<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Terra Nova (Bermuda) Holdings Ltd.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
TERRA NOVA (BERMUDA) HOLDINGS LTD.
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
April 2, 1997
Hamilton, Bermuda
TO THE SHAREHOLDERS OF TERRA NOVA (BERMUDA) LTD.
The Annual General Meeting of Terra Nova (Bermuda) Limited (the "Company")
will be held on Monday, May 5, 1997, at 2:00 P.M. at the Hamilton Princess
Hotel, Hamilton, Bermuda, for the following purposes:
1. To elect eleven Directors to hold office until the 1998 Annual General
Meeting of the Shareholders or until their successors are elected; and
2. To appoint Coopers & Lybrand, Bermuda to act as the independent
auditors of the Company for the fiscal year ending December 31, 1997; and
3. To transact such other further business, if any, as lawfully may be
brought before the meeting.
Only Shareholders of record, as shown by the transfer books of the Company
at the close of business on March 14, 1997, are entitled to receive notice of
and to vote at the Annual General Meeting.
PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE RETURN ENVELOPE
FURNISHED FOR THAT PURPOSE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON,
YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT. FOR
FURTHER INFORMATION CONCERNING THE INDIVIDUALS NOMINATED AS DIRECTORS, USE OF
THE PROXY AND OTHER RELATED MATTERS, YOU ARE URGED TO READ THE PROXY STATEMENT
ON THE FOLLOWING PAGES.
By order of the Board of Directors,
/s/ William O. Bailey
William O. Bailey
Chairman and Chief Executive Officer
<PAGE>
TERRA NOVA (BERMUDA) HOLDINGS LTD.
RICHMOND HOUSE
12 PAR-LA-VILLE ROAD
HAMILTON HM 08 BERMUDA
APRIL 2, 1997
PROXY STATEMENT
The Board of Directors of Terra Nova (Bermuda) Holdings (the "Company") is
soliciting the enclosed proxy to be voted at the Annual General Meeting of the
Company to be held at 2:00 p.m. on May 5, 1997 at the Hamilton Beach Hotel,
Hamilton, Bermuda, and any adjournments thereof. When the proxy is properly
executed and returned, the Ordinary Shares it represents will, subject to any
direction to the contrary, be voted at the meeting in favor of the matters
specified in the "Notice of Annual General Meeting" attached hereto.
Any shareholder giving a proxy may revoke it prior to its exercise by
providing the Secretary of the Company with written notice of revocation, by
voting in person at the Annual General Meeting or by executing a later-dated
proxy. However, such action must be taken in sufficient time to permit the
necessary examination and tabulation of the subsequent proxy or revocation
before the vote is taken.
Shareholders of record as of the close of business on March 14, 1997 will be
entitled to vote at the meeting, with each Class A Ordinary Share entitling
the holder of record on such date to one vote. As of March 1, 1997, there were
outstanding 23,804,626 Class A Ordinary Shares, par value US$5.80 per share,
of the Company entitled to vote at the meeting. As of such date there were
outstanding 2,048,140 Class B Ordinary Shares, par value US$5.80 per share
("Class B Ordinary Shares") which have no voting rights.
The election of each nominee for director, and the approval of all other
matters to be voted upon at the Annual General Meeting, require the
affirmative vote of a majority of the votes cast at the Annual General
Meeting, provided there is a quorum (consisting of not less than two persons
present in person or by proxy holding in excess of 50% of the issued and
outstanding Class A Ordinary Shares entitled to vote at the Annual General
Meeting). The Company will appoint one or more inspectors of election to count
votes cast in person or by proxy. Class A Ordinary Shares owned by
shareholders electing to abstain from voting will be counted toward the
presence of a quorum. However, such Class A Ordinary Shares, and Class A
Ordinary Shares owned by shareholders (including brokers) not voted in person
or by proxy at the Annual General Meeting, will not count towards the majority
needed to elect a director or approve any other matter before the shareholders
and thus will have no effect on the outcome of those votes.
A copy of the Company's Annual Report to Shareholders for the fiscal year
ended December 31, 1996 accompanies this Proxy Statement.
This Proxy Statement, the attached Notice of Annual Meeting and the
accompanying proxy card are being mailed to shareholders on or about April 2,
1997.
Other than the approval of the minutes of the 1996 Annual General Meeting,
the Company knows of no specific matter to be brought before the Annual
General Meeting which is not referred to in this Notice of Annual General
Meeting and Proxy Statement. If any such matter comes before the meeting,
including any shareholder proposal properly made, the proxy holders will vote
proxies in accordance with their judgement.
1
<PAGE>
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
The Company's Articles of Association provide that all of the Company's
Directors shall be elected for a term expiring at the 1998 Annual General
Meeting of Shareholders or until their successors are elected. The Board of
Directors has nominated William O. Bailey, Mark J. Byrne, John J. Dwyer,
Robert S. Fleischer, Allan W. Fulkerson, Steven J. Gilbert, David L. Jaffe,
Hugh P. Lowenstein, Philip F. Petronis, John Riddick and Nigel H.J. Rogers for
consideration by the Shareholders. Each of the Nominees is presently a member
of the Board.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THESE NOMINEES
AS DIRECTORS OF THE COMPANY.
It is the intention of the persons named as proxies, subject to any
direction to the contrary, to vote in favor of the candidates nominated by the
Board of Directors. If any one or more of the nominees is unable or unwilling
to serve, the proxies will, subject to any direction to the contrary, be voted
for such other person or persons as the Board of Directors may designate to
replace the nominee.
Certain information with respect to the nominees for election as directors
proposed by the Company is set forth below.
WILLIAM O. BAILEY
William O. Bailey has been the Chairman of the Board, President and Chief
Executive Officer of the Company since 1993. Mr. Bailey also has been a
director of Terra Nova Insurance (UK) Holdings plc. ("UK Holdings") since
November 1994, and Chairman of the Board of each of Terra Nova Insurance
Company Limited ("Terra Nova") and Terra Nova (Bermuda) Insurance Company Ltd
("Terra-Nova (Bermuda)") since December 1994. From 1987 to 1993, Mr. Bailey
served as Chairman of the Board of MBIA, Inc. and its operating company,
Municipal Bond Investors Assurance Corporation, and was Chief Executive
Officer of both companies from 1987 to 1992. Mr. Bailey served in various
executive capacities with Aetna, including President and Chief Operating
Officer from 1976 to 1987 and Vice Chairman from 1987 to 1988. Mr. Bailey also
serves as trustee of Century Shares Trust ("Century Shares"). Age 70.
MARK J. BYRNE
Mark J. Byrne has been a Director of the Company since November 1996 and was
a director of Terra Nova (Bermuda) from December 1994 to November 1996. Mr.
Byrne is Managing Director, Global Fixed Income Arbitrage, Credit Suisse First
Boston. Age 35.
JOHN J. DWYER
John J. Dwyer has been a Deputy Chairman of the Board of the Company since
May 1995 and President and a director of Terra Nova (Bermuda) since March
1995. Mr. Dwyer is also a director of UK Holdings, Terra Nova Capital Limited
("TN Capital") and Octavian Syndicate Management Limited ("Octavian"). From
May 1960 to August 1994, Mr. Dwyer was employed in various positions with
Aetna. Age 59.
2
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ROBERT S. FLEISCHER
Robert S. Fleischer has been a Director of the Company since December 21,
1994. Mr. Fleischer is currently a Managing Director of DLJ Securities
Corporation Inc. ("DLJSC") and has been employed in various positions by DLJSC
since 1978. Age 54.
ALLAN W. FULKERSON
Allan W. Fulkerson has been a Director of the Company since December 1994.
Mr. Fulkerson has been President and a director of Century Capital Management
Inc., as investment management firm ("Century Capital"). Since April 1992, and
President and director of Massachusetts Fiduciary Advisors, Inc., an
investment management firm ("Massachusetts Fiduciary"), since January 1976.
Mr. Fulkerson was Managing Trustee of Century Shares from July 1971 to June
1994. Mr. Fulkerson is also a director of Mutual Risk Management Ltd. Risk
Capital Holdings, Inc. and of Wellington Underwriting Plc. Age 63.
STEVEN J. GILBERT
Steven J. Gilbert has been a Director of the Company since December 1994.
Mr. Gilbert is the Chairman of Gilbert Global Equity Partners (Bermuda) Ltd,
and was the Managing General Partner of Soros Capital LP, the principal
venture capital and leveraged transaction entity of Quantum Group of Funds
from 1992 to 1996. He is also the Managing Director of Commonwealth Capital
Partners LP, a private equity investment fund, a principle advisor to Quantum
Industrial Holdings Ltd, and a limited partner of Chemical Venture partners,
which he founded. Mr. Gilbert is a director of Katz Media Corporation, NTO
Research Inc., and The Asian Infrastructure Fund, Peregrine. Age 49.
DAVID L. JAFFE
David L. Jaffe has been a director of the Company since December 1994
November and was a director of Terra Nova (Bermuda) from December 1994 to
November 1996. Mr. Jaffe has been a Managing Director of DLJ Merchant Banking,
Inc. ("DLJMB") since January 1995 and has been employed in various positions
by DLJMB or DLJSC since 1984. Mr. Jaffe is also a director of EZ Buy & EZ Sell
Recycler Corporation, OSF Holdings Inc., (Toronto Stock Exchange), and OHA
Financial Inc. Age 38.
HUGH P. LOWENSTEIN
Hugh P. Lowenstein has been a Director of the Company since December 1994
and was a director of Terra Nova (Bermuda) from December 1994 to November
1996. From March 1987 to June 1994, Mr. Lowenstein was a Managing Director of
DLJSC. Mr. Lowenstein is the founder and owner of Shore Capital Limited, a
Bermuda-based consulting and investment firm ("Shore Capital"). Shore Capital
currently provides consulting services to DLJSC. Age 66.
PHILIP F. PETRONIS
Philip F. Petronis has been a Director of the Company since December 1994.
Mr. Petronis has been a Managing Director of Marsh & McLennan Risk Capital
Holdings, Ltd. since May 1992 and of Marsh & McLennan Inc. since 1984. Age 48.
3
<PAGE>
JOHN RIDDICK
John Riddick has been the Deputy Chairman of the Company since December
1994. Mr. Riddick has also been Chairman of the Board and Managing Director of
UK Holdings and TN Capital since January 1995, and Oct. 1995, respectively, a
director of Terra Nova since 1977, Managing Director of Terra Nova since 1979,
and a director of Terra Nova (Bermuda) and Octavian since December 1994 and
October 1995, respectively. Mr. Riddick serves as the Chairman of the Board of
each of Terra Nova Pension Trustee Limited, Terra Nova Insurance Agency
Limited, Intercontinental Reinsurance Agency Limited and Terra Nova Asset
Management Limited ("TNAM"), each of which is a wholly owned subsidiary of UK
Holdings. Age 50.
NIGEL H.J. ROGERS
Nigel H.J. Rogers has been a Deputy Chairman of the Company since January,
1996. Mr. Rogers has served as Managing Director of Octavian since January
1996. Mr. Rogers has been a member of Lloyd's since the 1982 year of account.
Mr. Rogers also serves as a director of UK Holdings and TN Capital. Age 48.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the year ended December 31, 1996, there were five meetings of the
Board of Directors of the Company (including regularly scheduled and special
meetings). Each incumbent Director who served on the Board during the full
fiscal year 1996 attended at least 75% of the aggregate of such meetings and
of the meetings held by all Committees of the Board of which such Director was
a member, except for Mr. Gilbert who attended 57% of such meetings.
The Board of Directors has established an Executive Committee, Audit
Committee, Compensation Committee, Financial Policy Committee and Underwriting
Review Committee, whose activities are discussed below.
EXECUTIVE COMMITTEE
The Executive Committee of the Board of Directors has authority to exercise
all the powers and authorities of the Board of Directors between meetings of
the Board except as expressly limited by applicable law or the Company's
Memorandum or Articles of Association. At year-end, the Executive Committee
was comprised of Messrs. Bailey, Jaffe, Petronis and Riddick. No meeting of
the Executive Committee was held in 1996.
AUDIT COMMITTEE
The Audit Committee, composed entirely of non-management directors, annually
recommends to the Board a firm of independent public accountants to serve as
auditors. The Committee meets with the appointed auditors to review the scope
and results of their audit, their audit report and their fees for services. At
year-end, the Audit Committee was comprised of Messrs. Fleischer, Byrne,
Gilbert and Lowenstein. The Audit Committee held one meeting in 1996.
COMPENSATION COMMITTEE
The Compensation Committee has responsibility for establishing overall
compensation policies, determining the compensation of the Chairman and Chief
Executive Officer, reviewing and approving compensation
4
<PAGE>
recommendations made by the Chief Executive Officer for the executive officers
of the Company and authorizing option grants to eligible employees under the
Company's Executive Stock Option Plans. No member of the compensation
Committee is a member of management or is eligible for compensation from the
Company other than as a Director. Messrs. Jaffe, Fulkerson, Lowenstein and
Petronis were members of the compensation Committee at year-end. The
Compensation Committee held three meetings in 1996.
FINANCIAL POLICY COMMITTEE
The Financial Committee of the Board of Directors establishes overall
investment guidelines and policies, and monitors asset allocations and the
investment portfolios on a regular basis. Messrs. Bailey, Byrne, Gilbert,
Jaffe and Lowenstein were members of the Financial Policy Committee at year-
end. The Financial Policy committee, held two meetings in 1996.
UNDERWRITING REVIEW COMMITTEE
The Underwriting Review Committee establishes guidelines and policies for
the Company's underwriters and receives and reviews reports from the Company's
underwriters on a regular basis. Messrs. Riddick, Dwyer, Fleischer, Fulkerson,
Petronis and Rogers were members of the Underwriting Review Committee at year-
end. The Underwriting Review Committee held one meeting in 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The 1996 Compensation Committee was composed of David L. Jaffe (Chairman),
John J. Byrne (retired November 26, 1996), Allan W. Fulkerson, Philip F.
Petronis and Hugh P. Lowenstein (appointed November 26, 1996). Mr. Jaffe is a
member of DLJMB, an affiliate of DLJSC.
DIRECTORS' COMPENSATION
Directors of the Company who are officers of the Company or its subsidiaries
do not receive additional compensation for their service as Directors. The
annual fee paid for the services of a Director who is not an officer of the
company currently is $8,000 per year, with an additional fee paid for
attendance at Board Meetings of $2,000 and for Committee Meetings of $1,000.
In addition, the Directors are reimbursed for out-of-pocket expenses incurred
in relation to their service on the Board. Chairpersons of the Audit and
Compensation Committees receive an additional $250 for each Committee meeting
attended.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") is composed of four independent
non-employee Directors of the Board of Directors and is responsible for
establishing and monitoring the implementation of the compensation policies of
the Company. The Compensation Committee reviews the performance and
compensation for the executive officers, authorizes salary and bonus programs
and awards option grants under the Executive Stock Option Plans to all
eligible employees.
The Company's compensation philosophy is to pay all employees, including
executive officers, for actual performance based on level of responsibility in
a manner which is designed to motivate such employees to perform at the
highest possible level and seeks to assure that the Company obtains and
retains highly qualified employees in its competitive marketplace. The Company
achieves these objectives by using a combination of both fixed (i.e. salary)
and variable (i.e. annual bonus and stock options) compensation. The Committee
is aware of and committed to creating programs that will fulfil the unique
human resource and compensation needs required to build strong executive
talent in each of the operating companies in Bermuda and the UK.
5
<PAGE>
The Committee recommends to the Board the compensation , including salary,
bonus and stock options, to be paid to the Chairman, President and Chief
Executive Officer (the "Chairman and CEO"). The Committee also evaluates the
performance of the executive officers reporting to the Chairman and CEO,
reviews and approves the recommendations of the Chairman and CEO for the
compensation, including salary and bonus, and awards options grants to the
executive officers. Finally, the Committee establishes the basis for and
aggregate amount of salary increases, total bonus awards and aggregate stock
option grants.
Executive total compensation generally includes three elements: base salary,
annual bonus awards, and long-term compensation awards in the form of stock
option grants. Executive officer salaries are based on job content of each
position, the market relative to comparable positions at peer companies in
each relevant jurisdiction in which the Company's operating companies and
branches are located, the individual's applicable experience and the
performance of each executive.
Individual bonuses reflect Company performance and the individual's personal
contribution to the achievement of the Company's goals. Bonus ranges are
established by the Committee for each job position as a function of base
salary. The size of the Company's aggregate bonus pool is approved by the
Committee based on its assessment of actual results in relation to the overall
Company's annual business plan.
The Company's Executive Stock Options Plans were adopted in January, 1995.
The Committee believes that employee equity ownership provides significant
motivation to executive officers to maximize value for the Company's
shareholders and, therefore, periodically grants stock options under the
Option Plans. Option grant ranges are established by the Committee for each
job position as a function of base salary. The Plans provide the right to
purchase shares of ordinary stock at the fair market value (closing price) of
the stock on the three days preceding the date of grant. Options granted in
1996 vest over five years, with 40% of the shares vesting at the second
anniversary, and 20% on each of the subsequent three anniversaries of the date
of grant, conditioned upon continued employment with the Company with the
exception of options granted to the Chairman and CEO which vest one year from
the date of grant.
The Company is not a US taxpayer and therefore Section 162 (m) of the
Internal Revenue Code, related to the tax deductibility of compensation, is
not relevant to the Company.
Respectfully submitted
COMPENSATION COMMITTEE
David Jaffe, Chairman
Allan W. Fulkerson
Hugh P. Lowenstein
Philip F. Petronis
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SUMMARY COMPENSATION TABLE
The following table sets forth, in summary form, the compensation earned by
William O. Bailey, the Company's Chairman, President and Chief Executive
Officer and each of the Company 's other four most highly compensated
executive officers for its 1994, 1995 and 1996 fiscal years (collectively, the
"Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------- ------------
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL SALARY BONUS COMPENSATION(3) OPTIONS
POSITION YEAR $ $ $ #
------------------ ---- ------- --------- --------------- ------------
<S> <C> <C> <C> <C> <C>
William O. Bailey....... 1996 375,000 700,000 100,000 17,241
Chairman, President and 1995 375,000 475,000 100,000 131,521
Chief Executive Officer 1994 200,000 1,000,000(2) -- --
of the Company
Director of U.K.
Holdings
Chairman of Terra Nova
Chairman of Terra Nova
(Bermuda)
John Riddick............ 1996 389,321 159,151 23,524 8,414
Deputy Chairman of the 1995 341,570 133,524 20,870 55,303
Company 1994 297,255 270,502(2) 10,808 --
Chairman and Managing
Director of UK
Holdings
Director and Managing
Director of Terra Nova
Director of Terra Nova
(Bermuda)
Director of Octavian
John J. Dwyer........... 1996 262,500 160,000 127,440 8,500
Deputy Chairman of the 1995 187,750 140,000 90,000 45,127
Company 1994 -- -- -- --
Director and President
of Terra Nova
(Bermuda)
Director of UK Holdings
Director of Octavian
Nigel H.J. Rogers....... 1996 260,973 205,356 30,890 -- (4)
Deputy Chairman of the 1995 -- -- -- --
Company 1994 -- -- -- --
Director and Managing
Director of Octavian
Director of UK Holdings
Richard J. Edmunds...... 1996 285,787 128,348 19,625 6,172
Director of Terra Nova 1995 256,179 93,156 18,663 40,471
Managing Director of 1994 251,885 226,696(2) 18,776 --
TNAM
</TABLE>
- --------
(1) Except for compensation paid to Messrs. Bailey and Dwyer, which was paid
in U.S. dollars, all compensation payments were made in British pounds and
have been translated into U.S. dollars at the year-end exchange rate for
each of 1996, 1995 and 1994, which was $1.7113, $1.5526, and $1.5645
respectively.
(2) Wholly in respect of Mr. Bailey and partially in respect of Messrs.
Riddick and Edmunds, bonuses were paid in connection with the completion
of the Terra Nova Acquisition by the pre-Terra Nova Acquisition
shareholders of Terra Nova.
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(3) This column includes the cost to the Company of personal health insurance
and the value attributable for personal taxation purposes to car, car fuel
and private telephone expenses paid by the Company for the Named Executive
Officer where appropriate. In the case of Messrs. Bailey and Dwyer, the
amounts include housing allowances as residents in Bermuda.
(4) Mr. Rogers participates in the Octavian Stock Option Plan which provides
for a grant of options in 1999 based on profit commissions received by
Octavian following the closure of the 1996 underwriting year of account.
OPTION GRANTS IN 1996
The following table sets forth information concerning grants of stock
options under the Company's Executive Share Option Plans made to the Company's
Chairman, President and CEO, to the Named Executive Officers, to all current
executive officers as a group and to all employees, including all current
officers who are not executive officers, as a group during the year ended
December 31, 1996. No options were granted in 1996 to Directors who were not
executive officers. Neither the Chairman nor any of the Named Executives
exercised options in 1996.
OPTION GRANTS AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO FOR OPTION TERM(1)
UNDERLYING OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ----------------------
NAME GRANTED(#) FISCAL YEAR PRICE($/SH) DATE 5% 10%
---- ------------------ ------------ ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Mr. Bailey................ 94,118(2) 13.74% 5.80 12/21/04 $343,304 $869,999
37,403(2) 5.46 9.57 10/13/05 136,431 345,742
17,241(3) 9.43 12.80 12/31/05 62,888 159,371
Mr. Riddick............... 43,294(2) 6.32 5.80 12/21/04 157,919 400,197
12,069(2) 1.83 9.57 10/13/02 28,497 66,410
8,414(4) 4.60 12.80 12/31/02 19,867 46,299
Mr. Dwyer................. 37,646(2) 5.50 5.80 12/21/04 137,317 347,989
7,481(2) 1.13 9.57 10/13/05 27,288 69,152
8,500(4) 4.65 12.80 12/31/05 31,005 78,572
Mr. Rogers................ -- -- -- -- -- --
Mr. Edmunds............... 40,471(2) 5.91 5.80 12/21/04 147,622 374,102
6,172(4) 3.37 12.80 12/31/02 14,573 33,962
</TABLE>
- --------
(1) Assumes market value of stock on date of grant equal to exercise price.
(2) The options granted match one for one the contemparaneous investment in
the shares of the company by the executive and became fully exercisable on
completion of the Offerings.
(3) Each option becomes exercisable on the first anniversary of the date of
grant.
(4) Each option will become exercisable with respect to 40% of the underlying
shares on the second anniversary of the date of grant, and, thereafter, in
equal 20% installments on each of the third, fourth and fifth
anniversaries of the date of grant.
8
<PAGE>
SERVICE AGREEMENTS
Terra Nova has entered into a service agreement with John Riddick, as
Managing Director, and TNAM has entered a service agreement with Richard J.
Edmunds, as Managing Director, (each, an "Executive" and collectively, the
"Executives"). Each service agreement provides for a base salary subject to
annual review and an annual bonus. Additionally, the Executives are entitled
to participate in Terra Nova's pension and health insurance plans, to be
reimbursed for out-of-pocket expenses incurred in the ordinary course of
business and to receive the use of company automobiles.
Each service agreement is terminable (i) by either party giving written
notice to the other not less than 12 months prior to March 31 of any year and
(ii) automatically on the first day of the month following the respective
Executive's 62 birthday. Terra Nova can also terminate the employment of any
Executive at any time with legal cause. If Terra Nova terminates employment
with legal cause, the Executive is not entitled to receive any severance
compensation but is entitled to accrued but unpaid salary and bonus to the
date of termination. Each Executive has agreed, for a period of six months
following termination, not to solicit certain business underwritten by Terra
Nova or to entice any employee of Terra Nova away from Terra Nova.
The Company has entered into a service agreement with Nigel H.J. Rogers. Mr.
Rogers' service agreement provides for a base salary subject to annual review
and an annual bonus. Additionally, Mr. Rogers is entitled to (i) participate
in the Octavian Stock Option Plan, the OMP Plan and the Company's medical
insurance and life assurance plans, (ii) be reimbursed for travel-related
expenses incurred by him in or about the performance of his duties under the
service agreement, and (iii) receive the use of a company automobile.
The service agreement provides for a period of employment of two years,
which term is automatically extended for subsequent one-year periods. The
service agreement is terminable (i) on December 31 of any year after January
1998 by either party giving written notice to the other prior to March 31 in
such year, (ii) automatically on Mr. Rogers' 60th birthday, and (iii) by the
Company at any time for cause, in which case Mr. Rogers is entitled to accrued
but unpaid salary to the date of termination. The Company may also terminate
Mr. Rogers' employment without cause and without notice, in which case Mr.
Rogers is entitled to his base salary and all other benefits that he would
have earned through the notice period set forth in clause (i) above (except
that his bonus shall only be payable up to and including the date of
termination). Mr. Rogers has agreed, for a period of six months following
termination, not to (i) solicit any customers or clients of the Company in
connection with the carrying on of any business in competition with the
business of the Company or (ii) solicit or entice any employee of the Company
or its affiliates away from the Company or such affiliates.
APPROVED EXECUTIVE SHARE OPTION PLANS
On January 9, 1995, the Board of Directors of the Company adopted Executive
Share Option Schemes ("the Stock Option Plans" as amended on February 6, and
March 13 and 4 August, 1996) . The Stock Option Plans provide for the grant to
eligible employees of options to purchase Shares (the "Option Shares"). The
maximum number of Option Shares for which an option may be granted is limited
so that when aggregated with the number of Option Shares issued or remaining
issuable with respect to options granted within the previous ten years under
the Stock Option Plans, they will not exceed 8% of the aggregate number of
Ordinary Shares of the Company outstanding on the date preceding the date on
which the option is granted. Unexercised options will expire either seven or
ten years after the date granted as provided in the respective Stock Option
Plans, subject to certain limited exceptions. The Stock Option Plans are
administered by the Compensation Committee which determines which employees
will be granted any future options.
9
<PAGE>
OCTAVIAN STOCK OPTION PLAN
In connection with the Octavian Acquisition, the Company, on January 5,
1996, established the Octavian Stock Option Plan providing for the grant of
options to certain individual members of the management of Octavian, including
Mr. Rogers, based on profit commissions received by Octavian for the 1996 to
2000 years of account. Under the Octavian Stock Option Plan, such members of
management will receive annual option grants to purchase a number of Shares
equal in the aggregate to (i) 90% of the profit commission received by
Octavian from the Octavian Syndicates (less underwriters' and management
bonuses relating thereto and corporate taxes) for each year of account,
divided by (ii) the fully-diluted net asset value (as defined in the Octavian
Stock Option Plan) per Ordinary Share of the Company as at the end of such
year. The aggregate Profit Commission Component for the 1996 to 2000 years of
account is subject to a maximum of (Pounds)10.0 million and no further options
shall be issued once such maximum has been reached. The options will be
granted upon receipt of the profit commissions on closure of each year of
account under applicable Lloyd's regulations, which currently are 1999 to 2003
for each of the years 1996 to 2000, respectively. The options have a nominal
exercise price and become exercisable on or after the January 1 next
succeeding the date of grant, commencing January 1, 2000, provided that all
options granted after January 1, 2002 become immediately exercisable. Options
expire seven years after the date of grant. The Octavian Stock Option Plan
will be administered, with respect to persons subject to the reporting
requirements of Section 16(a) of the Securities Exchange Act of 1934, as
amended, by the Compensation Committee.
10
<PAGE>
TOTAL RETURN
PERFORMANCE GRAPH
Set forth below is a line graph comparing the dollar change in the
cumulative total shareholder return on the company's Ordinary Shares from
April 17, 1996 (the date on which the Company's Ordinary Shares were first
traded on the New York Stock Exchange) Through December 31, 1996 as compared
to the cumulative total return of the Standard & Poor's 500 Stock Index and
the cumulative total return of the Standard & Poor's Property--Casualty
Insurance Index.
The chart depicts the value at the end of each calendar quarter of a $100
investment made on April 17, 1996, with all dividends reinvested.
[CHART]
(Assumes U.S. $100 invested at April 17, 1996)
Terra Nova S&P Property
Bermuda Holdings, Ltd. Casualty Index S&P 500 Index
---------------------- -------------- -------------
4/17/96 100 100 100
6/30/96 94.24 109.14 102.97
9/30/96 120.87 110.66 106.15
12/31/96 126.88 127.12 115
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(ITEM 2 ON PROXY CARD)
Coopers & Lybrand, Bermuda currently serve as the Company's independent
auditors. They have served in that capacity since the Company's reorganization
in 1994, and, prior to that, Coopers & Lybrand L.L.P. served as the
independent auditors of the Terra Nova, a principal operating company in the
Group, from 1981.
Upon recommendation of the Audit Committee, the Board proposes that the
shareholders appoint Coopers & Lybrand, Bermuda to serve as the independent
auditors of the Company for the 1997 fiscal year.
It is anticipated that a representative of Coopers & Lybrand, Bermuda will
be present at the Annual General Meeting with an opportunity to make a
statement, if desired, and will be available to answer appropriate questions
from shareholders present.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPOINTMENT OF COOPERS &
LYBRAND, BERMUDA AS THE INDEPENDENT AUDITORS OF THE COMPANY FOR THE 1997
FISCAL YEAR.
11
<PAGE>
BENEFICIAL OWNERSHIP OF ORDINARY SHARES
The following tables set forth information, as of March 1, 1997, with
respect to the beneficial ownership of Class A Ordinary Shares by William O.
Bailey, the Company's Chairman, President and Chief Executive Officer, the
Company's other four most highly compensative executive officers, each of the
Company's Directors, and all of the Directors and executive officers of the
Company as a group. Unless otherwise indicated, the named individual has sole
voting and investment power over the Ordinary Shares set forth below.
<TABLE>
<CAPTION>
NUMBER OF
SHAREHOLDER SHARES PERCENT
----------- --------- -------
<S> <C> <C>
William O. Bailey(1).................................... 131,000 *
John Riddick............................................ 52,824 *
John J. Dwyer........................................... 28,862 *
Nigel H. Rogers......................................... 1,000 *
David L. Jaffe.......................................... 3,000 *
Philip F. Petronis...................................... 500 *
Allan W. Fulkerson(2)................................... 37,000 *
Hugh P. Lowenstein...................................... 25,862 *
Robert S. Fleischer..................................... 2,000 *
Mark J. Byrne........................................... -- *
Steven J. Gilbert(3).................................... 206,896 *
Richard J. Edmunds...................................... 37,068 *
All directors and executive officers as a group (17
persons)............................................... 569,803 2.4
</TABLE>
- --------
(1) Shares include 100 shares beneficially owned by Mrs. Carole Bailey.
(2) Massachusetts Fiduciary is the general partner of MFA-MASTERS, which is
the record owner of 825,706 Shares. Massachusetts Fiduciary exercises both
voting and investment power with respect to such Shares. Allan W.
Fulkerson is the sole shareholder, President and director of Massachusetts
Fiduciary. Additionally, Mr. Fulkerson is a director, shareholder and
President of Century Capital Management Inc., which exercises both voting
and investment power with respect to the 411,853 Shares owned of record by
ISF and 224,137 Shares owned by Century Capital Partners, L.P. Mr.
Fulkerson's address is One Liberty Square, Boston Massachusetts 02109.
Although Mr. Fulkerson may be deemed to beneficially own the 1,459,696
Shares owned of record by MFA-MASTERS, ISF and Century Capital Partners
L.P., he disclaims beneficial ownership of such shares except to the
extent of his proportionate interest therein.
(3) Consists of 158,344 Shares owned by Soros Capital L.P. and 48,552 Shares
currently owned by Soros Capital Coinvestment Partners LLC. Mr. Gilbert
was the General Partner of Soros Capital L.P. and Soros Capital
Coinvestment Partners LLC and has both voting and investment power with
respect to such Shares.
12
<PAGE>
OTHER BENEFICIAL OWNERS
The following table sets forth information with respect to beneficial
ownership of the Shares, as of March 1, 1997, by each person known to the
Company (including corporate groups) who own beneficially more than five
percent of the Company's outstanding (Class A) (voting) Ordinary Shares:
<TABLE>
<CAPTION>
SHAREHOLDER NUMBER OF SHARES PERCENTAGE
----------- ---------------- ----------
<S> <C> <C>
DLJ Entities(1)................................. 2,775,766 11.7%
Bank of NT Butterfield & Son Ltd.(2)............ 1,214,414 5.1%
</TABLE>
- --------
(1) Consists of Shares held directly by the following related investors: DLJMB
Funding, 567,905 Shares, DLJSC, 82,048 Shares, DLJMB Overseas Partners
C.V. ("DLJMB Overseas"), 1,121,517 Shares, DLJ International Partners C.V.
("DLJIP"), 967,499 Shares, and DLJ Offshore Partners, C.V. ("DLJOP"),
36,797 Shares, representing, respectively, 2.4% , 0.4%, 4.7%, 4.1% and
0.1% of the Shares outstanding. As the parent of each of DLJMB Funding and
DLJSC, Donaldson, Lufkin & Jenrette, Inc. ("DLJ") may be deemed to
beneficially own indirectly all of the Shares held by such entities. As
parent of DLJMB, the general partner of each of DLJMB Overseas, DLJIP and
DLJOP, DLJ may be deemed to beneficially own indirectly all of the Shares
held by such entities. DLJ is an indirect subsidiary of The Equitable
Companies Incorporated. The address of DLJ is 277 Park Avenue, New York,
New York 10172.
(2) Such Shares are subject to a special depository receipt agreement under
which Marsh & McLennan Risk Capital Holdings, Ltd. and Bowring
(collectively, "Marsh & McLennan") have the right to request the sale or
transfer of the Shares under certain circumstances. Marsh & McLennan has
no voting power under such Shares. Marsh & McLennan may not own legally or
beneficially in excess of 5% of the Shares. Marsh & McLennan disclaims
beneficial ownership over such Shares.
13
<PAGE>
CERTAIN BUSINESS RELATIONSHIPS
REGISTRATION RIGHTS AGREEMENT
The Company and certain existing shareholders of the Company ("the
Shareholders") have entered into a Registration Rights Agreement, which grants
the Shareholders and certain of their affiliates certain incidental and demand
registration rights with respect to Ordinary Shares held by them. Under this
agreement, Shareholders other than the DLJ Entities (individually or as a
group) owning or having the rights to acquire 30% or more of the Ordinary
Shares outstanding and issuable prior to the Offerings have the right to
require the Company on one occasion, and one or more of the DLJ Entities have
the right to require the Company on two occasions, to register Shares under
the Securities Act for sale in the public market, provided that the total fair
value of the Shares requested to be registered in the exercise of any such
right must be at least $15 million. Any other Shareholder not making the
request will have the right to participate in such registration on a first-
priority basis (pro rata according to the respective Shares requested for
registration) subject to a customary underwriter's reduction. In addition, if
the Company proposes to file a registration statement covering Ordinary Shares
held by it or any other shareholder of the Company at any time, each
Shareholder will have the right to include Ordinary Shares held by it in the
registration, in each case on a first-priority basis with other Shareholders
and any other holders of Shares requesting registration, pro-rata according to
the respective Shares requested for registration, and on a second-priority
basis with the Company, in each case subject to a customary underwriter's
reduction. The Company has agreed to indemnify each Shareholder in respect of
certain liabilities, including civil liabilities under the Securities Act, and
to pay certain expenses relating to such registration.
TRANSACTIONS WITH FIVE PERCENT SHAREHOLDERS
From time to time, in the ordinary course of its insurance business, the
Company may insure risks of 5% Shareholders and, in addition, may cede risks
to insurance companies who are affiliates of 5% Shareholders. Such business
may be conducted through intermediaries which may from time to time include
affiliates of 5% Shareholders. As an investor, the Company may transact
business with counterparties and intermediaries which may be affiliated with
certain 5% Shareholders. All of the above transactions would be conducted on
an arm's length basis.
DLJSC acted as financial advisor to the Company in connection with the Terra
Nova Acquisition in 1994 and received aggregate fees of approximately $2.3
million for such services, as well as reimbursement of disbursements and out-
of-pocket expenses incurred in connection with such services.
DLJSC acted as one of the underwriters in connection with the Senior Notes
Offering in June 1995 and received approximately $2.1 million as underwriting
compensation for such activities, plus reimbursement for certain expenses.
DLJSC acted as one of the underwriters in connection with the Offerings in
April 1996 and received approximately $3.2 million for such activities, plus
reimbursement for certain expenses.
The Company has retained DLJSC as its investment banker and financial
advisor on an exclusive basis until the earlier to occur of December 21, 1999
and the date that the ownership of Ordinary Shares by the DLJ Entities shall
have fallen below 40% of their initial ownership of Ordinary Shares (including
Ordinary Shares issuable upon exchange or conversion of other securities). The
Company has agreed to indemnify DLJSC in connection therewith.
Messrs. Jaffe and Fleischer, both directors of the Company, are Managing
Directors of DLJMB, an affiliate of DLJSC, and DLJSC, respectively, and Mr.
Lowenstein, who is also a director of the Company, was a
14
<PAGE>
Managing Director of DLJSC until June 1994 and now, through Shore Capital,
provides consulting services to DLJSC. Mr. Jaffe is Chairman of the Board's
Compensation Committee.
In April 1996, in connection with the offerings, the company issued an
aggregate of 1,036,531 to the DLJ Entities in exchange for equity securities
in Terra Nova and Terra Nova (Bermuda) owned by such DLJ entities.
SECTION 16 REPORTING
Directors and certain executives of the Company are subject to the reporting
requirements of Section 16 of the Securities Exchange Act of 1934 as amended.
During the year ended December 31, 1996, Mr. Wedlake was late filing his Form
3. The form has been filed.
OTHER MATTERS
The Board knows of no other business to be brought before the meeting other
than as set forth above. If any other business should properly come before the
Annual General, it is the intention of the persons named in the enclosed proxy
card to vote such proxies in accordance with their best judgement of such
matters.
SHAREHOLDER PROPOSALS
Shareholder proposals for the 1998 Annual Meeting of Shareholders must be
received at the principal offices of the Company, Richmond House, 12 Par-La-
Ville Road, Hamilton HM 08 Bermuda, no later than November 21, 1997, in order
to be considered for inclusion in the Company's Proxy Statement for such
Meeting.
MISCELLANEOUS
The cost of preparing and mailing this notice and statement and the enclosed
form of proxy will be borne by the Company. In addition to solicitation by
mail, proxies may be solicited in person or by telephone or telegraph by
Directors, officers and regular employees of the Company, without extra
compensation and at the Company's expense. Proxy cards and materials also will
be distributed to beneficial owners of ordinary Shares through brokers,
custodians, nominees and other parties, and the Company will reimburse them
for their reasonable charges.
On request, the Company will furnish a copy of the Company's Annual Report
on Form 10-K that it files annually with the Securities and Exchange
Commission. A copy of this report for the fiscal year ended December 31, 1996
may be obtained by writing to the Company's Secretary at Terra Nova (Bermuda)
Holdings Ltd., Richmond House, 12 Par-La-Ville Road, Hamilton HM 08 Bermuda.
By order of the Board of Directors,
/s/ William O. Bailey
William O. Bailey
Chairman, President, and Chief
Executive Officer
15
<PAGE>
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
TERRA NOVA (BERMUDA) HOLDINGS LTD.
The undersigned hereby appoints John Riddick and John J. Dwyer proxies, with
power to act without the other and with power of substitution, and hereby
authorizes them to represent and vote, as designated on the other side, all the
shares of stock of Terra Nova (Bermuda) Holdings Ltd. standing in the name of
the undersigned with all powers which the undersigned would possess if present
at the Annual Meeting of Stockholders of the Company to be held May 5, 1997 or
any adjournment thereof.
(Continued, and to be marked, dated and signed, on the other side)
FOLD AND DETACH HERE
<PAGE>
Item 1--Election of Directors Item 2--Appointment of Coopers & Lybrand,
Bermuda as the Independent Accountants
FOR all nominees WITHHOLD FOR AGAINST ABSTAIN
listed below AUTHORITY
(except as to vote for all
marked to the nominations
contrary) listed
[_] [_] [_] [_] [_]
Nominees:
William O. Bailey Allan W. Fulkerson Philip F. Petronis
Mark J. Byrne Steven J. Gilbert John Riddick
John J. Dwyer David L. Jaffe Nigel H.J. Rogers
Robert S. Fleischer Hugh P. Lowenstein
Date: _________________________, 1997
_____________________________________
Signature
Date: _________________________, 1997
_____________________________________
Signature (if held jointly)
Please sign exactly as name appears on
stock certificates. When shares are held
by joint tenants, both should sign. When
signing as attorney, executor,
administrator, trustee, or guardian,
please give full title as such. If
corporation, please sign in full
corporate name by President or other
authorized officer. If partnership,
please sign in partnership name by
authorized person.
FOLD AND DETACH HERE
