SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
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[X] Definitive Proxy Statement
[ ] Definitive Additional Materials [ ]
Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14a-12
Chartwell Re Corporation
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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Chartwell Re Corporation
Four Stamford Plaza
P. O. Box 120043
Stamford, Connecticut 06912-0043
Tel: (203) 705-2500
Fax: (203) 705-2710
April 10, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Chartwell Re Corporation (the "Corporation") on Thursday, May 21, 1998 at
9:00 a.m. The Annual Meeting will be held at the offices of the Corporation
located at Four Stamford Plaza, 107 Elm Street, 15th Floor, Stamford,
Connecticut 06902.
The official Notice of Annual Meeting, Proxy and Proxy Statement
containing information about the matters to be acted upon at the Annual Meeting
are enclosed. The matters listed in the Notice of Annual Meeting are described
in detail in the Proxy Statement.
The Board of Directors appreciates and encourages stockholder
participation in the Corporation's affairs. Whether or not you plan to attend
the Annual Meeting, please mark, sign, date and return the enclosed proxy
promptly in the prepaid envelope provided in order to make certain that your
shares will be represented at the Annual Meeting. If you attend the Annual
Meeting, you may, of course, withdraw your earlier Proxy and vote in person.
We sincerely hope that you will be able to attend the Annual Meeting.
Members of the Board of Directors, other executives of the Corporation and I
will be on hand to talk with you individually both before and after the Annual
Meeting.
Very truly yours,
/S/ Richard E. Cole
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Richard E. Cole
Chairman and Chief Executive Officer
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CHARTWELL RE CORPORATION
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held May 21, 1998
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To the Stockholders of Chartwell Re Corporation:
Notice is hereby given that the Annual Meeting of Stockholders of
Chartwell Re Corporation, a Delaware corporation, will be held on Thursday, May
21, 1998, at 9:00 a.m. at the offices of the corporation located at Four
Stamford Plaza, 107 Elm Street, 15th Floor, Stamford, Connecticut 06902, for the
following purposes:
1. To elect five persons to serve as Class III Directors until the
Annual Meeting of Stockholders in 2001 or until their successors
have been duly elected and qualified.
2. To consider and vote upon a proposal to amend the Chartwell Re
Corporation 1997 Omnibus Stock Incentive Plan to increase the
aggregate number of shares of Common Stock reserved for issuance
pursuant to the Plan.
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment(s) thereof.
These matters are more fully discussed in the accompanying Proxy
Statement. The Board of Directors has fixed the close of business on March 27,
1998 as the record date for determining stockholders entitled to notice of, and
to vote at, the Annual Meeting and any adjournment thereof. All stockholders,
whether or not they expect to attend the Annual Meeting in person, are requested
to mark, date, sign and return the enclosed proxy in the enclosed prepaid
envelope.
By Order of the Board of Directors,
/s/ John V. Del Col
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John V. Del Col
Vice President, General Counsel
and Secretary
Dated: April 10, 1998
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PROXY STATEMENT
OF
CHARTWELL RE CORPORATION
Four Stamford Plaza, 107 Elm Street
Stamford, Connecticut 06902
Solicitation of Proxies
The accompanying proxy is solicited from stockholders by the Board of
Directors of Chartwell Re Corporation (the "Corporation") for use at the annual
meeting of stockholders to be held on May 21, 1998 at 9:00 a.m. at the offices
of the Corporation located at Four Stamford Plaza, 107 Elm Street, 15th Floor,
Stamford, Connecticut 06902 (the "Annual Meeting"). When the enclosed proxy card
is properly executed and returned, the shares represented will be voted by the
proxyholders named on the card (the "Proxyholders") in accordance with the
stockholder's directions. Stockholders are urged to indicate the way they wish
to vote on each matter by marking the appropriate boxes on the card; if no
choice is specified, the shares will be voted as recommended by the Board of
Directors. This Proxy Statement, the accompanying form of proxy, the
Corporation's 1997 Annual Report to Stockholders and the Corporation's Annual
Report on Form 10-K for the year ended December 31, 1997 are first being sent to
stockholders on or about April 10, 1998.
Voting Procedures
Stockholders of record at the close of business on March 27, 1998 are
entitled to notice of the Annual Meeting and to vote the shares held by him or
her on that date at the Annual Meeting. Each share of common stock, par value
$.01 per share (the "Common Stock"), is entitled to one vote upon each of the
matters to be voted on at the Annual Meeting. As of March 27, 1998, a total of
9,623,653 shares of Common Stock of the Corporation were outstanding. There is
no cumulative voting of Common Stock.
Returning your completed proxy will not prevent you from voting in
person at the Annual Meeting should you be present and wish to do so. Any
stockholder executing a proxy may revoke such proxy at any time before it is
actually voted on any matter by notifying the Secretary of the Corporation in
writing at Four Stamford Plaza, P.O. Box 120043, Stamford, Connecticut 06912, by
submitting a duly executed proxy bearing a later date, or by voting by ballot at
the Annual Meeting, thereby canceling any proxy previously returned as to any
matter voted on by ballot.
Quorum and Votes Required
The presence, in person or by proxy, of a majority in number of the
outstanding shares of Common Stock as of the record date constitutes a quorum
and is required in order for the Corporation to conduct business at the Annual
Meeting. Under the General Corporation Law of the State of Delaware abstaining
votes and broker non-votes are both deemed to be present for purposes of
determining whether a quorum is present at a meeting but are not deemed to be
votes duly cast on a particular proposal. A broker non-vote occurs when a
nominee holding shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have discretionary voting power with
respect to such proposal and has not received voting instructions from the
beneficial owner. Shares with respect to which a stockholder has abstained from
voting (but not broker non-votes) are considered present at the meeting for
purposes of determining if the Corporation has obtained the requisite vote on a
particular matter. Consequently, an abstention will have the same effect as a
negative vote on a particular matter, but a broker non-vote will have no effect
on the vote.
Directors of the Corporation must be elected by a plurality of the vote
of the shares present in person or represented by proxy at the Annual Meeting.
This means that (i) the director nominees (up to the number of directors to be
elected) receiving the highest number of affirmative votes will be elected, (ii)
only shares voted in favor of a particular nominee will be counted toward such
nominee's achievement of a plurality and (iii) shares present at the Annual
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 the other matters 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 Annual Meeting for a particular
proposal is required for such proposal to become effective.
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ELECTION OF DIRECTORS
Your Board of Directors Recommends a Vote "For"
the Nominees for Election as Directors
The Corporation's Certificate of Incorporation and Bylaws provide for
the election of directors by the stockholders. As permitted by Delaware law, the
Board of Directors is divided into three classes (Classes I, II and III) as
nearly equal in number as possible. The terms of office of the members of one
class expire and a successor class is elected at each annual meeting of
stockholders. Vacancies in directorships (including vacancies resulting from
resignations and newly created directorships) may be filled, until the
expiration of the term of the vacated directorship and until a successor is
elected and qualified, by the vote of a majority of the directors then in
office.
At this Annual Meeting, the terms of office of the Class III directors
will terminate; therefore, the Board of Directors has nominated Messrs. Bonneau,
DeMichele, Feldman, Green and S. Richardson (all of whom are also presently
serving on the Board) for re-election as Class III directors, to serve
three-year terms until the Annual Meeting of Stockholders is held in 2001 or
until their successors have been duly elected and qualified. It is intended that
proxies will be voted in favor of these persons. If, for any reason, any of the
nominees is not able or willing to serve as a director when the election occurs
(a situation which is not presently contemplated), it is intended that the
proxies will be voted for the election of a substitute nominee in accordance
with the judgment of the Proxyholder.
Class III: Directors Standing for Re-election
Jacques Q. Bonneau, 43, has been a director of the Corporation since
February 1994 and has served as Senior Executive Vice President and Chief
Underwriting Officer since February 1997. From March 1993 until February 1997,
Mr. Bonneau served as Executive Vice President and Chief Underwriting Officer of
the Corporation. From October 1990, when he joined the Corporation and
established Specialty Accounts, to March 1993, Mr. Bonneau was a Senior Vice
President of the Corporation. Mr. Bonneau managed the Special Treaty and Program
Department of Trenwick Group, Inc. ("Trenwick") from June 1988 to October 1990,
and served as a director of Trenwick America Reinsurance Company. Prior to June
1988, he was a Vice President and manager of the Special Treaty and Program
Department of Trenwick.
Robert M. DeMichele, 53, has been a director of the Corporation as
well as a director, Chief Executive Officer and President of Lexington Global
Asset Managers, Inc. ("Lexington") since December 13, 1995. From 1982 until
December 13, 1995, Mr. DeMichele served as President, Chief Executive Officer
and a director of Piedmont Management Company Inc. ("Piedmont"). He also served
as President and Chief Operating Officer of The Reinsurance Corporation of New
York ("RECO") from 1985 until December 13, 1995. Mr. DeMichele also serves as a
director of The Navigators Group, Inc., Vanguard Cellular Systems, Inc.
("Vanguard") and Lexington Global Asset Managers, Inc.
Greg S. Feldman, 41, has been a director of the Corporation since 1992
and is a Managing Partner of Wellspring Capital Management LLC, a New York
investment firm. From 1990 to 1994, Mr. Feldman was with EXOR America Inc.,
where he was a Vice President. From 1988 to 1990, Mr. Feldman was a Vice
President of Clegg Industries, Inc., an investment firm.
Stephen L. Green, 47, has been a director of the Corporation since 1992
and has been a General Partner of Canaan Partners since 1992. From 1973 to 1992,
Mr. Green held a variety of financial positions with General Electric Company.
He is also Chairman of Chartwell Advisers Limited ("Chartwell Advisers") and a
director of Alarmguard Holdings, Inc., Advance Paradigm, Inc. and Suiza Foods
Corporation.
Stuart Smith Richardson, 51, has been a director of the Corporation
since December 13, 1995. Prior to December 13, 1995, Mr. Richardson had been a
director of Piedmont since 1983 and was Vice Chairman of Piedmont since 1986. He
is also Chairman of Lexington and Chairman of Vanguard. Stuart Smith Richardson
is the cousin of Lunsford Richardson, Jr., a Class II director.
For information with respect to arrangements relating to the election of certain
directors, see "Certain Relationships and Related Transactions."
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Class I: Term Expires in 1999
David J. Callard, 59, has been a director of the Corporation since 1992
and has been President of Wand Partners Inc. since December 1990. From November
1989 until he joined Wand in September 1990, Mr. Callard was a financial advisor
to several corporations. For 17 years prior thereto, he held several senior
positions with Alex. Brown & Sons, an investment bank, including, from 1984, the
positions of director and managing director. Mr. Callard is also a director of
Waverly, Inc., Panorama Trust and Information Management Associates, Inc.
Richard E. Cole, 58, became Chairman of the Board of Directors of the
Corporation in March 1993 and has served as Chief Executive Officer and a
director of the Corporation since July 1990. From July 1990 to March 1993, Mr.
Cole also served as President of the Corporation. From October 1988 to July
1990, Mr. Cole was engaged as a principal in various entrepreneurial activities
outside of the insurance and reinsurance industries. Prior to October 1988, Mr.
Cole was President of Cole, Booth, Potter (formerly Sten-Re Cole & Associates,
Inc.), a reinsurance brokerage firm focusing on specialty lines reinsurance and
reinsurance for regional companies.
Frank E. Grzelecki, 60, has been a director of the Corporation since
March 1994 and has been Vice Chairman of Handy & Harman since 1997. He has been
a director of Handy & Harman since prior to 1989, was President and Chief
Operating Officer of Handy & Harman from 1992 to 1997 and was Vice Chairman of
Handy & Harman from 1989 to 1992. Mr. Grzelecki is also a director of Spinnaker
Industries Inc., Morgan Group Inc., and Barnes Group Inc.
William R. Miller, 67, has been a director of the Corporation since
December 13, 1995. From 1994 until December 13, 1995, Mr. Miller had been a
director of Piedmont. He was President and Chief Executive Officer of Winterthur
U.S. Holdings from 1981 until 1990. Mr. Miller is also a director of Lexington.
He is currently retired.
Class II: Term Expires in 2000
Steven J. Bensinger, 43, has served as President of the Corporation
since March 1993 and as director of the Corporation since February 1994. From
February 1991 to November 1992, Mr. Bensinger was President and Chief Operating
Officer of Skandia America Reinsurance Corporation ("Skandia America"). From
prior to 1988 to February 1991, Mr. Bensinger was Skandia America's Chief
Financial Officer. Prior to joining Skandia America, he was a partner with the
international accounting and consulting firm of Coopers & Lybrand, L.L.P.
Lunsford Richardson, Jr., 73, has been a director of the Corporation
since December 13, 1995. From 1968 until December 13,1995, Mr. Richardson had
been a director of Piedmont and the Chairman of RECO. Mr. Richardson is also the
Chairman of Richardson Corporation of Greensboro and Vice Chairman of Lexington.
Lunsford Richardson, Jr. is the cousin of Stuart Smith Richardson, a Class III
director standing for re-election.
John Sagan, 77, has been a director of the Corporation since 1992 and
has been President of Sagan Associates, a financial advisory service firm, since
1986. Prior to that time he was Vice President and Treasurer of Ford Motor
Company. Mr. Sagan is also a director of Telident Inc. and SBCM Derivative
Products Ltd.
Stephen L. Wenman, 50, has been a director of the Corporation since May
1997 and Chief Executive Officer of Archer Group Holdings plc, a subsidiary of
the Corporation, since March 1997. He was Chairman of Special Risk Services
Group from January 1988 to October 1995 and Executive Director of Willis Faber &
Dumas Ltd., in London from March 1984 to December 1987.
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AMENDMENT OF
THE CHARTWELL RE CORPORATION
1997 OMNIBUS STOCK INCENTIVE PLAN
Your Board of Directors Recommends a Vote "For" This Proposal
Proposed Amendment
The Board of Directors has approved and recommends that you vote to
approve an amendment to the Chartwell Re Corporation 1997 Omnibus Stock
Incentive Plan (the "Plan") to increase the aggregate number of shares of Common
Stock subject to awards under the Plan by 300,000 shares.
Purpose of Amendment
The Board of Directors believes that the Plan promotes the interests of
the Corporation and the stockholders of the Corporation by providing officers
and other employees of the Corporation (including directors who are also
employees of the Corporation) with appropriate incentives and rewards to
encourage them to enter into and continue in the employ of the Corporation and
to acquire a proprietary interest in the long-term success of the Corporation
thereby aligning their interest more closely with the interest of the
stockholders. An aggregate of 607,000 shares of Common Stock are subject to
awards under the Plan, subject to adjustment as described below. As of March 31,
1998, the number of shares subject to award and available for grant under the
plan is only 126,000 shares. The Board of Directors believes that the number of
shares remaining in the Plan is insufficient to insure the continued success of
the Plan over its term. With the amendment, the aggregate number of shares
subject to award and available for grant will be 426,000. The Board believes
that the amendment will assure that the Plan has adequate shares to fulfill its
goals for the foreseeable future.
A summary description of the Plan is set forth below. A copy of the
Plan was filed as Exhibit A to the Corporation's definitive Proxy Statement on
Schedule 14A filed with the Securities and Exchange Commission (the "SEC") on
April 11, 1997 and is incorporated herein by reference. Attached as Exhibit A
hereto is a copy of the amended section of the Plan marked to show the
amendment. Capitalized terms used herein will, unless otherwise defined, have
the meanings assigned to them in the text of the Plan.
Summary of Terms
The Plan is the successor plan to the 1993 Stock Option Plan. An
aggregate of 607,000 shares of Common Stock are subject to awards under the
Plan, subject to adjustment as described below. Such shares may be authorized
and unissued shares, treasury shares or shares acquired by the Corporation for
purposes of the Plan. Generally, shares subject to an award that remain unissued
upon expiration or cancellation of the award will be available for other awards
under the Plan. The total number of shares of Common Stock subject to awards
(including awards paid in cash but denominated in shares of Common Stock)
granted to any Participant in the Omnibus Plan during any taxable year of the
Corporation will not exceed 300,000. In the event that the Compensation
Committee of the Board of Directors (the "Committee") determines that any
dividend or other distribution, stock split, recapitalization, reorganization,
merger or other similar corporate transaction or event affects the Common Stock
such that an adjustment is appropriate in order to prevent dilution or
enlargement of the rights of Participants under the Plan, then the Committee
will make such equitable changes or adjustments as it deems necessary to the
aggregate number of shares available under the Plan, the limit on individual
awards, the number of shares subject to each outstanding award, and the exercise
price of each outstanding option or stock appreciation right.
Awards under the Plan may be made in the form of (i) Incentive Stock
Options, (ii) Non-Qualified Stock Options, (iii) Stock Appreciation Rights, (iv)
Restricted Stock, (v) Phantom Stock and (vi) Stock Bonuses. Awards may be
granted to such officers and other employees of the Corporation and its
subsidiaries (including employees who are directors) as the Committee shall, in
its discretion, select. To date, only Non-Qualified Stock Options have been
awarded under the Plan.
The Plan is administered by the Committee which, at all times, consists
of two or more persons each of whom is an "outside director" within the meaning
of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
and a non-employee director within the meaning of Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Committee is authorized, among other things, to construe, interpret and
implement the provisions of the Plan, to select the persons to whom awards will
be
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granted, to determine the terms and conditions of such awards and to make all
other determinations deemed necessary or advisable for the administration of the
Plan.
Awards under the Plan
Stock Options. Unless the Committee expressly provides otherwise, an
option will not be exercisable prior to one year after the date of grant and
will become exercisable as to 25% of the shares subject thereto on each of the
first through fourth anniversaries of the grant. The Committee will determine
each option's expiration date; provided, however, that no incentive stock option
may be exercised more than ten years after the date of grant. The purchase price
per share payable upon the exercise of an option (the "option exercise price")
will be established by the Committee, but may be no less than the Fair Market
Value of a share of Common Stock on the date of grant. The option exercise price
is payable (i) in cash, by certified check, bank cashier's check or wire
transfer, (ii) by delivering instructions to a broker to deliver promptly to the
Corporation the amount of sale or loan proceeds to pay the full amount of the
Purchase Price, (iii) by delivering shares of Common Stock owned by the
Participant with appropriate stock powers, (iv) by electing to have the
Corporation retain shares of Common Stock which would otherwise be issued on the
exercise of the Option, (v) any combination of the foregoing forms or (vi) by
such other payment method as the Committee may prescribe.
Stock Appreciation Rights. Stock appreciation rights may be granted in
connection with all or any part of, or independently of, any option granted
under the Plan. A stock appreciation right granted independently of any option
will be subject to the same vesting rules as described above for options. A
stock appreciation right granted in tandem with any stock option will be
exercisable only when and to the extent the option to which it relates is
exercisable. The grantee of a stock appreciation right has the right to
surrender the stock appreciation right and receive from the Corporation, in
cash, an amount equal to the excess of the Fair Market Value of a share of
Common Stock over the exercise price of the stock appreciation right for each
share of Common Stock in respect of which such stock appreciation right is being
exercised.
Restricted Stock. The Committee may grant restricted shares of Common
Stock to such persons, in such amounts, and subject to such terms and conditions
(including the attainment of performance goals) as the Committee shall determine
in its discretion. Awards of Restricted Stock granted to Executive Officers of
the Corporation will be contingent on the attainment by the Corporation or a
subsidiary of the Corporation, if applicable, of one or more pre-established
performance goals (the "Performance Goals") established by the Committee. The
Performance Goals may be based on the attainment by the Corporation (and/or its
subsidiaries, if applicable) of any one or more of the following criteria: (i) a
specified percentage return on total stockholder equity of the Corporation; (ii)
a specified percentage increase in earnings per share of Common Stock; (iii) a
specified percentage increase in net income of the Corporation; and (iv) a
specified percentage increase in profit before taxation of the Corporation.
Phantom Stock. The Committee may grant shares of Phantom Stock to such
persons, in such amounts, and subject to such terms and conditions (including
the attainment of performance goals) as the Committee shall determine in its
discretion. If the requirements specified by the Committee are met, the grantee
of such an award will receive a cash payment equal to the Fair Market Value of
the shares covered thereby plus the dividends that would have been paid on such
shares had they actually been outstanding following the grant date. Awards of
Phantom Stock granted to Executive Officers of the Corporation will be
contingent on the attainment by the Corporation or a subsidiary of the
Corporation, if applicable, of any one or more of the Performance Goals noted
above.
Stock Bonus. The Committee may grant bonuses comprised of shares of
Common Stock free of restrictions to such persons, in such amounts, as the
Committee shall determine in its discretion. No Executive Officer shall be
eligible to receive a Stock Bonus under the Plan unless a prior determination of
eligibility is made by the Committee.
The Board may suspend, discontinue, revise, terminate or amend the Plan
at any time, provided, however, that stockholder approval will be obtained if
and to the extent that the Board deems it appropriate to satisfy Section 162(m)
of the Code.
In the event of a Change in Control, all outstanding awards will become
fully vested and/or immediately exercisable.
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Plan Benefits
Inasmuch as awards under the Plan are granted at the sole discretion of
the Committee and that performance goal criteria may vary from year to year and
from Participant to Participant, the Corporation cannot now determine the exact
number of Incentive Stock Options, Non-Qualified Stock Options, Stock
Appreciation Rights, Restricted Stock, Phantom Stock and Stock Bonuses to be
granted in the future to the executive officers named under the "Executive
Officer Compensation - Summary Compensation Table" below, to all current
executive officers as a group, or to all employees (including executive
officers). See "Executive Officer Compensation - Option Grants in Last Fiscal
Year" below for the number of options granted under the Plan and its predecessor
stock option plan to the executive officers named in the Summary Compensation
Table in the year ended December 31, 1997. During the year ended December 31,
1997, options to purchase 169,000 shares of Common Stock were granted to all
current executive officers as a group.
Certain Federal Income Tax Consequences
The following discussion is a brief summary of the principal United
States Federal income tax consequences under current Federal income tax laws
relating to awards under the Plan in effect at this time. This summary is not
intended to be exhaustive and, among other things, does not describe state,
local or foreign income and other tax consequences.
Non-Qualified Stock Options. An optionee will not recognize any taxable
income upon the grant of a Non-Qualified Stock Option. The Corporation will not
be entitled to a tax deduction with respect to the grant of a Non-Qualified
Stock Option. Upon exercise of a Non-Qualified Stock Option, the excess of the
Fair Market Value of the Common Stock on the exercise date over the option
exercise price will be taxable as compensation income to the optionee and will
be subject to applicable withholding taxes. The Corporation will generally be
entitled to a tax deduction at such time in the amount of such compensation
income. The optionee's tax basis for the Common Stock received pursuant to the
exercise of a Non-Qualified Stock Option will equal the sum of the compensation
income recognized and the exercise price.
In the event of a sale of Common Stock received upon the exercise of a
Non-Qualified Stock Option, any appreciation or depreciation after the exercise
date generally will be taxed as capital gain or loss and will be long-term
capital gain or loss if the holding period for such Common Stock is more than
one year.
Incentive Stock Options. An optionee will not recognize any taxable
income at the time of grant or timely exercise of an Incentive Stock Option and
the Corporation will not be entitled to a tax deduction with respect to such
grant or exercise. Exercise of an Incentive Stock Option may, however, give rise
to taxable compensation income subject to applicable withholding taxes, and a
tax deduction to the Corporation, if the Incentive Stock Option is not exercised
or if the optionee subsequently engages in a "disqualifying disposition," as
described below.
A sale or exchange by an optionee of shares acquired upon the exercise
of an Incentive Stock Option more than one year after the transfer of the shares
to such optionee and more than two years after the date of grant of the
Incentive Stock Option will result in any difference between the net sale
proceeds and the exercise price being treated a long-term capital gain (or loss)
to the optionee. If such sale or exchange takes place within two years after the
date of grant of the Incentive Stock Option or within one year from the date of
transfer of the Incentive Stock Option shares to the optionee, such sale or
exchange will generally constitute a "disqualifying disposition" of such shares
that will have the following results: any excess of (i) the lesser of (a) the
Fair Market Value of the shares at the time of exercise of the Incentive Stock
Option and (b) the amount realized on such disqualifying disposition of the
shares over (ii) the option exercise price of such shares, will be ordinary
income to the optionee, subject to applicable withholding taxes, and the
Corporation will be entitled to a tax deduction in the amount of such income.
Any further gain or loss after the date of exercise generally will qualify as
capital gain or loss and will not result in any deduction by the Corporation.
Restricted Stock. A grantee will not recognize any income upon the
receipt of Restricted Stock unless the holder elects under Section 83(b) of the
Code, within thirty days of such receipt, to recognize ordinary income in an
amount equal to the Fair Market Value of the Restricted Stock at the time of
receipt. If the election is made, the holder will not be allowed a deduction for
amounts subsequently required to be returned to the Corporation. If the election
is not made, the holder will generally recognize ordinary income, on the date
that the restrictions to which the Restricted Stock are subject are removed, in
an amount equal to the Fair Market Value of such shares on such date, less any
amount paid for the shares. At the time the holder recognizes ordinary income,
the Corporation generally will be entitled to a deduction in the same amount.
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Generally, upon a sale or other disposition of Restricted Stock with
respect to which the holder has recognized ordinary income (i.e., a Section
83(b) election was previously made or the restrictions were previously removed),
the holder will recognize capital gain or loss in an amount equal to the
difference between the amount realized on such sale or other disposition and the
holder's basis in such shares. Such gain or loss will be long-term capital gain
or loss if the holding period for such shares is more than one year.
Other Awards. The grant of a Stock Appreciation Right or Phantom Stock
award will not result in income for the grantee or in a tax deduction for the
Corporation. Upon the settlement of such a right or award, the grantee will
recognize ordinary income equal to the aggregate value of the payment received,
and the Corporation generally will be entitled to a tax deduction in the same
amount. A Stock Bonus generally will result in compensation income for the
grantee and a tax deduction for the Corporation, equal to the Fair Market Value
of the shares of Common Stock granted.
OTHER BUSINESS
The Board of Directors of the Corporation does not intend to present,
and does not have any reason to believe that others intend to present, any
matter of business at the Annual Meeting other than that set forth in the
accompanying Notice of Annual Meeting of Stockholders. However, if other matters
properly come before the Annual Meeting, it is the intention of the Proxyholders
to vote any proxies in accordance with their judgment.
CERTAIN INFORMATION REGARDING THE BOARD OF DIRECTORS
Attendance
In 1997, the Board of Directors held four (4) regularly scheduled
meetings and two (2) special meetings. All of the directors attended at least
75% of the meetings of the Board of Directors and of the committees of Board of
Directors on which they served except Directors Feldman and Miller who attended
66% of such meetings. Mr. Feldman did, however, attend at least 75% of the
regularly scheduled meetings of the Board of Directors and committee meetings of
which he was a member. The Corporation considers attendance at meetings to be
only one measure of a Director's contribution to the Corporation. Directors also
fulfill their responsibilities by rendering advice in informal consultations
with executive officers of the Corporation.
Committees of the Board of Director
The Board of Directors has four committees: the Audit Committee, the
Compensation Committee, the Corporate Finance Committee and the Nominating
Committee. All of the committees are comprised of non-employee directors. Some
of the director's committee assignments were amended, effective October 10,
1997, to reflect the resignation of Bruce W. Schnitzer from the Board of
Directors. Until his resignation. Mr. Schnitzer served on the Nominating
Committee and was Chairman of the Corporate Finance Committee.
The Audit Committee recommends an accounting firm to serve as the
Corporation's independent auditors, reviews the independence of such auditors,
reviews the audit reports prepared by such auditors, reviews the Corporation's
accounting and financial reporting practices and reports its findings and
recommendations to the Board of Directors for appropriate action. From January
1, 1997 through October 10, 1997, the Audit Committee was comprised of Messrs.
Sagan (Chairman), Feldman and Miller. Commencing October 10, 1997 the Audit
Committee is comprised of Messrs. Sagan (Chairman), Miller and L. Richardson,
Jr. The Audit Committee met twice during 1997.
The Compensation Committee supervises the Corporation's compensation
policies including the establishment of compensation and bonuses for executive
officers, monitors the compensation arrangements of other management employees
for consistency with corporate objectives and to enhance stockholder value and
approves significant changes in salaried employee benefits. The Compensation
Committee, which is comprised of Messrs. Grzelecki (Chairman), Callard and S.
Richardson, met four times during 1997.
7
<PAGE>
The Corporate Finance Committee reviews and monitors the financial
affairs of the Corporation including its investment strategy, financing
activities and mergers and acquisitions strategy. From January 1, 1997 through
October 10, 1997, the Corporate Finance Committee, was comprised of Messrs.
Schnitzer (Chairman), DeMichele, Green, and L. Richardson, Jr. Commencing
October 10, 1997, the Corporate Finance Committee is comprised of Messrs.
DeMichele (Chairman), Feldman and Green. The Corporate Finance Committee met
five times during 1997.
The Nominating Committee recommends board committee structure,
establishes criteria for the selection of directors, reviews the performance of
each director and proposes nominees for election to the Board of Directors. This
committee considers nominations for directors received from other directors,
stockholders and management. In order for the Nominating Committee to consider
stockholder nominations, such nominations must be submitted in writing and must
be received by the Secretary of the Corporation not less than sixty (60) nor
more than ninety (90) days prior to an Annual Meeting. The notice of nomination
must include the information concerning the nominee that must be disclosed about
nominees for election as directors in proxy solicitations prepared in accordance
with Regulation 14A under the Exchange Act. The notice must be accompanied by
the written consent of each proposed nominee to serve as a director of the
Corporation if so elected. From January 1, 1997 through October 10, 1997, the
Nominating Committee was comprised of Messrs. Green (Chairman), DeMichele and
Schnitzer. Commencing October 10, 1997, the Nominating Committee is comprised of
Messrs. Green (Chairman), DeMichele and Grzelecki. The Nominating Committee met
once during 1997.
Director Compensation
Each director who is not an employee of the Corporation received
an annual retainer of $20,000 in 1997. Each director serving as chairman of a
committee of the Board received additional committee chairman compensation of
$1,000 per year. Certain directors' annual compensation includes a pro rata
payment reflecting such director's assumption, in October 1997, of the
responsibility of chairman of a committee of the Board. In addition, directors
received reasonable out-of-pocket expenses incurred in attending meetings of the
Board of Directors and committees thereof. Directors who were employees of the
Corporation did not receive any fees for serving on the Board of Directors or
for committee service in 1997. On May 22, 1997, pursuant to the terms of the
1996 Non-Employee Director Stock Option Plan, all non-employee directors were
granted options to purchase 1,000 shares of Common Stock at an exercise price of
$27.875 per share.
Section 16(a) Compliance
Section 16(a) of the Exchange Act requires certain officers and
directors and persons who own more than 10% of the Corporation's Common Stock to
report to the SEC their ownership and changes in ownership of the Corporation's
Common Stock and other equity securities on Forms 3, 4, and 5. The Corporation
has adopted procedures to assist its officers and directors in complying with
these requirements which include assisting them in preparing forms for filing.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Corporation during 1997 and Forms 5 for the year ended December
31, 1997, the Corporation believes that all Section 16(a) filing requirements
have been complied with for all Section 16 officers except as follows: the Form
5s for the year ended December 31, 1997 reporting two separate option grants to
each of Messrs. Bensinger, Bonneau, Cole, Giordano, Hayes and Meyers and one
option grant to Mr. Wenman were filed with the SEC on March 17, 1998.
8
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to beneficial
ownership of the Common Stock based on publicly available information as of
February 28, 1998 by: (i) each person who is the beneficial owner of more than
5% of any class of the Corporation's Common Stock; (ii) all directors of the
Corporation and nominees for director; (iii) the Chief Executive Officer of the
Corporation and the four other most highly compensated executive officers of the
Corporation in 1997; and (iv) all directors and executive officers of the
Corporation as a group.
Percent of
Number of Common
Name of Beneficial Owner Shares Stock
------------------------ ---------- -----------
Wand/Chartwell Investments L.P. (1) 1,027,011 10.4%
c/o Wand Partners, Inc.
30 Rockefeller Plaza, Suite 3226
New York, NY 10012
- -------------------------------------
Firstar Investment Research & 622,200 6.5%
Management
777 East Wisconsin Avenue
Suite 1899
Milwaukee, WI 53201
- -------------------------------------
Siegler, Collery & Company 521,100 5.4%
712 Fifth Avenue
19th Floor
New York, NY 10019
- -------------------------------------
Waddell & Reed, Inc. 500,000 5.2%
6300 Lamar Avenue
Shawnee Mission, KS 66202
- -------------------------------------
Stuart Smith Richardson (3) 658,584 6.8%
32 Bibbins Road
Easton, CT 06612
- -------------------------------------
Richard E. Cole (4) 186,499 1.9%
Steven J. Bensinger 127,070 1.3%
Jacques Q. Bonneau 122,720 1.3%
Lunsford Richardson, Jr. (5) 90,990 *
Michael H. Hayes (4) 77,202 *
David J. Callard (1) 52,309 *
Robert M. DeMichele 21,035 *
John Sagan (6) 15,885 *
Stephen L. Green (7) 5,000 *
Stephen L. Wenman 5,000 *
William R. Miller 4,500 *
Greg S. Feldman 3,000 *
Frank Grzelecki 3,000 *
All executive officers and directors as a 1,474,741 14.5%
group (18 persons) (4)
- ----------------------
*Less than 1%
(1) 797,926 shares of the Corporation's Common Stock are owned of record by
Wand/Chartwell Investments L.P. (the "Partnership") and 46,608 shares of
the Corporation's Common Stock are issuable to the Partnership upon the
exercise of warrants owned by the Partnership. Further, 182,477 shares of
the Corporation's Common Stock are issuable to Wand Partners (Chartwell)
L.P. ("Wand (Chartwell)") upon the exercise of warrants held by Wand
(Chartwell). Mr. Callard, a director of the Corporation, owns of record 34%
of the outstanding shares of common stock of Wand Partners Inc. ("Wand"),
which is the general partner of Wand (Chartwell), the general partner of
the Partnership. As such, Mr. Callard shares with the other shareholder of
the general partner, investment and voting power with respect to, and may
be deemed to be the beneficial owner of, the Common Stock and the warrants
owned by the Partnership and Wand (Chartwell), respectively. Mr. Callard
owns 2.1138% of the limited partnership interests in the Partnership and
Wand owns 50% of the limited partnership interests in Wand (Chartwell).
Except as stated in the preceding sentence, Mr. Callard disclaims
beneficial ownership of the Corporation's Common Stock and the warrants
owned by the Partnership and Wand (Chartwell). Share ownership for Mr.
Callard shown in the chart represents his pro rata ownership interest in
the Corporation's Common Stock and the warrants held by the Partnership and
Wand (Chartwell), respectively.
(2) Torchmark Corporation, Liberty National Life Insurance Company, United
Investors Management Company, Waddell & Reed Financial Services, Inc.,
Waddell & Reed, Inc., Waddell & Reed Investment Management Company and
Waddell & Reed Asset Management Company (collectively, the "Filing
Persons"), are parties to an agreement, dated February 9, 1996, pursuant to
which they agreed to file jointly all required Schedule 13Gs and amendments
thereto as required by Rule 13d-1 and Rule 13d-2 promulgated under the
Exchange Act relating to the aggregate ownership by each of the Filing
Persons of any voting equity security of a class which is registered
pursuant to Section 12 of the Exchange Act.
(3) These shares include shares of various trusts of which Mr. Richardson is a
trustee and exercises shared voting and investment power with respect to
such shares. Mr. Richardson has sole voting and investment power with
respect to 253,886 shares of the Corporation's Common Stock. Mr. Richardson
is a Richardson Stockholder; see "Certain Relationships and Related
Transactions."
9
<PAGE>
(4) Includes, with respect to each of the officers indicated, the following
numbers of options exercisable within 60 days of the date hereof: Mr. Cole
158,700; Mr. Bensinger 119,900; Mr. Bonneau 109,800; Mr. Hayes 71,380 and
Mr. Wenman 5,000. With respect to all executive officers and directors as a
group, includes an aggregate of 566,060 options exercisable within 60 days
of the date hereof, 4,481 warrants held by Mr. Sagan and includes 656,584
shares held by Stuart Smith Richardson, a director of the Corporation. See
footnote 3 above.
(5) Mr. Richardson may be deemed to be a control person of the Corporation
(other than solely by reason of being a director of the Corporation)
according to the rules of the SEC. Mr. Richardson is a Richardson
Stockholder; see "Certain Relationships and Related Transactions."
(6) Includes 4,481 shares of the Corporation's Common Stock issuable upon the
exercise of the warrants owned by Mr. Sagan, a director of the Corporation.
(7) Mr. Green, a director of the Corporation, is a general partner of Canaan
Partners, the ultimate general partner of Canaan Capital Offshore Limited
Partnership C.V. ("CCLP") and Canaan Capital Limited Partnership. 178,127
shares of the Corporation's Common Stock and warrants to purchase 11,112
additional shares are owned of record by CCLP and 21,343 shares of the
Corporation's Common Stock and warrants to purchase 1,331 additional shares
are owned of record by Canaan Capital Limited Partnership. The other
general partners of Canaan Partners are Harry T. Rein, James J.
Fitzpatrick, Deepak Kamra, Gregory Kopchinsky, Robert J. Migliorino and
Eric A. Young. As such, Messrs. Green, Rein, Fitzpatrick, Kamra,
Kopchinsky, Migliorino and Young share investment and voting power with
respect to and may be deemed to be the beneficial owners of the
Corporation's Common Stock held by Canaan Partners.
CERTAIN INFORMATION REGARDING THE EXECUTIVE OFFICERS
Executive Officers
The following table provides information as of the date of this Proxy
Statement regarding the executive officers of the Corporation. Biographical
information for each of the individuals set forth in the table is presented
immediately following the table.
Name Age Title
---- --- -----
Richard E. Cole 58 Chairman and Chief Executive Officer
Steven J. Bensinger 43 President
Jacques Q. Bonneau 43 Senior Executive Vice President,
Chief Underwriting Officer
James A. Giordano 45 Executive Vice President
Michael H. Hayes 44 Executive Vice President
Charles E. Meyers 48 Senior Vice President, Chief Financial Officer
John V. Del Col 36 Vice President, General Counsel and Secretary
Richard E. Cole
See, Proposal Number 1 - Election of Directors
Steven J. Bensinger
See, Proposal Number 1 - Election of Directors
Jacques Q. Bonneau
See, Proposal Number 1 - Election of Directors
James A. Giordano, head of Regional Accounts and Marine & Aviation
Accounts, has served as an Executive Vice President of the Corporation since
February 1997 and, prior thereto, as Senior Vice President since April 1990.
From December 1985 to April 1990, Mr. Giordano served as a Vice President of the
Corporation. Mr. Giordano has been a Director of Chartwell Advisers since
December 1996.
10
<PAGE>
Michael H. Hayes, head of Global Accounts, has served as an Executive
Vice President of the Corporation since March 1990. Since September 1993, Mr.
Hayes has been Managing Director of Chartwell Advisers. From October 1988 to
March 1990, Mr. Hayes served as Senior Vice President of the Corporation. Prior
to October 1988, Mr. Hayes was a Vice President of Trenwick, where he was
responsible for Trenwick's treaty operations.
Charles E. Meyers has served as Senior Vice President and Chief
Financial Officer of the Corporation since October 1994. Prior to October 1994,
Mr. Meyers served as Senior Vice President and Treasurer of the Corporation from
August 1990 to October 1993 when he became Senior Vice President, Treasurer and
Chief Financial Officer of the Corporation. In addition, he served as Secretary
of the Corporation from July 1990 to October 1993. Prior thereto, he was Vice
President, Accounting and Finance of the Corporation from October 1988 to August
1990 and Assistant Vice President, Accounting and Finance from prior to October
1988.
John V. Del Col has served as Vice President, General Counsel and
Secretary since January 1998. From July 1994 until December 1997, Mr. Del Col
was the Deputy General Counsel and Assistant Secretary at MeesPierson Holdings
Inc., a Dutch merchant bank. From November 1991 until July 1994, Mr. Del Col was
an associate in the law firm LeBoeuf, Lamb, Greene & MacRae. Prior thereto, Mr.
Del Col was an associate in the law firm Sullivan & Cromwell.
Employment Arrangements
On December 31, 1997, the Corporation amended the employment agreements
with Messrs. Cole, Bensinger, Bonneau and Hayes (as amended, the "Employment
Agreements") extending the term of each agreement from December 31, 1997 to
December 31, 1998. The Employment Agreements provide for annual base salaries
(which may be increased at the discretion of the Corporation's Board of
Directors) of $425,000, $375,000, $300,000 and $225,000, respectively, during
1998. Under the terms of the Employment Agreements, bonus awards will be payable
to these employees, at the sole discretion of the Corporation's Board of
Directors, in an amount of 0-50% of base salary if annual results are less than
the Corporation's business plan for such year and 50-100% of base salary if
results equal or exceed such annual plan.
Messrs. Cole, Bensinger, Bonneau and Hayes will also receive a
supplement to the Corporation's Section 401(k) Plan payable at the earlier of
age 65 or employment termination. The supplement will be equal to the aggregate
contributions made with respect to the employee to a trust established by the
Corporation. Annual contributions to the trust will equal 20% of the year's base
salary for Mr. Cole and 13.5% of salary for Messrs. Bensinger, Bonneau and
Hayes. The employees will also be provided with certain other benefits and
perquisites pursuant to the Employment Agreements.
Upon a termination of the employee's employment by the Corporation
without "Cause" or by the employee for "Good Reason" (each as defined in the
Employment Agreements), the Corporation will be obligated to pay the employee's
base salary for three years and maintain certain benefits for two years. If such
termination occurs following a "Change in Control" as defined in the Employment
Agreements, a lump sum payment will be made equal to the amount described in the
immediately preceding sentence plus an amount equal to the annual bonus received
by the employee for the fiscal year immediately preceding the Change of Control
or the "Date of Termination" (as defined in the Employment Agreement) whichever
is greater.
In the event any payments to an employee under the Employment
Agreements are subject to an excise tax under Section 4999 of the Code, the
Corporation will reimburse the employee so that the employee will retain an
after-tax benefit as if the excise tax had not been incurred; provided, however,
that in the event a Change in Control triggers a lump sum payment to the
employee as described in the preceding paragraph, the employee's lump sum
payment shall include only that portion of the bonus which would not result in
the assessment of an excise tax.
Each employee is subject under the terms of his Employment Agreement to
a non-competition provision during the term of his employment and for up to one
year thereafter under certain circumstances and to ongoing
11
<PAGE>
confidentiality obligations. Although there is no obligation to mitigate
severance benefits, certain amounts received from a new employer will reduce the
Corporation's obligations under the Employment Agreements.
On March 20, 1997, Archer Group Management Services Limited, a
subsidiary of the Corporation, entered into an employment agreement with Stephen
L. Wenman pursuant to which Mr. Wenman agreed to act as Chief Executive of
Archer Group Holdings plc and all subsidiary and associated companies (the
"Archer Group"). The Agreement provides for an annual base salary of
(pound)250,000 plus an annual bonus award, which shall be determined at the sole
discretion of the Corporation's Board of Directors, in an amount of 0-50% of
base salary if annual results are less than the Corporation's business plan for
such year and 50-100% of base salary if results equal or exceed such annual
plan. Mr. Wenman will also be provided with certain other benefits and
perquisites pursuant to the Agreement. The Agreement shall remain in effect
until terminated by either party, and subject to certain exceptions, six months
prior notice is required to terminate the Agreement. If the Corporation
terminates the Agreement, Mr. Wenman shall be entitled to receive all
compensation and benefits payable under the Agreement during the notice period.
In addition, Mr. Wenman is subject to a non-competition provision which applies
during the term of his employment and, subject to certain exceptions, for up to
one year thereafter. Finally, Mr. Wenman has agreed to certain confidentiality
provisions which apply indefinitely as well as non-solicitation provisions which
apply for one year after his termination.
Executive Officer Compensation
The following table sets forth the cash and non-cash compensation with
respect to the fiscal years ended December 31, 1997, 1996 and 1995 awarded to or
earned by the Chief Executive Officer of the Corporation and the four other most
highly compensated executive officers of the Corporation and its subsidiaries:
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Annual Compensation Compensation
-------------------------------- -------------------------
Other Securities
Annual Underlying All Other
Salary Bonus Compensation Restricted Options Compensation
Year (1)(2)($) (2)($) (2)(3)($) Stock ($) (4)(#) (5)($)
---- -------- -------- ---------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard E. Cole 1997 $444,609 $212,500 $ 70,434 --- 40,000 $144,765
Chairman & Chief 1996 442,443 403,750 151,355 --- 28,500 96,086
Executive Officer 1995 367,905 314,775 147,277 --- --- 100,641
Steven J. Bensinger 1997 $378,239 $187,500 $ 63,257 --- 35,000 $ 58,861
President 1996 388,809 356,250 138,581 --- 26,000 58,580
1995 300,000 270,000 145,733 --- --- 47,818
Stephen L. Wenman 1997 $320,481 $206,250 --- --- 30,000 ---
Chief Executive 1996 --- --- --- --- --- ---
Archer Group 1995 --- --- --- --- --- ---
Holdings plc
Jacques Q. Bonneau 1997 $323,457 $150,000 $ 66,800 --- 30,000 $ 50,546
Sr. Executive Vice 1996 300,000 285,000 79,580 --- 23,000 49,263
President and Chief 1995 244,125 207,000 20,395 --- --- 40,132
Underwriting Officer
Michael H. Hayes 1997 $231,812 $112,500 $ 36,395 --- 5,000 $ 38,610
Executive Vice 1996 235,977 125,000 41,807 --- 10,000 38,360
President 1995 200,000 125,000 13,647 --- 3,100 33,940
</TABLE>
- ------------------------
(1) Includes payment for unused vacation. For 1995, the amounts included as
payment for unused vacation had, in 1995, been included in the Other Annual
Compensation column.
(2) Mr. Wenman's salary, bonus and other annual compensation are paid in
British pounds sterling. For purposes of this table, such amounts have been
converted into United States dollars at a rate of (pound)1=$1.65.
(3) Consists of personal benefits provided by the Corporation for the indicated
calendar years in which the amounts exceeded the lesser of $50,000 or ten
percent of the named executive's combined salary and bonus for the year.
Includes (a) financial planning expenses of $26,949, $21,247, $24,479 and
$27,293 for Messrs. Cole, Bensinger, Bonneau and Hayes, respectively, in
1997, (b) automobile expenses of $23,538, $26,043 and $32,622 for Messrs.
Cole, Bensinger and Bonneau, respectively, in 1997 and (c) club expenses of
$18,858 for Mr. Cole in 1997.
12
<PAGE>
(4) The exercise price of all options issued prior to December 12, 1995 was
adjusted to $21.00 per share as of such date.
(5) Includes (a) Corporation matching contributions to the Corporation's 401(k)
Savings Plan on behalf of each of the named executives of $4,750 in 1997,
(b) Corporation contributions to the Trust under Chartwell Re Corporation
Employment Agreements in the amounts of $85,000, $50,625, $40,500 and
$30,375 for Messrs. Cole, Bensinger, Bonneau and Hayes, respectively, in
1997 and (c) term life insurance policy premiums and related tax
adjustments of $55,015, $3,486, $5,296 and $3,485 for Messrs. Cole,
Bensinger, Bonneau and Hayes, respectively, in 1997.
Summarized below in tabular format are options granted during the
fiscal year ended December 31, 1997 to the above-named executive officers:
Option Grants in Last Fiscal Year
Potential Realized
Value
at Assumed Annual
% of Total Rates of
Options Stock Price
Granted to Appreciation
Employees Exercise for Option Term
Options in Fiscal Price Expiration --------------------
Name Granted Year ($/Sh) Date 5% 10%
- ---------------- -------- ------ --------- --------- -------- -----------
Richard E. Cole 40,000 9.3% $33.3125 8/05/07 $838,035 $2,123,714
Steven J. Bensinger 35,000 8.1% $33.3125 8/05/07 $733,280 $1,858,249
Jacques Q. Bonneau 30,000 7.0% $33.3125 8/05/07 $628,526 $1,592,785
Stephen L. Wenman 25,000 5.8% $27.5000 3/21/07 $417,094 $1,071,382
5,000 1.2% $33.3125 8/05/07 $104,754 $ 265,464
Michael H. Hayes 5,000 1.2% $33.3125 8/05/07 $104,754 $ 265,464
Set forth below are the number of outstanding options at December 31,
1997 granted to each of the executive officers named in the Summary Compensation
Table:
Number of Unexercised Value of Unexercised
Options In-the-Money
at Fiscal Year-End Options (1)
----------------------------- ---------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------ ---------------- ------------ --------------
Richard E. Cole 158,700 62,800 $1,999,200 $211,300
Steven J. Bensinger 105,900 69,800 $1,328,125 $370,613
Jacques Q. Bonneau 109,800 48,400 $1,380,400 $169,525
Stephen L. Wenman 0 30,000 $ 0 $158,438
Michael H. Hayes 71,380 13,620 $ 901,595 $ 78,093
(1) Based on closing price of $33.75 per share for the Corporation's Common
Stock on December 31, 1997.
Compensation Committee Report on Executive Compensation
Decisions regarding aggregate compensation of the executive officers of
the Corporation, including compensation in the form of cash bonuses and
equity-based awards, are made by the Compensation Committee of the Board of
Directors. During 1997, the Compensation Committee consisted of Frank E.
Grzelecki, David J. Callard and Stuart S. Richardson. None of the members of the
Compensation Committee are employees of the Corporation or any of its
subsidiaries. Decisions by the Compensation Committee regarding executive
compensation are submitted, as appropriate, to the other non-employee members of
the Board of Directors for approval.
13
<PAGE>
The Compensation Committee has implemented compensation policies, plans
and programs that are designed to attract, retain, motivate and reward executive
officers whom the Corporation expects to make significant contributions to the
Corporation's performance. To that end, the Corporation currently provides
executive officers with competitive salaries, cash bonuses based upon objective
criteria and equity-based awards principally in the form of stock options. The
Compensation Committee periodically evaluates the Corporation's performance,
executive compensation and executive share ownership compared with those of
other comparable United States reinsurance companies in making its decisions. In
1996, the Compensation Committee engaged William M. Mercer Inc. to assist in
evaluating the competitiveness of the Corporation's compensation program.
To the extent readily determinable and as one of the factors in the
consideration of compensation matters, the Compensation Committee considers the
anticipated tax treatment to the Corporation and the executives of various
payments and benefits. Section 162(m) of the Code limits federal income tax
deductions for compensation paid to the Chief Executive Officer and the four
other most highly compensated officers of a public company to $1,000,000 per
year, subject to an exception for performance-based compensation arrangements
which satisfy certain conditions. Total compensation of the Corporation's
executive officers did not exceed this deduction limitation in 1997. In the
future, the Compensation Committee will consider various alternatives for
preserving the deductibility of compensation payments and benefits to the extent
reasonably practicable and to the extent consistent with its other compensation
objectives.
Base Salary. Each year the Chief Executive Officer recommends to the
Compensation Committee a base salary for certain executive officers including,
but not limited to, the executive officers named in this Proxy Statement, other
than the Chief Executive Officer, the President, the Chief Executive of Archer
Group, the Chief Underwriting Officer and the Executive Vice President, Global
Accounts, whose salaries are set by the Compensation Committee and reflected in
their employment contracts. These salary recommendations are based on each
executive officer's individual performance over the past year, annual corporate
performance, industry salary trends and competitive salary levels. Base salary
decisions also take into account the Compensation Committee's views as to the
emphasis to be placed on variable, performance-based compensation. The
Compensation Committee reviews the recommendations of management and fixes the
base salaries of each executive officer, subject to approval by the full Board
of Directors.
Annual Bonus Plan. The Board of Directors of the Corporation adopted a
bonus plan for all officers of the Corporation in February 1994. The bonus plan
permits the Compensation Committee to award cash bonuses ranging from 0% to 100%
of base salary for any given year based on (i) officer level, (ii) the
Corporation's business plan results for the past year, including achievement of
budget goals, including, but not limited to, overhead expenses, growth in
premiums and return on investment, and achievement of strategic goals, and (iii)
the overall business climate in the reinsurance industry. The bonus plan calls
for bonuses in the lower end of the ranges to be awarded in years when lower
returns on investment are experienced and in the higher end of the ranges during
years when returns on investment should be greater.
Each year the Chief Executive Officer recommends to the Compensation
Committee a bonus for all eligible officers. In January 1998, the Compensation
Committee determined to recommend to the full Board of Directors that Messrs.
Cole, Bensinger, Bonneau, Hayes and Wenman receive bonuses of 50% of base salary
and all other eligible officers receive bonuses ranging from 1.5% to 40.6% of
base salary. In determining the bonus levels for 1997, the Compensation
Committee considered the achievement of budget goals and also recognized the
contributions of each officer to the corporation's performance in 1997 as well
as the Corporation's stock performance during the year. The non-employee members
of the Board of Directors approved the bonuses as recommended by the
Compensation Committee in February 1998.
Stock Options. The Compensation Committee administers the 1997 Omnibus
Stock Incentive Plan (the "Plan") which provides for the issuance of options to
purchase up to 607,000 shares of Common Stock. The primary purpose of the Plan
is to provide additional incentive to executive officers to further the growth,
development and financial success of the Corporation and to align officers'
interests with those of the Corporation's stockholders. The Compensation
Committee has a policy of considering annual grants under the Plan to executive
officers. In 1997, the Compensation Committee granted options to purchase
421,000 shares of the Common Stock to officers of the Corporation and its
subsidiaries. In making grants, the Compensation Committee also considered the
number of options remaining available for grant under the Plan and the aggregate
amount of options previously granted.
14
<PAGE>
Chief Executive Compensation. Pursuant to the terms of his employment
agreement, the Corporation's Chief Executive Officer, Richard E. Cole, received
$425,000 in base salary in 1997, which represents no increase over his base
salary for 1996. In February 1998, the Compensation Committee granted an award
to Mr. Cole under the Corporation's bonus plan of $212,500, or 50% of his 1997
base salary. In addition, Mr. Cole was awarded 40,000 options under the Plan in
1997 with an exercise price of $33.3125, which was the fair market value of the
Corporation's Common Stock on the date of grant.
Frank E. Grzelecki
David J. Callard
Stuart S. Richardson
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on
the Corporation's Common Stock with the cumulative total return of the Standard
& Poor's 500, the Standard & Poor's Property/ Casualty Index and a peer group
comprised of Everest Reinsurance Holdings, Inc., NAC Re Corp., Transatlantic
Holdings, Inc. and Trenwick Group, Inc., in each case since December 13, 1995,
the date on which the Corporation's Common Stock commenced trading
The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T.
Period Ending
-----------------------------------------------------
Index 12/13/95 12/31/95 06/30/96 12/31/96 06/30/97 12/31/97
- ------------------------- -------- -------- -------- -------- -------- --------
Chartwell Re Corporation 100.00 104.76 105.55 128.04 144.01 162.41
S&P 500 100.00 99.16 109.16 121.83 146.93 162.48
SNL Custom Peer Index 100.00 104.17 103.51 113.79 149.47 157.34
S&P Property-Casualty Index 100.00 99.97 104.35 122.03 148.30 173.99
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Stockholders Agreement
In connection with the Merger, the Corporation entered into the
Stockholders Agreement with certain of its stockholders, including VRS, IVCF II,
Michigan Mutual Insurance Company ("MMIC"), FIMA Finance Management Inc.
("FIMA") and the Partnership (collectively, the "Chartwell Stockholders"), and
Messrs. L. Richardson, Jr., S. Richardson, S. Boney, L.R. Preyer, P.L.
Richardson and R.R. Richardson, each of whom was a director of Piedmont, and
certain other stockholders who are relatives of the foregoing, or which are
trusts with respect to which the foregoing or such relatives are trustees or
hold beneficial interests, as well as a charitable organization established by
relatives of the foregoing (collectively, the "Richardson Stockholders"). The
Stockholders Agreement addresses certain matters relating to the control of the
Corporation after the December 1995 merger with Piedmont (the "Merger").
The Stockholders Agreement contains certain "standstill" provisions
intended to restrict the ability of any party to increase significantly its
present share of control over the Corporation. Pursuant to the standstill
provisions, the Chartwell Stockholders and the Richardson Stockholders are each
prohibited from engaging in certain actions, including the following: (i) during
the six month period commencing upon the effective time of the Merger,
purchasing additional shares of the Common Stock or other voting securities of
the Corporation, except that such stockholders may purchase additional shares of
the Common Stock up to certain individual and aggregate thresholds prescribed by
the Stockholders Agreement; and (ii) for three years following the effective
time of the Merger, depositing any shares of the Common Stock or other voting
securities of the Corporation into a voting trust or subjecting any such
securities to any arrangement or agreement (other than the Stockholders
Agreement) with respect to the voting of such securities, subject to specified
exceptions.
The Stockholders Agreement contains provisions giving the Richardson
Stockholders certain rights with respect to representation on the Corporation's
Board of Directors. Upon consummation of the Merger, the Richardson Stockholders
were entitled to designate four persons to be nominated for election to the
Corporation's Board of Directors.
Pursuant to the provisions of the Stockholders Agreement, the number of
persons that the Richardson Stockholders may designate will be permanently
reduced if the Richardson Stockholders hold less than 16% of the outstanding
Common Stock, such that (i) if the Richardson Stockholders hold less than 16%
but equal to or greater than 12% of the Common Stock, they will be entitled to
three designees; (ii) if the Richardson Stockholders hold less than 12% but
equal to or greater than 8% of the Common Stock, they will be entitled to two
designees; (iii) if the Richardson Stockholders hold less than 8% but equal to
or greater than 5% of the Common Stock, they will be entitled to one designee;
or (iv) if the Richardson Stockholders hold less than 5% of the Common Stock,
they will have no further designation rights. Initially, Stuart Smith Richardson
will exercise the designation rights of the Richardson Stockholders.
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<PAGE>
Currently, the Richardson Stockholders hold less than 16% but more
than 12% of the Corporation's outstanding Common Stock. As a result, the
Richardson Stockholders are currently entitled to designate three persons to be
nominated for election to the Board of Directors. Directors L. Richardson, Jr.,
S. Richardson and DeMichele are the current designees of the Richardson
Stockholders. Messrs. S. Richardson and DeMichele are standing for reelection at
this year's Annual Meeting.
The designees of the Richardson Stockholders will be recommended by the
nominating committee of the Corporation's Board of Directors to the full Board
of Directors for inclusion in the Corporation's slate of nominees for election.
Each party to the Stockholders Agreement agrees to vote its shares in favor of
the slate proposed by the Corporation, subject to the right of the Chartwell
Stockholders to be released from this voting obligation upon their ownership
interests in the Corporation declining below certain specified thresholds. As a
result of the Corporation's public offering of its Common Stock on March 8, 1996
(the "Offering"), the ownership interest of each of VRS, IVCF II, MMIC and FIMA
has fallen below such specified level, and therefore, each entity has been
released from its voting obligation. In the event that any designee of the
Richardson Stockholders ceases to serve as a director, the Richardson
Stockholders will have the right to designate another person for election to the
Corporation's Board of Directors.
If at any time (i) a designee of the Richardson Stockholders is sitting
on the Corporation's Board of Directors and (ii) the board of directors of any
principal U.S. subsidiary of the Corporation has any member who is not an
officer or employee of the Corporation or any of its subsidiaries, the
Corporation will cause one designee of the Richardson Stockholders that is
sitting on the Corporation's Board of Directors to be elected to the board of
directors of such subsidiary.
With certain limited exceptions, any party or parties to the
Stockholders Agreement proposing to sell a number of shares of the Common Stock
representing 30% or more of the then outstanding Common Stock in one or a series
of related transactions must provide written notice to the other parties of the
proposed action at least fifteen days before the proposed date of sale. Within
ten days of the receipt of such notice any other party may inform the party
proposing to sell the shares that such other party desires to sell shares to the
prospective buyer on the same terms and conditions set forth in the notice and,
upon giving notice, such other party will be entitled to participate on a
pro-rata basis in the sale of the shares.
Amendments to and modifications of the Stockholders Agreement may only
be made by written consent of the Corporation and other parties to the
Stockholders Agreement holding not less than 66 2/3% of the Common Stock then
subject to the Stockholders Agreement, except that any amendment, modification
or other change to the Stockholders Agreement that affects the nomination or
agreement to vote for the directors designated by the Richardson Stockholders
requires the consent of 66 2/3% of the outstanding shares of the Common Stock
held by the Richardson Stockholders.
The Stockholders Agreement became effective as of the effective time of
the Merger and will continue in effect (subject to the earlier termination of
certain provisions as described above) until (i) the written consent of all
parties to the agreement is obtained, (ii) the Corporation is dissolved or
liquidated, (iii) the date which is the later of (A) the date on which
settlement of the Corporation's CI Notes due 2006 occurs and (B) the first date
on which the total number of shares of the Common Stock held by the Richardson
Stockholders represents less than ten percent of the then issued and outstanding
the Common Stock, or (iv) eleven years from the date of the Stockholders
Agreement.
Registration Rights Agreement
In connection with the Merger, the Corporation entered into the
Registration Rights Agreement with the Chartwell Stockholders, the Richardson
Stockholders and a majority of the Corporation's other stockholders prior to the
Merger. Pursuant to the Registration Rights Agreement, at any time after the
Merger, upon the request of stockholders holding at least 400,000 shares of the
Common Stock or any security convertible into 400,000 shares of the Common
Stock, the Corporation must, subject to certain limited exceptions, use its best
efforts to register such shares under the Securities Act of 1933, as amended.
The Corporation is not obligated to effect more than one registration in any
nine-month period or more than four during the term of the Registration Rights
Agreement. The Richardson Stockholders have the right to initiate two of the
four registrations effected pursuant to the Registration Rights Agreement. The
Corporation will pay all registration expenses in connection with the four
registrations except underwriting discounts and commissions and transfer taxes.
If the registration is in the form of an underwritten offering, the stockholders
holding a majority of the shares of the Common Stock being registered pursuant
to the registration may select the underwriters, subject to the Corporation's
approval.
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<PAGE>
Parties to the Registration Rights Agreement have "piggyback" rights to
register shares of the Common Stock in connection with registration of equity
securities by the Corporation. These rights are subject to limitation if the
registration involves an underwritten offering and the managing underwriter
determines that, in its good faith view, the inclusion of all or any portion of
such additional securities in the registration would have a material adverse
effect on the offering.
Indemnification; Insurance
The Corporation has generally agreed to indemnify the former officers
and directors of Piedmont in respect of acts or omissions occurring prior to the
effective time of the Merger (including, but not limited to, the transactions
contemplated by the Merger Agreement pursuant to which the Merger was effected)
to the extent provided under Piedmont's certificate of incorporation and by-laws
as in effect on the date of the Merger Agreement, in each case subject to any
limitation imposed by applicable law. In addition, the Corporation has agreed to
maintain Piedmont's existing directors' and officers' liability insurance for
six years from the Merger, subject to certain limitations.
Certain Other Relationships
Relationship with Old American Insurance Company. Chartwell Reinsurance
Company ("Chartwell Reinsurance"), an indirect, wholly-owned subsidiary of the
Corporation, provides reinsurance on certain reinsurance programs to Old
American Insurance Company, a Texas County Mutual Company ("Old American").
Chartwell Reinsurance participates with other broker market reinsurers on those
programs which meet its underwriting requirements. Old American accounted for
0.2% 0.7%, and 0.9%, of the Corporation's gross premiums written for the years
ended December 31, 1997, 1996 and 1995, respectively. High Ridge Capital
Partners Limited Partnership ("High Ridge") is the majority owner of Old
American, and the Corporation owns approximately 26% of High Ridge.
AUDITORS
Representatives of Deloitte & Touche LLP, independent public auditors for
the Corporation for fiscal 1997 and the current fiscal year, will be present at
the Annual Meeting, will have an opportunity to make a statement, and will be
available to respond to appropriate questions.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
In order for a proposal by a stockholder of the Corporation to be
eligible to be included in the Corporation's Proxy Statement and form of proxy
card for the 1999 Annual Meeting of Stockholders, the proposal must be received
in proper form by the Secretary of the Corporation at the Corporation's
principal executive offices no later than December 11, 1998.
MISCELLANEOUS INFORMATION
The Corporation will bear the cost of preparing, assembling and mailing
the enclosed Proxy, this Proxy Statement and other material which may be sent to
stockholders in connection with this solicitation. Proxies will be solicited on
behalf of the Corporation by Corporate Investor Communications, Inc. ("CIC") for
a fee of approximately $4,000 plus reasonable out of pocket expenses. CIC and
the Corporation's officers, directors and other employees will solicit proxies
by mail and may solicit proxies by personal interview, telephone and telegraph.
The Corporation will also request brokers and other nominees to forward
soliciting material to the beneficial owners of shares which are held of record
by them and may reimburse such persons for expenses incurred in connection with
the forwarding of such material.
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<PAGE>
Copies of the 1997 Annual Report on Form 10-K are being mailed to the
stockholders simultaneously with this Proxy Statement. The financial statements
and financial information appearing in such Form 10-K are incorporated herein by
reference.
PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY.
By order of the Board of Directors,
/s/ John V. Del Col
-------------------------
John V. Del Col
Secretary
Dated: April 10, 1998
================================================================================
10-K REPORT
================================================================================
The Corporation's Annual Report on Form 10-K and the 1997 Annual Report to
Stockholders were mailed simultaneously herewith. Upon written request, the
Corporation will provide, without charge, additional copies of its Form 10-K
without Exhibits, as filed with the Securities and Exchange Commission, for the
fiscal year ended December 31, 1997. Copies of the Exhibits will be furnished at
the Corporation's cost for the reproduction, postage and handling thereof. The
Corporation will also provide, without charge, copies of the 1997 Omnibus Stock
Incentive Plan, which is incorporated herein by reference. Stockholders may
request such materials by writing to the Investor Relations Department,
Chartwell Re Corporation, Four Stamford Plaza, P.O. Box 120043, Stamford, CT
06912-0043, or by calling 203-705-2500.
================================================================================
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EXHIBIT A
Section 3(a) of the 1997 Omnibus Stock Incentive Plan is proposed to be amended
as follows (new language is indicated by underlining and deleted language is
indicated by strikeout):
3. Stock subject to the Plan
(a) Shares Available for Awards
The maximum number of shares of Common Stock reserved
for issuance under the Plan shall be 907,000 607,000 shares
(subject to adjustment as provided herein), which shall
include 107,000 shares authorized but unissued under the
Predecessor Plan. The total number of shares reserved for
issuance hereunder may be authorized but unissued Common Stock
or authorized and issued Common Stock held in the Company's
treasury or acquired by the Company for the purposes of the
Plan. The Committee may direct that any stock certificate
evidencing shares issued pursuant to the Plan shall bear a
legend setting forth such restrictions on tranferability as
may apply to such shares pursuant to the Plan.
The grant of a Tandem SAR shall not reduce the number
of shares of Common Stock with respect to which Incentive
Awards may be granted pursuant to the Plan. Upon the exercise
of any Tandem SAR, the related Option shall be canceled to the
extent of the number of shares of Common Stock as to which the
Tandem SAR is exercised and, notwithstanding the foregoing,
such number of shares shall no longer be available for
Incentive Awards under the Plan.
<PAGE>
APPENDIX A
PROXY
CHARTWELL RE CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Revoking any such prior appointments, the undersigned hereby appoints
Richard E. Cole and Steven J. Bensinger, and each of them, with full power of
substitution, as proxies to represent and to vote the shares of common stock of
Chartwell Re Corporation (the "Corporation") held of record on March 27, 1998 by
the undersigned at the Annual Meeting of Stockholders of the Corporation to be
held at 9:00 a.m. Eastern Standard Time, Thursday, May 21, 1998 at the offices
of the Corporation, Four Stamford Plaza, 107 Elm Street, 15th Floor, Stamford,
Connecticut 06902, and at any adjournment thereof. The proxies are to vote the
shares of the undersigned as instructed below and on the reverse side and in
accordance with their judgement on all other matters which may properly come
before the Annual Meeting, all in accordance with the accompanying Notice of
Annual Meeting and Proxy Statement, receipt of which is hereby acknowledged by
the undersigned.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
X Please mark
- -- vote as in this
example
IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS AND FOR PROPOSAL 2.
The Board of Directors Recommends a Vote FOR Proposals 1 and 2
1. Election of Directors
__ For all nominees Withhold Authority to
(except as indicated to the contrary below) vote for all nominees
Nominees: Jacques Q. Bonneau, Robert M. DeMichele, Greg S. Feldman,
Stephen L. Green and Stuart Smith Richardson
Instruction: To withhold authority to vote for any individual nominee
please print that nominee's name below.
- -----------------------------------------
2. Proposal to amend the 1997 Omnibus Stock Incentive Plan to increase the
aggregate number of shares of Common Stock reserved for issuance pursuant to
the Plan.
____ For ____ Against _____ Abstain
Please sign, date and mail this Proxy Card in the enclosed envelope. No
postage is required if mailed in the United States.
Dated: _______________ , 1998
Please sign exactly as name appears hereon. When
shares are held by joint tenants, both should sign.
When sigining as attorney, executor, administrator,
trustee or guardian, please give full title as
such. If corporation or partnership, please sign
in full corporate or partnership name by
authorized officer or signatory.
<PAGE>
APPENDIX B
Chartwell Re Corporation
1997 OMNIBUS STOCK INCENTIVE PLAN
1. Establishment and Purpose.
There is hereby adopted the Chartwell Re Corporation 1997 Omnibus Stock
Incentive Plan (the "Plan"). The Plan shall be the successor to the Amended and
Restated Chartwell Re 1993 Stock Option Plan (the "Predecessor Plan"). Upon
adoption of the Plan by the Board of Direc tors and approval of the Plan by
stockholders of Chartwell Re Corporation (the "Company"), no further awards
shall be made under the Predecessor Plan. If the Plan is not approved by the
stockholders of The Company, the Predeces sor Plan shall remain in full force
and effect. The Plan is intended to promote the interests of the Company and the
stockholders of The Company by providing officers and other employees of the
Company (including directors who are also employees of the Company) with
appropriate incentives and rewards to encourage them to enter into and continue
in the employ of the Company and to acquire a proprietary interest in the
long-term success of the Company, thereby aligning their interest more closely
to the interest of stockholders.
2. Definitions.
As used in the Plan, the following definitions apply to the terms
indicated below:
(a) "Award Agreement" shall mean the written agree ment between
the Company and a Participant evi dencing an Incentive Award.
(b) "Board of Directors" shall mean the Board of
Directors of the Company.
(c) "Cause," when used in connection with the
termination of a Participant's employment by the
Company, shall mean (i) the willful and
continued failure by the Participant
substantially to perform his duties and
obligations to the Company (other than any such
failure resulting from his incapacity due to
physical or mental illness) or (ii) the willful
engaging by the Participant in misconduct which
is materially injurious to the Company. For
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purposes of this Section 2(c), no act, or failure to act, on a
Participant's part shall be considered "willful" unless done,
or omitted to be done, by the Participant in bad faith and
without reasonable belief that his action or omission was in
the best interest of the Company. The Committee shall
determine whether a termination of employment is for Cause.
(d) "Change in Control" shall mean any of the fol
lowing occurrences:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company, any trustee
or other fiduciary holding securities under an employee
benefit plan of the Company or any corporation owned, directly
or indirectly, by the stock holders of the Company in
substantially the same proportions as their ownership of stock
of the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of The Company representing 50% or
more of the com bined voting power of The Company's then out
standing securities;
(ii) during any period of not more than two consecutive years
(not including any period prior to the adoption of the Plan),
individuals who at the beginning of such period constitute the
Board of Directors and any new director (other than a director
designated by a person who has entered into an agreement with
the Company to effect a transaction described in clause (i),
(iii) or (iv) of this Section) whose election by the Board of
Directors or nomination for election was approved by a vote of
at least two-thirds (2/3) of the directors then still in
office who either were directors at the begin ning of the
period or whose election or nomina tion for election was
previously so approved, cease for any reason to constitute at
least a majority thereof;
(iii) the stockholders of the Company approve a
merger or consolidation of the Company with any
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<PAGE>
other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Company
outstanding immedi ately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviv ing entity) more than 50% of
the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after
such merger or consolidation or (B) a merger or consolidation
effected to implement a recapitalization of The Company (or
similar transaction) in which no "person" (as herein above
defined) acquires more than 50% of the combined voting power
of the Company's then out standing securities; or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all
of the Company's assets.
(e) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(f) "Committee" shall mean the Compensation Commit
tee of the Board of Directors. The Committee
shall consist of two or more persons each of
whom is an "outside director" within the meaning
of Section 162(m) of the Code and a "Non-
Employee Director" within the meaning of Rule
16b-3 under the Exchange Act (or who satisfies
any other criteria for administering employee
benefit plans as may be specified by the
Securities and Exchange Commission in order for
transactions under such plan to be exempt from
the provisions of Section 16(b) of the Exchange
Act).
(g) "Company" shall mean, Chartwell Re Corporation,
a Delaware corporation.
(h) "Commmon Stock" shall mean the common stock of
the Company, par value $0.01 per share.
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<PAGE>
(i) "Disability" shall mean: (1) any physical or
mental condition that would qualify a Partici
pant for a disability benefit under the long-
term disability plan maintained by the Company
or a Subsidiary of the Company and applicable to
such Participant; or (2) when used in connection
with the exercise of an Incentive Stock Option
following termination of employment, disability
within the meaning of Section 22(e)(3) of the
Code.
(j) "Effective Date" shall mean the date upon which
this Plan is adopted by the Board of Directors.
(k) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(l) "Executive Officer" shall have the meaning set
forth in Rule 3b-7 promulgated under the Ex
change Act.
(m) "Exercise Date" shall mean the date on which a
Participant may exercise an Incentive Award.
(n) "Fair Market Value" of a share of Common Stock,
as of a date of determination, shall mean (i)
the closing sales price per share of Common
Stock on the national securities exchange on
which such stock is principally traded for the
last preceding date on which there was a sale of
such stock on such exchange, or (ii) if the
shares of Common Stock are not listed or admit
ted to trading on any such exchange, the closing
price as reported by the Nasdaq Stock Market for
the last preceding date on which there was a
sale of such stock on such exchange, or (iii) if
the shares of Common Stock are not then listed
on the Nasdaq Stock Market, the average of the
highest reported bid and lowest reported asked
prices for the shares of Common Stock as
reported by the National Association of
Securities Dealers, Inc. Automated Quotations
System for the last preceding date on which
there was a sale of such stock in such market,
or (iv) if the shares of Common Stock are not
then listed on a national securities exchange or
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<PAGE>
traded in an over-the-counter market, such value
as determined by the Committee in good faith.
(o) "Incentive Award" shall mean an Option, Tandem SAR,
Stand-Alone SAR, Restricted Stock grant, Phantom Stock grant
or Stock Bonus granted pur suant to the terms of the Plan.
(p) "Incentive Stock Option" shall mean an Option that is an
"incentive stock option" within the meaning of Section 422 of
the Code.
(q) "Issue Date" shall mean the date established by the Company on
which certificates representing shares of Restricted Stock
shall be issued by the Company pursuant to the terms of
Section 10(e)of the Plan.
(r) "Non-Qualified Stock Option" shall mean an
Option that is not an Incentive Stock Option.
(s) "Option" shall mean an option to purchase shares of Common
Stock granted pursuant to Section 7 of the Plan.
(t) "Participant" shall mean an employee of the Company or a
subsidiary of the Company to whom an Incentive Award is
granted pursuant to the Plan, and, upon his death, his
successors, heirs, executors and administrators, as the case
may be.
(u) "Phantom Stock" shall mean the right, granted pursuant to
Section 11 of the Plan, to receive in cash the Fair Market
Value of a share of Common Stock.
(v) "Plan" shall mean this 1997 Omnibus Stock Incentive Plan, as
amended from time to time.
(x) "Reference Value" shall mean, with respect to Stand-Alone
SARs, the greater of the Fair Market Value or the value given
by the Compensation Committee.
(y) "Restricted Stock" shall mean a share of Common
Stock which is granted pursuant to the terms of
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<PAGE>
Section 10 hereof and which is subject to the restrictions set
forth in Section 10 of the Plan.
(z) "Rule 16b-3" shall mean the Rule 16b-3 promul
gated under the Exchange Act.
(aa) "Section 162(m)" shall mean Section 162(m) of
the Code and the regulations promulgated there
under.
(ab) "Securities Act" shall mean the Securities Act
of 1933, as amended from time to time.
(ac) "Stand-Alone SAR" shall mean a stock apprecia tion right
granted pursuant to Section 9 of the Plan which is not related
to any Option.
(ad) "Stock Bonus" shall mean a bonus payable in shares of Common
Stock granted pursuant to Section 12 of the Plan.
(ae) "Subsidiary" shall mean a "subsidiary corpora
tion" within the meaning of Section 424(f) of
the Code.
(af) "Tandem SAR" shall mean a stock appreciation right granted
pursuant to Section 8 of the Plan which is related to an
Option.
(ag) "Vesting Date" shall mean the date established by the
Committee on which a share of Restricted Stock or Phantom
Stock may vest.
3. Stock subject to the Plan
(a) Shares Available for Awards
The maximum number of shares of Common Stock reserved for
issuance under the Plan shall be 607,000 shares (subject to
adjustment as pro vided herein), which shall include 107,000
shares authorized but unissued under the Predecessor Plan. The
total number of shares reserved for issuance hereunder may be
autho rized but unissued Common Stock or authorized and issued
Common Stock held in the Company's
6
<PAGE>
treasury or acquired by the Company for the pur poses of the
Plan. The Committee may direct that any stock certificate
evidencing shares issued pursuant to the Plan shall bear a
legend setting forth such restrictions on transfer ability as
may apply to such shares pursuant to the Plan.
The grant of a Tandem SAR shall not reduce the number of
shares of Common Stock with respect to which Incentive Awards
may be granted pursuant to the Plan. Upon the exercise of any
Tandem SAR, the related Option shall be canceled to the extent
of the number of shares of Common Stock as to which the Tandem
SAR is exercised and, notwithstanding the foregoing, such
number of shares shall no longer be available for Incentive
Awards under the Plan.
(b) Individual Limitation
The total number of shares of Common Stock subject to
Incentive Awards (including Incentive Awards payable in cash
but denominated as shares of Common Stock, i.e., Stand-Alone
SARs and Phantom Stock), awarded to any employee during any
tax year of the Company, shall not exceed 300,000 shares.
Determinations under the pre ceding sentence shall be made in
a manner that is consistent with Section 162(m) of the Code.
(c) Adjustment for Change in Capitalization.
In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash,
Common Stock, or other property), recapitalization, stock
split, re verse stock split, reorganization, merger,
consolidation, spin-off, combination, repur chase, or share
exchange, or other similar corporate transaction or event,
affects the Common Stock such that an adjustment is appro
priate in order to prevent dilution or enlarge ment of the
rights of Participants under the Plan, then the Committee
shall make such equi table changes or adjustments as it deems
neces sary or appropriate to any or all of (i) the
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<PAGE>
number and kind of shares of stock which may thereafter be
issued in connection with Incentive Awards, (ii) the number
and kind of shares of stock issued or issuable in respect of
outstanding Incentive Awards, and (iii) the exercise price,
grant price, or purchase price relating to any Incentive
Award; provided that, with respect to Incentive Stock Options,
such adjustment shall be made in accordance with Section 424
of the Code.
(d) Re-use of Shares.
The following shares of Common Stock shall again become
available for Incentive Awards: any shares subject to an
Incentive Award that remain unissued upon the cancellation,
surrender, exchange or termination of such award for any
reason whatsoever; any shares of Restricted Stock forfeited;
and any shares in respect of which a stock appreciation right
is settled for cash.
4. Administration of the Plan.
The Plan shall be administered by the Committee. The Committee shall
have the authority in its sole discretion, subject to and not inconsistent with
the express provisions of the Plan, to administer the Plan and to exercise all
the powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administra tion of the Plan, including, without
limitation, the authority to grant Incentive Awards; to determine the per sons
to whom and the time or times at which Incentive Awards shall be granted; to
determine the type and number of Incentive Awards to be granted, the number of
shares of Stock to which an Award may relate and the terms, condi tions,
restrictions and performance criteria relating to any Incentive Award; to
determine whether, to what extent, and under what circumstances an Incentive
Award may be set tled, canceled, forfeited, exchanged, or surrendered (provided
that in no event shall the foregoing be construed to permit the repricing of an
Option (whether by amendment, cancellation and regrant or otherwise) to a lower
exercise price); to make adjustments in the performance goals in recognition of
unusual or non-recurring events affecting the Company or the financial
statements of the Company (to
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<PAGE>
the extent in accordance with Section 162(m)of the Code, if applicable), or in
response to changes in applicable laws, regulations, or accounting principles;
to construe and interpret the Plan and any Incentive Award; to prescribe, amend
and rescind rules and regulations relating to the Plan; to determine the terms
and provisions of Award Agree ments; and to make all other determinations deemed
neces sary or advisable for the administration of the Plan.
The Committee may, in its absolute discretion, without amendment to the
Plan, (i) accelerate the date on which any Tandem SAR or Stand-Alone SAR or
Incentive Award relating to Phantom Stock granted under the Plan becomes
exercisable, waive or amend the operation of Plan provisions respecting exercise
after termination of employment or otherwise adjust any of the terms of such
Option or Stand-Alone SAR, and (ii) accelerate the Exercise Date or Issue Date,
or waive any condition imposed hereunder, with respect to any share of
Restricted Stock or Phantom Stock or otherwise adjust any of the terms
applicable to such share.
No member of the Committee shall be liable for any action, omission or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Committee) arising out of any action, omission or
determination relating to the Plan, if, in either case, such action, omission or
determination was taken or made by such member, director or employee in good
faith and in a manner such member, director or employee reasonably believed to
be in or not opposed to the best interests of the Company.
5. Eligibility.
The persons who shall be eligible to receive Incentive Awards pursuant
to the Plan shall be such employees of the Company or its Subsidiaries(including
officers of the Company or its Subsidiaries, whether or not they are directors
of the Company or its Subsidiaries) as the Committee shall select from time to
time. Directors who
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<PAGE>
are not employees or officers of the Company shall not be eligible to receive
Incentive Awards under the Plan.
6. Awards Under the Plan; Award Agreement.
The Committee may grant Options, Tandem SARs, Stand-Alone SARs, shares
of Restricted Stock, shares of Phantom Stock and Stock Bonuses, in such amounts
and with such terms and conditions as the Committee shall determine, subject to
the provisions of the Plan.
Each Incentive Award granted under the Plan (except an unconditional
Stock Bonus) shall be evidenced by an Award Agreement which shall contain such
provisions as the Committee may in its sole discretion deem necessary or
desirable. By accepting an Incentive Award, a Participant thereby agrees that
the award shall be subject to all of the terms and provisions of the Plan and
the applicable Award Agreement.
7. Options.
(a) Identification of Options.
Each Option shall be clearly identified in the applicable
Award Agreement as either an Incen tive Stock Option or a
Non-Qualified Stock Op tion.
(b) Exercise Price.
Each Award Agreement with respect to an Option shall set forth
the amount (the "option exercise price") payable by the
grantee to the Company upon exercise of the Option. The option
exer cise price per share shall be determined by the Committee
but shall in no event be less than the Fair Market Value of a
share of Common Stock on the date the Option is granted.
(c) Term and Exercise of Options.
(1) Unless the applicable Award Agreement pro
vides otherwise, an Option shall become
cumulatively exercisable as to 25 percent
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<PAGE>
of the shares covered thereby on each of the first,
second, third and fourth anni versaries of the date
of grant. The Com mittee shall determine the
expiration date of each Option; provided, however,
that no Incentive Stock Option shall be exercisable
more than 10 years after the date of grant. Unless
the applicable Award Agreement pro vides otherwise,
no Option shall be exer cisable prior to the first
anniversary of the date of grant.
(2) An Option may be exercised for all or any portion of
the shares as to which it is exercisable, provided,
that no partial exercise of an Option shall be for an
aggregate exercise price of less than $1,000. The
partial exercise of an Option shall not cause the
expiration, termination or cancellation of the
remaining portion thereof.
(3) An Option shall be exercised by delivering notice to
the Company's principal office, to the attention of
its Secretary, no less than one business day in
advance of the effective date of the proposed
exercise. Such notice shall specify the number of
shares of Common Stock with respect to which the
Option is being exercised and the effective date of
the proposed exercise and shall be signed by the
Participant or other person then having the right to
exercise the Option. Such notice may be withdrawn at
any time prior to the close of business on the
business day immediately preceding the effective date
of the proposed exercise. Payment for shares of
Common Stock purchased upon the exercise of an Option
shall be made on the effective date of such exercise
by one or a combination of the following means: (i)
in cash, by cer tified check, bank cashier's check or
wire transfer; (ii) by delivering a properly executed
exercise notice to the Company together with a copy
of irrevocable instructions to a broker to deliver
11
<PAGE>
promptly to the Company the amount of sale or loan
proceeds to pay the full amount of the Purchase
Price, (iii) by delivering shares of Common Stock
owned by the Participant with appropriate stock
powers, (iv) by electing to have the Company retain
shares of Common Stock which would otherwise be
issued on the exercise of the Option, or (v) any
combination of the foregoing forms. In determining
the number of shares of Common Stock necessary to be
delivered to or retained by the Company, such shares
shall be valued at their Fair Market Value as of the
exercise date.
(4) Certificates for shares of Common Stock purchased
upon the exercise of an Option shall be issued in the
name of the Partic ipant or other person entitled to
receive such shares, and delivered to the Partici
pant or such other person as soon as prac ticable
following the effective date on which the Option is
exercised.
(d) Limitations on Incentive Stock Options.
(1) To the extent that the aggregate Fair Market Value of
shares of Common Stock with respect to which
Incentive Stock Options are exercisable for the first
time by a Participant during any calendar year under
the Plan and any other stock option plan of the
Company (or any Subsidiary of the Company) shall
exceed $100,000, or such higher value as may be
permitted under Section 422 of the Code, such Options
shall be treated as Non-Qualified Stock Options. Such
Fair Market Value shall be determined as of the date
on which each such Incentive Stock Option is granted.
(2) No Incentive Stock Option may be granted to an
individual if, at the time of the grant, such
individual owns stock possessing more than ten
percent of the total combined voting power of all
classes of stock of the Company unless (i) the
exercise price per
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<PAGE>
share of such Incentive Stock Option is at least 110
percent of the Fair Market Value of a share of Common
Stock at the time such Incentive Stock Option is
granted and (ii) such Incentive Stock Option is not
exer cisable after the expiration of five years from
the date such Incentive Stock Option is granted.
(e) Effect of Termination of Employment.
(1) Unless the applicable Award Agreement pro vides
otherwise, in the event that the employment of a
Participant with the Com pany or a Subsidiary of the
Company shall terminate for any reason other than
death, Disability or Cause, (i) Options granted to
such Participant, to the extent that they are
exercisable at the time of such termination, shall
remain exercisable until the date that is ninety
(90)days after such termination, on which date they
shall expire, and (ii) Options granted to such
Participant, to the extent that they were not
exercisable at the time of such termi nation, shall
expire at the close of busi ness on the date of such
termination. Notwithstanding the foregoing, no Option
shall be exercisable after the expiration of its
term.
(2) Unless the applicable Award Agreement pro vides
otherwise, in the event that the employment of a
Participant with the Company or a Subsidiary of the
Company shall terminate on account of the Disability
or death of the Participant (i) Options granted to
such Participant, to the extent that they were
exercisable at the time of such termination, shall
remain exercisable until the first anniversary of
such termination, on which date they shall expire,
and (ii) Options granted to such Participant, to the
extent that they were not exercisable at the time of
such termination, shall expire at the close of
business on the date of such termination.
Notwithstanding the foregoing,
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<PAGE>
no Option shall be exercisable after the
expiration of its term.
(3) If a Participant's employment with the Company or a
Subsidiary of the Company is terminated for Cause,
all outstanding op tions granted to such Participant
shall expire at the commencement of business on the
date of such termination.
(f) Acceleration of Exercise Date Upon Change in
Control.
Upon the occurrence of a Change in Control, each Option
granted under the Plan and outstanding at such time shall
become fully and immediately exercisable and shall remain
exercisable until its expiration, pursuant to the terms of the
Plan notwithstanding the provisions of Section 7(e)(1) and (2)
of the Plan.
8. Tandem SARs.
The Committee may grant in connection with any Option granted hereunder
one or more Tandem SARs relating to a number of shares of Common Stock less than
or equal to the number of shares of Common Stock subject to the related Option.
A Tandem SAR may be granted at the same time as, or, in the case of a
Non-Qualified Stock Option, subsequent to the time that, its related Option is
granted.
(a) Benefit Upon Exercise.
The exercise of a Tandem SAR with respect to any number of
shares of Common Stock shall entitle the Participant to a cash
payment, for each such share, equal to the excess of (i) the
Fair Market Value of a share of Common Stock on the exercise
date over (ii) the option exercise price per share of the
related Option. Such payment shall be made as soon as
practicable after the effec tive date of such exercise.
(b) Term and Exercise of Tandem SAR.
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<PAGE>
(1) A Tandem SAR shall be exercisable only if
and to the extent that its related Option is
exercisable.
(2) The exercise of a Tandem SAR with respect to a number
of shares of Common Stock shall cause the immediate
and automatic cancella tion of its related Option
with respect to an equal number of shares. The
exercise of an Option, or the cancellation,
termination or expiration of an Option (other than
pursuant to this Section 8(b)(2)), with respect to a
number of shares of Common Stock shall cause the
automatic and immedi ate cancellation of any related
Tandem SARs to the extent that the number of shares
of Common Stock remaining subject to such Option is
less than the number of shares then subject to such
Tandem SAR.
Such Tandem SARs shall be canceled in the order in
which they become exercisable.
(3) A Tandem SAR may be exercised for all or any portion
of the shares as to which the re lated Option is
exercisable; provided, that no partial exercise of a
Tandem SAR shall be for less than a number of shares
having an aggregate option exercise price of less
than $1,000. The partial exercise of a Tandem SAR
shall not cause the expiration, termi nation or
cancellation of the remaining portion thereof.
(4) No Tandem SAR shall be assignable or trans ferable
otherwise than together with its related Option, and
any such transfer or assignment will be subject to
the provisions of Section 20 of the Plan.
(5) A Tandem SAR shall be exercised by deliv ering notice
to the Company's principal office, to the attention
of its Secretary, no less than one business day in
advance of the effective date of the proposed
exercise. Such notice shall specify the number of
shares of Common Stock with respect to which
15
<PAGE>
the Tandem SAR is being exercised and the effective
date of the proposed exercise and shall be signed by
the Participant or other person then having the right
to exercise the Option to which the Tandem SAR is
related. Such notice may be withdrawn at any time
prior to the close of business on the busi ness day
immediately preceding the effective date of the
proposed exercise.
9. Stand-Alone SARs.
(a) Benefit Upon Exercise.
The exercise of a Stand-Alone SAR with respect to any number
of shares of Common Stock shall entitle the Participant to a
cash payment, for each such share, equal to the excess of (i)
the Fair Market Value of a share of Common Stock on the
exercise date over (ii) the Reference Value of the Stand-Alone
SAR. Such payments shall be made as soon as practicable after
the effective date of such exercise.
(b) Term and Exercise of Stand-Alone SARs.
(1) Unless the applicable Award Agreement pro vides
otherwise, a Stand-Alone SAR shall become
cumulatively exercisable as to 25 percent of the
shares covered thereby on each of the first, second,
third and fourth anniversaries of the date of grant.
The Committee shall determine the expiration date of
each Stand-Alone SAR. Unless the applicable Award
Agreement provides other wise, no Stand-Alone SAR
shall be exercis able prior to the first anniversary
of the date of grant.
(2) A Stand-Alone SAR may be exercised for all or any
portion of the shares as to which it is exercisable;
provided, that no partial exercise of a Stand-Alone
SAR shall be for an aggregate Reference Value of less
than $1,000. The partial exercise of a Stand-Alone
SAR shall not cause the expiration,
16
<PAGE>
termination or cancellation of the remaining
portion thereof.
(3) A Stand-Alone SAR shall be exercised by delivering
notice to the Company's principal office, to the
attention of its Secretary, no less than one business
day in advance of the effective date of the proposed
exercise. Such notice shall specify the number of
shares of Common Stock with respect to which the
Stand-Alone SAR is being exercised, and the effective
date of the proposed exercise, and shall be signed by
the Participant. The Participant may withdraw such
notice at anytime prior to the close of business on
the business day immediately preceding the effective
date of the proposed exercise.
(c) Effect of Termination of Employment.
The provisions set forth in Section 7(e) with respect to the
exercise of Options following termination of employment shall
apply as well to the exercise of Stand-Alone SARs.
(d) Acceleration of Exercise Date Upon Change in
Control.
Upon the occurrence of a Change in Control, any Stand-Alone
SAR granted under the Plan and outstanding at such time shall
become fully and immediately exercisable and shall remain exer
cisable until its expiration pursuant to the terms of the Plan
notwithstanding the provisions of Section 7(e) of the Plan
which are incorpo rated into this Section 9.
10. Restricted Stock.
(a) Issue Date and Vesting Date.
At the time of the grant of shares of Restricted Stock, the
Committee shall establish an Issue Date or Issue Dates and a
Vesting Date or Vesting Dates with respect to such shares. The
Committee may divide such shares into classes and assign a
different Issue Date and/or Vesting Date for each
17
<PAGE>
class. If the grantee is employed by the Company or a
Subsidiary of the Company on an Issue Date (which may be the
date of grant), the specified number of shares of Restricted
Stock shall be issued in accordance with the provisions of
Section 10(e) of the Plan. Provided that all conditions to the
vesting of a share of Re stricted Stock imposed pursuant to
Section 10(b) of the plan are satisfied, and except as
provided in Section 10(g) of the Plan, upon the occurrence of
the Vesting Date with respect to a share of Restricted Stock,
such share shall vest and the restrictions of Section 10(c)of
the Plan shall lapse.
(b) Conditions to Vesting.
At the time of the grant of shares of Restricted Stock, the
Committee may impose such restrictions or conditions to the
vesting of such shares as it, in its absolute discretion,
deems appropri ate.
(c) Restrictions on Transfer Prior to Vesting.
Prior to the vesting of a share of Restricted Stock, no
transfer of a Participant's rights with respect to such share,
whether voluntary or involuntary, by operation of law or
otherwise, shall be permitted. Immediately upon any attempt to
transfer such rights, such share, and all of the rights
related thereto, shall be forfeited by the Participant.
(d) Dividends on Restricted Stock.
The Committee in its discretion may require that any dividends
paid on shares of Restricted Stock shall be held in escrow
until all restrictions on such shares have lapsed.
(e) Issuance of Certificates.
(1) Reasonably promptly after the Issue Date with respect
to shares of Restricted Stock, the Company shall
cause to be issued a stock certificate, registered in
the name of the
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<PAGE>
Participant to whom such shares were granted,
evidencing such shares; provided, that the Company
shall not cause such a stock certificate to be issued
unless it has received a stock power duly endorsed in
blank with respect to such shares. Each such stock
certificate shall bear the fol lowing legend:
The transferability of this certifi cate and the
shares of stock repre sented hereby are subject to
the re strictions, terms and conditions (in cluding
forfeiture provisions and restrictions against
transfer) con tained in the 1997 Omnibus Stock In
centive Plan of Chartwell Re Corpora tion and an
Award Agreement entered into between the registered
owner of such shares and Chartwell Re Corpora tion. A
copy of such Plan and Award Agreement is on file in
the office of the Secretary of Chartwell Re Corpora
tion, 4 Stamford Plaza, Stamford, Connecticut 06912.
Such legend shall not be removed until such shares vest
pursuant to the terms of the applicable Award Agreement.
(2) Each certificate issued pursuant to this Section
10(e), together with the stock powers relating to the
shares of Restricted Stock evidenced by such
certificate, shall be held by the Company unless the
Committee determines otherwise.
(f) Consequences of Vesting.
Upon the vesting of a share of Restricted Stock pursuant to
the terms of the applicable Award Agreement, the restrictions
of Section 10(c) of the Plan shall lapse. Reasonably promptly
after a share of Restricted Stock vests, the Company shall
cause to be delivered to the Participant to whom such shares
were granted, a certificate
19
<PAGE>
evidencing such share, free of the legend set
forth in Section 10(e) of the Plan.
(g) Effect of Termination of Employment.
(1) Subject to such other provision as the Committee may
set forth in the applicable Award Agreement, and to
the Committee's amendment authority pursuant to
Section 4 of the Plan, upon the termination of a
Partici pant's employment by the Company or any
Subsidiary of the Company for any reason other than
Cause, any and all shares to which restrictions on
transferability apply shall be immediately forfeited
by the Par ticipant and transferred to the Company,
provided that if the Committee, in its sole
discretion and within thirty (30) days after such
termination of employment notifies the Participant in
writing of its decision not to terminate the
Participant's rights in such shares, then the
Participant shall continue to be the owner of such
shares subject to such continuing restrictions as the
Committee may prescribe in such notice. If shares of
Restricted Stock are forfeited in accordance with the
provision of this Section 10, the Company shall also
have the right to require the return of all dividends
paid on such shares, whether by termination of any
escrow arrangement under which such dividends are
held or otherwise.
(2) In the event of the termination of a Par ticipant's
employment for Cause, all shares of Restricted Stock
granted to such Partici pant which have not vested as
of the date of such termination shall immediately be
re turned to the Company, together with any dividends
paid on such shares.
(h) Effect of Change in Control.
Upon the occurrence of a Change in Control, all outstanding
shares of Restricted Stock which have not theretofore vested
shall immediately vest and
20
<PAGE>
all restrictions on such shares shall immediately
lapse.
(i) Special Provisions Regarding Restricted Stock
Awards.
Notwithstanding anything to the contrary con tained herein,
Restricted Stock granted pursuant to this Section 10 shall be
based on the attain ment by the Company (or a Subsidiary or
division of the Company if applicable) of performance goals
pre-established by the Committee, based on one or more of the
following criteria: (i) the attainment of a specified
percentage return on total stockholder equity of the Company;
(ii) the attainment of a specified percentage increase in
earnings per share of Common Stock; (iii) the attainment of a
specified percentage increase in net income of the Company;
and (iv) the attain ment of a specified percentage increase in
profit before taxation of the Company (or a Subsidiary or
division of the Company if applicable). Attainment of any such
performance criteria shall be determined in accordance with
generally ac cepted accounting principles as in effect from
time to time. Such shares of Restricted Stock shall be
released from restrictions only after the attainment of such
performance measures have been certified by the Committee.
11. Phantom Stock.
(a) Vesting Date.
At the time of the grant of shares of Phantom Stock, the
Committee shall establish a Vesting Date or Vesting Dates with
respect to such shares. The Committee may divide such shares
into classes and assign a different Vesting Date for each
class. Provided that all conditions to the vesting of a share
of Phantom Stock imposed pursuant to Section 11(c) of the Plan
are satis fied, and except as provided in Section 11(d) of the
Plan, upon the occurrence of the Vesting Date with respect to
a share of Phantom Stock, such share shall vest.
21
<PAGE>
(b) Benefit Upon Vesting.
Upon the vesting of a share of Phantom Stock, the Participant
shall be entitled to receive in cash, within 30 days of the
date on which such share vests, an amount equal to the sum of
(i) the Fair Market Value of a share of Common Stock on the
date on which such share of Phantom Stock vests and (ii) the
aggregate amount of cash dividends paid with respect to a
share of Common Stock during the period commencing on the date
on which the share of Phantom Stock was granted and
terminating on the date on which such share vests.
(c) Conditions to Vesting.
At the time of the grant of shares of Phantom Stock, the
Committee may impose such restrictions or conditions to the
vesting of such shares as it, in its absolute discretion,
deems appropri ate.
(d) Effect of Termination of Employment.
(1) Subject to such other provisions as the Committee may
set forth in the applicable Award Agreement, and to
the Committee's amendment authority pursuant to
Section 4 of the Plan, shares of Phantom Stock that
have not vested, together with any dividends credited
on such shares, shall be forfeited upon the
Participant's termination of employment for any
reason other than Cause.
(2) In the event of the termination of a Par ticipant's
employment for Cause, all shares of Phantom Stock
granted to such Participant which have not vested as
of the date of such termination shall immediately be
forfeited, together with any dividends credited on
such shares.
22
<PAGE>
(e) Effect of Change in Control.
Upon the occurrence of a Change in Control, all outstanding
shares of Phantom Stock which have not theretofore vested
shall immediately vest.
(f) Special Provisions Regarding Phantom Stock
Awards.
Notwithstanding anything to the contrary con tained herein,
Phantom Stock granted pursuant to this Section 11 to Executive
Officers shall be based on the attainment by the Company (or a
Subsidiary or division of the Company if appli cable) of
performance goals pre-established by the Committee, based on
one or more of the following criteria: (i) the attainment of a
specified percentage return on total stockholder equity of the
Company; (ii) the attainment of a specified percentage
increase in earnings per share of Common Stock from continuing
operations; (iii) the attainment of a specified percentage
increase in net income of the Company; and (iv) the attainment
of a specified percentage increase in profit before taxation
of the Company (or a Subsidiary or division of the Company if
applica ble). Attainment of any such performance crite ria
shall be determined in accordance with gen erally accepted
accounting principles as in effect from time to time. No cash
payment in respect of any Phantom Stock award will be paid to
an Executive Officer until the attainment of the respective
performance measures have been certified by the Committee.
12. Stock Bonuses.
In the event that the Committee grants a Stock Bonus, a certificate for
the shares of Common Stock comprising such Stock Bonus shall be issued in the
name of the Participant to whom such grant was made and delivered to such
Participant as soon as practicable after the date on which such Stock Bonus is
payable.
23
<PAGE>
13. Rights as a Stockholder.
No person shall have any rights as a stockholder with respect to any
shares of Common Stock covered by or relating to any Incentive Award until the
date of issuance of a stock certificate with respect to such shares. Except as
otherwise expressly provided in Section 3(c) of the Plan, no adjustment to any
Incentive Award shall be made for dividends or other rights for which the record
date occurs prior to the date such stock certificate is issued.
14. No Special Employment Rights; No Right to Incentive
Award.
Nothing contained in the Plan or any Award Agreement shall confer upon
any Participant any right with respect to the continuation of employment by the
Company or any Subsidiary of the Company or interfere in any way with the right
of the Company or any Subsidiary of the Company, subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the Par ticipant.
No person shall have any claim or right to receive an Incentive Award
hereunder. The Committee's granting of an Incentive Award to a Participant at
any time shall neither require the Committee to grant any other Incentive Award
to such Participant or other person at any time or preclude the Committee from
making subsequent grants to such Participant or any other person.
15. Securities Matters.
(a) The Company shall be under no obligation to ef
fect the registration pursuant to the Securities
Act of any interests in the Plan or any shares of
Common Stock to be issued hereunder or to effect
similar compliance under any state laws.
Notwithstanding anything herein to the contrary,
The Company shall not be obligated to cause to be
issued or delivered any certificates evidencing
shares of Common Stock pursuant to the Plan
unless and until the Company is advised by its
counsel that the issuance and delivery of such
certificates is in compliance with all applicable
laws, regulations of governmental authority and
24
<PAGE>
the requirements of any securities exchange on which shares of
Common Stock are traded. The Committee may require, as a
condition of the issuance and delivery of certificates
evidencing shares of Common Stock pursuant to the terms hereof
and of the applicable Award Agreement, that the recipient of
such shares make such covenants, agreements and
representations, and that such certificates bear such legends,
as the Committee, in its sole discretion, deems neces sary or
desirable.
(b) The transfer of any shares of Common Stock
hereunder shall be effective only at such time as
counsel to the Company shall have determined that
the issuance and delivery of such shares is in
compliance with all applicable laws, regulations
of governmental authority and the requirements of
any securities exchange on which shares of Common
Stock are traded. The Committee may, in its sole
discretion, defer the effectiveness of any
transfer of shares of Common Stock hereunder in
order to allow the issuance of such shares to be
made pursuant to registration or an exemption
from registration or other methods for compliance
available under federal or state securities laws.
The Committee shall inform the Participant in
writing of its decision to defer the effective
ness of a transfer. During the period of such
deferral in connection with the exercise of an
Option, the Participant may, by written notice,
withdraw such exercise and obtain the refund of
any amount paid with respect thereto.
16. Withholding Taxes.
Whenever cash is to be paid pursuant to an Incentive Award, the Company
shall have the right to deduct therefrom an amount sufficient to satisfy any
federal, state and local withholding tax requirements related thereto.
Whenever shares of Common Stock are to be delivered pursuant to an
Incentive Award, the Company shall have the right to require the Participant to
remit to the Company in cash an amount sufficient to satisfy any federal, state
and local withholding tax requirements related thereto. With the approval of the
Committee, a Participant may satisfy
25
<PAGE>
the foregoing requirement by electing to have the Company withhold from delivery
shares of Common Stock having a fair market value equal to the amount of tax to
be withheld. Such shares shall be valued at their Fair Market Value on the date
on which the amount of tax to be withheld is determined (the "Tax Date").
Fractional share amounts shall be settled in cash. Such a withholding election
may be made with respect to all or any portion of the shares to be delivered
pursuant to an Incentive Award.
17. Notification of Election Under Section 83(b) of the
Code.
If any Participant shall, in connection with the acquisition of shares
of Common Stock under the Plan, make the election permitted under Section 83(b)
of the Code (i.e., an election to include in gross income in the year of
transfer the amounts specified in Section 83(b)), such Participant shall notify
the Company of such election within 10 days of filing notice of the election
with the Internal Revenue Service, in addition to any filing and a notification
required pursuant to regulation issued under the authority of Code Section
83(b).
18. Notification Upon Disqualifying Disposition Under
Section 421(b) of the Code.
Each Award Agreement with respect to an Incentive Stock Option shall
require the Participant to notify the Company of any disposition of shares of
Common Stock issued pursuant to the exercise of such Option under the circum
stances described in Section 421(b) of the Code (relating to certain
disqualifying dispositions), within 10 days of such disposition.
19. Amendment or Termination of the Plan.
The Board of Directors may, at any time, suspend or terminate the Plan
or revise or amend it in any respect whatsoever; provided, however, that
stockholder approval shall be required if and to the extent the Board of
Directors determines that such approval is appropriate for purposes of
satisfying Section 162(m) or 422 of the Code or to the extent such approval is
required by the rules of any stock exchange on which the Common Stock is listed.
Nothing herein shall restrict the Committee's ability to exercise its
discretionary authority pursuant to Section 4
26
<PAGE>
of the Plan, which discretion may be exercised without amendment to the Plan. No
action hereunder may, without the consent of a Participant, reduce the
Participant's rights under any outstanding Incentive Award.
20. Transfers Upon Death; Nonassignability.
Upon the death of a Participant, outstanding Incentive Awards granted
to such Participant may be exercised only by the executor or administrator of
the Participant's estate or by a person who shall have acquired the right to
such exercise by will or by the laws of descent and distribu tion. No transfer
of an Incentive Award by will or the laws of descent and distribution shall be
effective to bind the Company unless the Committee shall have been furnished
with (a) written notice thereof and with a copy of the will and/or such evidence
as the Committee may deem necessary to establish the validity of the transfer
and (b) an agreement by the transferee to comply with all the terms and condi
tions of the Incentive Award that are or would have been applicable to the
Participant and to be bound by the acknowledgments made by the Participant in
connection with the grant of the Incentive Award.
During a Participant's lifetime, the Committee may permit the transfer,
assignment or other encumbrance of an outstanding Option or outstanding shares
of Restricted Stock unless such Option is an Incentive Stock Option and the
Committee and the Participant intend that it shall retain such status.
Notwithstanding the foregoing, subject to any conditions as the Committee may
prescribe, a Participant may, upon providing written notice to the Secretary of
the Company, elect to transfer any or all Op tions granted to such Participant
pursuant to the Plan to members of his or her immediate family, including, but
not limited to, children, grandchildren and spouse or to trusts for the benefit
of such immediate family members or to partnerships in which such family members
are the only partners; provided, however, that no such transfer by any
Participant may be made in exchange for consideration.
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21. Expenses and Receipts.
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Incentive Award will be used for
general corporate pur poses.
22. Failure to Comply.
In addition to the remedies of the Company elsewhere provided for
herein, failure by a Participant (or benefi ciary or transferee) to comply with
any of the terms and conditions of the Plan or the applicable Award Agreement,
unless such failure is remedied by such Participant (or beneficiary or
transferee) within ten days after notice of such failure by the Committee, shall
be grounds for the cancellation and forfeiture of such Incentive Award, in whole
or in part, as the Committee, in its absolute discretion, may determine.
23. Effective Date and Term of Plan.
The Plan became effective on the Effective Date, but the Plan (and any
grants of Incentive Awards made prior to stockholder approval of the Plan) shall
be subject to the requisite approval of the stockholders of the Company. In the
absence of such approval, such Incentive Awards shall be null and void. Unless
earlier terminated by the Board of Directors, the right to grant Incentive
Awards under the Plan will terminate on the tenth anniversary of the Effective
Date. Incentive Awards outstanding at Plan termination will remain in effect
according to their terms and the provisions of the Plan.
24. Applicable Law.
Except to the extent preempted by any applicable federal law, the Plan
will be construed and administered in accordance with the laws of the State of
Delaware, without reference to the principles of conflicts of law.
25. Participant Rights.
No Participant shall have any claim to be granted any Incentive Award
under the Plan, and there is no obligation for uniformity of treatment for
Participants. Except as
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provided specifically herein, a Participant or a transferee of an Incentive
Award shall have no rights as a stockholder with respect to any shares covered
by any award until the date of the issuance of a Common Stock certificate to him
for such shares.
26. 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
Participant pursuant to an Incentive Award, nothing contained in the Plan or any
Award Agreement shall give any such Participant any rights that are greater than
those of a general creditor of the Company.
27. No Fractional Shares.
No fractional shares of Common Stock shall be issued or delivered
pursuant to the Plan. The Committee shall determine whether cash, other
Incentive Awards, or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto shall
be forfeited or otherwise eliminated.
28. Beneficiary.
A Participant may file with the Committee a written designation of a
beneficiary on such form as may be prescribed by the Committee and may, from
time to time, amend or revoke such designation. If no designated beneficiary
survives the Participant, the executor or administrator of the Participant's
estate shall be deemed to be the Participant's beneficiary.
29. Interpretation.
The Plan is designed and intended to comply with Rule 16b-3 promulgated
under the Exchange Act and, with Section 162(m) of the Code, and all provisions
hereof shall be construed in a manner to so comply.
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