SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14A
(Rule 14A-101)
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by Registrant [X]
Filed by Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ]Confidential,for Use of the Commission Only (as permitted by Rule 14-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials [ ] Soliciting
Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Chartwell Re Corporation
(Name of Registrant as Specified in its Charter)
Chartwell Re Corporation
(Name of Person(s) Filing Proxy Statement)
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Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange ActRules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
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.)
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] 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:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
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It is anticipated that this Proxy Statement and a related form of
proxy will first be delivered to security
holders on or around April 14, 1997.
April 14, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Chartwell Re Corporation on Thursday, May 22, 1997 at 9:00 a.m. The Annual
Meeting will be held at the Stamford Marriott Hotel located at 2 Stamford Forum,
Stamford, Connecticut 06901.
The official Notice of Annual Meeting, proxy and Proxy Statement
containing information about the matters to be acted upon at the Annual Meeting
are enclosed. The matters listed in the Notice of Annual Meeting are described
in detail in the Proxy Statement.
The Board of Directors appreciates and encourages stockholder
participation in the Company's affairs. Whether or not you plan to attend the
Annual Meeting, please mark, sign, date and return the enclosed proxy promptly
in the prepaid envelope provided in order to make certain that your shares will
be represented at the Annual Meeting. If you attend the Annual Meeting, you may,
of course, withdraw your earlier proxy and vote in person.
We sincerely hope that you will be able to attend the Annual Meeting.
Members of the Board of Directors, other executives of the Company and I will be
on hand to talk with you individually both before and after the Annual Meeting.
Very truly yours,
Richard E. Cole
Chairman and Chief
Executive Officer
CHARTWELL RE CORPORATION
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held May 22, 1997
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To the Stockholders of Chartwell Re Corporation:
Notice is hereby given that the Annual Meeting of Stockholders of
Chartwell Re Corporation, a Delaware corporation ("Chartwell" or the "Company"),
will be held on Thursday, May 22, 1997, at 9:00 a.m. at the Stamford Marriott
Hotel located at 2 Stamford Forum, Stamford, Connecticut 06901, for the
following purposes:
1. To elect five persons to serve as Class II Directors until the
Annual Meeting of Stockholders in 2000 or until their successors
have been duly elected and qualified.
2. To consider and vote upon a proposal to adopt the Chartwell Re
Corporation 1997 Omnibus Stock Incentive Plan.
3. To consider and vote upon a proposal to amend the 1995 Employee
Stock Purchase Plan in order to amend the service requirement for
participation from one year to three months.
4. To transact such other business as may properly come before
the Annual Meeting or any adjournment(s) thereof.
These matters are more fully discussed in the accompanying Proxy
Statement. The Board of Directors has fixed the close of business on March 27,
1997 as the record date for determining stockholders entitled to notice of, and
to vote at, the Annual Meeting and any adjournment thereof. All stockholders,
whether or not they expect to attend the Annual Meeting in person, are requested
to mark, date, sign and return the enclosed proxy in the enclosed prepaid
envelope.
By Order of the Board of Directors,
Kathleen M. Carroll
Senior Vice President,
General Counsel
and Secretary
Dated: April 14, 1997
PROXY STATEMENT
OF
CHARTWELL RE CORPORATION
Four Stamford Plaza, 107 Elm Street
Stamford, Connecticut 06912-0043
PROXY INFORMATION
Solicitation of Proxies
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Proxies are solicited from stockholders by the Board of Directors of
the Company in order to provide every stockholder an opportunity to vote on all
matters scheduled to come before the Annual Meeting, whether or not he or she
attends in person. When the enclosed proxy card is properly executed and
returned, the shares represented will be voted by the proxyholders named on the
card (the "Proxyholders") in accordance with the stockholder's directions.
Stockholders are urged to indicate the way they wish to vote on each matter by
marking the appropriate boxes on the card; if no choice is specified, the shares
will be voted as recommended by the Board of Directors. This Proxy Statement,
the accompanying form of proxy and the Company's 1996 Annual Report to
Stockholders are first being sent to stockholders on or about April14,1997.
Voting Procedures
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Stockholders of record at the close of business on March 27, 1997 are
entitled to notice of the Annual Meeting and to vote the shares held by him or
her on that date at the Annual Meeting. Each share of common stock, par value
$.01 per share (the "Common Stock"), is entitled to one vote upon each of the
matters to be voted on at the Annual Meeting. As of March 27, 1997, a total of
9,596,753 shares of Common Stock of the Company were outstanding. There is no
cumulative voting of Common Stock.
Returning your completed proxy will not prevent you from voting in
person at the Annual Meeting should you be present and wish to do so. Any
stockholder executing a proxy may revoke such proxy at any time before it is
actually voted on any matter by notifying the Secretary of the Company in
writing at Four Stamford Plaza, 107 Elm Street, Stamford, Connecticut
06912-0043, by submitting a duly executed proxy bearing a later date, or by
voting by ballot at the Annual Meeting, thereby canceling any proxy previously
returned as to any matter voted on by ballot.
Quorum and Votes Required
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The presence, in person or by proxy, of a majority in number of the
outstanding shares of Common Stock as of the record date constitutes a quorum
and is required in order for the Company to conduct business at an Annual
Meeting. Under the General Corporation Law of the State of Delaware abstaining
votes and broker non-votes are both deemed to be present for purposes of
determining whether a quorum is present at a meeting but are not deemed to be
votes duly cast on a particular proposal. A broker non-vote occurs when a
nominee holding shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have discretionary voting power with
respect to such proposal and has not received voting instructions from the
beneficial owner. Shares with respect to which a stockholder has abstained from
voting (but not broker non-votes) are considered present at the meeting for
purposes of determining if the Company has obtained the requisite vote on a
particular matter. Consequently, an abstention will have the same effect as a
negative vote on a particular matter, but a broker non-vote will have no effect
on the vote.
Directors of the Company must be elected by a plurality of the vote of
the shares present in person or represented by proxy at the Annual Meeting. This
means that (i) the director nominees (up to the number of directors to be
elected) receiving the highest number of affirmative votes will be elected, (ii)
only shares voted in favor of a particular nominee will be counted toward such
nominee's achievement of a plurality and (iii) shares present at the Annual
Meeting that are not voted for a particular nominee or shares present by proxy
where the stockholder properly withheld authority to vote for such nominee
(including broker non-votes) will not be counted toward such nominee's
achievement of a plurality.
With respect to the other matters submitted to the stockholders for a
vote, the affirmative vote of the holders of at least a majority of the shares
present in person or represented by proxy at the Annual Meeting for a particular
proposal is required for such proposal to become effective.
PROPOSAL NUMBER 1 - ELECTION OF DIRECTORS
Your Board of Directors Recommends
a Vote "For" This Proposal
Chartwell's Certificate of Incorporation and Bylaws provide for the
election of directors by the stockholders. As permitted by Delaware law, the
Board of Directors is divided into three classes (Classes I, II and III) as
nearly equal in number as possible. The terms of office of the members of one
class expire and a successor class is elected at each Annual Meeting of
Stockholders. Vacancies in directorships (including vacancies resulting from
resignations and newly created directorships) may be filled, until the
expiration of the term of the vacated directorship and until a successor is
elected and qualified, by the vote of a majority of the directors then in
office.
At this Annual Meeting, the terms of office of the Class II directors
will terminate; therefore, the Board of Directors has nominated Messrs.
Bensinger, L. Richardson, Jr., Sagan and Schnitzer (all of whom are also
presently serving on the Board) for re-election as Class II directors, to serve
three-year terms until the Annual Meeting of Stockholders is held in 2000 or
until their successors have been duly elected and qualified. Bryan P. D.
Kellett, a Class II director and the Chairman and former Chief Executive Officer
of Archer Group Holdings plc ("Archer"), has indicated his intention not to
stand for reelection. Mr. Wenman, the current Chief Executive Officer of Archer,
was nominated by the Board of Directors for election as a Class II director to
fill the vacancy created by Mr. Kellett's relinquishment of his board seat. It
is intended that proxies will be voted in favor of these persons. If, for any
reason, any of the nominees is not able or willing to serve as a director when
the election occurs (a situation which is not presently contemplated), it is
intended that the proxies will be voted for the election of a substitute nominee
in accordance with the judgment of the Proxyholder.
Class II: Directors and Nominee Standing For Election
Steven J. Bensinger, 42, has served as President of Chartwell since March
1993 and as a director of Chartwell since February 1994. From February 1991 to
November 1992, Mr. Bensinger was President and Chief Operating Officer of
Skandia America Reinsurance Corporation ("Skandia America"). From prior to 1988
to February 1991, Mr. Bensinger was Skandia America's Chief Financial Officer.
Prior to joining Skandia America, he was a partner with the international
accounting and consulting firm of Coopers & Lybrand, L.L.P. Mr. Bensinger is a
director of Archer Group Holdings plc.
Lunsford Richardson, Jr., 72, has been a director of Chartwell since
December 13, 1995. From 1968 until December 13,1995, Mr. Richardson had been a
director of Piedmont Management Company Inc ("Piedmont") and the Chairman of The
Reinsurance Corporation of New York ("RECO"). Mr. Richardson is also the
Chairman of Richardson Corporation of Greensboro and Vice Chairman of Lexington
Global Asset Managers, Inc. ("Lexington"). Lunsford Richardson, Jr. is the
cousin of Stuart Smith Richardson, a Class III director of the Company.
John Sagan, 76, has been a director of Chartwell since 1992 and has been
President of Sagan Associates, a financial advisory service firm, since 1986.
Prior to that time he was Vice President and Treasurer of Ford Motor Company.
Mr. Sagan is also a director of Telident Inc. and SBCM Derivative Products Ltd.
Bruce W. Schnitzer, 52, has been a director of Chartwell since 1992. From
March 1992 to March 1993, he was also Chairman of the Board of Directors of
Chartwell. Mr. Schnitzer has been Chairman of the Board of Directors of Wand
Partners Inc. ("Wand") since 1990 and was President of Magical Corporation, the
general partner of Wand Investments, L.P., from prior to 1990. Mr. Schnitzer is
a director of Amresco, Inc., Life Partners Group, Inc., Nestor, Inc. and
PennCorp Financial Group Inc. He is also Chairman of New London Capital plc
("NLC").
Stephen L. Wenman, 49, has been Chief Executive Officer of Archer Group
since March 1997. He was Chairman of Special Risk Services Group from January
1988 to October 1995 and Executive Director of Willis Faber & Dumas Ltd., in
London from March 1984 to December 1987. Mr. Wenman also served as Chairman &
Chief Executive Officer, Special Risk Services Inc., New York, Chairman and
Chief Executive Officer, SRS Insurance Services, California, Director and
Chairman of the Executive Committee, Risques & Finance S/A, France and various
smaller subsidiaries in Australia, New Zealand and a risk management and survey
company in the UK.
For information with respect to arrangements relating to the election of certain
directors, see "Certain Relationships and Related Transactions."
Class I: Term Expires in 1999
David J. Callard, 58, has been a director of Chartwell since 1992 and has
been President of Wand since December 1990. From November 1989 until he joined
Wand in September 1990, Mr. Callard was a financial advisor to several
corporations. Prior thereto, he was, for 17 years, a general partner and from
1984 a director and managing director of Alex. Brown & Sons, an investment bank.
Mr. Callard is also a director of Waverly, Inc.
Richard E. Cole, 57, became Chairman of the Board of Directors of Chartwell
in March 1993 and has served as Chief Executive Officer and a director of
Chartwell since July 1990. From July 1990 to March 1993, Mr. Cole also served as
President of Chartwell. From October 1988 to July 1990, Mr. Cole was engaged as
a principal in various entrepreneurial activities outside of the insurance and
reinsurance industries. Prior to October 1988, Mr. Cole was President of Cole,
Booth, Potter (formerly Sten-Re Cole & Associates, Inc.), a reinsurance
brokerage firm focusing on specialty lines reinsurance and reinsurance for
regional companies. Mr. Cole is a director of NLC.
Frank E. Grzelecki, 59, has been a director of Chartwell since March 1994
and has been President and Chief Operating Officer of Handy & Harman since 1992.
He has been a director of Handy & Harman since prior to 1989. Mr. Grzelecki was
Vice Chairman of Handy & Harman from 1989 to 1992. Mr. Grzelecki is also a
director of Spinnaker Industries Inc., Morgan Group Inc., and Barnes Group Inc.
William R. Miller, 66, has been a director of Chartwell since December 13,
1995. From 1994 until December 13, 1995, Mr. Miller had been a director of
Piedmont. He was President and Chief Executive Officer of Winterthur U.S.
Holdings from 1981 until 1990. Mr. Miller is also a director of Lexington. He is
currently retired.
Class III: Term Expires in 1998
Jacques Q. Bonneau, 42, has been a director of Chartwell since February
1994 and has served as Senior Executive Vice President and Chief Underwriting
Officer since February 1997. Prior to February 1997, Mr. Bonneau served as
Executive Vice President and Chief Underwriting Officer of Chartwell since March
1993. From October 1990, when he joined Chartwell and established Specialty
Accounts, to March 1993, Mr. Bonneau was a Senior Vice President of Chartwell.
From June 1988 to October 1990, Mr. Bonneau managed the Special Treaty and
Program Department of Trenwick Group, Inc. ("Trenwick") and served as a director
of Trenwick America Reinsurance Company. Prior to June 1988, he was a Vice
President in and managed the Special Treaty and Program Department of Trenwick.
Robert M. DeMichele, 52, has been a director of Chartwell as well as a
director, Chief Executive Officer and President of Lexington since December 13,
1995. From 1982 until December 13, 1995, Mr. DeMichele served as President,
Chief Executive Officer and a director of Piedmont. He also served as President
and Chief Operating Officer of RECO from 1985 until December 13, 1995. Mr.
DeMichele also serves as a director of The Navigators Group, Inc., Vanguard
Cellular Systems, Inc. ("Vanguard") and Lexington Global Asset Managers, Inc.
Greg S. Feldman, 40, has been a director of Chartwell since 1992 and is a
Managing Partner of Wellspring Associates L.L.C., a New York investment firm.
From 1990 to 1994, Mr. Feldman was with EXOR America Inc., where he was a Vice
President. From 1988 to 1990, Mr. Feldman was a Vice President of Clegg
Industries, Inc., an investment firm.
Stephen L. Green, 45, has been a director of Chartwell since 1992 and has
been a General Partner of Canaan Partners since 1992. From 1973 to 1992, Mr.
Green held a variety of financial positions with General Electric Company. He is
also Chairman of Chartwell Advisers Limited ("Chartwell Advisers") and a
director of CapMAC Holdings Inc.
Stuart Smith Richardson, 50, has been a director of Chartwell since
December 13, 1995. Prior to December 13, 1995, Mr. Richardson had been a
director of Piedmont since 1983 and was Vice Chairman of Piedmont since 1986. He
is also Chairman of Lexington and Chairman of Vanguard. Stuart Smith Richardson
is the cousin of Lunsford Richardson, Jr., a Class II director standing for
reelection.
PROPOSAL NUMBER 2 - APPROVAL OF THE
CHARTWELL RE CORPORATION
1997 OMNIBUS STOCK INCENTIVE PLAN
Your Board of Directors Recommends
a Vote "For" This Proposal
Proposed Amendment
The Board of Directors has adopted and recommends that you vote to
approve the Chartwell Re Corporation 1997 Omnibus Stock Incentive Plan (the
"Omnibus Plan"). The Omnibus Plan will, if approved, be substituted in part for
the 1993 Stock Option Plan (the "1993 Plan") and, therefore, shares of Common
Stock previously authorized for the granting of stock options under the 1993
Plan but not granted prior to May 22, 1997 will no longer be available under the
1993 Plan but will, instead, be available under the Omnibus Plan. Any stock
options previously granted under the 1993 Plan will remain outstanding pursuant
to the terms of the 1993 Plan. Under the 1993 Plan approximately 25 officers
have been granted stock options. If the Omnibus Plan is not approved, the 1993
Plan will remain in effect in its present form. The terms of the Omnibus Plan
are summarized below, and a copy of the Omnibus Plan is set forth in its
entirety as Exhibit A to this Proxy Statement. Capitalized terms used herein
will, unless otherwise defined, have the meanings assigned to them in the text
of the Omnibus Plan.
General
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The Omnibus Plan is intended to promote the interests of the Company
and the stockholders of the Company by providing officers and other employees of
the Company (including directors who are also employees of the Company) with
appropriate incentives and rewards to encourage them to enter into and continue
in the employ of the Company and to acquire a proprietary interest in the
long-term success of the Company thereby aligning their interest more closely to
the interest of the stockholders.
The Omnibus Plan is intended to comply with the requirements of Rule
16b-3 ("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as
amended. In addition, the Plan is intended to provide performance-based
compensation so as to be eligible for compliance with Section 162(m) ("Section
162(m)") of the Internal Revenue Code of 1986, as amended (the "Code"). Section
162(m) denies a deduction by an employer for certain compensation in excess of
$1 million per year paid by a publicly traded corporation to the following
individuals who are employed at the end of the employer's taxable year ("Covered
Employees"): the chief executive officer and the four most highly compensated
executive officers (other than the chief executive officer), for whom
compensation disclosure is required under the proxy rules. Certain compensation,
including compensation based on the attainment of performance goals, is excluded
from this deduction limit if certain requirements are met. Among the
requirements for compensation to qualify for this exception is that the material
terms pursuant to which the compensation is to be paid be disclosed to and
approved by the stockholders in a separate vote prior to the payment.
Accordingly, if the Omnibus Plan is approved by stockholders and the other
conditions of Section 162(m) relating to performance-based compensation are
satisfied, compensation paid to Covered Employees pursuant to the Omnibus Plan
will not be subject to the deduction limit of Section 162(m).
With respect to eligible Participants employed in the United Kingdom
(the "U. K. Participants"), the Omnibus Plan shall be interpreted, enforced and
construed in a manner such that the U. K. Participants shall be entitled to
receive results similar to Participants employed in the United States including,
but not limited to, the tax impact of participation, and the Board of Directors
shall amend the Omnibus Plan as necessary to effectuate this result.
Summary of Terms
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The Omnibus Plan authorizes an aggregate of 607,000 shares of Common
Stock that may be subject to awards, subject to adjustment as described below;
however, upon approval of the Omnibus Plan, no future options may be granted
under the 1993 Plan and 107,000 shares of Common Stock previously available for
stock options under the 1993 Plan but not covered by outstanding stock options
will no longer be available under the 1993 Plan but will, instead, be available
under the Omnibus Plan. Accordingly, only an additional 500,000 shares of Common
Stock would be available for awards under the Omnibus Plan in excess of the
number of shares currently available under the 1993 Plan. Such shares may be
authorized and unissued shares, treasury shares or shares acquired by the
Company for purposes of the Omnibus Plan. Generally, shares subject to an award
that remain unissued upon expiration or cancellation of the award will be
available for other awards under the Omnibus Plan. The total number of shares of
Common Stock subject to awards (including awards paid in cash but denominated in
shares of Common Stock) granted to any Participant in the Omnibus Plan during
any taxable year of the Company will not exceed 300,000. In the event that the
Compensation Committee of the Board of Directors ( the "Committee") determines
that any dividend or other distribution, stock split, recapitalization,
reorganization, merger or other similar corporate transaction or event affects
the Common Stock such that an adjustment is appropriate in order to prevent
dilution or enlargement of the rights of Participants under the Omnibus Plan,
then the Committee will make such equitable changes or adjustments as it deems
necessary to the aggregate number of shares available under the Omnibus Plan,
the limit on individual awards, the number of shares subject to each outstanding
award, and the exercise price of each outstanding option or stock appreciation
right.
Awards under the Omnibus Plan may be made in the form of (i) Incentive
Stock Options, (ii) Non-Qualified Stock Options, (iii) Stock Appreciation
Rights, (iv) Restricted Stock, (v) Phantom Stock and (vi) Stock Bonuses. Awards
may be granted to such officers and other employees of the Company and its
subsidiaries (including employees who are directors) as the Committee shall, in
its discretion, select.
The Omnibus Plan will be administered by the Committee which shall, at
all times, consist of two or more persons each of whom is an "outside director"
within the meaning of Section 162(m) and a non-employee director within the
meaning of Rule 16b-3. The Committee is authorized, among other things, to
construe, interpret and implement the provisions of the Omnibus Plan, to select
the persons to whom awards will be granted, to determine the terms and
conditions of such awards and to make all other determinations deemed necessary
or advisable for the administration of the Omnibus Plan.
Awards under the Plan
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Stock Options. Unless the Committee expressly provides otherwise, an
option will not be exercisable prior to one year after the date of grant and
will become exercisable as to 25% of the shares subject thereto on each of the
first through fourth anniversaries of the grant. The Committee will determine
each option's expiration date; provided, however, that no incentive stock option
may be exercised more than ten years after the date of grant. The purchase price
per share payable upon the exercise of an option (the "option exercise price")
will be established by the Committee, but may be no less than the Fair Market
Value of a share of Common Stock on the date of grant. The option exercise price
is payable (i) in cash, by certified check, bank cashier's check or wire
transfer, (ii) by delivering instructions to a broker to deliver promptly to the
Company the amount of sale or loan proceeds to pay the full amount of the
Purchase Price, (iii) by delivering shares of Common Stock owned by the
Participant with appropriate stock powers, (iv) by electing to have the Company
retain shares of Common Stock which would otherwise be issued on the exercise of
the Option, (v) any combination of the foregoing forms or (vi) by such other
payment method as the Committee may prescribe.
Stock Appreciation Rights. Stock appreciation rights may be granted in
connection with all or any part of, or independently of, any option granted
under the Omnibus Plan. A stock appreciation right granted independently of any
option will be subject to the same vesting rules as described above for options.
A stock appreciation right granted in tandem with any stock option will be
exercisable only when and to the extent the option to which it relates is
exercisable. The grantee of a stock appreciation right has the right to
surrender the stock appreciation right and receive from the Company, in cash, an
amount equal to the excess of the Fair Market Value of a share of Common Stock
over the exercise price of the stock appreciation right for each share of Common
Stock in respect of which such stock appreciation right is being exercised.
Restricted Stock. The Committee may grant restricted shares of Common
Stock to such persons, in such amounts, and subject to such terms and conditions
(including the attainment of performance goals) as the Committee shall determine
in its discretion. Awards of Restricted Stock granted to Executive Officers of
the Company will be contingent on the attainment by the Company or a subsidiary
of the Company, if applicable, of one or more pre-established performance goals
(the "Performance Goals") established by the Committee. The Performance Goals
may be based on the attainment by the Company (and/or its subsidiaries, if
applicable) of any one or more of the following criteria: (i) a specified
percentage return on total stockholder equity of the Company; (ii) a specified
percentage increase in earnings per share from continuing operations of Common
Stock; (iii) a specified percentage increase in net income of the Company; and
(iv) a specified percentage increase in profit before taxation of the Company.
Phantom Stock. The Committee may grant shares of Phantom Stock to such
persons, in such amounts, and subject to such terms and conditions (including
the attainment of performance goals) as the Committee shall determine in its
discretion. If the requirements specified by the Committee are met, the grantee
of such an award will receive a cash payment equal to the Fair Market Value of
the shares covered thereby plus the dividends that would have been paid on such
shares had they actually been outstanding following the grant date. Awards of
Phantom Stock granted to Executive Officers of the Company will be contingent on
the attainment by the Company or a subsidiary of the Company, if applicable, of
any one or more of the Performance Goals noted above.
Stock Bonus. The Committee may grant bonuses comprised of shares of
Common Stock free of restrictions to such persons, in such amounts, as the
Committee shall determine in its discretion. No Executive Officer shall be
eligible to receive a Stock Bonus under the Omnibus Plan unless a prior
determination of eligibility is made by the Committee.
The Board may suspend, discontinue, revise, terminate or amend the
Omnibus Plan at any time, provided, however, that stockholder approval will be
obtained if and to the extent that the Board deems it appropriate to satisfy
Section 162(m).
In the event of a Change in Control, all outstanding awards will become
fully vested and/or immediately exercisable.
Plan Benefits
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The Company cannot now determine the exact number of Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted
Stock, Phantom Stock and Stock Bonuses to be granted in the future to the
executive officers named under the "Executive Officer Compensation - Summary
Compensation Table" below, to all current executive officers as a group, or to
all employees (including executive officers). See "Executive Officer
Compensation - Options Granted in Last Fiscal Year" below for the number of
options granted under the Stock Option Plan to the executive officers named in
the Summary Compensation Table in the year ended December 31, 1996. During the
year ended December 1996, options to purchase 115,000 shares of Common Stock
were granted to all current executive officers as a group.
Certain Federal Income Tax Consequences
- ---------------------------------------
The following discussion is a brief summary of the principal United
States Federal income tax consequences under current Federal income tax laws
relating to awards under the Omnibus Plan. This summary is not intended to be
exhaustive and, among other things, does not describe state, local or foreign
income and other tax consequences.
Non-Qualified Stock Options. An optionee will not recognize any taxable
income upon the grant of a Non-Qualified Stock Option. The Company will not be
entitled to a tax deduction with respect to the grant of a Non-Qualified Stock
Option. Upon exercise of a Non-Qualified Stock Option, the excess of the Fair
Market Value of the Common Stock on the exercise date over the option exercise
price will be taxable as compensation income to the optionee and will be subject
to applicable withholding taxes. The Company will generally be entitled to a tax
deduction at such time in the amount of such compensation income. The optionee's
tax basis for the Common Stock received pursuant to the exercise of a
Non-Qualified Stock Option will equal the sum of the compensation income
recognized and the exercise price.
In the event of a sale of Common Stock received upon the exercise of a
Non-Qualified Stock Option, any appreciation or depreciation after the exercise
date generally will be taxed as capital gain or loss and will be long-term
capital gain or loss if the holding period for such Common Stock is more than
one year.
Incentive Stock Options. An optionee will not recognize any taxable
income at the time of grant or timely exercise of an Incentive Stock Option and
the Company will not be entitled to a tax deduction with respect to such grant
or exercise. Exercise of an Incentive Stock Option may, however, give rise to
taxable compensation income subject to applicable withholding taxes, and a tax
deduction to the Company, if the Incentive Stock Option is not exercised or if
the optionee subsequently engages in a "disqualifying disposition," as described
below.
A sale or exchange by an optionee of shares acquired upon the exercise
of an Incentive Stock Option more than one year after the transfer of the shares
to such optionee and more than two years after the date of grant of the
Incentive Stock Option will result in any difference between the net sale
proceeds and the exercise price being treated a long-term capital gain (or loss)
to the optionee. If such sale or exchange takes place within two years after the
date of grant of the Incentive Stock Option or within one year from the date of
transfer of the Incentive Stock Option shares to the optionee, such sale or
exchange will generally constitute a "disqualifying disposition" of such shares
that will have the following results: any excess of (i) the lesser of (a) the
Fair Market Value of the shares at the time of exercise of the Incentive Stock
Option and (b) the amount realized on such disqualifying disposition of the
shares over (ii) the option exercise price of such shares, will be ordinary
income to the optionee, subject to applicable withholding taxes, and the Company
will be entitled to a tax deduction in the amount of such income. Any further
gain or loss after the date of exercise generally will qualify as capital gain
or loss and will not result in any deduction by the Company.
Restricted Stock. A grantee will not recognize any income upon the
receipt of Restricted Stock unless the holder elects under Section 83(b) of the
Code, within thirty days of such receipt, to recognize ordinary income in an
amount equal to the Fair Market Value of the Restricted Stock at the time of
receipt. If the election is made, the holder will not be allowed a deduction for
amounts subsequently required to be returned to the Company. If the election is
not made, the holder will generally recognize ordinary income, on the date that
the restrictions to which the Restricted Stock are subject are removed, in an
amount equal to the Fair Market Value of such shares on such date, less any
amount paid for the shares. At the time the holder recognizes ordinary income,
the Company generally will be entitled to a deduction in the same amount.
Generally, upon a sale or other disposition of Restricted Stock with
respect to which the holder has recognized ordinary income (i.e., a Section
83(b) election was previously made or the restrictions were previously removed),
the holder will recognize capital gain or loss in an amount equal to the
difference between the amount realized on such sale or other disposition and the
holder's basis in such shares. Such gain or loss will be long-term capital gain
or loss if the holding period for such shares is more than one year.
Other Awards. The grant of a Stock Appreciation Right or Phantom Stock
award will not result in income for the grantee or in a tax deduction for the
Company. Upon the settlement of such a right or award, the grantee will
recognize ordinary income equal to the aggregate value of the payment received,
and the Company generally will be entitled to a tax deduction in the same
amount. A Stock Bonus generally will result in compensation income for the
grantee and a tax deduction for the Company, equal to the Fair Market Value of
the shares of Common Stock granted.
Inasmuch as awards under the Omnibus Plan will be granted at the sole
discretion of the Committee and that performance goal criteria may vary from
year to year and from Participant to Participant, benefits under the Omnibus
Plan are not determinable. Compensation paid and other benefits granted for the
1996 fiscal year are set forth above in the section entitled "Executive Officer
Compensation" commencing on page 16.
PROPOSAL NUMBER 3 -AMENDMENT OF THE 1995 EMPLOYEE
STOCK PURCHASE PLAN
Your Board of Directors Recommends
a Vote "For" This Proposal
Proposed Amendment.
- -------------------
The Board of Directors has approved, and recommends that you vote to
approve, an amendment to the 1995 Employee Stock Purchase Plan (the "Stock
Purchase Plan") so that the years of service requirement for all Plan Years (as
defined in the Stock Purchase Plan) commencing with the 1997 Plan Year will be
reduced to three months from one year. If approved, all employees of the Company
as of October 1, 1996 will be eligible to participate in the 1997 Plan Year and
all employees as of October 1 of each subsequent year will be eligible to
participate in the immediately following Plan Year. A copy of the Stock Purchase
Plan was filed as Exhibit 4(c) to the Company's registration statement on Form
S-8 (Reg. No. 33-80975) (the "Purchase Plan Registration Statement"). The terms
of the Stock Purchase Plan are summarized below, and attached hereto as Exhibit
B is a copy of the amended section of the Stock Purchase Plan which is marked to
show the proposed amendment.
Summary of Terms
- ----------------
The Stock Purchase Plan was adopted by the Company's Board of Directors
on August 3, 1995 and approved by the Company's stockholders by written consent
dated December 5, 1995. At the time of adoption, the Board of Directors
authorized 100,000 shares of Common Stock for purchase under the Stock Purchase
Plan. The Purchase Plan Registration Statement registering the 100,000 shares
was filed with the SEC on December 29, 1995. The Stock Purchase Plan provides
that, subject to certain procedural requirements, those employees of Chartwell
and its designated subsidiaries (i) who have completed one year of continuous
service with Chartwell or a designated subsidiary, (ii) whose customary
employment is at least twenty hours per week and at least five months in any
calendar year and (iii) who are not five percent or greater stockholders of
Chartwell, are eligible to participate ("Participating Employees"). As of
January 1, 1997, approximately 100 employees of the Company were eligible to
participate in the Stock Purchase Plan including those employees who would be
eligible if the proposed amendment is approved. On January 2, 1997,
approximately 12,361 shares of Common Stock were purchased with Participants'
1996 payroll deductions for the 1996 Plan Year.
Pursuant to the Stock Purchase Plan, each Participating Employee will
be permitted to purchase shares of the Common Stock through regular payroll
deductions in an amount equal to not less than two percent and not greater than
ten percent of the Participating Employee's base pay (as elected by the
Participating Employee). Participating Employees may also elect to use payroll
deductions ranging from 2%-10% of his or her bonus compensation to purchase
shares of Common Stock. Participating Employees will be able to purchase shares
of the Common Stock with such payroll deductions at the end of a one year cycle
at a purchase price equal to the lesser of (i) 85 percent of the fair market
value per share of the Common Stock on the date the defined plan cycle begins or
(ii) 85 percent of the fair market value per share of Common Stock on the date
the defined plan cycle ends. Under the Stock Purchase Plan, the fair market
value of the shares of Common Stock which may be purchased by any Participating
Employee during any calendar year may not exceed the amount set by the
applicable tax code . A Participating Employee in the Stock Purchase Plan may
request and receive delivery of all or a portion of the shares purchased by such
Participating Employee pursuant to the Stock Purchase Plan; provided, however,
that withdrawal of shares cannot occur more than once each Plan Year or prior to
two years from the date such shares were purchased under the Stock Purchase Plan
unless the appropriate committee of the Board of Directors, in its sole
discretion, accelerates the permitted date of withdrawal or within sixty days of
the occurrence of a Change in Control (as defined in the Stock Purchase Plan).
The Board of Directors may from time to time amend or terminate the
Stock Purchase Plan, provided that (i) no such amendment or termination may
adversely affect options previously granted under the Stock Purchase Plan or the
rights of any Participating Employee without the consent of such Participating
Employee and (ii) to the extent required by Rule 16b-3 of the Exchange Act or
any other law, regulation or stock exchange rule, no such amendment shall be
effective without the approval of Chartwell's stockholders.
Plan Benefits
- -------------
Because participation in the Stock Purchase Plan will vary from
employee to employee, and levels of participation among Participating Employees
will also vary, it is not possible to determine the value of benefits which may
be obtained by executive officers and other employees under the Stock Purchase
Plan.
Federal Income Tax Consequences to the Participating Employee and the Company
- -----------------------------------------------------------------------------
The Stock Purchase Plan is intended to qualify as an "Employee Stock
Purchase Plan" within the meaning of Section 423 of the Internal Revenue Code.
Pursuant to Section 421 of the Internal Revenue Code, as an Employee Stock
Purchase Plan, a Participating Employee does not have to pay any Federal income
tax upon joining the Stock Purchase Plan or when an offering ends and he or she
receives shares of Common Stock pursuant to the exercise of an option. A
Participating Employee is, however, required to pay Federal income tax on the
difference, if any, between the price at which he or she sells the shares and
the price that he or she paid for them. If a Participating Employee has owned
the shares for more than one year and disposes of them at least two years after
the date the offering commenced, he or she will be taxed as follows: If the sale
price of the shares is equal to or less than the price paid for the shares under
the Stock Purchase Plan, a Participating Employee will incur a long-term capital
loss in the amount equal to the price paid over the sale price. If the sale
price is higher than the price paid under the Stock Purchase Plan, the
Participating Employee will recognize ordinary income in an amount equal to the
lesser of (i) the fair market value of the shares on the day the offering
commenced over the price paid, or (ii) the excess of the sale price over the
price paid. Any further gain is treated as long-term capital gain.
If a Participating Employee sells the shares before he or she has owned
them for more than one year or before the expiration of a two-year period
commencing on the day the offering period commenced, the Participating Employee
will recognize ordinary income on the amount of the difference between the
purchase price and the market price of the shares on the date of purchase and
the Company will be entitled to a Federal income tax deduction for the same
amount, provided that all applicable Federal income tax withholding requirements
are satisfied. A Participating Employee will also recognize a capital gain or
loss (long-term or short-term, depending on the period the Participating
Employee has owned the shares) for the difference between the sale price and the
fair market value on the date of purchase. Other than as described above, the
Company will not be entitled to a Federal income tax deduction upon the purchase
or sale of shares by Participating Employees under the Stock Purchase Plan.
This summary of Federal income tax consequences does not purport to be
complete and is based upon interpretations of the existing laws, regulations and
rulings which could be materially altered with the enactment of any new tax
legislation. There also may be state and local income tax laws applicable to
transactions related to the Stock Purchase Plan.
PROPOSAL NUMBER 4 - OTHER BUSINESS
The Board of Directors of the Company does not intend to present, and
does not have any reason to believe that others intend to present, any matter of
business at the Annual Meeting other than that set forth in the accompanying
Notice of Annual Meeting of Stockholders. However, if other matters properly
come before the Annual Meeting, it is the intention of the Proxyholders to vote
any proxies in accordance with their judgment.
CERTAIN INFORMATION REGARDING THE BOARD OF DIRECTORS
Attendance
- ----------
In 1996, the Board of Directors held six regularly scheduled meetings
and two special meetings. All of the directors attended at least 75% of the
meetings of the Board of Directors and of the committees of the Board of
Directors on which they served. The Company considers attendance at meetings to
be only one measure of a Director's contribution to the Company. Directors also
fulfill their responsibilities by rendering advice in informal consultations
with executive officers of the Company.
Committees of the Board of Directors
- -------------------------------------
The Board of Directors has four committees: the Audit Committee, the
Compensation Committee, the Corporate Finance Committee and the Nominating
Committee. All of the committees are comprised of non-employee directors.
The Audit Committee recommends an accounting firm to serve as the
Company's independent auditors, reviews the independence of such auditors,
reviews the audit reports prepared by such auditors, reviews the Company's
accounting and financial reporting practices and reports its findings and
recommendations to the Board of Directors for appropriate action. The Audit
Committee, which is comprised of Messrs. Sagan (Chairman), Feldman and Miller,
met twice during 1996.
The Compensation Committee supervises the Company's compensation
policies including the establishment of compensation and bonuses for executive
officers, monitors the compensation arrangements of other management employees
for consistency with corporate objectives and to enhance stockholder value and
approves significant changes in salaried employee benefits. The Compensation
Committee, which is comprised of Messrs. Grzelecki (Chairman), Callard and S.
Richardson, met twice during 1996.
The Corporate Finance Committee reviews and monitors the financial
affairs of the Company including its investment strategy, financing activities
and mergers and acquisitions strategy. The Corporate Finance Committee, which is
comprised of Messrs. Schnitzer(Chairman), DeMichele,Green, and L.Richardson, Jr.
met five times during 1996.
The Nominating Committee recommends board committee structure,
establishes criteria for the selection of directors, reviews the performance of
each director and proposes nominees for election to the Board of Directors. This
committee considers nominations for directors received from other directors,
stockholders and management. In order for the Nominating Committee to consider
stockholder nominations, such nominations must be submitted in writing and must
be received by the Secretary of the Company not less than sixty (60) nor more
than ninety (90) days prior to an Annual Meeting. The notice of nomination must
include the information concerning the nominee that must be disclosed about
nominees for election as directors in proxy solicitations prepared in accordance
with Regulation 14A under the Exchange Act. The notice must be accompanied by
the written consent of each proposed nominee to serve as a director of the
Company if so elected. The Nominating Committee, which is comprised of Messrs.
Green (Chairman), DeMichele and Schnitzer, met once during 1996.
Director Compensation
- ---------------------
Each director who is not an employee of the Company received an
annual retainer of $20,000 in 1996. Each director serving as chairman of a
committee of the Board received additional compensation of $1,000 per year. In
addition, directors received reasonable out-of-pocket expenses incurred in
attending meetings of the Board of Directors and committees thereof. Directors
who were employees of the Company did not receive any fees for serving on the
Board of Directors or for committee service in 1996. In 1996, pursuant to the
terms of the 1996 Non-Employee Director Stock Option Plan, all non-employee
directors were granted options to purchase 1,000 shares of Common Stock at an
exercise price of $22.00 per share.
Section 16(a) Compliance
- ------------------------
Section 16 of the Exchange Act requires certain officers and directors
and persons who own more than 10% of the Company's Common Stock to report to the
SEC their ownership and changes in ownership of the Company's Common Stock on
Forms 3, 4, and 5. The Company has adopted procedures to assist its officers and
directors in complying with these requirements which include assisting them in
preparing forms for filing.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company and Form 5 for the year ended December 31, 1996, the
Company believes that all Section 16(a) filing requirements have been complied
with except as follows: Bryan P.D. Kellett, a Class II director, did not file a
Form 4 with respect to a purchase of 7,500 shares of the Company's stock in a
timely manner. However, Mr. Kellett has, prior to the date of this Proxy
Statement, filed the Form 4 regarding his purchase of Common Stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to beneficial
ownership of the Common Stock based on publicly available information as of
March 31, 1997 by: (i) each person who is the beneficial owner of more than 5%
of any class of the Company's Common Stock; (ii) all directors of the Company
and nominees for director; (iii) the Chief Executive Officer of the Company and
the four other most highly compensated executive officers of the Company in
1996; and (iv) all directors and executive officers of the Company as a group.
Percent of
Number of Common
Name of Beneficial Owner Shares Stock
- ------------------------ ------ -----
Wand/Chartwell Investments L.P. (1)
c/o Wand Partners Inc.
30 Rockefeller Plaza Suite 3226
New York, NY 10012 1,141,011 11.6%
Firstar Investment Research
& Management
777 East Wisconsin Avenue
Suite 1899
Milwaukee, WI 53201 685,900 7.2
Brinson Partners Inc. (2)
209 South LaSalle Street
Chicago, IL 6060 616,962 6.4
Franklin Resources
777 Mariners Island Blvd.
4th Floor
San Mateo, CA 94404 614,300 6.4
Siegler, Collery & Company
712 Fifth Avenue
19th Floor
New York, NY 10019 526,100 5.5
Stuart Smith Richardson (3)
32 Bibbins Road
Easton, CT 06612 657,584 6.9
Richard E. Cole (4) 168,265 1.7
Steven J. Bensinger (4) 109,496 1.1
Jacques Q. Bonneau (4) 107,506 1.1
Lunsford Richardson Jr. (5) 89,990 *
Bruce W. Schnitzer (1) 84,642 *
Michael H. Hayes (4) 67,740 *
David J. Callard (1) 53,912 *
Charles E. Meyers (4) 37,491 *
Robert M. DeMichele 20,035 *
John Sagan (6) 14,885 *
Bryan P.D. Kellett 7,500 *
Stephen L. Green (7) 4,000 *
Greg S. Feldman 2,000 *
Frank E. Grzelecki 2,000 *
William R. Miller 1,500 *
All executive officers and directors as a
group (18 persons) (4) 1,492,980 14.7
* Less than 1%.
(1) 911,926 shares of the Company's Common Stock are owned of record by
Wand/Chartwell Investments L.P. (the "Partnership") and 46,608 shares of
the Company's Common Stock are issuable to the Partnership upon the
exercise of warrants owned by the Partnership. Further, 182,477 shares of
the Company's Common Stock are issuable to Wand Partners (Chartwell) L.P.
("Wand (Chartwell)") upon the exercise of warrants held by Wand
(Chartwell). Mr. Schnitzer and Mr. Callard, directors of Chartwell,
together own of record all the outstanding shares of common stock of Wand
Partners Inc. ("Wand"), which is the general partner of Wand (Chartwell),
the general partner of the Partnership. As such, Messrs. Callard and
Schnitzer share investment and voting power with respect to, and may be
deemed to be the beneficial owners of, the Company's Common Stock and the
warrants owned by the Partnership and Wand (Chartwell), respectively.
Messrs. Schnitzer and Callard each own 2.1138% of the limited partnership
interests in the Partnership and Wand owns 50% of the limited partnership
interests in Wand (Chartwell). Except as stated in the preceding sentence,
Messrs. Schnitzer and Callard disclaim beneficial ownership of the
Company's Common Stock and the warrants owned by the Partnership and Wand
(Chartwell). Share ownership for Messrs. Schnitzer and Callard shown in the
chart represents their pro rata ownership interest in the Company's Common
Stock and the warrants held by the Partnership and Wand (Chartwell),
respectively.
(2) 543,308 and 38,808 shares of the Company's Common Stock and warrants to
purchase 32,523 and 2,323 additional shares are owned of record by Virginia
Retirement Systems ("VRS") and Institutional Venture Capital Fund II ("IVCF
II"), respectively. Brinson has voting and dispositive power over the
shares held of record by VRS, pursuant to agreements between Brinson and
VRS. IVCF II is a closed end collective investment trust, the trustee of
which (Brinson Trust Company) is a subsidiary of Brinson. Brinson is a
wholly-owned subsidiary of SBC Holding (USA), Inc., a Delaware corporation
("SBC (USA)"), which is a wholly-owned subsidiary of Swiss Bank
Corporation, a Swiss corporation ("SBC"). Brinson, SBC (USA) and SBC
disclaim beneficial ownership of any shares of the Company's Common Stock.
(3) These shares include shares of various trusts of which Mr. Richardson is a
trustee and exercises shared voting and investment power with respect to
such shares.Mr.Richardson has sole voting and investment power with respect
to 253,886 shares of the Company's Common Stock. Mr. Richardson is a
Richardson Stockholder;see"Certain Relationships and Related Transactions."
(4) Includes, with respect to each of the officers indicated, the following
numbers of options exercisable within 60 days of the date hereof: Mr. Cole
138,400; Mr. Bensinger 105,760; Mr. Bonneau 95,520; Mr. Hayes 62,380; and
Mr.Meyers 26,720. With respect to all executive officers and directors as a
group, includes an aggregate of 501,421 options exercisable within 60 days
of the date hereof, 4,481 warrants held by Mr.Sagan and includes 656,584
shares held by Stuart Smith Richardson, a director of the Company. See
footnote 3 above.
(5) Mr. Richardson may be deemed to be a control person of Chartwell (other
than solely by reason of being a director of Chartwell) according to the
rules of the SEC. Mr. Richardson is a Richardson Stockholder; see
"Certain Relationships and Related Transactions."
(6) Includes 4,481 shares of the Company's Common Stock issuable upon the
exercise of the warrants owned by Mr. Sagan, a director of Chartwell.
(7) Mr. Green, a director of Chartwell, is a general partner of Canaan
Partners, the ultimate general partner of Canaan Capital Offshore Limited
Partnership C.V. ("CCLP") and Canaan Capital Limited Partnership. 217,419
shares of the Company's Common Stock and warrants to purchase 11,112
additional shares are owned of record by CCLP and 26,051 shares of the
Company's Common Stock and warrants to purchase 1,331 additional shares are
owned of record by Canaan Capital Limited Partnership. The other general
partners of Canaan Partners are Harry T. Rein, James J. Fitzpatrick, Deepak
Kamra, Gregory Kopchinsky, Robert J. Migliorino and Eric A. Young. As such,
Messrs. Green, Rein, Fitzpatrick, Kamra, Kopchinsky, Migliorino and Young
share investment and voting power with respect to and may be deemed to be
the beneficial owners of the Company's Common Stock held by Canaan
Partners.
CERTAIN INFORMATION REGARDING THE EXECUTIVE OFFICERS
Executive Officers
The following table provides information as of the date of this Proxy
Statement regarding the executive officers of Chartwell. Biographical
information for each of the individuals set forth in the table is presented
immediately following the table.
Name Age Title
- --------------------- ------- ------------------------------------
Richard E. Cole 57 Chairman and Chief Executive Officer
Steven J. Bensinger 42 President
Jacques Q. Bonneau 42 Senior Executive Vice President, Chief
Underwriting Officer
James A. Giordano 44 Executive Vice President
Michael H. Hayes 43 Executive Vice President
Kathleen M. Carroll 43 Senior Vice President, General Counsel
and Secretary
Charles E. Meyers 47 Senior Vice President, Chief Financial Officer
Richard E. Cole
See, Proposal Number 1 - Election of Directors
Steven J. Bensinger
See, Proposal Number 1 - Election of Directors
Jacques Q. Bonneau
See, Proposal Number 1 - Election of Directors
James A. Giordano, head of Regional Accounts and Marine & Aviation
Accounts, has served as an Executive Vice President of Chartwell since February
1997 and prior thereto as Senior Vice President since April 1990. From December
1985 to April 1990, Mr. Giordano served as a Vice President of Chartwell. Mr.
Giordano has been a Director of Chartwell Advisers since December 1996.
Michael H. Hayes, head of Global Accounts, has served as an Executive
Vice President of Chartwell since March 1990.Since September 1993, Mr. Hayes has
been Managing Director of Chartwell Advisers. From October 1988 to March 1990,
Mr. Hayes served as Senior Vice President of Chartwell. Prior to October 1988,
Mr. Hayes was a Vice President of Trenwick, where he was responsible for
Trenwick's treaty operations.
Kathleen M. Carroll has served as Senior Vice President, General
Counsel and Secretary of Chartwell since February 1997 and prior thereto as Vice
President, General Counsel and Secretary since October 1993. From May 1991 until
September 1993, she served as Second Vice President and Associate General
Counsel of NAC Reinsurance Company ("NAC"). From prior to 1988 until May 1991,
she served as Assistant Vice President and Assistant General Counsel of NAC.
Charles E. Meyers has served as Senior Vice President and Chief
Financial Officer of Chartwell since October 1994. Prior to October 1994, Mr.
Meyers served as Senior Vice President and Treasurer of Chartwell from August
1990 to October 1993 when he became Senior Vice President, Treasurer and Chief
Financial Officer of Chartwell. In addition, he served as Secretary of Chartwell
from July 1990 to October 1993. Prior thereto, he was Vice President, Accounting
and Finance of Chartwell from October 1988 to August 1990 and Assistant Vice
President, Accounting and Finance from prior to October 1988.
Employment Arrangements
- -----------------------
On August 2, 1995, the Chartwell Board of Directors extended the term
of the employment agreements with Messrs. Cole, Bensinger, Bonneau and Hayes
(the "Employment Agreements") from December 31, 1996 to December 31, 1997. The
Employment Agreements provide for annual base salaries (which may be increased
at the discretion of the Chartwell Board of Directors) of $425,000, $375,000,
$300,000 and $225,000, respectively, during 1996 and 1997. Under the terms of
the Employment Agreements, bonus awards will be payable to these employees, at
the sole discretion of the Chartwell Board of Directors, in an amount of 0-50%
of base salary if annual results are less than Chartwell's business plan for
such year and 50-100% of base salary if results equal or exceed such annual
plan. In addition, Mr. Bensinger was paid a signing bonus of $200,000, the
payment of which was spread out over the first two years of his employment with
the Company.
Messrs. Cole, Bensinger, Bonneau and Hayes will also receive a
supplement to Chartwell's Section 401(k) Plan payable at the earlier of age 65
or employment termination. The supplement will be equal to the aggregate
contributions made with respect to the employee to a trust established by
Chartwell. Annual contributions to the trust will equal 20% of the year's base
salary for Mr. Cole and 132% of salary for Messrs. Bensinger, Bonneau and Hayes.
The employees will also be provided with certain other benefits and perquisites
pursuant to the Employment Agreements.
Upon a termination of the employee's employment by Chartwell without
"Cause" or by the employee for "Good Reason" (each as defined in the Employment
Agreements), Chartwell will be obligated to pay the employee's base salary for
three years and maintain certain benefits for two years. If such termination
occurs following a "Change in Control" as defined in the Employment Agreements,
a lump sum payment will be made equal to the amount described in the immediately
preceding sentence plus an amount equal to one times the average bonus received
by the employee for the most recent three years prior to the date of
termination.
In the event any payments to an employee under the Employment
Agreements are subject to an excise tax under Section 4999 of the Internal
Revenue Code, Chartwell will reimburse the employee so that the employee will
retain an after-tax benefit as if the excise tax had not been incurred;
provided, however, that in the event a Change in Control triggers a lump sum
payment to the employee as described in the preceding paragraph, the employee's
lump sum payment shall include only that portion of the bonus which would not
result in the assessment of an excise tax.
Each employee is subject under the terms of his Employment Agreement to
a non-competition provision during the term of his employment and for up to one
year thereafter under certain circumstances and to ongoing confidentiality
obligations. Although there is no obligation to mitigate severance benefits,
certain amounts received from a new employer will reduce Chartwell's obligations
under the Employment Agreements.
Executive Officer Compensation
- ------------------------------
The following table sets forth the cash and non-cash compensation with
respect to the fiscal years ended December 31, 1996, 1995 and 1994 awarded to or
earned by the Chief Executive Officer of Chartwell and the four other most
highly compensated executive officers of Chartwell:
Summary Compensation Table
Annual Compensation Long Term Compensation
------------------------------- --------------------------
Other Securities All
Annual Under- Other
Compen- Restrict- lying Comp-
Year Salary Bonus sation ed Stock Options ensation
(1)($) ($) (2)($) (3)($) (4)(#) 5($)
------ ------- -------- -------- ------- ------ --------
Richard E. Cole 1996 $442,443 $403,750 $157,941 -- 28,500 $ 89,500
Chairman & Chief 1995 367,905 314,775 173,348 -- -- 72,775
Executive Officer 1994 349,750 104,925 51,726 -- -- 72,775
Steven J. Bensinger 1996 388,809 356,250 142,036 -- 26,000 55,125
President 1995 300,000 270,000 148,431 -- -- 45,120
1994 304,086 90,000 176,878 -- -- 40,500
Jacques Q. Bonneau 1996 300,000 285,000 83,843 -- 23,000 45,000
Sr. Executive Vice 1995 244,125 207,000 24,857 -- -- 33,969
President and Chief 1994 247,331 69,000 28,432 -- -- 33,900
Underwriting Officer
Michael H. Hayes 1996 235,977 125,000 45,291 -- 10,000 34,875
Executive Vice 1995 199,231 125,000 23,621 -- 3,100 31,620
President 1994 199,589 65,000 13,718 -- -- 30,270
Charles E. Meyers 1996 176,887 125,000 9,608 -- 10,000 4,500
Sr. Vice President 1995 169,633 95,000 5,626 -- 1,400 4,094
and Chief Financial 1994 160,189 31,080 3,641 -- -- 3,894
Officer
- ------------------------
(1) Includes payment for unused vacation. For 1995 and 1994, the amounts
included as payment for unused vacation had, in prior years, been included
in the Other Annual Compensation column.
(2) Includes reimbursement for taxes due on certain perquisites of
$107,128, $93,213, $47,282, $24,785 and $6,478, for Messrs. Cole,
Bensinger, Bonneau, Hayes and Meyers, respectively. For Messrs. Cole,
Bonneau, Hayes and Meyers, the amount set forth in the preceding sentence
includes tax reimbursement for 1996 perquisites of $41,426, $29,794,
$16,727 and $2,551, respectively, and a correction to the amount of tax
reimbursement paid in the years 1992-1995 of $65,702, $17,488, $8,058, and
$3,927, respectively. For Mr. Bensinger, the total tax reimbursement set
forth in the first sentence of this footnote includes $45,055 for 1996
perquisites and $48,158 as a correction to the amount of tax reimbursement
paid in the years 1993-1995
(3) On March 6, 1992, 21,629, 4,155, 4,448, and 5,749 shares of restricted
stock were granted to Messrs. Cole, Bonneau, Hayes and Meyers,
respectively, at a value of $21.00 per share. All such shares are vested,
with the vesting of the last unvested shares having occurred in 1995.
(4) The exercise price of all options outstanding as of December 12, 1995 was
adjusted to $21.00 per share as of such date.
(5) The amounts in this column consist of 401(k) Plan matching contributions
by Chartwell and contributions made by Chartwell to a trust established
as a supplement to the 401(k) Plan.
Summarized below in tabular format are options granted during the fiscal
year ended December 31, 1996 to the above-named executive officers:
Option Grants in Last Fiscal Year
Potential Realized
Value
at Assumed Annual
% of Total Rates of
Options Stock Price
Grnted to Appreciation
Employees Exercise for Option Term
Options in Price Expiration -------------------
Name Granted Fiscal Year ($/Sh) Date 5% 10%
- ------------------- ------- ----------- ------ ---------- -------- -----------
Richard E. Cole 28,500 14.8% $25.25 1/01/06 $452,568 $1,146,897
Steven J. Bensinger 26,000 13.4 25.25 1/01/06 412,869 1,046,292
Jacques Q. Bonneau 23,000 11.9 25.25 1/01/06 365,231 925,566
Michael H. Hayes 10,000 5.2 25.25 1/01/06 158,796 402,420
Charles E. Meyers 10,000 5.2 25.25 1/01/06 158,796 402,420
Set forth below are the number of outstanding options at December 31,
1996 granted to each of the executive officers named in the Summary Compensation
Table:
Number of Unexercised
Options Value of Unexercised
at Fiscal Year-End In-the-Money
Exercisable Unexercisable Options(1)
----------- ------------- ----------
Richard E. Cole 138,400 43,100 $ 795,800 (2)
126,700 (3)
Steven J. Bensinger 91,760 48,940 527,620 (2)
170,905 (3)
Jacques Q. Bonneau 95,160 33,040 547,170 (2)
92,230 (3)
Michael H. Hayes 62,380 17,620 358,685 (2)
58,815 (3)
Charles E. Meyers 26,720 13,280 153,640 (2)
33,860 (3)
- ----------------
(1) Based on closing price of $26.75 per share for Chartwell's Common Stock
on December 31, 1996.
(2) Exercisable options.
(3) Unexercisable options.
Compensation Committee Report on Executive Compensation
- -------------------------------------------------------
Decisions regarding aggregate compensation of the executive officers of
Chartwell, including compensation in the form of cash bonuses and equity-based
awards, are made by the Compensation Committee of the Board of Directors. During
1996, the Compensation Committee consisted of Frank E. Grzelecki, David J.
Callard and Stuart S. Richardson. None of the members of the Compensation
Committee are employees of Chartwell or any of its subsidiaries. Decisions by
the Compensation Committee regarding executive compensation are submitted, as
appropriate, to the other non-employee members of the Board of Directors for
approval.
The Compensation Committee has implemented compensation policies, plans
and programs that are designed to attract, retain, motivate and reward executive
officers whom the Company expects to make significant contributions to the
Company's performance. To that end, Chartwell currently provides executive
officers with competitive salaries, cash bonuses based upon objective criteria
and equity-based awards principally in the form of stock options. The
Compensation Committee periodically evaluates Chartwell's performance, executive
compensation and executive share ownership compared with those of other
comparable United States reinsurance companies in making its decisions. In 1996
the Compensation Committee engaged William M. Mercer Inc. to assist in
evaluating the competitiveness of the Company's executive compensation program.
To the extent readily determinable and as one of the factors in the
consideration of compensation matters, the Compensation Committee considers the
anticipated tax treatment to Chartwell and the executives of various payments
and benefits. Section 162(m) of the Internal Revenue Code limits federal income
tax deductions for compensation paid to the Chief Executive Officer and the four
other most highly compensated officers of a public company to $1,000,000 per
year, subject to an exception for performance-based compensation arrangements
which satisfy certain conditions. Total compensation of Chartwell's executive
officers did not exceed this deduction limitation in 1996. In the future, the
Compensation Committee will consider various alternatives for preserving the
deductibility of compensation payments and benefits to the extent reasonably
practicable and to the extent consistent with its other compensation objectives.
Base Salary. Each year the Chief Executive Officer recommends to the
Compensation Committee a base salary for certain executive officers including,
but not limited to, the executive officers named in this Proxy Statement, other
than the Chief Executive Officer, the President, the Chief Underwriting Officer
and the Executive Vice President, Global Accounts, whose salaries are set by the
Compensation Committee and reflected in their employment contracts. These salary
recommendations are based on each executive officer's individual performance
over the past year, annual corporate performance, industry salary trends and
competitive salary levels. Base salary decisions also take into account the
Compensation Committee's views as to the emphasis to be placed on variable,
performance-based compensation. The Compensation Committee reviews the
recommendations of management and fixes the base salaries of each executive
officer, subject to approval by the full Board of Directors.
Annual Bonus Plan. The Board of Directors of Chartwell adopted a bonus
plan for all officers of Chartwell in February 1994. The bonus plan permits the
Compensation Committee to award cash bonuses ranging from 0% to 100% of base
salary for any given year based on (i) officer level, (ii) Chartwell's business
plan results for the past year, including achievement of budget goals,
including, but not limited to, overhead expenses, growth in premiums and return
on investment, and achievement of strategic goals, and (iii) the overall
business climate in the reinsurance industry. The bonus plan calls for bonuses
in the lower end of the ranges to be awarded in years when lower returns on
investment are experienced and in the higher end of the ranges during years when
returns on investment should be greater.
Each year the Chief Executive Officer recommends to the Compensation
Committee a bonus for all eligible officers. In January 1997, the Compensation
Committee determined to recommend to the full Board of Directors that Messrs.
Cole, Bensinger and Bonneau receive bonuses of 95% of base salary and all other
eligible officers receive bonuses ranging from 1.3% to 71.4% of base salary. In
determining the bonus levels for 1996, particularly those of Messrs. Cole,
Bensinger and Bonneau, the Compensation Committee considered the achievement of
budget goals and also recognized the contributions of each officer in completing
the acquisition of Archer as well as the Company's stock performance during the
year. The non-employee members of the Board of Directors approved the bonuses as
recommended by the Compensation Committee in February 1997.
Stock Options. The Compensation Committee administers the Stock Option
Plan which provides for the issuance of options to purchase up to 1,000,000
shares of Common Stock. The primary purpose of the Stock Option Plan is to
provide additional incentive to executive officers to further the growth,
development and financial success of Chartwell and to align officers' interests
with those of Chartwell's stockholders. The Compensation Committee has a policy
of considering annual grants under the Stock Option Plan to executive officers.
In 1996, the Compensation Committee granted options to purchase 193,500 shares
of the Common Stock to officers of the Company. In making grants, the
Compensation Committee also considered the number of options remaining available
for grant under the Stock Option Plan and the aggregate amount of options
previously granted.
Chief Executive Compensation. Pursuant to the terms of his employment
agreement, the Company's Chief Executive Officer, Richard E. Cole, received
$425,000 in base salary in 1996, a 21.5% increase over his 1995 base salary
which, pursuant to the employment agreement had remained unchanged since 1993.
In February 1997, the Compensation Committee granted an award to Mr. Cole under
the Company's bonus plan of $403,750 or 95% of his 1996 base salary. This grant
was in recognition of Chartwell's performance with respect to the strategic and
financial goals set by the Board of Directors and Mr. Cole's efforts in the
successful completion of certain strategic initiatives, including the
acquisition of Archer. In addition, Mr. Cole was awarded 28,500 options under
the Stock Option Plan with an exercise price of $25.25, which was the fair
market value of the Company's Common Stock on the date of grant.
1997 Omnibus Stock Incentive Plan. In February 1997, the Compensation
Committee recommended that the Board of Directors approve the Omnibus Plan in
order to provide the Company with greater flexibility to meet its objective of
providing an equity-based incentive to Chartwell's executive officers and senior
officers. The stated purpose of the Omnibus Plan is the same as the current
Stock Option Plan, that is, to promote the interests of the Company and the
stockholders of Chartwell by providing officers and other employees of the
Company (including directors who are also employees of the Company) with equity
incentives and rewards to encourage them to enter into and continue in the
employ of the Company and to acquire a proprietary interest in the long-term
success of the Company. The full Board of Directors concurred with the
Compensation Committee's recommendation, subject to stockholder approval.
Frank E. Grzelecki
David J. Callard
Stuart S. Richardson
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on
the Company's Common Stock with the cumulative total return of the Standard &
Poor's 500, the Standard & Poor's Property/ Casualty Index and a peer group
comprised of Everest Re, NAC Re Corporation, Transatlantic Holdings, Inc. and
Trenwick Group, Inc., in each case since December 13, 1995, the date on which
the Company commenced trading on the Nasdaq National Market.
The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T.
S&P
Investment Value CWL S&P 500 Prop&Cas Custom Peer Group
- ---------------- ------- -------- --------- -----------------
12/13/95 $100.00 $100.00 $100.00 $100.00
12/31/95 104.76 99.16 99.40 104.18
03/31/96 108.33 104.46 97.92 98.95
06/30/96 105.55 109.16 103.70 103.51
09/30/96 121.28 112.54 105.14 102.53
12/31/96 128.04 121.83 120.78 113.77
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Stockholders Agreement
- ----------------------
In connection with the Merger, Chartwell entered into the Stockholders
Agreement with certain of its stockholders, including VRS, IVCF II, Michigan
Mutual Insurance Company ("MMIC"), FIMA Finance Management Inc. ("FIMA") and the
Partnership (collectively, the "Chartwell Stockholders"), and Messrs. L.
Richardson, Jr., S. Richardson, S. Boney, L.R. Preyer, P.L. Richardson and R.R.
Richardson, each of whom was a director of Piedmont, and certain other
stockholders who are relatives of the foregoing, or which are trusts with
respect to which the foregoing or such relatives are trustees or hold beneficial
interests, as well as a charitable organization established by relatives of the
foregoing (collectively, the "Richardson Stockholders"). The Stockholders
Agreement addresses certain matters relating to the control of Chartwell after
the December 1995 merger with Piedmont (the "Merger").
The Stockholders Agreement contains certain "standstill" provisions
intended to restrict the ability of any party to increase significantly its
present share of control over Chartwell. Pursuant to the standstill provisions,
the Chartwell Stockholders and the Richardson Stockholders are each prohibited
from engaging in certain actions, including the following: (i) during the six
month period commencing upon the effective time of the Merger, purchasing
additional shares of the Common Stock or other voting securities of Chartwell,
except that such stockholders may purchase additional shares of the Common Stock
up to /ertain individual and aggregate thresholds prescribed by the Stockholders
Agreement; and (ii) for three years following the effective time of the Merger,
depositing any shares of the Common Stock or other voting securities of
Chartwell into a voting trust or subjecting any such securities to any
arrangement or agreement (other than the Stockholders Agreement) with respect to
the voting of such securities, subject to specified exceptions.
The Stockholders Agreement contains provisions giving the Richardson
Stockholders certain rights with respect to representation on the Chartwell
Board of Directors. Upon consummation of the Merger, the Richardson Stockholders
were entitled to designate four persons to be nominated for election to the
Chartwell Board of Directors.
Pursuant to the provisions of the Stockholders Agreement, the number of
persons that the Richardson Stockholders may designate will be permanently
reduced if the Richardson Stockholders hold less than 16% of the outstanding
Common Stock, such that (i) if the Richardson Stockholders hold less than 16%
but equal to or greater than 12% of the Common Stock, they will be entitled to
three designees; (ii) if the Richardson Stockholders hold less than 12% but
equal to or greater than 8% of the Common Stock, they will be entitled to two
designees; (iii) if the Richardson Stockholders hold less than 8% but equal to
or greater than 5% of the Common Stock, they will be entitled to one designee;
or (iv) if the Richardson Stockholders hold less than 5% of the Common Stock,
they will have no further designation rights. Initially, Stuart Smith Richardson
will exercise the designation rights of the Richardson Stockholders.
Upon completion of the Company's public offering of its Common Stock on
March 8, 1996 (the "Offering"), the Richardson Stockholders held less than 16%
but more than 12% of the Company's outstanding Common Stock. As a result, the
Richardson Stockholders are currently entitled to designate three persons to be
nominated for election to the Board of Directors. Directors L. Richardson, Jr.,
S. Richardson and DeMichele are the current designees as the Richardson
Stockholders. Mr. L. Richardson, Jr. is standing for reelection at this year's
Annual Meeting.
The designees of the Richardson Stockholders will be recommended by the
nominating committee of Chartwell's Board of Directors to the full Board of
Directors for inclusion in Chartwell's slate of nominees for election. Each
party to the Stockholders Agreement agrees to vote its shares in favor of the
slate proposed by Chartwell, subject to the right of the Chartwell Stockholders
to be released from this voting obligation upon their ownership interests in
Chartwell declining below certain specified thresholds. As a result of the
Offering, the ownership interest of each of VRS, IVCF II, MMIC and FIMA has
fallen below such specified level, and therefore, each entity has been released
from its voting obligation. In the event that any designee of the Richardson
Stockholders ceases to serve as a director, the Richardson Stockholders will
have the right to designate another person for election to the Chartwell Board
of Directors.
If at any time (i) a designee of the Richardson Stockholders is sitting
on the Chartwell Board of Directors and (ii) the board of directors of any
principal U.S. subsidiary of Chartwell has any member who is not an officer or
employee of Chartwell or any of its subsidiaries, Chartwell will cause one
designee of the Richardson Stockholders that is sitting on the Chartwell Board
of Directors to be elected to the board of directors of such subsidiary.
With certain limited exceptions, any party or parties to the
Stockholders Agreement proposing to sell a number of shares of the Common Stock
representing 30% or more of the then outstanding Common Stock in one or a series
of related transactions must provide written notice to the other parties of the
proposed action at least fifteen days before the proposed date of sale. Within
ten days of the receipt of such notice any other party may inform the party
proposing to sell the shares that such other party desires to sell shares to the
prospective buyer on the same terms and conditions set forth in the notice and,
upon giving notice, such other party will be entitled to participate on a
pro-rata basis in the sale of the shares.
Amendments to and modifications of the Stockholders Agreement may only
be made by written consent of Chartwell and other parties to the Stockholders
Agreement holding not less than 66 2/3% of the Common Stock then subject to the
Stockholders Agreement, except that any amendment, modification or other change
to the Stockholders Agreement that affects the nomination or agreement to vote
for the directors designated by the Richardson Stockholders requires the consent
of 66 2/3% of the outstanding shares of the Common Stock held by the Richardson
Stockholders.
The Stockholders Agreement became effective as of the effective time of
the Merger and will continue in effect (subject to the earlier termination of
certain provisions as described above) until (i) the written consent of all
parties to the agreement is obtained, (ii) Chartwell is dissolved or liquidated,
(iii) the date which is the later of (A) the date on which settlement of the
Company's CI Notes due 2004 occurs and (B) the first date on which the total
number of shares of the Common Stock held by the Richardson Stockholders
represents less than ten percent of the then issued and outstanding the Common
Stock, or (iv) eleven years from the date of the Stockholders Agreement.
Registration Rights Agreement
- -----------------------------
In connection with the Merger, Chartwell entered into the Registration
Rights Agreement with the Chartwell Stockholders, the Richardson Stockholders
and a majority of Chartwell's other stockholders prior to the Merger. Pursuant
to the Registration Rights Agreement, at any time after the effective time of
the Merger, upon the request of stockholders holding at least 400,000 shares of
the Common Stock or any security convertible into 400,000 shares of the Common
Stock, Chartwell must, subject to certain limited exceptions, use its best
efforts to register such shares under the Securities Act of 1933, as amended.
Chartwell is not obligated to effect more than one registration in any
nine-month period or more than four during the term of the Registration Rights
Agreement. The Richardson Stockholders have the right to initiate two of the
four registrations effected pursuant to the Registration Rights Agreement.
Chartwell will pay all registration expenses in connection with the four
registrations except underwriting discounts and commissions and transfer taxes.
If the registration is in the form of an underwritten offering, the stockholders
holding a majority of the shares of the Common Stock being registered pursuant
to the registration may select the underwriters, subject to Chartwell's
approval.
Parties to the Registration Rights Agreement have "piggyback" rights to
register shares of the Common Stock in connection with registration of equity
securities by Chartwell. These rights are subject to limitation if the
registration involves an underwritten offering and the managing underwriter
determines that, in its good faith view, the inclusion of all or any portion of
such additional securities in the registration would have a material adverse
effect on the offering.
Indemnification; Insurance
- --------------------------
Chartwell has generally agreed to indemnify the former officers and
directors of Piedmont in respect of acts or omissions occurring prior to the
effective time of the Merger (including, but not limited to, the transactions
contemplated by the Merger Agreement pursuant to which the Merger was effected)
to the extent provided under Piedmont's certificate of incorporation and by-laws
as in effect on the date of the Merger Agreement, in each case subject to any
limitation imposed by applicable law. In addition, Chartwell has agreed to
maintain Piedmont's existing directors' and officers' liability insurance for
six years from the effective time of the Merger, subject to certain limitations.
Certain Other Relationships
- ---------------------------
Relationship with Old American Insurance Company. Chartwell Reinsurance
Company, an indirect, wholly-owned subsidiary of the Company, provides
reinsurance on certain reinsurance programs to Old American Insurance Company, a
Texas County Mutual Company ("Old American"). Chartwell participates with other
broker market reinsurers on those programs which meet its underwriting
requirements. Old American accounted for 0.7%, 0.9%, and 4.1% of Chartwell's
gross premiums written for the years ended December 31, 1996, 1995 and 1994,
respectively. Chartwell and Old American have no ownership in each other;
however, Wand is the general partner both of Wand (Chartwell) and of the
Delaware general partnership that controls Old American.
Relationships with New London Capital plc. In 1993, pursuant to an
Advisory Agreement between Chartwell Advisers Limited, an indirect, wholly-owned
subsidiary of the Company, and NLC (the "NLC Advisory Agreement"), Chartwell
Advisers became the exclusive Lloyd's adviser to NLC, an investment company
formed to underwrite at Lloyd's of London through a group of wholly-owned
subsidiaries that are limited liability corporate members of certain selected
Lloyd's syndicates. Messrs. Schnitzer and Cole are directors of NLC, Chartwell
and Chartwell Reinsurance. The NLC Advisory Agreement, which has a term of five
years commencing on November 15, 1993, provides that Chartwell Advisers will (i)
review and evaluate Lloyd's syndicates to identify those which satisfy NLC's
underwriting criteria, (ii) recommend those syndicates to which the NLC
corporate members should provide underwriting capacity and (iii) monitor the
selected syndicates throughout the underwriting year. Chartwell Advisers'
remuneration for its services will consist of (i) an annual service fee based on
the Available Capacity of NLC (as defined in the NLC Advisory Agreement) and
(ii) a profit commission based on the underwriting success of the syndicates in
which the NLC corporate members participate. Chartwell will provide a limited
indemnity to NLC only in cases involving negligence, breach of trust or willful
misconduct on the part of Chartwell Advisers in the performance of its duties
under the NLC Advisory Agreement.
In 1994, Chartwell and NLC entered into a Participation Agreement
whereby Chartwell participates in the 1995 Year of Account underwriting results
of NLC's syndicates, which are selected by Chartwell Advisers, by posting a
letter of credit in the sum of ,6.5 million and guaranteeing a loan to NLC in
the sum of ,1.5 million. Under Lloyd's rules, this allowed NLC to increase its
premium capacity by ,16 million. The results relating to this increased capacity
inure to Chartwell. The maximum liability for this investment would be ,8
million, the sum of the letter of credit and the loan guarantee. This
arrangement was extended by Chartwell and NLC in 1995 and 1996 in order to cover
the 1996 and 1997 Years of Account, respectively.
Relocation Loan. In August 1990, Mr. Cole received a compensation related
loan from Chartwell in the amount of $134,000 to assist with his relocation to
Connecticut. The loan is non-interest bearing and interest is imputed and
included as compensation to Mr. Cole. The outstanding balance at December 31,
1995 was $22,333. Such balance was forgiven in 1996.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
In order for a proposal by a stockholder of the Company to be eligible
to be included in the Company's Proxy Statement and form of proxy card for the
1998 Annual Meeting of Stockholders, the proposal must be received in proper
form by the Secretary of the Company at the Company's principal executive
offices no later than December 15, 1997.
MISCELLANEOUS INFORMATION
The Company will bear the cost of preparing, assembling and mailing the
enclosed form of proxy, this Proxy Statement and other material which may be
sent to stockholders in connection with this solicitation. In addition to
solicitation of proxies by mail, proxies may be solicited by personal,
telephonic and telegraphic communications by the Company's directors, officers
and other employees. Such persons will receive no additional compensation for
such services. The Company will also request brokers and other nominees to
forward soliciting material to the beneficial owners of shares which are held of
record by them and may reimburse such persons for expenses incurred in
connection with the forwarding of such material.
Copies of the 1996 Annual Report to Stockholders are being mailed to
the stockholders simultaneously with this Proxy Statement. The financial
statements and financial information appearing in such Annual Report are
incorporated herein by reference.
PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY.
By order of the Board of Directors,
Kathleen M. Carroll
Secretary
Dated: April 14, 1997
================================================================================
10-K REPORT
================================================================================
The Company's Annual Report on Form 10-K is included in the 1996 Annual Report
to Stockholders which was mailed simultaneously herewith. Upon written request,
the Company will provide, without charge, additional copies of its Annual Report
on Form 10-K, including the financial statements and the financial statement
schedules thereto, but without Exhibits, as filed with the Securities and
Exchange Commission, for the fiscal year ended December 31, 1996. Copies of the
Exhibits will be furnished at the Company's cost for the reproduction, postage
and handling thereof. Letters requesting the 10-K Report should be addressed to
the Corporate Secretary, Chartwell Re Corporation, Four Stamford Plaza, 107 Elm
Street, Stamford, CT 06912-0043.
================================================================================
APPENDIX A
CHARTWELL RE CORPORATION
Four Stamford Plaza-107 Elm Street
Stamford, CT 06912-0043
PROXY FOR THE MAY 22, 1997 ANNUAL MEETING OF STOCKHOLDERS
Richard E. Cole or Steven J. Bensinger, or either of them, with power of
substitution, are hereby authorized as proxies to represent, and to vote the
shares of the undersigned at the Annual Meeting of Stockholders of Chartwell Re
Corporation to be held at 9:00 a.m. Eastern Standard Time, Thursday, May 22,
1997 at the Stamford Marriott Hotel, 2 Stamford Forum, Stamford, Connecticut
06901, and at any adjournment thereof. The proxies are to vote the shares of the
undersigned as instructed below and on the reverse side and in accordance with
their judgement on all other matters which may properly come before the Annual
Meeting.
The Board of Directors Recommends a Vote FOR 1, 2, and 3
1. Election of Directors
__ For all nominees __ Withhold Authority to
(except as indicated to the contrary below) vote for all nominees
Nominees: Steven J. Bensinger, Lunsford Richardson, Jr., John Sagan,
Bruce W. Schnitzer and Stephen Wenman
Instruction: To withhold authority to vote for any individual nominee please
print that nominee's name below.
- --------------------------------------------------------------------------------
(continued and to be signed on reverse side)
(continued from reverse side)
2. Proposal to adopt the 1997 Omnibus Stock Incentive Plan.
__ For __ Against __ Abstain
3. Proposal to amend the 1995 Employee Stock Purchase Plan in order two amend
the service requirement for participation from one year to three months.
__ For __ Against __ Abstain
IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS AND PROPSOALS 2 AND 3.
Please Sign this Proxy Form which is Solicited on Behalf of the Board of
Directors, and Return it Promptly in the Enclosed Postage Prepaid Envelope.
Dated: _______________ , 1997
___________________________________
___________________________________
Please sign exactly as name appears hereon.
Exhibit A
Chartwell Re Corporation
1997 OMNIBUS STOCK INCENTIVE PLAN
1. Establishment and Purpose.
There is hereby adopted the Chartwell Re Corporation 1997 Omnibus Stock
Incentive Plan (the "Plan"). The Plan shall be the successor to the Amended and
Restated Chartwell Re 1993 Stock Option Plan (the "Predecessor Plan"). Upon
adoption of the Plan by the Board of Direc tors and approval of the Plan by
stockholders of Chartwell Re Corporation (the "Company"), no further awards
shall be made under the Predecessor Plan. If the Plan is not approved by the
stockholders of The Company, the Predeces sor Plan shall remain in full force
and effect. The Plan is intended to promote the interests of the Company and the
stockholders of The Company by providing officers and other employees of the
Company (including directors who are also employees of the Company) with
appropriate incentives and rewards to encourage them to enter into and continue
in the employ of the Company and to acquire a proprietary interest in the
long-term success of the Company, thereby aligning their interest more closely
to the interest of stockholders.
2. Definitions.
As used in the Plan, the following definitions apply to the terms
indicated below:
(a) "Award Agreement" shall mean the written agree ment between
the Company and a Participant evi dencing an Incentive Award.
(b) "Board of Directors" shall mean the Board of
Directors of the Company.
(c) "Cause," when used in connection with the
termination of a Participant's employment by the
Company, shall mean (i) the willful and
continued failure by the Participant
substantially to perform his duties and
obligations to the Company (other than any such
failure resulting from his incapacity due to
physical or mental illness) or (ii) the willful
engaging by the Participant in misconduct which
is materially injurious to the Company. For
1
purposes of this Section 2(c), no act, or failure to act, on a
Participant's part shall be considered "willful" unless done,
or omitted to be done, by the Participant in bad faith and
without reasonable belief that his action or omission was in
the best interest of the Company. The Committee shall
determine whether a termination of employment is for Cause.
(d) "Change in Control" shall mean any of the fol
lowing occurrences:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company, any trustee
or other fiduciary holding securities under an employee
benefit plan of the Company or any corporation owned, directly
or indirectly, by the stock holders of the Company in
substantially the same proportions as their ownership of stock
of the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of The Company representing 50% or
more of the com bined voting power of The Company's then out
standing securities;
(ii) during any period of not more than two consecutive years
(not including any period prior to the adoption of the Plan),
individuals who at the beginning of such period constitute the
Board of Directors and any new director (other than a director
designated by a person who has entered into an agreement with
the Company to effect a transaction described in clause (i),
(iii) or (iv) of this Section) whose election by the Board of
Directors or nomination for election was approved by a vote of
at least two-thirds (2/3) of the directors then still in
office who either were directors at the begin ning of the
period or whose election or nomina tion for election was
previously so approved, cease for any reason to constitute at
least a majority thereof;
(iii) the stockholders of the Company approve a
merger or consolidation of the Company with any
2
other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Company
outstanding immedi ately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviv ing entity) more than 50% of
the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after
such merger or consolidation or (B) a merger or consolidation
effected to implement a recapitalization of The Company (or
similar transaction) in which no "person" (as herein above
defined) acquires more than 50% of the combined voting power
of the Company's then out standing securities; or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all
of the Company's assets.
(e) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(f) "Committee" shall mean the Compensation Commit
tee of the Board of Directors. The Committee
shall consist of two or more persons each of
whom is an "outside director" within the meaning
of Section 162(m) of the Code and a "Non-
Employee Director" within the meaning of Rule
16b-3 under the Exchange Act (or who satisfies
any other criteria for administering employee
benefit plans as may be specified by the
Securities and Exchange Commission in order for
transactions under such plan to be exempt from
the provisions of Section 16(b) of the Exchange
Act).
(g) "Company" shall mean, Chartwell Re Corporation,
a Delaware corporation.
(h) "Commmon Stock" shall mean the common stock of
the Company, par value $0.01 per share.
3
(i) "Disability" shall mean: (1) any physical or
mental condition that would qualify a Partici
pant for a disability benefit under the long-
term disability plan maintained by the Company
or a Subsidiary of the Company and applicable to
such Participant; or (2) when used in connection
with the exercise of an Incentive Stock Option
following termination of employment, disability
within the meaning of Section 22(e)(3) of the
Code.
(j) "Effective Date" shall mean the date upon which
this Plan is adopted by the Board of Directors.
(k) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(l) "Executive Officer" shall have the meaning set
forth in Rule 3b-7 promulgated under the Ex
change Act.
(m) "Exercise Date" shall mean the date on which a
Participant may exercise an Incentive Award.
(n) "Fair Market Value" of a share of Common Stock,
as of a date of determination, shall mean (i)
the closing sales price per share of Common
Stock on the national securities exchange on
which such stock is principally traded for the
last preceding date on which there was a sale of
such stock on such exchange, or (ii) if the
shares of Common Stock are not listed or admit
ted to trading on any such exchange, the closing
price as reported by the Nasdaq Stock Market for
the last preceding date on which there was a
sale of such stock on such exchange, or (iii) if
the shares of Common Stock are not then listed
on the Nasdaq Stock Market, the average of the
highest reported bid and lowest reported asked
prices for the shares of Common Stock as
reported by the National Association of
Securities Dealers, Inc. Automated Quotations
System for the last preceding date on which
there was a sale of such stock in such market,
or (iv) if the shares of Common Stock are not
then listed on a national securities exchange or
4
traded in an over-the-counter market, such value
as determined by the Committee in good faith.
(o) "Incentive Award" shall mean an Option, Tandem SAR,
Stand-Alone SAR, Restricted Stock grant, Phantom Stock grant
or Stock Bonus granted pur suant to the terms of the Plan.
(p) "Incentive Stock Option" shall mean an Option that is an
"incentive stock option" within the meaning of Section 422 of
the Code.
(q) "Issue Date" shall mean the date established by the Company on
which certificates representing shares of Restricted Stock
shall be issued by the Company pursuant to the terms of
Section 10(e)of the Plan.
(r) "Non-Qualified Stock Option" shall mean an
Option that is not an Incentive Stock Option.
(s) "Option" shall mean an option to purchase shares of Common
Stock granted pursuant to Section 7 of the Plan.
(t) "Participant" shall mean an employee of the Company or a
subsidiary of the Company to whom an Incentive Award is
granted pursuant to the Plan, and, upon his death, his
successors, heirs, executors and administrators, as the case
may be.
(u) "Phantom Stock" shall mean the right, granted pursuant to
Section 11 of the Plan, to receive in cash the Fair Market
Value of a share of Common Stock.
(v) "Plan" shall mean this 1997 Omnibus Stock Incentive Plan, as
amended from time to time.
(x) "Reference Value" shall mean, with respect to Stand-Alone
SARs, the greater of the Fair Market Value or the value given
by the Compensation Committee.
(y) "Restricted Stock" shall mean a share of Common
Stock which is granted pursuant to the terms of
5
Section 10 hereof and which is subject to the restrictions set
forth in Section 10 of the Plan.
(z) "Rule 16b-3" shall mean the Rule 16b-3 promul
gated under the Exchange Act.
(aa) "Section 162(m)" shall mean Section 162(m) of
the Code and the regulations promulgated there
under.
(ab) "Securities Act" shall mean the Securities Act
of 1933, as amended from time to time.
(ac) "Stand-Alone SAR" shall mean a stock apprecia tion right
granted pursuant to Section 9 of the Plan which is not related
to any Option.
(ad) "Stock Bonus" shall mean a bonus payable in shares of Common
Stock granted pursuant to Section 12 of the Plan.
(ae) "Subsidiary" shall mean a "subsidiary corpora
tion" within the meaning of Section 424(f) of
the Code.
(af) "Tandem SAR" shall mean a stock appreciation right granted
pursuant to Section 8 of the Plan which is related to an
Option.
(ag) "Vesting Date" shall mean the date established by the
Committee on which a share of Restricted Stock or Phantom
Stock may vest.
3. Stock subject to the Plan
(a) Shares Available for Awards
The maximum number of shares of Common Stock reserved for
issuance under the Plan shall be 607,000 shares (subject to
adjustment as pro vided herein), which shall include 107,000
shares authorized but unissued under the Predecessor Plan. The
total number of shares reserved for issuance hereunder may be
autho rized but unissued Common Stock or authorized and issued
Common Stock held in the Company's
6
treasury or acquired by the Company for the pur poses of the
Plan. The Committee may direct that any stock certificate
evidencing shares issued pursuant to the Plan shall bear a
legend setting forth such restrictions on transfer ability as
may apply to such shares pursuant to the Plan.
The grant of a Tandem SAR shall not reduce the number of
shares of Common Stock with respect to which Incentive Awards
may be granted pursuant to the Plan. Upon the exercise of any
Tandem SAR, the related Option shall be canceled to the extent
of the number of shares of Common Stock as to which the Tandem
SAR is exercised and, notwithstanding the foregoing, such
number of shares shall no longer be available for Incentive
Awards under the Plan.
(b) Individual Limitation
The total number of shares of Common Stock subject to
Incentive Awards (including Incentive Awards payable in cash
but denominated as shares of Common Stock, i.e., Stand-Alone
SARs and Phantom Stock), awarded to any employee during any
tax year of the Company, shall not exceed 300,000 shares.
Determinations under the pre ceding sentence shall be made in
a manner that is consistent with Section 162(m) of the Code.
(c) Adjustment for Change in Capitalization.
In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash,
Common Stock, or other property), recapitalization, stock
split, re verse stock split, reorganization, merger,
consolidation, spin-off, combination, repur chase, or share
exchange, or other similar corporate transaction or event,
affects the Common Stock such that an adjustment is appro
priate in order to prevent dilution or enlarge ment of the
rights of Participants under the Plan, then the Committee
shall make such equi table changes or adjustments as it deems
neces sary or appropriate to any or all of (i) the
7
number and kind of shares of stock which may thereafter be
issued in connection with Incentive Awards, (ii) the number
and kind of shares of stock issued or issuable in respect of
outstanding Incentive Awards, and (iii) the exercise price,
grant price, or purchase price relating to any Incentive
Award; provided that, with respect to Incentive Stock Options,
such adjustment shall be made in accordance with Section 424
of the Code.
(d) Re-use of Shares.
The following shares of Common Stock shall again become
available for Incentive Awards: any shares subject to an
Incentive Award that remain unissued upon the cancellation,
surrender, exchange or termination of such award for any
reason whatsoever; any shares of Restricted Stock forfeited;
and any shares in respect of which a stock appreciation right
is settled for cash.
4. Administration of the Plan.
The Plan shall be administered by the Committee. The Committee shall
have the authority in its sole discretion, subject to and not inconsistent with
the express provisions of the Plan, to administer the Plan and to exercise all
the powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administra tion of the Plan, including, without
limitation, the authority to grant Incentive Awards; to determine the per sons
to whom and the time or times at which Incentive Awards shall be granted; to
determine the type and number of Incentive Awards to be granted, the number of
shares of Stock to which an Award may relate and the terms, condi tions,
restrictions and performance criteria relating to any Incentive Award; to
determine whether, to what extent, and under what circumstances an Incentive
Award may be set tled, canceled, forfeited, exchanged, or surrendered (provided
that in no event shall the foregoing be construed to permit the repricing of an
Option (whether by amendment, cancellation and regrant or otherwise) to a lower
exercise price); to make adjustments in the performance goals in recognition of
unusual or non-recurring events affecting the Company or the financial
statements of the Company (to
8
the extent in accordance with Section 162(m)of the Code, if applicable), or in
response to changes in applicable laws, regulations, or accounting principles;
to construe and interpret the Plan and any Incentive Award; to prescribe, amend
and rescind rules and regulations relating to the Plan; to determine the terms
and provisions of Award Agree ments; and to make all other determinations deemed
neces sary or advisable for the administration of the Plan.
The Committee may, in its absolute discretion, without amendment to the
Plan, (i) accelerate the date on which any Tandem SAR or Stand-Alone SAR or
Incentive Award relating to Phantom Stock granted under the Plan becomes
exercisable, waive or amend the operation of Plan provisions respecting exercise
after termination of employment or otherwise adjust any of the terms of such
Option or Stand-Alone SAR, and (ii) accelerate the Exercise Date or Issue Date,
or waive any condition imposed hereunder, with respect to any share of
Restricted Stock or Phantom Stock or otherwise adjust any of the terms
applicable to such share.
No member of the Committee shall be liable for any action, omission or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Committee) arising out of any action, omission or
determination relating to the Plan, if, in either case, such action, omission or
determination was taken or made by such member, director or employee in good
faith and in a manner such member, director or employee reasonably believed to
be in or not opposed to the best interests of the Company.
5. Eligibility.
The persons who shall be eligible to receive Incentive Awards pursuant
to the Plan shall be such employees of the Company or its Subsidiaries(including
officers of the Company or its Subsidiaries, whether or not they are directors
of the Company or its Subsidiaries) as the Committee shall select from time to
time. Directors who
9
are not employees or officers of the Company shall not be eligible to receive
Incentive Awards under the Plan.
6. Awards Under the Plan; Award Agreement.
The Committee may grant Options, Tandem SARs, Stand-Alone SARs, shares
of Restricted Stock, shares of Phantom Stock and Stock Bonuses, in such amounts
and with such terms and conditions as the Committee shall determine, subject to
the provisions of the Plan.
Each Incentive Award granted under the Plan (except an unconditional
Stock Bonus) shall be evidenced by an Award Agreement which shall contain such
provisions as the Committee may in its sole discretion deem necessary or
desirable. By accepting an Incentive Award, a Participant thereby agrees that
the award shall be subject to all of the terms and provisions of the Plan and
the applicable Award Agreement.
7. Options.
(a) Identification of Options.
Each Option shall be clearly identified in the applicable
Award Agreement as either an Incen tive Stock Option or a
Non-Qualified Stock Op tion.
(b) Exercise Price.
Each Award Agreement with respect to an Option shall set forth
the amount (the "option exercise price") payable by the
grantee to the Company upon exercise of the Option. The option
exer cise price per share shall be determined by the Committee
but shall in no event be less than the Fair Market Value of a
share of Common Stock on the date the Option is granted.
(c) Term and Exercise of Options.
(1) Unless the applicable Award Agreement pro
vides otherwise, an Option shall become
cumulatively exercisable as to 25 percent
10
of the shares covered thereby on each of the first,
second, third and fourth anni versaries of the date
of grant. The Com mittee shall determine the
expiration date of each Option; provided, however,
that no Incentive Stock Option shall be exercisable
more than 10 years after the date of grant. Unless
the applicable Award Agreement pro vides otherwise,
no Option shall be exer cisable prior to the first
anniversary of the date of grant.
(2) An Option may be exercised for all or any portion of
the shares as to which it is exercisable, provided,
that no partial exercise of an Option shall be for an
aggregate exercise price of less than $1,000. The
partial exercise of an Option shall not cause the
expiration, termination or cancellation of the
remaining portion thereof.
(3) An Option shall be exercised by delivering notice to
the Company's principal office, to the attention of
its Secretary, no less than one business day in
advance of the effective date of the proposed
exercise. Such notice shall specify the number of
shares of Common Stock with respect to which the
Option is being exercised and the effective date of
the proposed exercise and shall be signed by the
Participant or other person then having the right to
exercise the Option. Such notice may be withdrawn at
any time prior to the close of business on the
business day immediately preceding the effective date
of the proposed exercise. Payment for shares of
Common Stock purchased upon the exercise of an Option
shall be made on the effective date of such exercise
by one or a combination of the following means: (i)
in cash, by cer tified check, bank cashier's check or
wire transfer; (ii) by delivering a properly executed
exercise notice to the Company together with a copy
of irrevocable instructions to a broker to deliver
11
promptly to the Company the amount of sale or loan
proceeds to pay the full amount of the Purchase
Price, (iii) by delivering shares of Common Stock
owned by the Participant with appropriate stock
powers, (iv) by electing to have the Company retain
shares of Common Stock which would otherwise be
issued on the exercise of the Option, or (v) any
combination of the foregoing forms. In determining
the number of shares of Common Stock necessary to be
delivered to or retained by the Company, such shares
shall be valued at their Fair Market Value as of the
exercise date.
(4) Certificates for shares of Common Stock purchased
upon the exercise of an Option shall be issued in the
name of the Partic ipant or other person entitled to
receive such shares, and delivered to the Partici
pant or such other person as soon as prac ticable
following the effective date on which the Option is
exercised.
(d) Limitations on Incentive Stock Options.
(1) To the extent that the aggregate Fair Market Value of
shares of Common Stock with respect to which
Incentive Stock Options are exercisable for the first
time by a Participant during any calendar year under
the Plan and any other stock option plan of the
Company (or any Subsidiary of the Company) shall
exceed $100,000, or such higher value as may be
permitted under Section 422 of the Code, such Options
shall be treated as Non-Qualified Stock Options. Such
Fair Market Value shall be determined as of the date
on which each such Incentive Stock Option is granted.
(2) No Incentive Stock Option may be granted to an
individual if, at the time of the grant, such
individual owns stock possessing more than ten
percent of the total combined voting power of all
classes of stock of the Company unless (i) the
exercise price per
12
share of such Incentive Stock Option is at least 110
percent of the Fair Market Value of a share of Common
Stock at the time such Incentive Stock Option is
granted and (ii) such Incentive Stock Option is not
exer cisable after the expiration of five years from
the date such Incentive Stock Option is granted.
(e) Effect of Termination of Employment.
(1) Unless the applicable Award Agreement pro vides
otherwise, in the event that the employment of a
Participant with the Com pany or a Subsidiary of the
Company shall terminate for any reason other than
death, Disability or Cause, (i) Options granted to
such Participant, to the extent that they are
exercisable at the time of such termination, shall
remain exercisable until the date that is ninety
(90)days after such termination, on which date they
shall expire, and (ii) Options granted to such
Participant, to the extent that they were not
exercisable at the time of such termi nation, shall
expire at the close of busi ness on the date of such
termination. Notwithstanding the foregoing, no Option
shall be exercisable after the expiration of its
term.
(2) Unless the applicable Award Agreement pro vides
otherwise, in the event that the employment of a
Participant with the Company or a Subsidiary of the
Company shall terminate on account of the Disability
or death of the Participant (i) Options granted to
such Participant, to the extent that they were
exercisable at the time of such termination, shall
remain exercisable until the first anniversary of
such termination, on which date they shall expire,
and (ii) Options granted to such Participant, to the
extent that they were not exercisable at the time of
such termination, shall expire at the close of
business on the date of such termination.
Notwithstanding the foregoing,
13
no Option shall be exercisable after the
expiration of its term.
(3) If a Participant's employment with the Company or a
Subsidiary of the Company is terminated for Cause,
all outstanding op tions granted to such Participant
shall expire at the commencement of business on the
date of such termination.
(f) Acceleration of Exercise Date Upon Change in
Control.
Upon the occurrence of a Change in Control, each Option
granted under the Plan and outstanding at such time shall
become fully and immediately exercisable and shall remain
exercisable until its expiration, pursuant to the terms of the
Plan notwithstanding the provisions of Section 7(e)(1) and (2)
of the Plan.
8. Tandem SARs.
The Committee may grant in connection with any Option granted hereunder
one or more Tandem SARs relating to a number of shares of Common Stock less than
or equal to the number of shares of Common Stock subject to the related Option.
A Tandem SAR may be granted at the same time as, or, in the case of a
Non-Qualified Stock Option, subsequent to the time that, its related Option is
granted.
(a) Benefit Upon Exercise.
The exercise of a Tandem SAR with respect to any number of
shares of Common Stock shall entitle the Participant to a cash
payment, for each such share, equal to the excess of (i) the
Fair Market Value of a share of Common Stock on the exercise
date over (ii) the option exercise price per share of the
related Option. Such payment shall be made as soon as
practicable after the effec tive date of such exercise.
(b) Term and Exercise of Tandem SAR.
14
(1) A Tandem SAR shall be exercisable only if
and to the extent that its related Option is
exercisable.
(2) The exercise of a Tandem SAR with respect to a number
of shares of Common Stock shall cause the immediate
and automatic cancella tion of its related Option
with respect to an equal number of shares. The
exercise of an Option, or the cancellation,
termination or expiration of an Option (other than
pursuant to this Section 8(b)(2)), with respect to a
number of shares of Common Stock shall cause the
automatic and immedi ate cancellation of any related
Tandem SARs to the extent that the number of shares
of Common Stock remaining subject to such Option is
less than the number of shares then subject to such
Tandem SAR.
Such Tandem SARs shall be canceled in the order in
which they become exercisable.
(3) A Tandem SAR may be exercised for all or any portion
of the shares as to which the re lated Option is
exercisable; provided, that no partial exercise of a
Tandem SAR shall be for less than a number of shares
having an aggregate option exercise price of less
than $1,000. The partial exercise of a Tandem SAR
shall not cause the expiration, termi nation or
cancellation of the remaining portion thereof.
(4) No Tandem SAR shall be assignable or trans ferable
otherwise than together with its related Option, and
any such transfer or assignment will be subject to
the provisions of Section 20 of the Plan.
(5) A Tandem SAR shall be exercised by deliv ering notice
to the Company's principal office, to the attention
of its Secretary, no less than one business day in
advance of the effective date of the proposed
exercise. Such notice shall specify the number of
shares of Common Stock with respect to which
15
the Tandem SAR is being exercised and the effective
date of the proposed exercise and shall be signed by
the Participant or other person then having the right
to exercise the Option to which the Tandem SAR is
related. Such notice may be withdrawn at any time
prior to the close of business on the busi ness day
immediately preceding the effective date of the
proposed exercise.
9. Stand-Alone SARs.
(a) Benefit Upon Exercise.
The exercise of a Stand-Alone SAR with respect to any number
of shares of Common Stock shall entitle the Participant to a
cash payment, for each such share, equal to the excess of (i)
the Fair Market Value of a share of Common Stock on the
exercise date over (ii) the Reference Value of the Stand-Alone
SAR. Such payments shall be made as soon as practicable after
the effective date of such exercise.
(b) Term and Exercise of Stand-Alone SARs.
(1) Unless the applicable Award Agreement pro vides
otherwise, a Stand-Alone SAR shall become
cumulatively exercisable as to 25 percent of the
shares covered thereby on each of the first, second,
third and fourth anniversaries of the date of grant.
The Committee shall determine the expiration date of
each Stand-Alone SAR. Unless the applicable Award
Agreement provides other wise, no Stand-Alone SAR
shall be exercis able prior to the first anniversary
of the date of grant.
(2) A Stand-Alone SAR may be exercised for all or any
portion of the shares as to which it is exercisable;
provided, that no partial exercise of a Stand-Alone
SAR shall be for an aggregate Reference Value of less
than $1,000. The partial exercise of a Stand-Alone
SAR shall not cause the expiration,
16
termination or cancellation of the remaining
portion thereof.
(3) A Stand-Alone SAR shall be exercised by delivering
notice to the Company's principal office, to the
attention of its Secretary, no less than one business
day in advance of the effective date of the proposed
exercise. Such notice shall specify the number of
shares of Common Stock with respect to which the
Stand-Alone SAR is being exercised, and the effective
date of the proposed exercise, and shall be signed by
the Participant. The Participant may withdraw such
notice at anytime prior to the close of business on
the business day immediately preceding the effective
date of the proposed exercise.
(c) Effect of Termination of Employment.
The provisions set forth in Section 7(e) with respect to the
exercise of Options following termination of employment shall
apply as well to the exercise of Stand-Alone SARs.
(d) Acceleration of Exercise Date Upon Change in
Control.
Upon the occurrence of a Change in Control, any Stand-Alone
SAR granted under the Plan and outstanding at such time shall
become fully and immediately exercisable and shall remain exer
cisable until its expiration pursuant to the terms of the Plan
notwithstanding the provisions of Section 7(e) of the Plan
which are incorpo rated into this Section 9.
10. Restricted Stock.
(a) Issue Date and Vesting Date.
At the time of the grant of shares of Restricted Stock, the
Committee shall establish an Issue Date or Issue Dates and a
Vesting Date or Vesting Dates with respect to such shares. The
Committee may divide such shares into classes and assign a
different Issue Date and/or Vesting Date for each
17
class. If the grantee is employed by the Company or a
Subsidiary of the Company on an Issue Date (which may be the
date of grant), the specified number of shares of Restricted
Stock shall be issued in accordance with the provisions of
Section 10(e) of the Plan. Provided that all conditions to the
vesting of a share of Re stricted Stock imposed pursuant to
Section 10(b) of the plan are satisfied, and except as
provided in Section 10(g) of the Plan, upon the occurrence of
the Vesting Date with respect to a share of Restricted Stock,
such share shall vest and the restrictions of Section 10(c)of
the Plan shall lapse.
(b) Conditions to Vesting.
At the time of the grant of shares of Restricted Stock, the
Committee may impose such restrictions or conditions to the
vesting of such shares as it, in its absolute discretion,
deems appropri ate.
(c) Restrictions on Transfer Prior to Vesting.
Prior to the vesting of a share of Restricted Stock, no
transfer of a Participant's rights with respect to such share,
whether voluntary or involuntary, by operation of law or
otherwise, shall be permitted. Immediately upon any attempt to
transfer such rights, such share, and all of the rights
related thereto, shall be forfeited by the Participant.
(d) Dividends on Restricted Stock.
The Committee in its discretion may require that any dividends
paid on shares of Restricted Stock shall be held in escrow
until all restrictions on such shares have lapsed.
(e) Issuance of Certificates.
(1) Reasonably promptly after the Issue Date with respect
to shares of Restricted Stock, the Company shall
cause to be issued a stock certificate, registered in
the name of the
18
Participant to whom such shares were granted,
evidencing such shares; provided, that the Company
shall not cause such a stock certificate to be issued
unless it has received a stock power duly endorsed in
blank with respect to such shares. Each such stock
certificate shall bear the fol lowing legend:
The transferability of this certifi cate and the
shares of stock repre sented hereby are subject to
the re strictions, terms and conditions (in cluding
forfeiture provisions and restrictions against
transfer) con tained in the 1997 Omnibus Stock In
centive Plan of Chartwell Re Corpora tion and an
Award Agreement entered into between the registered
owner of such shares and Chartwell Re Corpora tion. A
copy of such Plan and Award Agreement is on file in
the office of the Secretary of Chartwell Re Corpora
tion, 4 Stamford Plaza, Stamford, Connecticut 06912.
Such legend shall not be removed until such shares vest
pursuant to the terms of the applicable Award Agreement.
(2) Each certificate issued pursuant to this Section
10(e), together with the stock powers relating to the
shares of Restricted Stock evidenced by such
certificate, shall be held by the Company unless the
Committee determines otherwise.
(f) Consequences of Vesting.
Upon the vesting of a share of Restricted Stock pursuant to
the terms of the applicable Award Agreement, the restrictions
of Section 10(c) of the Plan shall lapse. Reasonably promptly
after a share of Restricted Stock vests, the Company shall
cause to be delivered to the Participant to whom such shares
were granted, a certificate
19
evidencing such share, free of the legend set
forth in Section 10(e) of the Plan.
(g) Effect of Termination of Employment.
(1) Subject to such other provision as the Committee may
set forth in the applicable Award Agreement, and to
the Committee's amendment authority pursuant to
Section 4 of the Plan, upon the termination of a
Partici pant's employment by the Company or any
Subsidiary of the Company for any reason other than
Cause, any and all shares to which restrictions on
transferability apply shall be immediately forfeited
by the Par ticipant and transferred to the Company,
provided that if the Committee, in its sole
discretion and within thirty (30) days after such
termination of employment notifies the Participant in
writing of its decision not to terminate the
Participant's rights in such shares, then the
Participant shall continue to be the owner of such
shares subject to such continuing restrictions as the
Committee may prescribe in such notice. If shares of
Restricted Stock are forfeited in accordance with the
provision of this Section 10, the Company shall also
have the right to require the return of all dividends
paid on such shares, whether by termination of any
escrow arrangement under which such dividends are
held or otherwise.
(2) In the event of the termination of a Par ticipant's
employment for Cause, all shares of Restricted Stock
granted to such Partici pant which have not vested as
of the date of such termination shall immediately be
re turned to the Company, together with any dividends
paid on such shares.
(h) Effect of Change in Control.
Upon the occurrence of a Change in Control, all outstanding
shares of Restricted Stock which have not theretofore vested
shall immediately vest and
20
all restrictions on such shares shall immediately
lapse.
(i) Special Provisions Regarding Restricted Stock
Awards.
Notwithstanding anything to the contrary con tained herein,
Restricted Stock granted pursuant to this Section 10 shall be
based on the attain ment by the Company (or a Subsidiary or
division of the Company if applicable) of performance goals
pre-established by the Committee, based on one or more of the
following criteria: (i) the attainment of a specified
percentage return on total stockholder equity of the Company;
(ii) the attainment of a specified percentage increase in
earnings per share of Common Stock; (iii) the attainment of a
specified percentage increase in net income of the Company;
and (iv) the attain ment of a specified percentage increase in
profit before taxation of the Company (or a Subsidiary or
division of the Company if applicable). Attainment of any such
performance criteria shall be determined in accordance with
generally ac cepted accounting principles as in effect from
time to time. Such shares of Restricted Stock shall be
released from restrictions only after the attainment of such
performance measures have been certified by the Committee.
11. Phantom Stock.
(a) Vesting Date.
At the time of the grant of shares of Phantom Stock, the
Committee shall establish a Vesting Date or Vesting Dates with
respect to such shares. The Committee may divide such shares
into classes and assign a different Vesting Date for each
class. Provided that all conditions to the vesting of a share
of Phantom Stock imposed pursuant to Section 11(c) of the Plan
are satis fied, and except as provided in Section 11(d) of the
Plan, upon the occurrence of the Vesting Date with respect to
a share of Phantom Stock, such share shall vest.
21
(b) Benefit Upon Vesting.
Upon the vesting of a share of Phantom Stock, the Participant
shall be entitled to receive in cash, within 30 days of the
date on which such share vests, an amount equal to the sum of
(i) the Fair Market Value of a share of Common Stock on the
date on which such share of Phantom Stock vests and (ii) the
aggregate amount of cash dividends paid with respect to a
share of Common Stock during the period commencing on the date
on which the share of Phantom Stock was granted and
terminating on the date on which such share vests.
(c) Conditions to Vesting.
At the time of the grant of shares of Phantom Stock, the
Committee may impose such restrictions or conditions to the
vesting of such shares as it, in its absolute discretion,
deems appropri ate.
(d) Effect of Termination of Employment.
(1) Subject to such other provisions as the Committee may
set forth in the applicable Award Agreement, and to
the Committee's amendment authority pursuant to
Section 4 of the Plan, shares of Phantom Stock that
have not vested, together with any dividends credited
on such shares, shall be forfeited upon the
Participant's termination of employment for any
reason other than Cause.
(2) In the event of the termination of a Par ticipant's
employment for Cause, all shares of Phantom Stock
granted to such Participant which have not vested as
of the date of such termination shall immediately be
forfeited, together with any dividends credited on
such shares.
22
(e) Effect of Change in Control.
Upon the occurrence of a Change in Control, all outstanding
shares of Phantom Stock which have not theretofore vested
shall immediately vest.
(f) Special Provisions Regarding Phantom Stock
Awards.
Notwithstanding anything to the contrary con tained herein,
Phantom Stock granted pursuant to this Section 11 to Executive
Officers shall be based on the attainment by the Company (or a
Subsidiary or division of the Company if appli cable) of
performance goals pre-established by the Committee, based on
one or more of the following criteria: (i) the attainment of a
specified percentage return on total stockholder equity of the
Company; (ii) the attainment of a specified percentage
increase in earnings per share of Common Stock from continuing
operations; (iii) the attainment of a specified percentage
increase in net income of the Company; and (iv) the attainment
of a specified percentage increase in profit before taxation
of the Company (or a Subsidiary or division of the Company if
applica ble). Attainment of any such performance crite ria
shall be determined in accordance with gen erally accepted
accounting principles as in effect from time to time. No cash
payment in respect of any Phantom Stock award will be paid to
an Executive Officer until the attainment of the respective
performance measures have been certified by the Committee.
12. Stock Bonuses.
In the event that the Committee grants a Stock Bonus, a certificate for
the shares of Common Stock comprising such Stock Bonus shall be issued in the
name of the Participant to whom such grant was made and delivered to such
Participant as soon as practicable after the date on which such Stock Bonus is
payable.
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13. Rights as a Stockholder.
No person shall have any rights as a stockholder with respect to any
shares of Common Stock covered by or relating to any Incentive Award until the
date of issuance of a stock certificate with respect to such shares. Except as
otherwise expressly provided in Section 3(c) of the Plan, no adjustment to any
Incentive Award shall be made for dividends or other rights for which the record
date occurs prior to the date such stock certificate is issued.
14. No Special Employment Rights; No Right to Incentive
Award.
Nothing contained in the Plan or any Award Agreement shall confer upon
any Participant any right with respect to the continuation of employment by the
Company or any Subsidiary of the Company or interfere in any way with the right
of the Company or any Subsidiary of the Company, subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the Par ticipant.
No person shall have any claim or right to receive an Incentive Award
hereunder. The Committee's granting of an Incentive Award to a Participant at
any time shall neither require the Committee to grant any other Incentive Award
to such Participant or other person at any time or preclude the Committee from
making subsequent grants to such Participant or any other person.
15. Securities Matters.
(a) The Company shall be under no obligation to ef
fect the registration pursuant to the Securities
Act of any interests in the Plan or any shares of
Common Stock to be issued hereunder or to effect
similar compliance under any state laws.
Notwithstanding anything herein to the contrary,
The Company shall not be obligated to cause to be
issued or delivered any certificates evidencing
shares of Common Stock pursuant to the Plan
unless and until the Company is advised by its
counsel that the issuance and delivery of such
certificates is in compliance with all applicable
laws, regulations of governmental authority and
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the requirements of any securities exchange on which shares of
Common Stock are traded. The Committee may require, as a
condition of the issuance and delivery of certificates
evidencing shares of Common Stock pursuant to the terms hereof
and of the applicable Award Agreement, that the recipient of
such shares make such covenants, agreements and
representations, and that such certificates bear such legends,
as the Committee, in its sole discretion, deems neces sary or
desirable.
(b) The transfer of any shares of Common Stock
hereunder shall be effective only at such time as
counsel to the Company shall have determined that
the issuance and delivery of such shares is in
compliance with all applicable laws, regulations
of governmental authority and the requirements of
any securities exchange on which shares of Common
Stock are traded. The Committee may, in its sole
discretion, defer the effectiveness of any
transfer of shares of Common Stock hereunder in
order to allow the issuance of such shares to be
made pursuant to registration or an exemption
from registration or other methods for compliance
available under federal or state securities laws.
The Committee shall inform the Participant in
writing of its decision to defer the effective
ness of a transfer. During the period of such
deferral in connection with the exercise of an
Option, the Participant may, by written notice,
withdraw such exercise and obtain the refund of
any amount paid with respect thereto.
16. Withholding Taxes.
Whenever cash is to be paid pursuant to an Incentive Award, the Company
shall have the right to deduct therefrom an amount sufficient to satisfy any
federal, state and local withholding tax requirements related thereto.
Whenever shares of Common Stock are to be delivered pursuant to an
Incentive Award, the Company shall have the right to require the Participant to
remit to the Company in cash an amount sufficient to satisfy any federal, state
and local withholding tax requirements related thereto. With the approval of the
Committee, a Participant may satisfy
25
the foregoing requirement by electing to have the Company withhold from delivery
shares of Common Stock having a fair market value equal to the amount of tax to
be withheld. Such shares shall be valued at their Fair Market Value on the date
on which the amount of tax to be withheld is determined (the "Tax Date").
Fractional share amounts shall be settled in cash. Such a withholding election
may be made with respect to all or any portion of the shares to be delivered
pursuant to an Incentive Award.
17. Notification of Election Under Section 83(b) of the
Code.
If any Participant shall, in connection with the acquisition of shares
of Common Stock under the Plan, make the election permitted under Section 83(b)
of the Code (i.e., an election to include in gross income in the year of
transfer the amounts specified in Section 83(b)), such Participant shall notify
the Company of such election within 10 days of filing notice of the election
with the Internal Revenue Service, in addition to any filing and a notification
required pursuant to regulation issued under the authority of Code Section
83(b).
18. Notification Upon Disqualifying Disposition Under
Section 421(b) of the Code.
Each Award Agreement with respect to an Incentive Stock Option shall
require the Participant to notify the Company of any disposition of shares of
Common Stock issued pursuant to the exercise of such Option under the circum
stances described in Section 421(b) of the Code (relating to certain
disqualifying dispositions), within 10 days of such disposition.
19. Amendment or Termination of the Plan.
The Board of Directors may, at any time, suspend or terminate the Plan
or revise or amend it in any respect whatsoever; provided, however, that
stockholder approval shall be required if and to the extent the Board of
Directors determines that such approval is appropriate for purposes of
satisfying Section 162(m) or 422 of the Code or to the extent such approval is
required by the rules of any stock exchange on which the Common Stock is listed.
Nothing herein shall restrict the Committee's ability to exercise its
discretionary authority pursuant to Section 4
26
of the Plan, which discretion may be exercised without amendment to the Plan. No
action hereunder may, without the consent of a Participant, reduce the
Participant's rights under any outstanding Incentive Award.
20. Transfers Upon Death; Nonassignability.
Upon the death of a Participant, outstanding Incentive Awards granted
to such Participant may be exercised only by the executor or administrator of
the Participant's estate or by a person who shall have acquired the right to
such exercise by will or by the laws of descent and distribu tion. No transfer
of an Incentive Award by will or the laws of descent and distribution shall be
effective to bind the Company unless the Committee shall have been furnished
with (a) written notice thereof and with a copy of the will and/or such evidence
as the Committee may deem necessary to establish the validity of the transfer
and (b) an agreement by the transferee to comply with all the terms and condi
tions of the Incentive Award that are or would have been applicable to the
Participant and to be bound by the acknowledgments made by the Participant in
connection with the grant of the Incentive Award.
During a Participant's lifetime, the Committee may permit the transfer,
assignment or other encumbrance of an outstanding Option or outstanding shares
of Restricted Stock unless such Option is an Incentive Stock Option and the
Committee and the Participant intend that it shall retain such status.
Notwithstanding the foregoing, subject to any conditions as the Committee may
prescribe, a Participant may, upon providing written notice to the Secretary of
the Company, elect to transfer any or all Op tions granted to such Participant
pursuant to the Plan to members of his or her immediate family, including, but
not limited to, children, grandchildren and spouse or to trusts for the benefit
of such immediate family members or to partnerships in which such family members
are the only partners; provided, however, that no such transfer by any
Participant may be made in exchange for consideration.
27
21. Expenses and Receipts.
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Incentive Award will be used for
general corporate pur poses.
22. Failure to Comply.
In addition to the remedies of the Company elsewhere provided for
herein, failure by a Participant (or benefi ciary or transferee) to comply with
any of the terms and conditions of the Plan or the applicable Award Agreement,
unless such failure is remedied by such Participant (or beneficiary or
transferee) within ten days after notice of such failure by the Committee, shall
be grounds for the cancellation and forfeiture of such Incentive Award, in whole
or in part, as the Committee, in its absolute discretion, may determine.
23. Effective Date and Term of Plan.
The Plan became effective on the Effective Date, but the Plan (and any
grants of Incentive Awards made prior to stockholder approval of the Plan) shall
be subject to the requisite approval of the stockholders of the Company. In the
absence of such approval, such Incentive Awards shall be null and void. Unless
earlier terminated by the Board of Directors, the right to grant Incentive
Awards under the Plan will terminate on the tenth anniversary of the Effective
Date. Incentive Awards outstanding at Plan termination will remain in effect
according to their terms and the provisions of the Plan.
24. Applicable Law.
Except to the extent preempted by any applicable federal law, the Plan
will be construed and administered in accordance with the laws of the State of
Delaware, without reference to the principles of conflicts of law.
25. Participant Rights.
No Participant shall have any claim to be granted any Incentive Award
under the Plan, and there is no obligation for uniformity of treatment for
Participants. Except as
28
provided specifically herein, a Participant or a transferee of an Incentive
Award shall have no rights as a stockholder with respect to any shares covered
by any award until the date of the issuance of a Common Stock certificate to him
for such shares.
26. Unfunded Status of Awards.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
Participant pursuant to an Incentive Award, nothing contained in the Plan or any
Award Agreement shall give any such Participant any rights that are greater than
those of a general creditor of the Company.
27. No Fractional Shares.
No fractional shares of Common Stock shall be issued or delivered
pursuant to the Plan. The Committee shall determine whether cash, other
Incentive Awards, or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto shall
be forfeited or otherwise eliminated.
28. Beneficiary.
A Participant may file with the Committee a written designation of a
beneficiary on such form as may be prescribed by the Committee and may, from
time to time, amend or revoke such designation. If no designated beneficiary
survives the Participant, the executor or administrator of the Participant's
estate shall be deemed to be the Participant's beneficiary.
29. Interpretation.
The Plan is designed and intended to comply with Rule 16b-3 promulgated
under the Exchange Act and, with Section 162(m) of the Code, and all provisions
hereof shall be construed in a manner to so comply.
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EXHIBIT B
Section 3.a. of the 1995 Employee Stock Purchase Plan is proposed to be
amended as follows (new language is indicated by { } and deleted
language is indicated by [ ]):
3.Eligibility.
a. Subject to the requirements of Section 4.b. hereof, any person who
is (i)an Employee as of an Offering Date, (ii) regularly scheduled to work at
least twenty (20) hours per week and at least five (5) months per calendar year
and (iii) at the commencement of such Offering Period has maintained Continuous
Status as an Employee for at least {three (3) months} [one (1)year], shall be
eligible to participate in the Plan and to be granted an option for the Offering
Period commencing on such Offering Date (each, an "eligible Employee");
provided, that continuous service with Piedmont or RECO prior to the time of the
Merger shall be included for purposes of the condition set forth in clause
(iii)above.