-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WDR9xSvmusNWUH+N0T2891K4NVZabsYCNmjgJtO0sNCoRnBkIguYsfLDz4jwENkG vLMa86fgyCTqLE7BcF3lqw== 0000914039-98-000152.txt : 19980421 0000914039-98-000152.hdr.sgml : 19980421 ACCESSION NUMBER: 0000914039-98-000152 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980521 FILED AS OF DATE: 19980420 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRENWICK GROUP INC CENTRAL INDEX KEY: 0000787952 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 061152790 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-14737 FILM NUMBER: 98597465 BUSINESS ADDRESS: STREET 1: ONE STATION PL STREET 2: METRO CENTER CITY: STAMFORD STATE: CT ZIP: 06902 BUSINESS PHONE: 2033535500 DEF 14A 1 NOTICE OF MEETING AND PROXY STATEMENT 1 PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Filed by the registrant /X/ Filed by a party other than the registrant - Check the appropriate box: - Preliminary proxy statement - Confidential, for Use of The Commission Only (as permitted by Rule 14a-6(e)(2)) /x/ Definitive proxy statement - Definitive additional materials - Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12 TRENWICK GROUP INC. (Name of Registrant as Specified in Its Charter) ________________________________________________________________________________ (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of filing fee (Check the appropriate box): /X/ No fee required. - Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. ________________________________________________________________________________ (1) Title of each class of securities to which transaction applies: ________________________________________________________________________________ (2) Aggregate number of securities to which transaction applies: ________________________________________________________________________________ (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): ________________________________________________________________________________ (4) Proposed maximum aggregate value of transaction: ________________________________________________________________________________ (5) Total fee paid: ________________________________________________________________________________ - Fee paid previously with preliminary materials. ________________________________________________________________________________ - Check box if any part of the fee is offset as provided by change Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount previously paid: ________________________________________________________________________________ (2) Form, Schedule or Registration Statement No.: ________________________________________________________________________________ (3) Filing party: ________________________________________________________________________________ (4) Date Filed: ________________________________________________________________________________ 2 Trenwick Group Inc. [TRENWICK LOGO] Metro Center One Station Place Stamford, Connecticut 06902 April 20, 1998 Dear Fellow Stockholder: You are cordially invited to attend the Annual Meeting of Stockholders of Trenwick Group Inc. (the "Company") on Thursday, May 21, 1998, at the Hyatt Regency Greenwich, 1800 East Putnam Avenue, Old Greenwich, Connecticut, at 10:00 a.m. local time. A Notice of the Meeting, a Proxy and a Proxy Statement containing information about the matters to be acted upon at the meeting are enclosed. All holders of common stock as of the close of business on March 26, 1998, are entitled to vote at the Annual Meeting on the basis of one vote for each share of common stock held. A record of the Company's activities for the year 1997 is included in the annual report to stockholders. Whether or not you attend the Annual Meeting, the Company requests that you please exercise your voting rights by completing and returning your Proxy promptly in the enclosed self-addressed, stamped envelope. If you attend the meeting and desire to vote in person, your Proxy will not be used. Sincerely, /s/ James F. Billett, Jr. JAMES F. BILLETT, JR. Chairman, President and Chief Executive Officer 3 [TRENWICK LOGO] METRO CENTER, ONE STATION PLACE STAMFORD, CONNECTICUT 06902 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS MAY 21, 1998 To the Holders of Common Stock: The Annual Meeting of Stockholders of Trenwick Group Inc. (the "Company"), a Delaware corporation, will be held on Thursday, May 21, 1998, at the Hyatt Regency Greenwich, 1800 East Putnam Avenue, Old Greenwich, Connecticut at 10:00 a.m. local time to act upon the following matters: PROPOSAL NO. 1 To elect two directors to serve until the Annual Meeting of Stockholders in 2001. PROPOSAL NO. 2 To approve amendments to the Trenwick Group Inc. 1993 Employee Stock Option Plan to increase the aggregate number of shares of common stock authorized for issuance under the plan and to increase the maximum number of shares which may be awarded to a participant thereunder. PROPOSAL NO. 3 To ratify the appointment of Price Waterhouse LLP ("Price Waterhouse") as independent accountants for the year ending December 31, 1998. PROPOSAL NO. 4 To consider and act upon such other matters as may properly come before the meeting or any adjournment thereof. Information regarding the matters to be acted upon at the Annual Meeting is contained in the accompanying Proxy Statement. The Board of Directors has fixed the close of business on March 26, 1997, as the record date for the determination of stockholders entitled to notice of and to vote at the meeting and any postponement or adjournment thereof. Accordingly, only holders of record of the Company's common stock at the close of business on March 26, 1997, will be entitled to vote at the meeting and any adjournment or postponement thereof. MANAGEMENT SINCERELY DESIRES THE ATTENDANCE OF EVERY STOCKHOLDER AT THE MEETING. IT IS RECOGNIZED, HOWEVER, THAT SOME WILL BE UNABLE TO ATTEND. IN ORDER TO ACHIEVE A QUORUM REQUIRED TO CONDUCT BUSINESS AT THE MEETING, WE ASK THAT YOU VOTE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE SELF-ADDRESSED, STAMPED ENVELOPE. YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU ARE LATER ABLE TO ATTEND. By order of the Board of Directors, /s/ Jane T. Wiznitzer Jane T. Wiznitzer Secretary 4 [TRENWICK LOGO] METRO CENTER, ONE STATION PLACE STAMFORD, CONNECTICUT 06902 PROXY STATEMENT INTRODUCTION This Proxy Statement is being furnished by Trenwick Group Inc. (the "Company") to stockholders of the Company on or about April 20, 1998, in connection with the solicitation of Proxies for use at the Annual Meeting of Stockholders of the Company to be held on May 21, 1998, at the Hyatt Regency Greenwich, 1800 East Putnam Avenue, Old Greenwich, Connecticut at 10:00 a.m. local time for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. The cost of soliciting Proxies will be borne by the Company. The Company will supply Proxies and proxy materials as requested to brokerage houses, nominees, fiduciaries and other custodians for transmission to the beneficial owners of the Company's common stock and will reimburse such parties for reasonable expenses incurred thereby. Proxy solicitations may be made by mail, telephone and other means by employees of the Company and by others. D. F. King & Co., Inc., New York, New York, has been engaged by the Company to assist in the solicitation of Proxies for an anticipated fee of approximately $6,500, plus out-of-pocket costs and expenses. VOTING SECURITIES The close of business on March 26, 1997, has been fixed by the Board of Directors as the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting. At such date the Company had issued and outstanding 12,052,199 shares of common stock, par value $.10 per share. Each share of common stock issued and outstanding on the record date will be entitled to one vote on all matters to come before the Annual Meeting. ANNUAL REPORT A copy of the annual report to stockholders for the fiscal year 1997 containing financial statements of the Company has been mailed to all stockholders. REVOCATION OF PROXY The accompanying Proxy, if properly executed by a stockholder entitled to vote, will be voted at the Annual Meeting, but may be revoked at any time before the vote is taken by giving written notice to the Secretary of the Company, by a duly executed Proxy bearing a later date or by voting in person at the Annual Meeting. QUORUM The presence, in person and by Proxy, of a majority in number of the outstanding shares of common stock as of the record date constitutes a quorum and is required in order for the Company to conduct business at the Annual Meeting. Each share is entitled to one vote. In accordance with the Company's Restated Certificate of Incorporation, as amended, and the General Corporation Law of the State of Delaware, (i) a plurality of the votes duly cast is required for the election of directors to serve until the Annual Meeting of Stockholders in 2001; and (ii) the affirmative vote of a majority of the votes duly cast is required (a) to approve the amendment of the 1993 Employee Stock Option Plan to increase the aggregate number of shares of common stock authorized for issuance and increase the maximum number of shares which 5 may be awarded to a participant thereunder, and (b) to ratify the appointment of Price Waterhouse as independent accountants for the year ending December 31, 1998. A broker non-vote occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that proposal and has not received instructions from the beneficial owner. Under the General Corporation Law of the State of Delaware, abstaining votes and broker non-votes are deemed to be present for purposes of determining whether a quorum is present at a meeting but are not deemed to be votes duly cast. As a result, abstentions and broker non-votes will be included for the purposes of determining whether a quorum is present at the Annual Meeting, but will not be included in the tabulation of the voting results and will not have the effect of votes in opposition with respect to the election of directors, the amendment of the 1993 Employee Stock Option Plan or the ratification of the appointment of Price Waterhouse. AUTHORITY GRANTED BY THE PROXY The Proxy is in such form as to permit a vote for, or the withholding of authority to vote for, individual nominees, and to indicate separate approval, disapproval or abstention with respect to the other proposals which are identified in the Proxy and accompanying Notice of Annual Meeting of Stockholders and described in this Proxy Statement. If no instructions are indicated, Proxies returned to the Company will be voted FOR the election of the directors described herein by the persons named in the enclosed Proxy, to wit: James F. Billett, Jr., W. Marston Becker and Joseph D. Sargent, or any one or several of them as may act (the "Proxy Committee"). With respect to each of the other proposals described herein, if no instructions are indicated, the shares represented by the Proxy will be voted FOR the proposal. As to any such other matters that may properly be brought before the Annual Meeting, the shares represented by the Proxy will be voted in accordance with the judgment of the Proxy Committee. PRINCIPAL STOCKHOLDERS The following table lists the stockholders known to the Company to be beneficial owners of more than five percent of the outstanding common stock, as of the record date, based upon information filed with the Securities and Exchange Commission (the "Commission"). Such stockholders hold sole voting and dispositive power over such shares except as noted.
SHARES BENEFICIALLY NAME & ADDRESS OWNED PERCENT -------------- ------------ ------- The Prudential Insurance Company of America................. 1,294,200(1) 10.7% 751 Broad Street Newark, New Jersey 07102-3777 NewSouth Capital Management, Inc. .......................... 1,169,077(2) 9.7% 1000 Ridgeway Loop Road, Suite 233 Memphis, Tennessee 38120 Royce & Associates Inc. .................................... 933,815(3) 7.7% Royce Management Company Charles M. Royce 1414 Avenue of the Americas New York, New York 10019 The Capital Group Companies, Inc. .......................... 774,100(4) 6.4% 333 South Hope Street Los Angeles, California 90071
2 6
SHARES BENEFICIALLY NAME & ADDRESS OWNED PERCENT -------------- ------------ ------- Orion Capital Corporation................................... 608,267(5) 5.0% 9 Farm Springs Road Farmington, Connecticut 06032
- --------------- (1) Based upon information contained in Amendment No. 5, dated February 10, 1998, to Schedule 13G filed with the Commission. The Prudential Insurance Company of America may have direct or indirect voting and/or investment discretion over the shares, which are held for the benefit of its clients by its separate accounts, externally managed accounts, registered investment companies, subsidiaries and/or other affiliates, so that in the aggregate sole voting and dispositive power is held over 914,500 shares and shared voting power and dispositive power is held over 379,700 shares. (2) Based upon information contained in Amendment No. 3, dated February 12, 1998, to Schedule 13G filed with the Commission. The filing states that of the reported shares, an aggregate of 81,625 shares are managed by NewSouth Capital Management, Inc. ("NewSouth"), a registered investment adviser, through various programs whereby accounts are placed with NewSouth for management and the respective programs retain responsibility for Commission filings should their cumulative holdings trigger the need for 13G reporting. Sole voting power is held over 1,094,077 shares, shared voting power is held over 75,000 shares and sole dispositive power is held over all the shares. (3) Based upon information contained in Amendment No. 1, dated February 4, 1998, to Schedule 13G filed with the Commission. Royce & Associates Inc. holds sole voting and dispositive power over 933,815 shares and Royce Management Company holds sole voting and dispositive power over 30,650 shares. Both are registered investment advisers. Mr. Royce may be deemed a controlling person of those entities. (4) Based upon information contained in Amendment No. 10, dated June 10, 1997, to Schedule 13G filed with the Commission. The Capital Group Companies, Inc. is the parent holding company of a group of investment management companies that have investment power and, in some cases, voting power over the shares, but does not itself have investment or voting power over them. The investment management companies provide investment advisory and management services for clients which include registered investment companies and institutional accounts. Sole voting power is held with respect to 399,100 shares, and sole dispositive power is held with respect to all the shares. (5) Based upon information contained in Amendment No. 5 dated March 18, 1997, to Schedule 13G filed with the Commission. The shares are held by Orion Capital Corporation's wholly owned subsidiaries, The Connecticut Indemnity Company (149,999 shares), Design Professionals Insurance Company (42,400 shares), EBI Indemnity Company (51,450 shares), The Fire and Casualty Insurance Company of Connecticut (35,700 shares) and Security Insurance Company of Hartford (328,718 shares). PROPOSAL NO. 1 ELECTION OF DIRECTORS The Board of Directors is divided into three classes, each currently consisting of three directors. Each class serves three years, with the terms of office of the respective classes expiring in successive years. The term of the office of directors in Class II expires at the 1998 Annual Meeting. The Board of Directors proposes that the nominees described below be elected to Class II for a new term of three years and until their successors are duly elected and qualified. Both of the 3 7 nominees are currently serving as Class II directors and were elected to Class II at the 1995 Annual Meeting. Dr. Herbert Palmberger, who is also currently serving as a Class II director, recently advised the Board of Directors that he would not stand for re-election. The Board of Directors has not yet met to consider a replacement for the Class II directorship held by Dr. Palmberger. Proxies may be voted only for the two nominees to Class II. Although the Board of Directors does not contemplate that either of the nominees will be unable to serve, if such a situation arises prior to the meeting, the Proxy Committee will vote in accordance with its best judgment. Unless otherwise directed, all returned Proxies will be voted FOR the election of the directors standing for election in Class II. CLASS II: DIRECTORS STANDING FOR ELECTION FREDERICK D. WATKINS Director since 1979(1) Frederick D. Watkins, 82, has been a member of the Executive Committee of the Board of Directors (the "Executive Committee") since 1979, a member of the Compensation Committee of the Board of Directors (the "Compensation Committee") since 1986, a member of the Audit Committee of the Board of Directors (the "Audit Committee") since 1988 and a director of Trenwick America Reinsurance Corporation ("Trenwick America Re"), the Company's U.S. operating subsidiary, since 1983. He is retired Executive Vice President of Connecticut General Insurance Corporation (1979-1980) and former President of Aetna Insurance Company (1966-1979), which he joined in 1937. Mr. Watkins was Chairman of Terra Nova Insurance Company Ltd. from 1978 until 1994. STEPHEN R. WILCOX Director since 1978(1) Stephen R. Wilcox, 64, has been a member of the Investment Committee since 1979 and a member of the Audit Committee since 1985, serving as the latter's Chairman since 1988. On April 1, 1998, Mr. Wilcox became President and Chief Executive Officer of Kelton International Inc., a securities broker-dealer. He was previously President of The Wilcox Group, Inc., a financial and consulting firm, and Senior Vice President of Conning & Company, with which he was associated from 1958 to 1988. CLASS III: TERM EXPIRES AT THE 1999 ANNUAL MEETING ANTHONY S. BROWN Director since 1990 Anthony S. Brown, 55, has served as a member of the Audit Committee since 1991. He is a Professor at the Terry Sanford Institute of Public Policy at Duke University and was Director of Equity Administration of The First Boston Corporation, an investment banking firm, between 1991 and 1993. Prior to 1991, Mr. Brown was Vice President, External Affairs, of the University of Connecticut and was formerly Chairman and Chief Executive Officer of Covenant Insurance Company, with which he was associated from 1968 to 1989. NEIL DUNN Director since 1984(1) Neil Dunn, 48, has been a member of the Investment Committee since 1984 and a member of the Executive Committee and the Compensation Committee since 1986. He is Managing Director of Kempen Capital Management (UK) Ltd and previously served in the same capacity for Voyageur International Asset Managers Ltd and for Piper International Asset Management, an affiliate of Piper Jaffray Companies Inc. Prior to 1994, Mr. Dunn was Senior Partner of the investment advisory firm Neil Dunn & Company, Scotland. 4 8 P. ANTHONY JACOBS Director since 1979(1) P. Anthony Jacobs, 56, a member of the Investment Committee since 1979 and of the Executive Committee and Compensation Committee since 1986, has been Chairman of the Board of SHL Corporation, a holding company whose primary business is the development of a synthetic liquid hydrocarbons technology, since December 1996. In addition, since September 1997, Mr. Jacobs has served as President and Chief Executive Officer of Lab Holdings, a holding company with subsidiary operations in insurance testing, substance abuse testing and clinical laboratory testing, where he also served as President from May 1993 to September 1997 and as Chief Operating Officer from May 1990 to September 1997. Mr. Jacobs is also a director of Response Oncology, Inc. and Syntroleum Corporation. CLASS I: TERM EXPIRES AT THE 2000 ANNUAL MEETING JAMES F. BILLETT, JR. Director since 1978(1) James F. Billett, Jr., 53, has served as Chairman of the Board and Chief Executive Officer of the Company and its predecessor since 1978 and resumed the Presidency in 1988. He is Chairman of the Company's Executive Committee and Investment Committee and is Chairman, President and Chief Executive Officer of Trenwick America Re. Mr. Billett also serves as a Director and Chairman of Trenwick Holdings Ltd. ("Trenwick Holdings"), the holding company for the Company's London-based operating subsidiary Trenwick International Ltd. ("Trenwick International"), of which he is also a Director. Mr. Billett was formerly a Vice President of General Reinsurance Corporation. W. MARSTON BECKER Director since 1997 Mr. Becker, 45, has been Chairman of the Board and Chief Executive Officer of Orion Capital Corporation ("Orion") since January 1997. He was previously Vice Chairman of the Board (March 1996 to December 1996) and Senior Vice President (July 1994 to March 1996) of Orion and served as President and Chief Executive Officer of the DPIC Companies (subsidiaries of Orion) from July 1994 to June 1996 and as President and Chief Executive Officer of McDonough Caperton Insurance Group, an insurance brokerage firm, from March 1987 to July 1994. Trenwick America Re is a reinsurer of various Orion subsidiaries. In each case, Trenwick America Re is a participant in a treaty which includes other independent reinsurers subject to the same terms and conditions. Aggregate reinsurance premiums written with Orion subsidiaries in 1997 were $1.8 million, representing less than 1% of total reinsurance premiums written by Trenwick America Re for the year. JOSEPH D. SARGENT Director since 1978(1) Joseph D. Sargent, 68, has been a member of the Executive Committee since 1979 and of the Compensation Committee since 1986. He is Chairman of Bradley, Foster & Sargent, an investment advisory firm, and Vice Chairman and Treasurer of Connecticut Surety Corporation, the parent holding company of The Connecticut Surety Company, where he formerly served as Chairman and Chief Financial Officer. Mr. Sargent is a member of the Board of Directors of Mutual Risk Management, Ltd., MMI Companies Inc., E. W. Blanch Holdings, Executive Risk Inc., Policy Management Systems Corporation and Command Systems Inc. There are no family relationships among any directors and executive officers of the Company. 5 9 All directors have entered into indemnification agreements with the Company which limit a director's personal liability, as a result of serving as a director, to the maximum extent permitted by Delaware law. - --------------- (1) Dates earlier than December 30, 1985, reflect Board membership of Trenwick Limited, the Company's predecessor. THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES OF THE BOARD The Board of Directors held five meetings during the fiscal year 1997. No director attended fewer than 75% of the aggregate number of meetings of the Board and Board Committees on which the director served. The Company does not have a Nominating Committee and nominations for directors are made by the Board of Directors. The Audit Committee is composed of Messrs. Wilcox -- Chairman, Brown, Palmberger (whose term as a director will expire at the 1998 Annual Meeting) and Watkins. The Committee has responsibility to recommend to the Board of Directors the selection of the Company's independent accountants, to review and approve the scope of the independent accountants' audit activity, to review the financial statements which are the subject of the independent accountants' certification and to review with such independent accountants the adequacy of the Company's accounting systems and systems of internal accounting control. The Audit Committee met four times during 1997. The Compensation Committee is composed of Messrs. Watkins -- Chairman, Becker, Dunn, Jacobs and Sargent. The Committee exercises authority with respect to the Company's compensation structure for senior executives and other key employees, approves cash compensation and non-stock based benefits for the Chief Executive Officer and executive officers, and designs, recommends for Board approval and administers the Company's stock-based compensation plans. The Compensation Committee met four times during 1997. The Executive Committee is composed of Messrs. Billett -- Chairman, Dunn, Jacobs, Sargent and Watkins. The Committee meets when required on short notice during intervals between the meetings of the Board of Directors and has authority to exercise all the powers of the Board of Directors concerning the management and direction of the affairs of the Company, subject to specific directions of the Board of Directors and subject to the limitations of the General Corporation Law of the State of Delaware. The Executive Committee met three times during 1997. The Investment Committee is composed of Messrs. Billett -- Chairman, Dunn, Jacobs and Wilcox. The Committee exercises authority with respect to financial matters including the investment of the Company's assets, assessment of the potential impact of both short-term and long-term economic trends and the establishment of related investment guidelines. The Investment Committee met four times during 1997. MANAGEMENT The following table reflects information as of the date of this Proxy Statement regarding the number of shares of the Company's Common Stock beneficially owned by each director, by the 6 10 executive officers named in the Summary Compensation table below and by all directors and executive officers as a group:
AMOUNT OF BENEFICIAL OWNERSHIP(1) ----------------------------- NUMBER OF SHARES COMMON STOCK PERCENT ---------------- ------- DIRECTORS W. Marston Becker.................................... 611,267(2) 5.0% Anthony S. Brown..................................... 8,625(3) * Neil Dunn............................................ 7,500(3) * P. Anthony Jacobs.................................... 9,000(3) * Herbert Palmberger................................... 375 * Joseph D. Sargent.................................... 122,676(3)(4) 1.0% Frederick D. Watkins................................. 11,700(3) * Stephen R. Wilcox.................................... 6,000(3) * NAMED EXECUTIVE OFFICERS - ------------------------------------------------------- James F. Billett, Jr. ............................... 302,970(5) 2.5% Stephen H. Binet..................................... 87,224(6) 0.7% Paul Feldsher........................................ 70,746(7) 0.6% Alan L. Hunte........................................ 77,893(8) 0.6% James E. Roberts..................................... 27,472(9) 0.2% Directors and executive officers as a group (15 individuals)......................................... 1,425,987 11.6%
- --------------- * Less than 0.1% (1) Includes, in each case, shares deemed to be beneficially owned by such persons because they hold or share investment or voting power. Includes, as to directors, a total of 39,000 shares subject to outstanding stock options which are vested and exercisable within 60 days of the date of this Proxy Statement. Includes, as to executive officers, a total of 215,070 shares subject to outstanding stock options which are vested and exercisable within 60 days of the date of this Proxy Statement and 72,438 Restricted Shares not vested within 60 days of the date of this Proxy Statement, but which have full dividend and voting rights and which are included in the computation of such executive officers' percentage of beneficial ownership. (2) Includes 3,000 shares subject to stock options which are vested and exercisable within 60 days of the date of this Proxy Statement. Also includes the shares attributed to Orion Capital Corporation (see "Principal Stockholders"). Mr. Becker is Chairman of the Board and Chief Executive Officer of Orion Capital Corporation and serves on its Investment and Executive Committees. He disclaims beneficial ownership of the shares attributed to Orion Capital Corporation. (3) Includes 6,000 shares subject to stock options which are vested and exercisable within 60 days of the date of this Proxy Statement. (4) Also includes 30,150 shares owned by relatives or held in trust for them, as to which Mr. Sargent disclaims beneficial ownership. (5) Includes 59,445 shares subject to stock options which are vested and exercisable within 60 days of the date of this Proxy Statement and 20,741 Restricted Shares which are not vested within 60 days of the date of this Proxy Statement, but which have full dividend and voting rights. (6) Includes 43,500 shares subject to stock options which are vested and exercisable within 60 days of the date of this Proxy Statement and 11,046 Restricted Shares which are not 7 11 vested within 60 days of the date of this Proxy Statement, but which have full dividend and voting rights. (7) Includes 26,250 shares subject to stock options which are vested and exercisable within 60 days of the date of this Proxy Statement and 10,096 Restricted Shares which are not vested within 60 days of the date of this Proxy Statement, but which have full dividend and voting rights. (8) Includes 25,125 shares subject to stock options which are vested and exercisable within 60 days of the date of this Proxy Statement and 9,396 Restricted Shares which are not vested within 60 days of the date of this Proxy Statement, but which have full dividend and voting rights. (9) Includes 5,625 shares subject to stock options which are vested and exercisable within 60 days of the date of this Proxy Statement and 12,446 Restricted Shares which are not vested within 60 days of the date of this Proxy Statement, but which have full dividend and voting rights. BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS Stephen H. Binet, 43, a director of Trenwick America Re since 1988 and an Executive Vice President since 1993, co-heads its underwriting operations and chairs its Marketing Committee. Mr. Binet joined Trenwick America Re in 1980, prior to which time he was employed by General Reinsurance Corporation. Pierre D. Croizat, 57, was named Managing Director and Chief Executive Officer of Trenwick Holdings and a Director and Chairman of Trenwick International in February 1998. From April 1996 until joining the Company in September 1997, he was engaged in reinsurance consulting. Previously, he headed the Paris-based SOREMA Group of global reinsurance companies. Paul Feldsher, 49, has been a director of Trenwick America Re since 1988 and was appointed Executive Vice President in 1993. Mr. Feldsher manages Trenwick America Re's underwriting policy and quality control operations and chairs its Underwriting Committee. He also serves as a Director of Trenwick Holdings. He began his career with Liberty Mutual Insurance Company in 1972 and was employed by North American Reinsurance prior to joining Trenwick America Re in 1983. Robert A. Giambo, 44, has served as a director and Chief Actuary of Trenwick America Re since 1988, and was appointed Executive Vice President in 1993. He is also a Director of Trenwick Holdings. Prior to joining Trenwick America Re in 1986, he was associated with The Home Insurance Company and The Insurance Services Office. Mr. Giambo received his Casualty Actuarial Fellowship in 1980. Alan L. Hunte, 48, was appointed Vice President of the Company in 1984, Treasurer in 1987 and Chief Financial Officer in 1993. He has been a director and Treasurer of Trenwick America Re since 1988 and also Executive Vice President and Chief Financial Officer of Trenwick America Re since 1993. He serves as a Director of both Trenwick Holdings and Trenwick International. Mr. Hunte is a Chartered Accountant, having served as audit manager with Price Waterhouse, with which he was associated prior to joining the Company in 1981. James E. Roberts, 52, was appointed director and Vice Chairman of Trenwick America Re in May 1995. Mr. Roberts co-heads Trenwick America Re's underwriting operations. He was previously associated with Re Capital Corporation and its principal operating subsidiary, Re Capital Reinsurance Corporation, a property-casualty reinsurer. At the former, he served as President and Chief Executive Officer from March 1992 until joining Trenwick America Re. He was President and Chief Executive Officer of the operating subsidiary from 1991 until May 1995. 8 12 DIRECTORS' COMPENSATION During the year ended December 31, 1997, each non-employee director chairing a Board Committee received an annual retainer of $17,500, and each other non-employee director received an annual retainer of $15,000. In addition, each non-employee director received a fee of $1,000 for each Board meeting attended, plus reimbursement of all customary expenses incurred in connection with attendance at Board meetings. Directors who served on the various Board Committees each received, in addition to the above amounts, a meeting fee of $750 per Committee meeting attended in conjunction with a regularly scheduled Board meeting and $1,000 per Committee meeting attended not in conjunction with a regularly scheduled Board meeting, plus reimbursement of customary expenses incurred in connection with attendance at each Committee meeting. The Company also pays the premium to provide the directors with $250,000 of coverage under a group Travel Accident Insurance policy. Under the Company's Deferred Compensation Plan, non-employee directors may elect to defer receipt of all or a portion of fees to be earned in the next succeeding year and have such fees accrue either (i) at the interest rate determined by the Compensation Committee or (ii) based upon the performance of the Company's common stock, including any dividends paid thereon. A participating non-employee director will receive all amounts so deferred and accrued in one payment on the first business day of the year following the year in which the participant ceases to be a director. OTHER COMPENSATION FOR OUTSIDE DIRECTORS The Company maintains a Retirement Plan which covers non-employee directors. At the time of retirement, a director becomes entitled to receive, for that number of years equal to the number of years of service as a director, an annual pension benefit equal to 50% of the amount of the director's final annual retainer. Except for Mr. Watkins, who has been exempted, directors who have attained age 70 cannot stand for re-election and must retire. Pursuant to the 1993 Stock Option Plan for Non-Employee Directors (the "Option Plan"), each of the Company's eligible non-employee directors has received a one-time grant of an option for 3,000 shares of the Company's common stock. Under the Option Plan, each eligible director is granted an option for an additional 750 shares immediately following each Annual Meeting. EXECUTIVE COMPENSATION The following table sets forth information concerning the annual and long-term compensation for services in all capacities to the Company for the calendar years ended December 31, 9 13 1997, 1996 and 1995 of all persons who were, at December 31, 1997, the Chief Executive Officer and the four most highly paid officers of the Company (the "Named Executives"): SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION ANNUAL COMPENSATION AWARDS -------------------------------- ------------------------- RESTRICTED SECURITIES NAME & OTHER ANNUAL SHARE UNDERLYING ALL OTHER PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS/ COMPENSATION POSITION YEAR ($)(1) ($)(2) ($)(3) ($)(4) SARS (#) ($)(5) - --------- ---- ------- ------- ------------ ------------ ---------- ------------ James F. Billett, Jr. ............... 1997 446,492 405,000 88,201 108,183 Chairman, President & 1996 430,496 375,000 84,373 97,717 Chief Executive Officer 1995 414,384 335,000 81,888 71,183 Stephen H. Binet..................... 1997 247,692 200,000 32,490 Executive Vice President* 1996 237,808 175,000 30,667 1995 228,423 150,000 18,131 Paul Feldsher........................ 1997 212,692 225,000 32,509 Executive Vice President* 1996 203,038 150,000 30,686 1995 180,577 120,000 18,344 Alan L. Hunte........................ 1997 187,692 250,000 32,513 Vice President, 1996 177,923 125,000 30,690 Chief Financial Officer 1995 163,846 120,000 18,392 & Treasurer James E. Roberts**................... 1997 296,769 200,000 31,240 Vice Chairman* 1996 283,462 175,000 10,000 29,480 1995 190,385 100,000 306,250 25,000 2,000
- --------------- * The position is with the Company's U.S. operating subsidiary, Trenwick America Re. ** Mr. Roberts joined Trenwick America Re in May 1995. (1) Includes all before-tax contributions to the Company's 401(k) Savings Plan. (2) Includes cash bonus awards earned for the indicated calendar years. (3) Consists of personal benefits provided by the Company for the indicated calendar years in which the amounts exceeded the lesser of $50,000 or ten percent of the Named Executive's combined salary and bonus for the year. Includes for 1997, 1996 and 1995 supplemental whole life and health benefits of $43,653, $43,653, and $42,888, respectively, and for 1997, 1996 and 1995 automobile expenses of $38,868, $35,040 and $26,748, respectively. (4) Mr. Roberts was awarded 7,000 Restricted Shares on May 24, 1995, based on a market price per share of $43.75 and vesting in equal annual installments over three years beginning in March 1996. Restricted Shares were not awarded to any other Named Executive during the periods indicated. Dividends are paid on Restricted Shares at the same rate as paid to all stockholders and, as permitted, those amounts have not been included in this table. The aggregate total of unvested Restricted Share holdings of each of the Named Executives, valued as of December 31, 1997, at a market price per share of $37.625, are as follows:
UNVESTED NAME RESTRICTED SHARES VALUE($) - ---- ----------------- -------- James F. Billett, Jr. .......................... 623 23,440 Stephen H. Binet................................ 281 10,573 Paul Feldsher................................... 293 11,024 Alan L. Hunte................................... 312 11,739 James E. Roberts................................ 3,501 131,725
(5) Includes Company contributions to the Company's 401(k) Savings Plan on behalf of each of the Named Executives of $9,500 in 1997, $9,000 in 1996 and $2,000 in 1995 (the maximum contribution under the Plan in each case). Also includes Company contributions to the Company's Pension Plan, a qualified defined contribution plan (the "Qualified Pension Plan"), of $12,800 in 1997 and $12,000 in 1996 for each of the Named Executives and $8,664 in 1995 for each of the Named Executives except Mr. Roberts (who was not 10 14 eligible to participate until 1996). Also includes contributions made and interest credited for each of these Named Executives to the Company's Supplemental Executive Retirement Plan (consisting of contributions in excess of Qualified Pension Plan contribution limits imposed by the Internal Revenue Code). For Mr. Billett, contributions were $52,920, $49,276, and $38,877, respectively, and interest credited was $32,963, $27,441, and $21,641, respectively, for 1997, 1996 and 1995. For 1997, the contribution for each of the other Named Executives was $8,240 and interest credited was $1,950, $1,969, $1,973, and $700 for Messrs. Binet, Feldsher, Hunte, and Roberts, respectively. For 1996, the contribution for each of the other Named Executives was $8,480, and interest credited for Messrs. Binet, Feldsher and Hunte was $1,187, $1,206, and $1,212, respectively. For 1995, contributions for Messrs. Binet, Feldsher and Hunte were $6,930, $7,143 and $7,192, respectively, and interest credited was $537 for each of them. Mr. Roberts was not eligible to participate in the Supplemental Executive Retirement Plan until 1996. The following table sets forth all stock options exercised during 1997 by the Named Executives and the number of unexercised options held by the Named Executives at December 31, 1997. Also included is the value of "in-the-money" options on December 31, 1997. In-the-money options are options whose exercise price is less than the fair market value of the Company's common stock. AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY OPTIONS/SARS OPTIONS/SARS SHARES AT FY-END (#) AT FY-END($)(2) ACQUIRED VALUE -------------- ------------------- EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/ NAME (#) ($)(1) UNEXERCISABLE UNEXERCISABLE ---- -------- -------- -------------- ------------------- James F. Billett, Jr........ -- -- 59,445/127,500 1,217,956/1,396,763 Stephen H. Binet............ 22,500 511,275 40,500/ 79,500 659,858/ 867,443 Paul Feldsher............... 11,250 226,448 42,000/ 66,750 733,815/ 727,766 Alan L. Hunte............... 18,750 407,813 22,125/ 60,375 228,459/ 657,928 James E. Roberts............ -- -- 5,625/ 46,875 48,516/ 326,747
- --------------- (1) Represents in each case the difference between the fair market value per share of the Company's common stock on the date of exercise and the option exercise price per share. (2) Represents the difference between the closing price per share of the Company's common stock on December 31, 1997, of $37.625 and the exercise price of "in-the-money" options granted to each Named Executive. The dollar amounts shown reflect the value of options granted over a period of more than nine years. REPORT OF THE COMPENSATION COMMITTEE ON THE COMPENSATION OF EXECUTIVE OFFICERS OF THE COMPANY The Compensation Committee of the Board of Directors (the "Committee") is composed entirely of five independent outside directors, four of whom have served together in such capacity since 1986. The fifth, W. Marston Becker, was named to the Committee in May 1997. The Committee meets periodically to review and recommend for Board approval the Company's compensation program for senior executives and other key employees and independently administers the stock option and other incentive plans of the Company. 11 15 The guiding principle of the Committee is to establish a compensation program which aligns executive compensation with the Company's objectives, business strategies and financial and operational performance. In this connection, the Committee seeks to: (1) Attract and retain qualified executives, in a highly competitive environment, who will play a significant role in the achievement of the Company's goals. (2) Create a performance-oriented environment that rewards performance with respect to the financial and operational goals of the Company and which takes into account industry-wide trends and performance levels. (3) Reward executives for strategic management and the long-term enhancement of stockholder value. Compensation for the Named Executives consists of three key elements: base salary and benefits, discretionary annual cash bonus and stock-based compensation. The Committee seeks to weigh each element both separately and collectively to ensure that the executive officers are appropriately compensated in a manner that advances both the short-term and long-term interests of the stockholders. During 1997, the Committee retained an independent compensation consulting firm to undertake a comparative analysis of the Company's executive compensation practices. The firm concluded that while the Company's base salary structure was commensurate with its peer group, the Company's incentive compensation (i.e., annual cash bonuses and stock-based awards) significantly lagged that of its peers and placed the Company at a competitive disadvantage for a limited pool of top-quality industry executives. The base salary for each executive officer is set on the basis of the salary levels in effect for comparable positions in the reinsurance industry, adjusted for the executive's experience and performance level and internal comparability considerations. The Company monitors industry salary levels through its participation in an annual industry survey administered by a nationally known compensation consulting firm. The Committee believes that base salaries should be adjusted from time to time with the objective of remaining within the range of the 50th through the 75th percentiles of the Company's peers based on survey information available to the Committee. In addressing the second compensation element, the Committee considered the material provided by the consulting firm and approved an increase in the maximum annual cash bonuses payable to executive officers and the establishment of a menu of measures to be utilized in setting goals and evaluating annual performance. These measures include return on equity (ROE), growth in earnings per share (EPS), growth in dividend-adjusted book value per share, total return to shareholders and combined ratio (calculated by dividing claims, claims expenses, policy acquisition costs and underwriting expenses by net premiums earned), each of which is to be considered on an absolute basis and in comparison to the company's peers, as well as the accomplishment of tactical and strategic objectives. The Committee fixes the amount that may be awarded to the Chief Executive Officer ("CEO") and an aggregate amount that may be awarded to other executive officers. The CEO allocates awards among the other executive officers up to the aggregate amount, which allocations are then reviewed and ratified by the Committee. In authorizing 1997 bonuses for executive officers, the Committee emphasized the Company's excellent strategic performance and identified three accomplishments which merited particular recognition, i.e., the development and implementation of a plan to establish an international presence; the adherence to strict underwriting discipline in the face of an increasingly competitive market; and the restructuring of the Company's balance sheet. The Committee also took into account the numerical measures specified in the preceding paragraph. The Company's third compensation element, stock-based compensation, provides each executive officer with a meaningful stockholding in the Company as a long-term incentive and a 12 16 mechanism for aligning the executive officers' interests with those of the stockholders. Under the Company's stock plans, the Committee has the opportunity to award both stock options and restricted stock to executive officers. Each is linked to the creation of stockholder value by providing additional value to the executive as the Company's stock price increases. Options are exercisable over an extended period of time and expire within ten years of grant. Option grants are made at an exercise price not less than the fair market value of the underlying stock at the time of grant. Restricted Shares cannot be transferred until the shares vest, with vesting occurring over an extended time subject to the executive officer's continued employment. The holder has all the rights and privileges of a stockholder with respect to the Restricted Shares, other than the ability to transfer them, including the right to vote and to receive dividends. During the four-year period following the Committee's December 1993 grant of non-qualified stock options to the Company's executive officers, the Committee made no stock-based awards to this group except for those made to James E. Roberts (who joined the Company in 1995) in order to afford him an equity appreciation opportunity commensurate with those of his peers. The compensation study identified stock-based compensation as an area where the Company was no longer competitive and recommended (i) a one-time Restricted Share award to each executive officer, approximately equal in value to his annual salary as then in effect, for the purpose of rectifying the shortfall in stock-based compensation; and (ii) annual awards of Restricted Shares and stock options with a potential total value of up to a maximum of 150% of the recipient's annual salary. The Committee concurred with the consulting firm's recommendations and implemented them during the first quarter of 1998; the one-time Restricted Share award was effected on January 20, 1998, and the annual Restricted Share and stock option program was initiated on March 4. Under the terms of the Company's 1993 Stock Option Plan (the "Plan"), no individual may receive aggregate awards in excess of 150,000 shares. Because the CEO had been granted options for 150,000 shares under the Plan in 1993, his 1998 stock awards were made subject the approval by the Company's stockholders of an amendment to the Plan to revise the limit on shares awarded to any individual, as further described under Proposal No. 2 on page 15. The Committee believes that the new stock-based compensation structure will promote the retention of key employees in a highly competitive labor environment while emphasizing the alignment between their interests and those of the Company's stockholders. COMPENSATION OF THE CHIEF EXECUTIVE OFFICER Mr. Billett's base salary is set using the same criteria as all other executive officers and is in the approximate midpoint of the range of salaries for comparable positions in the 1997 industry survey data. His 1997 cash bonus award reflected the Company performance factors cited above and additionally rewarded his success in initiating the Company's global expansion: In September 1997, Mr. Billett succeeded in attracting Pierre Croizat, an international insurance executive with more than 31 years of experience, to lead the Company's international operations, and in the last quarter of the year he and Mr. Croizat led the negotiations for the acquisition of Trenwick International Ltd. (formerly SOREMA (UK) Ltd.), an effort which culminated in a definitive purchase agreement on January 16, 1998. COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m) Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation over $1 million paid to the Company's Chief Executive Officer and the four other most highly compensated executive officers. However, qualifying performance-based compensation is not subject to the deduction limit if certain requirements are met. No executive officer was subject to the limitations of Section 162(m) in 1997. The Committee structures stock-based compensation for executive officers so as to qualify for deductibility under the statute to the extent feasible. However, to maintain a competitive position within the 13 17 Company's peer group, the Committee retains the authority the approve stock-based compensation that may not be deductible. Members of the Compensation Committee Frederick D. Watkins, Chairman W. Marston Becker Neil Dunn P. Anthony Jacobs Joseph D. Sargent STOCKHOLDER RETURN PERFORMANCE PRESENTATION Set forth below is a line graph for the five year period commencing January 1, 1993 and ending December 31, 1997, comparing the yearly percentage change on a dividend reinvestment basis of the Company's common stock against the cumulative total stockholder return of the Standard & Poor's 500 Stock Index ("S&P 500 Index") and the Dow Jones Property and Casualty Insurance Index.
Property- Measurement Period Trenwick Group Casualty (Fiscal Year Covered) Inc. S&P 500 Index Insurance Dec. 1992 100.00 100.00 100.00 Dec. 1993 97.97 110.08 110.83 Dec. 1994 108.90 111.53 106.03 Dec. 1995 148.09 153.45 149.79 Dec. 1996 124.81 188.68 180.10 Dec. 1997 156.54 251.64 263.53
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's common stock, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Based on the Company's review of all insiders' filings received, and written representations from reporting persons that no Forms 5 were required for such persons, the Company believes there were no Section 16 violations for 1997 other than the inadvertent one-week delay in Mr. Roberts' reporting of his October 31 sale of 2,000 shares of the Company's Common Stock. 14 18 PROPOSAL NO. 2 APPROVAL OF AMENDMENTS TO 1993 STOCK OPTION PLAN Proposed Amendments The Board of Directors has approved amendments to the Trenwick Group Inc. 1993 Stock Option Plan (the "Plan"), subject to the approval of the Company's stockholders, to (i) increase the aggregate number of shares authorized for issuance under the Plan by 500,000 shares and (ii) increase the maximum number of shares which may be awarded under the Plan to any one participant from 150,000 (22.2% of the shares originally authorized under the Plan) to 450,000 (26.9% of the authorized shares as proposed to be increased). As currently in effect, the Plan provides for the issuance of up to 1,175,000 shares of common stock. The Compensation Committee has granted options for an aggregate of 779,710 shares under the Plan, none of which have been exercised, and has awarded 53,488 Restricted Shares under the Plan, leaving 341,802 shares available for potential future awards. If the proposed amendments to the Plan are approved by the stockholders, a total of 841,802 shares would be available for potential future awards. The amendments will be adopted if they are approved by the affirmative vote of a majority of the votes duly cast in person or by Proxy at the Annual Meeting. There are currently 271,714 shares reserved for issuance under the Company's other stock plans, of which 227,198 shares are reserved for outstanding options and 44,516 shares are reserved for potential future awards (22,500 shares reserved for automatic stock option grants under the Non Employee Directors' Stock Option Plan and 22,016 shares reserved for awards under the 1989 Stock Plan, which is currently used only for awards of Restricted Stock). Purpose of Amendments The Board of Directors believes that the Plan promotes continuity of management and increased incentive and personal interest in the welfare of the Company by those who are responsible for shaping and carrying out the long-range plans of the Company and securing its continued growth and financial success. As described in the Report of the Compensation Committee beginning on page 11, the Committee awarded Restricted Shares to executive officers in January 1998, including an award of 12,550 shares to Mr. Billett vesting in equal annual installments over five years beginning in January 1999, and adopted a new stock-based incentive compensation program for executive officers in March 1998 pursuant to which Mr. Billett received 8,191 Restricted Shares vesting in equal annual installments over five years beginning in March 1999 and options for 24,573 shares at an exercise price of $36.625, vesting on the same schedule as the Restricted Shares and expiring ten years from the date of grant. Because his 150,000-share award in 1993 was the maximum permitted under the Plan, Mr. Billett's January and March awards were made subject to the approval and ratification by the stockholders of the amendments to the Plan. With the new compensation program in effect, the number of shares remaining in the Plan will be insufficient for the continued success of the Plan over its term, while the 150,000-share cap on awards to any individual will impede the program in future years and preclude the participation of Mr. Billett. The Board believes that these amendments will assure that the Plan is appropriately designed to fulfill its goals for the foreseeable future, including the provision of competitive incentive compensation opportunities to the Company's executive officers. The Plan The full text of the Plan, reflecting the proposed amendments, is set forth in Appendix A attached hereto. A summary of the Plan as so amended is set forth below. 15 19 Purpose. The Plan is intended to strengthen the ability of the Company and its subsidiaries to attract and retain highly qualified employees by providing them with added incentive to render high levels of performance and effective service in connection with their employment through the opportunity for common stock ownership. Administration. The Plan is administered by the Compensation Committee (the "Committee") of the Board of Directors. None of the Committee members are eligible to participate in the Plan. The Committee, among other things, determines which qualified employees will receive Restricted Share, Option and Stock Appreciation Right ("SAR") grants, the time of the grants, the size and exercise price of the grants, whether to grant Restricted Shares or an Option and whether an Option shall be an Incentive Stock Option ("ISO") or a Non-Qualified Stock Option ("NQSO"), whether a qualified employee may receive more than one grant of Restricted Shares, more than one grant and more than one type of Option, and the terms upon which Restricted Shares are granted and under which Options and SARs may be exercised, all subject to any express requirements or limitations of the Plan. Shares Subject to the Plan. An aggregate of 1,675,000 shares of common stock of the Company have been authorized for issuance under the Plan pursuant to Options and SARs and as Restricted Shares, subject to the discretion of the Board in the case of various types of capital or corporate adjustments or changes as set forth in Section 10 of the Plan. Shares subject to any part of an Option which terminates unexercised for any reason will be available for future Option and Restricted Share grants. No individual, including the Chief Executive Officer of the Company, may receive, in the aggregate, grants of Options, SARs and Restricted Shares covering more than 450,000 shares. Grants may not be made under the Plan after December 14, 2003. Eligibility. Only qualified employees may receive grants under the Plan. A qualified employee is defined as a person designated by the Committee who is employed by the Company or a subsidiary on a salaried basis (including an officer who is also a director) and whose performance has had or could have a significant effect on the current or long-term success of the Company or a subsidiary. To date, twelve qualified employees have received awards under the Plan. Option Exercise Price. The price at which Options may be exercised may not be less than 100% of the fair market value of the shares on the date of grant. The exercise price of each Option granted under the Plan to date has been equal to the fair market value of the shares on the date of grant. The Option price is to be paid, upon exercise, in cash or in shares of common stock of the Company held for at least six months valued at their fair market value at the time of exercise, or by promissory note with such terms as determined by the Committee, or by a combination thereof. Provision is also made in the Plan to allow an optionee to pay the exercise price with the proceeds of sale of a portion of the shares obtained upon the Option exercise. The issuance of Options at fair market value on the date of grant constitutes a performance goal under Section 162(m) of the Internal Revenue Code. (See the Report of the Compensation Committee, above.) The closing price of the Company's common stock on the Nasdaq National Market System on April 9, 1998 was $41.75 per share. Other Option Terms. The Committee determines the time or times at which an Option becomes exercisable. The terms of each Option granted under the Plan prior to March 1998 provide that it will become fully exercisable on a fixed date (ranging from just under eight years from the date of grant to 9 1/2 years from the date of grant), subject to acceleration if the Company's common stock trades at or above specified targets. The terms of the Options granted in March 1998 provide that they become exercisable in five annual 20% installments beginning on the first anniversary of their grant date. If an Option is not fully exercisable at the time of occurrence of a Change in Control, as defined in the Plan, all portions of the Option become immediately exercisable in full. 16 20 Options terminate at the earliest of ten years after the date of grant, five years after retirement, immediately if employment is terminated for cause, one month after any voluntary termination of employment other than retirement, 180 days after the date of death (but the Option may only be exercised to the extent it was exercisable on the date of such events) or any earlier time set by the Committee at the time of the Option grant. Options granted to date terminate in accordance with the described schedule. An Option is exercisable only by the optionee. No Option is transferable except by will or the laws of descent and distribution. Stock Appreciation Rights. A SAR permits an optionee to surrender all or part of the shares subject to an Option rather than exercise the Option with respect to such shares and, in connection with the surrender, to request payment in cash, or shares of the Company's common stock, or a combination of cash and shares, equal to the fair market value of the surrendered Option shares determined on the SAR exercise date less the aggregate Option exercise price of the shares surrendered. The Committee has the sole discretion to determine the form of payment. The Committee determines whether a SAR will be granted in conjunction with any or all of the shares subject to an Option granted under the Plan and whether to grant a SAR with respect to an Option previously granted without a related SAR. A SAR may only be exercised if the related Option is exercisable and terminates when the related Option terminates. Shares subject to any portion of an Option as to which SARs are exercised will not be available for future Options. The issuance of SARs at fair market value on the date of grant constitutes a performance goal under Section 162(m) of the Internal Revenue Code. (See the Report of the Compensation Committee, above.) No SARs have been granted under the Plan to date. Restricted Shares. A Restricted Share award is an award of shares of common stock that may not be sold, assigned, or otherwise disposed of (i.e., do not "vest") for a period determined by the Committee at the time of the award. The Restricted Shares awarded under the Plan to date vest in five annual 20% installments beginning on the first anniversary of their award date. Except for the restriction against transfer until vesting, the recipient of the award has all rights of a stockholder of the Company's common stock including the right to vote such shares at stockholder meetings and the right to receive dividends paid on such stock. The number of Restricted Shares that may be awarded to a Restricted Stockholder in any one calendar year under the Plan will be determined by the Committee based on a percentage of the qualified employees' base salaries as a group, such percentage not to exceed 25% of the gross annual aggregate salaries of all qualified employees, divided by the closing market price of the Company's common stock on the day prior to the date of grant. Upon the occurrence of a Change in Control, all restrictions will be removed and the Restricted Shares will be deemed to have vested. In the event of the termination of employment of any Restricted Stockholder for any reason, all shares of common stock awarded pursuant to the Plan which have not vested will be forfeited by such employee and will be cancelled and unavailable for future awards. Upon death or disability, the Restricted Stockholder shall be considered to be vested for purposes of the Plan for those Restricted Shares which would have otherwise vested in the year of such death or disability. Tax Withholding for Options, SARs and Restricted Shares. The Company may, as the Options are exercised or as the Restricted Shares vest, pay to the respective optionee or participant upon request a cash amount up to the aggregate minimum federal, state and local income tax withholding obligations that arise to the optionee or Restricted Stockholder at the time that the Option is exercised or the Restricted Shares vest. This cash payment, the amount of which is determined based on the then fair market value of such shares, is made in lieu of delivering the exercised Option shares or vested Restricted Shares and is applied by the Company to the satisfaction of such tax withholding obligations. To the extent that a cash payment is made in lieu of Option shares or vested Restricted Shares, the corresponding number 17 21 of Option shares or Restricted Shares having such aggregate fair market value are charged against the total number of shares reserved under the Plan. Federal Income Tax Consequences to the Company and the Participant. Incentive Stock Options ("ISO's") Options granted under the Plan which constitute ISOs will, in general, be subject to the following Federal income tax treatment: (i) The grant of an ISO will give rise to no Federal income tax consequences to either the Company or the participant. (ii) A participant's exercise of an ISO will result in no Federal income tax consequences to the Company. (iii) A participant's exercise of an ISO will not result in ordinary Federal taxable income to the participant, but may result in the imposition of or an increase in the alternative minimum tax. If shares acquired upon exercise of an ISO are not disposed of within the same taxable year the ISO is exercised, the excess of the fair market value of the shares at the time the ISO is exercised over the option price is included in the participant's computation of alternative minimum taxable income. (iv) If shares acquired upon the exercise of an ISO are disposed of within two years of the date of the option grant, or within one year of the date of the option exercise, the participant will realize ordinary Federal taxable income at the time of the disposition to the extent that the fair market value of the shares at the time of exercise exceeds the option price, but not in an amount greater than the excess, if any, of the amount realized on the disposition over the option price. Short-term or long-term capital gain will be realized by the participant at the time of such a disposition to the extent that the amount of proceeds from the sale exceeds the fair market value at the time of the exercise of the ISO. Short-term or long-term capital loss will be realized by the participant at the time of such a disposition to the extent that the option price exceeds the amount of proceeds from the sale. If a disposition is made as described in this section, the Company will be entitled to a Federal income tax deduction in the taxable year in which the disposition is made in an amount equal to the amount of ordinary Federal taxable income realized by the participant. If shares acquired upon the exercise of an ISO are disposed of after the later of two years from the date of the option grant or one year from the date of the option exercise, the participant will realize long-term capital gain or loss in an amount equal to the difference between the amount realized by the participant on the disposition and the participant's Federal income tax basis in the shares, usually the option price. In such event, the Company will not be entitled to any Federal income tax deduction with respect to the ISO. Non-Qualified Stock Options ("NQSOs") NQSOs granted under the Plan (which constitute all Options granted under the Plan to date) will, in general, be subject to the following Federal income tax treatment: (i) The grant of a NQSO will give rise to no Federal income tax consequences to either the Company or the participant. (ii) The exercise of an Option will generally result in ordinary Federal taxable income to the participant in an amount equal to the excess of the fair market value of the shares at the time of exercise over the Option price. (iii) A deduction from Federal taxable income will be allowed to the Company in an amount equal to the amount of ordinary income recognized by the participant, provided the Company deducts and withholds all appropriate Federal withholding tax. 18 22 (iv) Upon a subsequent disposition of shares, a participant will recognize a short-term or long-term capital gain or loss equal to the difference between the amount received and the tax basis of the shares, usually fair market value at the time of exercise. Stock Appreciation Rights Any SARs which may be granted in conjunction with all or part of any Option granted under the Plan will be subject to the following Federal income tax treatment: (i) The grant of a SAR will give rise to no Federal income tax consequences to either the Company or the participant. (ii) Upon the exercise of a SAR, the economic value received by the participant, the excess of the fair market value of the shares on the date of the exercise over the Option price, will be taxable to the optionee as ordinary Federal taxable income. The Company will receive a Federal income tax deduction in an amount equal to the income realized by the participant. Restricted Shares Restricted Shares granted under the Plan will be subject to the following Federal income tax treatment: (i) The grant of Restricted Shares will give rise to no Federal income tax consequences to either the Company or the participant. (ii) The participant will, however, realize ordinary income to the extent of the fair market value of the shares released from restrictions (determined at the date of release of restrictions) at the time of such release. Cash dividends received on Restricted Shares are also taxable to the participant as ordinary income. A deduction from Federal taxable income will be allowed to the Company in an amount equal to the amount of ordinary income recognized by the participant, provided the Company deducts and withholds all appropriate Federal withholding tax. (iii) Upon a subsequent disposition of vested shares, the participant will realize a short-term or long-term capital gain or loss in an amount equal to the difference between the amount of proceeds from the sale and the tax basis of the shares, usually fair market value at the date of vesting. (iv) Under a special provision of the Code, a participant may elect within the 30-day period after a grant of Restricted Shares to include in ordinary income the fair market value of the shares (without considering the restrictions on them) at the date of grant in the year of such grant. If the election is made, the Company would be allowed a deduction against income in the same year and in the same amount. While no additional income would be recognized by the participant upon the release of the shares from restrictions, no loss would be allowed to the participant upon subsequent forfeiture of any shares on which tax was paid. If any Restricted Shares are forfeited under the Plan, in the year of forfeiture the Company would, however, be required to include in income any amount it had earlier deducted related to those shares. The participant's basis in the shares for computing gain or loss on a subsequent disposition would be equal to the fair market value at grant which the participant included in income under the election. The Federal income tax consequences described in this section are based on laws and regulations in effect on March 31, 1998. Future changes in those laws and regulations may affect the tax consequences described herein. No discussion of state or local income tax treatment has been included. 19 23 The Board of Directors believes that the proposal to amend the Plan is in the best interests of the Company and its stockholders and recommends a vote FOR approval of the amendments the 1993 Stock Option Plan. PROPOSAL NO. 3 RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS Audited financial statements of the Company and its consolidated subsidiaries are included in the Company's annual report to stockholders, a copy of which has been furnished to all stockholders of record. Upon recommendation of the Audit Committee, the Board of Directors has appointed Price Waterhouse to examine its consolidated financial statements for the year ending December 31, 1998, and has determined it desirable to request that the stockholders approve such appointment. Price Waterhouse has acted as the Company's independent accountants since 1979. Representatives of Price Waterhouse will be present at the Annual Meeting and will have the opportunity to make a statement if they desire to do so and are also expected to be available to respond to appropriate questions. The Board of Directors recommends a vote FOR the ratification of the appointment of Price Waterhouse as independent accountants for the Company for the year ending December 31, 1998. STOCKHOLDER PROPOSALS--1999 ANNUAL MEETING Stockholders of the Company may present proposals for the 1999 Annual Meeting by directing such proposals to the Secretary at the corporate address. Such proposals must be received no later than December 21, 1998, in order to be included in the Proxy Statement and Proxy relating to such meeting. OTHER MATTERS Management of the Company is not aware of, and does not intend to present, any matters at the Annual Meeting other than those set forth above. Should other matters properly come before the meeting, the persons named on the enclosed Proxy may vote such Proxy in accordance with their best judgment. By order of the Board of Directors, /s/ Jane T. Wiznitzer Jane T. Wiznitzer Secretary STOCKHOLDERS ARE ENTITLED TO RECEIVE, UPON WRITTEN REQUEST, AND WITHOUT CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED DECEMBER 31, 1997. PLEASE DIRECT SUCH REQUESTS TO THE OFFICE OF THE SECRETARY, TRENWICK GROUP INC., METRO CENTER, ONE STATION PLACE, STAMFORD, CONNECTICUT 06902. 20 24 APPENDIX A TRENWICK GROUP INC. 1993 STOCK OPTION PLAN 1. PURPOSE This Plan is intended to strengthen the ability of the Company and its Subsidiaries to attract and retain Qualified Employees of outstanding competence by providing them with added incentive to render high levels of performance and effective service in connection with their employment through the opportunity for common stock ownership and benefits of common stock appreciation. 2. DEFINITIONS For the Purposes of the Plan, except where the context otherwise indicates, the following definitions shall apply: "Board" means the Board of Directors of the Company. A "Change in Control" shall be deemed to have occurred at such time as: a. Any person within the meaning of Section 16(d) of the Securities Exchange Act of 1934, other than the Company, a subsidiary or any employee benefit plan(s) sponsored by the Company or any subsidiary, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of fifty percent (50%) or more of the Company's issued and outstanding shares of common stock, or shares of capital stock at any time issued by the Company representing fifty percent (50%) or more of the voting rights of all shares of stock issued by the Company; b. Individuals who constitute the Board of Directors on December 15, 1993 cease for any reason to constitute a majority at least thereof, provided that any person becoming a director subsequent to December 15, 1993, whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least three quarters of the directors comprising the Board on December 15, 1993 (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be considered as though such person were a member of the Board on December 15, 1993; c. Trenwick consolidates with, or merges with and into, any other person (other than a subsidiary of Trenwick), and Trenwick is not the continuing or surviving corporation of such consolidation or merger; d. Any person (other than a subsidiary of Trenwick) consolidates with, or merges with and into, Trenwick, and Trenwick is the continuing or surviving corporation of such consolidation or merger, and in connection with such consolidation or merger, all or part of the outstanding shares of common stock are changed into or exchanged for stock or other securities of any other person or cash or any other property; e. Trenwick sells or otherwise transfers (or one or more of its subsidiaries sells or otherwise transfers), in one transaction or in a series of related transactions, assets or earning power aggregating more than fifty percent (50%) of the assets or earning power of Trenwick and its subsidiaries (taken as a whole) to any person or persons (other than Trenwick or subsidiaries of Trenwick); f. Any person commences a tender offer (as defined in Rule 14d-2 as promulgated by the Securities and Exchange Commission) for fifty percent (50%) or more of Trenwick's outstanding shares of common stock. "Code" means the Internal Revenue Code of 1986, as amended from time to time. A-1 25 "Committee" means the Compensation Committee or any other committee designated by the Board to have administrative responsibility with respect to the Plan. "Common stock" means the Company's common stock, par value $0.10. "Company" means Trenwick Group Inc. "Date of Exercise" of an Option or a Stock Appreciation Right ("SAR") means the date upon which written notice thereof is received by the Company's Corporate Secretary. "Date of Grant" means the date Restricted Shares, an Option or any related SARs become effective under the terms of the governing Restricted Stock Agreement or Option Agreement. "Exercise Notice" means a written notice from an Optionee to the Company, made on a form and in a manner as the Committee may from time to time determine, pursuant to which the Optionee irrevocably elects to exercise all or any portion of an Option and irrevocably directs the Company to deliver the common stock certificate to be issued to such Optionee upon such Option exercise directly to a "broker" or "dealer" (within the meaning of Section 3 (a) of the Securities Exchange Act of 1934, as amended from time to time). An Exercise Notice must be accompanied by or contain irrevocable instructions to the broker or dealer (i) to promptly sell a sufficient number of shares of such common stock, or to loan the Optionee a sufficient amount of money, to pay the exercise price for the Options, and (ii) to promptly remit such sum to the Company upon the broker's or dealer's receipt of the certificate. "Fair Market Value" means the fair market value of common stock determined by the Committee. "Incentive Stock Option" means an Option granted as an incentive stock option as defined in Section 422A of the Code. "Non-Employee Director" means "non-employee director" as defined in Rule 16b-3 of the Securities and Exchange Commission, as amended from time to time. "Non-Qualified Stock Option" means an Option that does not qualify as an Incentive Stock Option or is so stated to be a Non-Qualified Stock Option upon issuance. The terms of the Option Agreement for a Non-Qualified Stock Option shall expressly state that the Option is a Non-Qualified Stock Option. "Option" means the rights granted to a Qualified Employee to purchase common stock pursuant to the terms and conditions of an Option Agreement, including both Incentive Stock Options and Non-Qualified Stock Options. "Option Agreement" means a written agreement (and any amendment or supplement thereto) between the Company and a Qualified Employee designating the terms and conditions of an Option, including any related SAR. "Optionee" means a Qualified Employee to whom an Option and any related SAR are granted. "Plan" means Trenwick Group Inc. 1993 Stock Option Plan. "Qualified Employee" means any person employed on a full-time basis by the Company or a Subsidiary whose performance, in the judgement of the Committee, could have or did have a significant effect on either (or both) the current or long-term success of the Company or a Subsidiary (or both). "Restricted Shares" means common stock which shall be non-transferable and subject to forfeiture to the Company until vested. A-2 26 "Restricted Stock Agreement" means a written agreement (and any amendment or supplement thereto) between the Company and a Qualified Employee evidencing the number of shares of common stock granted. "Stock Appreciation Right" or "SAR" means a right (which shall not exist separately from a related unexercised Option) granted to the terms and conditions of an Option Agreement to surrender an unexercised Option, or some portion of an unexercised Option, and to receive from the Company either shares of common stock (valued at Fair Market Value on the Date of Exercise of the SAR), cash, or a combination thereof, equal in amount to the excess of the aggregate Fair Market Value (on the Date of Exercise of the SAR) of the shares as to which the Option is surrendered, over the aggregate Option price of such shares, subject to any limitations in Section 7. Notwithstanding any other provision of this Plan or of an Option Agreement to the contrary, in no event shall the amount payable to the Optionee upon exercise of a SAR related to an Incentive Stock Option exceed one hundred (100%) percent of the difference between the exercise price of the related Incentive Stock Option and the Fair Market Value of the common stock at the Date of Exercise of the SAR. "Subsidiary" means any entity of which, at the time such Subsidiary status is to be determined, at least fifty (50%) percent of the combined voting power of such entity is directly or indirectly owned or controlled by the Company. 3. ADMINISTRATION OF THE PLAN The Plan shall be administered by the Committee (whose members shall be appointed by the Board) consisting solely of three or more members of the Board who are Non-Employee Directors. A majority of the Committee shall constitute a quorum, and all acts of the Committee must be approved by a majority (at least two) of its members. Subject to the provisions of the Plan, the Committee shall have authority in its sole discretion: (a) To interpret the provisions of the Plan and decide all questions of fact arising in its application; (b) To prescribe, amend and rescind rules and regulations relating to the Plan; (c) To determine the Qualified Employees to whom, the time or times at which, the price at which, and the extent to which Restricted Shares, Options and any SARs shall be granted based upon the nature of the services rendered or to be rendered by the persons it deems eligible, their past, present and potential contributions to the success of the Company and/or any of its Subsidiaries their other compensation from the Company or any Subsidiary, and such other factors as the Committee in its discretion shall deem relevant; (d) To determine, upon their issuance but not thereafter, the time when Restricted Shares are vested; (e) To determine, upon their issuance but not thereafter, the time or times when Options and any SARs become exercisable and the duration of the exercise period; (f) To determine whether any shares of common stock under any Option must be purchased before any related SAR becomes exercisable; (g) To prescribe and amend the form or forms of the Restricted Stock Agreement and Option Agreement; (h) To determine the form or forms of consideration which will be accepted by the Company from an Optionee in payment of the purchase price upon the exercise of an Option; and (i) To determine which Options shall be Incentive Stock Options and which Options shall be Non-Qualified Stock Options. A-3 27 The Committee's determinations of the foregoing shall be final and conclusive. 4. ELIGIBILITY Restricted Shares, Options and any SARs may be granted under the Plan only to Qualified Employees. Any Qualified Employee may be granted and may hold more than one award of Restricted Shares, more than one Option and more than one SAR. In no event shall an Incentive Stock Option be granted to a Qualified Employee if the grant of such Incentive Stock Option would cause the aggregate Fair Market Value (on the Date of Grant) of the common stock with respect to which Incentive Stock Options are exercisable for the first time by such Qualified Employee during any calendar year (under all plans of the Company and any parent or subsidiary corporations of the Company within the meaning of Code Section 425) to exceed $100,000. 5. SHARES AVAILABLE Subject to adjustment as provided in Section 10 hereof: (a) An aggregate of 1,675,000 shares of common stock will be available and reserved for issue or transfer with respect to Restricted Shares, Options or SARs granted under the Plan. (b) When the right to purchase shares pursuant to an Option is surrendered on exercise of a SAR, whether such right is settled in cash, common stock or a combination thereof, the aggregate number of shares covered by the related Option shall be reduced by the number of shares with respect to which the SAR was exercised, and such shares shall not be available for granting further Options and SARS. (c) No Qualified Employee including the Chief Executive Officer of the Company may receive more than 450,000 Restricted Shares, Options or SARs granted under the Plan. (d) If an Option shall terminate for any reason without having been exercised in full or surrendered on exercise of a SAR, the unpurchased and non-surrendered shares subject thereto shall become available for further Restricted Shares, Options and SARs. (e) In applying the limitation on the number of Restricted Shares, Options or SARs that can be received by a Qualified Employee as set forth in paragraphs (c) and (d) of this Section 5, the principles of Section 162(m) of the Internal Revenue Code of 1986, as amended, and the regulations issued thereunder, shall govern. (f) In the case of Options or SARs, the maximum amount of compensation payable to a Qualified Employee attributable to the exercise of Options or SARs under the Plan shall be equal to the maximum number of shares of common stock for which Options or SARs can be granted to a Qualified Employee under Section 5 hereof multiplied by the excess of the Fair Market Value of the common stock on the date of the exercise over the aggregate Option price of such shares as determined under Section 7 hereof. 6. RESTRICTED SHARES Restricted Shares shall be granted subject to the following conditions: (a) The number of Restricted Shares granted to a Qualified Employee in any one calendar year shall be determined by the Committee and shall be based on a percentage of such qualified employees' salary as a group, such percentage not to exceed twenty five (25%) percent of the gross annual aggregate salaries of such employees, divided by the Fair Market Value of the Company's stock on the day prior to the Date of Grant. (b) Restricted Shares shall vest ratably over a five (5) year period from the Date of Grant or pursuant to such other vesting schedule as the Committee shall approve at the time of grant. The Restricted Stockholder may make provision for the payment of all or any part of any taxes which the Company is obligated to collect or withhold with respect to the vesting of Restricted Shares by (i) the delivery to the Company of full shares of common stock, valued at Fair Market Value, that have been held for at least six (6) months or A-4 28 (ii) by electing to have the Company withhold whole shares of common stock, valued at Fair Market Value, from the vested Restricted Shares to be delivered to the Restricted Stockholder. (c) Upon the occurrence of a Change in Control, subject to any limitation set forth in the Restricted Stock Agreement, all restrictions shall lapse and all Restricted Shares shall be deemed to have vested. (d) Forfeiture of Restricted Shares: (i) Restricted Shares which have not vested in the hands of the Restricted Stockholder shall be forfeited to the Company upon voluntary or involuntary termination of the Restricted Stockholder's employment with the Company for any reason; (ii) Notwithstanding the foregoing, upon death or disability, a Restricted Stockholder shall be considered to be vested for those Restricted Shares which would have otherwise vested in the year such death or disability occurred. (e) Each certificate representing shares issued to a Restricted Stockholder which have not vested shall be retained by the Company and shall bear a legend that complies with applicable law with respect to the restrictions on transferability: "The shares represented by this certificate are subject to restrictions on transferability imposed by that certain instrument entitled the 1993 Stock Option Plan adopted December 15, 1993 as from time to time amended which limits transferability and subjects these shares to forfeiture to Trenwick Group Inc. in certain instances." Nothing in the Plan or in any Restricted Stock Agreement shall in any way diminish the right of the Company or any Subsidiary to reduce the compensation or to terminate the employment of any Restricted Stockholder or Qualified Employee. 7. OPTIONS Each Option granted shall be subject to the following conditions: (a) The Option price per share of common stock shall be set by the Option Agreement but shall in no instance be less than one hundred (100%) percent of the Fair Market Value on the Date of Grant with respect to any Option. (b) Each Option will become exercisable in part or in full on the date or dates specified in the Option Agreement. (c) Upon the occurrence of a Change in Control of the Company, subject to any limitation set forth in the Option Agreement, all outstanding Options shall become immediately exercisable in full. (d) Each Option and any related SARs shall terminate: (1) If the Optionee is then living, at the earliest of the following times: (i) ten years after the Date of Grant of the Option; (ii) five years after termination of employment because of retirement (iii) one month after termination of employment other than termination because of retirement or through discharge for cause provided, however, that if any Option is not fully exercisable at the time of such termination of employment, such Option shall expire on the date of such termination of employment to the extent not then exercisable; (iv) immediately upon termination of employment through discharge for cause; or (v) any earlier time set forth in the Option Agreement. A-5 29 (2) If the Optionee dies while employed by the Company or any Subsidiary, or if no longer so employed, prior to termination of the entire Option under Section 7(d)(1)(ii) or (iii) hereof, one hundred and eighty (180) days after the date of death. To the extent an Option is exercisable after the death of the Optionee, it may be exercised by the person or persons to whom the Optionee's rights under the Option Agreement have passed by will or by the applicable laws of descent and distribution. (e) If the Optionee exercises any Option or SAR with respect to some, but not all, of the shares of common stock subject to such Option or SAR, the right to exercise such Option or SAR with respect to the remaining shares shall continue until it lapses or terminates. No Option shall be exercisable except in respect of whole shares. The exercise of an Option or SAR may be made with respect to no fewer than ten shares at one time unless fewer than ten shares remain subject to the Option or SAR. (f) Any exercise of an Option shall be effective on the Date of Exercise, provided the full purchase price of such shares or an effective Exercise Notice has been tendered with the notice of exercise. Payment of the purchase price upon the exercise of any Option shall be made in cash (including check, bank draft or money order), by the delivery of full shares of common stock valued at Fair Market Value (but only if such shares have been held by the Optionee for at least six (6) months), by promissory note (containing such terms and conditions as the Committee may in its discretion determine) or by any combination thereof. The Optionee may make provision for the payment of all or any part of any taxes which the Company is obligated to collect or withhold with respect to the issue or transfer of any common stock underlying an Option by (i) the delivery to the Company of full shares of common stock, valued at Fair Market Value, that have been held for at least six (6) months or (ii) electing to have the Company withhold whole shares of common stock, valued at Fair Market Value, from the shares to be delivered to the Optionee upon the exercise. Nothing in the Plan or in any Option Agreement shall in any way diminish the right of the Company or any Subsidiary to reduce the compensation or to terminate the employment of any Optionee or Qualified Employee. 8. STOCK APPRECIATION RIGHTS The Committee may in its discretion grant SARs either concurrently with or subsequent to the Date of Grant of the related Option. A SAR shall be evidenced by provisions in the Option Agreement or an amendment or supplement thereto. SARs shall be subject to the following terms and conditions: (a) Grant. The number of shares of common stock covered by a SAR shall not exceed the number of shares of common stock covered by the related Option. (b) Exercise. A SAR shall be exercisable, in whole or in part, at such time or times, on the conditions and to the extent set forth in the Option Agreement but in no event will such SAR be exercisable; (i) At any time that the related Option is not exercisable; or (ii) At any time that the Fair Market Value of a share of common stock does not exceed the Option price of the related Option share. (c) A SAR will terminate on the same date as the related Option. An Optionee shall be entitled upon exercise of a SAR to receive payment in the amount described in the definition of "Stock Appreciation Right". In connection with the exercise of a SAR, the Optionee thereof may, subject to the provisions of the following paragraph, request by application to the Committee to receive payment in the form of cash, shares of common stock, or a combination thereof. However, the Committee, in its sole discretion, shall determine the form of payment. A-6 30 9. LIMITATIONS ON COMMON STOCK Any shares of common stock issued or transferred pursuant to the Plan shall not be sold, transferred or otherwise disposed of by Restricted Stockholders or Optionees except in compliance with applicable registration requirements of state and federal securities laws unless in the opinion of counsel for the Company, such sale, transfer or disposition is exempt from registration. 10. ADJUSTMENT OF SHARES If any change is made in the common stock subject to the Plan, or subject to Restricted Shares, any Option or SAR, through merger, consolidation, reorganization, recapitalization, stock dividend, stock split, combination of shares, rights offerings, change in corporate structure of the Company, or otherwise, the Board in its discretion may make appropriate adjustments as to the number and type of securities subject to and reserved for issue or transfer under the Plan and, in order to prevent dilution or enlargement of the rights of Restricted Stockholders, Optionees, the number of Restricted Shares or number of Options, type and Option price of securities subject to outstanding Options and SARs. 11. NON-TRANSFERABILITY Each share of Restricted Shares shall be nontransferable and subject to forfeiture to the Company until vested. No Option or SAR is transferable by the Optionee other than by will or the laws of descent and distribution, and no Option or SAR is exercisable during the Optionee's lifetime by anyone other than the Optionee. 12. STOCKHOLDER'S RIGHTS The Restricted Stockholder shall have all rights relative to the Restricted Shares, including the right to vote and to collect dividends. Neither the Optionee nor the Optionee's legal representative, legatees or distributees, as the case may be, shall have any of the rights or privileges of a stockholder of the Company by virtue of the grant of an Option or SAR except with respect to any shares of common stock actually issued or transferred of record and delivered to one of the aforementioned persons. 13. TERMINATION, SUSPENSION OR MODIFICATION OF PLAN The Board may at any time terminate, suspend or modify the Plan. No termination, suspension or modification of the Plan shall adversely affect any right acquired by any Restricted Stockholder or Optionee under the terms of Restricted Shares, Options or SARs granted before the date of such termination, suspension or modification, unless such Restricted Stockholder or Optionee shall consent thereto. 14. GOVERNING LAWS The Plan and all rights and obligations thereunder shall be construed in accordance with and governed by the laws of the State of Delaware. 15. TERM Unless previously terminated by the Board, the Plan shall terminate at the close of business on December 14, 2003. No Restricted Shares, Options or SARs shall be granted after Plan termination, but such termination shall not affect any Restricted Shares, Options or SARs previously granted. 16. APPROVAL The Plan shall become effective on December 15, 1993 but shall be subject to approval by vote of the stockholders of the Company at the 1994 Annual Meeting. A-7 31 /X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE. This Proxy when properly executed will be voted in the manner directed herein. If no direction is made, this Proxy will be voted FOR Election of Directors and FOR Proposals 2 and 3. The Board of Directors recommends a vote FOR Election of Directors and FOR Proposals 2 and 3. FOR WITHHELD 1. Election of / / / / Directors (see reverse) For, except vote withheld from the following nominee(s): - -------------------------------------------------- FOR AGAINST ABSTAIN 2. Amendment to 1997 / / / / / / Employee Stock Option Plan to increase shares authorized for issuance and increase size of maximum award per participant. FOR AGAINST ABSTAIN 3. Ratification of the appoint- / / / / / / ment of Price Waterhouse LLP as independent accountants for the year ending December 31, 1998 Change of / / Address/Comments on Reverse Side SIGNATURE(S) DATE ,1998 ----------------------------- -------------------- The signer hereby revokes all proxies heretofore given by the signer to vote at said meeting or any adjournments thereof. NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. 32 TRENWICK GROUP INC. PROXY SOLICITED ON BEHALF ON THE MANAGEMENT OF P THE COMPANY FOR THE ANNUAL MEETING ON MAY 21, 1998 R The undersigned hereby constitutes and appoints James F. Billett, Jr., W. Marston Becker and Joseph D. Sargent and each of them, his/her true O and lawful agents and proxies with full power of substitution in each to represent the undersigned at the Annual Meeting of Stockholders of X Trenwick Group Inc. to be held on May 21, 1998 at the Hyatt Regency Greenwich, 1800 East Putnam Avenue, Old Greenwich, Connecticut at Y 10:00 a.m. local time, and at any adjournment thereof on all matters coming before said meeting. COMMENTS: (change of address) Election of Directors, Nominees: To elect the following directors to terms ----------------------------- of three years: ----------------------------- Frederick D. Watkins, Stephen R. Wilcox ----------------------------- ----------------------------- The nominees listed above shall serve (if you have written in the their respective terms until their above space, please mark the successors are duly elected and corresponding box on the qualified. reverse side of this card.) You are encouraged to specify your choices by marking the appropriate boxes (SEE REVERSE SIDE), but you need not mark any boxes if you wish to vote in accordance with the Board of Directors' recommendations. The Proxy Committee cannot vote your shares unless you sign and return this card. SEE REVERSE SIDE -----END PRIVACY-ENHANCED MESSAGE-----