<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
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
RE CAPITAL CORPORATION
- --------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
RE CAPITAL CORPORATION
- --------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:/1
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/ / 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:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
- ---------------
/1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
PROXY STATEMENT
RE CAPITAL CORPORATION
TWO STAMFORD PLAZA
P.O. BOX 10148
STAMFORD, CONNECTICUT 06904-2148
------------------------------------------------
ANNUAL MEETING -- MAY 18, 1994
------------------------------------------------
To the Shareholders of Re Capital Corporation:
You are cordially invited to attend the Annual Meeting of your Corporation
to be held at 10:00 a.m. on Wednesday, May 18, 1994 at The Landmark Club, One
Landmark Square, Stamford, Connecticut.
A report on the current affairs of the Corporation will be presented at the
meeting and shareholders will have an opportunity for questions and comments.
It is requested that you sign, date and mail your proxy card whether or not
you plan to attend the Annual Meeting.
Prompt return of your proxy card will reduce the cost of further mailings
and other follow-up work. You may revoke your voted proxy at any time prior to
the meeting or vote in person if you attend the meeting.
We are grateful for your assistance and express our appreciation in
advance.
Sincerely yours,
JAMES E. ROBERTS
President and Chief
Executive Officer
April 8, 1994
<PAGE> 3
RE CAPITAL CORPORATION
TWO STAMFORD PLAZA
P.O. BOX 10148
STAMFORD, CONNECTICUT 06904-2148
------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 18, 1994
------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of RE
CAPITAL CORPORATION (the "Company") will be held at The Landmark Club, One
Landmark Square, Stamford, Connecticut, on Wednesday, May 18, 1994, at 10:00
a.m., Eastern Daylight Savings Time, for the following purposes:
1. To elect three (3) directors to hold office until the 1997 Annual
Meeting of Shareholders and until their respective successors have been
duly elected and qualified; and one (1) director to hold office until the
1996 Annual Meeting of Shareholders and until his successor has been duly
elected and qualified;
2. To ratify the appointment of Ernst & Young, independent public
accountants, as the Company's auditors for the ensuing year; and
3. To consider and take action with respect to such other matters as may
properly come before the Annual Meeting or any adjournment or adjournments
thereof.
The Board of Directors has fixed the close of business on April 4, 1994 as
the record date for the determination of shareholders entitled to notice of, and
to vote at, the Annual Meeting.
All shareholders are cordially invited to attend the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, the Board of Directors
urges you to complete, date, sign and return the enclosed proxy as soon as
possible in the enclosed business reply envelope, which requires no postage if
mailed in the United States. You may revoke the proxy at any time prior to its
exercise provided that you comply with the procedures set forth in the Proxy
Statement to which this Notice of Annual Meeting of Shareholders is attached. If
you attend the Annual Meeting, you may vote in person if you wish.
By order of the Board of Directors,
CONOR D. REILLY,
Secretary
Stamford, Connecticut
April 8, 1994
IMPORTANT: PLEASE MAIL YOUR PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. THE MEETING
DATE IS MAY 18, 1994.
<PAGE> 4
PROXY STATEMENT
RE CAPITAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
MAY 18, 1994
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of Re Capital Corporation (the "Company")
of proxies from holders of the Company's common stock, par value $.10 per share
(the "Common Stock"). The proxies will be voted at the Annual Meeting of
Shareholders to be held on May 18, 1994 at 10:00 a.m., Eastern Daylight Savings
Time, at The Landmark Club, One Landmark Square, Stamford, Connecticut, and at
any adjournment or adjournments thereof (the "Annual Meeting").
The mailing address of the Company is Two Stamford Plaza, P.O. Box 10148,
Stamford, Connecticut 06904-2148 (telephone no. (203) 977-6100). The Proxy
Statement and the accompanying Proxy are being first transmitted to shareholders
of the Company on or about April 8, 1994.
The Board has fixed the close of business on April 4, 1994 as the record
date (the "Record Date") for determining the shareholders of the Company
entitled to receive notice of, and to vote at, the Annual Meeting. At the close
of business on the Record Date, an aggregate of 7,045,875 shares of Common Stock
were issued and outstanding, each share entitling the holder thereof to one vote
on each matter to be voted upon at the Annual Meeting, other than the 123,000
shares of Common Stock issued under the Company's Restricted Stock Incentive
Compensation Plan which, by the terms of that plan, may not be voted until the
restrictions on such shares expire or are lifted. The presence, in person or by
proxy, of the holders of a majority of such outstanding shares (i.e. 3,522,938
shares) is necessary to constitute a quorum for the transaction of business at
the Annual Meeting. Proxies will be solicited by mail. The Company also intends
to make, through bankers, brokers or other persons, a solicitation of beneficial
holders of Common Stock.
At the Annual Meeting, shareholders of the Company will be asked (i) to
elect three directors to serve on the Board for three (3) years and one director
to serve on the Board for two (2) years and (ii) to ratify the appointment of
Ernst & Young, independent public accountants, as the Company's auditors for the
year ending December 31, 1994.
Shareholders may also be asked to consider and take action with respect to
such other matters as may properly come before the Annual Meeting or any
adjournment or adjournments thereof.
A copy of the Company's Annual Report for the year ended December 31, 1993
is being mailed to shareholders together with this Proxy Statement. The
financial statements of the Company for the year ended December 31, 1993
contained in such Annual Report and the Management's Discussion and Analysis of
Financial Condition and Results of Operations for the three years ended December
31, 1993 are specifically incorporated herein by reference and made a part
hereof.
SOLICITATION AND REVOCATION
PROXIES IN THE FORM ENCLOSED ARE SOLICITED BY, OR ON BEHALF OF, THE BOARD
OF DIRECTORS OF THE COMPANY. THE PERSONS NAMED IN THE FORM OF PROXY HAVE BEEN
DESIGNATED AS PROXIES BY THE BOARD OF DIRECTORS. Such persons designated as
proxies are officers of the Company. A shareholder desiring to appoint some
other person to represent him at the Annual Meeting may do so either by
inserting such person's name in the blank space provided in the enclosed Form of
Proxy, or by completing another form of proxy and, in either case, delivering
the completed Proxy to the Secretary of the Company at the address indicated
above, before the time of the Annual Meeting. It is the responsibility of the
shareholder appointing some other person to represent him to inform such person
of this appointment.
1
<PAGE> 5
Shares of Common Stock represented at the Annual Meeting by a properly
executed and returned Proxy will be voted at the Annual Meeting in accordance
with instructions noted thereon, or if no instructions are noted, the Proxy will
be voted in favor of the proposals set forth in the Notice of Annual Meeting. If
a shareholder appoints a person other than the persons named in the Form of
Proxy to represent him, such person will vote the shares in respect of which he
is appointed proxy holder in accordance with the directions of the shareholder
appointing him. A submitted Proxy is revocable by a shareholder at any time
prior to it being voted provided that such shareholder gives written notice to
the Secretary of the Company at or prior to the Annual Meeting that such
shareholder intends to vote in person or by submitting a subsequently dated
Proxy. Attendance at the Annual Meeting by a shareholder who has given a Proxy
shall not in and of itself constitute a revocation of such Proxy.
Proxies will be solicited initially by mail. Further solicitation may be
made by officers and regular employees of the Company personally, by telephone
or otherwise, but such persons will not be specifically compensated for such
services. Banks, brokers, nominees and other custodians and fiduciaries will be
reimbursed for their reasonable out-of-pocket expenses in forwarding soliciting
material to their principals, the beneficial owners of Common Stock of the
Company. The costs of soliciting proxies will be borne by the Company. It is
estimated that said costs will be nominal.
OWNERSHIP OF VOTING SECURITIES BY CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the Company's
Common Stock owned on March 22, 1994 (i) by each person who is known by the
Company to own beneficially more than five percent of the Company's Common
Stock, (ii) by each of the Company's directors, and (iii) by all directors and
executive officers of the Company as a group. Except as otherwise indicated, to
the Company's knowledge, all shares are beneficially owned, and investment and
voting power is held, solely by the persons named as owners.
In July 1993, the Company issued $69,000,000 of 5.5% convertible debentures
due August 1, 2000 (the "Debentures"). The Debentures are convertible into
shares of Re Capital common stock at $17.1875 per share. Holders of the
Debentures are required to include shares of Common Stock issuable upon
conversion of the Debentures in the calculation of the number of shares of
Common Stock beneficially owned by them. Accordingly, beneficially owned shares
reported may include shares of Common Stock issuable upon the conversion of the
Debentures.
<TABLE>
<CAPTION>
AMOUNT OF
BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------------------------------------------------------------ --------- --------
<S> <C> <C>
John Deere Insurance Group, Inc.
John Deere Road
Moline, Illinois 61265 (1)............................................ 3,086,998 43.81%
The TCW Group, Inc.
865 South Figueroa Street
Los Angeles, CA 90017 (2)............................................. 771,270 9.98%
Norwest Corporation
1200 Peavey Building
Minneapolis, Minnesota 55479 (3)...................................... 470,000 6.67%
Donald E. Chisholm (4).................................................. 236,465 3.28%
George G. D'Amato, Jr. (5).............................................. 10,047 *
Harold R. Hiser, Jr. ................................................... 2,000 *
Dennis E. Hoffmann (6).................................................. 2,500 *
Jean R. Perrette........................................................ 0 *
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
AMOUNT OF
BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------------------------------------------------------------ --------- --------
<S> <C> <C>
James E. Roberts (7).................................................... 166,460 2.32%
Maurice W. Slayton...................................................... 3,000 *
R. Richard Mueller (8).................................................. 8,849 *
Molly P. Sanders (9).................................................... 44,694 *
Stephen B. Slade (10)................................................... 83,331 1.17%
David C. Smith (11)..................................................... 142,603 1.99%
All directors and executive officers of the Company as a group
(12 persons) (4)(5)(6)(7)(8)(9)(10)(11)(12)........................... 700,149 9.28%
</TABLE>
- ------------
* Less than one percent of issued and outstanding Common Stock.
(1) Dennis E. Hoffmann, Chairman of the Board of Directors of the Company, is
President and a Director of John Deere Insurance Group, Inc. Conor D.
Reilly, Secretary of the Company, and George G. D'Amato, Jr., a director of
the Company, are directors of John Deere Insurance Group, Inc. Does not
include 2,500 shares owned by Mr. Hoffmann.
(2) The TCW Group, Inc. holds the shares through its subsidiary which is an
affiliate of TCW Asset Management Company, an investment advisor under the
1940 Act. Consists of 88,000 shares of Common Stock and Debentures
convertible into 683,270 shares of Common Stock.
(3) 235,000 shares of Common Stock are owned by Norwest Growth Fund, Inc., a
wholly-owned subsidiary of Norwest Corporation. 235,000 shares of Common
Stock are owned by Norwest Venture Partners, a limited partnership, the
general partner of which consists of Norwest V.C. Partners, which itself is
a general partnership consisting of certain individuals and Norwest
Investors, Inc., a wholly-owned subsidiary of Norwest Corporation. All of
the individual general partners of Norwest V.C. Partners are officers or
employees of Norwest Venture Capital Management, Inc., a wholly-owned
subsidiary of Norwest Corporation.
(4) Includes options to purchase 167,102 shares of Common Stock which are
currently exercisable; does not include stock appreciation rights with
regard to 17,687 shares of Common Stock which upon exercise are payable by
the Company in cash and/or Common Stock at the Company's election.
(5) Does not include shares held by John Deere Insurance Group, Inc. See note
(1). Mr. D'Amato disclaims beneficial ownership of such shares.
(6) Does not include shares held by John Deere Insurance Group, Inc. See note
(1). Mr. Hoffmann disclaims beneficial ownership of such shares.
(7) Includes options to purchase 124,120 shares which are presently
exercisable; does not include options to purchase 3,893 shares which vest
in 1995; includes 25,000 restricted shares.
(8) Includes options to purchase 849 shares which are presently exercisable;
does not include options to purchase 283 shares which vest in 1995;
includes 8,000 restricted shares.
(9) Includes options to purchase 31,550 shares which are presently exercisable;
does not include options to purchase 10,458 shares which vest through 1995;
includes 12,000 restricted shares.
(10) Includes options to purchase 65,195 shares which are presently exercisable;
does not include options to purchase 11,046 shares which vest through 1995;
includes 16,000 restricted shares.
(11) Includes options to purchase 107,063 shares which are presently
exercisable; does not include options to purchase 3,397 shares which vest
in 1995; includes 17,500 restricted shares.
(Footnotes continued on following page)
3
<PAGE> 7
(12) Includes 200 shares owned jointly by Conor D. Reilly and his wife, as to
which shares Mr. Reilly has shared voting and dispositive power. Does not
include shares held by John Deere Insurance Group, Inc. See note (1). Mr.
Reilly disclaims beneficial ownership of such shares.
SHAREHOLDER APPROVAL
The affirmative vote of a plurality of the shares of Common Stock
represented in person or by proxy at the Annual Meeting is required for the
election of directors and the ratification of the choice of Ernst & Young as the
Company's auditors for 1994. Shareholders are entitled to one vote per share on
all matters submitted for consideration at the Annual Meeting. With regard to
the election of directors, votes may be cast in favor or withheld; votes that
are withheld will be excluded entirely from the vote and will have no effect.
Abstentions may be specified on all proposals other than the election of
directors and will be counted as present for purposes of the item on which the
abstention is noted. Because approval of the ratification of the choice of Ernst
& Young as the Company's auditors for 1994 requires the approval of a majority
of the shares present in person or by proxy, abstentions will have the effect of
a negative vote. Under applicable Delaware law, a non-vote will have no effect
on the outcome of the election of directors or the proposal to ratify the choice
of Ernst & Young as the Company's auditors for 1994. John Deere Insurance Group,
Inc., which owns approximately 44% of the outstanding shares of Common Stock,
has indicated that it intends to vote for the proposed slate of directors and
for ratification of the choice of Ernst & Young. Therefore, it is extremely
unlikely that the votes of the other shareholders of the Company will lead to a
different result on either matter.
CHANGE IN CONTROL
The Company knows of no arrangements, including any pledge by any person of
securities of the Company or of its shareholders, the operation of which, at a
subsequent date, will result in a change of control of the Company. The Company,
in preparing the disclosures in this Proxy Statement, has relied on public
documents, namely Statements on Schedules 13D and 13G, as delivered to the
Company, filed with the Securities and Exchange Commission.
ABSENCE OF DISSENTERS' OR APPRAISAL RIGHTS
Under Section 262 of the Delaware General Corporation Law, shareholders of
the Company have the right to dissent from certain corporate actions. In such
cases, dissenting shareholders are entitled to have their shares appraised and
paid the fair value of their shares provided that certain procedures perfecting
their rights are followed. In the opinion of counsel, the proposals described in
this Proxy Statement do not entitle a shareholder to exercise any such
dissenters' or appraisal rights. Accordingly, shareholders who do not approve of
any of the proposals contained in this Proxy Statement will not be entitled to
exercise any dissenters' or appraisal rights.
OTHER MATTERS
The Board knows of no matters to be brought before the Annual Meeting other
than the matters set forth above. However, should any other matters properly
come before the meeting, the persons named in the accompanying Form of Proxy
will vote or refrain from voting thereon in their discretion.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The By-Laws of the Company provide for the Company to have not less than
three nor more than twelve directors. The following seven persons are currently
serving as directors of the Company: Donald E. Chisholm, George G. D'Amato, Jr.,
Harold R. Hiser, Jr., Dennis E. Hoffmann, Jean R. Perrette, James E. Roberts and
Maurice W. Slayton. The Company's Board of Directors is classified. Messrs.
Hoffmann and Slayton are serving as Class III directors; their terms expire at
the 1995 annual meeting of shareholders. Messrs. D'Amato, Perrette and Roberts
are serving as Class II directors; their terms expire at the 1994 annual
4
<PAGE> 8
meeting of shareholders. Messrs. Chisholm and Hiser are serving as Class I
directors; their terms expire at the 1996 annual meeting of shareholders.
Messrs. D'Amato, Roberts and Richard R. West have been nominated for election as
Class II directors; if so elected, their terms would expire at the 1997 annual
meeting of shareholders. Mr. Perrette has been nominated for election as a Class
I director; if so elected, his term would expire at the 1996 annual meeting of
shareholders. The proxies solicited by and on behalf of the Board of Directors
will be voted "FOR" the election of GEORGE G. D'AMATO, JR., JAMES E. ROBERTS,
RICHARD R. WEST AND JEAN R. PERRETTE unless such authority is withheld as
provided in the proxy. The Company has no reason to believe that any of the
foregoing nominees is not available or will not serve if elected, although in
the unexpected event that any such nominees should become unavailable to serve
as director, full discretion is reserved to the persons named as proxies to vote
for such other persons as may be nominated.
NOMINEES
The following information as at March 22, 1994 is provided with respect to
each nominee for election to the Board of Directors of the Company:
<TABLE>
<CAPTION>
NAME, AGE AND OTHER POSITION, PRINCIPAL OCCUPATION
IF ANY, WITH REGISTRANT DURING PAST FIVE YEARS
- -------------------------------------------- --------------------------------------------
<S> <C>
George G. D'Amato, Jr., 69.................. Served as director of the Company since May
Member of Audit Committee of the Board 1991; has been a senior partner in the law
firm of D'Amato & Lynch since before 1989.
Mr. D'Amato was required to file a Form 5
with regard to his holdings of Common
Stock in February 1994; such report was
not filed until April 1994.
Jean R. Perrette, 62........................ Served as director of the Company since
Chairman of Audit Committee of the Board; 1986; has been President and a director of
Member of Investment Committee of the Worms & Co., Inc., an investment banking
Board. firm since before 1989; since before 1989
has also served as a director, Chairman
and/or President of certain affiliates of
Worms. Mr. Perrette is also a director of
Worth Corporation and Mr. Coffee, Inc.
James E. Roberts, 48........................ Served as director of the Company since
President and Chief Executive Officer of January 1989 and as a Senior Vice President
the Company; Chairman of Investment of the Company from May 1986 to March 1991
Committee of the Board; Member of and as its President since March 1991;
Executive Committee and Nominating Chief Executive Officer of the Company
Committee of the Board; President, Chief since March 1992.
Executive Officer and Director of Re
Capital Reinsurance Corporation and RCI
Systems, Inc.
Richard R. West, 56......................... Has been Professor of Finance at the New
York University Leonard N. Stern School of
Business since before 1989 and also served
as dean of that school from 1984 to 1993.
Mr. West is also a director of Bowne &
Co., Inc., Smith Corona, Inc., Alexander's
Inc. and various investment companies
managed by Merrill Lynch Asset Management.
</TABLE>
5
<PAGE> 9
DIRECTORS
Set forth below is certain information with respect to the directors of the
Company who are not nominees for election at this Annual Meeting.
<TABLE>
<CAPTION>
NAME, AGE AND OTHER POSITION, PRINCIPAL OCCUPATION
IF ANY, WITH REGISTRANT DURING PAST FIVE YEARS
- -------------------------------------------- --------------------------------------------
<S> <C>
Donald E. Chisholm, 55...................... Served as director of the Company since 1986
Vice Chairman of the Board and Member of and as the Company's President and Chief
Compensation Committee of the Board Executive Officer from May 1986 to March
1991. He has been Vice Chairman of the
Board since March 1991.
Harold R. Hiser, Jr., 62.................... Served as director of the company since May
Member of Investment Committee and Audit 1993; has been Executive Vice President and
Committee of the Board Chief Financial Officer of Schering-Plough
Corporation, a pharmaceutical company,
since before 1989. Mr. Hiser is also a
director of John Hancock Sovereign
Investments, Inc. and John Hancock
Technology Series, Inc.
Dennis E. Hoffmann, 51...................... Served as director of the Company since May
Chairman of the Board and of the Executive 1989 and as its Chairman of the Board since
Committee and Nominating Committee of the March 1991 and as its Chief Executive
Board; Member of the Investment Committee Officer from March 1991 to March 1992; has
and Compensation Committee of the Board; been President of John Deere Insurance
Chairman of the Board of Directors of Re Group since before 1989. Mr. Hoffmann is
Capital Reinsurance Corporation. also a director of First Moline Financial
Corp.
Maurice W. Slayton, 55...................... Served as director of the Company since 1986
Chairman of the Compensation Committee of and as the Company's Chairman from January
the Board; Member of the Executive 1989 to March 1991; has been President and
Committee, Investment Committee and a director of Conning & Company, an
Nominating Committee of the Board. investment firm providing specialty
research, trading, consulting and fi-
nancial advisory services to the insurance
industry, since before 1989. Mr. Slayton
is also a director of Investors Insurance
Group, Tenant Risk Services, Inc., Arlberg
Holding Company, Inc., Robert Plan
Corporation, GAN National Insurance
Company, GAN North American Insurance
Company and PennCorp Financial Group, Inc.
</TABLE>
EXECUTIVE OFFICERS
Set forth below is certain information with respect to the executive
officers of the Company and its subsidiaries who are not directors of the
Company.1
<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------------------ --- ------------------------------------
<S> <C> <C>
R. Richard Mueller (1).............. 33 Treasurer, Vice President and
Chief Financial Officer
Conor D. Reilly (2)................. 42 Secretary
Molly P. Sanders (3)................ 39 Senior Vice President,
Re Capital Reinsurance Corporation
Stephen B. Slade (4)................ 36 Senior Vice President,
Re Capital Reinsurance Corporation
David C. Smith (5).................. 49 Senior Vice President
</TABLE>
- ------------
1 Dennis E. Hoffmann, Chairman and director, and James E. Roberts, President
and director, are discussed above as directors.
(1) R. Richard Mueller has served as Treasurer of the Company since March 1992
and as its Vice President and Chief Financial Officer since September 1992;
also is a Director, Vice President and Treasurer of
6
<PAGE> 10
Re Capital Reinsurance Corporation and is Treasurer of RCI Systems, Inc.;
joined the Company as Controller of Re Capital Reinsurance Corporation in
May 1991; prior to that from before 1989 was employed by the accounting
firm of Coopers & Lybrand as an Audit Manager.
(2) Conor D. Reilly has served as the Company's Secretary since July 1986; also
the Secretary of Re Capital Reinsurance Corporation and RCI Systems, Inc.
Mr. Reilly has been a partner in the law firm of Gibson, Dunn & Crutcher
from before 1989. Mr. Reilly also served as Vice Chairman of the Board of
Directors of Memorex Telex Corporation N.V. from February 1992 to December
1992 and has been a director of John Deere Insurance Group, Inc. since
August 1992.
(3) Joined Re Capital Reinsurance Corporation as a Second Vice President in June
1986; promoted to Vice President in January 1987; promoted to Senior Vice
President in January 1992; has been a Director of Re Capital Reinsurance
Corporation since October 1986.
(4) Joined Re Capital Reinsurance Corporation as a Second Vice President in June
1986; promoted to Vice President in January 1987; promoted to Senior Vice
President in October 1989; has been a Director of Re Capital Reinsurance
Corporation since October 1986.
(5) Has been Senior Vice President of the Company since May 1986; also a
Director and Senior Vice President of Re Capital Reinsurance Corporation
and a Director of RCI Systems, Inc. In April 1994 Mr. Smith filed a Form 4
relating to a purchase of shares of Common Stock which should have been
filed in February 1987.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 1, 1987 the Company entered into underwriting and claims services
agreements with John Deere Insurance Company ("JDIC"), an Illinois insurance
company licensed to transact business in all fifty states of the United States.
Pursuant to such agreements, JDIC appointed the Company as its underwriter and
claims manager to act on its behalf and in its name in underwriting and
servicing various lines of treaty reinsurance business. Under the original terms
of the agreements, JDIC agreed to cede to the Company 92.5% of the casualty
reinsurance business and 52.725% of the property reinsurance business written by
the Company in its capacity as underwriter for JDIC. Effective January 1, 1988,
the agreements were amended to provide for 92.5% cession of both property and
casualty reinsurance business written on behalf of JDIC. The Company has also
agreed to provide JDIC with a quota share participation of 7.5% in other
reinsurance business written by the Company. The terms of the agreements as
currently in effect limit the reinsurance premiums which may be written by the
Company in its capacity as underwriter for JDIC to no more than $50 million
gross written premium per year as customarily reported in conformity with the
practices of the reinsurance business as conducted in the United States.
On October 2, 1991, JDIC entered into a Note Purchase Agreement with the
Company, providing for a $10,000,000 loan to the Company, bearing interest at a
per annum rate of 8% and convertible, at the option of JDIC, into shares of
Common Stock at a conversion price of $21.00 per share. The Company also granted
to JDIC certain piggy-back registration rights with regard to such shares of
Common Stock. In June 1993 the terms of the convertible note were amended to
provide for (i) conversion at $17.00 per share and (ii) a reduction in the
stated per annum interest rate to 5 1/2%. On June 15, 1993, JDIC converted the
note into 588,235 shares of Common Stock.
On June 9, 1993, John Deere Insurance Group, Inc. and Re Capital
Reinsurance Corporation entered into a Right of First Acceptance Agreement which
grants to Re Capital Reinsurance Corporation the opportunity to participate in
the reinsurance of all business of the insurance company subsidiaries of John
Deere Insurance Group, Inc.
Dennis E. Hoffmann, Chairman of the Board of Directors of the Company, is
President and a Director of John Deere Insurance Group, Inc., the parent of JDIC
and a principal shareholder of the Company; see "Ownership of Voting Securities
by Certain Beneficial Owners and Management." George G. D'Amato, Jr., a Director
of the Company, and Conor D. Reilly, Secretary of the Company, are Directors of
John Deere Insurance Group, Inc.
7
<PAGE> 11
On June 2, 1987, pursuant to an employment agreement between Donald E.
Chisholm and the Company, the Company loaned $175,142 to Mr. Chisholm as an
interest-free loan to pay some of the taxes incurred as a result of the
Company's stock grant to Mr. Chisholm. On April 11, 1988, the Company loaned an
additional $186,802 to Mr. Chisholm for the same purpose, also on an
interest-free basis. Mr. Chisholm is Vice-Chairman and a director of the
Company. $286,839 was the largest aggregate amount of indebtedness outstanding
since January 1, 1993. $265,693 of the total amount loaned was outstanding as of
March 15, 1994.
The Company has an investment advisory agreement with Conning & Company
("Conning"), an investment firm providing specialty research, trading,
consulting, underwriting and financial advisory services to the insurance
industry. Pursuant to such agreement, Conning provides investment advice to Re
Capital Reinsurance Corporation, the Company's wholly-owned subsidiary, for a
fee equal to .15 percent of the market value of the first $200 million of its
mean invested assets and .125 percent of the amount of such assets in excess of
$200 million. In 1993, Conning was paid $426,755 pursuant to such agreement. The
investment advisory agreement may be terminated by either party upon written
notice. Maurice W. Slayton, a director of the Company, is President and Chief
Executive Officer of Conning.
LEGAL COUNSEL
Conor D. Reilly, Secretary of the Company, is a partner in the law firm of
Gibson, Dunn & Crutcher, which serves as general counsel for the Company.
BOARD OF DIRECTORS
There were four meetings of the Board of Directors of the Company in 1993.
No incumbent director of the Company other than Harold R. Hiser, Jr. and Jean R.
Perrette attended fewer than seventy-five percent of the aggregate of the total
number of meetings of the Board and the total number of meetings held by all
committees of the Board on which he served (during the periods that he so
served).
The Board has an Executive Committee, a Compensation Committee, a
Nominating Committee, an Investment Committee and an Audit Committee.
The Executive Committee exercises the powers of the Board during intervals
between meetings of the Board. The Committee members are Dennis E. Hoffmann,
Chairman, James E. Roberts and Maurice W. Slayton. The Executive Committee met
once in 1993.
The Compensation Committee reviews and approves the compensation of
officers of the Company and administers the Long Term Incentive Plan and the
Restricted Stock Incentive Compensation Plan. The Compensation Committee members
are Maurice W. Slayton, Chairman, Donald E. Chisholm and Dennis E. Hoffmann. The
Compensation Committee met twice in 1993.
The Nominating Committee considers possible nominees for election to the
Board. The Nominating Committee members are Dennis E. Hoffmann, Chairman, James
E. Roberts and Maurice W. Slayton. The Nominating Committee met once in 1993.
The Nominating Committee will consider nominees recommended by shareholders.
Nominations may be submitted in writing to Conor D. Reilly, Secretary, c/o
Gibson, Dunn & Crutcher, 200 Park Avenue, New York, New York 10166-0193.
The Investment Committee supervises all investments of the funds of the
Company and its subsidiaries. The Investment Committee members are James E.
Roberts, Chairman, Harold R. Hiser, Jr., Jean R. Perrette, Dennis E. Hoffmann
and Maurice W. Slayton. The Investment Committee met four times in 1993.
The Audit Committee discusses audit and financial reporting matters with
both the management and the Company's independent public accountants. The Audit
Committee members are Jean R. Perrette, Chairman, George G. D'Amato, Jr. and
Harold R. Hiser, Jr. The Audit Committee met twice in 1993.
8
<PAGE> 12
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------- ---------------------- -------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
OTHER
ANNUAL RESTRICTED ALL OTHER
COMPEN- STOCK OPTIONS/ LTIP COMPEN-
SALARY BONUS SATION AWARD(S) SARS PAYOUTS SATION(1)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- -------------------------------------------- ----- -------- ------- ------- ---------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JAMES E. ROBERTS............................ 1993 $295,000 $53,000 $19,343 $378,125(2) $ 0 $ 0 $ 4,497
PRESIDENT & 1992 $275,000 $71,500 $18,122 $ 0 15,570 $ 0 $ 4,364
CHIEF EXECUTIVE OFFICER 1991 $239,166 $72,000 NR $ 0 58,060(3) $ 0 NR
DAVID C. SMITH.............................. 1993 $254,375 $46,000 $23,722 $264,688(2) $ 0 $ 0 $ 4,497
SENIOR VICE PRESIDENT 1992 $239,083 $62,400 $20,922 $ 0 13,588 $ 0 $ 4,364
1991 $217,159 $65,400 NR $ 0 45,762(3) $ 0 NR
R. RICHARD MUELLER.......................... 1993 $117,208 $18,000 $ 378 $121,000(2) $ 0 $ 0 $ 3,516
VICE PRESIDENT, CHIEF 1992 $ 98,271 $22,350 $ 373 $ 0 1,132 $ 0 $ 1,610
FINANCIAL OFFICER & TREASURER 1991 $ 52,462 $14,000 NR $ 0 0 $ 0 NR
MOLLY P. SANDERS............................ 1993 $166,542 $30,000 $ 9,479 $181,500(2) $ 0 $ 0 $ 4,170
SENIOR VICE PRESIDENT, RE 1992 $154,917 $40,600 $ 8,752 $ 0 8,832 $ 0 $ 3,868
CAPITAL REINSURANCE CORPORATION 1991 $129,375 $29,250 NR $ 0 21,450(3) $ 0 NR
STEPHEN B. SLADE............................ 1993 $210,917 $38,000 $10,312 $242,000(2) $ 0 $ 0 $ 4,497
SENIOR VICE PRESIDENT, RE 1992 $197,500 $51,400 $11,059 $ 0 11,182 $ 0 $ 4,364
CAPITAL REINSURANCE CORPORATION 1991 $172,500 $51,750 NR $ 0 32,284(3) $ 0 NR
</TABLE>
- ---------------
NR: Not Required
(1) Consists of employer contributions to the Re Capital Corporation 401(k)
Plan.
(2) There were 123,000 restricted stock shares granted in total as of December
31, 1993 with an aggregate value of $1,860,375. Dividends paid on these
restricted stock shares, which are the same as those paid on the Company's
unrestricted outstanding common shares, are held in escrow until the shares
vest or otherwise become unrestricted, at which time they will be paid to
the employees. Restricted stock shares will vest according to the following
schedule based on the Company meeting a designated performance target
described as the "Average of Book Value and Market Value Per Share of Common
Stock".
<TABLE>
<CAPTION>
TIME FRAME TARGET
------------------------------------------------------------ ------
<S> <C>
Prior to 12/31/95........................................... $25.00
1996........................................................ $26.50
1997........................................................ $28.00
1998........................................................ $30.00
1999........................................................ $32.00
2000........................................................ $34.50
2001........................................................ $37.00
</TABLE>
In the event that the designated performance targets above are not met, the
restrictions on the shares will lapse on January 15, 2003.
(3) Options issued to Messrs. Roberts, Smith and Slade and Ms. Sanders in 1991
included stock options to replace SAR's granted in 1990 to each such
individual. Therefore, for example, of Mr. Roberts' 58,060 stock options in
1991, 44,448 replaced SAR's granted in 1990 which were then cancelled and
13,612 options represented newly granted options or SAR's.
9
<PAGE> 13
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END(#) FY-END($)(1)
SHARES ACQUIRED -------------------------- --------------------------
NAME ON EXERCISE(#) VALUE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- --------------- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
JAMES E. ROBERTS........... 0 $ 0 116,825 11,188 $ 130,398 $ 1,089
DAVID C. SMITH............. 0 $ 0 100,604 9,856 119,101 980
R. RICHARD MUELLER......... 0 $ 0 566 566 -- --
MOLLY P. SANDERS........... 0 $ 0 28,452 13,556 35,351 285
STEPHEN B. SLADE........... 0 $ 0 60,042 16,199 70,269 755
</TABLE>
- ---------------
(1) Represents the difference between the closing price of the Company's Common
Stock on December 31, 1993 and the exercise price of the options.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
125,000 33,180 44,240 55,300 66,360 77,420
150,000 40,680 54,240 67,800 81,360 94,920
175,000 48,180 64,240 80,300 96,360 112,420
200,000 55,680 74,240 92,800 111,360 115,641
225,000 63,180 84,240 105,300 115,641 115,641
250,000 66,432 88,576 110,720 115,641 115,641
300,000 66,432 88,576 110,720 115,641 115,641
400,000 66,432 88,576 110,720 115,641 115,641
450,000 66,432 88,576 110,720 115,641 115,641
500,000 66,432 88,576 110,720 115,641 115,641
</TABLE>
This table shows the benefits payable to employees of the Company pursuant
to the Company's pension plan. The amounts shown represent annual cash amounts
payable to employees. Five employees of the Company (including James E. Roberts
and David C. Smith, whose pension benefits are described below) are parties to
contracts with the Company which entitle them to pension benefits in excess of
what they would be entitled to receive under the Company's pension plan, so that
the table does not reflect their anticipated pension benefits.
The compensation covered by the Company's pension plan consists solely of
base salary, exclusive of bonuses, overtime and other forms of special pay. For
each of R. Richard Mueller, Molly P. Sanders and Stephen B. Slade, their
compensation for purposes of calculation of benefits under the Company's pension
plan is as listed in column (c) of the Summary Compensation Table on page 9. The
estimated credited years of service for those individuals is as follows:
<TABLE>
<CAPTION>
NAME YEARS OF SERVICE
-------------------------------------------------------------
<S> <C>
R. Richard Mueller........................... 3
Molly P. Sanders............................. 6
Stephen B. Slade............................. 6
</TABLE>
The benefits listed in the pension plan table are not subject to any
deduction for Social Security or other offset amounts.
10
<PAGE> 14
On June 1, 1988 Messrs. Roberts and Smith entered into amended and restated
employment contracts with the Company. Each such contract was further amended as
of January 15, 1990 and March 29, 1994. The term of each such contract expires,
subject to extension or prior termination, on May 31, 1995. Each such contract
provides that if the Company, within three months of May 31, 1995, fails to
attempt in good faith to negotiate a new employment agreement with each such
employee, such employee shall have the right to extend his period of employment
to May 31, 1996. Messrs. Smith and Roberts receive compensation under their
respective employment contracts in the form of salaries and cash incentive
awards. The contracts provide Messrs. Smith and Roberts with annual cash
incentive awards upon satisfaction of performance criteria established by the
Board. The amount of such awards is to be fixed by the Board but is not to
exceed eighty percent of the recipient's annual base salary.
The employment contracts of Messrs. Roberts and Smith provide them each
with $1,000,000 life insurance for the benefit of a designated beneficiary. The
employment contracts of Messrs. Roberts and Smith each provide coverage under
the Company's supplemental uninsured medical reimbursement plan coverage for
expenses, not to exceed $5,000 per annum, and disability insurance for the
benefit of each individual in the amount of 60% of his respective base salary,
but not to exceed $15,000 per month.
The employment contracts of Messrs. Roberts and Smith provide for severance
pay in the event of termination, other than for cause, in an amount equal to the
terminated executive's annual base salary for a period through the date which is
five years after the May 31 preceding such a termination.
In addition, Messrs. Roberts and Smith are entitled to receive severance
pay pursuant to severance compensation agreements that each such individual
entered into with the Company, effective as of February 15, 1989. The severance
compensation agreements provide that if such individual's employment is
terminated within six months following a change of control of the Company, the
individual shall be entitled to receive compensation in an amount equal to 2.99
times the individual's average annualized compensation, over the most recent
five years preceding the year in which the change of control occurred. The
severance compensation agreements further provide for the payment of any amounts
forfeited under any employee pension benefit plan, as a result of the
termination, and for the payment of other employee welfare benefits.
The employment contracts of Messrs. Roberts and Smith provide for
retirement benefits. Each of Messrs. Roberts or Smith may elect to retire after
his attainment of age 62, and is entitled to receive a monthly retirement
benefit equal to 65 percent of his "Final Average Compensation." "Final Average
Compensation" means the average monthly amount of the individual Base Salary
plus incentive compensation awards for the 60 consecutive months of the Period
of Employment which produces the highest average amount. Final Average
Compensation includes amounts deferred by the individual but does not include
any amount paid or payable, or realized or realizable, under stock option,
pension, profit sharing or similar plans, fringe benefits or reimbursement of
expenses. The payment of the monthly retirement benefit to each of Messrs.
Roberts and Smith is to commence immediately upon retirement and continue for
the remainder of his life, and after his death the Company is required to pay
the same monthly retirement benefit to his wife, if she survives him, which is
to commence immediately upon the individual's death and to continue for the
remainder of her life.
Each of Messrs. Roberts and Smith may also elect to retire after his
attainment of age 55. If Mr. Roberts or Smith so elects, the Company must make
the same payments and provide the same benefits as would have been the case if
Mr. Roberts or Smith had continued in the employment of the Company until his
attainment of age 62 at the same Final Average Compensation, provided that the
amount of monthly retirement benefit is to be reduced by a factor of 1/35 ( 1/30
for Mr. Roberts) for each full or fractional period of 12 months by which the
individual's actual retirement date precedes his 62nd birthday and is to be
reduced further by a factor of 3 percent for each of the first 2 and 5 percent
for each additional 12 month period by which the retirement date precedes the
individual's 62nd birthday.
11
<PAGE> 15
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
ANNUAL ANNUAL
BENEFIT UPON BENEFIT UPON
RETIREMENT RETIREMENT
AT AGE 62(2) AT AGE 55(2)
------------ ------------
<S> <C> <C>
Roberts(1)........................... 209,000 111,000
Smith(1)............................. 177,000 98,000
</TABLE>
- ------------
(1) Based on average annual compensation of Messrs. Roberts and Smith for the 60
months prior to retirement of $342,000 and $303,000, respectively.
(2) Retirement benefits shown in the table above reflect reductions for certain
benefits to be received from Social Security and previous employers.
In the event Messrs. Roberts' or Smith's employment with the Company
terminates due to a Without Cause Termination or Constructive Discharge or
expiration of the Period of Employment (as defined in his respective Employment
Agreement) and he is not entitled to any of the retirement payments described
above, the Company must make the same payments as would have been the case if
the individual had been entitled to payments thereunder, assuming, if he had not
attained age 55 at termination, that he had continued in the employment of the
Company until his attainment of age 55 and then retired at the same Final
Average Compensation as is determined at termination, except that, in such
event, the reduction by a factor of 1/35 ( 1/30 in the case of Mr. Roberts)
shall take into account the entire period between the individual's 62nd birthday
and the actual date the Period of Employment terminates.
In the event of the death of either of Messrs. Roberts or Smith before
becoming entitled to payments under the foregoing retirement provisions, the
Company shall pay his wife, if she survives him, the same monthly benefit that
would have been paid to her if the individual's employment had terminated due to
a Without Cause Termination (as defined in the Employment Agreements)
immediately before the date of death.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive an annual retainer
of $7,500, payable in equal semi-annual installments in advance, and receive
$3,000 per Board meeting attended. Any outside director who acts as Chairman of
any of the standing Board Committees receives an annual fee of $2,000 per
chairmanship, payable annually in advance. Outside directors who serve on any of
the standing Board Committees other than as Chairman receive an annual fee of
$1,500 per committee, payable annually in advance. The Company also reimburses
its directors for travel, lodging and related expenses they incur in attending
Board and committee meetings. In addition, to the extent any Board Committee
meets on a date other than the date of a Board meeting, each committee member
attending such a meeting receives an attendance fee of $1,000.
REPORT OF COMPENSATION COMMITTEE
TO SHAREHOLDERS
NOTE: The Report of the Compensation Committee and the Performance Graph
on page 15 shall not be deemed to be incorporated by reference, in whole or in
part, by any general statement incorporating by reference this Proxy Statement
into any filing under the Securities Act of 1933, as amended, or under the
Securities Exchange Act of 1934, as amended.
Re Capital's compensation programs are intended to reinforce its philosophy
that executive compensation should be strongly related to the value created for
shareholders and to the achievement of the Company's strategic objectives. The
Committee is aware that the "product" the Company sells in the reinsurance
business is fundamentally "a promise to pay," whose cornerstone is nothing more
and nothing less than its willingness and ability to honor long-term
commitments. The Committee believes that such ends are best promoted by
attracting, and equally importantly by retaining, a team of well-qualified
executives able to
12
<PAGE> 16
provide both the talent and the continuity necessary to attain them. The
Company's short and long-term compensation plans have been structured to
accomplish this purpose.
Since its entry into the reinsurance business in 1986, Re Capital has based
executive compensation on three components:
BASE SALARY. In determining base salaries for the CEO and the executive
officers of Re Capital, the Committee takes into account salaries at other
reinsurance companies for comparable positions. The Committee also considers the
contribution of the CEO and the executive officers to the Company's performance.
Executive officer salaries are reviewed annually by the Committee. In comparing
Re Capital's salaries with those of executive officers at other reinsurance
companies, the Committee uses the findings of an annual survey of reinsurance
industry compensation practices as a benchmark from which individual salary
increases are measured. The survey is conducted by an independent consulting
firm and for 1993 included data from 38 domestic reinsurers, of whom
approximately one-quarter are publicly traded.
The base salary for James E. Roberts, President and Chief Executive
Officer, was increased by $20,000 or 7.3% during 1993. This amount represented
an annual merit increase and was commensurate with median annual increases for
other Chief Executive Officers participating in the aforementioned survey. Mr.
Roberts' 1993 salary places him at the 50th percentile of CEOs of companies
participating in the survey.
ANNUAL INCENTIVE COMPENSATION. The Committee each year establishes an
annual cash incentive program to provide for cash bonuses to officers of Re
Capital. The Committee, in approximately March of each year, establishes a
formula applicable to that year for determination of such bonuses.
For 1993, the determination of annual incentive awards for executives and
other officers of Re Capital was based on a formula which measured three areas
of performance -- earnings per share, absolute combined ratio and combined ratio
relative to industry averages. The formula also permitted the Board of Directors
to determine a portion of annual awards on the basis of its overall assessment
of the Company's performance, without regard to numerical results.
The 1993 component of the plan based on earnings per share provided the
most explicit link between the payment of annual incentives and the creation of
shareholder values. For 1993, no portion of the annual incentive award
attributable to this factor was to be paid for primary earnings per share equal
to or below $1.45 per share. Therefore, for 1993, no officer cash incentive
awards were granted on the basis of this factor.
The fact that two elements of the 1993 plan were based on Re Cap's
statutory combined ratio underscores the importance that the Committee places on
underwriting results. The Committee holds as a central value the belief that the
long-term success of a reinsurer is measured by its commitment to, and
consistent ability to attain, underwriting profitability.
As a direct outgrowth of this belief, one of the two combined ratio
components of the 1993 plan had the most basic standard of measurement. If Re
Cap achieved underwriting profitability (as denoted by a combined ratio below
100%), the portion of the Annual Incentive Award attributable to this factor
would be fully paid. If underwriting profitability was not attained, no award
would be made under this portion of the plan. Therefore, for 1993, no officer
cash incentive awards were granted on the basis of this factor.
The other element of the 1993 plan dealing with combined ratio measured the
performance of Re Cap relative to its reinsurance industry peers. This peer
group is defined to include all property and casualty reinsurance companies
utilizing the intermediary distribution system which report results to the
Reinsurance Association of America. In 1993, this peer group included 51
companies. To reinforce the goal of achieving consistently superior underwriting
results, awards under this component were determined by the amount by which Re
Cap outperforms industry average ratios. No awards were to be made under this
section for performance which failed to surpass industry averages. For 1993, Re
Cap's combined ratio of 106.9% was 3.6 points better than the 1993 average
combined ratio for its reinsurance industry peers of 110.5%; as a result,
approximately 90% of the target component of officer cash awards based on this
factor was paid for 1993.
13
<PAGE> 17
The final component of the 1993 award which was paid was based on the
Committee's overall assessment of the Company's performance. For 1993, the
Committee awarded the officers in the aggregate an additional $148,000 under
this component.
For 1993, the Chief Executive Officer was awarded a cash bonus of $53,000.
In addition to the portion of the award attributable to the relative combined
ratio ($32,000), the Committee included an additional cash bonus of $21,000 on
the basis of its overall assessment of the Company's performance and Mr.
Roberts' contribution thereto, without regard to numerical factors. As a result
of this cash incentive award for 1993, combined with his salary for 1993, Mr.
Roberts' total cash compensation increased over 1992 by $1,500, or 0.4%.
LONG-TERM INCENTIVE COMPENSATION. In 1987, the Company adopted a Long-Term
Incentive Plan through which it provided annual grants of stock incentives to
senior executives and other eligible officers. Stock options have been granted
at the then current market prices and have value only if the Company's share
price increases. Recent grants have vested evenly over four years. The number of
stock options granted to executive officers who did not have employment
agreements with the Company which specify the number of options to be granted
were determined as a percentage of salary based on the position held by the
officer, with higher ranking officers receiving stock options calculated on the
basis of a higher percentage of base salary.
Although the award of stock options is widely regarded as an effective
method of encouraging executives to build shareholder value, the Committee
wished to establish an even stronger and more explicit link between the returns
received by, and the value created for, shareholders and the frequency and
amount of long-term executive compensation. Consequently, in 1993 the Company
adopted and the shareholders approved a Restricted Stock Incentive Compensation
Plan.
This plan grants restricted shares of Re Capital stock to eligible
executives, to be distributed prior to the tenth anniversary of the grant only
upon the attainment of pre-selected targets representing an average of (a)
dividend-adjusted book value per share, and (b) the average closing prices for
Re Capital shares during any 60 day period. The Committee believes that the
linkage of awards under this plan to targets based on book value per share and
the actual share price of its stock affords executives maximum incentives to
plan and manage not only for the creation but also the realization of
shareholder value.
Further, because new awards under this plan are to be made only after the
original award has vested, performance determines not only the value of awards,
but their frequency as well. The Committee believes that this feature of the
plan provides a degree of leverage absent from conventional option plans. On the
one hand, the consistent achievement of performance targets results in a more
rapid vesting of more valuable awards. On the other hand, failure to achieve
target goals reduces the present value of the current award, while delaying
future awards under the plan. During 1993, Mr. Roberts received 25,000
restricted shares of Re Capital Common Stock under the Plan.
COMPENSATION COMMITTEE
Maurice W. Slayton, Chairman
Donald E. Chisholm, Dennis E.
Hoffmann, Members
14
<PAGE> 18
STOCK PRICE PERFORMANCE GRAPH
COMPARATIVE FIVE-YEAR TOTAL RETURNS*
RE CAPITAL CORP., RUSSELL 2000, PEER GROUP
(PERFORMANCE RESULTS THROUGH 12/31/93)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD RE CAPITAL
(FISCAL YEAR COVERED) CORPORATION RUSSELL 2000 PEER GROUP
<S> <C> <C> <C>
1988 100.00 100.00 100.00
1989 156.16 116.24 160.71
1990 141.10 93.57 171.69
1991 159.10 136.66 195.06
1992 185.68 161.81 228.09
1993 151.92 192.41 211.64
</TABLE>
*Cumulative total return assumes reinvestment of dividends.
Assumes $100 invested at the close of trading on the last trading day preceding
the first day of the fifth preceding fiscal year in Re Capital Corporation
common stock, Russell 2000 and Peer Group.
For purposes of the performance graph, the Company has elected to assemble
its own peer group. At present, there is no nationally recognized index for
property and casualty reinsurance stocks. The Company's peer group includes the
following publicly traded reinsurance companies: General Re Corp., NAC Re Corp.,
Phoenix Re Corp., Piedmont Management Co., SCOR US Corp. and Trenwick Group,
Inc. The Company believes that this peer group includes all property and
casualty reinsurance companies operating as public companies during the entire
period January 1, 1989 through December 31, 1993.
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants selected by the Board for the Company's
fiscal year ending December 31, 1994 are Ernst & Young. Ernst & Young served in
that capacity for the fiscal year ended December 31, 1993. A representative of
that firm is expected to be present at the Annual Meeting of the Company. The
representative will be given an opportunity to make a statement to the
shareholders if he or she desires to do so, and he or she is expected to be
available to respond to appropriate questions from shareholders of the Company.
THE BOARD AND MANAGEMENT RECOMMEND THAT YOU VOTE FOR THIS PROPOSAL.
15
<PAGE> 19
PROPOSAL NO. 3
ALL OTHER MATTERS WHICH MAY PROPERLY
COME BEFORE THIS MEETING
As of the date of this Proxy Statement, management of the Company knows of
no business that will be presented for consideration at the Annual Meeting other
than that which has been referred to above. As to other business, if any, that
may properly come before the meeting, it is intended that proxies in the
enclosed form will be voted in respect thereof in accordance with the judgment
of the person or persons voting the proxies.
OTHER MATTERS
COPIES OF FORM 10-K ANNUAL REPORT
The Company will furnish, without charge, a copy of its most recent annual
report on Form 10-K to the Securities and Exchange Commission to each person
solicited hereunder who mails a written request therefor to Conor D. Reilly,
Secretary, c/o Gibson, Dunn & Crutcher, 200 Park Avenue, New York, New York
10166-0193. The Company will also furnish, upon payment of a reasonable fee to
cover reproduction and mailing expenses, a copy of all exhibits to such annual
report on Form 10-K.
SHAREHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
Any proposals of shareholders intended to be presented for inclusion in the
Company's Proxy Statement and form of Proxy for the next Annual Meeting
scheduled to be held in 1995 must be received in writing by the Secretary of the
Company, Conor D. Reilly, c/o Gibson, Dunn & Crutcher, 200 Park Avenue, New
York, New York 10166-0193 not later than December 31, 1994, in order for such
proposal to be considered for inclusion in the Company's Proxy Statement and
Proxy relating to the 1995 Annual Meeting.
Shareholders are urged to complete, sign and date the accompanying proxy
and return it in the enclosed envelope, to which no postage need be affixed if
mailed in the United States.
By order of the Board of
Directors,
CONOR D. REILLY
Secretary
Stamford, Connecticut
April 8, 1994
Again, we call your attention to the enclosed Proxy. We would appreciate it
very much if you would VOTE, DATE, SIGN AND RETURN IT PROMPTLY, regardless of
whether you plan to attend the meeting.
16
<PAGE> 20
RE CAPITAL CORPORATION
TWO STAMFORD PLAZA, P.O. BOX 10148, STAMFORD, CONNECTICUT 06904-2148
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 18, 1994
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Re Capital Corporation does hereby
constitute and appoint James E. Roberts and Conor D. Reilly, or either of
them, as attorneys and proxies of the undersigned, with full power of
substitution to each of them, for and in the name, place and stead of the
undersigned to appear and vote all of the shares of stock of Re Capital
Corporation standing in the name of the undersigned, according to the number of
votes upon such shares of stock to which the undersigned would be entitled if
personally present, at the Annual Meeting of Stockholders of Re Capital
Corporation to be held at The Landmark Club, One Landmark Square, Stamford,
Connecticut on May 18, 1994 at 10:00 A.M. Eastern Daylight Savings Time, and at
any and all adjournments thereof.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
NOTE: YOU ARE REQUESTED TO SIGN AND DATE THIS PROXY AND MAIL IT PROMPTLY IN
THE ENCLOSED ENVELOPE
(WHICH REQUIRES NO POSTAGE).
THE BOARD OF DIRECTORS SOLICITS THIS PROXY
THE SHARES REPRESENTED BY THIS PROXY SHALL BE VOTED AS SPECIFIED. IF NO
DIRECTION IS GIVEN, SUCH SHARES SHALL BE VOTED IN FAVOR OF PROPOSAL NOS. 2 AND
3 AND FOR ALL NOMINEES LISTED IN PROPOSAL NO. 1. ELECTION OF DIRECTORS
REQUIRES A PLURALITY OF THE TOTAL NUMBER OF SHARES OF COMMON STOCK REPRESENTED
AT THE ANNUAL MEETING. PROPOSAL NOS. 2 AND 3 REQUIRE THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE ISSUED AND OUTSTANDING SHARES OF COMMON STOCK REPRESENTED AT
THE ANNUAL MEETING.
/ X / PLEASE MARK YOUR VOTES AS THIS
- ----------------------------------------------
COMMON
<TABLE>
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR PROPOSALS 1 THROUGH 3.
WITHHOLD
AUTHORITY
FOR all to vote for
nominees all nominees
<S> <C> <C>
I. ELECTION OF DIRECTORS: George G. D'Amato, Jr., / / / /
James E. Roberts, Richard R. West (three year terms)
and Jean R. Perrette (two year term).
INSTRUCTION: To withhold authority to vote for any
individual nominee, write that nominee's name in the
space provided below.
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. Ratification of Independent Public Accountants for the / / / / / /
fiscal year ending December 31, 1994.
3. Other Matters: In their discretion, to take such / / / / / /
other action and to vote upon such other business as may
properly come before the meeting or any adjournments
thereof.
The undersigned hereby acknowledges receipt of the Notice
of Annual Meeting of Shareholders, the Proxy Statement and
the Annual Report of the Company to the Stockholders for
1993, previously sent to the undersigned.
</TABLE>
WITNESS my hand this ____ day of ____________, 1994.
(L.S)
- --------------------------------------------------
(Signature of Shareholder)
(L.S)
- --------------------------------------------------
PLEASE SIGN EXACTLY AS NAME APPEARS ABOVE. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. WHEN THE
STOCK HAS BEEN ISSUED IN THE NAME OF TWO OR MORE PERSONS, EACH SHOULD SIGN.
