<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-K/A
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___ to ____
COMMISSION FILE NO. 0-15886
THE NAVIGATORS GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3138397
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
123 WILLIAM STREET, NEW YORK, NEW YORK 10038
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (212) 406-2900
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.10 PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part Ill of this Form 10-K or any amendment to this
Form 10-K [x]
Aggregate market value of voting stock held by non-affiliates as of March 15,
1996 - $55,037,606
Common shares outstanding March 15, 1996 - 8,172,400
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE> 2
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table provides information as of December 31,
1995 regarding the individuals who serve as directors of the Group. Biographical
information for each director is presented below.
<TABLE>
<CAPTION>
Name Age Position With The First Became a
---- --- ----------------- --------------
Group Director
----- --------
<S> <C> <C> <C>
Terence N. Deeks . . . . . . . . . . . . . 56 President, Chairman 1982
of the Board of
Directors
Robert M. DeMichele . . . . . . . . . . . . 51 Director 1983
Leandro S. Galban, Jr. . . . . . . . . . . 61 Director 1983
John F. Knight . . . . . . . . . . . . . . 76 Director 1988
Robert Lepowsky . . . . . . . . . . . . . . 70 Director 1987
Marc M. Tract . . . . . . . . . . . . . . . 36 Director 1991
Marion A. Woodbury . . . . . . . . . . . . 72 Director 1983
Robert F. Wright . . . . . . . . . . . . . 70 Director 1993
</TABLE>
Terence N. Deeks is the founder of the Group, Navigators, NIC and of
all the Somerset Companies. He has been Chairman of the Board and President of
the Group since its formation in 1982. He is a director of each of the Somerset
Companies. In addition, Mr. Deeks is Chairman of SIS Texas, NMC, SIS Washington,
Somerset Georgia and Somerset Property.
Robert M. DeMichele has been President and Chief Executive Officer of
Lexington Global Asset Managers, Inc. since December 1995. From 1982 until
December 1995, Mr. DeMichele served as Director, President and Chief Executive
Officer of Piedmont Management Company Inc. ("Piedmont"), which was a
stockholder of the Group until December 1995 when it was merged into Chartwell
Re Corporation ("Chartwell"). Chartwell is now a stockholder of the Group. From
1982 to December 1995, Mr. DeMichele served as President of Reco. Reco is now a
stockholder of the Group and is a wholly owned subsidiary of Chartwell. Mr.
DeMichele has been Chairman of the Board and Chief Executive Officer of
Lexington Management Corporation ("LMC") since 1982. He is a director of
Chartwell and Vanguard Cellular Systems, Inc.
Leandro S. Galban, Jr. has been employed by Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ") since 1977, and prior thereto for a
predecessor company of DLJ from 1958 to 1977. Since 1990, Mr. Galban has served
as a Managing Director and Principal of DLJ.*
John F. Knight has been active as a consultant for H.S. Fox
Corporation, a reinsurance broker, since 1985. Prior thereto he was Vice
Chairman of Republic Financial Services, Inc. from 1983 to 1988 and prior to
that its President from 1975 to 1983. He is a director of Republic Financial
Services, Inc. and Foremost Corporation of America.+
Robert Lepowsy is a certified public accountant and until his
retirement in 1991 was a partner in the accounting firm of Lopez, Edwards &
Frank. Lopez, Edwards & Frank previously rendered services to the Group and to
certain of the Somerset Companies.+
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<PAGE> 3
Marc M. Tract has been a partner of the law firm of Rosenman & Colin
since August 1994. From January 1990 to August 1994, Mr. Tract was a partner of
the law firm of Kroll & Tract, and prior thereto he had been associated with
Kroll & Tract since before 1986. Rosenman & Colin has been counsel to the Group,
Navigators, NIC and the Somerset Companies since August 1994. Until August 1994,
Kroll & Tract had been counsel to the Group, Navigators, NIC and the Somerset
Companies since before 1986. Mr. Tract is a member of the Board of Directors of
several insurance and reinsurance companies.*+
Marion A. Woodbury served as a director of Piedmont from 1976 to his
retirement in January 1988. From 1965 until 1985 he served as President of Reco
and from 1985 to 1987 as Vice Chairman of Reco, as well as Chairman of the Board
of United Re.
Robert F. Wright was a partner of the public accounting firm of Arthur
Andersen & Co. from 1960 to 1988. He has been President of Robert F. Wright
Associates, Inc. since 1988. Mr. Wright is a director of Hanover Direct, Inc.,
Reliance Standard Life Insurance Co. and its affiliates, Williams Real Estate
Co., Inc. and Norwab North American Ltd. He is an advisory director of Quadrant
Management, Inc.*
* Member Compensation Committee.
+ Member Audit Committee.
The executive officers of the Group as of December 31, 1995 who are not
directors and the other executive officers of certain of the subsidiaries of the
Group who are named in the Summary Compensation Table below, are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
W. Allen Barnett . . . . . . . . . . . 55 Senior Vice President, Chief Financial
Officer, Treasurer and Secretary of
the Group and Director of Navigators and NIC
Salvatore A. Margarella . . . . . . . . 46 Controller of the Group
Francis V. Bigley, Jr. . . . . . . . . 47 President of Somerset Re and
Director of Navigators and NIC
Peter L. Johnson . . . . . . . . . . . 54 Vice President of SIS Texas and
Director of Navigators and NIC
Robert A. Rogers . . . . . . . . . . . 37 Executive Vice President of Navigators,
NIC and NMC, and Director of Navigators and
NIC
</TABLE>
W. Allen Barnett has been Senior Vice President, Chief Financial
Officer, Treasurer and Secretary of the Group since March 1987. Mr. Barnett is
also currently Senior Vice President and a director of Navigators and NIC and
Vice President and Assistant Secretary of each of the Somerset Companies. Since
1993, he has been Managing Director of Navigators Underwriters plc, a corporate
name underwriting at Lloyd's of London, in which the Company currently owns a
twenty-seven percent interest.
Salvatore A. Margarella has been Controller of the Group since its
inception and Vice President and Treasurer of Navigators since 1987 and NIC
since 1989.
Francis V. Bigley has been President of Somerset Re since 1987. Mr.
Bigley is a director of Navigators and NIC.
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<PAGE> 4
Peter L. Johnson has been Vice President of SIS Texas since June 1991.
From 1975 until June 1991, Mr. Johnson was President of Texas Marine
Underwriters Agency. Mr. Johnson is a director of Navigators and NIC.
Robert A. Rogers has been Executive Vice President of Navigators, NIC
and NMC since 1995. From 1993 to 1995, Mr. Rogers was a Senior Vice President of
Navigators and NIC. Prior thereto, he was an underwriter at Lloyd's of London
from 1989-1993. Mr. Rogers is a director of Navigators and NIC.
Under the securities laws of the United States, the Company's
directors, its executive (and certain other) officers, and any persons holding
more than ten percent of the Company's Common Stock are required to report their
ownership of the Company's Common Stock and any changes in that ownership to the
Securities and Exchange Commission. Specific due dates for these reports have
been established and the Company is required to report in this Form 10-K any
failure to file by these dates. All of these filing requirements were satisfied
by its directors and officers and ten percent holders. In making these
statements, the Company has relied on the written representations of its
incumbent directors and officers and its ten percent holders and copies of the
reports that they have filed with the Securities and Exchange Commission.
ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY OF COMPENSATION
The following Summary Compensation Table sets forth compensation paid
by the Group for each of the years in the three year period ended December 31,
1995 to the President and Chairman of the Board of the Group, each of the four
other most highly paid executive officers of the Group or its subsidiaries and a
former executive officer of the Group who resigned during the 1995 fiscal year
(the "Named Executive Officers"). Prior to the acquisition by the Group of the
Somerset Companies in 1994, neither the Group, Navigators nor NIC had any
operating employees and none of their executive officers received any salary or
bonus compensation from the Group, Navigators or NIC for the fiscal year ended
December 31, 1993. The only compensation paid by the Group, Navigators or NIC to
the President and Chairman of the Board or the other Named Executive Officers
for the fiscal year ended December 31, 1993 was in the form of life insurance
premiums paid by the Group or stock option awards.
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<PAGE> 5
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
------ -------
Securities
Restricted Underlying All other
Name and Principal Other Annual Stock Options/ LTIP Compensa-
Position Year Salary Bonus Compensation Award(s) SARs Payouts tion
------------------ ---- ------ ----- ------------ -------- ---------- ------- ---------
$ $ $ $ # $ $(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Terence N. Deeks 1995 $416,666 $440,000 $ -- $ -- 50,000 $ -- $70,999
President and 1994 450,000 -- -- -- -- -- 70,999
Chairman of the 1993 -- -- -- -- -- -- 70,999
Board
W. Allen Barnett 1995 225,000 119,250 -- -- 50,000 -- --
Senior Vice President 1994 212,500 -- -- -- -- -- --
and Chief Financial 1993 -- -- -- -- -- -- --
Officer
Francis V. Bigley, Jr. 1995 183,333 22,200 -- -- 50,000 -- --
President of 1994 173,333 10,000 -- -- 10,000 -- --
Somerset Re 1993 -- -- -- -- -- -- --
Peter L. Johnson 1995 144,666 43,621 -- -- 2,500 -- --
Vice President of 1994 139,333 105,530 -- -- 5,000 -- --
SIS Texas 1993 -- -- -- -- -- -- --
Robert A. Rogers 1995 180,833 113,466 -- -- 60,000 -- --
Senior Vice 1994 160,000 12,500 -- -- 12,500 -- --
President of 1993 -- -- -- -- 5,000 -- --
Navigators and NIC
Peter E. O'Grady(2) 1995 400,000 -- -- -- -- -- --
Former President of 1994 350,000 -- -- -- -- -- 18,830
Navigators and NIC 1993 -- -- -- -- -- -- 18,830
</TABLE>
- --------------------------
(1) Represents the dollar value of life insurance premiums paid by the Group for
the benefit of the named person.
(2) Mr. O'Grady resigned his positions as President of Navigators and NIC and as
an officer or director of all of the Somerset Companies effective as of June
30, 1995.
EMPLOYMENT AGREEMENTS
The Group has entered into employment agreements (the "Employment
Agreements") with Messrs. Deeks, O'Grady and Barnett. In general, the Employment
Agreements provide for the continuation of the base salary outlined on the
Summary Compensation Table for such executives for a period of three years from
June 30, 1994 and that such executives will be eligible to participate in an
annual incentive plan. The Employment Agreements generally provide that if the
Group terminates the employment of a named executive other than for Cause or
Disability (as such terms are defined in the Employment Agreements), the Group
will continue to pay amounts of the base salary until the earlier of (i) the end
of the employment period, (ii) one year from the date of the executive's
termination of employment or (iii) the date as of which the executive breaches
any of the provisions of the Employment Agreements.
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<PAGE> 6
STOCK OPTIONS
The following table contains information concerning the grant of
options under the Group's stock option plans to each of the Named Executive
Officers during the fiscal year ended December 31, 1995. For a description of
the Company's stock option plans, see "Stock Option Plans."
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
-------------------------------------------------------- Value at Assumed
Percent of Annual Rates of Stock
Number of Total Price Appreciation for
Securities Options/SARs Option/SAR Term
Underlying Granted to Exercise ----------------------
Name Options/SARs Employees in Price Expiration 5%($) 10%($)
---- granted (#) Fiscal Year ($/Share) Date ----- ------
------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Terence N. Deeks . . . 50,000 16% $ 14.50 4/21/04 $400,000 $984,500
W. Allen Barnett . . . 50,000 16 14.50 4/21/04 400,000 984,500
Francis V. Bigley, Jr. 50,000 16 14.50 4/21/04 400,000 984,500
Peter L. Johnson . . . 2,500 1 17.00 12/31/04 23,425 57,725
Robert A. Rodgers(1) . 50,000 16 14.50 4/21/04 400,000 984,500
10,000 3 17.00 12/31/04 95,700 230,900
Peter E. O'Grady(2) . . -- -- -- -- -- --
</TABLE>
- --------------------------
(1) Mr. Rodgers was awarded an aggregate of 60,000 stock options in two separate
grants during 1995. Such options represent 19 percent of the total options
granted to employees in 1995.
(2) Mr. O'Grady resigned his positions as President of Navigators and NIC and as
an officer or director of all of the Somerset Companies effective as of June
30, 1995.
The following table sets forth information for each of the Named
Executive Officers with respect to the value of options/SARs exercised during
the fiscal year ended December 31, 1995 and the value of outstanding and
unexercised options/SARs held as of December 31, 1995, based upon the market
value of the Common Stock of $17.625 per share on December 29, 1995. There were
no options exercised by the Named Executive Officers during the fiscal year
ended December 31, 1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying unexercised Value of unexercised
Options/SARs at in-the-money Options/SARs
Fiscal Year End at Fiscal Year End
(#) ($)
Shares Acquired Value Realized ---------------------------- ---------------------------
Name on Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Terence N. Deeks -- -- 35,375 50,625 $148,125 $156,250
W. Allen Barnett -- -- 43,625 50,625 163,099 156,250
Francis V. Bigley, Jr. -- -- 30,750 57,500 89,144 183,437
Peter L. Johnson -- -- 4,625 6,250 24,266 15,156
Robert A. Rogers -- -- 5,625 71,875 11,328 176,172
Peter E. O'Grady(1) -- -- 45,250 5,000 95,119 --
</TABLE>
- ------------------------
(1) Mr. O'Grady resigned his positions as President of Navigators and NIC and as
an officer or director of all of the Somerset Companies effective as of June
30, 1995.
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<PAGE> 7
COMPENSATION OF DIRECTORS
Directors of the Group who are not also officers of the Group,
Navigators or NIC, or officers, directors or employees of any Somerset Company,
receive an annual retainer of $7,000, and an additional $750 for each meeting of
the Board of Directors of the Group attended.
STOCK OPTION PLANS
The Group has adopted two stock option plans which allow for the grant
to key employees of the Group, its subsidiaries and affiliates, of options to
purchase an aggregate of 900,000 shares of Common Stock. The Group filed a Form
S-8/S-3 Registration Statement relating to the aggregate of the 900,000 shares
of Common Stock which may be issued upon the exercise of options granted or that
may be granted under these two plans, an incentive stock option plan (the
"Plan") and a non-qualified stock option plan (the "Non-Qualified Stock Option
Plan").
The Plan is administered by the Compensation Committee of the Group's
Board of Directors, which consists of Leandro S. Galban, Jr., Marc M. Tract and
Robert F. Wright. The Compensation Committee determines, in its discretion, and
recommends to the Board of Directors the persons to receive options, option
prices, dates of grant and vesting periods, although no option may extend longer
than ten years. The Plan requires that all options granted shall be at exercise
prices not less than the fair market value of the Common Stock on the date of
the grant, as such value is determined by the Compensation Committee. Unless
otherwise provided, an option is exercisable in installments after the first
anniversary of its grant to the extent of 25% of the number of shares originally
covered by the option (subject to adjustment in the event of changes in the
capitalization of the Group), multiplied by the number of full years elapsed
since the grant of the option and less any amounts theretofore exercised up to
the maximum number of shares covered by the option. Generally, options may be
exercised in whole or in part as to all full shares which have become
purchasable.
The Compensation Committee also administers the Non-Qualified Stock
Option Plan and selects the officers and key employees who will receive grants
of options and stock appreciation rights and the number of shares that will be
subject thereto. The Compensation Committee is entitled to make appropriate
adjustments in the number of shares under the Non-Qualified Stock Option Plan to
take into account any stock split, stock dividend, recapitalization, exchange of
shares or other similar event. The shares issued pursuant to the Non-Qualified
Stock Option Plan consist of authorized but unissued shares, or shares which
have been issued and reacquired by the Group.
The persons eligible to participate in the Non-Qualified Stock Option
Plan consist of officers and key employees (collectively, "key employees") of
the Group and/or its affiliates who contribute, and are expected to contribute
materially to the success of the Group and its affiliates. Options may be
granted to a key employee either alone or with an attached stock appreciation
right. The number of shares and other terms of grant are fixed by the
Compensation Committee and set forth in an option agreement. An option shall
become 100% vested at the earliest of (i) the optionee's normal retirement date,
(ii) the optionee's death or disability, or (iii) four years from the date of
grant. Prior to becoming 100% vested, each option becomes exercisable at a rate
of one-quarter of the number of shares covered by such option after each of the
first four anniversaries of the date of grant, unless the Compensation Committee
accelerates such schedule.
Under the Non-Qualified Stock Option Plan, the Compensation Committee
may, at its discretion, grant stock appreciation rights in tandem with the
options granted under the Non-Qualified Stock Option Plan. Each stock
appreciation right must relate to a specific option and may only be exercised
when the
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<PAGE> 8
related option is exercisable; provided, that a stock appreciation right may
only be exercised and received in cash during a specified ten-day period
following the release by the Group of its quarterly financial reports. The
exercise of a stock appreciation right results in the cancellation of the
related option on a share-for-share basis. Upon exercise of a stock appreciation
right, the optionee is entitled to receive an amount equal to the fair market
value on the date of exercise of the total number of shares of Common Stock for
which the right is exercised, less the exercise price the optionee would have
been required to pay to purchase such shares had the related option been
exercised. Payment by the Group upon exercise of a stock appreciation right may
be made in cash or shares of Common Stock, or a combination thereof, as
determined in the sole discretion of the Compensation Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Galban, Tract and
Wright. Mr. Galban is both a director of the Group as well as a Managing
Director of DLJ. DLJ provided a fairness opinion with respect to the Mergers.
Mr. Galban is a member of the Compensation Committee, the Executive Committee
and the Finance Committee.
Mr. Tract is both a director of the Group as well as a partner of
Rosenman & Colin and a former partner of Kroll & Tract. Rosenman & Colin has
served as counsel to the Group, Navigators, NIC and certain of the Somerset
Companies since August 1994. Until August 1994, Kroll & Tract served as general
counsel to the Group, Navigators, NIC and certain of the Somerset Companies
since before 1986. Kroll & Tract, with the consent of the Group, was retained by
the Somerset Companies in connection with the Mergers. Mr. Tract serves as
trustee under several instruments of trust for the benefit of children of Mr.
and Mrs. Deeks. Mr. Tract is a member of the Audit Committee and the
Compensation Committee.
The Group has entered into a consulting agreement (the "Consulting
Agreement") with Robert F. Wright Associates, Inc., pursuant to which Robert F.
Wright Associates, Inc. provides certain consulting services to the Group.
Robert F. Wright, a director of the Group, is the President of Robert F. Wright
Associates, Inc. The Consulting Agreement provides for an annual consultation
fee of $40,000 to be paid to Robert F. Wright Associates, Inc. Mr. Wright is a
member of the Compensation Committee and the Finance Committee.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Group's Board of Directors, which
consists of Messrs. Galban, Tract and Wright, is charged, among other things, to
make periodic reviews of the Group's compensation arrangements and to make
recommendations to the Board of Directors with respect to such arrangements. The
Committee was organized in July 1994 and first met formally in December 1994.
For Messrs. Deeks and Barnett, compensation arrangements for the three year
period commencing June 30, 1994, with the exception of the determination of
annual incentive payments and grants of stock options, were adopted prior to the
Committee's formation and reflected in the Employment Agreements with each such
officer. Each such arrangement has been reviewed and approved or ratified by the
Committee.
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<PAGE> 9
The principal objectives of the Committee's compensation policies are
to attract and retain qualified executives and to provide incentives for such
executives to enhance the profitability and growth of the Company and thus
enhance stockholder value. The executive compensation program consists
principally of base salaries, an annual incentive plan and the two stock option
plans. The following describes components of the Group's executive compensation
program for the fiscal year ended December 31, 1995 and the related factors
considered by the Committee in determining compensation.
Base Salaries. Base Salaries were determined after evaluating a number
of factors, including local market conditions, job performance and amounts paid
to executives with comparable experience, qualifications and responsibilities at
other insurance companies and underwriting management companies.
Annual Incentive Plan. The Group's annual incentive plan consisted
principally of bonus payments based on the following factors, subject to a
maximum bonus amount for each officer or key employee specified as a percentage
of his or her base salary: (i) return on capital; (ii) underwriting results; and
(iii) subjective evaluation. Officers and key employees are grouped into three
categories for the purposes of annual incentive awards, with compensation of the
executive officers of the Group tied exclusively to return on capital and
subjective evaluation. Under the first factor, return on capital, the annual
incentive plan provided for a bonus of 10% of the officer or key employee's
maximum bonus if a 10%-12.5% return on capital was achieved, with incremental
increases in the amount of the bonus up to 100% of the officer or key employee's
maximum bonus if a 22.5% return on capital was achieved. The amount of the bonus
for officers and key employees with underwriting responsibilities was primarily
based on a formula tied to their individual underwriting results. In addition,
20% of each officer or key employee's bonus, 50% in the case of Mr. Deeks, was
based on a subjective evaluation of his or her performance during the year.
The objectives of the annual incentive plan in 1995 were to
reward top executives and key employees for achieving defined annual performance
goals, provide superior rewards for superior competitive performance and reward
executives and key employees based on performance measures that are recognized
within the industry and among investors as being key measures of success. The
Committee believes its annual incentive plan is typical within the industry and
permits management to adjust the goals annually to reflect the competitive
environment. In addition, by aligning the financial interests of the Group's
executives and key employees with those of the Group's stockholders, the annual
incentive plan is intended to be directly related to the creation of value for
stockholders of the Group.
Stock Option Plans. The Group has adopted two stock option plans which
allow for the grant to key employees of stock options which generally vest over
a number of years. The number of shares of Common Stock subject to an
executive's stock option grant is determined with reference to the
responsibility and experience of the executive and competitive conditions. By
aligning the financial interests of the Group's executives with those of the
Group's stockholders, these equity awards are intended to be directly related to
the creation of value for stockholders of the Group. The deferred vesting
provisions are designed to create an incentive for an individual executive to
remain with the Group.
President and Chairman of the Board. The Committee reviewed the 1995
compensation levels of Terence N. Deeks, President and Chairman of the Board of
the Group, within the context of industry information regarding chief executive
officers with comparable experience, qualifications and responsibilities at
other insurance companies and underwriting management companies. The Committee
also considered local market conditions and job performance, as well as the
significant ownership position of Mr. Deeks and the fact that he has received
substantial compensation in the past. Mr. Deeks' 1995 base salary was determined
prior to the Committee's formation but has been approved or ratified by the
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<PAGE> 10
Committee. In response to the Group's net loss in 1994, which was largely a
result of losses from the January 17, 1994 earthquake that occurred in the
vicinity of the Northridge area of Los Angeles, California, Mr. Deeks
voluntarily offered to reduce the base salary specified in his Employment
Agreement for 1995 by $100,000. For 1995, Mr. Deeks received from the Group and
the Somerset Companies a base salary of $416,666 per annum, annual incentive
compensation payments of $440,000, and 50,000 of stock options (See Option
Grants in Last Fiscal Year table).
Under Section 162(m) ("Section 162(m)") of the Internal Revenue Code of
1986, as amended, effective in 1994, annual compensation in excess of $1.0
million paid to the chief executive officer or any of the four other highest
compensated officers of any publicly-held corporation will not be deductible in
certain circumstances. Generally, "performance - based" compensation, as defined
in Section 162(m), is not subject to the limitation if certain requirements are
satisfied. The compensation of no executive officer was subject to the
limitation of Section 162(m) in 1995. The Committee intends to structure the
Group's annual incentive plan and any stock-based compensation for executive
officers so that such compensation qualifies as performance-based compensation
under Section 162(m).
Submitted by the Compensation Committee:
Leandro S. Galban, Jr.
Marc M. Tract
Robert F. Wright
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<PAGE> 11
FIVE-YEAR PERFORMANCE GRAPH
The comparison of Five-Year Cumulative Returns among the Group,
Standard & Poor's 500 Composite ("S&P 500") and the S&P Property & Casualty
Insurance Industry ("Insurance Industry") listed companies is as follows:
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Navigators Group, Inc. $100.00 $187.79 $148.86 $160.31 $ 72.45 $ 88.07
S&P 500 Comp Ltd. $100.00 $130.47 $140.41 $154.56 $156.60 $215.45
Property-Casualty Insurance $100.00 $125.19 $146.61 $144.02 $151.07 $204.54
- -----------------------------------------------------------------------------------
</TABLE>
The Stock Performance Graph, as presented above, which was prepared
with the aid of independent consultant Standard & Poor's Compustat, a division
of McGraw-Hill, Inc., reflects the cumulative return on the Common Stock of the
Group, S&P 500 and the Insurance Industry, respectively, assuming an original
investment in each of $100 on December 31, 1990 (the "base") and reinvestment of
dividends to the extent declared. Cumulative returns for each fiscal year
subsequent to 1990 are measured as a change from this base.
-32-
<PAGE> 12
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the holdings of Common Stock (i) by each
person who, as of March 15, 1996, holds of record or is known by the Group to
own beneficially more than 5% of the outstanding Common Stock, (ii) by each of
the Group's current directors, (iii) by each of the Named Executive Officers
other than Mr. O'Grady, and (iv) by all directors and executive officers as a
group. Except as otherwise indicated, to the Group's knowledge all shares are
beneficially owned by the persons named as owners.
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OWNERSHIP
OF OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES STOCK
- ------------------------------------ ------ -----
<S> <C> <C>
Terence N. Deeks(1) 4,252,273 52.2%
123 William Street
New York, New York 10038
Marc M. Tract (2)(3) 905,578 11.1%
575 Madison Avenue
New York, New York 10022
Chartwell Re Corporation(4) 814,700 9.99%
300 Atlantic Street, Suite 400
Stamford, Connecticut
The Reinsurance Corporation of New York(4) 762,900 9.36%
80 Maiden Lane
New York, New York 10038
Scudder, Stevens & Clark, Inc.
345 Park Avenue 455,500 5.6%
New York, New York 10154
W. Allen Barnett(5) 141,403 1.7%
Francis V. Bigley, Jr.(6) 104,489 1.3%
Peter L. Johnson(7) 54,292 *
Robert A. Rodgers (8) 77,500 1.1%
Robert M. DeMichele(9) 45,740 *
Leandro S. Galban, Jr.(10) 18,540 *
John F. Knight(11) 29,820 *
Salvatore A. Margarella(12) 34,250 *
Robert F. Wright 4,000 *
Robert Lepowsky(13) 750 *
Marion A. Woodbury 0 *
All current directors and officers
as a group
(1)(2)(3)(5)(6)(7)(8)(9)(10)(11)(12)(13) 4,812,857 58.9%
</TABLE>
- -------------------------
* Less than 1% of issued and outstanding Common Stock.
(1) Includes options to receive 86,000 shares of Common Stock at exercise
prices varying between $10.00 and $28.00 per share. Includes 880,254 shares
considered beneficially owned by Mr. Deeks which are held under several
instruments of trust for the benefit of children of Mr. Deeks.
(2) Includes 49,800 shares held as trustee pursuant to a testamentary trust for
the benefit of Mrs. Harold M. Tract, and with remainder interests in Marc
M. Tract and Laurence T. Tract.
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<PAGE> 13
(3) Includes 854,878 shares held as trustee under several instruments of trust
for the benefit of children of Mr. and Mrs. Terence N. Deeks.
(4) Based upon a Schedule 13G/A filed with the Securities and Exchange
Commission (the "Commission") by Chartwell, dated February 12, 1995.
Includes 762,900 shares owned through its wholly-owned subsidiary, Reco.
The shares owned by Reco may be deemed to be beneficially owned by its
immediate and intermediate parent companies, Chartwell Reinsurance Company
and Chartwell Re Holdings Corporation.
(5) Includes options to receive 94,250 shares of Common Stock at exercise
prices varying between $10.00 and $28.00 per share.
(6) Includes options to receive 88,250 shares of Common Stock at exercise
prices varying between $10.00 and $28.00 per share.
(7) Includes options to receive 10,875 shares of Common Stock at exercise
prices varying between $10.00 and $17.00 per share.
(8) Includes options to receive 77,500 shares of Common Stock at exercise
prices varying between $14.50 and $34.00 per share.
(9) Excludes 176,100 shares owned by clients of Lexington Global Assets
Managers, Inc., for which Mr. DeMichele serves as Director and President,
and 1,200 shares owned by Mr. DeMichele's children. Mr. DeMichele disclaims
beneficial ownership of such shares.
(10) Includes 1,350 shares held by Mr. Galban's son and 150 shares held by Mr.
Galban's wife.
(11) Includes 10,950 shares held as trustee of The Jeffrey J. Knight, Melanie K.
Eggers, John Mark Knight, Jane M. Knight and James M. Knight Trusts.
(12) Includes options to receive 34,250 shares of Common Stock at exercise
prices varying between $10.00 and $34.00 per share.
(13) Mr. Lepowsky is one of three trustees for several instruments of trust
holding a total of 25,386 shares of Common Stock for the benefit of
children of Mr. and Mrs. Terence N. Deeks. Mr. Lepowsky disclaims
beneficial ownership of such shares and accordingly they are excluded from
his share ownership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Group has entered into the Consulting Agreement with Robert F. Wright
Associates, Inc., pursuant to which Robert F. Wright Associates, Inc. provides
certain consulting services to the Group. Robert F. Wright, a director of the
Group, is the President of Robert F. Wright Associates, Inc. The Consulting
Agreement provides for an annual consultation fee of $40,000 to be paid to
Robert F. Wright Associates, Inc. Mr. Wright is a member of the Compensation
Committee and the Finance Committee.
Navigators and NIC have investment advisory agreements with LMC, pursuant to
which LMC provides investment advice to Navigators. Robert M. DeMichele, a
director of the Group, is Chairman of the Board and Chief Executive Officer of
LMC and is President and Chief Executive Officer of Lexington Global Asset
Managers, Inc., of which LMC is a wholly owned subsidiary. Mr. DeMichele is a
member of the Executive Committee and the Finance Committee.
Management believes that the terms of the Consulting Agreement and the
investment advisory agreements are no less favorable to Navigators, NIC and the
Group than those which could be obtained from unaffiliated third parties.
Management further believes that all other transactions with affiliated
companies have in the past and will in the future be on fair and equitable terms
no less favorable than the Group, Navigators and NIC could obtain in arm's
length transactions with unaffiliated third parties.
-34-
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
The Navigators Group, Inc.
(Registrant)
Dated: April 29, 1996 By:/s/ W. ALLEN BARNETT
-------------------------
W. Allen Barnett
Senior Vice President,
Secretary
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ TERENCE N. DEEKS President and Chairman of the Board April 29, 1996
- -------------------- (Principal Executive Officer)
Terence N. Deeks
/s/ W. ALLEN BARNETT Senior Vice President, Secretary April 29, 1996
- -------------------- (Principal Financial Officer)
W. Allen Barnett
/s/ SALVATORE A. MARGARELLA Controller April 29, 1996
- --------------------------- (Principal Accounting Officer)
Salvatore A. Margarella
/s/ ROBERT M. DEMICHELE Director April 29, 1996
- -----------------------
Robert M. DeMichele
/s/ LEANDRO S. GALBAN, JR. Director April 29, 1996
- --------------------------
Leandro S. Galban, Jr.
/s/ JOHN F. KNIGHT Director April 29, 1996
- ------------------
John F. Knight
/s/ ROBERT LEPOWSKY Director April 29, 1996
- -------------------
Robert Lepowsky
/s/ MARC M. TRACT Director April 29, 1996
- -----------------
Marc M. Tract
/s/ MARION A. WOODBURY Director April 29, 1996
- ----------------------
Marion A. Woodbury
/s/ ROBERT F. WRIGHT Director April 29, 1996
- --------------------
Robert F. Wright
</TABLE>
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