SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
20TH CENTURY INDUSTRIES
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
20TH CENTURY INDUSTRIES
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement.)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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NOTICE OF 1997
ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT
[LOGO]
20TH CENTURY INDUSTRIES
WOODLAND HILLS, CALIFORNIA 91367
DEAR SHAREHOLDER,
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING OF SHAREHOLDERS OF
20TH CENTURY INDUSTRIES ON TUESDAY, MAY 20, 1997 AT 10:00 A.M., AT THE MARRIOTT
HOTEL, 21850 OXNARD STREET, WOODLAND HILLS, CALIFORNIA.
DETAILS OF THE BUSINESS TO BE CONDUCTED AT THE ANNUAL MEETING ARE GIVEN IN
THE ATTACHED NOTICE OF ANNUAL MEETING AND PROXY STATEMENT.
WHETHER OR NOT YOU PLAN TO ATTEND, IT IS IMPORTANT THAT YOUR SHARES BE
REPRESENTED AND VOTED AT THE MEETING. I THEREFORE URGE YOU TO SIGN, DATE AND
PROMPTLY RETURN YOUR PROXY CARD IN THE ENCLOSED SELF-ADDRESSED ENVELOPE, SO THAT
YOUR SHARES CAN BE VOTED IN ACCORDANCE WITH YOUR INSTRUCTIONS. YOU MAY ATTEND
THE ANNUAL MEETING AND VOTE IN PERSON, IF YOU SO DECIDE.
TICKETS FOR THE MEETING ARE NOT REQUIRED, THOUGH WE ASK THAT ATTENDEES SIGN
THE ATTENDANCE REGISTER PRIOR TO THE COMMENCEMENT OF THE MEETING.
ON BEHALF OF THE BOARD OF DIRECTORS, I WOULD LIKE TO EXPRESS OUR
APPRECIATION FOR YOUR CONTINUED INTEREST IN THE AFFAIRS OF THE COMPANY.
SINCERELY,
[SIG]
JOHN B. DE NAULT
CHAIRMAN OF THE BOARD
YOUR VOTE IS IMPORTANT
Please Sign, Date and Return Your Proxy Card
Promptly in the Enclosed Envelope.
[LOGO]
20TH CENTURY INDUSTRIES
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 20, 1997
The Annual Meeting of Shareholders of 20TH CENTURY INDUSTRIES will be held
at the Marriott Hotel, 21850 Oxnard Street, Woodland Hills, California 91367 on
May 20, 1997 at 10:00 a.m. for the following purposes:
1. To elect nine directors.
2. To ratify the appointment of Ernst & Young as independent accountants
for 1997.
3. To approve the amendments to the 20th Century Industries 1995 Stock
Option Plan described in the attached Proxy Statement.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on April 7, 1997 as
the record date for the determination of those shareholders entitled to notice
of, and to vote at the meeting.
By Order of the Board of Directors,
JOHN R. BOLLINGTON
Secretary
Woodland Hills, California
DATED: April 18, 1997
IMPORTANT
Whether or not you expect to attend in person, we urge you to sign, date,
and return the enclosed Proxy at your earliest convenience. This will ensure the
presence of a quorum at the meeting. PROMPTLY SIGNING, DATING, AND RETURNING THE
PROXY WILL SAVE THE COMPANY THE EXPENSE AND EXTRA WORK OF ADDITIONAL
SOLICITATION. An addressed envelope is enclosed for that purpose. Sending in
your Proxy will not prevent you from voting your stock at the meeting if you
desire to do so, as your Proxy is revocable at your option.
LOGO
20TH CENTURY INDUSTRIES
6301 OWENSMOUTH AVENUE
WOODLAND HILLS, CALIFORNIA 91367
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 1997
GENERAL INFORMATION
This Proxy Statement and the accompanying Notice of Annual Meeting and Proxy
Card are solicited by the Board of Directors of 20th Century Industries (the
"Company") for use at the Annual Meeting of Shareholders to be held on Tuesday,
May 20, 1997 at 10:00 a.m., at the Marriott Hotel, 21850 Oxnard Street, Woodland
Hills, California 91367. These proxy materials are proposed to be sent on or
about April 18, 1997 to all shareholders of the Company's common stock of record
as of April 7, 1997. The Company's principal executive office is located at 6301
Owensmouth Avenue, Woodland Hills, California 91367.
All proxies, properly executed and returned, will be voted at the annual
meeting as directed by the shareholder. Any shareholder may revoke a proxy by
giving written notice to the Secretary of the Company, by submitting a
duly-executed proxy bearing a later date, or by voting in person at the meeting.
If no directions are indicated, the shares represented by the signed proxy will
be voted FOR the election of the nominees, FOR the appointment of Ernst & Young
as the independent accountants for 1997 and FOR the amendments to the 20th
Century Industries 1995 Stock Option Plan. The cost of the solicitation of these
proxies is to be borne by the Company.
Only shareholders of record of the Company's common stock at the close of
business on April 7, 1997 will be entitled to notice of and to vote at the
meeting. As of that date, 51,609,361 shares of common stock without par value of
20th Century Industries were outstanding. A quorum represented by a majority of
the outstanding shares of common stock, present in person or by proxy, is
necessary to conduct the meeting. In the election of directors, nominees
receiving the highest number of affirmative votes cast, up to the number of the
directors to be elected, are elected. Each share is entitled to one vote on all
matters except for the election of directors. In electing directors, each
shareholder is entitled to that number of votes which is equal to the number of
shares held multiplied by the number of directors to be elected. If notice of
intention to cumulate votes is given by any shareholder, all shareholders may
cumulate their votes and give one nominee all of those votes, or they may
distribute the votes among as many nominees as the shareholder deems fit.
If there are nominees other than those designated by the Board of Directors,
the proxyholders have discretionary authority to cumulate votes, which they will
do through instructions from the Board, with the objective of electing as many
of the nominees of the Board of Directors as possible. The effect of the
decision of the proxyholders to exercise their discretionary authority to
cumulate votes will be to make it more difficult for nominees, other than those
designated by the Board of Directors, to be elected.
1
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Board of Directors recommends the election of the nine nominees named in
this Proxy Statement to hold office until the next annual meeting and until
their successors are elected and qualified. All of the nominees are members of
the present Board. Eight nominees were elected at the last annual meeting of
shareholders and the ninth, William H. Braddock, was elected by the Board of
Directors at a meeting held on February 25, 1997. The remaining positions on the
Board of Directors are held by Robert M. Sandler and Howard I. Smith. Mr.
Sandler and Mr. Smith were elected to the Board by the holders of the Series A
Preferred Stock pursuant to authority granted in the Series A Preferred Stock
Certificate of Determination and the Investment and Strategic Alliance Agreement
between the Company and American International Group, Inc. ("AIG"), as approved
by the common shareholders on December 15, 1994.
It is intended that the accompanying proxy will be voted in favor of the
following persons to serve as directors unless the shareholder indicates to the
contrary on the proxy. Management expects that each of the nominees will be
available for election, but if any of them is not a candidate at the time the
election occurs, it is intended that such proxy will be voted for the election
of another nominee to be designated by the Board of Directors to fill any such
vacancy. The proxy may not be voted for more than nine nominees.
NOMINEES FOR BOARD OF DIRECTORS
JOHN B. DE NAULT Director since 1956. Age 78
Chairman of the Board of the Company. He
previously served as Vice Chairman of the
Board from 1971 to December 15, 1994. He is
an investor, maintaining offices in Los
Angeles, California and is the father of
Director John B. De Nault, III. He currently
serves as a director of Roaring Camp & Big
Trees Narrow Gauge Railroad, and Liberty
Bank.
WILLIAM H. BRADDOCK Director since 1997 Age 61
Retired as Executive Vice President of
Marketing for Farmers Group, Inc. in June
1996. Since 1957 he held several positions
with Farmers Group, Inc., including Executive
Vice President, Property and Casualty
Operations from 1989 to 1994.
STANLEY M. BURKE Director since 1982. Age 61
Certified Public Accountant with offices in
Santa Monica, California.
JOHN B. DE NAULT, III Director since 1988. Age 49
Chairman of the Board of Omnithruster, Inc.
in Orange, California and private investor
with offices in Los Angeles, California. He
is the son of Director John B. De Nault. He
currently serves as a director of Liberty
Bank.
2
R. SCOTT FOSTER, M.D. Director since 1986. Age 56
Ophthalmologist in Stockton, California. He
is the son of Louis W. Foster, Chairman
Emeritus and Director Emeritus of the
Company.
RACHFORD HARRIS Director since 1956. Age 84
Retired since 1989. He previously served as a
Financial Consultant with Shearson Lehman
Brothers, Inc.
WILLIAM L. MELLICK Director since 1995 Age 55
Chief Executive Officer, President and Chief
Operating Officer of the Company. Mr. Mellick
joined the Company in 1979, and at various
times has served as Vice President, Senior
Vice President and Group Vice President. He
assumed the positions of Chief Operating
Officer and Executive Vice President in 1993,
President in 1994 and Chief Executive Officer
on March 1, 1995.
GREGORY M. SHEPARD Director since 1995 Age 41
Chairman of the Board of Directors and
President of American Union Financial
Corporation and its subsidiaries, Direct Auto
Insurance Company, American Union Life
Insurance Company and Direct Auto Indemnity
Company, all of Bloomington, Illinois.
ARTHUR H. VOSS Director since 1963. Age 77
Chairman of Voss International Corporation,
an Exporter and Importer in Long Beach,
California.
Each director will also serve as a director of 20th Century Insurance
Company and of 21st Century Casualty Company.
DIRECTORS OTHER THAN THE NOMINEES
Current directors of the Company, other than the nominees, are:
ROBERT M. SANDLER Director since 1994 Age 54
Vice Chairman of the Board of the Company.
Executive Vice President, Senior Casualty
Actuary and Senior Claims Officer of American
International Group, Inc. located in New
York, N.Y. Mr. Sandler is also Chairman of
American International Underwriters, AIG's
overseas property-casualty operation.
HOWARD I. SMITH Director since 1994 Age 52
Executive Vice President, Chief Financial
Officer and Comptroller of American
International Group, Inc. located in New
York, N.Y. Mr. Smith currently serves as a
director of Transatlantic Holdings, Inc.
Directors Sandler and Smith were elected by the holders of the Series A
Preferred Stock, pursuant to the terms of the Series A Preferred Stock
Certificate of Determination and the Strategic Alliance and Investment
Agreement. They also serve as directors of 20th Century Insurance Company and
21st Century Casualty Company.
3
EXECUTIVE OFFICERS
The following is information concerning the executive officers of the
Company.
HAS SERVED
AS AN OFFICER
OFFICERS OF THE COMPANY AGE SINCE BUSINESS BACKGROUND
- ----------------------- --- --------------- -------------------------------------------------------------------
WILLIAM L. MELLICK 55 1979 Chief Executive Officer, President and Chief Operating Officer. Mr.
Mellick joined the Company in 1979 as Vice President of Operations,
was promoted to Senior Vice President in 1986 and to Group Vice
President in 1989. He assumed the positions of Chief Operating
Officer and Executive Vice President in 1993, President in 1994 and
Chief Executive Officer on March 1, 1995.
RICHARD A. ANDRE 47 1988 Vice President, Human Resources. Before joining the Company in June
1988, Mr. Andre was with Fidelity National Title Insurance Company.
Prior to that time he was with Safeco Corporation where he held a
variety of positions including Vice President of Personnel for
Safeco Title Insurance Company.
JOHN R. BOLLINGTON 61 1991 Senior Vice President, General Counsel and Secretary. Mr.
Bollington joined the Company in 1975, serving as managing counsel
of the Company's Legal Department from 1975 to 1991.
MARGARET CHANG 59 1982 Treasurer and Assistant Secretary. Ms. Chang has been employed by
the Company since February 1966, serving in various capacities with
accounting responsibilities prior to being elected Treasurer and
Assistant Secretary in November 1982.
TERESA K. COLPO 48 1993 Vice President, Marketing. Ms. Colpo joined the Company in 1984 as
Marketing Service Manager and has served as Assistant Vice
President of Marketing. Previously, Ms. Colpo held several
positions at California Casualty Insurance Group, including policy
service supervisor and district sales manager.
WILLIAM G. CRAIN 58 1981 Vice President, Administrative Services. Mr. Crain joined the
Company in October 1981. From July 1976 to October 1981 he served
as the Regional Material Damage Manager for United Services
Automobile Association.
RICHARD A. DINON 52 1986 Senior Vice President, Corporate Relations. Mr. Dinon joined the
Company in July 1983 as a manager of training. He later was named
Assistant Vice President in Corporate Relations and was elected to
the position of Vice President, Corporation Relations in June 1986.
He has served as Senior Vice President since 1990.
4
HAS SERVED
AS AN OFFICER
OFFICERS OF THE COMPANY AGE SINCE BUSINESS BACKGROUND
- ----------------------- --- --------------- -------------------------------------------------------------------
PAUL F. FARBER 45 1989 Group Vice President. Mr. Farber joined the Company in January
1984. Prior to his promotion to his current position in June 1996,
he held positions in Claims, Marketing and Operations, serving as
Senior Vice President, Claims in 1995 and 1996 and as Vice
President of Operations from 1989 to 1995.
MICHAEL T. FARRELL 48 1997 Vice President and Chief Information Officer. Mr. Farrell joined
the Company in February 1997. He was Vice President of Information
Services for National Computer Systems, Inc. from 1993 to 1997.
Previously, Mr. Farrell was employed for 19 years with General
Mills, Inc. in various information services capacities.
RICHARD L. HILL 44 1993 Vice President, Corporate Relations. Mr. Hill joined the Company in
1979, serving in numerous technical, administrative and management
positions. He was previously an Assistant Vice President in Claims
and in Corporate Relations.
JOHN M. LORENTZ 44 1996 Controller. Mr. Lorentz joined the Company in July 1996. He was
employed by Transamerica Financial Services as Vice President and
Controller in 1995 and 1996 and as Assistant Controller from 1990
to 1995. Previously, he served with Ernst & Young in various
accounting and auditing capacities for 15 years.
JOSEPH J. PRATT 48 1995 Vice President and Chief Actuary. Mr. Pratt joined the Company in
October 1995. He was an actuary with Farmers Insurance Group from
June 1994 to October 1995. He also served as Vice President and
Actuary for Transamerica Insurance Group from October 1988 to May
1994. Previously he served in various actuarial capacities with the
Automobile Club of Southern California from 1974 to 1988, including
Chief Actuary for three years.
RICKARD F. SCHUTT 49 1992 Vice President, Operations. Mr. Schutt joined the Company in 1982
as Underwriting Manager and was promoted to Assistant Vice
President in 1986. He served as Vice President of Underwriting from
January 1992 until January 1995, when he assumed responsibility for
Operations.
DEAN E. STARK 43 1993 Vice President, Claims. Mr. Stark joined the Company in 1979,
serving in numerous claim positions including Assistant Vice
President. He has 20 years of experience in the insurance industry.
5
HAS SERVED
AS AN OFFICER
OFFICERS OF THE COMPANY AGE SINCE BUSINESS BACKGROUND
- ----------------------- --- --------------- -------------------------------------------------------------------
ROBERT B. TSCHUDY 48 1995 Senior Vice President and Chief Financial Officer. Mr. Tschudy
joined the Company in July 1995. Previously, he was with Ernst &
Young for over 20 years, including nine years as a partner in its
Los Angeles office.
Each executive officer serves at the pleasure of the Board of Directors.
There is no person chosen to be an executive officer who is not listed above.
6
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
The business of the Company is managed under the direction of the Board of
Directors. The Board meets on a regularly scheduled basis during the year to
review significant developments affecting the Company and to act on matters
requiring Board approval. It also holds special meetings when an important
matter requires Board action between scheduled meetings. The Board of Directors
met six times during 1996. Each Board member participated in at least 75% of the
meetings of the Board and Committees of the Board on which he served.
The Board of Directors had six standing committees, identified below, in
1996. The Company does not have a standing nominating committee. The functions
of a nominating committee are performed by the Board as a whole.
AUDIT COMMITTEE. The Audit Committee, which met twice during 1996,
recommends to the Board of Directors the appointment of the firm selected to be
independent accountants for the Company, reviews the Company's procedures and
accounting objectives, reviews and approves the findings and reports of the
independent accountants, and makes recommendations and reports to the Board of
Directors as it deems appropriate. Members of the Committee are Stanley M.
Burke, John B. De Nault, III and Howard I. Smith.
KEY EMPLOYEE INCENTIVE COMMITTEE. The Key Employee Incentive Committee,
which met twice during 1996, is empowered to make recommendations to the Board
of Directors pertaining to various benefit plans in which the officers and
directors of the Company are eligible to participate. Members of the Committee
are Stanley M. Burke, John B. De Nault, John B. De Nault, III, R. Scott Foster,
M.D., Rachford Harris, Robert M. Sandler, Gregory M. Shepard, Howard I. Smith
and Arthur H. Voss.
INVESTMENT COMMITTEE. The Investment Committee, which met four times during
1996, is empowered to make recommendations to the Board on investment matters.
Members of the Committee are John B. De Nault III, Rachford Harris and Howard I.
Smith.
COMPENSATION COMMITTEE. The Compensation Committee met twice last year. The
Compensation Committee reviews and approves compensation policies and makes
recommendations regarding executive compensation to the Board of Directors. No
member of the Committee is a former or current officer or employee of the
Company or any of its subsidiaries. Members of the Committee are John B. De
Nault, Rachford Harris and Gregory M. Shepard.
EXECUTIVE COMMITTEE. The Executive Committee, which met twice during 1996,
is empowered to act in lieu of the Board of Directors and may exercise all the
powers of the Board of Directors except those powers reserved to the Board by
law. The members are Stanley M. Burke, John B. De Nault, Rachford Harris,
William L. Mellick, and Robert M. Sandler.
STOCK OPTION COMMITTEE. The Stock Option Committee is empowered to
administer the 1995 Stock Option Plan. The members are John B. De Nault, III, R.
Scott Foster, M.D., Rachford Harris, Gregory M. Shepard and Arthur H. Voss. The
Committee met twice in 1996.
7
COMPENSATION OF DIRECTORS
For 1996, each outside director of the Company received an annual
remuneration of $15,000. All directors received $1,250 for each attended meeting
of the Board of Directors. In addition, each committee member received $1,250
for each attended meeting of a committee, if otherwise entitled. No director is
entitled to more than $1,250 for any calendar day, regardless of the number of
meetings attended on that day. Under the Company's 1995 Stock Option Plan,
nonemployee directors currently receive an option to purchase 2,000 shares of
the Company's common stock on the day of each Annual Meeting of Shareholders.
See Proposal 3, below, for proposed changes in future option amounts. The
options have an exercise price equal to the fair market value of the underlying
shares subject to the option on the date of grant and become exercisable one
year after the date of grant.
BENEFICIAL OWNERSHIP OF SECURITIES
PRINCIPAL SHAREOWNERS
The following table lists the beneficial ownership of each person or group
who owned, to the Company's knowledge, more than five percent of any class of
its outstanding voting securities.
SERIES A
COMMON STOCK PREFERRED STOCK
--------------------------- ---------------------------
AMOUNT AND AMOUNT AND
NATURE OF NATURE OF
BENEFICIAL PERCENT OF BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS (4) OWNERSHIP CLASS
- ----------------------------------------------- ------------- ------------ ------------ -------------
AMERICAN INTERNATIONAL GROUP, INC. 20,754,369 28.90% 224,950 100%
and its subsidiaries (1)
70 Pine Street
New York, New York 10270
DIRECT AUTO INSURANCE COMPANY 4,850,000 6.76% -0- --
and its subsidiary,
American Union Life Insurance Company
303 East Washington Street
Bloomington, IL 61701
LOUIS W. FOSTER 4,725,696 6.58% -0- --
6301 Owensmouth Avenue
Woodland Hills, CA 91367
JOHN B. DE NAULT (2)(3) 4,366,000 6.08 % -0- --
3314 Motor Avenue
Los Angeles, CA 90034
- ------------------------
(1) Series A Preferred Stock held by American International Group Inc. is
convertible into 19,854,369 shares of common stock. The number of shares of
common stock shown as beneficially owned by American International Group,
Inc. includes shares of common stock issuable upon conversion of preferred
stock and 900,000 shares of common stock currently owned.
8
(2) John B. De Nault and John B. De Nault, III share voting and investment
power on 408,000 shares for which they are both considered beneficial
owners.
(3) Includes 4,000 shares issuable upon exercise of stock options exercisable
within 60 days of the date of this Proxy Statement.
(4) The "Percent of Class" column for common stock is calculated based upon a
total of 71,821,230 shares, reflecting an increase in the number of common
shares by the conversion value of the American International Group, Inc.
outstanding Series A Preferred Stock and shares issuable upon exercise of
stock options exercisable within 60 days of this proxy statement.
MANAGEMENT OWNERSHIP
The following table sets forth information regarding the beneficial
ownership of the Company's common stock by directors, the Company's Chief
Executive Officer, the four other highest paid executive officers, and the
directors and officers as a group.
TITLE OF AMOUNT AND NATURE OF PERCENT OF
CLASS NAMES BENEFICIAL OWNERSHIP (1) CLASS (11)
- -------- -------------------------------- ---------------------------- -----------
Common John B. De Nault 4,366,000(2)(3) 6.08%
Common Stanley M. Burke 20,000(3) *
Common William H. Braddock 1,100 *
Common John B. De Nault, III 1,577,700(2)(3) 2.20%
Common R. Scott Foster, M.D. 322,996(3) *
Common Rachford Harris 886,713(3)(4) 1.23%
Common Robert M. Sandler 4,000(3) *
Common Gregory M. Shepard 4,854,000(3)(5) 6.76%
Common Howard I. Smith 4,000(3) *
Common Arthur H. Voss 404,000(3) *
Common William L. Mellick 85,731(6) *
Common Robert B. Tschudy 25,947(7) *
Common John R. Bollington 77,879(8) *
Common Paul F. Farber 33,232(9) *
Common Richard A. Dinon 40,052(10) *
Common All Directors and Officers as a 17,687,013 24.63%
Group (25 persons)
- ------------------------
* Less than 1%
(1) Under the rules of the Securities and Exchange Commission (the "SEC"), a
person is deemed to be a beneficial owner of a security if he or she has
or shares the power to vote or to direct the voting of such security, or
the power to dispose or to direct the disposition of such security. A
person is also deemed to be a beneficial owner of any securities of which
that person has the right to acquire beneficial ownership within 60 days,
as well as any securities owned by such person's spouse, children or
relatives living in the same household. Accordingly, more than one person
may be deemed to be a beneficial owner of the same securities. Unless
otherwise indicated by footnote, the named individuals have sole voting
and investment power with respect to the shares held by them.
9
(2) John B. De Nault and John B. De Nault, III share voting and investment
power on 408,000 shares for which they are both considered beneficial
owners.
(3) Includes 4,000 shares issuable upon exercise of stock options exercisable
within 60 days of the date of this Proxy Statement.
(4) Excludes 14,400 shares held by the wife of Rachford Harris and 3,600 held
by his daughter and grandson as to which he has no voting or investment
power and for which he disclaims beneficial ownership.
(5) Mr. Shepard is Chairman of the Board and President of Direct Auto
Insurance Company and its subsidiary, American Union Life Insurance
Company, which together own 4,850,000 shares.
(6) Includes 30,305 shares currently held under the Company's Restricted
Shares Plan, which can be voted by the participant but cannot be disposed
of until vested, and 13,000 shares issuable upon exercise of stock options
exercisable within 60 days of this Proxy Statement.
(7) Includes 9,172 shares currently held under the Company's Restricted Shares
Plan, which can be voted by the participant but cannot be disposed of
until vested, 1,482 shares purchased through the Company's 401(k) Plan,
and 13,000 shares issuable upon exercise of stock options exercisable
within 60 days of this Proxy Statement.
(8) Includes 14,060 shares currently held under the Company's Restricted
Shares Plan, which can be voted by the participant but cannot be disposed
of until vested, 892 shares purchased through the Company's 401(k) Plan,
and 13,000 shares issuable upon exercise of stock options exercisable
within 60 days of this Proxy Statement.
(9) Includes 8,052 shares currently held under the Company's Restricted Shares
Plan, which can be voted by the participant but cannot be disposed of
until vested, and 13,000 shares issuable upon exercise of stock options
exercisable within 60 days of this Proxy Statement.
(10) Includes 11,000 shares currently held under the Company's Restricted
Shares Plan, which can be voted by the participant but cannot be disposed
of until vested, and 13,000 shares issuable upon exercise of stock options
exercisable within 60 days of this Proxy Statement.
(11) The "Percent of Class" column is calculated based upon a total of
71,821,230 shares, reflecting an increase in the number of common shares
by the conversion value of the American International Group, Inc.
outstanding Series A Preferred Stock and shares issuable upon exercise of
stock options exercisable within 60 days of this Proxy Statement.
10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid during each of the Company's last three years to the Company's Chief
Executive Officer, and each of the Company's four other most highly compensated
executive officers (the "Named Executives"), based on salary and bonus earned
during 1996.
LONG TERM
COMPENSATION (4)
-----------------------------------------
AWARDS
ANNUAL COMPENSATION ------------------------
------------------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(3) ($)(5) (#)(6) ($)(7)
- -------------------- --------- ------------ ------------ --------------- ----------- ----------- ---------------
William L. Mellick 1996 408,750(1) 125,000 14,267 -- 20,000 29,250
CEO, President, COO 1995 299,167(1) 100,000 12,013 -- 20,000 10,782
and Director 1994 200,000 32,500(2) 13,200 -- -- 10,098
Robert B. Tschudy 1996 233,625 57,500 15,500 225,000 20,000 6,477
Sr. VP and CFO 1995 103,125 18,000 3,229 -- 20,000 512
1994 -- -- -- -- -- --
John R. Bollington 1996 219,500 38,000 13,200 -- 15,000 18,396
General Counsel Sr. 1995 207,500 28,500 13,200 -- 12,500 14,640
VP & Secretary 1994 172,000 25,000(2) 13,200 -- -- 11,124
Paul F. Farber 1996 179,583 65,000 15,500 -- 15,000 10,031
Group VP 1995 156,400 27,000 13,967 142,600 12,500 7,611
1994 118,000 17,500(2) 13,200 -- -- 7,505
Richard A. Dinon 1996 171,000 30,000 14,900 -- 12,500 11,358
Sr. VP Corporate 1995 162,421 22,000 13,700 -- 12,500 9,273
Relations 1994 135,000 17,500(2) 13,700 -- -- 8,981
- --------------------------
(1) Includes fees for attending meetings of the Board of Directors.
(2) Non-cash award through the Restricted Shares Plan granted and vested in
January 1995.
(3) Company-owned automobile allowance.
(4) During 1996 there were no awards of Stock Appreciation Rights ("SARs"), nor
were there any Long-Term Incentive Plan ("LTIP") payouts.
11
(5) Restricted Stock awards are for a five-year period, vesting at 20% per
year. During the restriction period, participants are entitled to receive
dividends on and may vote the shares. The following table sets forth the
restricted stock award information and the vesting schedule for the Named
Executives:
PRESENT VALUE
AS OF
SHARES VESTING IN BALANCE 12/31/96 FMV
DATE SHARE AWARD -------------------------------------- AS OF $16 7/8 PER
AWARDED AWARDED VALUE 1997 1998 1999 2000 2001 12/31/96 SHARE
------- ------- -------- ------ ------ ------ ------ ------ --------- -------------
William L. Mellick 1/2/92 7,760 $160,000 1,552 -- -- -- -- 1,552 $ 26,190
Robert B. Tschudy 1/2/96 11,465 $225,000 2,293 2,293 2,293 2,293 2,293 11,465 $ 193,472
John R. Bollington 1/2/92 7,465 $154,000 1,493 -- -- -- -- 1,493 $ 25,194
Paul F. Farber 1/22/95 13,420 $142,600 2,684 2,684 2,684 2,684 -- 10,736 $ 181,170
Richard A. Dinon 1/2/92 6,060 $125,000 1,212 -- -- -- -- 1,212 $ 20,453
(6) Represents the number of shares of the Company's common stock for which
options were granted under the Company's 1995 Stock Option Plan.
(7) Includes the following other compensation for each Named Executive:
(a) Imputed income of group term life in excess of $50,000.
(b) Deferred employer's contribution to the Company's qualified 401(k) plan
and supplemental 401(k) plan.
1996
(A) (B) TOTAL
--------- --------- ---------
William L. Mellick....................................... 6,750 22,500 29,250
Robert B. Tschudy........................................ 2,090 4,387 6,477
John R. Bollington....................................... 8,059 10,337 18,396
Paul F. Farber........................................... 1,706 8,325 10,031
Richard A. Dinon......................................... 2,673 8,685 11,358
--------- --------- ---------
21,278 54,234 75,512
--------- --------- ---------
--------- --------- ---------
12
OPTION GRANTS IN 1996
The following table sets forth as to each of the Named Executives
information with respect to options granted during 1996 and the present value of
the options on the date of grant.
PERCENT OF
TOTAL OPTIONS
NUMBER OF GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED (1) IN 1996 ($/SH) DATE $ (2)
- --------------------- ----------- --------------- ----------- ----------- --------------
William L. Mellick 20,000 5.7% 19.875 1-9-06 $ 217,000
Robert B. Tschudy 20,000 5.7% 19.875 1-9-06 $ 217,000
John R. Bollington 15,000 4.2% 19.875 1-9-06 $ 162,750
Paul F. Farber 15,000 4.2% 19.875 1-9-06 $ 162,750
Richard A. Dinon 12,500 3.5% 19.875 1-9-06 $ 135,625
- ------------------------
(1) Options were granted to the Named Executives on January 10, 1996 at an
exercise price of $19.875 per share. The exercise price is equal to the
closing price of the Company's common stock on the business day immediately
preceding the date of grant, as reported in the Wall Street Journal,
Western Edition. These options vest at the rate of no more than 5,000 per
year and began to become exercisable on January 10, 1997.
(2) Present value was calculated using the Black-Scholes option pricing model.
Use of this model should not be viewed in any way as a forecast of the
future performance of the Company's common stock, which will be determined
by future events and unknown factors. The estimated values under the
Black-Scholes model are based upon certain assumptions as to variables,
including expected stock price volatility of .39, an annual interest rate
of 6.5%, a dividend yield of 1.0% and an expected term of ten years.
DECEMBER 31, 1996 OPTION VALUES
The following table provides information as to the value of options held by
each of the Named Executives at December 31, 1996. No options were exercised by
the Named Executives during 1996.
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
DECEMBER 31, 1996 (#) AT DECEMBER 31, 1996 ($)(1)
----------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ------------- -------------- ------------ --------------
William L. Mellick 8,000 32,000 $ 35,000 $ 52,500
Robert B. Tschudy 8,000 32,000 $ 35,000 $ 52,500
John R. Bollington 8,000 19,500 $ 35,000 $ 19,687
Paul F. Farber 8,000 19,500 $ 35,000 $ 19,687
Richard A. Dinon 8,000 17,000 $ 35,000 $ 19,687
- ------------------------
(1) In accordance with proxy statement reporting requirements, values of both
exercisable and unexercisable options are based on the difference between
the exercise price of each option and $16.875, the closing price of the
Company's common stock on December 31, 1996, as reported in the Wall Street
Journal, Western Edition.
13
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE MANAGEMENT COMPENSATION
The Compensation Committee, consisting of nonemployee directors John B. De
Nault, Rachford Harris and Gregory M. Shepard, has furnished the following
report on executive compensation:
GENERAL COMPENSATION POLICY
The Board of Directors' fundamental policy has been to offer the Company's
executive officers competitive compensation opportunities based in large part
upon their contributions to the success of the Company, and upon their personal
performance. The Company believes in compensating its executives for
demonstrated and sustained levels of performance in their individual jobs. The
achievement of higher levels of performance and contribution is rewarded by
higher levels of compensation. Each individual officer's compensation package,
other than that of the Chief Executive Officer, is comprised of three elements:
(i) base salary, designed principally to be competitive with relevant salary
levels in the industry, (ii) annual variable performance awards paid in cash,
based upon subjective evaluation of individual performance not tied to specific
company performance goals and (iii) long-term stock awards and stock option
grants which strengthen the mutuality of interest between executive officers and
the Company's shareholders.
Some of the more important factors which the Board considered in
establishing the components of each executive officer's compensation package for
the 1996 fiscal year are summarized below.
BASE SALARY. Base salary for each officer is set subjectively, after
reviewing personal performance, internal comparability considerations and salary
levels in effect for comparable positions in the market place. The Company uses
salary survey information to assign a salary grade range to each position,
including executive officers. Salary range midpoints are targeted at the 50th
percentile of like business enterprises in the same geographic area, if
possible.
Salary recommendations for the year were based in part upon salary survey
information published by the National Association of Independent Insurers and
Sibson & Company. The Committee believes that information provided by these
groups presents a broadly based cross-section of insurance company compensation
practices. Individual salary adjustments for executive officers were based upon
analysis of base salary levels, effectiveness of performance, changes in job
responsibilities and a subjective assessment of their personal contributions to
the effectiveness of the organization as a whole. All of the factors enumerated
were applied in a subjective, non-quantitative manner to establish an executive
officer's base salary. The peer group examined when establishing these
compensation levels is different from the industry group utilized in the
Stockholder Return Performance Graph diagramed below.
ANNUAL CASH INCENTIVE COMPENSATION. Bonuses were paid to Chief Executive
Officer William L. Mellick and other executive officers for the 1996 fiscal year
based upon subjective evaluation of Company performance relative to key issues
impacting profitability, development of corporate surplus and enhancement of
marketplace competitiveness. At the end of the year, a bonus pool was
established for executive officers other than the Chief Executive Officer.
Thereafter, the Company determined individual
14
executive officer bonuses based upon that officer's performance and
contributions measured subjectively. Another factor of importance was assessment
of the relative contributions of each executive officer. Full-year bonuses
varied by individual executive and generally ranged between 12% and 35% of base
salary.
LONG-TERM EQUITY INCENTIVE COMPENSATION. Restricted Shares Awards are
granted to executive officers through the Key Employee Incentive Committee,
consistent with a policy designed to align the interests of executive officers
with those of the shareholders. The grants provide the executives with a
significant incentive to manage the Company from the perspective of an owner
with an equity stake in the Company. The number of shares subject to each grant
is based on the officer's salary level on the grant date, as reflected in
Restricted Shares Plan guidelines. Prior awards are not considered when a new
grant is awarded. A grant of stock vests 20 percent per year, provided the
officer continues his or her employment with the Company.
In 1995 the Compensation Committee concluded that a stock option plan would
improve the linkage between shareholder value and executive compensation. Upon
this Committee's recommendation, the Board of Directors adopted the 1995 Stock
Option Plan, which was approved by shareholders at the 1995 Annual Meeting.
Executives and key managers are eligible to receive stock options from time to
time, giving them the right to purchase shares of the Company's common stock at
a specified price in the future. The Plan is administered by the Stock Option
Committee, which has authority to select optionees and to determine the number
of shares granted to them.
CEO COMPENSATION. William L. Mellick's base salary was established by the
Board of Directors upon recommendation of the Compensation Committee, and took
into account the fact that he held not only the office of Chief Executive
Officer, but also served as President and Chief Operating Officer. In 1996, his
annualized base salary was increased from $300,000 to $400,000. In January of
1996, Mr. Mellick was awarded 20,000 stock options under the 1995 Stock Option
Plan. Mr. Mellick was awarded a cash bonus of $125,000 for services rendered in
1996 based upon subjective evaluation by the Compensation Committee of Mr.
Mellick's 1996 performance.
The Compensation Committee's recommendations as outlined in this report have
been submitted to, reviewed and approved by the Board of Directors.
The Company has reviewed Section 162(m) of the Internal Revenue Code which
does not permit the deductibility of applicable employee remuneration to a
company's chief executive officer and each of the other four highest compensated
executive officers to the extent such compensation exceeds $1,000,000 for any
individual, and does not otherwise qualify for an exception under the statute.
As the Summary Compensation Table above indicates, no executive officer's
compensation exceeded $1,000,000 in 1996. The Compensation Committee continues
to evaluate the advisability of qualifying the deductibility of such executive
compensation in the future. No performance goals have been recommended to the
Board of Directors for Section 162(m) qualification purposes.
Submitted by the Compensation
Committee
John B. De Nault, Chairman
Rachford Harris
Gregory M. Shepard
15
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
As indicated above, the Company's Compensation Committee consists of John B.
De Nault, Rachford Harris and Gregory M. Shepard. No Committee member is or was
an employee of 20th Century Industries.
William L. Mellick, Director and Chief Executive Officer, also participated
in deliberations concerning executive officers' compensation during 1996, other
than his own. Mr. Mellick has been an officer of the Company since 1979, Chief
Executive Officer since March 1, 1995 and a director since May 25, 1995.
16
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return on the Company's Common Stock against the cumulative total return of the
Standard & Poor's 500 Stock Index and the Standard & Poor's Property & Casualty
Insurance Index for the period of five years commencing December 31, 1991 and
ending December 31, 1996. The graph and table assume that $100 was invested on
December 31, 1991 in each of the Company's Common Stock, the Standard & Poor's
500 Stock Index and the Standard & Poor's Property & Casualty Insurance Index,
and that all dividends were reinvested. This data was furnished by Research
Holdings, Ltd.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG 20TH CENTURY INDUSTRIES, THE S&P 500 INDEX
AND THE S&P PROPERTY-CASUALTY INSURANCE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
20TH CENTURY (TW) S&P 500 S&P P&C
1991 $100 $100 $100
1992 $140 $108 $117
1993 $137 $118 $115
1994 $53 $120 $121
1995 $100 $165 $163
1996 $85 $203 $199
17
RETIREMENT PLANS
PENSION PLAN
The Company's Pension Plan is a noncontributory defined benefit plan for all
regular employees under which normal retirement is at age 65 and early
retirement can be elected by any participant who has reached age 55 and has at
least 10 years of service. The plan, subject to certain maximum and minimum
provisions, bases pension benefits on an employee's career average compensation
and length of service. The annual pension benefit payable upon normal retirement
is equal to the sum of the accruals for each year a participant was in the plan.
At retirement, the participant has various life and contingent annuity
payment elections. For purposes of this plan, compensation includes base annual
salary plus overtime and bonuses. These pension benefits serve as an offset in
calculating benefits for participants under the Supplemental Executive
Retirement Plan.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Employees nominated by the Chief Executive Officer and approved by the Board
of Directors are eligible to participate in the Supplemental Executive
Retirement Plan. The plan is a nonqualified defined benefit plan under which
normal retirement is age 65 with at least 5 years of service, and early
retirement can be elected by any participant who has reached age 55 with at
least 10 years of service. The annual retirement benefit payable is equal to 60%
of the participant's final average compensation during the three years preceding
retirement, reduced by the participant's benefit under the Pension Plan and 50%
of the participant's social security benefit. At retirement, the participant may
elect a 15 year certain or 100% joint and survivor payment method.
PENSION SUPPLEMENTAL PLAN AND 401(K) SUPPLEMENTAL PLAN
Effective January 1, 1996, the Company adopted the Pension Supplemental Plan
and the 401(k) Supplemental Plan. Each is a non-qualified deferred compensation
plan designed for certain executives and key employees of the Company whose
benefits under the Company's qualified Pension and 401(k) Plans have been
limited by certain provisions of the Internal Revenue Code (the "Code").
The Pension Supplemental Plan provides a benefit equal to the difference
between the pension that would be payable under the Pension Plan, absent the
Code's limitations upon compensation considered in calculating pension benefits,
and the actual benefits payable subject to those limitations. If a participant
in this plan is also entitled to receive benefits under the Supplemental
Executive Retirement Plan, the Pension Supplemental Plan benefits will be
reduced accordingly.
The 401(k) Supplemental Plan permits certain executives and key employees to
defer an amount of current compensation which, in addition to amounts actually
contributed to the 401(k) Plan, allows the participant to defer the full amount
of contributions that could have been deferred under the 401(k) Plan without
regard to limitations which the Code places on contributions and eligible
compensation. To the extent that such limitations preclude a participant's
account from receiving matching contributions under the 401(k) Plan, the
participant will receive a like amount of matching contributions under the
401(k) Supplemental Plan.
18
The table below sets forth the benefit payable from the Pension Plan,
Supplemental Executive Retirement Plan, the Pension Supplemental Plan, and one
half of the Social Security benefit (assuming the recipient is entitled to the
age 65 Social Security benefit).
NUMBER OF YEARS OF SERVICE
FINAL AVERAGE -------------------------------------
COMPENSATION 5 10 15 OR MORE
- -------------- ----------- ----------- -----------
$ 150,000 $ 45,000 $ 67,500 $ 90,000
200,000 60,000 90,000 120,000
250,000 75,000 112,500 150,000
300,000 90,000 135,000 180,000
350,000 105,000 157,500 210,000
400,000 120,000 180,000 240,000
450,000 135,000 202,500 270,000
500,000 150,000 225,000 300,000
550,000 165,000 247,500 330,000
600,000 180,000 270,000 360,000
650,000 195,000 295,500 390,000
Any deduction for Social Security or other offset has already been taken
into account.
As set forth above, compensation used in calculating the Pension,
Supplemental Executive Retirement Plan and Pension Supplemental retirement
benefit includes annual base salary plus overtime and bonuses. This compensation
will approximate and fall within 10% of the total of 1994 through 1996 salary
and bonus amounts shown in the Summary Compensation Table for the listed
individuals.
The credited years for the Named Executives in the Summary Compensation
Table are William L. Mellick -- 17 years; Robert B. Tschudy -- 1 year; John R.
Bollington -- 21 years; Paul F. Farber -- 12 years and Richard A. Dinon -- 13
years.
RESTRICTED SHARES PLAN
The shareholders at their meeting held on May 25, 1982 approved the 20th
Century Industries Restricted Shares Plan. Pursuant to the Plan, the Board of
Directors established a committee of its members entitled the Key Employee
Incentive Committee (the "Committee") to designate the participants in the Plan,
the amount of benefits thereunder, and to otherwise administer the Plan. Members
of the Committee are not eligible for benefits under the Plan. Designation of an
employee for benefits under the Restricted Shares Plan does not necessarily
entitle the employee to benefits under any other Company benefit plan.
In general, the shares granted are restricted for a period of five years,
vesting at the rate of 20% per year. If the employment of the participant is
terminated within the five year period, all shares not then vested are
forfeited. Any shares forfeited may be regranted to an existing participant or
any other employee eligible to be designated as a participant. During the
restricted period, a participant has the right to receive dividends and the
right to vote the shares.
The Plan does not create any right of any employee or class of employees to
receive a grant, nor does it create in any employee or class of employees any
right with respect to continuation of employment by the Company.
19
STOCK OPTION PLAN
In 1995, the Company's shareholders approved the Company's 1995 Stock Option
Plan in order to enable the Company to attract, retain and motivate key
employees and nonemployee directors and to further align their interests with
those of the Company's shareholders by providing for or increasing their
proprietary interest in the Company. The Stock Option Plan is administered by a
committee comprised of disinterested members of the Board of Directors. The
committee has the authority to select persons to be granted options and to
determine exercise prices, vesting schedules and other provisions not
inconsistent with the provisions of the Stock Option Plan.
Each option gives a grantee the right to purchase shares of the Company's
common stock at a specified price in the future. Shares vest at fixed numbers of
shares per year over varying future periods. The Stock Option Plan provides that
on the day of an annual meeting of shareholders of the Company each nonemployee
director will be granted an option to purchase 2,000 shares of the Company's
common stock (or 4,000 shares if the proposed amendments described in Proposal
3, below, are approved). Nonemployee director options have an exercise price
equal to the fair market value of the underlying shares subject to the option on
the date of grant and become exercisable one year after the date of grant.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons who own more than ten percent of a
registered class of the Company's equity securities to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Executive officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on a review of reports furnished to
the Company and written representations that no other reports were required
during the 1996 fiscal year, all Section 16(a) filing requirements were complied
with.
INDEPENDENT ACCOUNTANTS
(PROPOSAL 2)
The Board of Directors has approved a resolution retaining Ernst & Young,
Certified Public Accountants, as its independent accountants for 1997. Ernst &
Young has audited the Company's financial statements since 1991. The appointment
was recommended by the Audit Committee. It is intended that unless otherwise
directed by the shareholders, proxies will be voted for the ratification of this
appointment.
Representatives of Ernst & Young are expected to be present at the annual
meeting to make a statement, if they desire, and to be available to respond to
appropriate questions.
20
APPROVAL OF AMENDMENTS TO THE COMPANY'S STOCK PLAN
(PROPOSAL 3)
On May 25, 1995 the Company's shareholders approved the 20th Century
Industries 1995 Stock Option Plan (hereinafter "Plan" or "Stock Option Plan").
At that time 1,000,000 shares of the Company's Common Stock were reserved for
issuance under the Plan; as of the date of this Proxy Statement a total of
747,250 shares either have been issued upon exercise or are subject to
outstanding options under the Plan. In order to reserve sufficient shares for
future options, the Board of Directors proposes that the number of shares
reserved under the Stock Option Plan be increased from 1,000,000 to 4,000,000.
At the same time the Board proposes that the annual limitation on the number of
shares which may be granted to a single employee be increased from 20,000 to
100,000 and that the number of shares automatically granted to each nonemployee
director each year be increased from 2,000 to 4,000.
The Board believes that granting fairly priced options to key employees and
nonemployee directors is an effective means to promote the future growth of the
Company. The purpose of the Plan and the proposed amendments is to enable the
Company and its subsidiaries to attract, retain and motivate employees
designated as key employees by providing for or increasing the proprietary
interests of such employees in the Company and to enable the Company to attract,
retain and motivate its nonemployee directors and further align their interests
with those of the Company's shareholders by providing for or increasing the
proprietary interest of such directors in the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF THE AMENDMENTS TO THE PLAN.
The Plan's summary below does not purport to be complete, and is qualified
in its entirety by reference to the entire text of the Plan, as proposed to be
amended, which is available to shareholders upon request.
GENERAL
Any person, including any director of the Company, who is an employee of the
Company or any of its subsidiaries (an "Employee") is eligible to be considered
for the grant of options under the Plan. The Plan also provides for the
automatic grant of options to directors of the Company who are not employees
("Nonemployee Directors").
Stock options granted under the Plan are for the purchase of common stock of
the Company. The options are intended to qualify either as incentive stock
options ("ISO's") pursuant to Section 422 of the Internal Revenue Code of 1986,
as amended from time to time, or will constitute nonqualified stock options
("NQSO's"). The aggregate number of shares of common stock authorized pursuant
to the Plan currently may not exceed 1,000,000 shares (or 4,000,000 if the
proposed amendments are approved), subject to antidilution adjustment. During
the life of the Plan, options for no more than 800,000 shares may be granted as
Incentive Stock Options (or no more than 3,600,000 shares if the proposed
amendments are adopted). No Employee may currently be granted options to
purchase more than 20,000 shares per year (or 100,000 shares per year if the
proposed amendments are approved).
21
ADMINISTRATION
The Plan provides that it will be administered by a Committee comprised of
at least two members of the Board of Directors, each of whom is a "disinterested
person", as described in the Plan (the "Committee"). The Committee has complete
authority (i) to construe, interpret, and administer the provisions of the Plan
and the provisions of the option agreements granted thereunder, (ii) to
determine which persons are to be granted options, the number of options, the
number of shares of common stock with respect to each option, the exercise price
or prices of each option, the vesting and exercise period of each option,
whether an option may be exercised as to less than all of the common stock
subject to the option, and such other terms and conditions of each option, if
any, that are not inconsistent with the provisions of the Plan; (iii) to
prescribe, amend, and rescind rules and regulations pertaining to the Plan; and
(iv) to make all other determinations necessary or advisable for its
implementation and administration.
PLAN DURATION
The Plan's effective date was April 6, 1995. Neither Employee options nor
Nonemployee Director options can be granted on or after April 6, 2005. No common
stock shall be issued under the Plan on or after April 6, 2015.
TERMS AND CONDITIONS OF THE EMPLOYEE AWARDS AND NONEMPLOYEE DIRECTOR OPTIONS
Pursuant to the Plan's terms and conditions, the Committee in its
discretion, may grant stock options to any Employee. An Employee becomes
eligible upon his or her designation, in the sole and absolute discretion of the
Committee, as an individual possessing the capacity to contribute in a
substantial measure to the successful performance of the Company. When an option
is granted, the exercise price per share may be no less than the fair market
value of the underlying shares at the time of grant. The Plan specifies that
options must have an exercise price no less than the fair market value of the
underlying common stock on the date of grant of the option, and therefore the
maximum compensation payable to employees pursuant to the Plan, during the term
of the Plan and options granted thereunder, is equal to the number of shares of
common stock with respect to which options may be issued thereunder, multiplied
by the appreciation in value of each such share from the date of grant of the
option to the date such compensation is measured.
The Plan provides that each Nonemployee Director will, on the day of the
annual meeting of shareholders of the Company at which directors of the Company
are elected, automatically be granted a Nonemployee Director option to purchase
2,000 shares of common stock (or 4,000 shares if the proposed amendments are
approved). Each Nonemployee Director is granted a Nonemployee Director option to
purchase 2,000 shares of common stock upon appointment to the Board of Directors
(or 4,000 shares if the proposed amendments are approved). In no event, however,
may a Nonemployee Director be granted options for more than 2,000 shares in any
one calendar year (or 4,000 shares if the proposed amendments are approved).
Nonemployee Director options have an exercise price equal to the fair market
value of the underlying shares subject to such option on the date of its grant.
Each Nonemployee Director option granted pursuant to the Plan becomes
exercisable to purchase 100% of the underlying common stock one year after the
date of grant of such Nonemployee Director option. If the proposed amendments
are approved, they will govern the automatic grant of Nonemployee Director
options on May 20, 1997.
22
Each Nonemployee Director option expires upon the first to occur of the
following: (i) the first anniversary of the date upon which the optionee ceases
to be a Nonemployee Director as a result of death or total disability; (ii) the
90th day after the date upon which the optionee ceases to be a Nonemployee
Director for any reason other than death or total disability; or (iii) the tenth
anniversary of the date of grant of the Nonemployee Director option.
The Committee may include provisions in any option conditioning or
accelerating the receipt of benefits when specific events occur, including a
change of control of the Company. All currently outstanding options contain
change of control provisions. The Committee may not include a provision which
violates any provision of the Company's charter, or of the Plan itself.
AMENDMENT
The Board may amend or terminate the Plan, but neither the Board nor the
Committee can deprive a recipient of any options granted under the Plan without
that person's consent.
FEDERAL TAX CONSEQUENCES
The following is a brief description of the federal income tax treatment
which will generally apply to options granted under the Plan, based on federal
income tax laws in effect on the date of this Proxy Statement. The exact federal
income tax treatment of options will depend on the specific nature of the grant.
No information is provided herein with respect to estate, inheritance, gift,
state or local tax laws, although there may be certain tax consequences upon the
receipt or exercise of an option or the disposition of any acquired shares under
those laws. Recipients of awards are advised to consult their personal tax
advisors with regard to all consequences arising from the awards.
INCENTIVE STOCK OPTIONS. Pursuant to the Plan, employees may be granted
options which are intended to qualify as ISO's under the provisions of Section
422 of the Internal Revenue Code. Generally, the optionee is not taxed and the
Company is not entitled to a deduction on the grant or the exercise of an ISO.
However, if the optionee sells the shares acquired upon the exercise of an ISO
("ISO Shares") at any time within (a) one year after the date of transfer of ISO
Shares to the optionee pursuant to the exercise of such ISO or (b) two years
after the date of grant of such ISO, then (1) the optionee will recognize
capital gain equal to the excess, if any, of the sales price over the fair
market value of the ISO Shares on the date of exercise, (2) the optionee will
recognize ordinary income equal to the excess, if any, of the lesser of the
sales price or the fair market value of the ISO Shares on the date of exercise,
over the exercise price of such ISO, (3) the optionee will recognize capital
loss equal to the excess, if any, of the exercise price of such ISO over the
sales price of the ISO Shares, and (4) the Company will generally be entitled to
a deduction equal to the amount of ordinary income recognized by the optionee.
If the optionee sells the ISO Shares at any time after the optionee has held ISO
Shares for at least (i) one year after the date of transfer of the ISO Shares to
the optionee pursuant to the exercise of the ISO and (ii) two years after the
date of grant of the ISO, then the optionee will recognize capital gain or loss
equal to the difference between the sales price and the exercise price of such
ISO, and the Company will not be entitled to any deduction.
The amount by which the fair market value of the ISO Shares received upon
exercise of an ISO exceeds the exercise price will be included as a positive
adjustment in the calculation of an optionee's "alternative minimum taxable
income" ("AMTI") in the year of exercise. The "alternative minimum tax"
23
imposed on individual taxpayers is generally equal to the amount by which 28%
(26% of AMTI below certain amounts) of the individual's AMTI (reduced by certain
exemption amounts) exceeds his or her regular income tax liability for the year.
NONQUALIFIED STOCK OPTIONS. The grant of an option or other similar right
to acquire stock which does not qualify for treatment as an ISO is generally not
a taxable event for the optionee. Upon exercise of the option, the optionee will
generally recognize ordinary income in an amount equal to the excess of the fair
market value of the stock acquired upon exercise (determined as of the date of
the exercise) over the exercise price of such option, and the Company will be
entitled to a tax deduction equal to such amount. See "Special Rules for Awards
Granted to Insiders," below.
SPECIAL RULES FOR AWARDS GRANTED TO INSIDERS. If an optionee is a director,
officer or shareholder subject to Section 16 of the Exchange Act (an "Insider"),
the determination of the amount and the timing of income recognition in
connection with the exercise of an option generally may be required to be
deferred until the expiration of any period during which the Insider would be
restricted from disposing of any stock received. Insiders should consult their
tax advisors to determine the tax consequences to them prior to exercising
options granted to them pursuant to the Plan, including the advisability of
making an election under Section 83(b) of the Internal Revenue Code in
connection with such exercise.
MISCELLANEOUS TAX ISSUES. Generally, the Company will be required to make
arrangements for withholding applicable taxes with respect to any ordinary
income recognized by a participant in connection with Awards made under the
Plan.
With certain exceptions, an individual may not deduct investment-related
interest to the extent such interest exceeds the individual's net investment
income for the year. Investment interest generally includes interest paid on
indebtedness incurred to purchase shares of common stock. Interest disallowed
under this rule may be carried forward to and deducted in later years, subject
to the same limitations.
A holder's tax basis in common shares acquired pursuant to the Plan
generally will equal the amount paid for the common shares plus any amount
recognized as ordinary income with respect to such stock. Other than ordinary
income recognized with respect to the common shares and included in basis, any
subsequent gain or loss upon the disposition of such stock generally will be
capital gain or loss (long-term or short-term, depending on the holder's holding
period).
Special rules will apply in cases where a recipient of an Award pays the
exercise or purchase price of the Award or applicable withholding tax
obligations under the Plan by delivering previously owned common shares or by
reducing the amount of shares otherwise issuable pursuant to the Award. The
surrender of withholding of such shares will in certain circumstances result in
the recognition of income with respect to such shares or a carryover basis in
the shares acquired.
The terms of the agreements pursuant to which specific Awards are made to
employees under the Plan may provide for accelerated vesting or payment of an
Award in connection with a change in ownership or control of the Company. In
that event and depending upon the individual circumstances of the recipient,
certain amounts with respect to such Awards may constitute "excess parachute
payments" under the "golden parachute" provisions of the Internal Revenue Code.
Pursuant to these provisions, a recipient will be subject to a 20% excise tax on
any "excess parachute payments" and the
24
Company will be denied any deduction with respect to such payment. Recipients of
Awards should consult their tax advisors as to whether accelerated vesting of an
Award in connection with a change of ownership or control of the Company would
give rise to an excess parachute payment.
The Company generally obtains a deduction equal to the ordinary income
recognized by the recipient of an Award. However, the Company's deduction for
such amounts (including amounts attributable to the ordinary income recognized
with respect to options or restricted stock) may be limited to $1,000,000 (per
person) annually.
SHAREHOLDERS PROPOSALS AT 1998 ANNUAL MEETING OF SHAREHOLDERS
If a shareholder desires to present a proposal at the Annual Meeting of
Shareholders of the Company for the year 1998 (scheduled to be held on May 19,
1998), such proposal must conform with all of the requirements of Rule 14a-8,
paragraphs (a), (b), and (c) under the Securities Exchange Act of 1934, and must
be received at the principal executive offices of the Company at 6301 Owensmouth
Avenue, Woodland Hills, California 91367 no later than December 19, 1997.
ADDITIONAL INFORMATION
The Annual Report to Shareholders for the year ended December 31, 1996 is
being mailed to the shareholders separately from this proxy statement.
THE COMPANY WILL PROVIDE WITHOUT CHARGE ON WRITTEN REQUEST A COPY OF 20TH
CENTURY INDUSTRIES' ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. THE REQUEST SHOULD BE DIRECTED TO JOHN B. DE NAULT,
CHAIRMAN OF THE BOARD OF 20TH CENTURY INDUSTRIES, 6301 OWENSMOUTH AVENUE,
WOODLAND HILLS, CALIFORNIA 91367.
OTHER BUSINESS
The Company is unaware of any matter to be acted upon at the meeting by
shareholder vote except the election of directors, the ratification of the
appointment of independent accountants and approval of the amendments to the
Stock Option Plan. In the case of any matter properly coming before the meeting
for shareholder vote, the proxyholders named in the proxy accompanying this
statement shall vote shares held by them in accordance with their best judgment.
April 18, 1997 JOHN B. DE NAULT, Chairman of the Board
20th Century Industries
6301 Owensmouth Avenue
Woodland Hills, California 91367
25
Annex
FIRST AMENDMENT
TO
20TH CENTURY INDUSTRIES
1995 STOCK OPTION PLAN
The 1995 Stock Option Plan (the "Plan") of 20th Century Industries, a
California corporation (the "Company") is hereby amended in the following
respects:
1. Paragraph (e) of Section 3 of the Plan is amended and restated to read as
follows:
(e) Notwithstanding any other provision of this Plan, no Employee shall be
granted Awards in excess of 100,000 shares of Common Stock, subject to
adjustment pursuant to Section 8 hereof, during any one calendar year.
2. Paragraph (a) of Section 4 of the Plan is amended and restated to read as
follows:
(a) Each year, on the day of the annual meeting of shareholders of the
Company (or any adjournment thereof) at which directors of the Company are
elected (the "Date of Grant"), each Nonemployee Director shall
automatically be granted an option (a "Nonemployee Director Option") to
purchase 4,000 Common Shares. Each Nonemployee Director shall
automatically be granted a Nonemployee Director Option to purchase 4,000
Common Shares upon appointment to the Board of Directors. In no event
shall a Nonemployee Director be granted options for more than 4,000 Common
Shares per calendar year.
3. Paragraphs (a) and (b) of Section 5 of the Plan are amended and restated to
read as follows.
(a) The aggregate number of Common Shares that may be issued pursuant to
all Incentive Stock Options granted under this Plan shall not exceed
3,600,000, subject to adjustment as provided in Section 8 hereof.
(b) At any time, the aggregate number of Common Shares issued and issuable
pursuant to all Awards (including Incentive Stock Options) and Nonemployee
Director Options granted under this Plan shall not exceed 4,000,000,
subject to adjustment as provided in Section 8 hereof.
4. In all other respects the 1995 Stock Option Plan, as amended, is hereby
ratified, confirmed and approved.
5. This First Amendment shall be effective upon approval, directly or
indirectly, by the affirmative votes of the holders of a majority of the Common
Shares of the Company present, or represented, and entitled to vote at a meeting
duly held in accordance with the laws of the State of California, or by written
consent of a majority of the outstanding Common Shares.
_________________________________________________________
WHEN PROXY IS OKAYED PLEASE SIGN & DATE IT ABOVE
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
20TH CENTURY INDUSTRIES
MAY 20, 1997
20TH CENTURY INDUSTRIES
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John B. De Nault, Rachford Harris
and William L. Mellick as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as
designated on the reverse side of this card, all the shares of common
stock of 20th Century Industries held of record by the undersigned on
April 7, 1997 at the Annual Meeting of Shareholders to be held at the
Marriott Hotel, 21850 Oxnard Street, Woodland Hills, California on May
20, 1997 at 10:00 A.M. or any adjournment thereof.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE.)
_________________________________________________________
WHEN PROXY IS OKAYED PLEASE SIGN & DATE IT ABOVE
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
A /X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
WITHHOLD
AUTHORITY
to vote for all nominees
FOR listed in right
1. Election of Directors / / / /
NOMINEES: W. H. Braddock
S. M. Burke
J. B. De Nault
J. B. De Nault, III
R. S. Foster, M.D.
R.Harris
W. L. Mellick
G. M. Shepard
A. H. Voss
FOR THE NOMINEES LISTED AT RIGHT WITH DISCRETIONARY AUTHORITY TO CUMULATE VOTES
EXCEPT AS MARKED TO THE CONTRARY BELOW.
(INSTRUCTION; TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
2. Proposal to ratify the appointment of Ernst & Young as the independent
accountants of the Company for 1997.
FOR AGAINST ABSTAIN
/ / / / / /
3. Proposal to approve the amendments to the 20th Century Industries 1995
Stock Option Plan described in the Proxy Statement for the 1997 Annual
Meeting.
FOR AGAINST ABSTAIN
/ / / / / /
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
PLEASE CHECK THIS BOX IF YOU PLAN TO ATTEND THE MEETING. / /
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHARE HOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature(s)_______________________________________________Dated______ , 1997
SIGNATURE, IF HELD JOINTLY
NOTE: Please sign exactly as your name appears hereon. When shares are held
by joint tenants, both should sign. When signing as attorney, or as
executor, administrator, trustee or guardian, please so indicate. If a
corporation, please sign in full corporate name by the President or
other authorized officer. If a partnership, please sign in partnership
name by authorized person.