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.
<PAGE>
[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, will be held at the corporate
headquarters of Farm Family Holdings, Inc., 344 Route 9W, Glenmont, New York on
April 28, 1998 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 2001;
2. To ratify the appointment of Coopers & Lybrand L.L.P. as the
Corporation's independent auditors for the year 1998;
3. To transact any other business that may properly come before the Annual
Meeting and any adjournment(s) thereof.
The close of business on March 2, 1998 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 20, 1998
Glenmont, New York
<PAGE>
FARM FAMILY HOLDINGS, INC.
344 Route 9W
Glenmont, NY 12077
PROXY STATEMENT
1998 Annual Meeting of Stockholders
To Be Held April 28, 1998
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 1998 Annual Meeting of Stockholders to be held on Tuesday, April 28,
1998 at 9:00 A.M. New York time at the corporate headquarters of Farm Family
Holdings, Inc. 344 Route 9W, Glenmont, 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 20, 1998.
As of March 2, 1998, 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 March 2, 1998 (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 and
"FOR" the ratification of Coopers & Lybrand L.L.P. ("Coopers & Lybrand") as the
independent auditors for the year 1998. 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. 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
<PAGE>
mail or overnight courier, by submitting a subsequent proxy, or by voting in
person at the Annual Meeting.
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 2000, 1998 and 1999, respectively. The term
of the Class II directors expires with this Annual Meeting.
The Board of Directors proposes the election of Wayne R. Bissonette, Joseph E.
Calhoun, Gordon H. Gowen, Jon R. Greenwood, Frank W. Matheson, John P. Moskos,
Norma R. O'Leary and John I. Rigolizzo, Jr. as Class II directors, to hold
office for a term of three years, expiring on the date of the Annual Meeting of
Stockholders to be held in 2001 and until their successors are duly elected and
qualified. Each nominee, with the exception of Wayne R. Bissonette and Frank W.
Matheson, 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 2001
Wayne R. Bissonette, 59, has been nominated to the Board of Directors of the
Corporation for election at the Annual Meeting. Mr. Bissonette is Second Vice
President and a Director of Vermont Farm Bureau, Inc. Mr. Bissonette has been a
self-employed dairy farmer since 1970.
Joseph E. Calhoun, 63, 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 Farm Family Casualty Insurance Company ("FFCIC"), a wholly-owned
subsidiary of the Corporation, 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.
Gordon H. Gowen, 71, 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.
2
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Jon R. Greenwood, 44, 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.
Frank W. Matheson, 72, has been nominated to the Board of Directors of the
Corporation for election at the Annual Meeting. Mr. Matheson has been a Director
of FFCIC since 1996. Mr. Matheson is Vice President and a Director of
Massachusetts Farm Bureau Federation, Inc. Mr. Matheson has been a self-employed
farmer since 1951.
John P. Moskos, 46, has been a Director of the Corporation since February 1996.
His term as a Director will expire in 1998. Mr. Moskos has also served as a
Director of FFCIC since March 1997. 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, 64, 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., 44, 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.
The Board of Directors Recommends That You Vote FOR the Election Of the Above
Nominees.
CONTINUING DIRECTORS
Robert L. Baker, 48, has been a Director of the Corporation since February 1996.
His term as a Director will expire in 2000. Mr. Baker has also served as a
Director of FFCIC 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.
Randolph C. Blackmer, Jr., 56, 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.
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Fred G. Butler, Sr., 69, 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 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.
James V. Crane, 36, has been a Director of the Corporation since February 1996.
His term as a Director will expire in 2000. Mr. Crane has also served as a
Director of FFCIC since 1994. Mr. Crane is a Director of Maine Farm Bureau
Association. Mr. Crane has been a farmer and manager of Crane Bros., Inc. since
1983.
Stephen J. George, 58, 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.
Clark W. Hinsdale III, 42, has been a Director of the Corporation since February
1996. His term as a Director will expire in 2000. 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.
Richard A. Jerome, 49, 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 has been a self-employed farmer since
1972.
Arthur D. Keown, Jr., 52, 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, 59, has been a Director of the Corporation since February
1996. His term as a Director will expire in 1999. Mr. LaPointe previously served
as a Director of FFCIC from 1987 to 1997. Mr. LaPointe is a Director of Maine
Farm Bureau Association. Mr. LaPointe has been a self-employed farmer since
1969.
John W. Lincoln, 59, has been a Director and Vice Chairman of the Board of the
Corporation since February 1996. His term as a Director will expire in 2000. Mr.
Lincoln has also served as Vice Chairman of the Board of FFCIC 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 Linholm dairy farm since 1961.
Wayne A. Mann, 64, has been a Director of the Corporation since February 1996.
His term as a Director will expire in 2000. 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.
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Howard T. Sprow, 78, has been a Director of the Corporation since February 1996.
His term as a Director will expire in 2000. Mr. Sprow has also served as a
Director of FFCIC since March 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 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.
William M. Stamp, Jr., 58, 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 Board of FFCIC 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.
Charles A. Wilfong, 40, has been a Director of the Corporation since February
1996. His term as a Director will expire in 2000. Mr. Wilfong has also served as
a Director of FFCIC since 1991. Mr. Wilfong is 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, 37, has been a Director of the Corporation since February 1996.
His term as a Director will expire in 2000. 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.
5
<PAGE>
Board of Directors and Committees
The Board of Directors held seven meetings during 1997. 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 six meetings in 1997.
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 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 and recommends policies to the Board concerning director
compensation. The Compensation Committee held seven meetings in 1997.
The Executive Committee is comprised of Mr. Stamp, Mr. Lincoln, Mr. George, Mr.
Gowen, 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 two meetings in 1997.
The Nominating Committee is comprised of Mr. Stamp, Mr. Lincoln, Mr. George, Mr.
Keown and Ms. O'Leary, none of whom is an employee of the Corporation. This
committee recommends to the Board the names of qualified individuals to serve as
corporate directors and committee members and makes recommendations to the Board
concerning the size and composition of the Board and its committees. This
committee will consider stockholder recommendations for director sent to the
Nominating Committee, c/o Victoria M. Stanton, Secretary, Farm Family Holdings,
Inc., P.O. Box 656, Albany, New York 12201-0656. The Nominating Committee held
five meetings in 1997.
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
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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 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 1999 election of directors must be
received by the Secretary of the Corporation not earlier than January 28, 1999
or later than February 27, 1999, provided that the date of the annual meeting is
not advanced or delayed by more than 30 days from the prior anniversary date.
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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
1997, 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 $20,000 and $10,000 respectively. All other directors
received an annual retainer of $5,000. Directors also received a daily fee of
$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. 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.
As part of the companies' support of agribusiness, a contribution in the amount
of $25,000 toward the funding of an endowed faculty chair in New Use Agriculture
named for Stephen J. George, a director of the Corporation, will be paid to Cook
College of Rutgers University over a four-year period. Pursuant to this
arrangement, a contribution in the amount of $6,250 has been paid in each of
1996 and 1997.
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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 1998. 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
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.
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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>
William M. Stamp, Jr............................................. 534(1)
John W. Lincoln.................................................. 167(2)
Philip P. Weber.................................................. 1,037(3)
James J. Bettini................................................. 563(4)
Stuart C. Henderson ............................................. 213(5)
Victoria M. Stanton.............................................. 185(6)
Timothy A. Walsh................................................. 100
Robert L. Baker.................................................. 963(7)
Wayne R. Bissonette ............................................. 0
Randolph C. Blackmer, Jr......................................... 800( 8)
Fred G. Butler, Sr............................................... 587( 9)
Joseph E. Calhoun................................................ 73(10)
Jonathan M. Carpenter............................................ 25(11)
James V. Crane................................................... 350(12)
Stephen J. George................................................ 100(13)
Gordon H. Gowen.................................................. 1,017(14)
Jon R. Greenwood................................................. 1,479(15)
Clark W. Hinsdale III............................................ 210(16)
Richard A. Jerome................................................ 50(17)
Arthur D. Keown, Jr.............................................. 0(18)
Daniel R. LaPointe............................................... 62(19)
Wayne A. Mann.................................................... 67(20)
Frank W. Matheson ............................................... 372(21)
John P. Moskos................................................... 0
Norma R. O'Leary................................................. 1,216(22)
John I. Rigolizzo, Jr............................................ 27(23)
Howard T. Sprow.................................................. 0
Richard D. Tryon................................................. 431(24)
Charles A. Wilfong............................................... 643(25)
Tyler P. Young................................................... 227(26)
All directors and executive officers as a group
(32 Persons)............................................. 11,919
</TABLE>
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<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>
FMR Corp......................................................... 525,300(27) 9.99
82 Devonshire Street
Boston, MA 02109
Gotham Partners, L. P. and Gotham Partners II, L.P. ............. 350,500(28) 6.67
110 E. 42nd Street, 18th Floor
New York, NY 10017
Franklin Resources, Inc.......................................... 285,800(29) 5.44
777 Mariners Island Boulevard
San Mateo, CA 94404
W. R. Berkley Corporation ....................................... 272,200(30) 5.18
165 Mason Street
Greenwich, CT 06830
- --------------------
</TABLE>
(1) Includes 297 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 as 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) Includes 113 shares as to which voting and investment power is shared
with Melanie S. Henderson.
(6) Represents shares as to which voting and investment power are shared
with Randy M. Sweeney.
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(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., 744 shares as to which voting
and investment power are shared with Baker Farms, Inc. and 100 shares held
by the Robert L. Baker Revocable Trust. 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 Tammy E. Carpenter. Excludes 296 shares owned by Vermont Farm Bureau,
Inc.
(12) 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.
(13) Represents shares as to which voting and investment power are shared
with Susan George. Excludes 996 shares owned by New Jersey Farm Bureau.
(14) 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.
(15) 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.
(16) Excludes 296 shares owned by Vermont Farm Bureau, Inc. and its
affiliates.
(17) 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.
(18) Excludes 637 shares owned by Massachusetts Farm Bureau Federation,
Inc. and its affiliates.
(19) Excludes 397 shares owned by Maine Farm Bureau Association and its
affiliates.
(20) 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.
12
<PAGE>
(21) Includes 69 shares as to which voting and investment power are shared
with Eunice Matheson. Excludes 637 shares owned by Massachusetts Farm
Bureau Federation, Inc. and its affiliates.
(22) 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.
(23) Represents shares as to which voting and investment power are shared
with Marita Rigolizzo. Excludes 996 shares owned by New Jersey Farm Bureau.
(24) Includes 85 shares as to which voting and investment power are shared
with Barbara Tryon. Excludes 637 shares owned by Massachusetts Farm Bureau
Federation, Inc. and its affiliates.
(25) 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.
(26) 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.
(27) Based on Schedule 13G dated February 14, 1998 filed with the
Securities and Exchange Commission ("SEC") by FMR Corp. which has the sole
dispositive power over 525,300 shares and the sole voting power over 0
shares.
(28) Based on Schedule 13D dated March 7, 1997 filed with the SEC by Gotham
Partners, L.P. and Gotham Partners II, L.P. Gotham Partners, L.P. has the
sole dispositive power over 345,505 shares and the sole voting power over
345,505 shares. Gotham Partners II, L.P. has sole dispositive power over
4,995 shares and the sole voting power over 4,995 shares.
(29) Based on Schedule 13G dated January 16, 1998 filed with the SEC by
Franklin Resources, Inc. and certain affiliates thereof. An affiliate of
Franklin Resources, Inc., Franklin Advisory Services, Inc., has the sole
dispositive power over 285,800 shares and the sole voting power over
194,800 shares.
(30) Based on Schedule 13G dated February 6, 1998 filed with the SEC by W.
R. Berkeley Corporation which has the sole voting and dispositive power
over 272,200 shares.
13
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires executive officers
and directors, and persons who beneficially own more than 10% of the Common
Stock, to file initial reports of ownership and reports of changes in ownership
with the Securities and Exchange Commission (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 for the
year ended December 31, 1997.
14
<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, 1.99% of such aggregate compensation expense in 1997 was
charged to the Corporation, 64.03% was charged to FFCIC, 32.42% was charged to
the Life Company and 1.56% was charged to United.
15
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Awards
Annual Compensation
---------------------------------- Securities
Name and Other Annual Underlying All Other
Principal Position Year Salary Bonus Compensation Options Compensation
<S> <C> <C> <C> <C> <C> <C> <C>
Philip P. Weber 1997 $300,000 $180,000(1) $ ________(2) 75,000 $38,815(3)
President & Chief Executive Officer 1996 285,000 114,000(4) ________(2) 4,090(5)
1995 240,000 0 ________(2) 1,449(6)
Victoria M. Stanton 1997 200,000 90,000(1) ________(2) 40,000 26,521(7)
Executive Vice President, 1996 150,000 45,000(4) ________(2) 4,090(8)
General Counsel & Secretary 1995 118,000 11,150 13,643(9) 4,377(10)
James J. Bettini 1997 160,000 72,000(1) ________(2) 40,000 21,862(11)
Executive Vice President - Operations 1996 131,154 39,900(4) ________(2) 4,090(12)
1995 114,500 10,000 14,898(9) 4,271(13)
Timothy A. Walsh 1997 140,000 63,000(1) ________(2) 40,000 19,362(14)
Executive Vice President - Finance 1996 91,308 28,500(4) ________(2) 840(15)
& Treasurer 1995 30,000(16) 0 0 0
Stuart C. Henderson 1997 125,000 37,500(1) ________(2) 5,000 17,427(17)
Senior Vice President - Casualty 1996 115,154 0 12,976(18) 3,703(19)
Operations of FFCIC 1995 100,000 0 12,334(9) 3,542(20)
- -------------
</TABLE>
(1) Represents bonuses earned in 1997 by the named executive officer
pursuant to the Corporation's Annual Incentive Plan and the Life
Company's Annual Incentive Plan. Under the Annual Incentive Plans,
bonus payments are made during the year subsequent to the year in
which the bonus is earned.
(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
$19,150 under the Farm Family Profit Sharing Plan and the Farm Family
Money Purchase Plan (collectively, the "Profit Sharing and Money
Purchase Plan"), a credit of $18,581 under the Farm Family
Supplemental Money Purchase and Profit Sharing Plan (the "Supplemental
Plan") and a group term life insurance premium of $1,084 paid by the
Companies for the benefit of Mr. Weber, of which $696 was taxable
income.
(4) 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.
16
<PAGE>
(5) 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.
(6) 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.
(7) Represents a contribution by the Companies to Ms. Stanton's account of
$19,150 under the Profit Sharing and Money Purchase Plan, a credit of
$6,183 under the Supplemental Plan, a credit of $104 representing the
difference between market interest rates determined pursuant to SEC
rules and the "Prime Rate" as published in the "Money Rates" section
of The Wall Street Journal credited by the Corporation on salary
deferred pursuant to the Officers' Deferred Compensation Plan and a
group term life insurance premium of $1,084 paid by the Companies for
the benefit of Ms. Stanton, of which $264 was taxable income.
(8) 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.
(9) Includes a car allowance of $8,640 paid by the Companies.
(10) 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.
(11) Represents a contribution by the Companies to Mr. Bettini's account of
$19,150 under the Profit Sharing and Money Purchase Plan, a credit of
$1,628 under the Supplemental Plan and a group term life insurance
premium of $1,084 paid by the Companies for the benefit of Mr.
Bettini, of which $408 was taxable income.
(12) 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.
(13) 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.
(14) Represents a contribution by the Companies to Mr. Walsh's account of
$18,278 under the Profit Sharing and Money Purchase Plan and a group
term life insurance premium of $1,084 paid by the Corporation for the
benefit of Mr. Walsh, of which $264 was taxable income.
17
<PAGE>
(15) 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.
(16) Mr. Walsh joined FFCIC as Director of Corporate Development in August
1995.
(17) Represents a contribution by the Companies to Mr. Henderson's account
of $16,343 under the Profit Sharing and Money Purchase Plan and a
group term life insurance premium of $1,084 paid by the Companies for
the benefit of Mr. Henderson, of which $408 was taxable income.
(18) Includes a car allowance of $8,916 paid by the Companies.
(19) Represents a contribution by the Companies to Mr. Henderson's account
of $2,553 under the Savings Plus Plan, and a group term life insurance
premium of $1,150 paid by the Companies for the benefit of Mr.
Henderson, of which $368 was taxable income.
(20) Represents a contribution by the Companies to Mr. Henderson's account
of $2,603 under the Savings Plus Plan, and a group term life insurance
premium of $939 paid by the Companies for the benefit of Mr.
Henderson, of which $198 was taxable income.
18
<PAGE>
Options
The following tables set forth information concerning the grant of options to
each of the named executive officers during 1997 and the value of options held
by the named executive officers on December 31, 1997.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual Grants
------------------------------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees Exercise Expiration Grant Date
Granted in Fiscal Year Price Date Value(2)
------- -------------- ----- ---- --------
<S> <C> <C> <C> <C> <C>
Philip P. Weber 75,000(1) 34.88% $22.56 4/22/07 657,975
James J. Bettini 40,000(1) 18.60% $22.56 4/22/07 350,920
Victoria M. Stanton 40,000(1) 18.60% $22.56 4/22/07 350,920
Timothy A. Walsh 40,000(1) 18.60% $22.56 4/22/07 350,920
Stuart C. Henderson 5,000(1) 2.32% $22.56 4/22/07 43,865
</TABLE>
(1) Thirty-three and one/third percent of the options granted vest on
December 13, 1997, 1998 and 1999. No options may be exercised before July
26, 1999. All options immediately vest and become exercisable or
satisfiable, as applicable, in the event of a Change of Control of the
Corporation (as defined in the Corporation's Omnibus Securities Plan).
(2) The Black-Scholes method is used with these assumptions: expected
volatility of 22.79%, dividend yield of 0%, expected term of 6 years,
initial forfeiture rate of 5% and risk-free rate of return of 6.78%.
19
<PAGE>
<TABLE>
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 1997
AND 1997 FISCAL YEAR-END OPTION VALUES
<CAPTION>
Shares Value Value of Unexercised
Acquired Realized Number of Unexercised In-the-Money Options
Upon Upon Options at 12/31/97 at 12/31/97(1)
Exercise Exercise Exercisable Unexercisable Exercisable Unexercisable
-------- -------- ----------- ------------- ----------- -------------
(#) ($) (#) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Philip P. Weber.......... 0 0 0 75,000 0 750,225
James J. Bettini......... 0 0 0 40,000 0 400,120
Victoria M. Stanton...... 0 0 0 40,000 0 400,120
Timothy A. Walsh......... 0 0 0 40,000 0 400,120
Stuart C. Henderson...... 0 0 0 5,000 0 50,015
</TABLE>
(1) Stock options are classified as in-the-money if the fair market value of
the underlying common stock exceeds the exercise price of the option. The
value of such in-the-money options shown above is the difference between
the exercise price and the fair market value of the underlying Common
Stock as of December 31, 1997. The fair market value of the Common Stock
on December 31, 1997, based on the December 31, 1997 closing price on the
New York Stock Exchange, was $32.563 per share. The values of unexercised
in-the-money stock options at December 31, 1997 are included pursuant to
Securities and Exchange Commission rules; there is no assurance that such
values will in fact be realized.
20
<PAGE>
Severance Plan
Each of the officers of the Corporation is eligible for severance benefits under
the Corporation's, 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, a Change
in Control (as defined in the Severance Plan) of 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) 36 months salary in the case of the Chief
Executive Officer, 24 months salary in the case of an Executive Vice President,
12 months salary in the case of a Senior Vice President and 6 months salary in
the case of any other officer.
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>
21
<PAGE>
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.
The credited years of service as of December 31, 1997 for Mr. Weber, Mr.
Bettini, Ms. Stanton, Mr. Walsh and Mr. Henderson were 17, 18, 6, 2, 11,
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. 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.
22
<PAGE>
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.
Omnibus Securities Plan
In 1996, the Board of Directors of the Corporation adopted the Farm Family
Holdings, Inc. Omnibus Securities Plan, as amended by Amendment No. 1 dated as
of February 13, 1997 (the "Omnibus Securities Plan"). The Corporation's
stockholders approved the Omnibus Securities Plan at their Annual Meeting held
on April 22, 1997. The purpose of the Omnibus Securities Plan is to enable the
Corporation and its Affiliates 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
Omnibus Securities Plan authorizes the granting of Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards
or any combination of the foregoing (collectively, the "Awards"). In the event
of a Change of Control, all outstanding Awards will immediately vest and become
exercisable or satisfiable, as applicable. The Committee may, in its discretion,
determine that upon the occurrence of a Change of Control, each Award
outstanding 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. Unless otherwise indicated, capitalized terms shall
have the meaning set forth in the Omnibus Securities Plan.
Compensation Committee Interlocks and Insider Participation
In 1997, 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 and of
FFCIC.
23
<PAGE>
Report of the Compensation Committee of Farm Family Holdings, Inc.
Overview
The Compensation Committee is responsible for establishing compensation
objectives for the Corporation, recommending policies and plans to the Board of
Directors of the Corporation concerning salaries, bonuses and other forms of
compensation of the Corporation's executive officers, reviewing policies
regarding management perquisites and granting stock options, restricted stock
and other awards under long-term incentive plans. In addition, the Compensation
Committee recommends policies and plans to the Board of Directors of the
Corporation concerning director compensation. In carrying out its duties, the
Compensation Committee has direct access to independent compensation consultants
and outside survey data.
The objectives of the Corporation's executive compensation program are to
attract and retain the highest caliber of executive talent and to align
executive reward programs with the interests of shareholders in growing the
Corporation, maximizing economic value and enhancing products and services.
In order to further these objectives, target base salary, annual and long-term
incentive opportunities are established such that a substantial portion of the
executive officers' total compensation is placed at-risk in the form of
performance-related incentives. Base salaries are set to be at or near the
median of the labor market for similar positions at similar companies in like
markets. Long-term incentive opportunities are established so that total
compensation (the sum of base salary, annual incentive and present value of
long-term incentives) can exceed the median of such labor market when the
Corporation's financial performance and total shareholder return objectives are
exceeded.
This report reflects the compensation philosophy of the Corporation as endorsed
by the Compensation Committee and approved by the Board of Directors of the
Corporation. All cash compensation is 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. All members of the
Corporation's Compensation Committee are also members of FFCIC's Compensation
Committee.
Components of Executive Compensation
The components of the 1997 compensation for executive officers of the
Corporation, including the Chief Executive Officer, consist of base salary,
annual and long-term incentive compensation.
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 marketplace, personal performance and
potential future contributions to the Companies. The 1997 base salaries for the
executive officers were recommended by the Compensation Committee and approved
by the Corporation's Board of Directors.
24
<PAGE>
Annual Incentive Compensation. In 1996, the Compensation Committee recommended,
and the Board approved, the Corporation's 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 is
designed to tie annual incentive compensation to performance goals.
Annual bonuses paid to executive officers under the Annual Incentive Plan are a
significant element of the Corporation's executive compensation program.
Objective performance measures and target performance levels are established
annually by the Compensation Committee for each executive officer. Performance
measures for each executive officer are based on the executive officer's
responsibilities. Relative weights are assigned to each of the performance
measures to determine the portion of the annual bonuses to be represented by
each variable. In addition, "threshold," "target" and "outstanding" performance
levels are set for each of the performance measures, and bonus payments, as a
percentage of base salary, are established for each performance level.
Under the Annual Incentive Plan, 1997 target bonuses for the Chief Executive
Officer, Executive Vice Presidents and Senior Vice Presidents were established
at 40%, 30% and 20% of base salary, respectively. Actual bonuses paid pursuant
to the Annual Incentive Plan may range from 0% to 150% of the target bonus. The
1997 target bonus percentages were recommended by the Compensation Committee and
approved by the Corporation's Board of Directors.
The performance measures for 1997 were tied to quantifiable financial
objectives, such as the achievement of net income and premium growth targets,
thereby establishing a direct link between executive pay and corporate
profitability. In addition to objective performance measures, the Chief
Executive Officer's evaluation of each executive officer's overall performance
accounted for up to 20% of the officer's overall performance measure to
determine the final incentive amount for each executive officer, other than the
Chief Executive Officer. The Compensation Committee's evaluation of the Chief
Executive Officer's overall performance, as approved by the Corporation's Board
of Directors, accounted for 20% of the Chief Executive Officer's overall
performance measure. The Compensation Committee approved the 1997 performance
measures and performance levels in December 1996 and certified attainment of the
performance levels following the end of 1997. Under the Annual Incentive Plan,
payment is made during the year subsequent to the year in which the bonus is
earned, after attainment of the performance levels is certified by the
Compensation Committee. Awards paid in 1998 for the 1997 bonus year were based
on corporate performance at the "outstanding" level.
Long-Term Incentive Compensation. In 1996, the Compensation Committee
recommended, and the Board adopted, the Corporation's Omnibus Securities Plan
(the "Plan") which was approved by the Corporation's stockholders on April 22,
1997. Grants of non-qualified stock options to certain executive officers of the
Corporation and FFCIC were recommended by the Compensation Committee, and
approved by the Corporation's Board of Directors in December 1996, subject to
the Plan's approval by the Corporation's stockholders. The exercise price of
each such non-qualified stock option is equal to the fair market value of a
share of Common Stock of
25
<PAGE>
the Corporation on April 22, 1997. The grants of non-qualified stock options
were based in part on insurance industry survey data.
CEO Compensation
For 1997, Mr. Weber's base salary was established at $300,000. Mr. Weber's 1997
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. Pursuant to the Annual Incentive Plan,
the Compensation Committee recommended, and the Board approved a 1997 bonus of
$90,000 for Mr. Weber. Mr. Weber also earned a 1997 bonus of $90,000 under the
Life Company's Annual Incentive Plan. Eighty percent of Mr. Weber's 1997 bonus
was based on achievement of the "outstanding" performance levels of company
profitability as measured by net income targets. The remaining 20% of Mr.
Weber's 1997 bonus was based on the Compensation Committee's evaluation of Mr.
Weber's performance, as approved by the Corporation's Board of Directors. During
1996, the Compensation Committee recommended, and the Board approved, the grant
to Mr. Weber of non-qualified stock options to purchase 75,000 shares of Common
Stock of the Corporation subject to the approval of the Plan by the
Corporation's stockholders which was obtained on April 22, 1997. The exercise
price of each non-qualified stock option granted to Mr. Weber is equal to the
fair market value of a share of Common Stock of the Corporation on April 22,
1997.
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 Committee
believes that tax deductibility is a important factor, but not the sole factor
to be considered in setting executive compensation policy. Accordingly, the
Compensation Committee generally intends to take such reasonable steps as are
required to avoid the loss of a tax deduction due to Section 162(m), but
reserves 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
26
<PAGE>
COMMON STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the Common
Stock for the seventeen month period July 23, 1996 through December 31, 1997
with the cumulative total return on the S&P 500 Index and the S&P Insurance
(Property-Casualty) Index over the same period.
<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
12/31/97 204 149 169
</TABLE>
<TABLE>
<CAPTION>
Value on Value on
December 31, 1996 December 31, 1997
----------------- -----------------
<S> <C> <C>
Farm Family Holdings, Inc. .......................... $122 $204
S&P 500 Index ....................................... $112 $149
S&P 500 Insurance
(Property-Casualty) Index............................ $116 $169
</TABLE>
27
<PAGE>
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, as amended by Amendment No. 1 dated April 22, 1997 and as further
amended by and restated as the Amended and Restated Option Purchase Agreement
dated as of February 26, 1998, with the shareholders of the Life Company (the
"Option Purchase Agreement") pursuant to which the Corporation has, for a
two-year period commencing on July 26, 1996, the option to acquire the Life
Company subject to certain conditions. On February 26, 1998, the Board of
Directors of the Corporation approved the exercise of the option to acquire the
Life Company. Under the terms of the Option Purchase Agreement, the Corporation
will pay an exercise price of $37.5 million to acquire the Life Company
consisting of $31.5 million of Common Stock and $6 million stated value of 6 1/8
% voting preferred stock of the Corporation. The proposed acquisition of the
Life Company is subject to certain conditions, including the approval of the
shareholders of the Corporation and receipt of all required governmental
approvals.
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, 1997, shared operating expenses totaled $29
million of which 67% or $20 million were 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, 1997 was approximately $760,000.
28
<PAGE>
United
Substantially all of the directors and executive officers of United are also
directors and executive officers of the Corporation.
Per Risk Reinsurance Contract
FFCIC and United were 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 Contract"). For the year ended December 31,
1997, net earned premiums ceded by FFCIC to United under the Per Risk
Reinsurance Contract were $8.7 million. The Per Risk Reinsurance Contract was
terminated effective December 31, 1997.
Umbrella Reinsurance Contract
United had 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, Addendum No. 2, effective July 26, 1996 and
Addendum No. 3, effective retroactively to January 1, 1995 as to Article IV and
effective January 1, 1997 as to all other changes (as so amended, the "Umbrella
Reinsurance Contract"). For the year ended December 31, 1997, net written
premiums ceded by FFCIC to United under the Umbrella Reinsurance Contract were
$0.2 million. The Umbrella Reinsurance Contract was terminated December 31,
1997.
Catastrophe Reinsurance Contract
United had assumed 16.67% of the 1st layer and 2% of the 3rd and 4th layers of
FFCIC's per occurrence losses under an Excess Catastrophe Reinsurance Contract,
effective January 1, 1997 (the "Catastrophe Reinsurance Contract"). For the year
ended December 31, 1997, net earned premiums ceded by FFCIC to United under the
Catastrophe Reinsurance Contract were $0.1 million. The Catastrophe Reinsurance
Contract expired on December 31, 1997.
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, 1997, United incurred approximately $0.5 million in
direct and allocated expenses and overhead under the Service Agreement.
29
<PAGE>
Farm Bureaus
Many of the directors of the Corporation are also directors or executive
officers of state Farm Bureau(R) organizations in the ten states in which FFCIC
operates (collectively, the "Farm Bureaus").
Membership List Purchase Agreement
FFCIC has entered into a Membership List Purchase Agreement, commencing on
January 1, 1996, with the Farm Bureau in each of the ten states in which it
operates. 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, 1997, FFCIC
paid approximately $600,000 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 20, 1998 in
order to be considered for inclusion in the proxy materials relating to the 1999
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 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.
30
<PAGE>
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,
1997, as filed with the Securities and Exchange Commission, without exhibits.
Please address all such requests to Farm Family Holdings, Inc., P.O. Box 656,
Albany, New York 12201-0656, Attention: Executive Vice President - Finance.
Exhibits will be provided upon written request and payment of an appropriate
processing fee.
Victoria M. Stanton
Secretary
March 20, 1998
Glenmont, New York
31
<PAGE>
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
posses if present at the Annual Meeting of Stockholders of Farm Family Holdings,
Inc. to be held April 28, 1998, 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, NY 10203-0098]
<PAGE>
[LOGO]
March 20, 1998
Dear Stockholder:
You are invited to attend the 1998 Annual Meeting of Stockholders of Farm Family
Holdings, Inc. The meeting will be held on April 28, 1998 at 9:00 A.M. New York
time at the corporate headquarters of Farm Family Holdings, Inc., 344 Route 9W,
Glenmont, 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 1997 Annual
Report, including consolidated financial statements.
WHETHER OR NOT YOU 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,
/s/ William M. Stamp, Jr.
William M. Stamp, Jr.
Chairman of the Board
Detach Proxy Card Here
| |
<PAGE>
[ ]
The Board of Directors recommends a vote FOR Proposals I and II.
<TABLE>
<S> <C> <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: Wayne R. Bissonette, Joseph E. Calhoun, Gordon
H. Gowen, Jon R. Greenwood, Frank W. Matheson, John P. Moskos, Norma R. O'Leary
and John I. Rigolizzo, Jr.
*Exceptions
_______________________________________________________________________________
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
"Exceptions" box and write that nominee's name in the space provided.)
Proposal II: Ratification of the appointment of Coopers and Lybrand L.L.P. as
the Corporation's independent auditors for the year 1998.
FOR /X/ AGAINST /X/ ABSTAIN/X/
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.
I plan to attend
the Annual Meeting. /X/
If you do not wish to receive an Annual Report for this
account, please mark this box. /X/
Change of Address and
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.
Dated: ___________________, 1998
------------------------------
Signature
------------------------------
(Additional signature(s) if held
jointly)
Votes MUST be indicated (X) in
Black or Blue ink. /X/
Please mark, sign and date on this side of this Proxy Card and return it in the
postage-paid envelope provided.
