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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PROXY STATEMENT
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
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/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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GCR HOLDINGS LIMITED
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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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/X/ No fee required.
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
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/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
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[LOGO] GCR HOLDINGS LIMITED
ANNUAL GENERAL MEETING OF SHAREHOLDERS
DECEMBER 19, 1996
Dear Shareholder:
It's a pleasure for us to extend to you a cordial invitation to attend the
Annual General Meeting of Shareholders of GCR Holdings Limited for the fiscal
year 1996 at the HAMILTON PRINCESS HOTEL, 76 PITTS BAY ROAD, PEMBROKE HM 08
BERMUDA ON THURSDAY, DECEMBER 19, 1996, AT 9:30 A.M. LOCAL TIME.
We know that most of our Shareholders are unable personally to attend the
Annual General Meeting. Proxies are solicited so that each shareholder has an
opportunity to vote on all matters that are scheduled to come before the
meeting. Whether or not you plan to attend, please take a few minutes now to
vote, sign, date and return your proxy in the enclosed postage-paid envelope.
Regardless of the number of shares you own, your vote is important.
Besides helping us conduct business at the Annual General Meeting, there
is another reason for you to return your proxy card. Under the abandoned
property law of some states, a shareholder may be considered "missing" if that
stockholder has failed to communicate with us in writing. The return of your
proxy card qualifies as written communication with us.
The Notice of Annual General Meeting and Proxy Statement accompanying this
letter describe the business to be acted on at the meeting.
Members of management will review with you the Company's results and will
be available to respond to questions during the meeting.
We look forward to seeing you at the meeting.
Sincerely,
/s/ Lawrence S. Doyle
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Lawrence S. Doyle
November 26, 1996 President and Chief Executive Officer
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GCR HOLDINGS LIMITED
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NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
To Be Held on December 19, 1996
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To the Shareholders of GCR Holdings Limited:
NOTICE IS HEREBY GIVEN that the annual general meeting of the shareholders of
GCR Holdings Limited (the "Company") will be held at the HAMILTON PRINCESS
HOTEL, 76 PITTS BAY ROAD, PEMBROKE HM 08 BERMUDA ON THURSDAY, DECEMBER 19, 1996,
AT 9:30 A.M., LOCAL TIME, for the following purposes:
1. To elect ten directors of the Company to hold office until the
conclusion of the next annual general meeting of the Company's
shareholders;
2. To approve the appointment of Arthur Andersen & Co. as the Company's
independent auditors for the fiscal year ending September 30, 1997;
3. To approve the Company's Amended and Restated Non-Employee Directors
Share Option Plan and Amended and Restated 1995 Share Option Plan, both
of which were originally adopted before the Company's initial public
offering in December 1995, and thereby approve prior grants of
restricted shares made contingent upon shareholder approval of these
plans;
4. To approve the adoption of the Company's new 1996 Share Incentive Plan;
5. To authorize the Company to purchase from its wholly owned subsidiary,
Global Capital Reinsurance Limited, one million Ordinary Shares of the
Company currently held by such subsidiary, within 90 days after the
Fiscal 1996 Annual General Meeting and at a purchase price of $20.92
per share;
6. To approve an amendment of the Company's Amended and Restated Articles
of Association to permit the annual general meeting of shareholders to
be held at any time on or before the 123rd day after the Company's
fiscal year end and to approve certain related amendments of the
Articles in order to accommodate this change; and
7. To transact any other business that may properly come before the
meeting or any adjournments thereof.
Only shareholders of record, as shown by the transfer books of the Company, at
the close of business on November 21, 1996 are entitled to notice of and to vote
at the Annual General Meeting.
PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE RETURN ENVELOPE
FURNISHED FOR THAT PURPOSE AS PROMPTLY AS POSSIBLE BUT NO LATER THAN THE CLOSE
OF BUSINESS ON DECEMBER 18, 1996, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE
MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT.
By order of the Board of Directors
Dated: November 26, 1996 Frederick W. Deichmann
Secretary
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GCR HOLDINGS LIMITED
HAMILTON, BERMUDA
PROXY STATEMENT
FOR
THE ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY, DECEMBER 19, 1996
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November 26, 1996
THE BOARD OF DIRECTORS OF GCR HOLDINGS LIMITED, A CAYMAN ISLANDS
COMPANY (THE "COMPANY"), IS SOLICITING THE ACCOMPANYING PROXY TO BE VOTED AT THE
ANNUAL GENERAL MEETING OF SHAREHOLDERS OF THE COMPANY TO BE HELD AT 9:30 A.M.,
LOCAL TIME, ON DECEMBER 19, 1996 (THE "FISCAL 1996 ANNUAL GENERAL MEETING"), AT
THE HAMILTON PRINCESS HOTEL, 76 PITTS BAY ROAD, PEMBROKE HM 08 BERMUDA AND ANY
ADJOURNMENTS THEREOF. THIS PROXY STATEMENT, THE ATTACHED NOTICE OF ANNUAL
GENERAL MEETING AND THE ACCOMPANYING PROXY CARD ARE FIRST BEING MAILED TO
SHAREHOLDERS ON OR ABOUT NOVEMBER 26, 1996. THE RECORD DATE FOR DETERMINING
SHAREHOLDERS ENTITLED TO VOTE AT THE MEETING, IN PERSON OR BY PROXY, IS NOVEMBER
21, 1996. FOR YOUR PROXY TO BE EFFECTIVE, YOU MUST SIGN AND COMPLETE THE PROXY
CONTAINED IN THE ENCLOSED PROXY CARD AND RETURN IT TO THE COMPANY, AS PROVIDED
THEREIN. PLEASE DO SO AS PROMPTLY AS POSSIBLE BUT NOT LATER THAN THE CLOSE OF
BUSINESS ON DECEMBER 18, 1996.
When a proxy is properly executed and returned, the Ordinary Shares it
represents will, subject to any direction to the contrary, be voted at the
meeting according to the instructions of the executing shareholder either FOR or
AGAINST the adoption of the resolutions set forth in Annex A to this Proxy
Statement (the "Resolutions"), which in general purport: (i) to elect ten
directors of the Company to hold office until the conclusion of the next annual
general meeting of the Company's shareholders; (ii) to approve the appointment
of Arthur Andersen & Co. as the Company's independent auditors for the fiscal
year ending September 30, 1997; (iii) to approve the Company's Amended and
Restated Non-Employee Directors Share Option Plan and Amended and Restated 1995
Share Option Plan, both of which were originally adopted before the Company's
initial public offering in December 1995, and thereby approve prior grants of
restricted shares made contingent upon shareholder approval of these plans; (iv)
to approve the adoption of the Company's new 1996 Share Incentive Plan; (v) to
authorize the Company to purchase from its wholly owned subsidiary, Global
Capital Reinsurance Limited, one million Ordinary Shares of the Company
currently held by such subsidiary, within 90 days after the Fiscal 1996 Annual
General Meeting and at a purchase price of $20.92 per share; (vi) to approve an
amendment of the Company's Amended and Restated Articles of Association (the
"Articles") to permit the annual general meeting of shareholders to be held at
any time on or before the 123rd day after the Company's fiscal year end and to
approve certain related amendments of the Articles in order to accommodate this
change; and (vii) to transact any other business that may properly come before
the meeting or any adjournments thereof.
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The Company knows of no specific matter to be brought before the Fiscal
1996 Annual General Meeting which is not referred to in the attached Notice of
Annual General Meeting. If any such matter comes before the meeting, including
any shareholder proposal properly made, the persons named in the Proxy card as
proxies for the executing shareholders (the "Proxy holders") intend to vote the
Proxies as in their discretion they see fit. The Proxy holders are employees of
the Company.
Any shareholder giving a proxy may revoke it prior to its exercise by
notice of revocation to the Secretary of the Company in writing, by voting in
person at the Fiscal 1996 Annual General Meeting or by executing a later-dated
proxy; provided, however, that the action is taken in sufficient time to permit
the necessary examination and tabulation of the revocation or subsequent proxy
before the vote is taken.
At the close of business on November 21, 1996, there were 25,674,255
Ordinary Shares outstanding and entitled to vote at the Fiscal 1996 Annual
General Meeting, with each such share entitling the holder of record to one
vote, except that, if the "Controlled Shares" (other than "Excluded Controlled
Shares") of any "U.S. Person" (as such terms are defined in the Articles)
constitute 10% or more of the total combined voting rights attaching to the
issued shares of the Company, the voting power of such shares is to be reduced
in accordance with the provisions of the Articles. Based on its share registry
and other information, the Company estimates that between 2,006,158 and
3,089,482 of the Ordinary Shares outstanding and entitled to vote as specified
above are Controlled Shares (other than Excluded Controlled Shares) attributable
to Goldman Sachs Persons under the Articles and that, pursuant to the Articles,
these shares (as well as certain shares currently held by the Company's
subsidiary as described below) will have between 0.5800 and 0.8286 votes per
share at the Fiscal 1996 Annual General Meeting.*
Based on its share registry and relevant Schedule 13D and Schedule 13G
share ownership reports currently on file with the U.S. Securities and Exchange
Commission (the "Commission"), the Company believes that, other than Goldman
Sachs Persons, none of the Company's shareholders as of the record date for the
Fiscal 1996 Annual General Meeting held shares subject to the voting power
reduction provisions described above. However, because the applicability of
these provisions to any particular shareholder depends on facts and
circumstances that may be known only to the shareholder or related persons, the
Company requests that any holder of Ordinary Shares (other than Goldman Sachs
Persons) with reason to believe that it is a "United States 10% Shareholder"
within the meaning of the Articles, please contact the Company promptly so that
the Company may determine whether the voting power of such holder's shares
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* The actual number of these shares subject to the voting cutback and the
actual number of votes for each such share will depend on the extent to
which certain of these shares held for customers of Goldman, Sachs &
Co. are voted by such customers rather than by Goldman, Sachs & Co. in
accordance with stock exchange rules. The Company estimates that, if
all such customer shares are voted by Goldman, Sachs & Co., the number
of Controlled Shares (other than Excluded Controlled Shares)
attributable to Goldman Sachs Persons will be the maximum number
specified above (3,089,482 plus the shares currently held by the
Company's subsidiary) and the number of votes for each of these shares
will be the minimum number specified above (0.5800).
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should be reduced.* BY SUBMITTING A PROXY, A HOLDER OF ORDINARY SHARES (OTHER
THAN GOLDMAN SACHS PERSONS) WILL BE DEEMED TO HAVE CONFIRMED THAT, TO ITS
KNOWLEDGE, IT IS NOT, AND IS NOT ACTING ON BEHALF OF, A UNITED STATES 10%
SHAREHOLDER.
In July 1996, the Company's Bermuda operating subsidiary, Global
Capital Reinsurance Limited ("Global Capital Re"), purchased 1,000,000 of the
Ordinary Shares (the "GCR Repurchase Shares") sold by certain shareholders of
the Company in an underwritten public offering. The GCR Repurchase Shares
continue to be held by Global Capital Re and will carry the voting, dividend and
other rights associated with outstanding Ordinary Shares until such time as they
are acquired by the Company and retired (although, for purposes of the Company's
consolidated financial statements, the GCR Repurchase Shares are deemed to have
been retired by the Company when they were purchased by Global Capital Re).
Global Capital Re intends to vote the GCR Repurchase Shares in favor of the
Resolutions, and such shares will be counted as present for purposes of
determining whether the quorum requirements have been met, at the Fiscal 1996
Annual General Meeting. If the Fifth Resolution is adopted at the meeting as
described below, the Company would be authorized to acquire the GCR Repurchase
Shares from Global Capital Re, whereupon such shares could be retired and cease
to be outstanding for any purpose.
This Proxy Statement is divided into two parts. Part One describes the
Resolutions to be voted upon by shareholders at the Fiscal 1996 Annual General
Meeting. Part Two sets forth certain background information about the Company's
Board of Directors, executive compensation arrangements and other matters. A
copy of the Company's Annual Report to Shareholders for the fiscal year ended
September 30, 1996 accompanies this Proxy Statement.
Unless the context otherwise requires, references herein to the
"Company" mean GCR Holdings Limited and to "GCR" mean the Company together with
its wholly owned subsidiary, Global Capital Re. GCR's fiscal year begins on
October 1, and references herein to a specific fiscal year mean the fiscal year
ending on September 30 of the specified year.
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* For this purpose, "United States 10% Shareholder" means a U.S. Person
who owns, directly or by application of the constructive ownership
rules of sections 958(a) and 958(b) of the U.S. Internal Revenue Code
of 1986, as amended, issued shares representing 10% or more of the
total combined voting rights attaching to the issued Ordinary Shares.
"U.S. Person" means (i) an individual who is a citizen or resident of
the United States, (ii) a corporation or partnership that is, as to the
United States, a domestic corporation or partnership and (iii) an
estate or trust that is subject to U.S. federal income tax on its
income regardless of its source. Please note that the constructive
ownership rules referred to above generally apply to family members,
partnerships, estates, trusts or controlled corporations and holders of
certain options.
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PART ONE
THE RESOLUTIONS
The Resolutions, which are to be voted on by shareholders at
the Fiscal 1996 Annual General Meeting, are set forth in Annex A to this Proxy
Statement. Adoption of the Resolutions at the meeting will require the
following:
(i) in the case of the First through Fifth Resolutions, the
affirmative vote of a majority of the combined voting power of the
Ordinary Shares that are outstanding on the record date for the meeting
and are voted in person or by proxy at the meeting; and
(ii) in the case of the Sixth Resolution (providing for
amendments of the Articles), the affirmative vote of at least sixty-six
and two-thirds percent (66-2/3%) of the combined voting power of the
Ordinary Shares that are outstanding on such record date and are voted
in person or by proxy at the meeting;
provided that, in each case (i) and (ii) above, at least two members who are the
registered holders of at least fifty percent (50%) of the combined voting power
of the Ordinary Shares that are outstanding on the record date for the meeting
(a quorum) are present in person or by proxy at the meeting.
A Proxy card submitted to the Company without direction as to how to
vote on a particular Resolution will be voted for the Resolution. Regardless of
whether or how they provide direction to vote, all Proxy cards submitted will be
counted as present at the meeting in determining whether the quorum requirement
has been met.
I. ELECTION OF DIRECTORS
The Company has nominated 10 of its current directors for election as
directors at the Fiscal 1996 Annual General Meeting (Mr. Lerner, the 11th
current director, has notified the Company of his intention to retire from the
Board upon the conclusion of the meeting). Each nominee elected as a director at
the meeting will hold office until the conclusion of the next annual general
meeting of shareholders, which, if the Sixth Resolution is adopted, is expected
to be held within 123 days after the end of fiscal year 1997, and until his
successor is elected or appointed and qualified (in each case subject to prior
death, resignation, retirement or removal from office). Except for Mr. Al-Naqib,
who was appointed a director by the Board in July 1996, each of the nominees has
served as a director (or, in one case, an alternate director) of the Company
since October 1993.
The name, principal occupation and other information concerning each
nominee, each of whom is currently a director, is set forth below.
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NOMINEES FOR WHOM PROXIES WILL BE VOTED
STEVEN H. NEWMAN (age: 53) has been Chairman of the Board of Directors
of the Company since 1993. He has been CEO and Chairman of the Board of
Directors of Underwriters Re since February 1987 and was President from 1987
until 1994. Mr. Newman is a Fellow and past President of the Casualty Actuarial
Society, a member of the International Actuarial Association and is a member and
past Chairman of the Board of Directors of the Reinsurance Association of
America. Mr. Newman is also a director of Capital Re Corporation, of which
another director of the Company, Michael Satz, is the Chairman, President and
Chief Executive Officer, and is a director of the Chicago Title and Trust
Company and World Minerals Corporation.
LOAY AL-NAQIB (age: 44) has been a director of the Company since July
1996. He is Deputy Chairman and Chief Executive Officer of Imperial Fire &
Marine Re-Insurance Company Ltd. in London. Mr. Al-Naqib had been Deputy
Chairman and Chief Executive Officer of Arig Insurance Company, also in London,
from 1991 to 1996. He is a director of the International Insurance Foundation in
New York.
LAWRENCE S. DOYLE (age: 53) has been President, Chief Executive Officer
and a director of the Company since 1993. He was President and CEO of the New
England Reinsurance Corporation, First State Insurance Company and the New
England Insurance Company from 1986 to 1993. Mr. Doyle was also Senior Vice
President of ITT Hartford Insurance Group and President of ITT Hartford's
International Division from 1983 to 1993.
J. MARKHAM GREEN (age: 53) has been a director of the Company since
1993. He was a general partner of Goldman, Sachs & Co. from 1984 to 1992 and has
been a limited partner of that firm since 1992. During his tenure as a general
partner, Mr. Green was co-head of the Financial Services Industry Group in the
Investment Banking Division.
JOHN P. MCNULTY (age: 44) has been a director of the Company since
1993. He has been a general partner of Goldman, Sachs & Co. from 1989 to 1994, a
limited partner of that firm during most of 1995 and, since November 25, 1995, a
general partner of that firm, a member of its Operating Committee and co-head of
Goldman Sachs Asset Management since November 25, 1995.
DAVID A. OLSEN (age: 58) has been a director of the Company since 1993.
He has been Chairman and Chief Executive Officer of Johnson & Higgins since 1991
and 1990, respectively, and has held various positions with Johnson & Higgins
since 1966. Mr. Olsen is a Trustee of The College of Insurance and of the
American Institute for Chartered Property Casualty Underwriters and the
Insurance Institute of America.
JERRY S. ROSENBLOOM (age: 57) has been a director of the Company since
1993. He has been Frederick H. Ecker Professor of Insurance and Risk Management
and Academic Director, Certified Employee Benefit Specialist Program at the
Wharton School of the University of Pennsylvania since 1990 and 1974,
respectively. Mr. Rosenbloom is currently a member of the Boards of Directors of
Mutual Risk Management, Ltd. and the Harleyville Insurance Companies.
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JOSEPH D. ROXE (age: 60) has been a director of the Company since
November 1995 and an alternate director since October 1993. He has been Senior
Vice President and Chief Financial Officer of Johnson & Higgins since 1987 and a
director of Johnson & Higgins since 1988.
MICHAEL E. SATZ (age: 48) has been a director of the Company since
1993. He has been Chairman, President and Chief Executive Officer of Capital Re
Corporation since its founding in 1988. Mr. Satz founded and was the first
president of the Association of Financial Guaranty Insurers.
DONALD J. ZUK (age: 60) has been a director of the Company since 1993.
He has been President and Chief Executive Officer of the Southern California
Physicians Insurance Exchange since 1989.
The First Resolution, which is set forth in Annex A to this Proxy
Statement, provides for shareholder approval of each of the nominees named
above. Unless voting authority is withheld by a shareholder in the manner
provided in the enclosed Proxy card it is the intention of the Proxy holders to
vote for all of the nominees named above. All of the nominees have consented to
serve if elected, but if any becomes unavailable to serve, the Proxy holders may
exercise their discretion to vote for a substitute nominee.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL 10 OF THE NOMINEES
NAMED IN THE FIRST RESOLUTION.
II. APPROVAL OF INDEPENDENT AUDITORS
The Board of Directors and its Audit Committee have recommended the
appointment of Arthur Andersen & Co., Bermuda, as the independent auditors of
the Company for the fiscal year ending September 30, 1997. Representatives of
that firm are expected to be present at the Fiscal 1996 Annual General Meeting
with an opportunity to make a statement if they desire to do so and to be
available to respond to appropriate questions.
The Second Resolution, which is set forth in Annex A to this Proxy
Statement, provides for shareholder approval of Arthur Andersen & Co. as
independent auditors of the Company for the fiscal year ending September 30,
1997.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE SECOND RESOLUTION.
III. APPROVAL OF EXISTING OPTION PLANS
Prior to its initial public offering in December 1995, the Company
adopted the Amended and Restated Non-Employee Directors Share Option Plan, which
was revised during fiscal year 1996 (in its current form, the "Director Option
Plan"), and the Amended and Restated 1995 Share Option Plan (in its current
form, the "1995 Employee Option Plan"). The Directors Option Plan and the 1995
Employee Option Plan are referred to herein as the "Existing Option Plans."
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During fiscal year 1996 and to date, the Board of Directors granted a
total of 8,719 restricted Ordinary Shares to 14 directors, officers and
employees of the Company (with no such grantee receiving more than 2,799 shares)
pursuant to the Existing Option Plans on condition that such plans be approved
by the shareholders at the Fiscal 1996 Annual General Meeting. These grants (the
"Restricted Share Grants") were conditioned on shareholder approval of such
plans so that, if such approval were obtained, the grants would be exempt
transactions for purposes of Section 16(b) of the U.S. Securities Exchange Act
of 1934 (the "Exchange Act") and the Commission's rules thereunder.*
Consequently, shareholder approval of the Existing Option Plans will cause the
Restricted Share Grants to become effective and to be exempt transactions for
these purposes.** None of the option grants that have been made under the
Company's compensation plans to date were conditioned on shareholder approval,
and such grants (including option grants under the Existing Option Plans) will
remain in effect regardless of the results of the shareholder vote.
Set forth below is a summary of the terms of the Director Option Plan
and the 1995 Employee Option Plan, as well as the Restricted Share Grants made
under each plan.
THE DIRECTOR OPTION PLAN
General. The purpose of the Director Option Plan is to align the
interests of non-employee members of the Company's Board with those of its
shareholders. The Board or, if so appointed, a committee thereof is authorized
to administer the Director Option Plan (the Board currently administers the
plan). The plan administrator has full power and authority to interpret the
plan, to establish, amend and rescind rules relating to the plan and to amend
the plan, except that shareholder approval is required for any amendment that
increases the number of shares that may be issued under the plan (other than
pursuant to adjustments provided for in the plan).
Awards and Eligibility. Under the Director Option Plan, each director,
other than the Chairman and any director who is an employee or officer of the
Company or Global Capital Re (each a "Non-Employee Director"), will receive a
grant of options on 1,500 Ordinary Shares on the first business day after each
annual shareholders' meeting. Each Non-Employee Director also received an
initial grant of options on 3,000 Ordinary Shares when the plan was initially
adopted. The Director Option Plan provides for options (and restricted shares as
described below) to be granted in an aggregate amount up to 100,000 Ordinary
Shares.
Terms of Awards. The terms and conditions applicable to each award
under the Director Option Plan are to be set forth in an option agreement
between the Company and each recipient. Generally, the exercise price per share
for each option is equal to the fair market value of an
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* Due to recent changes in the Commission's rules under Section 16,
shareholder approval will no longer be required in order for grants of
options, restricted shares or other securities made by the Company
under its compensation plans to be exempt for purposes of Section
16(b).
** Prior to the Fiscal 1996 Annual General Meeting, the Company expects to
make additional grants of restricted shares under these plans in
respect of the November 1996 dividend. See "-- Summary of Benefits to
be Received". References herein to "Restricted Share Grants" include
such additional grants.
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Ordinary Share (book value per share for grants prior to the Company's initial
public offering in December 1995 and market value per share for grants
thereafter) on the date of grant as determined by the plan administrator in
accordance with the plan. Such options are fully vested on grant, are generally
not transferable, are exercisable for a period of 10 years from grant and
continue to be exercisable following the termination of service of the grantee
as a director, provided, however, that no such options may be exercised more
than 12 months after the death of the grantee.
The number of Ordinary Shares issuable on exercise of an option under
the plan and the exercise price per share thereof are subject to adjustment in
certain events having a dilutive or antidilutive effect on the Ordinary Shares.
In addition, in the event of any cash dividend in respect of the Ordinary
Shares, the grantee of an option will be granted restricted Ordinary Shares with
respect to an amount (the "Applicable Dividend Amount") equal to 30% of the
total dividend that would have been paid in respect of all Ordinary Shares
subject to the option (plus all unvested restricted shares previously granted in
respect of such option) held by the grantee, were such shares then outstanding
(or vested, as the case may be). The number of restricted Ordinary Shares to be
granted will be determined by dividing the Applicable Dividend Amount by the
fair market value of an Ordinary Share as determined by the plan administrator.
Restricted shares vest at the rate of 25% on each of the first four
anniversaries of their grant date until fully vested for as long as the director
remains in service on the Board and also vest immediately upon a Change of
Control (as defined below). Once vested, restricted shares may be held or
transferred by the grantee without restriction (other than certain restrictions
relating to the registration requirements of the U.S. Securities Act of 1933
(the "Securities Act")).
A "Change of Control" is deemed to occur, in general, if (i) any person
or group of persons (subject to certain limited exceptions) is or becomes the
direct or indirect beneficial owner of 50% or more of the Company's then
outstanding voting securities, (ii) during any two year period the directors at
the beginning of the period (including replacements approved by two-thirds of
such directors) cease to constitute a majority of the Board, (iii) the
shareholders of the Company approve a merger, consolidation or reorganization or
a court of competent jurisdiction approves a scheme of arrangement of the
Company, other than such a transaction or arrangement pursuant to which the
shareholders of the Company retain at least 50% of the combined voting power of
the voting securities of the Company or the surviving entity, or (iv) the
shareholders of the Company approve a plan of complete liquidation of the
Company or the sale or disposition of all or substantially all of the Company's
assets.
Grants to Date. To date, options on 27,000 shares have been granted to
nine Non-Employee Directors under the Director Option Plan, and 9,000 of such
options have been exercised. The exercise price of these options is $15.24 per
share.
To date, 390 restricted shares have been conditionally granted to six
Non-Employee Directors, in respect of the quarterly dividends declared by the
Board in February, May and August 1996. These Restricted Share Grants are
conditioned on shareholder approval of the Director Option Plan at the Fiscal
1996 Annual General Meeting, and none of these grants will be effective unless
and until such approval is obtained. The date of such approval will be the
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grant date for vesting purposes. (For all purposes of this Proxy Statement,
therefore, none of the shares subject to the Restricted Share Grants are
considered to be outstanding.)*
THE 1995 EMPLOYEE OPTION PLAN
General. The purpose of the 1995 Employee Option Plan is to enable the
Company to provide eligible employees with an additional incentive to contribute
to the success of the Company by giving such individuals an opportunity to
acquire a proprietary interest in the Company. The Compensation Committee of the
Board is authorized to administer the 1995 Employee Option Plan. As plan
administrator, the Compensation Committee has full power and authority to
interpret the plan, to establish, amend and rescind rules relating to the plan
and to determine which employees are eligible to receive options in any year,
whether options are to be incentive stock options or nonqualified stock options
for U.S. federal income tax purposes, the time or times at which options are to
be granted, the number of options granted to each eligible participant, the
duration of each option and the time within which any option may be exercised.
The Board has the authority to amend the plan, except that shareholder approval
is required for any amendment that increases the number of shares that may be
issued under the plan (other than pursuant to adjustments provided for in the
plan).
Awards and Eligibility. Key employees of the Company and its
subsidiaries are eligible to receive awards under the 1995 Employee Option Plan.
The plan provides for options (and restricted shares as described below) to be
granted in an aggregate amount up to 1,500,000 Ordinary Shares. Options may be
either incentive stock options within the meaning of Section 422 of the U.S.
Internal Revenue Code ("ISOs") or options that do not qualify as ISOs, known as
non-qualified stock options ("NSOs"). The maximum number of Ordinary Shares
which may be subject to options granted under the plan in any one year is based
on a formula that takes into account the short-term and long-term returns on
consolidated shareholders' equity ("ROE") of the Company. Under this formula,
the number of Ordinary Shares that can be subject to options granted in any
fiscal year cannot exceed a percentage (the "Maximum Yearly Percentage") of the
total number of shares subject to the plan. The Maximum Yearly Percentage equals
the lesser of 30% and the sum of two percentages, one that ranges from 0 to 10%
based on ROE for the relevant fiscal year and one that ranges from 0 to 20%
based on ROE over a three year period ending with the relevant fiscal year. Each
of these two percentages is determined by reference to specified target levels
of short-term or long-term ROE, as applicable (with the maximum percentage being
reached in each case when the relevant ROE reaches a 25% target level). In no
event may options on more than 450,000 Ordinary Shares be granted in any one
year. Subject to the aggregate annual limit represented by the Maximum Yearly
Percentage, the number of options granted to a particular employee in any given
year is determined by the Compensation Committee in its discretion. The Company
intends that, if the New Share Incentive Plan is approved by shareholders at the
Fiscal 1996 Annual General Meeting, future
- --------
* Prior to the Fiscal 1996 Annual General Meeting, the Company expects to
grant additional restricted shares under the Director Option Plan, in
respect of the November 1996 dividend. These grants will also be
conditioned on shareholder approval of the plan. See "-- Summary of
Benefits to be Received."
-9-
<PAGE> 13
grants of options to employees would be made under the new plan and no further
grants of options would be made under the 1995 Employee Option Plan.
Terms of Awards. The terms and conditions of each option granted under
the 1995 Employee Option Plan are to be set forth in an option agreement between
the Company and the grantee. Generally, the exercise price per share for each
option is equal to the fair market value of an Ordinary Share (book value per
share for grants prior to the Company's initial public offering in December 1995
and market value per share for grants thereafter) on the date of grant of such
options as determined by the Compensation Committee in accordance with the plan.
Unless determined otherwise by the Compensation Committee, 25% of each option
grant vests on each of the first four anniversaries of the grant date until
fully vested for as long as the grantee remains employed by the Company.
However, all options (and restricted Ordinary Shares granted in respect of such
options) vest immediately on a "Change of Control" (as defined with respect to
the Director Option Plan). No option will become exercisable after the
termination of the grantee's employment. No option that is otherwise exercisable
may be exercised more than ninety days after the termination of the grantee's
employment for any reason other than death or disability or more than six months
after termination for death or disability, and in no event may any option be
exercisable after the tenth anniversary of the date of grant.
The number of Ordinary Shares issuable on exercise of an option granted
under the plan and the exercise price per share thereof are subject to
adjustment in certain events having a dilutive or antidilutive effect on the
Ordinary Shares. In addition, in the event of any cash dividend in respect of
the Ordinary Shares, the grantee of an option will be granted restricted
Ordinary Shares with respect to an amount (the "Applicable Dividend Amount")
equal to 30% of the total dividend that would have been paid in respect of all
Ordinary Shares subject to the option (plus all unvested restricted shares
previously granted in respect of such option), were they then outstanding (or
vested, as the case may be). The number of restricted Ordinary Shares to be
granted will be determined by dividing the Applicable Dividend Amount by the
fair market value of an Ordinary Share as determined by the Compensation
Committee. Restricted shares vest at the rate of 25% on each of the first four
anniversaries of their grant date until fully vested for as long as the grantee
remains employed by the Company and also vest immediately upon a Change of
Control. Once vested, restricted shares may be held or transferred by the
grantee without restriction (other than certain restrictions relating to the
registration requirements of the Securities Act).
Grants to Date. In November 1995, options on 360,000 Ordinary Shares
were granted to eight employees of the Company under the 1995 Employee Option
Plan. These options have an exercise price of $15.24 per share and none has been
exercised. In October 1996, options on 360,000 Ordinary Shares were granted to
fourteen employees under this plan. These options have an exercise price of
$23.25 per share and none has been exercised.
To date, 8,329 restricted Ordinary Shares have been conditionally
granted to eight employees under the 1995 Employee Option Plan, in respect of
the quarterly dividends declared by the Board in February, May and August 1996.
These Restricted Share Grants are conditioned on shareholder approval of the
1995 Employee Option Plan at the Fiscal 1996 Annual General Meeting, and none of
these grants will be effective unless and until such approval is obtained. The
date of such approval will be the grant date for vesting purposes. (For all
purposes of this
-10-
<PAGE> 14
Proxy Statement none of the shares subject to Restricted Share Grants are
considered to be outstanding.)*
CERTAIN U.S. FEDERAL INCOME TAX EFFECTS
For a discussion of certain U.S. federal income tax effects of NSOs and
ISOs which may be granted under the Existing Plans, see "IV. Approval of the
1996 Share Incentive Plan -- Certain Federal Income Tax Effects."
SUMMARY OF BENEFITS TO BE RECEIVED
The following table sets forth in summary form the benefits or amounts
to be received by each of the following persons as a result of the Restricted
Share Grants, if the Existing Option Plans are approved by shareholders:
BENEFITS FROM RESTRICTED SHARE GRANTS
<TABLE>
<CAPTION>
1995 EMPLOYEE OPTION PLAN DIRECTOR OPTION PLAN
---------------------------- ---------------------------
NUMBER NUMBER
OF OF
ESTIMATED RESTRICTED ESTIMATED RESTRICTED
DOLLAR ORDINARY DOLLAR ORDINARY
NAME & POSITION VALUE ($)(1) SHARES VALUE ($)(1) SHARES
- --------------------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Lawrence S. Doyle
- - President & Chief
Executive Officer........ 63,503 2,799 0 0
Robert L. Nason
- - Senior Vice President
North American
Underwriting............. 36,212 1,596 0 0
Stephen S. Outerbridge
- - Senior Vice President
International
Underwriting............. 36,212 1,596 0 0
Frederick W.
Deichmann
- - Chief Financial Officer 22,567 995 0 0
(table continues on following page)
</TABLE>
- --------
* Prior to the Fiscal 1996 Annual General Meeting, the Company expects to
grant additional restricted shares under the 1995 Employee Option Plan,
in respect of the November 1996 dividend. The grants will also be
conditioned on shareholder approval of the plan. See "-- Summary of
Benefits to be Received."
-11-
<PAGE> 15
<TABLE>
<S> <C> <C> <C> <C>
William G. Fanning
- - Vice President &
Chief Actuary.......... 22,567 995 0 0
Executive Group.......... 181,069 7,981 0 0
Non-Executive Director
Group.................... 0 0 8,848 390
Non-Executive Officer
Employee Group........... 7,895 348 0 0
</TABLE>
- -----------
(1) Calculated based upon a price of $22.6875 per Ordinary Share, the last
reported sale price in the Nasdaq National Market on November 21, 1996.
If the Existing Option Plans are approved by shareholders, the
restricted shares will vest over a four-year period beginning on the
first anniversary of the date such approval is obtained.
Prior to the Fiscal 1996 Annual General Meeting, the Company expects to
grant additional restricted shares to 22 directors, officers and employees under
the Existing Option Plans, in respect of the November 1996 dividend. The total
number of such shares will depend on the market price of the Ordinary Shares
when the dividend is paid; based on an assumed price of $22.6875 per share, the
number would not exceed 6,098. Following the meeting, options on 1,500 Ordinary
Shares will be granted to each Non-Employee Director under the Director Option
Plan, with each option having an exercise price per share equal to the
then-current fair market value of one Ordinary Share. For information about
option grants made under the 1995 Employee Option Plan to date, see "III.
Executive Compensation" in Part Two of this Proxy Statement. Except for the
Restricted Share Grants reflected above, none of the grants made under the
Existing Option Plans is subject to shareholder approval, and all such grants
will remain in effect regardless of the results of the shareholder vote.
APPROVAL OF EXISTING OPTION PLANS
The Third Resolution, which is set forth in Annex A to this Proxy
Statement, provides for shareholder approval of the Existing Option Plans, in
the forms presented to the Fiscal 1996 Annual General Meeting. The forms to be
presented to the meeting will be substantially the forms in which these plans
were in effect (after all amendments and restatements thereof) on the record
date for the meeting.
The Company believes that the Existing Option Plans, which in their
current or prior form have been in place for more than a year, as well as the
Restricted Share Grants, have been important elements of its ability to attract,
retain and motivate quality management, by linking the remuneration of its
officers, directors and employees to the performance of the Company.
Consequently, the Company believes that these plans and grants are in the best
interests of the Company and its shareholders.
The directors who are not employees of the Company (other than the
Chairman) have a direct pecuniary interest in the approval of the Director
Option Plan, as they are eligible to
-12-
<PAGE> 16
participate in, and have received Restricted Share Grants under, such plan. The
directors who are also employees of the Company have a direct pecuniary interest
in the approval of the 1995 Employee Option Plan, as they are eligible to
participate in, and have received Restricted Share Grants under, such plan.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE THIRD
RESOLUTION.
IV. APPROVAL OF THE NEW SHARE INCENTIVE PLAN
In October 1996, the Board of Directors adopted the 1996 Share
Incentive Plan (the "New Share Plan") and, in light of the requirements of the
Nasdaq National Market in which the Ordinary Shares are traded, adoption of the
New Share Plan was conditioned on shareholder approval of the plan at the Fiscal
1996 Annual General Meeting. Set forth below is a summary of the terms of the
plan.
SUMMARY OF THE NEW SHARE PLAN
General. The purposes of the New Share Plan are to assist the Company
in attracting and retaining officers, other employees, consultants and advisors
with experience and ability by providing incentives to such participating
persons that are linked directly to increases in shareholder value and to
facilitate the ownership of the Company's shares by such individuals, thereby
increasing the identity of their interests with those of the Company's
shareholders. The Company intends that, if the New Share Plan is approved by
shareholders at the Fiscal 1996 Annual General Meeting, future grants of options
to employees would be made under the new plan and no further grants of options
would be made under the 1995 Employee Option Plan.
The New Share Plan provides for grants of ISOs, NSOs or a combination
thereof (as used in this section IV, "options"); provided, however, that ISOs
may be granted only to employees of the Company and its subsidiaries. Options
granted under the New Share Plan may be accompanied by share appreciation rights
("SARs") or limited share appreciation rights ("LSARs") or both (as used in this
section IV, "rights"). Rights may also be granted independently of options. The
New Share Incentive Plan also provides for grants of restricted shares, deferred
shares and performance shares (as used in this section IV, collectively,
"restricted awards").
Plan Administration. The New Share Plan may be administered by the
Board of Directors or the Compensation Committee. Subject to the terms of the
plan, the plan administrator has the right to determine the eligible
participants in the plan, to grant awards to eligible participants and to
determine the terms and conditions of the award agreements evidencing the grant
of such awards, including the conditions under which restrictions on restricted
shares and deferred shares will lapse. Such award agreements will typically set
forth the vesting schedule, exercise price and any other terms and conditions of
such awards, and the effect of a Change of Control (which term will be defined
by the plan administrator in the relevant award agreement) on such awards.
-13-
<PAGE> 17
Shares Subject to the Plan. The New Share Plan provides for the
issuance of up to 500,000 Ordinary Shares. (This limit will also apply to any
rights issued under the plan which are payable in Ordinary Shares). In the event
of any change in the number or nature of the Ordinary Shares by reason of a
merger, reorganization, consolidation, scheme of arrangement, recapitalization,
share dividend or other change in corporate structure affecting the nature or
amount of outstanding Ordinary Shares, the plan administrator may make a
substitution or appropriate adjustments in the aggregate number of shares
available for issuance under the plan and in the number of shares and any
exercise, purchase or similar provision relating to any option, right or
restricted award then outstanding. The plan administrator will have the
discretion to make other appropriate adjustments.
Eligibility. Discretionary grants of options, rights and restricted
awards may be made to any officer (including any officer who is also a
director), employee, consultant or advisor of the Company or any of its direct
and indirect subsidiaries who is determined by the plan administrator to be in a
position to contribute to the management, growth or profitability of the
Company.
Exercise of Options. Options will vest and become exercisable according
to a schedule established by the plan administrator at the time of grant.
Options may not be exercised more than ten years after the date of grant.
The purchase price of the shares purchased pursuant to the exercise of
an option will be as determined by the plan administrator at the time of grant
(but in the case of ISOs, will not be less than 100% of the Fair Market Value of
the Ordinary Shares at the time of grant, and in any event, will not be less
than the par value of the Ordinary Shares) and may be adjusted in accordance
with the antidilution provisions described above.
Upon the exercise of any option, the purchase price must be fully paid
in cash, or, at the discretion of the plan administrator, by delivery of
Ordinary Shares or restricted awards or by means of any other cashless exercise
procedure approved by the plan administrator, subject to certain limitations in
the case of an exercise of an ISO. If restricted awards are used to pay the
exercise price, certain of the shares acquired upon exercise will also be
subject to restrictions.
Share Appreciation Rights and Limited Share Appreciation Rights. A SAR
is the right to receive an amount, payable in cash, Ordinary Shares or as the
plan administrator otherwise determines, equal to or based on (i) the difference
between (A) the fair market value of the Ordinary Shares covered by such right
and (B) the aggregate exercise price of such right, (ii) the amount of dividends
paid with respect to Ordinary Shares over a specified time or (iii) any other
factor reasonably selected by the plan administrator. A LSAR is a SAR that may
only be exercised within the 30-day period following a Change of Control (as
defined by the plan administrator in the agreement evidencing such LSAR). Upon
the exercise of a SAR or LSAR, a holder is entitled to receive cash,
unrestricted Ordinary Shares or any combination thereof in an amount equal to
the appreciation in value of the number or Ordinary Shares covered by the right
above a specified price per share, all as determined by the plan administrator.
SARs and LSARs may be granted either alone ("Free Standing Rights") or in
conjunction with all or part of an option ("Related Rights").
-14-
<PAGE> 18
With respect to SARs and LSARs that are Related Rights, each such SAR
or LSAR will terminate upon the termination or exercise of the pertinent portion
of the related option, and the pertinent portion of the related option will
terminate upon the exercise of such right. SARs that are Related Rights may be
exercised at any time that the underlying option is exercisable or, at the
discretion of the plan administrator, in other circumstances. With respect to
NSOs, Related Rights may be granted at or after the grant of such an option. In
the case of ISOs, Related Rights may be granted only at the time of grant of the
ISOs.
SARs that are Free Standing Rights may be exercised at such time or
times and may be subject to such terms and conditions as may be determined by
the plan administrator at or after grant. LSARs that are Free Standing Rights
can only be exercised with the 30-day period following a Change of Control. The
term of each Free Standing Right will be fixed by the plan administrator but may
not exceed ten years from the date of grant.
Restricted Awards. A restricted share award is an award of Ordinary
Shares that may not be sold, assigned, transferred or pledged for a specified
period ("restricted period"). The plan administrator may determine the
restricted period and may also impose such other restrictions and conditions on
an award as it deems appropriate. The plan administrator may provide that these
restrictions will lapse upon certain events and may modify, accelerate or waive
such restrictions, in whole or in part. A deferred share award is the right to
receive Ordinary Shares at the end of a deferral period, and performance shares
are Ordinary Shares subject to restrictions based upon the attainment of
performance objectives, all as determined by the plan administrator.
Unless otherwise determined by the plan administrator, upon the award
of any restricted shares or performance shares, such shares will be deemed to be
outstanding for all purposes and the participant will have the rights of a
shareholder with respect to the shares, including voting and dividend rights,
subject to certain transfer and other restrictions set forth in the plan or the
relevant award agreement. In general, upon award of deferred shares, the
participant will not have any rights of a shareholder, other than the right to
receive dividends, during the specified deferral period.
Recipients of restricted shares, deferred shares or performance shares
will enter into an award agreement with the Company, in such form as the plan
administrator determines, which will set forth the terms and conditions,
including the restrictions and performance or other vesting criteria, applicable
to the shares.
Effect of Termination of Employment. If a grantee's employment with or
service as a consultant or advisor of the Company terminates for any reason, (i)
options may thereafter be exercised to the extent provided in the agreement
evidencing such options, or as otherwise determined by the plan administrator;
(ii) Free Standing Rights will be exercisable at such time or times and subject
to such terms and conditions as will be determined by the plan administrator at
or after grant; and (iii) the rights of participants with respect to restricted
awards will be set forth in the agreements evidencing such awards.
Amendment and Termination. The Board of Directors may terminate or
amend the New Share Plan, and the Board or the plan administrator may amend the
terms of or terminate any
-15-
<PAGE> 19
award granted thereunder, at any time, provided that any such action may not
impair the rights of any participant in the plan without his consent.
Contingent Grants to Date. In October 1996, performance share awards
covering 91,000 Ordinary Shares were granted to five officers of the Company
under the New Share Plan. All such grants were conditioned upon shareholder
approval of the plan at the Fiscal 1996 Annual General Meeting. For each
grantee, the performance shares will vest (i) on October 31, 1999 (or any
earlier date chosen by the plan administrator) if and to the extent the Company
achieves certain performance criteria, as determined by the plan administrator,
and (ii) all performance shares that have not previously vested will vest on
October 31, 2006; provided, however, that unvested performance shares will be
forfeited by a grantee whose employment terminates for any reason other than a
termination in connection with or following a Change of Control (as defined in
the award agreement) or resulting from death, disability or retirement. Vesting
on or prior to October 31, 1999 will depend on a comparison of Shareholder
Return (based on changes in share prices) and ROE (based on return on
shareholders' equity) for the Company and a peer group of companies selected by
the plan administrator, in each case during the vesting period. The portion of
the performance shares that will vest will range from 33% if Shareholder Return
or ROE for the Company exceeds that for at least 25% of the peer group
companies, to 100% if Shareholder Return or ROE for the Company exceeds that for
75% or more of the peer group companies. Prior to vesting, the performance
shares may not be transferred, pledged or otherwise encumbered by the grantee
but the grantee will be entitled to vote and to receive dividends on the shares.
Once vested, the performance shares may be held or transferred by the grantee
without restriction (other than certain restrictions relating to the
registration requirements of the Securities Act). All performance shares will
vest immediately if the grantee's employment is terminated in connection with or
following a Change of Control (as defined in the award agreement). The vesting
period, performance criteria and other terms and conditions of the performance
share awards are set forth in award agreements between the Company and the
recipients.
CERTAIN U.S. FEDERAL INCOME TAX EFFECTS
The following is a summary discussion of certain U.S. federal income
tax effects of options, rights and restricted awards under the New Share Plan.
Non-qualified Stock Options. A plan participant will not be subject to
U.S. federal income tax upon the grant of an NSO. Rather, at the time of
exercise of the NSO, the participant will recognize ordinary income for U.S.
federal income tax purposes in an amount equal to the excess of the fair market
value of the shares purchased over the exercise price.
If shares acquired upon exercise of an NSO are later sold or exchanged,
then the difference between the sale price and the fair market value of such
shares on the date that ordinary income was recognized with respect thereto will
generally be subject to tax as long-term capital gain or loss, if the
participant's holding period for the shares at the time of disposition is more
than one year; otherwise, it will be subject to tax as short-term capital gain
or loss. If the Company were subject to U.S. federal income tax, it would not be
entitled to a deduction at the
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<PAGE> 20
time of grant of an NSO but would be entitled to a deduction when a grantee
exercises such an option in an amount equal to the ordinary income realized by
the grantee.
Incentive Stock Options. A plan participant will not be subject to U.S.
federal income tax upon the grant of an ISO or upon its timely exercise.
Exercise of an ISO will be timely if made during its term and if the participant
remains an employee of the Company or a subsidiary at all times during the
period beginning on the date of grant of the ISO and ending on the date three
months before the date of exercise (or one year before the date of exercise in
the case of a disabled employee). Exercise of an ISO will also be timely if made
by the legal representative of a participant who dies (i) while in the employ of
the Company or a subsidiary or (ii) within three months after termination of
employment (or one year after termination in the case of a disabled employee).
The tax consequences of an untimely exercise of an ISO will be determined in
accordance with the rules applicable to NSOs (see"--Non-qualified Stock
Options"). If the Company were subject to U.S. federal income tax, it would not
be entitled to a deduction at the time of grant or exercise of an ISO, but would
be entitled to a deduction in the year of disposition of the shares if the
grantee did not hold the shares for the one-year and two-year periods described
below, in an amount equal to the ordinary income realized by the grantee.
If shares acquired pursuant to a timely exercised ISO are later
disposed of, the participant will, except as noted below with respect to a
"disqualifying disposition," recognize long-term capital gain or loss equal to
the difference between the amount realized upon such sale and the option
exercise price. If, however, a participant disposes of shares acquired pursuant
to the exercise of an ISO prior to the expiration of two years from the date of
grant of the ISO or within one year from the date such shares are transferred to
him upon exercise (a "disqualifying disposition"), generally (i) the participant
will realize ordinary income at the time of the disposition in an amount equal
to the excess, if any, of the fair market value of the shares at the time of
exercise (or, if less, the amount realized on such disqualifying disposition)
over the option exercise price, and (ii) any additional gain realized by the
participant will be subject to tax as short-term or long-term capital gain.
The amount by which the fair market value of the stock on the exercise
date of an ISO exceeds the option exercise price will be an item of adjustment
for purposes of the "alternative minimum tax."
SUMMARY OF PLAN BENEFITS
The following table sets forth in summary form the benefits or amounts
to be received by each of the following persons by reason of the performance
share awards made under the New Share Plan in October 1996, if the plan is
approved by shareholders:
-17-
<PAGE> 21
BENEFITS FROM PERFORMANCE SHARE AWARDS
<TABLE>
<CAPTION>
NEW SHARE PLAN
NUMBER
OF PERFORMANCE SHARES
NAME & POSITION ---------------------
<S> <C>
Lawrence S. Doyle
- - President & Chief
Executive Officer ............................... 27,400
Robert L. Nason
- - Senior Vice President
North American Underwriting ..................... 17,000
Stephen S. Outerbridge
- - Senior Vice President
International Underwriting ...................... 17,000
Frederick W. Deichmann
- - Chief Financial Officer ......................... 14,800
William G. Fanning
- - Vice President &
Chief Actuary ................................... 14,800
Executive Group ................................... 91,000
Non-Executive Director Group ...................... 0
Non-Executive Officer
Employee Group .................................... 0
</TABLE>
APPROVAL OF THE NEW SHARE PLAN
The Company believes that the New Share Plan, and the contingent
performance share awards made thereunder in October 1996, are important elements
of its ability to attract, retain and motivate quality management, by linking
the remuneration of its officers and employees to the performance of the
Company. Consequently, the Company believes that this plan and the contingent
awards are in the best interests of the Company and its shareholders and is
seeking shareholder approval of the plan in order to satisfy the requirements of
the Nasdaq National Market.
The directors who are also employees of the Company have a direct
pecuniary interest in the approval of the New Share Plan, as they are eligible
to participate in, and have received contingent grants under, such plan.
The Fourth Resolution, which is set forth in Annex A to this Proxy
Statement, provides for shareholder approval of the New Share Plan, in the form
presented to the Fiscal 1996 Annual General Meeting. The form to be presented to
the meeting will be substantially the form approved by the Board in October
1996.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
FOURTH RESOLUTION.
-18-
<PAGE> 22
V. APPROVAL OF PURCHASE AND RETIREMENT
OF SHARES HELD BY SUBSIDIARY
In July 1996, Global Capital Re purchased one million Ordinary Shares
in an underwritten public offering conducted on behalf of certain shareholders
of the Company. The one million shares, which are referred to herein as the GCR
Repurchase Shares, were purchased at the public offering price net of
underwriters' discount, or $20.92 per share (approximately $20.9 million in the
aggregate). As long as the GCR Repurchase Shares are held by Global Capital Re,
they are deemed to be outstanding for purposes of the Articles (though not for
purposes of the Company's consolidated financial statements) and continue to
carry voting and dividend rights. The Company proposes to purchase the GCR
Repurchase Shares from Global Capital Re so that the shares may be retired and
cease to be outstanding. In addition, the Company believes that retiring the
shares will have the effect of reducing the Controlled Shares attributable to
Goldman Sachs Persons for purposes of the Articles. As described below under
"--Restrictions on Transfer," certain transfer restrictions currently applicable
under the Articles to all Ordinary Shares will terminate when the Controlled
Shares attributable to Goldman Sachs Persons represent less than 10% of the
Company's outstanding shares, regardless of any subsequent increase in their
number. After taking account of all Controlled Shares believed to be
attributable to Goldman Sachs Persons based on share data as of November 21,
1996, the Company estimates that, if the GCR Repurchase Shares were retired,
these Controlled Shares would continue to exceed the 10% threshold but by a
smaller amount than would otherwise be the case. Therefore, the Company believes
that purchasing and retiring the GCR Repurchase Shares could result in
termination of these transfer restrictions sooner than otherwise might be the
case. Whether and when these transfer restrictions will terminate if the GCR
Repurchase Shares are retired will depend on the share ownership positions of
the relevant persons going forward. For further information about current share
ownership, see "IV. Beneficial Ownership of Ordinary Shares" in Part Two of this
Proxy Statement.
The purchase price for the GCR Repurchase Shares would equal $20.92 per
share, or approximately $20.9 million in the aggregate, the same price at which
Global Capital Re purchased the shares in the public offering. The Company would
pay the purchase price out of the proceeds of a dividend in an equal amount from
Global Capital Re. The proposed transaction would not affect the Company's
consolidated financial position or results of operations but, under Bermuda
insurance regulations, would reduce the maximum amount of dividends and other
distributions that Global Capital Re would otherwise be permitted to make to the
Company during fiscal year 1997 without notifying Bermuda regulators, from
approximately $107 million to approximately $86 million. This reduced amount
substantially exceeds the total amount of dividends paid or to be paid by the
Company in respect of its most recent four fiscal quarters (approximately $64
million in the aggregate). Consequently, the Company does not believe that the
proposed repurchase will impair its ability to pay a regular quarterly dividend
during fiscal year 1997 as contemplated by its current dividend policy, at least
in the absence of significant losses in its reinsurance business. However,
because Global Capital Re can be expected to incur significant catastrophe
reinsurance losses from time to time, there is no assurance that the Company's
ability to pay dividends as contemplated by its current dividend policy will not
be impaired by the proposed purchase of the GCR Repurchase Shares.
-19-
<PAGE> 23
RESTRICTIONS ON TRANSFER
The Articles contain several provisions restricting the transferability
of Ordinary Shares. The directors are required to decline to register a transfer
of shares if they have reason to believe that the result of such transfer would
be (i) to increase the number of total Controlled Shares of any U.S. person
other than a Goldman Sachs Person to 10% or more of the shares of the Company,
(ii) to increase the number of total Controlled Shares of any Goldman Sachs
Person to 10% or more of the shares of the Company without the prior written
consent of Goldman, Sachs & Co. or (iii) subject to certain exceptions, that a
Goldman Sachs Person would become or continue to be a United States 25%
Shareholder, in each case without giving effect to the limitation on voting
rights provided in the Articles. "Controlled Shares" of any U.S. person means,
in general, voting shares of the Company that such person owns directly or by
application of the constructive ownership rules of sections 958(a) and 958(b) of
the U.S. Internal Revenue Code, as amended (the "Code"), or is deemed to
beneficially own for purposes of Section 13(d) of the Exchange Act and the
Commission's rules thereunder. "Goldman Sachs Person" means any of Goldman,
Sachs & Co. and its affiliates and "United States 25% Shareholder" means a U.S.
person who owns, directly or by application of such constructive ownership
rules, more than 25% of either (i) the total combined voting rights attaching to
the issued shares of the Company or (ii) the total combined value of such
shares, determined pursuant to Section 957 of the Code. Similar restrictions
apply to the Company's ability to issue or repurchase shares.
These transfer, issuance and repurchase restrictions will terminate at
any time when no Goldman Sachs Person is deemed to have total Controlled Shares
representing 10% or more of the Company's shares, regardless of any subsequent
increase in the number of such Controlled Shares. As described above, the
Company believes that the proposed purchase and retirement of the GCR Repurchase
Shares would lower the number of Controlled Shares attributable to Goldman Sachs
Persons closer to the 10% threshold than otherwise would be the case.
For the reasons described below under "--Certain U.S. Federal Income
Tax Considerations," a U.S. shareholder whose Controlled Shares exceeded the 10%
threshold described above -- whether intentionally due to share acquisitions or
inadvertently due to the application of the constructive ownership rules under
the Code -- could be exposed to adverse U.S. federal income tax treatment in the
event that the Controlled Shares of other U.S. shareholders also exceeded such
threshold and, taken together, all such Controlled Shares exceeded the 25%
threshold described above. Termination of the transfer, issuance and repurchase
restrictions described above could make it more likely that the Controlled
Shares attributable to any U.S. shareholder might exceed the 10% threshold.
Whether or not the transfer restrictions described above remain in
effect, the Articles continue to provide that the directors may, in their
absolute discretion, decline to register the transfer of any shares if they have
reason to believe (i) that such transfer may expose the Company, any subsidiary
thereof, any shareholder or any person ceding insurance to the Company or any
such subsidiary to adverse tax or regulatory treatment in any jurisdiction
(including treatment of shareholders as United States shareholders of a
"controlled foreign corporation" within the meaning of the Code) or (ii) that
registration of such transfer under the Securities Act or under any U.S. state
securities laws or under the laws of any other jurisdiction is required and such
registration has not been duly effected.
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<PAGE> 24
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
Each "United States shareholder" of a "controlled foreign corporation"
("CFC") must include in its gross income for U.S. federal income tax purposes
its pro rata share of the CFC's "subpart F income," even if the subpart F income
is not distributed. For these purposes, any U.S. person who owns, directly or
indirectly through foreign persons, or is considered to own, under the
constructive ownership rules set forth in sections 958(a) and 958(b) of the Code
(generally applying to family members, partnerships, estates, trusts or
controlled corporations or holders of certain options), 10% or more of the total
combined voting power of all classes of stock of the foreign corporation will be
considered to be a "United States shareholder." In general, a foreign insurance
company such as Global Capital Re is treated as a CFC only if such "United
States shareholders" collectively own or are considered to own more than 25% of
the total combined voting power or total value of the corporation's shares for
an uninterrupted period of 30 days or more during any tax year. Currently, to
the Company's knowledge, Goldman Sachs Persons, are the only shareholders to
whom 10% or more of the Company's voting shares are attributable for this
purpose (although, because of the voting cutback provision in the Articles,
these persons do not control 10% or more of the Company's voting power). The
Company believes that, because of the current dispersion of the Company's share
ownership among holders and because under the Articles the voting power
associated with the shares held by any U.S. person, directly or by attribution
(including shares attributable to Goldman Sachs Persons), is limited to less
than 10% of the total combined voting power of the Company, shareholders of the
Company should not be viewed as shareholders of a CFC for purposes of these
rules. There can be no assurance, however, that the current dispersion of the
Company's share ownership will continue (particularly if certain transfer
restrictions terminate as described above under "--Restrictions on Transfer")
or, therefore, that these rules will not apply to shareholders of the Company.
Accordingly, U.S. persons who might, directly or through attribution, acquire or
hold 10% or more of the Ordinary Shares should consider the possible application
of the CFC rules.
APPROVAL OF FIFTH RESOLUTION
The Fifth Resolution, which is set forth in Annex A to this Proxy
Statement, authorizes the Company to purchase the GCR Repurchase Shares from
Global Capital Re at any time within 90 days after the Fiscal 1996 Annual
General Meeting, at a purchase price equal to $20.92 per share.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE FIFTH
RESOLUTION.
VI. AMENDMENTS TO ARTICLES OF ASSOCIATION
The Company's Amended and Restated Articles of Association currently
contain a provision requiring that the Company hold an annual general meeting of
shareholders in each year. Because the Company's fiscal year currently ends on
September 30, this provision has the effect of requiring the Company to complete
the preparation of its annual financial statements and make all other
arrangements necessary for the annual general meeting within 90 days after its
fiscal year end. In order to provide the Company with additional time for these
matters, the
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<PAGE> 25
shareholders are asked to approve an amendment to the Articles that would permit
the annual general meeting to be held at any time within 123 days after the
close of the fiscal year (e.g., not later than the next January 31 for a fiscal
year ending September 30). If this amendment is approved, the annual general
meeting next following the Fiscal 1996 Annual General Meeting could be held as
late as January 31, 1998, with no such meeting being held during calendar year
1997.
To accommodate this proposed change in the timing of annual general
meetings, it is desirable that certain related provisions of the Articles be
amended in a corresponding manner. These related amendments are described
below.
If the timing of the annual general meeting is tied to the end of the
Company's fiscal year as proposed, a change in the fiscal year could require
that the frequency of such meetings be temporarily adjusted. For this reason,
the Company proposes to amend the Articles to provide that, in the event the
Company's fiscal year is changed, the first annual general meeting following the
first changed fiscal year could be held at any time up to one year and 180 days
after the last such meeting. This amendment would provide the Board of Directors
with flexibility to adjust the usual period between annual general meetings in a
particular year in order to accommodate a change in the Company's fiscal year.
This amendment could result in the period between annual general meetings (and
the corresponding terms of office for the directors) being up to 180 days longer
than one year, but only if the fiscal year were changed during that period.
Under the Articles, the Board of Directors is authorized to change the Company's
fiscal year without shareholder approval, although the Company has no plans to
do so.
The Articles currently provide that the term of each director will be
one year and that a director will hold office until the conclusion of the annual
general meeting for the year in which his term expires. In order to accommodate
the proposed change in the timing of annual general meetings, these provisions
are also proposed to be amended, so as to provide that the term of office for a
director would run until the conclusion of the annual general meeting next
following his or her election or appointment as a director, whenever held. This
proposed amendment would result in the directors who are elected at the Fiscal
1996 Annual General Meeting serving a term that could be up to 31 days longer
than otherwise would be permitted, depending on when the fiscal 1997 annual
general meeting is held.
The Articles also currently provide that shareholders who intend to
nominate persons for election as directors at an annual general meeting must
notify the Company not later than 60 days prior to the anniversary date of the
immediately preceding annual general meeting. The Company proposes to amend this
provision to require that the notice be given to the Company not later than the
120th day prior to the anniversary of the day on which notice of the immediately
preceding annual general meeting was first sent or given to shareholders (or, in
the case of any annual or extraordinary general meeting, not later than such day
and time as the directors may authorize in order to comply with applicable law).
This change is also intended to enable the Company to comply with the
Commission's notice requirements under the proxy rules, if applicable.
The Sixth Resolution, which is set forth in Annex A to this Proxy
Statement, provides for the Articles to be amended and restated in the form
presented to the Fiscal 1996 Annual
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<PAGE> 26
General Meeting. The form to be presented to the meeting will contain amended
provisions of Articles 23(a), 29, 52(a) and 52(b) that implement the changes
described above and that will be substantially in the form set forth in Annex B
to this Proxy Statement. For ease of comparison, Annex B sets forth these
provisions, both as currently in effect and as they are proposed to be amended.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE SIXTH
RESOLUTION.
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<PAGE> 27
PART TWO
Part two of this Proxy Statement sets forth certain background
information about the Company's incumbent directors, executive officers,
executive compensation and other matters.
I. BOARD OF DIRECTORS
INCUMBENT DIRECTORS
The following persons were, at September 30, 1996, and are currently
serving on the Board of Directors of the Company. All of them have been
nominated for election at the Fiscal 1996 Annual General Meeting, other than Mr.
Lerner, who has indicated to the Company that he intends to retire from the
Board upon conclusion of the meeting. Information about the ages and principal
occupations of the directors who are nominees for election is set forth in Part
One of this Proxy Statement, under "I. Election of Directors." Information
regarding Mr. Lerner is set forth below.
Steven H. Newman (Chairman) (1)(2)
Loay Al-Naqib
Lawrence S. Doyle (1)
J. Markham Green (2)(3)
Alfred Lerner (1)
John P. McNulty (1)
David A. Olsen (3)
Jerry S. Rosenbloom (2)(3)
Joseph D. Roxe (1)(2)
Michael E. Satz (3)
Donald J. Zuk (2)(3)
- ---------------
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
ALFRED LERNER (age: 63) has been a director of the Company since 1993.
He has been Chairman and Chief Executive Officer of MBNA Corporation since its
inception in January 1991 and has been a director of MBNA America Bank, N.A.
since December 1991. He has been Chairman and Chief Executive Officer of The
Town and Country Trust since August 1993. He is a member of the Boards of
Trustees of Columbia University, of the Cleveland Clinic Foundation and of Case
Western Reserve University and President of the Cleveland Clinic Foundation.
NUMBER AND TERMS OF DIRECTORS
The Board of Directors currently consists of eleven members, each of
whose current term of office will expire at the conclusion of the Fiscal 1996
Annual General Meeting and when his
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<PAGE> 28
successor is elected or appointed and qualified. Under the Articles, directors
will be elected at an annual general meeting by an ordinary resolution of the
shareholders. Candidates for election by shareholders will be nominated by the
Board and, subject to certain notice and other requirements, may be nominated by
shareholders.
The Articles provide for a minimum of three and a maximum of 20
directors (subject to modification by ordinary resolution of the shareholders)
and empower the Board to fix the exact number of directors within these limits
and to appoint persons to fill, or to eliminate, any vacancies on the Board.
Vacancies on the Board are filled by action of a majority of the Board remaining
in office, with each such appointed director holding office until the next
following annual general meeting of shareholders and his or her successor is
elected or appointed and qualified. Shareholders are not entitled to fill
vacancies except at a general meeting called by the Board for the election of
directors or to fill a vacancy created by removal of a director. Directors may
not be removed during their term of office except by ordinary resolution of the
shareholders and only for willful neglect or default. Because Mr. Lerner intends
to retire from the Board at the conclusion of the Fiscal 1996 Annual General
Meeting, the Board has resolved that the number of directors be reduced to ten
at such time and until otherwise determined by the Board.
Directors may take action by a majority of their number present at a
duly called and held meeting at which a quorum is present. The majority of
directors in office at any time will be a quorum for all purposes.
A director who expects to be unable to attend any meeting of the Board
or any committee thereof for any reason may appoint any person as an alternate
director to attend and act in his place. A director also may be represented at
any meeting of the Board or any committee by a proxy appointed by him.
During fiscal year 1996, the Board held six meetings. Each incumbent
director attended at least 75% of all meetings of the Board, and of the
committees thereof on which he served, held during the fiscal year 1996 (or the
portion thereof in which he served).
The Company is a Cayman Islands company and its Articles and corporate
governance matters are governed by Cayman Islands law.
COMMITTEES OF BOARD OF DIRECTORS
The Board of Directors established Audit and Compensation Committees in
October 1993 and an Executive Committee in November 1995. Each such committee
reports to the Board. The Board has not established a nominating committee.
Executive Committee. The Board appoints an Executive Committee to
exercise all of the authority of the Board between meetings of the full Board.
The Executive Committee does not, however, have authority to (i) declare
dividends, (ii) issue shares of the Company, (iii) recommend to the shareholders
any action which requires shareholder approval, (iv) alter, amend or repeal any
resolution of the Board relating to the Executive Committee or (v) take any
other action which legally may be taken only by the full Board. In addition, the
Executive
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<PAGE> 29
Committee may review any aspects of GCR's business (including Global Capital
Re's underwriting guidelines) and report or make recommendations to the Board
thereon. The Executive Committee currently consists of five directors (Messrs.
Newman (Chairman), Doyle, Lerner, McNulty and Roxe). The Executive Committee met
once in fiscal year 1996.
Audit Committee. The Board appoints an Audit Committee to nominate the
independent accountants to be the auditors of the Company and, in consultation
with the auditors, review the scope of their audit and the accounting policies
and procedures of the Company. The Audit Committee currently consists of five
directors (Messrs. Zuk (Chairman), Green, Newman, Rosenbloom and Roxe), none of
whom is an officer or employee of the Company or Global Capital Re. The Audit
Committee met four times in fiscal year 1996.
Compensation Committee. The Board appoints a Compensation Committee to
review the performance of corporate officers and the Company's compensation
policies and procedures and to make recommendations to the Board with respect to
such policies and procedures. The Compensation Committee also administers the
share option, restricted share and incentive compensation plans of the Company.
The Compensation Committee currently consists of five directors (Messrs.
Rosenbloom (Chairman), Green, Olsen, Satz and Zuk), none of whom is an officer
or employee of the Company or Global Capital Re. The Compensation Committee met
three times in fiscal year 1996.
The Company expects that, if the current directors (other than Mr.
Lerner) are elected at the Fiscal 1996 Annual General Meeting as proposed, those
of such directors who are currently members of the foregoing committees will be
reappointed to their respective committee roles by the Board after the meeting.
OTHER SUPERVISORY ARRANGEMENTS
The Board of Directors of Global Capital Re appoints an Investment
Committee to review the guidelines governing the investment of Global Capital
Re's funds and to make recommendations to the Global Capital Re Board with
respect to such guidelines. The Investment Committee also reviews the
performance of Global Capital Re's investment manager, Goldman Sachs Asset
Management International. The Investment Committee presently consists of Messrs.
Satz (Chairman), Doyle, Lerner, Newman and Roxe. The Investment Committee met
four times in fiscal year 1996.
COMPENSATION OF DIRECTORS
Directors, other than directors who are employees or officers of the
Company or Global Capital Re, are entitled to remuneration for their services as
determined by the Board from time to time. Such remuneration is currently fixed
at $25,000 per annum plus a $1,000 fee for each Board meeting attended
(including meetings of committees of the Board). In addition, directors are
reimbursed for travel and out-of-pocket expenses incurred to attend meetings of
the Board and its committees. Non-Employee Directors also participate in the
Director Option Plan, which is summarized under "III. Approval of Existing
Option Plans -- Director Option Plan" in Part One of this Proxy Statement.
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<PAGE> 30
Mr. Newman and the Company are party to the Amended and Restated
Chairman's Incentive Agreement. Under this agreement, in 1993 Mr. Newman
received options to purchase 70,480 Ordinary Shares at an exercise price of
$11.00 per share. These options constitute "Initial Options" as defined below
under "--Executive Compensation--Management Options" and are subject to the
vesting and adjustment provisions described thereunder. Pursuant to this
agreement, in 1993 Mr. Newman also invested $950,000 in Ordinary Shares at a
purchase price of $20.00 per share. This investment was financed by a
non-recourse loan from the Company, which is secured by the Ordinary Shares
purchased, matures on October 8, 2000 (or, if earlier, 60 days after Mr. Newman
ceases to be a director) and bears interest (payable at maturity) at the rate of
7% per annum. As of September 30, 1996, the amount outstanding on the loan was
$619,400. This loan can be forgiven in an amount not to exceed 30% of the
initial principal amount plus interest thereon each year, as determined by the
Compensation Committee in accordance with a sliding scale based on the Company's
short-term and long-term return on consolidated shareholders' equity.
II. EXECUTIVE OFFICERS
The executive officers of the Company are elected by and serve at the
discretion of the Board of Directors. As of September 30, 1996, the executive
officers of the Company were as follows:
EXECUTIVE OFFICERS
LAWRENCE S. DOYLE (age: 53) has been President, Chief Executive Officer
and a director of the Company since 1993. He was President and CEO of the New
England Reinsurance Corporation, First State Insurance Company and the New
England Insurance Company from 1986 to 1993. Mr. Doyle was also Senior Vice
President of ITT Hartford Group and President of ITT Hartford's International
Division from 1981 to April 1993.
ROBERT L. NASON (age: 45) has been Senior Vice President -- North
American Underwriting of the Company since 1993. He was Senior Vice President
and Director from 1988 to 1993 and Vice President from 1983 to 1988 of Trenwick
America Reinsurance Company.
STEPHEN S. OUTERBRIDGE (age: 45) has been Senior Vice President --
International Underwriting of the Company since 1993. He was Chief Underwriting
Officer -- International from 1992 to 1993, Director -- International
Reinsurance Underwriting and Head Underwriter from 1988 to 1992 and Manager --
International Property and Casualty from 1984 to 1988 of Hartford Fire
International Reinsurance.
JOHN K. WITHERSPOON, JR. (age: 58) has been Director of Marine
Underwriting of the Company since 1994. He was Vice President of BEP
International from 1992 to 1994 and President of Bell Nicholson Henderson (USA)
Inc. from 1986 to 1991. He is a past President of the American Marine Insurance
Forum and is a Chartered Property Casualty Underwriter.
FREDERICK W. DEICHMANN (age: 54) has been Chief Financial Officer and
Secretary of the Company since 1993. He was Vice President from 1988 to 1993 of
General Re Corporation
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<PAGE> 31
and Vice President of Aetna Life & Casualty from 1985 to 1988. He is a member of
the American Institute of Certified Public Accountants and has served on its
Insurance Companies Committee.
WILLIAM G. FANNING (age: 38) has been Chief Actuary of the Company
since 1994. He was Commercial Pricing Director and Actuary from 1992 to 1993 and
Actuary-Reinsurance Pricing from 1987 to 1991 at Allstate Insurance Company. Mr.
Fanning is a Fellow of The Casualty Actuarial Society and a member of the
American Academy of Actuaries.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who beneficially own more than ten percent
of the Company's Ordinary Shares, to file reports of ownership as well as
changes in ownership with the Commission and the National Association of
Securities Dealers, Inc. ("NASD"). Such persons are required by Commission
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely upon its review of the copies of such forms received by
it, the Company believes that during fiscal year 1996 all filing requirements
applicable to its executive officers, directors and greater than ten percent
beneficial owners were complied with, subject to the exceptions set forth below.
The Company's directors and executive officers and The Goldman Sachs
Group, L.P. made late filings of initial ownership reports on Form 3 following
the Company's initial public offering in December 1995, although all information
required to be filed on such forms was disclosed in the Company's registration
statement on Form S-1 filed with the Commission in connection with the offering
prior to the time required for filing the Form 3 reports. All such Form 3
reports have been filed (and in most cases were filed within three days of the
required date). Joseph D. Roxe, a director, also made late filings of three
transaction reports on Form 4.
III. EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth in summary form all compensation for all
services rendered in all capacities to the Company and its subsidiary for the
years ended September 30, 1994, 1995 and 1996 to the Chief Executive Officer of
the Company and the other four most highly compensated executive officers of the
Company each of whose total annual salary and bonus exceeded $100,000
(collectively with the Chief Executive Officer, the "Named Executives"):
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<PAGE> 32
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------------------- ---------------------------
OTHER ANNUAL INITIAL OPTIONS OTHER ALL OTHER
FISCAL SALARY BONUS COMPENSATION ON SHARES OPTIONS ON COMPENSATION
YEAR $ $(1) $(2) #(3) SHARES(3) $(4)
----- ------- ------- ------------ --------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lawrence S. Doyle, President 1996 421,867 457,000 116,167 0 121,000 45,102
and Chief Executive Officer 1995 401,775 292,000 167,548 58,730 12,335 43,089
1994 370,500 93,000 217,808 0 0 38,371
Robert L. Nason, Senior Vice 1996 257,292 206,000 138,410 0 69,000 27,199
President - North American 1995 228,750 175,000 139,165 23,495 7,050 24,344
Underwriting 1994 205,833 64,000 132,541 0 0 21,291
Stephen S. Outerbridge, Senior Vice 1996 215,833 172,000 139,881 0 69,000 23,053
President - International 1995 199,375 145,000 140,766 23,495 7,050 21,403
Underwriting 1994 184,375 43,500 128,153 0 0 19,323
Frederick W. Deichmann, Chief 1996 205,833 165,000 110,459 0 43,000 23,466
Financial Officer 1995 182,500 135,000 109,083 15,740 4,405 20,868
1994 162,500 43,500 137,338 0 0 16,648
William G. Fanning, Chief Actuary 1996 185,625 150,000 114,419 0 43,000 20,018
1995 160,625 122,000 102,312 15,740 41,405 17,499
1994 123,295 30,000 120,228 0 0 12,654
</TABLE>
- --------------
(1) Amounts are awarded pursuant to the Company's Amended and Restated
Employee Incentive Compensation Plan (the "Employee Incentive Plan"),
based on individual and Company performance, with the latter being
based one-half on the annual ROE of the Company and one-half on the
annual ROE compared to the ROE of a peer group of companies. An annual
award may not exceed 75% (175% beginning in fiscal year 1997) of the
recipient's base salary.
(2) Includes amounts in respect of reimbursement for certain travel
expenses, automobile expenses, club dues and relocation expenses and
also includes housing expenses of $132,000, $144,000 and $102,874;
$110,000, $120,000 and $125,000; $120,000, $120,000 and $120,000;
$96,000, $96,000 and $96,000; and $72,000, $96,000 and $104,000 for
Messrs. Doyle, Nason, Outerbridge, Deichmann and Fanning, respectively,
for fiscal years 1994, 1995 and 1996, respectively.
(3) For a description of Initial Options and Other Options, see "Management
Options" below. Does not include options on 360,000 Ordinary Shares
granted in October 1996 to fourteen employees at an exercise price of
$23.25, including options on 108,000, 60,000, 60,000, 52,000 and 52,000
shares to Messrs. Doyle, Nason, Outerbridge, Deichmann and Fanning,
respectively.
(4) Includes payments made in connection with life insurance premiums and
retirement plan contributions. Includes life insurance premiums of
$1,321, $2,911 and $2,911; $708, $1,469 and $1,469; $885, $1,465 and
$1,470; $398, $2,618 and $2,883; and $324, $1,436 and $1,456 and
retirement plan contributions of $37,050, $40,178 and $42,191; $20,583,
$22,875 and $25,729; $18,438, $19,938 and $21,583; $16,250, $18,250 and
$20,583; and $12,330, $16,063 and $18,562 for Messrs. Doyle, Nason,
Outerbridge, Deichmann and Fanning, respectively, for fiscal years
1994, 1995 and 1996, respectively.
MANAGEMENT OPTIONS
To date, two types of options have been granted to employees of the
Company since its inception in 1993: Initial Options, which were granted to the
Named Executives in connection with the commencement of their employment in 1993
(1994 for Mr. Fanning), and Other
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<PAGE> 33
Options, which were granted to key employees of the Company and Global Capital
Re, including the Named Executives, pursuant to the 1995 Employee Option Plan
and the Company's Amended and Restated Share Option Plan (the "Initial Employee
Option Plan"). The 1995 Employee Option Plan is summarized under "III. Approval
of Existing Option Plans" in Part One of this Proxy Statement. The terms of the
Initial Employee Option Plan are similar to those of the 1995 Employee Option
Plan, except that under the initial plan annual grants were not limited by
performance criteria, the exercise price per share for an outstanding option is
reduced automatically by the amount of any cash dividend paid in respect of an
Ordinary Share and plan participants do not receive restricted shares in respect
of such dividends. Options on 35,245 Ordinary Shares have been granted under the
Initial Employee Option Plan, of which none has been exercised to date, and no
further options are available for grant under that plan. The information in this
section III does not reflect the Restricted Shares Grants made under the 1995
Employee Option Plan or the performance share awards made under the New Share
Plan, all of which are conditioned on shareholder approval as described in
sections III and IV of Part One of this Proxy Statement.
For each option granted under the Company's compensation plans to date,
the number of shares issuable thereunder and the exercise price per share, as
set forth herein, have been adjusted as necessary to reflect a five-for-one
split of the Ordinary Shares in the form of a share dividend in December 1995, a
distribution by the Company of approximately $201 million in cash to its
shareholders in August 1995 and the quarterly cash dividends paid by the Company
in February, May and August 1996, in each case to the extent such adjustments
apply. No adjustment is reflected in respect of the quarterly cash dividend
payable in November 1996.
Option Grants in Fiscal Year 1996. The following table contains
information concerning the share options granted to each of the Named Executives
during fiscal year 1996. The Company has not authorized the grant of any share
appreciation rights.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
SHARE PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(3)
---------------------------------------------------------- -----------------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL EXERCISE MARKET
UNDERLYING OPTIONS GRANTED TO OR BASE PRICE ON
OPTIONS EMPLOYEES IN FISCAL PRICE PER DATE OF EXPIRATION
NAME GRANTED(1) YEAR SHARE(2) GRANT(2) DATE 5% 10%
- ---- ---------- ------------------- --------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Lawrence S. Doyle 121,000 33.60 15.24 15.24 11/16/05 1,161,745 2,932,024
Robert L. Nason 69,000 19.20 15.24 15.24 11/16/05 662,483 1,671,980
Stephen S. Outerbridge 69,000 19.20 15.24 15.24 11/16/05 662,483 1,671,980
Frederick W. Deichmann 43,000 11.90 15.24 15.24 11/16/05 412,852 1,041,959
William G. Fanning 43,000 11.90 15.24 15.24 11/16/05 412,852 1,041,959
</TABLE>
- -----------------
(1) Does not reflect options on 15,000 shares granted to employees (other
than Named Executives) in fiscal year 1996.
(2) All options were granted at fair market value, as determined by the
Compensation Committee of the Board, on the date of grant. All options
vest and become exercisable at a rate of 25% on each of the first
through
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<PAGE> 34
fourth anniversaries of the grant date for as long as the Named
Executive remains employed by the Company.
(3) The 5% and 10% assumed annual rates of compounded share price
appreciation are mandated by rules of the Commission and have been
calculated based upon the market price on the date of grant as
described in note (2) above. There can be no assurance that the actual
share price appreciation over the 10-year option term will be at the
assumed 5% and 10% levels or at any other defined level and such
assumed rates are not intended to forecast the future appreciation of
Ordinary Shares. Unless the market price of the Ordinary Shares
appreciates over the option term, no value will be realized from the
option grants made to the Named Executives.
Aggregated Option Exercises in Fiscal Year 1996 and 1996 Fiscal
Year-End Option Values. The following table contains information for each Named
Executive with regard to the number of Ordinary Shares underlying unexercised
options and the value of such options, in each case at September 30, 1996. No
options have been exercised by Named Executives.
<TABLE>
<CAPTION>
NUMBER OF ORDINARY SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS AT OPTIONS AT SEPTEMBER 30,
SEPTEMBER 30, 1996(#) 1996($)(1)
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
--------------------------------- -------------------------
<S> <C> <C>
Lawrence S. Doyle 26,576/165,489 $386,195/$1,824,362
Robert L. Nason 11,161/88,384 161,827/952,823
Stephen S. Outerbridge 1,161/88,384 161,827/952,823
Frederick W. Deichmann 7,398/55,748 107,311/603,541
William G. Fanning 7,397/55,748 107,311/603,541
</TABLE>
- -----------------
(1) No effect is given to any exercise price adjustment in respect of the
November 1996 cash dividend or any subsequent cash dividend that may be
paid. All options were granted at fair market value, as determined by
the Compensation Committee of the Board, on the date of grant. Value
calculated on the basis of the market value of the underlying shares as
of September 30, 1996 ($24.125).
Employment Contracts, Termination of Employment and Change-of-Control
Arrangements. The Company has entered into employment agreements with each of
the Named Executives, which are substantially identical. Unless otherwise
indicated, the following discussion pertains to Mr. Doyle's agreement and
addresses material differences applicable to the other agreements.
Each employment agreement provides for a term of five years, commencing
on October 8, 1993 (January 15, 1994 for Mr. Fanning). During the period of each
agreement, the relevant Named Executive is entitled to receive a base salary as
set forth in the agreement, subject to review and increase annually by the
Board, to participate in all employee benefit plans of the Company and to
receive reimbursement for certain relocation and travel expenses, a monthly
housing allowance, the use of an automobile and the costs of a club membership.
Upon signing his employment agreement, the Named Executive also received Initial
Options to purchase Ordinary Shares having a five-year vesting schedule, with
20% of such options being immediately exercisable and an additional 20% becoming
exercisable on each of the second through fifth anniversaries of the grant date
for as long as the Named Executive remains employed. No Initial Option will
become exercisable after the termination of the Named Executive's employment. No
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<PAGE> 35
Initial Option that is otherwise exercisable may be exercised more than ninety
days after the termination of employment for any reason other than death or
disability or more than six months after termination for death or disability,
and in no event more than 10 years after the grant date. To date, no Initial
Options have been exercised.
Pursuant to his employment agreement, each Named Executive invested
$400,000 ($800,000 for Mr. Doyle and $190,000 for Mr. Fanning) in Ordinary
Shares at a price of $20.00 per share. One half of each of these investments
($150,000 for Mr. Fanning) was financed by a non-recourse loan (each an
"Employee Loan") from the Company, which is secured by a proportionate number of
the Ordinary Shares, matures on October 8, 2000 (January 15, 2001 for Mr.
Fanning) or, if earlier, three months after his employment ends and bears
interest (payable at maturity) at the rate of 7% per annum. At the Named
Executive's option, up to one-half of his bonus award under the Employee
Incentive Plan can be applied to forgiveness of his loan, in which event 200% of
the amount elected will be so applied, provided that no more than 20% of the
original amount of the loan plus accrued interest may be forgiven in any one
year.
The employment of any Named Executive may be terminated by the Company
for "Serious Cause" (as defined in the agreements), after which the executive
cannot compete with the Company for 18 months (two years for Mr. Doyle), or by
the executive for "Good Reason" (as defined), after which only Mr. Doyle may not
compete with the Company (for one year). Any executive who voluntarily
terminates his employment without Good Reason may not compete for 18 months (two
years for Mr. Doyle).
Upon termination of employment by the Named Executive for Good Reason
or by the Company for other than Serious Cause, or if the Company liquidates or
the Board elects to discontinue permanently operating the Company, the executive
is entitled to receive his salary for a period of one year after termination and
benefits as provided in his agreement. If a Change of Control occurs and the
executive remains employed for at least 60 days, the executive is entitled to
receive (i) one year's salary (at the rate in effect immediately prior to the
Change of Control), (ii) immediate vesting of options, restricted shares and
other awards and (iii) after one year of employment following such transaction,
the forgiveness of his Employee Loan. If a Change of Control occurs and the
executive's employment is terminated by him for Good Reason or by the Company
other than for Serious Cause within one year thereafter, the executive is
entitled to receive (in lieu of the benefits described in the first sentence but
in addition to those described in the second sentence of this paragraph) (i) his
salary for two years (at the rate referred to above), (ii) automobile and
housing allowances for one year, (iii) forgiveness of his Employee Loan and (iv)
immediate vesting of options, restricted shares and other awards. For a
description of the term "Change of Control," see "III. Approval of Existing
Option Plans --Director Option Plan" in Part One of this Proxy Statement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee during fiscal year 1996 consisted of Messrs.
Rosenbloom (Chairman), Green, Olsen, Satz and Zuk, none of whom is or was an
officer or employee of the Company or Global Capital Re. Mr. Green is a limited
partner of The Goldman Sachs Group, L.P. and Mr. Olsen is an officer of Johnson
& Higgins. See "Certain Relationships and Related Party Transactions."
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<PAGE> 36
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The following graph and table show a comparison of cumulative total
shareholder returns, including reinvestment of dividends, on the Company's
Ordinary Shares to such return for Standard & Poor's ("S&P") 500 Composite Stock
Price Index and S&P's Property-Casualty Industry Group Stock Price Index for the
period beginning on December 19, 1995 (the first day of public trading for the
Ordinary Shares) and ending on September 30, 1996, assuming $100 was invested on
December 19, 1995. Each measurement point on the graph and in the table
represents the cumulative shareholder return as measured by the last reported
sale price at the end of each quarter during the relevant period. This graph and
table are not deemed to be "soliciting material" or to be "filed" with the
Commission or subject to the Commission's proxy rules or the liabilities of
Section 18 of the Exchange Act, and shall not be deemed to be incorporated by
reference into any prior or subsequent filing by the Company under the
Securities Act or the Exchange Act.
[COMPARISON OF CUMULATIVE TOTAL RETURN GRAPH]
<TABLE>
<CAPTION>
12/19/95 12/31/95 03/31/96 06/30/96 09/30/96
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
GCR HOLDINGS LIMITED 100.00 109.09 124.19 134.82 126.12
S&P 500 Composite Stock Price Index 100.00 100.00 105.37 110.10 113.50
S&P Property-Casualty Industry Group 100.00 100.00 98.51 104.32 105.78
Stock Price Index
</TABLE>
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<PAGE> 37
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has furnished the
following report on its policies with respect to the compensation of executive
officers. The report is not deemed to be "soliciting material" or to be "filed"
with the Commission or subject to the Commission's proxy rules or the
liabilities of Section 18 of the Exchange Act, and the report shall not be
deemed to be incorporated by reference into any prior or subsequent filing by
the Company under the Securities Act or the Exchange Act.
Decisions on compensation of the Company's executive officers generally
are made by the Compensation Committee and reviewed by the full Board. The Board
and the Committee believe that the Company's success requires a small but highly
motivated professional staff. The compensation policies, therefore, are
primarily designed to attract and retain at the Company's Bermuda location, and
to motivate, such a staff.
The Company's executive compensation program combines base salary,
annual bonus, share option and share ownership programs to attract, retain and
motivate key employees. Base salary increases and annual bonuses are based on
individual and corporate performance. Among the factors on which compensation
has been based is a review of compensation paid by other large, Bermuda-based
insurance companies. Other primary factors influencing compensation terms have
been: the need for highly qualified professionals to serve in Bermuda,
specialized areas of expertise, retention of executives critical to the
Company's success, high barrier to recruitment for potential competitors and
experience and performance. The Compensation Committee also considered the
Company's structure and methods of operation, which require a small and highly
qualified and efficient executive team headquartered in one location and
reinsuring risks on a worldwide basis.
Under the Employee Incentive Plan, bonuses are based on individual and
corporate performance during the prior fiscal year. Annual compensation is
leveraged to provide a strong link to corporate and individual performance.
Factors taken into account for corporate performance include the Company's
returns on shareholders' equity compared to certain targets and to returns for
certain peer companies. Factors taken into account for individual performance
include underwriting performance, business production, development of the
management team and/or strategic steps.
The 1995 Employee Option Plan and the New Share Plan provide for grants
of share options, restricted and performance share awards and, potentially,
other share-related rights intended to motivate executives to build shareholder
value. The number of options and restricted shares granted to date under these
plans (and awards under the Employee Incentive Plan) is based on achievement of
return on equity goals and performance relative to peers. For a summary of the
performance criteria for grants and awards under the 1995 Employee Option Plan
and the New Share Plan, see "III. Approval of Existing Option Plans -- The 1995
Employee Option Plan" and "IV. Approval of the New Share Incentive Plan,"
respectively in Part One of this Proxy Statement. For a description of the
performance criteria for awards under the Employee Incentive Plan, see "III.
Executive Compensation" above.
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<PAGE> 38
In fiscal year 1996, Mr. Doyle, the President and Chief Executive
Officer of the Company, received a base salary of $421,867 and a cash bonus of
$457,000. In determining Mr. Doyle's total compensation for the year, including
the cash bonus, the Compensation Committee considered several factors including
the compensation paid to chief executive officers of comparable companies, the
effort, dedication and commitment applied by Mr. Doyle to successfully
positioning the Company as a specialized worldwide catastrophe reinsurer and the
Company's financial and operating performance. For fiscal year 1996, Mr. Doyle
was awarded options to purchase 108,000 Ordinary Shares, 25% of which will vest
on each of October 31, 1997, October 31, 1998, October 31, 1999 and October 31,
2000. For fiscal year 1996, Mr. Doyle was also awarded 27,400 performance shares
under the New Share Plan, although this award is conditioned on shareholder
approval of such plan. The options granted to Mr. Doyle in November 1995, for
fiscal year 1995, and reported in the Summary Compensation Table under "III.
Executive Compensation" above were granted, under the 1995 Employee Option Plan,
on the basis of the foregoing criteria. The Compensation Committee believes that
these options and shares are an important part of Mr. Doyle's long-term
compensation in that they provide an incentive to improve shareholder value.
The Company believes that it is not subject to U.S. taxation and
therefore that the provisions of section 162(m) of the Code with respect to its
compensation of the Named Executives is not relevant to the Company.
Submitted by the members of the Compensation Committee:
Jerry S. Rosenbloom, Chairman
J. Markham Green
David A. Olsen
Michael E. Satz
Donald J. Zuk
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<PAGE> 39
IV. BENEFICIAL OWNERSHIP OF ORDINARY SHARES
The table below sets forth certain information as of November 21, 1996
(unless otherwise specified) with respect to the beneficial ownership of the
Company's Ordinary Shares by each person who is known to the Company to
beneficially own more than 5% of the outstanding Ordinary Shares, each person
currently serving as a director, each Named Executive and all directors and
executive officers as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
------------------------------------ ------ -------
<S> <C> <C>
5% BENEFICIAL OWNERS, DIRECTORS AND EXECUTIVE OFFICERS:
The Goldman Sachs Group, L.P. .................................. 977,130(2) 3.8
85 Broad Street
New York, NY 10004
Johnson & Higgins .............................................. 904,429(3) 3.7
125 Broad Street
New York, NY 10004
Alfred Lerner .................................................. 0 *
Steven H. Newman ............................................... 89,788(4) *
Lawrence S. Doyle .............................................. 111,656(5) *
Robert L. Nason ................................................ 44,872(6) *
Stephen S. Outerbridge ......................................... 54,872(6) *
William G. Fanning ............................................. 29,714(7) *
Frederick W. Deichmann ......................................... 42,597(8) *
Loay Al-Naqib .................................................. 0 *
J. Markham Green ............................................... 3,389 *
John P. McNulty ................................................ 3,000(9) *
David A. Olsen ................................................. 6,000(10) *
Jerry S. Rosenbloom ............................................ 3,000(10) *
Joseph D. Roxe ................................................. 7,668(10) *
Michael E. Satz ................................................ 3,000(10) *
Donald J. Zuk .................................................. 4,000(11) *
All Directors and Executive Officers as a group (16 persons).... 410,306 1.65
</TABLE>
- ----------------
* Less than 1% of the outstanding shares.
(1) In accordance with the rules of the Commission, each beneficial owner's
holdings have been calculated assuming full exercise of outstanding
options exercisable by such owner within 60 days after November 21,
1996, but no exercise of outstanding options held by any other person.
For the purposes of these calculations, the one million shares
purchased by Global Capital Re in July 1996 are treated as if they
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<PAGE> 40
have ceased to be outstanding (although such shares continue to carry
voting, dividend and other rights). For further information about the
calculation of beneficial ownership, see the footnotes below. For a
discussion of the "Controlled Shares" attributable to certain
shareholders for purposes of the Articles, see the introductory section
of this Proxy Statement.
(2) Includes 377,209 Ordinary Shares beneficially owned by certain
investment limited partnerships, including GS Capital Partners, L.P.,
or their general or managing general partners which are affiliates of
The Goldman Sachs Group, L.P. ("GS Group"). GS Group disclaims
beneficial ownership of shares held by such investment partnerships to
the extent partnership interests in such partnerships are held by
persons other than GS Group and its affiliates. Also includes 596,921
Ordinary Shares beneficially owned by Goldman, Sachs & Co., an
affiliate of GS Group. In addition, 3,000 Ordinary Shares are issuable
upon the exercise of options held by Mr. McNulty, a general partner of
GS Group who holds such options for the benefit of GS Group. Does not
include certain shares held in customer accounts managed by affiliates
of GS Group or any shares which may be held by Goldman, Sachs & Co. and
certain of its affiliates as a result of market-making activities.
These excluded shares, together with the shares of GS Group set forth
in the table above, represent approximately 8.1% of the Ordinary Shares
outstanding as of November 21, 1996. GS Group disclaims beneficial
ownership of shares held in such customer accounts.
(3) Consists of Ordinary Shares beneficially owned by Johnson & Higgins
(Bermuda) Limited, a subsidiary of Johnson & Higgins. Does not include
shares beneficially owned by Messrs. Olsen and Roxe, officers of
Johnson & Higgins and directors of the Company.
(4) Includes 42,288 Ordinary Shares issuable upon the exercise of options;
does not include 165,324 shares held by Underwriters Reinsurance
Company, a subsidiary of Allegheny Corporation.
(5) Includes 71,656 Ordinary Shares issuable upon the exercise of options.
(6) Includes 34,872 Ordinary Shares issuable upon the exercise of options.
(7) Includes 22,397 Ordinary Shares issuable upon the exercise of options.
(8) Includes 22,397 Ordinary Shares issuable upon the exercise of options.
Also includes 200 Ordinary Shares held by Mr. Deichmann for the benefit
of his children and as to which he disclaims beneficial ownership.
(9) Includes 3,000 Ordinary Shares issuable upon the exercise of options,
which are held by Mr. McNulty for the benefit of GS Group. Does not
include Ordinary Shares which otherwise may be deemed to be
beneficially owned by GS Group. See note (2) above. The general
partners of GS Group may be deemed to share beneficial ownership of the
shares shown as beneficially owned by GS Group. Mr. McNulty, who is a
general partner of GS Group, disclaims beneficial ownership of the
shares owned by GS Group and certain of its affiliates. Also does not
include a limited number of shares held by a charitable organization.
(10) Includes 3,000 Ordinary Shares issuable upon the exercise of options.
(11) Includes 3,000 Ordinary Shares issuable upon the exercise of options.
Does not include 188,373 shares held by Southern California Physicians
Insurance Exchange.
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<PAGE> 41
V. CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Upon assuming their current positions with the Company, each of the
Named Executives and Mr. Newman has given a non-recourse note to the Company, in
amounts ranging from $150,000 to $950,000, to finance purchases of Ordinary
Shares.
CERTAIN BUSINESS RELATIONSHIPS
Goldman, Sachs & Co., an affiliate of The Goldman Sachs Group, L.P.
("GS Group"), was a founding sponsor of the Company. Together with certain
affiliated investment partnerships and other affiliates, GS Group owned 977,130
Ordinary Shares as of November 21, 1996 (on the basis described above in "IV.
Beneficial Ownership of Ordinary Shares"). One of the Company's directors is a
limited partner of GS Group and another is a general partner of GS Group.
Goldman, Sachs & Co. acted as financial adviser and placement agent for
the Company in connection with the Company's organization and initial share
placement in 1993, for which they received fees totaling approximately $6.9
million and reimbursement of certain expenses. In addition. as partial
consideration for those services. the Company granted to Goldman, Sachs & Co.
and certain affiliated investment partnerships warrants to purchase 2,317,640
Ordinary Shares, all of which had an exercise price of $11.00 per share, or
$25.5 million in the aggregate. These entities exercised their warrants in full
immediately prior to the closing for the Company's initial public offering in
December 1995 and sold a total of 1,450,151 Ordinary Shares in that offering.
These entities sold an additional 883,646 shares in a public offering in July
1996. Goldman, Sachs & Co. acted as lead manager of the underwriters in both
public offerings, in which the underwriters received aggregate underwriting
discounts of approximately $9.1 million and $5.8 million, respectively, from the
selling shareholders in such offerings. The Company has agreed to indemnify
Goldman, Sachs & Co. and their affiliates against certain liabilities in
connection with the organization of the Company and the public offerings.
GSAMI, an affiliate of Goldman, Sachs & Co., performs asset management
services for Global Capital Re pursuant to an investment advisory agreement.
This agreement provides for an annual fee based on the value of Global Capital
Re's investment portfolio and may be terminated by either party upon 30 days'
notice. In addition, this agreement provides that GSAMI may effect portfolio
transactions for Global Capital Re with or through GSAMI or any of its
affiliates, acting as agent or as principal, and in each such case GSAMI or such
affiliate may earn commissions in addition to the advisory fees under the
agreement. GSAMI may also invest a portion of the portfolio in funds managed by
affiliates of Goldman, Sachs & Co. Pursuant to this agreement, the Company paid
advisory fees and brokerage commissions to GSAMI and its affiliates totaling
$497,000, $559,000 and $674,000 during fiscal years 1994, 1995 and 1996,
respectively.
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<PAGE> 42
Goldman, Sachs & Co. and its affiliates have provided, and currently
provide, other investment banking services to GCR from time to time for which
they have received or will receive customary fees.
Goldman, Sachs & Co. has entered into an undertaking and
indemnification agreement with the Company pursuant to which it has agreed, in
general, that if any Goldman Sachs Person becomes a United States 25%
Shareholder (in compliance with certain provisions of the Articles), no Goldman
Sachs Person would be a United States 25% Shareholder for a period of 29
consecutive days or more at any time or for a period of 29 days or more during
any single calendar quarter and no Goldman Sachs Person would exceed a 29%
ownership threshold at any time. (Capitalized terms used in this paragraph are
defined in the Articles.)
Johnson & Higgins was a founding sponsor of the Company. Through an
affiliate, Johnson & Higgins beneficially owns 904,429 Ordinary Shares (on the
basis described above in "IV. Beneficial Ownership of Ordinary Shares"). Two of
the Company's directors are officers of Johnson & Higgins.
Johnson & Higgins provided reinsurance advice in connection with the
organization of the Company in 1993 and, in consideration therefore, the Company
granted to Johnson & Higgins affiliates warrants to purchase 986,015 Ordinary
Shares at an exercise price of $11.00 per share, or $10.8 million in the
aggregate. These affiliates exercised these warrants in full immediately prior
to the closing of the Company's initial public offering in December 1995 and
sold a total of 327,659 Ordinary Shares in that offering. A Johnson & Higgins
affiliate also sold 739,989 shares in the July 1996 public offering. The Company
reimbursed Johnson & Higgins for certain expenses relating to the organization
of the Company.
On November 19, 1996, the Company announced the formation of a joint
venture between Global Capital Re and Capital Re Corporation. The joint venture
company, Capital Global Underwriters Limited, will be a Bermuda-domiciled
reinsurance company specializing in financial reinsurance, including financial
guaranty, mortgage guaranty and finite risk reinsurance. The joint venture will
have up to $50 million of committed capital and is expected to begin operations
by year end 1996. The Company has committed to provide $10 million in cash and a
$15 million letter of credit to the venture. The Company will hold most of the
voting shares of the joint venture company. Global Capital Underwriters Limited
will be managed by an affiliate of Capital Re which will receive reimbursement
of expenses and an annual commission based on the profit of the venture. Michael
E. Satz, the Chairman, President and Chief Executive Officer of Capital Re, is a
director of the Company.
Underwriters Reinsurance Company holds 165,324 Ordinary Shares, which
it purchased in the Company's initial share placement in 1993 at the offering
price of $20.00 per share. Steven H. Newman, the Chairman of Underwriters
Reinsurance Company, a subsidiary of Alleghany Corporation, is the non-executive
Chairman of the Board of Directors of the Company and holds 47,500 Ordinary
Shares and options to purchase 70,480 additional Ordinary Shares. Underwriters
Reinsurance Company is engaged in the reinsurance business, including the
writing of property catastrophe reinsurance.
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<PAGE> 43
Donald J. Zuk, a member of the Board, is also President and Chief
Executive Officer of the Southern California Physicians Insurance Exchange,
which holds 113,000 Ordinary Shares. Mr. Zuk holds 1,000 Ordinary Shares and
options to purchase 3,000 additional Ordinary Shares.
REGISTRATION RIGHTS
In connection with its initial public offering in December 1995, the
Company agreed to provide Goldman, Sachs & Co. and Johnson & Higgins (each, a
"Rightholder") with registration rights for Ordinary Shares held by them and
certain of their affiliates (collectively, a "Holder Group"). Under this
agreement, each Rightholder has the right to require the Company, on one
occasion, to register Ordinary Shares (not previously registered or sold into
the public market) under the Securities Act for sale into the public market, in
an underwritten offering, block trades from time to time or otherwise, and the
other Holder Group not making the demand will have the right to participate in
such registration on a second-priority basis. The Company generally may include
other Ordinary Shares in any such demand registration, on a third-priority basis
subject to a customary underwriter's reduction. The total aggregate public
offering price of shares registered pursuant to any such demand must equal or
exceed $10 million. In addition, if the Company proposes to file a registration
statement covering Ordinary Shares at any time, each Rightholder will have the
right to include Ordinary Shares held by its Holder Group in the registration,
in each case on a first-priority basis with any other shareholders and on a
second-priority basis with the Company, pro rata according to the relevant
respective holdings and subject to a customary underwriter's reduction. The
Company has agreed to indemnify each Rightholder and certain of its affiliates
in respect of certain liabilities, including civil liabilities under the
Securities Act, and to pay certain expenses relating to such registrations. Each
Rightholder's rights under the agreement terminate when its Holder Group ceases
to hold at least 50% (in the case of the demand rights) or 25% (in the case of
joining rights) of the unregistered Ordinary Shares held by it immediately after
the Company's initial public offering (subject to certain adjustments). The
Company has also agreed to maintain a registration statement covering sales that
may be effected by Goldman, Sachs & Co. from time to time in connection with
market-making transactions.
VI. SHAREHOLDER PROPOSALS FOR FISCAL 1997
ANNUAL GENERAL MEETING
Proposals intended for inclusion in next year's proxy statement should
be sent to the Company at its principal executive offices at Sofia House, 48
Church Street, Hamilton HM 12, Bermuda and must be received by July 29, 1997.
Any shareholder entitled to vote at a general meeting called by the
Board of Directors for the election of directors may nominate persons for
election as directors if written notice of such intent is delivered or mailed,
postage prepaid, and received by the Secretary at the principal executive
offices of the Company not later than (i) if the amendments to the Articles
proposed in the Sixth Resolution are approved by shareholders, the 120th day
prior to the anniversary of the day on which notice of the immediately preceding
annual general meeting was first sent or given to shareholders (or not later
than such day and time as the directors may authorize in order to comply with
applicable law) (i.e., not later than July 29, 1997) or (ii) if such amendments
are
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<PAGE> 44
not so approved, sixty (60) days prior to the anniversary date of the
immediately preceding annual general meeting (i.e., not later than October 20,
1997). Each such notice by a member shall describe the nomination in sufficient
detail for a nomination to be summarized on the agenda for the meeting and shall
set forth (a) the name and address, as it appears on the books of the Company,
of the member who intends to make the nomination, (b) a representation that the
member is a holder of record of shares of the Company entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to present
such nomination and (c) the class and number of shares of the Company which are
beneficially owned by the member. In addition, the notice shall set forth: (d)
the name and address of any person to be nominated, (e) a description of all
arrangements or understandings between the member and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the member and (f) such other
information regarding such nominee proposed by such member as would be required
to be included in a proxy statement filed pursuant to Regulation 14A under the
Exchange Act, whether or not the Company is then subject to such regulation,
including the proposed nominee's written consent to serve if elected. The
Chairman of the annual general meeting shall, if the facts warrant, refuse to
authorize a nomination not made in compliance with the foregoing procedure, and
any such nomination not properly brought before the meeting shall not be
considered.
VII. OTHER MATTERS
The Company will bear the cost of this solicitation of Proxies. Proxies
may be solicited by mail, personal interview, telephone and telegraph by
directors, officers and employees of the Company without receiving additional
compensation. In addition, the Company has retained Georgeson & Company, Inc. to
assist in the solicitation of Proxies for a fee of approximately $10,000 plus
reasonable out-or-pocket expenses and disbursements of that firm. Upon request,
the Company will also reimburse brokers and others holding shares in their
names, or in the names of nominees, for forwarding proxy materials to their
principals.
THE COMPANY WILL FURNISH, WITHOUT CHARGE TO ANY SHAREHOLDER, A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K (INCLUDING THE FINANCIAL STATEMENTS AND
FINANCIAL SCHEDULES INCORPORATED THEREIN BY REFERENCE TO THE COMPANY'S ANNUAL
REPORT TO SHAREHOLDERS) FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996. A COPY OF
SUCH REPORT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE COMPANY AT SOFIA HOUSE,
3RD FLOOR, 48 CHURCH STREET, HAMILTON, HM 12, BERMUDA, ATTENTION FREDERICK W.
DEICHMANN, SECRETARY. Each such request must include a representation that, as
of November 21, 1996, the person making the request was a beneficial owner of
Ordinary Shares entitled to vote. As permitted by the Commission's rules, the
Company will not furnish any exhibits to its Annual Report on Form 10-K without
charge, but will provide with such report a list of such exhibits and
information about its charges for providing them.
As ordered,
Frederick W. Deichmann
Secretary
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<PAGE> 45
ANNEX A
The following Resolutions will be proposed for adoption by shareholders
at the Fiscal 1996 Annual General Meeting:
FIRST RESOLUTION:
In respect of the following nominees, the following resolution shall be proposed
as separate resolutions (a) through (j), respectively, each to be voted upon
separately. BE IT RESOLVED, that [each person named below] is hereby elected to
serve as a member of the Board of Directors (the "Board") of GCR Holdings
Limited (the "Company"), to hold such office from the conclusion of this annual
general meeting until the conclusion of the next annual general meeting of the
Company's shareholders (or until such other time as his term of office may end
as provided in the Company's Amended and Restated Articles of Association):
(a) Steven H. Newman
(b) Loay Al-Naqib
(c) Lawrence S. Doyle
(d) J. Markham Green
(e) John P. McNulty
(f) David A. Olsen
(g) Jerry S. Rosenbloom
(h) Joseph D. Roxe
(i) Michael E. Satz
(j) Donald J. Zuk
SECOND RESOLUTION:
BE IT RESOLVED, that the appointment of Arthur Andersen & Co. to serve as the
Company's independent auditors for the financial year ending September 30, 1997
is hereby approved, ratified and confirmed in all respects.
THIRD RESOLUTION:
BE IT RESOLVED, that the Amended and Restated Non-Employee Directors Share
Option Plan and the Amended and Restated 1995 Share Option Plan of the Company,
each in the form presented to this Annual General Meeting (as initialed as such
by the Chairman of the Meeting), are hereby approved, ratified and confirmed in
all respects.
A-1
<PAGE> 46
FOURTH RESOLUTION:
BE IT RESOLVED, that the 1996 Share Incentive Plan of the Company, in the form
presented to this Annual General Meeting (as initialed as such by the Chairman
of the Meeting), is hereby approved, ratified and confirmed in all respects.
FIFTH RESOLUTION:
BE IT RESOLVED, that the Company is hereby authorized to purchase from its
wholly owned subsidiary, Global Capital Reinsurance Limited, one million
Ordinary Shares of the Company currently held by such subsidiary, within 90 days
after this Annual General Meeting and at a purchase price of $20.92 per share.
SIXTH RESOLUTION:
BE IT RESOLVED, as a Special Resolution, that the Company's Amended and Restated
Articles of Association are hereby further amended and restated to read in their
entirety as set forth in the form presented to this Annual General Meeting (as
initialed as such by the Chairman of the Meeting).
A-2
<PAGE> 47
ANNEX B
Set forth below are the provisions of the Articles proposed to be
amended, in each case as currently in effect and as they are proposed to read
after amendment.
FIRST SENTENCE OF ARTICLE 23(a)
(regarding the timing of annual general meetings)
Current Provision "The Company shall in each year of its existence
(beginning in 1996) hold an annual general meeting and
may at any time hold an extraordinary general meeting,
and in each case shall specify the meeting as such in
the notices calling it."
Proposed Provision "The Company shall hold an annual general meeting not
later than the 123rd day after the end of each
financial year of the Company (with the first such
meeting after 1996 to be held not later than January
31, 1998 and PROVIDED that, if the financial year is
changed at any time, the first such meeting held after
the end of the first changed financial year may be held
at any time up to one year and 180 days after the last
preceding annual general meeting) and may at any time
hold an extraordinary general meeting, and in each case
shall specify the meeting as such in the notices
calling it."
SECOND SENTENCE OF ARTICLE 29
(regarding shareholder nominations for directors)
Current Provision "A Member may nominate persons for election as
Directors only at a general meeting of Members duly
called by the Directors for the election of Directors.
In any such case, written notice of such Member's
intent to make such a nomination must be given and
received by the Secretary of the Company at the
principal executive offices of the Company in Bermuda
or at such other place as the Directors may from time
to time designate as the principal executive offices of
the Company not later than (i) with respect to such an
annual general meeting, sixty (60) days prior to the
anniversary date of the immediately preceding annual
general meeting, and (ii) with respect to such an
extraordinary general meeting, the close of business on
the tenth (10th) day following the date on which notice
of such meeting is first sent or given to Members."
Proposed Provision "[No change in first sentence of Article 29.] In any
such case, written notice of such Member's intent to
make such a nomination must be given and received by
the Secretary of the Company at the principal executive
offices of the Company in Bermuda or at such other
place as the Directors may from time to time designate
as the principal executive offices of the Company not
later than (i) with respect to such an annual general
meeting, the close of business on the 120th day prior
to the anniversary of the day on which notice of the
immediately preceding
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<PAGE> 48
annual general meeting was first sent or given to
Members, and (ii) with respect to such an extraordinary
general meeting, the close of business on the tenth
(10th) day following the date on which notice of such
meeting is first sent or given to Members (or, in
either case (i) or (ii), not later than such day and
time as the Directors may authorize in order to comply
with applicable law)."
THIRD AND FOURTH SENTENCES OF ARTICLE 52(a)
(regarding directors' terms of office)
Current Provisions "The Directors shall be subject to election at each
annual general meeting of the shareholders, and the
term of each director shall be one year (subject to the
first sentence of Article 52(b)). Successors to
Directors shall be elected for one-year terms."
Proposed Provisions "The Directors (including Directors elected or
appointed to fill new directorships or other vacancies
pursuant to Article 52(b) or (c)) shall be subject to
election at each annual general meeting of the
shareholders, and the term of each Director shall last
until the conclusion of the next annual general meeting
of shareholders held after his or her election or
appointment (subject to the first sentence of Article
52(b)). [Fourth sentence of Article 52(a) deleted.]"
FIRST AND THIRD SENTENCES OF ARTICLE 52(b)
(regarding directors' terms of office)
Current Provisions "A Director shall hold office until the conclusion of
the annual general meeting for the year in which his or
her term expires and until his or her successor shall
be elected or appointed and shall qualify, subject,
however, to prior death, resignation, retirement or
removal from office. Any newly created directorship
resulting from an increase in the number of Directors
and any other vacancy on the Board of Directors,
however caused, may be filled by a majority of the
Directors then in office, although less than a quorum,
or by a sole remaining Director (unless the vacancy is
filled by the Members pursuant to Article 52(c)). Any
Director elected by one or more Directors to fill a
newly created directorship or other vacancy shall hold
office until the next succeeding annual general meeting
of Members and until his or her successor shall have
been elected or appointed and qualified."
Proposed Provisions "A Director (including a Director elected or appointed
to fill a new directorship or other vacancy pursuant to
Article 52(b) or (c)) shall hold office until the
conclusion of the annual general meeting at which his
or her term expires and until his or her successor
shall be elected or appointed and shall qualify,
subject, however, to prior death, resignation,
retirement or removal from office. [No changes in
second sentence of Article 52(b); third sentence of
Article 52(b) deleted.]"
B-2
<PAGE> 49
For your information, Article 52(c) referred to above is set forth below; no
change in this Article is proposed.
Current Provisions "One or more or all of the Directors of the Company may
be removed only by ordinary resolution of the Members,
but only for wilful neglect or default. The Members
shall have the power to appoint another person in place
of such a removed Director, and in default of such
appointment the vacancy arising upon the removal of a
Director from office may be filled as a casual vacancy.
In the case of any other vacant directorship, the
Members may elect a Director to fill such vacancy, but
only if the Directors first convene a general meeting
for such purpose."
B-3
<PAGE> 50
[FORM OF PROXY CARD]
GCR HOLDINGS LIMITED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 19, 1996
The undersigned holder of Ordinary Shares of GCR Holdings Limited (the
"Company") acknowledges receipt of the accompanying Proxy Statement and Notice
of Annual General Meeting of Shareholders, dated the date hereof, and hereby
constitutes and appoints Sally L. Browne, Roderick L. Gray and Stephen S.
Outerbridge, or any of them acting singly in the absence of the others, the true
and lawful proxy or proxies for and in the name of the undersigned to vote the
entire number of Ordinary Shares that the undersigned is entitled to vote at the
Annual General Meeting of Shareholders of the Company to be held at the Hamilton
Princess Hotel, 76 Pitts Bay Road, Pembroke HM 08 Bermuda on Thursday, December
19, 1996 at 9:30 A.M., local time, and at all adjournments thereof, for and on
behalf of the undersigned on the resolutions set forth on the reverse hereof.
The undersigned further appoints the aforementioned proxy or proxies to vote on
all other matters arising at the meeting or any adjournment thereof as they in
their discretion see fit.
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE RETURN ENVELOPE
FURNISHED FOR THAT PURPOSE, AS PROMPTLY AS POSSIBLE BUT NO LATER THAN THE CLOSE
OF BUSINESS ON DECEMBER 18, 1996, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE
MANNER DESCRIBED IN THE PROXY STATEMENT.
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS INDICATED,
THIS PROXY WILL BE VOTED FOR ALL THE RESOLUTIONS SET FORTH ON THE REVERSE
HEREOF.
EXCEPT FOR GOLDMAN SACHS & CO. AND ITS AFFILIATES, BY SUBMITTING THIS
PROXY, YOU WILL BE DEEMED TO HAVE CONFIRMED THAT, TO YOUR KNOWLEDGE, YOU ARE
NOT, AND ARE NOT ACTING ON BEHALF OF, A UNITED STATES 10% SHAREHOLDER (AS
DESCRIBED IN THE PROXY STATEMENT).
(Continued and to be dated and signed on the reverse side.)
GCR HOLDINGS LIMITED
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<PAGE> 51
Nominees: Steven H. Newman, Loay Al-Naqib, Lawrence S. Doyle,
J. Markham Green, John P. McNulty, David A. Olsen,
Jerry S. Rosenbloom, Joseph D. Roxe, Michael E. Satz and
Donald J. Zuk.
1. Election of Directors FOR / / WITHHELD / /
For, except vote withheld from the following nominee(s)
---------------
To withhold authority to vote for any individual nominee, mark the
"FOR" box and write that nominee's name in the space provided; by doing
so, you will be deemed to have given authority to vote for all nominees
not so named.
2. That the appointment of Arthur Andersen & Co. to serve as the
Company's independent auditors for the financial year ending
September 30, 1997 is hereby approved, ratified and confirmed in all
respects.
FOR / / AGAINST / / ABSTAIN / /
3. That the Amended and Restated Non-Employee Directors Share Option Plan
and the Amended and Restated 1995 Share Option Plan of the Company,
each in the form presented to this Annual General Meeting (as initialed
as such by the Chairman of the Meeting), are hereby approved, ratified
and confirmed in all respects.
FOR / / AGAINST / / ABSTAIN / /
4. That the 1996 Share Incentive Plan of the Company, in the form
presented to this Annual General Meeting (as initialed as such by the
Chairman of the Meeting), is hereby approved, ratified and confirmed in
all respects.
FOR / / AGAINST / / ABSTAIN / /
5. That the Company is hereby authorized to purchase from its wholly owned
subsidiary, Global Capital Reinsurance Limited, one million Ordinary
Shares of the Company currently held by such subsidiary, within 90 days
after this Annual General Meeting and at a purchase price of $20.92 per
share.
FOR / / AGAINST / / ABSTAIN / /
6. (As a Special Resolution) That the Company's Amended and Restated
Articles of Association are hereby further amended and restated to read
in their entirety as set forth in the form presented to this Annual
General Meeting (as initialed as such by the Chairman of the Meeting).
FOR / / AGAINST / / ABSTAIN / /
And to transact such other business as may properly come before the meeting and
at all adjournments thereof.
SIGNATURE(S)_______________________________
DATE_______________________________________
Please sign EXACTLY as name(s) appear(s) hereon. Joint owners
should each sign. When signing as attorney, administrator, trustee,
guardian, or corporate officer, please give full title as such.
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
Votes MUST be Indicated (x) in Black or Blue Ink.
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<PAGE> 52
[FOR SUBMISSION TO SECURITIES AND EXCHANGE COMMISSION ONLY]
APPENDICES
APPENDIX NO. DESCRIPTION
A Amended and Restated Non-Employee Directors Share Option
Plan
B Amended and Restated 1995 Share Option Plan
C 1996 Share Incentive Plan
D Form of Performance Share Award Agreement
<PAGE> 53
APPENDIX NO. A
AMENDED AND RESTATED NON-EMPLOYEE DIRECTORS
SHARE OPTION PLAN
<PAGE> 54
GCR HOLDINGS LIMITED
AMENDED AND RESTATED
NON-EMPLOYEE DIRECTORS SHARE OPTION PLAN
1. Establishment.
GCR Holdings Limited (the "Company") hereby adopts the GCR
Holdings Limited Non-Employee Directors Share Option Plan, the purposes of which
are to attract and retain individuals who are not employees of the Company as
members of the Company's Board of Directors, by encouraging them to acquire a
proprietary interest in the Company, and to provide them with an ownership
interest in the Company which is parallel to that of the shareholders of the
Company.
2. Definitions.
The following terms shall have the respective meanings
assigned to them as used herein:
(a) "Appraised Value" shall mean (1) the result of dividing
(A) the shareholders' equity attributable to the Company's Ordinary
Shares on a fully diluted basis, as determined by the latest audited
consolidated financial statement of the Company, by (B) the total
number of the Company's Ordinary Shares on a fully diluted basis, or
(2) the public market value of one Ordinary Share, if the Company's
Ordinary Shares are publicly traded, which shall be equal to (i) the
average of the closing prices of an Ordinary Share on the principal
securities exchange on which the Ordinary
<PAGE> 55
Shares are listed or, if not so listed, as traded in the NASDAQ
National Market, if traded therein, on each of the ten consecutive
trading days prior to the date of determination, or (ii) if the
Ordinary Shares are not so listed or traded, the average of the bid and
asked prices of an Ordinary Share as otherwise quoted on the NASDAQ
system or any successor system in use on the most recent date prior to
the date of determination on which such quoted prices exist.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Non-Employee Director" shall mean a member of the Board
who is not an employee of the Company or its subsidiaries.
(d) "Option" shall mean an option to purchase Ordinary Shares
granted under the Plan.
(e) "Ordinary Shares" shall mean the Company's ordinary
redeemable shares of U.S. $0.10 per share.
(f) "Participant" shall mean a Non-Employee Director who has
been granted an Option.
(g) "Plan" shall mean this GCR Holdings Limited Non-Employee
Directors Share Option Plan.
3. Plan Administration.
3.1. Authority. The Plan shall be administered by the Board
(unless the Board appoints a committee thereof to administer the Plan, in which
case the Plan may be
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<PAGE> 56
administered by such committee and references herein to the "Board" shall be
deemed to mean such Committee unless the context otherwise requires) which shall
have full power and authority to interpret the Plan, to establish, amend and
rescind rules and regulations relating to the Plan, to provide for conditions
and assurances deemed necessary or advisable to protect the interests of the
Company and to make all other determinations necessary or advisable for the
administration of the Plan.
3.2. Decisions are Final and Conclusive. The determination of
the Board (or the applicable committee thereof) as to any question arising under
the Plan, including questions of construction and interpretation, shall be
final, binding and conclusive upon all persons, including the Company, its
shareholders and persons having any interest in the Options.
4. Eligibility.
All Non-Employee Directors are eligible for the grant of
Options, other than the Chairman of the Board.
5. Shares Subject to the Plan.
5.1. Number. The aggregate number of Ordinary Shares, which
shall be authorized but unissued Ordinary Shares, that may be subject to Options
granted, and may be granted as restricted Ordinary Shares under this Plan shall
not exceed 20,000 (which shall be adjusted to 100,000 to give effect to the
five-for-one split of the Ordinary Shares to be
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<PAGE> 57
effected by way of a share dividend (the "Share Split") immediately prior to and
in connection with the Company's initial public offering; such adjustment shall
occur automatically, without further action, upon effectiveness of the share
split). The number of Ordinary Shares subject to each Option granted hereunder
prior to the effectiveness of the Share Split, and the exercise price thereof,
shall automatically, upon such effectiveness, without any further action and in
lieu of any adjustment that otherwise would be required under Section 5.2 below,
be adjusted by multiplying the number of shares by five and dividing the
exercise price by five.
5.2. Adjustment in Capitalization. If there is any change in
the number or nature of outstanding shares of the Company's capital stock by
reason of a share dividend, recapitalization, merger, consolidation, scheme of
arrangement, share split, combination or exchange, share repurchase or
otherwise, or if there is any non-cash distribution in respect of any such
shares, which in any case has a dilutive or anti-dilutive effect on the Ordinary
Shares, the number of Ordinary Shares subject to each outstanding Option, the
exercise price thereof and/or other terms thereof shall be appropriately
adjusted by the Board, and appropriate adjustment shall be made by the Board in
respect of all unvested restricted Ordinary Shares granted to the Option holder
pursuant to Section 8 below and then held
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<PAGE> 58
by him, so as to restore the Option holder to his rights thereunder and
hereunder.
6. Terms and Conditions of Options.
6.1. Grant of Options. Each eligible Non-Employee Director on
the effective date of the Plan is hereby granted as of such date an Option to
purchase 600 Ordinary Shares (which shall be adjusted to 3,000 Ordinary Shares
automatically as aforesaid upon effectiveness of the Share Split). Each person
who is an eligible Non-Employee Director on the first business day after each
annual general meeting of the Company's shareholders shall automatically be
granted as of such day an Option to purchase 300 Ordinary Shares (which shall be
adjusted to 1,500 Ordinary Shares automatically as aforesaid upon effectiveness
of the Share Split).
6.2. Exercise Price. The exercise price for each Option shall
be equal to the Appraised Value of an Ordinary Share on the date of grant.
6.3. Vesting. All Options granted under the Plan shall be
fully vested and exercisable on the date of grant.
6.4. Option Agreement. Each Option granted under the Plan
shall be evidenced by a written share option agreement setting forth the terms
under which the Option is granted.
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<PAGE> 59
6.5. Term of Options. All rights to exercise an Option shall
expire ten years from the date on which such Option is granted.
6.6. Nontransferability. No Option, and no unvested restricted
Ordinary Share issued pursuant to the Plan, shall be assignable or transferable,
and no right or interest of any Participant shall be subject to any lien,
obligation or liability of the Participant, except by will or the laws of
descent and distribution. Each Participant shall become a party to the Company's
Amended and Restated Shareholder's Agreement, which is to become effective
immediately prior to the closing for the Company's proposed initial public
offering, by executing and delivering to the Company such documentation as the
Company may reasonably request (which may subject the Options and securities
acquired pursuant thereto to the transfer restrictions set forth in such
agreement) promptly after such agreement becomes effective.
6.7. Other Terms and Conditions. Options may contain such
other terms, conditions and restrictions, which shall not be inconsistent with
the provisions of the Plan, as the Board shall deem appropriate.
7. Exercise of Options.
7.1. Written Notice. A Participant who wishes to exercise an
Option, or a portion of an Option, shall give written notice thereof to the
Company. The date the Company
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<PAGE> 60
receives such notice shall be considered as the date such Option was exercised
as to the Ordinary Shares specified in such notice.
7.2. Payment. A Participant who exercises an Option shall pay
to the Company at the date of exercise and prior to the delivery of the Ordinary
Shares for which the Option is being exercised the aggregate exercise price of
all Ordinary Shares pursuant to such exercise of the Option. All payments shall
be made by check payable to the order of the Company.
7.3. No Privileges of Shareholder. A Participant shall not
have any of the rights or privileges of a shareholder of the Company with
respect to the Ordinary Shares subject to an Option (or any unvested restricted
Ordinary Shares) unless and until such Ordinary Shares have been issued and (if
applicable) vested and have been duly registered in the Participant's name.
7.4. Termination of Service. Upon the termination of the
service of the Participant as a member of the Board for any reason, the
Participant shall have the right to exercise any outstanding Options until the
end of their terms as provided in Section 6.5. Notwithstanding the foregoing, in
the event of the Participant's death, his legal representative shall have twelve
months from the date of the Participant's death to exercise any Options, but in
no event
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<PAGE> 61
may any such Option be exercisable after the term thereof as provided in Section
6.5.
8. Restricted Share Grants.
8.1. Grant of Restricted Ordinary Shares. A Participant who is
granted an Option under the Plan shall also (but without duplication of any
adjustment made pursuant to Section 5.2 above) be granted restricted Ordinary
Shares with respect to an amount (the "Applicable Dividend Amount") that is
equal to 30% of the sum of (A) all cash dividends that are declared by the
Company and paid or payable to shareholders of record as of a time before the
exercise of the Option that would have been paid or payable to the Participant
in respect of the Ordinary Shares which are subject to the Option had they been
held by the Participant at such time and (B) all cash dividends that are
declared by the Company and paid or payable to shareholders of record as of a
time before any restricted Ordinary Shares granted pursuant to clause (A) above
become vested and that would have been paid or payable to the Participant in
respect to such unvested restricted shares had they been vested at such time.
The number of restricted Ordinary Shares to be granted to a Participant each
time a dividend is paid shall be equal to the Applicable Dividend Amount for
such Participant divided by the Appraised Value of one Ordinary Share on the
date the dividend is paid. In addition, the Participant may be required to enter
into a written agreement with respect to
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<PAGE> 62
such restricted Ordinary Shares containing such terms as the Board deems
appropriate.
8.2. Vesting. Twenty-five percent (25%) of the restricted
Ordinary Shares granted under the Plan shall vest on each of the next four
anniversaries of the date of grant of the restricted Ordinary Shares if the
Participant is then a member of the Board. Such restricted Ordinary Shares shall
be forfeited to the extent not vested upon the termination of the Participant's
service as a member of the Board for any reason.
In addition, all restricted Ordinary Shares shall vest
immediately in the event of a "Change of Control", which shall be deemed to
occur if (i) any "person" (as such term is defined in Section 3(a)(9) and as
used in Sections 13(d) and 14(d) of the United States Securities Exchange Act of
1934, as amended (the "Exchange Act")), excluding the Company or any of its
subsidiaries, a trustee or any fiduciary holding securities under an employee
benefit plan of the Company or any of its subsidiaries, an underwriter
temporarily holding securities pursuant to an offering of such securities or a
corporation owned, directly or indirectly, by shareholders of the Company in
substantially the same proportion as their ownership 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 combined voting power of the
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<PAGE> 63
Company's then outstanding securities ("Voting Securities"); (ii) during any
period of not more than two years, individuals who constitute the Board as of
the beginning of the period 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) or (iii) of this sentence) whose
election by the Board or nomination for election by the Company's shareholders
was approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at such time or whose election or nomination
for election was previously so approved, cease for any reason to constitute a
majority thereof; (iii) the shareholders of the Company approve a merger,
consolidation or reorganization or a court of competent jurisdiction approves a
scheme of arrangement of the Company, other than a merger, consolidation,
reorganization or scheme of arrangement which would result in the Voting
Securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into Voting
Securities of the surviving entity) at least 50% of the combined voting power of
the Voting Securities of the Company or such surviving entity outstanding
immediately after such merger, consolidation, reorganization or scheme of
arrangement; or (iv) the shareholders of the Company approve a plan of complete
liquidation of the Company or any agreement for the
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<PAGE> 64
sale or disposition by the Company of all or substantially all of the Company's
assets.
9. Duration.
This Plan shall remain in effect for a period of five years
after the effective date of the Plan, unless sooner terminated by the Board.
Options theretofore granted may extend beyond that date in accordance with the
provisions of the Plan.
10. Amendment.
The Board may amend the Plan from time to time, provided that
no amendment which increases the aggregate number of Ordinary Shares that may be
issued under the Plan may be made without the approval of the Company's
shareholders, and provided further that the provisions of Sections 4, 6.1, 6.2,
6.3 and 6.5 of this Plan may not be amended more than once every six months,
other than to comport with changes in the U.S. Internal Revenue Code or the
rules thereunder.
11. Government Regulations.
This Plan, the grant and exercise of Options hereunder, the
obligation of the Company to sell and deliver Ordinary Shares pursuant to such
Options and the grant of restricted Ordinary Shares shall be subject to all
applicable laws, rules and regulations, and to any required approvals by any
governmental agencies.
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<PAGE> 65
12. Effective Date.
The Plan was originally effective as of November 16, 1995.
This amendment and restatement of the Plan is effective as of April 18, 1996.
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<PAGE> 66
APPENDIX NO. B
AMENDED AND RESTATED 1995 SHARE OPTION PLAN
<PAGE> 67
GCR HOLDINGS LIMITED
AMENDED AND RESTATED 1995 SHARE OPTION PLAN
1. Establishment.
GCR Holdings Limited (the "Company") hereby adopts this GCR
Holdings Limited 1995 Share Option Plan, the purpose of which is to enable the
Company and its subsidiaries to provide certain key employees with an additional
incentive to contribute to the success of the Company by giving them an
opportunity to acquire a proprietary interest in the Company.
2. Definitions.
The following terms shall have the respective meanings
assigned to them as used herein:
(a) "Appraised Value" shall mean (1) the result of dividing
(A) the shareholders' equity attributable to the Company's Ordinary
Shares on a fully diluted basis, as determined by the latest audited
consolidated financial statement of the Company, by (B) the total
number of the Company's Ordinary Shares on a fully diluted basis, or
(2) the public market value of one Ordinary Share, if the Company's
Ordinary Shares are publicly traded, which shall be equal to (i) the
closing price of an Ordinary Share on the principal securities exchange
on which the Ordinary Shares are listed or, if not so listed, as traded
in the NASDAQ National Market, if traded therein, on the date of
determination, or
<PAGE> 68
(ii) if the Ordinary Shares are not so listed or traded, the average of
the bid and asked prices of an Ordinary Share as otherwise quoted on
the NASDAQ system or any successor system in use on the most recent
date prior to the date of determination on which such quoted prices
exist.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Cause" shall mean the willful and continued failure of a
Participant to substantially perform his duties as an employee of the
Company or its subsidiaries; gross misconduct, material dishonesty or
fraud by a Participant in connection with the business of the Company
and its subsidiaries; the habitual abuse of any substance (such as
narcotics or alcohol) by a Participant; or the conviction for, or
pleading guilty or nolo contendere to, an act constituting a felony.
(d) "Committee" shall mean the Compensation Committee of the
Board.
(e) "Disability" shall mean the inability of a Participant,
for reasons of health, to carry out the functions of his duties for the
Company or its subsidiaries for a total of six months during any
twelve-month period.
(f) "Good Reason" shall mean a substantial reduction in a
Participant's salary, the demotion of a
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<PAGE> 69
Participant, or a material reduction in the Participant's duties.
(g) "Option" shall mean an option to purchase Ordinary Shares
granted under the Plan.
(h) "Ordinary Shares" shall mean the Company's ordinary
redeemable shares of U.S. $0.10 per share.
(i) "Participant" shall mean an employee of the Company or
its subsidiaries who has been granted an Option.
(j) "Plan" shall mean this GCR Holdings Limited 1995 Share
Option Plan.
(k) "Retirement" shall mean retirement from employment with
the Company and its subsidiaries upon attaining age 65, or such earlier
age agreed to by the Committee.
(l) "Return on Equity" shall mean the result, expressed as a
percentage, of dividing (1) consolidated net income of the Company for
a fiscal year, as determined in accordance with U.S. generally accepted
accounting principles, after taxes, by (2) the average of shareholders'
equity attributable to the Company's Ordinary Shares on a fully diluted
basis at year-end for each of the two most recently ended fiscal years,
as determined by reference to the two most recent year-end audited
consolidated financial statements of the Company. The Committee, in its
discretion, may adjust
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Return on Equity for a fiscal year for purposes of the Plan to exclude
unusual or non-recurring items of income and expense.
3. Plan Administration.
3.1. Authority. The Plan shall be administered by the
Committee, which shall have full power and authority to interpret the Plan, to
establish, amend and rescind rules and regulations relating to the Plan, to
determine the terms of Options to be issued under the Plan, to provide for
conditions and assurances deemed necessary or advisable to protect the interests
of the Company and to make all other determinations necessary or advisable for
the administration of the Plan.
The Committee shall determine the time or times at which
Options shall be granted, the number of Options to be granted to each
Participant, the duration of each of the Options and the time or times within
which (during the term of such Options) all or a portion of each of the Options
may be exercised.
3.2. Decisions are Final and Conclusive. The determination of
the Committee as to any question arising under the Plan, including questions of
construction and interpretation, shall be final, binding and conclusive upon all
persons, including the Company, its shareholders and persons having any interest
in the Options.
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4. Eligibility.
All key employees of the Company and its subsidiaries are
eligible for the grant of options by the Committee.
5. Shares Subject to the Plan.
5.1. Number. The aggregate number of Ordinary Shares, which
shall be authorized but unissued Ordinary Shares, that may be subject to Options
and that may be granted under the Plan as restricted Ordinary Shares shall not
exceed in the aggregate 300,000 (which shall be adjusted to 1,500,000 to give
effect to the five-for-one split of Ordinary Shares to be implemented by way of
a share dividend, to be effected immediately prior to and in connection with the
Company's initial public offering; such adjustment shall occur automatically,
without further action, upon effectiveness of such split).
5.2. Adjustment in Capitalization. If there is any change in
the number or nature of outstanding shares of the Company's capital stock by
reason of a share dividend, recapitalization, merger, consolidation, scheme of
arrangement, share split, combination or exchange, share repurchase or
otherwise, or if there is any non-cash distribution in respect of any such
shares, which in any such case has a dilutive or anti-dilutive effect on the
Ordinary Shares, the number of Ordinary Shares subject to each outstanding
Option, the exercise price thereof and/or other
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terms thereof shall be appropriately adjusted by the Committee, and appropriate
adjustment shall be made by the Committee in respect of all unvested restricted
Ordinary Shares granted to the Option holder pursuant to the next paragraph and
then held by him, so as to restore the Option holder to his rights thereunder
and hereunder, provided that with respect to any such Option that was granted
pursuant to Section 6.1 as an incentive stock option, the Committee may in its
discretion not make the foregoing adjustments to the extent that the treatment
of such Option as an incentive stock option under Section 422 of the U.S.
Internal Revenue Code would be impaired thereby.
A Participant who is granted an Option under the Plan shall
also (but without duplication of any adjustment made pursuant to the preceding
paragraph) be granted restricted Ordinary Shares with respect to an amount (the
"Applicable Dividend Amount") that is equal to 30% of the sum of (A) all cash
dividends that are declared by the Company and paid or payable to shareholders
of record as of a time before the exercise of the Option that would have been
paid or payable to the Participant in respect of the Ordinary Shares which are
the subject of the Option had they been held by the Participant at such time and
(B) all cash dividends that are declared by the Company and paid or payable to
shareholders of record as of a time before any restricted Ordinary Shares
granted pursuant to clause (A) above become
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vested and that would have been paid or payable to the Participant in respect of
such unvested restricted Ordinary Shares had they been vested at such time. The
number of restricted Ordinary Shares to be granted to a Participant each time a
dividend is paid shall be equal to the Applicable Dividend Amount for such
Participant divided by the Appraised Value of one Ordinary Share on the date the
dividend is paid, as determined by the Committee. Such restricted Ordinary
Shares shall be subject to the same vesting rules under Section 6.3 as the
Option pursuant to which it is related (based on the date of issuance of the
restricted Ordinary Shares) and shall be forfeited to the extent not vested upon
the termination, for whatever reason, of the Participant's employment with the
Company and its subsidiaries. In addition, the Participant may be required to
enter into a written agreement with respect to such restricted Ordinary Shares
containing such terms as the Committee deems appropriate, including the
covenants referred to in Section 6.4.
6. Terms and Conditions of Options.
6.1. Grant of Options. The Committee shall determine from time
to time the key employees of the Company and its subsidiaries who shall be
granted Options (either incentive stock options, within the meaning of Section
422 of the United States Internal Revenue Code, or non-statutory options) and
the number of Ordinary Shares which shall be
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subject to each Option. In no event will the total number of Ordinary Shares
which may be subject to Options granted under the Plan in any fiscal year of the
Company exceed a percentage (hereinafter referred to as the "Maximum Yearly
Percentage") of the aggregate number of Ordinary Shares specified in Section 5.1
determined by a combination of short-term and long-term Company performance.
Short-term Company performance will determine one-third of the
Maximum Yearly Percentage and will be based on Return on Equity for the fiscal
year for which the Options are granted. Long-term Company performance will
determine two-thirds of the Maximum Yearly Percentage and will be based on the
average Return on Equity for such fiscal year and the two immediately preceding
fiscal years; provided, however, that for the fiscal year ended September 31,
1995 long-term performance will be based on the average Return on Equity for
such fiscal year and the preceding fiscal year.
Set forth below is the determination of the Maximum Yearly
Percentage based on short-term and long-term Company performance for the
applicable Return on Equity. The total Maximum Yearly Percentage is equal to the
sum of the applicable percentages as determined below.
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<PAGE> 75
<TABLE>
<CAPTION>
Maximum Yearly Percentage
Based on
Short-Term Long-Term
Return on Equity Performance Performance
---------------- ----------- -----------
<S> <C> <C>
Below 8% 0 0
9% - 12% 2.0 4.0
13% - 16% 4.0 8.0
17% - 20% 6.0 12.0
21% - 24% 8.0 16.0
25% and above 10.0 20.0
</TABLE>
6.2. Exercise Price. Except as provided in Section 5.2, the
exercise price for each Option shall be equal to the Appraised Value of an
Ordinary Share on the date of grant as determined by the Committee.
6.3. Vesting. Unless determined otherwise by the Committee,
twenty-five percent (25%) of the Options granted under the Plan shall vest and
become exercisable on each of the next four anniversaries of the date of grant
of the Options.
In addition, all Options shall vest immediately and become
exercisable in the event of a "Change of Control", which shall be deemed to
occur if (i) any "person" (as such term is defined in Section 3(a)(9) and as
used in Sections 13(d) and 14(d) of the United States Securities Exchange Act of
1934, as amended (the "Exchange Act")), excluding the Company or any of its
subsidiaries, a trustee or any fiduciary holding securities under an employee
benefit plan of the Company or any of its subsidiaries, an underwriter
temporarily holding securities pursuant to an offering of such securities or a
corporation owned, directly or
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<PAGE> 76
indirectly, by shareholders of the Company in substantially the same proportion
as their ownership 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 combined voting power
of the Company's then outstanding securities ("Voting Securities"); (ii) during
any period of not more than two years, individuals who constitute the Board as
of the beginning of the period 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) or (iii) of this sentence) whose
election by the Board or nomination for election by the Company's shareholders
was approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at such time or whose election or nomination
for election was previously so approved, cease for any reason to constitute a
majority thereof; (iii) the shareholders of the Company approve a merger,
consolidation or reorganization or a court of competent jurisdiction approves a
scheme of arrangement of the Company, other than a merger, consolidation,
reorganization or scheme of arrangement which would result in the Voting
Securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into Voting
Securities of the surviving entity) at
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least 50% of the combined voting power of the Voting Securities of the Company
or such surviving entity outstanding immediately after such merger,
consolidation, reorganization or scheme of arrangement; or (iv) the shareholders
of the Company approve a plan of complete liquidation of the Company or any
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets.
6.4. Option Agreement. Each Option granted under the Plan
shall be evidenced by a written share option agreement setting forth the terms
under which the Option is granted.
6.5. Term of Options. All rights to exercise an Option shall
expire not later than ten years from the date on which such Option is granted.
6.6. Nontransferability. No Option, and no unvested restricted
Ordinary Share issued pursuant to the Plan, shall be assignable or transferable,
and no right or interest of any Participant shall be subject to any lien,
obligation or liability of the Participant, except by will or the laws of
descent and distribution. Each Participant shall become a party to the Company's
Amended and Restated Shareholders' Agreement, which is to become effective
immediately prior to the closing of the Company's proposed initial public
offering, by executing and delivering to the Company such documentation as the
Company reasonably may
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request (which may subject the Options and any securities acquired pursuant to
Options to the transfer restrictions set forth in such agreement), promptly
after such agreement becomes effective.
6.7. Other Terms and Conditions. Options may contain such
other terms, conditions and restrictions, which shall not be inconsistent with
the provisions of the Plan, as the Committee shall deem appropriate.
7. Exercise of Options.
7.1. Written Notice. A Participant who wishes to exercise an
Option, or a portion of an Option, shall give written notice thereof to the
Company. The date the Company receives such notice shall be considered as the
date such Option was exercised as to the Ordinary Shares specified in such
notice.
7.2. Payment. A Participant who exercises an Option shall pay
to the Company at the date of exercise and prior to the delivery of the Ordinary
Shares for which the Option is being exercised (i) the aggregate exercise price
of all Ordinary Shares pursuant to such exercise of the Option and (ii) an
amount equal to the income and other taxes, if any, required to be withheld and
paid by the Company as a result of such exercise, unless such taxes are withheld
or otherwise collected from the Participant. All payments shall be made by check
payable to the order of the Company.
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<PAGE> 79
7.3. No Privileges of Shareholder. A Participant shall not
have any of the rights or privileges of a shareholder of the Company with
respect to the Ordinary Shares subject to an Option (or any unvested restricted
Ordinary Shares) unless and until such Ordinary Shares have been duly issued and
(if applicable) vested and have been registered in the Participant's name.
8. Termination of Employment.
8.1. Unvested Options. Each unvested Option shall terminate
upon the termination, for whatever reason, of the Participant's employment with
the Company and its subsidiaries.
8.2. Vested But Unexercised Options. Upon the termination of
the Participant's employment with the Company and its subsidiaries for any
reason other than the Participant's death or Disability, the Participant shall
have 90 days in which to exercise any Options which were vested but unexercised
as of the date of such termination. In the event of the Participant's death or
Disability, the Participant or his estate or legal representative, as
applicable, shall have six months from the date of the Participant's death or
Disability in which to exercise any vested but unexercised Options.
9. Duration.
The Plan shall remain in effect for a period of five years
after the effective date of the Plan, unless
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sooner terminated by the Board. Options theretofore granted may extend beyond
that date in accordance with the provisions of the Plan.
10. No Right to Employment.
Nothing contained in the Plan or in any option agreement shall
give a Participant any right to continue employment with the Company or its
subsidiaries.
11. Amendment.
The Board may amend the Plan from time to time, provided that
no amendment which increases the aggregate number of Ordinary Shares that may be
issued under the Plan may be made without the approval of the Company's
shareholders.
12. Government Regulations.
The Plan, the grant and exercise of Options hereunder, the
obligation of the Company to sell and deliver Ordinary Shares pursuant to such
Options, the grant of restricted Ordinary Shares and the Company's right or
obligation to purchase Ordinary Shares pursuant to Section 8.3 above shall be
subject to all applicable laws, rules and regulations, and to any required
approvals by any governmental agencies.
13. Effective Date.
The Plan was originally effective as of September 30, 1995.
This amendment and restatement of the Plan is effective as of April 18, 1996.
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<PAGE> 81
APPENDIX NO. C
1996 SHARE INCENTIVE PLAN
<PAGE> 82
Draft 11/22/96
GCR HOLDINGS LIMITED
1996 SHARE INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.
The name of this plan is the GCR Holdings Limited 1996 Share Incentive
Plan (the "Plan"). The Plan was adopted by the Board on October 31, 1996,
subject to approval of the shareholders of the Company. The purpose of the Plan
is to enable the Company to attract and retain highly qualified personnel who
will contribute to the Company's success by their ability, ingenuity and
industry and to provide incentives to the participating officers, employees,
consultants and advisors that are linked directly to increases in shareholders
value and will therefore inure to the benefit of all shareholders of the
Company.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(1) "Administrator" means the Board, or, if and to the extent the Board
delegates its administrative duties with respect to the Plan pursuant to Section
2, the Committee.
(2) "Board" means the Board of Directors of the Company.
(3) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor thereto.
(4) "Committee" means the Compensation Committee of the Board, or any
other Committee the Board may subsequently appoint to administer the Plan.
(5) "Company" means GCR Holdings Limited, a Cayman Islands corporation,
or any successor to the business thereof.
(6) "Deferred Shares" means an award made pursuant to Section 7 below
of the right to receive Shares at the end of a specified deferral period.
(7) "Disability" means the inability of a Participant, for reasons of
health, to carry out the
<PAGE> 83
functions of his duties for the Company or its Subsidiaries for a total of six
months during any twelve-month period.
(8) "Effective Date" shall mean the date provided pursuant to Section
11.
(9) "Eligible Employee" means an officer, employee, consultant or
advisor of the Company or any Subsidiary.
(10) "Fair Market Value" means, as of any given date, with respect to
any Shares subject to an award hereunder, (1) the closing price of a Share on
the principal securities exchange on which the Shares are listed or, if not so
listed, as traded in the NASDAQ National Market, if traded therein, on the date
of determination, or (2) if the Shares are not so listed or traded, the average
of the bid and asked prices of a Share as otherwise quoted on the NASDAQ system
or any successor system in use on the most recent date prior to the date of
determination on which such quoted prices exist.
(11) "Incentive Share Option" means any Share Option intended to be
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
(12) "Limited Share Appreciation Right" means a Share Appreciation
Right that can be exercised only in the event of a "Change of Control" (as
defined in the award evidencing such Limited Share Appreciation Right).
(13) "Non-Qualified Share Option" means any Share Option that is not an
Incentive Share Option, including any Share Option that provides (as of the time
such option is granted) that it will not be treated as an Incentive Share
Option.
(14) "Parent Corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company, if each
of the corporations in the chain (other than the Company) owns stock possessing
50% or more of the combined voting power of all classes of stock in one of the
other corporations in the chain.
(15) "Participant" means any Eligible Employee, consultant or advisor
to the Company selected by the Administrator, pursuant to the Administrator's
authority in Section 2 below, to receive grants of Share Options, Share
Appreciation Rights, Limited Share Appreciation Rights, Restricted Share awards,
Deferred Share awards, Performance Shares or any combination of the foregoing.
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(16) "Performance Share" means an award of Shares pursuant to Section 7
that is subject to restrictions based upon the attainment of specified
performance objectives.
(17) "Restricted Shares" means an award pursuant to Section 7 of Shares
subject to certain restrictions.
(18) "Shares" means the Company's ordinary redeemable shares of U.S.
$0.10 per share.
(19) "Share Appreciation Right" means the right pursuant to an award
granted under Section 6 to receive an amount, payable in cash, Shares or as the
Administrator otherwise determines, equal to or based on (A) the difference
between (1) the Fair Market Value, as of the date such Share Appreciation Right
or portion thereof is surrendered, of the Shares covered by such right or such
portion thereof, and (2) the aggregate exercise price of such right or such
portion thereof, (B) the amount of dividends paid with respect to a Share over a
specified time period or (C) any other factor reasonably selected by the
Administrator.
(20) "Share Option" means any option to purchase Shares granted
pursuant to Section 5.
(21) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations (other than the last corporation) in the unbroken chain owns shares
possessing 50% or more of the total combined voting power of all classes of
shares in one of the other corporations in the chain.
SECTION 2. ADMINISTRATION
The Plan shall be administered by the Board or by the Committee which
shall be appointed by the Board and which shall serve at the pleasure of the
Board.
Pursuant to the terms of the Plan, the Administrator shall have the
power and authority to grant to Eligible Employees, consultants and advisors to
the Company, pursuant to the terms of the Plan: (a) Share Options, (b) Share
Appreciation Rights or Limited Share Appreciation Rights, (c) Restricted Shares,
(d)Performance Shares, (e) Deferred Shares or (f) any combination of the
foregoing.
In particular, the Administrator shall have the authority:
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<PAGE> 85
(a) to select those employees of the Company who shall be
Participants;
(b) to determine whether and to what extent Share Options, Share
Appreciation Rights, Limited Share Appreciation Rights, Restricted Shares,
Deferred Shares, Performance Shares or a combination of the foregoing, are to be
granted hereunder to Participants;
(c) to determine the number of Shares to be covered by each such
award granted hereunder;
(d) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder (including, but not
limited to, (x) the restrictions applicable to Restricted or Deferred Share
awards and the conditions under which restrictions applicable to such Restricted
or Deferred Shares shall lapse, and (y) the performance goals and periods
applicable to the award of Performance Shares); and
(e) to determine the terms and conditions, not inconsistent with
the terms of the Plan, which shall govern all written instruments evidencing the
Share Options, Share Appreciation Rights, Limited Share Appreciation Rights,
Restricted Shares, Deferred Shares, Performance Shares or any combination of the
foregoing.
The Administrator shall have the authority, in its discretion, to
adopt, alter and repeal such administrative rules, guidelines and practices
governing the Plan as it shall from time to time deem advisable; to interpret
the terms and provisions of the Plan and any award issued under the Plan (and
any agreements relating thereto); and to otherwise supervise the administration
of the Plan.
All decisions made by the Administrator pursuant to the provisions of
the Plan shall be final and binding on all persons, including the Company and
the Participants.
SECTION 3. SHARES SUBJECT TO PLAN.
The total number of Shares reserved and available for issuance under
the Plan shall be 500,000.
In the event of any merger, reorganization, consolidation,
recapitalization, scheme of arrangement, share dividend or other change in
corporate structure affecting the nature or amount of outstanding Shares, a
substitution or adjustment shall be made in (i) the aggregate number of Shares
reserved for issuance under the Plan, (ii) the kind, number and option price of
Shares
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subject to outstanding Stock Options granted under the Plan, and (iii) the kind,
number and purchase price of Shares issuable pursuant to awards of Restricted
Shares, Deferred Shares and Performance Shares, as may be determined by the
Administrator, in its sole discretion. Such other substitutions or adjustments
shall be made as may be determined by the Administrator, in its sole discretion.
An adjusted option price shall also be used to determine the amount payable by
the Company upon the exercise of any Share Appreciation Right or Limited Share
Appreciation Right associated with any Share Option. In connection with any
event described in this paragraph, the Administrator may provide, in its
discretion, for the cancellation of any outstanding awards and payment in cash
or other property therefor.
SECTION 4. ELIGIBILITY.
Officers (including officers who are directors of the Company),
employees of the Company, and consultants and advisors to the Company who are
responsible for or are in a position to contribute to the management, growth
and/or profitability of the business of the Company shall be eligible to be
granted Share Options, Share Appreciation Rights, Limited Share Appreciation
Rights, Restricted Share awards, Deferred Share awards or Performance Shares
hereunder. The Participants under the Plan shall be selected from time to time
by the Administrator, in its sole discretion, from among the Eligible Employees,
consultants and advisors to the Company recommended by the senior management of
the Company, and the Administrator shall determine, in its sole discretion, the
number of shares covered by each award.
SECTION 5. SHARE OPTIONS.
Share Options may be granted alone or in addition to other awards
granted under the Plan. Any Share Option granted under the Plan shall be in such
form as the Administrator may from time to time approve, and the provisions of
Share Option awards need not be the same with respect to each optionee.
Recipients of Share Options shall enter into a subscription and/or award
agreement with the Company, in such form as the Administrator shall determine,
which agreement shall set forth, among other things, the exercise price of the
option, the term of the option and provisions regarding exercisability of the
option granted thereunder.
The Share Options granted under the Plan may be of two types: (i)
Incentive Share Options and (ii) Non-Qualified Share Options.
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The Administrator shall have the authority to grant any Eligible
Employee Incentive Share Options, Non-Qualified Share Options, or both types of
Share Options (in each case with or without Share Appreciation Rights or Limited
Share Appreciation Rights). Consultants and advisors may only be granted
Non-Qualified Share Options (with or without Share Appreciation Rights or
Limited Share Appreciation Rights). To the extent that any Share Option does not
qualify as an Incentive Share Option, it shall constitute a separate
Non-Qualified Share Option. More than one option may be granted to the same
optionee and be outstanding concurrently hereunder.
Share Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Administrator shall deem
desirable:
(1) Option Price. The option price per share of Share purchasable under
a Stock Option shall be determined by the Administrator in its sole discretion
at the time of grant but shall not, in the case of Incentive Share Options, be
less than 100% of the Fair Market Value of the Share on such date and shall not,
in any event, be less than the par value (if any) of the Share.
(2) Option Term. The term of each Share Option shall be fixed by the
Administrator, but no Share Option shall be exercisable more than ten years
after the date such Share Option is granted.
(3) Exercisability. Share Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Administrator at or after grant. The Administrator may provide, in its
discretion, that any Share Option shall be exercisable only in installments, and
the Administrator may waive such installment exercise provisions at any time in
whole or in part based on such factors as the Administrator may determine, in
its sole discretion.
(4) Method of Exercise. Subject to Section 5(3) above, Share Options
may be exercised in whole or in part at any time during the option period, by
giving written notice of exercise to the Company specifying the number of Shares
to be purchased, accompanied by payment in full of the purchase price in cash or
its equivalent as determined by the Administrator. As determined by the
Administrator, in its sole discretion, payment in whole or in part may also be
made (i) by means of any cashless exercise procedure approved by the
Administrator, (ii) in the form of
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unrestricted Shares already owned by the optionee, or (iii) in the case of the
exercise of a Non-Qualified Share Option, Restricted Shares or Performance
Shares subject to an award hereunder (based, in each case, on the Fair Market
Value of the Share on the date the option is exercised); provided, however, that
in the case of an Incentive Share Option, the right to make payment in the form
of already owned Shares may be authorized only at the time of grant. If payment
of the option exercise price of a Non-Qualified Share Option is made in whole or
in part in the form of Restricted Shares or Performance Shares, the shares
received upon the exercise of such Share Option (to the extent of the number of
shares of Restricted Shares or Performance Shares surrendered upon exercise of
such Share Option) shall be restricted in accordance with the original terms of
the Restricted Share or Performance Share award in question, except that the
Administrator may direct that such restrictions shall apply only to that number
of shares equal to the number of shares surrendered upon the exercise of such
option. An optionee shall generally have the rights to dividends and any other
rights of a shareholder with respect to the Share subject to the option only
after the optionee has given written notice of exercise, has paid in full for
such Shares, and, if requested, has given the representation described in
paragraph (1) of Section 10.
(5) Loans. The Company may make loans available to Share Option holders
in connection with the exercise of outstanding options granted under the Plan,
as the Administrator, in its discretion, may determine. Such loans shall (i) be
evidenced by promissory notes entered into by the Share Option holders in favor
of the Company, (ii) be subject to the terms and conditions set forth in this
Section 5(5) and such other terms and conditions, not inconsistent with the
Plan, as the Administrator shall determine, (iii) bear interest, if any, at such
rate as the Administrator shall determine, and (iv) be subject to Board approval
(or to approval by the Administrator to the extent the Board may delegate such
authority). In no event may the principal amount of any such loan exceed the sum
of (x) the exercise price less the par value (if any) of the Shares covered by
the option, or portion thereof, exercised by the holder, and (y) any income tax
attributable to such exercise. The initial term of the loan, the schedule of
payments of principal and interest under the loan, the extent to which the loan
is to be with or without recourse against the holder with respect to principal
or interest and the conditions upon which the loan will become payable in the
event of the holder's termination of employment shall be determined by the
Administrator. Unless the Administrator determines otherwise, when a loan is
made, Shares having a Fair Market Value at least equal to the principal amount
of
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<PAGE> 89
the loan shall be pledged by the holder to the Company as security for payment
of the unpaid balance of the loan, and such pledge shall be evidenced by a
pledge agreement, the terms of which shall be determined by the Administrator,
in its discretion; provided, however, that each loan shall comply with all
applicable laws, regulations and rules of the Board of Governors of the Federal
Reserve System and any other governmental agency having jurisdiction.
(6) Non-Transferability of Options. Unless otherwise determined by the
Administrator, no Share Option shall be transferable by the optionee, and all
Share Options shall be exercisable, during the optionee's lifetime, only by the
optionee.
(7) Termination of Employment or Service. If an optionee's employment
with or service as a consultant or advisor to the Company terminates by reason
of death, Disability or for any other reason, the Share Option may thereafter be
exercised to the extent provided in the applicable subscription or award
agreement, or as otherwise determined by the Administrator.
SECTION 6. SHARE APPRECIATION RIGHTS AND LIMITED SHARE APPRECIATION RIGHTS.
(1) Grant and Exercise. Share Appreciation Rights and Limited Share
Appreciation Rights may be granted either alone ("Free Standing Rights") or in
conjunction with all or part of any Share Option granted under the Plan
("Related Rights"). Share Appreciation Rights and Limited Share Appreciation
Rights shall be evidenced by a Share Appreciation Right Agreement or, in the
case of a Related Right, the agreement evidencing the grant the related Share
Option. In the case of a Non-Qualified Share Option, Related Rights may be
granted either at or after the time of the grant of such Share Option. In the
case of an Incentive Share Option, Related Rights may be granted only at the
time of the grant of the Incentive Share Option.
A Related Right or applicable portion thereof granted in conjunction
with a given Share Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Share Option, except that, unless
otherwise provided by the Administrator at the time of grant, a Related Right
granted with respect to less than the full number of shares covered by a related
Share Option shall only be reduced if and to the extent that the number of
Shares covered by the exercise or termination of the related Share Option
exceeds the number of Shares not covered by the Related Right.
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A Related Right may be exercised by an optionee, in accordance with
paragraph (2) Of this Section 6, by surrendering the applicable portion of the
related Share Option. Upon such exercise and surrender, the optionee shall be
entitled to receive an amount determined in the manner prescribed in the Share
Appreciation Right Agreement or agreement evidencing the related Share Option.
Share Options which have been so surrendered, in whole or in part, shall no
longer be exercisable to the extent the Related Rights have been so exercised.
(2) Terms and Conditions. Share Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Administrator, including the
following:
(a) Related Rights shall be exercisable only at such time or times
and to the extent that the Share Options to which they relate shall be
exercisable in accordance with the provisions of Section 5 and this Section 6 of
the Plan;
(b) Related Rights shall be transferable only when and to the
extent that the underlying Share Option would be transferable under paragraph
(6) of Section 5 of the Plan;
(c) Upon the exercise of a Related Right, the Share Option or part
thereof to which such Related Right is related shall be deemed to have been
exercised for the purpose of the limitation set forth in Section 3 of the Plan
on the number of Shares to be issued under the Plan, but only to the extent of
the number of Shares issued under the Related Right;
(d) A Related Right in connection with an Incentive Share Option
may be exercised only if and when the Fair Market Value of the Share subject to
the Incentive Share Option exceeds the exercise price of such Share Option;
(e) Free Standing Rights shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Administrator at or after grant;
(f) The term of each Free Standing Right shall be fixed by the
Administrator, but no Free Standing Right shall be exercisable more than ten
years after the date such right is granted;
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(g) Free Standing Rights shall be transferable only when and to
the extent that a Share Option would be transferable under paragraph (6) of
Section 5 of the Plan;
(h) In the event of the termination of employment or service of a
Participant who has been granted one or more Free Standing Rights, such rights
shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Administrator at or after grant; and
(i) Limited Share Appreciation Rights may only be exercised within
the 30-day period following a "Change of Control" (as defined by the
Administrator in the agreement evidencing such Limited Share Appreciation
Right).
SECTION 7. RESTRICTED SHARES, DEFERRED SHARES AND PERFORMANCE SHARES.
(1) General. Restricted Share, Deferred Share or Performance Share
awards may be issued either alone or in addition to other awards granted under
the Plan. The Administrator shall determine the Eligible Employees, consultants
and advisors to whom, and the time or times at which, grants of Restricted
Share, Deferred Share or Performance Share awards shall be made; the number of
Shares to be awarded; the price, if any, to be paid by the recipient of
Restricted Share, Deferred Share or Performance Share awards; the Restricted
Period (as defined in paragraph (3) hereof) applicable to Restricted Share or
Deferred Share awards; the performance objectives applicable to Performance
Share or Deferred Share awards; the date or dates on which restrictions
applicable to such Restricted Share or Deferred Share awards shall lapse during
such Restricted Period; and all other conditions of the Restricted Share,
Deferred Share and Performance Share awards. The Administrator may also
condition the grant of Restricted Share, Deferred Share awards or Performance
Shares upon the exercise of Share Options, or upon such other criteria as the
Administrator may determine, in its sole discretion. The provisions of
Restricted Share, Deferred Share or Performance Share awards need not be the
same with respect to each recipient. In the discretion of the Administrator,
loans may be made to Participants in connection with the purchase of Restricted
Shares under substantially the same terms and conditions as provided in Section
5(5) with respect to the exercise of Share Options.
(2) Awards and Certificates. The prospective recipient of a Restricted
Share, Deferred Share or Performance Share award shall not have any rights with
respect to such award, unless and until such recipient has
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executed an agreement evidencing the award (a "Restricted Share Award
Agreement," "Deferred Share Award Agreement," or "Performance Share Award
Agreement," as appropriate) and delivered a fully executed copy thereof to the
Company. Except as otherwise provided below in this Section 7(2), (i) each
Participant who is awarded Restricted Shares or Performance Shares shall be
issued a share certificate in respect of Restricted Shares or Performance
Shares; and (ii) such certificate shall be registered in the name of the
Participant, and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award.
The Company may require that the share certificates evidencing
Restricted Share or Performance Share awards hereunder be held in the custody of
the Company until the restrictions thereon shall have lapsed, and that, as a
condition of any Restricted Share award or Performance Share award, the
Participant shall have delivered such documents as are necessary to provide the
Company the authority to exercise the rights applicable to any Share covered by
such award.
With respect to Deferred Share awards, at the expiration of the
Restricted Period, share certificates in respect of such Deferred Shares shall
be delivered to the participant, or his legal representative, in a number equal
to the number of Shares covered by the Deferred Share award.
(3) Restrictions and Conditions. The Restricted Share, Deferred Share
and Performance Share awards granted pursuant to this Section 7 shall be subject
to the following restrictions and conditions:
(a) Subject to the provisions of the Plan and the Restricted Share
Award Agreement, Deferred Share Award Agreement or Performance Share Award
Agreement, as appropriate, governing such award, during such period as may be
set by the Administrator commencing on the grant date (the "Restricted Period"),
the Participant shall not be permitted to sell, transfer, pledge or assign
Restricted Shares, Performance Shares or Deferred Shares awarded under the Plan;
provided, however, that the Administrator may, in its sole discretion, provide
for the lapse of such restrictions and may accelerate or waive such restrictions
in whole or in part based on such factors and such circumstances as the
Administrator may determine, in its sole discretion, including, but not limited
to, the attainment of certain performance related goals, the Participant's
termination of employment or service, death or Disability or the occurrence of a
"Change of Control" as defined in the agreement evidencing such award;
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(b) Except as provided in paragraph (3)(a) of this Section 7 or as
otherwise determined by the Administrator, the Participant shall generally have,
with respect to the Restricted Shares or Performance Shares, all of the rights
of a shareholder with respect to such Shares during the Restricted Period,
including the right to receive distributions on such Restricted Shares or
Performance Shares and the right to exercise the voting rights applicable to
such Restricted Shares or Performance Shares. Further, unless otherwise
determined by the Administrator, the Restricted Shares and Performance Shares
granted under this Plan shall be outstanding for all purposes. The Participant
shall generally not have the rights of a shareholder with respect to Shares
subject to Deferred Share awards during the Restricted Period; provided,
however, that dividends declared during the Restricted Period with respect to
the number of Shares covered by a Deferred Share award shall be paid to the
Participant. Certificates for unrestricted Shares shall be delivered to the
Participant promptly after, and only after, the Restricted Period shall expire
without forfeiture in respect of such Restricted Shares, Performance Shares or
Deferred Shares, except as the Administrator, in its sole discretion, shall
otherwise determine; and
(c) The rights of holders of Restricted Share, Deferred Share and
Performance Share awards upon termination of employment or service for any
reason during the Restricted Period shall be set forth in the Restricted Share
Award Agreement, Deferred Share Award Agreement or Performance Share Award
Agreement, as appropriate, governing such awards.
SECTION 8. AMENDMENT AND TERMINATION.
The Board may amend, alter or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made that would impair the rights of a
Participant under any award theretofore granted without such Participant's
consent.
The Administrator may amend the terms of any award theretofore granted,
prospectively or retroactively, but, subject to Section 3 above, no such
amendment shall impair the rights of any holder without his or her consent.
SECTION 9. GENERAL PROVISIONS.
(1) The Administrator may require each person purchasing shares
pursuant to a Share Option to represent to and agree with the Company in writing
that such person is acquiring the Shares without a view to distribution thereof.
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The certificates for such Shares may include any legend which the Administrator
deems appropriate to reflect any restrictions on transfer.
All certificates for Shares delivered under the Plan shall be subject
to such share-transfer orders and other restrictions as the Administrator may
deem advisable under the rules, regulations, and other requirements of the
Commission, any share exchange upon which the Share is then listed, and any
applicable securities law, and the Administrator may cause a legend or legends
to be placed on any such certificates to make appropriate reference to such
restrictions.
(2) The adoption of the Plan shall not confer upon any employee,
consultant or advisor of the Company any right to continued employment or
service with the Company, as the case may be, nor shall it interfere in any way
with the right of the Company to terminate the employment or service of any of
its employees, consultants or advisors at any time.
(3) Each Participant shall, no later than the date as of which the
value of an award first becomes includible in the gross income of the
Participant for income tax purposes, pay to the Company, or make arrangements
satisfactory to the Administrator regarding payment of, any taxes of any kind
required by law to be withheld with respect to the award. The obligations of the
Company under the Plan shall be conditional on the making of such payments or
arrangements, and the Company shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
Participant.
(4) No member of the Board or the Administrator, nor any officer or
employee of the Company acting on behalf of the Board or the Administrator,
shall be personally liable for any action, determination, or interpretation
taken or made in good faith with respect to the Plan, and all members of the
Board or the Administrator and each and any officer or employee of the Company
acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination or interpretation.
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SECTION 10. EFFECTIVE DATE OF PLAN.
The Plan became effective (the "Effective Date") on October 31, 1996
subject to approval by the Company's shareholders.
SECTION 11. TERM OF PLAN.
No Share Option, Share Appreciation Right, Limited Share Appreciation
Right, Restricted Share, Deferred Share or Performance Share award shall be
granted pursuant to the Plan on or after the tenth anniversary of the Effective
Date, but awards theretofore granted may extend beyond that date.
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APPENDIX NO. D
FORM OF PERFORMANCE SHARE AWARD AGREEMENT
<PAGE> 97
Draft of 11/22/96
PERFORMANCE SHARE AWARD AGREEMENT
PERFORMANCE SHARE AWARD AGREEMENT, dated as of _________,
1996, by and between GCR Holdings Limited, a Cayman Islands corporation (the
"Company") and, _________________ (the "Recipient").
Pursuant to Company's 1996 Share Incentive Plan (the "Plan"),
the Committee has determined that the Recipient shall be granted Performance
Shares, subject to the terms and conditions set forth in the Plan and in this
Agreement. Unless defined elsewhere herein or unless the context requires
otherwise, capitalized terms used herein shall have the meanings ascribed to
such terms in the Plan.
1. Definitions.
The following terms shall have the respective meanings
assigned to them as used herein:
(a) "Administrator" under the Plan with respect to the
Performance Shares shall be the Compensation Committee of the Board or
any successor thereof.
(b) "Change of Control" shall mean the occurrence of any of
the following: (i) any "person" (as such term is defined in Section
3(a)(9) and as used in Sections 13(d) and 14(d) of the United States
Securities Exchange Act of 1934, as amended (the "Exchange Act")),
excluding the Company or any of its subsidiaries, a trustee or any
fiduciary holding securities under an employee benefit plan of the
Company or any of its subsidiaries, an underwriter temporarily holding
securities pursuant to an offering of such securities or a corporation
owned, directly or indirectly, by shareholders of the Company in
substantially the same proportion as their ownership 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 combined voting power of the Company's
then outstanding securities ("Voting Securities"); provided that no
transaction that is a Non-Qualifying Transaction (as defined in clause
(iii) of this sentence) shall be a Change of Control under this clause
(i); (ii) during any period of not more than two years, individuals who
constitute the Board as of
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the beginning of the period 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) or (iii) of
this sentence) whose election by the Board or nomination for election
by the Company's shareholders was approved by a vote (either by a
specific vote or by approval of the proxy statement in which such
person is nominated for director) of at least two-thirds (2/3) of the
directors then still in office who either were directors at such time
or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof;
provided, that no individual elected or nominated as a director
initially as a result of an actual or threatened election contest with
respect to directors or as a result of any other actual or threatened
solicitation of proxies by or on behalf of any person other than the
Board shall be treated as a director whose election or nomination for
election was approved; (iii) the shareholders of the Company approve a
merger, consolidation, reorganization share exchange or similar form of
corporate transaction involving the Company or its subsidiaries (or
issuance of shares of the Company in such transaction) or a court of
competent jurisdiction approves a scheme of arrangement of the Company
(each, a "Business Combination"), other than a Business Combination
pursuant to which the holders of the Voting Securities of the Company
outstanding immediately prior thereto would retain, directly or
indirectly, at least 50% of the combined voting power of the securities
of the surviving entity outstanding immediately after such merger,
consolidation, reorganization or scheme of arrangement (a
"Non-Qualifying Transaction"); or (iv) the shareholders of the Company
approve a plan of complete liquidation of the Company or any agreement
for the sale or disposition by the Company of all or substantially all
of the Company's assets.
(c) "Disability" shall mean the inability of the Recipient,
for reasons of health, to carry out the functions of his duties for the
Company or its subsidiaries for a total of six months during any
twelve-month period.
(d) "Peer Group Company" shall mean an entity selected by the
Administrator the performance of which is measured against the
performance of the Company.
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(e) "Peer ROE" with respect to a Peer Group Company shall mean
the result, expressed as a percentage, of dividing (1) the Peer Group
Company's consolidated net income during the Performance Period, as
determined in accordance with U.S. generally accepted accounting
principles, by (2) the average shareholders' equity attributable to the
outstanding stock of the Peer Group Company on a fully diluted basis at
the end of each of the Peer Group Company's fiscal years (or other
fiscal periods selected by the Administrator) that occurs during the
Performance Period, as determined by reference to the year-end audited
consolidated financial statements of the Peer Group Company. The
Administrator may adjust the Peer ROE to exclude unusual or
non-recurring items of income and expense and may determine Peer ROE by
reference to fiscal periods other than fiscal years (and unaudited
financial statements for such other fiscal periods) as necessary in
cases where the Performance Period includes a fiscal period other than
a fiscal year.
(f) "Peer Return" with respect to a Peer Group Company shall
mean the shareholder return of such Peer Group Company during the
Performance Period where the shareholder return means the result,
expressed as a percentage, of dividing (1) the closing stock price of
the Peer Group Company on the last day of the Performance Period, minus
the closing stock price of the Peer Group Company on the first day of
the Performance Period, plus the [regular] cash dividends paid with
respect to such stock during such Performance Period by (2) the closing
stock price of the Peer Group Company on the first day of the
Performance Period. The Administrator, in its discretion, may adjust a
Peer Return to reflect unusual or non-recurring events, including but
not limited to share splits, mergers, share dividends, reorganizations
or schemes of arrangement.
(g) "Performance Period" shall mean the period commencing on
October 1, 1996 and ending on September 30 of any year thereafter, or
on such other date as the Administrator may determine, but in no case
later than September 30, 1999.
(h) "Performance Shares" shall mean the Shares granted to the
Recipient pursuant to this Agreement.
(i) "Shareholders Agreement" shall mean the Company's Amended
and Restated Shareholders Agreement dated as of December 18, 1995.
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(j) "Retirement" shall mean retirement from employment with
Company and its subsidiaries upon attaining age 65, or such earlier age
agreed to by the Administrator.
(k) "ROE" shall mean the result, expressed as a percentage, of
dividing (1) the Company's consolidated net income during the
Performance Period, as determined in accordance with U.S. generally
accepted accounting principles, by (2) the average shareholders' equity
attributable to the outstanding Shares of the Company on a
fully-diluted basis at the end of each fiscal year that occurs during
the Performance Period, as determined by reference to the year-end
audited consolidated financial statements of the Company. The
Administrator, in its discretion, may adjust the ROE to exclude unusual
or non-recurring items of income and expense and may determine Peer ROE
by reference to fiscal periods other than fiscal years (and unaudited
financial statements for such other fiscal periods) as necessary in
cases where the Performance Period includes a fiscal period other than
a fiscal year.
(l) "Total Shareholder Return" shall mean the result expressed
as a percentage, of dividing (1) the Fair Market Value of Shares on the
last day of the Performance Period plus the cash dividends declared
with respect to the Performance Shares during the Performance Period,
minus the Fair Market Value of Shares on the first day of the
Performance Period, by (2) the Fair Market Value of Shares on the first
day of the Performance Period. The Administrator, in its discretion,
may adjust Total Shareholder Return to reflect unusual or non-recurring
events, including but not limited to share-splits, mergers, share
dividends, reorganizations or schemes of arrangement.
(m) "Vesting Date" shall mean (i) the first day after the last
day of the Performance Period, upon the certification by the
Administrator of the Company's performance in accordance with Section
5(a) or 5(b) of this Agreement or (ii) for all Performance Shares that
have not previously vested, October 31, 2006.
2. Shares Granted.
The Recipient shall be entitled to receive _______ Performance
Shares pursuant to this Agreement. A stock certificate issued in respect of
Performance Shares shall be registered in the name of the Participant, but shall
be held by the Company until the time such Performance Shares vest.
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3. Restrictions Applicable to the Shares.
The following restrictions shall apply to the Performance
Shares and the Recipient hereby covenants to comply with such restrictions:
a. Nontransferability. The Recipient shall not assign,
transfer, tender, pledge or otherwise encumber the Performance Shares prior to
the date on which such shares become vested. Further, prior to the time at which
they become vested, the Performance Shares shall not be assignable by operation
of law, and shall not be subject to execution, attachment or similar process,
except by will or the laws of descent or distribution. Any attempted assignment,
transfer, pledge, hypothecation or other disposition of the Performance Shares
contrary to the provisions hereof, and the levy of any execution, attachment or
similar process upon the Performance Shares, shall be null and void and without
effect.
b. Shareholders Agreement. If the Recipient is not already a
party to the Shareholders Agreement, such Recipient shall enter into and become
a party to the Shareholders Agreement. Further, the Recipient shall treat the
Performance Shares as "Registrable Shares" within the meaning of the
Shareholders Agreement and, whether or not such shares are vested, the
Participant shall comply with the terms and conditions of the Shareholders
Agreement until the Performance Shares cease to be Registrable Shares under such
Shareholders Agreement.
c. Share Dividends; Splits. The Recipient acknowledges that
all Shares issued with respect to the Performance Shares, by reason of a share
dividend, share split or otherwise, shall be treated as additional Performance
Shares and shall be subject to the restrictions set forth herein.
d. Forfeiture. The Recipients rights with respect to the
unvested Performance Shares will be forfeited automatically if the Recipient's
employment with the Company and its Subsidiaries terminates for any reason other
than a termination [following or otherwise in connection with] a Change of
Control or resulting from death, Disability or Retirement. The Recipient shall
take such actions and deliver such documents as are necessary to transfer back
to the Company his or her ownership rights to any unvested Performance Shares as
soon as practicable following forfeiture of such Performance Shares.
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4. Rights With Respect to Unvested Performance Shares.
Subject to the limitations imposed by Section 3 hereof, the
Participant shall have all rights of a holder of Shares with respect to
Performance Shares, including but not limited to the right to receive
distributions on such Performance Shares and the right to exercise the voting
rights applicable to the Performance Shares and unless forfeited all Performance
Shares (whether or not vested) shall be deemed to be outstanding Shares of the
Company.
5. Vesting of the Performance Shares.
As soon as practicable following the vesting of any Performance Shares,
the Company shall deliver to the Recipient the stock certificate issued in
respect of such Performance Shares. The Performance Shares shall vest in
accordance with the requirements set forth below; provided, however, that no
more than 100% of the Performance Shares may vest.
a. Attainment of Total Shareholder Return Performance
Objectives. At any time on or prior to October 31, 1999, all or a portion of the
Performance Shares shall vest effective as of the Vesting Date upon
certification by the Administrator (as soon as practicable after the Performance
Period) of the Company's performance in relation to the following performance
criteria: (i) 33% of the Performance Shares shall vest if the Total Shareholder
Return exceeds the Peer Return of at least 25% but less than 50% of the Peer
Group Companies, (ii) 67% of the Performance Shares shall vest if the Total
Shareholder Return exceeds the Peer Return of at least 50% but less than 75% of
the Peer Group Companies and (iii) 100% of the Performance Shares shall vest if
the Total Shareholder return exceed the Peer Return of 75% or more of the Peer
Group Companies.
b. Attainment of ROE Performance Objectives. At any time on or
prior to October 31, 1999, all or a portion of the Performance Shares shall vest
effective as of the Vesting Date upon certification by the Administrator (as
soon as practicable after the Performance Period) of the Company's performance
in relation to the following performance criteria: (i) 33% of the Performance
Shares shall vest if the ROE exceeds the Peer ROE of at least 25% but less than
50% of the Peer Group Companies, (ii) 67% of the Performance Shares shall vest
if the ROE exceeds the Peer ROE of at least 50% but less than 75% of the Peer
Group Companies and (iii) 100% of the Performance Shares shall vest if the ROE
exceed the Peer ROE of 75% or more of the Peer Group Companies.
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c. Termination of Employment. All Performance Shares shall
vest upon a termination of the Recipient's employment that occurs prior to
October 31, 2006 and either (i) occurs [following or otherwise in connection
with] a Change of Control or (ii) occurs by reason of death, Disability or
Retirement.
d. Vesting on October 31, 2006. In any case, all outstanding
Performance Shares subject to this Agreement shall vest on October 31, 2006.
6. Investment Representation.
The Recipient hereby represents that the Shares acquired
pursuant to this Agreement are being acquired for the Recipient's own account
and not with a view to the sale or distribution thereof.
7. Governing Law.
This Agreement shall be construed in accordance with the laws
of the State of New York.
8. Amendments.
This Agreement may be amended or modified only by a written
instrument signed and agreed to by both parties hereto.
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9. Authority of Administrator.
The Administrator shall have full authority to interpret and
construe the terms of the Plan and this Agreement. The determination of the
Administrator as to any such matter of interpretation or construction shall be
final, binding and conclusive.
GCR HOLDINGS LIMITED
by: Compensation Committee of
the Board of Directors
by:_________________________
The undersigned hereby accepts and
agrees to all the terms and
provisions of the foregoing
Agreement and to all the terms and
provisions of the Plan.
_________________________________
RECIPIENT
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