<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] 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 Section 240.14a-11(c) or Section 240.14a-2.
[ ] Confidential for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
Selective Insurance Group, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(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> 2
[SELECTIVE INSURANCE GROUP LETTERHEAD]
March 31, 2000
James W. Entringer
Chairman
Dear Stockholder of Selective Insurance Group, Inc.:
It is a pleasure to invite you to your Company's 2000 Annual Meeting of
Stockholders to be held on Friday, May 5, 2000, 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 and file your proxy either by mail, electronically or by
telephone as soon as possible.
Your continued support is appreciated. We look forward to seeing you at the
meeting.
Warmest regards,
/s/ JAMES W. ENTRINGER
James W. Entringer
<PAGE> 3
[SELECTIVE INSURANCE GROUP LETTERHEAD]
NOTICE OF ANNUAL MEETING TO BE HELD
May 5, 2000
TO OUR STOCKHOLDERS:
The Annual Meeting of Stockholders of Selective Insurance Group, Inc. (the
"Company") will be held on Friday, May 5, 2000, 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.
2. To approve amendments to the Company's Stock Compensation Plan for
Nonemployee Directors.
3. To approve amendments to the Company's Stock Option Plan for Directors.
4. To transact such other and further business, if any, as properly may be
brought before the meeting.
The Board of Directors has fixed the close of business on March 15, 2000, as the
record date for the determination of stockholders entitled to notice of, and to
vote at, the Annual Meeting.
NEW WAY TO VOTE YOUR SHARES. This year you may choose to vote your shares by
using a toll-free telephone number or the Internet, as described on the proxy
card. You may also mark, sign, date, and mail your proxy in the envelope
provided, which requires no postage if mailed in the United States. We
encourage you to complete and file your proxy by accessing the World Wide Web
or by using a touch-tone telephone if these options are available to you.
The method by which you decide to vote will not limit your right to revoke your
proxy or to vote in person at the Annual Meeting should you later decide to
attend the Annual Meeting in person.
By order of the Board of Directors,
/s/ MICHELE C. NIERODA
Michele C. Nieroda
Assistant Vice President,
Corporate Secretary
and Corporate Counsel
Dated: March 31, 2000
<PAGE> 4
Selective Insurance Group, Inc.
40 Wantage Avenue
Branchville, New Jersey 07890
March 31, 2000
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. (the "Company") for
use at the Annual Meeting of Stockholders to be held on Friday, May 5, 2000, 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 Georgenson Shareholder Communications, Inc. for a fee
of $7,500 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, 2000, 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 26,163,525 shares of common stock, $2.00 par value ("Common Stock"). This
is the Company's only issued and outstanding class of voting stock. This Proxy
Statement and the accompanying proxy are being mailed beginning on or about
March 31, 2000, to all stockholders of record as of the record date. Under New
Jersey law and the Company's Bylaws, each share of Common Stock outstanding as
of the record date is entitled to one vote at the Annual Meeting of
Stockholders. The presence in person or by proxy of the holders of a majority of
the shares of Common Stock entitled to vote constitutes a quorum. Under New
Jersey law, proxies submitted with votes withheld for the election of directors,
abstentions 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. Each matter submitted to the
stockholders at the Annual Meeting requires the affirmative vote of a majority
of the total votes cast at the Annual Meeting. Abstentions and broker nonvotes
are not counted in tabulating the number of votes cast on matters submitted to
the stockholders.
The only persons or groups which were known by the Company as of March 15, 2000
to be the beneficial owners of more than 5% of the Company's outstanding Common
Stock are listed below:
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner Amount of Nature of Beneficial Ownership Percent of Class
<S> <C> <C>
Dimensional Fund Advisors, Inc.(1) 1,503,900 5.7%
1299 Ocean Avenue, 11th floor
Santa Monica, CA 90401
Commerce Insurance Company(2) 1,451,500 5.5%
211 Main Street
Webster, MA 01570
</TABLE>
(1) Dimensional Fund Advisors, Inc., a registered investment advisor and a
Delaware Corporation, filed a Schedule 13G dated February 11, 2000, with the
Securities and Exchange Commission which states that it is a registered
investment advisor and furnishes investment advise to four registered
investment companies and that it serves as investment manager to certain other
commingled group trusts and separate accounts; and that in its capacity as
investment advisor or manager that, at December 31, 1999, it has the power to
vote and/or investment power over the 1,503,900 shares. The Schedule 13G also
indicates that Dimensional Fund Advisors, Inc. disclaims beneficial ownership
of all such securities.
(2) Commerce Insurance Company, a Massachusetts property and casualty insurance
company, in Schedule D to its Annual Statement for the Year 1999 filed with the
Insurance Department of Massachusetts, indicated that at December 31, 1999, it
owned 1,451,500 shares.
1
<PAGE> 5
As of the date hereof, the Board of Directors knows of no other business that
will be presented for consideration at the meeting, except the 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. Duly executed proxies that contain no
instructions to the contrary will be voted FOR the election of the four nominees
named herein as directors of the Company and FOR the proposals to amend the
Company's Stock Compensation Plan for Nonemployee Directors and the Company's
Stock Option Plan for Directors.
The Annual Report to Stockholders for the fiscal year ending December 31, 1999,
is being provided to all stockholders of record as of the close of business on
March 15, 2000 together with this Proxy Statement.
HOW TO VOTE
Stockholders of record (that is, stockholders who hold their shares in their
own name) can vote any one of three ways:
(1) By Mail: Sign, date and return your proxy card in the enclosed
postage-paid envelope. If you sign and return your proxy card but do not
give voting instructions, the shares represented by that proxy will be
voted as recommended by the Board of Directors.
(2) By Telephone: Call the toll-free number on your proxy card to vote by
phone. You will need to follow the instructions on your proxy card and
the voice prompts.
(3) By Internet: Go to the web site listed on your proxy card to vote through
the Internet. You will need to follow the instructions on your proxy card
and the web site. If you vote through the Internet, you may incur
telephone and Internet access charges.
If you vote by telephone or the Internet, your electronic vote authorizes the
named proxies to vote on your behalf in the same manner as if you signed, dated
and returned your proxy card. IF YOU VOTE BY TELEPHONE OR THE INTERNET, YOU DO
NOT NEED TO RETURN YOUR PROXY CARD.
If your shares are held in the name of a bank, broker or other holder of record
(that is, "street name"), you will receive instructions from the holder of
record that you must follow in order for your shares to be voted. Telephone and
Internet voting may be offered to stockholders whose shares are held by banks
and brokers.
CHANGING OR REVOKING YOUR VOTE
You may revoke your proxy by giving proper written notice of revocation to the
Secretary of the Company before your proxy is exercised. You may change your
vote at any time before the proxy is exercised. Any subsequent vote by any
means will change your prior vote. For example, if you voted by telephone, a
subsequent Internet vote will change your vote. The last vote received before
midnight eastern time, May 4, 2000 will be the one counted. You may also change
your vote by voting in person at the annual meeting.
I. ELECTION OF DIRECTORS
(Item 1 on Proxy)
The Company's Restated Certificate of Incorporation, as amended (the
"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. As provided
in the Certificate, the Board of Directors is divided into three classes, equal
or nearly as equal as possible, so that directors serve staggered three-year
terms.
The Board has nominated A. David Brown, William M. Kearns, Jr., S. Griffin
McClellan III and J. Brian Thebault for reelection as directors for three-year
terms expiring at the Annual Meeting of Stockholders in 2003. All such persons
are currently directors and were previously elected by stockholders. James W.
Entringer will be retiring as director, effective immediately after the date of
the Annual Meeting. The Board has reduced the number of directors from thirteen
to twelve, effective upon Mr. Entringer's retirement.
In the event any nominee shall be unable to serve as a director at the time of
the Annual Meeting of Stockholders, which the Board of Directors does not
presently expect, the proxies in favor of such unavailable nominee will be
voted for a consenting nominee selected by the Board of Directors. 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.
2
<PAGE> 6
NOMINEES
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 2003.
<TABLE>
<CAPTION>
Names
of
Directors Positions and Offices in Company and Business Experience
--------- --------------------------------------------------------
<S> <C>
A. David Brown Managing Director, Pendelton James Associates, since 1997; Managing Vice
Age: 57 President, Korn/Ferry International, executive recruiting, 1994 to 1997; served
Director since: 1996 in various executive positions with R.H. Macy & Co., Inc., 1968 to 1994;
Term to expire: 2003 Director, the Zale Corporation; Director, The Sports Authority, Inc.
William M. Kearns, Jr. President, W.M. Kearns & Co., Inc., a private investment company, since 1994;
Age: 64 Vice Chairman, Keefe Managers, Inc., money management since 1998; Director,
Director since: 1975 Transitor Devices, Inc., since 1991; Malibu Entertainment Worldwide, Inc., since
Term to expire: 2003 1995; Director, Greenfield Capital Partners, since 1996; Senior Advisor to
Proudfoot Consulting, PLC, since 1996; Trustee of EQ Advisors Trust (Equitable
Life Assurance Society of the U.S.), since 1997; Director, Marine Transport
Corporation, since 1998.
S. Griffin McClellan III Consultant since 1994.
Age: 62
Director since: 1980
Term to expire: 2003
J. Brian Thebault Chairman and Chief Executive Officer, L.P. Thebault Company, graphic
Age: 48 communications, since 1998; President and Chief Executive Officer, L.P. Thebault
Director since: 1996 Company, 1985 to 1998.
Term to expire: 2003
</TABLE>
CONTINUING DIRECTORS
The following information is set forth with respect to the directors whose terms
of office will continue after the Annual Meeting.
<TABLE>
<CAPTION>
Names
of
Directors Positions and Offices in Company and Business Experience
--------- --------------------------------------------------------
<S> <C>
Paul D. Bauer Retired; Formerly Executive Vice President and Chief Financial Officer of Tops
Age: 56 Markets, Inc.; Director, R P Adams Co., since 1996; Director, IMC, Inc., since
Director since: 1998 1995; Vice-Chairman, Catholic Health Systems of Western New York, since 1998;
Term to expire: 2002 Chairman of the Board, D'Youville College; Board Member of the Buffalo Intercity
Scholarship Opportunity Network.
William A. Dolan, II Attorney, Of Counsel to Michael C. Gaus, Esq., since 1998; Of Counsel, Kelly,
Age: 68 Gaus & Holub, 1994 to 1998; Director since 1982 and Chairman of the Board, 1988
Director since: 1988 to 1996, High Point Financial Corporation.
Term to expire: 2002
William C. Gray, D.V.M. Retired; Veterinarian and President, Newton Veterinary Hospital, Inc.,
Director, Age: 70 1960 to 1997; Newton Financial Corp. and Newton Trust Company.
Director since: 1992
Term to expire: 2002
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
Names
of
Directors Positions and Offices in Company and Business Experience
--------- --------------------------------------------------------
<S> <C>
C. Edward Herder, CPCU President, Chester H. Herder & Son, Inc., since 1959; Chairman, Herder Tarricone
Age: 64 Associates, 1994 to 1996, general insurance agencies.
Director since: 1978
Term to expire: 2001
Joan M. Lamm-Tennant, Ph.D. Vice President, General Reinsurance Corporation, since 1996; Professor of
Age: 47 Finance, Villanova University, since 1988; Thomas G. Labreque Endowed Chair in
Director since: 1993 Business, since 1999.
Term to expire: 2002
Gregory E. Murphy President and Chief Executive Officer of the Company, since May 1999; President
Age: 44 and Chief Operating Officer of the Company, 1997 to May 1999; Senior Vice
Director since: 1997 President and Chief Financial Officer of the Company, 1995 to 1997; Senior Vice
Term to expire: 2001 President, Finance of the Company, 1994 to 1995.
William M. Rue, CPCU President, Chas. E. Rue & Son, Inc. T/A Rue Insurance, since 1987; Director,
Age: 52 First Constitution Bank.
Director since: 1977
Term to expire: 2001
Thomas D. Sayles, Jr. Retired; Director, Pillar Funds (Summit Bancorp., mutual funds); Chairman, The
Age: 68 Summit Bancorporation, 1994 to 1996; Chairman and Chief Executive Officer, The
Director since: 1988 Summit Bancorporation, 1974 to 1994.
Term to expire: 2001
</TABLE>
4
<PAGE> 8
EXECUTIVE OFFICERS OF THE COMPANY
As of March 15, 2000, the executive officers of the Company were:
<TABLE>
<S> <C> <C>
Gregory E. Murphy age 44 President and Chief Executive Officer. *
James W. Coleman, Jr. age 41 Executive Vice President, Diversified
Insurance Services, since July 1999; Senior
Vice President, Strategic Business Units,
since May 1996; Vice President, Personal
Lines Strategic Business Unit, May 1994 to
May 1996.
Thornton R. Land age 59 Executive Vice President, Administration,
and General Counsel, since May 1993.
David B. Merclean age 49 Senior Vice President and Chief Financial
Officer, since August 1997; Senior Vice
President and Treasurer, Sun Alliance USA,
Inc., 1995 to 1997; Formerly Partner, KPMG
LLP, (formerly KPMG Peat Marwick LLP).
Jamie Ochiltree, III age 47 Executive Vice President, Insurance
Operations, since July 1999; Executive Vice
President, Branch and Field Operations,
since 1997; Senior Vice President, Branch
and Field Operations, 1994 to 1996.
Robert P. Rank age 58 Senior Vice President and Chief Investment
Officer, since December 1993.
Donald E. Williams age 55 Senior Vice President and Chief Information
Officer, since June 1997; Senior Vice
President, Information Systems, 1992 to
1997.
Ronald J. Zaleski age 45 Senior Vice President and Chief Actuary,
since February 2000; Vice President and
Chief Actuary, since September 1999.
</TABLE>
All terms of office are for a one-year period.
*See additional information about Mr. Murphy on page 4.
5
<PAGE> 9
STOCK OWNERSHIP OF DIRECTORS AND OFFICERS
The following table sets forth, as of February 15, 2000, certain information
with respect to shares of Common Stock owned by (i) each director; (ii) each of
the executive officers named in the Summary Compensation Table below; and (iii)
all of the Company's directors and executive officers as a group:
<TABLE>
<CAPTION>
Number of Shares
Beneficially Owned Options Total shares
Name (excluding options) Exercisable(1) Beneficially Owned*
- ---- ------------------- -------------- -------------------
<S> <C> <C> <C>
Paul D. Bauer 5,480 3,000 8,480
- -------------------------------------------------------------------------------------------------------------------
A. David Brown 5,302 12,000 17,302
- -------------------------------------------------------------------------------------------------------------------
James W. Coleman, Jr. 39,481 59,300 98,781
- -------------------------------------------------------------------------------------------------------------------
William A Dolan, II 23,748(2) 21,000 44,748
- -------------------------------------------------------------------------------------------------------------------
James W. Entringer 135,732 242,030 377,762**
- -------------------------------------------------------------------------------------------------------------------
William C. Gray, D.V.M. 33,082 24,000 57,082
- -------------------------------------------------------------------------------------------------------------------
C. Edward Herder, CPCU 68,514(3) 27,000 95,514
- -------------------------------------------------------------------------------------------------------------------
William M. Kearns, Jr. 58,326 27,000 85,326
- -------------------------------------------------------------------------------------------------------------------
Joan M. Lamm-Tennant, Ph.D 9,502 18,000 27,502
- -------------------------------------------------------------------------------------------------------------------
Thornton R. Land 103,406 124,076 227,482
- -------------------------------------------------------------------------------------------------------------------
S. Griffin McClellan III 23,414(4) 21,000 44,414
- -------------------------------------------------------------------------------------------------------------------
Gregory E. Murphy 94,684(5) 94,200 188,884
- -------------------------------------------------------------------------------------------------------------------
Jamie Ochiltree, III 71,624 65,876 137,500
- -------------------------------------------------------------------------------------------------------------------
Robert P. Rank 32,827 41,200 74,027
- -------------------------------------------------------------------------------------------------------------------
William M. Rue, CPCU 240,688(6) 27,000 267,688***
- -------------------------------------------------------------------------------------------------------------------
Thomas D. Sayles, Jr. 36,633 27,000 63,633
- -------------------------------------------------------------------------------------------------------------------
J. Brian Thebault 9,349 12,000 21,349
All directors and executive officers
as a group (20 persons) 1,091,539 916,282 2,007,821****
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* The amount of shares beneficially owned by each of the above-named
directors and officers, except Messrs. Entringer and Rue, is less than
1.0% of the Common Stock outstanding.
** The total number of shares beneficially owned by Mr. Entringer is equal
to 1.4% of the Common Stock outstanding.
*** The total number of shares of beneficially owned by Mr. Rue is equal to
1.0% of the Common Stock outstanding.
**** The total number of shares of Common Stock beneficially owned by the
directors and executive officers as a group represents 7.4% of the Common
Stock outstanding.
(1) Includes shares under options exercisable on February 15, 2000 and
options which become exercisable within 60 days thereafter.
(2) Includes 2,100 shares held by wife of which Mr. Dolan disclaims
beneficial ownership.
(3) Includes 16,339 shares held by wife.
(4) Includes 2,000 shares held by wife of which Mr. McClellan disclaims
beneficial ownership.
(5) Includes 2,129 shares held in custody for daughter and in custody for
son.
(6) Includes the following:
(a) 15,864 shares held by Chas. E. Rue & Sons, Inc., a general insurance
agency of which Mr. Rue is President and owner of more than a 5%
equity interest. (See page 21 of this statement.)
(b) 12,745 shares held in custody for daughter.
(c) 23,684 shares held in trust for son and trust for daughter.
(d) 11,266 shares held by son.
(e) 990 shares held by wife.
(f) 36,000 shares held by Mr. Rue and First Union Bank. Mr. Rue is
co-trustee with First Union for shares held on behalf of son and
daughter.
6
<PAGE> 10
COMPENSATION OF DIRECTORS
During 1999, nonemployee directors, consisting of all directors other than
Messrs. Entringer and Murphy, received directors' fees in shares of Common
Stock pursuant to the Stock Compensation Plan for Nonemployee Directors (the
"Stock Plan"). Under the Stock Plan, each nonemployee director receives
annually Common Stock having a fair market value equal to an amount of
compensation fixed annually by the Board of Directors. Shares are issued
quarterly on January 1, April 1, July 1 and October 1 of each year. For 1999,
such annual compensation was fixed at $35,000, and each nonemployee director
who did not elect to defer his or her compensation was issued a total of 1,841
shares of Common Stock pursuant to the Stock Plan, except for Frederick H.
Jarvis, who received 922 shares prior to his retirement as a director in May
1999. Under the Stock Plan, each nonemployee director may elect on or before
December 20 of each year to defer the receipt of shares of Common Stock, and
any dividends accrued with interest thereon, to a specified future year, the
attainment of age 70 or termination of services as a director. Messrs. Bauer,
Brown, Dolan, Sayles, Thebault and Ms. Lamm-Tennant elected to defer their 1999
compensation under the Stock Plan. For 2000, such annual compensation has been
fixed at $38,000.
The compensation payable to nonemployee directors is proposed to be amended
effective January 1, 2001, subject to stockholder approval, so that: (i) the
directors are permitted to elect to receive up to 50% of his or her
compensation under the Stock Plan in cash for each calendar year; (ii) to
eliminate from the Stock Plan the requirement of stockholder approval of any
change to the Stock Plan which would modify the requirement that all
participants compensation be only in shares of Common Stock; and (iii) to
extend the term of the Stock Plan from December 31, 2007 to December 31, 2010.
See "Proposal to Amend the Selective Insurance Group, Inc. Stock Compensation
Plan for Nonemployee Directors" on page 17.
The Board of Directors terminated the Directors' Plan (the retirement plan for
directors) on December 31, 1997. In connection therewith, the present value of
the future benefits of each eligible nonemployee director was determined to be
fully vested as of December 31, 1997. Such benefits were converted into units,
with each such unit having a value equal to the fair market value of a share of
Common Stock on December 31, 1997. Each unit accrues an amount equal to the
dividends on a share of Common Stock, as and when declared by the Board of
Directors and paid by the Company, which amount is deemed reinvested in
additional units in the same manner as dividends are reinvested in shares of
Common Stock under the Company's dividend reinvestment plan for stockholders.
The value of each unit fluctuates with the value of the Company's Common Stock.
Each participating director will become entitled to receive the value of his or
her units in cash, either in a lump sum or in installments over 15 years, upon
termination of his or her service as a director. In the event of a director's
termination of service as a director following a "change in control" of the
Company, (as defined in Board resolutions terminating the Directors' Plan) the
director will be immediately entitled to receive the value of his or her units
in cash, either in a lump sum or in installments over a period of five years.
Any units which are unpaid at the time of the director's death shall be payable
in cash to a surviving spouse or estate, as the case may be. Retired Directors
or their surviving spouses who were receiving benefits under the Directors'
Plan at the time of its termination will continue to receive benefits in
accordance with the terms of the Directors' Plan as in effect at the time the
benefits commenced.
The Company has a Stock Option Plan for Directors (the "Option Plan") for
nonemployee directors. Under such plan, each eligible director automatically
receives an option to purchase 3,000 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 pursuant to the Option Plan is
400,000, 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 of a share of Common Stock on the date such option is
granted and is payable in cash or in Common Stock of the Company. 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, 1999, options to purchase 3,000 shares of
Common Stock were granted to each eligible director at an exercise price of
$18.3125 per share.
The Stock Option Plan for Directors is proposed to be amended effective January
1, 2001, subject to stockholder approval to: (i) extend the term of the Option
Plan for an additional ten years; and (ii) increase by 450,000 the number of
shares of Common Stock reserved for issuance under the Option Plan to an
aggregate of 850,000 shares. See "Proposal to Amend the Selective Insurance
Group, Inc. Stock Option Plan for Directors" on page 19.
7
<PAGE> 11
COMMITTESS OF THE BOARD OF DIRECTORS
<TABLE>
<CAPTION>
Salary &
Board Member Audit Directors Employee Benefits
- ------------ ----- --------- -----------------
<S> <C> <C> <C>
Paul D. Bauer X
- -----------------------------------------------------------------------------------------------------
A. David Brown X X*
- -----------------------------------------------------------------------------------------------------
William A Dolan, II X
- -----------------------------------------------------------------------------------------------------
James W. Entringer **(1)
- -----------------------------------------------------------------------------------------------------
William C. Gray, D.V.M. X
- -----------------------------------------------------------------------------------------------------
C. Edward Herder, CPCU X
- -----------------------------------------------------------------------------------------------------
William M. Kearns, Jr X
- -----------------------------------------------------------------------------------------------------
Joan M. Lamm-Tennant, Ph.D X
- -----------------------------------------------------------------------------------------------------
S. Griffin McClellan III X
- -----------------------------------------------------------------------------------------------------
Gregory E. Murphy (1)
- -----------------------------------------------------------------------------------------------------
William M. Rue, CPCU X*
- -----------------------------------------------------------------------------------------------------
Thomas D. Sayles, Jr. X X
- -----------------------------------------------------------------------------------------------------
J. Brian Thebault X*
- -----------------------------------------------------------------------------------------------------
Total meetings held in 1999 4 3 4
Total number of Board meetings during 1999: 4
</TABLE>
* Chairperson
** Chairman of the Board
1 - Messrs. Entringer and Murphy serve on other Committees of the Board of
Directors.
Audit: Receives and examines the Auditors' Report, meets with the auditors, and
accesses the books and vouchers of the Company, as necessary. Considers the
adequacy of internal controls, confers with the officers of the Company, and
reports to the Board on its findings.
Directors: Seeks and reviews qualified candidates for directorships and makes
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.
Salary and Employee Benefits: Evaluates the performance of certain officers of
the Company and its subsidiaries and makes recommendations to the Board as to
salary adjustments. Continuously evaluates employee benefits and makes
recommendations to the Board in connection with these benefits. 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.
ATTENDANCE OF BOARD MEMBERS AT MEETINGS
All Board members attended 75% or more of the aggregate number of meetings of
the Board and of the meetings of Committees on which he or she served.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year, no executive officer of the Company served on the
Compensation Committee of another entity or as a director of another entity,
one of whose executive officers served on the Salary and Employee Benefits
Committee.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on the Company's review of Forms 3, 4, and 5 and written representations
submitted to the Company during and with respect to the fiscal year ended
December 31, 1999, all statements of beneficial ownership required to be filed
by directors and officers of the Company with the Securities and Exchange
Commission were timely filed.
8
<PAGE> 12
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table shows, for the fiscal years ending December 31, 1999, 1998,
and 1997, the compensation, paid or accrued for those years, to the Chairman,
the 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 1999. (See footnote 1.)
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------
Annual Compensation Awards
---------------------------------------------------------
Name Securities All Other
and Restricted Underlying Compen-
Principal Stock Options/ sation(4)
Position Year Salary ($)(1) Bonus ($)(2) Awards($)(3) SARs (#) ($)
- -------- ---- ------------- ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
James W. Entringer (5,6) 1999 309,231 -- -- -- 5,000
Chairman 1998 536,712 180,000 397,500(7) -- 5,000
1997 440,337 300,000 296,000 8,600 4,750
15,000 (8)
Gregory E. Murphy (6,9) 1999 393,885 -- 164,250 12,000 11,825
President and Chief 1998 331,731 120,000 265,000 -- 10,345
Executive Officer 1997 222,385 200,000 185,000 3,200 9,582
10,000 (8)
Thornton R. Land (6,9) 1999 222,938 -- 110,820(7) -- 5,000
Executive Vice President 1998 222,087 60,000 212,000(7) -- 5,000
and General Counsel 1997 199,688 100,000 166,500 4,000 4,750
5,000 (8)
Jamie Ochiltree, III (6,9) 1999 215,469 -- 109,500 -- 13,346
Executive Vice President 1998 204,323 60,000 212,000 7,500 13,313
1997 176,154 100,000 185,000 3,200 13,782
7,500 (8)
James W. Coleman, Jr. (6,9) 1999 185,185 -- 109,500 -- 6,791
Executive Vice President 1998 172,062 60,000 212,000 7,500 5,682
1997 147,019 100,000 185,000 2,800 3,866
7,500 (8)
Robert P. Rank 1999 184,054 -- 27,375 -- 11,558
Senior Vice President and 1998 183,326 40,000 39,750 4,000 11,348
Chief Investment Officer 1997 167,154 55,500 37,000 3,200 11,524
4,000 (10)
</TABLE>
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. 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 1997,
1998 and 1999 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 aggregate value of restricted stock awards at the end of 1999 was
$275,000 for Mr. Entringer, $653,125 for Mr. Murphy, $309,375 for Mr. Land,
$567,188 for Mr. Ochiltree, $446,875 for Mr. Coleman and $120,313 for Mr.
Rank, excluding Phantom Stock awards granted to Mr. Entringer and Mr. Land.
See footnote 7 below. At the end of 1999, the aggregate number of
restricted shares held by Mr. Entringer was 16,000; by Mr. Murphy, 38,000;
by Mr. Land 18,000; by Mr. Ochiltree 33,000; by Mr. Coleman, 26,000 and by
Mr. Rank, 7,000. The restricted stock awards 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. Pursuant to an award Mr. Entringer
received outside of the plan on November 1, 1995, 6,932 shares vested to
Mr. Entringer on each of November 1, 1995, November 1, 1996, November 1,
1997 and November 1, 1998. This grant is now fully vested. Mr. Entringer
has received dividends on all shares from this grant since November 1,
1995. On December 16, 1999, the restricted stock award granted to Mr.
Entringer on February 9, 1996 became fully vested. See the "Report of the
Salary and Employee Benefits Committee" in this statement. The value of the
restricted stock awards shown in this footnote is based on the closing
market price per share of Common Stock on December 31, 1999 of $17.1875.
The values set forth in the table are based on the closing price on the
date of each of the grants, which was: $21.00, $26.50 and $18.25 on January
24, 1997, February 4, 1998 and February 2, 1999, respectively.
9
<PAGE> 13
4. The amounts in "All Other Compensation" include Company contributions under
the Company's Retirement Savings Plan for the fiscal years ended December
31, 1999, December 31, 1998 and December 31, 1997. 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. The Company contributions reflected in
the table above are $5,000 for Messrs. Entringer, Murphy, Land, Ochiltree,
Coleman and Rank. In addition, for Messrs. Murphy, Ochiltree, Coleman and
Rank the amounts for 1999 in the "All Other Compensation" column also
include $6,825, $8,346, $1,791 and $6,558, 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" set forth in this Proxy
Statement.
5. Mr. Entringer's compensation decreased effective May 5, 1999 due to his
decrease in duties following his stepping down as Chief Executive Officer.
The Company and Mr. Entringer agreed that for the 12 months ending in May
of 1999 he would be paid his full salary and for the 12 months following
May 1999 he would receive compensation in the amount of $100,000.
6. Messrs. Entringer, Land, Murphy, Ochiltree and Coleman 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 and Land are
automatically renewable for successive one-year terms each September unless
prior written notice of nonrenewal is given; the agreement for Mr. Murphy
is automatically renewable for successive one-year terms each August unless
prior written notice of nonrenewal is given; the agreement for Mr.
Ochiltree is automatically renewable for successive one-year terms each
October unless prior written notice of nonrenewal is given. Mr. Coleman's
agreement is effective May 2, 1997 through May 2, 2000 and is automatically
renewable for successive one-year terms each May 2 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) of the Code), the Company shall pay
to the executive officer on a net after-tax basis the greater of (1) the
payments and benefits due to the executive officer reduced in order of
priority and amount as 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 or (2) payments and benefits due to
the executive officer, plus an amount in cash equal to (x) the amount of
such "excess parachute payments" multiplied by (y) twenty (20%) percent.
The Company has guaranteed SICA's performance of all its obligations under
the termination agreements.
7. Messrs. Entringer and Land were granted Phantom Stock units in lieu of
grants of Restricted Stock on February 4, 1998. Mr. Entringer was granted
15,000 units of Phantom Stock and Mr. Land was granted 8,000 units of
Phantom Stock. Mr. Land was also granted 6,000 Phantom Stock Units in lieu
of a grant of Restricted Stock on February 2, 1999. The Phantom Stock Units
are valued with reference to the fair value of Selective Common Stock and
will accrue amounts equivalent to dividends which will also be converted
into Phantom Stock Units based on the fair market value of Selective Common
Stock on the applicable dividend reinvestment dates. The accumulated value
of the Phantom Stock Units will be paid to each of the officers in cash
upon retirement, based on the value of Selective's Common Stock on the last
day of the officer's employment. The value of Phantom Stock Units set forth
in the table on page 9 is based on the closing market price per share of
Common Stock on February 4, 1998 and February 2, 1999, of $26.50 and
$18.47, respectively.
8. This option was granted as a qualified option under Stock Option Plan II on
December 2, 1997. The grant became fully vested on December 16, 1998. In
addition, the qualified option was amended so that a portion of the option
is now a non-qualified option.
9. Under an employment agreement with SICA effective August 1, 1995, amended
May 1, 1998 and in effect through August 1, 2001, Mr. Murphy receives an
annual base salary of not less than $325,000 through August 1, 2001. Under
an employment agreement with SICA effective September 1, 1996, amended
effective September 1, 1999, Mr. Land receives an annual base salary of not
less than $240,000 through September 1, 2001. Under an employment agreement
with SICA effective October 31, 1995, amended October 31, 1998 and in
effect through October 31, 2001, Mr. Ochiltree receives an annual base
salary of not less than $197,600 through October 31, 2001. Under an
employment agreement with SICA dated May 2, 1997 through May 2, 2000, Mr.
Coleman receives an annual base salary of not less than $135,000 through
May 2, 2000.
10. This qualified option was granted under Stock Option Plan II and vests at a
rate of 25% per year each year through December 2, 2001 when it will become
fully vested.
10
<PAGE> 14
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table contains information concerning the grant of stock options
and tandem stock appreciation rights ("SARs") under the Company's Stock Option
Plan II ("Plan") to the Chairman, the President and Chief Executive Officer, and
each of the other executive officers named in the Summary Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
-------------------------------------
<TABLE>
<CAPTION>
Individual Grants Grant Date Value
- ---------------------------------------------------------------------------------------- ----------------
Number of % of
Securities Total Options/
Underlying SARs Granted Exercise
Options/SARs to Employees or Base Grant Date
Name Granted(1)(#) in Fiscal Year Price ($/Sh)(2) Expiration Date Present Value($)(3)
- ---- ------------- -------------- --------------- --------------- -------------------
<S> <C> <C> <C> <C> <C>
James W. Entringer -- -- -- -- --
Gregory E. Murphy 12,000 50.0 18.47 02/02/09 51,173
Thornton R. Land -- -- -- -- --
Jamie Ochiltree, III -- -- -- -- --
James W. Coleman, Jr. -- -- -- -- --
Robert P. Rank -- -- -- -- --
</TABLE>
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 a SAR is
exercised, the employee must surrender the related stock option or portion
thereof. Upon exercise of a 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 1999 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 options set forth in the table above were granted on February 2, 1999 at
an exercise price equal to the fair market value of a share of Common Stock
at such date and were immediately exercisable.
3. The Black-Scholes option pricing method has been used to calculate the
present value as of the date of grant and it is not intended to forecast
appreciation, if any, of the Company's stock price. The present value as of
the date of the grant, calculated using the Black-Scholes method, is based
on assumptions about future interest rates, expected life of the options,
dividend yield and stock price volatility. The risk free interest rate is
based on a zero coupon US Government Issue with the same terms and issue
date as the specified option grant. The volatility is based on an estimate
of the future price variability of Selective Insurance Group, Inc. (SIGI)
stock for a term commensurate with the expected life of the option. There is
no assurance that these assumptions will prove to be true in the future.
Listed below are the various assumptions that were made with regard to the
grants:
<TABLE>
<S> <C>
Exercise Price $18.4688
Risk Free Interest Rate 4.8%
Expected Life of Option 8 Years
Dividend Yield 3.2%
Expected Volatility 22%
</TABLE>
11
<PAGE> 15
OPTION AND SAR EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Chairman, the
President and Chief Executive Officer, and each of the other executive officers
named in the Summary Compensation Table concerning the exercise of options
and/or SARs during the last fiscal year and unexercised options and SARs held as
of the end of the last fiscal year:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Securities Underlying In-the-Money
Unexercised Options/SARs
Options/SARs at at Fiscal
Fiscal Year-End (#)(1); Year-End ($)(2);
* * * * * * * * * * * * * * * *
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value realized ($) Unexercisable Unexercisable
- ------------- --------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
James W. Entringer -- -- 242,030/ 538,746/
0 0
Gregory E. Murphy -- -- 84,200/ 160,313/
0 0
Thornton R. Land -- -- 118,076/ 457,673/
0 0
Jamie Ochiltree, III -- -- 58,376/ 47,064/
0 0
James W. Coleman, Jr. -- -- 51,800/ 54,813/
0 0
Robert P. Rank -- -- 37,200/ 49,500/
0 0
</TABLE>
1. The number of securities underlying unexercised options at the end of 1999
included options with tandem SARs granted under the Company's former stock
option plan for employees, which plan expired November 5, 1992.
2. The value of unexercised in-the-money options is based on the closing market
price per share of Common Stock on December 31, 1999 of $17.1875, less the
option exercise price per share.
12
<PAGE> 16
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, 1999 the Chairman, the 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, 6 years; Mr. Murphy, 18 years; Mr. Land, 13
years; Mr. Ochiltree, 4 years; Mr. Coleman, 16 years and Mr. Rank, 5 years.
PENSION PLAN TABLE(1)
Years of Service
<TABLE>
<CAPTION>
Remuneration 5 15 20 25 30 35
- ------------ -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
1. The Company maintains a noncontributory Retirement Income Plan integrated
with Social Security benefits. This pension 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.
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 administration requirements of
Rule 16b-3 under the Securities Exchange Act of 1934, and Section 162(m) of the
Internal Revenue Code. The Committee consists of Messrs. Brown (Chairman),
Bauer, Herder and Ms. Lamm-Tennant, all of whom are nonemployee directors,
within the meaning of Rule 16b-3 and "outside directors" within the meaning of
Section 162(m). 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 insurance 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 insurance industry is smaller and more diverse
13
<PAGE> 17
REPORT OF THE SELECTIVE INSURANCE GROUP, INC.
SALARY AND EMPLOYEE BENEFITS COMMITTEE
than the group comprising the Company's peer group for purposes of the
performance graph set forth on page 16 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
Chief Executive Officer; 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 a minimum of 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,
cash payments under the Company's Annual Cash Incentive Plan 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 Chief Executive Officer (and with respect to the Chief
Executive Officer between the Chief Executive Officer 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. If both 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 1999, corporate goals included
improving the combined ratio and increasing premium growth.
In February 2000, the Committee reviewed each executive officer's performance
evaluation, the recommendations of the Chief Executive Officer as to the
achievement of the individual performance-related goals and the Company's
performance for 1999 using the criteria described above. Based upon the
Company's performance for 1999 and the Annual Cash Incentive Plan percentage
guidelines, the Committee determined that no annual cash incentives would be
awarded for the year ended December 31, 1999 to any employee, including the
Company's executive officers.
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 stock ownership by management is an incentive for 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 Chief Executive Officer. 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. Grants of stock 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. Some grants are 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. In 1999, grants of restricted
stock under the Plan were made to all executive officers, except Messrs.
Entringer and Land. All restricted stock grants to executive officers are
subject to a four-year vesting period and the attainment of various
predetermined corporate financial goals, such as return on equity or cumulative
earnings, during the vesting period.
14
<PAGE> 18
REPORT OF THE SELECTIVE INSURANCE GROUP, INC.
SALARY AND EMPLOYEE BENEFITS COMMITTEE
On February 2, 1999, the Committee granted Mr. Murphy 9,000 restricted shares
of the Company's Common Stock under Stock Option Plan II. The shares vest four
years after the grant and are subject to the achievement of predetermined
corporate performance goals, including fiscal year return on average equity
during the vesting period. On the same date, the Committee granted Mr. Murphy a
non-qualified stock option to purchase 6,586 shares of the Company's common
stock at an exercise price of $18.4688 per share, and an incentive stock option
to purchase 5,414 shares of the Company's common stock at an exercise price of
$18.4688 per share.
On February 2, 1999, Mr. Entringer announced that effective May 5, 1999, he
would step down as Chief Executive Officer of the Company, but would continue
as Chairman of the Board and an employee and Director of the Company. Given
effect to the decrease in Mr. Entringer's duties, the Company and Mr. Entringer
agreed that for the 12 months ending in May of 1999 he would be paid his full
salary and for the 12 months following May 1999 he would receive compensation
in the amount of $100,000. In addition, as part of the arrangement between the
Company and Mr. Entringer, in November 1999, the Committee changed the vesting
schedule of 16,000 shares of a restricted stock award made in February 1996, to
Mr. Entringer so that this award would fully vest, as of December 16, 1999. The
restricted stock award was originally scheduled to vest over a four-year period
after the date of grant or earlier in the event of a change in control of the
Company.
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 basis for determining the compensation of the Chief Executive
Officer has 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 and
Mr. Murphy's base salary for 1999 were affected by their performance in the
prior year and the Company's performance in the prior year, as compared to the
peer group as described below. Both Mr. Entringer and Mr. Murphy are eligible
to participate in the same employee benefit plans available to the other
executive officers of the Company.
No Compensation Committee interlocks or insider participation in compensation
decisions occurred during the fiscal year ended December 31, 1999.
Submitted by the Salary and Employee Benefits Committee of the Company's Board
of Directors: A. David Brown (Chairman), Paul D. Bauer, C. Edward Herder and
Joan M. Lamm-Tennant, Ph.D.
15
<PAGE> 19
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]
<TABLE>
<CAPTION>
CRSP Total Revenue Index for: 12/1994 12/1995 12/1996 12/1997 12/1998 12/1999
- ---------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Selective Insurance Group, Inc. 100.0 145.7 161.1 234.4 179.0 157.8
Nasdaq Stock Market (US Companies) 100.0 141.3 173.9 213.1 300.2 542.4
NASDAQ Stocks (SIC 6330-6339 100.0 140.2 152.0 230.9 197.0 148.2
US Companies) Fire, Marine and
Casualty Insurance
</TABLE>
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for a series was set to $100.0 on 12/30/1994.
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: 21st Century Holding Company; Allcity Insurance Company;
Allied Group, Inc.; American Bankers Insurance Group, Inc.; American Country
Holdings, Inc.; American Indemnity Financial Corporation; Argonaut Group,
Inc.; Baldwin & Lyons, Inc. Class A; Baldwin &Lyons, Inc. Class B;
Bancinsurance Corporation; Berkley W. R. Corporation; Cincinnati Financial
Corporation; Citizens Security Group, Inc.; Condor Services, Inc.; Donegal
Group, Inc.; EMC Insurance Group, Inc.; Exstar Financial Corporation;
Financial Institutions Insurance Group, Ltd.; Foremost Corporation America;
Gryphon Holdings, Inc.; HCC Insurance Holdings, Inc.; Harleysville Group
Inc.; Home State Holdings, Inc.; Intercargo Corporation; Kaye Group, Inc.;
MAIC Holdings, Inc.; MEEMIC Holdings, Inc.; Markel Corp.; Mercury General
Corporation; Meridian Insurance Group, Inc.; Midland Company; Midland
Financial Group, Inc.; Milwaukee Insurance Group Inc.; Mobile America
Corporation; Motor Club of America; Mutual Assurance, Inc.; NAC Re
Corporation; NCRIC Group, Inc.; National Security Group, Inc.; Navigators
Group, Inc.; North East Insurance Company; Ohio Casualty Corporation; Old
Guard Group, Inc.; Old Lyme Holding Corp.; Omni Insurance Group, Inc.; PXRE
Corp.; PAC RIM Holding Corporation; Paula Financial; Pennsylvania
Manufacturers Corporation; Philadelphia Consolidated Holding Company;
Piedmont Management, Inc.; PMA Capital Corporation; Professionals Group
Inc.; Professionals Insurance Company Management; RTW, Inc.; Rescorp, Inc.;
Risk Capital Holdings, Inc.; SAFECO Corporation; Seibels Bruce Group, Inc.;
Selective Insurance Group, Inc.; State Auto Financial Corporation; Superior
National Insurance Group, Inc.; Symons International Corporation; Trenwick
Group, Inc.; Unico American Corporation; United Fire & Casualty Company;
United States Facilities Corporation; Unitrin, Inc.; Walshire Assurance
Company.
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<PAGE> 20
II. PROPOSAL TO AMEND THE SELECTIVE INSURANCE GROUP, INC.
STOCK COMPENSATION PLAN FOR NONEMPLOYEE DIRECTORS
(Item 2 on Proxy Card)
At the Annual Meeting, stockholders will be asked to approve amendments to the
Company's Stock Compensation Plan for Nonemployee Directors (the "Stock Plan").
The amendments are intended to (i) permit nonemployee directors to elect to
receive up to 50% of his or her compensation under the Stock Plan for services
as a director in cash for each calendar year, (ii) to eliminate from the Stock
Plan the requirement that all participants receive compensation only in shares
of Common Stock and (iii) to extend the term of the Stock Plan from December 31,
2007 to December 31, 2010. If the amendments to the Stock Plan are approved by
the stockholders, the amendments would be effective for the quarterly payment on
January 1, 2001.
The amendments and the principal features of the Stock Plan are summarized
below. A copy of the Stock Plan, as proposed to be amended, is annexed hereto as
Exhibit A and reference is made thereto for the complete text of the Stock Plan,
as proposed to be amended.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE AMENDMENTS TO THE STOCK
PLAN.
DESCRIPTION OF THE AMENDMENTS
On February 3, 2000, the Board of Directors (the "Board") unanimously approved
amendments to the Stock Plan, subject to stockholder approval. The amendments
would permit each director to elect, on or before December 20 of each year, to
receive in cash up to 50% of his or her compensation for services as a director
payable during the next succeeding calendar year. Currently, the Stock Plan
provides for the payment of compensation solely in shares of Common Stock. If
approved by stockholders, the amendments would permit each participant to elect
on or before December 20, 2000 to receive in cash up to 50% of that portion of
his or her compensation payable in 2001 and thereafter. The amendments further
provide for the elimination from the Stock Plan the requirement of stockholder
approval of any change to the Stock Plan which would modify the requirement that
all participants receive compensation in only shares of Common Stock. The
amendments also extend the term of the Stock Plan from December 31, 2007 to
December 31, 2010.
REASONS FOR THE AMENDMENTS
Currently, participants receive all of their compensation under the Stock Plan
for services as directors in only shares of Common Stock. For those participants
who do not elect to defer the receipt of the shares as permitted by the Stock
Plan, compensation received by them is recognized by them as ordinary income in
the year of receipt. Participants thereby receive taxable compensation in the
form of shares of Common Stock, but do not receive any cash in order to pay
their income taxes. The purpose of the amendments is to permit each director the
flexibility of electing to receive in cash up to 50% of his or her compensation
in order to pay taxes and other expenses incurred as a result of his or her
service as a director. The Board further believes that the extension of the term
of the Stock Plan and the payment of directors' compensation all or partly in
Common Stock enables the Company to attract and retain directors by offering
them equity participation in the Company and further promotes the interests of
the Company and stockholders by aligning the interests of directors and
stockholders.
The amendments further eliminate from the Stock Plan the requirement that all
participants receive compensation in only shares of Common Stock. This change in
the Stock Plan is necessary to make the Stock Plan consistent with the proposed
amendments.
DESCRIPTION OF THE STOCK PLAN
The Stock Plan was previously approved by stockholders at the 1996 Annual
Meeting. The Stock Plan commenced on January 1, 1997 and currently expires on
December 31, 2007 unless terminated earlier by the Board. If the amendments are
approved by the stockholders, the term of the Stock Plan, as amended, will be
extended to December 31, 2010.
Each member of the Board who is not an employee of the Company or a subsidiary
of the Company participates in the Stock Plan (each, a "Participant"). Eleven
directors are currently participants in the Stock Plan.
The maximum number of shares of Common Stock that are available for issuance
under the Stock Plan is 400,000 shares. In the event of any reorganization,
recapitalization, reclassification, stock dividend, stock split or other change
in the capital structure of the Company, an appropriate adjustment will be made
in the number and/or kind of securities issuable under the Stock Plan and
available for issuance under the Stock Plan to prevent either a dilution or
enlargement of the Participants' rights under the Stock Plan. Such an adjustment
was made in connection with the Company's two-for-one Common Stock split
effective December 1, 1997.
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<PAGE> 21
The Stock Plan is administered by the Secretary of the Company. The
administrator's duties are limited to matters of interpretation and
administrative oversight of the Stock Plan.
The Stock Plan currently provides that each Participant receives compensation
for services as a director ("Compensation") only in shares of Common Stock.
Participants are entitled to receive quarterly in each year (each January 1,
April 1, July 1 and October 1), a number of shares of Common Stock determined by
dividing one-fourth of the amount of their 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. Compensation is 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
Stock Plan are nontransferable except by will or the laws of descent and
distribution. If the amendments to the Stock Plan are approved by the
stockholders, Participants will be permitted to elect to receive up to 50% of
their Compensation in cash.
A Participant may elect prior to December 20 of each year to defer the issuance
and receipt of shares of Common Stock issuable as Compensation for the next
succeeding calendar year and thereafter. An election covering more than one year
may be revoked or modified by a Participant with respect to calendar years not
yet begun by written notice to the Company not later than December 20 of the
year prior to the first year for which such revocation or modification is to
apply. A Participant may elect to defer the issuance of shares of Common Stock
until (i) a specified year in the future, (ii) the attainment of age 70 or (iii)
termination of services as a director. 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. If the amendments to the Stock Plan are approved by the
stockholders, Participants will also have the right to defer the cash portion
(if any) of their Compensation in the same manner as the stock portion.
The amount of Participants' Compensation is determined by the Board no more
frequently than once per year during the term of the Stock Plan.
The Board may terminate or suspend the Stock Plan at any time. The Board may
amend the Stock Plan from time to time in such respects as the Board may deem
advisable to conform to changes in applicable laws or regulations or in any
other respect that the Board deems to be in the Company's best interests,
except, that no amendment to the Stock Plan is effective without stockholder
approval if the amendment would increase the number of shares of Common Stock
available for issuance under the Stock Plan or if stockholder approval is
required 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. No amendment of the Stock Plan shall be
made to modify the eligibility requirement for Participants. If the amendments
to the Stock Plan are approved by the stockholders, the requirement for
stockholder approval for any change that would modify the requirement that
Participants receive all of their Compensation in shares of Common Stock would
be eliminated.
The Board has set the amount of Compensation for all Participants at $38,000.00
per annum, effective January 1, 2000. Under the Stock Plan, as currently in
effect, each Participant received or deferred payment of 564 shares of Common
Stock on the January 1, 2000 payment date. As of March 15, 2000, a total of
55,500 shares of Common Stock have been awarded to all current directors as a
group. The following table sets forth, as of March 15, 2000, the number of
shares of Common Stock received or deferred by each current Participant:
<TABLE>
<CAPTION>
NAME NO. OF SHARES
---- -------------
<S> <C>
Paul D. Bauer..................2,480
A. David Brown.................5,302
William A. Dolan, II...........5,302
William C. Gray, D.V.M.........5,302
C. Edward Herder...............5,302
William M. Kearns, Jr..........5,302
S. Griffin McClellan III.......5,302
William M. Rue.................5,302
Thomas D. Sayles, Jr...........5,302
Joan Lamm-Tennant, Ph.D........5,302
J. Brian Thebault..............5,302
</TABLE>
The market value of the Common Stock as of March 15, 2000, as reflected by the
closing price of the Common Stock on the Nasdaq National Market, was $15.25 per
share.
18
<PAGE> 22
FEDERAL INCOME TAX CONSEQUENCES
Compensation paid under the Stock Plan, whether in Common Stock or cash, is
recognized by the recipient as ordinary income in the year it is received.
Amounts paid in Common Stock are valued for tax purposes at the fair market
value of the shares on the date of payment. The amount of ordinary income
recognized by the recipient is generally deductible for the same year by the
Company for Federal income tax purposes.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of the shares of Common Stock
present or represented and entitled to vote at the Annual Meeting is necessary
for the adoption of the amendments to the Stock Plan. If stockholders do not
approve the amendments, the Stock Plan will continue in effect as presently
constituted.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE
AMENDMENTS TO THE STOCK PLAN.
III. PROPOSAL TO AMEND THE SELECTIVE INSURANCE GROUP, INC.
STOCK OPTION PLAN FOR DIRECTORS
(Item 3 on Proxy Card)
At the Annual Meeting, stockholders will be asked to approve amendments to the
Company's Stock Option Plan for Directors (the "Option Plan"). The amendments
are intended to (i) extend the term of the Option Plan for an additional ten
years and (ii) increase by 450,000 the number of shares of Common Stock reserved
for issuance under the Option Plan to an aggregate of 850,000 shares.
The amendments and the principal features of the Option Plan are summarized
below. A copy of the Option Plan, as proposed to be amended, is annexed hereto
as Exhibit B and reference is made thereto for the complete text of the
provisions of the Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE
AMENDMENTS TO THE OPTION PLAN.
DESCRIPTION OF THE AMENDMENTS
On February 3, 2000, the Board unanimously approved the amendments to the Option
Plan, subject to stockholder approval. The amendments provide for the extension
of the Option Plan for an additional ten years to March 1, 2010. The amendments
further provide for the increase by 450,000 the number of shares of Common Stock
reserved for issuance under the Option Plan to an aggregate of 850,000 shares.
REASONS FOR THE AMENDMENTS
The Board believes that the Option Plan is an important incentive for attracting
and retaining outside directors through the opportunity of equity participation,
and that the Option Plan should continue. The Option Plan was previously
approved by stockholders at the 1990 Annual Meeting and took effect on and as of
March 1, 1990. If the Option Plan is not extended, the options granted to
directors under the Option Plan on March 1, 2000 would be the last options
granted under the Option Plan. Also, as of March 15, 2000, only 37,000 shares
remained available for the grant of stock options under the Option Plan. The
extension of the term of the Option Plan and increase in the number of shares
reserved for issuance thereunder are intended to enable the Company to continue
the Option Plan in effect.
DESCRIPTION OF THE OPTION PLAN
The Option Plan currently provides for the automatic annual grant to all
directors who are not full-time employees of the Company or any subsidiary of
the Company of non-qualified stock options to purchase 3,000 shares of Common
Stock (each, a "Participant"). Eleven directors are currently Participants under
the Option Plan. The annual grant is made on March 1 of each year or, if March 1
is not a business day, on the next succeeding business day. The options become
exercisable on the first anniversary of the date of grant; provided that any
option not yet exercisable becomes exercisable in full (i) upon the retirement
of the optionee because of total and permanent disability or upon the death of
the optionee or (ii) six months after the retirement of the optionee for any
other reason. No option is exercisable after ten years from the date the option
is granted. The exercise price for
19
<PAGE> 23
each share of Common Stock covered by an option is equal to the fair market
value of a share of Common Stock on the date of grant of the option. An
aggregate of 400,000 shares of Common Stock were originally reserved for
issuance under the Option Plan.
The Board may amend the Option Plan but not more than once every six months so
as to: (i) change the class of persons eligible to receive options, (ii) change
the timing of grants of options or (iii) change the amount of options to be
granted to directors, other than amendments to comport with changes in the
Internal Revenue Code or rules thereunder. The Board may suspend or discontinue
the Plan at any time.
Options granted under the Option Plan may be exercised during the lifetime of
the optionee only by the optionee or the optionee's guardian or legal
representative. Options are transferable by an optionee only by will or by the
laws of descent and distribution or by gift or pursuant to a domestic relations
order to any (i) family member as specified in the Option Plan, (ii) any trust,
or trusts, in which such family members have more than 50% of the beneficial
interest, (iii) any foundation in which the optionee or such family members
control the management of assets and/or (iv) any other entity in which the
optionee or such family members own more than 50% of the voting interests.
In the event of any merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, or other changes in the corporate structure or
capitalization affecting Common Stock, adjustments shall be made in the number
(including the number of shares reserved for issuance) and kind of shares which
are or may become subject to options granted or which may be granted under the
Option Plan. Such an adjustment was made in connection with the Company's two
for one Common Stock split effective December 1, 1997.
On March 1, 2000, each Participant was granted, options to purchase 3,000 shares
of Common Stock. As of March 15, 2000, options to purchase a total of 282,000
shares have been awarded to all current directors as a group. The following
table sets forth for each current Participant, as of March 15, 2000, the total
number of shares of Common Stock underlying options granted under the Option
Plan:
<TABLE>
<CAPTION>
NAME NO. OF SHARES UNDERLYING OPTIONS
---- --------------------------------
<S> <C>
Paul D. Bauer..................6,000
A. David Brown................15,000
William A. Dolan, II..........33,000
William C. Gray, D.V.M........27,000
C. Edward Herder..............33,000
William M. Kearns, Jr.........33,000
S. Griffin McClellan III......33,000
William M. Rue................33,000
Thomas D. Sayles, Jr..........33,000
Joan Lamm-Tennant, Ph.D.......21,000
J. Brian Thebault.............15,000
</TABLE>
The market value of the Common Stock as of March 15, 2000, as reflected by the
closing price of the Common Stock on the Nasdaq National Market, was $15.25 per
share.
FEDERAL INCOME TAX CONSEQUENCES
Options granted under the Option Plan are "non-qualified" stock options. An
optionee who exercises a non-qualified stock option will recognize ordinary
income at the date of exercise, in an amount equal to the excess of the fair
market value of the Common Stock on the date of exercise over the exercise
price. The Company ordinarily will be entitled to a Federal income tax deduction
in the same year and in the same amount as the income recognized by the
optionee, provided the Company satisfies certain federal income tax withholding
requirements that may be applicable.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of the shares of Common Stock
present or represented and entitled to vote at the Annual Meeting is necessary
for the adoption of the amendments to the Option Plan. If stockholders do not
approve the proposed amendments to the Option Plan, options could no longer be
granted under the Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE
AMENDMENTS TO THE OPTION PLAN.
20
<PAGE> 24
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
William M. Rue, a director of the Company, is President and owner of
more than a 5% equity interest in Chas. E. Rue & Sons, Inc., a general
insurance agency, which received $1,225,554 in commissions during 1999
for insurance policies placed with the Company's subsidiaries. During
1999, the Company's insurance subsidiaries purchased insurance
coverages with premiums of $689,111 through the agency. J. Brian
Thebault, a director of the Company, is Chairman and Chief Executive
Officer of L.P. Thebault Company, Inc., graphic communications, which
received $58,848 during 1999 for services performed for the Company and
its subsidiaries. The foregoing relationships have existed during the
past fiscal year, and the Company intends to continue its relationship
with Chas. E. Rue & Sons, Inc. and L.P. Thebault Company, Inc. in the
current year.
On December 16, 1994, Messrs. Murphy, Ochiltree and Rank, 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. Murphy, Ochiltree and Rank were
$105,395, $197,000 and $147,750, respectively. These loans bear no interest and
are due in 2005. Principal amounts outstanding as of February 11, 2000 were
$65,908, $114,260 and $94,843, respectively for Messrs. Murphy, Ochiltree and
Rank, respectively.
On August 7, 1998, Messrs. Murphy, Ochiltree, Coleman and Rank incurred certain
indebtedness to the Company in connection with the purchase of Common Stock on
the open market. Loans were made by the Company to senior management and certain
other officers in order to encourage greater ownership of Common Stock. The
principal amounts of such loans to Messrs. Murphy, Ochiltree, Coleman and Rank
were $162,495, $98,799, $83,196, and $87,987, respectively. These loans bear an
annual interest rate of 2.5% and are due in 2009. Principal amounts outstanding
as of February 11, 2000 were $148,523, $84,967, $76,700 and $81,117 for Messrs.
Murphy, Ochiltree, Coleman and Rank, respectively.
DATE FOR SUBMISSION
OF STOCKHOLDER PROPOSALS
Any stockholder desiring to submit a proposal for inclusion in the Proxy
Statement relating to the 2001 Annual Meeting of Stockholders (to be held on or
about May 4, 2001) must submit the same in time to be received at the Company's
head-quarters at Branchville, New Jersey, on or before December 1, 2000, for
determination of eligibility in accordance with law.
DISCRETIONARY AUTHORITY
A duly executed proxy given in connection with the Company's 2001 Annual Meeting
of Stockholders will confer discretionary authority on the proxies named
therein, or any of them, to vote at such meeting on any matter of which the
Company does not have written notice on or before February 16, 2001, without
advice in the Company's proxy statement as to the nature of such matter.
FINANCIAL STATEMENTS
AND OTHER INFORMATION
Consolidated financial statements for the Company and its subsidiaries and the
report thereon of KPMG LLP are included in the 1999 Annual Report to
Stockholders. A copy of the Company's Annual Report on Form 10-K for the year
ended December 31, 1999, as filed with the Securities and Exchange Commission,
excluding exhibits, will be provided without charge to stockholders upon written
request to the Vice President and Controller, 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 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.
21
<PAGE> 25
EXHIBIT A
SELECTIVE INSURANCE GROUP, INC.
STOCK COMPENSATION PLAN
FOR NONEMPLOYEE DIRECTORS, AS AMENDED
I. PURPOSE OF THE PLAN
The purpose of this Selective Insurance Group, Inc. Stock Compensation
Plan for Nonemployee Directors, as amended (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"), or in a combination of
cash and shares of Common Stock as provided in the Plan, 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. COMPENSATION
(a) Subject to approval of the Plan by stockholders of the Company,
commencing January 1, 2001, each Participant shall receive his or her
annual compensation for services as a Director (the "Compensation") as
provided in this Plan. Compensation shall be paid in (i) shares of Common
Stock or (ii) in cash and shares of Common Stock, at the election of the
Participant, provided that not more than fifty percent (50%) of the
Compensation shall be paid in cash. Each Participant may elect on or
before December 20 of each year to receive in cash up to fifty percent
(50%) of his or her Compensation payable during the next succeeding
calendar year. The elections made pursuant to this Section IV shall be
irrevocable for the calendar year for which the election is made and
shall apply to each calendar year thereafter until the Participant, on or
before December 20 of the immediately preceding calendar year, makes a
different election for the next succeeding calendar year, which election
shall remain continue in effect until a different election is made in the
manner provided in the Plan. 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
(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 to be paid in Common Stock by the Fair Market
Value (as hereinafter defined) of a share of Common Stock on the Payment
Date. Any fractional shares resulting from such calculation shall be
rounded up to the nearest whole number of shares and shall be issued on
the applicable Payment Date.
(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
amount of Compensation payable under Section IV(a) until the next Payment
Date. Such pro rata amount of Compensation shall be determined by
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. Such person may effect an
election under Section IV(a) for the remainder of the calendar year in
which he or she became a Participant by making such election prior to the
Payment Date next succeeding the date on which such person became a
Participant.
A-1
<PAGE> 26
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.
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 COMPENSATION
(a) Election to Defer Receipt of Compensation (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 and cash (if any) 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 and cash (if any) 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 of cash (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 of cash (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 and cash (if any) 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 and cash under the Plan, and all shares and cash 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 Compensation and 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 including Compensation
paid in cash, 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 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
cash, dividends paid on shares of Common Stock, on a cumulative basis,
and interest, if any, credited to such Participant's account.
A-2
<PAGE> 27
(d) Form of Payment. A Participant may elect to receive shares of Common
Stock and cash, 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.
(e) Nontransferability. The right to receive the shares of Common Stock
and cash deferred hereunder, amounts 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 cash, 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 400,000 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 the
eligibility requirement for Participants set forth in Section
A-3
<PAGE> 28
II of the Plan. 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.
XII. EFFECTIVE DATE AND DURATION OF THE PLAN
Subject to approval by the Company's stockholders, the Plan shall become
effective on January 1, 2001 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.
A-4
<PAGE> 29
EXHIBIT B
SELECTIVE INSURANCE GROUP, INC.
STOCK OPTION PLAN FOR DIRECTORS
I. PURPOSE
The purpose of this Stock Option Plan for Directors (the "Plan") of
Selective Insurance Group, Inc. (the "Company") is to encourage ownership
of the Company's common stock, $2.00 par value ("Common Stock"), by
outside directors of the Company, whose services are considered essential
to the Company's progress, and to thereby provide them with a further
incentive to continue as directors of the Company.
II. PARTICIPATION IN THE PLAN
All directors of the Company who are not full-time employees of the
Company or any subsidiary of the Company ("Director(s)") shall
participate in the Plan except for any Director who shall elect in a
written notice to the Secretary of the Company not to participate in the
Plan.
III. COMMON STOCK SUBJECT TO THE PLAN
The maximum number of shares of Common Stock available for the exercise
of options granted under the Plan ("Option(s)") shall be eight hundred
fifty thousand (850,000) shares. Such number of shares of Common Stock
shall be subject to adjustment as provided in Section VIII of the Plan.
If any outstanding Option expires or is terminated for any reason without
having been exercised in full, the shares of Common Stock covered by the
unexercised portion of such Option shall again become available for the
grant of Options.
IV. NONSTATUTORY STOCK OPTIONS
All Options shall be nonqualifed Options and shall not be entitled to tax
treatment under Section 422A of the Internal Revenue Code of 1986, as
amended to date, and as may be amended from time to time (the "Code").
V. TERMS, CONDITIONS AND FORM OF OPTIONS
(a) Option Agreements. Each Option granted under the Plan shall be
evidenced by a written agreement in the form annexed hereto as
Exhibit A-1.
(b) Grant of Options. An Option to purchase three thousand (3,000)
shares of Common Stock shall be granted automatically to each
Director on March 1 or, if March 1 is not a business day, on the
next succeeding business day of each year, commencing March 1,
2001, during the term of the Plan.
(c) Options Not Transferable. Except as otherwise expressly provided
in Section V(d) of the Plan, each Option shall not be transferable
by the optionee, except by will or by the laws of descent and
distribution and shall be exercised during the lifetime of the
optionee only by the optionee or the optionee's guardian or legal
representative. Except as otherwise expressly provided in Section
V(d) of the Plan, no Option or interest therein may be
transferred, assigned, pledged or hypothecated by the optionee,
whether by operation of law or otherwise, or be made subject to
execution, attachment or similar process."
(d) Transfer of Options. Notwithstanding anything in the Plan to the
contrary, each Option granted or to be granted to any optionee
under the Plan shall be transferable by such optionee, by gift or
pursuant to a domestic relations order, to any (i) child,
stepchild, grandchild, parent, stepparent, grandparent, spouse,
former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law or
sister-in-law, including adoptive relationships, (collectively
"Family Members"), (ii) any trust or trusts in which any Family
Members have more than fifty percent (50%) of the beneficial
interest, (iii) any foundation in which the optionee or any Family
Members control the management of assets and/or (iv) any other
entity in which the optionee or any Family Members own more than
fifty percent (50%) of the voting interests, provided that (x) the
agreement or assignment pursuant to which such Options are
transferred must provide for such transferability only in a manner
consistent with the provisions of the Plan, (y) subsequent
transfers of transferred Options shall be prohibited except in
accordance with Section V(c) of the Plan and (z) any transfer of
Options not in compliance with this Section V(d) shall be void and
of no effect. Following the transfer of any Options, the
transferred Options shall continue to be subject to the same terms
and conditions as were applicable immediately prior to such
transfer, and the provisions of the Plan shall continue to apply
to such transferred Options"; and it is further
B-1
<PAGE> 30
(e) Exercise of Option. Each Option shall become exercisable on the
first anniversary of the date upon which it was granted; provided,
however, that any outstanding Option that is not yet exercisable
shall become exercisable in full (i) upon the retirement of the
optionee because of total and permanent disability or upon the
death of the optionee, as hereinafter provided or (ii) six months
after the retirement of the optionee for any other reason. No
Option shall be exercisable after the expiration of ten (10) years
from the date upon which such Option is granted.
(f) Exercise by Representative Following Death or Disability of
Director. In the event of the death or disability of an optionee,
any Option outstanding as of the date of death or disability 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.
(g) Exercise of Options. Options may be exercised by written notice to
the Company addressed to the office of the Secretary of the
Company and accompanied by payment in cash or in shares of Common
Stock of the Company for the full exercise price for the shares as
to which they are exercised.
VI. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS
No Option shall be extended or renewed, and no Option shall be granted in
substitution for any Option granted. No Option shall be modified oar
amended without the consent of the optionee or the optionee's executor,
administrator, guardian or legal representative.
VII. OPTION EXERCISE PRICE
The exercise price for each share of Common Stock covered by an Option
shall be equal to the Fair Market Value of a share of Common Stock on the
date of grant of such Option. For the purposes of the Plan, the term
"Fair Market Value" shall mean the average of the highest and lowest
quoted selling prices for a share of Common Stock on the date of grant of
an Option, or, if the date of grant of the Option is not a business day,
on the next succeeding business day, as reported on the NASDAQ National
Market System. If there is no sale of Common Stock reported on such date,
"Fair Market Value" shall mean the average of the highest asked and
lowest bid prices for a share of common Stock on such date as reported on
the NASDAQ National Market System.
VIII. GENERAL PROVISIONS
(a) Assignments. The rights and benefits under this Plan may not be
assigned except as provided in Section V hereof.
(b) Term of the Plan. No Options shall be granted more than ten (10)
years after the effective date of this Plan.
(c) Limitation of Rights. Neither the Plan, nor the granting of an
Option, nor any other action taken pursuant to the Plan, shall
constitute or be evidence of any agreement or understanding,
express or implied, that the Company will retain a Director for
any period of time or at any particular rate of compensation. An
optionee shall have no rights as a stockholder with respect to the
shares covered by such optionee's Options until the date of the
issuance to such optionee of a stock certificate therefor, and no
adjustment will be made for dividends or other rights for which
the record date precedes the date such certificate is issued.
(d) Adjustments. In the event of any merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, or
other changes in the corporate structure or capitalization
affecting Common Stock, adjustments shall be made in the number
(including the aggregate numbers specified in Section III) and
kind of shares which are or may become subject to Options granted
or to be granted hereunder.
(e) Effective Date. This Plan shall take effect on and as of March 1,
2001, upon approval of the Plan by the stockholders or the
Company. In no event shall any Option become exercisable until
twenty (20) days after the filing with the Securities and Exchange
Commission of a registration statement on Form S-8, or such other
form of registration statement, if any, as shall be required.
B-2
<PAGE> 31
(f) Amendment. The Board of Directors of the Company may suspend or
discontinue the Plan at any time. The Plan may be amended by the
Board of Directors but may not be amended more than once every six
(6) months so as to: (i) change the class of persons eligible to
receive Options; (ii) change the timing of grants of Options; or
(iii) change the amount of Options to be granted to Directors
under the Plan, other than amendments made to comport with changes
in the Code or rules thereunder.
(g) Administrative Discretion. No discretion concerning decisions
regarding the Plan shall be afforded to any person who is not a
"disinterested person," as defined in Rule 16b-3 under the
Securities Exchange Act of 1934, or any successor rule, as in
effect from time to time.
(h) Notice. Any written notice to the Company required by any of the
provisions of this Plan or the Option Agreement under the Plan
shall be addressed to the Secretary of the Company and shall
become effective when it is received.
IX. GOVERNING LAW
This Plan and all determinations made and actions taken pursuant hereto
shall be governed by the law of the State of New Jersey and construed
accordingly.
B-3
<PAGE> 32
EXHIBIT A-1 to EXHIBIT B
SELECTIVE INSURANCE GROUP, INC.
STOCK OPTION PLAN FOR DIRECTORS
STOCK OPTION AGREEMENT
THIS AGREEMENT, effective the ___________________________of , by and between
SELECTIVE INSURANCE GROUP, INC., a New Jersey corporation, with its principal
office at Wantage Avenue, Branchville, New Jersey 07890 (hereinafter called the
"Company"), and _______________________, residing at
_______________________________________________ (hereinafter called the
"Optionee").
WITNESSETH THAT:
WHEREAS, the Board of Directors of the Company (the "Board") adopted a Stock
Option Plan for Directors (the "Plan") on May 4, 1990 and said plan expires in
2000; and
WHEREAS, the Board has approved an amendment to the Plan to increase in number
of shares available in the Plan, and extending the expiration date of the plan
to March 1, 2010; and
WHEREAS, the Plan provides for the automatic grant of options to Directors of
the Company who are not full-time employees of the Company to purchase shares of
the Company's Common Stock, $2.00 par value ("Common Stock");
NOW THEREFORE, it is mutually agreed as follows:
1.) The Company hereby grants to the Optionee, pursuant to the Plan and on
the terms and conditions hereinafter set forth, an option to purchase all
or any part of three thousand (3,000) shares of Common Stock at a price
of $____ per share (the "Option"), said price being the Fair Market Value
of a share of Common Stock on the date hereof as determined under the
Plan.
2.) The right to purchase the shares of Common Stock subject to the Option
shall vest and be exercisable twelve (12) months after the date hereof.
Any unexercised part of the Option shall lapse ten (10) years after the
date hereof. No fractional share may be purchased or delivered hereunder.
In no event shall any Option become exercisable until twenty (20) days
after the filing with the Securities and Exchange Commission of a
registration statement of Form S-8, or such other form of registration
statement, if any, as shall be required.
3.) The Option may be exercised only by written notice to the Company,
addressed to the Secretary of the Company, specifying the number of
shares of Common Stock in respect of which the Option is being exercised
and accompanied by cash payment of the full purchase price for such
shares.
4.) The Company shall take any action required by law and applicable
regulations to authorize the issuance and delivery of any shares of
Common Stock subject to an Option. Upon completion of such action, and
upon valid exercise of an Option, the Company shall deliver to the
Optionee certificates for such shares, which shares, when issued, shall
be fully paid and nonassessable.
5.) If, prior to delivery by the Company of all of the shares covered by the
Option, there shall be any increases or reductions in the number or
shares of Common Stock outstanding by reason of any stock dividend or
stock split or other readjustment or, if there is any other material
change in the capital structure of the Company by reason of any
reclassification, reorganization, recapitalization or otherwise, there
shall be a proportionate and equitable adjustment of the terms of the
Option with respect to the amount and class of shares remaining subject
to the Option and the purchase price to be paid therefor.
6.) The Optionee shall have no rights or privileges as a stockholder of the
Company with respect to the shares of Common Stock issuable under the
Option until certificates representing such shares have been issued to
said Optionee. Prior to the delivery of such shares, the Company may
require the Optionee or other authorized person exercising the Option to
furnish such representations as may be required in the sole discretion of
the Company's counsel to satisfy the requirements of applicable law.
1
<PAGE> 33
7.) The Option shall not be assignable or transferable by the Optionee
otherwise than by will or the laws of descent and distribution and shall
be exercisable during the Optionee's lifetime only by the Optionee or the
Optionee's guardian or legal representative.
8.) In the event that the Optionee shall cease to be a Director of the
Company, or in the event of the death or disability of the Optionee, the
Option shall be exercisable in accordance with the terms and conditions
of the Plan.
9.) Neither the granting of the Option, nor any action taken pursuant to the
Plan, shall constitute or be evidence of any agreement or understanding,
express or implied, that the Company shall retain a Director for any
period of time or any particular rate of compensation.
10.) The acceptance by the Optionee of the Option and the execution and
delivery of this Agreement constitutes the agreement by the Optionee to
be bound by the terms and conditions of the Plan, as amended from time to
time. In the event of any inconsistency between the terms and conditions
of the Plan and the provisions of this Agreement, the terms and
conditions of the Plan shall take precedence.
11.) Any notice to be given or served under the terms of this Agreement or the
Plan shall be delivered to the Secretary of the Company and to the
Optionee at the address shown above or such other address or addresses as
either party may designate in writing to the other. Any such notice shall
be given by hand delivery or by registered or certified United States
mail, postage prepaid, return receipt requested, and shall become
effective when received.
12.) This Agreement shall be construed in accordance with the laws of New
Jersey and shall be binding on and inure to the benefit of any successor
or successors of the Company and each executor, administrator, guardian
or legal representative of the Optionee.
13.) The Company may make such provisions as it may deem necessary and
appropriate for the withholding of any taxes if the Company determines it
is required to withhold in connection with this Agreement and the
transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the day and year first above written.
SELECTIVE INSURANCE GROUP, INC.
By:
-------------------------
Gregory E. Murphy
Chief Executive Officer and President
ATTEST:
- ----------------------------
Michele C. Nieroda
Corporate Secretary
--------------------------------
,Optionee
2
<PAGE> 34
[SELECTIVE LOGO]
Selective Insurance Group, Inc.
40 Wantage Avenue
Branchville, NJ 07890
(973) 948-3000
http://www.selectiveinsurance.com
3
<PAGE> 35
SELECTIVE INSURANCE GROUP, INC.
Proxy Solicited on Behalf of the Board of Directors of
Selective Insurance Group, Inc. for Annual Meeting of Stockholders, May 5, 2000
The undersigned, a stockholder of Selective Insurance Group, Inc. (the
"Company"), hereby constitutes and appoints C. Edward Herder, William M.
Rue and Thomas D. Sayles, Jr. and/or any one or more of them (with full
power of substitution and the full power to act without the others or
P other), the Proxy Committee to vote the stock of Selective Insurance Group,
R Inc. registered in the name of the undersigned at the Annual Meeting of
O Stockholders of the Company to be held on Friday, May 5, 2000, at 11:00
X a.m., in the auditorium at the headquarters of the Company at 40 Wantage
Y Avenue, Branchville, New Jersey, and at any adjournment thereof, for the
Election of Directors to be held at said meeting, for the proposal to amend
the Stock Compensation Plan for Non-Employee Directors, for the proposal to
amend the Stock Option Plan for Directors, and upon such other matters as
may properly come before the meeting, hereby granting to said Proxy
Committee, or any member thereof, full power and authority to act for and
vote in the name of the undersigned with full power of substitution.
ELECTION OF DIRECTORS
Nominees for Terms Expiring 2003:
A. David Brown
William M. Kearns, Jr.
S. Griffin McCellan III
J. Brian Thebault
Specify you choices by marking the appropriate boxes (SEE REVERSE SIDE),
but you need no mark any boxes if you wish to vote in accordance with the
Board of Directors' recommendations. The Proxy Committee cannot vote your
shares unless you sign and return this Proxy, submit a proxy by telephone
or through the Internet, or attend the meeting and vote by ballot.
|-----------|
|see reverse|
| side |
|-----------|
-----------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 36
- ---- Please mark your
X votes as in this
- ---- example.
This Proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR Election of
Directors. FOR approval of the amendment to Selective's Stock compensation
Plan for Non-Employee Directors, and FOR approval of the amendment to
Selective Stock Option Plan for Directors.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of ----- ----- 2. To approve the ----- ----- -----
Directors proposal to amend
(see reverse) ----- ----- Selective's Stock ----- ----- -----
Compensation Plan
For, except vote withheld from for Non-Employee
the following nominee(s). Directors
- ------------------------------
FOR AGAINST ABSTAIN
3. To approve the proposal to ----- ----- -----
amend Selective's Stock Option
Plan for Directors ----- ----- -----
4. In their discretion upon such other matters as may
properly come before the meeting
----------------------------------
SIGNATURE(S)---------------------- DATE----- Please mark, sign, date and return
NOTE: Please sign exactly as name appears this Proxy promptly using the
hereon. Joint owners should each enclosed envelope.
sign. When signing as attorney, ----------------------------------
executor, administrator, trustee
or guardian, please give full title
as this Proxy promptly using the
enclosed envelope.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE OR INTERNET
VOTE BY TELEPHONE VOTE BY INTERNET VOTE BY MAIL
Call TOLL-FREE using a Access the WEBSITE and Return your proxy in the
Touch Tone phone cast your vote POSTAGE-PAID envelope
1-877-PRX VOTE HTTP://www.eproxyvote.com/sigi provided
1-877-779-8683
Your telephone or Internet vote must be received by midnight eastern time on
May 4, 2000 to be counted in the final tabulation.
VOTE BY TELEPHONE
Have your proxy card available when you call the Toll-Free number 1-877-779-8683
using a Touch-Tone phone. You will be prompted to enter your control number and
then you can follow the simple prompts that will be presented to you to record
your vote.
VOTE BY INTERNET
Have your proxy card available when you access the website
http://www.eproxyvote.com/sigi. You will be prompted to enter your
control number and then you can follow the simple prompts that will be
presented to you to record your vote.
VOTE BY MAIL
Please mark, sign and date your proxy card and return it in the postage paid
envelope provided or return it to: Selective Insurance Group, Inc. c/o First
Chicago Trust Co, a Division of EquiServe, P.O. Box 8079,
Edison NJ 08818-9126.
TO CHANGE YOUR VOTE
You may revoke your proxy by giving proper written notice of revocation to the
Secretary of the Company before your proxy is exercised. Any subsequent vote by
any means will change your prior vote. For example, if you voted by telephone, a
subsequent Internet vote will change your vote. The last vote received before
midnight eastern time, May 4, 2000 will be the one counted. You may also change
your vote by voting in person at the annual meeting.
