<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 as amended
Filed by the Registrant X
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statements
X Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
PIEDMONT MANAGEMENT COMPANY INC.
(Name of Registrant as Specified in its Charter)
PIEDMONT MANAGEMENT COMPANY INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
X $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
$500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
Fee computed on table below Exchange Act Rules 14a-6(i)(4) and 0-11.*
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
*Set forth the amount on which the filing fee is calculated and state how
it was determined.
Check box if any 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>
PIEDMONT MANAGEMENT COMPANY INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 25, 1995
The Annual Meeting of Stockholders of Piedmont Management Company
Inc. (the "Company") will be held at the offices of the Company,
80 Maiden Lane, New York, New York 10038 on Thursday, May 25,
1995 at 2:00 P.M., New York City time, for the following
purposes:
1. To elect four directors to hold office for terms
expiring in 1998 and until their respective
successors shall have been elected and shall qualify;
2. To elect three members of the Nominating and Proxy
Committee to serve until the next Annual Meeting of
Stockholders and until their respective successors
shall have been elected and shall qualify;
3. To approve the appointment of Coopers & Lybrand L.L.P.
as independent auditors for the current calendar year;
and
4. To act upon such other matters as may properly come
before the meeting or any adjournment
thereof.
The Board of Directors has fixed the close of business, April 6,
1995, as the record date for the determination of the
stockholders entitled to notice of and to vote at the meeting and
any adjournment thereof.
By Order of the Board of Directors
PETER J. PALENZONA
Senior Vice President & Secretary
Chief Financial Officer
New York, New York
April 10, 1995
YOUR VOTE IS IMPORTANT.
IF YOU CANNOT ATTEND THE MEETING IN PERSON,
PLEASE MARK, DATE, SIGN AND RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE.
<PAGE>
PIEDMONT MANAGEMENT COMPANY INC.
80 Maiden Lane
New York, New York 10038
PROXY STATEMENT
INFORMATION CONCERNING PROXY
This Proxy Statement is furnished in connection with the
solicitation of proxies for use at the Annual Meeting of
Stockholders of Piedmont Management Company Inc., a Delaware
corporation (the "Company"), to be held at the time and place for
the purposes set forth in the foregoing Notice and at any and all
adjournments thereof. It is expected that this Proxy Statement
and the accompanying form of proxy will be mailed to stockholders
on April 10, 1995 or shortly thereafter.
Solicitation of proxies for use at this Annual Meeting is being
made by mail on behalf of the Board of Directors by the members
of the Nominating and Proxy Committee consisting of Messrs.
Lunsford Richardson, Jr.; L. Richardson Preyer; and Stuart Smith
Richardson, directors of the Company.
The cost of solicitation will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by
persons regularly employed by the Company by personal interview
or telephone and telegraph, with no additional compensation
therefor. Arrangements will also be made with brokerage houses
and other custodians, nominees and fiduciaries for the forwarding
of solicitation material to the beneficial owners of stock
held of record by such persons, and the Company will reimburse
them for reasonable out-of-pocket expenses incurred by them in
connection therewith.
As of April 6, 1995, there were outstanding 4,986,527 shares of
Common Stock, par value $.50 per share (the "Common Stock") and
192,024 shares of $1.00 Cumulative Preferred Stock, Convertible
Series A, par value $1.00 per share (the "Series A Preferred
Stock"), of the Company entitled to be voted at the meeting.
Only stockholders of record at the close of business on April
6, 1995 will be entitled to notice of and to vote at the meeting,
each share of Common Stock and Series A Preferred Stock being
entitled to one vote. A favorable vote of the holders of a
majority of the shares of Common Stock and Series A Preferred
Stock represented in person or by proxy at the meeting, voting as
one class, is required for the approval of each of the matters
covered by this Proxy Statement.
Based upon their aggregate holdings of Common Stock and Series A
Preferred Stock, members of the Richardson Family have the ability
to cast a majority of the votes entitled to notice of and to vote at
the meeting. See "Principal Holders of Securities of the Company."
<PAGE>
Any stockholder giving a proxy pursuant to this solicitation has
the power to revoke it at any time before it is exercised. A
proxy may be revoked by delivery of a written statement to the
Secretary of the Company stating that the proxy is revoked, by
subsequent proxy executed by the person executing the prior proxy
and presented to the meeting, or by attendance at the meeting and
voting in person by the person executing the proxy. As to each
proposal, abstentions will be included, but broker non-votes will
not be included in the calculation of the number of holders who
are considered present and voting at the meeting.
1. ELECTION OF FOUR DIRECTORS
Pursuant to the Bylaws, the Nominating and Proxy Committee has
fixed the number of directors which shall constitute the Board of
Directors for the ensuing year at twelve. The persons named as
nominees in the following list have been nominated by the
Nominating and Proxy Committee as directors to hold office for
the terms of office set forth opposite their respective names and
until their successors shall have been elected and shall qualify,
and it is intended that the proxies be voted for them (unless
authority is withheld by a stockholder). If any nominee is, in
the judgment of the Nominating and Proxy Committee, unable or
unavailable to serve, the proxies may be voted for the election
of another person designated by said Committee, but it is not
presently anticipated that any nominee will be unable or
unavailable to serve. The names, ages, principal occupations and
selected biographical information of the directors as of March 1,
1995 including such nominees and the period of previous service
as a director of the Company are as follows:
Sion A. Boney, III (2), age 39, director since 1987 to expire 1996,
Vice President and General Manager of The Venture Group of
Bristol-Myers Squibb Company; formerly Consultant, Marketing
Corporation of America.
Terence N. Deeks, age 55, director since 1984 to expire 1996,
Chairman, President and Chief Executive Officer of The Navigators
Group, Inc.
Robert M. DeMichele, age 50, director since 1982 to expire 1997,
President and Chief Executive Officer of the Company; President
and Chief Operating Officer of The Reinsurance Corporation of New
York (property and casualty reinsurance subsidiary of the
Company); Chairman and Chief Executive Officer of Lexington
Management Corporation (investment counseling and mutual fund
management subsidiary of the Company); Director of The Navigators
Group, Inc.; Director of Vanguard Cellular Systems, Inc.
Haynes G. Griffin (3), age 48, director since 1992 to expire 1998,
President and Chief Executive Officer of Vanguard Cellular
Systems, Inc.; Director of Geotek Communications Inc.
<PAGE>
William R. Miller (3), age 64, director since 1994 to expire 1998,
Retired; formerly President and Chief Executive Officer of
Winterthur U.S. Holdings.
L. Richardson Preyer (2), age 76, director since 1982 to expire 1997,
Retired; formerly Professor, University of North Carolina;
formerly a Member of the U.S. House of Representatives from the
State of North Carolina; Director of Vanguard Cellular Systems, Inc.
Lunsford Richardson, Jr. (2), age 71, director since 1968 to
expire 1996, Chairman of The Reinsurance Corporation of New
York; Chairman of Richardson Corporation of Greensboro.
Peter L. Richardson (2), age 41, director since 1986 to expire
1996, President of Smith Richardson Foundation, Inc.; Managing
Trustee of H. Smith Richardson Family Trust.
R. R. Richardson (2), age 69, director since 1972 to expire 1996,
Chairman of the Company.
Stuart Smith Richardson (2,3), age 48, director since 1983 to
expire 1998, Vice Chairman of the Company; Chairman of Vanguard
Cellular Systems, Inc.
Carl H. Tiedemann (3), age 68, director since 1982 to expire 1998,
General Partner, Tiedemann Boltres Partners; Director of Alltel
Corporation.
Marion A. Woodbury, age 72, director since 1979 to expire 1997,
Retired; Director of The Navigators Group, Inc.
[FN]
<FN1> In addition to the other principal occupations listed
opposite his name, each of the directors or nominees
except Messrs. Boney, Deeks, Griffin, Preyer, Peter L.
Richardson and Tiedemann is a director of either The
Reinsurance Corporation of New York ("RECO") or
Lexington Management Corporation ("Lexington"), both of
which are wholly-owned subsidiaries of the Company.
<FN2> Messrs. R. R. Richardson, Lunsford Richardson, Jr. and
L. Richardson Preyer are first cousins. Messrs. Stuart
Smith Richardson and Peter L. Richardson are brothers.
Mr. Sion A. Boney, III is a nephew of Mr. Lunsford
Richardson, Jr.
<FN3> Nominees for director.
<PAGE>
INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors has delegated certain of its authority to
standing audit, executive personnel and nominating and proxy
committees.
The members of the Audit Committee are nominated annually by the
Nominating and Proxy Committee and appointed by the Board of
Directors. Presently, the members of the Audit Committee are
Lunsford Richardson, Jr.; L. Richardson Preyer; and Sion A.
Boney, III. The Audit Committee is responsible for appointing
and engaging, subject to the approval of stockholders each year,
the independent accountants for the Company. The committee
discusses and approves plans for the accountants' annual audit,
reviews with the independent accountants and with management the
scope and results of the accountants' report and monitors the
implementation of suggestions made by the independent
accountants. The committee met two times during 1994.
The members of the Executive Personnel Committee are designated
by the Bylaws to be the Chairman of the Board of Directors, the
President and such additional persons from among the Board of
Directors as may be elected by a resolution passed by a majority
thereof. The members of the committee are R. R. Richardson;
Robert M. DeMichele; Stuart Smith Richardson; and Lunsford
Richardson, Jr. The committee reviews, discusses and approves
proposed executive salaries, benefit changes, promotions,
development plans, and stock option grants. This committee met
two times during 1994.
The members of the Nominating and Proxy Committee, elected
annually by the stockholders, are L. Richardson Preyer; Lunsford
Richardson, Jr.; and Stuart Smith Richardson, directors of the
Company. The Nominating and Proxy Committee is authorized under
the Bylaws to designate nominees for directors of the Company, to
solicit proxies for the election of directors and for all other
matters coming before the stockholders and to cast all votes
represented by proxies received by it for the election of
directors and for such other matters as may come before a meeting
of the stockholders. The Nominating and Proxy Committee met two
times during 1994.
The Nominating and Proxy Committee will consider proposals for
nominees for the Board of Directors suggested by stockholders.
Stockholders who wish to suggest nominees should submit their
suggestions in writing to the Secretary of the Company at the
address of the Company set forth on the first page of this proxy
statement.
During 1994, each director of the Company attended at least 75%
of the meetings of the Board of Directors and the committees on
which he served. The Board of Directors held four meetings in
1994.
<PAGE>
DIRECTORS' COMPENSATION
A director who is also an employee of the Company or one of its
subsidiaries receives no compensation for his service on the
Board in addition to that compensation which he receives as an
employee. A director who is not an employee of the Company and
who does not receive a fee for performing services as a committee
member or for performing consulting and advisory services for the
Company is paid a director's fee of $6,000 per year plus $500 for
each Board meeting he attends.
For their services on committees of the Board, in lieu of the
foregoing fees, Messrs. R. R. Richardson, Lunsford Richardson, Jr.,
Peter L. Richardson and Carl Tiedemann received $30,000, $8,155,
$10,000 and $18,000, respectively. Mr. Stuart Smith Richardson
is a full time salaried employee of the Company in addition to
serving as the Vice Chairman of the Board of Directors. In 1994
Mr. Stuart Smith Richardson was paid a salary of $224,275 and a
cash bonus of $40,000.
2. SECURITIES OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth information concerning the
security ownership of each director, each of the five most highly
compensated executive officers and directors and executive
officers as a group as of March 1, 1995.
<TABLE>
SHARES OF STOCK BENEFICIALLY OWNED AS OF MARCH 1, 1995 (1,2)
<CAPTION>
Director/ Common Percent Series A
Executive Officer (3,4) (5) Preferred Percent
<S> <C> <C> <C> <C>
Sion A. Boney, III (6,7) 287,586 5.4 23,910 12.4
Terence N. Deeks 13,860 .3 - -
Robert M. DeMichele 112,128 2.1 378 .2
Haynes G. Griffin (7) 421,464 7.8 - -
Richard M. Hisey 15,900 .3 - -
Lawrence Kantor 30,700 .6 - -
Richard J. Matinale 43,400 .8 - -
William R. Miller - - - -
Peter J. Palenzona 49,000 .9 - -
L. Richardson Preyer (6) 10,988 .2 2,141 1.1
Lunsford Richardson, Jr. (6,7) 212,958 4.0 24,980 13.0
Peter L. Richardson (6,7) 533,655 9.9 1,100 .6
R. R. Richardson (6) 50,576 .9 7,136 3.7
Stuart Smith Richardson (6,7) 1,232,496 23.0 14,799 7.7
Carl H. Tiedemann - - - -
Marion A. Woodbury - - - -
Directors and Executive
Officers as a Group 2,171,783 40.4 74,444 38.8
<PAGE>
<FN>
<FN1> Except as otherwise indicated and subject to applicable
community property and similar statutes, the persons listed
as beneficial owners of the shares have either sole or shared
voting power and investment power with respect to such
shares.
<FN2> The amounts shown include shares which are beneficially owned
by more than one individual since many shares are held in
trusts with more than one trustee.
<FN3> The amounts shown include shares which may be acquired within
sixty days following March 1, 1995 through the conversion of
Series A Preferred Stock at a conversion ratio of two shares
of Common Stock for every share of Series A Preferred Stock
as follows: Mr. Sion A. Boney, III, 47,820; Mr. Robert M.
DeMichele, 756; Mr. L. Richardson Preyer, 4,282; Mr. Lunsford
Richardson, Jr., 49,960; Mr. Peter L. Richardson, 2,200; Mr.
R. R. Richardson, 14,272; Mr. Stuart Smith Richardson,
29,598; and Directors and Executive Officers as a Group,
148,888.
<FN4> The amounts shown include shares which may be acquired within
sixty days following March 1, 1995 through the exercise of
stock options as follows: Mr. Robert M. DeMichele, 102,000;
Mr. Richard M. Hisey, 15,900; Mr. Lawrence Kantor, 28,700;
Mr. Richard J. Matinale, 43,400; Mr. Peter J. Palenzona,
48,500; Mr. Stuart Smith Richardson, 58,000; and Directors
and Executive Officers as a Group, 296,500.
<FN5> For purposes of computing the percentages, the number of
shares of Common Stock outstanding is calculated for each
individual to include shares which may be purchased by that
individual within sixty days upon exercise of outstanding
options and shares which may be obtained by that individual
through the conversion of Series A Preferred Stock at a
conversion ratio of two shares of Common Stock for every
share of Series A Preferred Stock.
<FN6> The individuals named may be deemed to be control persons of
the Company (other than solely by reason of being directors
of the Company) according to the rules of the Securities and
Exchange Commission.
<FN5> For a discussion of the beneficial stock ownership of Messrs.
Boney; Griffin; Lunsford Richardson, Jr.; Peter L.
Richardson; and Stuart Smith Richardson and their associates,
see "Principal Holders of Securities of the Company."
</FN>
</TABLE>
<PAGE>
EXECUTIVE OFFICERS' COMPENSATION
Set forth below is certain information regarding the compensation of
each of the five most highly compensated executive officers of the
Company and its subsidiaries for the calendar years ended December 31,
1994, 1993 and 1992.
<TABLE>
<CAPTION>
Annual Compensation Securities
Other Underlying All
Annual Stock Options Other
Name/Position Year Salary Bonus Compensation Granted (#) Compensation(1)
<S> <C> <C> <C> <C> <C> <C>
Robert M. DeMichele 1994 $437,775 $100,000 - 17,000 $53,152
President & CEO 1993 $396,297 $401,100 - - $37,948
of the Company 1992 $379,816 - - 15,000 $37,303
Richard M. Hisey 1994 $167,034 $103,000 - 7,000 $5,011
Managing Director 1993 $143,000 $70,000 - - $4,290
of Lexington 1992 $124,000 $49,500 - 4,500 $3,720
Lawrence Kantor 1994 $230,535 $153,000 - 7,000 $6,916
Managing Director 1993 $205,575 $115,000 - - $6,167
of Lexington 1992 $195,505 $72,000 - 7,000 $5,865
Richard J. Matinale 1994 $230,000 $35,000 - 10,000 $6,900
Executive VP 1993 $197,500 $95,000 - - $5,925
of RECO 1992 $186,250 $20,000 - 9,000 $5,588
Peter J. Palenzona 1994 $205,250 $25,000 - 10,000 $6,158
Senior VP & CFO 1993 $188,500 $55,000 - - $5,655
of the Company 1992 $177,650 $20,000 - 9,000 $2,703
<FN>
<FN1>The amounts reported in this column represent, for each of the
individuals named, the employer portion of contributions to the
Company's Pay Conversion Plan, a defined contribution salary
deferral plan which qualifies under Section 401(k) of the Internal
Revenue Code. In addition, amounts include employer contributions
to the Company's Executive and Supplemental Benefit Plans,
non-qualified plans replacing the portion of benefits which are in
excess of Internal Revenue Code limits for tax qualified plans.
For each of the last three calendar years, contributions to the
Executive Benefit Plan for Mr. DeMichele were $48,652; $33,451;
and $32,939, respectively; and in 1994 contributions to the
Supplemental Benefits Plan were as follows: for Mr. Hisey, $511;
Mr. Kantor, $2,416; Mr. Matinale, $2,400; and Mr. Palenzona,
$1,658. There were no contributions to the Supplemental Benefits
Plan prior to 1994.
</FN>
</TABLE>
<PAGE>
STOCK OPTIONS
The Company has granted options to purchase shares of Common Stock to
officers and other key employees of the Company and its subsidiaries
under its 1979 Stock Option Plan (the "1979 Plan") and its 1988
Piedmont Management Company Inc. Employee Stock Option Plan (the "1988
Plan"). The plans are administered by a committee of disinterested
members of the Board of Directors. No additional options may be granted
under the 1979 Plan. Options may be granted under the 1988 Plan until
August 17, 1998. The option price of Common Stock under both plans is
fair market value on the date of the grant. Upon exercise of an option
the option price must be paid in full. Options granted under the plans
are not exercisable until two years after the date of the grant, and no
option may be exercised more than ten years after the date of the
grant.
Prior to May 1, 1991, when the plans were amended, the Company also
granted stock appreciation rights ("SARs") with respect to options
granted under both plans. The SARs are exercisable only upon surrender
of the related option and only to the extent that the related option is
exercisable. The SAR terminates upon termination of the related
option. Upon exercise of the SAR, the holder is entitled to receive
the excess of the fair market value of the shares for which the right
is exercised over the option price under the related option. The
committee referred to above has the authority to determine whether the
value of the SAR is paid in cash or shares of Common Stock or a
combination of both. No SARs have been granted subsequent to May 1, 1991.
The following table contains information concerning the grants of stock
options under the Company's 1988 Employee Stock Option Plan with
respect to the named executive officers during 1994.
<TABLE>
<CAPTION>
Number of % of
Securities Options Exercise Grant
Underlying Granted or Date
Options to Employees Base Expiration Present
Name Granted in 1994 Price Date Value(1)
<S> <C> <C> <C> <C> <C>
Robert M. DeMichele 17,000 14.4% $14.75 2/28/04 $99,790
Richard M. Hisey 7,000 5.9% $14.75 2/28/04 $41,090
Lawrence Kantor 7,000 5.9% $14.75 2/28/04 $41,090
Richard J. Matinale 10,000 8.5% $14.75 2/28/04 $58,700
Peter J. Palenzona 10,000 8.5% $14.75 2/28/04 $58,700
<FN>
<FN1> The estimated grant date present value reflected in the above
table is determined using the Black-Scholes model. The model
assumes: a) an exercise price of $14.75, equal to the fair market
value of the underlying common stock on the date of grant; b) an
option term of 8.4 years, which represents the weighted average (by
number of options) of the length of time between grant date of
options under the Company's plans and their exercise for all who
<PAGE>
received options; c) an interest rate of 6.05% that represents an
average of seven year and ten year U.S. Treasury Securities on the
date of grant; d) volatility of 36.83% calculated using quarterly
stock prices for five years prior to the date of grant; e) a
dividend yield equal to 0.0%; and f) a reduction of 28% to reflect
the probability of forfeiture prior to the options' expiration.
The Company's use of the Black-Scholes model should not be construed
as an endorsement of its accuracy. The future values realized may
vary significantly from the model and will ultimately depend upon the
excess of the market price of the stock over the grant price on the date
the option is exercised.
</FN>
</TABLE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the named
executive officers, concerning exercise of options and SARs during 1994
and unexercised options and SARs held as of December 31, 1994.
<TABLE>
<CAPTION>
Shares
Acquired Number of Shares Underlying Value of Unexercised
on Value Unexercised Options/SAR's "In the Money" Options(3)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Robert M. DeMichele - - 102,000 (1) 35,000 (1) $111,000 $35,250
Richard M. Hisey - - 15,900 12,100 $25,000 $10,500
Lawrence Kantor 2,000 $7,140 28,700 14,800 $36,200 $16,300
Richard J. Matinale 3,500 $14,665 43,400 20,600 $42,900 $21,100
Peter J. Palenzona - - 48,500 (2) 20,500 (2) $56,300 $21,075
<FN>
<FN1> Mr. DeMichele has 87,000 shares of exercisable SARs and 3,000 shares of
unexercisable SARs that were granted in tandem with his stock options.
<FN2> Mr. Palenzona has 39,500 shares of exercisable SARs and 1,500 shares of
unexercisable SARs that were granted in tandem with his stock options.
<FN3> These values are based upon the December 31, 1994 market price of the
Company's common stock which was $12.25 per share.
</FN>
</TABLE>
Retirement Plan Benefits
The Company and its subsidiaries are the sponsors of a defined benefit
pension plan on behalf of their employees. Benefit formulas under the
plan are explained below. Benefits vest after five years of service.
An employee becomes a participant in the plan after attaining age 21
and completing one year of service. The pension benefit is equal to
the sum of past service retirement income plus future service
retirement income. For a participant as of December 31, 1988, the
<PAGE>
amount of normal retirement income standing to his credit as of that
date will not be less than 1 1/4% of the first $17,000 of his average
annual earnings for the calendar years 1984 through 1988 inclusive,
plus 1 3/4% of average earnings in excess of $17,000, multiplied by his
credited service through December 31, 1988. Certain employees of RECO
who participated in a predecessor pension plan have their benefits
reduced by the December 31, 1978 annuitized value of their balance in a
previously sponsored Profit Sharing Plan. All participants' benefits
for future service are arrived at by calculating 1 1/2% of annual salary
for each year of service. A participant is eligible for this normal
retirement pension on the first date of the month coincident with or next
following his 65th birthday.
The following table illustrates, as of December 31, 1994, for the
individuals named (a) years of service credited under the retirement
plan and (b) the estimated annual benefits payable under the plan,
including Social Security benefits, assuming the election of a single
life annuity upon normal retirement at the age of 65.
<TABLE>
<CAPTION>
Name of Years of Service as of Estimated Annual Benefit
Officer December 31, 1994 Payable
<S> <C> <C>
Robert M. DeMichele 14 $94,512
Richard M. Hisey 8 $91,632
Lawrence Kantor 10 $77,436
Richard J. Matinale 21 $91,452
Peter J. Palenzona 15 $93,084
</TABLE>
DEFERRED COMPENSATION AGREEMENT
The Company and Mr. DeMichele entered into a deferred compensation
agreement dated as of January 1, 1987 (the "Agreement") whereby the
Company agreed to make certain payments to Mr. DeMichele in recognition
of the instrumental role that he played in the Company's 1982
investment of $3.5 million in the common stock of The Navigators Group,
Inc. ("Navigators"). Under one provision of the Agreement, payments
were based upon the Company's total unrealized gain on the Navigators
common stock as of June 19, 1986 and varied each year until July 1,
1991. Each annual payment was adjusted by the amount of any dividends
paid by Navigators to its stockholders, by fluctuations of the market
price of the Navigators common stock and by any gain or loss realized
by the Company upon the sale of any Navigators common stock prior to
July 1, 1991. Another provision under the Agreement provides that upon
any sale (or other transaction having similar characteristics) of the
Navigators common stock subsequent to July 1, 1991, the Company shall
pay to Mr. DeMichele 10% of the profit realized based upon the excess
of the per share sale price over the per share market price on July 1,
1991. There have not been any payments under this Agreement subsequent
to July 1, 1991. If Mr. DeMichele's employment by the Company is
terminated by reason of his death or any physical or mental disability
<PAGE>
rendering the performance of his duties for the Company impossible, the
Company will pay the agreed amounts to his estate or other
representative.
SEVERANCE AND CHANGE IN CONTROL AGREEMENTS
The Company has entered into a Severance Compensation and Change in
Control Agreement ("the Agreement") with a number of employees,
including three of the named executive officers (Messrs. DeMichele,
Matinale and Palenzona). The Agreements provide that if an employee is
terminated either within six months before a change in control (as
defined) or within eighteen months after a change in control the
employee shall be entitled to a severance pay (defined as monthly base
salary on date of termination) payable in a lump sum and reimbursement
for the future cost of medical insurance coverage provided by the
Company and in effect on termination.
The amount of severance pay and reimbursement of medical insurance
premiums under each Agreement varies for each employee from six to
thirty months of base salary and six to thirty months of medical
insurance premium reimbursement. Messrs. DeMichele, Matinale and
Palenzona are each entitled to thirty months of base salary and medical
insurance premium reimbursement under their Agreements.
For purposes of the Agreement, a "change in control" is defined as the
loss by the Company of voting control of its Board of Directors or the
Board of Directors of RECO or Lexington; a merger, consolidation or
other reorganization of the Company, except where the stockholders of
the Company immediately prior to the consummation of any such
transaction continue to hold at least a majority of the voting power of
the outstanding voting securities of the legal entity resulting from or
existing after any transaction and a majority of the members of the
Board of Directors of the legal entity resulting from or existing after
a transaction are former members of the Company's Board of Directors.
The Board of Directors of the Company unanimously approved the
Agreement because it believes the continued attention and dedication of
the particular employees to their duties under adverse circumstances
is in the best interests of the Company and its stockholders and
ultimately outweighs the potential cost of the benefit.
TRANSACTIONS WITH DIRECTORS, OFFICERS OR THEIR ASSOCIATES
Approximately $639 million of invested assets of principal stockholders
of the Company (several of whom are directors) and their related
interests are managed by Lexington. See "Principal Holders of
Securities of the Company." The fees charged by Lexington for the
management of such assets are based upon standard fee schedules which
are competitive with the fees charged on non-related accounts.
Except as stated above, no director or officer of the Company, nominee
for director, beneficial owner of more than 5% of any class of stock of
the Company, member of the immediate family of any of the foregoing
persons had any material interest in any material transaction of the
<PAGE>
Company or any of its subsidiaries or affiliates during the period
January 1, 1994 through March 1, 1995 or any such proposed transaction.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. DeMichele, the Company's Chief Executive Officer and a director,
and Mr. Stuart Smith Richardson, Vice Chairman of the Board of
Directors and an employee of the Company, serve on the Executive
Personnel Committee of the Board of Directors. While these individuals
serve on the Committee, their participation is limited to an evaluation
of senior Company personnel and they do not participate in any
decisions regarding their own compensation.
Mr. DeMichele is also a director and member of the Stock Option
Committee of The Navigators Group, Inc. whose Chief Executive Officer,
Mr. Terence N. Deeks, is a member of the Board of Directors of the
Company. Mr. Deeks does not serve on any committees of the Board of
Directors of the Company.
Mr. DeMichele and Mr. Stuart Smith Richardson also serve as directors
of Vanguard Cellular Systems, Inc., whose Chief Executive Officer, Mr.
Haynes G. Griffin is a member of the Board of Directors of the
Company. Mr. DeMichele also serves on the Compensation Committee of
Vanguard. Mr. Griffin does not serve on any committees of the Board of
Directors of the Company.
REPORT OF THE EXECUTIVE PERSONNEL COMMITTEE
Decisions on compensation for the Company's executive officers and
other senior personnel are made by the Executive Personnel Committee of
the Board of Directors (the "Committee"). All decisions made by the
Committee relating to compensation of the executive officers of the
Company and its subsidiaries are reviewed by the full Board of
Directors. In addition, all compensation decisions regarding the Chief
Executive Officer of the Company are required to be ratified by the
full Board of Directors. Set forth below is a report submitted
by the members of the Committee which addresses the Company's
compensation policies for 1994 as they relate to Mr. Robert M.
DeMichele, President and Chief Executive Officer of the Company, and
the four executive officers of the Company and its subsidiaries, other
than Mr. DeMichele, who for 1994 were the most highly paid executive
officers. Mr. DeMichele and Mr. Stuart Smith Richardson, Vice Chairman
of the Board of Directors and an employee of the Company, are also
members of the Committee but their capacity is limited to an evaluation
of executive officers and senior personnel other than themselves and,
as such, they do not participate in any decisions regarding their own
compensation.
Compensation paid to or earned by the Company's executive officers, as
reflected in the foregoing tables, consisted of base salary paid in
each year, bonus compensation earned for each year and paid in the
subsequent calendar year; and grants of stock options under the
Company's 1988 Employee Stock Option Plan during 1994 and 1992. There
were no options granted during 1993. Based upon the level of annual
<PAGE>
compensation historically paid to its executive officers, the Company
believes such compensation will continue to be deductible for tax
purposes and not subject to the limitations imposed by Section 162(m)
of the Internal Revenue Code of 1986, as amended.
In determining the salaries of the four executive officers other than
Mr. DeMichele, depending upon the Company's performance and the
attainment of specific goals concerning the individual's performance,
each executive is targeted to be paid within a range corresponding to
that of executives of other companies of similar size in the same
industry with comparable responsibilities. In this regard, the
Committee consults surveys published on compensation of executives in
the reinsurance and investment management industries. Also considered
are the executive's managerial reponsibilities, new responsibilities
added and performance in special projects.
An executive officer's compensation is linked to the long term
interests of the shareholders by making a portion of each executive
officer's potential compensation dependent upon the price of the
Company's Common Stock. The Committee, in conjunction with the Stock
Option Committee, awards stock options to purchase Common Stock of the
Company which have value only to the extent the market price of the
underlying stock increases subsequent to the grant of the option.
1994 was not a successful year for the Company, mainly due to
catastrophic activity that negatively impacted the performance of RECO.
These results overshadowed the continued operating success of Lexington
and the underlying business strategy being pursued by RECO.
Each operating company has separate criteria to be considered in
arriving at bonus compensation for its executives. Lexington's bonus
pools are directly linked to the operating performance of the company.
The Committee focuses on the pretax income of Lexington as a percentage
of its total revenue and benchmarks that percentage against other
published industry statistics. In addition, other financial measures
are reviewed such as return on capital and compensation costs as a
percentage of revenue. The Committee allocates a portion of the total
bonus pool to each executive officer after assessing the individual's
contribution to the overall performance of the organization, the
attainment of specific performance goals and individual initiatives
which contribute to the short and long term success of the company.
The bonus pools are directly correlated with the profitability of the
firm. In 1994, the bonus pools, including a key man supplemental pool,
represented 9.8% of revenue while pre federal taxable income was 32.6%
of revenue in comparison to 22.9% in 1993. 1994 was an outstanding
year for Lexington with pretax income growing by more than 100% in
comparison with 1993. In 1993 and 1992, the bonus pools for Lexington
ranged between 5.4% and 7.9% of revenue, while operating income as a
percentage of revenue ranged between 20% and 32%.
RECO's bonus program is largely driven by its operating results. RECO
had its second worst operating year in history, following a successful
1993. Because of industry conditions, competitive issues, and after
<PAGE>
reviewing various industry statistics, the Committee chose to award a
limited group of key personnel at RECO bonus compensation in 1994.
Therefore, a modest bonus pool was approved representing less than 4%
of its executive and other senior officers' salaries, in contrast to
the 1993 bonus pool of 16.5% of that salary base.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Committee sets Mr. DeMichele's salary level after reviewing
industry comparisons covering the types of operating companies he is
responsible for managing. The Committee also considers the additional
responsibilities of Mr. DeMichele in carrying out the Company's
strategic planning objectives. In April of 1994, Mr. DeMichele's annual
base salary was increased to $450,000 from $401,100 in the previous year.
For 1994, Mr. DeMichele was awarded a bonus of $100,000. In 1993, Mr.
DeMichele's bonus was $401,100, which was directly tied to achieving
specific profit targets established in that year's operating plan.
Mr. DeMichele received the maximum bonus directed by his formula for
1993. He did not earn a bonus in 1992, because the Company did not
achieve profit targets. Depending upon whether the Company achieves
its profit target, Mr. DeMichele can earn up to a maximum of 3% of
operating income as a bonus, or 100% of salary, whichever is less.
Mr. DeMichele's bonus target for 1994 was $278,000; however, the bonus
target derived from the formula was not achieved.
In 1994, Mr. DeMichele's bonus was awarded for the additional
responsibilities he assumed during the course of the year with respect
to Lexington. The bonus was in recognition of the extra effort and
time required in restructuring the company following the resignation of
key personnel earlier in the year. Were it not for the Committee's
awarding a bonus of $100,000 in recognition of his efforts, Mr.
DeMichele would not have qualified for a bonus in 1994 because of the
consolidated operating results of the Company.
The Committee, in consultations with the Stock Option Committee,
granted 17,000 stock options to Mr. DeMichele in 1994. The Committee
considers the percentage of total grants of options to other chief
executive officers of public companies in arriving at the level of
options to grant Mr. DeMichele as a percentage of total options granted
to all personnel participating in the Stock Option Plan. The Committee
believes that this grant is a key incentive linking Mr. DeMichele's
long term financial reward with those of all Piedmont shareholders.
Submitted by:
R.R. Richardson, Chairman
Robert M. DeMichele
Lunsford Richardson, Jr.
Stuart Smith Richardson
<PAGE>
PERFORMANCE GRAPH
The following line graph compares the yearly percentage change in the
cumulative total shareholder return on the Company's Common Stock with
the NASDAQ Stock Market Index and the NASDAQ Financial Stocks Index.
It assumes $100 invested on December 29, 1989 (including dividends
reinvested) in Common Stock of the Company as against each index.
There can be no assurance that the Company's Common Stock performance
will continue into the future with the same or similar trends depicted
in the graph.
COMPANY MARKET PEER
DATE INDEX INDEX INDEX
12/29/89 100.000 100.000 100.000
12/31/90 60.185 84.918 76.618
12/31/91 68.518 136.277 118.556
12/31/92 89.815 158.579 169.536
12/31/93 122.222 180.933 196.992
12/30/94 90.741 176.916 197.568
<PAGE>
3. ELECTION OF THE NOMINATING AND PROXY COMMITTEE
It is the intention of the persons named in the accompanying proxy to
vote such proxy for the election of Messrs. L. Richardson Preyer,
Lunsford Richardson, Jr. and Stuart Smith Richardson as members of the
Nominating and Proxy Committee. Collectively, these nominees
beneficially own 26% of the Common Stock and 22% of the Series A
Preferred Stock. The Bylaws of the Company provide that the
stockholders shall elect the members of the Nominating and Proxy
Committee and that the Nominating and Proxy Committee shall consist of
three members, of which at least two members shall each own a minimum
of 2,000 shares of Common Stock of the Company and a third shall hold
or have held certain executive offices with the Company or shall have
served for at least five years as a member of the Board of Directors.
The nominees for the Nominating and Proxy Committee satisfy these
qualification requirements. The above referenced provisions of the
Bylaws may be amended only by a majority vote of the stockholders.
4. APPOINTMENT OF AUDITORS
The Board of Directors, at the recommendation of its Audit Committee,
has appointed the firm of Coopers & Lybrand L.L.P., certified public
accountants, as its independent auditors for the 1995 calendar year.
The services to be performed by Coopers & Lybrand L.L.P. will primarily
include an audit of the Company's 1995 consolidated financial
statements and audit services related to various filings with the
Securities and Exchange Commission. The Company expects that a
representative of Coopers & Lybrand L.L.P. will attend the Annual
Meeting of Stockholders and will have an opportunity to make a
statement if he so desires. In addition, such representative
will be available to respond to appropriate questions from stockholders
or their representatives.
5. PRINCIPAL HOLDERS OF SECURITIES OF THE COMPANY
The following table sets forth information as of March 1, 1995 with
respect to shares of the Company's Common Stock and Series A Preferred
Stock which are held by certain directors, persons and entities known
to the Company to be the beneficial owners of more than 5% of either
class of such stock. For purposes of this Proxy Statement, beneficial
ownership of securities is defined in accordance with the rules of the
Securities and Exchange Commission and means generally the power to
vote or dispose of securities, regardless of any economic interest
therein.
<PAGE>
<TABLE>
Shares of Stock Beneficially Owned as of March 1, 1995
<CAPTION>
Name and Address of Common Percent Series A
Beneficial Owner (2) (3) Preferred Percent
<S> <C> <C> <C> <C>
Sion A. Boney, III 287,586 (4,5) 5.4 23,910 (4,5) 12.4
12 Town Line Road
Bridgewater, CT 06752
Barbara R. Evans 879,129 (4,6) 16.4 75,643 (4,6) 39.4
5 Fernwood Road
Summit, NJ 07901
Haynes G. Griffin 421,464 (4,7) 7.8 - -
309 Sunset Drive
Greensboro, NC 27408
Laurinda V. Lowenstein 344,900 (4,8) 6.4 19,848 (4,8) 10.3
Box 371
Seal Harbor, ME 04675
H. Smith Richardson, Jr. 442,258 (4,9) 8.2 7,160 (4,9) 3.7
6246 Head Road
Wilmington, NC 28409
Peter L. Richardson 533,655 (4,10) 9.9 1,100 (4,10) .6
60 Jesup Road
Westport, CT 06880
Stuart Smith Richardson 1,232,496 (4,11) 23.0 14,799 (4,11) 7.7
80 Maiden Lane
New York, NY 10038
Richard G. Smith, III 804,504 (4,12) 15.0 47,498 (4,12) 24.7
1133 Black Gold Place
Gahanna, OH 43230
Center for Creative
Leadership 421,464 (4,13) 7.8 - -
P.O. Box P-1
Greensboro, NC 27402
Richardson Family (14) 2,828,795 52.7 181,926 94.7
Gilchrist B. Berg (15) 635,800 11.8 - -
1987 Enterprise Center
Jacksonville, FL 32202
Southeastern Asset
Management, Inc. (16) 436,800 8.1 - -
6075 Poplar Avenue
Memphis, TN 38119
<PAGE>
<FN>
<FN1> The amounts shown include shares which are beneficially owned by
more than one individual since many shares are held in trusts with
more than one trustee.
<FN2> The amounts shown include shares which may be acquired within
sixty days following March 1, 1995 through the conversion of Series
A Preferred Stock at a conversion ratio of two shares of Common
Stock for every share of Series A Preferred Stock as follows: Mr.
Sion A. Boney, III, 47,820; Ms. Barbara R. Evans, 151,286; Ms.
Laurinda Lowenstein, 39,696; Mr. H. Smith Richardson, Jr., 14,320;
Mr. Peter L. Richardson, 2,200; Mr. Stuart Smith Richardson, 29,598;
Mr. Richard G. Smith, III, 94,996; and the "Richardson Family," 363,852.
<FN3> For purposes of computing the percentages, the number of shares of
Common Stock outstanding is calculated for each individual or
group to include shares which may be purchased by that individual
or group within sixty days upon conversion of Series A Preferred
Stock at a conversion ratio of two shares of Common Stock for every
share of Series A Preferred Stock.
<FN4> These shares are included in those owned by the "Richardson Family."
<FN5> These shares include shares of various trusts of which Mr. Boney
is a trustee and exercises shared voting and investment
power with respect to such shares. Mr. Boney exercises sole
voting and investment power with respect to 20,772 shares of
Common Stock and 2,330 shares of Series A Preferred Stock.
<FN6> These shares include shares of various trusts of which Ms. Evans
is a trustee and exercises shared voting and investment power with
respect to such shares. Ms. Evans exercises sole voting and
investment power with respect to 271,239 shares of Common Stock and
34,293 shares of Series A Preferred Stock.
<FN7> These shares include shares of a trust of which Mr. Griffin is a
trustee and exercises shared voting and investment power with
respect to such shares.
<FN8> These shares include shares of various trusts of which Ms.
Lowenstein is a trustee and exercises shared voting and
investment power with respect to such shares. Ms. Lowenstein
exercises sole voting and investment power with respect to
2,800 shares of Common Stock and 560 shares of Series A Preferred
Stock.
<FN9> These shares include shares of various trusts of which Mr.
Richardson is a trustee and exercises shared voting and
investment power with respect to such shares. Mr. Richardson has
sole voting and investment power with respect to 6,474 shares of
Common Stock and 7,160 shares of Series A Preferred Stock.
<PAGE>
<FN10> These shares include shares of various trusts of which Mr.
Richardson is a trustee and exercises shared voting and
investment power with respect to such shares. Mr. Richardson has
sole voting and investment power with respect to 200 shares of
Series A Preferred Stock.
<FN11> These shares include shares of various trusts of which Mr.
Richardson is a trustee and exercises shared voting and
investment power with respect to such shares. Mr. Richardson
exercises sole voting and investment power with respect to
443,210 shares of Common Stock and 200 shares of Series A
Preferred Stock.
<FN12> These shares include shares of various trusts of which Mr. Smith
is a trustee and exercises shared voting and investment power with
respect to such shares. Mr. Smith exercises sole voting and
investment power with respect to 97,531 shares of Common Stock and
8,360 shares of Series A Preferred Stock.
<FN13> The Trustees of the Center for Creative Leadership are: Messrs.
Haynes G. Griffin; Charles T. Hagan, Jr.; L. Richardson
Preyer, Jr.; John W. Red, Jr.; H. Smith Richardson, Jr.; Peter L.
Richardson; Stuart Smith Richardson; Frances J. Rue, Jr.; and
Richard D. Waters. These individuals are deemed to be beneficial
owners of all shares held by the Center.
<FN14> See below for a description of the "Richardson Family."
<FN15> Mr. Berg's present principal occupation is President of Water
Street Capital, Inc., an investment advisory firm. Mr. Berg,
in his capacity with such firm, exercises sole voting and
investment power with respect to such shares.
<FN16> Southeastern Asset Management, Inc., an investment advisory firm,
exercises sole voting and investment power with respect to 156,800
shares of Common Stock.
</FN>
</TABLE>
"Richardson Family," as used herein, means the descendants of Lunsford
Richardson, Sr., their spouses, trusts, a corporation in which they
have interests and charitable organizations established by such
descendants. In addition, several of the descendants of Mr. Richardson
or their spouses currently serve as directors of the Company (Messrs.
Sion A. Boney, III; L. Richardson Preyer; Lunsford Richardson, Jr.;
Peter L. Richardson; R. R. Richardson; and Stuart Smith Richardson).
At March 1, 1995, such descendants and spouses (numbering approximately
190 persons), trusts, a corporation in which they have interests and
charitable organizations established by them owned approximately
2,464,943 shares (49.4%) of Common Stock and 181,926 shares (94.7%) of
Series A Preferred Stock. Many of these shares may be deemed to be
beneficially owned by more than one person because of multiple
fiduciaries, but such shares have been counted only once for purposes
<PAGE>
of the foregoing totals. These individuals and institutions have
differing interests and may not necessarily vote their shares in the
same manner. Furthermore, trustees and directors have fiduciary
obligations (either individually or jointly with other fiduciaries)
under which they must act on the basis of fiduciary requirements which
may dictate positions which differ from their personal interests.
6. STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Proposals for stockholder action at the 1996 Annual Meeting must be
received by Management no later than December 11, 1995, if such
proposals are to be placed before the stockholders.
The Board of Directors and Management know of no business other than
that specified in the Notice of Meeting which will be presented for
consideration at this Annual Meeting but, if other matters are
presented, it is the intention of the persons designated as proxies to
vote in accordance with their best judgment and discretion on such
matters.
7. FINANCIAL INFORMATION
The consolidated financial statements and other financial information
of the Company and its subsidiaries, as well as notes to the financial
statements, the related report of Coopers & Lybrand L.L.P., independent
public accountants, and management's discussion and analysis of
financial statements are contained in the Company's Annual Report to
Stockholders for 1994 accompanying this Proxy Statement.
Solicited by the Board of Directors
PETER J. PALENZONA
Senior Vice President & Secretary
Chief Financial Officer
April 10, 1995
<PAGE>
APPENDIX
PIEDMONT MANAGEMENT COMPANY INC.
Proxy Solicited by the Board of Directors
For the Annual Meeting of Stockholders, May 25, 1995
The undersigned stockholder(s) of PIEDMONT MANAGEMENT COMPANY INC. hereby
appoint(s) the members of The Nominating and Proxy Committee, Stuart Smith
Richardson, L. Richardson Preyer and Lunsford Richardson, Jr., and each or
either of them (the "Proxies"), the true and lawful agents and attorneys-in-
fact for the undersigned, with power of substitution, to attend the meeting
and to vote the stock owned by or registered in the name of the undersigned,
as instructed below, at the Annual Meeting of Stockholders to be held at the
offices of the Company, 80 Maiden Lane, New York, NY on May 25, 1995, at
2:00 P.M. local time, and at any adjournments thereof, for the transaction
of the following business:
Election of Directors, Nominees:
Haynes G. Griffin, William R. Miller, Stuart Smith Richardson and
Carl H. Tiedemann
You are encouraged to specify your choices by marking the appropriate boxes,
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. Please sign and
return this card using the enclosed envelope.
(continued on the reverse side)
<PAGE>
X Please mark your
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 and FOR Proposals 2 and 3.
FOR WITHHELD
1. Election of
Directors
(see reverse)
FOR, except vote withheld from the following nominee(s):
FOR AGAINST ABSTAIN
2. To elect three members of
the Nominating and Proxy
Committee to serve until
the next Annual Meeting of
Stockholders and until
their respective successors
shall have been elected and
shall qualify.
FOR AGAINST ABSTAIN
3. To approve the appointment
of Coopers & Lybrand as
independent auditors for
1995.
FOR AGAINST ABSTAIN
4. In their discretion, the
Proxies are authorized
to act upon such other
matters as may properly
come before the meeting
or any adjournment thereof.
Please sign exactly as name appears
hereon. Joint owners should each sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such.
______________ _________1995
SIGNATURE(S) DATE
