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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
FILED BY THE REGISTRANT /x/
FILED BY A PARTY OTHER THAN THE REGISTRANT / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2)
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
FARM FAMILY HOLDINGS, INC.
________________________________________________________________________________
(Name of Registrant as Specified in its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required.
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
It is anticipated that this Proxy Statement and a related form of proxy will
first be delivered to security holders on or about March 7, 1997.
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[LOGO]
FARM FAMILY HOLDINGS, INC.
344 ROUTE 9W
GLENMONT, NEW YORK 12077
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of Farm
Family Holdings, Inc., a Delaware corporation (the "Corporation"), will be held
at The Century House Inn and Conference Center, Route 9, Latham, New York on
April 22, 1997 at 9:00 A.M., New York time, for the following purposes:
1. To elect eight directors to serve for three-year terms expiring in 2000;
2. To ratify the appointment of Coopers & Lybrand L.L.P. as the
Corporation's independent auditors for the year 1997;
3. To approve the adoption of the Corporation's Omnibus Securities Plan;
and
4. To transact any other business that may properly come before the Annual
Meeting and any adjournment(s) thereof.
The close of business on February 24, 1997 has been fixed as the record date
for determination of the stockholders entitled to notice of and to vote at the
Annual Meeting.
By order of the Board of Directors,
/s/ Victoria M. Stanton
--------------------------------------
Victoria M. Stanton
SECRETARY
YOUR VOTE IS IMPORTANT. PLEASE PROMPTLY COMPLETE, DATE AND SIGN THE ENCLOSED
PROXY CARD AND RETURN IT IN THE POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT
YOU PLAN TO ATTEND THE ANNUAL MEETING.
March 7, 1997
Glenmont, New York
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FARM FAMILY HOLDINGS, INC.
344 ROUTE 9W
GLENMONT, NY 12077
PROXY STATEMENT
1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 22, 1997
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Farm Family Holdings, Inc. (the
"Corporation") for use at the 1997 Annual Meeting of Stockholders to be held on
Tuesday, April 22, 1997 at 9:00 A.M. New York time at The Century House Inn and
Conference Center, Route 9, Latham, New York, and at any adjournment(s) thereof
(the "Annual Meeting"). Distribution of this Proxy Statement and the enclosed
proxy card began on or about March 7, 1997.
As of February 24, 1997, 5,253,813 shares of the Corporation's common stock,
par value $.01 per share (the "Common Stock"), were outstanding and entitled to
be voted. Each share entitles the holder to one vote on each matter. The record
date and hour for determining stockholders entitled to vote at the Annual
Meeting has been fixed at the close of business on February 24, 1997 (the
"Record Date").
All proxies, properly executed and returned, will be voted at the Annual
Meeting as directed by the stockholder. Please vote by marking the appropriate
boxes on the enclosed proxy card. If the card is signed and returned without
directions, the shares will be voted "FOR" the election of all directors as
nominated, "FOR" the ratification of Coopers & Lybrand L.L.P. ("Coopers &
Lybrand") as the independent auditors for the year 1997 and "FOR" the adoption
of the Corporation's Omnibus Securities Plan. If other matters properly come
before the meeting, the shares will be voted in accordance with the best
judgment of the persons named as proxies on the proxy card. Any shares not voted
"FOR" a particular director as a result of a direction to withhold or a broker
nonvote will not be counted in the director's favor.
A quorum represented by one-third of the outstanding shares of the Common
Stock present in person or by proxy, is necessary to conduct the meeting.
Directors shall be elected by a plurality of the votes properly cast at the
Annual Meeting either in person or by proxy. All matters to be acted on at the
Annual Meeting other than the election of directors require the affirmative vote
of a majority of the shares present in person or by proxy at the meeting to
constitute the action of the stockholders. In accordance with Delaware law,
abstentions will, while broker nonvotes will not, be treated as present for this
purpose. A broker nonvote is a proxy submitted by a broker for which
instructions have not been received from the beneficial owners or persons
entitled to vote and with respect to which the broker does not have
discretionary authority to vote on a particular matter. The adoption of the
Corporation's Omnibus Securities Plan requires the affirmative vote of a
majority of the shares present in person or by proxy at the Annual Meeting. In
addition, the New York Stock Exchange rules provide that, as a prerequisite to
the listing of any additional or new shares of the Corporation issued pursuant
to the Corporation's Omnibus Securities Plan, the minimum vote which will
constitute stockholder approval for listing purposes is defined as approval by a
majority of votes cast on such proposal, provided that the total vote cast on
such proposal represents over 50% in interest of all shares entitled to vote on
such proposal. A proxy may be revoked by a stockholder at any time before its
use by giving written notice of revocation to the Secretary of the Corporation,
P.O. Box 656 Albany, New York, 12201-0656, if sent by mail, or 344 Route 9W,
Glenmont, New York 12077, if by hand, express mail or overnight courier, by
submitting a subsequent proxy, or by voting in person at the Annual Meeting.
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ITEM I
ELECTION OF DIRECTORS
The Board of Directors is divided into three approximately equal classes,
with one class elected each year to hold office for a three-year term. Currently
there are eight Class I directors, eight Class II directors, and seven Class III
directors, serving terms expiring in 1997, 1998 and 1999, respectively. The term
of the Class I directors expires with this Annual Meeting.
The Board of Directors proposes the election of Robert L. Baker, James V.
Crane, Clark W. Hinsdale III, John W. Lincoln, Wayne A. Mann, Howard T. Sprow,
Charles A. Wilfong and Tyler P. Young as Class I directors, to hold office for a
term of three years, expiring on the date of the Annual Meeting of Stockholders
to be held in 2000 and until their successors are duly elected and qualified.
Each nominee is currently serving as a member of the Board of Directors of the
Corporation.
If any nominee is unable to serve, or for good cause declines to serve at
the time of the Annual Meeting, the persons named as proxies on the proxy card
will exercise discretionary authority to vote for the person or persons the
Board of Directors recommends, if any. The Board of Directors has no reason to
believe that any of the named nominees is not available or would be unable to
serve if elected.
Set forth below is information about each nominee and continuing director.
NOMINEES FOR ELECTION FOR TERM EXPIRING IN 2000
ROBERT L. BAKER, 47, has been a Director of the Corporation since February
1996. His term as a Director will expire in 1997. Mr. Baker has also served as a
Director of Farm Family Casualty Insurance Company ("FFCIC"), a wholly-owned
subsidiary of the Corporation, since 1988. Mr. Baker is Second Vice President
and a Director of Delaware Farm Bureau, Inc. Mr. Baker has been a farmer and
Treasurer of Baker Farms, Inc. since 1972.
JAMES V. CRANE, 35 has been a Director of the Corporation since February
1996. His term as a Director will expire in 1997. Mr. Crane has also served as a
Director of FFCIC since 1994. Mr. Crane is Vice President and a Director of
Maine Farm Bureau Association. Mr. Crane has been a farmer and manager of Crane
Bros., Inc. since 1983.
CLARK W. HINSDALE III, 41, has been a Director of the Corporation since
February 1996. His term as a Director will expire in 1997. Mr. Hinsdale has also
served as a Director of FFCIC since 1993. Mr. Hinsdale is President and a
Director of Vermont Farm Bureau, Inc. Mr. Hinsdale has been a self-employed
farmer, land planner and real estate broker since 1983.
JOHN W. LINCOLN, 58, has been a Director and Vice Chairman of the Board of
the Corporation since February 1996. His term as a Director will expire in 1997.
Mr. Lincoln has also served as Vice Chairman of the FFCIC Board since July 1996,
as First Vice President of FFCIC from March 1996 to July 1996 and as a Director
of FFCIC since 1984. Mr. Lincoln is President and a Director of New York Farm
Bureau, Inc. Mr. Lincoln has owned and operated a dairy farm since 1961.
WAYNE A. MANN, 63, has been a Director of the Corporation since February
1996. His term as a Director will expire in 1997. Mr. Mann has also served as a
Director of FFCIC since 1994. Mr. Mann is First Vice President and a Director of
New Hampshire Farm Bureau Federation. Mr. Mann is a retired air force officer
and pilot and has been a self-employed farmer since 1980.
HOWARD T. SPROW, 77, has been a Director of the Corporation since February
1996. His term as a Director will expire in 1997. Mr. Sprow is an attorney and
has been Senior Counsel to Whiteman Osterman & Hanna, Albany, New York since
November 1992 and was Professor of Law, Albany Law School of Union University
from July 1980 until 1990; he is at present Professor of Law Emeritus.
Previously, Mr. Sprow was Of Counsel to the law firm of Crane & MacKrell,
Albany, New York from August 1990 to November 1992, Partner at the law firm of
Rogers & Wells, New York, New York from
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January 1977 to June 1980 and General Counsel, Vice President--Corporate and
Public Affairs and Secretary of Merrill Lynch, Pierce, Fenner & Smith,
Incorporated and Merrill Lynch & Co., Inc., New York from May 1970 to December
1976.
CHARLES A. WILFONG, 39, has been a Director of the Corporation since
February 1996. His term as a Director will expire in 1997. Mr. Wilfong has also
served as a Director of FFCIC since 1991. Mr. Wilfong is Vice President and a
Director of West Virginia Farm Bureau, Inc. Mr. Wilfong has been a farmer and a
Partner of Wilfong Farms since 1976.
TYLER P. YOUNG, 36, has been a Director of the Corporation since February
1996. His term as a Director will expire in 1997. Mr. Young has also served as a
Director of FFCIC since 1995. Mr. Young is Vice President and a Director of
Rhode Island Farm Bureau Federation, Inc. Mr. Young has been a farmer and
Manager of Ferolbink Farms, Inc. since 1984.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE ABOVE
NOMINEES.
CONTINUING DIRECTORS
WILLIAM M. STAMP, JR., 57, has been a Director and Chairman of the Board of
the Corporation since February 1996. His term as a Director will expire in 1999.
Mr. Stamp has also served as Chairman of the FFCIC Board since July 1996, as
President of FFCIC from 1987 to July 1996 and as a Director of FFCIC since 1975.
Mr. Stamp is President and a Director of Rhode Island Farm Bureau Federation,
Inc. Mr. Stamp has been a farmer and President of Stamp Farm Enterprises, Inc.,
a greenhouse and sweet corn farming operation, since 1956.
RANDOLPH C. BLACKMER, JR., 55, has been a Director of the Corporation since
February 1996. His term as a Director will expire in 1999. Mr. Blackmer has also
served as a Director of FFCIC since 1984. Mr. Blackmer is First Vice President
and a Director of Connecticut Farm Bureau Association, Inc. Mr. Blackmer has
been a self-employed farmer since 1966 and has been the owner of Blackmer Farm
and President of Ag Service, Inc since 1975.
FRED G. BUTLER, SR., 68, has been a Director of the Corporation since
February 1996. His term as a Director will expire in 1999. Mr. Butler has also
served as a Director of FFCIC since 1981. Mr. Butler is President and a Director
of West Virginia Farm Bureau, Inc. Mr. Butler has been a self-employed dairy
farmer since 1956 and has been owner and President of Wright Motors, Inc., an
automobile dealership, since 1965.
JOSEPH E. CALHOUN, 62, has been a Director of the Corporation since February
1996. His term as a Director will expire in 1998. Mr. Calhoun has also served as
a Director of FFCIC since 1990. Mr. Calhoun is President and a Director of
Delaware Farm Bureau, Inc. Mr. Calhoun has owned and operated Joseph E. Calhoun
Farms since 1953.
STEPHEN J. GEORGE, 57, has been a Director of the Corporation since February
1996. His term as a Director will expire in 1999. Mr. George has also served as
a Director of FFCIC since 1989. Mr. George has been a self-employed farmer in
the greenhouse and nursery business since 1965.
GORDON H. GOWEN, 70, has been a Director of the Corporation since February
1996. His term as a Director will expire in 1998. Mr. Gowen has also served as a
Director of FFCIC since 1991. Mr. Gowen previously served as a Director of FFCIC
from 1978 to 1980. Mr. Gowen is President and a Director of New Hampshire Farm
Bureau Federation. Mr. Gowen has been a self-employed farmer since 1957.
JON R. GREENWOOD, 43, has been a Director of the Corporation since February
1996. His term as a Director will expire in 1998. Mr. Greenwood has also served
as a Director of FFCIC since 1995. Mr. Greenwood is Vice President and a
Director of New York Farm Bureau, Inc. Mr. Greenwood has been a self-employed
farmer since 1978.
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RICHARD A. JEROME, 48, has been a Director of the Corporation since February
1996. His term as a Director will expire in 1999. Mr. Jerome has also served as
a Director of FFCIC since 1995. Mr. Jerome is a Director of New York Farm
Bureau, Inc. Mr. Jerome has been a self-employed farmer since 1972.
ARTHUR D. KEOWN, JR., 51, has been a Director of the Corporation since
February 1996. His term as a Director will expire in 1999. Mr. Keown has also
served as a Director of FFCIC since 1993. Mr. Keown is President and a Director
of Massachusetts Farm Bureau Federation, Inc. Mr. Keown has been a self-employed
farmer since 1967.
DANIEL R. LAPOINTE, 58, has been a Director of the Corporation since
February 1996. His term as a Director will expire in 1999. Mr. LaPointe has also
served as a Director of FFCIC since 1987. Mr. LaPointe is a Director of Maine
Farm Bureau Association. Mr. LaPointe has been a self-employed farmer since
1969.
JOHN P. MOSKOS, 45, has been a Director of the Corporation since February
1996. His term as a Director will expire in 1998. Mr. Moskos has been Senior
Vice President, Corporate Banking of Fleet Bank since January 1996. Mr. Moskos
was previously employed by Chase Manhattan Bank N.A. in various capacities from
1973 to 1995, including serving as a Regional President and Senior Lending
Officer and a Division Executive.
NORMA R. O'LEARY, 63, has been a Director of the Corporation since February
1996. Her term as a Director will expire in 1998. Ms. O'Leary has also served as
a Director of FFCIC since 1983. Ms. O'Leary is President and a Director of
Connecticut Farm Bureau Association, Inc. Ms. O'Leary has been a self-employed
farmer since 1952.
JOHN I. RIGOLIZZO, JR., 43, has been a Director of the Corporation since
February 1996. His term as a Director will expire in 1998. Mr. Rigolizzo has
also served as a Director of FFCIC since 1995. Mr. Rigolizzo is President and a
Director of New Jersey Farm Bureau. Mr. Rigolizzo has been a farm employee of
Johnny Boy Farms, Inc. since 1975.
RICHARD D. TRYON, 73, has been a Director of the Corporation since February
1996. His term as a Director will expire in 1998. Mr. Tryon previously served as
a Director of FFCIC from 1988 to 1996. Mr. Tryon is a Director of Massachusetts
Farm Bureau Federation, Inc. Mr. Tryon has been a self-employed farmer since
1946.
Harvey T. Smith currently serves as a Class II director of the Corporation.
Mr. Smith has notified the Corporation of his intention to resign his position
as director effective on the date of the Annual Meeting. Pursuant to the By-Laws
of the Corporation, the vacancy will be filled by a majority of the directors
then in office.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held seven meetings during 1996. Each director
attended more than 75 percent of the meetings of the Board of Directors and of
the committees on which they served. The Board of Directors has an Audit
Committee, a Compensation Committee, an Executive Committee and a Nominating
Committee.
The Audit Committee is comprised of Mr. Baker, Mr. Blackmer, Mr. Greenwood,
Mr. Mann, Mr. Sprow and Mr. Wilfong, none of whom is an officer or employee of
the Corporation. The Audit Committee recommends to the Board the selection of
independent certified public accountants to audit annually the books and records
of the Corporation, reviews the activities and the reports of the independent
certified public accountants and reports the results of such review to the
Board. The Audit Committee also considers the adequacy of the Corporation's
internal controls and internal auditing methods and procedures. The Audit
Committee held two meetings in 1996.
The Compensation Committee is comprised of Mr. Lincoln, Mr. Blackmer, Mr.
Hinsdale and Mr. Moskos, none of whom is an employee of the Corporation. This
committee, as authorized by the
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Board of Directors, makes recommendations to the Board of Directors with respect
to the administration of the salaries, bonuses and other compensation to be paid
to the Corporation's officers. The Compensation Committee held five meetings in
1996.
The Executive Committee is comprised of Mr. Stamp, Mr. Lincoln, Mr. Butler,
Mr. Calhoun, Mr. George, Mr. Gowen, Mr. Hinsdale, Mr. Keown, Mr. LaPointe, Mr.
Moskos and Ms. O'Leary. This committee, to the extent authorized by the Board of
Directors, exercises all the powers and authority of the Board of Directors in
the management of the business and affairs of the Corporation. The Executive
Committee held one meeting in 1996.
In preparation for the Annual Meeting, the Board of Directors appointed a
Nominating Committee for the purposes of recommending to the Board the names of
eight qualified individuals to serve as directors of the Corporation for a
three-year term expiring on the date of the 2000 annual meeting of stockholders.
This committee is comprised of Mr. Stamp, Mr. Lincoln, Mr. George, Mr. Keown,
and Ms. O'Leary. The Nominating Committee held two meetings in 1996.
Stockholders who wish to nominate candidates for election to the Board of
Directors may do so by complying with the nomination requirements of the
Corporation's By-Laws described below.
In addition to any other applicable requirements, the Corporation's By-Laws
provide, in general, that if a stockholder intends to make a nomination for the
election of directors at an annual meeting, the Secretary of the Corporation
must receive written notice of such intention not less than 60 days nor more
than 90 days prior to the anniversary date of the immediately preceding annual
meeting. If the date of the annual meeting is advanced or delayed by more than
30 days from the prior anniversary date, notice must be received not later than
the close of business on the 10th day following the day on which such notice of
the annual meeting was mailed or such public disclosure of the date of the
annual meeting was made, whichever first occurs. If a stockholder intends to
make a nomination for the election of directors at a special meeting called for
the purpose of electing directors, written notice must be received by the
Secretary of the Corporation not later than the 10th day following the day on
which notice of the date of the special meeting was mailed or public disclosure
of the date of the special meeting was made, whichever first occurs.
A stockholder's notice to the Secretary shall set forth (a) as to each
nominee for director (i) the name, age, business address and residence address
of the person; (ii) the principal occupation or employment of the person; (iii)
the class or series and number of shares of capital stock of the Corporation
which are owned beneficially or of record by the person; and (iv) any other
information relating to the person that is required to be disclosed in
solicitations of proxies for election of directors pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder, and (b) as to the stockholder giving the
notice (i) the name and record address of such stockholder, (ii) the class or
series and number of shares of capital stock of the Corporation which are owned
beneficially or of record by the stockholder, (iii) a description of all
arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by proxy at
the annual meeting to nominate the persons named in its notice and (v) any other
information relating to such stockholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Exchange Act and the rules and regulations promulgated thereunder. Such notice
must be accompanied by a written consent of each proposed nominee to being named
as a nominee and to serve as a director if elected.
The foregoing is only a summary of the detailed provisions of the By-Laws
and is qualified by reference to the text thereof. Stockholders wishing to
submit a nomination should review the By-Law requirements regarding nominations
by stockholders and should communicate with the Secretary of Farm
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Family Holdings, Inc., P.O. Box 656 Albany, New York, 12201-0656, if sent by
mail, or 344 Route 9W, Glenmont, New York 12077, if by hand, express mail or
overnight courier, for further information.
The effect of the provisions of the By-Laws described in the foregoing
paragraph is that any stockholder nominations for the 1998 election of directors
must be received by the Secretary of the Corporation not earlier than January
22, 1998 or later than February 21, 1998, provided that the date of the annual
meeting is not advanced or delayed by more than 30 days from the prior
anniversary date.
COMPENSATION OF DIRECTORS
Many of the directors of the Corporation are also directors of FFCIC, Farm
Family Life Insurance Company (the "Life Company") and the Life Company's
wholly-owned subsidiary, United Farm Family Insurance Company ("United"). In
1996, the Chairman of the Board (the same individual for each company) and the
Vice Chairman of the Board (also the same individual for each company) received
an annual retainer of $10,000 and $4,500 respectively. All other directors
received an annual retainer of $3,000. Directors also received a daily fee of
$500 for meetings of the boards of directors of the companies, $250 per meeting
of a board committee and $250 per day for attendance at other company functions.
Effective January 1, 1997, the Chairman of the Board and Vice Chairman of the
Board receive an annual retainer of $20,000 and $10,000 respectively. All other
directors receive an annual retainer of $5,000. Also effective January 1, 1997,
daily meeting fees were increased to $1,000 for meetings of the boards of
directors of the companies, $500 per meeting of a board committee and $500 per
day for attendance at other company functions. Effective January 1, 1997,
Directors may defer their compensation pursuant to a non-qualified deferred
compensation plan. Directors are reimbursed for reasonable travel and other
expenses of attending meetings of the boards of directors and board committees
and other functions. Fees and expenses paid to directors are allocated among the
Corporation, FFCIC, the Life Company and United pursuant to expense sharing
arrangements.
ITEM II
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, on the recommendation of its Audit Committee, has
appointed Coopers & Lybrand as independent auditors for the year 1997. Although
not required, the Board has determined that it is desirable to request
ratification of this appointment by the stockholders of the Corporation. If
ratification is not obtained, the Board will reconsider the appointment.
The Corporation has been advised that representatives of Coopers & Lybrand
will be present at the Annual Meeting. They will be afforded the opportunity to
make a statement, should they desire to do so, and to respond to appropriate
stockholder questions.
Coopers & Lybrand has served as the Corporation's independent auditors since
1996 and has served as FFCIC's independent auditors since 1993.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
ITEM III
APPROVAL OF THE CORPORATION'S OMNIBUS SECURITIES PLAN
Subject to stockholder approval, the Board of Directors of the Corporation
adopted the Omnibus Securities Plan on December 13, 1996. On February 13, 1997,
the Board adopted Amendment No. 1 to the Omnibus Securities Plan (as so amended,
hereinafter the "Plan"). The purpose of the Plan is to enable the Corporation
and its Affiliates (as defined in the Plan) to attract, retain and motivate
employees designated as key management employees by providing for or increasing
the proprietary interest of such employees in the Corporation and by aligning
the interests of such employees with those of the Corporation's stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO APPROVE
THE PLAN.
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The following summary description of the Plan is qualified in its entirety
by reference to the copy of the Plan which is attached to this Proxy Statement
as Exhibit A. Stockholders are urged to read the Plan in its entirety.
GENERAL PLAN PROVISIONS
Under the Plan, employees of the Corporation and its Affiliates may be
granted stock options, stock appreciation rights, and/or shares of Common Stock
which are subject to transfer restrictions ("Restricted Stock") (all of which
are collectively referred to herein as "Awards"). The maximum number of shares
of Common Stock available for all Awards under the Plan is five hundred thousand
(500,000) and the maximum number of shares of Common Stock that may be subject
to Awards of Restricted Stock is one hundred thousand (100,000). The maximum
number of shares of Common Stock that may be subject to Awards of stock options
and stock appreciation rights granted to any individual is one hundred thousand
(100,000) for calendar year 1996 and one hundred thousand (100,000) per year, on
a cumulative basis, for all calendar years after 1996. Shares of Common Stock
issued under the Plan may be authorized but unissued shares, or shares
reacquired by the Corporation and held in its treasury.
The Plan is to be administered by a committee appointed by the Board of
Directors and comprised of not less than three (3) members of the Board (the
"Committee"). The Committee must be constituted so as to permit the Plan to
comply with Rule 16b-3 under the Exchange Act. In addition, each member of the
Committee must be an "outside director" within the meaning of Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"). On December 13,
1996, the Board appointed the members of its Compensation Committee to serve as
the Committee under the Plan.
Subject to the express provisions of the Plan, the Committee is authorized
to construe the Plan and to prescribe such rules and regulations relating to the
Plan as it may deem advisable to carry out the intent of the Plan. The Committee
has the sole authority, in its discretion, to determine which employees of the
Corporation and its Affiliates will be granted Awards, the times at which Awards
will be granted, and the terms, conditions and restrictions of each Award.
Awards are not transferable other than by will or by the laws of descent and
distribution unless the Award agreement specifically provides otherwise.
Stock options granted under the Plan may be either incentive stock options
("ISOs") or non-qualified stock options ("NQSOs"). For ISOs, the option price
may be no less than the Fair Market Value (as defined in the Plan) of a share of
Common Stock on the date the option is granted and the terms of the option must
meet all requirements of Section 422 of the Code. For NQSOs, the option price
may be no less than eighty-five percent (85%) of the Fair Market Value of a
share of Common Stock on the date the option is granted.
Stock Appreciation Rights ("SARs") give the holder the right to receive an
amount equal to the appreciation in value of the Common Stock from the time the
SAR is awarded until the time the SAR is exercised. SARs may be granted in
tandem with stock options or independently. SARs may be payable either in cash,
in Common Stock, or in a combination of cash and Common Stock.
Restricted Stock is subject to forfeiture by the grantee until certain
conditions have been fulfilled and a Restriction Period (as defined in the Plan)
has elapsed. The shares of Common Stock which underlie Awards of Restricted
Stock must vest either (i) in full at the expiration of a period of not less
than three (3) years from the date of grant of the Award; or (ii)
proportionately in equal installments over a period of not less than three (3)
years from the date of grant of the Award. Grants of Restricted Stock will be
made at such cost as the Committee may determine and may be issued for no
monetary consideration, subject to applicable law. Shares of Restricted Stock
are nontransferable during the Restriction Period. At the discretion of the
Committee, the grantee may or may not be entitled to voting and dividend rights
with respect to the Restricted Stock from the date of grant.
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If an Award lapses or the rights of its holder terminate without the
issuance of shares, shares subject to that Award will become available for other
Awards under the Plan. If there is any change in Common Stock by reason of
recapitalization, reorganization, or any other similar transaction, the number
of shares of Common Stock available for grant under the Plan or subject to, or
granted pursuant to, an Award, and the price thereof, will be appropriately
adjusted by the Committee. In the event of a Change of Control (as defined in
the Plan), all outstanding Awards will immediately vest and become exercisable
or satisfiable.
Unless an Award agreement provides otherwise, any rights an employee may
have to exercise any NQSOs and/or SARs (other than those granted in tandem with
ISOs) will terminate one (1) year after termination of employment for any
reason. Any rights an employee may have to exercise any ISOs and/or SARs granted
in tandem with ISOs will terminate three (3) months after termination of
employment due either to the employee's retirement upon or after attaining age
fifty-five (55) or disability, one (1) year after the employee's termination of
employment due to his or her death, or thirty (30) days after the employee's
termination of employment for any other reason.
The Board, in its discretion, may terminate the Plan at any time with
respect to any shares for which Awards have not been granted. The Board may
alter or amend the Plan from time to time except that no alteration or amendment
may be effected which impairs the rights of a Holder with respect to a
previously granted Award without the Holder's (as defined in the Plan) consent
(unless required for purposes of Section 162(m) of the Code). In addition, the
Board's authority to alter or amend the Plan will require shareholder approval
where such alteration or amendment would: (a) increase the maximum number of
shares which may be issued upon exercise or surrender of an Award (except in the
case of recapitalization or reorganization); (b) change the Option (as defined
in the Plan) price; (c) change the class of individuals eligible to receive
Awards or materially increase the benefits accruing to employees under the Plan;
(d) modify materially the requirements as to eligibility for participation in
the Plan; or (e) decrease any authority granted to the Committee under the Plan
in contravention of Rule 16b-3 under the Exchange Act.
AWARDS GRANTED UNDER THE PLAN
Under the Plan, all employees of the Corporation and its Affiliates are
eligible to participate. Approximately 460 employees would presently be eligible
to be considered for Awards under the Plan. On December 13, 1996, the Committee
granted NQSOs, subject to stockholder approval of the Plan, to eight (8)
employees who, in the opinion of the Committee, have had, and would continue to
have, a significant role in improving the profitability and value of the
Corporation for the benefit of its shareholders. These NQSOs may be exercised no
earlier than July 26, 1999 and no later than the tenth anniversary of the date
of the Corporation's 1997 Annual Meeting of Stockholders. These NQSOs vest in
equal amounts over a three (3) year period. The Option price per share for these
NQSOs is equal to the Fair Market Value of the Common Stock on the date of the
Corporation's 1997 Annual Meeting of Stockholders. The market value per share of
the securities underlying the options based on the closing price of the Common
Stock on the Record Date is $22.50.
8
<PAGE>
The following table shows the NQSO Awards which have been granted, subject
to shareholder approval of the Plan:
<TABLE>
<CAPTION>
NAME AND NUMBER
PRINCIPAL POSITION OF UNITS
- ----------------------------------------------------------------------------------- -----------
<S> <C>
Philip P. Weber.................................................................... 75,000
President & Chief Executive Officer
James J. Bettini................................................................... 40,000
Executive Vice President--Operations
Victoria M. Stanton................................................................ 40,000
Executive Vice President,
General Counsel & Secretary
Timothy A. Walsh................................................................... 40,000
Executive Vice President--Finance & Treasurer
Dale E. Wyman...................................................................... 5,000
Senior Vice President--Marketing of
Farm Family Casualty Insurance Company
Executive Officers as a Group (8 persons).......................................... 215,000
Non-Executive Officer Employee Group............................................... --
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain federal income tax consequences
of the Plan. This summary is based on the Corporation's understanding of present
federal tax law and regulations. The summary does not purport to be complete or
applicable to every specific situation. RECIPIENTS OF AWARDS ARE ADVISED TO
CONSULT THEIR PERSONAL TAX ADVISORS WITH REGARD TO ALL TAX CONSEQUENCES ARISING
WITH RESPECT TO THE AWARDS.
TAX WITHHOLDING
If a distribution is made under the Plan in cash, the Corporation will
withhold taxes as required by law. If an Award is satisfied in the form of
shares of Common Stock, then no shares may be issued unless and until
arrangements satisfactory to the Corporation have been made to satisfy any tax
withholding obligations applicable with respect to such Award.
DEDUCTIBILITY OF AWARDS
All Corporation deductions for Plan Awards are limited by Section 162(m) of
the Code which generally limits the Corporation's deduction for non-performance
based compensation to $1 million per year for the Corporation's CEO and its
other four most highly compensated officers. The Corporation has not paid any
compensation to any executive officers that was not deductible by reason of the
prohibition of Section 162(m).
INCENTIVE STOCK OPTIONS
Pursuant to the Plan, employees may be granted stock options which are
intended to qualify as ISOs under the provisions of Section 422 of the Code.
Generally, the optionee is not taxed and the Corporation is not entitled to a
deduction at the time of the grant or the exercise of an ISO. However, if the
optionee sells the shares acquired upon the exercise of an ISO ("ISO Shares") at
any time within (a) one (1) year after the date of transfer of ISO Shares to the
optionee pursuant to the exercise of such ISO or (b) two (2) years after the
date of grant of such ISO, then (1) the optionee will recognize capital gain
equal to the
9
<PAGE>
excess, if any, of the sales price over the sum of the exercise price of the ISO
plus the amount of ordinary income realized per clause (2), (2) the optionee
will recognize ordinary income equal to the excess, if any, of the lesser of the
sales price or the fair market value of the ISO Shares on the date of exercise,
over the exercise price of such ISO, (3) the optionee will recognize capital
loss equal to the excess, if any, of the exercise price of such ISO over the
sales price of the ISO Shares, and (4) the Corporation will generally be
entitled to a federal income tax deduction equal to the amount of ordinary
income recognized by the optionee per clause (2). If the optionee sells the ISO
Shares at any time after the optionee has held such ISO Shares for at least (i)
one (1) year after the date of transfer of the ISO Shares to the optionee
pursuant to the exercise of the ISO and (ii) two (2) years after the date of
grant of the ISO, then the optionee will recognize capital gain or loss equal to
the difference between the sales price and the exercise price of such ISO, and
the Corporation will not be entitled to a federal income tax deduction.
The amount by which the fair market value of the ISO Shares received upon
exercise of an ISO exceeds the exercise price of such ISO will be included as a
positive adjustment in the calculation of an optionee's "alternative minimum
taxable income" ("AMTI") in the year of exercise. The "alternative minimum tax"
imposed on individual taxpayers is generally equal to the amount by which 28%
(26% of AMTI below certain amounts) of the individual's AMTI (reduced by certain
exemption amounts) exceeds his or her regular income tax liability for the year.
NON-QUALIFIED STOCK OPTIONS
An optionee does not recognize income at the time of the grant of a NQSO.
The optionee recognizes ordinary income upon the exercise of a NQSO in an amount
equal to the difference between the fair market value of the stock on the date
of exercise of the NQSO and the exercise price of the NQSO and the Corporation
will be entitled to a federal income tax deduction in an amount equal to such
amount.
STOCK APPRECIATION RIGHTS
Recipients of SARs do not recognize income upon the grant of such rights.
When a participant elects to receive payment of an SAR, the participant
recognizes ordinary income in an amount equal to the cash and fair market value
of shares of Common Stock received, and the Corporation is entitled to a federal
income tax deduction in an amount equal to such amount.
RESTRICTED STOCK
Grantees of Restricted Stock do not recognize income at the time of the
grant of such stock. However, when shares of Restricted Stock are no longer
subject to a substantial risk of forfeiture, grantees recognize ordinary income
in an amount equal to the fair market value of the stock less the amount paid,
if any, for the stock. Alternatively, the grantee of Restricted Stock may file
an election with the Internal Revenue Service to recognize ordinary income upon
the grant of the stock and not at the time the restrictions lapse. The
Corporation is entitled to a federal income tax deduction in an amount equal to
the fair market value of the stock at the time the grantee recognizes income
related to the grant.
ITEM IV
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
Annual Meeting. If other matters are properly brought before the Annual Meeting,
it is intended that the persons named as proxies on the proxy card will have
discretionary authority to vote on such matters in accordance with their best
judgment.
10
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Corporation as of the Record Date by (i)
each director or nominee for director of the Corporation, (ii) the named
executive officers in the Summary Compensation Table appearing later in this
Proxy Statement, (iii) all executive officers and directors of the Corporation
as a group; and (iv) each person who is known by the Corporation to be the
beneficial owner of more than 5% of Common Stock as of such date. The
shareholdings reported for all directors, nominees and executive officers as a
group total less than 1% of the outstanding shares of the Common Stock on the
Record Date. Except as noted below, each person listed in the table has sole
investment and voting power with respect to the shares held by such person. This
information has been furnished by the persons listed in the table.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK
NAME BENEFICIALLY OWNED
- -------------------------------------------------------------------------- -------------------
<S> <C> <C>
William M. Stamp, Jr...................................................... 534 (1)
John W. Lincoln........................................................... 167 (2)
Philip P. Weber........................................................... 1,037 (3)
James J. Bettini.......................................................... 563 (4)
Charles E. Simon.......................................................... 229
Victoria M. Stanton....................................................... 185 (5)
Timothy A. Walsh.......................................................... 100
Dale E. Wyman............................................................. 151 (6)
Robert L. Baker........................................................... 863 (7)
Randolph C. Blackmer, Jr.................................................. 800 (8)
Fred G. Butler, Sr........................................................ 587 (9)
Joseph E. Calhoun......................................................... 73 (10)
James V. Crane............................................................ 350 (11)
Stephen J. George......................................................... 0 (12)
Gordon H. Gowen........................................................... 1,017 (13)
Jon R. Greenwood.......................................................... 1,479 (14)
Clark W. Hinsdale III..................................................... 210 (15)
Richard A. Jerome......................................................... 50 (16)
Arthur D. Keown, Jr....................................................... 0 (17)
Daniel R. LaPointe........................................................ 62 (18)
Wayne A. Mann............................................................. 67 (19)
John P. Moskos............................................................ 0
Norma R. O'Leary.......................................................... 1,216 (20)
John I. Rigolizzo, Jr..................................................... 27 (21)
Harvey T. Smith........................................................... 216 (22)
Howard T. Sprow........................................................... 0
Richard D. Tryon.......................................................... 431 (23)
Charles A. Wilfong........................................................ 643 (24)
Tyler P. Young............................................................ 227 (25)
All directors and executive officers as a group (32 Persons).............. 11,811
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK % OF COMMON
HOLDERS OF GREATER THAN 5% OF COMMON STOCK BENEFICIALLY OWNED STOCK OUTSTANDING
- -------------------------------------------------------------------------- ------------------ -----------------
<S> <C> <C>
Franklin Resources, Inc. ................................................. 421,200(26) 8.01
777 Mariners Island Boulevard
San Mateo, CA 94403
The Crabbe Huson Small Cap Fund and The Crabbe Huson Group, Inc. ......... 375,000(27) 7.14
121 Southwest Morrison, Suite 1400
Portland, OR 97204
FMR Corp. ................................................................ 334,100(28) 6.36
82 Devonshire Street
Boston, MA 02109
W.R. Berkley Corporation.................................................. 272,200(29) 5.18
165 Mason Street
Greenwich, CT 06830
</TABLE>
- ------------------------
(1) Represents shares as to which voting and investment power are shared with
Stamp Farm Enterprises, Inc. or Carol Stamp. Excludes 1,090 shares owned by
Rhode Island Farm Bureau Federation, Inc.
(2) Includes 113 shares to which voting and investment power are shared with S.
Anne Lincoln. Excludes 2,021 shares owned by New York Farm Bureau, Inc.
(3) Represents shares as to which voting and investment power are shared with
Brenda Lee Weber.
(4) Represents shares as to which voting and investment power are shared with
Marie C. Bettini.
(5) Represents shares as to which voting and investment power are shared with
Randy M. Sweeney.
(6) Represents shares as to which voting and investment power are shared with
Barbara Wyman.
(7) Represents 33 shares as to which voting and investment power are shared
with Pamela M. Baker, 86 shares as to which voting and investment power are
shared with Delaware Produce Growers, Inc. and 744 shares as to which voting
and investment power are shared with Baker Farms, Inc. Excludes 60 shares
owned by Delaware Farm Bureau, Inc.
(8) Represents shares as to which voting and investment power are shared with
Myrtie I. Blackmer or Ag Services, Inc. Excludes 91 shares owned by
Connecticut Farm Bureau Association, Inc.
(9) Represents shares as to which voting and investment power are shared with
Norma Gene Butler. Excludes 7,053 shares owned by West Virginia Farm Bureau,
Inc.
(10) Represents shares as to which voting and investment power are shared with
Bessie J. Calhoun. Excludes 60 shares owned by Delaware Farm Bureau, Inc.
(11) Represents shares as to which voting and investment power are shared with
Crane Bros., Inc. Excludes 397 shares owned by Maine Farm Bureau Association
and its affiliates.
(12) Excludes 996 shares owned by New Jersey Farm Bureau.
(13) Includes 929 shares as to which voting and investment power are shared with
Elizabeth R. Gowen. Excludes 207 shares owned by New Hampshire Farm Bureau
Federation.
(14) Represents shares as to which voting and investment power are shared with
Linda R. Greenwood. Excludes 2,021 shares owned by New York Farm Bureau,
Inc.
(15) Excludes 426 shares owned by Vermont Farm Bureau, Inc. and its affiliates.
12
<PAGE>
(16) Represents shares as to which voting and investment power are shared with
Mary Margaret Jerome. Excludes 2,021 shares owned by New York Farm Bureau,
Inc.
(17) Excludes 637 shares owned by Massachusetts Farm Bureau Federation and its
affiliates.
(18) Excludes 397 shares owned by Maine Farm Bureau Association and its
affiliates.
(19) Represents shares as to which voting and investment power are shared with
Ruth F. Mann. Excludes 207 shares owned by New Hampshire Farm Bureau
Federation.
(20) Includes 71 shares as to which voting and investment power are shared with
Ernest J. O'Leary. Excludes 91 shares owned by Connecticut Farm Bureau
Association, Inc.
(21) Represents shares as to which voting and investment power are shared with
Marita Rigolizzo. Excludes 996 shares owned by New Jersey Farm Bureau.
(22) Includes 137 shares as to which voting and investment power are shared with
Donna G. Smith. Excludes 426 shares owned by Vermont Farm Bureau, Inc. and
its affiliates.
(23) Includes 85 shares as to which voting and investment power are shared with
Barbara Tryon. Excludes 637 shares owned by Massachusetts Farm Bureau
Federation and its affiliates.
(24) Represents shares as to which voting and investment power is shared with
Linda Wilfong. Excludes 7,053 shares owned by West Virginia Farm Bureau,
Inc.
(25) Represents shares as to which voting and investment power are shared with
Karla K. Young. Excludes 1,090 shares owned by Rhode Island Farm Bureau
Federation, Inc.
(26) Based on Schedule 13G dated February 12, 1997 filed with the Securities and
Exchange Commission (the "SEC") by Franklin Resources, Inc. and certain
affiliates thereof. An affiliate of Franklin Resources, Inc., Franklin
Advisory Services, Inc., has sole voting and dispositive power over 421,200
shares.
(27) Based on Schedule 13G dated February 7, 1997 filed with the SEC by The
Crabbe Huson Small Cap Fund and The Crabbe Huson Group, Inc. According to
the Schedule 13G, Crabbe Huson Small Cap Fund owns 12,200 shares directly
and shares voting and dispositive power as to such shares with an affiliate.
In addition, The Crabbe Huson Group, Inc. owns 0 shares and shares voting
and dispositive power with respect to 362,800 shares with 20 investors for
whom the Crabbe Huson Group, Inc. acts as an investment advisor.
(28) Based on Schedule 13G dated February 14, 1997 filed with the SEC by FMR
Corp. which has the sole dispositive power over 334,100 shares and the sole
voting power over 0 shares.
(29) Based on Schedule 13G dated February 12, 1997 filed by W.R. Berkley
Corporation which has sole voting and dispositive power over 272,200 shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires executive officers and directors,
and persons who beneficially own more than 10 percent of the Common Stock, to
file initial reports of ownership and reports of changes in ownership with the
SEC and the New York Stock Exchange. Such persons are required by SEC
regulations to provide to the Corporation copies of all their Section 16(a)
filings. Based solely on a review of the forms furnished to the Corporation and
written representations from the Corporation's executive officers and directors,
the Corporation believes that there was full compliance with all Section 16(a)
filing requirements with the exception of one Form 3 filed late by each of
Messrs. Conine, Henderson, Neville, Osterhout, Walsh and Wyman.
13
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation of the
Chief Executive Officer and the other most highly compensated executive officers
of the Corporation. The figures below represent the aggregate compensation paid
to such executive officers by the Corporation, FFCIC, the Life Company and
United (collectively, the "Companies"). Pursuant to expense sharing arrangements
among the Companies, 0.58% of such aggregate compensation expense in 1996 was
charged to the Corporation, 62.55% was charged to FFCIC, 34.44% was charged to
the Life Company and 2.44% was charged to United.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------
NAME AND OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION
- --------------------------------------------------- ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Philip P. Weber.................................... 1996 $285,000 $114,000(1) $-- (2) $ 4,090(3)
President & Chief Executive Officer 1995 240,000 0 -- (2) 1,449(4)
Victoria M. Stanton................................ 1996 150,000 45,000(1) -- (2) 4,090(5)
Executive Vice President, 1995 118,000 11,150 13,643 (6) 4,377(7)
General Counsel & Secretary
James J. Bettini................................... 1996 131,154 39,900(1) -- (2) 4,090(8)
Executive Vice President--Operations 1995 114,500 10,000 14,898 (6) 4,271(9)
Timothy A. Walsh................................... 1996 91,308 28,500(1) -- (2) 840(10)
Executive Vice President--Finance 1995 30,000(11) 0 0 0
& Treasurer
Dale E. Wyman...................................... 1996 118,000 0 13,676(12) 1,318(13)
Senior Vice President--Marketing 1995 112,000 0 11,650 (6) 1,309(14)
of FFCIC
Charles E. Simon(15)............................... 1996 160,223 0 -- (2) 173,678(16)
1995 152,550 0 17,384(17) 4,599(18)
</TABLE>
- ------------------------
(1) Represents bonus paid by the Corporation to the named executive officer for
the officer's role in the initial public offering of the Corporation's
Common Stock.
(2) Does not include certain compensation in the form of perquisites and other
personal benefits provided to the named executive officer for services to
the Companies during the year reported, the aggregate value of which did not
exceed 10% of total annual salary and bonus.
(3) Represents a contribution by the Companies to Mr. Weber's account of $2,940
under the Farm Family Employee "Savings Plus" Plan (the "Savings Plus
Plan"), and a group term life insurance premium of $1,150 paid by the
Companies for the benefit of Mr. Weber, of which $696 was taxable income.
(4) Represents a contribution by the Companies to Mr. Weber's account of $240
under the Savings Plus Plan, and a group term life insurance premium of
$1,209 paid by the Companies for the benefit of Mr. Weber, of which $696 was
taxable income.
(5) Represents a contribution by the Companies to Ms. Stanton's account of
$2,940 under the Savings Plus Plan, and a group term life insurance premium
of $1,150 paid by the Companies for the benefit of Ms. Stanton, of which
$264 was taxable income.
(6) Includes a car allowance of $8,640 paid by the Companies.
14
<PAGE>
(7) Represents a contribution by the Companies to Ms. Stanton's account of
$3,244 under the Savings Plus Plan, and a group term life insurance premium
of $1,133 paid by the companies for the benefit of Ms. Stanton of which $245
was taxable income.
(8) Represents a contribution by the Companies to Mr. Bettini's account of
$2,940 under the Savings Plus Plan, and a group term life insurance premium
of $1,150 paid by the Companies for the benefit of Mr. Bettini, of which
$406 was taxable income.
(9) Represents a contribution by the Companies to Mr. Bettini's account of
$3,175 under the Savings Plus Plan, and a group term life insurance premium
of $1,096 paid by the Companies for the benefit of Mr. Bettini, of which
$365 was taxable income.
(10) Represents a group term life insurance premium of $840 paid by the
Corporation for the benefit of Mr. Walsh, of which $185 was taxable income.
(11) Mr. Walsh joined FFCIC as Director of Corporate Development in August 1995.
(12) Includes a car allowance of $8,916 paid by the Companies.
(13) Represents a contribution by the Companies to Mr. Wyman's account of $240
under the Savings Plus Plan, and a group term life insurance premium of
$1,078 paid by the Companies for the benefit of Mr. Wyman, of which $1,071
was taxable income.
(14) Represents a contribution by the Companies to Mr. Wyman's account of $240
under the Savings Plus Plan, and an insurance premium of $1,069 paid by the
Companies for the benefit of Mr. Wyman, of which $1,002 was taxable income.
(15) Mr. Simon resigned his positions with the Companies effective November 15,
1996. See "Settlement Agreement".
(16) Represents an amount of $172,528 paid or to be paid to Mr. Simon pursuant
to a Separation Agreement and General Release whereby he resigned his
positions with the Companies effective November 15, 1996 (see "Settlement
Agreement"), and a group term life insurance premium of $1,150 paid by the
Companies for the benefit of Mr. Simon, of which $975 was taxable income.
(17) Includes a car allowance of $8,640 and gasoline credit card payments of
$4,434 paid by the Companies.
(18) Represents a contribution by the Companies to Mr. Simon's account of $3,390
under the Savings Plus Plan, and a group term life insurance premium of
$1,209 paid by the Corporation for the benefit of Mr. Simon, of which $1,152
was taxable income.
SEVERANCE PLAN
Each of the officers of the Corporation is eligible for severance benefits
under FFCIC's and the Life Company's joint Officer Severance Pay Plan (the
"Severance Plan") when such officer's employment is terminated under defined
qualifying conditions, which include, but are not limited to, certain sales of
assets or mergers or other corporate reorganizations involving the Companies.
Under the Severance Plan, the Companies will pay to a qualifying officer
severance benefits generally equal to the greater of (i) one week's salary for
each year of service with the Companies or (ii) 24 months salary in the case of
the Chief Executive Officer, 12 months salary in the case of a Senior Vice
President and 6 months salary in the case of any other officer.
SETTLEMENT AGREEMENT
Pursuant to the Severance Plan, Charles E. Simon entered into a Separation
Agreement and General Release (the "Settlement Agreement") pursuant to which Mr.
Simon resigned his position with the
15
<PAGE>
Companies effective November 15, 1996. Pursuant to the Settlement Agreement, Mr.
Simon receives an amount equal to the total amount Mr. Simon would have received
for (i) the Severance Plan, (ii) premium for medical and dental insurance
through December of 1997, and (iii) the Companies' 1996 contribution to Mr.
Simon's "Savings Plus" Plan if he were employed by the Companies at year end. In
addition, pursuant to the Settlement Agreement, Mr. Simon received an amount
equal to the value of his accrued but unused vacation time. As a material
inducement to enter into the Settlement Agreement, Mr. Simon executed a general
release releasing the Companies and their Related Persons (as defined in the
Settlement Agreement) from certain obligations including, but not limited to,
any claims arising out of or in any way related to (i) ownership of any common
stock of the Companies, (ii) Mr. Simon's employment with the Companies and the
conclusion thereof, (iii) any severance plan, and (iv) any future Voluntary
Retirement Incentive Plan which may be offered to employees of the Companies.
PENSION BENEFITS
The Corporation and FFCIC are participating employers under the Farm Family
Employee Retirement Plan (the "Retirement Plan"). Substantially all salaried
employees of the Corporation who were participants in the Plan on December 31,
1996, including executive officers, are eligible to receive pension benefits
under the Retirement Plan. The Retirement Plan is a tax-qualified defined
benefit retirement plan which is subject to the Employee Retirement Income
Security Act of 1974, as amended. Federal law limits the amount of pension
benefits that can be accrued and compensation that can be recognized under a
tax-qualified retirement plan such as the Retirement Plan. FFCIC has adopted a
non-qualified unfunded retirement plan, the Farm Family Supplemental Employee
Retirement Plan (the "SERP"), for the payment of those benefits at retirement
that cannot be accrued under the Retirement Plan on account of the Federal law
limits on the amount of pension benefits that can be accrued and compensation
that can be recognized under the Retirement Plan. The practical effect of the
SERP is to provide for the calculation of retirement benefits on a uniform basis
for all employees. Benefit payments under the Retirement Plan and the SERP are
allocated among the Corporation, FFCIC, the Life Company and United pursuant to
expense sharing arrangements. New benefit accruals under the Retirement Plan
were discontinued as of December 31, 1996.
The table below illustrates the approximate annual retirement benefits which
would be payable at age 65 under the Retirement Plan and, if applicable, under
the SERP.
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE ANNUAL -------------------------------------------
COMPENSATION 15 20 25 30 35
- -------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$100,000.... $30,000 $40,000 $50,000 $60,000 $60,000
150,000.... 45,000 60,000 75,000 90,000 90,000
200,000.... 60,000 80,000 100,000 120,000 120,000
250,000.... 75,000 100,000 125,000 150,000 150,000
300,000.... 90,000 120,000 150,000 180,000 180,000
350,000.... 105,000 140,000 175,000 210,000 210,000
400,000.... 120,000 160,000 200,000 240,000 240,000
</TABLE>
For purposes of calculating retirement benefits, a participant's average
annual compensation ("Average Annual Compensation") shall be equal to a
participant's compensation during the five calendar years (out of the last ten
calendar years of employment) for which the participant's compensation was
highest, divided by five. Compensation, as used to calculate retirement
benefits, means the aggregate of the amounts listed in the Summary Compensation
Table under the captions "Salary," "Bonus" and "Other Annual Compensation" and
the portion of the amount listed under the caption "All Other Compensation"
which corresponds to the part of the group term life insurance premium, if any,
paid by the Corporation which is taxable as income to the participant in the
Retirement Plan.
16
<PAGE>
The credited years of service as of December 31, 1996 for Mr. Weber, Mr.
Bettini, Mr. Simon, Ms. Stanton, Mr. Walsh and Mr. Wyman were 17.0, 18.0, 24.4,
6.0, 2.0, 14.9, respectively.
The annual pension benefit under the Retirement Plan and, when applicable,
the SERP, equals 2.0% of Average Annual Compensation multiplied by years of
service (not to exceed 30 years). Benefits under the Retirement Plan and the
SERP are not subject to Social Security or other offset amounts.
CHANGE IN CONTROL ARRANGEMENTS
Certain of the Corporation's compensation plans applicable to the named
executive officers appearing in the Summary Compensation Table include
provisions regarding payments pursuant to such plans in the event of the change
of control of the Corporation. Plans containing such provisions are described
below except for the Corporation's Omnibus Securities Plan, which is described
in "Item III--Approval of the Corporation's Omnibus Securities Plan." These
provisions are generally applicable to all participants in such plans.
ANNUAL INCENTIVE PLAN
In 1996, the Board of Directors of the Corporation adopted the Farm Family
Holdings, Inc. Annual Incentive Plan (the "Annual Incentive Plan") to provide
incentives and financial rewards to officers and other key employees of the
Corporation selected for participation by the Board of Directors. The Annual
Incentive Plan authorizes the payment of cash awards calculated as a percentage
of base salary with the applicable percentage determined based on the
performance of the participant assessed according to the achievement of
predefined goals derived from the Corporation's and its affiliates' strategic
plans and budgets. Except in the event of a Change of Control (as defined in the
Annual Incentive Plan), achievement of a target performance level is a
prerequisite to the receipt of an award pursuant to the Annual Incentive Plan.
In the event of a Change of Control, each participant will receive payment of an
amount equal to the greater of the participant's actual Earned Award or Target
Award Opportunity (both as defined in the Annual Incentive Plan) for the plan
year in which the Change of Control occurs, regardless of whether the
participant achieved the target performance level.
OFFICERS' DEFERRED COMPENSATION PLAN
In 1996, the Board of Directors of the Corporation adopted a non-qualified,
unfunded Officers' Deferred Compensation Plan (the "Deferred Compensation Plan")
pursuant to which officers of the Corporation and its affiliates selected by the
Board of Directors as eligible to participate in the Deferred Compensation Plan
may elect to defer compensation payable by the Corporation or its affiliates.
Participants may elect to receive their Accrued Benefit (as defined in the
Deferred Compensation Plan) in a single lump sum or in five (5), ten (10) or
fifteen (15) equal annual installments commencing upon the date of termination
of service with the Corporation. In the event of a Change of Control (as defined
in the Deferred Compensation Plan), each participant shall receive that
participant's entire Accrued Benefit, in a single sum, as soon as
administratively practicable following the date of the Change of Control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1996, the Corporation's Compensation Committee was comprised of John W.
Lincoln, Randolph C. Blackmer, Clark W. Hinsdale III and John P. Moskos. Mr.
Lincoln is Vice Chairman of the Board of Directors of the Corporation.
17
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF FARM FAMILY HOLDINGS, INC., COMPENSATION
COMMITTEE OF FARM FAMILY CASUALTY INSURANCE COMPANY AND EXECUTIVE COMMITTEE OF
FARM FAMILY CASUALTY INSURANCE COMPANY ON EXECUTIVE COMPENSATION
OVERVIEW
This report is the first report submitted to stockholders since the
Corporation became a publicly-held entity in July 1996, upon the conversion of
its subsidiary, FFCIC, from a mutual property casualty insurance company to a
stock property casualty insurance company. Prior to the formation of the
Corporation, the Executive Committee of the Board of Directors of FFCIC (the
"Executive Committee") recommended to FFCIC's Board the salaries of the
executive officers for 1996. In 1996, the Board of Directors of the Corporation
established the Corporation's Compensation Committee for the purposes of
recommending to the Board policies and plans concerning salaries, bonuses and
other compensation of the Corporation's officers. In addition, in 1996, the
Board of Directors of FFCIC established FFCIC's Compensation Committee and the
compensation-related functions of the Executive Committee were transferred to
FFCIC's Compensation Committee. The Compensation Committees of the Corporation
and FFCIC are collectively referred to herein as the "Compensation Committees."
During 1996, FFCIC retained an independent compensation consulting firm to
educate the Compensation Committees with respect to incentive compensation
arrangements. Working with the consulting firm, the Corporation's Compensation
Committee has recommended to the Board of Directors of the Corporation and the
Board has adopted an Omnibus Securities Plan, subject to shareholder approval,
and an Annual Incentive Plan which are intended to provide incentives that
encourage and reward the creation of additional shareholder value.
Except for bonuses paid by the Corporation in 1996 to certain of the
executive officers appearing in the Summary Compensation Table, all compensation
prior to and following the conversion of FFCIC was paid by FFCIC and allocated
among the Corporation, FFCIC, the Life Company and United (collectively the
"Companies") pursuant to expense sharing arrangements among the Companies. This
report reflects the compensation philosophy of the Corporation and FFCIC, as
endorsed by the Executive Committee and the Compensation Committees and approved
by the Boards of Directors of the Corporation and FFCIC.
COMPONENTS OF EXECUTIVE COMPENSATION
The components of the 1996 compensation for executive officers of the
Corporation, including the Chief Executive Officer, consist of base salary and
bonus. Annual incentive compensation and long-term incentive compensation plans
have been put in place for 1997.
BASE SALARY. Base salary for each executive officer is set based on a
subjective evaluation of the recommendations of the Chief Executive Officer,
salary levels in effect for comparable positions in the market place, personal
performance and potential future contributions to the Companies. The 1996 base
salaries for the executive officers were recommended by the Executive Committee
and approved by the Board of Directors of FFCIC.
BONUS. In 1996, the Compensation Committee of the Board of Directors of the
Corporation recommended, and the Board approved, the payment by the Corporation
of a 1996 bonus to Mr. Weber, Mr. Bettini, Ms. Stanton, and Mr. Walsh for such
officers' roles in the initial public offering of the Corporation's Common
Stock.
ANNUAL INCENTIVE COMPENSATION. During 1996, the Corporation's Compensation
Committee recommended, and the Board approved, an Annual Incentive Plan to
provide incentives and financial rewards to officers and other key employees of
the Corporation and its subsidiaries who are responsible for or contribute to
the management, growth or profitability of the business of the Corporation, or
its subsidiaries. The Annual Incentive Plan became effective January 1, 1997 and
will tie annual incentive compensation to performance goals.
LONG-TERM INCENTIVE COMPENSATION. In addition, during 1996, the
Corporation's Compensation Committee recommended, and the Board adopted, the
Corporation's Omnibus Securities Plan (the "Plan")
18
<PAGE>
which is being submitted for approval by the stockholders of the Corporation at
the Annual Meeting. The Board of Directors of the Corporation has approved the
Compensation Committee's recommendation of grants of non-qualified options to
certain executive officers of the Corporation and its subsidiary, FFCIC,
pursuant to the Plan, subject to the approval of the Plan by the stockholders of
the Corporation at the Annual Meeting. The grants of non-qualified options were
based in part on insurance industry survey data. See "Item III--Approval of the
Corporation's Omnibus Securities Plan."
CEO COMPENSATION
For 1996, Mr. Weber's base salary was established at $285,000. Mr. Weber's
1996 base salary was set based on a subjective evaluation of salary levels in
effect for comparable positions in the marketplace, personal performance and
potential future contributions to the Companies. In 1996, the Compensation
Committee of the Board of Directors of the Corporation recommended, and the
Board approved, the payment of a 1996 bonus in the amount of $114,000 to Mr.
Weber for Mr. Weber's role in the initial public offering of the Corporation's
common stock. In addition, during 1996, the Compensation Committee recommended,
and the Board approved subject to approval of the Plan by the stockholders of
the Corporation, the grant to Mr. Weber of non-qualified stock options to
purchase 75,000 shares of Common Stock of the Corporation under the Plan. See
"Item III--Approval of the Corporation's Omnibus Securities Plan."
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1 million
paid to the Chief Executive Officer and four other most highly compensated
executive officers. Qualifying performance-based compensation will not be
subject to the deduction limit if certain requirements are met. The Corporation
has not paid any compensation to any executive officers that was not deductible
by reason of the prohibition in Section 162(m). The Compensation Committees
believe that tax deductibility is a important factor, but not the sole factor to
be considered in setting executive compensation policy. Accordingly, the
Compensation Committees generally intend to take such reasonable steps as are
required to avoid the loss of a tax deduction due to Section 162(m), but reserve
the right, in appropriate circumstances, to pay amounts which are not
deductible.
COMPENSATION COMMITTEE OF FARM FAMILY HOLDINGS, INC.
Randolph C. Blackmer, Jr.
Clark W. Hinsdale III
John W. Lincoln
John P. Moskos
COMPENSATION COMMITTEE OF FARM FAMILY CASUALTY INSURANCE COMPANY
Randolph C. Blackmer, Jr.
Clark W. Hinsdale III
John W. Lincoln
EXECUTIVE COMMITTEE OF FARM FAMILY CASUALTY INSURANCE COMPANY
<TABLE>
<S> <C>
Fred G. Butler Daniel R. LaPointe
Joseph E. Calhoun John W. Lincoln
Stephen J. George Norma R. O'Leary
Gordon H. Gowen William M. Stamp, Jr.
Clark W. Hinsdale III Richard D. Tryon
</TABLE>
19
<PAGE>
COMMON STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Common Stock for the five month period July 23, 1996 through December 31, 1996
with the cumulative total return on the S&P 500 Index and the S&P Insurance
(Property-Casualty) Index over the same period.
COMPARISON OF 5 MONTH CUMULATIVE TOTAL RETURN*
AMONG FARM FAMILY HOLDINGS, INC., THE S & P 500 INDEX
AND THE S & P INSURANCE (PROPERTY-CASUALTY) INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S&P 500
INSURANCE
S&P 500 (PROPERTY-CASUALTY)
MEASUREMENT PERIOD CORPORATION INDEX INDEX
- ------------------ ----------- ---------- --------------------
<S> <C> <C> <C>
6/30/96........ -- 100 100
7/23/96........ 100 -- --
12/31/96........ 122 112 116
</TABLE>
<TABLE>
<CAPTION>
VALUE ON
DECEMBER 31, 1996
-----------------
<S> <C>
Farm Family Holdings, Inc.......... $ 122
S&P 500 Index...................... $ 112
S&P 500 Insurance
(Property-Casualty) Index.......... $ 116
</TABLE>
* $100 INVESTED ON 7/23/96 IN STOCK OR ON
6/30/96 IN INDEX--INCLUDING REINVESTMENT OF
DIVIDENDS, FISCAL YEAR ENDING DECEMBER 31.
20
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LIFE COMPANY
Substantially all of the directors and executive officers of the Corporation
are also directors and executive officers of the Life Company.
OPTION PURCHASE AGREEMENT
The Corporation has entered into an Option Purchase Agreement, dated
February 14, 1996, with the shareholders of the Life Company (the "Option
Purchase Agreement") which grants the Corporation an exclusive and irrevocable
option to purchase all outstanding shares of the Life Company (the "Option
Shares") at any time up to July 26, 1998, unless extended to July 26, 1999 upon
the agreement of all parties. The exercise price for each Option Share will be
the fair market value, as of the exercise date, determined in accordance with
specified valuation procedures and assumptions set forth in the Option Purchase
Agreement.
EXPENSE SHARING AGREEMENT
The Corporation, FFCIC, and the Life Company are parties to an Amended and
Restated Expense Sharing Agreement, effective February 14, 1996 (the "Expense
Sharing Agreement") pursuant to which shared expenses for goods, services and
facilities are allocated among the parties in accordance with applicable
provisions of the New York Insurance Law and regulations promulgated thereunder.
For the year ended December 31, 1996, shared operating expenses totaled $30.7
million of which 65% or $19.9 million was allocated to the Corporation and
FFCIC.
LEASE AGREEMENT
FFCIC and the Life Company are parties to a Lease Agreement, dated July 1,
1988, as amended by Amendment to Lease Agreement, effective January 1, 1994 (as
so amended, the "Lease Agreement"), pursuant to which FFCIC leases home office
space in Glenmont, New York from the Life Company. Annual rent under the Lease
Agreement for the year ended December 31, 1996 was $712,320.
UNITED
PER RISK REINSURANCE CONTRACT
FFCIC and United are parties to an Underlying Multi-Line Per Risk
Reinsurance Contract, effective January 1, 1995, as amended by Addendum No. 1,
effective January 1, 1996, Addendum No. 2, effective January 1, 1996, Addendum
No. 3, effective July 26, 1996, and Addendum No. 4, effective January 1, 1997
(as so amended, the "Per Risk Reinsurance Agreement"). For the year ended
December 31, 1996, net earned premiums ceded by FFCIC to United under the Per
Risk Reinsurance Agreement were $8.0 million.
UMBRELLA REINSURANCE AGREEMENT
United has assumed 5% of FFCIC's net liability retained under an Umbrella
Quota Share Reinsurance Contract, effective January 1, 1995, as amended by
Addendum No. 1, effective January 1, 1995 and Addendum No. 2 effective July 26,
1996 (as so amended, the "Umbrella Reinsurance Agreement"). For the year ended
December 31, 1996, net written premiums ceded by FFCIC to United under the
Umbrella Reinsurance Agreement were $0.2 million.
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CATASTROPHE REINSURANCE CONTRACT
United and FFCIC entered into an Excess Catastrophe Reinsurance Contract,
effective January 1, 1996, pursuant to which United assumed 16.67% of the 1st
layer and 2% of the 3rd and 4th layers of FFCIC's per occurrence losses during
the one year term of the Contract. Net earned premiums ceded by FFCIC to United
in 1996 under the Excess Catastrophe Reinsurance Contract were $0.11 million.
Effective January 1, 1997, United and FFCIC have entered into an Excess
Catastrophe Reinsurance Contract containing substantially similar terms to the
1996 Contract.
ASSUMPTION AGREEMENT
FFCIC and United were parties to an Assumption Agreement, commencing January
1, 1995 (the "Assumption Agreement"), pursuant to which FFCIC retroceded to
United a portion of its assumed reinsurance obligations each year during the
term of the Agreement. For the year ended December 31, 1996, premiums of $1.0
million were retroceded to United. The Assumption Agreement was terminated
effective December 31, 1996.
SERVICE AGREEMENT
FFCIC and United are parties to a Service Agreement, dated July 25, 1988
(the "Service Agreement"), pursuant to which FFCIC provides United with certain
services, property, equipment and facilities necessary for its operations. For
the year ended December 31, 1996, United incurred approximately $0.7 million in
direct and allocated expenses and overhead under the Service Agreement.
FARM BUREAUS
MEMBERSHIP LIST PURCHASE AGREEMENT
FFCIC has entered into a Membership List Purchase Agreement, commencing on
January 1, 1996, with the Farm Bureau-Registered Trademark- in each of the ten
states in which it operates (collectively, the "Farm Bureaus"). Pursuant to each
Membership List Purchase Agreement, Farm Bureau membership lists are provided to
FFCIC on an exclusive basis for the purpose of marketing its insurance products.
For the year ended December 31, 1996, FFCIC paid $595,875 to the Farm Bureaus,
in the aggregate, under the Membership List Purchase Agreements.
PROPOSALS OF STOCKHOLDERS
Proposals submitted by stockholders of the Corporation must be received at
the principal executive offices of the Corporation, 344 Route 9W Glenmont, New
York 12077 (mail to: Farm Family Holdings, Inc., P.O. Box 656, Albany, New York
12201-0656), Attention: Corporate Secretary, on or before November 7, 1997 in
order to be considered for inclusion in the proxy materials relating to the 1998
Annual Meeting of Stockholders.
In addition to any other applicable requirements, if a stockholder desires
to bring business before an annual meeting which is not the subject of a
proposal timely submitted for consideration for inclusion in the proxy materials
relating to the annual meeting, the stockholder must follow the advance notice
procedures outlined in the Corporation's By-Laws. The Corporation's By-Laws
provide, in general, that a proposal for action to be presented by a stockholder
at an annual meeting shall be out of order unless the proposal is specified in
the notice of meeting given by or at the direction of the Board of Directors or
unless the proposal shall have been submitted in writing (in the form specified
in the By-Laws) to the Secretary of the Corporation and received at the
principal executive offices of the Corporation not less than 60 days nor more
than 90 days prior to the anniversary date of the immediately preceding annual
meeting. If the date of the annual meeting has been advanced or delayed by more
than 30 days from the prior anniversary date, notice must be received not later
than the close of business on the 10th day
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<PAGE>
following the day on which such notice of the annual meeting was mailed or such
public disclosure of the date of such annual meeting was made, whichever first
occurs.
The foregoing is only a summary of the detailed provisions of the By-Laws
and is qualified by reference to the text thereof. Stockholders wishing to
submit a proposal should review the By-Law requirements regarding proposals by
stockholders and should communicate with the Secretary of Farm Family Holdings,
Inc., P.O. Box 656 Albany, New York, 12201-0656, if sent by mail, or 344 Route
9W, Glenmont, New York 12077, if by hand, express mail or overnight courier, for
further information.
ADDITIONAL INFORMATION
The Corporation will bear the cost of soliciting proxies from its
stockholders and will enlist the help of banks and brokerage houses in
soliciting proxies from their customers. In addition to the use of the mails,
proxies may be solicited personally or by telephone by the directors, officers,
agents and employees of the Corporation or its subsidiaries. The Corporation has
engaged Georgeson & Company Inc. to assist in soliciting proxies for a fee of
approximately $6,000 plus reasonable out-of-pocket expenses.
FORM 10-K
THE CORPORATION WILL, UPON WRITTEN REQUEST OF ANY STOCKHOLDER, FURNISH
WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1996, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT
EXHIBITS. PLEASE ADDRESS ALL SUCH REQUESTS TO FARM FAMILY HOLDINGS, INC., PO.
BOX 656, ALBANY, NEW YORK 12201-0656, ATTENTION: CORPORATE SECRETARY. EXHIBITS
WILL BE PROVIDED UPON WRITTEN REQUEST AND PAYMENT OF AN APPROPRIATE PROCESSING
FEE.
/s/ Victoria M. Stanton
--------------------------------------
Victoria M. Stanton
SECRETARY
March 7, 1997
Glenmont, New York
23
<PAGE>
EXHIBIT A
FARM FAMILY HOLDINGS, INC.
OMNIBUS SECURITIES PLAN
(AS AMENDED BY AMENDMENT NO. 1, DATED AS OF FEBRUARY 13, 1997)
ARTICLE I
PURPOSE
The purpose of this FARM FAMILY HOLDINGS, INC. OMNIBUS SECURITIES PLAN (the
"Plan") is to benefit the stockholders of FARM FAMILY HOLDINGS, INC., a Delaware
corporation (the "Company"), by assisting the Company to attract, retain and
incentivize key management employees of the Company and its Affiliates, and to
align the interests of such employees with those of the Company's stockholders.
Accordingly, the Plan provides for the granting of Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards
or any combination of the foregoing, as may be best suited to the circumstances
of the particular employee as provided herein.
ARTICLE II
DEFINITIONS
The following definitions shall be applicable throughout the Plan unless the
context otherwise requires:
"Affiliate" means any person or entity which, at the time of reference,
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the Company.
"Award" means, individually or collectively, any Option, Stock Appreciation
Right or Restricted Stock Award.
"Award Agreement" means a written agreement between the Company and the
Holder with respect to any Award.
"Board" means the Board of Directors of the Company.
A "Change of Control" of the Company shall mean a change in control of the
Company of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A under the Exchange Act, whether or not
the Company is subject to the Exchange Act at such time; PROVIDED, HOWEVER, that
without limiting the generality of the foregoing, a Change in Control will in
any event be deemed to occur if and when:
(a) any person (as such term is used in paragraphs 13(d) and 14(d)(2) of the
Exchange Act, hereinafter in this definition, "Person"), other than the
Company or a subsidiary or employee benefit plan of the Company or
subsidiary, becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing more than twenty-five percent (25%) of the combined voting
power of the Company's then outstanding securities;
(b) stockholders approve a merger, consolidation or other business combination
(a "Business Combination") other than a Business Combination in which
holders of common stock of the Company immediately prior to the Business
Combination have substantially the same proportionate ownership of common
stock of the surviving corporation immediately after the Business
Combination as immediately before;
A-1
<PAGE>
(c) stockholders approve either (i) an agreement for the sale or disposition of
all or substantially all of the Company's assets to any entity that is not a
subsidiary of the Company, or (ii) a plan of complete liquidation; or
(d) the persons who were members of the Board immediately before a tender offer
by any Person other than the Company or a subsidiary, or before a merger,
consolidation or contested election, or before any combination of such
transactions, cease to constitute a majority of the Board as a result of
such transaction or transactions.
"Code" means the Internal Revenue Code of 1986, as amended. Reference in the
Plan to any section of the Code shall be deemed to include any amendments or
successor provisions to any section and any regulation under such section.
"Committee" means not less than three (3) members of the Board who are
selected by the Board as provided in Section 4.1.
"Common Stock" means the Common Stock, par value $.01 per share, of the
Company.
"Company" means Farm Family Holdings, Inc., a Delaware corporation, and any
successor thereto.
"Effective Date" means December 13, 1996.
"Employee" means any person employed by the Company or an Affiliate.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, as of any specified date, the mean of the
reported high and low sales prices of the Common Stock on the stock exchange
composite tape on that date, or if no prices are reported on that date, on the
last preceding date on which such prices of the Common Stock are so reported. If
the Common Stock is traded over-the-counter at the time a determination of its
fair market value is required to be made hereunder, its fair market value shall
be deemed to be equal to the average between the reported high and low or
closing bid and asked prices of Common Stock on the most recent date on which
Common Stock was publicly traded. In the event Common Stock is not publicly
traded at the time a determination of this value is required to be made
hereunder, the determination of its fair market value shall be made by the
Committee in such manner as it deems appropriate.
"Holder" means an Employee who has been granted an Award.
"Incentive Stock Option" means an Option which is an "incentive stock
option" within the meaning of Section 422 of the Code.
"Non-Qualified Stock Option" means an Option which is not an Incentive Stock
Option.
"Option" means an Award granted under Article VII of the Plan of an option
to purchase shares of Common Stock and includes both Incentive Stock Options and
Non-Qualified Stock Options.
"Option Agreement" means a written agreement between the Company and a
Holder with respect to an Option.
"Plan" means this Farm Family Holdings, Inc. Omnibus Securities Plan, as
amended from time to time.
"Restricted Stock Agreement" means a written agreement between the Company
and a Holder with respect to a Restricted Stock Award.
"Restricted Stock Award" means an Award granted under Article IX of the
Plan.
"Rule 16b-3" means Rule 16b-3 promulgated by the Securities and Exchange
Commission under the Exchange Act, as such may be amended from time to time, and
any successor rule, regulation or statute fulfilling the same or a substantially
similar function.
A-2
<PAGE>
"Spread" means, in the case of a Stock Appreciation Right, an amount equal
to the excess, if any, of the Fair Market Value of a share of Common Stock on
the date such Stock Appreciation Right is exercised over the Fair Market Value
of a share of Common Stock on the date on which such Stock Appreciation Right
was granted.
"Stock Appreciation Right" means an Award granted under Article VIII of the
Plan.
"Stock Appreciation Rights Agreement" means a written agreement between the
Company and a Holder with respect to an Award of Stock Appreciation Rights.
"Total and Permanent Disability" means the inability of an individual to
provide meaningful service for the Company due to a medically determinable
physical or mental impairment, which service is reasonably consistent with the
individual's past service for the Company, training and experience. Such
determination of total and permanent disability shall be made by the Committee.
Notwithstanding the foregoing, if an individual qualifies for Federal Social
Security disability benefits or for payments under a long-term disability income
plan of the Company or the Affiliate which employs such individual, based upon
his physical or mental condition, such individual shall be deemed to suffer from
a Total and Permanent Disability hereunder.
ARTICLE III
EFFECTIVE DATE OF PLAN
The Plan shall be effective as of December 13, 1996, provided that the Plan
is approved by the stockholders of the Company within twelve (12) months of such
date and on or prior to the date of the first annual meeting of stockholders of
the Company held subsequent to the acquisition of an equity security by a Holder
hereunder for which exemption is claimed under Rule 16b-3.
ARTICLE IV
ADMINISTRATION
Section 4.1 Composition of Committee The Plan shall be administered by the
Committee, which shall be (i) appointed by the Board; (ii) constituted so as to
permit the Plan to comply with Rule 16b-3; and (iii) constituted solely of
"outside directors" within the meaning of Section 162(m) of the Code and
applicable interpretive authority thereunder. If a member of the Committee shall
be eligible to receive an Award under the Plan, such Committee member shall have
no authority hereunder with respect to his or her own Award.
Section 4.2 Powers. Subject to the provisions of the Plan, the Committee
shall have the sole authority, in its discretion, to determine which individuals
shall receive an Award, the time or times when such Award shall be made, what
type of Award shall be granted and the number of shares of Common Stock which
may be issued under each Option, Stock Appreciation Right or Restricted Stock
Award. In making such determinations the Committee may take into account the
nature of the services rendered by the respective individuals, their present and
potential contribution to the Company's (or the Affiliate's) success and such
other factors as the Committee in its discretion shall deem relevant.
Section 4.3 Additional Powers. The Committee shall have such additional
powers as are delegated to it under the other provisions of the Plan. Subject to
the express provisions of the Plan, the Committee is authorized to construe the
Plan and the respective Award Agreements executed hereunder, to prescribe such
rules and regulations relating to the Plan as it may deem advisable to carry out
the intent of the Plan, and to determine the terms, restrictions and provisions
of each Award, including such terms, restrictions and provisions as shall be
requisite in the judgment of the Committee to cause designated Options to
qualify as Incentive Stock Options, and to make all other determinations
necessary or advisable for administering the Plan. The Committee may correct any
defect or supply any omission or reconcile any
A-3
<PAGE>
inconsistency in any Award Agreement in the manner and to the extent it shall
deem expedient to carry it into effect. The determinations of the Committee on
the matters referred to in this Article IV shall be conclusive.
Section 4.4 Committee Action. In the absence of specific rules to the
contrary, action by the Committee shall require the consent of a majority of the
members of the Committee, expressed either orally at a meeting of the Committee
or in writing in the absence of a meeting.
ARTICLE V
STOCK SUBJECT TO PLAN AND LIMITATIONS THEREON
Section 5.1 Stock Grant and Award Limits. The Committee may from time to
time grant Awards to one or more Employees determined by it to be eligible for
participation in the Plan in accordance with the provisions of Article VI.
Subject to Article XII, the aggregate number of shares of Common Stock that may
be issued under the Plan shall not exceed Five Hundred Thousand (500,000)
shares. Shares shall be deemed to have been issued under the Plan solely (i) to
the extent actually issued and delivered pursuant to an Award, or (ii) to the
extent an Award granted under Article VII, VIII or IX is settled in cash. To the
extent that an Award lapses or the rights of its Holder terminate, any shares of
Common Stock subject to such Award shall again be available for the grant of a
new Award. Notwithstanding any provision in the Plan to the contrary, the
aggregate number of shares of Common Stock that may be subject to Awards of
Restricted Stock under Article IX is One Hundred Thousand (100,000) (subject to
adjustment as provided in Article X). Notwithstanding any provision in the Plan
to the contrary, the maximum number of shares of Common Stock that may be
subject to Awards of Options and Stock Appreciation Rights under Article VII or
VIII granted to any one individual during any calendar year is: One Hundred
Thousand (100,000) for 1996 and One Hundred Thousand (100,000) per year, on a
cumulative basis, for all years after 1996, (subject to adjustment in the same
manner as provided in Article X with respect to shares of Common Stock subject
to Awards then outstanding). The limitation set forth in the preceding sentence
shall be applied in a manner which shall permit compensation generated in
connection with the exercise of Options and Stock Appreciation Rights to
constitute "performance-based" compensation for purposes of Section 162(m) of
the Code, including, but not limited to, counting against such maximum number of
shares, to the extent required under Section 162(m) of the Code and applicable
interpretive authority thereunder, any shares subject to Options or Stock
Appreciation Rights that are canceled or repriced.
Section 5.2 Stock Offered. The stock to be offered pursuant to the grant of
an Award may be authorized but unissued Common Stock or Common Stock previously
issued and outstanding and reacquired by the Company.
ARTICLE VI
ELIGIBILITY FOR AWARDS; TERMINATION OF EMPLOYMENT
Section 6.1 Eligibility. Awards made under the Plan may be granted solely
to persons who, at the time of grant, are Employees. An Award may be granted on
more than one occasion to the same Employee, and, subject to the limitations set
forth in the Plan, such Award may include an Incentive Stock Option, a
Non-Qualified Stock Option, a Stock Appreciation Right, a Restricted Stock Award
or any combination thereof.
Section 6.2 Termination of Employment. Except to the extent inconsistent
with the terms of the applicable Award Agreement, the following terms and
conditions shall apply with respect to the termination of a Holder's employment
with the Company or an Affiliate, as applicable, for any reason, including,
without limitation, retirement upon or after attaining age fifty-five (55),
Total and Permanent Disability or death:
A-4
<PAGE>
(a) The Holder's rights, if any, to exercise any then exercisable Non-Qualified
Stock Options and/or Stock Appreciation Rights (other than Stock
Appreciation Rights granted in connection with Incentive Stock Options),
shall terminate:
(1) If such termination is for a reason other than the Holder's retirement
upon or after attaining age fifty-five (55), Total and Permanent
Disability or death, one (1) year after the date of such termination of
employment;
(2) If such termination is on account of the Holder's retirement upon or
after attaining age fifty-five (55) or on account of the Holder's Total
and Permanent Disability, one (1) year after the date of such termination
of employment; or
(3) If such termination is on account of the Holder's death, one (1) year
after the date of the Holder's death.
Upon such applicable date the Holder (and such Holder's estate, designated
beneficiary or other legal representative) shall forfeit any rights or
interests in or with respect to any such Non-Qualified Stock Options or
Stock Appreciation Rights.
(b) The Holder's rights, if any, to exercise any then exercisable Incentive
Stock Options and/or Stock Appreciation Rights granted in connection with
Incentive Stock Options, shall terminate:
(1) If such termination is for a reason other than the Holder's retirement
upon or after attaining age fifty-five (55), Total and Permanent
Disability or death, not more than thirty (30) days after the date of
such termination of employment;
(2) If such termination is on account of the Holder's retirement upon or
after attaining age fifty-five (55) or on account of the Holder's Total
and Permanent Disability, three (3) months after the date of such
termination of employment; or
(3) If such termination is on account of the Holder's death, one (1) year
after the date of the Holder's death.
Upon such applicable date the Holder (and such Holder's estate, designated
beneficiary or other legal representative) shall forfeit any rights or
interests in or with respect to any such Incentive Stock Options or Stock
Appreciation Rights.
(c) If a Holder's employment with the Company or an Affiliate, as applicable,
terminates for any reason prior to the actual or deemed satisfaction and/or
lapse of the restrictions, terms and conditions applicable to a grant of
Restricted Stock, such Restricted Stock shall immediately be cancelled, and
the Holder (and such Holder's estate, designated beneficiary or other legal
representative) shall forfeit any rights or interests in and with respect to
any such Restricted Stock. The immediately preceding sentence to the
contrary notwithstanding, the Committee, in its sole discretion, may
determine, prior to or within thirty (30) days after the date of such
termination of employment, that all or a portion of any such Holder's
Restricted Stock shall not be so cancelled and forfeited.
ARTICLE VII
OPTIONS
Section 7.1 Option Period. The term of each Option shall be as specified in
the Option Agreement.
Section 7.2 Limitations on Exercise of Option. An Option shall be
exercisable in whole or in such installments and at such times as specified in
the Option Agreement.
Section 7.3 Special Limitations on Incentive Stock Options. To the extent
that the aggregate Fair Market Value (determined at the time the respective
Incentive Stock Option is granted) of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by an individual
during any
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calendar year under all plans of the Company and any parent corporation or
subsidiary corporation thereof (both as defined in Section 424 of the Code)
which provide for the grant of Incentive Stock Options exceeds One Hundred
Thousand Dollars ($100,000) (or such other individual limit as may be in effect
under the Code on the date of grant), such Incentive Stock Options shall be
treated as Non-Qualified Stock Options. The Committee shall determine, in
accordance with applicable provisions of the Code, Treasury Regulations and
other administrative pronouncements, which of a Holder's Options, which were
intended by the Committee to be Incentive Stock Options when granted to the
Holder, will not constitute Incentive Stock Options because of such limitation
and shall notify the Holder of such determination as soon as practicable after
such determination. No Incentive Stock Option shall be granted to an Employee
if, at the time the Option is granted, such Employee owns stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of any parent corporation or subsidiary corporation
thereof (both as defined in Section 424 of the Code), within the meaning of
Section 422(b)(6) of the Code, unless (i) at the time such Incentive Stock
Option is granted the Option price is at least one hundred ten percent (110%) of
the Fair Market Value of the Common Stock subject to the Option and (ii) such
Incentive Stock Option by its terms is not exercisable after the expiration of
five (5) years from the date of grant.
Section 7.4 Option Agreement. Each Option shall be evidenced by an Option
Agreement in such form and containing such provisions not inconsistent with the
provisions of the Plan as the Committee from time to time shall approve,
including, but not limited to, provisions to qualify an Option as an Incentive
Stock Option. An Option Agreement may provide for the payment of the Option
price, in whole or in part, by the delivery of a number of shares of Common
Stock (plus cash if necessary) having a Fair Market Value equal to such Option
price. Each Option Agreement shall, solely to the extent inconsistent with the
provisions of Section 6.2, specify the effect of termination of employment on
the exercisability of the Option. Moreover, an Option Agreement may provide for
a "cashless exercise" of the Option by establishing procedures whereby the
Holder, by a properly-executed written notice, directs (i) an immediate market
sale or margin loan respecting all or a part of the shares of Common Stock to
which he is entitled upon exercise pursuant to an extension of credit by the
Company to the Holder of the Option price, (ii) the delivery of the shares of
Common Stock from the Company directly to a brokerage firm and (iii) the
delivery of the Option price from sale or margin loan proceeds from the
brokerage firm directly to the Company. Such Option Agreement may also include
provisions relating to (i) subject to the provisions hereof, accelerated vesting
of Options, including but not limited to accelerated vesting upon the occurrence
of a Change of Control, (ii) tax matters (including provisions covering any
applicable Employee wage withholding requirements and requiring additional
"gross-up" payments to Holders to meet any excise taxes or other additional
income tax liability imposed as a result of a payment upon a Change of Control
resulting from the operation of the Plan or of such Option Agreement) and (iii)
any other matters not inconsistent with the terms and provisions of the Plan
that the Committee shall in its sole discretion determine. The terms and
conditions of the respective Option Agreements need not be identical.
Section 7.5 Option Price and Payment. The price at which a share of Common
Stock may be purchased upon exercise of an Option shall be determined by the
Committee, but such Option price (i) in the case of an Option that is an
Incentive Stock Option, shall not be less than the Fair Market Value of a share
of Common Stock on the date such Option is granted, and (ii) in the case of an
Option that is a Non-Qualified Stock Option, shall not be less than eighty-five
percent (85%) of the Fair Market Value of a share of Common Stock on the date
such Option is granted and (iii) shall be subject to adjustment as provided in
Article X. The Option or portion thereof may be exercised by delivery of an
irrevocable notice of exercise to the Company. The Option price for the Option
or portion thereof shall be paid in full in the manner prescribed by the
Committee. Separate stock certificates shall be issued by the Company for those
shares of Common Stock acquired pursuant to the exercise of an Incentive Stock
Option and for those shares of Common Stock acquired pursuant to the exercise of
a Non-Qualified Stock Option.
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Section 7.6 Stockholder Rights and Privileges. The Holder shall be entitled
to all the privileges and rights of a stockholder of the Company solely with
respect to such shares of Common Stock as have been purchased under the Option
and for which certificates of stock have been registered in the Holder's name.
Section 7.7 Options and Rights in Substitution for Stock Options Granted by
Other Corporations. Options and Stock Appreciation Rights may be granted under
the Plan from time to time in substitution for stock options held by individuals
employed by entities who become Employees as a result of a merger or
consolidation of the employing entity with the Company or any Affiliate, or the
acquisition by the Company or an Affiliate of the assets of the employing
entity, or the acquisition by the Company or an Affiliate of stock of the
employing entity with the result that such employing entity becomes an
Affiliate.
ARTICLE VIII
STOCK APPRECIATION RIGHTS
Section 8.1 Stock Appreciation Rights. A Stock Appreciation Right is the
right to receive an amount equal to the Spread with respect to a share of Common
Stock upon the exercise of such Stock Appreciation Right. Stock Appreciation
Rights may be granted in connection with the grant of an Option, in which case
the Award Agreement will provide that the exercise of Stock Appreciation Rights
will result in the surrender of the right to purchase the shares under the
Option as to which the Stock Appreciation Rights were exercised. Alternatively,
Stock Appreciation Rights may be granted independently of Options in which case
each Award of Stock Appreciation Rights shall be evidenced by a Stock
Appreciation Rights Agreement which shall contain such terms and conditions as
may be approved by the Committee including all applicable matters set forth with
specificity in Section 7.4 with respect to Option Agreements. The terms and
conditions of the respective Stock Appreciation Rights Agreements need not be
identical. The Spread with respect to a Stock Appreciation Right may be payable
either in cash, in shares of Common Stock with a Fair Market Value equal to the
Spread or in a combination of cash and shares of Common Stock. Each Stock
Appreciation Rights Agreement shall, solely to the extent inconsistent with the
provisions of Section 6.2, specify the effect of termination of employment on
the exercisability of the Stock Appreciation Rights.
Section 8.2 Exercise Period. The term of each Stock Appreciation Right
shall be as specified by the Committee at the date of grant.
Section 8.3 Limitations on Exercise of Stock Appreciation Right. A Stock
Appreciation Right shall be exercisable in whole or in such installments and at
such times as determined by the Committee.
ARTICLE IX
RESTRICTED STOCK AWARDS
Section 9.1 Restriction Period to be Established by Committee. At the time
a Restricted Stock Award is made, the Committee shall establish a period of time
(the "Restriction Period") applicable to such Award. Each Restricted Stock Award
may have a different Restriction Period, in the discretion of the Committee,
provided however, that all shares underlying Awards of Restricted Stock shall
vest either (i) in full at the expiration of a period of not less than three (3)
years from the date of grant of such Award, or (ii) proportionately in equal
installments over a period of not less than three (3) years from the date of
grant of such Award. The Restriction Period applicable to a particular
Restricted Stock Award shall not be changed except as permitted by Section 9.2
or Article X.
Section 9.2 Other Terms and Conditions. Common Stock awarded pursuant to a
Restricted Stock Award shall be represented by a stock certificate registered in
the name of the Holder of such Restricted Stock Award. If provided for by the
Award Agreement, the Holder shall have the right to receive dividends during the
Restriction Period, to vote Common Stock subject thereto and to enjoy all other
stockholder rights, except that (i) the Holder shall not be entitled to delivery
of the stock certificate until the
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Restriction Period shall have expired, (ii) the Company shall retain custody of
the stock during the Restriction Period, (iii) the Holder may not sell,
transfer, pledge, exchange, hypothecate or otherwise dispose of the stock during
the Restriction Period and (iv) a breach of the terms and conditions established
by the Committee pursuant to the Restricted Stock Agreement shall cause a
forfeiture of the Restricted Stock Award. At the time of such Award, the
Committee may, in its sole discretion, prescribe additional terms and conditions
or restrictions relating to Restricted Stock Awards, including, but not limited
to, rules pertaining to the effect of termination of employment prior to
expiration of the Restriction Period, solely to the extent inconsistent with the
provisions of Section 6.2. Such additional terms, conditions or restrictions
shall, to the extent inconsistent with the provisions of Section 6.2, be set
forth in a Restricted Stock Agreement made in conjunction with the Award. Such
Restricted Stock Agreement may also include provisions relating to (i) subject
to the provisions hereof, accelerated vesting of Awards, including but not
limited to accelerated vesting upon the occurrence of a Change of Control, (ii)
tax matters (including provisions covering any applicable Employee wage
withholding requirements, prohibiting an election by the Holder under Section
83(b) of the Code and requiring additional "gross-up" payments to Holders to
meet any excise taxes or other additional income tax liability imposed as a
result of a Change of Control payment resulting from the operation of the Plan
or of such Restricted Stock Agreement) and (iii) any other matters not
inconsistent with the terms and provisions of the Plan that the Committee shall
in its sole discretion determine. The terms and conditions of the respective
Restricted Stock Agreements need not be identical.
Section 9.3 Payment for Restricted Stock. The Committee shall determine the
amount and form of any payment for Common Stock received pursuant to a
Restricted Stock Award, provided that in the absence of such a determination, a
Holder shall not be required to make any payment for Common Stock received
pursuant to a Restricted Stock Award, except to the extent otherwise required by
law.
Section 9.4 Agreements. At the time any Award is made under this Article
IX, the Company and the Holder shall enter into a Restricted Stock Agreement
setting forth each of the matters contemplated hereby and such other matters as
the Committee may determine to be appropriate.
ARTICLE X
RECAPITALIZATION OR REORGANIZATION
Section 10.1 Adjustments to Common Stock. The shares with respect to which
Awards may be granted are shares of Common Stock as presently constituted;
PROVIDED, HOWEVER, that if, and whenever, prior to the expiration or
distribution to the Holder of an Award theretofore granted, the Company shall
effect a subdivision or consolidation of shares of Common Stock or the payment
of a stock dividend on Common Stock without receipt of consideration by the
Company, the number of shares of Common Stock with respect to which such Award
may thereafter be exercised or satisfied, as applicable, (i) in the event of an
increase in the number of outstanding shares, shall be proportionately
increased, and the purchase price per share shall be proportionately reduced,
and (ii) in the event of a reduction in the number of outstanding shares, shall
be proportionately reduced, and the purchase price per share shall be
proportionately increased.
Section 10.2 Recapitalization. If the Company recapitalizes or otherwise
changes its capital structure, thereafter upon any exercise or satisfaction, as
applicable, of a previously granted Award, the Holder shall be entitled to
receive (or entitled to purchase, if applicable) under such Award, in lieu of
the number of shares of Common Stock then covered by such Award, the number and
class of shares of stock and securities to which the Holder would have been
entitled pursuant to the terms of the recapitalization if, immediately prior to
such recapitalization, the Holder had been the holder of record of the number of
shares of Common Stock then covered by such Award.
Section 10.3 Change of Control. In the event of the occurrence of a Change
of Control, all outstanding Awards shall immediately vest and become exercisable
or satisfiable, as applicable. The
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Committee, in its discretion, may determine that upon the occurrence of a Change
of Control, each Award outstanding hereunder shall terminate within a specified
number of days after notice to the Holder, and such Holder shall receive, with
respect to each share of Common Stock subject to such Award, cash in an amount
equal to the excess of (i) the higher of (x) the Fair Market Value of such share
of Common Stock immediately prior to the occurrence of such Change of Control or
(y) the value of the consideration to be received in connection with such Change
of Control for one share of Common Stock, over (ii) the exercise price per
share, if applicable, of one share of Common Stock. If the consideration offered
to stockholders of the Company in any transaction described in this Section 10.3
consists of anything other than cash, the Committee shall determine the fair
cash equivalent of the portion of the non-cash consideration offered. The
provisions contained in this Section 10.3 shall not terminate any rights of the
Holder to further payments pursuant to any other agreement with the Company
following the occurrence of a Change of Control.
Section 10.4 Other Events. In the event of changes to the outstanding
Common Stock by reason of recapitalization, reorganization, mergers,
consolidations, combinations, exchanges or other relevant changes in
capitalization occurring after the date of the grant of any Award and not
otherwise provided for under this Article X, any outstanding Awards and any
Award Agreements evidencing such Awards shall be subject to adjustment by the
Committee in its discretion as to the number and price of shares of Common Stock
or other consideration subject to such Awards. In the event of any such change
to the outstanding Common Stock, the aggregate number of shares available under
the Plan may be appropriately adjusted by the Committee, the determination of
which shall be conclusive.
Section 10.5 Powers Not Affected. The existence of the Plan and the Awards
granted hereunder shall not affect in any way the right or power of the Board or
of the stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change of the Company's capital
structure or business, any merger or consolidation of the Company, any issue of
debt or equity securities ahead of or affecting Common Stock or the rights
thereof, the dissolution or liquidation of the Company or any sale, lease,
exchange or other disposition of all or any part of its assets or business or
any other corporate act or proceeding.
Section 10.6 Required Stockholder Action. Any adjustment provided for in
Sections 10.1, 10.2, 10.3 and 10.4 above shall be subject to any required
stockholder action.
Section 10.7 No Adjustment for Certain Awards. Except as hereinabove
expressly provided, the issuance by the Company of shares of stock of any class
or securities convertible into shares of stock of any class, for cash, property,
labor or services, upon direct sale, upon the exercise of rights or warrants to
subscribe therefor or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, and in any case whether or not
for fair value, shall not affect previously granted Awards, and no adjustment by
reason thereof shall be made with respect to the number of shares of Common
Stock subject to Awards theretofore granted or the purchase price per share, if
applicable.
ARTICLE XI
AMENDMENT AND TERMINATION OF PLAN
The Board in its discretion may terminate the Plan at any time with respect
to any shares for which Awards have not theretofore been granted. The Board
shall have the right to alter or amend the Plan or any part hereof from time to
time; PROVIDED, HOWEVER, that no change in any Award theretofore granted may be
made which would impair the rights of a Holder without the consent of the Holder
(unless such change is required in order to cause the benefits under the Plan to
qualify as performance-based compensation within the meaning of Section 162(m)
of the Code and applicable interpretive authority thereunder), and, PROVIDED,
FURTHER, that the Board may not, without approval of the stockholders, amend the
Plan:
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(a) to increase the maximum number of shares which may be issued upon exercise
or surrender of an Award, except as provided in Article X;
(b) to change the Option price;
(c) to change the class of individuals eligible to receive Awards or materially
increase the benefits accruing to Employees under the Plan;
(d) to modify materially the requirements as to eligibility for participation in
the Plan; or
(e) to decrease any authority granted to the Committee hereunder in
contravention of Rule 16b-3.
ARTICLE XII
MISCELLANEOUS
Section 12.1 No Right to Award. Neither the adoption of the Plan by the
Company nor any action of the Board or the Committee shall be deemed to give an
Employee any right to be granted an Option, a right to a Stock Appreciation
Right and/or a Restricted Stock Award except as may be evidenced by an Award or
by an Award Agreement duly executed on behalf of the Company, and then solely to
the extent and on the terms and conditions expressly set forth therein.
Section 12.2 No Employment Rights Conferred. Nothing contained in the Plan
shall (i) confer upon any Employee any right with respect to continuation of
employment with the Company or any Affiliate, or (ii) interfere in any way with
the right of the Company or any Affiliate to terminate the employment of an
Employee at any time.
Section 12.3 Other Laws; Withholding. The Company shall not be obligated to
issue any Common Stock pursuant to any Award granted under the Plan at any time
when the shares covered by such Award have not been registered under the
Securities Act of 1933 and such other state and federal laws, rules or
regulations as the Company or the Committee deems applicable and, in the opinion
of legal counsel of the Company, there is no exemption from the registration
requirements of such laws, rules or regulations available for the issuance and
sale of such shares. No fractional shares of Common Stock shall be delivered,
nor shall any cash in lieu of fractional shares be paid. The Company shall have
the right to deduct in cash (whether under this Plan or otherwise) in connection
with all Awards any taxes required by law to be withheld and to require any
payments required to enable it to satisfy its withholding obligations. In the
case of any Award satisfied in the form of shares of Common Stock, no shares
shall be issued unless and until arrangements satisfactory to the Company shall
have been made to satisfy any tax withholding obligations applicable with
respect to such Award. Subject to such terms and conditions as the Committee may
impose, the Company shall have the right to retain, or the Committee may subject
to such terms and conditions as it may establish from time to time, permit
Holders to elect to tender Common Stock (including Common Stock issuable in
respect of an Award) to satisfy, in whole or in part, the amount required to be
withheld.
Section 12.4 No Restriction on Corporate Action. Nothing contained in the
Plan shall be construed to prevent the Company or any Affiliate from taking any
corporate action which is deemed by the Company or such Affiliate to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan or any Award made under the Plan. No Employee,
beneficiary or other person shall have any claim against the Company or any
Affiliate as a result of any such action.
Section 12.5 Restrictions on Transfer. No Award under the Plan or any Award
Agreement and no rights or interests herein or therein, shall or may be
assigned, transferred, sold, exchanged, encumbered, pledged or otherwise
hypothecated or disposed of by a Holder except (i) by will or by the laws of
descent and distribution, or (ii) by gift to any member of the Holder's
immediate family or to a trust for the benefit of such immediate family member,
if permitted under the applicable Award Agreement. An Award may be exercisable
during the lifetime of the Holder only by such Holder or by the Holder's
guardian or legal
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representative unless it has been transferred by gift to a member of the
Holder's immediately family or to a trust for the benefit of such immediate
family member, in which case it shall be exercisable solely by such transferee.
For purposes of this provision, a Holder's "immediate family" shall mean the
Holder's spouse, children and grandchildren. Notwithstanding any such transfer,
the Holder will continue to be subject to the withholding requirements provided
for under Section 12.3 hereof.
Section 12.6 Rule 16b-3. It is intended that the Plan and any grant of an
Award made to a person subject to Section 16 of the Exchange Act shall meet all
of the requirements of Rule 16b-3. If any provision of the Plan or of any such
Award would disqualify the Plan or such Award under, or would otherwise not
comply with, Rule 16b-3, such provision or Award shall be construed or deemed to
have been amended as necessary to conform to Rule 16b-3.
Section 12.7 Section 162(m). It is intended that the Plan shall comply
fully with and meet all the requirements of Section 162(m) of the Code so that
Options and Stock Appreciation Rights granted hereunder with an exercise price
not less than the Fair Market Value of a share of Common Stock on the date of
grant shall constitute "performance-based" compensation within the meaning of
Section 162(m). If any provision of the Plan would disqualify the Plan or would
not otherwise permit the Plan to comply with Section 162(m) as so intended, such
provision shall be construed or deemed amended to conform to the requirements or
provisions of Section 162(m); PROVIDED, HOWEVER, that no such construction or
amendment shall have an adverse effect on the economic value to a Holder of any
Award previously granted hereunder.
Section 12.8 Other Plans. No Award, payment or amount received hereunder
shall be taken into account in computing an Employee's salary or compensation
for the purposes of determining any benefits under any pension, retirement, life
insurance or other benefit plan of the Company or any Affiliate, unless such
other plan specifically provides for the inclusion of such Award, payment or
amount received.
Section 12.9 Limits of Liability. Any liability of the Company with respect
to an Award shall be based solely upon the contractual obligations created under
the Plan and the Award Agreement. Neither the Company nor any member of the
Committee shall have any liability to any party for any action taken or not
taken, in good faith, in connection with or under the Plan.
Section 12.10 Governing Law. Except as otherwise provided herein, the Plan
shall be construed in accordance with the laws of the State of New York.
Section 12.11 Severability of Provisions. If any provision of the Plan is
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of the Plan, and the Plan shall be construed and
enforced as if such invalid or unenforceable provision had not been included in
the Plan.
Section 12.12 No Funding. The Plan shall be unfunded. The Company shall not
be required to establish any special or separate fund or to make any other
segregation of funds or assets to ensure the payment of any Award.
Section 12.13 Headings. Headings used throughout the Plan are for
convenience only and shall not be given legal significance.
Adopted by the Board of
Directors on December 13,
1996, as amended by Amendment
No. 1, dated as of February
13, 1997.
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FARM FAMILY HOLDINGS, INC.
344 Route 9W
Glenmont, New York 12077
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
FARM FAMILY HOLDINGS, INC.
PROXY CARD
The person(s) signing the front of this Proxy Card hereby appoint(s)
William M. Stamp, Jr., John W. Lincoln and Victoria M. Stanton, or any of
them, lawful attorneys-in-fact and proxies with full power of substitution in
each of them and hereby authorize(s) them to represent and vote, as
designated on the reverse side hereof, all shares of Common Stock of Farm
Family Holdings, Inc. standing in the name of said person(s) with all powers
said person(s) would possess if present at the Annual Meeting of Stockholders
of Farm Family Holdings, Inc. to be held April 22, 1997, or any
adjournment(s) thereof. In their discretion, the proxies are authorized to
vote upon such other business as may properly come before the Annual Meeting
or any adjournment(s) thereof.
This proxy, properly executed and returned, will be voted as directed on
this card by the persons designated as proxies above. If no specific
directions are given, this proxy will be voted "FOR" each listed Proposal.
(Continued, and to be dated and signed on reverse side.)
FARM FAMILY HOLDINGS, INC.
P.O. BOX 11098
NEW YORK, N.Y. 10203-0098
<PAGE>
[LOGO]
March 7, 1997
Dear Stockholder:
You are invited to attend the 1997 Annual Meeting of Stockholders of Farm
Family Holdings, Inc. The meeting will be held on April 22, 1997, at 9:00
A.M. New York time at The Century House Inn and Conference Center, Route 9,
Latham, New York.
The items to be considered at this meeting are detailed in the enclosed proxy
statement. Also enclosed is a copy of Farm Family Holdings, Inc.'s 1996
Annual Report, including consolidated financial statements.
WHETHER OR NOT Y0U PLAN ON ATTENDING THE ANNUAL MEETING, WE URGE YOU TO
COMPLETE, DATE AND SIGN THE ATTACHED PROXY CARD AND RETURN IT IN THE
POSTAGE-PAID ENVELOPE PROVIDED AS SOON AS POSSIBLE. IF YOU PLAN ON ATTENDING THE
ANNUAL MEETING, PLEASE CHECK THE APPROPRIATE BOX ON THE ATTACHED PROXY CARD.
Thank you for your continued interest in and commitment to Farm Family
Holdings, Inc. We look forward to seeing you at the meeting.
Sincerely,
William M. Stamp, Jr.
Chairman of the Board
Detach Proxy Card Here
| |
[ ]
The Board of Directors recommends a vote FOR Proposals I, II and III.
<TABLE>
<S> <C> <C> <C>
Proposal I: Election of Directors FOR all nominees WITHHOLD AUTHORITY to vote *EXCEPTIONS /X/
listed below /X/ for all nominees listed below /X/
</TABLE>
Nominees for a three-year term: Robert L. Baker, James V. Crane, Clark W.
Hinsdale III, John W. Lincoln, Wayne A. Mann,
Howard T. Sprow, Charles A. Wilfong, Tyler P.
Young
*Exceptions ___________________________________________________________________
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided.)
<TABLE>
<CAPTION>
Prosposal II: Ratification of the appointment of Coopers & Proposal III: Approval of the adoption of the Corporation's Omnibus
Lybrand L.L.P. as the Corporation's independent Securities Plan
auditors for the year 1997.
<S> <C> <C> <C> <C> <C>
FOR /X/ AGAINST /X/ ABSTAIN /X/ FOR /X/ AGAINST /X/ ABSTAIN /X/
</TABLE>
<TABLE>
<S> <C> <C>
At their discretion, the proxies are authorized to vote
upon such other business that may properly come before I plan to attend Change of Address and
the Annual Meeting or any adjournment(s) thereof. the Annual Meeting. /X/ or Comments Mark Here /X/
Please sign exactly as your name(s) appear(s) to
the left. (Joint owners should each sign.) When
signing as an attorney, executor, administrator,
trustee, guardian or corporate officer, please
give your full title as such.
Date:________________________________________, 1997
___________________________________________________
Signature
___________________________________________________
(Additional signature(s) if held jointly)
Votes MUST be indicated
(x) in Black or Blue Ink /X/
</TABLE>
Please mark, sign and date on this side of this Proxy Card and return to in the
postage-paid envelope provided.
