<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
DELPHI FINANCIAL GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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 its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[LOGO]
April 11, 1997
Dear Stockholder,
It is a pleasure to invite you to Delphi Financial Group, Inc.'s 1997 Annual
Meeting of Stockholders, to be held on May 13, 1997 at the Metropolitan Club,
One East 60th Street, New York, New York, commencing at 10:00 a.m., Eastern
Daylight Time. We hope that you will be able to attend and review the year
with us.
Whether or not you plan to attend the meeting, please exercise your right to
vote as an owner of Delphi Financial Group, Inc. Review the proxy materials
and then mark your votes on the enclosed proxy card and return it in the
envelope provided as soon as possible.
At the meeting the stockholders will be electing directors and considering and
voting upon a proposed amendment to the Restated Certificate of Incorporation
of the Company, the adoptions of the Second Amended and Restated Employee
Stock Option Plan and the Amended and Restated Directors Stock Option Plan and
the establishment of the Long-Term Performance-Based Incentive Plan, each as
described in the formal Notice of Annual Meeting of Stockholders and Proxy
Statement enclosed herewith. We will also report on the progress of Delphi
Financial Group, Inc. and respond to questions posed by stockholders.
We look forward to seeing you at the Annual Meeting.
Sincerely,
Robert Rosenkranz
Chairman of the Board
<PAGE> 3
DELPHI FINANCIAL GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 13, 1997
To the Stockholders of Delphi Financial Group, Inc.:
Notice is hereby given that the 1997 Annual Meeting of Stockholders of Delphi
Financial Group, Inc. will be held at the Metropolitan Club, One East 60th
Street, New York, New York on May 13, 1997, commencing at 10:00 a.m., Eastern
Daylight Time, for the following purposes:
1. To elect eight directors to serve for a term of one year, one
of whom shall be elected by the holders of the Class A Common
Stock, voting as a separate class.
2. To consider and vote upon a proposed amendment to the Restated
Certificate of Incorporation of the Company to limit the
voting rights of the Class B Common Stock as described herein
and permit the issuance of additional shares of Class B Common
Stock pursuant to the Long-Term Performance-Based Incentive
Plan as described herein.
3. To consider and vote upon the adoption of the Second Amended
and Restated Employee Stock Option Plan as described herein.
4. To consider and vote upon the adoption of the Amended and
Restated Directors Stock Option Plan as described herein.
5. To consider and vote upon the establishment of the Long-Term
Performance-Based Incentive Plan as described herein.
6. To transact such other business that properly comes before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 20, 1997 as the
record date for stockholders entitled to notice of and to vote at the meeting
or any adjournment of the meeting. The list of stockholders entitled to vote
at the meeting shall be available at the offices of Delphi Capital Management,
Inc., 650 Madison Avenue, Suite 2600, New York, New York for a period of ten
days prior to the meeting date.
A copy of Delphi Financial Group, Inc.'s 1996 Annual Report, including its
Annual Report on Form 10-K for the fiscal year ended December 31, 1996, has
previously been mailed to stockholders receiving this notice.
Your attendance at this meeting is very much desired. However, whether or not
you plan to attend the meeting, please sign the enclosed Proxy and return it in
the enclosed envelope. If you attend the meeting, you may revoke the Proxy and
vote in person.
By Order of the Board of Directors,
Robert Rosenkranz
Chairman of the Board
<PAGE> 4
DELPHI FINANCIAL GROUP, INC.
1105 NORTH MARKET STREET, SUITE 1230, WILMINGTON, DE 19899
PROXY STATEMENT
This Proxy Statement is furnished for the solicitation by the Board of
Directors (the "Board of Directors" or the "Board") of Proxies for the Annual
Meeting of Stockholders of Delphi Financial Group, Inc., a Delaware corporation
(the "Company"), scheduled to be held on May 13, 1997 at the Metropolitan Club,
One East 60th Street, New York, New York commencing at 10 a.m., Eastern
Daylight Time. The submission of a signed Proxy will not affect the
stockholder's right to attend the meeting and vote in person. Any person
giving a Proxy may revoke it at any time before it is exercised by the delivery
of a later dated signed Proxy or written revocation sent to the Investor
Relations Department of the Company, or by attending the Annual Meeting and
voting in person.
Other than the matters set forth herein, management of the Company is not aware
of any matters that may come before the meeting. If any other business should
properly come before the meeting, the persons named in the enclosed Proxy will
have discretionary authority to vote the shares represented by the effective
Proxies and intend to vote them in accordance with their best judgment in the
interests of the Company. Management of the Company will consider any requests
from stockholders which are submitted in advance to the Investor Relations
Department.
The Company's 1996 Annual Report, including its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, has previously been mailed to each
stockholder of record as of the close of business on March 20, 1997.
MAILING AND VOTING OF PROXIES
This Proxy Statement and the enclosed Proxy were first mailed to stockholders
on or about April 11, 1997. Properly executed Proxies, timely returned, will
be voted and, where the person solicited specifies by means of a ballot a
choice with respect to the election of the nominees chosen by the Board, the
shares will be voted as indicated by the stockholder. Each share of the
Company's Class A Common Stock, par value $.01 per share (the "Class A Common
Stock"), entitles the holder thereof to one vote and each share of the
Company's Class B Common Stock, par value $.01 per share (the "Class B Common
Stock" and, together with the Class A Common Stock, the "Common Stock"),
entitles the holder thereof to ten votes. Proposals submitted to a vote of
stockholders will be voted on by holders of Class A Common Stock and Class B
Common Stock voting together as a single class, except that holders of Class A
Common Stock will vote as a separate class to elect one director (the "Class A
Director") and that the holders of the Class B Common Stock will also be
entitled to vote separately as a class with respect to the proposed amendment
to the Company's Restated Certificate of Incorporation. If the person
solicited does not specify a choice with respect to the election of any
nominee, the shares will be voted "for" such nominee.
As of March 20, 1997, Rosenkranz & Company, through ownership of shares of the
Company's Class B Common Stock, has a 29% equity interest in the Company, which
represents 70% of the combined voting power of the Company's Common Stock. In
addition, Mr. Robert Rosenkranz, the beneficial owner of the
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<PAGE> 5
corporate general partner of Rosenkranz & Company, holds an irrevocable proxy
to vote or has direct or beneficial ownership of additional shares of Class B
Common Stock representing a 14% voting interest in the Company as of March 20,
1997. Rosenkranz & Company has informed the Company that it intends to vote in
favor of the election of all nominated directors for which it is entitled to
vote, but has agreed to limit its vote for the election of directors as if the
proposed amendment to the Company's Restated Certificate of Incorporation had
been adopted, i.e., to 49.9% of the combined voting power of the Company's
stockholders. In addition, Rosenkranz & Company has informed the Company that
it intends to vote in favor of the adoptions of the Second Amended and Restated
Employee Stock Option Plan (the "Restated Employee Plan") and the Amended and
Restated Directors Stock Option Plan (the "Restated Directors Plan") and the
establishment of the Long-Term Performance-Based Incentive Plan (the "Incentive
Plan"). Accordingly, the adoptions of the Restated Employee Plan and the
Restated Directors Plan and the establishment of the Incentive Plan will be
approved at the Annual Meeting. Rosenkranz & Company has also informed the
Company that it currently intends to vote in favor of the proposal to amend the
Company's Restated Certificate of Incorporation to limit the voting rights of
the Class B Common Stock as described herein and permit the issuance of
additional shares of Class B Common Stock in accordance with the terms of the
Incentive Plan, but reserves the right to vote otherwise. Proxies marked as
abstaining (including proxies containing broker non-votes) on any matter to be
acted upon by stockholders will be treated as present at the meeting for
purposes of determining a quorum but will not be counted as votes cast on such
matters.
SOLICITATION OF PROXIES
The cost of soliciting Proxies will be borne by the Company. It is expected
that the solicitation of Proxies will be primarily by mail. Proxies may also
be solicited by officers and employees of the Company, at no additional cost to
the Company, in person or by telephone, telegram or other means of
communication. Upon written request, the Company will reimburse custodians,
nominees and fiduciaries holding the Company's Common Stock for their
reasonable expenses in sending proxy materials to beneficial owners and
obtaining their Proxies.
STOCKHOLDERS ENTITLED TO VOTE AND SHARES OUTSTANDING
Holders of record of Common Stock at the close of business on March 20, 1997
will be eligible to vote at the meeting. The Company's stock transfer books
will not be closed. As of the close of business on March 20, 1997, the Company
had outstanding 11,884,020 shares of Class A Common Stock and 6,258,944 shares
of Class B Common Stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of shares of Common Stock by each of the Company's directors and
executive officers, each person known by the Company to own beneficially more
than five percent of the Company's Common Stock and all directors and officers
of the Company as a group as of March 20, 1997. The information shown assumes
the exercise by each person (or all directors and officers as a group) of the
stock options owned by such person and the exercise by no other person (or
group) of stock options. Unless otherwise indicated, each beneficial owner
listed below is believed by the Company to own the indicated shares directly
and have sole voting and dispositive power with respect thereto.
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<TABLE>
<CAPTION>
Amount and
Nature of Percent
Name of Beneficial Owner Ownership of Class
- ------------------------ --------- --------
<S> <C> <C>
Class B Common Stock -
Five or greater percent owner:
Rosenkranz & Company . . . . . . . . . . . . . . . . . . . . 5,202,944 (1) 83.1%
Directors and Executive Officers:
Robert Rosenkranz . . . . . . . . . . . . . . . . . . . . . 6,258,944 (1) 100.0%
Christopher A. Fazzini . . . . . . . . . . . . . . . . . . . - -
Edward A. Fox . . . . . . . . . . . . . . . . . . . . . . . - -
Charles P. O'Brien . . . . . . . . . . . . . . . . . . . . . - -
Lewis S. Ranieri . . . . . . . . . . . . . . . . . . . . . . - -
Thomas L. Rhodes . . . . . . . . . . . . . . . . . . . . . . - -
Robert M. Smith, Jr. . . . . . . . . . . . . . . . . . . . . - -
Thomas A. Sullivan . . . . . . . . . . . . . . . . . . . . . - -
B.K. Werner . . . . . . . . . . . . . . . . . . . . . . . . - -
Directors and officers as a group (13 persons) . . . . . . . 6,258,944 100.0%
Class A Common Stock -
Five or greater percent owners . . . . . . . . . . . . . . . . - -
Directors and Executive Officers:
B.K. Werner . . . . . . . . . . . . . . . . . . . . . . . . 698,496 (2) 5.6%
Robert Rosenkranz . . . . . . . . . . . . . . . . . . . . . 289,000 (1) 2.3%
Charles P. O'Brien . . . . . . . . . . . . . . . . . . . . . 268,084 (3) 2.1%
Thomas A. Sullivan . . . . . . . . . . . . . . . . . . . . . 46,334 (4) *
Robert M. Smith, Jr. . . . . . . . . . . . . . . . . . . . . 42,288 (5) *
Edward A. Fox . . . . . . . . . . . . . . . . . . . . . . . 22,920 (6) *
Christopher A. Fazzini . . . . . . . . . . . . . . . . . . . 4,464 (4) *
Lewis S. Ranieri . . . . . . . . . . . . . . . . . . . . . . 4,200 (7) *
Thomas L. Rhodes . . . . . . . . . . . . . . . . . . . . . . 1,560 (7) *
Directors and officers as a group (13 persons) . . . . . . . 1,531,457 (8) 12.2%
</TABLE>
* Amount is less than 1% of Class.
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(1) Mr. Rosenkranz, as the beneficial owner of the corporate general
partner of Rosenkranz & Company, has the power to vote the shares of
Class B Common Stock held by Rosenkranz & Company. Accordingly, Mr.
Rosenkranz may be deemed to be the beneficial owner of all of the
shares of the Company owned by Rosenkranz & Company. In addition, Mr.
Rosenkranz holds an irrevocable proxy to vote or has direct or
beneficial ownership of 1,056,000 additional shares of Class B Common
Stock and 1,000 shares of Class A Common Stock. The remaining
indicated shares of Class A Common Stock represent the 1996 award
under the Incentive Plan of 72,000 deferred shares and 216,000 shares
which may be acquired pursuant to stock options, which award is
subject to the approval by the stockholders of the Company of such
plan. The address of Rosenkranz & Company and Mr. Rosenkranz is 650
Madison Avenue, Suite 2600, New York, NY 10022.
(2) Each of Mr. Werner and The Werner Partnership, LP, of which Mr. Werner
is the general partner, may be deemed to beneficially own the
indicated shares and have shared voting and dispositive power with
respect to such shares. Mr. Werner's address is c/o Safety National
Casualty Corporation, 2043 Woodland Parkway, St. Louis, MO 63146.
(3) Of the indicated shares of Class A Common Stock, 2,400 shares are
presently owned by Mr. O'Brien. The remaining shares indicated may be
acquired pursuant to currently exercisable stock options. The address
of Mr. O'Brien is c/o Reliance Standard Life Insurance Company, 2501
Parkway, Philadelphia, PA 19130.
(4) All of the indicated shares of Class A Common Stock are presently
owned. The address of Mr. Sullivan is c/o Delphi Capital Management,
Inc., 650 Madison Avenue, Suite 2600, New York, NY 10022. The
address of Mr. Fazzini is c/o Reliance Standard Life Insurance
Company, 2501 Parkway, Philadelphia, PA 19130.
(5) Of the indicated shares of Class A Common Stock, 1,600 shares are
presently owned by Mr. Smith. The remaining shares indicated may be
acquired pursuant to stock options within 60 days. Mr. Smith's
address is c/o Delphi Capital Management, Inc., 650 Madison Avenue,
Suite 2600, New York, NY 10022.
(6) Of the indicated shares of Class A Common Stock, 18,000 shares are
presently owned by Mr. Fox. The remaining shares indicated may be
acquired pursuant to stock options within 60 days. Mr. Fox's address
is R.R. 67-15, Harborside, ME 04642.
(7) None of the indicated shares of Class A Common Stock are presently
owned, but they may be acquired pursuant to stock options within 60
days. Mr. Ranieri's address is c/o Ranieri & Co., Inc., 50 Charles
Lindbergh Blvd., Suite 500, Uniondale, NY 11553. Mr. Rhodes' address
is c/o National Review, 150 East 35th Street, New York, NY 10016.
(8) Includes 684,679 shares of Class A Common Stock which may be acquired
pursuant to stock options within 60 days.
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ELECTION OF DIRECTORS
The Board of Directors consists of eight members, each of whom are elected
annually to serve until their successors have been elected and qualified, or
they have resigned or been removed from office. The Company's Restated
Certificate of Incorporation provides that the holders of Class A Common Stock
are entitled to vote as a separate class to elect the Class A Director so long
as the outstanding shares of Class A Common Stock represent at least 10% of the
aggregate number of outstanding shares of the Company's Class A and Class B
Common Stock. As of the date of this Proxy Statement, this condition continues
to be satisfied. Mr. Rhodes was elected by the holders of the Class A Common
Stock in 1996 as the Class A Director, and the Board of Directors has
unanimously recommended Mr. Rhodes for reelection as the Class A Director.
It is intended that the shares of Common Stock represented by Proxies will be
voted "for" the election of all such nominees unless a contrary direction is
indicated on the Proxy. While it is not expected that any of the nominees will
be unable to qualify for or accept office, if for any reason any nominee shall
be unable to do so, Proxies that would otherwise have been voted "for" such
nominee will instead be voted "for" a substitute nominee selected by the Board.
Nominees for Director
The following sets forth information as to each nominee for election at the
1997 Annual Meeting, including his age, positions with the Company, length of
service as a director of the Company, other directorships currently held, if
any, principal occupations and employment during the past five years and other
business experience.
Robert Rosenkranz, 54, has served as the President and Chief Executive Officer
of the Company since May 1987 and has served as Chairman of the Board of
Directors of the Company since April 1989. He is also Chairman of the Board of
Reliance Standard Life Insurance Company ("RSLIC"), First Reliance Standard
Life Insurance Company ("FRSLIC") and Reliance Standard Life Insurance Company
of Texas ("RSLIC-Texas") and serves on the Board of Directors of Safety
National Casualty Corporation ("SNCC"). Mr. Rosenkranz has served since
October 1978 as either sole or managing general partner of Rosenkranz & Company
or as beneficial owner of its corporate general partner.
Robert M. Smith, Jr., 45, commenced employment with the Company in March 1994
and has served as Vice President of the Company since July 1994 and as a
director of the Company since January 1995. Mr. Smith has also served as Vice
President of Delphi Capital Management, Inc. ("DCM") and as a director of
RSLIC, FRSLIC and RSLIC-Texas since July 1994 and as a director of SNCC since
March 1996. Prior to March 1994, Mr. Smith was Director, Investment Banking
for Merrill Lynch & Company in New York, NY.
Edward A. Fox, 60, has served as a director of the Company since March 1990.
From May 1990 until September 1994, Mr. Fox was the Dean of the Amos Tuck
School of Business Administration at Dartmouth College. From April 1973 until
May 1990, Mr. Fox was President and Chief Executive Officer of the Student Loan
Marketing Association.
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<PAGE> 8
Charles P. O'Brien, 60, has served as a director of the Company since November
1987. Since August 1976, Mr. O'Brien has served as President, Chief Executive
Officer and a director of RSLIC. Mr. O'Brien also serves as President and
Chief Executive Officer and a director of FRSLIC and RSLIC-Texas and as a
director of SNCC.
Lewis S. Ranieri, 50, has served as a director of the Company since July 1992.
Mr. Ranieri is currently Chairman and Chief Executive Officer of Ranieri & Co.,
Inc. and oversees Hyperion Partners L.P. and Hyperion Partners II L.P.
(collectively "Hyperion"), funds created to invest in the financial services,
housing and real estate industries. As part of his responsibilities with
Hyperion, Mr. Ranieri serves as Chairman of Hyperion Capital Management, a New
York-based money management firm specializing in mortgage-backed securities, as
Chairman, Director and/or Trustee of several investment companies advised by
Hyperion Capital Management, Inc., and as Chairman and a director of Bank
United Corp. and a director of Bank United, a Houston-based savings and loan
institution. Mr. Ranieri also serves on the compensation committee for both
Bank United entities.
Thomas A. Sullivan, 56, has served as a director of the Company since July
1991. He became President of DCM and a limited partner in Rosenkranz & Company
in July 1991. Prior to that, he served as Chief Investment Officer of DCM from
January 1990 to July 1991, and in that capacity with the Company from November
1987 to December 1989.
B.K. Werner, 63, was elected as a director of the Company upon the merger with
SIG Holdings, Inc. in March 1996. He has served as Chairman of the Board of
SNCC since June 1987 and as Chief Executive Officer of SNCC since June 1990.
Mr. Werner has served as a director of and has been employed in various
capacities by SNCC since 1959.
Nominee for Class A Director
Thomas L. Rhodes, 57, has served as a director of the Company since May 1995.
He has been President of National Review since November 1992, where he has also
served as a director since 1988. From 1987 to November 1992, Mr. Rhodes was a
Partner of Goldman, Sachs & Co., New York, NY. Mr. Rhodes is Co-Chairman,
Co-Chief Executive Officer and Co-Manager of Financial Asset Management LLC,
Co-Chairman and Co-Chief Executive Officer of Asset Investors Corporation and
Co-Chairman and Co-Chief Executive Officer of Commercial Assets, Inc. Mr.
Rhodes also serves as a director of Apartment Investment and Management
Company, director of The Lynde and Harry Bradley Foundation, trustee of The
Heritage Foundation and trustee of Reserve Special Portfolio Trusts.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee is responsible for reviewing the activities of the
Company's independent accountants and internal audit department. The
committee, whose membership consists of Messrs. Fox and Rhodes, held four
meetings during 1996. The Board of Directors does not have a nominating
committee.
The Stock Option and Compensation Committee (the "Committee") is responsible
for reviewing and approving all grants of stock options to employees and
reviewing and approving compensation arrangements for certain employees of the
Company and its subsidiaries. The Committee's membership consists of Messrs.
Fox and Rhodes.
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DIRECTORS' ATTENDANCE
The Board of Directors held five meetings during 1996. Each incumbent director
attended at least 75% of the aggregate of (i) the total number of meetings held
during the period for which such incumbent was a director, and (ii) the total
number of meetings held by all committees of the Board of Directors on which
such incumbent served, with the exception of Mr. Ranieri who attended 71% of
the meetings.
DIRECTOR COMPENSATION
The Company paid its directors who are not officers or employees of Rosenkranz
& Company, the Company, or any of the Company's affiliates (each, an "outside
director") annual compensation of $20,000 (the "Annual Retainer") and a fee of
$750 plus expenses for each Board of Directors or committee meeting attended in
1996.
In addition, under the Company's Directors Stock Option Plan, as more fully
described under "Proposal to Adopt the Amended and Restated Directors Stock
Option Plan," options to purchase a total of 11,400 shares of the Company's
Class A Common Stock were granted to the outside directors subsequent to the
1996 Annual Meeting of Stockholders at an exercise price of $23.96, which are
reflected in the "Security Ownership of Certain Beneficial Owners and
Management" table. At the 1997 Annual Meeting, stockholders will consider and
vote upon the Restated Directors Plan, which, in addition to the option grants
presently made annually thereunder, will also provide for an annual option
grant to each outside director in lieu of the Annual Retainer unless an
election to the contrary is made by the director. See "Proposal to Adopt the
Amended and Restated Directors Stock Option Plan."
PROPOSAL TO AUTHORIZE AN AMENDMENT TO THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION TO LIMIT THE
VOTING RIGHTS OF THE CLASS B COMMON STOCK
The Company's Restated Certificate of Incorporation currently provides that
every holder of Class B Common Stock is entitled to 10 votes for each share of
Class B Common Stock owned of record by such holder on all matters subject to
vote at any meeting of stockholders (other than the election of the Class A
Director), and every holder of Class A Common Stock is entitled to one vote for
each share of Class A Common Stock owned of record by such holder on all such
matters. The Restated Certificate of Incorporation also currently provides that
no additional shares of Class B Common Stock may be issued except (i) in
payment of stock dividends on outstanding shares of Class B Common Stock, (ii)
in connection with a stock split or reclassification of outstanding shares of
Class B Common Stock or (iii) upon exercise of certain options outstanding
immediately prior to the reclassificiation of the Company's common stock in
1990 into the Class A Common Stock and the Class B Common Stock.
The Company has been advised by its independent auditors that, under generally
accepted accounting principles ("GAAP"), because Rosenkranz & Company has more
than 50% of the voting power of the Common Stock, the Company may not be
considered to be autonomous for purposes of the requirements relating to
"pooling of interests" accounting, and therefore may not be able to account for
any business combination in this manner. Further, the Company has been advised
that, under these requirements, when a corporation (such as the Company) that
has two classes of common stock with different voting rights issues shares of
its common stock as consideration in a business combination, the shares issued
must be of the same class as the class of shares representing the majority of
the combined voting power of both classes of the corporation's common stock in
order for the business combination to be treated as a "pooling of interests"
under GAAP. Consequently, so long as the outstanding shares of Class B Common
Stock represent a majority of the combined voting power of the Company's
stockholders, in the event the Company were to issue
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Common Stock as consideration in any business combination, the Company would be
required to issue shares of Class B Common Stock in order to account for such
business combination as a pooling of interests under GAAP. The Company
currently would not be able to issue Class A Common Stock in a business
combination and account for such business combination as a pooling of
interests.
The Company believes that it would be in the best interests of its stockholders
for the Company to have the ability, where appropriate, to account for future
business combinations under the pooling of interests method. In contrast to
purchase accounting, the pooling of interests method generally does not result
in the creation of intangible assets such as goodwill, the amortization of
which is typically dilutive to reported earnings. Although the Company from
time to time considers business combination opportunities, as of the date of
this Proxy Statement it has no plans or commitments relating to any
transactions for which it would seek pooling of interests accounting.
In order to enhance the Company's ability to utilize the pooling of interest
accounting method for a business combination where deemed appropriate, and to
permit the issuance of shares of Class A Common Stock as consideration in such
a business combination, the Board of Directors has approved an amendment (the
"Amendment") to the Company's Restated Certificate of Incorporation to provide
that (1) the number of votes per share of Class B Common Stock be limited to
the lesser of such number of votes as would give the aggregate of all
outstanding shares of Class B Common Stock 49.9% of the combined voting power
of the Common Stock or 10 votes and (2) additional shares of Class B Common
Stock may be issued from time to time pursuant to the Incentive Plan, and has
proposed the Amendment for stockholder approval.
DESCRIPTION OF THE AMENDMENT
If the Amendment is approved by the Company's stockholders and is filed with
the Secretary of State of the State of Delaware, the Company's Restated
Certificate of Incorporation would provide that (A) a holder of record of Class
B Common Stock will be entitled to a number of votes per share equal to the
lesser of (1) the number of votes (with each share of Class B Common Stock
having the same number of votes as each other share of Class B Common Stock)
such that the aggregate of all outstanding shares of Class B Common Stock will
be entitled to cast 49.9% of all of the votes represented by the aggregate of
all outstanding shares of Class A Common Stock and Class B Common Stock or (2)
10 votes (except that, if there is no Class A Common Stock outstanding, clause
(1) above will not apply) and (B) additional shares of Class B Common Stock may
be issued from time to time pursuant to the Incentive Plan, as it may be
amended from time to time in accordance with its terms. All other provisions
of the Company's Restated Certificate of Incorporation will remain unchanged,
including the provision that a holder of Class A Common Stock is entitled to
one vote for each share of Class A Common Stock owned of record. The initial
effect of the Amendment would be to reduce the voting power of the Class B
Common Stock from 10 votes per share to approximately 1.89 votes per share
(calculated based on shares outstanding as of the record date), representing
49.9% of the combined voting power of the Company's stockholders and to permit
shares of Class B Common Stock to be issued pursuant to the Incentive Plan.
STOCKHOLDER VOTE REQUIRED
The authorization of the Amendment requires both (1) the affirmative vote of
the holders of a majority of the outstanding shares of the Company's Class A
Common Stock and Class B Common Stock present in person or represented by proxy
and entitled to vote, voting together as a single class, with the holder of
Class A Common Stock having one vote per share and the holders of Class B
Common Stock having ten votes per share, (2) the affirmative vote of the
holders of a majority of the outstanding shares of the Company's Class A Common
Stock present in person or represented by proxy and entitled to vote, voting as
a class and (3) the affirmative vote of the holders of a majority of the
outstanding shares of the Company's Class B Common Stock present in person or
represented by proxy and entitled to vote, voting as a class.
-7-
<PAGE> 11
It is intended that the shares of Common Stock represented by Proxies will be
voted "for" the resolution authorizing the Amendment unless a contrary
direction is indicated on the Proxy.
EFFECTIVENESS OF THE AMENDMENT
The Amendment will become effective upon filing with the Secretary of State of
the State of Delaware. Stockholders should be aware that, notwithstanding the
authorization of the proposed Amendment by them, the Board of Directors may
abandon the proposed Amendment without further action by the stockholders of
the Company at any time prior to the filing of the proposed Amendment with the
Secretary of State and may do so, among other reasons, depending on the outcome
of certain discussions currently under way between the Company and its
independent auditors regarding the accounting treatment of business
combinations such as those described above.
PROPOSAL TO ADOPT THE SECOND AMENDED AND RESTATED
EMPLOYEE OPTION PLAN
The Amended and Restated Option Plan (the "Option Plan") is administered by the
Committee and provides for the granting of nonqualified stock options to key
employees of the Company and its subsidiaries. As the authority to grant
awards under the Option Plan expires in 1997 and the Company intends to
continue its practice of granting stock options to key employees as a means of
incentive compensation, it is necessary to amend and readopt the Option Plan
pursuant to the Restated Employee Plan, which shall have a term of ten years.
The Company therefore intends to bring this matter to a vote of stockholders at
the Annual Meeting. See "Executive Compensation - Other Compensation Plans"
for a further description of the Option Plan.
The terms of the Restated Employee Plan are substantially similar to those of
the Option Plan; however, the Restated Employee Plan contains certain revisions
which are intended primarily to enhance flexibility in the administration of
the plan and the terms and conditions of the options awarded thereunder, and
thus to make the plan a more effective means for incentive compensation. Such
revisions, among other things, authorize the granting of options thereunder
that qualify as incentive stock options under Section 422 of the Internal
Revenue Code (the "Code"); make eligible as optionees non-employees who, in the
Committee's judgment, can make significant contributions to the Company's
long-term profitability and value; grant authority to the Committee to extend
the periods following termination of employment during which options may be
exercised; provide for the transferability of options to certain family members
and family entities in cases where the Committee so provides; provide that
option exercise prices may be paid in cash, in Company stock or other
acceptable consideration; limit the requirement of stockholder approval of
amendments to the Restated Employee Plan to circumstances where such approval
is required by law or by the rules of the New York Stock Exchange or other
applicable exchange; and add the term "Change of Ownership" (as defined
therein) to define those circumstances under which outstanding options may
become exercisable in full due to significant corporate transactions such as
mergers and consolidations in replacement of the existing provision of the
Option Plan
-8-
<PAGE> 12
which is applicable under such circumstances.
In addition, the Restated Employee Plan incorporates amendments made to the
Option Plan during 1996, including the incorporation of a limit on the number
of shares of Class A Common Stock as to which options can be granted thereunder
in any one calendar year to 500,000 (in order to satisfy one of the
requirements of Section 162(m) of the Code, which Code section is described in
the Report on Executive Compensation) and the reduction of the required number
of members of the committee administering the plan from three to two. Also,
the Restated Employee Plan reflects the adjustment of the number of shares of
Class A Common Stock available under the Option Plan from 1,650,000 to
1,980,000 that occurred pursuant to such plan's terms as a result of the 20%
stock dividend distributed by the Company in September 1996 (the "Stock
Dividend").
The full text of the Restated Employee Plan is attached hereto as Exhibit A, to
which the foregoing description is qualified by reference.
FEDERAL INCOME TAX CONSEQUENCES
Nonqualified Stock Options. No taxable income will be recognized by the
optionee upon the grant of nonqualified stock options. In general, the
optionee will recognize ordinary income in the year in which the options are
exercised equal to the excess of the fair market value of the shares received
at the date of exercise over the exercise price. The Company will be entitled
to a deduction equal to the amount of ordinary income recognized by the
optionee in connection with the exercise of the options. This deduction will in
general be allowed for the taxable year of the Company in which such ordinary
income is recognized by the optionee.
Incentive Stock Options. No taxable income will be recognized by the optionee
upon the grant of incentive stock options. When an optionee exercises an
incentive stock option while employed by the Company or, to the extent
permitted by the Code, within the period after termination of employment, no
ordinary income will be recognized by the optionee at that time, but the
excess, if any, of the fair market value of the shares acquired upon such
exercise over the option price will be an adjustment to taxable income for
purposes of the federal alternative minimum tax applicable to individuals. If
the shares acquired upon exercise by an optionee are not disposed of prior to
the expiration of one year after the date of transfer and two years after the
date of grant of the option, the excess, if any, of the sales proceeds over the
aggregate option price of such shares will treated as a long-term capital gain
by the optionee. The Company will not be entitled to any tax deduction with
respect to such gain. If the shares are disposed of by the optionee prior to
the expiration of such periods (a "disqualifying disposition"), the excess of
the fair market value of such shares at the time of exercise over the aggregate
option price (but not more than the gain on the disposition if the disposition
is a transaction on which a loss, if realized, would be recognized) will be
ordinary income to the optionee at the time of such disqualifying disposition
and the Company will be entitled to a tax deduction in a like amount. If an
incentive stock option is exercised by the optionee more than three months
after termination of employment (one year for disability), the tax consequences
are the same as described above for a nonqualified stock option.
It is intended that the shares of Common Stock represented by Proxies will be
voted "for" the proposed adoption of the Restated Employee Plan unless a
contrary direction is indicated on the Proxy.
-9-
<PAGE> 13
PROPOSAL TO ADOPT THE AMENDED AND RESTATED
DIRECTORS STOCK OPTION PLAN
Under the Directors Stock Option Plan (the "Directors Plan"), which was adopted
in 1994, on the day following the Company's Annual Meeting of Stockholders for
each year that the Directors Plan is in effect, each outside director then in
office is granted an option to purchase a number of shares of Class A Common
Stock determined pursuant to the following formula: number of option shares =
2,000 multiplied by [1+(.125 multiplied by the number of calendar years of
continuous service of such outside director to that point, including any
portion of a calendar year of service as a full year)]. Options granted become
exercisable in five equal annual installments, commencing on the first
anniversary of the date of the grant. The maximum term of an option granted
under the Directors Plan is ten years. The price per share upon the exercise
of an option is 100% of the fair market value of the Class A Common Stock on
the date of the grant. For this purpose, the fair market value on any such
date is the closing price per share of the Class A Common Stock, as reported
through the New York Stock Exchange for such date.
The Restated Directors Plan continues to provide for annual option grants on
these same terms. In addition, under such plan, an option will be granted to
each outside director to receive options to purchase Class A Common Stock in
lieu of the Annual Retainer for the period from the director's date of election
or reelection to the Board of Directors to the Company's next Annual Meeting of
Stockholders, unless such director elects in advance to receive the Annual
Retainer in cash for such period. Such options will be granted on the first
business day following the date on which such director is elected or reelected.
The number of shares of Class A Common Stock to which each such option will
relate will be equal to (a) three times the director's Annual Retainer for the
applicable period divided by (b) the fair market value of a share of Class A
Common Stock of the Company on the date of grant, and the exercise price will
be 100% of such fair market value on the date of grant. The options will
become exercisable in four equal 90-day installments and will expire ten years
from the date of grant. The number of options that an outside director may
receive in lieu of the Annual Retainer is dependent upon the time at which such
director is elected and the fair market value of the Class A Common Stock at
the date of grant and, as such, is not determinable.
The Directors Plan currently permits options to purchase up to 60,000 shares of
Class A Common Stock to be granted under the Directors Plan (taking into
account the adjustment that occurred in 1996 pursuant to such plan's terms as a
result of the Stock Dividend), of which options to purchase 28,800 shares have
been previously granted. In order to provide for a sufficient number of shares
of Class A Common Stock to be available for options under the two types of
option grants for which the Restated Directors Plan provides, and thus to
continue to enhance the Company's ability to attract and retain experienced and
knowledgeable individuals to serve as outside directors, it is desirable to
increase the number of shares available for such option grants to 120,000, as
provided in the Restated Directors Plan.
The other terms of the Restated Directors Plan are substantially similar to
those of the Directors Plan; however, the Restated Directors Plan contains
certain revisions which are intended primarily to enhance flexibility in the
administration of the plan and the terms and conditions of the options awarded
thereunder, and thus to make the plan a more effective means for incentive
compensation. Such revisions, among other things, provide for the
transferability of options to certain family members and family entities;
provide that option exercise prices may be paid in cash, Company stock or other
acceptable consideration; limit the requirement of stockholder approval of
amendments to the Restated Directors Plan to circumstances where such approval
-10-
<PAGE> 14
is required by law or by the rules of the New York Stock Exchange or other
applicable exchange; and add the term "Change of Ownership" (as defined
therein) to define those circumstances under which outstanding options may
become exercisable in full due to significant corporate transactions such as
mergers and consolidations in replacement of the existing provisions of the
Directors Plan applicable to such circumstances.
The full text of the Restated Directors Plan is attached hereto as Exhibit B,
to which the foregoing description is qualified by reference.
FEDERAL INCOME TAX CONSEQUENCES
As in the case of the annual option grants under the existing Directors Plan,
options to purchase Class A Common Stock granted in lieu of the Annual Retainer
will be treated as nonqualified stock options for federal income tax purposes.
See "Proposal to Adopt the Second Amended and Restated Employee Option Plan -
Federal Income Tax Consequences" for a description of the federal income tax
treatment of nonqualified stock options.
It is intended that the shares of Common Stock represented by Proxies will be
voted "for" the proposed adoption of the Restated Directors Plan unless a
contrary direction is indicated on the Proxy.
PROPOSAL TO ESTABLISH THE LONG-TERM PERFORMANCE-BASED
INCENTIVE PLAN
In 1996, the Committee adopted the Incentive Plan for Robert Rosenkranz, the
Chairman, President and Chief Executive Officer of the Company. The Incentive
Plan's purpose is to provide Mr. Rosenkranz with a compensation arrangement
that rewards him for significant gains in shareholders' wealth as measured by
the annual performance of the Company's Class A Common Stock, so long as such
performance surpasses that of the Standard & Poor's Corporation Insurance
Composite Index Total Return to Shareholders (the "S&P Insurance Index Total
Return").
Awards under the Incentive Plan are made and will continue to be made promptly
following the end of each Performance Period (as defined below) under the
Incentive Plan if and only if the Ending Stock Value (as defined below) of the
Company's Class A Common Stock exceeds the Beginning Stock Price (as defined
below) by an amount greater than the S&P Insurance Index Total Return over the
comparable period. The award is then determined as 2.5% of the amount by which
the Ending Market Value (as defined below) exceeds the Beginning Market Value
(as defined below). Expressed as a formula, the "Award Amount" = (Ending
Market Value minus Beginning Market Value) multiplied by .025. The
"Performance Period" is the calendar year, except that if an award is not made
under the plan for any calendar year, the next Performance Period will include
all calendar years following the last calendar year for which an award was so
made.
The Incentive Plan provides that 50% of the Award Amount, if earned, will be
paid in the form of restricted or deferred shares of Class A Common Stock, with
the number of such shares determined by dividing 50% of the Award Amount by the
average closing price of the Class A Common Stock during the twenty trading
days commencing nine trading days prior to the last trading day of the relevant
period (the "Ending Stock
-11-
<PAGE> 15
Price"). The remainder of the award will be paid in options to purchase shares
of Class A Common Stock having an exercise price equal to 100% of the fair
market value of a share of the Class A Common Stock on the date of grant. Such
options become exercisable in full thirty days following the date of the grant
and have a ten-year term. The number of shares subject to such options is
determined by dividing 50% of the Award Amount by the Ending Stock Price and
multiplying that amount by three. This formula reflects a general standard of
valuation indicating that, across a broad number of companies, stock options
with a 10-year term are worth approximately one-third of the market value of
the underlying stock on the date of grant. However, regardless of the Award
Amount for any Performance Period, the Incentive Plan limits, as to any
calendar year, the number of restricted or deferred shares of Class A Common
Stock which may be awarded to 72,000, and limits the number of shares of Class
A Common Stock as to which options may be granted to 216,000, plus the
"Carryover Amount." The "Carryover Amount" consists of the cumulative amounts
of such restricted or deferred shares and options which, in each year since the
inception of the Incentive Plan, would have been eligible for award in
conformity with such limits, but were not awarded. Any Award Amounts which do
not result in awards of restricted or deferred shares or options due to the
aforementioned limits may be applied to increase the Award Amount in any
subsequent Performance Period in which the Ending Stock Value exceeds the
Beginning Stock Price by an amount greater than the S&P Insurance Index Total
Return for such Performance Period (subject, in all events, to the per-year
share and option award limits referenced above).
"Beginning Market Value" for a Performance Period means the average closing
price of the Company's Class A Common Stock for each of the twenty trading days
commencing ten trading days prior to the first trading day of such period (the
"Beginning Stock Price") multiplied by the number of shares of Common Stock
outstanding on the first day of such period, including for such purpose shares
of Class A Common Stock subject to acquisition under the options assumed by the
Company in connection with the merger with SIG Holdings, Inc. in March 1996
(the "SIG Option Shares").
"Ending Market Value" for a Performance Period means the Ending Stock Price
multiplied by the number of shares of Common Stock outstanding on the last day
of the Performance Period, including for such purpose the SIG Option Shares.
The Ending Market Value also includes an adjustment for any cash dividends paid
during such period, assuming such dividends have been reinvested in Common
Stock on the date paid to shareholders using the methodology consistent with
the determination of the S&P Insurance Index Total Return.
The first award under the Incentive Plan relates to calendar year 1996.
Thereafter, awards earned under the terms of the plan, if any, will be made for
each subsequent Performance Period until the Incentive Plan terminates on
December 31, 2007. Under the Incentive Plan, upon approval of such plan by
the stockholders of the Company, the awards to Mr. Rosenkranz of the maximum
amounts of 72,000 deferred shares of Class A Common Stock and options to
acquire 216,000 shares of Class A Common Stock at an exercise price of $31.125
per share for calendar year 1996 will become effective. In addition, because,
under the aforementioned limits on awards of restricted or deferred shares and
options in any one year, a portion of the 1996 Award Amount equal to
approximately $3.4 million did not result in such awards, such amount will be
applied to increase Award Amounts earned in future Performance Periods, if any,
in the manner described above. Since it is not known if the performance of the
Class A Common Stock as measured under the Incentive Plan will exceed that of
the S&P Insurance Index Total Return in any Performance Period under the
Incentive Plan, the actual number of shares and options to acquire shares to be
issued under the Incentive Plan in any future Performance Period is not yet
determinable.
-12-
<PAGE> 16
If Mr. Rosenkranz's employment terminates during a Performance Period, he will
be entitled to an award under the Incentive Plan based on the performance of
the Company's Class A Common Stock if it surpasses the S&P Insurance Index
Total Return through such date, unless his employment was terminated by the
Company for "Cause" or by Mr. Rosenkranz without "Good Reason," as such terms
are defined in the Incentive Plan.
The Incentive Plan and awards of restricted or deferred shares and options
thereunder may be amended by the Committee at any time, subject to Mr.
Rosenkranz's consent if such amendment would adversely affect his rights under
the Incentive Plan or any such award.
Restricted or deferred shares of Class A Common Stock awarded under the
Incentive Plan vest upon the termination of Mr. Rosenkranz's employment due to
death, disability or normal retirement or by the Company other than for Cause
or upon a "Change in Ownership," as such term is defined in the Incentive Plan.
If Mr. Rosenkranz's employment is terminated by himself for other than Good
Reason or by the Company for Cause, such restricted or deferred shares are
forfeited to the Company.
Because the Incentive Plan provides for accelerated vesting of restricted or
deferred shares of Class A Common Stock awarded under the Plan upon a Change in
Ownership, it is possible that a twenty percent "golden parachute" excise tax
could be imposed upon Mr. Rosenkranz under the Code if such vesting were to
occur in such an event. In order to preserve the benefits intended to be
provided under the Incentive Plan, the plan contains a provision under which
payments would be made by the Company to Mr. Rosenkranz in order to adjust, on
an after-tax basis, for the amount of any such tax.
The Incentive Plan will be in lieu of future grants of stock options,
restricted stock or other long-term incentive compensation to Mr. Rosenkranz,
so long as the Incentive Plan is in effect, except that Mr. Rosenkranz will
continue to receive his present salary, any annual bonus awarded by the
Committee, and executive perquisites. If the annual increase in the market
value of the Company's stock exceeds the S&P Insurance Index Total Return for
the applicable Performance Period, the awards under the Incentive Plan, made in
the form of restricted or deferred shares and stock options granted at the then
market value, may be significant. The options will be valuable to Mr.
Rosenkranz, however, only if the stock price appreciates after the options are
granted.
The full text of the Incentive Plan is attached hereto as Exhibit C, to which
the foregoing description is qualified by reference.
FEDERAL INCOME TAX CONSEQUENCES
Share Awards. In the absence of an election by Mr. Rosenkranz, as explained
below, the grant of restricted or deferred shares pursuant to an award under
the Incentive Plan will not result in taxable income to him or a deduction to
the Company in the year of grant. The value of the shares will be taxable to
Mr. Rosenkranz as ordinary income in the year in which the restrictions lapse
or the shares represented by the deferred shares are actually received.
Alternatively, Mr. Rosenkranz may elect to treat as income in the year of grant
the fair market value of the shares on the date of grant. If such election
were made, Mr. Rosenkranz would not be allowed to deduct at a later date the
amount included as taxable income if the shares were ultimately forfeited to
the Company. The amount of ordinary income recognized by Mr. Rosenkranz is
generally deductible by
-13-
<PAGE> 17
the Company in the year the ordinary income is recognized. Prior to the lapse
of restrictions, any dividends paid on the shares subject to restrictions will
be taxable to Mr. Rosenkranz in the year received and the Company will be
allowed a corresponding deduction.
Stock Option Awards. Stock options granted under the Incentive Plan will be
treated as nonqualified stock options for federal income tax purposes. See
"Proposal to Adopt the Second Amended and Restated Employee Option Plan -
Federal Income Tax Consequences" for a description of the federal income tax
treatment of nonqualified stock options.
It is intended that the shares of Common Stock represented by Proxies will be
voted "for" the proposed adoption of the Incentive Plan unless a contrary
direction is indicated on the Proxy.
-14-
<PAGE> 18
EXECUTIVE COMPENSATION
The following table sets forth aggregate compensation paid by the Company and
its subsidiaries for services rendered in all capacities to the Company and its
subsidiaries during the fiscal years ended December 31, 1996, 1995 and 1994 to
or for the benefit of each of the five most highly compensated executive
officers of the Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------------------------------ --------------------------
Securities
Other Annual Restricted Underlying All Other
Name and Principal Compensation Stock Options Compensation
Position Year Salary ($) Bonus ($) ($)(1) Award ($) (#)(2) ($)(3)
- ----------------------------- ------ ----------- ------------ --------------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert Rosenkranz, 1996 $ 549,978 $ 550,000 $ - $2,174,177(4) 216,000 (4) $ -
President & Chief Executive 1995 400,006 400,000 - - - -
Officer of the Company 1994 174,996 - - - - -
Christopher A. Fazzini 1996 101,745 279,420 - - - 4,750 (5)
Vice President, Sales and 1995 89,565 226,171 - - - 4,620 (5)
Marketing of RSLIC 1994 89,565 226,746 - - - 4,620 (5)
Charles P. O'Brien, 1996 279,994 202,226 - - - 4,750 (5)
President & Chief Executive 1995 279,994 148,260 - - - 4,620 (5)
Officer of RSLIC 1994 288,383 192,360 - - - 4,620 (5)
Robert M. Smith, Jr., 1996 264,992 200,000 - - 35,000 3,000 (5)
Vice President of the 1995 250,000 150,000 - 36,000 2,500 (5)
Company 1994 197,115 (6) 75,000 (3) - - 55,814 -
Thomas A. Sullivan, 1996 425,022 150,000 - - - - (5)
President of DCM 1995 425,022 75,000 - - - 3,000 (5)
1994 425,022 - - - - 4,620 (5)
</TABLE>
(1) Personal benefits, which are non-cash compensation, were not disclosed
in the "Other Annual Compensation" column since they did not exceed
the lesser of either $50,000 or 10% of the total of annual salary and
bonus for the named executive officer.
(2) Other than the granting of stock options listed below, no other
long-term compensation was provided to the named executive officers.
(3) The Company and its subsidiaries paid certain amounts in 1996, 1995,
and 1994 to Rosenkranz, Inc., a wholly-owned subsidiary of Rosenkranz
& Company, pursuant to two investment consulting agreements. Portions
of these amounts were in turn earned by Mr. Rosenkranz (and, in 1994,
by Mr. Smith) in addition to the amounts set forth above. See
"Certain Relationships and Related Transactions."
(4) Under the Incentive Plan, subject to approval of such plan and the
1996 award thereunder by the stockholders of the Company, Mr.
Rosenkranz was awarded 72,000 deferred shares of Class A Common Stock
and options to acquire 216,000 shares of Class A Common Stock.
(5) These amounts represent the Company's annual contribution on behalf of
the employee to the Reliance Standard Life Insurance Company
Retirement Savings Plan and the Reliance Standard Life Insurance
Company Nonqualified Deferred Compensation Plan.
(6) Represents compensation for the period March 21, 1994 through December
31, 1994.
Employee Stock Option Plan. In 1987, the Company established, and in 1994
amended and restated, the Option Plan for key employees of the Company and its
subsidiaries. Under the Option Plan, a total of 1,980,000 shares of Class A
Common Stock have been reserved for issuance upon exercise of options granted
thereunder. Through March 20, 1997, options for 1,354,967 shares of Class A
Common Stock have been granted to a total of 21 optionees. As of March 20,
1997, options covering 667,242 shares of Class A Common Stock have been
exercised by a total of 9 optionees. These exercises reduced the total number
of outstanding options exercisable for Class A Common Stock to 687,725 shares,
of which options for 544,837
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<PAGE> 19
shares of Class A Common Stock were vested as of March 20, 1997. Options
currently outstanding under the Option Plan expire between November 6, 1997 and
December 13, 2006. Options granted under the Option Plan have a maximum term
of 10 years and become exercisable at such times and in such amounts as are
determined by the Committee at the time of grant. The price per share upon the
exercise of an option is 100% of the fair market value of the Class A Common
Stock on the date of the grant. For this purpose, the fair market value on any
such date is the closing price per share of the Class A Common Stock, as
reported through the New York Stock Exchange for such date.
OPTION GRANTS IN LAST FISCAL YEAR
Summarized below in tabular format are options granted to the named executive
officers during 1996.
<TABLE>
<CAPTION>
% of Total Potential
Number of Options Realizable Value at Assumed
Securities Granted to Annual Rates of Stock Price
Underlying Employees Exercise Appreciation for Option Term
Options in Last Price Expiration -----------------------------
Name Granted Fiscal Year ($/Sh) Date 5% 10%
- ---------------------- ----------- ----------- ---------- -------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Robert Rosenkranz 216,000 (1) 82% $31.125 01/15/07 $ 4,228,059 $ 10,714,731
Christopher A. Fazzini - - - - - -
Charles P. O'Brien - - - - - -
Robert M. Smith, Jr. 35,000 (2) 13% 28.500 12/13/06 627,322 1,589,758
Thomas A. Sullivan - - - - - -
</TABLE>
(1) The options indicated are subject to the approval by the stockholders
of the Company of the Incentive Plan and the 1996 award thereunder
and, upon such approval, will become exercisable immediately. All are
non-qualified options and become exercisable for Class A Common Stock.
(2) The options indicated are subject to the approval by the stockholders
of the Company of the Restated Employee Plan and, upon such approval,
will become exercisable in 5 equal annual installments beginning with
the first such installment occurring on December 13, 1997. All are
non-qualified options and become exercisable for Class A Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Summarized below in tabular format are options exercised by the named executive
officers during the fiscal year ended December 31, 1996 and options outstanding
at December 31, 1996.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Shares Options at Fiscal Year-End Fiscal Year-End (1)
Acquired on Value -------------------------------- ------------------------------------
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---------------------- ------------ --------- ----------- ------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert Rosenkranz - - 216,000 - - -
Christopher A. Fazzini - - - - - -
Charles P. O'Brien - - 265,684 - $ 7,237,232 -
Robert M. Smith, Jr. - - 40,688 86,126 624,804 $799,546
Thomas A. Sullivan - - - - - -
</TABLE>
(1) Based on a closing price of $29.50 for the Company's Class A Common
Stock on December 31, 1996.
-16-
<PAGE> 20
Pension Plans. The Reliance Standard Life Insurance Company Pension Plan (the
"Pension Plan") is a noncontributory, qualified defined benefit pension plan
that provides retirement and, in certain instances, death benefits to employees
of RSLIC, FRSLIC, DCM and other subsidiaries of the Company. Benefits under
the Pension Plan at the employee's normal retirement age, which is 65, are
calculated as the sum of (i) 0.85% of the employee's average compensation for
the five consecutive calendar years in the last ten years of participation
prior to retirement during which the employee was most highly paid ("Average
Compensation") up to and including their Social Security covered compensation
level plus (ii) 1.5% of the employee's Average Compensation in excess of their
Social Security covered compensation level, multiplied by the employee's years
of service up to 35 years; plus 1% of the employee's Average Compensation
multiplied by the employee's years of service in excess of 35. Average
Compensation is subject to the statutory limitation pursuant to the Code of
$160,000 for 1997 (or any limits as set down by the Code in the future).
Benefits payable under the Pension Plan are offset by any benefits payable
under the Dresser Industries Inc. Pension Plan, which covered RSLIC and FRSLIC
employees prior to November 6, 1987 (the "Dresser Pension Plan Offset").
Employees are eligible to participate in the Pension Plan following the
completion of one year of service and the attainment of age 21 and continue to
accrue benefits generally until termination of employment, death or retirement.
Benefits vest after five years of service with RSLIC, FRSLIC and/or DCM.
Supplemental Executive Retirement Plan. Effective January 1, 1994, the Company
established the Reliance Standard Life Insurance Company Supplemental Executive
Retirement Plan (the "RSL SERP"). The plan provides certain key employees with
the opportunity for additional postemployment income which would otherwise have
been limited under the Pension Plan due to the reduction of the statutory limit
on employee's compensation as calculated under the Pension Plan pursuant to the
Code. The RSL SERP is a nonqualified deferred retirement plan and is unfunded.
Retirement benefits under the RSL SERP are calculated in a similar manner as
those under the Pension Plan, except that Average Compensation is limited to
the 1993 statutory limit of $235,840, adjusted annually by the Social Security
Cost of Living Adjustment. Any benefits payable under the Pension Plan are
deducted from the benefit calculated under the RSL SERP. All other terms and
conditions of the RSL SERP are substantially identical to those contained in
the Pension Plan.
DCM Pension Plan. The Delphi Capital Management, Inc. Pension Plan for Robert
Rosenkranz (the "DCM Pension Plan") is a nonqualified, noncontributory defined
benefit pension plan that provides retirement benefits to Robert Rosenkranz
and, in certain instances, death benefits to his beneficiary. Benefits under
the DCM Pension Plan at Mr. Rosenkranz's normal retirement age, which is 65,
are calculated in the same manner as benefits under the Pension Plan. Benefits
are reduced should Mr. Rosenkranz elect an early retirement date. The DCM
Pension Plan is unfunded and assets held by DCM shall not be deemed to be held
in trust for the payment of the pension obligation. The payment is, however,
unconditionally guaranteed by the Company under a guarantee agreement between
the Company and Robert Rosenkranz, and should DCM default, the Company will
discharge the obligation. Mr. Rosenkranz does not participate in either the
Pension Plan or the RSL SERP.
The estimated annual benefits payable at the normal retirement age of 65 are
set forth in the table below for the indicated compensation and years of
service classifications in the form of a straight life annuity. The benefits
calculations show estimated annual payments excluding the effect of any Dresser
Pension Plan Offset and are based upon the Social Security Act in effect for an
employee retiring in 1997.
-17-
<PAGE> 21
<TABLE>
<CAPTION>
Years of Service as
Retirement Plan Participant and Estimated Amount of Benefits
Average ----------------------------------------------------------------------
Compensation 10 15 20 25 30 35
- ----------------- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 13,095 $ 19,642 $ 26,190 $ 32,738 $ 39,285 $ 45,833
$ 125,000 $ 16,845 $ 25,267 $ 33,690 $ 42,113 $ 50,535 $ 58,958
$ 150,000 $ 20,595 $ 30,892 $ 41,190 $ 51,488 $ 61,785 $ 72,083
$ 175,000 $ 24,345 $ 36,517 $ 48,690 $ 60,863 $ 73,035 $ 85,208
$ 200,000 $ 28,095 $ 42,142 $ 56,190 $ 70,238 $ 84,285 $ 98,333
$ 225,000 $ 31,845 $ 47,767 $ 63,690 $ 79,613 $ 95,535 $ 111,458
$ 250,000 $ 35,595 $ 53,392 $ 71,190 $ 88,988 $ 106,785 $ 124,583
$ 275,000 $ 39,345 $ 59,017 $ 78,690 $ 98,363 $ 118,035 $ 137,708
$ 300,000 $ 43,095 $ 64,642 $ 86,190 $ 107,738 $ 129,285 $ 150,833
$ 350,000 $ 50,595 $ 75,892 $ 101,190 $ 126,488 $ 151,785 $ 177,083
</TABLE>
The following executives named in the Summary Compensation Table shown under
"Executive Compensation" are covered by the Pension Plan, the RSL SERP and/or
the DCM Pension Plan:
<TABLE>
<CAPTION>
Years of Credited Service
Name As of December 31, 1996
---- -----------------------
<S> <C>
Robert Rosenkranz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.0
Christopher A. Fazzini . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.0
Charles P. O'Brien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.4
Robert M. Smith, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0
Thomas A. Sullivan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.0
</TABLE>
Employment Contract. The Company has entered into an agreement with Mr. Smith
which provides that if he is terminated without good and reasonable cause he
will be entitled to a severance payment up to a maximum of twelve months of
base salary, plus health benefits.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Fox, Ranieri and Rhodes, the members of the Stock Option and
Compensation Committee during 1996, are not "insiders" within the meaning of
the Securities Act and there were no "interlocks" within the meaning of the
Securities Act.
-18-
<PAGE> 22
PERFORMANCE GRAPH
In order to further assist stockholders in analyzing disclosure on
compensation, a graph comparing the total return on the Company's Class A
Common Stock to the total return on the common stock of the companies included
in the Standard & Poor's 500 Index ("S&P 500 Index") and the Standard & Poor's
Insurance Composite Index ("S&P Insurance Index") has been provided. Due to
the diversification of the composition of the Company's insurance products as a
result of the merger with SIG Holdings, Inc. in March 1996, the Company
selected the S&P Insurance Index for comparative purposes in the performance
graph to replace the Media General Financial Services Life Insurance Industry
Index, Group 261 - Life, Accident and Health Insurance Companies (the "MGFS
Index"), which was used in prior years. The Company believes that, as a result
of such merger, the companies that comprise the S&P Insurance Index are more
representative of the Company's industry peers. The MGFS Index has been
provided in the performance graph for information purposes only. The
performance graph should be analyzed in connection with the tables on the
preceding pages detailing the payment of compensation and the granting of
employee stock options. The graph assumes $100 was invested in the Company's
Class A Common Stock and the indices noted above on December 31, 1990, and
reflects the value of that investment on various dates through December 31,
1996.
COMPARISON OF TOTAL RETURN AMONG DELPHI,
S&P 500 INDEX, S&P INSURANCE INDEX AND MGFS INDEX
[CHART]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Delphi 100 223 381 285 327 545
- --------------------------------------------------------------------------------
S&P 500 Index 100 108 118 120 165 203
- --------------------------------------------------------------------------------
S&P Insurance Index 100 118 125 125 178 220
- --------------------------------------------------------------------------------
MGFS Index 100 128 147 135 193 247
- --------------------------------------------------------------------------------
</TABLE>
-19-
<PAGE> 23
REPORT ON EXECUTIVE COMPENSATION
Compensation of the Company's executive officers (including the named executive
officers) is supervised by the Stock Option and Compensation Committee of the
Board of Directors. The objective of the Company's compensation program is to
provide a total compensation package that will enable the Company to attract,
motivate and retain outstanding individuals and to reward such individuals for
increasing levels of profit and stockholder value.
In conformance with the above compensation philosophy, the total annual
compensation for senior officers of the Company and its subsidiaries is
determined by one base element, salary, and two incentive elements, annual
bonus and grants of stock options under the Company's Option Plan.
Salary for executive officers of the Company and its subsidiaries is determined
by analysis of three factors, consisting of (1) salary levels for executive
officers at other companies with comparable responsibilities; (2) evaluation of
the individual executive officer's performance; and (3) the Company's ability
to pay. While the three factors are not formally weighted, the Company's
ability to pay is a threshold consideration.
The level of base salary paid to an executive officer is determined on the
basis of the individual's overall performance and compensation level at the
Company during the prior year and such other factors as may be appropriately
considered by the Stock Option and Compensation Committee and by management in
making its proposals to such Committee.
For executive officers employed in the insurance operations at RSLIC, the level
of cash bonus paid is determined under the Senior Management Incentive Plan
administered by the Compensation Committee of RSLIC's Board of Directors. The
performance criteria used to determine the level of bonus under this plan
include, among others, earnings per share, underwriting results, production of
insurance premiums, deposits on sales of annuities and the maintenance of
expenses of the insurance subsidiaries relative to pre-determined targets.
Bonus as a percentage of base salary generally increases with the level of
responsibility of the executive officer; for example, RSLIC's Chief Executive
Officer's potential bonus is 43% of total compensation, with other executives'
respective potential bonuses reduced as their level of responsibility
decreases. Total cash compensation for such executive officers is reviewed for
comparability with the compensation levels of similarly situated officers of
insurance companies of similar size, including certain of those companies
included in the S&P Insurance Index.
The principal method for long-term incentive compensation is the Option Plan
described above under "Other Compensation Plans - Stock Option Plan" and
compensation thereunder takes the form of nonqualified stock option grants.
Those grants are designed to promote the identity of long-term interests
between key employees of the Company and its subsidiaries and the Company's
stockholders, since the value of options granted will increase or decrease with
the value of the Company's common stock. In this manner, key individuals are
rewarded in a manner that is commensurate with increases in stockholder value.
The size of a particular option grant is determined based on the individual's
position with and contributions to the Company (or, in the case of new hires,
the individual's current position and anticipated contributions). These grants
also typically include three to five year vesting periods to encourage
continued employment.
-20-
<PAGE> 24
Mr. Rosenkranz's compensation for 1996 was determined after considering the
general factors described above. Mr. Rosenkranz's base salary was set at a
level designed to approximate amounts received by him in past years as
consulting fees.
In addition, under the Incentive Plan for the Chairman, President and Chief
Executive Officer being proposed for stockholder approval, Mr. Rosenkranz will
be rewarded for the Company's achieving gains in stockholder wealth that
surpass the S&P Insurance Index Total Return, which the Committee believes to
be a representative index reflecting the stock performance of the Company's
peer group. The ultimate value of awards under the Incentive Plan will depend
on the Company's stockholder returns, since such awards will consist of
restricted or deferred shares, the value of which will be subject to market
risk so long as Mr. Rosenkranz remains employed with the Company (and which are
forfeitable if such employment terminates under certain circumstances). In
addition, the options will have value to Mr. Rosenkranz only to the extent that
the Company's stock price appreciates following the grant date.
Section 162(m) of the Code limits deductibility of certain compensation for the
Chief Executive Officer and the additional four highest paid executive officers
in excess of $1 million per year. The Committee intends to establish and
maintain executive compensation levels and programs that will be competitive
within the industry and will attract and retain highly talented individuals.
Executive compensation will be structured to avoid limitations on deductibility
where this result can be achieved consistent with the Company's compensation
goals.
STOCK OPTION AND COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Edward A. Fox Thomas A. Rhodes
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to two investment consulting agreements entered into in November 1987
and November 1988, respectively, RSLIC and the Company pay to Rosenkranz, Inc.,
a wholly owned subsidiary of Rosenkranz & Company, certain fees associated with
the formulation of the business and investment strategies of the Company and
its subsidiaries. These fees amounted to $2.3 million for the year ended
December 31, 1996. These fees generally increase at an annual rate of 10.0%
and are expected to be $2.5 million for calendar year 1997. Of the aggregate
amounts paid to Rosenkranz, Inc. for services rendered during the year ended
December 31, 1996 pursuant to these investment consulting agreements, $430,848
was earned by Mr. Rosenkranz due to his indirect and direct financial interests
in Rosenkranz & Company. Management believes that the fees charged by
Rosenkranz, Inc., are comparable to fees charged by unaffiliated third parties
for investment consulting services of considerably narrower scope than the
services provided by Rosenkranz, Inc.
Pursuant to a cost-sharing arrangement, a subsidiary of the Company received
reimbursements from Rosenkranz, Inc. and Acorn Partners, a limited partnership
in which Mr. Rosenkranz has an indirect beneficial interest, for expenses
associated with the sharing of office space and office personnel. The total
amount of these reimbursements during 1996 was $0.9 million.
-21-
<PAGE> 25
Pursuant to an investment advisory agreement, a subsidiary of the Company paid
fees to an investment advisor, Hyperion Capital Management, Inc., of which Mr.
Ranieri is the Chairman. Management believes that the fees charged by the
investment advisor under the agreement are comparable to the fees charged by
other unaffiliated investment advisors for investment advisory services. In
addition, at the time that such investment advisory agreement was entered into,
Mr. Ranieri was not a member of the Company's Board of Directors, nor was the
agreement entered into in contemplation of his becoming a Board member. The
Company's subsidiary paid $305,500 under such agreement during 1996.
INDEPENDENT AUDITORS
The firm of Ernst & Young LLP served as the Company's independent auditors for
1996 and is expected to so serve in 1997. A representative of Ernst & Young
LLP is expected to be present at the Annual Meeting to respond to appropriate
questions and to make a statement if such representative desires.
FINANCIAL STATEMENTS AVAILABLE
Consolidated financial statements for Delphi Financial Group, Inc. are included
in the Company's 1996 Annual Report on Form 10-K for the year ended December
31, 1996, which was previously mailed to stockholders receiving this Proxy
Statement. Additional copies of the Form 10-K and the Annual Report to
Stockholders may be obtained without charge by submitting a written request to
the Investor Relations Department, Delphi Financial Group, Inc., 1105 North
Market Street, Suite 1230, Wilmington, Delaware 19899.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the Company's knowledge, based solely on its review of Forms 3, 4 and 5 and
amendments thereto furnished to the Company pursuant to Section 16 of the
Securities Exchange Act of 1934 and written representations that no other
reports were required for such persons, all persons subject to these reporting
requirements filed the required reports on a timely basis, except that Mr.
Smith was late in filing one report.
SUBMISSION OF 1998 STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1998 Annual Meeting
of Stockholders must be received by the Company at 1105 North Market Street,
Suite 1230, Wilmington, Delaware 19899, by December 1, 1997.
By Order of the Board of Directors,
Robert Rosenkranz
Chairman of the Board
-22-
<PAGE> 26
EXHIBIT A
DELPHI FINANCIAL GROUP, INC.
SECOND AMENDED AND RESTATED EMPLOYEE STOCK OPTION PLAN
INTRODUCTION
Delphi Financial Group, Inc. (the "Company") adopted the Delphi
Financial Group, Inc. Employee Nonqualified Stock Option Plan effective
November 6, 1987, and amended and restated such plan effective January 1, 1994.
Because, under the terms of such plan, options could only be granted thereunder
within a period of ten years from when the plan was originally approved by the
Company's stockholders, the plan was, effective as of March 20, 1997 (subject
to the approval of the stockholders of the Company), further amended and
restated to readopt such plan, as well as to consolidate prior plan amendments
and adjustments, including, among other things, the adjustment to the number of
shares available for issuance thereunder that resulted from the twenty percent
(20%) stock dividend distributed by the Company on September 30, 1996, and to
effect certain further amendments. Such plan, as so amended and restated, is
as follows:
1. PURPOSE
This Second Amended and Restated Employee Stock Option Plan (the
"Plan") is intended to be an incentive for employees of Delphi Financial Group,
Inc. (the "Company") or any of its subsidiary corporations (the "Subsidiaries")
as that term is defined in Section 424(f) of the Internal Revenue Code of 1986,
as amended from time to time (the "Code"), and other Optionees (as herein
defined) to share in future appreciation in the value of the stock of the
Company, and to encourage stock ownership by such individuals in the Company,
so that such individuals may acquire or increase a proprietary interest in the
success of the Company and its Subsidiaries, and so that they may be encouraged
to continue to provide services to the Company and its Subsidiaries. The Plan
provides for the issuance of nonqualified and incentive stock options within
the meaning of Section 422 of the Code (each, an "Option").
2. ADMINISTRATION
The Plan shall be administered by a committee appointed by the Board of
Directors of the Company (the "Committee"). The Committee shall consist of not
less than two members of the Company's Board of Directors. The Board of
Directors may from time to time remove members from, or add members to, the
Committee. Vacancies on the Committee, howsoever caused, shall be filled by
the Board of Directors. The Committee shall select one of its members as
Chairman and shall hold meetings at such times and places as it may determine.
A majority of the members of the Committee then constituting the entire
Committee shall constitute a quorum. Acts by a majority of the Committee at a
meeting at which a quorum is present, or acts reduced to or approved in writing
by a majority of the members of the Committee, shall be valid acts of the
Committee. The Committee shall from time to time in its discretion determine
the individuals who shall be granted Options and the number of Shares (as
hereinafter defined) to be subject thereto.
A-1
<PAGE> 27
3. ELIGIBILITY
The persons who shall be eligible to receive Options (the "Optionees")
shall be the key employees (including officers whether or not they are
directors) of the Company or its Subsidiaries and other individuals who, in the
Committee's judgment, can make substantial contributions to the Company's
long-term profitability and value. An Optionee may be granted Options on more
than one occasion.
4. STOCK
The stock subject to the Options shall be shares (the "Shares") of the
Company's authorized but unissued or reacquired Class A common stock, par value
$.01 per share. The aggregate number of Shares as to which Options may be
granted shall not exceed 1,980,000. The aggregate number of Shares as to which
Options may be granted to any person in any one calendar year shall not exceed
500,000. The limitations established by the two immediately preceding
sentences shall be subject to adjustment as provided in Article 5(l) of the
Plan. In the event that any outstanding Option under the Plan for any reason
expires, terminates or is canceled, the Shares allocable to the unexercised
portion of such Option will again be subject to Options thereafter awarded
under the Plan.
5. TERMS AND CONDITIONS OF OPTIONS
When the Committee grants Options to an Optionee, a Notice of Grant of
Stock Option (an "Option Notice") shall be given to such Optionee, which notice
shall comply with and be subject to the following terms and conditions:
(a) Number of Shares. Each Option Notice shall state the
number of Shares to which the Options pertain.
(b) Incentive Stock Options. The Option Notice for an Option
that is intended to qualify as an incentive stock option under Section
422 of the Code shall state that the Option is intended to so qualify,
and shall contain such provisions as may be necessary for such Option
to so qualify.
(c) Option Price. Each Option Notice shall state the Option
price per Share, which shall be 100% of the Fair Market Value of a
Share on the date of the grant of the Option (the "Option Price"). For
purposes hereof, "Fair Market Value" shall be the closing price on the
applicable date of a Share, as reported on the New York Stock Exchange
(the "NYSE"), or, if the Shares are not then listed for trading on the
NYSE, the closing price of the Shares as reported on another recognized
securities exchange or on the NASDAQ National Market System if the
Shares shall then be listed on such exchange or system. If the Shares
did not trade on the award date on the NYSE or such other applicable
exchange or system, the Fair Market Value for purposes hereof shall be
the reported closing price on the last business day on which the Shares
were traded preceding the award date.
(d) Option Price. The Option Notice may provide that the
Optionee may make payment of the Option Price in cash, Shares or such
other consideration as may be specified therein or as may be acceptable
to the Committee, or any combination thereof, in an amount or having an
aggregate value, as the case may be, equal to the total Option Price.
Such payment shall be made upon exercise of the Option.
A-2
<PAGE> 28
(e) Term, Transferability And Exercisability Of Options.
(i) Each Option Notice shall state the date on which the
Option shall expire (the "Expiration Date"), which shall not be
later than ten years following the date on which the Option is
granted. Options are not transferable by an Optionee other than
by will or the laws of descent and distribution, except that in
the case of nonqualified stock options, if provided in the
applicable Option Notice (at the time of grant or as amended at
any time thereafter), an Option granted hereunder may be
transferred for no consideration by the Optionee to members of
his or her immediate family, to a trust or trusts established
for the exclusive benefit only of one or more members of his or
her immediate family or to a partnership in which his or her
immediate family members are the only partners. Any Option held
by such a transferee will continue to be subject to the same
terms and conditions that were applicable to the Option
immediately prior to the transfer, except that the Option will
be transferable by the transferee only by will or the laws of
descent and distribution. For purposes hereof, "immediate
family" means the Optionee's children, stepchildren,
grandchildren, parents, stepparents, grandparents, spouse,
siblings (including half brothers and sisters), in-laws, and
relationships arising because of legal adoption. Subject to
Article 5(j) hereof, Options may be exercised by an Optionee
only for so long as such person is employed by the Company or a
Subsidiary except as otherwise provided in Articles 5(f) through
(i) of the Plan.
(ii) The Option Notice may, but need not, provide that the
Option shall become exercisable in installments rather than
being exercisable immediately in full. In such case, the
Committee shall determine (A) the amount and terms of such
installments, which need not be equal, (B) the timing of such
installments, which need not be annual or consecutive, and (C)
whether such installments shall be cumulative. The Committee at
any time may provide, in the case of an Option which is to
become exercisable in installments, for the acceleration of the
times at which the Option may become exercisable. The
Committee's determination shall be specified in the Option
Notice.
(iii) Upon or in connection with a Change of Ownership,
each Optionee shall have the right, immediately prior to such
Change of Ownership, to exercise his or her Option without
regard to any installment provisions as to exercisability
contained in such Optionee's Option Notice. For purposes of
this Plan, a "Change of Ownership" shall be deemed to have
occurred (1) if individuals who, as of the effective date of
this Plan, constitute the Board of Directors of the Company (the
"Board of Directors" generally and as of the date hereof the
"Incumbent Board") cease for any reason to constitute at least a
majority of the directors constituting the Board of Directors,
provided that any person becoming a director subsequent to the
effective date of this Plan whose election, or nomination for
election by the Company's shareholders, was approved by a vote
of at least three-quarters (3/4) of the then directors who are
members of the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office
is (A) in connection with the acquisition by a third person,
including a "group" as such term is used in Section 13(d)(3) of
the Securities and Exchange Act of 1934, as amended (the "1934
Act"), of beneficial ownership, directly or indirectly, of 20%
or more of the combined voting securities ordinarily having the
right to vote for the election of directors of the Company
(unless such acquisition of beneficial ownership was approved by
a majority of the Board of Directors who are members of the
Incumbent Board), or (B) in connection with an actual or
threatened election contest relating to the election of the
directors of the Company, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the 1934
A-3
<PAGE> 29
Act) shall be, for purposes of this Plan, considered as though
such person were a member of the Incumbent Board; or (2) if the
stockholders of the Company approve a merger, consolidation,
recapitalization or reorganization of the Company, reverse split
of any class of voting securities of the Company, or an
acquisition of securities or assets by the Company, or the sale
or disposition by the Company of all or substantially all of the
Company's assets, or if any such transaction is consummated
without stockholder approval, other than any such transaction in
which the holders of outstanding Company voting securities
immediately prior to the transaction receive, with respect to
such Company voting securities, voting securities of the
surviving or transferee entity representing more than 60 percent
of the total voting power outstanding immediately after such
transaction, with the voting power of each such continuing
holder relative to other such continuing holders not
substantially altered in the transaction; or (3) if the
stockholders of the Company approve a plan of complete
liquidation of the Company.
(iv) At any time and from time to time when any Option or
portion thereof is exercisable, such Option or portion thereof
may be exercised in whole or in part, as applicable; provided,
however, that the Company shall not be required to issue
fractional Shares.
(f) Termination of Employment Except by Death, Disability or
Discharge for Cause. Unless otherwise specified in an Option Notice,
in the event that the employment of an Optionee by the Company or its
Subsidiaries shall terminate for any reason other than death,
disability, or discharge for cause, Options may be exercised only
within three (3) months after such termination of employment or such
longer period as may be established by the Committee at the time of
grant or thereafter, but only to the extent such Option was exercisable
on the last day of employment, and in no event may an Option be
exercised after its Expiration Date. Any portion of the Option which
was not exercisable on such last day shall expire immediately. Whether
authorized leave or absence or absence for military or governmental
service shall constitute termination of employment for the purposes of
the Plan shall be determined by the Committee, which determination
shall be final and conclusive.
(g) Death or Disability of Optionee. Unless otherwise
specified in an Option Notice, in the event an Optionee shall die or
become disabled while in the employ of the Company or a Subsidiary,
Options may be exercised at any time within one (1) year after the
Optionee's death or disability or such longer period as may be
established by the Committee at the time of grant or thereafter, but
only to the extent that such Option was exercisable on the last day of
employment, and in no event may an Option be exercised after its
Expiration Date. During such one-year period, the Option may be
exercised by the Optionee or a representative, or in the case of death,
by the executors or administrators of the Optionee or by any person or
persons who shall have acquired the Option directly from the Optionee
by bequest or inheritance. Whether an Optionee shall have become
disabled for the purposes of the Plan shall be determined by the
Committee, which determination shall be final and conclusive.
(h) Discharge for Cause. If an Optionee is discharged for
cause, all unexercised Options shall terminate as of the date of his
discharge. Whether an Optionee is discharged for cause for purposes of
the Plan shall be determined by the Committee, which determination
shall be final and conclusive.
A-4
<PAGE> 30
(i) Retirement. Notwithstanding the provisions of Article 5(f)
hereof, the Committee may, at the time of grant of an Option or
thereafter, permit the Optionee to exercise Options (but only to the
extent the Option was exercisable on the last date of employment) up to
one (1) year following the Optionee's retirement under the Company's or
its Subsidiary's, as applicable, retirement policy or such longer
period as may be established by the Committee at the time of grant or
thereafter; provided that in no event may an Option be exercised after
its Expiration Date.
(j) Non-Employee Optionees. Neither the last sentence of
Article 5(e)(i) nor any of Articles 5(f) through 5(i) hereof shall
apply with respect to Options having been granted to an Optionee who is
not an employee of the Company or its Subsidiaries (a "Non-Employee
Optionee"). In the case of any such Options, the Option Notice shall
set forth the applicable limitations on the exercisability thereof, and
the effect on such exercisability of death, disability and any other
events provided for therein, at the time of grant or thereafter.
(k) Right of Company. In the case of a termination of an
Optionee's employment by reason of death, disability, retirement or
discharge other than for cause (or, in the case of a Non-Employee
Optionee, to the extent provided in the Option Notice at the time of
grant or thereafter) the Company may, but is not obligated to, purchase
unexercised Options held by such Optionee and pay such person the
amount of cash equal to (i) the aggregate Fair Market Value of Shares
underlying such Option (to the extent that such Options would have been
exercisable by the Optionee upon termination of employment) as of the
date of termination of employment (or, in the case of a Non-Employee
Optionee, the date provided in the Option Notice at the time of grant
or thereafter), less (ii) the aggregate Option Price for such Shares.
(l) Recapitalization, Reorganization, Etc., of Company.
(i) Subject to any required action by the stockholders, the
number of Shares covered by each outstanding Option, and the
price per Share so covered shall automatically be
proportionately adjusted for any increase or decrease in the
number of issued shares of Class A Common Stock of the Company
resulting from a subdivision or consolidation of Shares or the
payment of a stock dividend or any other increase or decrease in
the number of such shares effected without receipt of
consideration by the Company.
(ii) If, pursuant to any reorganization, recapitalization,
sale or exchange of assets, consolidation or merger, outstanding
Class A Common Stock of the Company is or would be exchanged for
other securities of the Company or of another corporation which
is a party to such transaction, or for property, whether or not
any such transaction gives rise to a Change of Ownership, any
Options under the Plan theretofore granted shall apply to the
securities or property into which the Class A Common Stock
covered thereby shall be so changed or for which such Class A
Common Stock shall be exchanged. In any of such events, the
total number and class of Shares then remaining available for
issuance under the Plan (including Shares reserved for
outstanding Options and Shares available for future grant of
Options under the Plan) shall likewise be adjusted so that the
Plan shall thereafter cover the number and class of shares
equivalent to the Shares covered by the Plan immediately prior
to such event.
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(iii) In the event of a change in the Class A Common Stock
of the Company as presently constituted, which is limited to a
change of all of its authorized shares with par value into the
same number of shares with a different par value or without par
value, the shares resulting from any such change shall be deemed
to be the Class A Common Stock within the meaning of the Plan.
(iv) Adjustments pursuant to Article 5(l)(ii) hereof shall
be made by the Committee, whose determination as to which shall
be final, binding and conclusive.
(v) Except as hereinbefore expressly provided in this
Article 5(l), an Optionee shall have no rights by reason of any
subdivision or consolidation of shares of stock of any class or
the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class or by
reason of any dissolution, liquidation, merger or consolidation
or spin-off of assets or stock of another corporation, and any
class, or securities convertible into shares of stock of any
class, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of
Class A Common Stock subject to the Option.
(vi) The grant of an Option pursuant to the Plan shall not
affect in any way the right or power of the Company to make
adjustments, reclassifications, mergers, reorganizations or
changes of its capital or business structure, to merge or to
consolidate, to dissolve or liquidate or to sell or transfer all
or any part of its business or assets.
(m) Rights as a Stockholder. No person shall have any rights
as a stockholder with respect to any Shares covered by an Option until
the date of the issuance of the Shares to such person. No adjustments
shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights,
except as provided in Article 5(l) hereof.
(n) Modification, Extension and Renewal of Options. Subject to
the terms and conditions and within the limitations of the Plan, the
Committee may modify, extend or renew outstanding Options granted under
the Plan, or accept the surrender of outstanding Options (to the extent
not theretofore exercised). Notwithstanding the foregoing, however, no
modification of an Option shall, without the consent of the Optionee,
alter or impair any rights or obligations under any Option theretofore
granted under the Plan.
(o) Investment Purpose. Each Option under the Plan shall be
granted on the condition that the purchases of Shares hereunder shall
be for investment purposes and not with a view to resale or
distribution, except that in the event the Shares subject to such
Option are registered under the Securities Act of 1933, as amended (the
"Act"), or in the event a resale of such Shares without such
registration would otherwise be permissible, such condition shall be
inoperative if, in the opinion of counsel for the Company, such
condition is not required under the Act, or any other applicable law,
regulation or rule of any governmental agency.
(p) Other Provisions. The Option Notice shall contain such
other provisions, including, without limitation, restrictions upon
exercise of the Option or the transfer of the Shares received upon an
exercise, as the Committee shall deem advisable.
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6. TERM OF PLAN
Options may be granted pursuant to the Plan from time to time within a
period of ten years from the earlier of the date of adoption of the Plan or the
date on which the Plan is approved by the stockholders of the Company.
7. PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS
(a) The Committee may employ attorneys, consultants,
accountants, appraisers, brokers or other persons. The Committee, the
Company and the officers and directors of the Company shall be entitled
to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by
the Committee shall be final and binding upon all Optionees, the
Company and all other interested persons. No member of the Committee
shall be personally liable for any action, determination or
interpretation made with respect to the Plan or the Options and all
members of the Committee shall be fully protected by the Company in
respect to any such action, determination or interpretation.
(b) In addition to such other rights of indemnification as they
may have as directors or as members of the Committee, the members of
the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees actually and necessarily
incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or
any of them may be a party by reason of any action taken or failure to
act under or in connection with the Plan or any Option granted
thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding except in relation to matters to
which it shall be adjudged in such action, suit or proceeding that such
Committee member is liable for negligence or misconduct in the
performance of his duties; provided that within 60 days after
institution of any such action, suit or proceeding the Committee member
shall in writing offer the Company the opportunity, at its own expense,
to handle and defend the same.
8. AMENDMENT OF THE PLAN
The Board of Directors of the Company or the Committee may, insofar as
permitted by law, from time to time, with respect to any Shares not then
subject to Options, suspend or discontinue the Plan or revise or amend it in
any respect whatsoever, subject to the approval of the stockholders of the
Company where such approval is required by law or regulation or pursuant to the
rules of the NYSE or, if the Shares are not listed on the NYSE, the rules of
any other exchange or market on which the Shares may be traded.
9. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Shares pursuant
to Options will be used for general corporate purposes.
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10. NO OBLIGATION TO EXERCISE OPTION
The granting of an Option shall impose no obligation upon the Optionee
to exercise such Option.
11. APPROVAL OF STOCKHOLDERS
This Plan shall be effective upon its approval by the stockholders of
the Company.
12. NO EFFECT ON EMPLOYMENT
The grant of an Option pursuant to the Plan shall not be construed to
imply or to constitute evidence of any agreement, express or implied, on the
part of the Company or any Subsidiary to employ or continue to employ any
individual or which relates in any way to the responsibilities, duties or
authority of any employee or individual.
13. EFFECT OF PLAN UPON OTHER OPTIONS AND COMPENSATION PLANS
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company or any Subsidiary. Nothing in this
Plan shall be construed to limit the right of the Company or any Subsidiary to
(a) establish any other forms of incentives or compensation for employees or
directors of or persons associated with the Company or any Subsidiary, or (b)
grant or assume options otherwise than under this Plan in connection with any
proper corporate purpose, including, but not by way of limitation, the grant or
assumption of options in connection with the acquisition by purchase, lease,
merger, consolidation or otherwise, of the business, stock or assets of any
corporation, firm or association.
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EXHIBIT B
DELPHI FINANCIAL GROUP, INC.
AMENDED AND RESTATED DIRECTORS STOCK OPTION PLAN
INTRODUCTION
Delphi Financial Group, Inc. (the "Company") adopted the Delphi
Financial Group, Inc. 1994 Directors Stock Option Plan effective April 12,
1994. Effective as of March 20, 1997, the Company amended and restated such
plan (subject to the approval of the stockholders of the Company) to
incorporate provisions whereby the eligible members of its Board of Directors
may receive stock options in lieu of their annual cash retainers, to increase
the number of shares subject to nonqualified stock options available for
issuance under such plan, and to effect certain further amendments. Such plan,
as so amended and restated, is as follows:
1. PURPOSE
This Amended and Restated Directors Stock Option Plan (the "Plan") is
intended to increase the proprietary interest in Delphi Financial Group, Inc.
(the "Company") of outside directors of the Company, i.e., directors who are
not officers or employees of the Company or its subsidiaries, whose continued
services are important to the continued success of the Company, thereby
providing them with additional incentive to continue to serve as directors.
The Plan provides for the issuance of nonqualified stock options ("Options").
The Plan shall be effective upon its approval by the stockholders of the
Company (as provided in Section 10 below).
2. ADMINISTRATION
The Plan shall be substantially self-executing. To the extent,
however, that any administrative determinations regarding the Plan are required
to be made, they shall be made pursuant to the affirmative vote of a majority
of the members of a committee consisting of the members of the Company's Board
of Directors (the "Committee"). All ministerial matters relating to the Plan
shall be performed by or at the direction of the Committee.
3. ELIGIBILITY
The persons who shall receive Options (the "Optionees") shall be
members of the Company's Board of Directors who are not officers or employees
of the Company or any of its subsidiaries ("Subsidiaries"), as that term is
defined by Section 424(f) of the Internal Revenue Code of 1986, as amended from
time to time (the "Code"). Persons eligible to be Optionees are sometimes
referred to herein as "Outside Directors."
4. STOCK
The stock subject to the Options shall be shares (the "Shares") of the
Company's authorized but unissued or reacquired Class A common stock, par value
$.01 per share). The aggregate number of Shares as to which Options may be
granted shall not exceed 120,000. The limitation established by the preceding
sentence shall
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be subject to adjustment as provided in Section 5(B)(ix) of the Plan. In the
event that any outstanding Option under the Plan for any reason expires,
terminates or is canceled, the Shares allocable to the unexercised portion of
such Option will again be subject to Options thereafter awarded under the Plan.
5. TERMS AND CONDITIONS OF OPTIONS
A. Options shall automatically be granted under the Plan as follows:
(i) On the day immediately following the date on which the Plan
is approved by the stockholders of the Company (as provided in Section
10 below), and thereafter on the first business day immediately
following the each date on which the Company holds its annual meeting
of stockholders (commencing with the 1997 meeting), each Outside
Director then in office will automatically be awarded as of such date
Options exercisable for a number of Shares determined pursuant to the
following formula: Number of Option Shares = 2,000 multiplied by [1 +
(.125 multiplied by the number of years of continuous service of such
Outside Director to that point, including any portion of a year of
service, which shall be treated as a full year)].
(ii) Each Outside Director shall, on the first business day
following each date on which such director is elected, re-elected or
appointed, as applicable, to the Company's Board of Directors (the
"Election Date"), commencing with the elections to occur at the 1997
annual meeting of stockholders, be awarded Options in lieu of the cash
amount (the "Retainer Amount") that such director would be entitled to
receive for serving as such in the period from the Election Date up to
the date of the Company's next following annual meeting of
stockholders, exclusive of meeting fees, fees for serving on any
committee of the Board, or fees associated with any other services
provided to the Company or its Subsidiaries. Such Options will be
exercisable for the nearest number of whole Shares determined pursuant
to the following formula: Number of Option Shares = (Retainer Amount
multiplied by 3), divided by (Fair Market Value, as that term is
defined in Section 5(B)(ii) hereof, as of the award date).
Notwithstanding the foregoing, Options will not be awarded pursuant to
this Section 5(A)(ii) if the Outside Director files with the Secretary
of the Company, on or prior to the commencement of the calendar year in
which the applicable Election Date is to occur, a written election not
to receive Options in lieu of the Retainer Amount (other than the
Election Date on which such director is first elected or appointed, in
which case such election may be made at any time prior to such Election
Date).
B. Promptly after each award pursuant to Section 5(A), a Notice of
Award of Stock Option (an "Option Notice") shall be given to each
Optionee, which notice shall comply with and be subject to the following
terms and conditions:
(i) Number of Shares. Each Option Notice shall state the number of
Shares to which it pertains.
(ii) Option Price. Each Option Notice shall state the Option price
per Share, which shall be 100% of the Fair Market Value of a Share on the
date of the grant of the Option (the "Option Price"). For purposes
hereof, "Fair Market Value" shall be the closing price on the applicable
date of a Share, as reported on the New York Stock Exchange (the "NYSE"),
or, if the Shares are not then
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listed for trading on the NYSE, the closing price of the Shares as
reported on another recognized securities exchange or on the NASDAQ
National Market System if the Shares shall then be listed on such
exchange or system. If the Shares did not trade on the award date on the
NYSE or such other applicable exchange or system, the Fair Market Value
for purposes hereof shall be the reported closing price on the last
business day on which the Shares were traded preceding the award date.
(iii) Option Price. The Option Notice may provide that the Optionee
may make payment of the Option Price in cash, Shares or such other
consideration as may be specified therein or as may be acceptable to the
Committee, or any combination thereof, in an amount or having an
aggregate value, as the case may be, equal to the total Option Price.
Such payment shall be made upon exercise of the Option.
(iv) Term, Transferability and Exercisability of Options.
(a) Each Option Notice shall state the date on which the
Option shall expire (the "Expiration Date"), which shall be ten
years from the date on which the Option is awarded. Options are not
assignable or transferable by an Optionee other than by will or the
laws of descent and distribution, or pursuant to a qualified
domestic relations order as defined by the Code or by Title I of the
Employee Retirement Income Security Act, or the rules thereunder.
Notwithstanding the foregoing, if provided in the applicable Option
Notice (at the time of grant or at any time thereafter), an Option
granted hereunder may be transferred for no consideration by the
Optionee to members of his or her immediate family, to a trust or
trusts established for the exclusive benefit only of one or more
members of his or her immediate family or to a partnership in which
his or her immediate family members are the only partners. Any
Option held by the transferee will continue to be subject to the
same terms and conditions that were applicable to the Option
immediately prior to the transfer, except that the Option will be
transferable by the transferee only by will or the laws of descent
and distribution. For purposes hereof, "immediate family" means the
Optionee's children, stepchildren, grandchildren, parents,
stepparents, grandparents, spouse, siblings (including half brothers
and sisters), in-laws, and relationships arising because of legal
adoption.
(b) Options granted pursuant to Section 5(A)(i) hereof shall
become exercisable in five equal annual installments of twenty
percent (20%) per year. Options granted pursuant to Section
5(A)(ii) hereof shall become exercisable in four substantially equal
installments (without taking into account any fractional share) on
the dates which follow the date of the grant by 90, 180, 270 and 360
days, respectively. Once Options with respect to Shares become
exercisable as aforesaid, they may be exercised in whole or in part
from time to time through the applicable Expiration Date, subject to
the terms and conditions hereof. Upon or in connection with a
Change of Ownership, each Optionee shall have the right, immediately
prior to such Change of Ownership, to exercise his or her Options
without regard to the foregoing installment provisions as to
exercisability. For purposes of this Plan, a "Change of Ownership"
shall be deemed to have occurred (1) if individuals who, as of the
effective date of this Plan, constitute the Board of Directors of
the Company (the "Board of Directors" generally and as of the date
hereof the "Incumbent Board") cease for any reason to constitute at
least a majority of the directors constituting the Board of
Directors, provided that any person becoming a director
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subsequent to the effective date of this Plan whose election, or
nomination for election by the Company's shareholders, was approved
by a vote of at least three-quarters (3/4) of the then directors who
are members of the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is
(A) in connection with the acquisition by a third person, including
a "group" as such term is used in Section 13(d)(3) of the Securities
and Exchange Act of 1934, as amended (the "1934 Act"), of beneficial
ownership, directly or indirectly, of 20% or more of the combined
voting securities ordinarily having the right to vote for the
election of directors of the Company (unless such acquisition of
beneficial ownership was approved by a majority of the Board of
Directors who are members of the Incumbent Board), or (B) in
connection with an actual or threatened election contest relating to
the election of the directors of the Company, as such terms are used
in Rule 14a-11 of Regulation 14A promulgated under the 1934 Act)
shall be, for purposes of this Plan, considered as though such
person were a member of the Incumbent Board; or (2) if the
stockholders of the Company approve a merger, consolidation,
recapitalization or reorganization of the Company, reverse split of
any class of voting securities of the Company, or an acquisition of
securities or assets by the Company, or the sale or disposition by
the Company of all or substantially all of the Company's assets, or
if any such transaction is consummated without stockholder approval,
other than any such transaction in which the holders of outstanding
Company voting securities immediately prior to the transaction
receive, with respect to such Company voting securities, voting
securities of the surviving or transferee entity representing more
than 60 percent of the total voting power outstanding immediately
after such transaction, with the voting power of each such
continuing holder relative to other such continuing holders not
substantially altered in the transaction; or (3) if the stockholders
of the Company approve a plan of complete liquidation of the
Company.
(c) At any time and from time to time when any Option or
portion thereof is exercisable, such Option or portion thereof may
be exercised in whole or in part, as applicable; provided, however,
that the Company shall not be required to issue fractional Shares.
(v) Termination of Service Except by Death, Disability, Retirement
or Removal for Cause. In the event that the Optionee shall cease to be an
Outside Director for any reason other than death, disability, retirement
or removal for cause as further provided herein, Options may be exercised
only within three (3) months after such termination of service or such
longer period as may be established by the Committee at the time of grant
or thereafter, but only to the extent such Option was exercisable on the
last day on which the Optionee was an Outside Director, and in no event
may an Option be exercised after its Expiration Date. Any portion of the
Option which was not exercisable on such last day shall expire
immediately.
(vi) Death or Disability of Optionee. In the event an Optionee
shall die or become disabled while a director of the Company, Options may
be exercised at any time within one (1) year after the Optionee's death or
disability or such longer period as may be established by the Committee at
the time of grant or thereafter, but only to the extent that such Option
was exercisable by the Optionee on the last day on which the Optionee was
an Outside Director, and in no event may an Option be exercised after its
Expiration Date. During such one-year period, the Option may be
exercised by the Optionee or a representative, or in the case of death, by
the executors or administrators of the
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Optionee or by any person or persons who shall have acquired the Option
directly from the Optionee by bequest or inheritance. Whether an Optionee
shall have become disabled for the purposes of the Plan shall be
determined by the Committee, which determination shall be final and
conclusive.
(vii) Removal for Cause. If an Optionee is removed as a director
of the Company on account of any act of (a) fraud or intentional
misrepresentation or (b) embezzlement, misappropriation or conversion of
assets or opportunities of the Company, or any unauthorized disclosure or
confidential information or trade secrets of the Company, all unexercised
Options shall terminate as of the date of such Optionee's removal.
(viii) Retirement. To the extent an Option was exercisable on the
last date of service as a director of the Company, such Option may be
exercised up to one (1) year following the Optionee's retirement at or
after age 75 or such longer period as may be established by the Committee
at the time of grant or thereafter, but in no event may an Option be
exercised after its Expiration Date.
(ix) Recapitalization, Reorganization, Etc., of Company.
(a) Subject to any required action by the stockholders, the
number of Shares covered by each outstanding Option, and the price
per Share so covered, shall automatically be proportionately
adjusted for any increase or decrease in the number of issued shares
of Class A Common Stock of the Company resulting from a subdivision
or consolidation of Shares or the payment of a stock dividend or any
other increase or decrease in the number of such shares effected
without receipt of consideration by the Company.
(b) If, pursuant to any reorganization, recapitalization,
sale or exchange of assets, consolidation or merger, outstanding
Class A Common Stock of the Company is or would be exchanged for
other securities of the Company or of another corporation which is a
party to such transaction, or for property, whether or not any such
transaction gives rise to a Change of Ownership, any Options under
the Plan theretofore granted shall apply to the securities or
property into which the Class A Common Stock covered thereby shall
be so changed or for which such Class A Common Stock shall be
exchanged. In any of such events, the total number and class of
Shares then remaining available for issuance under the Plan
(including Shares reserved for outstanding Options and Shares
available for future grant of Options under the Plan) shall likewise
be adjusted so that the Plan shall thereafter cover the number and
class of shares equivalent to the Shares covered by the Plan
immediately prior to such event.
(c) In the event of a change in the Class A Common Stock of
the Company as presently constituted, which is limited to a change of
all of its authorized shares with par value into the same number of
shares with a different par value or without par value, the shares
resulting from any such change shall be deemed to be the Class A
Common Stock within the meaning of the Plan.
(d) Adjustments pursuant to Section 5(B)(ix)(b) hereof shall
be made by the Committee, whose determination as to which shall be
final, binding and conclusive.
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(e) Except as hereinbefore expressly provided in this Section
5(B)(ix), an Optionee shall have no rights by reason of any
subdivision or consolidation of shares of stock of any class or the
payment of any stock dividend or any other increase or decrease in
the number of shares of stock of any class or by reason of any
dissolution, liquidation, merger or consolidation or spin-off of
assets or stock of another corporation, and any class, or securities
convertible into shares of stock of any class, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Class A Common Stock subject to the
Option.
(f) The grant of an Option pursuant to the Plan shall not
affect in any way the right or power of the Company to make
adjustments, reclassifications, mergers, reorganizations or changes
of its capital or business structure, to merge or to consolidate, to
dissolve or liquidate or to sell or transfer all or any part of its
business or assets.
(x) Rights as a Stockholder. No person shall have any rights as a
stockholder with respect to any Shares covered by an Option until the date
of the issuance of the Shares to such person. No adjustments shall be
made to outstanding Options for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other
rights, except as provided in Section 5(B)(ix) hereof.
(xi) Modification, Extension and Renewal of Options. Subject to
the terms and conditions and within the limitations of the Plan, the
Committee may modify, extend or renew outstanding Options granted under
the Plan, or accept the surrender of outstanding Options (to the extent
not theretofore exercised). Notwithstanding the foregoing, however, no
modification of an Option shall, without the consent of the Optionee,
alter or impair any rights or obligations under any Option theretofore
granted under the Plan.
(xii) Investment Purpose. Each Option under the Plan shall be
granted on the condition that the purchases of Shares hereunder shall be
for investment purposes and not with a view to resale or distribution,
except that in the event the Shares subject to such Option are registered
under the Securities Act of 1933, as amended (the "Act"), or in the event
a resale of such Shares without such registration would otherwise be
permissible, such condition shall be inoperative if, in the opinion of
counsel for the Company, such condition is not required under the Act, or
any other applicable law, regulation or rule of any governmental agency.
(xiii) Other Provisions. The Option Notice shall comply with and
be subject to the terms and conditions of the Plan, and shall contain such
other terms, conditions and provisions as the Committee shall deem
advisable.
6. TERM OF PLAN
Options shall be granted pursuant to the Plan from time to time within the
period of ten years from the earlier of the date of adoption of the Plan and
the date on which the Plan is approved by the stockholders of the Company.
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7. AMENDMENT OF THE PLAN
The Board of Directors may, insofar as permitted by law, from time to
time, with respect to any Shares not then subject to Options, suspend or
discontinue the Plan or revise or amend it in any respect whatsoever, subject
to the approval of the stockholders of the Company where such approval is
required by law or regulation or pursuant to the rules of the NYSE or, if the
Shares are not listed on the NYSE, the rules of any other exchange or market on
which the Shares may be traded.
8. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of shares pursuant to
Options will be used for general corporate purposes.
9. NO OBLIGATION TO EXERCISE OPTION
The granting of an Option shall impose no obligation upon the Optionee to
exercise such Option.
10. APPROVAL OF STOCKHOLDERS
This Plan shall be effective upon its approval by the stockholders of the
Company.
11. NO RIGHT TO NOMINATION
Neither the Plan nor any action taken hereunder shall be construed as
giving any director any right to be nominated for reelection to the Company's
Board of Directors.
12. EFFECT OF PLAN UPON OTHER OPTIONS AND COMPENSATION PLANS
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company or any Subsidiary. Nothing in this
Plan shall be construed to limit the right of the Company or any Subsidiary to
(a) establish any other forms of incentives or compensation for employees or
directors of or persons associated with the Company or any Subsidiary, or (b)
grant or assume options otherwise than under this Plan in connection with any
proper corporate purpose, including, but not by way of limitation, the grant or
assumption of options in connection with the acquisition by purchase, lease,
merger, consolidation or otherwise, of the business, stock or assets of any
corporation, firm or association.
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EXHIBIT C
DELPHI FINANCIAL GROUP, INC.
LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN
1. PURPOSE
The purpose of this Long-Term Performance-Based Incentive Plan (the
"Plan") is to advance the interests of Delphi Financial Group, Inc. (the
"Company") by providing Mr. Robert Rosenkranz, Chairman, President and Chief
Executive Officer of the Company, with a compensation arrangement that rewards
him for significant gains in shareholder wealth as measured by the performance
of the Company's Class A Common Stock ("Stock") against the S&P Insurance
Composite Index Total Return to Shareholders, as defined in Section 5.2(d).
The Plan is intended to accomplish these goals by enabling the Company to
grant Awards in the form of Options and Restricted Stock or Deferred Shares,
all as more fully described below.
2. ADMINISTRATION
Unless otherwise determined by the Board of Directors of the Company (the
"Board"), the Plan will be administered by a Committee of the Board designated
for such purpose (the "Committee"). The Committee shall consist of at least
two directors. A majority of the members of the Committee shall constitute a
quorum, and all determinations of the Committee shall be made by a majority of
its members. Any determination of the Committee under the Plan may be made
without notice or meeting of the Committee by a writing signed by a majority of
the Committee members. So long as the Stock is registered under the Securities
Exchange Act of 1934 (the "1934 Act"), all members of the Committee shall be
Non-Employee Directors within the meaning of Rule 16b-3 under the 1934 Act and
outside directors within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"). The Committee will have authority, not
inconsistent with the express provisions of the Plan and in addition to other
authority granted under the Plan, to (a) grant Awards at such time or times as
they are earned in accordance with the Plan; (b) prescribe the form or forms of
instruments that are required or deemed appropriate under the Plan, including
any required written notices and elections, and change such forms from time to
time; (c) adopt, amend and rescind rules and regulations for the administration
of the Plan; and (d) interpret the Plan and decide any questions and settle all
controversies and disputes that may arise in connection with the Plan. Such
determinations and actions of the Committee, and all other determinations and
actions of the Committee made or taken under authority granted by any provision
of the Plan, will be conclusive and will bind all parties. Nothing in this
paragraph shall be construed as limiting the power of the Committee to make
adjustments under Section 8.6.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan shall be subject to approval by the stockholders of the Company,
and Awards granted prior to such approval shall also be subject to such
approval. The Plan will terminate on December 31, 2007.
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4. SHARES SUBJECT TO THE PLAN
Subject to the adjustment as provided in Section 8.6 below, the aggregate
number of shares of Stock subject to Award during any calendar year of the Plan
shall not exceed 240,000, consisting of 60,000 shares of restricted or deferred
shares of Stock and options to purchase 180,000 shares of Stock, plus the
Carryover Amount. The "Carryover Amount" is 240,000 shares, consisting of
60,000 shares of restricted or deferred shares of Stock and options to purchase
180,000 shares of Stock for each calendar year of the Plan commencing on or
after January 1, 1996 and ending prior to the year for which the Award is being
made, reduced by the number of shares of Stock for which Awards have been made
during any calendar year. The foregoing share amounts do not reflect the stock
dividend paid on September 30, 1996, which stock dividend will result in
adjustments of such share amounts under Section 8.6 hereof.
No fractional shares of Stock will be delivered under the Plan.
5. PARTICIPATION AND AWARDS
5.1 PARTICIPATION
Mr. Robert Rosenkranz, Chairman, President and Chief Executive
Officer of the Company, is the sole participant in the Plan. Mr.
Rosenkranz will receive an Award under the Plan following the end of each
Performance Period (as defined below), beginning with the year ending
December 31, 1996, when and only if the Ending Stock Value (as defined
below) exceeds the Beginning Stock Price (as defined below) by an amount
greater than the S&P Insurance Composite Index Total Return to
Shareholders over the comparable period. The first Award under the Plan
will be based on a Beginning Stock Price as of January 1, 1996 and an
Ending Stock Value as of December 31, 1996. Thereafter, Awards will be
based on the Beginning Stock Price and the Ending Stock Value for each
Performance Period.
5.2 DETERMINATION OF AWARDS
(a) Award. Promptly following the end of each Performance Period
of the Plan, the Committee shall determine whether Ending Stock Value
exceeds Beginning Stock Price for such period. If Ending Stock Value is
less than or equal to Beginning Stock Price, no Award will be made. If
Ending Stock Value exceeds Beginning Stock Price, the Committee shall then
determine the "S&P Return Value" for such period in the manner described
below. If the Ending Stock Value exceeds the S&P Return Value, Mr.
Rosenkranz will be entitled to receive an Award, as specified below,
valued at two and a half percent (2.5%) of the excess of Ending Market
Value over Beginning Market Value (the "Award Amount"). If the Ending
Stock Value for a Performance Period exceeds the Beginning Stock Price for
the period by an amount greater than the S&P Insurance Composite Index
Total Return to Shareholders over the comparable period, the Award Amount
for the Performance Period will be increased by the portion of the Award
Amount from previous Performance Periods which did not result in Awards
due to the limitation of Section 4 hereof; provided, however, that the
total Awards in any calendar year shall not exceed the maximum for the
year set forth in Section 4. To the extent required under the Code, the
Committee shall certify the achievement of the performance goals.
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(b) Beginning Stock Price. For purposes of this Plan, "Beginning
Stock Price" means the average closing price of the Stock for each of the
20 trading days commencing 10 trading days prior to the first trading day
of the relevant Performance Period; except that the Beginning Stock Price
for a particular Performance Period shall never be less than the Ending
Stock Price (as defined below) for any previously elapsed Performance
Period with respect to which an Award was made under the Plan.
(c) Ending Stock Value. For purposes of this Plan, "Ending Stock
Value" means the average closing price of the Stock for each of the 20
trading days commencing 9 trading days prior to the last trading day of
the relevant Performance Period (the "Ending Stock Price") adjusted for
the payment of cash dividends during the period, assuming such dividends
had been reinvested in Company common stock on the date paid to
stockholders using the methodology consistent with the determination of
the S&P Insurance Composite Index Total Return to Shareholders.
(d) S&P Insurance Composite Index Total Return to Shareholders.
For purposes of this Plan, "S&P Insurance Composite Index Total Return to
Shareholders" for a particular period shall mean the Standard & Poor's
Insurance Composite Index Total Return to Shareholders as determined by
Standard & Poor's Compustat, measured from the first day of the period in
question to the last day.
(e) S&P Return Value. For purposes of this Plan, "S&P Return
Value" means Beginning Stock Price multiplied by the sum of one (1) plus
the S&P Insurance Composite Index Total Return to Shareholders, provided
that the S&P Return Value for a Performance Period under the Plan may
never be less than the Beginning Stock Price for such period.
(f) Performance Period. For purposes of this Plan, "Performance
Period" means the calendar year (beginning with calendar year 1996);
provided, however, that if an Award is not made for a calendar year, the
next succeeding Performance Period shall include all calendar years
following the last calendar year for which an Award was made.
(g) Beginning Market Value. For purposes of this Plan, "Beginning
Market Value" means the Beginning Stock Price multiplied by the number of
shares of common stock of the Company outstanding on the first day of the
Performance Period (for this purpose treating shares of Company stock that
are subject to acquisition as of such day (without regard to applicable
vesting periods) under the options to purchase the common stock of SIG
Holdings, Inc. assumed by the Company pursuant to the Agreement and Plan
of Merger dated as of October 5, 1995 among SIG Holdings, Inc., the
Company and SIG Holdings Acquisition Corp. (the "SIG Option Shares") as
outstanding Company common stock).
(h) Ending Market Value. For purposes of this Plan, "Ending Market
Value" means the Ending Stock Price for the Performance Period multiplied
by the number of shares of common stock of the Company outstanding on the
last day of the Performance Period (for this purpose treating the SIG
Option Shares as outstanding Company common stock). Ending Market Value
shall be adjusted for the payment of cash dividends during the period,
assuming such dividends had been reinvested in Company common stock on the
date paid to stockholders using the methodology consistent with the
determination of the S&P Insurance Composite Index Total Return to
Shareholders.
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5.3 PAYMENT OF AWARDS
The Award to be made following any Performance Period shall consist
of:
(a) that number of shares of Restricted Stock as are determined by
dividing fifty percent (50%) of the Award Amount by the Ending Stock Price
for the period; and
(b) Options covering a number of shares of Stock equal to three
times the number of shares of Restricted Stock determined above.
The Restricted Stock and Options shall be granted upon the terms and
conditions set forth below.
5.4 DEFERRED SHARES
(a) Awards in Lieu of Restricted Stock. If the Committee
determines that the payment of an Award, in whole or in part, in shares of
Restricted Stock may result in the Company not being able to take a tax
deduction under Section 162(m) of the Code upon the vesting of such
Restricted Stock or otherwise would not be in the best interests of the
Company, or if the Committee determines that the Plan objective of
deferral of taxation may not be met by issuance of Restricted Stock, it
may elect instead to pay the Restricted Stock portion of the Award in an
equivalent number of Deferred Shares. Deferred Shares represent the right
to receive the stated number of shares of Stock upon the same events
described in Section 6.2(c) hereof for the vesting of Restricted Stock.
In the event that any Deferred Shares are awarded pursuant to this Section
5.4(a), all references to Restricted Stock in this Plan (including the
forfeiture provision in Section 6.2(c) hereof) shall be deemed to apply,
insofar as they are applicable, to the Deferred Shares.
(b) Dividend Equivalents. In the event that a dividend is paid or
property is distributed (including, without limitation, shares of Stock)
with respect to a share of Stock while a Deferred Share is outstanding,
Mr. Rosenkranz shall receive with respect to each Deferred Share then
outstanding:
(i) in the case of a cash dividend, or a distribution of
property other than Stock, dividend equivalents in cash or such
property which shall be paid concurrently with the payment of the
dividend on the Stock; and
(ii) in the case of Stock dividends, a number of additional
Deferred Shares equal to the number of whole or fractional shares of
Stock that would have been paid if the Deferred Shares had been
Stock outstanding on the date of distribution.
Any additional Deferred Shares issued under this Section 5.4(b) shall be
subject to the same terms and conditions, including with respect to
vesting, forfeiture and distribution, as apply to the Deferred Shares in
respect of which they are issued.
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5.5 AWARDS FOR PARTIAL YEARS
If Mr. Rosenkranz's employment terminates during any Performance
Period of the Plan other than by the Company for Cause or by Mr.
Rosenkranz without Good Reason, Mr. Rosenkranz will be entitled to receive
an Award based on the performance of the Stock versus the S&P Insurance
Composite Index through the date of termination. In addition, on the day
prior to the consummation of any transaction described in Section
6.2(f)(1) or (2), Mr. Rosenkranz will be entitled to receive an Award
based on the performance of the Stock versus the S&P Insurance Composite
Index through such date. The portion of any such Award that would have
been paid in Restricted Stock will be satisfied by an equivalent number of
shares of Stock free of any restrictions.
6. TYPES OF AWARDS
6.1 OPTIONS
(a) Nature of Options; Grant Date. An Option will entitle Mr.
Rosenkranz to purchase Stock at a specified exercise price. The grant
date for each Option shall be the last trading day used to determine the
Ending Stock Price used in calculating the Award.
(b) Exercise Price. The exercise price of an Option will be the
fair market value of the Stock subject to the Option, determined as of the
grant date. In no case may the exercise price paid for Stock which is
part of an original issue of authorized Stock be less than the par value
per share of the Stock.
(c) Duration of Options. The latest date on which an option may be
exercised will be the tenth anniversary of the day immediately preceding
the date the Option was granted.
(d) Exercise of Options. Options granted under any Award will be
exercisable 30 days following such grant, subject to approval of the Plan
by shareholders of the Company. Any exercise of an Option must be in
writing, delivered or mailed to the Company, accompanied by (1) any
documents required by the Committee and (2) payment in full in accordance
with paragraph (e) below for the number of shares for which the Option is
exercised.
(e) Payment for Stock. Stock purchased on exercise of an Option
must be paid for as follows: (1) in cash or by check (acceptable to the
Company in accordance with guidelines established for this purpose), bank
draft or money order payable to the order of the Company or (2) (i)
through the delivery of shares of Stock which have been outstanding for at
least six months and which have a fair market value on the last business
day preceding the date of exercise equal to the exercise price, or (ii) by
delivery of an unconditional and irrevocable undertaking by a broker to
deliver promptly to the Company sufficient funds to pay the exercise
price, or (iii) by any combination of the permissible forms of payment.
6.2 RESTRICTED STOCK
(a) Nature of Restricted Stock Award. The portion of the Award
paid in Restricted Stock entitles Mr. Rosenkranz to receive shares of
Stock subject to the restrictions described in paragraph (c) below
("Restricted Stock").
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(b) Rights as a Stockholder. Mr. Rosenkranz will have all the
rights of a stockholder with respect to the Stock granted in connection
with an Award, including voting and dividend rights, subject to the
restrictions described in paragraph (c) below, and subject to approval of
the Plan by shareholders of the Company. Certificates evidencing shares
of Restricted Stock will remain in the possession of the Company until
such shares are free of such restrictions, at which time such certificates
will be delivered to Mr. Rosenkranz.
(c) Restrictions. Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of until the
earliest of (i) Mr. Rosenkranz's termination of employment (A) by reason
of death, Disability or normal retirement in accordance with the policies
set by the Board of Directors, (B) by the Company other than for Cause or
(C) by Mr. Rosenkranz for Good Reason (each a "Qualifying Termination")
and (ii) a Change of Ownership of the Company. If the Company terminates
Mr. Rosenkranz's employment for Cause or if Mr. Rosenkranz terminates his
employment other than for Good Reason or in connection with an event
described in clause (A) above, any shares of Restricted Stock that he then
holds subject to restrictions will be forfeited to the Company.
(d) Cause. For purposes of this Plan, "Cause" means (i) conviction
of a felony or other crime involving fraud, dishonesty or moral turpitude,
(ii) fraud with respect to the business of the Company, or (iii) gross
neglect of duties of the office specified in writing by the Board. For
purposes of this Plan, Mr. Rosenkranz shall not be deemed to have been
terminated for Cause until the later to occur of (i) the 30th day after
notice of termination is given and (ii) the delivery to him of a copy of a
resolution duly adopted by the affirmative vote of not less than a
majority of the Company's directors at a meeting called and held for that
purpose, and at which Mr. Rosenkranz together with his counsel was given
an opportunity to be heard, finding that Mr. Rosenkranz was guilty of
conduct described in the definition of "Cause" above, and specifying the
particulars thereof in detail.
(e) Good Reason. For purposes of this Plan, "Good Reason" means
the voluntary termination by Mr. Rosenkranz of his employment (1) to enter
public service or (2) within 120 days after the occurrence without his
express written consent of any of the following events, provided that Mr.
Rosenkranz gives notice to the Company at least 30 days in advance
requesting that the situation be remedied, and the situation remains
unremedied upon expiration of such 30-day period:
(i) Mr. Rosenkranz's removal from, or any failure to reelect
him to, the positions of Chairman of the Board, President or Chief
Executive officer, except in connection with his termination for
Cause or Disability or termination by him other than for Good
Reason; or
(ii) reduction in Mr. Rosenkranz's rate of Base Salary for
any fiscal year to less than 100 percent of the rate of Base Salary
paid to him in fiscal 1996; or
(iii) failure of the Company to continue in effect any
retirement, life insurance, medical insurance or disability plan in
which Mr. Rosenkranz was participating on the date of Board adoption
of this Plan unless the Company provides Mr. Rosenkranz with a plan
or plans that provide substantially comparable benefits; or
(iv) a Change of Ownership; or
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(v) any purported termination by the Company of Mr.
Rosenkranz's employment for Cause that is not effected in compliance
with paragraph (d) of this Section 6.2.
(f) Change of Ownership. For purposes of this Plan, a "Change of
Ownership" shall be deemed to have occurred (1) if individuals who, as of
the effective date of this Plan, constitute the Board of Directors of the
Company (the "Board of Directors" generally and as of the date hereof the
"Incumbent Board") cease for any reason to constitute at least a majority
of the directors constituting the Board of Directors, provided that any
person becoming a director subsequent to the effective date of this Plan
whose election, or nomination for election by the Company's shareholders,
was approved by a vote of at least three-quarters (3/4) of the then
directors who are members of the Incumbent Board (other than an election
or nomination of an individual whose initial assumption of office is (A)
in connection with the acquisition by a third person, including a "group"
as such term is used in Section 13(d)(3) of the 1934 Act, of beneficial
ownership, directly or indirectly, of 20% or more of the combined voting
securities ordinarily having the right to vote for the election of
directors of the Company (unless such acquisition of beneficial ownership
was approved by a majority of the Board of Directors who are members of
the Incumbent Board), or (B) in connection with an actual or threatened
election contest relating to the election of the directors of the Company,
as such terms are used in Rule 14a-11 of Regulation 14A promulgated under
the 1934 Act) shall be, for purposes of this Plan, considered as though
such person were a member of the Incumbent Board; or (2) if the
stockholders of the Company approve a merger, consolidation,
recapitalization or reorganization of the Company, reverse split of any
class of voting securities of the Company, or an acquisition of securities
or assets by the Company, or the sale or disposition by the Company of all
or substantially all of the Company's assets, or if any such transaction
is consummated without stockholder approval, other than any such
transaction in which the holders of outstanding Company voting securities
immediately prior to the transaction receive, with respect to such Company
voting securities, voting securities of the surviving or transferee entity
representing more than 60 percent of the total voting power outstanding
immediately after such transaction, with the voting power of each such
continuing holder relative to other such continuing holders not
substantially altered in the transaction; or (3) if the stockholders of
the Company approve a plan of complete liquidation of the Company.
(g) Disability. For purposes of this Plan, "Disability" means an
illness, injury, accident or condition of either a physical or
psychological nature as a result of which Mr. Rosenkranz is unable to
perform substantially the duties and responsibilities of his position for
180 days during a period of 365 consecutive calendar days.
(h) Notice of Election. If Mr. Rosenkranz makes an election under
Section 83(b) of the Code with respect to Restricted Stock, he must
provide a copy thereof to the Company within 10 days of the filing of such
election with the Internal Revenue Service.
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7. EVENTS AFFECTING OUTSTANDING OPTIONS
7.1 QUALIFYING TERMINATION
If Mr. Rosenkranz's employment with the Company terminates in
connection with a Qualifying Termination, he (or his executor or
administrator or the person or persons to whom the Option is transferred
by will or the applicable laws of descent and distribution) may exercise
all or any Options he then holds at any time prior to the expiration of
their respective terms.
7.2 TERMINATION OF EMPLOYMENT (OTHER THAN A QUALIFYING TERMINATION)
If Mr. Rosenkranz's employment with the Company terminates other
than in connection with a Qualifying Termination, all Options will
continue to be exercisable for a period of ninety days following the
termination and shall thereupon terminate, unless the termination was by
the Company for Cause, in which case all such Options shall immediately
terminate. In no event, however, shall an Option remain exercisable
beyond the latest date on which it could have been exercised without
regard to this Section 7.
8. GENERAL PROVISIONS
8.1 DOCUMENTATION OF AWARDS
Awards will be evidenced by such written instruments, if any, as may
be prescribed by the Committee from time to time.
8.2 RIGHTS AS A STOCKHOLDER
Except as specifically provided by the Plan, the receipt of an Award
will not give Mr. Rosenkranz rights as a stockholder. He will obtain such
rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, upon actual receipt of Stock.
8.3 CONDITIONS ON DELIVERY OF STOCK
The Company will not be obligated to deliver any shares of Stock
pursuant to the Plan or to remove restrictions from shares previously
delivered under the Plan (a) until all conditions of the Award have been
satisfied or removed, (b) until, in the opinion of the Company's counsel,
all applicable federal and state laws and regulations have been complied
with, (c) if the outstanding Stock is at the time listed on any stock
exchange, until the shares to be delivered have been listed or authorized
to be listed on such exchange upon official notice of issuance, and (d)
until all other legal matters in connection with the issuance and delivery
of such shares have been approved by the Company's counsel. If the sale
of Stock has not been registered under the Securities Act of 1933, as
amended, the Company may require, as a condition to exercise of the Award,
such representations or agreements as counsel for the Company may consider
appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
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8.4 TAX WITHHOLDING
Upon the lapse of restrictions on the Restricted Stock, the delivery
of any Deferred Shares and the exercise of any Options, the Committee will
have the right to require that Mr. Rosenkranz or his representative remit
to the Company an amount sufficient to satisfy the withholding
requirements, or make other arrangements satisfactory to the Committee
with regard to such requirements, prior to the delivery of any Stock. If
and to the extent that such withholding is required, the Committee may
permit Mr. Rosenkranz or such other person to elect at such time and in
such manner as the Committee provides to have the Company hold back from
the shares to be delivered, or to deliver to the Company, Stock having a
value calculated to satisfy the withholding requirement.
8.5 NONTRANSFERABILITY OF AWARDS
Except as set forth below and in Section 6.2(c), Awards granted
hereunder may not be sold, assigned, transferred, pledged or otherwise
encumbered or disposed of other than by will or the laws of descent and
distribution. Notwithstanding the foregoing, if the Committee expressly
so provides in the applicable Award agreement (at the time of grant or at
any time thereafter), an Option granted hereunder may be transferred for
no consideration by Mr. Rosenkranz to members of his "immediate family",
to a trust or trusts established for the exclusive benefit of solely one
or more members of his "immediate family" or to a partnership in which his
"immediate family" members are the only partners. Any Option held by the
transferee will continue to be subject to the same terms and conditions
that were applicable to the Option immediately prior to the transfer,
except that the Option will be transferable by the transferee only by will
or the laws of descent and distribution. For purposes hereof, "immediate
family" means Mr. Rosenkranz's children, stepchildren, grandchildren,
parents, stepparents, grandparents, spouse, siblings (including half
brothers and sisters), in-laws, and relationships arising because of legal
adoption.
8.6 ADJUSTMENTS
(a) In the event of a stock dividend, stock split or combination of
shares, recapitalization or other change in the Company's capitalization,
or other distribution to common stockholders other than normal cash
dividends, after the effective date of the Plan, the Committee will make
any appropriate adjustments to the maximum number of shares that may be
delivered under the Plan under Section 4 above.
(b) In any event referred to in paragraph (a), the Committee will
also make any appropriate adjustments to the number and kind of shares of
stock or securities subject to Awards then outstanding or subsequently
granted, any exercise prices relating to Awards and any other provision
included in or relating to the calculation of Awards (including the
Beginning Stock Price determined in accordance with Section 5.2(b))
affected by such change. The Committee may also make appropriate
adjustments to take into account, mergers, consolidations, acquisitions,
dispositions or similar corporate transactions if it is determined by the
Committee that adjustments are appropriate to avoid distortion in the
operation of the Plan and to preserve (but not enhance) the benefits under
the Plan.
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8.7 EMPLOYMENT RIGHTS, ETC.
Neither the adoption of the Plan nor the grant of Awards will confer
upon Mr. Rosenkranz any right to continued retention by the Company as an
employee or otherwise, or affect in any way the right of the Company to
terminate an employment relationship at any time.
8.8 DEFERRAL OF PAYMENTS
The Committee may agree at any time, upon Mr. Rosenkranz's request
but subject to its discretion, to defer the date on which any payment
under an Award will be made.
8.9 EXCISE TAX GROSS-UP
In the event it shall be determined that any payment or distribution
made, or benefit provided (including, without limitation, the acceleration
of any payment, distribution or benefit and the acceleration of vesting of
any restricted stock or deferred stock), by the Company to or for the
benefit of Mr. Rosenkranz (whether paid or payable or distributed or
distributable pursuant to the terms of this Plan or otherwise, but
determined without regard to any additional payments required under this
Section 8.9) (a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Code (or any similar excise tax) or any interest or
penalties are incurred by Mr. Rosenkranz with respect to such excise tax
(such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then Mr.
Rosenkranz shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by Mr. Rosenkranz of all
taxes (including any Excise Tax, income tax or payroll tax) imposed upon
the Gross-Up Payment and any interest or penalties imposed with respect to
such taxes, Mr. Rosenkranz retains from the Gross-Up Payment an amount
equal to the Excise Tax imposed upon the Payments.
9. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
The Committee may at any time or times amend the Plan or any outstanding
Award for any purpose which may at the time be permitted by law, provided that
(except to the extent expressly required or permitted by the Plan) no such
amendment will without Mr. Rosenkranz's consent, amend the Plan or any
outstanding Award so as to adversely affect his rights under the Plan or any
outstanding Award.
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DELPHI FINANCIAL GROUP, INC.
This proxy is solicited on behalf of the Board of Directors of Delphi
Financial Group, Inc.
The undersigned stockholder hereby appoints Robert Rosenkranz and Robert M.
Smith, Jr. or either of them as attorneys or proxies, each with full power of
substitution, and hereby authorizes each of them to represent and vote in the
manner designated on the reverse side of this card (or, if no designation is
made, as provided below), all of the shares of Common Stock of Delphi Financial
Group, Inc. (the "Company") held of record by the undersigned at the close of
business on March 20, 1997 at the Company's Annual Meeting of Stockholders
scheduled to be held on May 13, 1997 at 10:00 AM, E.D.T., or any adjournments
or postponements thereof.
The undersigned acknowledges receipt of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996, Notice of Annual Meeting of
Stockholders and Proxy Statement dated April 11, 1997, and grants authority to
each of said proxies or their substitutes, and ratifies and confirms all that
said proxies may lawfully do in the undersigned's name, place, and stead.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" PROPOSAL 1, PROPOSAL 2, PROPOSAL 3, PROPOSAL 4, PROPOSAL 5, AND
PROPOSAL 6.
PLEASE VOTE, DATE, AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN ENCLOSED
ENVELOPE.
Please sign this proxy exactly as your name appears on the books of the
Company. Joint Owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more
than one name appears, a majority must sign. If a corporation, this signature
should be that of an authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
-------------------------- -------------------------
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<PAGE> 52
[ ] PLEASE MARK VOTES AS IN THIS EXAMPLE
- ----------------------------
DELPHI FINANCIAL GROUP, INC.
- ----------------------------
PROXY SOLICITED FOR THE
ANNUAL MEETING OF STOCKHOLDERS ON MAY 13, 1997
1. Election of Directors.
Class A Director:
Thomas L. Rhodes
Directors:
Robert Rosenkranz Lewis S. Ranieri
Robert M. Smith, Jr. Thomas A. Sullivan
Edward A. Fox B.K. Werner
Charles P. O'Brien
For [ ] Withhold [ ] For All Except [ ]
Note: If you do not wish your shares voted for a particular nominee, mark
the "For All Except" box and strike a line through the nominee's(s')
name(s). Your shares will be voted for the remaining nominee(s).
2. Approval of an amendment to the Restated Certificate of Incorporation of
the Company to limit the voting rights of the Class B Common Stock.
For [ ] Against [ ] Abstain [ ]
3. Approval of the Second Amended and Restated Employee Stock Option Plan.
For [ ] Against [ ] Abstain [ ]
4. Approval of the Amended and Restated Directors Stock Option Plan.
For [ ] Against [ ] Abstain [ ]
5. Approval of the Long-Term Performance-Based Incentive Plan.
For [ ] Against [ ] Abstain [ ]
6. To transact such other business that properly comes before the meeting or
any adjournment thereof.
For [ ] Against [ ] Abstain [ ]
Mark box at right if an address change or comment has been noted on the
reverse side of this card. [ ]
Please be sure to sign and date this Proxy. Date
-----------------------------
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Stockholder sign here Co-owner sign here
<PAGE> 53
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DETACH CARD DETACH CARD
DELPHI FINANCIAL GROUP, INC.
Dear Stockholder,
Please take note of the important information enclosed with this Proxy. There
are five matters related to the management and operation of your company that
require your prompt attention. These matters are discussed in the enclosed
proxy materials.
You vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the
enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders,
scheduled to be held on May 13, 1997.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Delphi Financial Group, Inc.
