<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:
- Preliminary proxy statement - Confidential, for Use
of The Commission
Only (as permitted
by Rule 14a-6(e)(2))
/x/ Definitive proxy statement
- Definitive additional materials
- Soliciting material pursuant to 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 LOGO]
Metro Center
One Station Place
Stamford, Connecticut 06902
April 20, 1998
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Trenwick Group Inc. (the "Company") on Thursday, May 21, 1998, at the Hyatt
Regency Greenwich, 1800 East Putnam Avenue, Old Greenwich, 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 26, 1998, 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 1997 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,
/s/ James F. Billett, Jr.
JAMES F. BILLETT, JR.
Chairman, President and Chief Executive Officer
<PAGE> 3
[TRENWICK LOGO]
METRO CENTER, ONE STATION PLACE
STAMFORD, CONNECTICUT 06902
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 1998
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 21, 1998, at the Hyatt
Regency Greenwich, 1800 East Putnam Avenue, Old Greenwich, Connecticut at 10:00
a.m. local time to act upon the following matters:
PROPOSAL NO. 1
To elect two directors to serve until the Annual Meeting of Stockholders in
2001.
PROPOSAL NO. 2
To approve amendments 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 and to increase the maximum number of shares which may
be awarded to a participant thereunder.
PROPOSAL NO. 3
To ratify the appointment of Price Waterhouse LLP ("Price Waterhouse") as
independent accountants for the year ending December 31, 1998.
PROPOSAL NO. 4
To consider and act upon such other matters as may properly come before the
meeting or any adjournment thereof.
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 26, 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 26, 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,
/s/ Jane T. Wiznitzer
Jane T. Wiznitzer
Secretary
<PAGE> 4
[TRENWICK LOGO]
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 20, 1998, in
connection with the solicitation of Proxies for use at the Annual Meeting of
Stockholders of the Company to be held on May 21, 1998, at the Hyatt Regency
Greenwich, 1800 East Putnam Avenue, Old Greenwich, 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 26, 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 12,052,199 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 1997
containing financial statements of the Company has been mailed to all
stockholders.
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 2001; and (ii) 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
and increase the maximum number of shares which
<PAGE> 5
may be awarded to a participant thereunder, and (b) to ratify the appointment of
Price Waterhouse as independent accountants for the year ending December 31,
1998.
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, 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:
James F. Billett, Jr., W. Marston Becker and Joseph D. Sargent, or any one or
several of them as may act (the "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 PERCENT
-------------- ------------ -------
<S> <C> <C>
The Prudential Insurance Company of America................. 1,294,200(1) 10.7%
751 Broad Street Newark,
New Jersey 07102-3777
NewSouth Capital Management, Inc. .......................... 1,169,077(2) 9.7%
1000 Ridgeway Loop Road, Suite 233
Memphis, Tennessee 38120
Royce & Associates Inc. .................................... 933,815(3) 7.7%
Royce Management Company
Charles M. Royce
1414 Avenue of the Americas
New York, New York 10019
The Capital Group Companies, Inc. .......................... 774,100(4) 6.4%
333 South Hope Street
Los Angeles, California 90071
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAME & ADDRESS OWNED PERCENT
-------------- ------------ -------
<S> <C> <C>
Orion Capital Corporation................................... 608,267(5) 5.0%
9 Farm Springs Road
Farmington, Connecticut 06032
</TABLE>
- ---------------
(1) Based upon information contained in Amendment No. 5, dated February 10,
1998, 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 914,500 shares and shared
voting power and dispositive power is held over 379,700 shares.
(2) Based upon information contained in Amendment No. 3, dated February 12,
1998, to Schedule 13G filed with the Commission. The filing states that of
the reported shares, an aggregate of 81,625 shares are managed by NewSouth
Capital Management, Inc. ("NewSouth"), a registered investment adviser,
through various programs whereby accounts are placed with NewSouth for
management and the respective programs retain responsibility for Commission
filings should their cumulative holdings trigger the need for 13G reporting.
Sole voting power is held over 1,094,077 shares, shared voting power is held
over 75,000 shares and sole dispositive power is held over all the shares.
(3) Based upon information contained in Amendment No. 1, dated February 4, 1998,
to Schedule 13G filed with the Commission. Royce & Associates Inc. holds
sole voting and dispositive power over 933,815 shares and Royce Management
Company holds sole voting and dispositive power over 30,650 shares. Both are
registered investment advisers. Mr. Royce may be deemed a controlling person
of those entities.
(4) Based upon information contained in Amendment No. 10, dated June 10, 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. The
investment management companies provide investment advisory and management
services for clients which include registered investment companies and
institutional accounts. Sole voting power is held with respect to 399,100
shares, and sole dispositive power is held with respect to all the shares.
(5) 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
(149,999 shares), Design Professionals Insurance Company (42,400 shares),
EBI Indemnity Company (51,450 shares), The Fire and Casualty Insurance
Company of Connecticut (35,700 shares) and Security Insurance Company of
Hartford (328,718 shares).
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 II expires at the 1998 Annual Meeting.
The Board of Directors proposes that the nominees described below be
elected to Class II for a new term of three years and until their successors are
duly elected and qualified. Both of the
3
<PAGE> 7
nominees are currently serving as Class II directors and were elected to Class
II at the 1995 Annual Meeting. Dr. Herbert Palmberger, who is also currently
serving as a Class II director, recently advised the Board of Directors that he
would not stand for re-election. The Board of Directors has not yet met to
consider a replacement for the Class II directorship held by Dr. Palmberger.
Proxies may be voted only for the two nominees to Class II.
Although the Board of Directors does not contemplate that either 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 II.
CLASS II: DIRECTORS STANDING FOR ELECTION
FREDERICK D. WATKINS Director since 1979(1)
Frederick D. Watkins, 82, has been a member of the Executive Committee of
the Board of Directors (the "Executive Committee") since 1979, a member of the
Compensation Committee of the Board of Directors (the "Compensation Committee")
since 1986, a member of the Audit Committee of the Board of Directors (the
"Audit Committee") since 1988 and a director of Trenwick America Reinsurance
Corporation ("Trenwick America Re"), the Company's U.S. operating subsidiary,
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, 64, 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. On April 1, 1998, Mr. Wilcox became President and Chief
Executive Officer of Kelton International Inc., a securities broker-dealer. He
was previously President of The Wilcox Group, Inc., a financial and consulting
firm, and 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, 55, 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, 48, has been a member of the Investment Committee since 1984 and
a member of the Executive Committee and the Compensation Committee since 1986.
He is Managing Director of Kempen Capital Management (UK) Ltd and previously
served in the same capacity for Voyageur International Asset Managers Ltd and
for 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, Scotland.
4
<PAGE> 8
P. ANTHONY JACOBS Director since 1979(1)
P. Anthony Jacobs, 56, a member of the Investment Committee since 1979 and
of the Executive Committee and Compensation Committee since 1986, has been
Chairman of the Board of SHL Corporation, a holding company whose primary
business is the development of a synthetic liquid hydrocarbons technology, since
December 1996. In addition, since September 1997, Mr. Jacobs has served as
President and Chief Executive Officer of Lab Holdings, a holding company with
subsidiary operations in insurance testing, substance abuse testing and clinical
laboratory testing, where he also served as President from May 1993 to September
1997 and as Chief Operating Officer from May 1990 to September 1997. Mr. Jacobs
is also a director of Response Oncology, Inc. and Syntroleum Corporation.
CLASS I: TERM EXPIRES AT THE 2000 ANNUAL MEETING
JAMES F. BILLETT, JR. Director since 1978(1)
James F. Billett, Jr., 53, 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 of the Company's Executive Committee and
Investment Committee and is Chairman, President and Chief Executive Officer of
Trenwick America Re. Mr. Billett also serves as a Director and Chairman of
Trenwick Holdings Ltd. ("Trenwick Holdings"), the holding company for the
Company's London-based operating subsidiary Trenwick International Ltd.
("Trenwick International"), of which he is also a Director. Mr. Billett was
formerly a Vice President of General Reinsurance Corporation.
W. MARSTON BECKER Director since 1997
Mr. Becker, 45, has been Chairman of the Board and Chief Executive Officer
of Orion Capital Corporation ("Orion") since January 1997. He was previously
Vice Chairman of the Board (March 1996 to December 1996) and Senior Vice
President (July 1994 to March 1996) of Orion and served as President and Chief
Executive Officer of the DPIC Companies (subsidiaries of Orion) from July 1994
to June 1996 and as President and Chief Executive Officer of McDonough Caperton
Insurance Group, an insurance brokerage firm, from March 1987 to July 1994.
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 1997 were $1.8 million,
representing less than 1% of total reinsurance premiums written by Trenwick
America Re for the year.
JOSEPH D. SARGENT Director since 1978(1)
Joseph D. Sargent, 68, has been a member of the Executive Committee since
1979 and of the Compensation Committee since 1986. He is Chairman of Bradley,
Foster & Sargent, an investment advisory firm, and Vice Chairman and Treasurer
of Connecticut Surety Corporation, the parent holding company of The Connecticut
Surety Company, where he formerly served as Chairman and Chief Financial
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., Policy Management Systems Corporation and Command Systems Inc.
There are no family relationships among any directors and executive
officers of the Company.
5
<PAGE> 9
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 1997. No
director attended fewer than 75% of the aggregate number of meetings of the
Board and Board Committees on which the director served. 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 (whose term as a director will expire at the 1998 Annual Meeting) 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 1997.
The Compensation Committee is composed of Messrs. Watkins -- Chairman,
Becker, Dunn, Jacobs and Sargent. 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 1997.
The Executive Committee is composed of Messrs. Billett -- Chairman, Dunn,
Jacobs, Sargent and Watkins. The Committee meets when required on short notice
during 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
three times during 1997.
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 1997.
MANAGEMENT
The following table reflects information as of the date of this Proxy
Statement regarding the number of shares of the Company's Common Stock
beneficially owned by each director, by the
6
<PAGE> 10
executive officers named in the Summary Compensation table below and by all
directors and executive officers as a group:
<TABLE>
<CAPTION>
AMOUNT OF
BENEFICIAL OWNERSHIP(1)
-----------------------------
NUMBER OF SHARES
COMMON STOCK PERCENT
---------------- -------
<S> <C> <C>
DIRECTORS
W. Marston Becker.................................... 611,267(2) 5.0%
Anthony S. Brown..................................... 8,625(3) *
Neil Dunn............................................ 7,500(3) *
P. Anthony Jacobs.................................... 9,000(3) *
Herbert Palmberger................................... 375 *
Joseph D. Sargent.................................... 122,676(3)(4) 1.0%
Frederick D. Watkins................................. 11,700(3) *
Stephen R. Wilcox.................................... 6,000(3) *
NAMED EXECUTIVE OFFICERS
- -------------------------------------------------------
James F. Billett, Jr. ............................... 302,970(5) 2.5%
Stephen H. Binet..................................... 87,224(6) 0.7%
Paul Feldsher........................................ 70,746(7) 0.6%
Alan L. Hunte........................................ 77,893(8) 0.6%
James E. Roberts..................................... 27,472(9) 0.2%
Directors and executive officers as a group (15
individuals)......................................... 1,425,987 11.6%
</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 directors, a total of 39,000 shares subject to outstanding stock options
which are vested and exercisable within 60 days of the date of this Proxy
Statement. Includes, as to executive officers, a total of 215,070 shares
subject to outstanding stock options which are vested and exercisable within
60 days of the date of this Proxy Statement and 72,438 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.
(2) Includes 3,000 shares subject to stock options which are vested and
exercisable within 60 days of the date of this Proxy Statement. Also
includes the shares attributed to Orion Capital Corporation (see "Principal
Stockholders"). Mr. Becker is Chairman of the Board and Chief Executive
Officer of Orion Capital Corporation and serves on its Investment and
Executive Committees. He disclaims beneficial ownership of the shares
attributed to Orion Capital Corporation.
(3) Includes 6,000 shares subject to stock options which are vested and
exercisable within 60 days of the date of this Proxy Statement.
(4) Also includes 30,150 shares owned by relatives or held in trust for them, as
to which Mr. Sargent disclaims beneficial ownership.
(5) Includes 59,445 shares subject to stock options which are vested and
exercisable within 60 days of the date of this Proxy Statement and 20,741
Restricted Shares which are not vested within 60 days of the date of this
Proxy Statement, but which have full dividend and voting rights.
(6) Includes 43,500 shares subject to stock options which are vested and
exercisable within 60 days of the date of this Proxy Statement and 11,046
Restricted Shares which are not
7
<PAGE> 11
vested within 60 days of the date of this Proxy Statement, but which have
full dividend and voting rights.
(7) Includes 26,250 shares subject to stock options which are vested and
exercisable within 60 days of the date of this Proxy Statement and 10,096
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 25,125 shares subject to stock options which are vested and
exercisable within 60 days of the date of this Proxy Statement and 9,396
Restricted Shares which are not vested within 60 days of the date of this
Proxy Statement, but which have full dividend and voting rights.
(9) Includes 5,625 shares subject to stock options which are vested and
exercisable within 60 days of the date of this Proxy Statement and 12,446
Restricted Shares which are not vested within 60 days of the date of this
Proxy Statement, but which have full dividend and voting rights.
BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Stephen H. Binet, 43, 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.
Pierre D. Croizat, 57, was named Managing Director and Chief Executive
Officer of Trenwick Holdings and a Director and Chairman of Trenwick
International in February 1998. From April 1996 until joining the Company in
September 1997, he was engaged in reinsurance consulting. Previously, he headed
the Paris-based SOREMA Group of global reinsurance companies.
Paul Feldsher, 49, 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 also serves as a Director of Trenwick
Holdings. 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.
Robert A. Giambo, 44, has served as a director and Chief Actuary of
Trenwick America Re since 1988, and was appointed Executive Vice President in
1993. He is also a Director of Trenwick Holdings. 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, 48, 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. He
serves as a Director of both Trenwick Holdings and Trenwick International. 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, 52, 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 President and Chief
Executive Officer from March 1992 until joining Trenwick America Re. He was
President and Chief Executive Officer of the operating subsidiary from 1991
until May 1995.
8
<PAGE> 12
DIRECTORS' COMPENSATION
During the year ended December 31, 1997, 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.
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 3,000 shares of the Company's common
stock. Under the Option Plan, each eligible director is granted an option for an
additional 750 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,
9
<PAGE> 13
1997, 1996 and 1995 of all persons who were, at December 31, 1997, the Chief
Executive Officer and the four most highly paid officers of the Company (the
"Named Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------- -------------------------
RESTRICTED SECURITIES
NAME & OTHER ANNUAL SHARE UNDERLYING ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS/ COMPENSATION
POSITION YEAR ($)(1) ($)(2) ($)(3) ($)(4) SARS (#) ($)(5)
- --------- ---- ------- ------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
James F. Billett, Jr. ............... 1997 446,492 405,000 88,201 108,183
Chairman, President & 1996 430,496 375,000 84,373 97,717
Chief Executive Officer 1995 414,384 335,000 81,888 71,183
Stephen H. Binet..................... 1997 247,692 200,000 32,490
Executive Vice President* 1996 237,808 175,000 30,667
1995 228,423 150,000 18,131
Paul Feldsher........................ 1997 212,692 225,000 32,509
Executive Vice President* 1996 203,038 150,000 30,686
1995 180,577 120,000 18,344
Alan L. Hunte........................ 1997 187,692 250,000 32,513
Vice President, 1996 177,923 125,000 30,690
Chief Financial Officer 1995 163,846 120,000 18,392
& Treasurer
James E. Roberts**................... 1997 296,769 200,000 31,240
Vice Chairman* 1996 283,462 175,000 10,000 29,480
1995 190,385 100,000 306,250 25,000 2,000
</TABLE>
- ---------------
* The position is with the Company's U.S. 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 1997, 1996 and 1995 supplemental whole life and health benefits
of $43,653, $43,653, and $42,888, respectively, and for 1997, 1996 and 1995
automobile expenses of $38,868, $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 and vesting in equal annual installments
over three years beginning in March 1996. 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 included in this table. The
aggregate total of unvested Restricted Share holdings of each of the Named
Executives, valued as of December 31, 1997, at a market price per share of
$37.625, are as follows:
<TABLE>
<CAPTION>
UNVESTED
NAME RESTRICTED SHARES VALUE($)
- ---- ----------------- --------
<S> <C> <C>
James F. Billett, Jr. .......................... 623 23,440
Stephen H. Binet................................ 281 10,573
Paul Feldsher................................... 293 11,024
Alan L. Hunte................................... 312 11,739
James E. Roberts................................ 3,501 131,725
</TABLE>
(5) Includes Company contributions to the Company's 401(k) Savings Plan on
behalf of each of the Named Executives of $9,500 in 1997, $9,000 in 1996 and
$2,000 in 1995 (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 $12,800 in 1997
and $12,000 in 1996 for each of the Named Executives and $8,664 in 1995 for
each of the Named Executives except Mr. Roberts (who was not
10
<PAGE> 14
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 $52,920, $49,276, and
$38,877, respectively, and interest credited was $32,963, $27,441, and
$21,641, respectively, for 1997, 1996 and 1995. For 1997, the contribution
for each of the other Named Executives was $8,240 and interest credited was
$1,950, $1,969, $1,973, and $700 for Messrs. Binet, Feldsher, Hunte, and
Roberts, respectively. For 1996, the contribution for each of the other
Named Executives was $8,480, and interest credited for Messrs. Binet,
Feldsher and Hunte was $1,187, $1,206, and $1,212, respectively. For 1995,
contributions for Messrs. Binet, Feldsher and Hunte were $6,930, $7,143 and
$7,192, respectively, and interest credited was $537 for each of them. Mr.
Roberts was not eligible to participate in the Supplemental Executive
Retirement Plan until 1996.
The following table sets forth all stock options exercised during 1997 by
the Named Executives and the number of unexercised options held by the Named
Executives at December 31, 1997. Also included is the value of "in-the-money"
options on December 31, 1997. In-the-money options are options whose exercise
price is less than the fair market value of the Company's common stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT FY-END (#) AT FY-END($)(2)
ACQUIRED VALUE -------------- -------------------
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(1) UNEXERCISABLE UNEXERCISABLE
---- -------- -------- -------------- -------------------
<S> <C> <C> <C> <C>
James F. Billett, Jr........ -- -- 59,445/127,500 1,217,956/1,396,763
Stephen H. Binet............ 22,500 511,275 40,500/ 79,500 659,858/ 867,443
Paul Feldsher............... 11,250 226,448 42,000/ 66,750 733,815/ 727,766
Alan L. Hunte............... 18,750 407,813 22,125/ 60,375 228,459/ 657,928
James E. Roberts............ -- -- 5,625/ 46,875 48,516/ 326,747
</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.
(2) Represents the difference between the closing price per share of the
Company's common stock on December 31, 1997, of $37.625 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, four of whom have
served together in such capacity since 1986. The fifth, W. Marston Becker, was
named to the Committee in May 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.
11
<PAGE> 15
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. During 1997, the Committee retained an independent compensation
consulting firm to undertake a comparative analysis of the Company's executive
compensation practices. The firm concluded that while the Company's base salary
structure was commensurate with its peer group, the Company's incentive
compensation (i.e., annual cash bonuses and stock-based awards) significantly
lagged that of its peers and placed the Company at a competitive disadvantage
for a limited pool of top-quality industry executives.
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. The Committee believes that base
salaries should be adjusted from time to time with the objective of remaining
within the range of the 50th through the 75th percentiles of the Company's peers
based on survey information available to the Committee.
In addressing the second compensation element, the Committee considered the
material provided by the consulting firm and approved an increase in the maximum
annual cash bonuses payable to executive officers and the establishment of a
menu of measures to be utilized in setting goals and evaluating annual
performance. These measures include return on equity (ROE), growth in earnings
per share (EPS), growth in dividend-adjusted book value per share, total return
to shareholders and combined ratio (calculated by dividing claims, claims
expenses, policy acquisition costs and underwriting expenses by net premiums
earned), each of which is to be considered on an absolute basis and in
comparison to the company's peers, as well as the accomplishment of tactical and
strategic objectives. 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.
In authorizing 1997 bonuses for executive officers, the Committee
emphasized the Company's excellent strategic performance and identified three
accomplishments which merited particular recognition, i.e., the development and
implementation of a plan to establish an international presence; the adherence
to strict underwriting discipline in the face of an increasingly competitive
market; and the restructuring of the Company's balance sheet. The Committee also
took into account the numerical measures specified in the preceding paragraph.
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
12
<PAGE> 16
mechanism for aligning the executive officers' interests with those of the
stockholders. Under the Company's stock plans, the Committee has the opportunity
to award both stock options and restricted stock to executive officers. 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.
During the four-year period following the Committee's December 1993 grant
of non-qualified stock options to the Company's executive officers, the
Committee made no stock-based awards to this group except for those made to
James E. Roberts (who joined the Company in 1995) in order to afford him an
equity appreciation opportunity commensurate with those of his peers. The
compensation study identified stock-based compensation as an area where the
Company was no longer competitive and recommended (i) a one-time Restricted
Share award to each executive officer, approximately equal in value to his
annual salary as then in effect, for the purpose of rectifying the shortfall in
stock-based compensation; and (ii) annual awards of Restricted Shares and stock
options with a potential total value of up to a maximum of 150% of the
recipient's annual salary. The Committee concurred with the consulting firm's
recommendations and implemented them during the first quarter of 1998; the
one-time Restricted Share award was effected on January 20, 1998, and the annual
Restricted Share and stock option program was initiated on March 4. Under the
terms of the Company's 1993 Stock Option Plan (the "Plan"), no individual may
receive aggregate awards in excess of 150,000 shares. Because the CEO had been
granted options for 150,000 shares under the Plan in 1993, his 1998 stock awards
were made subject the approval by the Company's stockholders of an amendment to
the Plan to revise the limit on shares awarded to any individual, as further
described under Proposal No. 2 on page 15. The Committee believes that the new
stock-based compensation structure will promote the retention of key employees
in a highly competitive labor environment while emphasizing the alignment
between their interests and those of the Company's stockholders.
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 1997 industry survey data. His 1997 cash bonus
award reflected the Company performance factors cited above and additionally
rewarded his success in initiating the Company's global expansion: In September
1997, Mr. Billett succeeded in attracting Pierre Croizat, an international
insurance executive with more than 31 years of experience, to lead the Company's
international operations, and in the last quarter of the year he and Mr. Croizat
led the negotiations for the acquisition of Trenwick International Ltd.
(formerly SOREMA (UK) Ltd.), an effort which culminated in a definitive purchase
agreement on January 16, 1998.
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 1997. The Committee
structures stock-based compensation for executive officers so as to qualify for
deductibility under the statute to the extent feasible. However, to maintain a
competitive position within the
13
<PAGE> 17
Company's peer group, the Committee retains the authority the approve
stock-based compensation that may not be deductible.
Members of the Compensation Committee
Frederick D. Watkins, Chairman
W. Marston Becker
Neil Dunn
P. Anthony Jacobs
Joseph D. Sargent
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph for the five year period commencing January
1, 1993 and ending December 31, 1997, 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>
Property-
Measurement Period Trenwick Group Casualty
(Fiscal Year Covered) Inc. S&P 500 Index Insurance
<S> <C> <C> <C>
Dec. 1992 100.00 100.00 100.00
Dec. 1993 97.97 110.08 110.83
Dec. 1994 108.90 111.53 106.03
Dec. 1995 148.09 153.45 149.79
Dec. 1996 124.81 188.68 180.10
Dec. 1997 156.54 251.64 263.53
</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 1997 other than the
inadvertent one-week delay in Mr. Roberts' reporting of his October 31 sale of
2,000 shares of the Company's Common Stock.
14
<PAGE> 18
PROPOSAL NO. 2
APPROVAL OF AMENDMENTS TO 1993 STOCK OPTION PLAN
Proposed Amendments
The Board of Directors has approved amendments to the Trenwick Group Inc.
1993 Stock Option Plan (the "Plan"), subject to the approval of the Company's
stockholders, to (i) increase the aggregate number of shares authorized for
issuance under the Plan by 500,000 shares and (ii) increase the maximum number
of shares which may be awarded under the Plan to any one participant from
150,000 (22.2% of the shares originally authorized under the Plan) to 450,000
(26.9% of the authorized shares as proposed to be increased). As currently in
effect, the Plan provides for the issuance of up to 1,175,000 shares of common
stock. The Compensation Committee has granted options for an aggregate of
779,710 shares under the Plan, none of which have been exercised, and has
awarded 53,488 Restricted Shares under the Plan, leaving 341,802 shares
available for potential future awards. If the proposed amendments to the Plan
are approved by the stockholders, a total of 841,802 shares would be available
for potential future awards. The amendments will be adopted if they are 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 271,714 shares reserved for issuance under the
Company's other stock plans, of which 227,198 shares are reserved for
outstanding options and 44,516 shares are reserved for potential future awards
(22,500 shares reserved for automatic stock option grants under the Non Employee
Directors' Stock Option Plan and 22,016 shares reserved for awards under the
1989 Stock Plan, which is currently used only for awards of Restricted Stock).
Purpose of Amendments
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. As
described in the Report of the Compensation Committee beginning on page 11, the
Committee awarded Restricted Shares to executive officers in January 1998,
including an award of 12,550 shares to Mr. Billett vesting in equal annual
installments over five years beginning in January 1999, and adopted a new
stock-based incentive compensation program for executive officers in March 1998
pursuant to which Mr. Billett received 8,191 Restricted Shares vesting in equal
annual installments over five years beginning in March 1999 and options for
24,573 shares at an exercise price of $36.625, vesting on the same schedule as
the Restricted Shares and expiring ten years from the date of grant. Because his
150,000-share award in 1993 was the maximum permitted under the Plan, Mr.
Billett's January and March awards were made subject to the approval and
ratification by the stockholders of the amendments to the Plan. With the new
compensation program in effect, the number of shares remaining in the Plan will
be insufficient for the continued success of the Plan over its term, while the
150,000-share cap on awards to any individual will impede the program in future
years and preclude the participation of Mr. Billett. The Board believes that
these amendments will assure that the Plan is appropriately designed to fulfill
its goals for the foreseeable future, including the provision of competitive
incentive compensation opportunities to the Company's executive officers.
The Plan
The full text of the Plan, reflecting the proposed amendments, is set forth
in Appendix A attached hereto. A summary of the Plan as so amended is set forth
below.
15
<PAGE> 19
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
Non-Qualified 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. An aggregate of 1,675,000 shares of common
stock of the Company have been authorized 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. Shares subject to any part of an
Option which terminates unexercised for any reason will be available for future
Option and Restricted Share grants. No individual, including the Chief Executive
Officer of the Company, may receive, in the aggregate, grants of Options, SARs
and Restricted Shares covering more than 450,000 shares. Grants may not be made
under the Plan after December 14, 2003.
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. To date, twelve qualified employees have received awards under the
Plan.
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 their fair market value at the time of
exercise, or by promissory note with such terms as determined by the Committee,
or by 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 the 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 April 9, 1998 was $41.75 per share.
Other Option Terms. The Committee determines the time or times at which an
Option becomes exercisable. The terms of each Option granted under the Plan
prior to March 1998 provide 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. The terms of the Options granted in March
1998 provide that they become exercisable in five annual 20% installments
beginning on the first anniversary of their grant date. 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.
16
<PAGE> 20
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 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 SARs
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, or otherwise disposed of (i.e., do
not "vest") for a period determined by the Committee at the time of the award.
The Restricted Shares awarded under the Plan to date vest in five annual 20%
installments beginning on the first anniversary of their award date. Except for
the restriction against transfer until vesting, the recipient of the award has
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. 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.
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 the
aggregate minimum federal, state and local income tax withholding obligations
that arise to the optionee or Restricted Stockholder at the time that the Option
is exercised or the Restricted Shares vest. This cash payment, the amount of
which is determined based on the then fair market value of such shares, is made
in lieu of delivering the exercised Option shares or vested Restricted Shares
and is applied by the Company to the satisfaction of such tax withholding
obligations. To the extent that a cash payment is made in lieu of Option shares
or vested Restricted Shares, the corresponding number
17
<PAGE> 21
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 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")
NQSOs 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.
18
<PAGE> 22
(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:
(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, 1998. 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.
19
<PAGE> 23
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 amendments the 1993 Stock Option Plan.
PROPOSAL NO. 3
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 the year ending December 31,
1998, 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, 1998.
STOCKHOLDER PROPOSALS--1999 ANNUAL MEETING
Stockholders of the Company may present proposals for the 1999 Annual
Meeting by directing such proposals to the Secretary at the corporate address.
Such proposals must be received no later than December 21, 1998, 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,
/s/ Jane T. Wiznitzer
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, 1997. PLEASE
DIRECT SUCH REQUESTS TO THE OFFICE OF THE SECRETARY, TRENWICK GROUP INC., METRO
CENTER, ONE STATION PLACE, STAMFORD, CONNECTICUT 06902.
20
<PAGE> 24
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;
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.
A-1
<PAGE> 25
"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.
"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 common stock
certificate 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 (ii) to promptly remit such sum to the Company upon the broker's or
dealer's receipt of the certificate.
"Fair Market Value" means the fair market value of common stock determined
by the Committee.
"Incentive Stock Option" means an Option granted as an incentive stock
option as defined in Section 422A of the Code.
"Non-Employee Director" means "non-employee director" as defined in Rule
16b-3 of the Securities and Exchange Commission, as amended from time to time.
"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.
A-2
<PAGE> 26
"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 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 Non-Employee Directors. 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
(i) To determine which Options shall be Incentive Stock Options and
which Options shall be Non-Qualified Stock Options.
A-3
<PAGE> 27
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 1,675,000 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 450,000 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 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 or pursuant to such other vesting schedule as the
Committee shall approve at the time of grant. The Restricted Stockholder
may make provision for the payment of all or any part of any taxes which
the Company is obligated to collect or withhold with respect to the vesting
of Restricted Shares by (i) the delivery to the Company of full shares of
common stock, valued at Fair Market Value, that have been held for at least
six (6) months or
A-4
<PAGE> 28
(ii) by electing to have the Company withhold whole shares of common stock,
valued at Fair Market Value, from the vested Restricted Shares to be
delivered to the Restricted Stockholder.
(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:
(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.
A-5
<PAGE> 29
(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.
(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), by the delivery of full
shares of common stock valued at Fair Market Value (but only if such shares
have been held by the Optionee for at least six (6) months), 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 all or any part 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 (i) the delivery to the Company
of full shares of common stock, valued at Fair Market Value, that have been
held for at least six (6) months or (ii) electing to have the Company
withhold whole shares of common stock, valued at Fair Market Value, from
the shares to be delivered to the Optionee upon the exercise.
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.
A-6
<PAGE> 30
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.
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.
A-7
<PAGE> 31
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
This Proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this Proxy will be voted FOR Election of Directors and
FOR Proposals 2 and 3.
The Board of Directors recommends a vote FOR Election of Directors and FOR
Proposals 2 and 3.
FOR WITHHELD
1. Election of / / / /
Directors
(see reverse)
For, except vote withheld from the following nominee(s):
- --------------------------------------------------
FOR AGAINST ABSTAIN
2. Amendment to 1997 / / / / / /
Employee Stock
Option Plan to
increase shares
authorized for
issuance and increase
size of maximum
award per participant.
FOR AGAINST ABSTAIN
3. Ratification of the appoint- / / / / / /
ment of Price Waterhouse
LLP as independent
accountants for the year
ending December 31, 1998
Change of / /
Address/Comments
on Reverse Side
SIGNATURE(S) DATE ,1998
----------------------------- --------------------
The signer hereby revokes all proxies heretofore
given by the signer to vote at said meeting
or any adjournments thereof.
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.
<PAGE> 32
TRENWICK GROUP INC.
PROXY SOLICITED ON BEHALF ON THE MANAGEMENT OF
P THE COMPANY FOR THE ANNUAL MEETING ON MAY 21, 1998
R The undersigned hereby constitutes and appoints James F. Billett, Jr.,
W. Marston Becker and Joseph D. Sargent and each of them, his/her true
O and lawful agents and proxies with full power of substitution in each
to represent the undersigned at the Annual Meeting of Stockholders of
X Trenwick Group Inc. to be held on May 21, 1998 at the Hyatt Regency
Greenwich, 1800 East Putnam Avenue, Old Greenwich, Connecticut at
Y 10:00 a.m. local time, and at any adjournment thereof on all matters
coming before said meeting.
COMMENTS: (change of address)
Election of Directors, Nominees:
To elect the following directors to terms -----------------------------
of three years: -----------------------------
Frederick D. Watkins, Stephen R. Wilcox -----------------------------
-----------------------------
The nominees listed above shall serve (if you have written in the
their respective terms until their above space, please mark the
successors are duly elected and corresponding box on the
qualified. 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.
SEE REVERSE
SIDE
