<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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
Annuity and Life Re (Holdings), Ltd.
- --------------------------------------------------------------------------------
(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 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:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
ANNUITY AND LIFE RE (HOLDINGS), LTD.
CUMBERLAND HOUSE
1 VICTORIA STREET
HAMILTON, HM 11, BERMUDA
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
------------------------
TIME 9:00 a.m. on Thursday, April 29, 1999
PLACE Elbow Beach Hotel
60 South Shore Road
Paget, PG 04, Bermuda
ITEMS OF BUSINESS (1) To elect four directors to hold office as specified in
the Proxy Statement.
(2) To approve and adopt an amendment to the Company's
Initial Stock Option Plan authorizing 2% of the
outstanding Common Shares of the Company to be
available for issuance annually thereunder.
(3) To appoint KPMG Peat Marwick as independent
accountants for the Company for the current fiscal
year.
(4) To act upon any other matters properly coming before
the meeting or any adjournment thereof.
RECORD DATE The close of business on March 10, 1999 has been fixed as
the record date for the meeting. All shareholders of
record at that time are entitled to notice of and are
entitled to vote in person or by proxy at the Annual
Meeting of Shareholders and any adjournment or
postponement thereof.
IMPORTANT It is important that your shares be voted at this meeting.
Please MARK, SIGN, DATE and MAIL your proxy PROMPTLY in
the return envelope provided, even if you plan to attend
the meeting. If you attend the meeting, you may withdraw
your proxy and vote your shares in person.
By Order of the Board of Directors,
WILLIAM W. ATKIN
Senior Vice President and Secretary
April 1, 1999
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
VOTING AND REVOCABILITY OF PROXIES.......................... 1
PROPOSAL ONE ELECTION OF DIRECTORS.......................... 2
NOMINEES FOR DIRECTOR....................................... 2
Information Concerning Meetings and Certain Committees.... 4
Compensation Committee Interlocks and Insider
Participation.......................................... 5
Compensation of Directors................................. 5
PROPOSAL TWO AMENDMENT TO THE COMPANY'S INITIAL STOCK OPTION
PLAN...................................................... 6
PROPOSAL THREE APPOINTMENT OF AUDITORS...................... 7
PROPOSAL FOUR OTHER MATTERS................................. 8
ADDITIONAL INFORMATION...................................... 8
Section 16(a) Beneficial Ownership Reporting Compliance... 8
Executive Officers........................................ 8
Executive Compensation.................................... 9
Employment Contracts...................................... 10
Compensation Committee Report on Executive Compensation... 10
Performance Graph......................................... 12
Principal Shareholders.................................... 13
Certain Relationships and Related Party Transactions...... 15
Proposals of Shareholders................................. 17
Miscellaneous............................................. 17
</TABLE>
i
<PAGE> 4
ANNUITY AND LIFE RE (HOLDINGS), LTD.
CUMBERLAND HOUSE
1 VICTORIA STREET
HAMILTON, HM 11, BERMUDA
-------------------------
PROXY STATEMENT
-------------------------
April 1, 1999
The Annual Meeting of the Shareholders of Annuity and Life Re (Holdings), Ltd.
(the "Company") will be held at the Elbow Beach Hotel, 60 South Shore Road,
Paget, PG 04, Bermuda at 9:00 a.m. on April 29, 1999 (the "Annual Meeting").
This Proxy Statement is being sent to each holder of the issued and outstanding
common shares (the "Common Shares") of the Company entitled to vote at the
Annual Meeting in order to furnish information relating to the business to be
transacted there. The Company's Annual Report to Shareholders for the fiscal
year ended December 31, 1998, including financial statements, was mailed to
shareholders with this Proxy Statement. No part of such Annual Report shall be
regarded as proxy-soliciting material or as a communication by means of which
any solicitation is made. This Proxy Statement and the enclosed proxy card are
being mailed to shareholders on or about March 30, 1999.
The close of business on March 10, 1999 has been fixed as the record date
for the Annual Meeting (the "Record Date"). All shareholders of record at that
time are entitled to notice of and are entitled to vote at the Annual Meeting
and any adjournment or postponement thereof. On the Record Date, there were
outstanding 25,499,999 Common Shares.
VOTING AND REVOCABILITY OF PROXIES
We hope you will be present at the Annual Meeting. If you cannot attend,
please complete, sign, date and return the enclosed proxy in the accompanying
envelope so that your Common Shares will be represented. The envelope is
addressed to the Company's transfer agent and requires no postage. Shareholders
who receive more than one proxy card -- due to the existence of multiple
accounts -- should sign and return all proxies received in order to be sure all
Common Shares so owned are in fact voted.
On each matter voted upon at the Annual Meeting and any adjournment or
postponement thereof, each record holder of Common Shares will be entitled to
one vote per share, except that with respect to the election of directors, the
voting rights of three institutional shareholders of the Company are restricted.
See "Certain Relationships and Related Party Transactions." In addition, certain
provisions of the Company's Bye-Laws reduce the total voting power of any
shareholder beneficially owning 10% or more of the Common Shares of the Company
to less than 10% of the total voting power of the Company's capital stock.
Directors are to be elected by a majority of the votes of the Common Shares
present, in person or by proxy, at the Annual Meeting and entitled to vote.
Approval of Proposals Two and Three require the affirmative vote of the holders
of a majority of the Common Shares present, in person or by proxy, at the Annual
Meeting and entitled to vote. If a proxy is marked as "Withhold Authority" or
"Abstain" on any matter, or if specific instructions are given that no vote be
cast on any specific matter (a "Specified Non-Vote"), the shares represented by
such proxy will not be voted on such matter but will count towards the
establishment of a quorum.
Shares may be voted at the Annual Meeting in person or by proxy. All valid
proxies received before the Annual Meeting will be voted according to their
terms. If no instructions are indicated on a properly completed proxy, such
proxy will be voted "FOR" the election of all directors, "FOR" the approval of
the amendment to the Company's Initial Stock Option Plan, and "FOR" the
ratification of the appointment of
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KPMG Peat Marwick as the Company's independent accountants for 1999. If any
other business is brought before the Annual Meeting, the proxies will be voted,
to the extent permitted by the rules and regulations of the United States
Securities and Exchange Commission (the "Commission"), in accordance with the
judgment of the persons voting the proxies. A shareholder who has given a proxy
may revoke it at any time before it is voted at the Annual Meeting by filing
with the Secretary of the Company an instrument revoking it or a duly executed
proxy bearing a later date, or by attending the Annual Meeting and giving notice
of revocation. Attendance at the Annual Meeting will not by itself constitute
revocation of a proxy.
The Company will bear the cost of the preparation and solicitation of
proxies, including the reasonable charges and expenses of brokerage firms or
other nominees for forwarding proxy materials to beneficial owners of Common
Shares. In addition to solicitation by mail, proxies may be solicited by
telephone, telegraph or personally by certain directors, officers and employees
of the Company and its subsidiaries without extra compensation. The Company has
retained Corporate Investor Communications, Inc., Carlstadt, New Jersey, United
States, to aid in the solicitation of proxies at an anticipated fee of $5,000
plus reasonable expenses. The enclosed proxy is solicited by and on behalf of
the Board of Directors of the Company.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board of Directors has nominated four persons for election as Directors
whose terms will expire at the regular Annual Meeting of Shareholders in the
year 2002. The nominees are Frederick S. Hammer, Robert Clements, Lee M.
Gammill, Jr. and Jon W. Yoskin, II, all of whom are currently directors of the
Company. The Board of Directors recommends that you vote for the election of
each of the nominees.
While the Board of Directors has no reason to believe that any of the
nominees will not be available to serve as a Director, if for any reason any of
them should become unavailable to serve as a Director, the shares represented by
proxies will be voted for the election of such substitute nominee(s) as may be
designated by the Board of Directors.
Set forth below is biographical information concerning each nominee for
election as a Director and each person who is continuing as a director,
including the individual's principal occupation and the period during which such
person has served as a Director of the Company.
NOMINEES FOR DIRECTOR
Frederick S. Hammer, age 62, was elected Chairman of the Board and a
director of the Company upon its formation in December 1997. Mr. Hammer has been
Co-Chairman of Inter-Atlantic Capital Partners, Inc., a corporation which
provides investment banking services for insurance companies and other financial
services firms, since 1998. He previously served as a Vice Chairman of
Inter-Atlantic Capital Partners, Inc. from 1994 to 1998. He serves as Deputy
Chairman and a director of Global Markets Access Ltd. and as a director of
Medallion Financial Corporation. Mr. Hammer served as Chairman and Chief
Executive Officer of Mutual of America Capital Management Corporation from 1993
to 1994 and as President of SEI Asset Management Group from 1989 to 1993. From
1985 to 1989, Mr. Hammer was Chairman and Chief Executive Officer of Meritor
Savings Bank, and prior thereto he was an Executive Vice President of The Chase
Manhattan Corporation, where he was responsible for its global consumer
activities.
Robert Clements, age 65, was elected a director of the Company on February
19, 1998. Mr. Clements has been Chairman and a director of Risk Capital
Holdings, Inc., a global reinsurance company, since its formation in 1995. He
also currently serves as an advisor to Marsh & McLennan Risk Capital Corp., a
subsidiary of J&H Marsh & McLennan Companies, Inc., and he served as Chairman of
the Board and Chief Executive Officer of Marsh & McLennan Risk Capital Corp.
from 1994 to 1996. Prior thereto, he served as President of Marsh & McLennan
Companies, Inc. from 1992 to 1994, having been Vice Chairman of the Board in
1991. Mr. Clements was Chairman of Marsh & McLennan Incorporated, a subsidiary
of Marsh & McLennan Companies, Inc. from 1988 to 1992. Mr. Clements presently
serves as a director of EXEL Limited
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<PAGE> 6
and Hiscox plc. and serves as Chairman of the Board of the College of Insurance.
Mr. Clements is serving as a director of the Company as the nominee of Risk
Capital Reinsurance Company. See "Certain Relationships and Related Party
Transactions."
Lee M. Gammill, Jr., age 64, was elected a director of the Company on
February 19, 1998. Mr. Gammill currently serves as Chairman of the Gammill
Group, a provider of financial and consulting services to the insurance
industry. From 1994 to 1997, Mr. Gammill served as Vice Chairman of the Board of
New York Life Insurance Company, where he was employed for more than 40 years.
He currently serves as a director of Guarantee Life Insurance Company and
National Affiliated Corporation.
Jon W. Yoskin, II, age 59, was elected a director of the Company on
February 19, 1998. Mr. Yoskin has been Chairman of the Board and Chief Executive
Officer of Tri-Arc Financial Services, Inc., an insurance broker, since 1988 and
has served as Chairman of the Board and Chief Executive Officer of Magellan
Insurance Company, Ltd. since 1996.
DIRECTORS WHOSE TERMS EXPIRE IN 2000
Robert M. Lichten, age 57, was elected Deputy Chairman of the Board and a
director of the Company upon its formation in December 1997. Mr. Lichten has
been Co-Chairman of Inter-Atlantic Capital Partners, Inc., a corporation which
provides investment banking services for insurance companies and other financial
services firms, since 1998. He previously served as a Vice Chairman of
Inter-Atlantic Capital Partners, Inc. from 1994 to 1998. He currently serves as
Chairman and a director of Global Markets Access Ltd. Mr. Lichten served as a
Managing Director of Smith Barney Inc. from 1990 to 1994 and as a Managing
Director of Lehman Brothers Inc. from 1988 to 1990. Prior thereto, he served as
an Executive Vice President of The Chase Manhattan Corporation, where he was
responsible for asset liability management and was President of The Chase
Investment Bank.
Albert R. Dowden, age 57, was elected a director of the Company on February
19, 1998. Mr. Dowden was President and Chief Executive Officer of Volvo Group
North America, Inc. and Senior Vice President of AB Volvo from 1991 to 1998.
Prior to 1991, Mr. Dowden served as Executive Vice President of Volvo Group
North America, Inc., having previously served as Executive Vice President and
Deputy Managing Director of Volvo Cars North America, Inc. He currently serves
as a director of the Cortland Fund.
Brian M. O'Hara, age 50, was elected a director of the Company on February
19, 1998. Mr. O'Hara has been Chairman of the Board, President and Chief
Executive Officer of X.L. Insurance Company, Ltd. and President and Chief
Executive Officer of XL Capital Ltd, a diversified Bermuda-based insurer and
reinsurer, since 1994. Mr. O'Hara served as President and Chief Operating
Officer of X.L. Insurance Company, Ltd. and as Vice Chairman of the Board of XL
Capital Ltd from 1986 to 1994. Prior thereto, he served as a director and Senior
Vice President and Chief Underwriting Officer of Trenwick America Group from
1979 to 1986. Mr. O'Hara currently serves as a director of XL Capital Ltd.
Walter A. Scott, age 61, was elected a director of the Company on February
19, 1998. Mr. Scott has been a director of ACE Ltd., a Bermuda property casualty
insurance company, since 1989. He served as a consultant to ACE Ltd. from 1994
to 1996 and was Chairman of the Board, President and Chief Executive Officer of
ACE Ltd. from 1991 to 1994 and was President and Chief Executive Officer of ACE
Ltd. from 1989 to 1991. Mr. Scott currently serves as a director of Overseas
Partners Limited.
Paul H. Warren, age 42, was elected a director of the Company on April 2,
1998. Mr. Warren has been Managing Partner of International Managed Care
Advisors, L.P., an investment fund and management company that focuses on the
health industry in the developing world, since 1996. He has been a partner of
Insurance Partners Advisors, L.P., the manager of Insurance Partners, L.P. and
Insurance Partners Offshore (Bermuda), L.P., two investment partnerships formed
to sponsor acquisitions, recapitalizations, demutualizations and other
structured transactions in the property/casualty, life and health insurance and
reinsurance industries, since its formation in 1994. Mr. Warren was a Managing
Director of International Insurance Advisors, L.P. from 1992 to 1994. Prior
thereto, he served as a Vice President in the Insurance Group of J.P. Morgan &
Co. from 1986 to 1992. He currently serves as a director of Corporate Health
Dimensions,
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Provincia Salud and Provincia Aseguradora Riesgos Trabajo. Mr. Warren is serving
as a director of the Company as the nominee of Insurance Partners, L.P. and
Insurance Partners Offshore (Bermuda), L.P. See "Certain Relationships and
Related Party Transactions."
DIRECTORS WHOSE TERMS EXPIRE IN 2001
Lawrence S. Doyle, age 55, was elected President, Chief Executive Officer
and a director of the Company upon its formation in December 1997. Mr. Doyle was
the President and Chief Executive Officer of GCR Holdings Limited, a
Bermuda-based start up reinsurer specializing in catastrophe risk, and its
subsidiary Global Capital Reinsurance Limited from 1993 until their acquisition
by EXEL Limited, a diversified Bermuda-based insurer and reinsurer, in 1997,
whereupon Mr. Doyle became an Executive President of EXEL Limited. Prior
thereto, Mr. Doyle was Senior Vice President of the Hartford Insurance Group in
charge of international operations, where he was employed for 27 years, the last
six of which he was also the President of Hartford Fire International.
Michael P. Esposito, Jr., age 59, was elected a director of the Company
upon its formation in December 1997. Mr. Esposito has been Co-Chairman of
Inter-Atlantic Capital Partners, Inc., a corporation which provides investment
banking services for insurance companies and other financial services firms,
since 1998. He previously served as a Vice Chairman of Inter-Atlantic Capital
Partners, Inc. from 1994 to 1998. He has been non-executive Chairman of the
Board of XL Capital Ltd since 1995 and a director since 1986. He also serves as
a director of Risk Capital Holdings, Inc. and Forest City Enterprises, Inc. Mr.
Esposito served as Executive Vice President and Chief Corporate Compliance,
Control and Administration Officer of The Chase Manhattan Corporation from 1992
to 1995, having previously served as Executive Vice President and Chief
Financial Officer from 1987 to 1992.
Mark Grier, age 46, was elected a director of the Company on May 27, 1998.
Mr. Grier has been Executive Vice President, Corporate Governance of The
Prudential Insurance Company of America, a life insurance company, since 1998.
He served as the Chief Financial Officer of The Prudential Insurance Company of
America from 1995 to 1997. Prior thereto, Mr. Grier served as co-head of Chase
Global Markets and as an Executive Vice President of The Chase Manhattan Bank,
N.A. from 1994 to 1995 and as an Executive Vice President of The Chase Manhattan
Bank, Retail Banking businesses, from 1991 to 1994. He currently serves as a
director of Rochester Gas & Electric Company.
Donald J. Matthews, age 65, was elected a director of the Company on
February 19, 1998. Mr. Matthews has been President, Chief Executive Officer and
a director of Global Markets Access Ltd., a Bermuda-based financial guaranty
insurer and reinsurer, since 1998. Prior thereto, Mr. Matthews served as
President, Chief Operating Officer and a director of American Capital Access, a
financial guaranty company, from 1997 to 1998. From 1992 to 1997, he served as
Senior Vice President and a Principal of Johnson and Higgins, where he was
employed for 23 years and where he also most recently served as Chairman of the
Global Financial Group.
Jerry S. Rosenbloom, age 59, was elected a director of the Company on
February 19, 1998. Mr. Rosenbloom has been the Frederick H. Ecker Professor of
Insurance and Risk Management at the Wharton School of the University of
Pennsylvania since 1974. He currently serves as a director of Mutual Risk
Management Ltd., Harleysville Mutual Insurance Company, Terra Nova Bermuda
Holdings and Century Shares Trust.
INFORMATION CONCERNING MEETINGS AND CERTAIN COMMITTEES
The Board of Directors held three meetings during 1998. The Board has
established Executive, Finance and Investment, Audit and Compensation
committees. Each committee reports to the Board.
Executive Committee. The Board has appointed an Executive Committee to
exercise all of the authority of the Board between meetings of the full Board.
The Executive Committee does not, however, have authority to take any action on
matters committed or reserved by Bermuda law, the Company's Bye-Laws or
resolution of the Board of Directors to the full Board or another committee of
the Board. The Executive Committee
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regularly reviews the Company's business and reports or makes recommendations to
the Board thereon. The Executive Committee presently consists of five directors
of the Company (Messrs. Hammer (Chairman), Doyle, Esposito, Lichten and Scott).
During 1998, the Executive Committee met once.
Finance and Investment Committee. The Board has appointed a Finance and
Investment Committee to establish and monitor the Company's investment policies
and the performance of the Company's investment managers. The Finance and
Investment Committee presently consists of seven directors of the Company
(Messrs. Lichten (Chairman), Hammer, Esposito, Gammill, O'Hara and Warren, as
well as Mr. Doyle, who serves as an ex-officio member). During 1998, the Finance
and Investment Committee met three times.
Audit Committee. The Board has appointed an Audit Committee to review the
Company's internal administrative and accounting controls and to recommend to
the Board the appointment of independent auditors. The Audit Committee presently
consists of four directors of the Company (Messrs. Scott (Chairman), Dowden,
Matthews and Rosenbloom), none of whom is an officer or employee of the Company
or its subsidiary. During 1998, the Audit Committee met three times.
Compensation Committee. The Board has appointed a Compensation Committee
to review the performance of corporate officers and the Company's compensation
policies and procedures and to make recommendations to the Board with respect to
such policies and procedures. The Compensation Committee also administers the
stock option plans and incentive compensation plans of the Company. The
Compensation Committee presently consists of four directors of the Company
(Messrs. Esposito (Chairman), Clements, Matthews and Yoskin), none of whom is an
officer or employee of the Company or its subsidiary. During 1998, the
Compensation Committee met three times.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is an officer or employee of the
Company or its subsidiary. No executive officer of the Company served as a
director or a member of the compensation committee of another company, one of
whose executive officers serves as a member of the Company's Board or
Compensation Committee, except that Mr. Doyle, the Company's President and Chief
Executive Officer, is a director of Global Markets Access Ltd., of which Mr.
Matthews, a director and member of the Compensation Committee, is the President
and Chief Executive Officer.
Mr. Esposito is an owner and officer of the Inter-Atlantic Capital
Partners, Inc., the parent corporation of Inter-Atlantic Securities Corporation.
See "Certain Relationships and Related Party Transactions."
COMPENSATION OF DIRECTORS
Directors who are employees of the Company are not paid any fees or
additional compensation for services as members of the Company's Board of
Directors or any committee thereof. Non-employee directors receive cash in the
amount of $20,000 per annum and $1,000 per board or committee meeting attended.
The Chairman of the Board and Committee Chairmen receive an additional $1,000
per annum. Non-employee directors who were not directors, officers or employees
of Inter-Atlantic Capital Partners, Inc. or its affiliates receive options to
acquire 15,000 Common Shares upon their initial election to the Company's Board
of Directors. Such options become exercisable in three equal annual installments
commencing on the first anniversary of the date of grant. On the date of each
annual meeting of the Company's shareholders, each non-employee director whose
term as a director has not ended as of the date of such annual meeting will
receive options to acquire 2,000 Common Shares. Such options will be immediately
exercisable if granted after April 8, 1999 and will have an exercise price equal
to the fair market value of the Common Shares on the date of grant. All
directors are reimbursed for travel and other expenses incurred in attending
meetings of the Board or committees thereof.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE ELECTION OF
EACH OF THE NOMINEES FOR DIRECTOR.
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PROPOSAL TWO
AMENDMENT TO THE COMPANY'S INITIAL STOCK OPTION PLAN
GENERAL
The Company's Initial Stock Option Plan (the "Option Plan") was adopted by
the Board of Directors and the shareholders of the Company in 1998. The purpose
of the Option Plan is to advance the interests of the Company and its
shareholders by strengthening the Company's ability to attract and retain
individuals with the desired training, experience and expertise as key
employees, and to furnish additional incentive to such key individuals to
promote the Company's financial success by providing them with an equity
ownership in the Company commensurate with the Company's performance, as
reflected in increased shareholder value.
To ensure that the Company has appropriate long term incentives and
competitive compensation opportunities for its key officers and employees, the
Compensation Committee of the Board of Directors (the "Committee") and the Board
of Directors has approved an amendment to the Option Plan (the "Amendment") that
provides that the number of Common Shares of the Company underlying the award of
stock options during any fiscal year of the Company may equal not more than 2%
of the adjusted average of the outstanding common shares of the Company, as that
number is determined by the Company to calculate fully diluted earnings per
share for the preceding fiscal year, and has directed that the Amendment be
submitted to the Company's shareholders for their approval at the Annual
Meeting. The Amendment will be effective as of the date it is approved by the
Company's shareholders. The full text of the Option Plan as modified by the
Amendment is set forth as Exhibit A to this Proxy Statement, and the following
discussion of the Amendment is qualified in its entirety by the text of the
Amendment.
Increase in Authorized Common Shares. The Option Plan currently authorizes
the issuance of up to 1,552,500 Common Shares of the Company, and the Amendment
would authorize for issuance under the Option Plan an additional 510,416 Common
Shares in 1999. The following table reflects, as of March 3, 1999, the number of
Common Shares authorized for issuance under the Option Plan, the aggregate
number of options granted prior to March 3, 1999, the number of options
exercised, the number of Common Shares currently subject to outstanding options,
and the number of Common Shares available for issuance in connection with the
grant of future options to purchase Common Shares under the Option Plan.
<TABLE>
<CAPTION>
COMMON SHARES COMMON SHARES
OPTIONS GRANTED SUBJECT TO AVAILABLE FOR
COMMON SHARES (NET OF OPTIONS OUTSTANDING GRANT OF FUTURE
AUTHORIZED FORFEITURES) EXERCISED OPTIONS OPTIONS
- ------------- --------------- --------- ------------- ---------------
<S> <C> <C> <C> <C>
1,552,500 1,441,865 0 1,441,865 110,635
</TABLE>
As of March 3, 1999, 110,635 Common Shares remained available for issuance
under the Option Plan and will remain available for issuance in addition to the
Common Shares that would be available for future issuance upon the exercise of
future option grants if shareholder approval of the Amendment is obtained. On
March 19, 1999, the closing price of the Company's Common Shares was $21.8125
per share.
The number of Common Shares underlying options that could be granted to the
Company's executive officers and other Company employees if this proposal is
approved is indeterminable at this time. There is no plan to issue options to
existing executives during 1999 based on the Company's performance in 1998. The
remaining terms and conditions of the Option Plan will not be changed by the
Amendment.
Under the Option Plan, directors and certain professional employees (the
"option recipients") of the Company are eligible to receive awards of stock
options. The Option Plan is administered by the Committee. The Committee
currently consists of four directors of the Company, each of whom is a
disinterested person with respect to the Option Plan within the meaning of the
applicable regulations under Section 16 of the United States Securities Exchange
Act of 1934, as amended. Subject to the provisions of the Option Plan, the
Committee has full authority, subject to the terms of the Option Plan, to select
optionees, to determine the terms and conditions of options, and generally to
administer the Option Plan.
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<PAGE> 10
The number of Common Shares that may be issued under the Option Plan is
subject to adjustment in the event of a stock dividend, stock split or similar
change in corporate structure or capitalization affecting the Common Shares or
certain other transactions which, in the determination of the Committee, would
affect the Common Shares. If any outstanding option granted under the Option
Plan for any reason expires or is terminated without having been exercised in
full, the shares allocable to the unexercised portion of such option will
(unless the Option Plan has expired or been terminated) become available for
subsequent grants. Common Shares issued under the Option Plan may consist of
authorized but unissued shares.
Options granted under the Option Plan may be "incentive stock options,"
within the meaning of Section 422 of the United States Internal Revenue Code of
1986, as amended, or nonqualified stock options. Options will be exercisable for
a period of ten years from the date of grant, or such lesser period as the
Committee may determine at the time of grant. The exercise price of the options
will be determined by the Committee when the options are granted, but in no
event will the exercise price be less than the Fair Market Value (as defined in
the Option Plan) of the Common Shares on the date of grant. In the discretion of
the Committee, the option exercise price may be paid (i) in cash or its
equivalent, (ii) in Common Shares having a fair market value on the date of
exercise equal to the option exercise price, (iii) in any combination of (i) or
(ii), or (iv) by delivering to the Company a copy of irrevocable instructions to
a broker promptly to deliver the exercise price to the Company.
Option agreements currently outstanding provide for vesting schedules
between three and four years. Options will become immediately exercisable under
the terms of the Option Plan upon (i) a change in control of the Company (as
defined in the Option Plan), (ii) death, disability or retirement of the option
recipient, (iii) involuntary termination of the option recipient other than for
"cause" (as defined in the Option Plan), or (iv) voluntary termination by the
option recipient for "good reason" (as defined in the option recipient's option
agreement).
The Committee is authorized to determine when, and the conditions upon
which, each stock option granted will become or remain exercisable during
employment or thereafter, and may provide for acceleration of the exercisability
of any options granted under the Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE APPROVAL OF
THE AMENDMENT TO THE OPTION PLAN.
PROPOSAL THREE
APPOINTMENT OF AUDITORS
The firm of KPMG Peat Marwick served as the Company's independent
accountants for 1998 and has been asked by the Board of Directors to serve in
the same capacity for 1999. The shareholders are being asked to appoint KPMG
Peat Marwick to serve as the Company's independent accountants for 1999. The
affirmative vote of holders of a majority of the outstanding Common Shares
present, in person or by proxy, at the Annual Meeting and entitled to vote is
required to appoint KPMG Peat Marwick. If a majority of the votes cast on this
matter are not cast in favor of the appointment of KPMG Peat Marwick, the
Company will select other independent accountants as soon as practicable and
before the close of 1999.
A representative of KPMG Peat Marwick is expected to be present at the
Annual Meeting and will be available to respond to appropriate questions. The
representative will also have the opportunity to make a statement if he or she
so desires.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR"
THE APPOINTMENT OF KPMG PEAT MARWICK AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR 1999.
7
<PAGE> 11
PROPOSAL FOUR
OTHER MATTERS
The Board of Directors knows of no matters to be presented for action at
the Annual Meeting other than those set forth in the attached notice and
customary procedural matters. However, if any other matters should properly come
before the Annual Meeting or any adjournment or postponement thereof, the
proxies solicited hereby will be voted on such matters, to the extent permitted
by the rules and regulations of the Commission and Bermuda law, in accordance
with the judgment of the persons voting such proxies.
ADDITIONAL INFORMATION
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the United States Securities Exchange Act of 1934, as
amended (the "Exchange Act"), requires the Company's directors, executive
officers and certain other officers, as well as persons beneficially owning more
than ten percent of a registered class of the Company's equity securities
(collectively, the "Covered Persons") to file reports of ownership and changes
in ownership of the Company's securities with the Commission. Copies of such
reports also must be provided to the Company. Based solely upon the Company's
review of the copies of the reports provided to the Company, and written
representations of Covered Persons that no other reports were required, to the
Company's knowledge, all of the Section 16(a) filings required to be made by
Covered Persons for 1998 were made on a timely basis, except that the initial
filing on Form 3 was filed late by each of the following Covered Persons:
William W. Atkin, Robert Clements, Albert R. Dowden, Lawrence S. Doyle, Michael
P. Esposito, Jr., Lee M. Gammill, Jr., Mark Grier, Frederick S. Hammer, Robert
M. Lichten, Donald J. Matthews, Robert P. Mills, Jr., Brian M. O'Hara, Robert J.
Reale, Jerry S. Rosenbloom, Walter A. Scott, Richard Tucker, Paul H. Warren and
Jon W. Yoskin, II.
EXECUTIVE OFFICERS
The following provides the name, principal occupation and other pertinent
information concerning certain executive officers of the Company who do not also
serve as Directors. (Information concerning Mr. Doyle is set forth above.) There
are no arrangements or understandings between the executive officers and any
other person pursuant to which the executive officers were selected, other than
the employment agreements more fully described herein.
Robert J. Reale, age 42, became a Senior Vice President and the Chief
Underwriter of the Company on February 1, 1998. Prior thereto, Mr. Reale, who
has over 19 years of experience in the insurance and reinsurance industries, was
a consultant at Tilllinghast Towers Perrin, a consulting and actuarial company,
from 1997 to 1998. He served as a Vice President of Swiss Re Life & Health
America, Inc. from 1989 to 1997 and as the President of Swiss-Am Reassurance
Company and Atlantic International Reinsurance Company (Barbados), two companies
affiliated with Swiss Re, from 1995 to 1996. Mr. Reale has been a Fellow of the
Society of Actuaries since 1986.
William W. Atkin, age 51, became Chief Financial Officer, Senior Vice
President and Treasurer of the Company on March 15, 1998. Prior thereto, Mr.
Atkin served from 1987 to 1998 as an Executive Vice President and the Chief
Financial Officer of Security Mutual Life Insurance Company of New York, where
he was employed for 24 years. Mr. Atkin also served as a director of such
company from 1990 to 1998. Mr. Atkin has been a Certified Public Accountant
since 1972 and a Chartered Life Underwriter since 1978.
8
<PAGE> 12
EXECUTIVE COMPENSATION
The following table sets forth certain information for the Company's last
fiscal year concerning the annual and long-term compensation paid to the
Company's Chief Executive Officer and to each of the Company's other executive
officers (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------------------------------- -----------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING
NAME PRINCIPAL POSITION YEAR(1) SALARY BONUS COMPENSATION(2) AWARD OPTIONS
---- ------------------------- ------- -------- -------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Lawrence S. Doyle.... President and Chief 1998 $322,550 $400,000 $79,166 -- 764,999
Executive Officer
Robert J. Reale...... Senior Vice President and 1998 $183,333 $224,993 $70,831 -- 174,499
Chief Underwriter
William W. Atkin..... Senior Vice President, 1998 $142,500 $110,000 $70,831 -- 127,499
Chief Financial Officer,
Treasurer and Secretary
Richard Tucker....... Vice President 1998 $130,625 $120,000 $83,836 -- 66,666
Robert P. Mills, Vice President and Chief 1998 $129,144 $ 60,000 $88,536 -- 98,202
Jr. ............... Actuary
<CAPTION>
ALL OTHER
NAME COMPENSATION(3)
---- ---------------
<S> <C>
Lawrence S. Doyle.... $26,250
Robert J. Reale...... $15,000
William W. Atkin..... $13,500
Richard Tucker....... $12,375
Robert P. Mills, $ 9,375
Jr. ...............
</TABLE>
- ---------------
(1) The Company commenced paying its executive officers in 1998. Prior thereto,
the Company's executive officers did not receive any compensation from or on
behalf of the Company.
(2) The amounts listed represent monthly housing and travel allowances paid
pursuant to employment agreements. Such payments were made from April to
December during 1998.
(3) Represents payments to the Company's defined contribution retirement
program.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT OF TOTAL RATES OF COMMON SHARE PRICE
COMMON SHARES OPTIONS GRANTED EXERCISE APPRECIATION FOR OPTION TERM(1)
UNDERLYING TO EMPLOYEES PRICE PER -------------------------------
NAME OPTIONS GRANTED IN FISCAL YEAR SHARE EXPIRATION DATE 5% 10%
- ---- --------------- ---------------- --------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence S. Doyle....... 764,999 60.62% $15.00 April 8, 2008 $7,216,667 $18,288,453
Robert J. Reale......... 174,499 13.83% $15.00 April 8, 2008 $1,683,888 $ 4,267,302
William W. Atkin........ 127,499 10.10% $15.00 April 8, 2008 $1,202,769 $ 3,048,054
Richard Tucker.......... 66,666 5.28% $15.00 April 8, 2008 $ 626,888 $ 1,593,727
Robert P. Mills, Jr..... 98,202 7.78% $15.00 April 8, 2008 $ 895,528 $ 2,269,443
</TABLE>
- ---------------
(1) Potential realizable value is based on the price of $15.00 per share. The
assumed annual rates of Common Share price appreciation have been provided
for illustrative purposes only in accordance with the rules and regulations
of the Commission and should not be construed as projected appreciation
rates for price of the Common shares.
9
<PAGE> 13
AGGREGATED OPTION EXERCISES IN 1998 AND 1998 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence S. Doyle.................... -- -- -- 764,999 -- $9,179,988
Robert J. Reale...................... -- -- -- 174,499 -- $2,141,988
William W. Atkin..................... -- -- -- 127,499 -- $1,529,988
Richard Tucker....................... -- -- -- 66,666 -- $ 729,992
Robert P. Mills, Jr.................. -- -- -- 98,202 -- $1,178,424
</TABLE>
- ---------------
(1) The value of the unexercised options is based on the difference between the
exercise price and the closing price of the Common Shares as of December 31,
1998.
EMPLOYMENT CONTRACTS
The Company has entered into employment agreements with each of the Named
Officers. The employment agreements were approved by the Board of Directors and
are for initial terms of three years, with consecutive one year terms
thereafter, subject to three months' advance notice by either party of a
decision not to renew.
Each employment agreement provides that if the Named Officer is terminated
by the Company for serious cause or the Named Officer resigns without good
reason, the Named Officer will forfeit all bonus amounts for the then current
fiscal year, and the Company will be liable to the Named Officer only for
accrued but unpaid salary, accrued but unpaid bonuses from a prior fiscal year
and reimbursable business expenses incurred prior to the termination. If the
employment of Mr. Doyle is terminated by the Company without serious cause or by
Mr. Doyle with good reason, the Company will continue to pay Mr. Doyle's base
salary for a period of 18 months from such termination. If the employment of
Messrs. Reale, Tucker or Mills is terminated by the Company without serious
cause or by Messrs. Reale, Tucker or Mills with good reason, the Company will
continue to pay Messrs. Reale's, Tucker's or Mills' base salary, as the case may
be, for a period of one year from such termination. If the employment of Mr.
Atkin is terminated by the Company without serious cause or by Mr. Atkin with
good reason, the Company will pay Mr. Atkin not less than $15,000 per month for
a period of one year from such termination. Additionally, in each such case,
Messrs. Doyle, Reale, Atkin, Tucker and Mills shall be entitled to any accrued
but unpaid salary, any earned but unpaid bonuses from a prior fiscal year,
reimbursement of business expenses incurred prior to the termination, travel and
housing allowances for six months after the date of termination and reasonable
relocation expenses from Bermuda to the United States.
Pursuant to each of the employment agreements, upon a change in control of
the Company, the Named Officers' respective options to purchase Common Shares of
the Company will become exercisable immediately, and if their employment with
the Company is terminated without serious cause, or if they terminate their
employment with the Company for good reason within one year following a change
in control, they will be entitled to receive a lump sum payment equal to two
times their respective annual base salaries as of the date of termination,
travel and housing allowances for one year from the date of termination,
reasonable relocation expenses from Bermuda to the United States plus an amount
equal to any income taxes payable by them by reason of such payments occurring
in connection with a change of control.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee recommends the Company's compensation policies
and procedures to the Board of Directors, reviews performance of Company
officers, approves base salary levels and administers the Company's Stock Option
Plan and other incentive compensation plans of the Company.
The Board of Directors and the Compensation Committee believe that the
Company's success requires a small, highly motivated and professional staff. The
compensation policies, therefore, are designed to attract,
10
<PAGE> 14
retain and motivate such a staff by providing competitive levels of
compensation, rewarding superior corporate performance, and recognizing
individual initiative and achievements.
The Executive Compensation Program adopted by the Compensation Committee
combines base salary, annual bonus and a long-term incentive in the form of a
stock ownership program. Base salaries are governed by employment agreements
negotiated between the Company and senior management. Base salary levels and
adjustments thereto are based on individual responsibilities and performance
expectation as to future contributions, market salary rates and cost of living
factors. Annual bonus compensation includes a substantial at-risk component, to
provide a link between Company and individual performance. To further align the
interests of senior management with the interests of shareholders, the program
provides management with a significant stock ownership component to their
compensation program through the Company's Stock Option Plan.
Awards under the Annual Bonus Plan are based on individual and corporate
performance during the prior fiscal year in relationship to established
performance targets. Factors taken into consideration in making awards include,
but may not be limited to, share performance relative to a peer group or other
index, revenue and business growth, investment management results and return on
shareholder equity. The most heavily weighted factor is the growth of operating
income.
The bonuses awarded to the Company's senior management for 1998 followed
the principles outlined in the preceding paragraphs. The Compensation Committee
judged that senior management bonuses for 1998 were consistent with the level of
accomplishment and appropriately reflected individual and Company performance in
1998.
The Company adopted the Initial Stock Option Plan in 1998 to provide stock
options to employees as a means of creating long-term compensation incentives.
Option grants are made at fair market value on the date of grant and vest
cumulatively to the extent of one third of the amount granted on each of the
first three anniversary dates of the effective date of such grants.
Mr. Doyle's base salary and stock option grant for 1998 were governed by
the employment agreement between him and the Company. Mr. Doyle's bonus award
for 1998 was determined based upon the same measures used for all senior
management of the Company, including, but not limited to, the share performance
of the Company relative to a peer group or other index, revenue and business
growth, investment management results and return on shareholder equity. The most
heavily weighted factor in the determination of Mr. Doyle's bonus award was the
growth of the Company's operating income.
Since April 15, 1998, the date on which the Company's common shares were
first listed on the Nasdaq National Market, the Company's stock has
significantly outperformed both the Standard & Poor's 500 Stock Index, and peer
groups.
THE COMPENSATION COMMITTEE
Michael P. Esposito, Jr., (Chairman)
Robert Clements
Donald J. Matthews
Jon W. Yoskin, II
March 2, 1999
11
<PAGE> 15
PERFORMANCE GRAPH
The graph set forth below compares the cumulative total returns to holders
of Common Shares of the Company with the cumulative total return of the Standard
& Poor's 500 Index, the Standard & Poor's Life/ Health Index and a Peer Group
Index for the period beginning April 8, 1998, the date trading first began in
the Company's Common Shares on the Nasdaq National Market, through December 31,
1998. The Peer Group Index is comprised of American General Corp., ARM Financial
Group, Inc., Conseco, Inc., The Equitable Companies Incorporated, ESG Re
Limited, Jefferson-Pilot Corporation, Lincoln National Corporation, Nationwide
Financial Services, Inc., Protective Life Insurance Company, ReliaStar Life
Insurance Company of New York, Reinsurance Group of America and SunAmerica Inc.
The graph assumes that the value of the investment in the relevant stock or
index was $100 at April 8, 1998 and that all dividends were reinvested. The
closing market price of the Company's Common Shares on December 31, 1998 was
$27.00 per share.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
April 9, 1998 Dec.1998
------------- --------
<S> <C> <C>
Company 100.00 180.28
S&P 500 Index 100.00 112.84
S&P Life/Health Index 100.00 92.74
Peer Group 100.00 113.17
</TABLE>
12
<PAGE> 16
PRINCIPAL SHAREHOLDERS
The table below sets forth, as of March 15, 1999, certain information
regarding the beneficial ownership of Common Shares by (a) each shareholder
known to the Company to be the beneficial owner, as defined in Rule 13d-3 under
the Exchange Act, of more than 5% of the Common Shares, based upon Company
records or the records of the Commission, (b) each director of the Company, (c)
each of the Named Officers, and (d) all executive officers and directors of the
Company as a group. Each of the shareholders named below has sole voting power
and sole investment power with respect to the shares indicated as beneficially
owned, unless otherwise indicated. Information regarding beneficial ownership of
shareholders that are not directors and/or officers of the Company is based on
filings with the Commission available to the Company.
<TABLE>
<CAPTION>
NUMBER PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNERS(1) OF SHARES OF CLASS
- ---------------------------------------- --------- --------
<S> <C> <C>
XL Capital Ltd.(2).......................................... 1,418,440 5.56%
Risk Capital Reinsurance Company(3)......................... 1,418,440 5.56
Citigroup Inc............................................... 1,329,331 5.21
Neuberger Berman, LLC....................................... 1,319,650 5.18
Wellington Management Company, LLP.......................... 1,294,600 5.08
Insurance Partners, L.P.(4)(6).............................. 1,143,065 4.48
Insurance Partners Offshore (Bermuda), L.P.(5)(6)........... 629,985 2.47
Michael P. Esposito, Jr.(7)................................. 106,000 *
Lawrence S. Doyle(8)........................................ 70,922 *
Richard Tucker(9)........................................... 35,461 *
Robert Clements(10)......................................... 30,000 *
William W. Atkin(11)........................................ 21,277 *
Robert J. Reale(12)......................................... 21,277 *
Robert P. Mills, Jr.(13).................................... 14,184 *
Frederick S. Hammer(14)..................................... 10,000 *
Donald J. Matthews(15)...................................... 10,000 *
Jerry S. Rosenbloom(15)..................................... 10,000 *
Robert M. Lichten(16)....................................... 7,000 *
Walter A. Scott(15)......................................... 5,000 *
Albert R. Dowden(15)........................................ 2,000 *
Lee M. Gammill, Jr.(15)..................................... 2,000 *
Brian M. O'Hara(15)......................................... 2,000 *
Jon W. Yoskin, II(15)....................................... 2,200 *
Mark Grier(15).............................................. -- --
Paul H. Warren(15).......................................... -- --
--------- ----
All directors and executive officers as a group (eighteen
persons).................................................. 349,321 1.37%
</TABLE>
- ---------------
* Less than 1%.
(1) The address for XL Capital Ltd is Cumberland House, One Victoria Street,
P.O. Box HM2245, Hamilton, HM JX, Bermuda. The address of Risk Capital
Reinsurance Company is 20 Horseneck Lane, Greenwich, Connecticut 06830. The
address for Citigroup Inc. is 153 East 53rd Street, New York, New York
10043. The address for Neuberger Berman, LLC is 605 Third Avenue, New York,
New York 10158. The address for Wellington Management Company, LLP is 75
State Street, Boston, Massachusetts 02109. The address for Insurance
Partners, L.P. is 201 Main Street, Fort Worth, Texas 76012 and the address
for Insurance Partners Offshore (Bermuda), L.P. is 41 Cedar Avenue, P.O.
Box HM 1179, Hamilton, HM EX, Bermuda. The address for each other
beneficial owner is c/o Annuity and Life Re (Holdings), Ltd., Cumberland
House, 1 Victoria Street, P.O. Box HM 98, Hamilton, HM 11, Bermuda.
13
<PAGE> 17
(2) Does not include 100,000 Common Shares issuable upon exercise of Class B
Warrants which are not currently exercisable.
(3) Does not include 100,000 Common Shares issuable upon exercise of Class B
Warrants which are not currently exercisable. For so long as Risk Capital
Reinsurance Company owns at least 500,000 Common Shares, the Company has
agreed to nominate for election as a director of the Company one person
selected by Risk Capital Reinsurance Company. In exchange for such right
and for so long as any person selected by Risk Capital Reinsurance Company
is a director (and during any period after such person's designation but
before his or her election) Risk Capital Reinsurance Company will not vote
or permit any of the Common Shares beneficially owned by it to be voted for
the election of any director of the Company, other than the nominee
selected by Risk Capital Reinsurance Company.
(4) Each of Insurance GenPar, L.P., the general partner of Insurance Partners,
L.P. ("IGP"), Insurance GenPar MGP, L.P., the general partner of IGP
("IMGP") and Insurance GenPar MGP, Inc., the general partner of IMGP (the
"IP General Partner") may be deemed to beneficially own such Common Shares.
Robert A. Spass owns 40% of capital stock of the IP General Partner and
Daniel L. Doctoroff and Steven B. Gruber each own 30% of the capital stock
of the IP General Partner. Each of Messrs. Spass, Doctoroff and Gruber
disclaim beneficial ownership of the Common Shams owned by Insurance
Partners, L.P. that he may be deemed to have. Does not include 80,586
Common Shares issuable upon exercise of Class B Warrants which are not
currently exercisable.
(5) Each of Insurance GenPar (Bermuda), L.P., the general partner of Insurance
Partners Offshore (Bermuda), L.P. ("IGPB"), Insurance GenPar (Bermuda) MGP,
LP., the general partner of IGPB ("IMGPB"), and Insurance GenPar (Bermuda)
MGP, Ltd., the general partner of IMGPB (the "IPB General Partner"), may be
deemed to beneficiary own such Common Shares. Mr. Spass owns 40% of the
capital stock of the IPB General Partner and Messrs. Doctoroff and Gruber
each own 30% of the capital stock of the IPB General Partner. Each of
Messrs. Spass, Doctoroff and Gruber disclaims beneficial ownership of the
Common Shares owned by Insurance Partners Offshore (Bermuda), L.P. that he
may be deemed to have. Does not include 44,414 Common Shares issuable upon
exercise of Class B Warrants which are not currently exercisable.
(6) For so long as Insurance Partners (Bermuda), L.P. and Insurance Partners
Offshore (Bermuda), L.P. collectively own at least 500,000 Common Shares,
the Company has agreed to nominate for election as a director of the
Company one person jointly selected by Insurance Partners, L.P. and
Insurance Partners Offshore (Bermuda), L.P. In exchange for such right and
for so long as any person selected by Insurance Partners, L.P. and
Insurance Partners Offshore (Bermuda), L.P. is a director (and during any
period after such person's designation but before his or her election)
Insurance Partners, L.P. and Insurance Partners Offshore (Bermuda), L.P.
will not vote or permit any of the Common Shares beneficially owned by them
to be voted for the election of any director of the Company, other than the
nominee selected by Insurance Partners, L.P. and Insurance Partners
Offshore (Bermuda), L.P.
(7) Includes 91,000 Common Shares held by M.A.&M. Esposito Company and Red
Tower Securities, companies in which Mr. Esposito has voting control. Does
not include 506,624 Common Shares issuable upon exercise, of Class A
Warrants which are not currently exercisable. Also does not include 150,000
Common Shares issuable upon exercise of Class A Warrants owned by adult
children of Mr. Esposito, as to which he disclaims beneficial ownership.
(8) Does not include 764,999 Common Shares issuable upon exercise of options
which are not currently exercisable.
(9) Does not include 66,666 Common Shares issuable upon exercise of options
which are not currently exercisable.
(10) Does not include 15,000 Common Shares issuable upon exercise of options
which are not currently exercisable. Mr. Clements has transferred certain
shares to a family-owned entity.
(11) Does not include 127,499 Common Shares issuable upon exercise of options
which are not currently exercisable.
14
<PAGE> 18
(12) Does not include 178,499 Common Shares issuable upon exercise of options
which are not currently exercisable.
(13) Does not include 98,202 Common Shares issuable upon exercise of options
which are not currently exercisable.
(14) Does not include 437,640 Common Shares issuable upon exercise of Class A
Warrants which are not currently exercisable. Also does not include 218,983
Common Shares issuable upon exercise of Class A Warrants owned by certain
trusts for the benefit of Mr. Hammer's children and grandchildren, as to
which he disclaims beneficial ownership.
(15) Does not include 15,000 Common Shares issuable upon exercise of options
which are not currently exercisable.
(16) Does not include 453,333 Common Shares issuable upon exercise of Class A
Warrants which are not currently exercisable. Also does not include 203,288
Common Shares issuable upon exercise of Class A Warrants owned by certain
trusts for the benefit of Mr. Lichten's children and grandchildren, as to
which he disclaims beneficial ownership.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Certain directors of the Company (Messrs. Esposito, Hammer and Lichten) are
owners, directors and/or officers of Inter-Atlantic Capital Partners, Inc.
and/or its subsidiary, Inter-Atlantic Securities Corporation. Inter-Atlantic
Capital Partners, Inc. is a United States domiciled corporation and
Inter-Atlantic Securities Corporation is a registered broker-dealer which
provides investment banking services for insurance companies and other financial
services firms. Pursuant to an agreement between Inter-Atlantic Securities
Corporation and the Company, Inter-Atlantic Securities Corporation provided
certain services in connection with the formation of the Company, including
assistance in recruiting senior management and obtaining necessary governmental
permits. Furthermore, in return for certain services related to the Company's
initial public offering, including assistance in preparing a registration
statement for the Company's Common Shares, retaining underwriters in connection
with the Company's initial public offering and such other services as the
Company or Inter-Atlantic Securities Corporation deemed appropriate, the Company
paid Inter-Atlantic Securities Corporation a fee of $2.0 million upon
consummation of the Company's initial public offering. The Company also
reimbursed Inter-Atlantic Securities Corporation $683,000 for expenses it
incurred in connection with performing services related to the formation of the
Company, the Company's initial public offering and the Company's ongoing
operations. In addition, pursuant to such agreement, Inter-Atlantic Securities
Corporation is paid an annual fee of $600,000 for services provided after April
8, 1998, payable in quarterly installments commencing on April 8, 1999 through
April 8, 2003. In exchange, Inter-Atlantic Securities Corporation will assist
the Company in the development of products, financial planning, management of
assets and liabilities, international marketing efforts and such other services
as the Company may request.
In connection with the formation of the Company, six individuals employed
by Inter-Atlantic Capital Partners, Inc. and/or Inter-Atlantic Securities
Corporation (Messrs. Esposito, Hammer, Andrew S. Lerner, Lichten, William S.
Ogden, Jr. and Arnold Welles) purchased for $238,000 in the aggregate Class A
Warrants to purchase up to an aggregate number of 3,059,990 Common Shares.
Messrs. Esposito, Hammer, Lichten and Ogden have each transferred a portion of
their Class A Warrants to certain family members or trusts that have been
established for the benefit of certain family members. The initial exercise
price of the Class A Warrants is equal to $15.00 per share, subject to customary
anti-dilution adjustments for certain events, including stock splits and the
issuance of Common Shares at a price below $15.00 per share. The Class A
Warrants become exercisable in three equal annual installments commencing on
April 8, 1999. In the event of a change of control of the Company, the Class A
Warrants then outstanding will become immediately exercisable. The Class A
Warrants will expire on January 15, 2008. The holders of the Class A Warrants
have also been granted rights to require the Company to register the Common
Shares underlying the Class A Warrants, which rights become exercisable on April
8, 1999.
15
<PAGE> 19
In connection with the purchase by Risk Capital Reinsurance Company of
Common Shares of the Company and Class B Warrants to purchase Common Shares of
the Company, and, for so long as Risk Capital Reinsurance Company owns at least
500,000 Common Shares, the Company has agreed to nominate for election as a
director of the Company one person selected by Risk Capital Reinsurance Company.
Similarly, in connection with the purchase by Insurance Partners, L.P. and
Insurance Partners (Offshore) Bermuda, L.P. of Common Shares of the Company and
Class B Warrants to purchase Common Shares of the Company, and, for so long as
such firms collectively own at least 500,000 Common Shares, the Company has
agreed to nominate for election as a director of the Company one person jointly
selected by Insurance Partners, L.P. and Insurance Partners Offshore (Bermuda),
L.P. In exchange for such rights, and, for so long as any person selected by
Risk Capital Reinsurance Company or Insurance Partners, L.P. and Insurance
Partners Offshore (Bermuda), L.P., respectively, is a director (and during any
period after such person's designation but before his or her election), such
entities will not vote or permit any of the Common Shares beneficially owned by
them to be voted for the election of any director of the Company, other than the
nominee selected by them. Each such entity is permitted to assign its right to
select one person to be nominated for election as a director of the Company only
upon the prior written consent of the Company, which may not be unreasonably
withheld. Robert Clements, the Chairman and a director of Risk Capital
Reinsurance Company and its parent company Risk Capital Holdings, Inc., is
serving as a director of the Company as the nominee of Risk Capital Reinsurance
Company. Paul H. Warren, a partner of Insurance Partners Advisors, L.P., the
manager of Insurance Partners, L.P. and Insurance Partners Offshore (Bermuda),
L.P., is serving as a director of the Company as the nominee of Insurance
Partners, L.P. and Insurance Partners Offshore (Bermuda), L.P.
Michael P. Esposito, Jr., a director of the Company, is a director of Risk
Capital Reinsurance Company and Risk Capital Holdings, Inc. Furthermore, an
affiliate of Marsh & McLennan Management Services (Bermuda) Limited ("Marsh &
McLennan") was a sponsor of Risk Capital Holdings, Inc. and, based on filings
with the Commission, currently holds approximately a 9.6% ownership interest in
Risk Capital Holdings, Inc. The Company has contracted with Marsh & McLennan to
provide office space and certain administrative services. EXEL Limited, one of
the Company's principal shareholders, was also an initial investor in Risk
Capital Holdings, Inc. and, based on filings with the Commission, currently
holds approximately a 28% ownership interest in such company and has the right
to designate two of its directors.
Brian M. O'Hara, a director of the Company, currently serves as the
President and Chief Executive Officer of XL Capital Ltd, one of the Company's
principal shareholders. In addition, Michael P. Esposito, Jr., a director of the
Company, currently serves as the non-executive Chairman of the Board of XL
Capital Ltd, and Robert Clements, a director of the Company, currently serves as
a director of XL Capital Ltd. Robert M. Lichten, a director of the Company, has
agreed to serve as a director of a United States-based subsidiary of XL Capital
Ltd.
During 1998, certain officers of the Company, Messrs. Lawrence S. Doyle,
Robert J. Reale, William W. Atkin, Richard Tucker and Robert P. Mills, Jr.,
purchased an aggregate total of 163,121 Common Shares from the Company. The
Company made loans to Messrs. Doyle, Reale, Atkin, Tucker and Mills in the
amounts of $500,000, $225,000, $225,000, $250,000 and $125,000, respectively, to
partially finance such purchases. Such loans bear interest at 7% per annum and
must be repaid by April 15, 2003, except that $75,000 of the loans made to
Messrs. Reale and Atkin and $25,000 of the loan made to Mr. Mills must be repaid
by June 15, 1999.
Annuity and Life Reassurance, Ltd., the Company's wholly owned subsidiary,
is subleasing office space to Global Markets Access Ltd., a Bermuda-based
financial guaranty insurer and reinsurer, on a month-to-month basis. Under the
terms of the sublease, Global Markets Access Ltd. has agreed to pay Annuity and
Life Reassurance, Ltd. BD$5,200 plus utilities in rent for the first month of
the sublease and BD$4,500 plus utilities in rent for each month thereafter.
Lawrence S. Doyle, the President, Chief Executive Officer and a director of the
Company is a director of Global Markets Access Ltd. Frederick S. Hammer, the
Chairman of the Board and a director of the Company, is Deputy Chairman and a
director of Global Markets Access Ltd. Robert M. Lichten, the Deputy Chairman of
the Board and a director of the Company, is Chairman and a
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director of Global Markets Access Ltd. Donald J. Matthews, a director of the
Company, is the President, Chief Executive Officer and a director of Global
Markets Access Ltd.
PROPOSALS OF SHAREHOLDERS
In order to be eligible for inclusion in the Company's proxy materials for
the 2000 Annual Meeting of Shareholders, shareholder proposals to take action at
such meeting must comply with applicable Commission rules and regulations, must
be directed to the Secretary of the Company at its office set forth on page one
of this Proxy Statement and must be received by the Company not later than
December 1, 1999.
MISCELLANEOUS
The Company, upon request, will furnish to record and beneficial holders of
its Common Shares, free of charge, a copy of its Annual Report on Form 10-K
(including financial statements but without exhibits and schedules) for fiscal
1998. Copies of exhibits to the Form 10-K also will be furnished upon request
and the payment of a reasonable fee. All requests should be directed to the
Secretary, at the offices of the Company set forth on page one of this Proxy
Statement.
By Order of the Board of Directors,
WILLIAM W. ATKIN
Senior Vice President and Secretary
April 1, 1999
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<PAGE> 21
EXHIBIT A
ANNUITY AND LIFE RE (HOLDINGS), LTD.
INITIAL STOCK OPTION PLAN
(as amended and restated effective April 29, 1999)
<PAGE> 22
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1 Definitions................................................. 1
SECTION 2 Administration.............................................. 2
SECTION 3 Eligibility................................................. 3
SECTION 4 Common Shares............................................... 3
SECTION 5 Annual Limit................................................ 3
SECTION 6 Granting of Options to Key Employees and Consultants........ 4
SECTION 7 Terms and Conditions of Options to Key Employees and 4
Consultants.................................................
SECTION 8 Options for Non-Employee Directors.......................... 7
SECTION 9 Option Agreements -- Other Provisions....................... 10
SECTION 10 Capital Adjustments......................................... 10
SECTION 11 Amendment or Discontinuance of the Plan..................... 10
SECTION 12 Termination of Plan......................................... 11
SECTION 13 Shareholder Approval........................................ 11
SECTION 14 Miscellaneous............................................... 11
SECTION 15 Change in Control........................................... 12
</TABLE>
<PAGE> 23
ANNUITY AND LIFE RE (HOLDINGS), LTD.
INITIAL STOCK OPTION PLAN
PURPOSE
This ANNUITY AND LIFE RE (HOLDINGS), LTD. INITIAL STOCK OPTION PLAN is
intended to provide a means whereby Annuity and Life Re (Holdings), Ltd. may,
through the grant of Options to purchase Common Shares of the Company to Key
Employees, Non-Employee Directors, and Consultants attract and retain such
individuals and motivate them to exercise their best efforts on behalf of the
Company and of any Related Corporation.
SECTION 1 DEFINITIONS
As used in the Plan the following words and terms shall have the meaning
hereinafter set forth unless the context clearly indicates otherwise:
(a) BOARD. The term "Board" shall mean the Board of Directors of the
Company.
(b) CODE. The term "Code" shall mean the Internal Revenue Code of
1986, as amended.
(c) COMMITTEE. The term "Committee" shall mean the Company's
Compensation Committee which shall consist of not less than two (2)
directors of the Company and who shall be appointed by, and shall serve at
the pleasure of, the Board. Each member of such Committee, while serving as
such, shall be deemed to be acting in his or her capacity as a director of
the Company. On and after the date the Company first registers equity
securities under Section 12 of the Exchange Act, it is intended that each
member of the Committee shall be a Rule 16b-3 Non-Employee Director.
Notwithstanding the foregoing, if the Committee does not consist solely of
two (2) or more Rule 16b-3 Non-Employee Directors, the full Board shall
serve as the Committee if it is intended that Options satisfy the advance
approval requirements of 17 CFR sec.240.16b-3.
(d) COMMON SHARES. The term "Common Shares" shall mean the common
shares of the Company, par value $1.00 per share.
(e) COMPANY. The term "Company" shall mean Annuity and Life Re
(Holdings), Ltd., a Bermuda corporation.
(f) CONSULTANT. The term "Consultant" shall mean a consultant or
advisor who is not an employee of the Company or a Related Corporation and
is not a Non-Employee Director, but may include directors, officers,
employees and partners of Inter-Atlantic Capital Partners, Inc. or its
affiliates.
(g) ELIGIBLE NON-EMPLOYEE DIRECTORS. The term "Eligible Non-Employee
Director" shall mean a Non-Employee Director who is not a director, officer
or employee of Inter-Atlantic Capital Partners, Inc. or its affiliates.
(h) EXCHANGE ACT. The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
(i) FAIR MARKET VALUE. The term "Fair Market Value" shall mean the
fair market value of the optioned Common Shares arrived at by a good faith
determination of the Committee and shall be:
(1) The quoted closing price, if there is a market for the Common
Shares on a registered securities exchange or in an over the counter
market, on the date of grant;
(2) The weighted average of the quoted closing prices on the
nearest date before and the nearest date after the date of grant, if
there are no sales on the date of grant but there are sales on dates
within a reasonable period both before and after the date of grant;
(3) The mean between the bid and asked prices, as reported by the
National Quotation Bureau on the date of grant, if actual sales are not
available during a reasonable period beginning before and ending after
the date of grant; or
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<PAGE> 24
(4) Such other method of determining fair market value as shall be
authorized by the Code, or the rules or regulations thereunder, and
adopted by the Committee.
Where the fair market value of the optioned Common Shares is
determined under (2) above, the average of the quoted closing prices on the
nearest date before and the nearest date after the date of grant is to be
weighted inversely by the respective numbers of trading days between the
selling dates and the date of grant (i.e., the valuation date), in
accordance with Treas. Reg. sec. 20.2031-2(b)(1).
(j) ISO. The term "ISO" shall mean an Option which, at the time such
Option is granted, qualifies as an incentive stock option within the
meaning of section 422 of the Code.
(k) KEY EMPLOYEE. The term "Key Employee" shall mean an officer or
any other key employee of the Company or of a Related Corporation.
(l) NON-EMPLOYEE DIRECTOR. The term "Non-Employee Director" shall
mean a director of the Company who is not an employee of the Company or a
Related Corporation.
(m) NQSO. The term "NQSO" shall mean an Option which is not an ISO,
and/or is designated as an NQSO in the Option Agreement.
(n) OPTION. The term "Option" shall mean any stock option granted to
a Key Employee, Non-Employee Director, or Consultant under Sections 7 and 8
hereof.
(o) OPTION AGREEMENT. The term "Option Agreement" shall mean a
written document evidencing the grant of an Option, as described in Section
9.
(p) OPTIONEE. The term "Optionee" shall mean a Key Employee,
Non-Employee Director, or Consultant to whom an Option has been granted.
(q) PLAN. The term "Plan" shall mean the Annuity and Life Re
(Holdings), Ltd. Initial Stock Option Plan, as set forth herein and as
amended from time to time.
(r) RELATED CORPORATION. The term "Related Corporation" shall mean
either a corporate subsidiary of the Company, as defined in section 424(f)
of the Code, or the corporate parent of the Company, as defined in section
424(e) of the Code.
(s) RULE 16B-3 NON-EMPLOYEE DIRECTOR. The term "Rule 16b-3
Non-Employee Director" shall mean a director who:
(1) Is not currently an officer (as defined in 17 CFR
sec.240.16a-1(f)) of, or otherwise currently employed by, the Company or
a parent or subsidiary of the Company within the meaning of 17 CFR
sec.240.16b-3(b)(3);
(2) Does not receive compensation, either directly or indirectly,
from the Company or a parent or subsidiary of the Company within the
meaning of 17 CFR sec.240.16b-3(b)(3) for services rendered as a
consultant or in any other capacity other than as a director, except for
an amount that does not exceed the dollar amount for which disclosure
would be required under 17 CFR sec.229.404(a);
(3) Does not possess an interest in any other transaction for which
disclosure would be required pursuant to 17 CFR sec.229.404(a); and
(4) Is not engaged in a business relationship for which disclosure
would be required pursuant to 17 CFR sec.229.404(b).
SECTION 2 ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall have
full authority, subject to the terms of the Plan, to select the Key Employees
and Consultants to be granted ISOs and/or NQSOs under the Plan, to grant Options
on behalf of the Company and to set the date of grant and the other terms of
such
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<PAGE> 25
Options. Options granted to Non-Employee Directors shall be granted pursuant to
the formula set forth in Section 8(a) hereof.
The Committee may correct any defect, supply any omission and reconcile any
inconsistency in this Plan and in any Option granted hereunder in the manner and
to the extent it shall deem desirable. The Committee also shall have the
authority to establish such rules and regulations, not inconsistent with the
provisions of the Plan, for the proper administration of the Plan, and to amend,
modify or rescind any such rules and regulations, and to make such
determinations and interpretations under, or in connection with, the Plan, as it
deems necessary or advisable. All such rules, regulations, determinations and
interpretations shall be binding and conclusive upon the Company, its
shareholders and all employees, directors, and consultants, and upon their
respective legal representatives, beneficiaries, successors and assigns and upon
all other persons claiming under or through any of them.
No member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Option granted
under it.
SECTION 3 ELIGIBILITY
Key Employees, Non-Employee Directors, and Consultants shall be eligible to
receive Options under the Plan. Key Employees shall be eligible to receive ISOs
and/or NQSOs. Non-Employee Directors and Consultants shall be eligible to
receive only NQSOs. More than one Option may be granted to a Key Employee,
Non-Employee Director, or Consultant under the Plan.
SECTION 4 COMMON SHARES
Options may be granted under the Plan to purchase up to a maximum of
1,552,500 Common Shares. In addition, effective as of April 29, 1999, Options
may be granted each calendar year to purchase up to a number of Common Shares
equal to two percent (2.0%) of the adjusted average of the outstanding Common
Shares of the Company for the preceding fiscal year, as that number is
determined by the Company to calculate fully diluted earnings per share for the
Company's Form 10-K. (For 1999, the additional number of shares available
pursuant to the preceding sentence is 510,416.) However, in no event may more
than 2,062,916 Common Shares be issued under ISOs. The maximum number of Common
Shares available under the Plan shall be subject to further adjustment as
provided in Section 10 hereof. Shares issuable under the Plan may be authorized
but unissued shares or reacquired shares, and the Company may purchase shares
required for this purpose, from time to time, if it deems such purchase to be
advisable.
If any Option granted under the Plan expires or otherwise terminates for
any reason whatever (including, without limitation, the Optionee's surrender
thereof) without having been exercised, the shares subject to the unexercised
portion of such Option shall continue to be available for the granting of
Options under the Plan as fully as if such shares had never been subject to an
Option.
SECTION 5 ANNUAL LIMIT
(a) ISOS. The aggregate Fair Market Value (determined as of the date
the ISO is granted) of the Common Shares with respect to which ISOs are
exercisable for the first time by a Key Employee during any calendar year
(under this Plan and any other ISO plan of the Company or a Related
Corporation) shall not exceed one hundred thousand dollars ($100,000).
(b) OPTIONS OVER ANNUAL LIMIT. If an Option intended as an ISO is
granted to a Key Employee and such Option may not be treated in whole or in
part as an ISO pursuant to the limitation in subsection (a) above, such
Option shall be treated as an ISO to the extent it may be so treated under
such limitation and as an NQSO as to the remainder, but shall continue to
be subject to the provisions of the Plan that apply to ISOs. For purposes
of determining whether an ISO would cause such limitation to be exceeded,
the Key Employee's incentive stock options shall be taken into account in
the order granted.
(c) NQSOS. The annual limit set forth above for ISOs shall not apply
to NQSOs.
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<PAGE> 26
SECTION 6 GRANTING OF OPTIONS TO KEY EMPLOYEES AND CONSULTANTS
From time to time until the expiration or earlier suspension or
discontinuance of the Plan, the Committee may, on behalf of the Company, grant
to Key Employees and Consultants under the Plan such Options as it determines
are warranted; provided, however, that grants of ISOs and NQSOs shall be
separate and not in tandem. The granting of an Option under the Plan shall not
be deemed either to entitle the Key Employee or Consultant to, or to disqualify
the Key Employee or Consultant from, any participation in any other grant of
Options under the Plan. In making any determination as to whether a Key Employee
or Consultant shall be granted an Option and as to the number of shares to be
covered by such Option, the Committee shall take into account the duties of the
Key Employee or Consultant, his or her present and potential contributions to
the success of the Company or a Related Corporation, and such other factors as
the Committee shall deem relevant in accomplishing the purposes of the Plan.
Moreover, the Committee may provide in the Option that said Option may be
exercised only if certain conditions, as determined by the Committee, are
fulfilled.
SECTION 7 TERMS AND CONDITIONS OF OPTIONS TO KEY EMPLOYEES AND CONSULTANTS
The Options granted pursuant to the Plan to Key Employees and Consultants
shall include expressly or by reference the following terms and conditions, as
well as such other provisions not inconsistent with the provisions of this Plan
and, for ISOs, the provisions of section 422(b) of the Code, as the Committee
shall deem desirable:
(a) NUMBER OF SHARES. A statement of the number of Common Shares to
which the Option pertains.
(b) PRICE. A statement of the Option exercise price, which shall be
determined and fixed by the Committee in its discretion but, in the case of
an ISO, shall not be less than the higher of one hundred percent (100%)
(one hundred ten percent (110%) in the case of more than ten percent (10%)
shareholders as discussed in Subsection (j) below) of the Fair Market Value
of the optioned Common Shares, or the par value thereof, on the date the
ISO is granted.
(c) TERM.
(1) ISOS. Subject to earlier termination as provided in
Subsections (e), (f) and (g) below and in Section 10 hereof, the term of
each ISO shall be not more than ten (10) years (five (5) years in the
case of more than ten percent (10%) shareholders as discussed in (j)
below) from the date of grant.
(2) NQSOS. Subject to earlier termination as provided in
Subsections (e), (f) and (g) below and in Section 9 hereof, the term of
each NQSO shall be not more than ten (10) years from the date of grant.
(d) EXERCISE.
(1) GENERAL. Unless otherwise provided in the Option Agreement,
Options shall become exercisable in three (3) equal annual installments,
commencing with the first anniversary of the grant date; provided that
the Committee may accelerate the exercise date of any outstanding
Options, in its discretion, if it deems such acceleration to be
desirable.
Any Common Shares, the right to the purchase of which has accrued
under an Option, may be purchased at any time up to the expiration or
termination of the Option. Exercisable Options may be exercised, in
whole or in part, from time to time by giving written notice of exercise
to the Company at its principal office, specifying the number of Common
Shares to be purchased and accompanied by payment in full of the
aggregate Option exercise price for such shares. Only full shares shall
be issued under the Plan, and any fractional share which might otherwise
be issuable upon exercise of an Option granted hereunder shall be
forfeited.
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<PAGE> 27
(2) MANNER OF PAYMENT. The Option exercise price shall be payable:
(A) In cash or its equivalent;
(B) If the Committee, in its discretion, so provides in the
Option Agreement (as hereinafter defined) or, in the case of Options
which are not ISOs, if the Committee, in its discretion, so
determines at or prior to the time of exercise, in whole or in part,
in Common Shares previously acquired by the Optionee, provided that
the Committee, in its discretion, may require (i) if such Common
Shares were acquired through the exercise of an ISO and are used to
pay the Option exercise price of an ISO, such shares have been held
by the Optionee for a period of not less than the holding period
described in section 422(a)(1) of the Code on the date of exercise,
or (ii) if such Common Shares were acquired through exercise of an
NQSO or of an option under a similar plan or through exercise of an
ISO and are used to pay the Option exercise price of an NQSO, such
shares have been held by the Optionee for a period of more than six
(6) months on the date of exercise;
(C) If the Committee, in its discretion, so provides in the
Option Agreement or, in the case of Options which are not ISOs, if
the Committee, in its discretion, so determines at or prior to the
time of exercise, in whole or in part, in Common Shares newly
acquired by the Optionee upon exercise of such Option (which shall
constitute a disqualifying disposition in the case of an Option which
is an ISO);
(D) If the Committee, in its discretion, so provides in the
Option Agreement or, in the case of Options which are not ISOs, if
the Committee, in its discretion, so determines at or prior to the
time of exercise, in any combination of (A), (B) and/or (C) above; or
(E) If the Committee, in its discretion, so provides in the
Option Agreement or, in the case of Options which are not ISOs, if
the Committee, in its discretion, so determines at or prior to the
time of exercise, by permitting the Optionee to deliver a properly
executed notice of exercise of the Option to the Company and a
broker, with irrevocable instructions to the broker promptly to
deliver to the Company the amount of sale or loan proceeds necessary
to pay the exercise price of the Option.
In the event such Option exercise price is paid, in whole or in
part, with Common Shares, the portion of the Option exercise price so
paid shall be equal to the Fair Market Value on the date of exercise of
the Option of the Common Shares surrendered in payment of such Option
exercise price.
(e) TERMINATION OF EMPLOYMENT OR SERVICE.
(1) GENERAL. If an Optionee's employment or service with the
Company (and Related Corporations) is terminated by either party prior
to the expiration date fixed for his or her Option for any reason other
than death, disability, or Cause (as described in paragraph (2) below),
such Option may be exercised, to the extent of the number of Common
Shares with respect to which the Optionee could have exercised it on the
date of such termination, or to any greater extent permitted by the
Committee, by the Optionee at any time prior to the earlier of:
(A) The expiration date fixed for such Option; or
(B) An accelerated termination date determined by the Committee,
in its discretion, except that, subject to Section 9 hereof, such
accelerated termination date shall not be earlier than the date of
the Optionee's termination of employment or service and, unless
otherwise determined by the Committee, in its discretion, shall not
be later than three (3) months after the date of such termination of
employment.
If an Optionee's employment or service with the Company or a
Related Corporation terminates by reason of Cause prior to the
expiration date fixed for his or her Option, such Option shall terminate
immediately.
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<PAGE> 28
(2) CAUSE. For purposes of this Plan, unless otherwise defined in
an Optionee's employment or service contract with the Company or a
Related Corporation, "Cause" shall include insubordination, gross
incompetence or misconduct in the performance of, or gross neglect of,
Optionee's duties, willful violation of any express direction or of any
rule or regulation applicable to such Optionee, any act of fraud or
intentional misrepresentation, or embezzlement, misappropriation, or
conversion of assets or opportunities of the Company or a Related
Corporation.
(f) EXERCISE UPON DISABILITY OF OPTIONEE. If an Optionee shall become
disabled (within the meaning of section 22(e)(3) of the Code) during his or
her employment or service and, prior to the expiration date fixed for his
or her Option, his or her employment or service is terminated as a
consequence of such disability, such Option may be exercised, to the extent
of the number of Common Shares with respect to which the Optionee could
have exercised it on the date of such termination, or to any greater extent
permitted by the Committee, by the Optionee at any time prior to the
earlier of:
(1) The expiration date fixed for the Option; or
(2) An accelerated termination date determined by the Committee, in
its discretion, except that, subject to Section 9 hereof, such
accelerated termination date shall not be earlier than the date of
termination of employment or service by reason of disability and, unless
otherwise determined by the Committee, in its discretion, shall not be
later than one (1) year after the date of such termination of
employment.
In the event of the Optionee's legal disability, such Option may be so
exercised by the Optionee's legal representative.
(g) EXERCISE UPON DEATH OF OPTIONEE. If an Optionee shall die during
his or her employment or service and prior to the expiration date fixed for
his or her Option, or if an Optionee whose employment or service is
terminated for any reason shall die following his or her termination of
employment or service, but prior to the earlier of:
(1) The expiration date fixed for such Option; or
(2) The expiration of the period determined under Subsections (e)
and (f) above, if applicable;
such Option may be exercised, to the extent of the number of Common Shares
with respect to which the Optionee could have exercised it on the date of
his or her death, or to any greater extent permitted by the Committee, by
the Optionee's estate, personal representative or beneficiary who acquired
the right to exercise such Option by bequest or inheritance or by reason of
the death of the Optionee, at any time prior to the earlier of:
(A) The expiration date specified in such Option (which may be the
expiration date determined under Subsections (e) and (f) above, if
applicable); or
(B) An accelerated termination date determined by the Committee, in
its discretion except that, subject to Section 9 hereof, such
accelerated termination date shall not be later than one (1) year after
the date of death.
(h) NON-TRANSFERABILITY.
(1) ISOS. No ISO shall be assignable or transferable by a Key
Employee otherwise than by will or by the laws of descent and
distribution, and during the lifetime of the Key Employee, the ISO shall
be exercisable only by him or by his or her guardian or legal
representative. If the Key Employee is married at the time of exercise
and if the Key Employee so requests at the time of exercise, the
certificate or certificates shall be registered in the name of the Key
Employee and the Key Employee's spouse, jointly, with right of
survivorship.
(2) NQSOS. Except as otherwise provided in any Option Agreement,
no NQSO shall be assignable or transferable by the Optionee otherwise
than by will or by the laws of descent and
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<PAGE> 29
distribution, and during the lifetime of the Optionee, the NQSO shall be
exercisable only by him or by his or her guardian or legal
representative. If the Optionee is married at the time of exercise and
if the Optionee so requests at the time of exercise, the certificate or
certificates shall be registered in the name of the Optionee and his or
her spouse, jointly, with right of survivorship.
(i) RIGHTS AS A SHAREHOLDER. An Optionee shall have no rights as a
shareholder with respect to any shares covered by his or her Option until
the issuance of a share certificate to him or her for such shares.
(j) TEN PERCENT SHAREHOLDER. If a Key Employee owns more than ten
percent (10%) of the total combined voting power of all shares of stock of
the Company or of a Related Corporation at the time an ISO is granted to
such Key Employee, the Option exercise price for the ISO shall be not less
than one hundred ten percent (110%) of the Fair Market Value of the
optioned Common Shares on the date the ISO is granted, and such ISO, by its
terms, shall not be exercisable after the expiration of five (5) years from
the date the ISO is granted. The conditions set forth in this Subsection
(j) shall not apply to NQSOs.
(k) LISTING AND REGISTRATION OF SHARES. Each Option shall be subject
to the requirement that, if at any time the Committee shall determine, in
its discretion, that the listing, registration or qualification of the
shares covered thereby upon any securities exchange or under any applicable
law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the
granting of such Option or the purchase of shares thereunder, or that
action by the Company or by the Optionee should be taken in order to obtain
an exemption from any such requirement, no such Option may be exercised, in
whole or in part, unless and until such listing, registration,
qualification, consent, approval, or action shall have been effected,
obtained, or taken under conditions acceptable to the Committee. Without
limiting the generality of the foregoing, each Optionee or his or her legal
representative or beneficiary may also be required to give satisfactory
assurance that shares purchased upon exercise of an Option are being
purchased for investment and not with a view to distribution, and
certificates representing such shares may be legended accordingly.
(l) WITHHOLDING AND USE OF SHARES TO SATISFY TAX OBLIGATIONS. The
obligation of the Company to deliver Common Shares upon the exercise of any
Option shall be subject to applicable tax withholding requirements.
If the exercise of any Option is subject to the withholding requirements of
applicable tax laws, the Committee, in its discretion (and subject to such
withholding rules ("Withholding Rules") as shall be adopted by the Committee),
may permit the Optionee to satisfy the minimum required withholding tax, in
whole or in part, by electing to have the Company withhold (or by returning to
the Company) Common Shares, which shares shall be valued, for this purpose, at
their Fair Market Value on the date of exercise of the Option (or if later, the
date on which the Optionee recognizes ordinary income with respect to such
exercise). An election to use Common Shares to satisfy tax withholding
requirements must be made in compliance with and subject to the Withholding
Rules. The Committee may not withhold shares in excess of the number necessary
to satisfy the minimum tax withholding requirements.
SECTION 8 OPTIONS FOR NON-EMPLOYEE DIRECTORS
(a) GRANTING OF OPTIONS TO OUTSIDE DIRECTORS.
(1) Each person who becomes an Eligible Non-Employee Director shall
be granted an NQSO to purchase 15,000 Common Shares on the later of (A)
the date he or she becomes an Eligible Non-Employee Director and (B) the
date of the Company's initial public offering of its Common Shares.
(2) In addition, with respect to the Company's first annual
shareholder's meeting after December 31, 1998 and each subsequent annual
shareholder's meeting of the Company, each Non-Employee Director whose
term as a director has not ended as of the date of such annual
shareholder's meeting shall be granted an NQSO to purchase 2,000 Common
Shares as of the day of such annual shareholder's meeting.
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(b) TERMS AND CONDITIONS OF OPTIONS. Options granted to Non-Employee
Directors shall expressly specify that they are NQSOs. In addition, such
Options shall include expressly or by reference the following terms and
conditions, as well as such other provisions not inconsistent with the
provisions of this Plan:
(1) NUMBER OF SHARES. A statement of the number of Common Shares
to which the Option pertains.
(2) PRICE. A statement of the Option exercise price, which shall
be one hundred percent (100%) of the Fair Market Value of the optioned
Common Shares on the date the Option is granted.
(3) TERM. Subject to earlier termination as provided in
Subsections (5), (6) and (7) below, the term of each Option granted
under this Section 8 shall be 10 years from the date of grant.
(4) EXERCISE.
(A) GENERAL. Options granted under Section 8(a)(1) shall become
exercisable in three (3) equal annual installments, commencing with
the first anniversary of the grant date. Options granted under
Section 8(a)(2) shall be immediately exercisable as of the grant
date, provided that if such date is not at least one year after the
date upon which the Company's initial public offering of its Common
Shares was consummated, such Options shall become exercisable on the
first anniversary of the consummation of such initial public
offering. Any Common Shares, the right to the purchase of which has
accrued under an Option, may be purchased at any time up to the
expiration or termination of the Option. Exercisable Options may be
exercised, in whole or in part, from time to time by giving written
notice of exercise to the Company at its principal office, specifying
the number of Common Shares to be purchased and accompanied by
payment in full of the aggregate Option exercise price for such
shares. Only full shares shall be issued under the Plan, and any
fractional share which might otherwise be issuable upon the exercise
of an Option granted hereunder shall be forfeited.
(B) MANNER OF PAYMENT. The Option exercise price shall be
payable:
(i) In cash or its equivalent;
(ii) Unless in the opinion of counsel to the Company to do
so may result in a possible violation of law, in whole or in part
through the transfer of Common Shares previously acquired by the
Non-Employee Director, provided that if such Common Shares were
acquired through exercise of an NQSO or of an option under a
similar plan, such Common Shares so transferred shall have been
held by the Non-Employee Director for more than six (6) months on
the date of exercise;
(iii) Unless in the opinion of counsel to the Company to do
so may result in a possible violation of law, in whole or in
part, in Common Shares newly acquired by the Non-Employee
Director upon the exercise of such Option; or
(iv) In any combination of (i), (ii), and/or (iii) above. In
the event such Option exercise price is paid, in whole or in
part, with Common Shares, the portion of the Option exercise
price so paid shall equal the Fair Market Value on the date of
exercise of the Option of the Common Shares surrendered in
payment of such Option exercise price.
(5) EXPIRATION OF TERM OR REMOVAL AS DIRECTOR. If a Non-Employee
Director's service as a director of the Company terminates prior to the
expiration date fixed for his or her Option for any reason (such as,
without limitation, failure to be re-elected by the Company's
shareholders) other than by disability, death, or Cause (as described in
Section 7(e)(2) above), such Option may be exercised, to the extent of
the number of Common Shares with respect to which the Non-Employee
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Director could have exercised it on the date of such termination, by the
Non-Employee Director at any time prior to the earlier of:
(A) The expiration date fixed for such Option; or
(B) Three (3) months after the date of such termination of
service as a director.
If a Non-Employee Director's service as a director of the
Company terminates by reason of Cause prior to the expiration date
fixed for his or her Option, such Option shall terminate immediately.
(6) EXERCISE UPON DISABILITY OF NON-EMPLOYEE DIRECTOR. If a
Non-Employee Director shall become disabled (within the meaning of
section 22(e)(3) of the Code) during his or her term as a director of
the Company and, prior to the expiration date fixed for his or her
Option, his or her term as a director is terminated as a consequence of
such disability, such Option may be exercised, to the extent of the
number of Common Shares with respect to which the Non-Employee Director
could have exercised it on the date of such termination, by the
Non-Employee Director at any time prior to the earlier of:
(A) The expiration date fixed for such Option; or
(B) One year after the date of such termination of service as a
director.
In the event of the Non-Employee Director's legal disability,
such Option may be so exercised by his or her legal representative.
(7) EXERCISE UPON DEATH OF NON-EMPLOYEE DIRECTOR. If a
Non-Employee Director shall die during his or her term as a director of
the Company and prior to the expiration date fixed for his or her
Option, or if a Non-Employee Director whose term as a director has been
terminated for any reason shall die following his or her termination as
a director, but prior to the earlier of:
(A) The expiration date fixed for such Option; or
(B) The expiration of the period determined under Subsections
(5) and (6) above, if applicable;
such Option may be exercised, to the extent of the number of Common
Shares with respect to which the Non-Employee Director could have
exercised it on the date of his or her death, by the Non-Employee
Director's estate, personal representative or beneficiary who
acquired the right to exercise such Option by bequest or inheritance
or by reason of the death of the Non-Employee Director, at any time
prior to the earlier of:
(i) The expiration date specified in such Option (which may
be the expiration date determined under Subsections (5) and (6)
above, if applicable); or
(ii) One year after the date of death.
(8) RIGHTS AS A SHAREHOLDER. A Non-Employee Director shall have no
rights as a shareholder with respect to any shares covered by his or her
Option until the issuance of a share certificate to him or her for such
shares.
(9) LISTING AND REGISTRATION OF SHARES. Each Option shall be
subject to the requirement that, if at any time the Committee shall
determine, in its discretion, that the listing, registration or
qualification of the shares covered thereby upon any securities exchange
or under any applicable law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition
of, or in connection with, the granting of such Option or the purchase
of shares thereunder, or that action by the Company or by the Optionee
should be taken in order to obtain an exemption from any such
requirement, no such Option may be exercised, in whole or in part,
unless and until such listing, registration, qualification, consent,
approval, or action shall have been effected, obtained, or taken under
conditions acceptable to the Committee. Without limiting the generality
of
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the foregoing, each Optionee or his or her legal representative or
beneficiary may also be required to give satisfactory assurance that
shares purchased upon exercise of an Option are being purchased for
investment and not with a view to distribution, and certificates
representing such shares may be legended accordingly.
SECTION 9 OPTION AGREEMENTS -- OTHER PROVISIONS
Options granted under the Plan shall be evidenced by Option Agreements in
such form as the Committee shall, from time to time, approve, which Option
Agreements shall contain such provisions, not inconsistent with the provisions
of the Plan for NQSOs granted pursuant to the Plan, and such conditions, not
inconsistent with section 422(b) of the Code or the provisions of the Plan for
ISOs granted pursuant to the Plan, as the Committee shall deem advisable, and
which Option Agreements shall specify whether the Option is an ISO or NQSO;
provided, however, if the Option is not designated in the Option Agreement as an
ISO or NQSO, the Option shall constitute an ISO if it complies with the terms of
section 422 of the Code, and otherwise, it shall constitute an NQSO. Each
Optionee shall enter into, and be bound by, such Option Agreement.
SECTION 10 CAPITAL ADJUSTMENTS
The number of shares which may be issued under the Plan, and the maximum
number of shares with respect to which options may be granted during a specified
period to any Key Employee, Non-Employee Director, or Consultant under the Plan,
as stated in Section 4 hereof, and the number of shares issuable upon exercise
of outstanding Options under the Plan (as well as the Option exercise price per
share under such outstanding Options), shall, subject to the provisions of
section 424(a) of the Code, be adjusted to reflect any stock dividend, stock
split, share combination, or similar change in the capitalization of the
Company.
In the event of a corporate transaction (as that term is described in
section 424(a) of the Code and the Treasury Regulations issued thereunder as,
for example, a merger, consolidation, acquisition of property or stock,
separation, reorganization, or liquidation), each outstanding Option shall be
assumed by the surviving or successor corporation or by a parent or subsidiary
of such corporation if such corporation is the employer corporation (as provided
in section 424(a) of the Code and the regulations thereunder); provided,
however, that, in the event of a proposed corporate transaction, the Committee
may terminate all or a portion of the outstanding Options to Key Employees and
Consultants if it determines that such termination is in the best interests of
the Company. If the Committee decides to terminate outstanding Options, the
Committee shall give each Key Employee and Consultant holding an Option to be
terminated not less than seven (7) days' notice prior to any such termination by
reason of such a corporate transaction, and any such Option which is to be so
terminated may be exercised (if and only to the extent that it is then
exercisable) up to, and including the date immediately preceding such
termination. Further, as provided in Section 7 hereof the Committee, in its
discretion, may accelerate, in whole or in part, the date on which any or all
Options granted to Key Employees and Consultants become exercisable.
The Committee also may, in its discretion, change the terms of any
outstanding Option to reflect any such corporate transaction, provided that, in
the case of ISOs, such change is excluded from the definition of a
"modification" under section 424(h) of the Code.
SECTION 11 AMENDMENT OR DISCONTINUANCE OF THE PLAN
(a) GENERAL. The Board from time to time may suspend or discontinue the
Plan or amend it in any respect whatsoever, except that the following amendments
shall require shareholder approval (given in the manner set forth in Section
11(b) below):
(1) With respect to ISOs, any amendment which would:
(A) Change the class of employees eligible to participate in the
Plan;
(B) Except as permitted under Sections 4 and 10 hereof, increase
the maximum number of Common Shares with respect to which ISOs may be
granted under the Plan; or
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(C) Extend the duration of the Plan under Section 12 hereof with
respect to any ISOs granted hereunder; and
(2) Any amendment which would require shareholder approval under 17
CFR sec.240.16b-3 in order for the Plan to continue to constitute a
"formula plan" with respect to Options granted to Non-Employee Directors,
unless (i) the Plan is amended in a manner that takes advantage of another
method of complying with 17 CFR sec.240.16b-3 with respect to Options
granted to Non-Employee Directors, or (ii) compliance with 17 CFR
sec.240.16b-3 is not intended.
Notwithstanding the foregoing, no such suspension, discontinuance or
amendment shall materially impair the rights of any holder of an outstanding
Option without the consent of such holder.
(b) SHAREHOLDER APPROVAL REQUIREMENTS. Shareholder approval must meet the
following requirements:
(1) The approval of shareholders must be by a majority of the votes
cast at a meeting duly held in accordance with the applicable laws of
Bermuda; and
(2) The approval of shareholders must comply with all applicable
provisions of the corporate charter, bye-laws, and applicable law
prescribing the method and degree of shareholder approval required for the
issuance of corporate stock or options. If the applicable law does not
prescribe a method and degree of shareholder approval in such case, the
approval of shareholders must be effected:
(A) By a method and in a degree that would be treated as adequate
under applicable law of Bermuda in the case of an action requiring
shareholder approval (i.e., an action on which shareholders would be
entitled to vote if the action were taken at a duly held shareholders'
meeting); or
(B) By a majority of the votes cast at a duly held shareholders'
meeting at which a quorum representing a majority of all outstanding
voting stock is, either in person or by proxy, present and voting on the
Plan.
SECTION 12 TERMINATION OF PLAN
Unless earlier terminated as provided in the Plan, the Plan and all
authority granted hereunder shall terminate absolutely at 12:00 midnight on
December 2, 2007, which date is within ten (10) years after the date the Plan
was adopted by the Board (or the date the Plan was approved by the shareholders
of the Company, whichever is earlier), and no Options hereunder shall be granted
thereafter. Nothing contained in this Section 12, however, shall terminate or
affect the continued existence of rights created under Options issued hereunder
and outstanding on December 2, 2007, which by their terms extend beyond such
date.
SECTION 13 SHAREHOLDER APPROVAL
This Plan shall become effective on December 3, 1997 (the date the Plan was
adopted by the Board); provided, however, that if the Plan is not approved by
the shareholders in the manner described in Section 11(b), within twelve (12)
months before or after said date, ISOs granted hereunder shall be null and void
and no additional ISOs shall be granted hereunder.
SECTION 14 MISCELLANEOUS
(a) GOVERNING LAW. With respect to any ISOs granted pursuant to the Plan
and the Option Agreements thereunder, the Plan, such Option Agreements and any
ISOs granted pursuant thereto shall be governed by the applicable Code
provisions to the maximum extent possible. Otherwise, the operation of, and the
rights of Optionees under, the Plan, the Option Agreements and any Options
granted thereunder shall be governed by applicable United States law and
otherwise by the laws of Bermuda.
(b) RIGHTS. Neither the adoption of the Plan nor any action of the Board
or the Committee shall be deemed to give any individual any right to be granted
an Option, or any other right hereunder, unless and until
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<PAGE> 34
the Committee shall have granted such individual an Option, and then his or her
rights shall be only such as are provided by the Option Agreement.
Any Option under the Plan shall not entitle the holder thereof to any
rights as a shareholder of the Company prior to the exercise of such Option and
the issuance of the shares pursuant thereto. Further, notwithstanding any
provisions of the Plan or the Option Agreement with an Optionee, the Company
shall have the right, in its discretion, to retire a Key Employee at any time
pursuant to its retirement rules or otherwise to terminate an Optionee's
employment or service at any time for any reason whatsoever.
(c) INDEMNIFICATION OF BOARD AND COMMITTEE. Without limiting any other
rights of indemnification which they may have from the Company and any Related
Corporation, the members of the Board and the members of the Committee shall be
indemnified by the Company against all costs and expenses reasonably incurred by
them in connection with any claim, action, suit, or proceeding to which they or
any of them may be a party by reason of any action taken or failure to act
under, or in connection with, the Plan, or any Option granted thereunder, and
against all amounts paid by them in settlement thereof (provided such settlement
is approved by legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit, or proceeding, except a
judgment based upon a finding of willful misconduct or recklessness on their
part. Upon the making or institution of any such claim, action, suit, or
proceeding, the Board or Committee member shall notify the Company in writing,
giving the Company an opportunity, at its own expense, to handle and defend the
same before such Board or Committee member undertakes to handle it on his or her
own behalf.
(d) APPLICATION OF FUNDS. Any cash received in payment for Common Shares
upon exercise of an Option shall be added to the general funds of the Company
and shall be used for its corporate purposes. Any Common Shares received in
payment for Common Shares upon exercise of an Option shall be cancelled.
(e) NO OBLIGATION TO EXERCISE OPTION. The granting of an Option shall
impose no obligation upon an Optionee to exercise such Option.
SECTION 15 CHANGE IN CONTROL
(a) GENERAL. All outstanding Options shall become fully vested and
exercisable upon a Change in Control of the Company. In the event of a Change in
Control in which outstanding Options are not assumed by the surviving entity,
the Committee shall terminate all outstanding Options on at least seven days'
notice. Any such Option which is to be so terminated may be exercised up to, and
including the date immediately preceding such termination. In any transaction to
which both Section 10 and this Section 15 are applicable, only the provisions of
this Section 15 shall apply.
(b) DEFINITION OF CHANGE IN CONTROL. For purposes of this Section 15, a
"Change in Control" of the Company shall be deemed to have occurred if:
(1) Any person, including a group of persons acting in concert,
becomes the beneficial owner of shares of the Company having 50 percent or
more of the total number of votes that may be cast for the election of
directors of the Company;
(2) There occurs any cash tender or exchange offer for shares of the
Company, merger or other business combination, or any combination of the
foregoing transactions, and as a result of or in connection with any such
event persons who were directors of the Company before the event shall
cease to constitute a majority of the board of directors of the Company or
any successor to the Company; or
(3) The sale, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of
all or substantially all of the assets of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed to have
occurred by reason of a change in beneficial ownership occurring in connection
with the initial public offering of the Common Shares.
(c) In the event of a Change in Control of the Company in which holders of
Common Shares are entitled only to receive money or other property exclusive of
securities, then in lieu of outstanding Options
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<PAGE> 35
being terminated or assumed by the Surviving Entity, each Optionee shall have
the right, at its sole option, to require the Company or such surviving entity
to purchase such Optionee's Options (without prior exercise by Optionee) at its
fair value as of the day before such transaction became publicly known, as
determined by an unaffiliated internationally recognized accounting firm or
investment bank selected by the Company or such surviving entity and reasonably
acceptable to all electing Optionees.
IN WITNESS WHEREOF, Annuity and Life Re (Holdings), Ltd. has caused these
presents to be duly executed, under seal, as of this 29th day of April, 1999.
ANNUITY AND LIFE RE (HOLDINGS), LTD.
By: /s/ LAWRENCE S. DOYLE
------------------------------------
President and Chief Executive
Officer
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<PAGE> 36
ANNUITY AND LIFE RE (HOLDINGS) LTD.
P THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE
O
The undersigned, revoking all prior proxies, hereby appoints Lawrence S.
X Doyle and William W. Atkin, or any of them, or failing them, the Chairman of
the Annual Meeting, as the undersigned's proxies, with full power of
Y substitution, to vote all the common shares of Annuity and Life Re
(Holdings), Ltd. (the "Company") standing in the name of the undersigned on
the Company's books on March 10, 1999, at the Annual Meeting of Shareholders
of the Company to be held on April 29, 1999 at 9:00 a.m. at the Elbow Beach
Hotel, 60 South Shore Road, Paget, PG 04, Bermuda, or at any adjournments
thereof, with all the powers the undersigned would possess if personally
present as follows:
SEE
REVERSE
SIDE
-FOLD AND DETACH HERE-
<PAGE> 37
X PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THIS PROXY, WHEN PROPERLY EXECUTED AND TIMELY DELIVERED, WILL BE VOTED AS
DIRECTED HEREIN, IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR"
THE NOMINEES LISTED IN PROPOSAL 1 AND "FOR" PROPOSALS 2, 3 AND 4.
FOR WITHHELD
1. Election of Nominees:
Directors. Frederick S. Hammer,
Robert Clements,
Lee M. Ganmill, Jr. and
For, except vote withheld from the Jon W. Yoskin, II
following nominee(s):
_______________________________________
FOR AGAINST ABSTAIN
2. To approve and adopt an amendment to the Annuity
and Life Re (Holdings), Ltd. Initial Stock Option
Plan authorizing 2% of the outstanding common
shares of the Company to be available for issuance
annually thereunder.
3. To appoint KPMG Peat Marwick as the Company's
independent accountants for 1999.
4. In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment or
postponement thereof.
CHANGE OF ADDRESS AND OR
COMMENTS MARK HERE
The signature on this proxy should
correspond exactly with the
shareholder's name as printed to the
left. In the case of joint tenancies,
co-executors or co-trustees, all should
sign. Persons signing as attorney,
executor, administrator, trustee or
guardian should indicate their full
title. Please sign, date and return this
Proxy in the enclosed postage paid
envelope.
______________________________________
______________________________________
SIGNATURE(S) DATE
-FOLD AND DETACH HERE-
