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TRENWICK GROUP LTD - DEF 14A - 20010411 - ANNUAL_REPORT
Annual Report
A copy of the annual report to common shareholders for the fiscal year 2000
containing financial statements of Trenwick has been mailed to all shareholders.
Revocation of Proxy
The accompanying proxy, if properly executed by a shareholder entitled to
vote, will be voted at the Annual General Meeting, but may be revoked at any
time before the vote is taken by giving written notice to the Secretary of
Trenwick, by a duly executed proxy bearing a later date or by voting in person
at the Annual General Meeting.
Quorum and Votes Required
The presence of two or more persons representing, in person or by proxy, of
a majority in number of Trenwick's outstanding common shares as of the record
date constitutes a quorum and is required in order for Trenwick to conduct
business at the Annual General Meeting. Each common share is entitled to one
vote. In accordance with Trenwick's Bye-Laws and the Companies Act 1981 of
Bermuda the election of each nominee for director, and the approval of all other
matters to be voted upon at the Annual General Meeting, require the affirmative
vote of a majority of the votes cast at the Annual General Meeting. Trenwick
will appoint one or more inspectors of election to count votes cast in person or
by proxy.
Common shares owned by shareholders electing to abstain from voting will be
counted towards the presence of a quorum. However, such common shares, and
common shares owned by shareholders and not voted in person or by proxy at the
Annual General Meeting, will not be counted towards the majority needed to
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elect a director or approve any other matter before the shareholders and thus
will have no effect on the outcome of those votes. "Broker non-votes" will be
counted towards the presence of a quorum, but will not be counted towards the
majority needed to elect a director or approve any other matter before the
shareholders and thus will have no effect on the outcome of those votes.
Authority Granted by the Proxy
The proxy is in such form as to permit a vote for, or the withholding of
authority to vote for, individual nominees, and to indicate separate approval,
disapproval or abstention with respect to the other proposals identified in the
proxy and accompanying Notice of Annual General Meeting of Shareholders and
described in this proxy statement. If no instructions are indicated, proxies
returned to Trenwick will be voted by W. Marston Becker, James F. Billett, Jr.,
and Joseph D. Sargent, or any one or several of them as may act FOR the election
of the directors described herein. With respect to the other proposals described
herein, if no instructions are indicated, the common shares represented by the
proxy will be voted FOR the proposals by Messrs. Becker, Billett and Sargent. As
to any such other matters that may properly be brought before the Annual General
Meeting, the common shares represented by the proxy will be voted in accordance
with the judgment of Messrs. Becker, Billett and Sargent.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, two of which consist
of five directors and one of which consists of four directors. Each class serves
three years, with the terms of office of the respective classes expiring in
successive years. The term of the office of directors in Class I expires at the
2001 Annual General Meeting. 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.
The Board of Directors proposes that the nominees described below be
elected as Class I directors for a new term of three years and until their
successors are duly elected and qualified. All nominees are currently serving as
Class I directors. Nominees Grzelecki, Watkins and Wilcox served as a directors
of Trenwick Group Inc. prior to its business combination with LaSalle Re
Holdings Limited, LaSalle Re Limited and Trenwick on September 27, 2000. Nominee
Rackley served as a director of LaSalle Re Holdings Limited prior to the
Trenwick/LaSalle business combination. Proxies may be voted only for the four
nominees to Class I.
Although the Board of Directors does not contemplate that any of the
nominees will be unable to serve, if such a situation arises prior to the
meeting, Messrs. Becker, Billett and Sargent, as the proxies, will vote in
accordance with their best judgment.
Unless otherwise directed, all returned proxies will be voted FOR the
election of the directors standing for election in Class I.
CLASS I: DIRECTORS STANDING FOR ELECTION
Frank E. Grzelecki
Frank E. Grzelecki, 63, has been a director of Trenwick since August 2000.
Mr. Grzelecki is a member of the Investment Committee and the Board Affairs
Committee. Mr. Grzelecki was a director of Trenwick Group Inc. from the merger
of Chartwell Re Corporation with and into Trenwick Group Inc., which was
effective October 27, 2000 until the Trenwick/LaSalle business combination. From
March 1994 until the Trenwick/Chartwell merger, Mr. Grzelecki was a director of
Chartwell Re Corporation. Mr. Grzelecki is
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retired. Mr. Grzelecki was a Managing Director of Saugatuck Associates, Inc., a
private investment firm, from 1999 to 2000. He was a director and Vice Chairman
of Handy & Harman from 1997 to 1998. From 1992 to 1997, Mr. Grzelecki served as
a director and President and Chief Operating Officer of Handy & Harman. Mr.
Grzelecki is also a director of Barnes Group Inc.
Peter J. Rackley
Peter J. Rackley, 62, has been a director of Trenwick since August 2000.
Mr. Rackley is a member of the Audit Committee and the Investment Committee. Mr.
Rackley was a director of LaSalle Re Holdings Limited from the time of its
organization in October 1995 until the Trenwick/LaSalle business combination and
a director of LaSalle Re Limited since its organization in October 1993 until
the Trenwick/LaSalle business combination. Mr. Rackley has been Chairman and
Group Chief Executive of Western International Financial Group Ltd., a
Bermuda-based insurance business, since 1993. Prior to that time, Mr. Rackley
held senior management executive positions in General Accident Fire & Life
Assurance Company plc and NZI Insurance Group. Mr. Rackley is also Chairman of
Catlin Westgen Holdings Limited, Westgen High Ridge Holdings Ltd. and CERTA (UK)
Limited and a Director of Stockton Holdings Limited.
Frederick D. Watkins
Frederick D. Watkins, 85, has been a director of Trenwick since August
2000. Mr. Watkins is a member of the Board Affairs Committee, Executive
Committee and the Compensation Committee. Mr. Watkins also serves as the Vice
Chairman of the Board of Directors. Mr. Watkins was a director of Trenwick Group
Inc. and its predecessor from 1979 until the Trenwick/LaSalle business
combination He is retired Executive Vice President of Connecticut General
Insurance Corporation (1979-1980) and former President of Aetna Insurance
Company (1966-1979), which he joined in 1937. Mr. Watkins was Chairman of Terra
Nova Insurance Company Ltd. from 1978 until 1994.
Stephen R. Wilcox
Stephen R. Wilcox, 67, has been a director of Trenwick since August 2000.
Mr. Wilcox is Chairman of the Audit Committee and a member of the Board Affairs
Committee. Mr. Wilcox was a director of Trenwick Group Inc. and its predecessor
from 1978 until the Trenwick/LaSalle business combination. Since 1998, Mr.
Wilcox has been President and Chief Executive Officer of Kelton International
Inc., a securities broker-dealer. He has been President of The Wilcox Group,
Inc., a financial and consulting firm, since 1998. He was a Senior Consultant of
Hyperion Capital Management from 1995 to 1998 and a Partner and Senior Vice
President of Conning & Company, with which he was associated from 1958 to 1988.
CLASS II: TERM EXPIRES AT 2002 ANNUAL GENERAL MEETING
Anthony S. Brown
Anthony S. Brown, 58, has been a director of Trenwick since August 2000.
Mr. Brown is Chairman of the Board Affairs Committee and a member of the Audit
Committee. Mr. Brown was a director of Trenwick Group Inc. from 1990 until the
Trenwick/LaSalle business combination. He is a Professor at the Terry Sanford
Institute of Public Policy at Duke University and was Director of Equity
Administration of The First Boston Corporation, an investment banking firm,
between 1991 and 1993. Prior to 1991, Mr. Brown was Vice President, External
Affairs, of the University of Connecticut and was formerly Chairman and Chief
Executive Officer of Covenant Insurance Company, with which he was associated
from 1968 to 1989.
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Richard E. Cole
Richard E. Cole, 61, has been a director of Trenwick since August 2000. Mr.
Cole is a member of the Executive Committee and the Board Affairs Committee. Mr.
Cole was a director of Trenwick Group Inc. from the Trenwick/Chartwell merger
until the Trenwick/LaSalle business combination. Until the Trenwick/Chartwell
merger he was the Chairman of the Board of Directors of Chartwell Re Corporation
(from March 1993) and Chartwell Re Corporation's Chief Executive Officer and a
director (from July 1990). From July 1990 to March 1993, Mr. Cole also served as
President of Chartwell Re Corporation. On March 5, 2001, Mr. Cole was elected
Vice Chairman of InsureTrade.com, an internet communication company that
facilitates property and casualty insurance transactions. 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
insurance and reinsurance for regional companies. Mr. Cole is also a director of
Indiana Lumbermens Mutual Insurance Company, InsureTrade.com and Euro-American
Reinsurance Management.
Neil Dunn
Neil Dunn, 51, has been a director of Trenwick since August 2000. Mr. Dunn
is a member of the Audit Committee and the Investment Committee. Mr. Dunn was a
director of Trenwick Group Inc. from 1984 until the Trenwick/LaSalle business
combination. He is Managing Director of Kempen Capital Management (UK) Ltd. and
previously served in the same capacity for Voyageur International Asset Managers
Ltd and for Piper International Asset Management, an affiliate of Piper Jaffray
Companies Inc. Prior to 1994, Mr. Dunn was Senior Partner of the investment
advisory firm Neil Dunn & Company, Scotland.
Clement S. Dwyer, Jr.
Clement S. Dwyer, Jr., 53, has served as a director of Trenwick since
August 2000. Mr. Dwyer is a member of the Executive Committee and the
Compensation Committee. Mr. Dwyer was a director of LaSalle Re Holdings Limited
and LaSalle Re Limited from February 1998 until the Trenwick/LaSalle business
combination. He has 30 years of experience in the insurance industry,
concentrating primarily in worldwide property casualty business and the
financing of insurance enterprises. Since 1997, Mr. Dwyer has been Managing
Member of URSA Advisors, L.L.C., which provides advisory and capital-raising
services to insurance and reinsurance companies. From May to December 1996, he
was President and Chief Executive Officer of Signet Star Holdings, Inc., the
holding company for the reinsurance subsidiaries of W.R. Berkeley Corp. From
1992 to 1996, he was Executive Vice President and Director of Guy Carpenter &
Company, Inc., a reinsurance broker and a subsidiary of Marsh & McLennan
Companies Inc., by whom he had been employed in various executive capacities
since 1970.
P. Anthony Jacobs
P. Anthony Jacobs, 59, has been a director of Trenwick since August 2000.
Mr. Jacobs is a member of the Audit Committee and the Investment Committee. Mr.
Jacobs was a director of Trenwick Group Inc. and its predecessor from 1979 until
the Trenwick/LaSalle business combination. Mr. Jacobs served as President and
Chief Executive Officer of Lab Holdings, a lab testing services company, from
September 1997 until August 1999, at which time Lab Holdings was merged with its
subsidiary Lab One and Mr. Jacobs retired. Mr. Jacobs also served as President
and Chief Operating Officer of Seafield Capital Corporation from May 1993 to
September 1997. From December 1996 until August 1998, he was Chairman of the
Board of SLH Corporation. Mr. Jacobs is also a director of Response Oncology,
Inc. and Syntroleum Corporation.
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CLASS III: TERM EXPIRES AT THE 2003 ANNUAL GENERAL MEETING
James F. Billett, Jr.
James F. Billett, Jr., 57, has served as Chairman of the Board and Chief
Executive Officer of Trenwick since August 2000. Mr. Billett served as the
Chairman of the Board and Chief Executive Officer of Trenwick Group Inc. and its
predecessor from 1978 until the Trenwick/LaSalle business combination and served
as President of Trenwick Group Inc. from 1988 until the Trenwick/LaSalle
business combination. He is Chairman of the Executive Committee. Mr. Billett was
formerly a Vice President of General Reinsurance Corporation.
W. Marston Becker
W. Marston Becker, 48, has served as a director of Trenwick since August
2000. Mr. Becker is Chairman of the Compensation Committee and a member of the
Executive Committee. Mr. Becker was a director of Trenwick Group Inc. from 1997
until the Trenwick/LaSalle business combination. He has been Chairman of Hales &
Company, an investment company, since June 2000. He was President - Specialty
Insurance of Royal & SunAlliance USA, Inc. from its acquisition of Orion Capital
Corporation in November 1999 until May 2000 and a director of Royal & Sun
Alliance USA, Inc. from November 1999 until December 2000. From January 1997 to
November 1999, he was Chairman of the Board and Chief Executive Officer of Orion
Capital Corporation. He was previously Vice Chairman of the Board (March 1996 to
December 1996) and Senior Vice President (July 1994 to March 1996) of Orion
Capital Corporation and served as President and Chief Executive Officer of the
DPIC Companies (subsidiaries of Orion Capital Corporation) from July 1994 to
June 1996 and as President and Chief Executive Officer of McDonough Caperton
Insurance Group, an insurance brokerage firm, from March 1987 to July 1994. Mr.
Becker also serves as a director for Arch Capital Group Ltd.
Robert M. DeMichele
Robert M. DeMichele, 56, has been a director of Trenwick since August 2000.
Mr. DeMichele is Chairman of the Investment Committee and a member of the
Compensation Committee. Mr. DeMichele was a director of Trenwick Group Inc. from
the Trenwick/Chartwell merger until the Trenwick/LaSalle business combination.
From December 1995 until the Trenwick/Chartwell merger, Mr. DeMichele was a
director of Chartwell Re Corporation. Mr. DeMichele has been President and Chief
Executive Officer of Strategy Asset Managers LLC, an investment advisor, since
February, 2001. From December 13, 1995 until October, 2000 he was a director,
Chief Executive Officer and President of Lexington Global Asset Management. From
1982 until December 13, 1995, Mr. DeMichele served as President, Chief Executive
Officer and a director of Piedmont Management Company Inc. Mr. DeMichele also
serves as a director of The Navigators Group, Inc.
Robert V. Deutsch
Robert V. Deutsch, 41, has been a director of Trenwick since August 2000.
Mr. Deutsch was a director of LaSalle Re Holdings Limited from September 1999
until the Trenwick/LaSalle business combination. Since August 1999, he has been
Senior Vice President and Chief Financial Officer of CNA Financial Corporation.
From May 1997 to August 1999, Mr. Deutsch was Executive Vice President and a
director of Executive Risk Inc., a specialty insurer based in Connecticut. He
was also Chief Financial Officer of Executive Risk Inc. from August 1990 to
August 1999, Chief Actuary of Executive Risk Inc. from June 1987 to August 1999
and Senior Vice President of Executive Risk Inc. from June 1987 to April 1997.
Mr. Deutsch's professional experience also includes serving as Assistant Vice
President with Swiss Re America and a senior manager with Ernst & Young. He is a
fellow of the Casualty Actuarial Society, an associate of the Society of
Actuaries and a member of the American Academy of Actuaries.
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Joseph D. Sargent
Joseph D. Sargent, 71, has been a director of Trenwick since August 2000.
Mr. Sargent is a member of the Executive Committee and the Compensation
Committee. Mr. Sargent was a director of Trenwick Group Inc. and its predecessor
since 1978. He has been Chairman and a Principal of Bradley, Foster & Sargent,
an investment advisory firm, since 1994. Mr. Sargent is a member of the Board of
Directors of Mutual Risk Management, Ltd.
There are no family relationships among any directors and executive
officers of Trenwick. For information with respect to business relationships
between certain directors and Trenwick, see "Certain Relationships and Related
Transactions."
All directors have entered into indemnification agreements with Trenwick
that limit a director's personal liability, as a result of serving as a
director, to the maximum extent permitted by Bermuda law.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors held two meetings during the three month period from
the time of the Trenwick/LaSalle business combination until the end of the year.
Each committee of the Board of Directors met once during the same three month
period. Messrs. Brown, Jacobs, Rackley and Sargent were unable to attend the
Board of Directors meeting held in September 2000 and Messrs. Grzelecki and Dunn
were unable to attend the Board of Directors and committee meetings held in
November 2000. Trenwick considers attendance at meetings to be only one measure
of a director's contribution to Trenwick. Directors also fulfill their
responsibilities by rendering advice in informal consultations with executive
officers of Trenwick.
The Board of Directors has five committees: the Audit Committee, the Board
Affairs Committee, the Compensation Committee, the Executive Committee and the
Investment Committee. The Audit Committee, the Board Affairs Committee, the
Compensation Committee and the Investment Committee are comprised exclusively of
non-employee directors. All members of the Executive Committee, other than Mr.
Billett, are non-employee directors.
The Audit Committee is composed of Messrs. Wilcox (Chairman), Brown, Dunn,
Jacobs, and Rackley. The Audit Committee has responsibility to recommend to the
Board of Directors the selection of Trenwick's independent auditors, to review
and approve the scope of the independent auditors' audit activity, to review the
financial statements which are the subject of the independent auditors'
certification, and to review with such independent auditors the adequacy of
Trenwick's accounting systems and system of internal accounting controls. The
Audit Committee met once during the three month period from the time of the
Trenwick/LaSalle business combination until the end of the year.
The Board Affairs Committee is composed of Messrs. Brown (Chairman), Cole,
Grzelecki, Watkins and Wilcox. The Board Affairs Committee provides assistance
to the Board of Directors in recommending qualified candidates to serve as
directors of Trenwick and recommending board policies, procedures and practices.
The Board Affairs committee will consider director nominees recommended by
shareholders. See "Shareholder Proposals - 2002 Annual General Meeting." The
Board Affairs Committee met once during the three month period from the time of
the Trenwick/LaSalle business Combination until the end of the year.
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The Compensation Committee is composed of Messrs. Becker (Chairman),
DeMichele, Deutsch, Dwyer, Sargent, and Watkins. The Compensation Committee
assists the Board of Directors in reviewing Trenwick's compensation structure
for senior executives and other key employees and approving cash compensation
and non-stock based benefits for the Chief Executive Officer and executive
officers. In addition, the Compensation Committee designs, recommends for Board
approval and administers Trenwick's equity-based compensation plans. The
Compensation Committee met once during the three month period from the time of
the Trenwick/LaSalle business combination until the end of the year.
The Executive Committee is composed of Messrs. Billett (Chairman), Becker,
Cole, Deutsch, Dwyer, Sargent, and Watkins. The Executive Committee meets when
required on short notice during intervals between the meetings of the Board of
Directors and has authority to exercise all the powers of the Board of Directors
concerning the management and direction of the affairs of Trenwick, subject to
specific directions of the Board of Directors and subject to the limitations of
the Bye-Laws of Trenwick and the Companies Act, 1981 of Bermuda. The Executive
Committee did not meet during the three month period from the time of the
Trenwick/LaSalle business combination until the end of the year.
The Investment Committee is composed of Messrs. DeMichele (Chairman), Dunn,
Grzelecki, Jacobs, and Rackley. The Investment Committee exercises authority
with respect to financial matters, including the investment of Trenwick's
assets, assessment of the potential impact of both short-term and long-term
economic trends, and the establishment of related investment guidelines. The
Investment Committee met once during the three month period from the time of the
Trenwick/LaSalle business combination until the end of the year.
PRINCIPAL SHAREHOLDERS
The following table lists the shareholders known to Trenwick to be
beneficial owners of more than five percent of the outstanding common shares, as
of the record date, based upon information filed with the Securities and
Exchange Commission. Such shareholders hold sole voting and dispositive power
over such shares except as noted.
Shares
Beneficially
Name & Address Owned Percent
-------------- ----- -------
CNA Financial Corporation(1) 3,707,400 10.1%
CNA Plaza
Chicago, IL 60685
NewSouth Capital Management, Inc.(2) 3,474,464 9.5%
1000 Ridgeway Loop Road, Suite 233
Memphis, Tennessee 38120
Aon Corporation(3) 2,514,599 6.8%
123 North Wacker Drive
Chicago, IL 60606
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(1) Based upon information contained in Amendment No. 1 to Schedule 13D filed
with the Securities and Exchange Commission on November 6, 1998 with
respect to LaSalle Re Holdings Limited. Of the 3,707,400 shares 3,389,250
and 318,150 are owned by Continental Casualty Company and CNA (Bermuda)
Services Limited, respectively, both of which are wholly-owned subsidiaries
of CNA Financial Corporation. According to information provided in CNA
Financial Corporation's definitive proxy statement filed with the
Securities and Exchange Commission on March 20, 2000, Loews Corporation
owned approximately 86.8% of the outstanding voting securities of CNA
Financial
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Corporation as of February 28, 2000.
(2) Based upon information contained in the Schedule 13G, dated February 8,
2001, filed with the Securities and Exchange Commission. Sole voting power
is held over 2,143,170 shares, shared voting power is held over 19,750
shares and sole dispositive power is held over all the shares.
(3) Based upon information provided by Aon Corporation and information
contained in Amendment No. 1 to Schedule 13D filed with the Securities and
Exchange Commission on February 11, 2000 with respect to LaSalle Re
Holdings Limited. Of the 2,514,599 shares, 859,532 are owned by Combined
Insurance Company of America which is a wholly-owned subsidiary of Aon
Corporation. The remaining 1,655,067 shares are owned by 123 Newco, Inc.
Aon Corporation has sole dispositive power but no voting power with respect
to the shares owned by 123 Newco, Inc.
MANAGEMENT
The following table reflects information as of the record date regarding
the number of Trenwick common shares beneficially owned by each director, by the
executive officers named in the summary compensation table below and by all
directors and executive officers as a group:
Amount of
Beneficial Ownership (1)
-----------------------------
Number of Shares
Directors Common Stock Percent
--------- ---------------- -------
W. Marston Becker............................... 9,584(2) *
Anthony S. Brown................................ 13,575(3) *
Richard E. Cole................................. 265,879(4) 0.72%
Robert M. DeMichele............................. 22,753(5) *
Robert V. Deutsch............................... 3,718,704(6) 10.12%
Neil Dunn....................................... 9,750(3) *
Clement S. Dwyer, Jr............................ 22,339(7) *
Frank E. Grzelecki.............................. 7,875(5) *
P. Anthony Jacobs............................... 11,250(3) *
Peter J. Rackley................................ 1,104 *
Joseph D. Sargent............................... 141,400(3)(8) 0.38%
Frederick D. Watkins............................ 13,950(3) *
Stephen R. Wilcox............................... 9,250(3) *
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* Less than 0.1%
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Amount of
Beneficial Ownership (1)
-----------------------------
Number of Shares
Directors Common Stock Percent
--------- ---------------- -------
James F. Billett, Jr............................ 520,952(9) 1.40%
Steven J. Bensinger............................. 228,799(10) 0.62%
Paul Feldsher................................... 178,985(11) 0.48%
Robert A. Giambo................................ 152,935(12) 0.41%
Coleman D. Ross................................. 23,908(13) *
Directors and executive officers as a group .... 5,353,492 14.13%
----------
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* Less than 0.1%
(1) Includes, in each case, shares deemed to be beneficially owned by such
persons because they hold or share investment or voting power. Includes, as
to directors, other than Mr. Billett, a total of 304,837 shares subject to
outstanding stock options that are vested and exercisable within 60 days of
the date of this document. Includes, as to executive officers, a total of
646,893 shares subject to outstanding stock options that are vested and
exercisable within 60 days of the date of this document and 103,028
restricted shares not vested within 60 days of the date of this document,
but that have full dividend and voting rights and that are included in the
computation of such executive officers' percentage of beneficial ownership.
(2) Includes 5,250 shares subject to stock options that are vested and
exercisable within 60 days of the date of this document.
(3) Includes 8,250 shares subject to stock options that are vested and
exercisable within 60 days of the date of this document.
(4) Includes 235,987 shares subject to stock options that are vested and
exercisable within 60 days of the date of this document.
(5) Includes 7,050 shares subject to stock options that are vested and
exercisable within 60 days of the date of this document.
(6) Of the 3,718,704 shares, 3,389,250 are owned by Continental Casualty
Company, a wholly-owned subsidiary of CNA Financial Corporation and 318,150
are owned by CNA (Bermuda) Services Limited, also a wholly-owned subsidiary
of CNA Financial Corporation. Mr. Deutsch may be deemed to share voting and
investment power over such shares as Senior Vice President and Chief
Financial Officer of CNA Financial Corporation. Mr. Deutsch disclaims
beneficial ownership of the shares attributed to CNA Financial Corporation
and its subsidiaries.
(7) Also includes 800 shares owned by relatives or held in trust for them, as
to which Mr. Dwyer disclaims beneficial ownership.
(8) Also includes 29,775 shares owned by relatives or held in trust for them,
as to which Mr. Sargent disclaims beneficial ownership.
(9) Includes 219,290 shares subject to stock options that are vested and
exercisable within 60 days of the date
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of this document and 38,652 restricted shares that are not vested within 60
days of the date of this document, but that have full dividend and voting
rights.
(10) Includes 194,855 shares subject to stock options that are vested and
exercisable within 60 days of the date of this document and 20,929
restricted shares that are not vested within 60 days of the date of this
document, but that have full dividend and voting rights.
(11) Includes 121,148 shares subject to stock options that are vested and
exercisable within 60 days of the date of this document and 14,105
restricted shares that are not vested within 60 days of the date of this
document, but that have full dividend and voting rights. Also includes 375
shares owned by relatives or held in trust for them, as to which Mr.
Feldsher disclaims beneficial ownership.
(12) Includes 111,600 shares subject to stock options that are vested and
exercisable within 60 days of the date of this document, 14,105 restricted
shares that are not vested within 60 days of the date of this document, but
that have full dividend and voting rights.
(13) Includes 15,237 restricted shares that are not vested within 60 days of
this document, but that have full dividend and voting rights.
Business Experience of Executive Officers Who Are Not Directors
Steven J. Bensinger, 46, has been an Executive Vice President of Trenwick
since the Trenwick/LaSalle business combination. Mr. Bensinger was an Executive
Vice President of Trenwick Group Inc. from the Trenwick/Chartwell merger until
the Trenwick/LaSalle business combination. Prior to the Trenwick/Chartwell
merger, Mr. Bensinger served as President of Chartwell Re Corporation from March
1993 until the Trenwick/Chartwell merger and as director of Chartwell Re
Corporation from February 1994, until the Trenwick/Chartwell merger. From July
1998 until the Trenwick/Chartwell merger, Mr. Bensinger also served as Chairman
and Chief Executive of Chartwell UK plc and Chartwell Managing Agents Limited.
From February 1991 to November 1992, Mr. Bensinger was President and Chief
Operating Officer of Skandia America Reinsurance Corporation. From prior to 1988
to February 1991, Mr. Bensinger was Skandia America's Chief Financial Officer.
Prior to joining Skandia America Reinsurance Corporation, he was a partner with
the international accounting and consulting firm of PricewaterhouseCoopers LLP.
Paul Feldsher, 52, has been an Executive Vice President and Chief
Underwriting Officer of Trenwick since the Trenwick/LaSalle business
combination. Mr. Feldsher was an Executive Vice President and Chief Underwriting
Officer of Trenwick Group Inc. from 1999 until the Trenwick/LaSalle business
combination, a director of Trenwick America Reinsurance Corporation since 1988
and an Executive Vice President of Trenwick America Reinsurance Corporation from
1993 until the Trenwick/LaSalle business combination. Mr. Feldsher manages
Trenwick's underwriting policy and quality control operations. He began his
career with Liberty Mutual Insurance Company in 1972 and was employed by North
American Reinsurance prior to joining Trenwick America Corporation in 1983.
Robert A. Giambo, 47, has been an Executive Vice President and Chief
Actuary of Trenwick since the Trenwick/LaSalle business combination. Mr. Giambo
was an Executive Vice President and Chief Actuary of Trenwick Group Inc. from
1999 until the Trenwick/LaSalle business combination, a director and Chief
Actuary of Trenwick America Reinsurance Corporation from 1988 until the
Trenwick/LaSalle business combination and an Executive Vice President of
Trenwick America Reinsurance Corporation from 1993 until the Trenwick/LaSalle
business combination. Prior to joining Trenwick America Reinsurance Corporation
in 1986, he was associated with The Home Insurance Company and The Insurance
Services Office. Mr. Giambo received his Casualty Actuarial Fellowship in 1980.
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Coleman D. Ross, 57, has been Executive Vice President and Chief Financial
Officer of Trenwick since the Trenwick/LaSalle business combination. Mr. Ross
was Executive Vice President and Chief Financial Officer of Trenwick Group Inc.
from June 2000 until the Trenwick/LaSalle business combination. Prior to joining
Trenwick Group Inc., he was associated with the firm of PricewaterhouseCoopers
LLP as a general partner from July 1, 1977 to June 30, 1999.
Directors' Compensation
For the three months ended December 31, 2000, each non-employee director
chairing a Board Committee received an annual retainer of $25,000 and each other
non-employee director received an annual retainer of $20,000. In addition, each
non-employee director received a fee of $1,000 for each Board meeting attended,
plus reimbursement of all customary expenses incurred in connection with
attendance at Board meetings. Directors who served on the various Board
Committees each received, in addition to the above amounts, a meeting fee of
$750 per Committee meeting attended in conjunction with a regularly scheduled
Board meeting and $1,000 per Committee meeting attended not in conjunction with
a regularly scheduled Board meeting, plus reimbursement of customary expenses
incurred in connection with attendance at each Committee meeting. During the
three months ended December 31, 2000, Trenwick provided non-employee directors
with a retirement plan, which paid retired directors an annual amount equal to
50% of the non-employee director's annual retainer for a period equal to the
non-employee director's years of service with Trenwick or its predecessor.
Trenwick also pays the premium to provide the directors with $250,000 of
coverage under a group travel accident Insurance policy.
Effective February 7, 2001, Trenwick adjusted the compensation of each
non-employee member of the Board of Directors to reflect the increased size and
complexity of Trenwick and the attendant increase in the oversight
responsibilities of the Board of Directors. The annual director retainer fee
increased to $25,000 and the annual retainer fee payable to non-employee
committee chairmen increased to $30,000. Board and committee meeting fees
remained unchanged at $1,000 per meeting, but the $250 reduction in meeting fees
for committee meetings held in conjunction with board meetings was eliminated.
Trenwick also terminated the non-employee directors' pension plan, effective
December 31, 2000. The present value of each non-employee director's potential
payouts under the pension plan as of such date were converted into common share
equivalent units in Trenwick's non-employee director deferred compensation plan.
Under Trenwick's deferred compensation plan, non-employee directors may
elect to defer receipt of all or a portion of fees to be earned in the next
succeeding year and have such fees accrue either (i) at the interest rate
determined by the Compensation Committee or (ii) based upon the performance of
Trenwick's common shares, including any dividends paid thereon. A participating
non-employee director will receive all amounts so deferred and accrued in one
payment on the first business day of the year following the year in which the
participant ceases to be a director.
Other Compensation for Outside Directors
Pursuant to the 1993 Stock Option Plan for Non-Employee Directors, each of
Trenwick's eligible non-employee directors has received a one-time grant of an
option for 3,000 shares of Trenwick's common stock. Under the 1993 Stock Option
Plan, each eligible director is granted an option for additional common shares
immediately following each Annual General Meeting. In conjunction with the
adjustment of non-employee director compensation on February 7, 2001, Trenwick
increased the annual share grant from 750 shares to 1,000 shares.
On February 7, 2001, Trenwick added to the non-employee director deferred
compensation plan a quarterly grant of $6,250 in the form of common share
equivalents to each non-employee director. Committee chairman will receive a
quarterly grant of $7,500 in common share equivalents. The grants will be made
on the last business day of each calendar quarter.
14
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to Trenwick for the
calendar years ended December 31, 2000, 1999 and 1998 of the Chief Executive
Officer and the four other most highly paid executive officers of Trenwick at
December 31, 2000:
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards
----------------------------------- -------------------------
Restricted Securities
Other Annual Share Underlying All Other
Salary Bonus Compensation Awards Options/ Compensation
Name & Principal Position Year ($) ($) ($)(1) ($)(2) SARs (#) ($)(3)
---- ------- ------- ------------ ---------- ---------- ------------
James F. Billett, Jr. 2000 574,233 315,000 90,560 352,495 81,346 140,336
Chairman, President 1999 560,334 315,000 87,443 375,007 28,448 128,031
& Chief Executive Officer 1998 526,928 350,000 76,274 739,245 24,573 125,416
Steven J. Bensinger 2000 382,313 250,000 187,499 43,269 75,775
Executive Vice President 1999 57,692 250,000 12,758
1998
Paul Feldsher 2000 262,121 250,000 128,505 29,654 37,742
Executive Vice President & 1999 255,177 202,500 124,990 12,931 35,154
Chief Underwriting Officer 1998 241,923 225,000 150,016 12,287 34,097
Robert A. Giambo 2000 262,121 225,000 128,505 29,654 37,753
Executive Vice President & 1999 255,177 180,000 124,990 12,931 35,163
Chief Actuary 1998 236,154 200,000 125,001 10,239 34,106
Coleman D. Ross 2000 175,000 250,000 87,495 17,499 4,846
Executive Vice President & 1999
Chief Financial Officer 1998
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(1) Consists of personal benefits provided by Trenwick for the indicated
calendar years in which the amounts exceeded the lesser of $50,000 or ten
percent of the named executive's combined salary and bonus for the year.
Includes $43,775 for 2000, $43,111 for 1999 and $43,653 for 1998 for
supplemental whole life and health benefits and $39,968 for 2000, $38,584
for 1999, and $29,121 for 1998 for automobile expenses.
(2) Amounts reflect restricted shares awarded as follows on March 1, 2000,
based on the closing price per share on such date of $13.00: Mr. Billett,
27,115 shares, Mr. Bensinger, 14,423 shares, Mr. Feldsher, 9,885 shares and
Mr. Giambo, 9,885 shares. The amount for Mr. Ross reflects an additional
5,833 restricted shares awarded on June 26, 2000, based on the closing
price per share on such date of $15.00. The restricted shares vest in equal
annual installments over five years from the date of award, beginning in
2001. Dividends are paid on restricted shares at the same rate as paid to
all shareholders and, as permitted, those amounts have not been included in
this table. The aggregate total of unvested restricted share holdings of
each of the named executives as of December 29, 2000, at the
then-applicable market price per share of $24.8125, were as follows:
15
Unvested
Name Restricted Shares Value ($)
---- ----------------- ---------
James F. Billett, Jr. 27,115 672,791
Steven J. Bensinger 14,423 357,871
Paul Feldsher 9,885 245,272
Robert A. Giambo 9,885 245,272
Coleman D. Ross 5,833 144,731
|
(3) This column shows contributions by Trenwick under various defined
contribution plans. The following table details the amounts contributed by
Trenwick by defined contribution plan and named executive.
Supplemental
Executive Supplemental
401(k) Retirement Executive
Savings Pension Plan Retirement Rabbi
Year Plans Plans Contribution Plan Interest Trust
---- ------- ------- ------------ -------------- ------
James F. Billett, Jr. 2000 10,200 13,600 57,539 58,997
1999 9,600 12,800 60,026 45,605
1998 9,600 12,800 61,754 41,262
Steven J. Bensinger 2000 10,200 13,600 51,975
1999 4,800 7,958
1998
Paul Feldsher 2000 10,200 13,600 8,960 4,982
1999 9,600 12,800 9,200 3,554
1998 9,600 12,800 8,800 2,897
Robert A. Giambo 2000 10,200 13,600 8,960 4,993
1999 9,600 12,800 9,200 3,563
1998 9,600 12,800 8,800 2,906
Coleman D. Ross 2000 4,846
1999
1998
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The following table sets forth information with respect to stock option
grants to the named executives in 2000. The options, granted during 2000, to the
named executives pursuant to Trenwick's 1993 Employee Stock Option Plan become
exercisable in five equal annual installments beginning one year from the date
of grant, but become immediately exercisable in full in the event of a change in
control of Trenwick. They are subject to termination prior to their expiration
date in the event of termination of the grantee's employment.
Option Grants in Last Fiscal Year
Potential Realizable
Value at Assumed Annual
Rates
Number of Percent of Total of Stock Price
Securities Options/SARs Appreciation
Underlying Granted to Exercise or for Option Term ($)
Options/SARs Employees in Base Price Expiration -----------------------
Name Granted (#) Fiscal Year (%) ($/Share) Date 5% 10%
---- ------------ ---------------- ----------- ---------- ------- ---------
James F. Billett, Jr. 81,346 14.5% 13.00 03/01/10 655,055 1,685,379
Steven J. Bensinger 43,269 7.7% 13.00 03/01/10 353,751 896,475
Paul Feldsher 29,654 5.3% 13.00 03/01/10 242,440 614,391
Robert A. Giambo 29,654 5.3% 13.00 03/01/10 242,440 614,391
Coleman D. Ross 17,499 3.1% 15.00 06/26/10 143,065 362,556
|
16
The following table sets forth all stock options exercised during 2000 by
the named executives and the number of unexercised options held by the named
executives at December 31, 2000. Also included is the value of "in-the-money"
options on December 31, 2000. In-the-money options are options whose exercise
price is less than the fair market value of Trenwick's common shares.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options/SARs
Options/SARs at FY
Shares at FY-End (#) End($)(2)
Acquired on Value -------------- -------------
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($)(1) Unexercisable Unexercisable
---- ----------- -------- -------------- -------------
James F. Billett, Jr. 0 0 203,021/81,346 0/960,900
Steven J. Bensinger 0 0 186,202/43,269 0/511,115
Paul Feldsher 0 0 115,218/29,654 0/350,288
Robert A. Giambo 0 0 105,670/29,654 0/350,288
Coleman D. Ross 0 0 0/17,499 0/171,709
|
(1) Represents in each case the difference between the fair market value per
Trenwick common share on the date of exercise and the option exercise price
per share.
(2) Represents the difference between the closing price per Trenwick common
share on December 29, 2000, of $24.8125 and the exercise price of
"in-the-money" options granted to each named executive.
REPORT OF THE COMPENSATION COMMITTEE ON
THE COMPENSATION OF EXECUTIVE OFFICERS OF TRENWICK
The Compensation Committee of the Board of Directors is composed entirely
of six independent outside directors. The Compensation Committee meets
periodically to review and recommend for Board approval Trenwick's compensation
program for senior executives and other key employees and independently
administers the share option, share purchase and other incentive plans of
Trenwick.
The guiding principle of the Compensation Committee is to establish a
compensation program which aligns executive compensation with Trenwick's
objectives, business strategies and financial and operational performance. In
this connection, the Compensation Committee seeks to:
(1) Attract and retain qualified executives, in a highly competitive
environment, who will play a significant role in the achievement of Trenwick's
goals.
(2) Create a performance-oriented environment that rewards performance with
respect to the financial and operational goals of Trenwick and which takes into
account industry-wide trends and performance levels.
(3) Reward executives for strategic management and the long-term
enhancement of shareholder value.
Compensation for the Trenwick's executive officers consists of three key
elements: base salary and benefits, discretionary annual cash bonus and
equity-based compensation. The Compensation Committee seeks to weigh each
element both separately and collectively to ensure that the executive officers
are appropriately compensated in a manner that advances both the short-term and
long-term interests of the shareholders. The Compensation Committee's
determinations are guided by the results of a comparative analysis of Trenwick's
executive compensation practices, which was performed in 2000 with the
assistance of an independent compensation consulting firm.
17
The base salary for each executive officer is set on the basis of the
salary levels in effect for comparable positions in the insurance and
reinsurance industry, adjusted for the executive's experience and performance
level and internal comparability considerations. Trenwick monitors industry
salary levels through its participation in several annual industry surveys
administered by nationally known compensation consulting firms. The Compensation
Committee believes that base salaries generally should be adjusted from time to
time so that they approximate the 50th percentile of Trenwick's peers based on
survey information available to the Compensation Committee. Base salaries of
executive officers have not been adjusted to conform to the 50th percentile of
Trenwick's peers for the past three years. Instead, base salaries of executive
officers have only been increased to keep pace with increases in consumer price
indices and in conjunction with promotions.
In addressing the second compensation element, the discretionary annual
cash bonus, the Compensation Committee considers a variety of measures to be
utilized in setting goals and evaluating annual performance. These measures
include return on average capital employed, total return to shareholders and
return on revenues, each of which is considered on an absolute basis and in
comparison to Trenwick's peers, as well as the accomplishment of tactical and
strategic objectives. The Compensation Committee fixes the amount that may be
awarded to the Chief Executive Officer and an aggregate amount that may be
awarded to other executive officers. The Chief Executive Officer allocates
awards among the other executive officers up to the aggregate amount, which
allocations are then reviewed and ratified by the Compensation Committee.
In authorizing 2000 bonuses for executive officers, the Compensation
Committee was cognizant of Trenwick's financial results as reflected in the
numerical measures specified in the preceding paragraph, as well as the
significant increase in the market price of its shares in 2000. The Compensation
Committee also weighed the successful completion of the business combination
with LaSalle Re Holdings Limited in September of 2000, the attendant
restructuring of Trenwick's operations and the creation of a new Bermuda holding
company. Based on these factors, the Compensation Committee reduced the overall
cash incentive compensation paid to its executive officers to 10% below the 1999
level of cash incentive compensation paid by Trenwick to its executive officers.
Trenwick's third compensation element, equity-based compensation, provides
each executive officer with a meaningful shareholding in Trenwick as a long-term
incentive and a mechanism for aligning the executive officers' interests with
those of the shareholders. Under Trenwick's equity incentive plans, the
Compensation Committee has the opportunity to award both share options and
restricted shares to executive officers. Each is linked to the creation of
shareholder value by providing additional value to the executive as Trenwick's
share price increases. Options vest over an extended time, subject to an
executive officer's continued employment with Trenwick, and expire within ten
years of grant. Option grants are made at an exercise price not less than the
fair market value of the underlying shares at the time of grant. Restricted
shares cannot be transferred until the shares vest, with vesting occurring over
an extended time, subject to the executive officer's continued employment. The
holder has all the rights and privileges of a shareholder with respect to the
restricted shares, other than the ability to transfer them, including the right
to vote and to receive dividends.
Trenwick makes annual awards of restricted shares and share options with a
potential total value ranging from zero to up to a maximum of 150% of the
recipient's annual salary. The Compensation Committee believes that this
structure, initiated by Trenwick's predecessor, Trenwick Group Inc., in March
1998, promotes the retention of key employees in a highly competitive labor
environment while emphasizing the alignment between their interests and those of
Trenwick's shareholders. In light of the cited performance measures and
strategic initiatives completed in 2000, the awards for 2000, distributed in
March 2001, were made at rate of up to 100% of 2000 salaries for Trenwick's
senior executive officers, other than Mr. Billett.
18
Compensation of the Chief Executive Officer
Mr. Billett's base salary is set using the same criteria as all other
executive officers. His 2000 cash bonus award remained unchanged from the prior
year's level in reflection of Trenwick's financial results in 2000 and
Trenwick's share price performance in 2000. The total value of his share award
was set at 125% of his 2000 salary, which was greater than the other executive
officers in recognition of the significance of his contribution to Trenwick's
2000 strategic initiatives.
Share Ownership Guidelines
Trenwick developed share ownership guidelines for the Chief Executive
Officer, the other executive officers and the non-employee directors of
Trenwick. Under these guidelines, which will be implemented in 2001, the Chief
Executive Officer of Trenwick is expected to own a minimum of 150,000 shares,
the other executive officers are each expected to own a minimum of 50,000 shares
and the non-employee directors are each expected to own a minimum of 7,500
shares. The time period for compliance is three years. At this time the Chief
Executive Officer and a majority of the non-employee directors and other
executive officers comply with the share ownership guidelines. Trenwick may
provide incentives for directors and officers to equal or exceed individual
share ownership guidelines.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation over $1 million paid to
Trenwick's Chief Executive Officer and the four other most highly compensated
executive officers. However, qualifying performance-based compensation is not
subject to the deduction limit if certain requirements are met. No executive
officer was subject to the limitations of Section 162(m) in 2000. The
Compensation Committee structures equity-based compensation for executive
officers so as to qualify for deductibility under the statute to the extent
feasible. However, to maintain a competitive position within Trenwick's peer
group, the Compensation Committee retains the authority to approve equity-based
compensation that may not be deductible.
Respectfully submitted,
Members of the Compensation Committee
W. Marston Becker, Chairman
Robert M. DeMichele
Robert V. Deutsch
Clement S. Dwyer, Jr.
Joseph D. Sargent
Frederick D. Watkins
19
Shareholder Return Performance Presentation
Set forth below is a line graph for the five year period commencing
December 31, 1995 and ending December 31, 2000, comparing the yearly percentage
change on a dividend reinvestment basis of the common shares of Trenwick and its
predecessors, Trenwick Group Inc. and LaSalle Re Holdings Limited against the
cumulative total shareholder return of the Standard & Poor's 500 Stock Index and
the SNL P & C Insurance Index. The line graph below tracks the performance of
Trenwick Group Inc. and LaSalle Re Holdings Limited for the period from December
31, 1995 until September 27, 2000 and the performance of Trenwick from September
28, 2000 to December 31, 2000.
COMPARISON OF 5YEAR CUMULATIVE TOTAL RETURN8
AMONG TRENWICK GROUP LTD., THE S & P 500 INDEX
AND TH4E SNL. P & C INSURANCE INDEX
[LINE CHART]
12/95 12/96 12/97 12/98 12/99 9/27/00 12/00
------ ------ ------ ------ ------ ----- ------
Trenwick Group Inc. 100.00 84.28 105.68 94.38 51.24 60.63 79.04
LaSalle Re Holdings Ltd. 100.00 135.39 179.02 119.50 95.01 60.63 79.04
S & P 500 100.00 122.96 163.98 210.84 255.22 231.98
SNL P & C Insurance 100.00 116.97 170.30 186.84 138.78 199.70
|
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires Trenwick's
officers and directors, and persons who own more than ten percent of a
registered class of Trenwick's common shares, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Based on
Trenwick's review of all insiders' filings received, and written representations
from reporting persons, Trenwick believes there were no Section 16 violations
for Trenwick for the three months ended December 31, 2000 other than a failure
of each director and Section 16 reporting officer to timely file a Form 3 within
the 10 day period following the month during which the Trenwick/LaSalle business
combination occurred.
AUDIT COMMITTEE REPORT
The Audit Committee of Trenwick's Board of Directors consists entirely of
non-employee directors who are independent, as defined in the New York Stock
Exchange Listing Standards. The Board of Directors has adopted a Charter for the
Audit Committee. A copy of the Charter is attached to this proxy statement as
Appendix A.
20
The Audit Committee assists the Board of Directors in its oversight of
Trenwick's financial statements. Management is responsible for Trenwick's
financial statements and the financial reporting process. PricewaterhouseCoopers
LLP, Trenwick's independent accountants are responsible for expressing an
opinion on the conformity of Trenwick's audited financial statements with
accounting principles generally accepted in the United States.
In this context, the Audit Committee has reviewed and discussed Trenwick's
audited financial statements with management and PricewaterhouseCoopers LLP. The
Audit Committee has also reviewed with PricewaterhouseCoopers LLP the matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees). In addition, the Audit Committee has
received from PricewaterhouseCoopers LLP the written disclosures required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), and discussed with PricewaterhouseCoopers LLP their independence
from Trenwick and its management.
In reliance on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in Trenwick's Annual Report on Form 10-K for the year
ended December 31, 2000, for filing with the Securities and Exchange Commission.
In addition to its audit services for the annual financial statements,
PricewaterhouseCoopers LLP, provides Trenwick with nonaudit and other services
(such as audits of Trenwick's employee benefit plans; various advisory and
consulting services, including tax consultation and compliance services;
acquisition due diligence and consulting; financial information systems design
and implementation; and technical research and consultation). The Audit
Committee reviews and discusses the scope of these additional services with
PricewaterhouseCoopers LLP. Based on this review, the Audit Committee believes
that PricewaterhouseCoopers LLP's provision of its nonaudit services is
compatible with maintaining its independence.
The following table sets out the various fees paid by Trenwick to
PricewaterhouseCoopers LLP for its services.
Annual Fees for 2000
Description Amount
----------- ----------
Audit Fees (1) $1,861,000
Financial Information Systems Design and Implementation Fees 3,894,000
All Other Fees (2) 895,000
|
(1) Professional audit services, including PricewaterhouseCoopers LLP's
audit of Trenwick's annual financial statements for 2000 and its
review of the financial statements included in Trenwick's Forms 10-Q.
Through March 15, 2001, PricewaterhouseCoopers LLP has billed Trenwick
$1,427,000.
(2) All nonaudit and other services include audits of Trenwick's employee
benefit plans; various advisory and consulting services, including tax
consultation and compliance services; acquisition due diligence and
consulting and technical research and consulting.
Leased personnel were not employed by PricewaterhouseCoopers LLP with
respect to this audit engagement. Respectfully submitted,
Members of the The Audit Committee
Stephen R. Wilcox, Chairman
Anthony Brown
Neil Dunn
P. Anthony Jacobs
Peter J. Rackley
21
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Audited financial statements of Trenwick and its consolidated subsidiaries
are included in Trenwick's annual report to shareholders, a copy of which has
been furnished to all shareholders of record. Upon the recommendation of the
Audit Committee, the Board of Directors has appointed PricewaterhouseCoopers LLP
to examine its consolidated financial statements for the year ending December
31, 2001, and has determined it desirable to request that the shareholders
approve such appointment. PricewaterhouseCoopers LLP and its predecessor Price
Waterhouse LLP have acted as Trenwick's or Trenwick Group Inc.'s independent
accountants since 1979. Representatives of PricewaterhouseCoopers LLP will be
present at the Annual General Meeting and will have the opportunity to make a
statement if they desire to do so and are also expected to be available to
respond to appropriate questions.
The Board of Directors recommends a vote FOR the ratification of the
appointment of PricewaterhouseCoopers LLP as independent accountants for
Trenwick for the year ending December 31, 2001.
PROPOSAL NO. 3
APPROVAL OF 2001 NON-EMPLOYEE DIRECTOR EQUITY INCENTIVE PLAN
The following is a summary of the Trenwick Group Ltd. 2001 Non-Employee
Director Equity Incentive Plan which was adopted by the Board of Directors on
February 9, 2001, subject to shareholder approval. A copy of the full text of
the Non-Employee Director Equity Incentive Plan is set forth in Appendix B to
this proxy statement, and the following description is qualified in its entirety
by reference to Appendix B.
The Board of Directors recommends a vote FOR approval of the Non-Employee
Director Equity Incentive Plan.
General
The Non-Employee Director Equity Incentive Plan authorizes the granting of
non-statutory options to purchase Trenwick's common shares to non-employee
directors and permits non-employee directors to purchase directly from Trenwick
Trenwick's common shares. The purpose of the Non-Employee Director Equity
Incentive Plan is to attract and retain the services of qualified persons who
are not employees of Trenwick to serve as members of its Board of Directors and
by encouraging such directors to acquire an increased proprietary interest in
Trenwick.
Eligibility
Only members of the Board of Directors who are not employees of Trenwick or
its subsidiaries will be eligible to participate under the Non-Employee Director
Equity Incentive Plan. At present, 13 members of the Board of Directors are
eligible to participate in the Non-Employee Director Equity Incentive Plan.
Available Shares
Up to 100,000 common shares will be initially available for grants and
purchases under the Non-Employee Director Equity Incentive Plan. If any share
options granted under the Non-Employee Director Equity Incentive Plan expires or
terminates without having been exercised, the common shares subject to but not
delivered under that option will again be available for option grants or share
purchases under the Non-Employee Director Equity Incentive Plan.
22
Effective Date
The Non-Employee Director Equity Incentive Plan will become effective on
the date it is approved by the shareholders of Trenwick.
Share Options
Options granted under the Non-Employee Director Equity Incentive Plan will
only be non-statutory share options (i.e., options which do not qualify as
"incentive stock options" under Section 422 of the Internal Revenue Code).
Number of Options to be Granted. Under the Non-Employee Director Equity
Incentive Plan, following Trenwick's annual general meeting of shareholders at
which a non-employee director is first elected to be a director or on the day a
non-employee director is appointed to the Board of Directors, he or she will be
granted 3,000 options. Thereafter, each non-employee director who is a member of
the Board of Directors will be automatically granted 1,000 options immediately
following Trenwick's Annual General Meeting of shareholders.
Exercise Price. The exercise price per share of options granted under the
Non-Employee Director Equity Incentive Plan will be the closing sales price of a
common share on the date of grant. There will be no consideration received by
Trenwick from a non-employee director in exchange for the grant of an option
under the Non-Employee Director Equity Incentive Plan.
Term. Each option will expire on the 10th anniversary of the date of its
grant. In the event of death while serving as a director, the then-outstanding
options that have vested shall be exercisable for one year from the date of the
death or until the stated grant expiration date, whichever is earlier, by
his/her successors in interest. All options which have been granted, but have
not vested shall automatically expire and shall not be exercisable. In the event
of the termination of service as a director by the Board of Directors for cause,
the Compensation Committee in its sole discretion can cancel the
then-outstanding options of such director, including those options which have
vested, and such options shall automatically expire and become non-exercisable
on the effective date of such termination.
When Exercisable. The options will vest and become exercisable on the
earlier to occur of (a) the day before the next Annual General Meeting of
Trenwick and (b) a change in control of Trenwick. In order for the options to
vest, the option recipient must still be a director of Trenwick at the time of
vesting. The options will remain exercisable until they expire as described
above under "Term."
Manner of Exercise. The options may be exercised by payment in cash or by
bank-certified, cashier's, or personal check. Payment may also be made in whole
or part by tendering common shares having a fair market value at the time of
exercise equal to the total option price, or by electing to have Trenwick
withhold from the common shares otherwise issuable upon exercise of the option
that number of common shares having a fair market value at the time of exercise
equal to the total option price.
Transferability. The right to exercise an option granted under the
Non-Employee Director Equity Incentive Plan shall be exercisable only by the
director receiving the option or pursuant to a qualified domestic relations
order as defined by the Internal Revenue Code of 1986, as amended, or Title I of
the Employee Retirement Income Security Act or the rules thereunder. The options
are not assignable or transferable other than by will or the laws of descent and
distribution or a qualified domestic relations order.
Tax Withholding. Upon exercise of any options pursuant to the Non-Employee
Director Equity Incentive Plan, a director may instruct Trenwick to withhold
option shares, that would otherwise be issuable upon such exercise, to cover
withholding taxes based on the difference between the fair market value of the
option shares on the date of their exercise of options and the exercise price of
such options.
23
Share Purchases
Each eligible non-employee director shall be entitled to purchase common
shares from Trenwick from time to time. The duration and frequency of the time
periods during which the eligible directors may purchase common shares will be
established by the Compensation Committee. The duration of any offering period
cannot exceed 12 months.
Purchase Price. The per share purchase price for common shares purchased
under the Non-Employee Director Equity Incentive Plan shall be the lower of (a)
85% of the fair market value of a common share at the beginning of a given
offering period and (b) 85% of the fair market value of a common share at the
end of a given offering period. Fair market value of a common share is the
closing sales price per common share on the securities exchange on which the
common shares are principally traded, which currently is the New York Stock
Exchange.
Share Restrictions. Common shares purchased under the Non-Employee Director
Equity Incentive Plan initially cannot be sold, transferred, pledged,
hypothecated or otherwise disposed of until the common shares vest. The Board of
Directors, in its sole discretion, may remove any or all of the restrictions for
any one or all of the non-employee directors.
Vesting. Common shares purchased under the Non-Employee Director Equity
Incentive Plan vest and become unrestricted as to transfer and non-forfeitable
upon the earliest to occur of (a) the six month anniversary of the date of
purchase or acquisition of the common shares, (b) the occurrence of a change in
control of Trenwick or (c) the non-employee director who purchases the shares
ceases to be a director of Trenwick for any reason other than termination for
cause. In the event of a termination for cause, the Compensation Committee may
cancel those unvested common shares purchased under the Non-Employee Director
Equity Incentive Plan by the director being terminated.
Dividends. Non-employee directors will be entitled to all dividends paid on
common shares purchased under the Non-Employee Director Equity Incentive Plan,
regardless of whether or not those common shares have vested.
Voting. Non-employee directors will have full voting rights with respect to
all common shares purchased under the Non-Employee Director Equity Incentive
Plan, regardless of whether or not those common shares have vested.
Federal Income Tax Consequences
Options granted under the Non-Employee Director Equity Incentive Plan will
not be taxable to a non-employee director at grant, but will result in taxation
at exercise. Upon exercise, a non-employee director will recognize ordinary
income in an amount equal to the difference between the option's exercise price
and the fair market value of the common shares on the exercise date.
Common shares purchased under the Non-Employee Director Equity Incentive
Plan will generally be taxable at the time the common shares vest. The
non-employee director purchasing common shares under the Non-Employee Director
Equity Incentive Plan will recognize ordinary income equal to the difference
between the purchase price of the common shares and the fair market value of the
common shares at the time of vesting. Alternatively, the non-employee director
may elect to be taxed on the date the common shares are purchased. In such
event, the non-employee director will recognize ordinary income equal to the
difference between the purchase price of the common shares and the fair market
value of the common shares on the date of purchase. Any appreciation in the
value of the common shares following the making of this election by the
non-employee director will be treated as capital gain income.
24
In each instance, Trenwick will be entitled to deduct a corresponding
amount as a business expense in the year in which the non-employee director
recognizes income related to the option exercises or share purchases under the
Non-Employee Director Equity Incentive Plan.
Tax consequences for states and jurisdictions other than the United States
may differ from those described above. The above discussion addresses only the
general federal income tax consequences under the Non-Employee Director Equity
Incentive Plan. It is not intended as tax advice to participants in the
Non-Employee Director Equity Incentive Plan, who should consult their own tax
advisors.
Adjustment of Outstanding Awards
In the event of any split-up or consolidation of shares or any similar
capital adjustment, share dividend or other increase or decrease in the number
of common shares outstanding without receipt of consideration by Trenwick, the
aggregate number of shares subject to the Non-Employee Director Equity Incentive
Plan, the number of shares with respect to which an option may be granted, the
number of shares for each outstanding option, the exercise price per option and
the number of shares purchasable under the Non-Employee Director Equity
Incentive Plan will be proportionately adjusted to reflect the increase or
decrease in common shares.
Administration
The Non-Employee Director Equity Incentive Plan will be administered by the
Compensation Committee of the Board of Directors. The Compensation Committee
presently consists of six non-employee directors who are appointed by the Board
of Directors. Among other functions, the Compensation Committee has the
authority to construe the provisions of and establish rules for the
administration of the Non-Employee Director Equity Incentive Plan.
Termination and Amendment
The Board of Directors may amend, terminate or suspend the Non-Employee
Director Equity Incentive Plan at any time, in its sole and absolute discretion.
No amendment can be made more than once every six months that would change the
amount, price or timing of the initial and annual grants or the price at which
the common shares are purchased, other than to comport with changes in the
Internal Revenue Code of 1986, as amended, or the rules and regulations
promulgated thereunder. Also, no amendment can be made that would (a) materially
increase the number of shares that may be issued under the Non-Employee Director
Equity Incentive Plan, (b) materially modify the requirements as to eligibility
for participation in the Non-Employee Director Equity Incentive Plan, or (c)
otherwise materially increase the benefits accruing to participants under the
Non-Employee Director Equity Incentive Plan without the approval of Trenwick's
shareholders.
PROPOSAL NO. 4
APPROVAL OF EMPLOYEE SHARE PURCHASE PLAN
The following is a summary of the Trenwick Group Ltd. Employee Share
Purchase Plan, which was adopted by the Compensation Committee of Trenwick Group
Inc. on August 2, 2000 and assumed by Trenwick upon completion of the
Trenwick/LaSalle business combination. The Employee Share Purchase Plan
commenced on February 1, 2001, subject to shareholder approval. A copy of the
full text of the Employee Share Purchase Plan is set forth in Appendix C to this
proxy statement, and the following description is qualified in its entirety by
reference to Appendix C.
The Board of Directors recommends a vote FOR approval of the Employee Share
Purchase Plan.
25
General
The purpose of the Employee Share Purchase Plan is to advance the interests
of Trenwick by encouraging and providing for the acquisition of an equity
interest in Trenwick by employees of Trenwick and its designated subsidiaries
and by enabling Trenwick to attract and retain the services of key employees
upon whose efforts the successful conduct of its operations is largely
dependent.
Administration
The Employee Share Purchase Plan is administered by the Compensation
Committee of the Board of Directors. Subject to the terms of the Employee Share
Purchase Plan, the Compensation Committee has authority to designate the
Trenwick subsidiaries who will participate, to determine the commencement and
length of any offering period and the number of common shares that may be
acquired, to interpret the Employee Share Purchase Plan, to promulgate the rules
and regulations relating to the Employee Share Purchase Plan, and to make all
other determinations necessary or advisable for the administration of the
Employee Share Purchase Plan.
Eligibility
Any person who is regularly scheduled to work at least twenty (20) hours
per week and at least five (5) months per calendar year and has maintained
continuous status as an employee for at least three (3) months, is eligible to
participate in the Employee Share Purchase Plan. No employee can be granted an
option under the Employee Share Purchase Plan (i) if, immediately after the
grant, the employee (or any other person whose stock would be attributed to such
employee pursuant to Section 424(d) of the Internal Revenue Code) would own
shares and/or hold outstanding options to purchase shares possessing five
percent (5%) or more of the total combined voting power or value of all classes
of shares of Trenwick or of any subsidiary or parent corporation of Trenwick, or
(ii) which permits such employee's right to purchase shares under all employee
share purchase plans (as described in Section 423 of the Internal revenue Code)
of Trenwick and any subsidiary or parent corporation of Trenwick to accrue at a
rate which exceeds twenty-five thousand dollars ($25,000) of the fair market
value of such shares (determined at the time such option is granted) for any
calendar year in which such option is outstanding at any time.
Shares Subject To The Employee Share Purchase Plan
The Employee Share Purchase Plan provides for the issuance of up to 300,000
common shares, subject to adjustment as described below. In the event of any
change in the outstanding common shares by reason of a share dividend,
recapitalization, forward split or reverse split, merger, amalgamation, scheme
of arrangement, consolidation, spin off, combination, exchange of shares or
other similar corporate change, the number of shares subject to outstanding
options and their stated option prices, and the number of shares subject to the
Employee Share Purchase Plan will be adjusted by the Compensation Committee.
Options
Trenwick may offer employees the opportunity to purchase common shares over
any period of time up to 12 months. Trenwick may commence an offer by granting
each eligible employee an option to purchase common shares. An eligible employee
may elect to become a participant in the Employee Share Purchase Plan solely by
filing an agreement with Trenwick authorizing payroll deductions of the
employee's compensation. The option price per Trenwick common share subject to
an offering shall be the lesser of: (i) eighty-five percent (85%) of the fair
market value of a common share at the beginning of the offering period or (ii)
eighty-five percent (85%) of the fair market value of a common share at the end
of the offering period. Fair market value of the common shares will be
determined by averaging the high and low sales prices of the common shares as
reported on the relevant date.
26
Transferability
No rights with regard to the exercise of an option or to receive common
shares under the Employee Share Purchase Plan may be assigned or transferred,
pledged or otherwise disposed of in any way.
Amendment or Termination
The Board of Directors may at any time terminate or amend the Employee
Share Purchase Plan. The Board of Directors may not amend the Employee Share
Purchase Plan to increase the number of shares available for purchase under the
Employee Share Purchase Plan, change the class of persons eligible to
participate in purchases under the Employee Share Purchase Plan or reduce the
purchase price below 85% of fair market value without approval of Trenwick's
shareholders.
The Employee Share Purchase Plan will also terminate on the date of any
transaction resulting in a change in control of Trenwick.
Federal Income Tax Considerations
It is the intention of Trenwick to have the Employee Share Purchase Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal
Revenue Code of 1986, as amended. The provisions of the Employee Share Purchase
Plan, accordingly, shall be construed so as to extend and limit participation in
a manner consistent with the requirements of that section of the Internal
Revenue Code.
The payroll deductions withheld from a participant's pay under the Employee
Share Purchase Plan will be taxable income to the participant and must be
included in the participant's gross income for federal income tax purposes in
the year which such amounts otherwise would have been received.
A participant will not be required to recognize any income for federal
income tax purposes either at the time the participant is granted an option
(which will be on the first day of an offering period) or by virtue of the
exercise of the option (which will take place on the last day of such offering
period). The federal income tax consequences of a sale or disposition of common
shares acquired under the Employee Share Purchase Plan depend in part on the
length of time the common shares are held by a participant before such sale or
disposition. If a participant sells or otherwise disposes of common shares
acquired under the Employee Share Purchase Plan (other than any transfer
resulting from death) within two years after the first day of the offering
period at the end of which the common shares were acquired, the participant must
recognize ordinary compensation income in the year of such disposition in an
amount equal to the excess of (i) the fair market value of the common shares on
the date such common shares were acquired over (ii) the price paid for the
common shares by the participant. The amount of "ordinary" compensation income
recognized by the participant will be added to the participant's basis in such
common shares for purposes of determining any additional gain or loss realized
by the participant on the sale of the common shares. Any such additional gain or
loss will be taxed as capital gain or loss, long or short, depending on how long
the participant held the shares.
If a participant sells common shares acquired under the Employee Share
Purchase Plan after the two-year period or if the participant dies, the
participant or the participant's estate must include as ordinary compensation
income in the year of sale (or the taxable year ending upon death) an amount
equal to the lesser of (i) the excess of the fair market value of the common
shares on the first day of the offering period over the option price (determined
as if the option had been exercised on the first day of the offering period), or
(ii) the excess of the fair market value of the common shares at the time of
sale of the common shares or on the date of death over the price paid for the
common shares by the participant. Except in the case of a transfer as a result
of death, the amount of ordinary income recognized by the participant will be
added to the participant's basis in such shares. Any gain realized upon the sale
in excess of such basis will be taxed as a long-term capital gain. Any loss
realized will be treated as long-term capital loss.
27
Trenwick will not receive any income tax deduction as a result of issuing
shares pursuant to the Employee Share Purchase Plan, except upon sale or
disposition of shares by a participant within the designated two-year period. In
such an event, Trenwick will be entitled to a deduction equal to the amount
included as ordinary income to the participant with respect to the sale or
disposition of such shares.
Tax consequences for states and jurisdictions other than the United States
may differ from those discussed above. The above discussion addresses only the
general federal income tax consequences under the Employee Share Purchase Plan.
It is not intended as tax advice to participants in the Employee Share Purchase
Plan, who should consult their own tax advisors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management Indebtedness
With the approval of the Compensation Committee, Trenwick extended lines of
credit of $1,000,000 to James F. Billett, Jr., the Chairman, President and Chief
Executive Officer of Trenwick, and $250,000 to Alan L. Hunte, an Executive Vice
President and the Chief Accounting Officer and Treasurer of Trenwick Services
Inc. The lines of credit are payable upon demand and bear interest on
outstanding balances at the prime rate of interest until paid in full. The
largest aggregate amount of indebtedness outstanding under Mr. Billett's line of
credit in 2000 was $750,000 as of February 16, 2000, with Mr. Billett's
indebtedness remaining at $750,000 for the rest of the year. The largest
aggregate amount of indebtedness outstanding under Mr. Hunte's line of credit in
2000 was $250,000 as of June 22, 2000, with Mr. Hunte's indebtedness remaining
at $250,000 for the rest of the year. The amount outstanding as of March 26,
2001 was $750,000 under Mr. Billett's line of credit and $250,000 under Mr.
Hunte's line of credit. The proceeds from loans made under the lines of credit
have been used by Messrs. Billett and Hunte to fund credit extended in
connection with earlier acquisitions of Trenwick's common shares.
Registration Rights Agreement
In connection with the Trenwick/Chartwell merger, Trenwick assumed
Chartwell Re Corporation's rights and obligations under a registration rights
agreement entered into in December 1995 by Chartwell Re Corporation, certain
members of the Richardson family and certain of Chartwell Re Corporation's other
stockholders. Pursuant to the registration rights agreement, upon the request of
shareholders holding at least 330,000 of Trenwick's common shares or any
security convertible into 330,000 Trenwick common shares, Trenwick must, subject
to certain limited exceptions, use its best efforts to register such shares
under the Securities Act of 1933, as amended. Trenwick 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 family has
the right to initiate two of the four registrations effected pursuant to the
registration rights agreement. Trenwick must 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 shareholders holding a majority of the Trenwick
common shares being registered pursuant to the registration may select the
underwriters, subject to Trenwick's approval.
Parties to the registration rights agreement have "piggyback" rights to
register Trenwick common shares in connection with registration of equity
securities by Trenwick. 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.
28
Mr. DeMichele, a director of Trenwick, was originally designated by the
Richardson family as its representative on the Board of Directors of Trenwick
Group Inc. and currently acts as a financial advisor for certain members of the
Richardson family.
Indemnification; Insurance
Trenwick has generally agreed to indemnify the former officers and
directors of Chartwell Re Corporation in respect of acts or omissions occurring
prior to the effective time of the Trenwick/Chartwell merger (including, but not
limited to, the transactions contemplated by the agreement pursuant to which the
Trenwick/Chartwell merger was effected) to the extent provided under Chartwell
Re Corporation'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, Trenwick agreed to maintain Chartwell Re
Corporation's existing directors' and officers' liability insurance for six
years from the Trenwick/Chartwell merger, subject to certain limitations.
Trenwick has also agreed to indemnify the present and former directors and
officers of Trenwick Group Inc. and LaSalle Re Holdings Limited against
liabilities arising out of the Trenwick/LaSalle business combination. Subject to
applicable Bermuda law and public policy, after we complete the transactions,
Trenwick will honor indemnification rights of the current and former directors
and officers of Trenwick Group Inc., LaSalle Re Holdings Limited or any of their
respective subsidiaries. In addition, Trenwick agreed to maintain, for all
former and current directors and officers of Trenwick Group Inc., LaSalle Re
Holdings Limited and their respective subsidiaries, the current directors' and
officers' liability insurance, fiduciary liability insurance and indemnification
policies maintained by Trenwick Group Inc. and LaSalle Re Holdings Limited for
at least six years from the effective time of the Trenwick/LaSalle business
combination.
Underwriting Services Agreement and Underwriting Support Services Agreement
Effective on October 1, 1998, LaSalle Re Limited entered into an
underwriting support services agreement with CNA Re Services Company and CNA
(Bermuda) Services Limited. Under the underwriting support services agreement,
which expires on September 30, 2001, CNA Re Services Company provided
underwriting support services to LaSalle Re Limited on a daily or hourly fee
basis when and as requested by LaSalle Re Limited. LaSalle Re Limited paid CNA
(Bermuda) Services Limited a $333,333 annual retainer, which was credited
against CNA Re Services Company's daily or hourly fees and associated travel
expenses. In recognition of the contribution made by CNA (Bermuda) Services
Limited to the development of LaSalle Re Limited's business, LaSalle Re Limited
agreed, subject to certain conditions, to pay CNA (Bermuda) Services Limited an
underwriting profit commission of 1.67% of the aggregate net underwriting
profits of LaSalle Re Limited for each fiscal year during the term of the
underwriting support services agreement for which LaSalle Re Limited's loss
ratio was 70% or less.
While the current underwriting support services agreement will not
terminate until September 30, 2001, LaSalle Re Limited has not utilized the
agreement since the Trenwick/LaSalle business combination and does not
anticipate utilizing it in 2001. Consequently, LaSalle Re Limited has accrued
and expensed all fees payable under the agreement during the year ended December
31, 2000. This amounted to $786,000.
Mr. Deutsch, a director of Trenwick, is the Senior Vice President and Chief
Financial Officer of CNA.
Investment Management Agreement
Pursuant to an investment management agreement with Aon Advisors (UK)
Limited, a subsidiary of Aon Corporation, Aon Advisors (UK) Limited provided
LaSalle Re Limited with investment management services in accordance with the
investment guidelines set by the board of directors of LaSalle Re Holdings
Limited. The investment management agreement expired on December 31, 2000.
Pursuant to the terms of the
29
investment management agreement, Trenwick paid Aon Advisors (UK) Limited a fee
equal to 0.16375% per annum of the assets under management. The fees for these
investment management services were determined in arm's length commercial
negotiations. The performance of Aon Advisors (UK) Limited and the fees paid
were periodically reviewed by the investment/finance committee of the board of
directors of LaSalle Re Holdings Limited. LaSalle Re Limited paid Aon Advisors
(UK) Limited investment management fees of $821,000 for the year ended December
31, 2000.
Michael A. Conway, who was a director of LaSalle Re Holdings Limited from
May 1999 until the Trenwick/LaSalle business combination, is an executive
officer of Aon Corporation.
Reinsurance Transactions with Aon and CNA
In the year ended December 31, 2000, LaSalle Re Holdings Limited assumed
premiums totaling approximately $668,000 from a ceding company related to CNA
Financial Corporation and ceded premiums totaling approximately $6,556,000 to a
reinsurer related to CNA Financial Corporation. Absent CNA Financial
Corporation's relationship with Trenwick and its predecessor company, LaSalle Re
Holdings Limited, such transactions might not have taken place. In addition,
during the same period, LaSalle Re Limited wrote premiums totaling approximately
$30,340,000 through brokers related to Aon Corporation; brokerage fees incurred
in respect of this business were approximately $3,034,000 during the same
period. The terms of these reinsurance transactions were negotiated between the
parties and Trenwick believes that such terms were at market rates. Trenwick
does not anticipate similarly assuming business from and ceding business to CNA
related companies, however, it will continue writing business through Aon
Corporation related brokers during the year ending December 31, 2001. However,
the quantity of such business for the 2001 fiscal year cannot yet be determined.
Loan to a former Executive Officer
In accordance with the 1994 employment agreement of Mr. Victor Blake,
LaSalle Re Holdings Limited's former Chief Executive Officer, LaSalle Re
Holdings Limited loaned Mr. Blake $695,000 to purchase a condominium in Bermuda.
The loan is evidenced by a promissory note and interest is payable at the rate
of 8% per annum. LaSalle Re Holdings Limited has agreed to reimburse Mr. Blake
for interest paid on the loan. Currently, Mr. Blake and LaSalle Re Holdings
Limited are looking for a buyer for the property. The loan will be due at the
time of sale. If, as of the date of sale, the fair market value of the
condominium has increased over the amount of the loan, Mr. Blake shall also be
required to pay the amount of the increase to LaSalle Re Holdings Limited. If
the fair market value of the condominium has decreased to below the purchase
price, the amount due from Mr. Blake shall be reduced by the amount of the
decrease.
Other Transactions
In 1999 and 2000, LaSalle Re Holdings Limited renegotiated its catastrophe
equity securities issuance option agreement that it had originally entered into
in 1997. Aon Capital Markets, a subsidiary of Aon Corporation acted as broker in
the renegotiation and received a brokerage fee. During the year ended December
31, 2000, this fee amounted to $936,479.
After the formation of LaSalle Re Holdings Limited's ad hoc committee on
strategic alternatives in May 1999, Trenwick engaged Aon Capital Markets as one
of three investment bankers to assist LaSalle Re Holdings Limited in
investigating and negotiating potential strategic transactions. Following the
Trenwick/LaSalle business combination, LaSalle Re Holdings Limited paid Aon
Capital Markets a transaction fee of $807,152.
30
SHAREHOLDER PROPOSALS--2002 ANNUAL GENERAL MEETING
In order for a proposal by a shareholder of Trenwick to be eligible to be
included in Trenwick's proxy statement and proxy for the 2002 Annual General
Meeting of shareholders, the proposal must be received in proper form by the
Secretary of Trenwick at Trenwick's principal executive offices no later than
December 11, 2001.
In order for a proposal by a shareholder of Trenwick which is not included
in Trenwick's proxy Statement and proxy for the 2002 Annual General Meeting of
shareholders to be considered timely, the proposal must be received by the
Secretary of Trenwick at Trenwick's principal executive offices no later than
February 24, 2002. Absent receipt of proper shareholder notice prior to February
24, 2002, the proxies designated by the Board of Directors of Trenwick for the
2002 Annual General Meeting of shareholders may vote in their discretion on any
proposal any shares for which they have been appointed proxies without mention
of such matter in Trenwick's proxy statement for such meeting or on the proxy
for such meeting.
Shareholder recommendations of nominees for director of Trenwick should be
submitted in writing to the Secretary of Trenwick, with a description of the
proposed nominee's qualifications and other relevant biographical information,
and the nominee's consent to serve as a director of Trenwick. Shareholder
recommendations for director nominees for the 2002 Annual General Meeting must
be received by Trenwick on or prior to December 11, 2001.
OTHER MATTERS
Management of Trenwick is not aware of, and does not intend to present, any
matters at the Annual General Meeting other than those set forth above. Should
other matters properly come before the meeting, the persons named on the
enclosed proxy may vote such proxy in accordance with their best judgment.
Trenwick will bear the cost of preparing, assembling and mailing the
enclosed proxy, this proxy statement and other material which may be sent to
shareholders in connection with this solicitation. Proxies will be solicited on
behalf of the Corporation by D.F. King & Co., Inc. for a fee of approximately
$6,500 plus reasonable out of pocket expenses. D.F. King & Co., Inc. may solicit
proxies by mail, personal interview, telephone and telegraph. In addition,
proxies may be solicited by mail, personal interview, telephone and telegraph by
directors, officers and employees of Trenwick and its subsidiaries without
receiving additional compensation. Trenwick 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.
By order of the Board of Directors,
/s/ John V. Del Col
John V. Del Col
Assistant Secretary
|
Shareholders are entitled to receive, upon written request, and without
charge, a copy of Trenwick's Annual Report on Form 10-K for the year ended
December 31, 2000 as filed with the Securities and Exchange Commission. Please
direct such requests to the Office of the Secretary, Trenwick Group Ltd.,
Continental Building, 25 Church Street, Hamilton HM 12, Bermuda.
31
Appendix A
TRENWICK GROUP LTD.
AUDIT COMMITTEE CHARTER
On behalf of the Board of Directors of Trenwick Group Ltd. (the "Company"),
Trenwick's Audit Committee (the "Committee") fulfills an oversight role in the
areas of auditing controls and financial reporting. It requires and receives
information and reports from management, the independent auditors and outside
actuaries to facilitate informed and vigilant review and discussion of the
auditing, control and financial reporting processes of Trenwick and its
subsidiaries. The Committee recognizes that the primary responsibility for
Trenwick's financial reporting and controls rests with Trenwick's senior
management. The Committee's essential function is to enhance the independence
and objectivity of the auditing function with the ultimate goal of reinforcing
the confidence of the shareholders and the public in the integrity of Trenwick's
financial reporting process.
Audit Committee Size
The size of the Committee shall be determined from time to time by Trenwick's
Board of Directors, but in any event must consist of at least three members of
Trenwick's Board of Directors. Vacancies of members of the Committee shall be
filled by the Board of Directors. The Board of Directors shall designate one
member of the Committee to be the Chairman of the Committee.
Audit Committee Member Qualifications
o Each Committee member must be "independent" (as such term is defined
in Rule 303.01(B)(3) of the New York Stock Exchange Listed Company
Manual).
o Each Committee member must be financially literate, as such
qualification is interpreted by Trenwick's Board of Directors in its
business judgment, or must become financially literate within a
reasonable period of time after his or her appointment to the
Committee.
o At least one Committee member must have accounting or related
financial management expertise, as Trenwick's Board of Directors
interprets such qualification in its business judgment.
o No Committee member may be employed as an executive of another
corporation where any of Trenwick's executives serve on that
corporation's compensation committee.
o No Committee member may be an "immediate family member" (as such term
is defined in Rule 303.02(A) of the New York Stock Exchange Listed
Company Manual) of an individual who is or has been during the past
three years an executive officer of Trenwick or any of its affiliates.
Areas of Oversight
The Committee's areas of oversight include:
o Controls - reinforcing management's strong commitment to controls and
the adequacy of adherence to Trenwick's accounting, administrative and
operating control and risk assessment processes.
o Financial Information - overseeing the adequacy of processes for
reporting financial information to shareholders, regulators and
others.
o Auditing Functions - overseeing the adequacy, objectivity and
independence of the external auditing process.
A-1
o Actuarial Functions - overseeing the adequacy and objectivity of any
external actuarial work.
o Communication - by periodic meetings, during which written and oral
reports are received, providing through the Committee to Trenwick's
Board of Directors the appropriate communication of findings arising
from the auditing process and the actuarial evaluation.
The Committee's periodic meetings provide the vehicle for carrying out its
responsibilities by considering communications from management, the independent
auditors and outside actuaries as set forth below.
Management
The Committee should review the following communications from management:
o Trenwick's annual financial statements and related footnotes.
o material matters affecting the financial statements and internal
control processes.
o material audit findings and management's responses thereto.
o filings with the Securities and Exchange Commission and other
published documents containing Trenwick's financial statements.
o any changes required in the planned scope of the audit plan.
o policies and procedures with respect to officers' expense accounts and
perquisites, including the use of the corporate assets.
o material risks or exposures and the steps management has taken to
minimize such risk to Trenwick.
o legal and regulatory matters, Company compliance policies, and
programs and reports received from regulators.
o adequacy of Trenwick's internal controls and related significant
findings and recommendations of the independent accountant together
with management's responses thereto.
Independent Auditors
The independent auditor for Trenwick is ultimately accountable to Trenwick's
Board of Directors and the Committee and the Committee and Trenwick's Board of
Directors have the ultimate authority and responsibility to select, evaluate
and, where appropriate, replace the independent auditor (or to nominate the
independent auditor to be proposed for shareholder approval in any proxy
statement).
The Committee should review the following communications from the independent
auditors:
o the annual scope and audit plan and significant changes required in
the planned scope of the audit.
o the annual fee budget.
o reports on fees for additional services arising during the year.
o the results of the annual audit and the report thereon.
A-2
o difficulties encountered in the audit, including any restrictions on
the scope of audit work or access to required information.
o confirm the independence of the independent auditors, including a
review on a periodic basis of a formal written statement prepared by
the independent auditors delineating all relationships between the
independent auditor and Trenwick, actively engaging in a dialogue with
the independent auditor with respect to any disclosed relationships or
services that may impact the objectivity and independence of the
independent auditor and recommending that Trenwick's Board of
Directors take appropriate action in response to the independent
auditors' report to satisfy itself of the independent auditors'
independence.
o recommend to Trenwick's Board of Directors the annual appointment of
the independent auditors.
o other matters related to the audit required to be communicated under
generally accepted auditing standards.
Actuaries
The Audit Committee should review the following communications from Trenwick's
internal and outside actuaries:
o the scope of any actuarial evaluation.
o the findings and results of any actuarial evaluation of loss reserves.
o the objectivity and independence of the outside actuaries.
Procedures and Responsibilities
The Committee's procedures and responsibilities will include:
o meeting with management, the independent accountant and outside
actuaries in separate executive sessions to discuss any matters the
Committee or these groups believe should be discussed privately with
the Committee.
o reporting the Committee's actions to Trenwick's Board of Directors
with such recommendations as may be appropriate.
o the power to conduct or authorize investigations into any matters
within the Committee's scope of responsibility with independent access
to Trenwick's outside counsel, accountants or others to assist it in
the conduct of any investigation.
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Meetings
The Committee will meet as often as necessary to carry out its responsibilities.
Meetings may be called by the Chairman of the Committee and/or the Chairman of
the Board of Directors. The Committee shall conform to such directions as the
Board of Directors shall impose on them, provided that each member shall have
one vote, and the Committee shall have the right as it deems appropriate to
retain outside experts. The Committee may adopt rules for the conduct of its
affairs, including rules governing the adoption of resolutions by unanimous
written consent, and the place, time, and notice of meetings, as shall be
advisable and as shall not be inconsistent with Trenwick's Bye-laws or with any
applicable resolution adopted by the Board of Directors. The Committee shall
cause minutes to be made of all meetings of the Committee and of the attendance
thereat and shall cause such minutes and copies of resolutions adopted by
unanimous written consent to be promptly inscribed or incorporated by the
Secretary in the minute book. Reports of meetings of the Committee shall be made
to the Board of Directors at its next regularly scheduled meeting following the
Committee meeting accompanied by any recommendations to the Board of Directors
approved by the Committee.
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Appendix B
TRENWICK GROUP LTD.
2001 NON-EMPLOYEE DIRECTOR EQUITY INCENTIVE PLAN
1. Purpose. The purpose of the Trenwick Group Ltd. 2001 Non-Employee
Director Equity Incentive Plan (the "Plan") is to promote the interests of
Trenwick Group Ltd. (the "Company") and its shareholders by strengthening
Trenwick's ability to attract and retain the services of experienced and
knowledgeable non-employee directors and by encouraging such directors to
acquire an increased proprietary interest in Trenwick.
2. Definitions. As used in the Plan, the following definitions apply to the
terms indicated below:
(a) "Award Agreement" shall mean the written agreement between Trenwick
and an Eligible Director evidencing an option.
(b) "Board" shall mean the Board of Directors of Trenwick.
(c) "Business Day" shall mean each day that the New York Stock Exchange,
Inc. (or such other exchange on which the Common Shares are
principally traded on the date of reference) is open for the
transaction of business.
(d) "Cause" when used in connection with the termination of an Eligible
Director's status as a Director of Trenwick, shall mean (i) the
willful and continued failure by the Eligible Director substantially
to perform his or her duties and obligations to Trenwick (other than
any such failure resulting from his incapacity due to physical or
mental illness) or (ii) the willful engaging by the Eligible Director
in misconduct which is materially injurious to Trenwick. For purposes
of this Section 2(d), no act, or failure to act, on an Eligible
Director's part shall be considered "willful" unless done, or omitted
to be done, by the Eligible Director in bad faith and without
reasonable belief that his action or omission was in the best interest
of Trenwick. The Board shall determine whether a termination of an
Eligible Director's status as a Director of Trenwick is for Cause.
(e) "Change in Control" shall mean any of the following occurrences:
(i) any "person," as such term is used in Sections 13(d) and 14(d)of
the Exchange Act (other than Trenwick, any trustee or other
fiduciary holding securities under an employee benefit plan of
Trenwick or any corporation owned, directly or indirectly, by
the shareholders of Trenwick in substantially the same
proportions as their ownership of stock of Trenwick), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of
Trenwick representing 50% or more of the combined voting power
of Trenwick's then outstanding 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 and any new director (other than a director designated by
a person who has entered into an agreement with Trenwick to
effect a transaction described in clause (i), (iii) or (iv) of
this Section) whose election by the Board 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 beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to
constitute at least a majority thereof;
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(iii) the shareholders of Trenwick approve a merger or consolidation
of Trenwick with any other corporation, other than (A) a merger
or consolidation which would result in the voting securities of
Trenwick outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of
the combined voting power of the voting securities of Trenwick
or such surviving entity outstanding immediately after such
merger or consolidation, or (B) a merger or consolidation
effected to implement a recapitalization of Trenwick (or similar
transaction) in which no "person" (as hereinabove defined)
acquires more than 50% of the combined voting power of
Trenwick's then outstanding securities; or
(iv) the shareholders of Trenwick approve a plan of complete
liquidation of Trenwick or an agreement for the sale or
disposition by Trenwick of all or substantially all of
Trenwick's assets.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(g) "Commencement Date" shall mean the first Business Day of each Offering
Period.
(h) "Committee" shall mean the Compensation Committee of the Board. 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
promulgated 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).
(i) "Common Shares" shall mean the common shares of Trenwick, par value
$0.10 per share.
(j) "Director" shall mean each member of Trenwick's Board.
(k) "Disabled" shall mean a disability within the meaning of Section
22(e)(3) of the Code.
(l) "Eligible Director" shall mean each Director who is not otherwise an
employee of Trenwick or any subsidiary of Trenwick.
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(n) "Fair Market Value" of a Common Share, as of a date of determination,
shall mean (i) the closing sales price per Common Share on the
national securities exchange on which such shares are principally
traded for the last preceding date on which there was a sale of such
shares on such exchange, or (ii) if the Common Shares are not listed
or admitted 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 shares on such exchange, or (iii) if
the Common Shares are not then listed on the Nasdaq Stock Market, the
average of the highest reported bid and lowest reported asked prices
for the Common Shares 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 Common Shares are not then listed on a national
securities exchange or traded in an over-the-counter market, such
value as determined by the Committee in good faith.
(o) "Offering" shall mean any proposal made in accordance with the terms
and conditions of the Plan permitting Eligible Directors to purchase
Common Shares under the Plan during an Offering Period.
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(p) "Offering Period" means each period which begins on a Commencement
Date and ends on a Purchase Date during which Eligible Directors may
purchase Common Shares pursuant to an Offering under the Plan.
(q) "Purchase Date" shall mean the last Business Day of each Offering
Period.
(r) "Unrestricted Shares" shall mean all Common Shares purchased by an
Eligible Director pursuant to Section 7 of the Plan following the
earliest to occur of the following events:
(i) the six month anniversary of the Purchase Date related to such
Common Shares or, with respect to any additional Common Shares
received pursuant to a stock split or stock dividend of any
Common Shares in an Eligible Director's account, the six month
anniversary of the date of acquisition;
(ii) a Change in Control of Trenwick; or
(iii) the Eligible Director ceases to be a Director of Trenwick for
any reason other than for Cause.
3. Shares Subject to the Plan. Subject to adjustment as provided in Section
8, the total number of Common Shares of Trenwick for which options may be
granted or which may be purchased under the Plan shall be 100,000 Common Shares
(the "Shares"). The Shares shall be shares currently authorized but unissued or
currently held or subsequently acquired by Trenwick as treasury shares,
including shares purchased in the open market or in private transactions. If any
option granted under the Plan expires or terminates for any reason without
having been exercised in full, the Shares subject to, but not delivered under,
such option may become available for that grant of other options or for sale
under the Plan. No shares delivered to Trenwick in full or partial payment of an
option exercise price payable pursuant to Section 6(c) shall become available
for the grant of other options or for sale under the Plan.
4. Administration of the Plan. The Plan shall be administered by the
Committee, subject to Sections 11 and 12. Subject to the terms of the Plan, the
Committee shall have the power to construe the provisions of the Plan, to
determine all questions arising thereunder, and to adopt and amend such rules
and regulations for administering the Plan as the Committee deems desirable.
5. Participation in the Plan. Each Eligible Director shall be eligible to
participate in the Plan.
6. Options. Each option granted to an Eligible Director under the Plan and
the issuance of Shares thereunder shall be subject to the following terms:
(a) Option Agreements. Each option granted under the Plan shall be
evidenced by an Award Agreement duly executed on behalf of Trenwick and by
the Eligible Director to whom such option is granted and dated as of the
applicable date of grant. Each Award Agreement shall be signed on behalf of
Trenwick by an officer or officers delegated such authority by the
Committee using either manual or facsimile signature. Each Award Agreement
shall comply with and be subject to the terms and conditions of the Plan.
Any Award Agreement may contain such other terms, provisions and conditions
not inconsistent with the Plan as may be determined by the Committee.
(b) Option Grant Size and Grant Dates.
(i) Initial Grants. An option to purchase 3,000 Shares, as
adjusted pursuant to Section 8 (an "Initial Grant"), shall be granted
to each Eligible Director immediately following the Annual Meeting at
which such Director is first elected to be a Director or at the close
of business on the day upon which such Eligible Director is first
appointed by the Board to be a Director, whichever first occurs;
provided, that
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if an Eligible Director who previously received an Initial Grant
terminates service as a Director and is subsequently elected or
appointed to the Board, such Director shall not be eligible to receive
a second Initial Grant, but shall be eligible to receive only Annual
Grants as provided in Section 6(b)(ii).
(ii) Annual Grants. An option to purchase 1,000 Shares, as
adjusted pursuant to Section 8 (an "Annual Grant"), shall be granted
automatically each year, immediately following the Annual Meeting, to
each Director who is an Eligible Director at such time.
(c) Option Exercise Price. Each Award Agreement shall state the
exercise price per share of the Common Shares to which it relates. The
exercise price per Common Share subject to an option shall not be less than
100% of the Fair Market Value per Common Share at the close of business on
the day of the grant of the option.
(d) Vesting; Exercisability. An option granted immediately following
an Annual General Meeting shall vest and become nonforfeitable on the
earlier to occur of (a) the day before the next Annual General Meeting or
(b) a Change in Control of Trenwick, in each case if the optionee has
continued to serve as a Director until such time. An option granted other
than immediately following an Annual General Meeting shall vest and become
nonforfeitable on the earlier to occur of (i) the first annual anniversary
of the day on which such option was granted or (ii) a Change of Control of
Trenwick, in each case if the optionee has continued to serve as a Director
until such time. An option shall on that day and thereafter be exercisable,
subject only to Section 6(g).
(e) Time and Manner of Option Exercise. Any vested and exercisable
option is exercisable in whole or in part at any time or from time to time
during the option period by giving written notice, signed by the person
exercising the option, to Trenwick stating the number of Shares with
respect to which the option is being exercised, accompanied by payment in
full of the option exercise price for the number of Shares to be purchased
and by the payment or making provision satisfactory to Trenwick for the
payment of any taxes which Trenwick is obligated to collect with respect to
the issue or transfer of the Shares upon such exercise. The date both such
notice and payment are received by the office of the Secretary of Trenwick
shall be the date of exercise of the option as to such number of Shares. No
option may at any time be exercised with respect to a fractional Share.
(f) Payment of Exercise Price. Payment of the option exercise price
may be in cash or by bank-certified, cashier's, or personal check or
payment may be in whole or part by:
(i) transfer to Trenwick of Common Shares having a Fair Market Value
equal to the option exercise price at the time of such exercise,
or
(ii) delivery of instructions to Trenwick to withhold Shares that
would otherwise be issued on such exercise of the option having a
Fair Market Value at the time of such exercise equal to the total
option exercise price of the options being exercised.
If the Fair Market Value of the number of whole Common Shares transferred
or the number of whole option Shares surrendered is less than the total
exercise price of the option being exercised, the shortfall must be made up
in cash or other form of payment as permitted under this Section 6(f).
(g) Term of Options. Each option shall expire ten years from its date
of grant, but shall be subject to earlier termination as follows.
(i) In the event of the death of an optionee while the optionee is a
Director, the then-outstanding options of such optionee that have
vested pursuant to Section 6(d) shall be exercisable for one
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year from the date of the death of the optionee or until the
stated grant expiration date, whichever is earlier, by his/her
successors in interest, in accordance with the paragraph below.
However, all options which have been granted, but have not vested
pursuant to Section 6(d), shall automatically expire and shall
not be exercisable.
(ii) In the event of the termination of an optionee's service as a
Director by the Board for Cause, the Committee in its sole
discretion can cancel the then-outstanding options of such
optionee, including those options which have vested pursuant to
Section 6(d), and such options shall automatically expire and
become non-exercisable on the effective date of such termination.
Exercise of a deceased optionee's options that are still exercisable shall
be by the estate of such optionee or by a person or persons whom the
optionee has designated in writing filed with Trenwick, or, if no such
designation has been made, by the person or persons to whom the optionee's
rights have passed by will or the laws of descent and distribution.
(h) Transferability. The right of any optionee to exercise an option
granted under the Plan shall, during the lifetime of such optionee, be
exercisable only by that optionee or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder (a "QDRO") and
shall not be assignable or transferable by such optionee other than by will
or the laws of descent and distribution or a QDRO.
(i) Limitation of Rights. Neither the recipient of an option under the
Plan nor an optionee's successor or successors in interest shall have any
rights as a shareholder of Trenwick with respect to any Shares subject to
an option granted to such person until the date of issuance of a
certificate for such Shares.
(j) Regulatory Approval and Compliance. Trenwick shall not be required
to issue any certificate or certificates for Shares upon the exercise of an
option granted under the Plan or to record as a holder of record of Shares
the name of the individual exercising an option under the Plan, without
obtaining to the complete satisfaction of the Committee the approval of all
regulatory bodies deemed necessary by the Committee and without complying,
to the Committee's complete satisfaction, with all rules and regulations
under federal, state, or local law deemed applicable by the Committee.
(k) Tax Withholding. Eligible Directors participating in the Plan,
upon exercise of any options pursuant to the Plan, may instruct Trenwick to
withhold option Shares that would otherwise be issuable upon such exercise
to cover applicable withholding taxes based upon the difference between the
Fair Market Value on the date of exercise of the Shares underlying the
options being exercised and the exercise price of such options.
(l) Nonstatutory Stock Options. All options granted under the Plan
shall be nonstatutory options not intended to qualify under Section 422 of
the Internal Revenue Code of 1986, as amended.
7. Stock Purchases. Each Eligible Director under the Plan shall be entitled
to purchase shares from Trenwick in accordance with the following terms:
(a) Offerings. The Plan shall be implemented by a series of Offerings
to all Eligible Directors, the duration and frequency of which will be
specified from time to time by the Committee.
(b) Purchase Price. Each Offering shall permit each Eligible Director
to purchase on the Purchase Date Common Shares at a purchase price per
share which shall be the lower of (i) 85% of the Fair Market Value of the
Common Shares on the Commencement Date, or (ii) 85% of the Fair Market
Value of the Common Shares on the Purchase Date.
B-5
(c) Duration of Offering Periods. No Offering Period pursuant to the
Plan shall be for a period greater than 12 months from the Commencement
Date.
(d) Restrictions on Shares. Common Shares purchased by an Eligible
Director under this Section 7 shall not be sold, transferred or otherwise
disposed of, and shall not be pledged or otherwise hypothecated until such
time as they shall become Unrestricted Shares. The Board, in its sole
discretion, may remove any or all of the restrictions on the Common Shares
established by this Section 7(d), at any time, for any Eligible Director or
any group of Eligible Directors.
(e) Vesting. Common Shares purchased by an Eligible Director under
this Section 7 shall vest and become nonforfeitable at such time as they
shall become Unrestricted Shares or the restrictions related to such Common
Shares shall be otherwise removed by the Board pursuant to Section 7(d). In
the event of the termination of an Eligible Director's service as a
Director by the Board for Cause, the Committee in its sole discretion can
cancel the issuance of those Common Shares purchased by such Director
pursuant to this Section 7 which have not yet become Unrestricted Shares
and such Director shall have no further rights with respect to such Common
Shares as of effective date of such termination.
(f) Dividends. Dividends paid in cash on Common Shares held in an
Eligible Director's account prior to becoming Unrestricted Shares shall be
distributed to such Eligible Director as soon as practicable. Dividends on
such Common Shares paid in Common Shares or stock splits of the Common
Shares shall be credited to the accounts of Eligible Directors. Dividends
paid on such Common Shares in property other than cash or Common Shares
shall be distributed to Directors as soon as practicable.
(g) Voting. An Eligible Director shall have the right to vote all
Common Shares purchased pursuant to this Section 7, whether or not such
Common Shares have become Unrestricted Shares.
8. Capital Adjustments. The aggregate number and class of Shares subject to
and authorized by the Plan, the number and class of Shares with respect to which
an option may be granted to an Eligible Director under the Plan as provided in
Section 6, the number and class of Shares subject to each outstanding option,
the exercise price per share specified in each such option and the number of
shares which may be purchased pursuant to Section 7 shall be proportionately
adjusted for any increase or decrease in the number of issued Common Shares
resulting from a split-up or consolidation of shares or any like capital
adjustment or the payment of any share dividend, or other increase or decrease
in the number of such Shares effected without receipt of consideration by
Trenwick.
9. Expenses of the Plan. All costs and expenses of the adoption and
administration of the Plan shall be borne by Trenwick, and none of such expenses
shall be charged to any optionee.
10. Effective Date and Duration of the Plan. The Plan shall be effective as
of the date of approval by Trenwick's shareholders. The Plan shall continue in
effect until it is terminated by action of the Board or Trenwick's shareholders,
but such termination shall not affect the terms of any then-outstanding options
issued pursuant to Section 6 or Common Shares purchased pursuant to Section 7.
11. Termination and Amendment of the Plan. The Board may amend, terminate
or suspend the Plan at any time, in its sole and absolute discretion; provided,
however, that no amendment shall be made more than once every six months that
would change the amount, price or timing of the Initial and Annual Grants or the
price at which the Common Shares are purchased, other than to comport with
changes in the Code, or the rules and regulations promulgated thereunder; and
provided, further, that no amendment shall be made without the approval of
Trenwick's shareholders that would (a) materially increase the number of Shares
that may be issued
B-6
under the Plan, (b) materially modify the requirements as to eligibility for
participation in the Plan, or (c) otherwise materially increase the benefits
accruing to participants under the Plan.
12. Compliance with Rule 16b-3. Other provisions of the Plan
notwithstanding, neither the Committee nor any other person (other than an
Eligible Director acting in conformity with the terms of the Plan) shall have
any discretionary authority to make determinations regarding the Plan required
by Rule 16b-3 to be afforded exclusively to "disinterested persons" as defined
thereunder.
13. Limitation as to Directorship. Neither the Plan, nor the granting of an
option, nor any other action taken pursuant to the Plan shall constitute or be
evidence of any agreement or understanding, express or implied, that an Eligible
Director has a right to continue as a Director for any period of time or at any
particular rate of compensation.
B-7
Appendix C
TRENWICK GROUP LTD.
EMPLOYEE SHARE PURCHASE PLAN
Section 1. Purpose of the Plan
The purpose of the Trenwick Group Ltd. Employee Share Purchase Plan (the
"Plan") is to provide employees of Trenwick Group Ltd. ("Trenwick") and
designated Subsidiaries an opportunity to acquire a proprietary interest in
Trenwick through the purchase of common shares, $.10 par value per share, of
Trenwick ("Common Shares"). It is intended that the Plan qualify as an "employee
stock purchase plan" under Section 423 of the Internal Revenue Code of 1986, as
amended ("Code"), and the provisions of the Plan shall be construed accordingly.
Section 2. Definitions
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Business Day" means each day that the New York Stock Exchange, Inc.
(or such other exchange on which Common Stock is principally traded on the date
of reference) is open for the transaction of business.
(b) "Commencement Date" shall mean the first Business Day of each Offering
Period.
(c) "Corporate Transaction" means the occurrence of any one of the
following events:
(i) any "person" (as defined in Section 3(a)(9) of the Exchange Act
and as such term is modified in Sections 13(d) and 14(d) of the Exchange
Act), excluding Trenwick or any of its Subsidiaries, a trustee or any
fiduciary holding securities under an employee benefit plan of Trenwick or
any of its Subsidiaries, an underwriter temporarily holding securities
pursuant to an offering of such securities or a corporation owned, directly
or indirectly, by shareholders of Trenwick in substantially the same
proportions as their ownership of Trenwick, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of Trenwick (not including in the securities
beneficially owned by such person any securities acquired directly from
Trenwick or its affiliates) representing fifty percent (50%) or more of the
combined voting power of Trenwick's then outstanding securities; or
(ii) during any period of not more than two (2) 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 of Trenwick
and any new director (other than a director designated by a person who has
entered into an agreement with Trenwick to effect a transaction described
in clause (i), (iii) or (iv) of this paragraph) whose election by the Board
of Directors of Trenwick or nomination for election by Trenwick's
shareholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were the directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority
thereof; or
(iii) the shareholders of Trenwick approve a merger, amalgamation,
scheme of arrangement or consolidation of Trenwick with any other
corporation, other than (A) a merger, amalgamation, scheme of arrangement
or consolidation which would result in the voting securities of Trenwick
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of
Trenwick, at least fifty percent (50%) of the combined voting power of the
voting securities of Trenwick or such surviving entity outstanding
immediately after such merger, amalgamation, scheme of arrangement or
C-1
consolidation, or (B) a merger, amalgamation, scheme of arrangement or
consolidation effected to implement a recapitalization of Trenwick (or
similar transaction) in which no person acquires more than fifty percent
(50%) of the combined voting power of Trenwick's then outstanding
securities; or
(iv) the shareholders of Trenwick approve a plan of complete
liquidation of Trenwick or an agreement for the sale or disposition by
Trenwick of all or substantially all of Trenwick's assets.
(d) "Eligible Employee" means any person who, on a Commencement Date, (i)
is customarily scheduled to be employed by any Participating Company as an
employee for at least 20 hours per week and for more than five (5) months in any
calendar year, and (ii) has completed three months of employment with Trenwick
or any Subsidiary.
(e) "Fair Market Value" means, with respect to the Common Shares, the mean
of the high and low sales prices of the Common Shares on the relevant date as
reported on the stock exchange or market on which the Common Shares are
primarily traded, or if no sale is made on such date, then the Fair Market Value
is the weighted average of the mean of the high and low sales prices of the
Common Shares on the next preceding day and the next succeeding day on which
such sales were made, as reported on the stock exchange or market on which the
Common Shares are primarily traded.
(f) "Offering" means any proposal made in accordance with the terms and
conditions of the Plan permitting Eligible Employees to purchase Common Shares
under the Plan during an Offering Period.
(g) "Offering Period" means each period which begins on a Commencement Date
and ends on a Purchase Date during which Eligible Employees may purchase Common
Shares pursuant to an Offering under the Plan.
(h) "Participating Company" shall mean Trenwick and each Subsidiary which
the Committee has designated to participate in the Plan.
(i) "Purchase Date" shall mean the last Business Day of each Offering
Period.
(j) "Subsidiary" shall mean any corporation which is a "Subsidiary" of
Trenwick, as that term is defined in Section 424(f) of the Code.
Section 3. Administration of the Plan
The Plan shall be administered by the Compensation Committee of the Board
of Directors of Trenwick (the "Committee"). Any action of the Committee in
administering the Plan shall be final, conclusive and binding on all persons,
including Trenwick, its Subsidiaries, employees, persons claiming rights from or
through employees and the shareholders of Trenwick.
Subject to the provisions of the Plan, the Committee shall have full and
final authority in its discretion (a) to designate the Subsidiaries whose
employees will participate in the Plan, (b) to determine the maximum number of
Common Shares to be acquired by each Eligible Employee during each Offering
Period, (c) to determine the terms and conditions of each Offering; (d) to
determine the length of each Offering Period and the Commencement Date thereof;
(e) to correct any defect or supply any omission or reconcile any inconsistency
in the Plan; (f) to adopt, amend and rescind such rules and regulations as, in
its opinion, may be advisable in the administration of the Plan and the conduct
of each Offering; and (g) to make all other determinations as it may deem
necessary or advisable for the administration of the Plan.
C-2
Section 4. Participation in the Plan
(a) Only individuals who are employees of a Participating Company shall be
eligible to acquire Common Shares pursuant to any Offering under the Plan.
Except as provided in paragraph (b) hereof, every Eligible Employee on the
Commencement Date of an Offering shall be eligible to participate in such
Offering, provided such individual remains an Eligible Employee until the
Purchase Date.
(b) Notwithstanding any provisions of the Plan to the contrary, no Eligible
Employee shall be eligible to participate in any Offering if:
(i) on the Commencement Date, such Eligible Employee (or any other
person whose shares would be attributed to such Eligible Employee pursuant
to Section 424(d) of the Code) would own shares and/or hold outstanding
options to purchase shares possessing five (5) percent or more of the total
combined voting power or value of all classes of shares of Trenwick or a
Subsidiary; or
(ii) the Eligible Employee belongs to a class or group of Eligible
Employees that the Committee deems ineligible for participation in any
Offering (as the Committee may do from time to time), so long as the
exclusion of such class or group of Eligible Employees from participation
in an Offering does not jeopardize qualification of the Plan under Section
423 of the Code or other applicable law.
Section 5. Offerings
(a) The Plan shall be implemented by a series of Offerings to all Eligible
Employees, the duration and frequency of which will be specified from time to
time by the Committee.
(b) Each Offering shall permit each Eligible Employee to purchase on the
Purchase Date Common Shares at a purchase price per share which shall not be
less than the lower of (i) 85% of the Fair Market Value of the Common Shares on
the Commencement Date, or (ii) 85% of the Fair Market Value of the Common Shares
on the Purchase Date.
(c) No Offering Period pursuant to the Plan shall be for a period greater
than 12 months from the Commencement Date.
(d) All Eligible Employees participating in an Offering under the Plan
shall have the same rights and privileges, except that the Committee may from
time to time provide for differences in the rights and privileges of Eligible
Employees so long as such differences do not jeopardize the qualification of the
Plan under Section 423 of the Code or violate other applicable law.
Section 6. Shares Available under the Plan
(a) Subject to the provisions of Section 7 hereof, the aggregate number of
Common Shares available for purchase pursuant to all Offerings under the Plan
shall not exceed 300,000 shares.
(b) If the total number of Common Shares to be purchased on any Purchase
Date when added to the number of Common Shares previously issued pursuant to
Offerings under the Plan exceeds the maximum number of shares then available
under the Plan, the Committee shall make a pro rata allocation of the shares
available for purchase in such Offering in as nearly a uniform manner as shall
be practicable and as it shall determine to be equitable, and the amounts
received from each Eligible Employee in excess of the amounts applied to
purchase Common Shares shall be refunded to each Eligible Employee.
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Section 7. Adjustments upon Changes in Capitalization
In the event that the Committee determines that any stock dividend,
recapitalization, forward split or reverse split, reorganization, merger,
amalgamation, scheme of arrangement, consolidation, spin-off, combination, share
exchange or other similar corporate transaction or event affects the Common
Shares such that an adjustment is appropriate in order to prevent dilution or
enlargement of the rights of Eligible Employees under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and kind of Common Shares which may thereafter be available under
the Plan, (ii) the number and kind of Common Shares issuable in respect of any
current Offering, and (iii) the purchase price relating to any purchase of
Common Shares to be acquired in any Offering; provided, however, that no
adjustment shall be made if, or to the extent that, such adjustment would cause
the Plan to violate Section 423 of the Code.
Section 8. Accrual Limitations
No Eligible Employee shall be entitled to accrue rights to acquire Common
Shares in any Offering under the Plan (which right shall accrue on the Purchase
Date for an Offering Period) if and to the extent such accrual, when aggregated
with (i) rights to purchase Common Shares accrued under any other Offering under
the Plan during the same calendar year and (ii) rights accrued under any other
employee stock purchase plan (within the meaning of Section 423 of the Code) of
Trenwick or any Subsidiary during the same calendar year, would cause such
Eligible Employee to be able to purchase more than Twenty-Five Thousand Dollars
($25,000) worth of Common Shares or shares of any Subsidiary (determined on the
basis of the Fair Market Value of such shares on the date or dates such rights
are granted) for each calendar year such rights are at any time outstanding.
Section 9. General Provisions
(a) Neither the Plan nor any action taken hereunder shall be construed as
giving any employee any right to be retained in the employ of Trenwick or any
Subsidiary, and no employee of any Subsidiary which is not a Participating
Company shall have any claim or right to participate in any Offerings under the
Plan.
(b) No right of an Eligible Employee to purchase Common Shares pursuant to
an Offering under the Plan shall be assigned or transferred by such Eligible
Employee and such rights to purchase Common Shares pursuant to an Offering shall
be exercisable during the lifetime of the Eligible Employee only by the Eligible
Employee.
(c) No Offering shall confer on any Eligible Employee any of the rights of
a shareholder of Trenwick unless and until Common Shares are duly issued or
transferred to the Eligible Employee in accordance with the terms of the
Offering.
(d) Upon the occurrence of any Corporate Transaction, any outstanding
Offering under the plan will terminate on the Business Day immediately preceding
such Corporate Transaction and such date shall be treated as the Purchase Date
for such Offering Period.
(e) The provisions of the Plan shall be governed by the laws of the State
of Connecticut without resort to that state's conflict-of-laws rules.
Section 10. Effective Date; Amendment; Termination
(a) The Plan shall become effective as of February 1, 2001, subject to the
approval of the Plan by the shareholders of Trenwick on or before December 31,
2001.
(b) The Board of Directors of Trenwick may terminate the Plan or amend the
Plan from time to time; provided, however, that the Board of Directors of
Trenwick shall not, without the approval of the
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shareholders of Trenwick (i) increase the number of shares available for
purchase pursuant to all Offerings, (iii) change the class of persons eligible
to participate in an Offering under the Plan, or (iii) reduce the purchase price
of Common Shares below that set forth in Section 5(b) herein.
(c) Unless sooner terminated by the Board of Directors of Trenwick, the
Plan shall terminate when all shares available for issuance under the Plan have
been purchased pursuant to an Offering under the Plan, or the date of any
Corporate Transaction, if earlier.
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