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 ss.240.14a-11(c) or ss.240.14a-12
NAC Re Corp.
...............................................................................
(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] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14s-6(i)(2) or
Item 22(a)(2) of Schedule 14a.
[ ] $500 per each party to the controversy pursuant to the 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 transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined.
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
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<PAGE>
[NAC RE CORPORATION LOGO]
NAC RE CORPORATION
ONE GREENWICH PLAZA
P.O. BOX 2568
GREENWICH, CT 06836-2568
March 22, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
NAC Re Corporation (the "Company") to be held on Friday, May 10, 1996, at 10:00
A.M. at One Greenwich Plaza, in the Third Floor Boardroom, Greenwich,
Connecticut 06836-2568.
At this important meeting, you will be asked to consider and vote upon (1)
the election of three directors to serve for a term of three years and (2) a
proposal to amend the Partners' Restricted Stock Plan.
Your vote is important. Whether or not you plan to attend the Annual Meeting
in person and regardless of the number of shares you own, we urge you to
complete, sign, date and return the enclosed proxy card promptly in the prepaid
envelope. You may attend the Annual Meeting and vote in person even if you have
previously returned your card. We look forward to meeting with you.
Sincerely,
/s/ RONALD L. BORNHUETTER
RONALD L. BORNHUETTER
Chairman, President
and Chief Executive Officer
<PAGE>
NAC RE CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of NAC Re Corporation (the "Company"), a
Delaware corporation, will be held at One Greenwich Plaza, Third Floor
Boardroom, Greenwich, Connecticut on Friday, May 10, 1996, at 10:00 A.M., for
the following purposes:
(1) To elect three directors to serve for a term of three years.
(2) To consider and vote upon the proposal to amend the Partners'
Restricted Stock Plan.
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on March 14, 1996 are
entitled to vote at the meeting.
You are requested to fill in, date and sign the enclosed proxy, which is
solicited by the Board of Directors of the Company, and to mail it promptly in
the enclosed envelope.
By Order of the Board of Directors,
/s/ CELIA R. BROWN
CELIA R. BROWN
Secretary
Greenwich, Connecticut
March 22, 1996
<PAGE>
NAC RE CORPORATION
PROXY STATEMENT WITH RESPECT TO ANNUAL MEETING
OF STOCKHOLDERS
MAY 10, 1996
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of NAC Re Corporation (the "Company" or "NAC
Re") to be used at the Annual Meeting of Stockholders of the Company which will
be held at One Greenwich Plaza, Third Floor Boardroom, Greenwich, Connecticut,
on Friday, May 10, 1996, at 10:00 A.M., and at any adjournment thereof.
Stockholders who execute proxies retain the right to revoke them at any
time. A stockholder who has given a proxy may revoke it at any time before it is
exercised at the meeting by filing with the Secretary of the Company a written
notice of revocation, by executing and delivering a subsequent proxy bearing a
later date, or by attending the meeting and voting in person. Unless so revoked,
the shares represented by proxies will be voted at the meeting. The shares
represented by the proxies solicited by the Board of Directors of the Company
will be voted in accordance with the directions given therein. For a description
of the voting procedures, see "Miscellaneous--Voting Procedures."
Stockholders of record at the close of business on March 14, 1996 will be
entitled to one vote for each share then held. There were outstanding on such
date 19,230,805 shares of NAC Re common stock, $.10 par value (the "Common
Stock").
The principal executive offices of the Company are at One Greenwich Plaza,
Greenwich, Connecticut, 06836-2568. The approximate date on which this Proxy
Statement and the enclosed form of proxy were first sent or given to
stockholders was March 22, 1996.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table identifies the number of shares of Common Stock
beneficially owned at March 14, 1996 by each director and nominee for director,
each named executive officer and all directors and executive officers as a
group.
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- -------------------------------------------- -------------------- ----------
Robert A. Belfer............................ 1,036,082(1)(2) 5.4%
John P. Birkelund........................... 48,671(1) *
Ronald L. Bornhuetter....................... 362,834(3) 1.9%
C. W. Carson, Jr............................ 27,000(1) *
Todd G. Cole................................ 27,000(1) *
Michael G. Fitt............................. 12,250(4) *
Daniel J. McNamara.......................... 26,250(5) *
Stephen Robert.............................. 37,230(1) *
Wendy J. Strothman.......................... 13,500(6) *
Herbert S. Winokur, Jr...................... 30,750(1) *
Martha G. Bannerman......................... 69,152(7) *
Stanley J. Kott............................. 27,953(8) *
C. Fred Madsen.............................. 31,431(9) *
John A. Murad............................... 57,806(10) *
All directors and executive officers
of NAC Re as a group (16 persons)........... 1,841,759(11) 9.3%
- ------------
<TABLE>
<C> <S>
* Less than 1%.
(1) Includes 24,750 shares issuable pursuant to options exercisable under the Directors'
Stock Option Plan.
(2) Includes 88,925 shares held in family trusts with respect to which Mr. Belfer and/or
his wife or son are trustees, and 154,992 shares owned by his wife. Mr. Belfer
disclaims beneficial ownership of such shares. Also includes 40,000 shares held by a
foundation of which Mr. Belfer is an officer and 21,770 shares held in a family trust.
Mr. Belfer has shared voting and investment power with respect to such shares. Also
includes 123,492 shares held by Mr. Belfer for his wife in trust. Mr. Belfer has sole
voting and investment power with respect to such shares. Mr. Belfer's address is 767
Fifth Avenue, 46th Floor, New York, NY 10153.
(3) Includes 14,046 shares held in Mr. Bornhuetter's Employee Savings Plan account and
240,350 shares issuable pursuant to exercisable options. Includes 2,100 shares owned by
Mr. Bornhuetter's spouse as to which he disclaims beneficial ownership.
(4) Includes 11,250 shares issuable pursuant to options exercisable under the Directors'
Stock Option Plan.
(5) Includes 20,250 shares issuable pursuant to options exercisable under the Directors'
Stock Option Plan.
(6) All of such shares are issuable pursuant to exercisable options.
(7) Includes 55 shares held in Ms. Bannerman's Employee Savings Plan account, 51,644 shares
issuable pursuant to exercisable options, and 450 shares as to which Ms. Bannerman
disclaims beneficial ownership.
(8) Includes 3,435 shares held in Mr. Kott's Employee Savings Plan Account and 18,560
shares issuable pursuant to exercisable options.
(9) Includes 7,074 shares held in Mr. Madsen's Employee Savings Plan Account and 20,125
shares issuable pursuant to exercisable options.
(10) Includes 14,546 shares held in Mr. Murad's Employee Savings Plan account and 42,260
shares issuable pursuant to exercisable options.
(11) Includes 44,368 shares held in Employee Savings Plan accounts, 587,429 shares issuable
pursuant to exercisable options, and 431,629 shares as to which such individuals
disclaim beneficial ownership.
</TABLE>
2
<PAGE>
The following table presents, to the knowledge of the Company, information
as to all beneficial owners of 5% or more of the outstanding shares of Common
Stock as of March 14, 1996, except for Robert A. Belfer, whose ownership is set
forth above.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS
- ---------------------------------------------------- ----------------------- --------
<S> <C> <C>
The Equitable Companies Incorporated................ 4,054,626(2) 21.1%
787 Seventh Avenue
New York, NY 10019
FMR Corp. ("FMR")................................... 2,431,799(3) 12.6%
82 Devonshire Street
Boston, MA 02109-3614
</TABLE>
- ------------
(1) Based on information contained in the most recent Schedule 13G or Schedule
13D filed by the beneficial owner under the Securities Exchange Act of 1934.
(2) Includes 605,000 shares held by The Equitable Life Assurance Society of the
United States ("Equitable") with respect to which Equitable has sole voting
power and sole power to dispose of such shares. The remaining shares are
held by Alliance Capital Management L.P. ("Alliance") on behalf of
investment advisory clients. Alliance has sole voting power with respect to
2,954,549 of such shares, shared voting power with respect to 70,000 of such
shares and sole power to dispose of all of such shares.
(3) Includes 2,200,759 shares, 115,959 of which are issuable upon conversion of
the Company's Convertible Subordinated Debentures (the "Debentures"), with
respect to which Fidelity Management & Research Company ("Fidelity"), a
subsidiary of FMR, is the beneficial owner as a result of acting as
investment adviser to several investment companies (the "Funds"). Edward C.
Johnson, 3rd, Chairman of FMR, FMR, through its control of Fidelity, and the
Funds each has sole power to dispose of such shares. Power to vote such
shares resides with the Boards of Trustees of the Funds. Also includes
218,739 shares, 33,939 of which are issuable upon conversion of the
Debentures, with respect to which Fidelity Management Trust Company ("FMT"),
a bank owned by FMR, is the beneficial owner as a result of serving as
investment manager of institutional accounts. Edward C. Johnson, 3rd, and
FMR, through its control of FMT, has sole dispositive power over all of such
shares, sole power to vote 205,406 of such shares, and no power to vote
13,333 of such shares. Also includes 12,300 shares owned by Fidelity
International Limited ("FIL"), an affiliate of FMR. FIL has the sole power
to vote and the sole power to dispose of such shares.
DIRECTORS AND EXECUTIVE OFFICERS
Three Directors will be elected at the meeting for a term of three years or
until their respective successors shall have been elected and shall qualify.
Each proxy received will be voted for the election of the nominees named below
unless otherwise specified in the proxy. At this time, the Board of Directors of
the Company knows of no reason why any nominee might be unable to serve. There
are no arrangements or understandings between any Director and any other person
pursuant to which such person was selected as a Director or nominee. The vacant
Class B and C Board positions will remain vacant until suitable candidates are
selected by the Nominating Committee. Proxies cannot be voted for a greater
number of persons than the number of nominees named below.
DIRECTOR
NAME OF NOMINEE AGE SINCE
- ------------------------------------------------ --- --------------
Class B (term expires 1996)
Robert A. Belfer.............................. 60 August 1985
Wendy J. Strothman............................ 45 March 1994
Herbert S. Winokur, Jr........................ 52 September 1987
3
<PAGE>
The following individuals are the Company's other Directors whose terms of
office continue after the Annual Meeting and until the Annual Meeting in the
year in which the directorships of their class expire.
DIRECTOR
NAME OF DIRECTOR AGE SINCE
- ----------------------------------------------- --- --------------
Class C (term expires 1997)
Ronald L. Bornhuetter........................ 63 August 1985
Todd G. Cole................................. 75 September 1987
Daniel J. McNamara........................... 68 September 1991
Class A (term expires 1998)
John P. Birkelund............................ 65 August 1985
C. W. Carson, Jr............................. 67 September 1987
Michael G. Fitt.............................. 64 December 1992
Stephen Robert............................... 55 August 1985
Ronald L. Bornhuetter was elected President and Chief Operating Officer of
the Company and a Director, Chairman of the Executive Committee and Chief
Executive Officer of NAC Reinsurance Corporation ("NAC") effective August 31,
1985. In November 1985 he was elected Chairman of the Finance and Investment
Committee of the Company and in March 1986, President of NAC. In December 1987
he was elected Chief Executive Officer of the Company. He became Chairman of the
Board of NAC in September 1990 and Chairman of the Board of the Company in June
1993. Prior to joining the Company, Mr. Bornhuetter was Vice President-Finance
of General Re Corporation and Senior Vice President and Comptroller of its
subsidiary, General Reinsurance Corporation, having served as Chief Financial
Officer of the Group. Mr. Bornhuetter is a Director of Washington National
Corporation. He is a Fellow and former President of the Casualty Actuarial
Society, a member and former President of the American Academy of Actuaries and
also served as Chairman of the Actuarial Standards Board. He is also a member of
the International Actuarial Association, serving as Vice President and head of
the U.S. delegation to its Ruling Council. He is also a member of ASTIN and
AFIR. He served as Chairman of The Reinsurance Association of America from 1993
to 1994. He is a Trustee of The College of Wooster, Wooster, Ohio.
Robert A. Belfer was President and Chairman of Belco Petroleum Corporation,
a petroleum exploration and production company, from 1965 until April 1986.
Since then, Mr. Belfer has pursued independent investment interests. Mr. Belfer
is a Director of Enron Corp., a member of the Board of Overseers and Treasurer
of the Albert Einstein College of Medicine and a member of the Board of
Overseers of Cornell University Medical College.
John P. Birkelund has been a Managing Director and a Director of Dillon,
Read & Co. Inc. since 1981, and has been Chairman since 1988. He also served as
Chief Operating Officer from 1981 through 1985 and as Co-Chairman and Co-Chief
Executive Officer from 1986 through 1988. From 1988 through 1993, he was Chief
Executive of the firm. Mr. Birkelund is a Director of Darden Restaurants, Inc.
and the Polish American Enterprise Fund. He is also a member of the Advisory
Board of ORIX USA Corporation.
C. W. Carson, Jr. currently serves as an independent financial consultant.
He was a Partner with Price Waterhouse & Partners from 1985 until June 1988.
From 1983 to 1985, Mr. Carson was Managing Director of the investment banking
firm of Wm. Sword & Co., Inc. From 1956 to 1983, he was affiliated with Chemical
Bank, serving as Vice Chairman and Director of the Bank and Holding Company from
1978 to 1983. Mr. Carson is a Director of Mitsubishi Trust & Banking Corporation
(USA) and Trebol International Corporation and serves as a trustee, director or
advisor to several universities, endowment funds and other not-for-profit
organizations.
4
<PAGE>
Todd G. Cole, retired Chairman and Chief Executive Officer of CIT Financial
Corporation, is a consultant and corporate director. In his consulting role he
served as Managing Director of SH&E, Inc., a consulting firm specializing in
aviation (1992-1995), President and Chief Executive Officer of Frontier
Airlines, Inc. D.I.P. (1986-1990) and Vice Chairman and Director of Eastern Air
Lines, Inc. D.I.P. (1989-1991). He is a Director of CapMac Holdings, Inc.,
Kaiser Ventures, Inc., Hawaiian Airlines, Inc. and several private companies.
Michael G. Fitt was President of Employers Reinsurance Corporation from 1979
to 1991 and Chairman and Chief Executive Officer from 1981 until his retirement
in 1992. He is a Director of Boatmen's First National Bank of Kansas City, a
Director of Kansas City Southern Industries, Inc., a Director of DST Systems
Inc. and a member of the Board of Directors of Midwest Research Institute.
Daniel J. McNamara currently is Of Counsel with the law firm of Hughes
Hubbard & Reed. He served as Chairman of the Insurance Group Practice of that
law firm from March 1988 through 1994. From 1971 to 1988 he served as the first
President of Insurance Services Office, Inc. (ISO). Mr. McNamara is a member and
past President of the Casualty Actuarial Society and the American Academy of
Actuaries. He is a Director of General Accident Insurance Company of America and
General Accident Corporation of America as well as several private companies. He
is Chairman of the Board of Trustees of the College of Mount St. Vincent and
also serves as a trustee or advisor to several not-for-profit charitable
institutions.
Stephen Robert has served as Chairman of the Board and Chief Executive
Officer of Oppenheimer & Co., Inc. since 1983, and was President of that company
from 1979 to 1983.
Wendy J. Strothman has been Executive Vice President and Publisher--Trade &
Reference Division of Houghton Mifflin Company since January 1996. She served as
Vice President and Publisher since September 1995. Between 1983 and 1995 she
served as the Director of Beacon Press. She is a Trustee of Brown University and
is affiliated with numerous publishing associations.
Herbert S. Winokur, Jr. has been President of Winokur & Associates, Inc., an
investment management company, and Managing General Partner of Capricorn
Investors, L.P. since 1987. From 1983 to 1987, Mr. Winokur served as Senior
Executive Vice President of Penn Central Corporation, and was a Director of that
company from 1984 to 1987. Mr. Winokur is currently a Director of Enron Corp.
and NHP, Inc., and Chairman of the Board of DynCorp.
The following individuals are the Company's executive officers:
<TABLE>
<CAPTION>
NAME AGE OFFICE
- ------------------------------- --- -------------------------------------------------------
<S> <C> <C>
Ronald L. Bornhuetter.......... 63 Chairman of the Board, President and Chief Executive
Officer, NAC Re Corp. and NAC Reinsurance Corporation
Martha G. Bannerman............ 53 Vice President and General Counsel, NAC Re Corp.;
Executive Vice President, General Counsel and
Secretary, NAC Reinsurance Corporation
John N. Adimari................ 41 Acting Chief Financial Officer and Acting Treasurer,
NAC Re Corp.; Vice President, Acting Chief Financial
Officer and Acting Treasurer, NAC Reinsurance
Corporation; Vice President of Operations, Greenwich
Insurance Company
Celia R. Brown................. 41 Secretary, NAC Re Corp.; Vice President, NAC
Reinsurance Corporation
Stanley J. Kott................ 47 Executive Vice President, NAC Reinsurance Corporation
C. Fred Madsen................. 42 Executive Vice President, NAC Reinsurance Corporation
John A. Murad.................. 50 Senior Vice President, NAC Reinsurance Corporation;
President & Chief Executive Officer, Greenwich
Insurance Company
</TABLE>
5
<PAGE>
Martha G. Bannerman was appointed Vice President, General Counsel and
Secretary of the Company and NAC and a Director of NAC in 1986. She served as
Secretary of the Company until June 1994. She became an Executive Vice President
of NAC in January 1994. From 1970 to 1977, Ms. Bannerman practiced law with
Milbank, Tweed, Hadley & McCloy in New York. In 1977, Ms. Bannerman joined the
Los Angeles law firm of Adams, Duque & Hazeltine (becoming a partner in 1978),
where she specialized in business litigation, including a variety of insurance
and securities matters. Ms. Bannerman served as Chair of the Law Committee of
The Reinsurance Association of America from 1992-1994 and is active in the Tort
and Insurance Practice Section of the American Bar Association.
John N. Adimari joined NAC in 1986 as Second Vice President and Controller.
He served as Vice President and Controller of NAC from 1993 to 1995. In
September 1995 he was appointed Acting Chief Financial Officer and Acting
Treasurer of the Company and NAC. He has served as a Director of NAC since March
1986. In addition, since August 1995 Mr. Adimari has served as Vice President of
Operations of Greenwich Insurance Company ("GIC"), a wholly-owned subsidiary of
NAC. Prior to joining NAC, Mr. Adimari served as an audit manager with the
public accounting firm of Coopers & Lybrand.
Celia R. Brown joined NAC in 1988 and was appointed Vice President of NAC
and Secretary of the Company in June 1994 and a Director of NAC in October 1993.
She served as Second Vice President and Associate General Counsel from 1991 to
1994 and, prior to that, as Assistant Vice President and Assistant General
Counsel. Prior to joining NAC, Ms. Brown served as Vice President at JWT Group,
Inc. and as an associate in the law firm of Burns Summit Rovins and Feldesman in
New York.
Stanley J. Kott joined NAC in 1990 as Vice President and Manager, Property
Facultative, and a Director. He became Executive Vice President in January 1994.
Before joining the Company, he was employed by E. W. Blanch Company as Senior
Vice President, Limited Partner and Director of Facultative Division for over
three years and also as Branch Manager, New York Treaty. Mr. Kott was previously
a Vice President at Guy Carpenter serving as Branch Manager of its Hartford
Office and a property facultative underwriter at General Reinsurance
Corporation.
C. Fred Madsen joined NAC in 1986 in the Casualty Treaty Department and was
appointed a Director in December 1991. He became Executive Vice President in
January 1994. He served as Vice President and Manager, Casualty Facultative,
from December 1991 to 1994. Prior to that time he held various positions in the
Casualty Treaty Department. Before joining the Company, he served in various
underwriting positions at General Reinsurance Corporation and Aetna Life &
Casualty Company.
John A. Murad joined NAC in 1985 as Vice President and Director and became
Senior Vice President in January 1994. He served as Chief Actuarial Officer from
1985 until June 1995, at which time he became President and Chief Executive
Officer of GIC. Prior to joining NAC, Mr. Murad was a Senior Vice President and
Director of Actuarial Services at Kramer Capital Consultants. Previously, Mr.
Murad served as a Senior Consultant at Coopers & Lybrand, and as Associate
Actuary for American International Group in New York. He is a Fellow of the
Casualty Actuarial Society and a Member of the American Academy of Actuaries.
BOARD AND COMMITTEE MEETINGS
The standing committees of the Board of Directors of the Company include,
among others, the Audit, Nominating, Compensation and Finance and Investment
Committees.
The Audit Committee held four meetings in 1995. The members of the Committee
were Messrs. Carson, Cole, Fitt and McNamara and Ms. Strothman, none of whom is
an officer or an employee of the Company or NAC. The Audit Committee oversees
management's discharge of its financial reporting
6
<PAGE>
responsibilities. It meets periodically with management and representatives of
the Company's independent certified public accountants to discuss auditing and
financial reporting matters. In addition, the independent certified public
accountants and Audit Director meet with the Audit Committee to discuss the
results of their examination and are given an opportunity to present their
opinions, without management's presence, concerning the quality of the Company's
financial reporting and adequacy of the system of internal controls. The
independent auditors have, at all times, free access to and meet regularly with
the Audit Committee. Representatives of Tillinghast--Towers Perrin, an
independent actuarial consulting firm retained by the Audit Committee, meet with
the Audit Committee to discuss the results of their examination and have, at all
times, free access to the Audit Committee without management's presence.
The Nominating Committee held one meeting in 1995. The members of the
Committee are Messrs. Belfer, Birkelund, Bornhuetter and Robert. The duties of
this Committee include reviewing the qualifications of candidates suggested by
Board members, management, stockholders and other sources, considering the
performance of incumbent Directors and approving a slate of nominees for
election as Directors.
Stockholders wishing to suggest candidates for election as Directors may
submit names and biographical data to the Secretary of the Company, who will
forward such information to the Nominating Committee for consideration.
The Compensation Committee held three meetings in 1995. The Committee is
composed of Messrs. Birkelund, Carson, McNamara, Robert and Winokur and Ms.
Strothman, none of whom is an officer or an employee of the Company or NAC. The
Committee is responsible for establishing, administering, reviewing and
recommending changes in the Company's compensation plans for its executives and
submitting such plans to the Board of Directors for approval. Representatives of
Towers Perrin, an independent compensation and benefits consulting firm selected
by the Committee, meet from time to time with the Compensation Committee to
provide advice on executive compensation and have, at all times, free access to
the Compensation Committee, without management's presence.
The Finance and Investment Committee held five meetings in 1995. The members
of the Committee are Messrs. Belfer, Bornhuetter, Carson, Cole, Fitt, McNamara
and Winokur. The Committee is responsible for the oversight of the Company's
investments, including the selection of investment advisors and the adoption of
investment policies and guidelines.
During 1995, there were six meetings of the Board of Directors. Of all
Directors only Mr. Robert attended less than 75% of the aggregate of the total
number of meetings of the Board of Directors and all Committees on which they
served. The Company considers attendance at scheduled meetings to be only one
measure of a Director's contribution to the Company. Directors also fulfill
their responsibilities by rendering advice in informal consultations with
executive officers of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information concerning certain relationships and related transactions
with respect to John P. Birkelund and Stephen Robert, see "Compensation
Committee Interlocks and Insider Participation." In March 1995, the Company
entered into a consulting agreement with Michael G. Fitt pursuant to which Mr.
Fitt provides insurance and reinsurance advisory services to the Company and, in
particular, to its UK subsidiaries. The agreement was renewed in March 1996 and
may be renewed in March 1997 for one additional year. For each year of his
consulting arrangement, Mr. Fitt receives a consulting fee of $75,000 and a
phantom stock option, which becomes fully vested in six months, in connection
with 5,000 shares of the Company's Common Stock, with a base price equal to the
market value of the Company's Common Stock on the date of grant, and a ten year
term. In the event of a "change in control" of the Company, any unpaid amounts
in connection with the agreement, including renewals thereof, will be
accelerated and immediately payable.
7
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth compensation paid or accrued for the last
three fiscal years, or as otherwise indicated, with respect to the named
executive officers of NAC Re, for services rendered by such persons to NAC Re,
NAC and GIC.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
AWARDS
----------------------
RESTRICTED SECURITIES PAYOUTS
ANNUAL COMPENSATION STOCK UNDERLYING ----------- ALL OTHER
NAME AND ------------------------------- AWARDS OPTIONS LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) (2) ($) (2) (#) PAYOUTS ($) SATION ($)
- --------------------------------------- ---- ---------- ------------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald L. Bornhuetter.................. 1995 $553,544 $ 423,500 -- 37,500 $ 379,100 $ 83,035(3)
Chairman, President and Chief 1994 $526,056 $ 236,700 -- 11,500 $ 312,700 $ 56,393(3)
Executive Officer, NAC Re and NAC 1993 $500,000 $ 191,250 -- 32,000 $ 283,400 $ 49,076(3)
Martha G. Bannerman.................... 1995 $241,347 $ 164,100 -- 15,000 $ 118,300 $ 29,820(4)
Vice President and General Counsel, 1994 $218,833 $ 87,500 $ 39,000 8,500 $ 94,500 $ 17,213(4)
NAC Re; Executive Vice President, 1993 $198,000 $ 64,200 -- 11,600 $ 65,800 $ 14,046(4)
General Counsel and Secretary, NAC
Stanley J. Kott (1).................... 1995 $221,000 $ 150,300 -- 15,000 $ 105,400 $ 27,170(5)
Executive Vice President, NAC 1994 $195,917 $ 78,400 $ 39,000 8,000 $ 82,500 $ 14,424(5)
C. Fred Madsen(1)...................... 1995 $220,667 $ 150,100 -- 15,000 $ 99,200 $ 26,641(6)
Executive Vice President, NAC 1994 $182,000 $ 72,800 $ 39,000 8,000 $ 72,100 $ 13,573(6)
John A. Murad (1)...................... 1995 $221,833 $ 132,000 -- 12,000 $ 93,700 $ 26,795(7)
Senior Vice President, NAC President, 1994 $209,750 $ 73,400 $ 26,000 8,000 $ 76,300 $ 16,541(7)
GIC
</TABLE>
- ------------
(1) In accordance with provisions of the SEC's rules on executive compensation
disclosure in proxy statements, compensation information has not been
included for Messrs. Murad, Kott and Madsen for fiscal year 1993 because
they were not then deemed "executive officers" of NAC Re Corp. under such
rules.
(2) Restricted Stock awards valued at the closing price on the date of award,
March 31, 1994, of $26.00. Restricted stock granted to Ms. Bannerman and
Messrs. Murad, Kott and Madsen on March 31, 1994 vests 20% on March 31, 1996
and an additional 20% each March 31 thereafter. Unvested restricted stock
held by the executive officers at year-end, valued at a December 29, 1995
closing price of $36.00, was as follows: Ms. Bannerman held 1,500 shares
valued at $54,000, Mr. Murad held 1,000 shares valued at $36,000, Mr. Kott
held 1,950 shares valued at $70,200 and Mr. Madsen held 2,093 shares valued
at $75,348. Dividends are paid quarterly on these shares at the same rate as
dividends paid on Common Stock held by public stockholders.
(3) Amounts shown reflect Company contributions to the Employee Savings Plan and
allocations to the Excess Benefit Savings Plan of $13,724 and $57,622,
respectively, for 1995, $9,188 and $34,700, respectively, for 1994 and
$12,306 and $24,360, respectively, for 1993. Also includes $11,689, $12,505
and $12,410 for life insurance premiums paid by the Company for 1995, 1994
and 1993, respectively.
(4) Includes Company contributions to the Employee Savings Plan and allocations
to the Excess Benefit Savings Plan of $13,724 and $16,096, respectively, for
1995, $9,188 and $8,025, respectively, for 1994 and $7,861 and $6,185,
respectively, for 1993.
(5) Includes Company contributions to the Employee Savings Plan and allocations
to the Excess Benefit Savings Plan of $13,724 and $13,446, respectively, for
1995 and $8,753 and $5,671, respectively, for 1994.
(6) Includes Company contributions to the Employee Savings Plan and allocations
to the Excess Benefit Savings Plan of $13,724 and $12,917, respectively, for
1995 and $9,188 and $4,385, respectively, for 1994.
(7) Includes Company contributions to the Employee Savings Plan and allocations
to the Excess Benefit Savings Plan of $13,724 and $13,071, respectively, for
1995 and $9,161 and $7,380, respectively, for 1994.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The Company maintains employee stock option plans pursuant to which eligible
individuals may receive options to purchase the Company's Common Stock. The
table below sets forth information concerning grants of stock options to the
named executive officers of NAC Re during the last fiscal year. The amounts
shown for each of the officers as potential realizable values are based on
arbitrarily assumed annualized rates of stock price appreciation of five percent
and ten percent over a ten-year period from the date of grant of the respective
options. At a five percent and ten percent appreciation, the share price would
reach $62.10 and $98.74, respectively, at ten years from the date of all of the
option grants. The amounts shown as potential realizable values for all
shareholders represent the corresponding increases in the market value of the
19,230,805 shares of the Company's Common Stock outstanding as of March 1, 1996.
Based on 19,230,805 outstanding shares at the share price of $33.75 on March 1,
1996, current market capitalization was $649,039,669. No gain to the optionees
is possible without an increase in the stock price, which will benefit all
shareholders proportionately. These potential realizable values are based solely
on arbitrarily assumed rates of appreciation and are required to be disclosed by
regulations adopted by the SEC. Actual gains, if any, on option exercises and
common stock holdings are dependent on the future performance of the Company's
Common Stock. There can be no assurance that the potential realizable values
shown in this table will be achieved.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------ POTENTIAL
% OF REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL
SECURITIES OPTIONS RATES OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION
OPTIONS EMPLOYEES OR BASE FOR OPTION TERM (1)
GRANTED IN FISCAL PRICE EXPIRATION -----------------------------
NAME (#) (2) YEAR ($/SH) DATE (3) 5% 10%
- ----------------------------- ---------- ---------- -------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Ronald L. Bornhuetter........ 37,500 9.8% $38.125 9/19/2005 $900,703 $2,273,203
Martha G. Bannerman.......... 15,000 3.9% $38.125 9/19/2005 $360,281 $909,281
Stanley J. Kott.............. 15,000 3.9% $38.125 9/19/2005 $360,281 $909,281
C. Fred Madsen............... 15,000 3.9% $38.125 9/19/2005 $360,281 $909,281
John A. Murad................ 12,000 3.1% $38.125 9/19/2005 $288,225 $727,425
All Shareholders............. $461,245,315 $1,164,095,318
</TABLE>
- ------------
(1) At 5% appreciation, share price would be $62.10 on 9/19/2005. At 10%
appreciation, share price would be $98.74 on 9/19/2005.
(2) Non-qualified stock options granted on September 19, 1995; exercisable in
20% installments each year commencing with the second anniversary of the
grant date, so long as employment with the Company or its subsidiaries
continues.
(3) Options expire unless exercised within five years following termination of
employment due to retirement, disability or death, or three months following
termination of employment due to discharge or resignation.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning the exercise of stock
options during the last fiscal year by the named executive officers of NAC Re
and the value of unexercised stock options held by such officers at December 31,
1995.
9
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SECURITIES VALUE OF UNEXERCISED
SECURITIES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
UNDERLYING OPTIONS AT FY-END (#) FY-END ($) (1)
OPTION --------------------------- ---------------------------
NAME EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ---------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald L. Bornhuetter....... -- -- 240,350 100,400 $ 4,243,902 $ 338,225
Martha G. Bannerman......... 5,000 $ 91,348 51,644 43,280 $ 892,071 $ 189,619
Stanley J. Kott............. -- -- 18,560 38,115 $ 242,625 $ 169,125
C. Fred Madsen.............. -- -- 19,625 35,875 $ 295,025 $ 128,350
John A. Murad............... 4,950 $ 76,175 42,260 39,540 $ 699,413 $ 184,869
</TABLE>
- ------------
(1) Based on year-end market value of Common Stock of $36.00.
LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
Pursuant to 1994 amendments to the Company's Long-term Incentive Plan,
administered by the Compensation Committee of the Board of Directors, awards are
based on corporate performance over three-year and five-year measurement periods
and are paid following the end of each measurement period. One-half of the award
is based on total shareholder return over a five year period, compared to the
return for the companies in the S&P Composite Stock Price Index, the S&P
Property-Casualty Industry Index and the S&P Multiline Index. The other half of
the award is based on operating return on beginning equity over a three year
period compared to a peer group composed of the 15 largest reinsurance
companies. Transition provisions will be applied until sufficient data is
available subsequent to the time of the amendments for an application of the
formulas. The following table sets forth information concerning Long-term
Incentive Plan awards for the named executive officers of NAC Re. The awards are
indicated in dollars, based on 1995 salaries, instead of percentages, in order
to give shareholders an estimate of the amounts that may be paid out.
Distributions under the Long-term Incentive Plan are made in March of each year
with respect to the measurement period ending at the end of the preceding
calendar year, and are included in the Summary Compensation Table.
LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER ESTIMATED FUTURE PAYOUTS UNDER
PERIOD UNTIL NON-STOCK PRICE-BASED PLAN (1)
MATURATION OR --------------------------------------------------
NAME PAYOUT (2) THRESHOLD ($) (3) TARGET ($) MAXIMUM ($) (4)
- ------------------------------------- ------------- ----------------- ---------- ---------------
<S> <C> <C> <C> <C>
Ronald L. Bornhuetter................ 1994-1996 $ 0 $315,634 $ 631,267
1995-1997 $ 0 $332,126 $ 664,253
Martha G. Bannerman.................. 1994-1996 $ 0 $98,475 $ 196,950
1995-1997 $ 0 $108,606 $ 217,212
Stanley J. Kott...................... 1994-1996 $ 0 $88,163 $ 176,325
1995-1997 $ 0 99,450 $ 198,900
C. Fred Madsen....................... 1994-1996 $ 0 $89,550 $ 179,100
1995-1997 $ 0 99,300 $ 198,600
John A. Murad........................ 1994-1996 $ 0 $78,656 $ 157,313
1995-1997 $ 0 83,188 $ 166,375
</TABLE>
(Footnotes on following page)
10
<PAGE>
(Footnotes for preceding page)
- ------------
(1) Actual awards and target and maximum amounts are characterized under the
Long-term Incentive Plan as percentages. When an actual award is determined
at the end of each measurement period, the percentage is applied to the
individual's average annual base salary for such period. Because this
average compensation level is not presently determinable, all amounts
disclosed reflect the application of the applicable percentages to the
individual's 1995 salary, which may be more or less than average
compensation at the end of the relevant measurement periods.
(2) Actual awards for the 1993-1995 measurement period are reflected in the
Summary Compensation Table.
(3) If neither formula threshold is reached, no award will be paid under the
Plan.
(4) While there are no maximum payouts under the plan as amended, the
Compensation Committee may exercise its discretion if and to the extent
formulas produce awards in excess of 200% of the target payout.
RETIREMENT PLAN
The NAC Re Corp. Retirement Plan is a qualified non-contributory defined
benefit plan for all employees. Benefits are computed on the basis of a
specified percentage of the individual's average total compensation, which
includes salary and bonus awards (exclusive of Long-term Incentive Plan awards),
for the thirty-six months of highest total compensation during the employee's
last ten years of service. Benefits are computed on the basis of a "life and
ten-year certain" annuity.
The Company maintains a Benefits Equalization Plan authorizing payment to
employees out of general funds of the Company of any benefits calculated under
provisions of the Retirement Plan that are otherwise above the limitations of
the Internal Revenue Code.
The following table shows the estimated annual benefits payable upon normal
retirement for specified average total compensation and years of credited
service under the Retirement Plan and the Benefits Equalization Plan. Amounts
disclosed are not subject to deduction for Social Security or other offset
amounts.
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
------------------------------------------------------------
AVERAGE TOTAL COMPENSATION 15 20 25 30 35
-------------------------- -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$250,000......................... $58,139 $77,518 $93,148 $108,777 $108,777
300,000.......................... 70,139 93,518 112,398 131,277 131,277
350,000.......................... 82,139 109,518 131,648 153,777 153,777
400,000.......................... 94,139 125,518 150,898 176,277 176,277
500,000.......................... 118,139 157,518 189,398 221,277 221,277
600,000.......................... 142,139 189,518 227,898 266,277 266,277
700,000.......................... 166,139 221,518 266,398 311,277 311,277
800,000.......................... 190,139 253,518 304,898 356,277 356,277
900,000.......................... 214,139 285,518 343,398 401,277 401,277
</TABLE>
The following table sets forth the number of full years of credited service
as of December 31, 1995 under the Retirement Plan and the Benefits Equalization
Plan, the 1995 compensation covered by the
11
<PAGE>
plans and number of years of credited service at normal retirement age for the
named executive officers of NAC Re.
<TABLE>
<CAPTION>
NUMBER OF YEARS
OF CREDITED SERVICE
NUMBER OF FULL CURRENT AT
YEARS OF COMPENSATION NORMAL RETIREMENT
NAME OF INDIVIDUAL CREDITED SERVICE COVERED AGE
- --------------------------------- ---------------- ------------ --------------------
<S> <C> <C> <C>
Ronald L. Bornhuetter............ 10 $790,254 11
Martha G. Bannerman.............. 9 328,847 21
Stanley J. Kott.................. 5 299,400 23
C. Fred Madsen................... 9 293,467 32
John A. Murad.................... 10 295,233 25
</TABLE>
Current Compensation Covered is the equivalent of the salary reported in the
Summary Compensation Table for 1995 and Annual Incentive Plan bonus for 1994
(and actually paid in 1995). See "Employment Agreement with Mr. Bornhuetter" for
a description of the supplemental pension payable to Mr. Bornhuetter upon his
retirement.
EMPLOYMENT AGREEMENT WITH MR. BORNHUETTER
Mr. Bornhuetter is employed pursuant to an agreement with NAC Re and NAC as
Chairman of the Board, President and Chief Executive Officer of both companies.
The agreement became effective in March 1992 and extends until July 1, 1997. The
agreement provides that Mr. Bornhuetter will be nominated to the respective
Boards of Directors of NAC Re and NAC and that he will be Chairman of the
Executive Committee and the Finance and Investment Committee and Chairman of the
Board of NAC.
Under the agreement, Mr. Bornhuetter's salary was $475,000 as of March 4,
1992, with the opportunity for subsequent annual increases. He receives bonuses
paid pursuant to the Annual Incentive Plan and Long-term Incentive Plan which
are dependent on corporate performance and are based on target percentages of
45% and 60%, respectively.
NAC Re and NAC are required to maintain life insurance of $600,000 on Mr.
Bornhuetter's life and for his benefit (Mr. Bornhuetter receives additional life
insurance pursuant to the Company's benefits program for all employees).
Following the employment term, such insurance must be maintained in the amount
of $100,000. If Mr. Bornhuetter's employment terminates because of disability
before the end of his employment term, his compensation and certain benefits
will continue except that annual salary payments will be 50% of his average
annual compensation (average salary of preceding 36 months times the sum of 1.00
plus target Annual Incentive Plan bonus percentage of 45%) reduced by the amount
of any disability payments and retirement benefits he receives under the various
benefit plans maintained by the Company and NAC. This benefit is payable for Mr.
Bornhuetter's lifetime and, following his death, 50% of such amount is payable
to his surviving spouse, unless a lump sum payment option is elected.
Mr. Bornhuetter will receive a supplemental pension upon his retirement in
an annual amount equal to 50% of his average annual compensation (average salary
of preceding 36 months times the sum of 1.00 plus target Annual Incentive Plan
bonus percentage of 45%) reduced by benefits payable to Mr. Bornhuetter under
pension plans of the Company or NAC or under pension plans of Mr. Bornhuetter's
prior employer. This benefit is payable to Mr. Bornhuetter for his lifetime and,
following his death, 50% of such amount is payable to his surviving spouse,
unless a lump sum payment option is elected.
12
<PAGE>
Severance payments to be made to Mr. Bornhuetter in the event of a change in
control are described below under "Employee Severance Agreements."
EMPLOYEE SEVERANCE AGREEMENTS
The Company has entered into severance agreements with the executive
officers of NAC Re and senior vice presidents and certain vice presidents of NAC
(the "Senior Officer Agreements") and severance agreements with the other
officers of NAC in order to reinforce and encourage the continued dedication and
attention of such persons to their assigned duties without distractions arising
from a potential change in control. These severance agreements as well as a
severance program for other employees are also intended to help retain staff
members in the event of a potential change in control and thereby protect the
assets of the Company.
As part of the Senior Officer Agreements, each party has agreed that in the
event of a "potential change in control" of the Company, the senior officer will
remain in the employ of the Company or its subsidiaries for a six-month period.
If a senior officer's employment is terminated within two years of a "change in
control" (i) by the Company other than for cause, or (ii) by the senior officer
for "good reason," the senior officer will be entitled to a severance payment
equal to his average compensation from the Company during the five years
immediately preceding the change in control plus target payments from the Annual
Incentive Plan and the Long-term Incentive Plan, multiplied by 2.99. The
severance payment will be made over 2.99 years or in a discounted lump sum. The
senior officer will also receive amounts earned but not yet paid under the
Long-term Incentive Plan, acceleration of vesting of stock options and
restricted stock, and continuing life and health insurance coverage for a
three-year period after termination, as well as legal fees incurred in enforcing
the severance agreement. If a senior officer becomes subject to an excise tax
under the Internal Revenue Code as a result of any payments or benefits received
on a change in control, the Company will make an additional payment to the
senior officer to make him whole after payment of the excise tax.
A "potential change in control" would be deemed to occur if (i) the Company
enters into an agreement, the consummation of which would result in a change in
control of the Company, (ii) any person (including the Company) publicly
announces an intention to take or to consider taking actions which if
consummated would constitute a change in control, (iii) any person becomes the
beneficial owner of securities representing 10% or more of the combined voting
power of the Company's then outstanding securities; or (iv) the Board of
Directors adopts a resolution to the effect that a potential change in control
has occurred. A "change in control" of the Company would be deemed to occur if
(i) any person is or becomes the beneficial owner of securities representing 30%
or more of the combined voting power of the Company's then outstanding
securities, (ii) during any two-year period individuals who constituted the
Board of Directors of the Company cease, for any reason, to constitute a
majority thereof, or (iii) the stockholders of the Company approve a merger,
consolidation or complete liquidation of the Company or a sale of substantially
all of the Company's assets. "Good reason" is defined to include any change in
duties or responsibilities, reduction in compensation or benefits, relocation or
the failure of the Company or its successor to provide the senior officer with a
three-year employment contract for the equivalent duties and at comparable
levels of compensation and benefits as exist at the time of the change in
control.
The Senior Officer Agreement for Ronald L. Bornhuetter has been superseded
by the provisions of his employment agreement referred to under "Employment
Agreement with Mr. Bornhuetter." If Mr. Bornhuetter's employment is terminated
before or after a change in control (i) by the Company other than for cause or
(ii) by Mr. Bornhuetter for "good reason," as defined in the agreement, in
addition to accrued benefits under such agreement, Mr. Bornhuetter will receive
a lump sum payment equal to his then current base salary plus target payments
from the Annual Incentive Plan and Long-term Incentive Plan (the "Severance
Amount") for the unexpired portion of his employment term multiplied by 65%,
except that, if such termination occurs after a change in control, Mr.
Bornhuetter's severance payment
13
<PAGE>
will in no event be less than 2.99 times the Severance Amount. Provisions
regarding continuing life and health insurance, excise tax payments and the
definition of change in control are comparable to those contained in the Senior
Officer Agreements described above.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive a retainer at a rate
of $27,500 per annum, and fees of $2,500 for each Board of Directors meeting
attended and $1,000 for each Committee meeting attended. The Chairman of each
Committee receives an additional retainer of $2,500 annually. The Company pays
for or reimburses the travel and related expenses incurred to attend Board and
Committee meetings.
Directors may elect to defer, until a date specified, receipt of all or a
portion of their retainers and fees. Interest is allocated to amounts deferred
at a rate comparable to the rate earned by the NAC Re Corp. Employee Savings
Plan Guaranteed Investment Contract Fund. During 1995, four Directors elected to
defer compensation pursuant to this arrangement.
The Company maintains the Directors' Stock Option Plan pursuant to which
Directors who are not full-time employees of the Company or its subsidiaries and
who are otherwise eligible automatically receive non-qualified stock options to
purchase NAC Re Common Stock at the market value for such stock on the grant
date. The initial grant under the plan is an option to purchase 11,250 shares of
Common Stock, with subsequent annual grants of options to purchase 2,250 shares
of Common Stock. Such options become exercisable six months following their
grant date. Mr. Fitt was ineligible to participate in the Director's Stock
Option Plan until September 1995 and, therefore, the Company agreed to reimburse
him to the extent of the appreciation in stock value during the period of
ineligibility.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during 1995 were: John P.
Birkelund, C. W. Carson, Jr., Daniel J. McNamara, Stephen Robert, Wendy J.
Strothman and Herbert S. Winokur, Jr. John P. Birkelund is Chairman of Dillon,
Read & Co. Inc. ("Dillon Read"). Stephen Robert is Chairman and Chief Executive
Officer of Oppenheimer & Co., Inc. ("Oppenheimer"). During 1994, Dillon Read and
Oppenheimer were retained to provide general financial advisory services to the
Company in 1994 and 1995 for a fee of $100,000 per firm. In addition, Dillon
Read and Oppenheimer acted as co-managing underwriters in connection with the
Company's 1995 Common Stock offering and co-lead underwriters in connection with
its concurrent debt offering. Further, Oppenheimer provides investment advisory
services with respect to the Company's pension funds and a small portion of the
Company's investment portfolio.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY
The Company's compensation philosophy is driven by its primary corporate
objectives--to provide the best return to the shareholders over the long term
and to maintain a highly motivated staff, providing them with the opportunity to
share in the success of the Company. Specifically, NAC Re's executive
compensation program serves:
. To align the interests of executives and shareholders by causing a
significant portion of executive compensation to be variable, or "at
risk," dependent upon the achievement of long-term corporate
performance objectives, while emphasizing significant ownership of NAC
Re Common Stock.
14
<PAGE>
. To sustain superior corporate performance over time by designing
elements of the compensation program that are based on longer-term
rewards, such as extended vesting and long-term plans.
. To attract and retain quality staff by emphasizing the necessity to be
highly competitive.
Total compensation is intended to fall at approximately the 75th percentile
of the reinsurance industry for above-average corporate performance. Industry
statistics are generally derived from an independent survey of approximately 40
public and private property and casualty reinsurance companies, including three
of the six companies in the S&P Property-Casualty Insurance Group Index, or
their reinsurance affiliate. This information is further refined to construct a
comparison to the top 15 reinsurers.
At present, the executive compensation program is composed of salary, annual
cash incentive opportunities, long-term cash incentive opportunities and
stock-based awards. As the executive officer's level of responsibility
increases, a greater portion of potential total compensation opportunity is
based on corporate performance and appreciation in stock value and a lesser
portion on individual performance and competitive industry levels, causing
greater potential variability in the individual's absolute compensation from
year to year.
Salaries
Salary is viewed as fixed base compensation determined initially by industry
and position comparisons. In addition, salaries are considered in the context of
the Company's internal salary range structure to insure that the compensation
level for each position is determined with regard to other relevant positions
within the Company. For the Chief Executive Officer, annual adjustments are
considered based on the goals and performance of the Company and prevailing
competitive conditions. For other executive officers, individual performance is
also considered.
Annual Incentive Plan
The Company's Annual Incentive Plan provides a yearly cash bonus opportunity
that serves to motivate executive officers to achieve the Company's operational
and strategic goals.
Cash payouts under the Annual Incentive Plan are recommended by management
and determined by the Compensation Committee after the completion of each
calendar year. These payouts are based primarily on corporate performance for
the prior year and an evaluation of each participant's respective contribution
to the performance of the Company. As a participant's responsibilities increase,
the portion of his or her bonus dependent on corporate performance increases.
For Messrs. Bornhuetter, Kott, Madsen and Murad and Ms. Bannerman, the entire
bonus for 1995 was based on corporate performance.
Awards are determined by an evaluation of the Company's performance relative
to its business plan, which plan has been approved by the Board of Directors.
Performance criteria include return on shareholders' equity, earnings and
earnings growth, composite ratio, expense ratio, premium volume, performance
relative to other comparable reinsurers and subjective measurements of success.
There is no predetermined weight given to each criterion. Rather, the
Committee's evaluation involves a subjective balancing of the various measures
of success. If the Company's overall performance meets the performance
expectations, bonuses are paid at the target level. It is not necessary for each
individual aspect of the performance expectations to be met for bonuses to be
paid at the target level. For 1995, the Committee determined that the Company's
overall performance far exceeded the expectations established in the approved
business plan for the year in virtually all areas. Based on the foregoing, the
Committee determined that the corporate performance element of the Annual
Incentive Plan payout should be 170% of target.
15
<PAGE>
Long-term Incentive Plan
The Company's Long-term Incentive Plan is a cash award plan designed to
provide incentives for superior long-term corporate performance. This program in
particular has been structured to recognize the critical importance and
retention of key management employees and to focus their attention on long-term
goals. Long-term Incentive Plan awards are based solely on corporate
performance.
In 1994, the Committee made substantial changes to the Long-term Incentive
Plan. The principal change included replacing the subjective evaluation of
corporate performance over a three-year measurement period with a determination
of performance based on objective formulas that measure the Company's internal
and external financial performance. The measurement of internal performance is
based on the Company's operating return on beginning equity over a three-year
period compared to a peer group composed of the 15 largest reinsurance
companies. The measurement of external performance is based on the Company's
total shareholder return over a five-year period, compared to the returns
measured by the S&P 500 Composite Stock Price Index, the S&P Property-Casualty
Industry Index and the S&P Multiline Index. Minimum performance levels are
required for a payout under each formula, and discretion may be applied in the
event a formula generates a payout in excess of a certain level.
Transition rules were established to accommodate the three-year measurement
periods that were "in stream" prior to the establishment of the formulas. Upon
application of the transition rules for 1993, and the formulas for 1994 and
1995, including the exercise of Committee discretion to the extent the shortened
time frame disproportionately impacted the results, the payout for the 1993-1995
measurement period was 120% of target.
Stock-based Plans
Stock-based plans are designed to align the interests of executives and
shareholders by providing value to the executive as the stock price increases.
Due to the variability of the stock price, stock options and restricted stock
make a significant portion of executive compensation dependent upon the
Company's overall results and how the Company is perceived by its shareholders
and the marketplace. Options granted to executives are typically granted at 100%
of the market value of the stock on the date of grant. Generally, option awards
become exercisable over a relatively long period, motivating executives to
sustain high corporate performance in order to increase the value of such
options.
For the 1995 option grant an option pool for all officers was established by
the Compensation Committee utilizing guidelines based on general and reinsurance
industry competitive practice and an option valuation. In addition, the total
number of options outstanding relative to shares outstanding was also
considered. Individual awards for executives were determined by the Compensation
Committee by the application of individual guideline amounts (which are based on
level and competitive practice) to the corporate pool.
CEO COMPENSATION
As described, the executive compensation program is designed to link
compensation with the accomplishment of business and corporate objectives and
with return for the shareholders. This is clearly exemplified in the
compensation of the Company's Chief Executive Officer, Mr. Bornhuetter.
The Company has an employment agreement with Mr. Bornhuetter that was
executed in March 1992. Mr. Bornhuetter's base salary was set at the same level
as under his prior employment agreement. In accordance with the employment
agreement, annual increases are determined based on a review of his salary in
relationship to the performance of NAC Re and prevailing competitive conditions.
Mr. Bornhuetter's annual salary increase for 1995 was determined in March 1995
to be 5.0%.
16
<PAGE>
Mr. Bornhuetter's Annual Incentive Plan payment for 1995 was determined by
multiplying the payout percentage determined by the Committee by his target,
resulting in a bonus of $423,500. The specific corporate performance criteria
for determining the bonus level are described under Annual Incentive Plan,
above. Further, Mr. Bornhuetter's Long-term Incentive Plan award for the
1993-1995 measurement period was determined by multiplying the payout percentage
determined on the basis of corporate performance by his target, resulting in a
bonus of $379,100. The objective performance measures utilized for determining
this award level are described under Long-term Incentive Plan, above. In
September 1995, Mr. Bornhuetter received a stock option grant to purchase 25,000
shares of Common Stock at the market value on the date of grant as part of the
Company's annual option grants. He also received an option to purchase 12,500
shares of Common Stock at the same price in recognition of the Company's tenth
anniversary.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1 million
paid to certain executive officers. Qualifying performance-based compensation
will not be subject to the deduction limit if certain requirements are met. The
Committee currently intends to structure a sufficient amount of the
performance-based portion of the compensation of its executive officers in a
manner that preserves the tax deduction for compensation in excess of $1
million.
Representatives of Towers Perrin, an independent compensation and benefits
consulting firm selected by the Committee, meet from time to time with the
Compensation Committee to provide advice on executive compensation and have, at
all times, free access to the Compensation Committee, without the presence of
management.
John P.Birkelund C. W. Carson, Jr. Daniel J.McNamara
Stephen Robert Wendy J. Strothman Herbert S. Winokur, Jr.(Chairman)
PERFORMANCE GRAPH
The following graph compares the yearly change in the Company's cumulative
total shareholder return on its Common Stock to such return for the S&P 500
Composite Stock Price Index (the "S&P 500 Index") and a peer group that combines
the S&P Property-Casualty Industry Index (the "P&C Index") and the S&P Multiline
Insurance Stock Price Index. The peer group consists of the following companies:
Allstate Corporation, Chubb Corporation, General Re Corporation, Loews
Corporation, SAFECO Corporation, The St. Paul Companies, United States Fidelity
& Guaranty Corporation, Aetna Life & Casualty Company, American International
Group, CIGNA Corporation and ITT Hartford Group Inc. (the "Peer Group"). The
graph compares such returns since the Company's initial public offering in
October 1985, with December 31, 1990 as the base year. The cumulative total
shareholder return on the Company's Common Stock (including dividends) was
264.5% from the initial public offering to the end of 1995 and 67.6% from
year-end 1990 to year-end 1995. The cumulative total return for the S&P 500
Composite Stock Price Index was 329% from October 1985 to December 31, 1995 and
98.3% from December 31, 1990 to December 31, 1995. The cumulative total return
for the Peer Group was 271.6% from October 1985 to December 31, 1995 and 135.3%
from December 31, 1990 to December 31, 1995.
17
<PAGE>
NAC RE CORP.
Cumulative Total Return (1)
[GRAPH]
MARKET CAP
TOTAL COMBINED
NAC RE S&P 500 PEER GROUP
IPO(2) $45.98 $46.23 $63.30
1985 $73.97 $53.94 $78.52
1986 $52.51 $63.95 $81.55
1987 $35.50 $67.21 $75.29
1988 $63.49 $78.37 $81.25
1989 $107.68 $103.20 $114.22
1990(3) $100.00 $100.00 $100.00
1991 $143.82 $130.47 $130.42
1992 $185.64 $140.41 $150.36
1993 $137.10 $142.26 $157.70
1994 $155.12 $144.14 $165.40
1995 $167.58 $198.32 $235.25
- ------------
(1) Stock price appreciation plus dividends.
(2) The Company's initial public offering was in October 1985.
(3) Assumes shareholder invests $100 on December 31, 1990. For periods prior to
that date, the graph shows how investments in the Company, the S&P 500 and
the Peer Group would have reached $100 on that date from an investment in
October 1985.
18
<PAGE>
PROPOSAL TO AMEND THE PARTNERS' RESTRICTED STOCK PLAN
GENERAL
In 1990, the Board of Directors adopted, and the stockholders subsequently
approved, the NAC Re Corp. Partners' Restricted Stock Plan (the "Plan"),
designed to expand employee identification with shareholders and to provide a
valuable incentive for attracting, retaining and rewarding staff members.
In September 1995, the Board adopted amendments to the Plan to increase the
number of shares of Common Stock, $.10 par value, available for issuance from
162,500 to 262,500, subject to stockholder approval.
The table below indicates grants of restricted stock under the Plan in the
last fiscal year. Other awards under the Plan are not yet determinable.
AMENDED PLAN BENEFITS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
DOLLAR VALUE
NAME AND POSITION PER SHARE (1) NUMBER OF SHARES
- ---------------------------------------------------------------- ------------- ----------------
<S> <C> <C>
Ronald L. Bornhuetter, Chairman, President and Chief Executive
Officer, NAC Re and NAC......................................... -- 0
Martha G. Bannerman, Vice President and General Counsel, NAC Re;
Executive Vice President, General Counsel and Secretary,
NAC............................................................. -- 0
Stanley J. Kott, Executive Vice President, NAC.................. -- 0
C. Fred Madsen, Executive Vice President, NAC................... -- 0
John A. Murad, Senior Vice President, NAC; President, GIC....... -- 0
All Executives as a Group....................................... -- 0
Non-Executive Officer Directors as a Group...................... -- 0
Non-Executive Officer Employees as a Group...................... $ 34.02 44,125
</TABLE>
- ------------
(1) Average per share market value of restricted stock awards on the date of
grant, without giving effect to the diminution of value attributable to the
restrictions on such stock.
The following description of the Plan, as amended, is a summary of its terms
and is qualified entirely by reference to the Plan, provided at Exhibit A.
Stockholders should carefully read this Exhibit before voting.
SUMMARY OF THE PLAN
Administration. The Compensation Committee of the Board of Directors is
authorized to administer the Plan in accordance with its terms. No member of the
Committee will be eligible to receive an award under the Plan while serving as a
member of the Committee. The Committee has the sole and complete authority to
interpret the Plan and make all determinations deemed necessary or advisable for
the administration of the Plan. The selection of participants in the Plan (the
"Partners") and the size of their awards will be made by the Senior Management
of the Company, except in the case of individuals at the level of Vice President
or above with department management responsibilities, in which case Committee
approval is required.
Eligibility. Any regular salaried employee of NAC Re or its subsidiaries may
be selected as a Partner under the Plan.
19
<PAGE>
Shares Subject to the Plan. An aggregate of 262,500 shares of Common Stock
($.10 par value) have been reserved for issuance under the Plan. This number is
subject to adjustment in the event of a stock split, stock dividend, subdivision
or combination of the Common Stock or other change in corporate structure
affecting the Common Stock.
Grant and Conditions of Awards. Partners may be granted a stated number of
shares of Common Stock without payment of consideration. The stock is restricted
for a six-year period, vesting in equal annual installments commencing on the
second anniversary of the date of grant. Restricted stock becomes
non-forfeitable at an earlier date in the event of the Partner's death, total
disability or retirement. The Committee may accelerate vesting under certain
other circumstances, such as a "Change in Control" of the Company.
The restricted stock will be issued in the name of the Partner and held by
the Company in escrow until restrictions lapse. Upon the issuance of the stock,
the Partner will have full voting and dividend rights with respect to such
shares. With respect to Common Stock subject to forfeiture, the rights and
interests of a Partner under the Plan may not be assigned, encumbered or
transferred, except in the event of the death of a Partner, by will or by the
laws of descent and distribution.
Plan Amendments; Duration. The Plan may be amended by the Board as it shall
deem advisable. Without the approval of stockholders, however, the Board may not
materially increase the benefits accruing to Partners under the Plan. If not
earlier terminated by the Board, the Plan will terminate on December 31, 2000.
FEDERAL INCOME TAX CONSEQUENCES
Under the present provisions of the Internal Revenue Code of 1986, as
amended, absent the election described below, the recipient of an award under
the Plan will recognize ordinary taxable income at the time shares of Common
Stock subject to the award become non-forfeitable. This income will equal the
fair market value of the shares of Common Stock which become non-forfeitable at
that time. The Company will be entitled to a federal income tax deduction in the
year in which shares of Common Stock subject to an award become non-forfeitable
in an amount equal to the taxable income recognized by the Partner. Any
dividends paid to a Partner with respect to shares of Common Stock become
non-forfeitable, will be taxable as ordinary income when paid and, assuming that
the Partner does not make the election described below, the Company will be
entitled to a federal income tax deduction.
A Partner may elect within 30 days after the date an award is made to
include in taxable income an amount equal to the fair market value of the shares
of Common Stock awarded at the time of the grant. No additional taxable income
will be recognized by the Partner at the time the shares become non-forfeitable.
The Company will be entitled to a federal income tax deduction in the year the
awards are granted in an amount equal to the taxable income recognized by the
Partner. If, however, the shares awarded are forfeited, no deduction will be
allowed to the Partner with respect to such forfeiture and the Company will be
required to include in its gross income for the year of forfeiture an amount
equal to the amount previously deducted by the Company with respect to the
shares.
VOTE REQUIRED
The amendment will not become effective unless it is approved in accordance
with the voting procedures described under the caption "Miscellaneous--Voting
Procedures" set forth below. In the event the amendment is not approved, any
shares of Common Stock granted in excess of the amount previously authorized by
the shareholders will be automatically cancelled.
BOARD RECOMMENDATIONS
The Board of Directors recommends a vote FOR approval of the amendment to
the Partners' Restricted Stock Plan.
20
<PAGE>
MISCELLANEOUS
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Ernst & Young LLP has been selected as the Company's
auditors for 1996. Representatives of Ernst & Young LLP will be present at the
Annual Meeting, will have the opportunity to make a statement if they desire to
do so, and will be available to respond to appropriate questions of
stockholders.
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING
The Board of Directors of the Company does not intend to present, and does
not have any reason to believe that others intend to present, any matter of
business at the meeting other than that set forth in the accompanying Notice of
Annual Meeting of Stockholders. However, if other matters properly come before
the meeting, it is the intention of the persons named in the enclosed form of
proxy to vote any proxies in accordance with their judgment.
VOTING PROCEDURES
Directors of the Company must be elected by a plurality of the vote of the
shares present in person or represented by proxy at the meeting. Consequently,
only shares that are voted in favor of a particular nominee will be counted
toward such nominee's achievement of a plurality. Shares present at the meeting
that are not voted for a particular nominee or shares present by proxy where the
stockholder properly withheld authority to vote for such nominee (including
broker non-votes) will not be counted toward such nominee's achievement of a
plurality.
With respect to other matters, if any, submitted to the stockholders for a
vote, the affirmative vote of the holders of at least a majority of the shares
present in person or represented by proxy at the meeting for a particular matter
is required to become effective. With respect to abstentions, the shares are
considered present at the meeting for the particular matter, but since they are
not affirmative votes for the matter, they will have the same effect as votes
against the matter. With respect to broker non-votes, the shares are not
considered present at the meeting for the particular matter as to which the
broker withheld its vote. Consequently, broker non-votes are not counted in
respect of the matter, but they do have the practical effect of reducing the
number of affirmative votes required to achieve a majority for such matter by
reducing the total number of shares from which the majority is calculated.
PROXY SOLICITATION
The Company will bear the cost of preparing, assembling and mailing the
enclosed form of proxy, this proxy statement and other material which may be
sent to stockholders in connection with this solicitation. Solicitation may be
made by mail, telephone, telegraph and personal interview. The Company may
reimburse persons holding shares in their names or in the names of nominees for
expenses incurred in sending proxies and proxy material to their respective
principals.
PROPOSALS FOR NEXT YEAR'S MEETING
Any proposal of a stockholder intended to be presented at the next Annual
Meeting of Stockholders must be received by the Company for inclusion in its
proxy statement and form of proxy relating to that Annual Meeting no later than
November 29, 1996.
21
<PAGE>
COPIES OF ANNUAL REPORT AND FORM 10-K
Copies of the 1995 Annual Report to Stockholders are being mailed to the
stockholders simultaneously with this Proxy Statement. The financial statements
and financial information appearing in such Annual Report are incorporated by
reference.
THE COMPANY WILL PROVIDE A COPY OF ITS ANNUAL REPORT TO THE SECURITIES AND
EXCHANGE COMMISSION ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 TO ANY
STOCKHOLDER WITHOUT CHARGE (OTHER THAN A REASONABLE CHARGE FOR ANY EXHIBIT
REQUESTED) UPON WRITTEN REQUEST TO:
NAC RE CORPORATION
P. O. BOX 2568
ONE GREENWICH PLAZA
GREENWICH, CONNECTICUT 06836-2568
ATTENTION: VICE PRESIDENT, CHIEF FINANCIAL OFFICER
AND TREASURER
By Order of the Board of Directors,
/s/CELIA R. BROWN
CELIA R. BROWN
Secretary
Greenwich, Connecticut
March 22, 1996
22
<PAGE>
EXHIBIT A
SECOND AMENDED AND RESTATED
NAC RE CORP.
PARTNERS' RESTRICTED STOCK PLAN
SECTION 1. Purposes.
1.1 The purposes of the Partners' Restricted Stock Plan (the "Plan") of NAC
Re Corp. (the "Company") are to foster and promote the interests of the Company
by (i) expanding employee identification with shareholders; (ii) providing a
valuable incentive for attracting and retaining high-quality individuals; and/or
(iii) providing management with a flexible tool with which to reward staff
members with increased responsibility or consistent superior levels of
performance.
SECTION 2. Definitions.
2.1 The following definitions are applicable to the Plan:
(a) "Change in Control" shall mean either (i) the acquisition of 30% or
more of the outstanding voting securities of the Company by any person, (ii)
a tender offer for the Common Stock of the Company or a proxy contest for
the election of directors, if after such tender offer or proxy contest, the
persons who were directors immediately prior to such tender offer or proxy
contest do not constitute a majority of the Board of Directors of the
Company, or (iii) approval by Company stockholders of either a transaction
whereby the Company will cease being publicly-held or a sale by the Company
of all or substantially all of its assets.
(b) "Committee" shall mean the Compensation Committee of the Board of
Directors of the Company.
(c) "Common Stock" shall mean the Common Stock of the Company, par value
$.10 per share.
(d) "Disinterested Person" shall mean any director of the Company, who,
at the time discretion under the Plan is exercised, is not eligible, and has
not at any time within one year prior thereto been eligible and will not for
one year subsequent thereto be eligible, for selection as a Partner under
the Plan or a grantee under any other discretionary plan of the Company
entitling the participants to acquire stock, stock options or stock
appreciation rights.
(e) "Employee" shall mean a regular salaried employee of a Participating
Employer.
(f) "Partner" shall mean an Employee who is selected by Senior
Management or, in the case of a Senior Officer, by the Committee, to receive
an award under the Plan.
(g) "Participating Employer" shall mean the Company, NAC Reinsurance
Corporation ("NAC") or any other subsidiary or affiliate of the Company.
(h) "Restricted Share Award" shall mean the issuance of forfeitable
Common Stock pursuant to Section 4 of the Plan.
(i) "Senior Management" shall mean the President and Executive Vice
President of the Company.
(j) "Senior Officer" shall mean an officer at any level equal to or more
senior than a Vice President, who has department management
responsibilities, of a Participating Employer.
(k) "Total Disability" shall mean accidental bodily injury or sickness
which wholly and continuously disables a Partner. All determinations of
Total Disability made by the Company
<PAGE>
pursuant to the Company's Long-term Disability Plan shall be determinative
of Total Disability under the Plan.
SECTION 3. Administration.
3.1 The Plan shall be administered under the discretion of the Committee,
which shall consist of three or more, but not more than six, members, each of
whom shall be a Disinterested Person. The members of the Committee shall be
appointed by the Board of Directors. The Committee shall have sole and complete
authority to establish regulations for the administration of the Plan, interpret
and amend the Plan, and make all determinations necessary or advisable for the
administration of the Plan, subject to its express provisions.
3.2 Two members of the Committee shall constitute a quorum for purposes of
administering the Plan, and the acts of a majority of the members present at any
meeting at which a quorum is present, or acts approved in writing by all members
of the Committee without a meeting, shall constitute the acts of the Committee.
3.3 The Committee may designate any officers or employees of the Company or
NAC to assist the Committee in the administration of the Plan and to execute
documents on its behalf, and the Committee may delegate to them such other
ministerial and limited discretionary duties as it sees fit.
3.4 The foregoing notwithstanding, Senior Management shall have the
authority to select Partners, determine the size of Restricted Share Awards, and
implement such grants, provided, however, that the selection of Partners at the
Senior Officer level and the timing and size of their awards are subject to the
determination of the Committee.
SECTION 4. Restricted Share Awards.
4.1 Issuance of Shares. The Company shall reserve two hundred sixty-two
thousand five hundred (262,500) shares of authorized and unissued Common Stock
for issuance pursuant to Restricted Share Awards. Any Restricted Share Award
shall be subject to the terms and conditions of this Plan.
4.2 Restricted Share Awards. When Senior Management or the Committee, as the
case may be, deems it appropriate in order to further the purposes of the Plan,
it may, as further described in Section 3.4, make Restricted Share Awards which
entitle a Partner to receive a stated number of shares of Common Stock subject
to forfeiture if such Partner fails to remain continuously employed by a
Participating Employer as provided in Section 4.4(b) of the Plan.
4.3 Award Agreements. Each Restricted Share Award shall be evidenced by a
written agreement, executed by the Partner and the Company, which shall contain
such terms and conditions as Senior Management or the Committee, as the case may
be, may require, including, but not limited to, escrow provisions meeting the
requirements of Section 5 of the Plan.
4.4 Restrictions. Restricted Share Awards and the shares of Common Stock
issued pursuant thereto shall be subject to the following restrictions:
(a) Except as otherwise permitted by Section 6 of the Plan, neither the
Restricted Share Awards nor the shares of Common Stock issued pursuant
thereto may be sold, assigned, transferred, pledged, hypothecated, or
otherwise disposed of prior to the delivery of the shares of Common Stock to
the Partner pursuant to Section 5.2 of the Plan.
(b) Except as provided in Section 4.6 or 4.7 of the Plan, shares of
Common Stock subject to a Restricted Share Award shall be forfeited in
accordance with the following schedule, and all rights of a Partner to a
Restricted Share Award shall terminate without any payment of consideration
or other obligation by the Company to the extent that the Partner fails to
remain continuously
2
<PAGE>
employed by a Participating Employer until the sixth anniversary date of the
Restricted Share Award.
PORTION OF
TERMINATION DATE SHARES FORFEITED
- ------------------------------------------------------------ ----------------
Prior to second anniversary date of the Restricted Share
Award....................................................... 100%
On or after second anniversary date, but prior to third
anniversary date of the Restricted Share Award.............. 80
On or after third anniversary date, but prior to fourth
anniversary date of the Restricted Share Award.............. 60
On or after fourth anniversary date, but prior to fifth
anniversary date of the Restricted Share Award.............. 40
On or after fifth anniversary date, but prior to sixth
anniversary date of the Restricted Share Award............ 20
On or after sixth anniversary date of the Restricted Share
Award....................................................... 0
(c) In the event of the forfeiture of any shares of Common Stock awarded
under the Plan, such shares may again be subject to an award.
4.5 Rights as a Shareholder. Upon the issuance of shares of Common Stock
subject to a Restricted Share Award to the Partner, such Partner shall, subject
to the Plan, have the right to vote such shares of Common Stock and receive cash
dividends, if any.
4.6 Termination of Employment. In the event that the employment of a Partner
terminates by reason of death or Total Disability, such Partner's Common Stock
subject to a Restricted Share Award shall become non-forfeitable. In the event
that the employment of a Partner terminates by reason of retirement, or under
such other circumstances that, in the discretion of the Committee, warrant
accelerated vesting, such Partner's Common Stock subject to a Restricted Share
Award shall become non-forfeitable at that time or six months after the date of
grant, whichever is later.
4.7 Change in Control. Notwithstanding the foregoing provisions of this
Plan, upon the occurrence of a Change in Control of the Company, the Committee
in its sole discretion may provide for the immediate vesting, but in no event
within six months of the date of grant, of any or all Restricted Share Awards
which are not fully vested at the time of the Change of Control. Delivery of
shares of Common Stock subject to Restricted Share Awards shall occur pursuant
to Section 5.2 of the Plan.
4.8 Other Restrictions. The Committee shall impose such other restrictions
on any Common Stock issued pursuant to the Plan as it may deem advisable,
including, without limitation, restrictions under the Securities Act of 1933, as
amended, under the rules or regulations of any stock exchange upon which the
Common Stock or any other class of shares of the Company are then listed, or
under any blue sky or securities laws applicable to such Common Stock.
SECTION 5. Custody of Shares.
5.1 Each certificate of Common Stock issued pursuant to a Restricted Share
Award shall be registered in the name of the Partner and held, together with a
stock power endorsed in blank, by the Company. Unless and until forfeited as
provided in the Plan, the Partner shall be entitled to vote all shares of such
Common Stock and receive all cash dividends, if any, with respect thereto. All
other distributions with respect to such Common Stock, including, but not
limited to, shares received as a result of a stock dividend, stock split,
combination of shares or otherwise shall be retained by the Company in escrow.
Each certificate of Common Stock issued pursuant to a Restricted Share Award
shall bear the following (or similar) legend:
3
<PAGE>
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) contained in the Partners' Restricted Stock Plan of NAC Re Corp.
(the "Company") and an Agreement entered into between the registered owner
and the Company. A copy of such Plan and Agreement is on file in the office
of the Secretary of the Company."
In lieu of the foregoing, the Company may issue stop transfer instructions
to its transfer agent or take such other steps as are necessary to preclude the
transfer of a Restricted Share Award that is subject to forfeiture.
5.2 Shares of Common Stock subject to Restricted Share Awards which are no
longer forfeitable pursuant to Section 4 of the Plan and which have been held by
the Company pursuant to Section 5.1 of the Plan shall be delivered by the
Company to the Partner (or the Partner's legal representative, beneficiary or
heir) in the form of a freely transferable certificate, without legend (provided
that the Partner is not an "affiliate" of the Company within the meaning of Rule
405 adopted pursuant to the Securities Act of 1933, as amended) promptly after
becoming non-forfeitable, provided, however, that the Company shall be under no
obligation to deliver such shares to a Partner until the Partner has paid or
caused to be paid all taxes required to be withheld pursuant to Section 8 of the
Plan.
SECTION 6. Assignments and Transfers.
6.1 With respect to Common Stock subject to forfeiture, the rights and
interests of a Partner under the Plan may not be assigned, encumbered or
transferred except, in the event of the death of a Partner, by will or by the
laws of descent and distribution.
SECTION 7. Employee Rights Under the Plan.
7.1 No Employee of a Participating Employer nor any other persons shall have
any claim or right to be granted a Restricted Share Award under the Plan.
Neither the Plan nor any action taken thereunder shall be construed as giving
any Employee any right to be retained in the employ of a Participating Employer,
or as creating terms and conditions of an employment contract, either express or
implied.
SECTION 8. Withholding Tax.
8.1 The Company may deduct from the Partner's salary any taxes required by
law to be withheld with respect to the issuance or vesting of shares of Common
Stock subject to a Restricted Share Award under the Plan. In the event and to
the extent a Partner's salary is not sufficient to pay all taxes required to be
withheld by the Company, the Partner shall be required to pay the Company the
amount of any such taxes (the "Deficiency"); in lieu thereof, the Company shall
have the right to retain, or require the Partner to sell, a sufficient number of
shares of Common Stock subject to a Restricted Share Award to cover the
Deficiency and assign the proceeds of such sale to the Company.
SECTION 9. Adjustments.
9.1 In the event of any change in the number of outstanding shares of Common
Stock by reason of stock dividend, stock split, combination or exchange of
shares or other similar corporate action, which results in a proportionate
increase or decrease in the number of shares of Common Stock theretofore issued
and outstanding and held by each stockholder of the Company, the number of
shares of Common Stock issuable pursuant to Restricted Share Awards shall be
increased or decreased in the same proportion.
9.2 In the event of a merger or consolidation in which the Company is a
constituent party or upon the sale of all or substantially all of the assets of
the Company, a Partner shall, upon becoming entitled to receive shares of Common
Stock pursuant to the Plan, be entitled to receive in lieu of such shares the
4
<PAGE>
number and class of shares of stock, other securities or cash or other
consideration to which the Partner would have been entitled pursuant to the
terms of the agreement of the merger, consolidation or sale of assets, if
immediately prior to such merger, consolidation or sale of assets the Partner
had been the holder of record of Common Stock subject to a Restricted Share
Award.
SECTION 10. Administration Expenses.
10.1 The expenses of administering the Plan shall be borne by the Company.
SECTION 11. Severability.
11.1 Whenever possible, each provision of the Plan shall be interpreted in
such manner as to be effective and valid under applicable law. If any provisions
of the Plan or the application thereof to any party or circumstance shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the minimal extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of the
Plan or the application of such provision to other parties or circumstances.
SECTION 12. Duration and Termination.
12.1 The Board of Directors of the Company may at any time terminate this
Plan as of any date specified in a resolution adopted by the Board. If not
earlier terminated, this Plan shall terminate on December 31, 2000. No
Restricted Share Award may be granted after this Plan has terminated. After this
Plan has terminated, the functions of the Committee shall be limited to
supervising the administration of Restricted Share Awards previously granted.
Termination of this Plan shall not affect any Restricted Share Award previously
granted.
SECTION 13. Amendment.
13.1 Following its approval by the stockholders of the Company, this Plan
may not be further amended without the consent of the stockholders if such
amendment would materially increase the benefits accruing to Partners under the
Plan.
SECTION 14. Governing Law.
14.1 The Plan shall be governed by and construed in accordance with the laws
of the State of Connecticut.
5
<PAGE>
NAC RE CORPORATION
ONE GREENWICH PLAZA, P.O. BOX 2568, GREENWICH, CT 06836-2568
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
MARTHA G. BANNERMAN, CELIA R. BROWN and JOHN N. ADIMARI, or any of them with
power of substitution, are hereby authorized to represent the undersigned and
vote all shares of the Common Stock of NAC Re Corporation held by the
undersigned at the Annual Meeting of Stockholders to be held at One Greenwich
Plaza, Third Floor, Greenwich, CT at 10:00 a.m. on May 10, 1996, and any
adjournments thereof, on all matters coming before said meeting.
PROPOSAL 1: The Election of Directors.
/ / FOR all nominees listed below (except as marked to the contrary
below)
/ / WITHHOLD AUTHORITY to vote for all nominees listed below
Robert A. Belfer, Wendy J. Strothman, Herbert S. Winokur, Jr.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below).
- --------------------------------------------------------------------------------
PROPOSAL 2: A proposal to amend the Partners' Restricted Stock Plan.
/ / FOR / / AGAINST / / ABSTAIN
PROPOSAL 3: In their discretion, upon such other matters as may properly come
before the meeting and any adjournments thereof.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR proposals 1 and 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2
(continued and to be signed on other side)
<PAGE>
PLEASE SIGN EXACTLY AS
YOUR NAME APPEARS AT THE
LEFT. WHEN SHARES ARE HELD
BY JOINT TENANTS, BOTH
SHOULD SIGN.
Dated:.............., 1996
.........................
Signature
.........................
Signature if held jointly
PLEASE MARK, SIGN, DATE,
AND RETURN THIS PROXY CARD
PROMPTLY, USING THE
ENCLOSED ENVELOPE.
THANK YOU.
