NYMAGIC, INC.
330 Madison Avenue
New York, New York 10017
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 8, 1999
May 17, 1999
The Annual Meeting of Shareholders of NYMAGIC, INC. will be held at its
offices at 330 Madison Avenue, New York, New York on June 8, 1999, at 9:30 A.M.
for the following purposes:
1. To elect (a) the six directors who shall constitute Class I of the
Board of Directors to hold office for the following three years; (b)
one director who shall serve as a Class II member of the Board of
Directors to hold office for the following year; and (c) two directors
who shall serve as Class III members of the Board of Directors to hold
office for the following two years.
2. To appoint KPMG Peat Marwick LLP as the independent public accountants
for the current fiscal year.
3. To transact such other business as may properly come before the
meeting.
All of the above matters are more fully described in the accompanying Proxy
Statement.
The close of business on May 10, 1999, has been fixed as the record date
for the determination of shareholders entitled to notice of, and to vote at,
this Annual Meeting. In order that your shares may be represented at this
meeting and to assure a quorum, please sign and return the enclosed Proxy
promptly. A postage paid, return addressed envelope is enclosed. In the event
you are able to attend in person, we will cancel the Proxy at your request.
Laura Moreno
Assistant Secretary
<PAGE>
Proxy Statement
Annual Meeting of Shareholders
of
NYMAGIC, INC.
May 17, 1999
This Proxy Statement and accompanying form of proxy are being sent to the
shareholders of NYMAGIC, INC., a New York corporation ("NYMAGIC" or the
"Company"), on or about May 17, 1999, in connection with the solicitation of
proxies to be voted at the Annual Meeting of Shareholders, and any adjournment
thereof (the "Annual Meeting"), to be held at 9:30 a.m. at the offices of the
Company at 330 Madison Avenue, New York, New York on June 8, 1999.
It is the policy of the Company that all proxy (voting instructions) cards
and ballots, which identify shareholders, be kept secret. Proxy cards are
returned in envelopes addressed to Chase Mellon Shareholder Services, L.L.C.,
the Company's transfer agent, which receives, inspects and tabulates the
proxies. When a signed proxy card is returned with choices specified with
respect to voting matters, the shares represented are voted in accordance with
the shareholder's instructions. If a proxy card is returned and the shareholder
has made no specifications with respect to voting matters, the shares will be
voted for all nominees for director identified on pages 2 and 3, and for the
proposal to ratify the appointment of KPMG Peat Marwick LLP as independent
accountants. Any shareholder of NYMAGIC may revoke any proxy given pursuant to
this solicitation by written notice delivered to the Secretary of the Company at
any time prior to its use or by voting in person at the Annual Meeting.
The proxy card provides space for a shareholder to withhold voting for any
of the nominees for the Board of Directors or to abstain from voting on any
proposal if the shareholder chooses to do so. Each matter submitted to the
shareholders requires the affirmative vote of a majority of the votes cast at
the meeting. For purposes of determining whether a quorum is present,
abstentions and broker non-votes will not be included. For purposes of
determining the number of votes cast with respect to any voting matter,
abstentions and broker non-votes will not be included.
The entire expense of this solicitation, which represents the amount
normally expended for an uncontested solicitation, will be borne by the Company.
In addition to solicitation by mail, there may be solicitation made by
directors, officers and regular employees of the Company. The cost of
solicitation may include reimbursements to brokers, custodians, nominees and
other fiduciaries for reasonable out-of-pocket and clerical expenses incurred in
forwarding proxy material to their principals.
The principal executive offices of NYMAGIC are located at 330 Madison
Avenue, New York, New York 10017 (telephone no. (212) 551-0600). The date of
this Proxy Statement is May 17, 1999.
<PAGE>
Introduction
This Proxy Statement is being furnished to the holders of shares of Common
Stock, $1.00 par value per share of the Company (the "Common Stock" or "NYMAGIC
Common Stock"), in connection with the solicitation of proxies by the Board of
Directors of NYMAGIC (the "Board" or "Board of Directors") for use at the Annual
Meeting of Shareholders to be held on June 8, 1999, at 9:30 a.m., local time, at
the offices of NYMAGIC located at 330 Madison Avenue, New York, New York and at
any adjournment thereof. This Proxy Statement and the accompanying Notice of
Meeting of Shareholders and form of Proxy, together with a copy of the Company's
Annual Report, are first being mailed to shareholders of NYMAGIC on or about May
17, 1999. Only shareholders of record of the Company's Common Stock outstanding
as of the close of business on May 10, 1999, will be entitled to vote. On May 1,
1999, there were 9,685,492 outstanding shares of Common Stock. Each share of
Common Stock is entitled to one vote. There are no cumulative voting rights.
John N. Blackman, Jr., Mark W. Blackman and their mother, Louise B. Tollefson,
as sole beneficiary of the Louise B. Tollefson Florida Intangible Tax Trust,
(collectively, the "Blackman Family"), own in the aggregate 5,788,208 shares or
approximately 60%, of the Company's Common Stock. The Blackman Family has
indicated that, with respect to the proposals set forth herein, it will vote in
favor of Proposals No. 1 and No. 2.
A list of shareholders entitled to vote at the meeting shall be made
available for inspection by shareholders during ordinary business hours at the
offices of NYMAGIC located at 330 Madison Avenue, New York, New York, 10017 for
a period of ten days before the meeting and at the time and place of the
meeting.
Proposal No. 1: Election of Directors
The Board of Directors of the Company has the responsibility for
establishing broad corporate policies and for the overall performance of
NYMAGIC. Although not involved in day-to-day operations, members of the Board of
Directors are kept informed of the Company's business by various reports and
documents sent to them on a regular basis and by operating and financial reports
at the Board and committee meetings made by the Chairman and other officers of
the Company.
NYMAGIC's charter and by-laws provide for a Board of Directors consisting
of not fewer than thirteen nor more than nineteen Directors divided into three
classes as nearly equal as possible. NYMAGIC presently has thirteen Directors.
The three year terms of Classes I, II and III expire in the years 1999, 2000 and
2001 respectively. At a meeting of the Board of Directors held on April 29,
1999, the size of the Board was increased to seventeen Directors.
Six Directors, who shall constitute the Class I members of the Board of
Directors to hold office for three years are to be elected at the Annual
Meeting. In addition, one Director, who shall serve as a Class II member of the
Board of Directors to hold office for one year, and two Directors, who shall
serve as Class III members of the Board of Directors to hold office for two
years, are to be elected at the Annual Meeting. Class I, II and III Directors
were last elected at the Annual Meeting of Shareholders held in 1996, 1997 and
1998, respectively.
The Board of Directors has nominated Messrs. Andersen, Bailey, Blackman,
Jr., Kensington, Thorne and Tollefson to serve as Class I Directors, Mr. Bannett
to serve as a Class II Director, and Messrs. Waite,
2
<PAGE>
III and Yanoff to serve as Class III Directors and, unless otherwise marked, a
proxy will be voted for the election of such persons. In the event any one or
more of such nominees shall unexpectedly become unavailable for election, votes
will be cast, pursuant to authority granted by the enclosed proxy, for such
persons as may be designated by the Board of Directors.
THE BOARD RECOMMENDS A VOTE "FOR" THE NINE NOMINEES LISTED BELOW.
The following table presents certain information concerning the nominees
for election as Directors, including all positions and offices with the Company
and its predecessors, terms of office as Director and periods during which the
nominee served as such, current membership on committees of the Board of
Directors of the Company, business experience during the last five years and
directorships held in other business corporations.
Nominees For Class I Directors
Director
Name Age Since Position
---- --- ----- --------
John R. Andersen 55 -- Director
Robert W. Bailey 65 -- Director
John N. Blackman, Jr. (2) 52 1975 Director
Costa N. Kensington 51 -- Director
William A. Thorne (1)(2)(4) 73 1972 Director
Bennet Tollefson 79 -- Director
Nominee For Class II Director
Director
Name Age Since Position
---- --- ----- --------
Jonathan Bannett 42 -- Director
Nominees For Class III Directors
Director
Name Age Since Position
---- --- ----- --------
Edward J. Waite, III 52 -- Director
Glenn R. Yanoff 43 -- Director
- ----------
(1) Member of Executive Committee.
(2) Member of Finance Committee.
(3) Member of Audit Committee.
(4) Member of Stock Option & Compensation Committee.
3
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John R. Anderson was a 50% owner of the Compain-Anderson Group, Inc., a
general agency of Guardian Life Insurance Company, from 1991 through February,
1999, and has worked in the insurance industry for 27 years. He is currently a
sales consultant for the S&W Agency, Inc., another Guardian Insurance Company
general agency. He has a BS from Rutgers University and an MBA from University
of Hartford.
Robert W. Bailey is a Senior Vice President of AON Re Inc., a subsidiary of
the AON Group and is a director of the Kenmark Companies, which provide various
processing services of the insurance industry. Prior to his position as Senior
Vice-President of Aon Re, Mr. Bailey was President and Chief Operating Officer
of BEP International, a reinsurance intermediary subsidiary of Sodarcan, and a
member of the executive management committee.
John N. Blackman, Jr. has been a Director since 1975 and served as Chairman
of the Board from 1988 through September 1998. Mr. Blackman was employed by MMO
and affiliates from 1973 until September 1998. Mr. Blackman is the son of Louise
B. Tollefson and brother of Mark W. Blackman.
Costa N. Kensington is a founder, and has been a member, of Kensington &
Ressler, LLC, a New York City law firm, for over 20 years.
William A. Thorne has been a Director since 1972. Mr. Thorne has been
employed by Hydrocarbon Products Company, Inc. as its Treasurer and has been its
Chairman of the Board since March 1983.
Bennet Tollefson is a former engineer who operated Tollefson Associates, an
Engineering and Sales agency for 35 years. He had previously worked for General
Electric and the Atomic Energy Commission, and is the husband of Louise B.
Tollefson. He is President and a member of the Board of Directors of the
Rochester Hemophilia Foundation.
Jonathan Bannett is a senior Vice-President of Delaware Valley Underwriting
Agency of New Jersey, Inc. and Delaware Valley Underwriting Agency of New York,
Inc. He also serves as Chairman of the Board of Directors of ECPI, a technical
college with campuses in Virginia and North Carolina.
Edward J. Waite, III is the President and managing member of Waite &
Associates, LLC. He serves as Chairman and Chief Executive Office of Fiber-Tec,
Inc. and as a Director of Niadyne, Inc. He was previously Vice President,
General Counsel and Secretary of General Chemical Corporation for a number of
years, and was also the Chief Legal Officer and Secretary of Crompton & Knowles
Corporation.
Glenn R. Yanoff is Chief Executive Officer and President of Crackerjack
Systems, Inc., where he has been employed since 1996, and has served as an
Assistant Secretary and Assistant Treasurer of North Sea Insurance Company for
more than the last five years. He is also an insurance underwriter with I.
Arthur Yanoff & Co., Ltd.
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<PAGE>
Directors and Executive Officers
The following is a list of the other Directors and Executive Officers of
the Company as of the date hereof:
Class of
Name Age Directors Position(s)
- ---- --- --------- -----------
Vincent T. Papa 52 President and Chief
Executive Officer
Mark W. Blackman(3) 47 II Director
Thomas J. Condon (1)(2) 54 I Director
Jean H. Goulding(1) 57 III Director
John Kean, Jr. (4) 74 III Director
James A. Lambert 43 III Director
Charles A. Mitchell 50 II Vice-President and Director
William R. Scarbrough(3) 70 II Director
Michael S. Shaffet (1)(3) 63 I Director
Richard T. Soper(1)(3) 73 II Director
Sergio B. Tobia (1) 60 I Chairman of the Board and
Director
Louise B. Tollefson (4) 75 II Director
Thomas J. Iacopelli 38 Chief Financial Officer
- ----------
(1) Member of Executive Committee.
(2) Member of Finance Committee.
(3) Member of Audit Committee.
(4) Member of Stock Option & Compensation Committee.
Vincent T. Papa was appointed President and Chief Executive Officer of the
Company effective March 19, 1999. Prior to joining the Company, Mr. Papa was
employed by Orion Capital since 1980, where he served most recently as a Senior
Vice-President of Orion Capital until March 1999 and as Chairman and Chief
Executive Officer of Wm. H. McGee & Co. Inc. from October 1, 1995 until March
1999.
Mark W. Blackman has been a Director since 1979 and was President of the
Company from 1988 until September 1998. Mr. Blackman was employed by the Company
or its subsidiaries from 1977 until September 1998. Mr. Blackman is the son of
Louise B. Tollefson and brother of John N. Blackman, Jr.
Thomas J. Condon was elected to the Board of Directors in June 1987. He is
a Vice-President -- Investments and Investment Advisor with A.G. Edwards & Sons,
Inc. which he joined in September 1993. Mr. Condon formerly served as Senior
Vice President at Peoples Westchester Savings Bank from 1981 through September
1993.
Jean H. Goulding has been a Director since 1976. Ms. Goulding was employed
by the Company or its subsidiaries from 1965 to 1992 and served as Executive
Vice President-Underwriting from 1988 until her retirement in 1992. Ms. Goulding
served as acting President of the Company from September 1998 until March 1999.
John Kean, Jr. has been a Director since 1991. Until his retirement in
1991, Mr. Kean was a Senior Vice President and Director of Guy Carpenter & Co.,
Inc.
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<PAGE>
James A. Lambert has been a Director since 1986. Mr. Lambert served as
Chief Operating Officer from 1989 until March 1999 and as General Counsel and
Secretary from 1986 until March 1999.
Charles A. Mitchell has been a Director and Vice President since 1981. He
has been employed by the Company or its subsidiaries since 1976.
William R. Scarbrough became a Director in June 1995. Until his retirement
in 1993, Mr. Scarbrough was a Vice President and Director of Wm. H. McGee & Co.
Inc.
Michael S. Shaffet has been a Director since September 1990. Mr. Shaffet is
the Treasurer and Chief Financial Officer of M. Fabrikant & Sons, Inc. Prior to
assuming that position in 1989, he was a partner in Berman, Shaffet & Schain,
the accountants for MMO and affiliates.
Richard T. Soper has been a Director since 1972. Mr. Soper has been Vice
Chairman of Argent Marine Operations, Inc. since 1990. Prior to that, Mr. Soper
served from 1986 as Chairman and President of the American Bureau of Shipping.
From 1978 to 1986, he was Executive Vice President of Sea Land Service, Inc. and
from 1983 to 1986, served as Chairman of the Board of Intersea Operations, Ltd.,
Inc.
Sergio B. Tobia has been a Director since 1981. Mr. Tobia was a Senior Vice
President and Director of Sorema North America Reinsurance Co. from 1989 until
his retirement in 1996. Mr. Tobia served as acting Chief Executive Officer of
the Company from September 1998 until March 1999 and has served as Chairman of
the Board of the Company since September 1998.
Louise B. Tollefson has been a Director since 1986. Mrs. Tollefson owns
approximately 18.0% of the Company's Common Stock and is the mother of John N.
Blackman, Jr. and Mark W. Blackman.
Thomas J. Iacopelli joined the Company in 1985 as its Assistant Controller.
In 1987, Mr. Iacopelli was appointed Controller of the Company and in 1989 he
was appointed Chief Financial Officer of the Company. Prior to joining the
Company, Mr. Iacopelli was employed by the accounting and consulting firm of
Coopers & Lybrand. Mr. Iacopelli is a Certified Public Accountant.
The Board of Directors, as well as its Audit, Finance and Stock Option and
Compensation Committees meet on a quarterly basis. In 1998, all Directors
attended at least 75% of the meetings of the Board and the Committees on which
they sit.
Compensation and Other Information
Compensation of Directors
Directors who are not also officers of the Company receive $8,000 and
shares of the Company's Common Stock in an amount equal to $10,000 as an annual
retainer plus an additional $1,000 for each meeting of the Board of Directors
and $750 for any Committee meeting attended. Directors who are also officers of
the Company receive $350 for each meeting of the Board of Directors and any
Committee meeting attended. All Directors of the Company's subsidiaries receive
$250 for each meeting of the Board of Directors and $100 for any Committee
meeting attended.
6
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Compensation of Executive Officers
The following Summary Compensation Table shows the compensation paid by the
Company for services rendered during fiscal years 1998, 1997, and 1996 by its
former Chairman of the Board and its former President and Chief Executive
Officer, each of whom ceased to serve in such positions in September 1998, and
each of the Company's other executive officers whose total salary and bonus
exceeded $100,000 during such fiscal year (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term All Other
Annual Compensation Compensation Awards Compensation
---------------------- ---------------------- ------------
Restricted
Name and Other Annual Stock Options/
Principal Position Year Salary ($) Bonus($) Compensation(2) Awards SARs(#) ($) (1)
- ------------------ ---- ---------- -------- --------------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
John N. Blackman, Jr 1998 323,606 5,000 -0- -0- -0- 24,000
Chairman (3) 1997 323,606 40,000 -0- -0- -0- 167,257
1996 304,375 40,000 336,600 -0- -0- 145,244
Mark W. Blackman 1998 335,817 40,000 -0- -0- -0- 24,000
President(4) 1997 323,606 40,000 -0- -0- -0- 167,257
1996 304,375 40,000 336,600 -0- -0- 145,244
Jean H. Goulding 1998 161,667 -0- -0- -0- -0- -0-
President(5) 1997 -0- -0- -0- -0- -0- -0-
1996 -0- -0- -0- -0- -0- -0-
James A. Lambert 1998 266,149 5,000 -0- -0- -0- 24,000
Chief Operating 1997 245,316 35,000 198,550 -0- -0- 24,000
Officer, General 1996 229,932 35,000 -0- -0- -0- 22,500
Counsel & Secretary(6)
Sergio B. Tobia 1998 242,499 -0- -0- -0- -0- -0-
Chairman & Chief 1997 -0- -0- -0- -0- -0- -0-
Executive Officer(7) 1996 -0- -0- -0- -0- -0- -0-
George F. Berg 1998 175,000 3,000 23,185 -0- -0- 24,000
Vice-President 1997 163,125 13,000 -0- -0- -0- 24,000
1996 34,667 10,000 -0- -0- -0- -0-
Charles A. Mitchell 1998 159,000 3,000 -0- -0- -0- 24,000
Vice-President 1997 149,224 13,000 13,095 -0- -0- 24,000
1996 139,032 13,000 36,000 -0- -0- 22,500
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The amounts shown in this column for 1998, represent contributions made by
the Company in 1998 on behalf of all eligible employees, including the
officers listed above, pursuant to the terms of the Company's defined
contribution retirement plans ("retirement benefits"). The amounts shown in
this column represent the retirement benefits paid in that year as well as
certain amounts for Mr. John N. Blackman, Jr. and Mr. Mark W. Blackman,
which represent compensation provided to them as the premium for term life
insurance, and in 1997 and 1996 representing the dollar value benefit to
each of them for an interest free loan for the payment of the premium for
whole life insurance.
(2) The amounts shown in this column represent proceeds from the exercise of
stock options.
(3) John H. Blackman, Jr. ceased to serve as Chairman of the Board of the
Company on September 9, 1998.
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- --------------------------------------------------------------------------------
Footnotes continued
(4) Mark W. Blackman ceased to serve as President and Chief Executive Officer
of the Company on September 9, 1998.
(5) Jean H. Goulding ceased to serve as Acting President of the Company on
March 31, 1999.
(6) James A. Lambert ceased to serve as Chief Operating Officer, General
Counsel and Secretary of the Company on March 31, 1999.
(7) Sergio B. Tobia ceased to serve as Acting Chief Executive Officer of the
Company on March 31, 1999.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
Vincent T. Papa
Vincent T. Papa entered into an employment agreement with the Company
effective March 19, 1999, to serve as President and Chief Executive Officer of
the Company. Prior to joining the Company, Mr. Papa served as Chairman and Chief
Executive Officer of Wm. H. McGee & Co., Inc., a marine and property insurance
subsidiary of Orion Capital Corporation from October 1, 1995 until March 1999
and as Senior Vice President of Orion Capital Corporation until March 1999.
Mr. Papa's employment agreement with the Company provides for an initial
three year term and is automatically renewable for an additional one-year period
on the third anniversary of the Effective Date (and on each subsequent
anniversary date thereafter) unless either party shall have given to the other
written notice of its intent not to extend the term within six months prior to
the applicable anniversary date. Under the terms of his employment agreement
with the Company, the Company paid Mr. Papa a one-time signing bonus in the
amount of $225,000 on March 19, 1999, and agreed to pay him an annual salary at
an initial rate of $425,000, which amount may be increased at the discretion of
the Board of Directors of the Company but may not be decreased. In addition to
his annual salary, Mr. Papa is eligible, for each calendar year that begins
within the term of his employment agreement, to participate in an annual
incentive bonus program under the terms of which he will have the opportunity to
earn a bonus of up to 100% of his annual salary in effect for the applicable
calendar year based on the Company's achievement of the performance targets
established by the Compensation Committee for that year. For calendar year 1999,
Mr. Papa will be entitled to a minimum bonus of $212,500.
Mr. Papa's employment agreement contains customary provisions relating to
disability, termination for cause and resignation without good reason. In
addition, such employment agreement provides that if, prior to the expiration of
the term thereof, Mr. Papa resigns from his employment with the Company for
"Good Reason," the Company will be required to pay him his annual salary and
bonus to the date of termination, together with periodic severance payments at a
rate equal to 150% of his annual salary (at the rate in effect on the date of
termination) for the longer of (i) the remainder of the term of his employment
agreement, and (ii) one year following such termination. For purposes of such
employment agreement, resignation for Good Reason means, among other things,
resignation by Mr. Papa because of a Change in Control of the Company. In such
event, Mr. Papa would be required to provide the Company with written notice of
his intent to resign for Good Reason within 90 days after he knows of the
occurrence of an event that constitutes Good Reason.
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Set forth below are provisions of the definition of the term "Change in
Control" contained in Mr. Papa's employment agreement which are relevant to the
following discussion:
(i) any "person" (within the meaning of Section 13(d) of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act") is or
becomes the beneficial owner within the meaning of Rule 13d-3 under
the Exchange Act (a "Beneficial Owner"), directly or indirectly, of
securities of the Company (not including in the securities
beneficially owned by such person any securities acquired from the
Company or its affiliates) representing 25% or more of the combined
voting power of the Company's then outstanding securities, excluding
any person who becomes such a Beneficial Owner in connection with a
transaction described in clause (A) of paragraph (iii) below;
provided, however, that with respect to the beneficial ownership of
securities by John N. Blackman, Jr., Mark W. Blackman and Louse B.
Tollefson and their respective heirs, executors, and assigns and any
trust formed by any of the Blackman Shareholders for the purpose of
estate and/or tax planning (including the Louise B. Tollefson Florida
Intangible Tax Trust) (collectively, the "Blackman Shareholders") the
reference to 25% in this Section 4(f)(i) shall be changed to 45%;
(ii) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, on
the date hereof, constitute the Board and any new director (other than
a director whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of the
Company) whose appointment or election by the Board or nomination for
election by the Company's stockholders was approved or recommended by
a vote of at least two thirds (2/3) of the directors then still in
office who either were directors on the date of such agreement or
whose appointment, election or nomination for election was previously
so approved or recommended;
(iii) there is consummated a merger or consolidation of the Company or any
direct or indirect wholly-owned subsidiary of the Company with any
other corporation other than (A) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately
prior to such merger or consolidation continuing to represent (either
by remaining outstanding or by being converted into voting securities
of the surviving entity or any parent thereof), in combination with
the ownership of any trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any subsidiary of the
Company, at least 50% of the combined voting power of the securities
of the Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or (B) a
merger or consolidation effected to implement a recapitalization of
the Company (or similar transaction) in which no person is or becomes
the Beneficial Owner, directly or indirectly, of securities of the
Company representing 25% or more of the combined voting power of the
Company's then outstanding securities; provided, however, that with
respect to the beneficial ownership of securities by the Blackman
Shareholders, the reference to 25% in this Section 4(f)(iii)(B) shall
be changed to 45%; or
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(iv) the stockholders of the Company approve a plan of complete liquidation
or dissolution of the Company or there is consummated an agreement for
the sale or disposition by the Company of all or substantially all of
the Company's assets, other than a sale or disposition by the Company
of all or substantially all of the Company's assets to an entity, at
least 50% of the combined voting power of the voting securities of
which are owned by stockholders of the Company in substantially the
same proportions as their ownership of the Company immediately prior
to such sale.
Notwithstanding the foregoing, a "Change of Control" shall not be
deemed to have occurred by virtue of the consummation of any transaction or
series of integrated transactions immediately following which the record
holders of the common stock of the Company immediately prior to such
transaction or transactions continue to have substantially the same
proportionate ownership in an entity which owns all or substantially all of
the assets of the Company immediately following such transaction or series
of transactions.
John N. Blackman, Jr., Mark W. Blackman, Louise B. Tollefson, the mother of
John N. Blackman, Jr. and Mark W. Blackman, and the Louise B. Tollefson Florida
Intangible Tax Trust (of which Louise B. Tollefson is the sole beneficiary), own
in the aggregate 5,788,208 shares (or 60%) of Common Stock of the Company. In
connection with the meeting of the Board of Directors of the Company commenced
on March 24, 1999, to approve management's recommendation of nominees for
election to the Board of Directors at the 1999 Annual Meeting of Stockholders of
the Company (the "1999 Annual Meeting"), John N. Blackman, Jr., Mark W. Blackman
and Louise B. Tollefson delivered a memorandum to the Board of Directors
stating, among other things, that "we are committed to reconstituting the Board
of Directors to move the Company forward and to provide appropriate support for
Mr. Papa through consensual resignations, new vacancies and, if necessary or
appropriate, full exercise of our rights as shareholders." At such meeting, Mark
W. Blackman proposed the nomination of nine individuals for election to the
Board of Directors, including two individuals who currently serve on the Board
of Directors and seven individuals (including Mr. Papa) who, if elected, would
be new directors. No action was taken by the Board of Directors at that time and
the meeting was adjourned. At the reconvened meeting of the Board of Directors
of the Company held on April 29, 1999, Mark W. Blackman renewed his proposal to
nominate such individuals and the Board was advised that Mr. Papa declined to
stand for election to the Board of Directors of the Company. The Board of
Directors then voted to expand the size of the Board from 13 members to 17
members, to nominate and recommend the election of the individuals (other than
Mr. Papa) proposed by Mr. Blackman to the Board of Directors of the Company and
to set a date for the 1999 Annual Meeting. The Board also approved a proposal
for the Company to enter into indemnification agreements with each of the
Company's directors and executive officers pursuant to which the Company agrees
to pay expenses incurred by such individuals in connection with indemnifiable
claims and to establish a $750,000 escrow fund to pay any such amounts.
Some or all of the foregoing events may be asserted by Mr. Papa to
constitute a Change of Control of the Company, triggering his right to resign
and receive the compensation provided for in his employment agreement. Mr. Papa
has not advised the Company of his intentions in this regard. Should Mr. Papa
assert such rights and resign from his positions as President and Chief
Executive Officer of the Company, such resignation might have a material adverse
effect on the business of the Company.
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<PAGE>
Mark W. Blackman
Mark W. Blackman entered into a termination of employment agreement with
the Company effective as of September 9, 1998. Pursuant to such agreement, Mr.
Blackman provided consulting and advisory services to the Company from September
9, 1998 through December 31, 1998, and continued to receive his monthly base
salary. Under such termination of employment agreement, Mr. Blackman was
entitled to receive a 1998 year-end bonus in an amount not less than that paid
to him by the Company in 1997 and to participate in 1998 distributions under the
NYMAGIC Profit Sharing Plan. In addition, the Company agreed to pay to Mr.
Blackman an annual base salary of $317,500 in 1999, payable in equal
installments, and a $317,500 lump sum payment on or as soon as practicable
following January 1, 2000. In the event of a "change of control," as defined in
Mr. Blackman's termination agreement, all payments due under such agreement will
be accelerated and become immediately due and payable and the Company's
obligations with respect to Mr. Blackman expire.
Jean H. Goulding
Jean H. Goulding entered into a four-month employment agreement with the
Company effective as of September 9, 1998, to serve as Interim President and
Interim Chief Executive Officer of the Company, which employment agreement was
subsequently extended through March 31, 1999. Pursuant to such agreement, Ms.
Goulding received a weekly base salary of $10,000 and reimbursement of
reasonable housing expenses.
James A. Lambert
James A. Lambert was employed as Chief Operating Officer and General
Counsel under an employment agreement with the Company that was extended through
March 31, 1999. Mr. Lambert's employment with the Company was deemed to have
been involuntarily terminated at March 31, 1999, within the terms of the
Company's Executive Severance Plan adopted by the Board of Directors on March
11, 1998.
Sergio B. Tobia
Sergio B. Tobia entered into a four-month employment agreement with the
Company effective as of September 9, 1998, to serve as Interim Chief Executive
Officer of the Company, which employment agreement was subsequently extended
through March 31, 1999. Pursuant to such agreement, Mr. Tobia received a weekly
base salary of $15,000.
The Company does not maintain any employment contracts with its other
executive officers. The Company maintains an Executive Severance Pay Plan which
provides for severance benefits to executive officers in an amount equal to two
years' salary in the event of the termination of employment, except for cause,
and one year's salary in the event of a change of control.
Stock Options
No stock options were granted to the Named Executive Officers in 1998 under
the Company's stock options plans. For a description of the Company's stock
option plans, see "Stock Option Plans."
11
<PAGE>
Aggregated Stock Option/SAR Exercises and Year-End Values
The following table shows stock options exercised by Named Executive
Officers in 1998, including the aggregate value of gains on the date of
exercise. In addition, this table includes the number of shares covered by both
exercisable and non-exercisable stock options as of December 31, 1998. Also
reported are values for "in-the-money" options that represent the positive
spread between the exercise price of any such existing stock options and the
year-end price of the Company's Common Stock.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Year-End Option/SAR Values
<TABLE>
<CAPTION>
Shares Number of Unexercised Value of Unexercised In
Acquired Value Options/SARs at The-Money Options/SARs
on Realized December 31, 1998 (#) at December 31, 1998 ($)
Name Exercise(#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
George F. Berg 2,000 23,185 2,000 6,000 -0- -0-
John N. Blackman, Jr -0- -0- -0- -0- -0- -0-
Mark W. Blackman -0- -0- -0- -0- -0- -0-
Jean H. Goulding -0- -0- -0- -0- -0- -0-
James A. Lambert -0- -0- 21,667 5,833 -0- -0-
Charles A. Mitchell -0- -0- 10,000 5,000 -0- -0-
Serge B. Tobia -0- -0- -0- -0- -0- -0-
</TABLE>
Retirement Plans
The Company maintains two retirement plans for the benefit of employees.
Both plans provide for 100% vesting upon completion of three years of service.
The Money Purchase Plan provides for a yearly contribution equal to 7-1/2% of an
employee's cash compensation for each year of service during which the employee
has completed 1,000 hours of service and is employed on the last day of the plan
year. The Profit Sharing Plan does not provide for any specified level of
contribution but any contribution made is subject to the restrictions set forth
above for the Money Purchase Plan. For the most recent plan year, a contribution
equal to 7-1/2% of cash compensation was made to all eligible participants in
the Profit Sharing Plan. The Company does not maintain any defined benefit
retirement plans.
Executive Life Insurance Plan
The Company maintains an Executive Life Insurance Plan for eligible
officers. Under the Plan, the Company pays life insurance premiums for the
benefit of participating officers with such amounts secured by a lien on the
policy and repaid in full upon termination of the policy.
Stock Option Plans
In 1983, the Company's Board of Directors and Shareholders approved the
Company's 1983 Employee Stock Option Plan (the "1983 Plan"). The 1983 Plan
authorized the granting to employees of the Company options to purchase an
aggregate of 250,000 shares of the Company's Common Stock under the 1983 Plan.
12
<PAGE>
Under the 1983 Plan, the option price may not be less than the fair market value
on the date of grant, or less than 110% of the fair market value in the case of
an employee who owns 10% of the total combined voting power or value of the
Common Stock of the Company immediately before the grant of any option. The 1983
Plan is administered by the Stock Option & Compensation Committee.
In 1986, the Company's Board of Directors and Shareholders approved the
1986 Stock Option Plan (the "1986 Plan"), to provide a means whereby the
Company, through the grant of non-qualified stock options to key officers and
employees, could attract and retain persons of ability as officers and
employees. The 1986 Plan authorized the issuance of options to purchase up to
500,000 shares of the Company's Common Stock at not less than 95% of the fair
market value at the date of grant. The 1986 Plan was administered by the Stock
Option & Compensation Committee. The 1986 Plan expired in 1997 and all options
issued under the plan have expired and are no longer exercisable.
In 1991, the Company's Board of Directors and Shareholders approved the
1991 Stock Option Plan (the "1991 Plan"), to provide a means whereby the
Company, through the grant of non-qualified stock options to key officers and
employees, may attract and retain persons of ability as officers and employees.
The 1991 Plan authorizes the issuance of options to purchase up to 500,000
shares of the Company's Common Stock at not less than 95% of the fair market
value at the date of grant. The 1991 Plan is administered by the Stock Option &
Compensation Committee.
Compensation Committee Interlocks and Insider Participation
Directors Kean, Thorne, Tobia and Tollefson served as members of the Stock
Option & Compensation Committee of the Board of Directors during 1998. Mr. Tobia
resigned from this Committee upon his appointment as Chairman and Chief
Executive Officer in September 1998.
John Kean, Jr. has been a Director since 1991. Until his retirement in
1991, Mr. Kean was a Senior Vice President and Director of Guy Carpenter & Co.,
Inc.
William A. Thorne has been a Director since 1972. Mr. Thorne has been
employed by Hydrocarbon Products Company, Inc. as its Treasurer and has been its
Chairman of the Board since March 1983.
Louise B. Tollefson is the mother of Mark W. Blackman and John N. Blackman,
Jr.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the "Securities
Exchange Act") requires the Company's executive officers and directors, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file initial reports of ownership and reports of changes in
ownership with the SEC. Executive officers and directors are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms which
they file.
The Company prepares Section 16(a) forms on behalf of its officers and
directors based on the information provided by them. Based solely on a review of
this information, copies of such forms furnished to the Company and written
representations from the Company's executive officers and directors, the Company
believes that in 1998 all Section 16(a) filing requirements applicable to its
executive officers, directors and greater than 10% beneficial owners were
complied with.
13
<PAGE>
Share Investment Performance Graph
In accordance with SEC rules, set forth below is a line graph comparing the
cumulative total stockholder return on the Company's Common Stock to the total
return of the S&P 500 Index and a peer group(1) of the Company's competitors,
obtained from Value Line, Inc. for the period of five fiscal years commencing
January 1, 1994 and ending December 31, 1998, assuming $100 invested in the
Company's Common Stock and in each index and assuming reinvestment of dividends.
Although inclusion of a share performance graph in this Proxy Statement
appears to suggest that Executive Compensation should be based on stock
performance alone, the Stock Option and Compensation Committee of the Board of
Directors considers many factors in determining compensation. See "Compensation
Committee Report."
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act, as amended, that might incorporate future filings, including the
Company's Proxy Statement, in whole or in part, the following Share Investment
Performance Graph and the Compensation Committee Report contained herein shall
not be incorporated by reference into any such filings.
Comparison of Five-Year Cumulative Total Return*
NYMAGIC, INC., Standard & Poors 500 And Value Line Insurance: Prop/Cas Index
(Performance Results Through 12/31/98)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Assumes $100 invested at the close of trading 12/93 in NYMAGIC, INC. common
stock, Standard & Poors 500 and Insurance: Prop/Cas
*Cumulative total return assumes reinvestment of dividends.
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NYMAGIC, INC. 100.00 73.66 69.78 75.50 117.67 90.00
Standard & Poors 500 100.00 101.60 139.71 172.18 229.65 294.87
Insurance:Prop/Cas 100.00 99.00 139.11 177.86 274.31 278.49
</TABLE>
(1) Based on information for a peer group of the Company's competitors as
obtained from and compiled by Value Line, Inc., which includes the
following companies: 20th Cent. Inds. Cal. (TW), Berkley W.R. Corp. (BKLY),
Chubb
14
<PAGE>
Corporation (CB), Cincinnati Financial Corp., (CINF), USF&G Corporation
(FG), Fremont General Corp. (FMT), Frontier Insurance Group (FTR), Gainsco
Inc. (GNA), General Reinsurance Corporation (GRN), Hartford Steam Boiler
(HSB), Orion Capital Corp. (OC), Ohio Casualty Corp. (OCAS), Progressive
Corp. Ohio (PGR), SAFECO Corporation (SAFC), Selective Insurance Group,
Inc. (SIGI), and St. Paul Insurance Co. (SPC), all of which were included
in the prior year's peer group. The following companies were added to the
peer group this year by Value Line, Inc.: Ace, Ltd. (ACL), Allmerical
Financial (AFC), Allstate Corp. (ALL), American Financial Group (AFG),
Hartford Financial (HIG), Market Corp. (MKL), Mercury General (MCY), NAC
Re. Corp. (NRC), Old Republic (ORI), and Transatlantic Holdings (TRH).
COMPENSATION COMMITTEE REPORT
Summary of Compensation Policies for Executive Officers
The Stock Option & Compensation Committee of the Board of Directors (the
"Committee") meets quarterly and reviews certain aspects of the Company's
compensation that affect executives and non-executives alike. The Committee's
review procedures for use during 1998 are summarized below.
o The Company develops compensation data for all employees utilizing national
and regional surveys for the insurance and brokerage industries. The
Company's executive positions including the positions of the Named
Executive Officers other than the former Chairman and the former President
were matched to comparable survey positions and compensation data. The
referenced surveys for the insurance and brokerage industries do not
disclose the identities of individual participants and survey data for
comparable executive positions is not generally available. The Committee
uses such survey data in connection with reviewing salaries on an
individual basis with the objective of providing each such officer with
sufficient compensation to cause them to maintain their continued
employment with the Company.
o The Committee reviewed the compensation levels of the former Chairman and
the former President in conjunction with the information developed from
industry surveys. The Committee, at the request of the former Chairman and
the former President, kept the salaries of these two executive officers
beneath the higher end of the median range of salaries indicated by the
compensation surveys. In light of the significant ownership position of the
former Chairman and the former President, the effect of their salaries in
maintaining their continued employment was not deemed to be as significant
as with the other executive officers. Additionally, the pricing pressures
which exist in the markets within which the Company competes adversely
impacted the Company's ability to show growth in earnings in 1998. It was
not deemed appropriate during this time period to increase the salaries of
these two executive officers towards the higher end of the median range of
salaries indicated by the compensation surveys. There were no specific
performance goals for these officers and no performance related
compensation incentives other than options.
o The Committee reviewed the compensation levels for executive officers
excluding the former Chairman and the former President within the context
of salary recommendations for such officers and the industry salary
information. The Committee does not utilize performance objectives for
executives and senior officers as such are deemed inappropriate for the
industry and markets within which the Company competes. Rather, the
Committee balanced the competitive marketplace pressures which might cause
an officer to leave the Company along with corporate needs in the context
of the recommendations of the former Chairman and the former President. The
Committee aims to maintain quality management without increasing the
Company's salary expense beyond the median range indicated by the
15
<PAGE>
compensation surveys. No specific relationship between corporate
performance for 1998 and each element of compensation was considered by the
Committee in determining executive compensation in general or the former
Chairman's and the former President's compensation in particular. Bonuses
are generally awarded based upon length of service and job
responsibilities.
o In connection with the review of executives and senior officers, the former
Chairman and the former President, from time to time, made recommendations
to the Committee with respect to the award or repricing of options pursuant
to the Company's Stock Option Plans. Through the use of options which vest
over a five to ten year period and a competitive base salary, the Committee
attempts to meet competitive marketplace pressures while at the same time
focusing long-term compensation gains for officers on areas which provide
similar benefits to non-employee shareholders. The options are awarded in a
quantity designed to be sufficient to provide each option recipient with an
incentive to maintain continued employment with the Company. In light of
their significant ownership position with the Company, the former Chairman
and the former President have not been awarded additional options for the
past six years. No outside factors other than comparative surveys were
considered by the Committee in determining each element of compensation. In
particular, the Committee did not consider the amounts of options
outstanding or previously granted or the aggregate size of current awards
in deciding to award additional options, although the repricing of previous
grants was taken into consideration.
John Kean, Jr., Chairman
William A. Thorne
Louise B. Tollefson
The Company has reviewed provisions of the Internal Revenue Code and
related regulations of the Internal Revenue Service which limit the
deductibility of executive compensation paid to the former Chairman and the
former President and each of the other three most highly compensated officers at
the end of any fiscal year to the extent such compensation exceeds $1,000,000 in
any year and does not qualify for an exception under the statute or proposed
regulations. The Committee does not believe that annual cash compensation will
be likely to exceed $1,000,000 for any executive officer in the foreseeable
future and has therefore concluded that no action with respect to qualifying
such compensation for deductibility was necessary at this time. The Committee
will continue to evaluate the advisability of qualifying the deductibility of
such compensation in the future.
Security Ownership of Certain
Beneficial Owners and Management
The following table sets forth information as of March 1, 1999, with
respect to beneficial ownership of NYMAGIC Common Stock by beneficial owners
known by the Company to own more than 5% of such stock, directors and nominees,
each officer named in the Summary Compensation Table, and all directors and
officers as a group. Except as described in the notes below, all owners listed
have power to vote and dispose of the shares held by them.
16
<PAGE>
Percent of
Amount and Nature Common Stock
Name of Ownership Outstanding
- ---- ------------ -----------
Dimensional Fund Advisors, Inc. 616,800 6.37%
1299 Ocean Avenue - 7th Floor
Santa Monica, CA 90401 90401
T. Rowe Price Associates, Inc. 1,012,700(6) 10.46%
100 East Pratt Street
Baltimore, Maryland 21202 21202
George F. Berg 2,000 *
John N. Blackman, Jr 2,010,996(1) 20.69%
Mark W. Blackman 1,962,674(2) 20.20%
Thomas J. Condon 960 *
Jean H. Goulding 22,460 *
John Kean, Jr 860 *
James A. Lambert 22,667(3) *
Charles A. Mitchell 10,700(3) *
William R. Scarbrough 960 *
Michael S. Shaffet 2,260(4) *
Richard T. Soper 860 *
William A. Thorne 33,260(4) *
Sergio B. Tobia 4,080 *
Louise B. Tollefson 3,860 *
Howard S. Tuthill, Trustee 1,814,611(7) 18.67%
--------- -----
All directors and officers as a
group (15 persons) 5,893,208(8) 60.62%
--------- -----
* Less than 1% of issued and outstanding Common Stock.
- --------------------------------------------------------------------------------
(1) Mr. Blackman is also the Trustee of trusts for the benefit of his minor
children which own, in total, 92,822 shares of the Company's Common Stock, which
shares are included herein.
(2) Trusts for the benefit of Mr. Blackman's children own, in total, 54,876
shares and his wife, Deborah, own 60,000 shares of the Company's Common Stock,
which shares are included herein.
(3) Of the shares shown as beneficially owned by the following individuals,
the amount listed next to each name include shares with respect to which options
are currently exercisable by that person: Mr. Mitchell -- 10,000, Mr. Berg --
2,000 and Mr. Lambert -- 21,667.
(4) Of the shares shown as beneficially owned by Mr. Thorne, 17,706 shares
are held by him individually and 16,200 shares are held by Mr. Thorne and his
wife as joint tenants. Of the shares shown as beneficially owned by Mr. Shaffet,
1,400 are held individually by his wife.
(5) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of 616,800 shares of
NYMAGIC, INC. stock as of December 31, 1998, all of which shares are held in
portfolios of DFA Investment Dimensions Group, Inc., a registered open-end
investment company, or in series of the DFA Investment Trust Company, a Delaware
business trust, or the DFA Group Trust and DFA Participation Group Trust,
investment vehicles for qualified employee benefit plans, all of which
Dimensional Fund Advisors, Inc. serves as investment manager. Dimensional
disclaims beneficial ownership of all such shares.
17
<PAGE>
- --------------------------------------------------------------------------------
Footnotes continued
(6) T. Rowe Price Associates, Inc. has filed a report on Schedule 13G
disclosing beneficial ownership of 1,012,000 shares in total. T. Rowe Price
Associates, Inc. beneficially owns 512,700 and T. Rowe Price Small Cap Value
Fund, Inc. 500,000.
(7) Howard S. Tuthill, as Trustee of the Louise B. Tollefson Florida
Intangible Tax Trust, of which Ms. Tollefson is the beneficiary, has filed a
report on Schedule 13D disclosing ownership of 1,814,611 shares of Common Stock
in connection with certain aspects of estate and tax planning for Louise B.
Tollefson.
(8) Of the 5,893,208 shares indicated as beneficially owned by all
directors and officers as a group, 33,667 are shares reserved for issuance
pursuant to currently exercisable options. See "Compensation and Other
Information-Stock Option Plans." These shares are included in the total number
of outstanding shares for the purpose of determining the percentage of Common
Stock beneficially owned by all directors and officers as a group.
Certain Transactions
The Company made annual charitable donations to the John N. Blackman, Sr.
Foundation (the "Foundation") in the amount of approximately $240,000 in 1998
and $480,000 in each of 1997 and 1996. The Foundation was established by Mr.
John N. Blackman, Sr., the founder of the Company, shortly before his death in
1988. The Foundation supports numerous charities with a primary emphasis on
those charities assisting the indigent, disabled or disadvantaged. The
Foundation is managed by Mr. John N. Blackman, Jr. and Mr. Mark W. Blackman, who
donate their time and receive no form of remuneration from the Foundation.
Proposal No. 2: Selection of Independent Public Accountants
KPMG Peat Marwick LLP, the independent accountant engaged as the principal
accountant to audit the Company's financial statements for the fiscal year
ending December 31, 1998, has been extended an offer to continue as the
Company's independent accountant for the fiscal year ending December 31, 1999.
The Company's Board of Directors, following the recommendations of the Audit
Committee, recommends that shareholders approve the selection of KPMG Peat
Marwick LLP as the Company's independent accountant for the fiscal year ending
December 31, 1999.
THE BOARD RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
Representatives of KPMG Peat Marwick LLP will be present at the Annual
Meeting and will be given an opportunity to make a statement, if they so desire,
and to respond to appropriate questions.
Other Matters
NYMAGIC knows of no matters other than those described above that may come
before the Annual Meeting. As to other matters, if any, that properly may come
before the Annual Meeting, NYMAGIC intends that proxies in the accompanying form
will be voted in respect thereof in accordance with the judgment of the person
or persons voting the proxies.
18
<PAGE>
Last Date of Submission of Shareholder Proposals and Additional Information
Shareholder proposals intended to be presented at NYMAGIC's Annual Meeting
to be held on May 9, 2000, must be received by NYMAGIC no later than December
14, 1999, and must satisfy the conditions set by the SEC for shareholder
proposals to be included in the Proxy Statement and form of Proxy for that
meeting.
NYMAGIC, INC.
Laura Moreno
Assistant Secretary
19
