<PAGE> 1
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant -
Check the appropriate box:
/X/ Preliminary proxy statement - Confidential, for Use
of The Commission
Only (as permitted
by Rule 14a-6(e)(2))
- Definitive proxy statement
- Definitive additional materials
- Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
TRENWICK GROUP INC.
(Name of Registrant as Specified in Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the 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)(1)
and 0-11.
________________________________________________________________________________
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
________________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________________
- Fee paid previously with preliminary materials.
________________________________________________________________________________
- Check box if any part of the fee is offset as provided by
change 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
Trenwick Group Inc.
[TRENWICK insignia]
Metro Center
One Station Place
Stamford, Connecticut 06902
April__, 1997
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Trenwick Group Inc. (the "Company") on Thursday, May 22, 1997, at the Company's
headquarters, Metro Center, One Station Place, Stamford, Connecticut at 10:00
a.m. local time. A Notice of the Meeting, a Proxy and a Proxy Statement
containing information about the matters to be acted upon at the meeting are
enclosed.
All holders of common stock as of the close of business on March 27, 1997, are
entitled to vote at the Annual Meeting on the basis of one vote for each share
of common stock held.
A record of the Company's activities for the year 1996 is included in the annual
report to stockholders. Whether or not you attend the Annual Meeting, the
Company requests that you please exercise your voting rights by completing and
returning your Proxy promptly in the enclosed self-addressed, stamped envelope.
If you attend the meeting and desire to vote in person, your Proxy will not be
used.
Sincerely,
James F. Billett, Jr.
Chairman, President and Chief Executive Officer
<PAGE> 3
[TRENWICK INSIGNIA]
METRO CENTER, ONE STATION PLACE
STAMFORD, CONNECTICUT 06902
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
MAY 22, 1997
To the Holders of Common Stock:
The Annual Meeting of Stockholders of Trenwick Group Inc. (the
"Company"), a Delaware corporation, will be held on Thursday, May 22, 1997, at
the Company's headquarters, Metro Center, One Station Place, Stamford,
Connecticut at 10:00 a.m. local time to act upon the following matters:
PROPOSAL NO. 1
To elect three directors to serve until the Annual Meeting of
Stockholders in 2000.
PROPOSAL NO. 2
To approve an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of common stock and
preferred stock.
PROPOSAL NO. 3
To approve an amendment to the Trenwick Group Inc. 1993 Employee Stock
Option Plan to increase the aggregate number of shares of common stock
authorized for issuance under the plan.
PROPOSAL NO. 4
To ratify the appointment of Price Waterhouse LLP ("Price Waterhouse")
as independent accountants for the year ending December 31, 1997.
PROPOSAL NO. 5
To consider and act upon such other matters as may properly come before
the meeting or any adjournment thereof.
<PAGE> 4
Information regarding the matters to be acted upon at the Annual
Meeting is contained in the accompanying Proxy Statement.
The Board of Directors has fixed the close of business on March 27,
1997, as the record date for the determination of stockholders entitled to
notice of and to vote at the meeting and any postponement or adjournment
thereof. Accordingly, only holders of record of the Company's common stock at
the close of business on March 27, 1997, will be entitled to vote at the meeting
and any adjournment or postponement thereof.
MANAGEMENT SINCERELY DESIRES THE ATTENDANCE OF EVERY STOCKHOLDER AT THE
MEETING. IT IS RECOGNIZED, HOWEVER, THAT SOME WILL BE UNABLE TO ATTEND. IN ORDER
TO ACHIEVE A QUORUM REQUIRED TO CONDUCT BUSINESS AT THE MEETING, WE ASK THAT YOU
VOTE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE SELF-ADDRESSED, STAMPED
ENVELOPE. YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU ARE LATER ABLE TO
ATTEND.
By order of the Board of Directors,
Jane T. Wiznitzer
Secretary
<PAGE> 5
[TRENWICK INSIGNIA]
METRO CENTER, ONE STATION PLACE
STAMFORD, CONNECTICUT 06902
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is being furnished by Trenwick Group Inc. (the
"Company") to stockholders of the Company on or about April __, 1997, in
connection with the solicitation of Proxies for use at the Annual Meeting of
Stockholders of the Company to be held on May 22, 1997, at the Company's
headquarters, Metro Center, One Station Place, Stamford, Connecticut at 10:00
a.m. local time for the purposes set forth in the accompanying Notice of Annual
Meeting of Stockholders.
The cost of soliciting Proxies will be borne by the Company. The
Company will supply Proxies and proxy materials as requested to brokerage
houses, nominees, fiduciaries and other custodians for transmission to the
beneficial owners of the Company's common stock and will reimburse such parties
for reasonable expenses incurred thereby. Proxy solicitations may be made by
mail, telephone and other means by employees of the Company and by others. D. F.
King & Co., Inc., New York, New York, has been engaged by the Company to assist
in the solicitation of Proxies for an anticipated fee of approximately $6,500,
plus out-of-pocket costs and expenses.
VOTING SECURITIES
The close of business on March 27, 1997, has been fixed by the Board of
Directors as the record date for the determination of stockholders entitled to
notice of and to vote at the Annual Meeting. At such date the Company had issued
and outstanding 7,954,501 shares of common stock, par value $.10 per share. Each
share of common stock issued and outstanding on the record date will be entitled
to one vote on all matters to come before the Annual Meeting.
ANNUAL REPORT
A copy of the annual report to stockholders for the fiscal year 1996
containing financial statements of the Company has been mailed to all
stockholders.
<PAGE> 6
REVOCATION OF PROXY
The accompanying Proxy, if properly executed by a stockholder entitled
to vote, will be voted at the Annual Meeting, but may be revoked at any time
before the vote is taken by giving written notice to the Secretary of the
Company, by a duly executed Proxy bearing a later date or by voting in person at
the Annual Meeting.
QUORUM
The presence, in person and by Proxy, of a majority in number of the
outstanding shares of common stock as of the record date constitutes a quorum
and is required in order for the Company to conduct business at the Annual
Meeting. Each share is entitled to one vote. In accordance with the Company's
Restated Certificate of Incorporation, as amended, and the General Corporation
Law of the State of Delaware, (i) a plurality of the votes duly cast is required
for the election of directors to serve until the Annual Meeting of Stockholders
in 2000; (ii) the affirmative vote of a majority of the outstanding stock
entitled to vote is required to approve the amendment of the Company's Restated
Certificate of Incorporation to increase the number of authorized shares of
common stock and preferred stock; and (iii) the affirmative vote of a majority
of the votes duly cast is required (a) to approve the amendment of the 1993
Employee Stock Option Plan to increase the aggregate number of shares of common
stock authorized for issuance thereunder, and (b) to ratify the appointment of
Price Waterhouse as independent accountants for the year ending December 31,
1997.
A broker non-vote occurs when a nominee holding shares for a beneficial
owner does not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that proposal and has not received
instructions from the beneficial owner. Under the General Corporation Law of the
State of Delaware, abstaining votes and broker non-votes are deemed to be
present for purposes of determining whether a quorum is present at a meeting but
are not deemed to be votes duly cast. As a result, abstentions and broker
non-votes will be included for the purposes of determining whether a quorum is
present at the Annual Meeting and will be included in the tabulation of the
voting results and have the effect of votes in opposition with respect to the
amendment to the Restated Articles of Incorporation, but will not be included in
the tabulation of the voting results and will not have the effect of votes in
opposition with respect to the election of directors, the amendment of the 1993
Employee Stock Option Plan or the ratification of the appointment of Price
Waterhouse.
AUTHORITY GRANTED BY THE PROXY
The Proxy is in such form as to permit a vote for, or the withholding
of authority to vote for, individual nominees, and to indicate separate
approval, disapproval or abstention with respect to the other proposals which
are identified in the Proxy and accompanying Notice of Annual Meeting of
Stockholders and described in this Proxy Statement. If no instructions are
indicated, Proxies returned to the Company will be voted FOR the election of the
directors described herein by the persons named in the enclosed Proxy, to wit:
P. Anthony Jacobs, Frederick D. Watkins and Stephen R. Wilcox, or any one or
several of them as may act (the
2
<PAGE> 7
"Proxy Committee"). With respect to each of the other proposals described
herein, if no instructions are indicated, the shares represented by the Proxy
will be voted FOR the proposal. As to any such other matters that may properly
be brought before the Annual Meeting, the shares represented by the Proxy will
be voted in accordance with the judgment of the Proxy Committee.
PRINCIPAL STOCKHOLDERS
The following table lists the stockholders known to the Company to be
beneficial owners of more than five percent of the outstanding common stock, as
of the record date, based upon information filed with the Securities and
Exchange Commission (the "Commission"). Such stockholders hold sole voting and
dispositive power over such shares except as noted:
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAME & ADDRESS OWNED(A) PERCENT
- -------------- ------------ -------
<S> <C> <C>
The Capital Group Companies, Inc. 913,090(1) 11.5%
333 South Hope Street
Los Angeles, California 90071
NewSouth Capital Management, Inc. 827,573(2) 10.4%
1000 Ridgeway Loop Road, Suite 233
Memphis, Tennessee 38120
The Prudential Insurance Company of America 718,861(3) 9.0%
751 Broad Street
Newark, New Jersey 07102-3777
Orion Capital Corporation 405,513(5) 5.1%
600 Fifth Avenue
New York, New York 10020-2302
</TABLE>
(A) Prior to February 20, 1997, the Company had outstanding $103,500,000
principal amount of its 6% Convertible Debentures due December 15, 1999
(the "debentures"). The debentures were convertible into shares of
common stock at $48.50 per share (equivalent to a conversion rate of
approximately 20.6186 shares per $1,000 principal amount of debentures).
Holders of the debentures were required, in accordance with Rule 13-3(d)
of the Exchange Act of 1934, to include shares of common stock issuable
upon conversion of the debentures in the calculation of the number of
shares of common stock beneficially owned by them. The debentures were
redeemed on February 20, 1997, to the extent not converted. Accordingly,
although any debentures held by Principal Stockholders have been
redeemed or converted since the date of their reports, beneficially
owned shares reported by the Principal Stockholders may include shares
of common stock which were issuable upon the conversion of the
debentures.
3
<PAGE> 8
(1) Based upon information contained in Amendment No. 9, dated February 14,
1997, to Schedule 13G filed with the Commission. The Capital Group
Companies, Inc. is the parent holding company of a group of investment
management companies that have investment power and, in some cases,
voting power over the shares, but does not itself have investment or
voting power over them. Capital Research and Management Company, a
registered investment adviser and wholly owned subsidiary of The Capital
Group Companies, Inc., is the beneficial owner of, and has sole
dispositive power over, but no voting power over, 613,200 shares as the
result of acting as investment adviser to various investment companies.
The remaining shares reported as beneficially owned by The Capital Group
Companies, Inc. are beneficially owned by other of its subsidiaries,
which hold sole dispositive power as to the shares they hold and sole
voting power as to 272,400 of such shares. None of those subsidiaries by
itself owns 5% or more of the outstanding shares. The number of shares
reported by The Capital Group Companies, Inc. includes 26,490 shares
resulting from the assumed conversion of debentures.
(2) Based upon information contained in Amendment No. 2, dated February 12,
1997, to Schedule 13G filed with the Commission. The filing states that
NewSouth Capital Management, Inc., a registered investment adviser,
holds the shares on behalf of its clients. Sole voting power is held
over 785,073 shares and shared voting power is held over 42,500 shares.
(3) Based upon information contained in Amendment No. 4, dated January 28,
1997, to Schedule 13G filed with the Commission. The Prudential
Insurance Company of America may have direct or indirect voting and/or
investment discretion over the shares, which are held for the benefit of
its clients by its separate accounts, externally managed accounts,
registered investment companies, subsidiaries and/or other affiliates,
so that in the aggregate sole voting and dispositive power is held over
419,200 shares, shared voting power is held over 294,500 shares and
shared dispositive power is held over 297,600 shares. The number of
shares reported includes 2,061 shares resulting from the assumed
conversion of debentures.
(4) Based upon information contained in Amendment No. 5 dated March 18,
1997, to Schedule 13G filed with the Commission. The shares are held by
Orion Capital Corporation's wholly owned subsidiaries, The Connecticut
Indemnity Company (100,000 shares), Design Professionals Insurance
Company (28,267 shares), EBI Indemnity Company (34,300 shares), The Fire
and Casualty Insurance Company of Connecticut (23,800 shares) and
Security Insurance Company of Hartford (219,146 shares).
4
<PAGE> 9
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, each currently
consisting of three directors. Each class serves three years, with the terms of
office of the respective classes expiring in successive years. The term of the
office of directors in Class I expires at the 1997 Annual Meeting.
The Board of Directors proposes that the nominees described below be
elected to Class I for a new term of three years and until their successors are
duly elected and qualified. All of the nominees are currently serving as Class I
directors and were elected to Class I at the 1994 Annual Meeting
Although the Board of Directors does not contemplate that any of the
nominees will be unable to serve, if such a situation arises prior to the
meeting, the Proxy Committee will vote in accordance with its best judgment.
Unless otherwise directed, all returned Proxies will be voted FOR the
election of the directors standing for election in Class I.
CLASS I: DIRECTORS STANDING FOR ELECTION
JAMES F. BILLETT, JR. Director since 1978(1)
James F. Billett, Jr., 52, has served as Chairman of the Board and
Chief Executive Officer of the Company and its predecessor since 1978 and
resumed the Presidency in 1988. He is Chairman, President and Chief Executive
Officer of Trenwick America Reinsurance Corporation ("Trenwick America Re"), the
Company's principal operating subsidiary, and Chairman of the Executive
Committee of the Company's Board of Directors (the "Executive Committee") and
its Investment Committee (the "Investment Committee"). Mr. Billett was formerly
a Vice President of General Reinsurance Corporation.
5
<PAGE> 10
ALAN R. GRUBER Director since 1984(1)
Alan R. Gruber, 69, has served as Chairman of the Compensation
Committee of the Company's Board of Directors (the "Compensation Committee"), a
member of the Executive Committee and a director of Trenwick America Re since
1986. He is Chairman of the Executive and Investment Committees of the Board of
Directors of Orion Capital Corporation ("Orion"), an insurance holding company,
where he served as Chairman of the Board and Chief Executive Officer from 1976
until retiring from those positions in 1996. He is Chairman of the Board of
Guaranty National Corporation and a trustee of six trusts which manage the
Neuberger & Berman family of equity mutual funds.
Trenwick America Re is a reinsurer of various Orion subsidiaries. In
each case, Trenwick America Re is a participant in a treaty which includes other
independent reinsurers subject to the same terms and conditions. Aggregate
reinsurance premiums written with Orion subsidiaries in 1996 were $2,695,000,
representing approximately 1% of total reinsurance premiums written by Trenwick
America Re for the year.
JOSEPH D. SARGENT Director since 1978(1)
Joseph D. Sargent, 67, has been a member of the Executive Committee
since 1979 and of the Compensation Committee since 1986. He is Chairman,
Treasurer and Chief Financial Officer of Connecticut Surety Corporation, the
parent holding company of The Connecticut Surety Company (formerly The
Connecticut Casualty and Surety Company, a subsidiary of Covenant Mutual
Insurance Company), and is Vice-Chairman of the Board of Conning & Company, with
which he has been associated since 1952 and for which he formerly served as
Chairman and Chief Executive Officer. Mr. Sargent is a member of the Board of
Directors of Mutual Risk Management, Ltd., MMI Companies Inc., E. W. Blanch
Holdings, Executive Risk Inc. and Policy Management Systems Corporation and
serves as Chairman of the Board and Treasurer of S.K.I. Ltd.
CLASS II: TERM EXPIRES AT THE 1998 ANNUAL MEETING
HERBERT PALMBERGER Director since 1985(1)
Herbert Palmberger, 51, a member of the Audit Committee of the Board of
Directors (the "Audit Committee") since 1986, is General Manager of Chubb
Insurance Company of Europe, S.A. Dr. Palmberger was a Partner with Rohreke,
Boye, Reme, von Werder, a Hamburg, Germany law firm, between 1991 and December
1992, prior to which he was General Manager of Deutsche Krankenversicherung A.G.
and Director of Legal and Executive Staff of Hannover Ruckversicherungs A.G.,
with which he was associated from 1978 to 1988.
6
<PAGE> 11
FREDERICK D. WATKINS Director since 1979(1)
Frederick D. Watkins, 81, has been a member of the Executive Committee
since 1979, a member of the Compensation Committee since 1986, a member of the
Audit Committee since 1988 and a director of Trenwick America Re since 1983. He
is retired Executive Vice President of Connecticut General Insurance Corporation
(1979-1980) and former President of Aetna Insurance Company (1966-1979), which
he joined in 1937. Mr. Watkins was Chairman of Terra Nova Insurance Company Ltd.
from 1978 until 1994.
STEPHEN R. WILCOX Director since 1978(1)
Stephen R. Wilcox, 63, has been a member of the Investment Committee
since 1979 and a member of the Audit Committee since 1985, serving as the
latter's Chairman since 1988. Mr. Wilcox is President of The Wilcox Group, Inc.,
a financial and consulting firm. He was formerly Senior Vice President of
Conning & Company, with which he was associated from 1958 to 1988.
CLASS III: TERM EXPIRES AT THE 1999 ANNUAL MEETING
ANTHONY S. BROWN Director since 1990
Anthony S. Brown, 54, has served as a member of the Audit Committee
since 1991. He is a Professor at the Terry Sanford Institute of Public Policy at
Duke University and was Director of Equity Administration of The First Boston
Corporation, an investment banking firm, between 1991 and 1993. Prior to 1991,
Mr. Brown was Vice President, External Affairs, of the University of Connecticut
and was formerly Chairman and Chief Executive Officer of Covenant Insurance
Company, with which he was associated from 1968 to 1989.
NEIL DUNN Director since 1984(1)
Neil Dunn, 47, has been a member of the Investment Committee since 1984
and a member of the Executive Committee and of the Compensation Committee since
1986. He is Managing Director of Voyageur International Asset Managers Ltd, and
until 1995 he was Managing Director of Piper International Asset Management, an
affiliate of Piper Jaffray Companies Inc. Prior to 1994, Mr. Dunn was Senior
Partner of the investment advisory firm Neil Dunn & Company, Midlothian,
Scotland, and, beginning in 1978, was associated with the investment banking
firm of Ivory & Sime plc, of which he became a director in 1984. In 1986, he was
Managing Director of Ivory & Sime (HK) Ltd.
P. ANTHONY JACOBS Director since 1979(1)
P. Anthony Jacobs, 55, a member of the Investment Committee since 1979
and of the Executive Committee and Compensation Committee since 1986, is
President and Chief Operating Officer of Seafield Capital Corporation, a holding
company whose subsidiaries
7
<PAGE> 12
operate in the healthcare and insurance services areas, with which he has been
associated since 1970. Mr. Jacobs is a director of Seafield Capital Corporation,
LabOne, Inc. and Response Oncology, Inc.
Donald E. Chisholm, who became a member of Class III of the Board of
Directors in August 1995, died on March 1, 1997. The Board of Directors has not
yet selected a nominee to fill the resulting vacancy.
There are no family relationships among any directors and executive
officers of the Company.
All directors have entered into indemnification agreements with the
Company which limit a director's personal liability, as a result of serving as a
director, to the maximum extent permitted by Delaware law.
- ----------
(1) Dates earlier than December 30, 1985, reflect Board membership of Trenwick
Limited, the Company's predecessor.
THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES OF THE BOARD
The Board of Directors held five meetings during the fiscal year 1996.
No director attended fewer than 75% of the aggregate number of meetings of the
Board and Board Committees on which the director served except for Mr. Jacobs,
who attended ten out of fourteen meetings. The Company does not have a
Nominating Committee and nominations for directors are made by the Board of
Directors.
The Audit Committee is composed of Messrs. Wilcox--Chairman, Brown,
Palmberger and Watkins. The Committee has responsibility to recommend to the
Board of Directors the selection of the Company's independent accountants, to
review and approve the scope of the independent accountants' audit activity, to
review the financial statements which are the subject of the independent
accountants' certification and to review with such independent accountants the
adequacy of the Company's accounting systems and systems of internal accounting
control. The Audit Committee met four times during 1996.
The Compensation Committee is currently composed of Messrs.
Gruber--Chairman, Dunn, Jacobs, Sargent and Watkins. Mr. Chisholm served as a
member of the Committee from May 23, 1996 until his death. The Committee
exercises authority with respect to the Company's compensation structure for
senior executives and other key employees, approves cash compensation and
non-stock based benefits for the Chief Executive Officer and executive officers,
and designs, recommends for Board approval and administers the Company's
stock-based compensation plans. The Compensation Committee met four times during
1996.
The Executive Committee is composed of Messrs. Billett--Chairman, Dunn,
Gruber, Jacobs, Sargent and Watkins. The Committee meets when required on short
notice during
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<PAGE> 13
intervals between the meetings of the Board of Directors and has authority to
exercise all the powers of the Board of Directors concerning the management and
direction of the affairs of the Company, subject to specific directions of the
Board of Directors and subject to the limitations of the General Corporation Law
of the State of Delaware. The Executive Committee met once during 1996.
The Investment Committee is composed of Messrs. Billett--Chairman,
Dunn, Jacobs and Wilcox. The Committee exercises authority with respect to
financial matters including the investment of the Company's assets, assessment
of the potential impact of both short-term and long-term economic trends and the
establishment of related investment guidelines. The Investment Committee met
four times during 1996.
MANAGEMENT
The following table reflects information as of the date of this Proxy
Statement regarding the beneficial ownership of the Company's equity securities
individually and as a group for all executive officers and directors:
<TABLE>
<CAPTION>
AMOUNT OF
BENEFICIAL OWNERSHIP (1)
---------------------------------
NUMBER OF SHARES
COMMON STOCK PERCENT
----------------- -------
EXECUTIVE OFFICERS
<S> <C> <C>
James F. Billett, Jr. .................... 183,477(2) 2.3%
Stephen H. Binet ......................... 55,941(3) 0.7%
Paul Feldsher ............................ 45,871(4) 0.6%
Robert A. Giambo ......................... 40,115(5) 0.5%
Alan L. Hunte ............................ 36,581(6) 0.5%
James E. Roberts ......................... 10,801(7) 0.1%
</TABLE>
9
<PAGE> 14
<TABLE>
<CAPTION>
DIRECTORS
<S> <C> <C>
Anthony S. Brown ......................... 5,250(8) *
Neil Dunn ................................ 4,500(8) *
Alan R. Gruber ........................... 409,013(8)(9) 5.1%
P. Anthony Jacobs ........................ 5,500(8) *
Herbert Palmberger ....................... 3,750(8) *
Joseph D. Sargent ........................ 81,284(8)(10) 1.0%
Frederick D. Watkins ..................... 7,250(8) *
Stephen R. Wilcox ........................ 3,500(8) *
Directors and executive officers as a group
(14 individuals) ......................... 892,833 11%
</TABLE>
- ----------
* Less than 0.1%
(1) Includes, in each case, shares deemed to be beneficially owned by such
persons because they hold or share investment or voting power. Includes,
as to executive officers, a total of 141,630 shares subject to outstanding
stock options which are vested and exercisable within 60 days of the date
of this Proxy Statement and 3,534 Restricted Shares not vested within 60
days of the date of this Proxy Statement, but which have full dividend and
voting rights and which are included in the computation of such executive
officers' percentage of beneficial ownership. Includes, as to directors, a
total of 28,000 shares subject to outstanding stock options which are
vested and exercisable within 60 days of the date of this Proxy Statement.
(2) Includes 34,630 shares subject to stock options which are vested and
exercisable within 60 days of the date of this Proxy Statement and 415
Restricted Shares which are not vested within 60 days of the date of this
Proxy Statement, but which have full dividend and voting rights.
(3) Includes 34,000 shares subject to stock options which are vested and
exercisable within 60 days of the date of this Proxy Statement and 187
Restricted Shares which are not vested within 60 days of the date of this
Proxy Statement, but which have full dividend and voting rights.
(4) Includes 25,500 shares subject to stock options which are vested and
exercisable within 60 days of the date of this Proxy Statement and 195
Restricted Shares which are not vested within 60 days of the date of this
Proxy Statement, but which have full dividend and voting rights.
(5) Includes 32,500 shares subject to stock options which are vested and
exercisable within 60 days of the date of this Proxy Statement and 195
Restricted Shares which are not vested within 60 days of the date of this
Proxy Statement, but which have full dividend and voting rights.
10
<PAGE> 15
(6) Includes 12,500 shares subject to stock options which are vested and
exercisable within 60 days of the date of this Proxy Statement and 208
Restricted Shares which are not vested within 60 days of the date of this
Proxy Statement, but which have full dividend and voting rights.
(7) Includes 2,500 shares subject to stock options which are vested and
exercisable within 60 days of the date of this Proxy Statement and 2,334
Restricted Shares which are not vested within 60 days of the date of this
Proxy Statement, but which have full dividend and voting rights.
(8) Includes 3,500 shares subject to stock options which are vested and
exercisable within 60 days of the date of this Proxy Statement.
(9) Also includes the shares attributed to Orion Capital Corporation (see
"Principal Stockholders"). Mr. Gruber has a minority interest of
approximately 1.5% in Orion Capital Corporation, where he is Chairman of
the Executive and Investment Committees. Mr. Gruber disclaims beneficial
ownership of the shares attributed to Orion Capital Corporation.
(10) Also includes 20,100 shares owned by relatives or held in trust for them,
as to which Mr. Sargent disclaims beneficial ownership.
In 1980 and 1981, at a time when the Company did not have a stock
option plan, Mr. Billett granted to an employee of the Company, as incentive
compensation, stock options to purchase for $6,180.00 the equivalent of 3,705
unregistered shares of the Company's common stock held by Mr. Billett. On August
1, 1996, the Company awarded this employee restricted shares of the Company's
common stock which vest over a seven-year period, Mr. Billett surrendered to
the Company stock options of equal economic value which he had been granted in
past years, and the employee agreed to the cancellation of his options.
BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Stephen H. Binet, 42, a director of Trenwick America Re since 1988 and
an Executive Vice President since 1993, co-heads its underwriting operations and
chairs its Marketing Committee. Mr. Binet joined Trenwick America Re in 1980,
prior to which time he was employed by General Reinsurance Corporation.
Paul Feldsher, 48, has been a director of Trenwick America Re since
1988 and was appointed Executive Vice President in 1993. Mr. Feldsher manages
Trenwick America Re's underwriting policy and quality control operations and
chairs its Underwriting Committee. He began his career with Liberty Mutual
Insurance Company in 1972 and was employed by North American Reinsurance prior
to joining Trenwick America Re in 1983.
11
<PAGE> 16
Robert A. Giambo, 43, has served as a director and Chief Actuary of
Trenwick America Re since 1988, and was appointed Executive Vice President in
1993. Prior to joining Trenwick America Re in 1986, he was associated with The
Home Insurance Company and The Insurance Services Office. Mr. Giambo received
his Casualty Actuarial Fellowship in 1980.
Alan L. Hunte, 47, was appointed Vice President of the Company in 1984,
Treasurer in 1987 and Chief Financial Officer in 1993. He has been a director
and Treasurer of Trenwick America Re since 1988 and also Executive Vice
President and Chief Financial Officer of Trenwick America Re since 1993. Mr.
Hunte is a Chartered Accountant, having served as audit manager with Price
Waterhouse, with which he was associated prior to joining the Company in 1981.
James E. Roberts, 51, was appointed director and Vice Chairman of
Trenwick America Re in May 1995. Mr. Roberts co-heads Trenwick America Re's
underwriting operations. He was previously associated with Re Capital
Corporation and its principal operating subsidiary, Re Capital Reinsurance
Corporation, a property-casualty reinsurer. At the former, he served as Senior
Vice President from 1986 to 1991, as President and Chief Operating Officer from
1991 to 1992, and as President and Chief Executive Officer from March 1992 until
joining Trenwick America Re. He was President and Chief Executive Officer of the
subsidiary from 1991 until May 1995. Mr. Roberts was previously associated with
North Star Reinsurance Corporation, a subsidiary of General Re Corporation.
DIRECTORS' COMPENSATION
During the year ended December 31, 1996, each non-employee director
chairing a Board Committee received an annual retainer of $17,500, and each
other non-employee director received an annual retainer of $15,000. In addition,
each non-employee director received a fee of $1,000 for each Board meeting
attended, plus reimbursement of all customary expenses incurred in connection
with attendance at Board meetings. Directors who served on the various Board
Committees each received, in addition to the above amounts, a meeting fee of
$750 per Committee meeting attended in conjunction with a regularly scheduled
Board meeting and $1,000 per Committee meeting attended not in conjunction with
a regularly scheduled Board meeting, plus reimbursement of customary expenses
incurred in connection with attendance at each Committee meeting. The Company
also pays the premium to provide the directors with $250,000 of coverage under a
group Travel Accident Insurance policy.
Under the Company's Deferred Compensation Plan, non-employee directors
may elect to defer receipt of all or a portion of fees to be earned in the next
succeeding year and have such fees accrue either (i) at the interest rate
determined by the Compensation Committee or (ii) based upon the performance of
the Company's common stock, including any dividends paid thereon. A
participating non-employee director will receive all amounts so deferred and
accrued in one payment on the first business day of the year following the year
in which the participant ceases to be a director.
12
<PAGE> 17
OTHER COMPENSATION FOR OUTSIDE DIRECTORS
The Company maintains a Retirement Plan which covers non-employee
directors. At the time of retirement, a director becomes entitled to receive,
for that number of years equal to the number of years of service as a director,
an annual pension benefit equal to 50% of the amount of the director's final
annual retainer. Except for Mr. Watkins, who has been exempted, directors who
have attained age 70 cannot stand for re-election and must retire.
Pursuant to the 1993 Stock Option Plan for Non-Employee Directors (the
"Option Plan"), each of the Company's eligible non-employee directors has
received a one-time grant of an option for 2,000 shares of the Company's common
stock. Under the Option Plan, each eligible director is also granted an option
for 500 shares immediately following each Annual Meeting.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company for the
calendar years ended December 31, 1996, 1995 and 1994 of all persons who were,
at December 31, 1996, the Chief Executive Officer and the five most highly paid
officers of the Company (the "Named Executives"):
13
<PAGE> 18
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------- ---------------------------
SECURITIES
NAME & OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION SHARE OPTIONS/ COMPENSATION
POSITION YEAR ($)(1) ($)(2) ($)(3 AWARDS ($)(4) SARS (#) ($)(5)
- --------- ---- ------- ------- ------ ------------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
James F. Billett, Jr. 1996 430,496 375,000 84,373 97,717
Chairman, President 1995 414,384 335,000 81,888 71,183
& Chief Executive 1994 397,388 275,000 58,096 54,905
Officer
Stephen H. Binet 1996 237,808 175,000 30,667
Executive Vice President* 1995 228,423 150,000 18,131
1994 219,000 115,000 17,185
Paul Feldsher 1996 203,038 150,000 30,686
Executive Vice President* 1995 180,577 120,000 18,344
1994 160,615 100,000 17,185
Robert A. Giambo 1996 177,923 125,000 30,694
Executive Vice President 1995 163,846 120,000 18,442
& Chief Actuary* 1994 152,077 100,000 17,185
Alan L. Hunte 1996 177,923 125,000 30,690
Vice President, 1995 163,846 120,000 18,392
Chief Financial Officer 1994 152,077 105,000 17,185
& Treasurer
James E. Roberts** 1996 283,462 175,000 10,000 29,480
Vice Chairman* 1995 190,385 100,000 306,250 25,000 2,000
</TABLE>
- ----------
* The position is with the Company's principal operating subsidiary, Trenwick
America Re.
** Mr. Roberts joined Trenwick America Re in May 1995.
(1) Includes all before-tax contributions to the Company's 401(k) Savings Plan.
(2) Includes cash bonus awards earned for the indicated calendar years.
(3) Consists of personal benefits provided by the Company for the indicated
calendar years in which the amounts exceeded the lesser of $50,000 or ten
percent of the Named Executive's combined salary and bonus for the year.
Includes for 1996, 1995 and 1994 supplemental whole life and health
benefits of $43,653, $42,888 and $42,158, respectively, and for 1996 and
1995 automobile expenses of $35,040 and $26,748, respectively.
(4) Mr. Roberts was awarded 7,000 Restricted Shares on May 24, 1995, based on
a market price per share of $43.75. Restricted Shares were not awarded to
any other Named Executive during the periods indicated. Dividends are paid
on Restricted Shares at the same rate as paid to all stockholders and, as
permitted, those amounts have not been
14
<PAGE> 19
included in this table. The Restricted Shares awarded to Mr. Roberts vest
in equal annual installments over three years beginning on the first
anniversary of the award. The aggregate total of unvested Restricted Share
holdings of each of the Named Executives, valued as of December 31, 1996,
at a market price per share of $46.25, are as follows:
<TABLE>
<CAPTION>
UNVESTED
NAME RESTRICTED SHARES VALUE ($)
---- ----------------- ---------
<S> <C> <C>
James F. Billett, Jr. 1,494 69,098
Stephen H. Binet 706 32,653
Paul Feldsher 656 30,340
Robert A. Giambo 689 31,866
Alan L. Hunte 724 33,485
James E. Roberts 4,667 215,849
</TABLE>
(5) Includes Company contributions to the Company's 401(k) Savings Plan on
behalf of each of the Named Executives of $9,000 in 1996 and $2,000 in
each of 1995 and 1994 (the maximum contribution under the Plan in each
case). Also includes Company contributions to the Company's Pension Plan,
a qualified defined contribution plan (the "Qualified Pension Plan"), of
$12,000 in 1996 for each of the Named Executives and $8,664 and $8,682 in
1995 and 1994, respectively, for each of the Named Executives except Mr.
Roberts (who was not eligible to participate until 1996). Also includes
contributions made and interest credited for each of these Named
Executives to the Company's Supplemental Executive Retirement Plan
(consisting of contributions in excess of Qualified Pension Plan
contribution limits imposed by the Internal Revenue Code). For Mr.
Billett, contributions were $49,276, $38,877 and $31,137, respectively,
and interest credited was $27,441, $21,641 and $13,086, respectively, for
1996, 1995 and 1994. The contribution for each of the other Named
Executives was $8,480 for 1996, and interest credited for 1996 for Messrs.
Binet, Feldsher, Giambo and Hunte was $1,187, $1,206, $1,214 and $1,212,
respectively. Contributions for Messrs. Binet, Feldsher, Giambo and Hunte
for 1995 were $6,930, $7,143, $7,242 and $7,192, respectively, and
interest credited for 1995 was $537 for each of them. The 1994
contribution for each of Messrs. Binet, Feldsher, Giambo and Hunte was
$6,503. Mr. Roberts was not eligible to participate in the Supplemental
Executive Retirement Plan until 1996.
The table below sets forth information with respect to the only stock
option grant to a Named Executive in 1996. The option, granted on March 5, 1996,
pursuant to the Company's 1993 Stock Option Plan, becomes fully vested and
exercisable on June 14, 2003, but will vest and become immediately exercisable
in full in the event of a change in control of the Company. The option is also
subject to acceleration in the event certain market price conditions are met In
the event that the Company's common stock trades at or above $60.00 or $70.00
per share on any 20 of 30 consecutive trading days on or before December 31,
1998, 45% and 55%, respectively, of the option will also accelerate, such that
on the date each condition is met, one-third of the accelerated portion will
vest and become immediately exercisable and an additional one-third will vest
and become exercisable upon each of the one-
15
<PAGE> 20
and two-year anniversaries of the acceleration. The option is subject to
termination prior to its expiration date in the event of termination of
employment.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF POTENTIAL REALIZABLE VALUE
SECURITIES % OF TOTAL AT ASSUMED ANNUAL RATES
UNDERLYING OPTIONS EXERCISE OF STOCK PRICE APPRECIATION
OPTIONS GRANTED TO OR BASE FOR OPTION TERM (B)
GRANTED EMPLOYEES IN PRICE EXPIRATION ----------------------------
NAME (#) FISCAL YEAR ($/SH)(A) DATE 5% 10%
- ---- --- ------------ --------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
James E. Roberts 10,000 19.8 51.25 12/14/03 $236,532 $563,097
</TABLE>
(A) The exercise price and tax withholding obligations related to exercise may
be paid by delivery of full shares of common stock that have been held for
at least six months, subject to certain conditions.
(B) Calculations are based on hypothetical annual compounded rates of stock
price appreciation of 5% and 10% over the full term of the option. Using
the same assumptions, and based on 7,954,501 shares outstanding as of
February 28, 1997, the total dollar gains for all shareholders as a group
would be $188,159,358 (5%) and $447,915,565 (10%) based on the March 5,
1996, price per share of $51.25.
The following table sets forth all stock options exercised during 1996
by the Named Executives and the number of unexercised options held by the Named
Executives at December 31, 1996. Also included is the value of "in-the-money"
options on December 31, 1996. In-the-money options are options whose exercise
price is less than the fair market value of the Company's common stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS
OPTIONS/SARS AT FY-
AT FY-END (#) END($)(2)
SHARES VALUE ------------- -------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($)(1) UNEXERCISABLE UNEXERCISABLE
- ---- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
James F. Billett, Jr. 110,852 2,350,062 34,630/90,000 782,928/562,500
Stephen H. Binet 4,000 136,000 37,000/58,000 782,000/355,500
Paul Feldsher 7,500 213,375 31,000/49,000 622,625/299,250
Robert A Giambo -- -- 45,500/44,500 1,037,625/271,125
Alan L. Hunte 15,000 424,000 23,000/44,500 420,750/271,125
James E. Roberts -- -- 2,500/32,500 6,875/ 61,875
</TABLE>
- ----------------
(1) Represents in each case the difference between the fair market value per
share of the Company's common stock on the date of exercise and the option
exercise price per share.
16
<PAGE> 21
(2) Represents the difference between the closing price per share of the
Company's common stock on December 31, 1996, of $46.25 and the exercise
price of "in-the-money" options granted to each Named Executive. The
dollar amounts shown reflect the value of options granted over a period of
more than nine years.
REPORT OF THE COMPENSATION COMMITTEE ON
THE COMPENSATION OF EXECUTIVE OFFICERS OF THE COMPANY
The Compensation Committee of the Board of Directors (the "Committee")
is composed entirely of five independent outside directors who have served
together in such capacity since 1986. Donald E. Chisholm, also an independent
outside director, served on the Compensation Committee from May 1996 until his
death in March 1997. The Committee meets periodically to review and recommend
for Board approval the Company's compensation program for senior executives and
other key employees and independently administers the stock option and other
incentive plans of the Company.
The guiding principle of the Committee is to establish a compensation
program which aligns executive compensation with the Company's objectives,
business strategies and financial and operational performance. In this
connection, the Committee seeks to:
(1) Attract and retain qualified executives, in a highly competitive
environment, who will play a significant role in the achievement of the
Company's goals.
(2) Create a performance-oriented environment that rewards performance
with respect to the financial and operational goals of the Company and which
takes into account industry-wide trends and performance levels.
(3) Reward executives for strategic management and the long-term
enhancement of stockholder value.
Compensation for the Named Executives consists of three key elements:
base salary and benefits, discretionary annual cash bonus and stock-based
compensation. The Committee seeks to weigh each element both separately and
collectively to ensure that the executive officers are appropriately compensated
in a manner that advances both the short-term and long-term interests of the
stockholders. The Committee's compensation program has been developed with the
assistance of an outside independent compensation consultant retained by the
Committee.
The base salary for each executive officer is set on the basis of the
salary levels in effect for comparable positions in the reinsurance industry,
adjusted for the executive's experience and performance level and internal
comparability considerations. The Company monitors industry salary levels
through its participation in an annual industry survey administered by a
nationally known compensation consulting firm. For 1996, executive
17
<PAGE> 22
officers' base salaries were at approximately the midpoint of the range of
salaries for individuals in comparable positions based on this industry survey.
An executive officer's discretionary annual cash bonus is based on a
subjective assessment of overall Company and individual performance as compared
to both budgeted and prior fiscal year performance and the extent to which the
Company achieved its overall financial goals of growth in earnings and return on
stockholders' equity. In addition, corporate performance relative to peer
company performance is considered. The Committee fixes the amount that may be
awarded to the Chief Executive Officer ("CEO") and an aggregate amount that may
be awarded to other executive officers. The CEO allocates awards among the other
executive officers up to the aggregate amount, which allocations are then
reviewed and ratified by the Committee.
The Committee's determination of 1996 bonuses for executive officers
was primarily based on the 12% increase in operating earnings which the Company
achieved notwithstanding a difficult market. This result was the product of
continued superior underwriting performance, as reflected in a combined
statutory ratio of 95.7%; record productivity, as evidenced by a decline in the
Company's overhead ratio and increased revenue per employee; and a 15% rate of
growth in net premium written, which, while lower than the previous two years'
growth rates, nevertheless exceeded the average rate experienced by member
companies of the Reinsurance Association of America. Although the total return
to the Company's stockholders for 1996 was negative, the Committee viewed this
element against the background of the Company's strong cumulative return to
stockholders over the last five years.
The Company's third compensation element, stock-based compensation,
provides each executive officer with a meaningful stockholding in the Company as
a long-term incentive and a mechanism for aligning the executive officers'
interests with those of the stockholders. In past years, the Committee has
awarded stock options and Restricted Shares under the Company's stock plans.
Each is linked to the creation of stockholder value by providing additional
value to the executive as the Company's stock price increases. Options are
exercisable over an extended period of time and expire within ten years of
grant. Option grants are made at an exercise price not less than the fair market
value of the underlying stock at the time of grant. Restricted Shares cannot be
transferred until the shares vest, with vesting occurring over an extended time
subject to the executive officer's continued employment. The holder has all the
rights and privileges of a stockholder with respect to the restricted shares,
other than the ability to transfer them, including the right to vote and to
receive dividends.
In December 1993, the Committee implemented a program designed to more
closely align the stock-based compensation of executive officers with the
creation of stockholder value. The use of Restricted Share awards was eliminated
for existing executive officers, and newly-structured non-qualified stock
options (the "1993 Options") were granted to those officers pursuant to the
Company's 1993 Stock Option Plan (the "1993 Plan"). These options become fully
exercisable in June 2003, but are subject to acceleration if the Company's
common stock trades at or above specified targets on or before December 31,
1998. (With the achievement of the first of these targets in October 1995, 15%
of each option was accelerated.)
18
<PAGE> 23
In the spring of 1995, James E. Roberts, formerly President and Chief Executive
Officer of one of the Company's peers, accepted the position of Vice Chairman of
the Company's principal operating subsidiary. To appropriately compensate an
executive of Mr. Roberts' caliber, the Committee crafted a compensation package
which included a grant of non-qualified stock options under the 1993 Plan
bearing the same vesting provisions as the 1993 Options and a one-time award of
Restricted Shares which recognized the loss of certain stock-based compensation
by Mr. Roberts upon his departure from his prior employer. In order to reward
his substantial contribution to the Company's 1995 results and more closely
match his equity appreciation opportunity to those of the other executive
officers, the Committee awarded Mr. Roberts a second grant of non-qualified
stock options under the 1993 Plan in March 1996, with vesting provisions
equivalent to those of his prior grant. The Committee believes the options
granted to executive officers pursuant to the 1993 Plan constitute a carefully
structured means by which the executive officers' equity appreciation
opportunity is aligned with that of the stockholders. As such, they are intended
to comprise the core of these individuals' stock-based compensation for the
foreseeable future.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation over $1 million paid to the
Company's Chief Executive Officer and the four other most highly compensated
executive officers. However, qualifying performance-based compensation is not
subject to the deduction limit if certain requirements are met. No executive
officer was subject to the limitations of Section 162(m) in 1996. The Committee
intends to structure any stock-based compensation for executive officers so as
to qualify for deductibility under the statute.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Billett's base salary is set using the same criteria as all other
executive officers and is in the approximate midpoint of the range of salaries
for comparable positions in the 1996 industry survey data. His 1996 cash bonus
award reflected the Company performance factors cited above and additionally
rewarded planning and development efforts during the year which facilitated the
establishment of two strategic alliances; these relationships have enabled
Company to diversify into the medical malpractice and accident and health
businesses.
Members of the Compensation Committee
Alan R. Gruber, Chairman
Neil Dunn
P. Anthony Jacobs
Joseph D. Sargent
Frederick D. Watkins
19
<PAGE> 24
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph for the five year period commencing
January 1, 1992 and ending December 31, 1996, comparing the yearly percentage
change on a dividend reinvestment basis of the Company's common stock against
the cumulative total stockholder return of the Standard & Poor's 500 Stock Index
("S&P 500 Index") and the Dow Jones Property and Casualty Insurance Index.
<TABLE>
<CAPTION>
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Trenwick Group Inc. $100.00 $147 $144 $160 $217 $183
S&P 500 Index 100.00 108 118 120 165 203
Property-Casualty Insurance 100.00 122 123 129 182 219
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's common stock, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission.
Based on the Company's review of all insiders' filings received, and
written representations from reporting persons that no Forms 5 were required for
such persons, the Company believes there were no Section 16 violations for 1996
other than the inadvertent failure of Mr. Billett to report on a timely basis
his June 1996 sale of 45,050 shares of the Company's stock. The disposition was
reported in early September when the omission was brought to his attention.
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE AUTHORIZED SHARES
OF COMMON STOCK AND PREFERRED STOCK
PROPOSED AMENDMENT
The Board of Directors has unanimously approved an amendment to the
Company's Restated Certificate of Incorporation increasing from 15,000,000 to
30,000,000 the number of shares of common stock authorized to be issued by the
Company and increasing from 1,000,000 to 2,000,000 the number of shares of
preferred stock authorized to be issued by the Company.
Of the 15,000,000 shares of common stock currently authorized, the
Company has, as of the date hereof, (i) 7,957,628 shares outstanding, (ii)
63,500 shares reserved for future grants pursuant to the Company's stock plans,
(iii) 613,630 shares subject to outstanding unexercised stock options under such
plans, (iv) approximately 3,978,814 shares reserved for
20
<PAGE> 25
the distribution, on April 15, 1997, of the shares of common stock issuable
pursuant to the three-for-two stock split previously announced by the Company,
and (iv) approximately 338,565 shares reserved for adjustments under the
Company's stock plans in connection with such stock split, leaving approximately
2,047,863 shares of common stock available for other purposes out of the
15,000,000 authorized shares. If the proposed amendment to add 500,000 shares to
the Company's 1993 Stock Option Plan is approved (see Proposal No. 3, below),
only 1,547,863 shares of common stock would remain available for other purposes.
However, upon approval of this proposal to increase the number of authorized
common shares to 30,000,000, 16,547,863 shares of common stock would be
available for other purposes.
No shares of preferred stock are currently outstanding. For purposes of
the Company's Shareholder Rights Plan, 150,000 shares of Series A Junior
Participating Preferred Stock, $.10 par value per share ("Series A Preferred
Stock"), are currently reserved, leaving 850,000 shares of preferred stock
available for other purposes. Upon approval of this proposal to increase the
number of authorized preferred shares to 2,000,000, an additional 50,000 shares
of Series A Preferred Stock would be reserved in connection with the Shareholder
Rights Plan, leaving 1,800,000 shares of preferred stock available for other
purposes.
The first paragraph of Article 4 of the Restated Certificate of
Incorporation currently reads as follows:
"The aggregate number of shares which the corporation is authorized to
issue is 16,000,000 shares, to consist of 15,000,000 Common shares
('Common Stock') at a par value of $.10 each and 1,000,000 Preferred
shares ('Preferred Stock') at a par value of $.10 each."
The proposed amendment would amend the paragraph to read as follows:
"The aggregate number of shares which the corporation is authorized to
issue is 32,000,000 shares, to consist of 30,000,000 Common shares
('Common Stock') at a par value of $.10 each and 2,000,000 Preferred
shares ('Preferred Stock') at a par value of $.10 each."
The proposal will be adopted if it is approved by the affirmative vote of a
majority of the outstanding stock entitled to vote.
PURPOSE OF AMENDMENT
The Board believes that it is desirable to have the additional
authorized shares of common and preferred stock available for potential future
financings, acquisitions, stock splits or dividends, or employee benefit plans,
or for other corporate purposes. Authorization at this time would permit such
actions without the delay and expense incident to holding a special meeting of
stockholders should the need for additional shares arise. The Board (subject to
applicable laws and rules) would have the power to issue the additional shares
without further stockholder approval. The Company has no definitive plans,
commitments, arrangements or understandings with respect to the issuance of any
additional shares of common stock or
21
<PAGE> 26
preferred stock which would be authorized by the proposed amendment. One of the
effects of the increase in authorized shares may be to enable the Board to
render more difficult or discourage an attempt to obtain control of the Company.
The Board would have additional shares available to make a counter-offer for the
shares of a bidder or to sell shares, thereby diluting the voting power of a
bidder. As of this date, the Board is not aware of any specific effort to
accumulate the Company's shares or to obtain control of the Company by means of
a tender offer, merger, solicitation in opposition to management or otherwise.
Any issuance of additional shares of common stock could have the effect of
diluting earnings per share and book value per share of existing shares of
common stock.
The Board of Directors recommends a vote FOR the approval of the
amendment to the Restated Certificate of Incorporation.
PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO 1993 STOCK OPTION PLAN
PROPOSED AMENDMENT
The Board of Directors has approved an amendment to the Trenwick Group
Inc. 1993 Stock Option Plan (the "Plan"), subject to the approval of the
Company's stockholders, to increase the aggregate number of shares authorized
for issuance under the Plan by 500,000 shares. As adopted by the Board of
Directors and approved by the stockholders at the Company's 1994 Annual Meeting
of Stockholders, the Plan provides for the issuance of up to 450,000 shares of
common stock. The Compensation Committee has granted options for an aggregate of
440,500 shares under the Plan, none of which have been exercised, leaving 9,500
shares available for potential future grants. In connection with the
three-for-two stock split previously announced by the Company, which will be
distributed on April 15, 1997, and in accordance with the terms of the Plan, the
total number of shares reserved for issuance under the Plan will be
proportionately increased to approximately 675,000 shares, approximately 660,750
of which will be reserved for the outstanding options and 14,250 of which will
be available for potential future awards. (Because the proposed 500,000-share
addition to the Plan would not take effect until after the split, it would not
be subject to that adjustment.) If the proposed amendment to the Plan is
approved by the stockholders, a total of approximately 1,175,000 shares would be
reserved under the Plan, of which approximately 660,750 shares would be reserved
for outstanding options and 514,250 shares would be available for potential
future awards. The amendment will be adopted if it is approved by the
affirmative vote of a majority of the votes duly cast in person or by Proxy at
the Annual Meeting.
There are currently 227,442 shares reserved for issuance under the
Company's other stock plans, of which 173,130 shares are reserved for
outstanding options and 54,000 shares are reserved for potential future awards
(20,000 shares reserved for automatic stock option grants under the Non Employee
Directors' Stock Option Plan and 34,000 shares reserved for awards under the
1989 Stock Plan, which is currently used only for awards of Restricted Stock).
In connection with the three-for-two stock split, and in accordance with the
terms of
22
<PAGE> 27
the plans, the number of shares reserved for issuance under the Company's other
stock plans will be proportionately increased to approximately 341,163 shares.
PURPOSE OF AMENDMENT
The Board of Directors believes that the Plan promotes continuity of
management and increased incentive and personal interest in the welfare of the
Company by those who are responsible for shaping and carrying out the long-range
plans of the Company and securing its continued growth and financial success.
However, the number of shares remaining in the Plan will be insufficient for the
continued success of the Plan over its term. The Board believes that this
amendment will assure that the Plan has adequate shares to fulfill its goals for
the foreseeable future.
THE PLAN
The full text of the Plan, reflecting the proposed amendment (as well
as the adjustments resulting from the referenced stock split), is set forth in
Appendix A attached hereto. A summary of the Plan is set forth below.
Purpose. The Plan is intended to strengthen the ability of the Company and
its subsidiaries to attract and retain highly qualified employees by providing
them with added incentive to render high levels of performance and effective
service in connection with their employment through the opportunity for common
stock ownership.
Administration. The Plan is administered by the Compensation Committee (the
"Committee") of the Board of Directors. None of the Committee members are
eligible to participate in the Plan. The Committee, among other things,
determines which qualified employees will receive Restricted Share, Option and
Stock Appreciation Right ("SAR") grants, the time of the grants, the size and
exercise price of the grants, whether to grant Restricted Shares or an Option
and whether an Option shall be an Incentive Stock Option ("ISO") or a
NonQualified Stock Option ("NQSO"), whether a qualified employee may receive
more than one grant of Restricted Shares, more than one grant and more than one
type of Option, and the terms upon which Restricted Shares are granted and under
which Options and SARs may be exercised, all subject to any express requirements
or limitations of the Plan.
Shares Subject to the Plan. As described above, upon adoption of the
proposed amendment, an aggregate of approximately 1,175,000 shares of common
stock of the Company will be reserved for issuance under the Plan pursuant to
Options and SARs and as Restricted Shares, subject to the discretion of the
Board in the case of various types of capital or corporate adjustments or
changes as set forth in Section 10 of the Plan. To date, only Options have been
awarded by the Compensation Committee under the Plan. Shares subject to any part
of an Option which terminates unexercised for any reason will be available for
future Option and Restricted Share grants. Grants may not be made under the Plan
after December 14, 2003.
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Eligibility. Only qualified employees may receive grants under the Plan. A
qualified employee is defined as a person designated by the Committee who is
employed by the Company or a subsidiary on a salaried basis (including an
officer who is also a director) and whose performance has had or could have a
significant effect on the current or long-term success of the Company or a
subsidiary. At present there are approximately twenty employees of the Company
and its subsidiaries considered to be within the definition of a qualified
employee under the Plan; sixteen qualified employees have been awarded Options
for an aggregate of 440,500 shares under the Plan to date. No qualified
employee, including the Chief Executive Officer of the Company, may receive, in
the aggregate, grants of Options, SARs and Restricted Shares covering more than
100,000 shares.
Option Exercise Price. The price at which Options may be exercised may not
be less than 100% of the fair market value of the shares on the date of grant.
The exercise price of each Option granted under the Plan to date has been equal
to the fair market value of the shares on the date of grant. The Option price is
to be paid, upon exercise, in cash or in shares of common stock of the Company
held for at least six months valued at fair market value at the time of
exercise, or by promissory note with such terms as determined by the Committee
or a combination thereof. Provision is also made in the Plan to allow an
optionee to pay the exercise price with the proceeds of sale of a portion of the
shares obtained upon Option exercise. The issuance of Options at fair market
value on the date of grant constitutes a performance goal under Section 162(m)
of the Internal Revenue Code. (See the Report of the Compensation Committee,
above.) The closing price of the Company's common stock on the Nasdaq National
Market System on______________, 1997 was $_____ per share.
Other Option Terms. The Committee determines the time or times at which an
Option becomes exercisable. The terms of each Option granted to date under the
Plan provides that it will become fully exercisable on a fixed date (ranging
from just under eight years from the date of grant to 9-1/2 years from the date
of grant), subject to acceleration if the Company's common stock trades at or
above specified targets. If an Option is not fully exercisable at the time of
occurrence of a Change in Control, as defined in the Plan, all portions of the
Option become immediately exercisable in full.
Options terminate at the earliest of ten years after the date of grant,
five years after retirement, immediately if employment is terminated for cause,
one month after any voluntary termination of employment other than retirement,
180 days after the date of death (but the Option may only be exercised to the
extent it was exercisable on the date of such events) or any earlier time set by
the Committee at the time of the Option grant. Options granted to date terminate
in accordance with the described schedule.
An Option is exercisable only by the optionee. No Option is
transferable except by will or the laws of descent and distribution.
Stock Appreciation Rights. A SAR permits an optionee to surrender all or
part of the shares subject to an Option rather than exercise the Option with
respect to such shares and, in connection with the surrender, to request payment
in cash, or shares of the Company's
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<PAGE> 29
common stock, or a combination of cash and shares, equal to the fair market
value of the surrendered Option shares determined on the SAR exercise date less
the aggregate Option exercise price of the shares surrendered. The Committee has
the sole discretion to determine the form of payment. The Committee determines
whether a SAR will be granted in conjunction with any or all of the shares
subject to an Option granted under the Plan and whether to grant a SAR with
respect to an Option previously granted without a related SAR. A SAR may only be
exercised if the related Option is exercisable and terminates when the related
Option terminates. Shares subject to any portion of an Option as to which SARs
are exercised will not be available for future Options. The issuance of SARs at
fair market value on the date of grant constitutes a performance goal under
Section 162(m) of the Internal Revenue Code. (See the Report of the Compensation
Committee, above.) No SAR's have been granted under the Plan to date.
Restricted Shares. A Restricted Share award is an award of shares of common
stock that may not be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of for a period determined according to a formula specified
in the Plan and as supplemented by each agreement governing Restricted Share
awards. Except for the restriction against transfer until vesting, the recipient
of the award will have all rights of a stockholder of the Company's common stock
including the right to vote such shares at stockholder meetings and the right to
receive dividends paid on such stock. No Restricted Shares have been awarded
under the Plan to date.
Other Restricted Share Terms. Restricted Shares will vest ratably over a
five-year period. The number of Restricted Shares that may be awarded to a
Restricted Stockholder in any one calendar year under the Plan will be
determined by the Committee based on a percentage of the qualified employees'
base salaries as a group, such percentage not to exceed 25% of the gross annual
aggregate salaries of all qualified employees, divided by the closing market
price of the Company's common stock on the day prior to the date of grant. Upon
the occurrence of a Change in Control, all restrictions will be removed and the
Restricted Shares will be deemed to have vested.
In the event of the termination of employment of any Restricted
Stockholder for any reason, all shares of common stock awarded pursuant to the
Plan which have not vested will be forfeited by such employee and will be
cancelled and unavailable for future awards.
Upon death or disability, the Restricted Stockholder shall be
considered to be vested for purposes of the Plan for those Restricted Shares
which would have otherwise vested in the year of such death or disability.
Each Restricted Share shall be non-transferable and subject to
forfeiture to the Company until vested.
Tax Withholding for Options, SARs and Restricted Shares. The Company may, as
the Options are exercised or as the Restricted Shares vest, pay to the
respective optionee or participant upon request a cash amount up to 35% of the
then current fair market value of the
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<PAGE> 30
shares that otherwise would be issued upon such Option exercise or Restricted
Shares vesting subject to his or her Option award or Restricted Share grant.
This cash payment is in lieu of the Option shares exercised or Restricted Shares
vested having such aggregate fair market value and is applied by the Company to
the satisfaction of the Federal and State income tax withholding obligations
that arise to the optionee or participant at the time that the Option is
exercised or the Restricted Shares vest. To the extent that a cash payment is
made in lieu of Option shares or vested Restricted Shares, the corresponding
number of Option shares or Restricted Shares having such aggregate fair market
value are charged against the total number of shares reserved under the Plan.
Federal Income Tax Consequences to the Company and the Participant.
Incentive Stock Options ("ISO's")
Options granted under the Plan which constitute ISOs will, in general,
be subject to the following Federal income tax treatment:
(i) The grant of an ISO will give rise to no Federal income tax
consequences to either the Company or the participant.
(ii) A participant's exercise of an ISO will result in no Federal
income tax consequences to the Company.
(iii) A participant's exercise of an ISO will not result in ordinary
Federal taxable income to the participant, but may result in the
imposition of or an increase in the alternative minimum tax. If shares
acquired upon exercise of an ISO are not disposed of within the same
taxable year the ISO is exercised, the excess of the fair market value of
the shares at the time the ISO is exercised over the option price is
included in the participant's computation of alternative minimum taxable
income.
(iv) If shares acquired upon the exercise of an ISO are disposed of
within two years of the date of the option grant, or within one year of
the date of the option exercise, the participant will realize ordinary
Federal taxable income at the time of the disposition to the extent that
the fair market value of the shares at the time of exercise exceeds the
option price, but not in an amount greater than the excess, if any, of the
amount realized on the disposition over the option price. Short-term or
long-term capital gain will be realized by the participant at the time of
such a disposition to the extent that the amount of proceeds from the sale
exceeds the fair market value at the time of the exercise of the ISO.
Short-term or long-term capital loss will be realized by the participant
at the time of such a disposition to the extent that the option price
exceeds the amount of proceeds from the sale.
If a disposition is made as described in this section, the Company will
be entitled to a Federal income tax deduction in the taxable year in which
the disposition is made in an amount equal to the amount of ordinary
Federal taxable income realized by the participant. If shares acquired
upon the exercise of an ISO are disposed of after the later
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<PAGE> 31
of two years from the date of the option grant or one year from the date
of the option exercise, the participant will realize long-term capital
gain or loss in an amount equal to the difference between the amount
realized by the participant on the disposition and the participant's
Federal income tax basis in the shares, usually the option price. In such
event, the Company will not be entitled to any Federal income tax
deduction with respect to the ISO.
Non-Qualified Stock Options ("NQSOs")
NQSO's granted under the Plan (which constitute all Options granted
under the Plan to date) will, in general, be subject to the following Federal
income tax treatment:
(i) The grant of a NQSO will give rise to no Federal income tax
consequences to either the Company or the participant.
(ii) The exercise of an Option will generally result in ordinary
Federal taxable income to the participant in an amount equal to the excess
of the fair market value of the shares at the time of exercise over the
Option price.
(iii) A deduction from Federal taxable income will be allowed to the
Company in an amount equal to the amount of ordinary income recognized by
the participant, provided the Company deducts and withholds all
appropriate Federal withholding tax.
(iv) Upon a subsequent disposition of shares, a participant will
recognize a short-term or long-term capital gain or loss equal to the
difference between the amount received and the tax basis of the shares,
usually fair market value at the time of exercise.
Stock Appreciation Rights
Any SARs which may be granted in conjunction with all or part of any
Option granted under the Plan will be subject to the following Federal income
tax treatment:
(i) The grant of a SAR will give rise to no Federal income tax
consequences to either the Company or the participant.
(ii) Upon the exercise of a SAR, the economic value received by the
participant, the excess of the fair market value of the shares on the date
of the exercise over the Option price, will be taxable to the optionee as
ordinary Federal taxable income. The Company will receive a Federal income
tax deduction in an amount equal to the income realized by the
participant.
Restricted Shares
Restricted Shares granted under the Plan will be subject to the
following Federal income tax treatment:
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<PAGE> 32
(i) The grant of Restricted Shares will give rise to no Federal income
tax consequences to either the Company or the participant.
(ii) The participant will, however, realize ordinary income to the
extent of the fair market value of the shares released from restrictions
(determined at the date of release of restrictions) at the time of such
release. Cash dividends received on Restricted Shares are also taxable to
the participant as ordinary income. A deduction from Federal taxable
income will be allowed to the Company in an amount equal to the amount of
ordinary income recognized by the participant, provided the Company
deducts and withholds all appropriate Federal withholding tax.
(iii) Upon a subsequent disposition of vested shares, the participant
will realize a short-term or long-term capital gain or loss in an amount
equal to the difference between the amount of proceeds from the sale and
the tax basis of the shares, usually fair market value at the date of
vesting.
(iv) Under a special provision of the Code, a participant may elect
within the 30-day period after a grant of Restricted Shares to include in
ordinary income the fair market value of the shares (without considering
the restrictions on them) at the date of grant in the year of such grant.
If the election is made, the Company would be allowed a deduction against
income in the same year and in the same amount. While no additional income
would be recognized by the participant upon the release of the shares from
restrictions, no loss would be allowed to the participant upon subsequent
forfeiture of any shares on which tax was paid. If any Restricted Shares
are forfeited under the Plan, in the year of forfeiture the Company would,
however, be required to include in income any amount it had earlier
deducted related to those shares. The participant's basis in the shares
for computing gain or loss on a subsequent disposition would be equal to
the fair market value at grant which the participant included in income
under the election.
The Federal income tax consequences described in this section are based
on laws and regulations in effect on March 31, 1997. Future changes in those
laws and regulations may affect the tax consequences described herein. No
discussion of state or local income tax treatment has been included.
The Board of Directors believes that the proposal to amend the Plan is
in the best interests of the Company and its stockholders and recommends a vote
FOR approval of the amendment of the 1993 Stock Option Plan.
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Audited financial statements of the Company and its consolidated
subsidiaries are included in the Company's annual report to stockholders, a copy
of which has been furnished to all stockholders of record. Upon recommendation
of the Audit Committee, the Board of Directors has appointed Price Waterhouse to
examine its consolidated financial statements for
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<PAGE> 33
the year ending December 31, 1997, and has determined it desirable to request
that the stockholders approve such appointment. Price Waterhouse has acted as
the Company's independent accountants since 1979. Representatives of Price
Waterhouse will be present at the Annual Meeting and will have the opportunity
to make a statement if they desire to do so and are also expected to be
available to respond to appropriate questions.
The Board of Directors recommends a vote FOR the ratification of the
appointment of Price Waterhouse as independent accountants for the Company for
the year ending December 31, 1997.
STOCKHOLDER PROPOSALS--1998 ANNUAL MEETING
Stockholders of the Company may present proposals for the 1998 Annual
Meeting by directing such proposals to the Secretary at the corporate address.
Such proposals must be received no later than December 2, 1997, in order to be
included in the Proxy Statement and Proxy relating to such meeting.
OTHER MATTERS
Management of the Company is not aware of, and does not intend to
present, any matters at the Annual Meeting other than those set forth above.
Should other matters properly come before the meeting, the persons named on the
enclosed Proxy may vote such Proxy in accordance with their best judgment.
By order of the Board of Directors,
Jane T. Wiznitzer
Secretary
STOCKHOLDERS ARE ENTITLED TO RECEIVE, UPON WRITTEN REQUEST, AND WITHOUT
CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED DECEMBER 31, 1996. PLEASE
DIRECT SUCH REQUESTS TO THE OFFICE OF THE SECRETARY, TRENWICK GROUP INC., METRO
CENTER, ONE STATION PLACE, STAMFORD, CONNECTICUT 06902.
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APPENDIX A
TRENWICK GROUP INC.
1993 STOCK OPTION PLAN
1. PURPOSE This Plan is intended to strengthen the ability of the Company
and its Subsidiaries to attract and retain Qualified Employees of outstanding
competence by providing them with added incentive to render high levels of
performance and effective service in connection with their employment through
the opportunity for common stock ownership and benefits of common stock
appreciation.
2. DEFINITIONS For the Purposes of the Plan, except where the context
otherwise indicates, the following definitions shall apply:
"Board" means the Board of Directors of the Company.
A "Change in Control" shall be deemed to have occurred at such time as:
a. Any person within the meaning of Section 16(d) of the Securities
Exchange Act of 1934, other than the Company, a subsidiary or any employee
benefit plan(s) sponsored by the Company or any subsidiary, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934), directly or indirectly, of fifty percent (50%) or
more of the Company's issued and outstanding shares of common stock, or
shares of capital stock at any time issued by the Company representing
fifty percent (50%) or more of the voting rights of all shares of stock
issued by the Company;
b. Individuals who constitute the Board of Directors on December 15,
1993 cease for any reason to constitute a majority at least thereof,
provided that any person becoming a director subsequent to December 15,
1993, whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least three quarters of the
directors comprising the Board on December 15, 1993 (either by a specific
vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without objection to such
nomination) shall be considered as though such person were a member of the
Board on December 15, 1993;
c. Trenwick consolidates with, or merges with and into, any other
person (other than a subsidiary of Trenwick), and Trenwick is not the
continuing or surviving corporation of such consolidation or merger;
d. Any person (other than a subsidiary of Trenwick) consolidates with,
or merges with and into, Trenwick, and Trenwick is the continuing or
surviving corporation of such consolidation or merger, and in connection
with such consolidation or merger, all or part of the outstanding shares
of common stock are changed into or exchanged for stock or other
securities of any other person or cash or any other property;
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e. Trenwick sells or otherwise transfers (or one or more of its
subsidiaries sells or otherwise transfers), in one transaction or in a
series of related transactions, assets or earning power aggregating more
than fifty percent (50%) of the assets or earning power of Trenwick and
its subsidiaries (taken as a whole) to any person or persons (other than
Trenwick or subsidiaries of Trenwick);
f. Any person commences a tender offer (as defined in Rule 14d-2 as
promulgated by the Securities and Exchange Commission) for fifty percent
(50%) or more of Trenwick's outstanding shares of common stock.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the Compensation Committee or any other committee
designated by the Board to have administrative responsibility with respect
to the Plan.
"Common stock" means the Company's common stock, par value $0.10.
"Company" means Trenwick Group Inc.
"Date of Exercise" of an Option or a Stock Appreciation Right ("SAR")
means the date upon which written notice thereof is received by the
Company's Corporate Secretary.
"Date of Grant" means the date Restricted Shares, an Option or any
related SARs become effective under the terms of the governing Restricted
Stock Agreement or Option Agreement.
"Disinterested Person" means "disinterested person" as defined in Rule
16b-3 of the Securities and Exchange Commission, as amended from time to
time, and generally, means any member of the Board who is not at the time
of acting on a matter, and within the previous year has not been, a
Qualified Employee of the Company or a Subsidiary.
"Exercise Notice" means a written notice from an Optionee to the
Company, made on a form and in a manner as the Committee may from time to
time determine, pursuant to which the Optionee irrevocably elects to
exercise all or any portion of an Option and irrevocably directs the
Company to deliver the Optionee's common stock certificates to be issued
to such Optionee upon such Option exercise directly to a "broker" or
"dealer" (within the meaning of Section 3 (a) of the Securities Exchange
Act of 1934, as amended from time to time). An Exercise Notice must be
accompanied by or contain irrevocable instructions to the broker or dealer
(i) to promptly sell a sufficient number of shares of such common stock,
or to loan the Optionee a sufficient amount of money, to pay the exercise
price for the Options and to fund any related employment or withholding
tax obligations to which the Exercise Notice relates, and (ii) to promptly
remit such sums to the Company upon the broker's or dealer's receipt of
the certificates.
"Fair Market Value" means the fair market value of common stock
determined by the Committee.
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"Incentive Stock Option" means an Option granted as an incentive stock
option as defined in Section 422A of the Code.
"Non-Qualified Stock Option" means an Option that does not qualify as
an Incentive Stock Option or is so stated to be a Non-Qualified Stock
Option upon issuance. The terms of the Option Agreement for a
Non-Qualified Stock Option shall expressly state that the Option is a
Non-Qualified Stock Option.
"Option" means the rights granted to a Qualified Employee to purchase
common stock pursuant to the terms and conditions of an Option Agreement,
including both Incentive Stock Options and Non-Qualified Stock Options.
"Option Agreement" means a written agreement (and any amendment or
supplement thereto) between the Company and a Qualified Employee
designating the terms and conditions of an Option, including any related
SAR.
"Optionee" means a Qualified Employee to whom an Option and any related
SAR are granted.
"Plan" means Trenwick Group Inc. 1993 Stock Option Plan.
"Qualified Employee" means any person employed on a full-time basis by
the Company or a Subsidiary whose performance, in the judgement of the
Committee, could have or did have a significant effect on either (or both)
the current or long-term success of the Company or a Subsidiary (or both).
"Restricted Shares" means common stock which shall be non-transferable
and subject to forfeiture to the Company until vested.
"Restricted Stock Agreement" means a written agreement (and any
amendment or supplement thereto) between the Company and a Qualified
Employee evidencing the number of shares of common stock granted.
"Stock Appreciation Right" or "SAR" means a right (which shall not
exist separately from a related unexercised Option) granted to the terms
and conditions of an Option Agreement to surrender an unexercised Option,
or some portion of an unexercised Option, and to receive from the Company
either shares of common stock (valued at Fair Market Value on the Date of
Exercise of the SAR), cash, or a combination thereof, equal in amount to
the excess of the aggregate Fair Market Value (on the Date of Exercise of
the SAR) of the shares as to which the Option is surrendered, over the
aggregate Option price of such shares, subject to any limitations in
Section 7. Notwithstanding any other provision of this Plan or of an
Option Agreement to the contrary, in no event shall the amount payable to
the Optionee upon exercise of a SAR related to an Incentive Stock Option
exceed one hundred (100%) percent of the difference between the exercise
price of
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the related Incentive Stock Option and the Fair Market Value of the common
stock at the Date of Exercise of the SAR.
"Subsidiary" means any entity of which, at the time such Subsidiary
status is to be determined, at least fifty (50%) percent of the combined
voting power of such entity is directly or indirectly owned or controlled
by the Company.
3. ADMINISTRATION OF THE PLAN The Plan shall be administered by the
Committee (whose members shall be appointed by the Board) consisting solely of
three or more members of the Board who are Disinterested Persons. A majority of
the Committee shall constitute a quorum, and all acts of the Committee must be
approved by a majority (at least two) of its members.
Subject to the provisions of the Plan, the Committee shall have authority in
its sole discretion:
(a) To interpret the provisions of the Plan and decide all questions of
fact arising in its application;
(b) To prescribe, amend and rescind rules and regulations relating to
the Plan;
(c) To determine the Qualified Employees to whom, the time or times at
which, the price at which, and the extent to which Restricted Shares,
Options and any SARs shall be granted based upon the nature of the
services rendered or to be rendered by the persons it deems eligible,
their past, present and potential contributions to the success of the
Company and/or any of its Subsidiaries their other compensation from
the Company or any Subsidiary, and such other factors as the Committee
in its discretion shall deem relevant;
(d) To determine, upon their issuance but not thereafter, the time when
Restricted Shares are vested;
(e) To determine, upon their issuance but not thereafter, the time or
times when Options and any SARs become exercisable and the duration of
the exercise period;
(f) To determine whether any shares of common stock under any Option
must be purchased before any related SAR becomes exercisable;
(g) To prescribe and amend the form or forms of the Restricted Stock
Agreement and Option Agreement;
(h) To determine the form or forms of consideration which will be
accepted by the Company from an Optionee in payment of the purchase
price upon the exercise of an Option; and
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(i) To determine which Options shall be Incentive Stock Options and
which Options shall be Non-Qualified Stock Options.
The Committee's determinations of the foregoing shall be final and
conclusive.
4. ELIGIBILITY Restricted Shares, Options and any SARs may be granted under
the Plan only to Qualified Employees. Any Qualified Employee may be granted and
may hold more than one award of Restricted Shares, more than one Option and more
than one SAR. In no event shall an Incentive Stock Option be granted to a
Qualified Employee if the grant of such Incentive Stock Option would cause the
aggregate Fair Market Value (on the Date of Grant) of the common stock with
respect to which Incentive Stock Options are exercisable for the first time by
such Qualified Employee during any calendar year (under all plans of the Company
and any parent or subsidiary corporations of the Company within the meaning of
Code Section 425) to exceed $100,000.
5. SHARES AVAILABLE Subject to adjustment as provided in Section 10 hereof:
(a) An aggregate of 1,175,000 shares of common stock will be available
and reserved for issue or transfer with respect to Restricted Shares,
Options or SARs granted under the Plan.
(b) When the right to purchase shares pursuant to an Option is
surrendered on exercise of a SAR, whether such right is settled in cash,
common stock or a combination thereof, the aggregate number of shares
covered by the related Option shall be reduced by the number of shares
with respect to which the SAR was exercised, and such shares shall not be
available for granting further Options and SARS.
(c) No Qualified Employee including the Chief Executive Officer of the
Company may receive more than 100,000 Restricted Shares, Options or SARs
granted under the Plan.
(d) If an Option shall terminate for any reason without having been
exercised in full or surrendered on exercise of a SAR, the unpurchased
and non-surrendered shares subject thereto shall become available for
further Restricted Shares, Options and SARS.
(e) In applying the limitation on the number of Restricted Shares,
Options or SARs that can be received by a Qualified Employee as set forth
in paragraphs (c) and (d) of this Section 5, the principles of Section
162(m) of the Internal Revenue Code of 1986, as amended, and the
regulations issued thereunder, shall govern.
(f) In the case of Options or SARS, the maximum amount of compensation
payable to a Qualified Employee attributable to the exercise of Options
or SARs under the Plan shall be equal to the maximum number of shares of
common stock for which Options or SARs can be granted to a Qualified
Employee under Section 5 hereof multiplied by
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the excess of the Fair Market Value of the common stock on the date of
the exercise over the aggregate Option price of such shares as determined
under Section 7 hereof.
6. RESTRICTED SHARES Restricted Shares shall be granted subject to the
following conditions:
(a) The number of Restricted Shares granted to a Qualified Employee in
any one calendar year shall be determined by the Committee and shall be
based on a percentage of such qualified employees' salary as a group,
such percentage not to exceed twenty five (25%) percent of the gross
annual aggregate salaries of such employees, divided by the Fair Market
Value of the Company's stock on the day prior to the Date of Grant.
(b) Restricted Shares shall vest ratably over a five (5) year period from
the Date of Grant.
(c) Upon the occurrence of a Change in Control, subject to any limitation
set forth in the Restricted Stock Agreement, all restrictions shall lapse
and all Restricted Shares shall be deemed to have vested.
(d) Forfeiture of Restricted Shares:
(i) Restricted Shares which have not vested in the hands of the
Restricted Stockholder shall be forfeited to the Company upon voluntary
or involuntary termination of the Restricted Stockholder's employment
with the Company for any reason;
(ii)Notwithstanding the foregoing, upon death or disability, a
Restricted Stockholder shall be considered to be vested for those
Restricted Shares which would have otherwise vested in the year such
death or disability occurred.
(e) Each certificate representing shares issued to a Restricted
Stockholder which have not vested shall be retained by the Company and
shall bear a legend that complies with applicable law with respect to the
restrictions on transferability:
"The shares represented by this certificate are subject to
restrictions on transferability imposed by that certain instrument
entitled the 1993 Stock Option Plan adopted December 15, 1993 as from
time to time amended which limits transferability and subjects these
shares to forfeiture to Trenwick Group Inc. in certain instances."
Nothing in the Plan or in any Restricted Stock Agreement shall in any way
diminish the right of the Company or any Subsidiary to reduce the compensation
or to terminate the employment of any Restricted Stockholder or Qualified
Employee.
7. OPTIONS Each Option granted shall be subject to the following conditions:
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(a) The Option price per share of common stock shall be set by the Option
Agreement but shall in no instance be less than one hundred (100%)
percent of the Fair Market Value on the Date of Grant with respect to any
Option.
(b) Each Option will become exercisable in part or in full on the date or
dates specified in the Option Agreement.
(c) Upon the occurrence of a Change in Control of the Company, subject to
any limitation set forth in the Option Agreement, all outstanding Options
shall become immediately exercisable in full.
(d) Each Option and any related SARs shall terminate:
(1) If the Optionee is then living, at the earliest of the following
times:
(i) ten years after the Date of Grant of the Option;
(ii) five years after termination of employment because of
retirement
(iii) one month after termination of employment other than
termination because of retirement or through discharge for cause
provided, however, that if any Option is not fully exercisable at
the time of such termination of employment, such Option shall
expire on the date of such termination of employment to the
extent not then exercisable;
(iv) immediately upon termination of employment through discharge
for cause; or
(v) any earlier time set forth in the Option Agreement.
(2) If the Optionee dies while employed by the Company or any
Subsidiary, or if no longer so employed, prior to termination of
the entire Option under Section 7(d)(1)(ii) or (iii) hereof, one
hundred and eighty (180) days after the date of death. To the
extent an Option is exercisable after the death of the Optionee, it
may be exercised by the person or persons to whom the Optionee's
rights under the Option Agreement have passed by will or by the
applicable laws of descent and distribution.
(e) If the Optionee exercises any Option or SAR with respect to some,
but not all, of the shares of common stock subject to such Option or
SAR, the right to exercise such Option or SAR with respect to the
remaining shares shall continue until it lapses or terminates. No
Option shall be exercisable except in respect of whole shares. The
exercise of an Option or SAR may be made with respect to no fewer than
ten shares at one time unless fewer than ten shares remain subject to
the Option or SAR.
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(f) Any exercise of an Option shall be effective on the Date of
Exercise, provided the full purchase price of such shares or an
effective Exercise Notice has been tendered with the notice of
exercise. Payment of the purchase price upon the exercise of any Option
shall be made in cash (including check, bank draft or money order),
provided, however, that payment with shares of common stock delivered
by the Optionee valued at Fair Market Value will be permitted only if
made with full shares of common stock that have been held at least six
(6) months, but will be permitted for payment of up to 100% of the
option price or by promissory note (containing such terms and
conditions as the Committee may in its discretion determine) or by any
combination thereof. The Optionee may make provision for the payment of
any taxes which the Company is obligated to collect or withhold with
respect to the issue or transfer of any common stock underlying an
Option by the delivery to the Company of full shares of common stock
that have been held for six (6) months or more, but only to the extent
that the Fair Market Value of the stock so delivered does not exceed
thirty five (35%) percent of the compensation element of the Option
being exercised.
Nothing in the Plan or in any Option Agreement shall in any way
diminish the right of the Company or any Subsidiary to reduce the
compensation or to terminate the employment of any Optionee or Qualified
Employee.
8. STOCK APPRECIATION RIGHTS The Committee may in its discretion grant SARs
either concurrently with or subsequent to the Date of Grant of the related
Option. A SAR shall be evidenced by provisions in the Option Agreement or an
amendment or supplement thereto. SARs shall be subject to the following terms
and conditions:
(a) Grant. The number of shares of common stock covered by a SAR shall
not exceed the number of shares of common stock covered by the related
Option.
(b) Exercise. A SAR shall be exercisable, in whole or in part, at such
time or times, on the conditions and to the extent set forth in the
Option Agreement but in no event will such SAR be exercisable;
(i)At any time that the related Option is not exercisable; or
(ii) At any time that the Fair Market Value of a share of common
stock does not exceed the Option price of the related Option share.
(c) A SAR will terminate on the same date as the related Option.
An Optionee shall be entitled upon exercise of a SAR to receive payment in
the amount described in the definition of "Stock Appreciation Right". In
connection with the exercise of a SAR, the Optionee thereof may, subject to the
provisions of the following paragraph, request by application to the Committee
to receive payment in the form of cash, shares of common stock, or a combination
thereof. However, the Committee, in its sole discretion, shall determine the
form of payment.
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If a person who, in the opinion of the Committee, is or may be subject to
Section 16 of the Securities Exchange Act of 1934, as amended from time to time,
wishes to exercise a SAR and make application to receive payment in cash or
partly in cash, such person shall do so only during the period beginning on the
third business day following the date of release for publication of the
Company's regular quarterly or annual summary statement of revenues and
income (assuming such financial data appears on a wire service, in a financial
news service, or in a newspaper of general circulation, or is otherwise made
publicly available) and ending on the twelfth business day following such date
and during the period described in the next sentence. A SAR may also be
exercised and application to receive payment in cash or partly in cash made by
such a person, subject to any limitations set forth in the Option Agreement,
during the thirty (30) day period that commences on the later of (a) the date of
a Change in Control or (b) the date that is six (6) months after the Date of
Grant of the SAR provided that a Change in Control has occurred since the Date
of Grant.
The Committee may impose such additional conditions or limitations on
exercise of a SAR as it may deem necessary or desirable to secure for Optionees
the benefit of Rule 16b-3 of the Securities and Exchange Commission, as amended
from time to time.
9. LIMITATIONS ON COMMON STOCK Any shares of common stock issued or
transferred pursuant to the Plan shall not be sold, transferred or otherwise
disposed of by Restricted Stockholders or Optionees except in compliance with
applicable registration requirements of state and federal securities laws unless
in the opinion of counsel for the Company, such sale, transfer or disposition is
exempt from registration.
10. ADJUSTMENT OF SHARES If any change is made in the common stock subject
to the Plan, or subject to Restricted Shares, any Option or SAR, through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
combination of shares, rights offerings, change in corporate structure of the
Company, or otherwise, the Board in its discretion may make appropriate
adjustments as to the number and type of securities subject to and reserved for
issue or transfer under the Plan and, in order to prevent dilution or
enlargement of the rights of Restricted Stockholders, Optionees, the number of
Restricted Shares or number of Options, type and Option price of securities
subject to outstanding Options and SARS.
11. NON-TRANSFERABILITY Each share of Restricted Shares shall be
nontransferable and subject to forfeiture to the Company until vested.
No Option or SAR is transferable by the Optionee other than by will or the
laws of descent and distribution, and no Option or SAR is exercisable during the
Optionee's lifetime by anyone other than the Optionee.
12. STOCKHOLDER'S RIGHTS The Restricted Stockholder shall have all rights
relative to the Restricted Shares, including the right to vote and to collect
dividends.
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<PAGE> 43
Neither the Optionee nor the Optionee's legal representative, legatees or
distributees, as the case may be, shall have any of the rights or privileges of
a stockholder of the Company by virtue of the grant of an Option or SAR except
with respect to any shares of common stock actually issued or transferred of
record and delivered to one of the aforementioned persons.
13. TERMINATION, SUSPENSION OR MODIFICATION OF PLAN The Board may at any
time terminate, suspend or modify the Plan. No termination, suspension or
modification of the Plan shall adversely affect any right acquired by any
Restricted Stockholder or Optionee under the terms of Restricted Shares, Options
or SARs granted before the date of such termination, suspension or modification,
unless such Restricted Stockholder or Optionee shall consent thereto.
14. GOVERNING LAWS The Plan and all rights and obligations thereunder shall
be construed in accordance with and governed by the laws of the State of
Delaware.
15. TERM Unless previously terminated by the Board, the Plan shall terminate
at the close of business on December 14, 2003. No Restricted Shares, Options or
SARs shall be granted after Plan termination, but such termination shall not
affect any Restricted Shares, Options or SARs previously granted.
16. APPROVAL The Plan shall become effective on December 15, 1993 but shall
be subject to approval by vote of the stockholders of the Company at the 1994
Annual Meeting.
17.01. CASH PAYMENT The Committee shall have the discretion to provide for
cash payments under one or more Restricted Share Awards granted under the Plan.
The Company may, as the Restricted Shares vest, pay to the employee-participant
upon request a cash amount up to thirty five (35%) percent of the then current
Fair Market Value of the shares of common stock subject to his vested Restricted
Share Award. This cash payment will be in lieu of the issuance of vested shares
of common stock having such aggregate Fair Market Value (i.e., the total number
of vested shares to be issued to the employee-participant will be reduced by up
to thirty five (35%) percent to take into account the cash payment). The cash
payment will be applied by the Company to the satisfaction of the federal and
state income tax withholding obligations that arise to the employee-participant
at the time the Restricted Shares vest.
17.02. SECTION 16 ELECTION The Committee shall have the discretion to grant
to one or more employee-participants an election, exercisable during any "window
period" under paragraph (e)(3)(iii) of Rule 16b-3, through and including the
window period immediately preceding the date on which the share rights are to
vest, to request such cash payment, in lieu of the shares of common stock
vesting pursuant to a Restricted Share Award.
17.03. REDUCTION IN AUTHORIZED SHARES The number of shares of common stock
issuable under the Plan is to be reduced by the number of shares actually issued
in payment of the vested Restricted Share Awards and by the number of shares
subject to that portion of the
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<PAGE> 44
vested Restricted Share Award which is paid in cash pursuant to the cash payment
feature of the Plan.
A-11
<PAGE> 45
/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, 3 and 4.
The Board of directors recommends a vote FOR Election of Directors and FOR
Proposals 2, 3 and 4.
1. Election of FOR WITHHELD
Directors
(see reverse) / / / /
For, except vote withheld from the following nominee(s)
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2. Amendment to Restated FOR AGAINST ABSTAIN
Certificate of
Incorporation to / / / / / /
increase authorized
shares
3. Amendment to 1993 FOR AGAINST ABSTAIN
Employee Stock Option
Plan to increase shares / / / / / /
authorized for issuance
4. Ratification of the FOR AGAINST ABSTAIN
appointment of Price
Waterhouse LLP / / / / / /
independent accountants
for the year ending
December 31, 1997
Change of
Address/Comments
on Reverse Side / /
SIGNATURE(S) DATE , 1997
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NOTE: 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.
The signer hereby revokes all proxies heretofore given by the signer to vote at
said meeting or any adjournments thereof.
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PROXY
TRENWICK GROUP INC.
Proxy Solicited on Behalf of the Management of
the Company for the Annual Meeting on May 22, 1997
The undersigned hereby constitutes and appoints P. Anthony Jacobs, Frederick D.
Watkins and Stephen R. Wilcox and each of them, his/her true and lawful agents
and proxies with full power of substitution in each to represent the
undersigned at the Annual Meeting of Stockholders of Trenwick Group Inc. to be
held on May 22, 1997 at the Company's corporate headquarters, Metro Center, One
Station Place, Stamford, Connecticut, at 10:00 a.m. local time, and at any
adjournment thereof on all matters coming before said meeting.
Election of Directors, Nominees:
To elect the following directors to terms of three years:
James F. Billett, Jr., Alan R. Gruber and Joseph D. Sargent
The nominees listed above shall serve their respective terms until their
successors are duly elected and qualified.
COMMENTS: (change of address)
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(If you have written in the above space, please mark the corresponding box
on the reverse side of this card.)
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. The Proxy Committee
cannot vote your shares unless you sign and return this card.
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SEE REVERSE SIDE
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