<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) of the Securities
Exchange Act of 1934
Filed by registrant [X]
Filed by a party other than registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary proxy statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
THE NAVIGATORS GROUP, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NOT APPLICABLE
- --------------------------------------------------------------------------------
(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 Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of the filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
It is anticipated that this Proxy Statement and a related form of proxy
will first be delivered to security holders on or around May 3, 2000.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE NAVIGATORS GROUP, INC.
123 WILLIAM STREET
NEW YORK, NEW YORK 10038
------------------------
ANNUAL MEETING -- JUNE 1, 2000
------------------------
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of your Company to
be held at 11:00 a.m. on Thursday, June 1, 2000 at the India House, One Hanover
Square, New York, New York 10004.
A report of the Company's current affairs will be presented at the Meeting
and Stockholders will have an opportunity for questions and comments.
You are requested to sign, date and mail your proxy card whether or not you
plan to attend the Annual Meeting.
We are grateful for your assistance and express our appreciation in
advance.
Sincerely yours,
/s/ Terence N. Deeks
TERENCE N. DEEKS
Chairman, President and
Chief Executive Officer
April 28, 2000
<PAGE> 3
THE NAVIGATORS GROUP, INC.
123 WILLIAM STREET
NEW YORK, NEW YORK 10038
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 1, 2000
------------------------
To the Stockholders of The Navigators Group, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of The
Navigators Group, Inc. (the "Company"), a Delaware corporation, will be held at
the India House, One Hanover Square, New York, New York, on Thursday, June 1,
2000, at 11:00 a.m., E.S.T., for the following purposes:
(1) To elect seven (7) directors to serve until the 2001 Annual Meeting of
Stockholders or until their respective successors have been duly
elected and qualified;
(2) To ratify the appointment by the Company's Board of Directors of KPMG
LLP as the independent auditors of the Company to examine and report on
the financial statements for 2000; and
(3) To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The close of business on April 17, 2000, has been fixed by the Board of
Directors as the date for the determination of stockholders entitled to notice
of and to vote at the Annual Meeting, and only stockholders of record at such
date will be entitled to vote. A list of stockholders will be open to
examination by stockholders during ordinary business hours for a period of ten
(10) days prior to the meeting at the offices of the Company, 123 William
Street, New York, New York 10038.
By Order Of The Board Of Directors
/s/ Bradley D. Wiley
BRADLEY D. WILEY
Secretary
New York, New York
April 28, 2000
IMPORTANT
If you do not plan to attend this meeting, please sign and return the
enclosed proxy. No postage is required if mailed in the United States. PLEASE
MAIL YOUR PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE> 4
THE NAVIGATORS GROUP, INC.
123 WILLIAM STREET
NEW YORK, NEW YORK 10038
------------------------
ANNUAL MEETING OF STOCKHOLDERS
------------------------
PROXY STATEMENT
GENERAL INFORMATION
The accompanying form of proxy is solicited on behalf of the Board of
Directors of The Navigators Group, Inc. (the "Company") for use at the annual
meeting (the "Meeting") of the Company's stockholders or any adjournment
thereof. The persons named on the proxy card have been designated as proxies by
the Company's Board of Directors. Such persons are officers of the Company. Any
stockholder desiring to appoint some other person to represent him at the
Meeting may do so either by inserting such person's name in the blank space
provided on the enclosed proxy card, or by completing another form of proxy and,
in either case, delivering the completed proxy to the Secretary of the Company
at the address indicated above, before the time of the Meeting. It is the
responsibility of the stockholder appointing some other person to represent him
to inform such person of his appointment. The Company has first mailed these
proxy materials to holders ("Stockholders") of shares of the Company's Common
Stock, $.10 par value per share (the "Common Stock"), on or about May 1, 2000.
The Company's executive offices are located at 123 William Street, New York, New
York 10038.
The proxies which are properly executed and duly returned to the Company
and not revoked will be voted as specified and, if no direction is made, will be
voted for the election of each of management's seven (7) nominees for election
as directors and in favor of Proposal Number 2. Stockholders may also be asked
to consider and take action with respect to such other matters as may properly
come before the Meeting or any adjournment or adjournments thereof. Each proxy
granted is revocable and may be revoked at any time prior to its exercise by
giving notice to the Company of its revocation. A Stockholder who attends the
Meeting in person may, if he wishes, vote by ballot at the Meeting, thereby
canceling any proxy previously given. The outstanding voting stock of the
Company as of April 17, 2000, the record date, consisted of 8,414,356 shares of
Common Stock held by approximately 100 holders of record, with each share of
Common Stock entitled to one vote. Only Stockholders of record at the close of
business on April 17, 2000, are entitled to vote at the Meeting. The closing
price of the Common Stock on April 17, 2000 was $10.25.
A copy of the Company's Annual Report for the year ended December 31, 1999,
is being mailed to Stockholders simultaneously herewith. The financial
statements of the Company for the year ended December 31, 1999, and the
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the 1999 Annual Report, are specifically incorporated
herein by reference and made a part hereof.
PROPOSAL NUMBER 1
ELECTION OF DIRECTORS
The By-Laws of the Company provide for the Company to have not less than
three nor more than twenty-one directors. Management proposes the election of
the seven nominees named below to constitute the entire Board of Directors of
the Company (the "Board") until the next Annual Meeting of Stockholders and
until their successors shall be duly elected and shall qualify. Each of the
nominees is currently a director of the Company. In the event any nominee named
below is unable or declines to serve, which the Board does not anticipate, it is
intended that the proxies will be voted for the balance of those named and for
any substitute nominees that the Board may designate.
<PAGE> 5
<TABLE>
<CAPTION>
POSITION WITH THE FIRST BECAME A
NAME AGE COMPANY DIRECTOR
- ---- --- --------------------------- --------------
<S> <C> <C> <C>
Terence N. Deeks........................... 60 Chairman, President and CEO 1982
Robert M. DeMichele........................ 55 Director 1983
Leandro S. Galban, Jr...................... 65 Director 1983
Marc M. Tract.............................. 40 Director 1991
William D. Warren.......................... 64 Director 1996
Robert F. Wright........................... 74 Director 1993
Howard M. Zelikow.......................... 66 Director 1999
</TABLE>
Terence N. Deeks is the Company's founder. He has been Chairman of the
Board, President and Chief Executive Officer of the Company since its formation
in 1982, and is chairman and a director of several of the Company's wholly owned
subsidiaries including Navigators Insurance Company ("Navigators Insurance").
Mr. Deeks has been engaged in the property and casualty insurance business since
1957.
Robert M. DeMichele has been President and Chief Executive Officer of
Lexington Global Asset Managers, Inc. since 1995. Mr. DeMichele has been
Chairman of the Board and Chief Executive Officer of Lexington Management
Corporation ("LMC") since 1981. From 1985 to 1995, Mr. DeMichele served as
President of The Reinsurance Corporation of New York, currently known as The
Insurance Corporation of New York ("ICNY"). ICNY is a wholly owned subsidiary of
Chartwell Reinsurance Company ("Chartwell") which is wholly owned by Trenwick
Group, Inc ("Trenwick"), a Stockholder of the Company. Mr. DeMichele is a
director of Trenwick and Lexington Global Asset Managers, Inc.
Leandro S. Galban, Jr. has been employed by Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") since 1977, and prior thereto by a predecessor
company of DLJ from 1958 to 1977. From 1990 to 1997, Mr. Galban served as a
Managing Director of DLJ responsible for investment banking services to the
insurance industry, and since 1997 as Co-Head of DLJ's Financial Institutions
Group.*
Marc M. Tract has been a partner of the law firm of Rosenman & Colin LLP
since 1994, which firm has been counsel to the Company for the same period.*+
William D. Warren had been Vice Chairman of General Reinsurance Corporation
from 1996 until his retirement in 1998. From 1989 until 1996, Mr. Warren served
as Chairman, President and Chief Executive Officer of National Re Corporation.*
Robert F. Wright has been President and CEO of Robert F. Wright Associates,
Inc. since 1988. Mr. Wright was a partner of the public accounting firm of
Arthur Andersen & Co. from 1960 to 1988. He is a director of Deotexas Inc.,
Hanover Direct, Inc., Quadlogic Controls Corp., U.S. Timberlands Company L.P.
and Universal American Financial Corp.*+
Howard M. Zelikow has been a Managing Director of Kayne Anderson Investment
Management, Inc. since 1988. Mr. Zelikow is a director of Financial Security
Assurance Holdings Ltd., Queensway Financial Holdings Limited and The Right
Start, Inc.+
- ---------------
* Member of the Compensation Committee.
+ Member of the Audit Committee.
The current non-director executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- ---------------------------------------------
<S> <C> <C>
Bradley D. Wiley................................ 46 Senior Vice President, Chief Financial
Officer and Secretary
Salvatore A. Margarella......................... 50 Vice President and Treasurer
</TABLE>
Bradley D. Wiley has been Senior Vice President, Chief Financial Officer
and Secretary of the Company since 1996 and of its insurance subsidiaries since
1997. From 1992 until 1996, Mr. Wiley was Senior Vice President and Chief
Financial Officer of Christiania Re Corp. and its wholly owned subsidiary,
Christiania
2
<PAGE> 6
General Insurance Corp. Mr. Wiley is a director of Navigators Insurance and its
wholly owned subsidiary, NIC Insurance Company ("NIC").
Salvatore A. Margarella has been Vice President and Treasurer of the
Company since 1997 and prior thereto he was the Controller of the Company since
its inception. Mr. Margarella has been Vice President and Treasurer of
Navigators Insurance since 1987 and NIC since 1989, and is a director of both
Navigators Insurance and NIC.
OWNERSHIP OF VOTING SECURITIES BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership, reported to the
Company as of April 17, 2000, of Common Stock (i) by each person who holds of
record or is known by the Company to own beneficially more than 5% of the
outstanding Common Stock, (ii) by each of the Company's current directors and
nominees for directors, (iii) by each of the executive officers named in the
Summary Compensation Table below, and (iv) by all directors and executive
officers as a group. Except as otherwise indicated, to the Company'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)......................................... 3,892,266 45.9%
123 William Street
New York, New York 10038
Marc M. Tract(2)............................................ 994,477 11.8%
575 Madison Avenue
New York, New York 10022
Trenwick Group, Inc.(3)..................................... 814,701 9.7%
One Canterbury Green
Stamford, Connecticut 06901
Brian R. Deans(4)........................................... 11,000 *
Robert M. DeMichele(5)...................................... 48,641 *
Leandro S. Galban, Jr.(6)................................... 21,841 *
Russell J. Johnson(7)....................................... 31,725 *
James V. McGuire(8)......................................... 14,700 *
William D. Warren........................................... 3,301 *
Bradley D. Wiley(9)......................................... 22,000 *
Robert F. Wright............................................ 7,301 *
Howard M. Zelikow(10)....................................... 9,881 *
All current directors and officers as a group............... 4,479,097 52.5%
(1)(2)(4)(5)(6)(7)(8)(9)(10)(11)
</TABLE>
- ---------------
* Less than 1%.
(1) Includes options to purchase 60,000 shares of Common Stock at exercise
prices between $14.50 and $28.00 per share. Also includes 593,336 shares
considered beneficially owned by Mr. Deeks which are held under certain
instruments of trust for the benefit of Mr. Deeks' minor children. Excludes
394,740 shares which are held under certain other instruments of trust for
the benefit of Mr. Deeks' non-minor children. Mr. Deeks disclaims
beneficial ownership of all shares held in trust for the benefit of his
children.
(2) Includes 990,276 shares held as trustee under certain instruments of trust
for the benefit of Mr. Deeks' children and grandchildren, of which 593,336
shares are included in Mr. Deeks' shares listed above.
(3) The shares owned by Trenwick are primarily held by ICNY, a wholly owned
subsidiary of Chartwell which is wholly owned by Trenwick.
3
<PAGE> 7
(4) Includes options to purchase 10,000 shares of Common Stock at exercise
prices between $14.25 and $28.00 per share.
(5) Excludes 165,000 shares owned by clients of Lexington Global Asset
Managers, Inc., for which Mr. DeMichele serves as Director and President.
Mr. DeMichele disclaims beneficial ownership of such shares.
(6) Includes 1,350 shares held by Mr. Galban's son and 150 shares held by Mr.
Galban's wife.
(7) Includes options to purchase 22,500 shares of Common Stock at exercise
prices between $14.25 and $34.00 per share.
(8) Includes options to purchase 14,500 shares of Common Stock at exercise
prices between $14.25 and $34.00 per share.
(9) Includes options to purchase 8,750 shares of Common Stock at exercise
prices between $14.00 and $17.00 per share.
(10) Includes 1,300 shares held by Mr. Zelikow's wife and 500 shares held as
trustee pursuant to a trust for the benefit of a family member. Excludes
240,087 shares held by managed accounts of a registered investment advisor
affiliate of Kayne Anderson Investment Management, Inc.
(11) Includes Mr. Margarella's options to purchase 17,500 shares of Common Stock
at exercise prices between $14.25 and $34.00 per share.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has a consulting agreement with Robert F. Wright Associates,
Inc., of which Mr. Wright, a director of the Company, is the President. The
consulting agreement provides for an annual consultation fee of $26,000 to be
paid to Robert F. Wright Associates, Inc. for certain consulting services
provided by Mr. Wright in conjunction with his director's responsibilities. Mr.
Wright is a member of the Audit, Compensation, Finance and Nominating
Committees.
The Company also has a consulting agreement with William D. Warren,
pursuant to which Mr. Warren provides certain consulting services to the Company
in conjunction with his director's responsibilities. Mr. Warren's consulting
agreement provides for an annual consultation fee of $25,000. Mr. Warren is a
member of the Compensation and Executive Committees.
Navigators Insurance has an investment management agreement with LMC,
pursuant to which LMC provides investment management services. Robert M.
DeMichele, a director of the Company, 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 also a director of Trenwick, a Stockholder of the
Company. Certain of Trenwick's wholly owned subsidiaries, are members of several
of the insurance pools managed by a subsidiary of the Company. Mr. DeMichele is
a member of the Finance Committee.
Terence N. Deeks and a member of his family own in the aggregate 97% of
Somerset Insurance Limited, a Bermuda corporation ("Somerset Bermuda"), with the
remaining 3% being owned by various investors. Somerset Bermuda reinsures a
member of several of the pools managed by a subsidiary of the Company. Mr. Deeks
is a member of the Company's Executive Committee.
Marc M. Tract is a director of the Company and a partner of Rosenman &
Colin LLP which firm has served as counsel to the Company since 1994. Mr. Tract
also serves as trustee under several instruments of trust for the benefit of Mr.
Deeks' children and grandchildren. Mr. Tract is a member of the Audit,
Compensation and Nominating Committees.
Management believes that the terms of the consulting agreements and the
investment management agreement are no less favorable to the Company and
Navigators Insurance than those which could be obtained from unaffiliated third
parties. Management further believes that all other transactions with affiliated
companies have in the past been on fair and equitable terms no less favorable
than the Company and Navigators Insurance could obtain in arm's length
transactions with unaffiliated third parties.
4
<PAGE> 8
BOARD OF DIRECTORS
The Board of Directors of the Company held four meetings in 1999. No
directors attended or participated in fewer than 75% of the meetings of the
Board or meetings of the committees of the Board during 1999, except that Mr.
Warren attended 50% of the Board of Directors meetings.
The Board's Compensation Committee oversees the Company's compensation and
benefit policies and programs, including the stock option and stock appreciation
rights plans of the Company and the annual salaries and annual incentive plan
for selected officers. During 1999, the Compensation Committee held one meeting.
The members of the Compensation Committee are Leandro S. Galban, Jr., Marc M.
Tract, William D. Warren and Robert F. Wright.
The Board's Audit Committee recommends the selection of independent
Certified Public Accountants and reviews the scope and results of independent
audits. During 1999, the Audit Committee held three meetings. The members of the
Audit Committee are Marc M. Tract, Robert F. Wright and Howard M. Zelikow.
The Board's Nominating Committee recommends nominees for election to the
Company's Board of Directors. The Nominating Committee met once during 1999. The
members of the Nominating Committee are Marc M. Tract and Robert F. Wright.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following Summary Compensation Table sets forth compensation paid by
the Company for each of the years in the three-year period ended December 31,
1999 to the Chairman, President and Chief Executive Officer of the Company and
to each of the four other most highly paid executive officers of the Company or
its subsidiaries (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
NAME AND PRINCIPAL ANNUAL COMPENSATION SECURITIES UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS OPTIONS/SARS COMPENSATION
- ------------------ ---- -------- ------- --------------------- ------------
$ $ # $
<S> <C> <C> <C> <C> <C>
Terence N. Deeks................................ 1999 $350,000 $ -- -- $69,444(1)
Chairman, President and Chief 1998 358,348 -- 5,000 69,542(1)
Executive Officer 1997 400,000 30,000 -- 69,144(1)
Bradley D. Wiley................................ 1999 207,500 -- 20,000 --
Senior Vice President, CFO 1998 206,250 40,000 7,500 --
and Secretary 1997 197,500 50,000 20,000 --
Russell J. Johnson.............................. 1999 200,000 -- -- --
Senior Vice President 1998 150,210 40,000 -- --
of Somerset Marine, Inc. 1997 130,700 40,000 10,000 --
James V. McGuire................................ 1999 190,000 -- -- --
Senior Vice President 1998 136,173 32,500 5,000 --
of Somerset Marine, Inc. 1997 119,678 32,500 -- --
Brian R. Deans.................................. 1999 188,500 -- -- --
President of Somerset 1998 144,494 20,000 -- --
Insurance Services of 1997 132,667 30,000 -- --
California, Inc.
</TABLE>
- ---------------
(1) Represents life insurance premiums paid by the Company for the benefit of
Mr. Deeks.
5
<PAGE> 9
EMPLOYMENT AGREEMENTS
The Company has entered into an agreement with Mr. Wiley that generally
provides that if the Company terminates Mr. Wiley's employment following a
change in control for reasons other than cause, including certain circumstances
in the event of a constructive discharge, Mr. Wiley will be entitled to receive
an amount equal to 150% of his base salary along with certain other benefits.
The Company has entered into agreements with Messrs. Deans, Johnson,
Margarella and McGuire providing for their employment. In general, the
agreements provide for the continuation of their base salary for one year in the
case of a termination by the Company without cause.
STOCK OPTIONS
The following table contains information concerning the grant of options
and stock appreciation rights ("SAR") under the Company's stock option plans and
stock appreciation rights plan to each of the Named Executive Officers during
the year ended December 31, 1999. For a description of the Company's stock
option plans, see "Stock Option Plans" included herein.
OPTION/SAR GRANTS IN 1999
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL
INDIVIDUAL GRANTS RATES OF STOCK
-------------------------------------------------------- PRICE
NUMBER OF PERCENT OF TOTAL APPRECIATION
SECURITIES OPTIONS/SARS FOR OPTION/SAR
UNDERLYING GRANTED TO EXERCISE TERM
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION ----------------
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- ---- ------------ ---------------- --------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Terence N. Deeks....................... -- -- -- -- -- --
Bradley D. Wiley....................... 20,000 62% $14.00 6/2/08 22,500 179,800
Russell J. Johnson..................... -- -- -- -- -- --
James V. McGuire....................... -- -- -- -- -- --
Brian R. Deans......................... -- -- -- -- -- --
</TABLE>
The following table sets forth information for each of the Named Executive
Officers with respect to the value of options/SARs exercised during the year
ended December 31, 1999 and the value of outstanding and unexercised
options/SARs held as of December 31, 1999, based upon the market value of the
Common Stock of $9.75 per share on December 31, 1999.
AGGREGATED OPTION/SAR EXERCISES IN 1999
AND DECEMBER 31, 1999 OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
DECEMBER 31, 1999 DECEMBER 31, 1999
(#) ($)
SHARES ACQUIRED VALUE REALIZED --------------------------- ---------------------------
NAME ON EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Terence N. Deeks............ -- -- 60,000 2,500 -- --
Bradley D. Wiley............ -- -- 33,750 43,750 -- --
Russell J. Johnson.......... -- -- 25,000 2,500 -- --
James V. McGuire............ -- -- 19,500 2,500 -- --
Brian R. Deans.............. -- -- 12,500 -- -- --
</TABLE>
6
<PAGE> 10
COMPENSATION OF DIRECTORS
Directors of the Company who are not officers or employees of the Company
or any of its subsidiaries, are paid a retainer of $2,000 per quarter, an
additional $1,000 for attending each of four quarterly meetings of the Board,
and the number of shares of Common Stock that is equivalent to a cash payment of
$12,000 based on the market price of the stock at the end of the year.
STOCK OPTION PLANS AND STOCK APPRECIATION RIGHTS PLAN
The Company has adopted two stock option plans which allow for the grant to
key employees of the Company, its subsidiaries and affiliates, options to
purchase an aggregate of 900,000 shares of Common Stock. The Company 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 and
a non-qualified stock option plan (the "Stock Option Plans").
The Stock Option Plans are administered by the Compensation Committee of
the Company's Board of Directors. The Compensation Committee approves the
persons to receive options, option prices, dates of grant and vesting periods.
No option may extend longer than ten years. The Stock Option Plans require that
all options granted shall be at exercise prices not less than 90% of the fair
market value of the Common Stock on the date of the grant, as such value is
determined by the Compensation Committee. The options vest at the rate of 25%
per year.
The Company also has adopted a phantom stock appreciation rights plan (the
"SAR Plan") which allows for the grant to key employees of the Company and its
affiliates of up to 300,000 stock appreciation rights. The Compensation
Committee administers the SAR Plan and approves the employees who will receive
grants of the rights. The SAR Plan includes a vesting schedule similar to that
of the Stock Option Plans, with the rights generally becoming 100% vested four
years from the date of the grant. Upon exercise of a stock appreciation right,
the key employee is entitled to receive cash in an amount equal to the
difference between the fair market value of the Common Stock at the exercise
date and the exercise price (which shall not be less than 90% of the fair market
value of the Common Stock at the date of grant).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Galban, Tract, Warren and
Wright. Please refer to "Certain Relationships and Related Transactions"
contained herein as such section relates to the members of the Compensation
Committee.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Board's Compensation Committee is charged, among other things, to make
periodic reviews of the Company's compensation arrangements and to make
recommendations to the Board of Directors with respect to such arrangements.
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, two Stock Option Plans
and the SAR Plan. The following describes components of the Company's executive
compensation program for the fiscal year ended December 31, 1999 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 Company's annual incentive plan consists
principally of bonus payments based on the following factors, subject to a
maximum bonus amount for each officer or key employee specified
7
<PAGE> 11
as a percentage of his or her base salary: (i) return on capital; (ii)
underwriting results; and (iii) subjective evaluation.
The objectives of the annual incentive plan are to 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 Company's executives and
key employees with those of the Company's Stockholders, the annual incentive
plan is intended to be directly related to the creation of value for
Stockholders of the Company.
Stock Option Plans and SAR Plan. These plans allow for the grant to key
employees of stock options and stock appreciation rights which generally vest
over four years. The number of shares of Common Stock subject to an executive's
stock option and/or SAR grants is determined with reference to the
responsibility and experience of the executive and competitive conditions. By
aligning the financial interests of the Company's executives with those of the
Company's Stockholders, these equity-based awards are intended to be directly
related to the creation of value for Stockholders of the Company. The deferred
vesting provisions are designed to create an incentive for an individual
executive to remain with the Company.
Chairman, President and Chief Executive Officer. The Committee reviewed
the 1999 compensation levels of Terence N. Deeks, Chairman, President and Chief
Executive Officer of the Company, 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. For
1999, Mr. Deeks received from the Company a base salary of $350,000 per annum
and no annual incentive compensation payments. Mr. Deeks was not granted any
stock options or SARs in 1999.
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. No executive officer's compensation was subject to the limitation of
Section 162(m) in 1999. The Compensation Committee intends to structure the
Company'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
William D. Warren
Robert F. Wright
8
<PAGE> 12
FIVE YEAR PERFORMANCE GRAPH
The comparison of five year cumulative returns among the Company, and the
companies listed in the Standard & Poor's 500 Index ("S&P 500 Index") and the
S&P Property & Casualty Insurance Index ("Insurance Index") is as follows:
<TABLE>
<CAPTION>
THE NAVIGATORS GROUP, INC S&P 500 INDEX INSURANCE INDEX
------------------------- ------------- ---------------
<S> <C> <C> <C>
Dec 94 $100.00 $100.00 $100.00
Dec 95 121.55 137.58 135.40
Dec 96 125.86 169.17 164.52
Dec 97 129.52 225.60 239.33
Dec 98 106.90 290.08 222.69
Dec 99 67.24 351.12 166.00
</TABLE>
The Stock Performance Graph, as presented above, which was prepared with
the aid of independent consultant Standard & Poor's Compustat, reflects the
cumulative return on the Company's common stock, the S&P 500 Index and the
Insurance Index, respectively, assuming an original investment in each of $100
on December 31, 1994 (the "base") and reinvestment of dividends to the extent
declared. Cumulative returns for each year subsequent to 1994 are measured as a
change from this base.
9
<PAGE> 13
PROPOSAL NUMBER 2
APPOINTMENT OF INDEPENDENT AUDITORS
INDEPENDENT AUDITORS
KPMG LLP, Certified Public Accountants, have been appointed by the Board,
upon the recommendation of the Audit Committee, as independent auditors for the
Company to examine and report on its financial statements for 2000, which
appointment will be submitted to the Stockholders for ratification at the
Meeting. Representatives of KPMG LLP are expected to be present at the Meeting,
with the opportunity to make a statement if they desire to do so, and to be
available to respond to appropriate questions. The appointment of the
independent auditors will be ratified if it receives the affirmative vote of the
holders of a majority of the shares of the Common Stock present at the Meeting,
in person or by proxy. Submission of the appointment of the auditors to the
Stockholders for ratification will not limit the authority of the Board or its
Audit Committee to appoint another accounting firm to serve as independent
auditors if the present auditors resign or their engagement is otherwise
terminated.
THE BOARD RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
ALL OTHER MATTERS WHICH MAY PROPERLY
COME BEFORE THE MEETING
Management does not know of any other matters to be brought before the
Meeting except those set forth in the notice thereof. If other business is
properly presented for consideration at the Meeting, it is intended that the
proxies will be voted by the persons named therein in accordance with their
judgment on such matters.
STOCKHOLDER APPROVAL
Approval of Proposals 1 and 2 require the affirmative vote of the holders
of a majority of the total number of shares of Common Stock represented at the
Meeting. Stockholders are entitled to one vote per share on all matters
submitted for consideration at the Meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of the
Common Stock, to file certain reports regarding the ownership of the Common
Stock with the Securities and Exchange Commission (the "Commission"). These
insiders are required by the Commission's regulations to furnish the Company
with copies of all Section 16(a) forms they file. To the Company's knowledge,
based solely on review of the copies of such reports furnished to the Company
and written representations that no reports were required, all of its directors,
executive officers and 10% Stockholders made all required filings on time.
ABSENCE OF DISSENTERS' OR APPRAISAL RIGHTS
Under Section 262 of the Delaware General Corporation Law, Stockholders
have the right to dissent from certain corporate actions. In such cases,
dissenting Stockholders are entitled to have their shares appraised and be paid
the fair value of their shares provided that certain procedures perfecting their
rights are followed. The proposals described in this proxy statement do not
entitle a Stockholder to exercise any such dissenters' or appraisal rights.
STOCKHOLDERS' PROPOSALS
Any proposal by a Stockholder of the Company intended to be presented at
the 2001 Annual Meeting of Stockholders must be received by the Company at its
principal executive office no later than January 22, 2001 for inclusion in the
Company's proxy statement and form of proxy relating to that meeting. Any such
proposal
10
<PAGE> 14
must also comply with the other requirements of the proxy solicitation rules of
the Securities and Exchange Commission.
FORM 10-K ANNUAL REPORT
UPON WRITTEN REQUEST BY A STOCKHOLDER, THE COMPANY WILL FURNISH THAT
PERSON, WITHOUT CHARGE, A COPY OF THE FORM 10-K ANNUAL REPORT FOR 1999 WHICH IS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL
STATEMENTS AND SCHEDULES THERETO. The Form 10-K Annual Report for 1999 provided
to Stockholders will not include the documents listed in the exhibit index of
the Form 10-K. Upon written request, the Company will furnish to the Stockholder
copies of any exhibits for a nominal charge. Requests should be addressed to The
Navigators Group, Inc., Attn: Angela Conenna, Investor Relations Department, 123
William Street, New York, New York 10038.
SOLICITATION AND EXPENSES OF SOLICITATION
Officers and employees of the Company may solicit proxies. Proxies may be
solicited by personal interview, mail, telegraph and telephone. Brokerage houses
and other institutions, nominees and fiduciaries will be requested to forward
solicitation material to the beneficial owners of Common Stock, and will be
reimbursed for their reasonable out-of-pocket expenses in forwarding such
solicitation material. The costs of preparing this Proxy Statement and all other
costs in connection with the solicitation of proxies for the Annual Meeting of
Stockholders are being borne by the Company. It is estimated that said costs
will be nominal.
Your cooperation in giving this matter your immediate attention and in
returning your proxy promptly will be appreciated.
By Order of the Board of Directors,
/s/ Bradley D. Wiley
BRADLEY D. WILEY
Secretary
New York, New York
April 28, 2000
11
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- ------- ----------- ------------
<S> <C> <C>
99 Form of Proxy of The Navigators Group, Inc. ................
</TABLE>
<PAGE> 16
PROXY
THE NAVIGATORS GROUP, INC.
123 WILLIAM STREET
NEW YORK, NEW YORK 10038
PROXY FOR THE JUNE 1, 2000 ANNUAL MEETING OF STOCKHOLDERS
Terence N. Deeks and Bradley D. Wiley, or any one of them, with power of
substitution, are hereby authorized as proxies to represent and to vote the
shares of the undersigned at the Annual Meeting of Stockholders of The
Navigators Group, Inc. to be held at 11:00 a.m., E.S.T., Thursday, June 1, 2000,
at the India House, One Hanover Square, New York, New York 10004, and at any
adjournment thereof. The proxies are to vote the shares of the undersigned as
instructed below and on the reverse side and in accordance with their judgement
on all other matters which may properly come before the Meeting.
1. Election of Directors:
Nominees -- Terence N. Deeks, Robert M. DeMichele, Leandro S. Galban, Jr.,
Marc M. Tract, William D. Warren, Robert F. Wright and Howard M. Zelikow.
IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL
NOMINEES AND FOR PROPOSAL NUMBER 2.
SEE REVERSE
SIDE
<PAGE> 17
[X] PLEASE MARK YOUR VOTES AS THIS EXAMPLE 3870
The Board of Directors Recommends a Vote FOR PROPOSAL NUMBER 1.
1. / / FOR ALL NOMINEES / / WITHHOLD AUTHORITY TO
VOTE FOR ALL NOMINEES
Instruction: To withhold authority to vote for any individual nominee, please
print that nominee's name below:
______________________________________________________________________________
The Board of Directors Recommends a Vote FOR PROPOSAL NUMBER 2.
2. Ratification of the selection of KPMG LLP as the Company's independent
auditors for 2000.
/ / FOR / / AGAINST / / ABSTAIN
Please sign this Proxy Form which is solicited on behalf of the Board of
Directors, and return it promptly in the enclosed postage prepaid envelope.
SIGNATURE(S) _______________________________ DATED ____________________, 2000
Please sign exactly as name appears hereon.
