EXEL LIMITED
--------------------
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
To Be Held on March 29, 1996
--------------------
Hamilton, Bermuda
February 16, 1996
TO THE SHAREHOLDERS OF EXEL LIMITED:
Notice is Hereby Given that the Annual General Meeting of Shareholders of
EXEL LIMITED (the "Company") will be held at the Hyatt Regency Hotel, West Bay
Road, Georgetown, Grand Cayman, Cayman Islands, British West Indies, on Friday,
March 29, 1996, at 8:30 a.m. local time for the following purposes:
1. To elect four Class III Directors to hold office until 1999;
2. To appoint Coopers & Lybrand, Bermuda, to act as the independent
Auditors of the Company for the fiscal year ending November 30, 1996;
3. Ratification of the Company's Stock Plan for Non-Employee Directors;
4. Ratification of Amendment to EXEL Limited Directors Stock & Option Plan;
and to transact such other business as may properly come before the meeting or
any adjournments thereof.
Only Shareholders of record, as shown by the transfer books of the Company
at the close of business on February 16, 1996, are entitled to notice of and to
vote at the Annual General Meeting.
PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE RETURN ENVELOPE
FURNISHED FOR THAT PURPOSE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU
MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT. A PROXY NEED
NOT BE A SHAREHOLDER OF THE COMPANY.
As ordered,
BRIAN M. O'HARA,
President and Chief Executive Officer
<PAGE>
EXEL LIMITED
CUMBERLAND HOUSE, HAMILTON, BERMUDA
PROXY STATEMENT
FOR
THE ANNUAL GENERAL MEETING OF SHAREHOLDERS
To Be Held on March 29, 1996
February 16, 1996
The accompanying proxy is solicited by the Board of Directors of EXEL
Limited (the "Company") to be voted at the Annual General Meeting of
Shareholders of the Company to be held on March 29, 1996, and any adjournments
thereof.
When such proxy is properly executed and returned, the Ordinary Shares it
represents will be voted at the meeting on: (1) the election of the four
nominees listed below for Director; (2) the appointment of Coopers & Lybrand,
Bermuda ("Auditors"), as auditors of the Company; (3) the ratification of the
Company's Stock Plan for Non-Employee Directors; and (4) the ratification of the
Amendment to the EXEL Limited Directors Stock & Option Plan.
Any Shareholder giving a proxy has the power to revoke it prior to its
exercise by notice of revocation to the Secretary of the Company in writing, by
voting in person at the Annual General Meeting or by execution of a subsequent
proxy, provided that such action is taken in sufficient time to permit the
necessary examination and tabulation of the subsequent proxy or revocation
before the vote is taken.
Shareholders of record as of the close of business on February 16, 1996
will be entitled to vote at the meeting. As of February 16, 1996, there were
outstanding 47,028,635 Ordinary Shares, par value US $0.01 per share ("Ordinary
Shares" or "Shares"), of the Company entitled to vote at the meeting, with each
Share entitling the holder of record on such date to one vote.
This Proxy Statement, the attached Notice of Annual Meeting and the
accompanying proxy card are first being mailed to Shareholders on or about
February 20, 1996.
Other than the approval of the minutes of the 1995 Annual General Meeting,
the Company knows of no specific matter to be brought before the Annual General
Meeting which is not referred to in this Notice of Meeting. If any such matter
comes before the meeting, including any Shareholder proposal properly made, the
proxy holders will vote proxies in accordance with their judgment.
Directors will be elected at the Annual General Meeting by a majority of
the votes cast at the meeting by the holders of Shares represented in person or
by proxy at the meeting, provided there is a quorum (consisting of holders of at
least fifty percent of the outstanding Shares being present in person or by
proxy). The appointment of the Auditors and the ratifications will be by similar
vote.
<PAGE>
BENEFICIAL OWNERSHIP
The following table lists the beneficial ownership of each person or group
who, as of February 1, 1996, owned, to the Company's knowledge, more than five
percent of the Company's Ordinary Shares:
Percentage
of
Number Outstanding
Name and Address of Shares Shares
---------------- --------- -----------
Oppenheimer Group, Inc. ........................... 9,280,978 19.7
Oppenheimer Tower
World Financial Centre
New York, New York 10281
Capital Group Companies ........................... 7,482,710 15.9
333, South Hope Street
Los Angeles, California 90071
Scudder, Stevens & Clark, Inc. .................... 3,134,275 6.7
345 Park Avenue
New York, New York 10154
Barrow, Hanley, Mewhinney & Strauss ............... 2,385,500 5.1
200 Crescent Court, 19th Floor
Dallas, Texas 75201
BOARD OF DIRECTORS
The Company's Articles of Association provide that the Board of Directors
shall be divided into three classes designated Class I, Class II and Class III,
each class consisting as nearly as possible of one-third of the total number of
Directors constituting the entire Board of Directors.
The term of office for each Director in Class I expires at the Annual
General Meeting of the Company in 1997; the term of office for each Director in
Class II expires at the Annual General Meeting in 1998; and the term of office
for each Director in Class III expires at the Annual General Meeting in 1996;
and at each Annual General Meeting the successors of the class of Directors
whose term expires at that meeting shall be elected to hold office for a term
expiring at the Annual General Meeting to be held in the third year following
the year of their election.
In 1995, there were four meetings of the Board and all incumbent Directors
attended at least 75% of such meetings and of the meetings held by all
committees of the Board of which they were a member.
The Board of Directors has passed a resolution that if a Director does not
attend 50% of the Board meetings during his term, such Director will not be
eligible for nomination for reelection unless the Board feels there are
exceptional reasons to retain such Director.
The Board of Directors has established an Audit Committee, Compensation
Committee, Nominating and Corporate Governance Committee and a Finance
Committee.
Audit Committee
The Audit Committee of the Board of Directors meets with the Company's
independent accountants to discuss the scope and results of their audit and to
review the adequacy of the Company's accounting and control system. The
Committee reviews the audit fee and considers issues raised by its members, the
independent accountants and management. Each year the Audit Committee recommends
to the Board an independent accounting firm to audit the financial statements of
the Company. Messrs. Gould, Heap, Levine, Rance and Thornton comprised the Audit
Committee. The Audit Committee met twice during 1995.
2
<PAGE>
Compensation Committee
The Compensation Committee reviews the performance of corporate officers,
establishes overall employee compensation policies and recommends to the Board
of Directors major compensation programs. No member of the Compensation
Committee is a member of management or eligible for compensation from the
Company other than as a Director. Messrs. Clements, Heap, Levine and Weiser
comprised the Compensation Committee. The Compensation Committee met three times
during 1995.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee makes recommendations to
the Board as to nominations for the Board (including qualifications and criteria
for Board and Committee memberships) and compensation for Board and Committee
members, as well as structural, governance and procedural matters. Messrs.
Esposito, Clements, Loudon, O'Hara and Parker comprised the Nominating and
Corporate Governance Committee. The Nominating and Corporate Governance
Committee met three times during 1995.
Finance Committee
The Finance Committee reviews capital issues, dividend policy, acquisitions
and overall investment policy. Messrs. Esposito, Loudon, O'Hara, Parker, Senter
and Thornton comprised the Finance Committee. The Finance Committee met three
times during 1995.
Directors Compensation
During fiscal 1995, all Directors, except for Directors who are also
employees of the Company, received an annual fee of $25,000 plus $3,000 per
meeting. Committee Chairmen received an annual fee of $2,000 and all Committee
members an attendance fee of $1,000 per meeting.
Directors may elect to have all or part of the Board annual retainer paid
in the form of shares as per the terms of the Directors Stock and Option Plan.
For fiscal 1995 the following Directors elected to defer all or a portion
of their annual retainer:
Share
Amount Unit
Directors Deferred Credited
--------- -------- --------
Michael P. Esposito, Jr.................... $ 15,000 440
Scott A. Levine............................ $ 25,000 733
John T. Thornton........................... $ 25,000 733
John Weiser................................ $ 25,000 733
On December 1, 1994, all Non-Employee Directors were granted 500 options
(with the exception of Michael J. Kevany who became a Non-Employee Director on
December 1, 1994 and who was granted 2,000 options) exercisable at $37.50 per
share (the Fair Market Value on December 1, 1994) pursuant to the terms of the
Directors Stock and Option Plan.
On May 16, 1995 Mr. Kevany died.
On February 1, 1996, Mr. Levine resigned from the Board.
A Retirement Plan for Non-Employee Directors was implemented effective July
1, 1994 to provide the Directors with a pension on the termination of service
for a period equal to the time served as a Director. The amount to be
3
<PAGE>
paid to each Director equals the annual retainer at the date of termination
of service multiplied by the number of years served on the Board. As at November
30, 1995 the total accumulated pension was approximately $2.3 million. At the
Annual General Meeting, subject to shareholder approval, this plan will be
converted to a Stock Plan.
Effective April 1, 1995, Michael P. Esposito, Jr. was elected Chairman of
the Board and was awarded 25,000 options at an exercise price of $44.125 per
share. Mr. Esposito's compensation for the period April 1, 1995 to November 30,
1995 as Chairman comprised: salary of $166,667, pension contributions of
$16,667, bonus of $50,000 and 10,000 options at an exercise price of $62.375.
Certain Transactions
Certain Shareholders of the Company and their affiliates, including the
employers of or entities otherwise associated with certain of the Directors,
have purchased third party general liability, directors and officers,
professional liability and excess property insurance from the Company, on terms
the Company believes were no more favorable to the insured than those made
available to non-affiliated customers.
Affiliates of Marsh & McLennan Risk Capital Holdings, Ltd., including an
entity with which a Director is associated, are authorized insurance brokers to
the Company. Commissions paid to these brokers in fiscal year 1995 were $14.2
million. An affiliate of J.P. Morgan Capital Corporation, an entity with which a
Director is associated, provides investment management services to the Company,
the fees for which in fiscal year 1995 were $1.7 million.
The Company owns approximately 9.6 million shares in Mid Ocean Limited
("Mid Ocean"), representing 28% of the total outstanding shares. Messrs.
Esposito and O'Hara currently serve as Directors of Mid Ocean. Marsh & McLennan
Risk Capital Holdings, Ltd. and J.P. Morgan Capital Corporation also have
substantial equity investments in Mid Ocean. Mid Ocean is a reinsurer of the
Company's Property program and during 1995 received $908,000 in premiums.
In 1995, the Company, through its wholly-owned subsidiary X.L. Insurance
Company, Ltd. ("X.L."), purchased approximately 3.8 million shares in Risk
Capital Holdings, Inc. ("R.C.H.I."), representing approximately 22% of the total
outstanding shares. Messrs. Esposito, Clements and Heap currently serve as
Directors of R.C.H.I. Marsh & McLennan Risk Capital Holdings, Ltd. also has a
substantial equity investment in R.C.H.I.
The Company is not aware of any Director or executive officer who failed to
file on a timely basis disclosure reports required by Section 16 of the
Securities Exchange Act of 1934, as amended.
I. ELECTION OF DIRECTORS
At the Annual General Meeting, four Directors are to be elected to hold
office until the 1999 Annual General Meeting of Shareholders. All of the
nominees are currently serving as Directors and, with the exception of Dr.
Thrower, have been elected by the Shareholders at prior meetings. The remaining
Directors of the Company will continue to serve in accordance with their
previously elected term.
Unless authority is withheld by the Shareholders, it is the intention of
the persons named in the enclosed proxy to vote for the nominees listed below.
All of the nominees have consented to serve if elected, but if any becomes
unavailable to serve, the persons named as proxies may exercise their discretion
to vote for a substitute nominee. The name, principal occupation and other
information concerning each Director is set forth below.
The Board of Directors recommends that Shareholders vote FOR the nominees.
4
<PAGE>
NOMINEES FOR WHOM PROXIES WILL BE VOTED
Nominees for Directors for terms to expire in 1999:
Robert Clements, age 63, has been a Director of the Company since 1986. Mr.
Clements has served as Chairman of Marsh & McLennan Risk Capital Corp. since
1994. He served as President of Marsh & McLennan Companies, Inc. from 1992 to
1994 and has been a Director of Marsh & McLennan Companies, Inc. since 1981. He
previously served as President and Chairman of the Board of Marsh and McLennan,
Incorporated from 1985 and 1988, respectively. Mr. Clements also serves as
Chairman and Director of Risk Capital Holdings, Inc.
Michael P. Esposito, Jr., age 56, has been Chairman of the Board since
April 1995 and a Director of the Company since 1986. Mr. Esposito has been a
Partner of Inter-Atlantic Securities Corporation since June 1995. Mr. Esposito
served as Chief Corporate Compliance, Control and Administration Officer of The
Chase Manhattan Corporation from 1991 to 1995, having previously served as
Executive Vice President and Chief Financial Officer from 1987 to 1991. Mr.
Esposito serves as a Director of Mid Ocean Limited, Risk Capital Holdings, Inc.
and Forest City Enterprises.
Cyril Rance, age 61, has been a Director of the Company since 1990. Mr.
Rance served as President and Chief Executive Officer of the Bermuda Fire &
Marine Insurance Co. Ltd. from 1985 to 1990.
Ellen E. Thrower, age 49, has been a Director of the Company since December
1995. Dr. Thrower has been President and Chief Executive Officer of The College
of Insurance since 1988. Dr. Thrower serves as a Director of SCOR U.S.
Corporation.
DIRECTORS WHOSE TERMS OF OFFICE DO NOT EXPIRE AT THIS MEETING
Class I Directors whose terms expire in 1997:
Gilbert Gould, age 45, has been a Director of the Company since 1987. Mr.
Gould has served as Manager of Financial Services for Southern California Edison
Company since 1993. He previously served as Manager of Insurance for Southern
California Edison Company from 1984 to 1993.
Ian R. Heap, age 70, has been a Director of the Company since 1987 and was
Chairman of the Board of the Company from 1988 to 1992. He was President and
Chief Executive Officer of the Company and X.L. from 1987 to 1988. From 1992 to
1993 he served as President and Chief Executive Officer of Mid Ocean Reinsurance
Company Ltd. Mr. Heap also serves as a Director of Risk Capital Holdings, Inc.
John Loudon, age 59, has been a Director of the Company since 1992. Mr.
Loudon has been Chairman of Caneminster Ltd., a British investment company,
since 1991 and previously served as Chairman of Warrior International Limited
from 1988 to 1991. Mr. Loudon also serves as a Director of Tambrands Inc.,
Heineken N.V., Derby Trust plc, BNB Resources plc, Ocean Group plc, and Alex
Brown & Sons (Holdings) Ltd.
Robert S. Parker, age 58, has been a Director of the Company since 1991.
Dr. Parker has been Dean of the School of Business Administration at Georgetown
University since 1986. Dr. Parker also serves as a Director of Back Bay
Restaurant Group, Inc.
Alan Z. Senter, age 54, has been a Director of the Company since 1986. Mr.
Senter has served as Executive Vice President and Chief Financial Officer of
Nynex Corporation since 1994. Mr. Senter served as Principal of Senter
Associates, a financial advisory company, from 1993 to 1994. Mr. Senter served
as a Director and Executive Vice President and Chief Financial Officer of
International Specialty Products from 1992 to 1993. Mr. Senter previously served
as the Vice President and Senior Financial Officer of Xerox Corporation from
1990 to 1992.
5
<PAGE>
Class II Directors whose terms expire in 1998:
Brian M. O'Hara, age 47, has been President and Chief Executive Officer of
the Company since 1994 and a Director of the Company since 1986, having
previously served as Vice Chairman of the Company from 1987. He has also served
as Chairman and Chief Executive Officer of X.L. since December 1995, having
served as Chairman, President and Chief Executive Officer from 1994, as
President and Chief Executive Officer from 1992, and as President and Chief
Operating Officer from 1986. Mr. O'Hara also serves as a Director of Mid Ocean
Limited.
John T. Thornton, age 58, has been a Director of the Company since 1988.
Mr. Thornton has served as Executive Vice President and Chief Financial Officer
of Norwest Corporation since 1987.
John Weiser, age 64, has been a Director of the Company since 1986. Mr.
Weiser serves as Senior Vice President and Director of Bechtel Group, Inc. Mr.
Weiser served as President of Bechtel Enterprises, Inc. from 1988 to 1992 and as
General Counsel of Bechtel Group, Inc. from 1980 to 1988 and from 1992 to 1994.
On November 1, 1991, Mesquite Terminal Corporation ("Mesquite") and Integrated
Automated Terminals ("Integrated"), Inc. each filed voluntary petitions for
relief under Chapter 11 of the federal bankruptcy laws. Plans of Reorganization
for both companies were approved in December, 1992. Both corporations' sole
purpose is to hold, in the aggregate, a 35% partnership interest in Houston
Terminal Owning Company, L.P. Mr. Weiser is President and a Director of both
Mesquite and Integrated.
The following table summarizes the beneficial ownership as of December 1,
1995 of the Shares of the Company by each Director and executive officer and all
Directors and executive officers of the Company as a group.
Equity Securities Owned Beneficially as of December 1, 1995
<TABLE>
<CAPTION>
Number of Number of
Name Shares Options Total (1)
---- ------ --------- ---------
<S> <C> <C> <C>
James J. Ansaldi............... 13,500 56,500 70,000
Robert Clements (2)............ 17,500 3,000 20,500
K. Bruce Connell............... 6,000 38,900 44,900
Robert J. Cooney (3)........... 36,200 109,500 145,700
Michael P. Esposito, Jr. (4)... 5,730 37,500 43,230
Gilbert Gould.................. 200 3,000 3,200
Ian R. Heap.................... 2,000 3,000 5,000
John Loudon.................... 126 3,000 3,126
Brian M. O'Hara................ 87,920 187,920 275,840
Robert S. Parker............... 264 3,000 3,264
Cyril Rance.................... 1,753 3,000 4,753
Alan Z. Senter................. 440 3,000 3,440
John T. Thornton............... 2,880 3,000 5,880
Ellen E. Thrower............... 0 2,000 2,000
Brian G. Walford............... 60,000 81,000 141,000
John Weiser.................... 11,680 3,000 14,680
All Directors and executive officers of the Company
as a group 786,513
(16 individuals)................................
<FN>
(1) To the Company's knowledge, no Director or executive officer had a
beneficial ownership interest in excess of 1 percent of the outstanding
shares.
(2) Includes 2,500 shares that Mr. Clements owns indirectly.
(3) Excludes 1,300 shares owned by Mr. Cooney's family as to which Mr. Cooney
disclaims beneficial ownership.
(4) Includes 2,000 shares that Mr. Esposito, Jr. owns indirectly.
</TABLE>
6
<PAGE>
Executive Compensation
The following table shows the compensation of the five most highly
compensated executive officers of the Company for services paid for or rendered
in fiscal 1995 to the Company in all capacities:
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------
Name and
Principal
Position Annual Compensation Awards Payouts
--------- -------------------------------------- ------------------ --------------------
Other Restricted Long-term
Annual Stock No. of Incentive All Other
Year Salary Bonus Compensation(1) Awards Options Payouts Compensation(2)
---- ------ ----- --------------- ---------- ------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Brian M. O'Hara(3) .................... 1995 $ 500,000 $ 450,000 $ 107,652 $935,000 35,625 $ 0 $50,000
President and Chief ................. 1994 437,500 375,000 80,208 562,500 30,000 0 43,750
Executive Officer of the ............ 1993 380,000 300,000 82,137 0 30,000 0 38,000
Company and Chairman
and Chief Executive
Officer of X.L ......................
Robert J. Cooney ...................... 1995 $ 330,000 $ 250,000 $ 93,759 $623,750 25,000 $ 0 $33,000
Executive Vice President ............ 1994 285,000 150,000 61,594 375,000 25,000 0 33,798
of the Company and .................. 1993 257,300 160,000 56,828 0 20,000 0 25,730
President and Chief
Operating Officer of X.L ............
Brian G. Walford ...................... 1995 $ 320,000 $ 220,000 $ 98,788 $249,500 17,500 $ 0 $32,000
Executive Vice President ............ 1994 275,000 135,000 62,447 225,000 20,000 0 32,798
and Chief Financial Officer ......... 1993 250,500 150,000 57,276 0 20,000 0 25,050
of the Company and X.L ..............
K. Bruce Connell ...................... 1995 $ 200,000 $ 175,000 $ 73,515 $187,125 7,500 $ 0 $20,000
Executive Vice President ............ 1994 160,000 85,000 58,356 112,500 10,000 0 21,298
and Chief Underwriting .............. 1993 150,000 100,000 54,047 0 10,000 0 15,000
Officer of X.L ......................
Reinsurance Company,
Ltd .................................
James J. Ansaldi ...................... 1995 $ 250,000 $ 140,000 $ 73,904 $124,750 7,500 $ 0 $25,000
Senior Vice President of ............ 1994 236,775 120,000 61,105 37,500 10,000 0 28,975
X.L ................................. 1993 225,500 130,000 57,159 0 10,000 0 22,550
<FN>
(1) In 1995 Mr. O'Hara received $96,000 for housing expenses, in 1994 $79,380
and in 1993 $72,000. In 1995 Messrs. Cooney and Walford each received
$84,000 for housing expenses, in 1994 $52,980 and in 1993 $48,000. In 1995
Messrs. Connell and Ansaldi each received $66,000 for housing expenses, in
1994 $52,980 and in 1993 $48,000. The balance of the other annual
compensation is for travel expenses relating to home leave.
(2) All other compensation relates to contributions to the Money Accumulation
Pension Plan.
(3) The Compensation Committee granted Mr. O'Hara a facility to borrow up to $1
million from the Company. This facility does not bear interest unless Mr.
O'Hara terminates his employment with the Company, at which time the
interest will be the applicable Federal rate for long-term loans determined
in accordance with Section 1274(d) of the Internal Revenue Code of 1986, as
amended. The facility requires repayment of amounts drawn in ten annual
installments. During 1995, Mr. O'Hara borrowed $600,000 under the terms of
this facility.
</TABLE>
Share Purchase Options
The Company has granted options to purchase 32,920 and 10,000 Shares to
Messrs. O'Hara and Cooney, respectively, at an option price, payable in cash
upon exercise of the option, of $10.00. As of the date hereof all of such
options are currently exercisable and Mr. Cooney exercised 5,000 options on June
20, 1995. The option
7
<PAGE>
purchase periods terminate for Messrs. O'Hara and Cooney on December 11,
1996 and September 15, 1997, respectively.
In the event Mr. O'Hara's employment is terminated for the reason of death,
disability, termination without cause by the Company or a Change of Control of
the Company, Mr. O'Hara shall be entitled to exercise options for a cumulative
number of Shares determined by a formula based on years of service with the
Company; under the formula, all of the options are vested in the event of Mr.
O'Hara's termination. In the event Mr. O'Hara's employment is terminated by the
Company for cause, the option terminates and may not be exercised. The time
period in which Mr. O'Hara, or his estate in the case of death, shall be
entitled to exercise the option is 12 months following the termination event in
the case of death, and any time during the option period in the case of
disability, termination without cause, voluntary termination by Mr. O'Hara and a
Change of Control of the Company.
The following table shows the options granted under the 1991 Performance
Incentive Program in the last fiscal year to the five most highly paid executive
officers together with the potential realizable value at assumed rates of
return: Potential Realizable alue at Assumed Annual Rates of Stock Price
Individual Grants Appreciation for V Options Term
<TABLE>
<CAPTION>
% of
Total Options
Number Granted to Exercise
of Employees or Base
Options in Last Price
Name Granted Fiscal Year (per share)(1) Expiration Date 5% 10%
---- ------- ----------- -------------- --------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Brian M. O'Hara .............................. 35,000 19.3 $ 62.375 December 1, 2005 $1,372,945 $3,479,350
President and Chief
Executive Officer of the
Company and Chairman
and Chief Executive
Officer of X.L ............................
Robert J. Cooney ............................. 25,000 13.8 $ 62.375 December 1, 2005 $ 980,675 $2,485,250
Executive Vice President
of the Company and
President and Chief
Operating Officer of X.L ..................
Brian G. Walford ............................. 17,500 9.6 $ 62.375 December 1, 2005 $ 686,473 $1,739,675
Executive Vice President
and Chief Financial
Officer of the Company
and X.L ...................................
K. Bruce Connell ............................. 7,500 4.1 $ 62.375 December 1, 2005 $ 294,203 $ 745,575
Executive Vice President
and Chief Underwriting
Officer of X.L. Reinsurance
Company, Ltd. .............................
====================
James J. Ansaldi ............................. 7,500 4.1 $ 62.375 December 1, 2005 $ 294,203 $ 745,575
Senior Vice President of X.L.
- --------------------
(1) Market price at date of grant.
</TABLE>
8
<PAGE>
The following table shows the options exercised during the last fiscal year
by the five most highly paid executive officers together with the number and
value of unexercised options at November 30, 1995:
<TABLE>
<CAPTION>
No. of Unexercised Value of Unexercised
Shares Implied Options at In-the-Money Options
Acquired Value November 30, 1995 at November 30, 1995
Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Brian M. O'Hara ............................ -- $ -- 97,920/55,000 $3,632,310/$1,210,625
President and Chief Executive
Officer of the Company and
Chairman and Chief Executive
Officer of X.L ..........................
Robert J. Cooney ........................... 5,000 $ 232,500 43,000/41,500 $1,362,292/$928,645
Executive Vice President of the
Company and President and
Chief Operating Officer of X.L ..........
Brian G. Walford ........................... 12,000 $ 390,000 27,000/36,500 $ 672,792/$804,270
Executive Vice President and
Chief Financial Officer of the
Company and X.L .........................
K. Bruce Connell ........................... -- $ -- 13,601/17,799 $ 369,102/$394,523
Executive Vice President and
Chief Underwriting Officer of
X.L. Reinsurance Company, Ltd. ..........
James J. Ansaldi ........................... -- $ -- 30,000/19,000 $ 898,335/$414,790
Senior Vice President of X.L ............
None of the options have adjustable exercise prices.
The following table shows the restricted stock grants held by the five most
highly paid executive officers at November 30, 1995:
</TABLE>
<TABLE>
<CAPTION>
No. of restricted Value of restricted
Name stock grants at stock grants at
November 30, 1995 November 30, 1995
Vested/Unvested Vested/Unvested
----------------- --------------------
<S> <C> <C>
Brian M. O'Hara ........................................................ 5,000/34,500 $311,875/$2,151,938
President and Chief Executive Officer of the Company and
Chairman and Chief Executive Officer of X.L .........................
Robert J. Cooney ....................................................... 3,000/20,500 $187,125/$1,278,688
Executive Vice President of the Company and President and
Chief Operating Officer of X.L ......................................
Brian G. Walford ....................................................... 3,000/19,500 $187,125/$1,216,313
Executive Vice President and
Chief Financial Officer of the Company and X.L ......................
K. Bruce Connell ....................................................... 0/3,000 $ 0/$187,125
Executive Vice President and
Chief Underwriting Officer of X.L. Reinsurance
Company, Ltd. .......................................................
James J. Ansaldi ....................................................... 2,000/9,500 $ 124,750/$592,563
Senior Vice President of X.L ........................................
</TABLE>
There were no Long-Term Incentive Plan Awards in fiscal 1995.
9
<PAGE>
Compensation Committee Report
The Compensation Committee, composed of four independent outside Directors,
recommends guiding principles and major compensation programs to the Board of
Directors and approves annual incentive compensation awards under the program.
The Board of Directors and the Compensation Committee believe that the
Company's success requires a small but highly motivated and professional staff.
The compensation policies, therefore, are designed to attract and retain at the
Company's offshore location, and to motivate, such a staff.
The executive compensation program combines base salary, annual bonus and a
long-term incentive in the form of a stock ownership program. Annual
compensation is highly leveraged with at risk components, to provide a strong
link to Company and individual performance. To further align the interest of
executive management with the interests of Shareholders, the program provides
management with a significant stock component to their compensation package.
The Company retained the services of Sibson & Company, Inc., a human
resource management consulting firm, to advise on competitive pay levels for
senior executives and to recommend appropriate pay levels for future
compensation administration. The Company has consulted Sibson & Company, Inc. in
this capacity since January 1989.
Sibson & Company, Inc. based its annual compensation recommendations on an
assessment of United States market rates for salary and bonus, with adjustments
to reflect appropriate pay positioning and cost-of-living differences for
Bermuda versus the United States. Sibson & Company, Inc. developed competitive
annual stock option and grant levels based on a market survey of approximately
50 large financial services companies.
Base salary increases are based on individual and corporate performance and
reflect market and cost-of-living increases. Pay positioning was set at
approximately the 80th percentile of comparative insurance industry segments.
Rationale for pay positioning was based on four primary factors: need for highly
qualified professionals, specialized areas of expertise, retention of executives
critical to Company success and high barrier of recruitment for potential
competitors.
The Company has also engaged other management consultants to review the
effectiveness of the Company's executive compensation program and to assist in
defining appropriate measures of corporate performance for incentive
compensation purposes.
Under the Company's annual bonus plan, bonuses are paid in December based
on individual and corporate performance during the prior fiscal year.
Performance targets are established annually.
Major factors taken into account include share performance relative to a
peer group, premium growth, combined ratio, retention rate, investment
management results and strategic steps to protect and expand the Company's
business in a rapidly changing market, featuring perceived increased linkages of
the risk transfer capabilities of the insurance industry and the capital access
and availability of the financial markets.
The bonus paid to Mr. O'Hara in fiscal 1995 was 90% of his fiscal 1995
salary due to fine individual performance as Chief Executive Officer and
excellent operating results under his management.
Since July 1991, the date on which the Company's Shares were first listed
on the New York Stock Exchange, the Company's stock has significantly
outperformed both the Standard & Poor's 500 Stock Index and the Standard &
Poor's Property Casualty Index.
The Company's 18.04% return on equity for fiscal 1995 compares favorably to
the estimated property casualty industry average of 8.5%.
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The Company's Long-Term Incentive Plan provides annual grants of stock
options and restricted stock intended to motivate executives to improve total
return to Shareholders. The number of options granted is based on competitive
grant values for the salary level/position and the Share price at the time of
grant. December 1, 1991 was the third and final award date under the former
restricted stock program.
Performance Graph
Set forth below is a line graph comparing the yearly dollar change in the
cumulative total Shareholder return on the Company's Shares (assuming
reinvestment of dividends) from July 19, 1991 (the date on which the Company's
Shares were first listed on the New York Stock Exchange) through November 30,
1995 as compared to the cumulative total return of the Standard & Poor's 500
Stock Index and the cumulative total return of the Standard & Poor's Property
Casualty Index.
[ART]
II. SELECTION OF INDEPENDENT ACCOUNTANTS
The Audit Committee and the Board of Directors have recommended the
appointment of Coopers & Lybrand, Bermuda, as the independent Auditors of the
Company for the fiscal year ending November 30, 1996. Representatives of the
firm are expected to be present at the Annual Meeting with an opportunity to
make a statement if they desire to do so and to be available to respond to
appropriate questions.
Your Board of Directors recommends a vote FOR the proposal to appoint
Coopers & Lybrand.
III. THE COMPANY'S STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
The Company has adopted the EXEL Limited Stock Plan for Non-Employee
Directors (the "Plan"). The Plan will become effective as of December 1, 1995,
provided Shareholder approval is obtained. The Plan is intended to replace the
Retirement Plan for Non-Employee Directors of EXEL Limited (the "Retirement
Plan"), the benefits accrued under which (except in the case of Non-Employee
Directors who are age 65 or older on December 1, 1995 and elect to continue to
participate therein in lieu of participation in the Plan) will be frozen as of
December 1, 1995. The Retirement Plan currently provides for payment of cash
retirement benefits following termination of service on the Board based upon the
number of years of the Non-Employee Director's service on the Board. Attached to
this Proxy Statement as Annex A is the full text of the Plan.
The Plan is designed to provide deferred compensation for Non-Employee
Directors as a supplement to their cash retainers and attendance fees, and it is
expected to encourage qualified individuals to accept nominations as Directors
of the Company and to strengthen the mutuality of interest between the
Non-Employee Directors and the Company's other Shareholders. Benefits under the
Plan are payable in the form of Ordinary Shares ("Shares") of the Company,
except that cash will be paid in lieu of fractional Shares.
11
<PAGE>
In General
The total number of Shares reserved for issuance under the Plan is 100,000,
subject to equitable adjustment in the event of Share splits, Share dividends,
recapitalizations, reorganizations, spin-offs, repurchases or other such capital
changes. Additionally, Shares subject to an award under the Plan which are
forfeited, canceled, exchanged or surrendered will again be available for
issuance under the Plan. Shares issued under the Plan may consist, in whole or
in part, of authorized and unissued shares or treasury shares, including shares
acquired by purchase in the open market or in private transactions. The Plan
will terminate as to future awards on the date which is ten years after the
effective date of the Plan.
Share Unit Accounts
The Company shall maintain a Share unit account (an "Account") for each
Non-Employee Director. Share units will be credited to each Account as follows.
As of each December 1, beginning with December 1, 1995, there shall be credited
to each Non-Employee Director's Account the number of Share units (including
fractional units) determined by dividing the amount of the annual retainer fee
for a Director by the Fair Market Value of a Share on that date, provided that
Share units awarded as of December 1, 1995 shall be contingent upon approval of
the Plan. In addition, each Non-Employee Director may make an irrevocable
election prior to April 30, 1996 to covert the present value of the Non-Employee
Director's benefit accrued as of December 1, 1995 under the Retirement Plan into
a number of Share units under the Plan. The number of Share units will be an
amount determined by dividing the actuarial present value (determined as set
forth in the Plan), as of the effective date of the election, of the Non-
Employee Director's accrued benefit by the Fair Market Value of a Share on the
effective date of the election. The election will be effective six months after
it is made, provided that any such election will be contingent upon approval of
the Plan. As of each date on which a cash dividend is paid on Shares, each
Non-Employee Director's Account will be credited with a number of Share units
determined by multiplying the amount of such dividend (per Share) by the number
of Share units in the Account and dividing the total by the Fair Market Value of
a Share on the date of payment of the cash dividend.
Distribution of Benefits
The Plan benefit of a Non-Employee Director will, in general, be
distributed in the form of Shares equal in number to the Share units in the
Non-Employee Director's Account. Distribution of the benefits will be made
following termination of the Non-Employee Director's service on the Board, and
such distribution may be in installments, if elected by the Non-Employee
Director.
Plan benefits of a Non-Employee Director will be forfeited if he or she
ceases service as a Director before serving for five years, unless the
termination of service is due to death or reaching age 72. Years of service as a
Director of the Company prior to the effective date of the Plan will be taken
into account for this purpose. Moreover, if a Non-Employee Director ceases, for
any reason other than death, to serve as a Director of the Company prior to any
annual meeting of the Shareholders of the Company, the portion of the
Non-Employee Director's Plan benefit represented by the most recent Share units
credited to his or her Account shall be forfeited.
Administration
The Plan is intended to operate automatically and not require
administration. However, ministerial matters relating to the Plan will be
performed by the Secretary of the Company.
Amendment
The Board may amend or terminate the Plan without the consent of
Shareholders of the Company, except that any such amendment or termination will
be subject to the approval of the Company's Shareholders if required by any U.S.
Federal law or regulation or the rules of any stock exchange or quotation system
on which the Shares are then listed or quoted. However, the Plan may not be
amended more than once every six months, other than to
12
<PAGE>
comport with changes in the Internal Revenue Code of 1986, as amended, the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder.
Miscellaneous
The Plan is intended to constitute an unfunded plan for incentive and
deferred compensation. Accordingly, nothing contained in the Plan will give any
Non-Employee Director any rights that are greater than those of a general
creditor of the Company. In addition, the right of a Non-Employee Director to
amounts described under the Plan will not be subject to assignment or other
disposition by him or her other than by will or the laws of descent and
distribution. The Plan also provides that the Board is free to adopt other
compensation arrangements as it may deem desirable.
1995 Awards
The following table shows the number of Share units awarded to Non-Employee
Directors as of December 1, 1995, contingent upon the approval of the Plan by
Shareholders of the Company:
Director Share Units Awarded
-------- -------------------
Robert Clements............. 1,613
Michael P. Esposito, Jr. ... 1,073
Gilbert Gould............... 516
John Loudon................. 502
Robert S. Parker............ 579
Cyril Rance................. 890
Alan Z. Senter.............. 956
John T. Thornton............ 989
John Weiser................. 1,613
United States Federal Income Tax Consequences
The following is a summary of the principal United States Federal income
tax consequences associated with Share units credited under the Plan. It does
not describe all United States Federal tax consequences under the Plan, nor does
it describe foreign, state or local tax consequences:
Crediting of Share units under the Plan will not result in income to
Non-Employee Directors or a deduction to the Company at the time such units are
credited. In general, Non-Employee Directors will recognize ordinary taxable
income equal to the value of the Shares (and the amount of cash in lieu of
fractional Shares) distributed under the Plan at the time of the distribution.
The Company will generally be able to claim a corresponding deduction.
Your Board of Directors recommends a vote FOR the ratification of the
Company's Stock Plan for Non- Employee Directors.
IV. AMENDMENT TO EXEL LIMITED DIRECTORS STOCK & OPTION PLAN
The EXEL Limited Directors Stock & Option Plan (the "Option Plan") became
effective as of December 1, 1993, and it provides for automatic annual grants of
stock options to Non-Employee Directors and for the elective deferral of all or
part of a Non-Employee Director's annual retainer fee (which deferrals are
credited as Share units until distribution). The purposes of the Option Plan are
to advance the interests of the Company and its Shareholders by providing a
means to attract, retain and motivate Non-Employee Directors of the Company and
to further align the interests of the Non-Employee Directors with those of the
Shareholders of the Company.
Summary of Amendment
The Option Plan currently provides for automatic annual grants to each
Non-Employee Director of an option
13
<PAGE>
to purchase 500 Ordinary Shares of EXEL Limited ("Shares"). The annual
grants are made on each December 1, the exercise price per Share of each option
is equal to the Fair Market Value of a Share on the date of grant, and the term
of each option is ten years. The Board has adopted, subject to Shareholder
approval, an amendment to the Option Plan which provides, effective as of
December 1, 1995, that the annual automatic option grant will be for 1,000
Shares. The terms of the Option Plan, and the terms of the options and
Non-Employee Director's retainer fee deferrals provided for therein, are
otherwise unchanged.
Additional 1995 Option Grants
The following table summarizes the additional options granted to
Non-Employee Directors as of December 1, 1995 under the amendment to the Option
Plan, subject to Shareholder approval:
Number of Additional
Name Ordinary Shares Exercise Price($)
---- -------------------- -----------------
Robert Clements...... 500 62.375
Gilbert Gould........ 500 62.375
Ian R. Heap.......... 500 62.375
John Loudon.......... 500 62.375
Robert S. Parker..... 500 62.375
Cyril Rance.......... 500 62.375
Alan Z. Senter....... 500 62.375
John T. Thorton...... 500 62.375
Ellen E. Thrower..... 500 62.375
John Weiser.......... 500 62.375
U.S. Federal Income Tax Consequences
The following is a summary of the principal United States Federal income
tax consequences associated with options granted to Non-Employee Directors under
the Option Plan. It does not describe all United States Federal tax consequences
under the Option Plan, nor does it describe foreign, state or local tax
consequences:
The grant of an option to a Non-Employee Director will not result in
ordinary income to the Non-Employee Director or a deduction to the Company. In
general, upon exercise of an option, the Non-Employee Director will recognize
ordinary taxable income equal to the excess of the Fair Market Value of the
Shares obtained on exercise over the exercise price. The Company will be able to
claim a deduction in an equivalent amount. Any gain or loss upon a subsequent
sale or exchange of the Shares obtained on exercise will be a capital gain or
loss, long-term or short-term depending on the holding period for the Shares.
Special rules would apply if an option is exercised within six months of the
date of its grant.
Your Board of Directors recommends a vote FOR the ratification of the
Amendment to EXEL Limited Directors Stock & Option Plan.
V. STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Proposals intended for inclusion in next year's Proxy Statement should be
sent to the Company's Secretary at Cumberland House, Hamilton, HM 11, Bermuda
and must be received by October 25, 1996.
Any Shareholder entitled to vote at a meeting may nominate persons for
election as Directors if written notice of such intent is delivered or mailed,
postage prepaid, and received by the Secretary at the principal executive
offices of the Company not less than 5 days nor more than 21 days before the
date appointed for such meeting. The shareholder notice must include the
following information about the proposed nominee: (a) name, age, and business
and residence addresses; (b) principal occupation or employment; (c) class and
number of Shares or securities of the Company beneficially owned; and (d) any
other information required to be disclosed in solicitations of proxies pursuant
to Regulation 14A of the Securities Exchange Act of 1934, as amended, including
the proposed nominee's written consent to serve if elected. The notice must also
include information on the Shareholder making the nomination, such as: name and
address as it appears on the Company's books, and the class and number of Shares
of the Company beneficially owned. The nomination of any person not made in
compliance with the foregoing procedures shall be disregarded.
14
<PAGE>
VI. OTHER MATTERS
While management knows of no other issues, if any other matters properly
come before the meeting, it is the intention of the persons named in the
accompanying proxy form to vote the proxy in accordance with their judgment on
such matters.
Proxy Solicitation
The Company will bear the cost of this solicitation of proxies. Proxies may
be solicited by mail, personal interview, telephone and telegraph by Directors,
officers and employees of the Company and X.L. without receiving additional
compensation. In addition to the foregoing, the Company has retained Georgeson &
Company Inc. to assist in the solicitation of proxies for a fee of approximately
$10,000 plus reasonable out-of-pocket expenses and disbursements of that firm.
Upon request the Company will also reimburse brokers and others holding stock in
their names, or in the names of nominees, for forwarding proxy materials to
their principals.
The Company will furnish, without charge to any Shareholder, a copy of its
Form 10-K Report that it files annually with the Securities and Exchange
Commission. A copy of this report for the fiscal year ended November 30, 1995
may be obtained upon written request to the Company's Secretary at Cumberland
House, Hamilton, HM 11, Bermuda.
As ordered,
BRIAN M. O'HARA
President and Chief Executive Officer
15
<PAGE>
ANNEX A
EXEL LIMITED STOCK PLAN
FOR NON-EMPLOYEE DIRECTORS
SECTION 1. Introduction.
The EXEL Limited Stock Plan for Non-Employee Directors (the "Plan")
provides deferred compensation for Non-Employee Directors of EXEL Limited as a
supplement to their cash retainers and attendance fees, and is expected to
encourage qualified individuals to accept nominations as Directors of EXEL
Limited and to strengthen the mutuality of interest between the Non-Employee
Directors and EXEL Limited's other Shareholders. Benefits under the Plan are
payable in the form of Ordinary Shares of EXEL Limited.
SECTION 2. Definitions.
For the purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Board" means the Board of Directors of EXEL Limited.
(b) "Code" means the Internal Revenue Code of 1986, as amended from time to
time. References to any provision of the Code shall be deemed to include
successor provisions thereto and regulations thereunder.
(c) "Company" means EXEL Limited, a corporation organized under the laws of
the Cayman Islands, or any successor corporation.
(d) "Director" means a member of the Board who is not employed by the
Company or any of its subsidiaries, but shall not include any member of the
Board who is over age 65 on December 1, 1995 and who has elected in writing
(which election shall be irrevocable) to continue to accrue benefits under the
Retirement plan for Non- Employee Directors of EXEL Limited in lieu of
participation in the Plan.
(e) "Fair Market Value" means, with respect to Shares on any day, the
following:
(i) If the Shares are at the time listed or admitted to trading on any
stock exchange, then the Fair Market Value shall be the closing selling price
per share of Shares on the day preceding the date in question on the stock
exchange which is the primary market for the Shares, as such is officially
quoted on such exchange. If there is no reported sale of Shares on such exchange
on such date, then the Fair Market Value shall be the closing selling price on
the exchange on the last preceding date for which such quotation exists; and
(ii) If the Shares are not at the time listed or admitted to trading
on any stock exchange but are traded in the over-the-counter market, the Fair
Market Value shall be the closing selling price per share of Shares on the day
preceding the date in question, as such price is reported by the National
Association of Securities Dealers through the NASDAQ National Market System or
any successor system. If there is no reported closing selling price for Shares
on such date, then the closing selling price on the last preceding date for
which such quotation exists shall be determinative of Fair Market Value.
(f) "Plan" means this Stock Plan for Non-Employee Directors.
(g) "Plan Benefits" means the benefits described in Sections 5. and 6.
hereof.
(h) "Retirement Plan" means the Retirement Plan for Non-Employee Directors
of EXEL Limited.
(i) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Securities Exchange Act of 1934.
(j) "Share" means Ordinary Shares, $0.01 par value per share, of the
Company.
A-1
<PAGE>
SECTION 3. Administration.
To the extent the Plan relates to Share unit awards, it is intended to
operate automatically and not require administration. However, to the extent
that administration is necessary with respect to such awards, the Plan shall be
administered by the Secretary of the Company. Since the Share unit awards are
made automatically, this function will be limited to ministerial matters. The
Plan Administrator will have no discretion with respect to the selection of
Share unit award recipients, the timing of such awards or number of Share units
awarded. The portion of the Plan which relates to a Director's election to
convert his or her accrued benefit under the Retirement Plan to an equivalent
amount of Share units shall also be administered by the Secretary of the
Company. Since the conversion is based on elections by Directors in accordance
with the terms of this Plan, this function will be limited to ministerial
matters.
SECTION 4. Shares Subject to the Plan.
(a) Subject to adjustment as provided in Section 7(g), the total number of
Shares reserved for issuance under the Plan shall be 100,000. If any Shares
subject to a Share unit award hereunder are forfeited, canceled, exchanged or
surrendered, any Shares counted against the number of Shares reserved and
available under the Plan with respect to such Share unit award shall, to the
extent of any such forfeiture, cancellation, exchange or surrender, again be
available under the Plan.
(b) Any Shares distributed pursuant to the Plan may consist, in whole or in
part, of authorized and unissued shares or treasury shares including shares
acquired by purchase in the open market or in private transactions.
SECTION 5. Share Unit Accounts.
The Company shall maintain a Share unit account (an "Account") for each
Director. Share units will be credited to each such Account as follows:
(a) As of December 1 of each year, beginning with December 1, 1995, there
shall be credited to each Director's Account that number of Share units
(including fractional units) determined by dividing the amount of the annual
retainer fee for a Director by the Fair Market Value of a Share on that date;
provided, however, that such Share units awarded as of December 1, 1995 shall be
contingent upon approval of this Plan by the affirmative votes of the holders of
a majority of voting securities of the Company at a meeting duly held during
calendar year of 1996.
(b) Each Director may make an irrevocable written election prior to April
30, 1996 to convert the present value of the Director's benefit accrued as of
December 1, 1995 under the Retirement Plan (the "Accrued Benefit") into a number
of Share units (including fractional units) under this Plan, determined as set
forth below. The number of Share units shall be an amount determined by dividing
the "present value", as of the effective date of the election, of the Director's
Accrued Benefit, by the Fair Market Value of a Share on the effective date of
the election. The election shall be effective six months after it is made and
delivered to the Company; provided, however, that any election under this
Section 5(b) shall be contingent upon approval of this Plan by the affirmative
votes of the holders of a majority of voting securities of the Company at a
meeting duly held during calendar year 1996. For this purpose the "present
value" of the Director's Accrued Benefit shall be determined, as of the
effective date of the election, by (i) assuming payment of benefits under the
Retirement Plan would begin on the December 1 following the date the Director
attains age 72; (ii) using a discount rate of 6%, compounded annually; and (iii)
assuming that the Director's death will occur after all annual retirement
payments to which the Director is entitled under the Retirement Plan have been
made.
(c) As of each date on which a cash dividend is paid on Shares, there shall
be credited to each Account that number of Share units (including fractional
units) determined by (i) multiplying the amount of such dividend (per share) by
the number of Share units in such Account; and (ii) dividing the total so
determined by the Fair Market Value of a Share on the date of payment of such
cash dividend. The additions to a Director's Account pursuant to this Section
5(c) shall continue until the Director's Plan Benefit is forfeited or fully
paid.
A-2
<PAGE>
SECTION 6. Plan Benefits.
(a) Form. The Plan Benefit of a Director shall consist of Shares equal in
number to the Share units in the Director's Account. Any fractional Share unit
shall be paid in cash.
(b) Distribution.
(i) The Plan Benefit of a Director (other than the portion of the Plan
Benefit described in Section 5(b) shall be distributed either (x) in a lump sum
at the time of termination of the Director's service in the Board or (y) in up
to ten annual installments commencing at the time of termination of the
Director's service on the Board, as elected by the Director. Each Director's
distribution election must be made in writing within the later of (A) 60 days
after execution of this Plan document or (B) 60 days after the Director first
becomes eligible to participate in the Plan, and the election will be
irrevocable. The Plan Benefit of a Director described in Section 5(b) shall be
distributed in five annual installments commencing at the time of termination of
the Director's service on the Board. In the case of Plan Benefits distributed in
installments, the amount of Shares distributed in each installment shall be
equal to the number of Share units in the Director's Account subject to such
installment distribution at the time of the distribution divided by the number
of installments remaining to be paid.
(ii) Notwithstanding Section 6(b)(i), in the case of the death of a
Director, the balance of any Plan Benefit shall be distributed, within a
reasonable time as determined by the Company, after the Director's death to the
Director's beneficiary or beneficiaries, as specified by the Director on a form
furnished by and filed with the Secretary of the Company. If no beneficiary has
been designated by the Director or if no beneficiary survives the Director, the
undistributed balance of his or her Plan Benefit shall be distributed to the
Director's surviving spouse as beneficiary if such spouse is still living or, if
not living, in equal shares to the then living children of the Director as
beneficiaries or, if none, to the Director's estate as beneficiary.
(iii) The entire Plan Benefit of a Director shall be forfeited if a
Director's service as a Director shall terminate, for any reason whatsoever,
before the Director has served on the Board for five years; provided, however,
that such forfeiture shall not apply if the Director dies or reaches age 72
while serving as a Director of the Company. Years of service as a Director of
the Company prior to the effective date of the Plan shall be taken into account.
If a Director whose Plan Benefit is forfeited under this Section 6(b)(iii)
resumes service as a Director, his or her Plan Benefit as of the date of
forfeiture shall be restored as of the date such resumed service begins.
(iv) If a Director shall, for any reason other than death, cease to
serve as a Director of the Company prior to any Annual Meeting of the
Shareholders of the Company, there shall be forfeited (A) the portion of the
Director's Plan Benefit represented by the most recent Share units credited to
his or her Account in accordance with Section 5(a); and (B) all Share units
credited to his or her Account in accordance with Section 5(c) on account of
Share units required to be forfeited by clause (A).
SECTION 7. General.
(a) Non-Transferability. Except as provided in Section 6(b)(ii), no payment
of any Plan Benefit of a Director shall be anticipated, assigned, attached,
garnished, optioned, transferred or made subject to any creditor's process,
whether voluntarily or involuntarily or by operation of law. Any act in
violation of this subsection shall be void.
(b) Compliance with Legal and Trading Requirements. The Plan shall be
subject to all applicable laws, rules and regulations, including, but not
limited to, U.S. Federal and State laws, rules and regulations, and to such
approvals by any regulatory or governmental agency as may be required. The
Company, in its discretion, may postpone the issuance or delivery of Shares
under the Plan until completion of such stock exchange or market system listing
or registration or qualification of such Shares or other required action under
any U.S. State or Federal law, rule or regulation or under laws, rules or
regulations of other jurisdictions as the Company may consider appropriate, and
may require any Director to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of Shares in compliance with applicable laws, rules and regulations. No
provisions of the Plan shall be interpreted or construed to obligate the Company
to register any Shares under U.S. Federal or State law or under the laws of
other jurisdictions.
A-3
<PAGE>
(c) Taxes. The Company is authorized to withhold from any Shares delivered
under this Plan any amounts of withholding and other taxes due in connection
therewith, and to take such other action as the Company may deem advisable to
enable the Company and a Director to satisfy obligations for the payment of any
withholding taxes and other tax obligations relating thereto. This authority
shall include authority to withhold or receive Shares or other property and to
make cash payments in respect thereof in satisfaction of a Director's tax
obligations.
(d) Amendment. The Board may amend, alter, suspend, discontinue, or
terminate the Plan without the consent of Shareholders of the Company or
individual Directors, except that any such amendment, alteration, suspension,
discontinuation, or termination shall be subject to the approval of the
Company's Shareholders within one year after such Board action if such
Shareholder approval is required by any U.S. Federal law or regulation
(including Rule 16b-3, if applicable) or the rules of any stock exchange or
automated quotation system on which the Shares may then be listed or quoted;
provided, however, that, without the consent of an affected Director, no
amendment, alteration, suspension, discontinuation, or termination of the Plan
may impair the rights or, in any other manner, adversely affect the rights of
such Director hereunder. Notwithstanding the other provisions of this paragraph,
this Plan may not be amended more than once every six months other than to
comport with changes in the Code, the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.
(e) Unfunded Status of Awards. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Director, nothing contained in the Plan shall give
any such Director any rights that are greater than those of a general creditor
of the Company; provided, however, that the Company may authorize the creation
of trusts or make other arrangements to meet the Company's obligations under the
Plan to deliver cash, Shares, or other property pursuant to any award, which
trusts or other arrangements shall be consistent with the "unfunded" status of
the Plan unless the Company otherwise determines with the consent of each
affected Director.
(f) Non-Exclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the Shareholders of the Company for approval shall
be construed as creating any limitations on the power of the Board to adopt such
other compensation arrangements as it may deem desirable, including, without
limitation, the granting of options on Shares and other awards otherwise than
under the Plan, and such arrangements may be either applicable generally or only
in specific cases.
(g) Adjustments. In the event that subsequent to the effective date any
dividend in Shares, recapitalization Share split, reverse split,
re-organization, merger, consolidation, spin-off, combination, repurchase, or
Share exchange, or other such change, affects the Shares such that they are
increased or decreased or changed into or exchanged for a different number or
kind of Shares, other securities of the Company or of another corporation or
other consideration, then in order to maintain the proportionate interest of the
Directors and preserve the value of the Directors' Share units, (i) there shall
automatically be substituted for each Share unit a new unit representing the
number and kind of Shares, other securities or other consideration into which
each outstanding Share shall be changed or for which each such Share shall be
exchanged, and (ii) the number and kind of Shares available for issuance under
the Plan shall be equitably adjusted in order to take into account such
transaction or other change. The substituted units shall be subject to the same
terms and conditions as the original Share units.
(h) No Right to Remain on the Board. Neither the Plan nor the crediting of
Share units under the Plan shall be deemed to give any individual a right to
remain a Director of the Company or create any obligation on the part of the
Board to nominate any Director for re-election by the Shareholders of the
Company.
(i) Governing Law. The validity, construction and effect of the Plan shall
be determined in accordance with the laws of the State of New York without
giving effect to principles of conflict of laws.
(j) Effective Date; Plan Termination. The Plan shall become effective as of
December 1, 1995 (the "Effective Date") upon approval by the affirmative votes
of the holders of a majority of voting securities of the Company at a meeting
duly held during calendar year 1996. The Plan shall terminate as to future
awards on the date which is ten (10) years after the Effective Date, or, if
earlier, at such time as no Shares remain available for issuance pursuant to
Section 4. and the Company has no further obligations under the Plan.
(k) Titles and Headings. The titles and headings of the Sections in the
Plan are for convenience of reference only. In the event of any conflict, the
text of the Plan, rather than such titles or headings, shall control.
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<PAGE>
SECTION 8. Execution.
To record the adoption of the Plan by the Board, the Company has caused its
authorized officer to execute the same this day of , 1996.
EXEL LIMITED
By------------------------------------
ATTEST
- ------------------------------
Secretary
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