ONEBEACON INSURANCE GROUP, LTD. (NYSE:OB) Files An 8-K Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

ONEBEACON INSURANCE GROUP, LTD. (NYSE:OB) Files An 8-K Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

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Item 5.02.

Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers.
Long-Term Incentive Award
On February 28, 2017, the Compensation Committee of the Board of
Directors (the Committee) of OneBeacon Insurance Group, Ltd. (the
Company) approved the grant of performance unit awards to each of
our named executive officers. The awards were made under the
OneBeacon 2017 Long-Term Incentive Plan (the 2017 Plan), and were
conditioned on our members approval of the 2017 Plan. Our members
approved the 2017 Plan at the Companys annual general meeting on
May 24, 2017.
The performance unit awards vest based on performance achievement
for the 2017-2019 performance cycle as well as continued
employment through the end of the performance cycle (subject to
earlier vesting upon a termination of employment due to death,
disability or retirement, or an involuntary or constructive
termination following a change in control). The performance
objective is generally the average of the Companys combined ratio
for 2017, 2018 and 2019. The awards made to our President and
Chief Executive Officer and Executive Vice President and Chief
Financial Officer include performance objectives based on
combined ratio and growth in book value per common share
(provided, that following the closing of the merger of the
Company with Intact Financial Corporation (Intact), announced on
May 2, 2017, the performance objective for such awards will be
based on combined ratio only). Performance achievement against
target goals will be determined by the Committee following the
end the performance cycle, and the number of performance units
actually awarded at that time may range from 0% to 200% of the
target number of performance units granted. The target number of
performance units granted to each of our named executive officers
was as follows: T. Michael Miller, President and Chief Executive
Officer, 26,250 performance units; Paul H. McDonough, Executive
Vice President and Chief Financial Officer, 4,500 performance
units; Paul J. Brehm, Executive Vice President, 4,500 performance
units; Dennis A. Crosby, Executive Vice President, 12,750
performance units; and Maureen A. Phillips, Senior Vice President
and General Counsel, 3,750 performance units. Each performance
unit has a fixed value of $100 at grant.
Retention Agreements
On May 24, 2017, the Company entered into retention agreements
with each of its named executive officers for the following
amounts: T. Michael Miller, President and Chief Executive
Officer, $10,000,000; Paul H. McDonough, Executive Vice President
and Chief Financial Officer, $2,700,000; Paul J. Brehm, Executive
Vice President, $3,000,000; Dennis A. Crosby, Executive Vice
President, $4,000,000; and Maureen A. Phillips, Senior Vice
President and General Counsel, $1,200,000. These bonuses were
awarded in recognition of the leadership and efforts demonstrated
by these officers, leading to the execution of the Agreement and
Plan of Merger, dated as of May 2, 2017, among the Company,
Intact, Intact Bermuda Holdings, Ltd., and Intact Acquisition Co.
Ltd. These bonuses were also awarded to encourage the additional
efforts that will be required to consummate the merger while
operating the business at the officers current level of
dedication and excellence, and to encourage continued employment
with the Company after the closing of the merger.
Each retention bonus, other than Mr. Millers, will become payable
as follows: 34% of the bonus will be payable upon the closing of
the merger, 33% of the bonus will be payable on the first
anniversary of the closing of the merger, and 33% of the bonus
will be payable on the second anniversary of the closing of the
merger, in each case, subject to continued employment. In the
case of Mr. Miller, 40% of the bonus will be payable on the
closing of the merger, 30% of the bonus will be payable on the
first anniversary of the closing of the merger, and 30% of the
bonus will be payable on the second anniversary of the closing of
the merger, in each case, subject to continued employment. If the
officers employment is terminated due to an involuntary
termination (as defined in the retention agreement), or death or
disability, a portion of the bonus may be accelerated, in
accordance with the payment schedule and other conditions set
forth in the retention agreement. In the case of Mr. Millers
retention bonus agreement only, if after the closing of the
merger, OneBeacon experiences a change in control, Mr. Miller
would be entitled to receive any remaining unpaid portion of his
retention bonus upon the date of such change in control.
If the officers employment terminates before the final
installment of the bonus is paid, the officer will be subject to
noncompetition restrictions for up to twelve months following
such termination (depending on the circumstances giving rise to
termination and when the termination occurs). The officer will
also be subject to nonsolicitation restrictions following
termination of employment until the first anniversary of such
termination, or in certain cases, until the second anniversary of
the date on which the last installment of the bonus was paid
(depending on the circumstances giving rise to termination and
when the termination occurs).
The retention agreements further provide that, if payments to the
officer in connection with the merger are subject to golden
parachute excise taxes imposed under Section 4999 of the Internal
Revenue Code, the payments to the officer will be reduced in
order to limit or avoid the golden parachute excise tax if and to
the extent such reduction is expected to produce a better
after-tax result for the officer. However, if the after-tax
result before applying any such reduction would not be more than
10% greater than the after-tax result if such payments were
reduced to avoid such golden parachute excise taxes, then the
Company may, in its sole discretion, reduce the payments to the
extent necessary so that no portion of such payments would be
subject to such golden parachute excise taxes.
The above disclosure is qualified by reference to the full text
of the forms of retention agreement, which are filed as Exhibits
10.1 and 10.2 hereto and incorporated by reference herein.
Severance Plan
On May 24, 2017, OneBeacon Services, LLC, a wholly owned
subsidiary of the Company, adopted the OneBeacon Severance Plan
(the Severance Plan), which provides severance benefits to
eligible employees, including the named executive officers. The
Severance Plan will be effective upon the closing of the merger.
The Severance Plan provides the Companys employees, including our
named executive officers, with severance benefits upon a
termination of employment without cause or due to a constructive
termination (as such terms are defined in the Severance Plan). If
such termination occurs with respect to any named executive
officer, he or she would be eligible to receive a lump sum
payment equal to two times the sum of his or her (i) annual base
salary and (ii) annual target bonus. In addition, like other
employees, the named executive officer would be eligible to
receive outplacement assistance as well as reimbursement of the
company-portion of COBRA premiums, for up to 18 months. Benefits
under the Severance Plan are contingent on the delivery of a
release of claims.
The above disclosure is qualified by reference to the full text
of the Severance Plan, which is filed as Exhibit 10.3 hereto and
incorporated by reference herein.
Item 5.07.
Submission of Matters to a Vote of Security Holders.
At the Companys 2017 Annual General Meeting of Members held on
May 24, 2017:
1)
two Class II directors were elected to serve terms ending
in 2020;
2)
the Companys director G. Manning Rountree was elected to
Class III with a term ending in 2018;
3)
the authorization of the election of the Board of
Directors of Split Rock Insurance, Ltd. was approved;
4)
the authorization of the election of the Board of
Directors of Grand Marais Capital Limited was approved;
5)
the authorization of the election of the Board of
Directors of any new designated subsidiary of the Company
was approved;
6)
the advisory resolution on executive compensation was
approved;
7)
the advisory resolution on the frequency of the advisory
vote on executive compensation was approved;
8)
the OneBeacon 2017 Long-Term Incentive Plan was approved;
and
9)
the appointment of PricewaterhouseCoopers LLP as the
Companys Independent Registered Public Accounting Firm
for 2017 was approved.
As of March 29, 2017, the record date for the 2017 Annual General
Meeting, a total of 22,986,618 Class A common shares and
71,754,738 Class B common shares were issued and outstanding. The
results of the vote are presented below.
Proposal 1 – Election of two Class II directors with terms ending
in 2020.
Director
Vote For*
Votes Withheld
Broker Non-Votes
Ira H. Malis
735,848,120
879,880
2,496,781
Patrick A. Thiele
735,934,638
793,362
2,496,781
David T. Foy, a former director of the Company, and former
Executive Vice President and Chief Financial Officer of White
Mountains Insurance Group, Ltd. (White Mountains), become an
advisor to White Mountains senior management effective as of May
17, 2017 until the end of the year. In connection with this
transition of his role with White Mountains, Mr. Foy resigned as
a Class II director of the Company, effective as of May 17, 2017.
As a result of his departure from the Companys Board of Directors
(the Board), Mr. Foy did not stand for re-election to the Board
at the Companys 2017 Annual General Meeting of Members.
Proposal 2 – Authorization to elect the Companys director G.
Manning Rountree to Class III with a term ending in 2018.
Votes For*
Votes Against
Abstentions
Broker Non-Votes
735,196,879
1,439,269
91,852
2,496,781
Proposal 3 – Authorization to elect Messrs. Christopher G.
Garrod, Kevin Pearson, John C. Treacy, and Ms. Sarah A. Kolar to
the Board of Directors of Split Rock Insurance, Ltd.
Votes For*
Votes Against
Abstentions
Broker Non-Votes
736,401,773
209,031
117,196
2,496,781
Proposal 4 – Authorization to elect Ms. Sarah A. Kolar, Mr. Jonah
Pfeffer, and Ms. Davinia Smith to the Board of Directors of Grand
Marais Capital Limited.
Votes For*
Votes Against
Abstentions
Broker Non-Votes
736,345,476
262,756
119,768
2,496,781
Proposal 5 – Authorization to elect Messrs. Paul H. McDonough,
Kevin Pearson, John C. Treacy, and Ms. Sarah A. Kolar to the
Board of Directors of any new designated subsidiary of the
Company.
Votes For*
Votes Against
Abstentions
Broker Non-Votes
736,465,978
199,964
62,058
2,496,781
Proposal 6 Approval of the advisory resolution on executive
compensation.
Votes For*
Votes Against
Abstentions
Broker Non-Votes
732,077,369
3,441,497
1,209,134
2,496,781
Proposal 7 – Approval of the advisory resolution on the frequency
of the advisory vote on executive compensation.
One Year*
Two Years
Three Years
Abstentions
Broker Non-Votes
733,782,495
234,544
2,488,219
222,742
2,496,781
In light of the foregoing vote on Proposal 7, the Company will
hold an advisory vote on executive compensation every year, until
the next required vote on the frequency of shareholder votes on
executive compensation.
Proposal 8 Approval of the OneBeacon 2017 Long-Term Incentive
Plan.
Votes For*
Votes Against
Abstentions
Broker Non-Votes
729,334,404
7,281,092
112,504
2,496,781
Proposal 9 – Appointment of PricewaterhouseCoopers LLP as the
Companys Independent Registered Public Accounting Firm for 2017.
Votes For*
Votes Against
Abstentions
Broker Non-Votes
739,038,113
133,547
53,121
*Each Class B common share is entitled to 10 votes for every one
share; the totals shown above give effect to the 10 for 1 Class B
common share voting rights. The Class A and Class B shares vote
together as one class.
Item 8.01.
Other Events.
The information contained above in Item 5.02 is hereby
incorporated by reference into this Item 8.01.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995
The information contained in this communication may contain
forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. All statements, other than statements of
historical facts, included or referenced in this communication
that address activities, events or developments which we expect
will or may occur in the future are forward-looking statements.
The words will, believe, intend, expect, anticipate, project,
estimate, predict and similar expressions are also intended to
identify forward-looking statements. These forward-looking
statements include, among others, statements with respect to our:
change in book value per share or return on equity;
business strategy;
financial and operating targets or plans;
incurred loss and loss adjustment expenses and the
adequacy of our loss and loss adjustment expense reserves
and related reinsurance;
projections of revenues, income (or loss), earnings (or
loss) per share, dividends, market share or other
financial forecasts;
expansion and growth of our business and operations;
future capital expenditures; and
pending legal proceedings.
These statements are based on certain assumptions and analyses
made by us in light of our experience and judgments about
historical trends, current conditions and expected future
developments, as well as other factors believed to be appropriate
in the circumstances. However, whether actual results and
developments will conform to our expectations is subject to a
number of risks, uncertainties or other factors which are
described in more detail beginning on page 16 of the Companys
2016 Annual Report on Form 10-K, that could cause actual results
to differ materially from expectations, including:
recorded loss and loss adjustment expense reserves
subsequently proving to have been inadequate;
changes in interest rates, debt or equity markets or
other market volatility that negatively impact our
investment portfolio;
competitive forces and the cyclicality of the property
and casualty insurance industry;
claims arising from catastrophic events, such as
hurricanes, windstorms, earthquakes, floods or terrorist
attacks;
the continued availability of capital and financing;
the continued availability and cost of reinsurance
coverage and our ability to collect reinsurance
recoverables;
the ability to maintain data and system security;
the outcome of litigation and other legal or regulatory
proceedings;
our ability to continue meeting our debt and related
service obligations or to pay dividends;
our ability to successfully develop new specialty
businesses;
changes in laws or regulations, or their interpretations,
which are applicable to us, our competitors, our agents
or our customers;
actions taken by rating agencies from time to time with
respect to us, such as financial strength or credit
rating downgrades or placing our ratings on negative
watch;
our ability to retain key personnel;
participation in guaranty funds and mandatory market
mechanisms;
our ability to maintain effective operating procedures
and manage operational risk;
changes to current shareholder dividend practice and
regulatory restrictions on dividends;
credit risk exposure in certain of our business
operations;
Bermuda law may afford less protection to shareholders;
our status as a subsidiary of White Mountains, including
potential conflicts of interest, competition, and
related-party transactions;
changes in tax laws or tax treaties;
the risk that the proposed merger with Intact may not be
completed on the currently contemplated timeline or at
all;
the failure to receive, on a timely basis or otherwise,
the required approval of the proposed merger with Intact
by OneBeacons shareholders;
the possibility that any or all of the various conditions
to the consummation of the merger may not be satisfied or
waived, including the failure to receive any required
regulatory approvals from any applicable governmental
entities (or any conditions, limitations or restrictions
placed on such approvals);
the occurrence of any event, change or other circumstance
that could give rise to the termination of the merger
agreement with Intact, including in circumstances which
would require OneBeacon to pay a termination fee or other
expenses;
risks related to diverting managements attention from our
ongoing business operations and other risks related to
the announcement or pendency of the proposed merger with
Intact, including on our ability to retain and hire key
personnel, our ability to maintain relationships with our
customers, policyholders, brokers, service providers and
others with whom we do business and our operating results
and business generally;
the risk that shareholder litigation in connection with
the transactions contemplated by the merger agreement
with Intact may result in significant costs of defense,
indemnification and liability; and
other factors, most of which are beyond our control.
Consequently, all of the forward-looking statements made in this
communication are qualified by these cautionary statements, and
there can be no assurance that the anticipated results or
developments will be realized or, even if substantially realized,
that they will have the expected consequences. Readers should
carefully review these risk factors, and are cautioned not to
place undue reliance on our forward-looking statements. The
forward-looking statements in this communication speak only as of
the date on which they are made. We assume no obligation to
update publicly any such forward-looking statements, whether as a
result of new information, future events or otherwise.
Additional information and where to find it
This communication may be deemed to be solicitation material in
respect of the proposed takeover of OneBeacon by Intact. In
connection with the proposed transaction, OneBeacon intends to
file relevant materials with the SEC, including a proxy statement
in preliminary and definitive form. Investors and security
holders are urged to read all relevant documents filed with the
SEC (if and when they become available), including OneBeacons
definitive proxy statement, because they will contain important
information about the proposed transaction. Investors and
security holders will be able to obtain copies of the proxy
statement and other documents filed with the SEC (if and when
available) free of charge at the SECs website,
http://www.sec.gov, or for free from OneBeacon by contacting
[email protected] Such documents are not currently available.
Participants in solicitation
This communication is neither a solicitation of a proxy nor a
substitute for any proxy statement or other filings that may be
made with the SEC in connection with the proposed transaction.
OneBeacon, Intact and their respective directors, executive
officers and other members of management and employees, under SEC
rules, may be deemed to be participants in the solicitation of
proxies from holders of OneBeacons common shares in favor of the
proposed transaction. Information about OneBeacons directors and
executive officers is set forth in OneBeacons Proxy Statement on
Schedule 14A for its 2017 Annual General Meeting of Shareholders,
which was filed with the SEC on April 11, 2017, its Annual Report
on Form 10-K for the fiscal year ended December 31, 2016, which
was filed with the SEC on February 27, 2017 and its Current
Report on Form 8-K filed with the SEC on March 6, 2017.
Information about Intacts directors and executive officers is set
forth in Intacts Management Proxy Circular for its 2017 Annual
and Special Meeting of Shareholders, its Annual Information Form
for the fiscal year ended December 31, 2016 and its Managements
Discussion and Analysis for the fiscal year ended December 31,
2016, all of which are available on www.sedar.com. These
documents may be obtained free of charge from the sources
indicated above. Additional information regarding the interests
of these participants which may, in some cases, be different than
those of OneBeacons shareholders generally, will also be included
in OneBeacons proxy statement relating to the proposed
transaction, when it becomes available.
Item 9.01
Financial Statements and Exhibits.
The following exhibits are filed as part of this report.
Exhibit No.
Description of Exhibit
10.1
Form of Retention Agreement for CEO
10.2
Form of Retention Agreement for Non-CEO Named Executive
Officers
10.3
OneBeacon Severance Plan


About ONEBEACON INSURANCE GROUP, LTD. (NYSE:OB)

OneBeacon Insurance Group, Ltd., through its subsidiaries, is a property and casualty insurance writer that offers a range of insurance products in the United States primarily through independent agencies, regional and national brokers, wholesalers and managing general agencies. The Company’s segments include Specialty Products, Specialty Industries, and Investing, Financing and Corporate. The Specialty Products segment consists of over 10 underwriting operating segments representing an aggregation based on those that offer products, coverages and services to customers across the United States. The Specialty Industries segment consists of over six underwriting operating segments representing an aggregation based on those that focus on a particular customer or industry group. The Investing, Financing and Corporate segment includes its investing and financing activities on a consolidated basis, and certain other activities conducted through it and its intermediate subsidiaries.

ONEBEACON INSURANCE GROUP, LTD. (NYSE:OB) Recent Trading Information

ONEBEACON INSURANCE GROUP, LTD. (NYSE:OB) closed its last trading session up +0.01 at 18.31 with 73,137 shares trading hands.

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