<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
-------------------------------
NOTICE OF 1995
ANNUAL MEETING
OF SHAREHOLDERS
AND PROXY STATEMENT
-------------------------------
<PAGE>
TABLE OF CONTENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LETTER FROM THE CHAIRMAN.................................................... 1
NOTICE OF 1995 ANNUAL MEETING OF SHAREHOLDERS............................... 2
PROXY STATEMENT............................................................. 3
PROPOSAL 1: ELECTION OF DIRECTORS......................................... 3
Procedures for Nominating Directors..................................... 5
Voting Securities and Principal Holders Thereof......................... 6
Compensation of Directors............................................... 8
Compensation of Executive Officers...................................... 9
Reports of the Compensation Committees on Executive Compensation........ 11
Shareholder Return Graph................................................ 15
Compensation Plans...................................................... 16
Compensation Committee Interlocks and Insider Participation in
Compensation Decisions................................................ 17
PROPOSAL 2: AMENDMENT TO THE 1985 LONG-TERM INCENTIVE PLAN................ 18
PROPOSAL 3: APPROVAL OF A NEW FIVE-YEAR EMPLOYMENT AGREEMENT
BETWEEN JOHN J. BYRNE AND FUND AMERICAN ENTERPRISES HOLDINGS, INC...... 18
PROPOSAL 4: APPOINTMENT OF INDEPENDENT AUDITORS........................... 19
OTHER MATTERS.............................................................. 19
Fund American Long-Term Incentive Plan (as amended)........................ Appendix I
Employment Agreement between Fund American Enterprises Holdings, Inc. and
John J. Byrne.......................................................... Appendix II
</TABLE>
================================================================================
Fund American Enterprises Holdings, Inc. (the "Company" and, together with
its subsidiaries, "Fund American") is a Vermont-based financial services holding
company which was organized as a Delaware corporation in 1980. The Company's
principal operating activities are conducted through its wholly-owned
subsidiary, Source One Mortgage Services Corporation, and its subsidiaries
("Source One"). Source One is one of the nation's largest mortgage banking
companies.
Operating affiliates added to the Fund American family during 1994 include
(i) a 23% voting interest in Financial Security Assurance Holdings Ltd. ("FSA"),
a leading Aaa/AAA writer of financial guarantee insurance and (ii) a 33% stake
in Main Street America Holdings, Inc., a unit of National Grange Mutual
Insurance Company, a New Hampshire based property and casualty insurer.
In March 1995 Fund American received its license from the Insurance
Commissioner of the State of New Hampshire to engage its newly formed
subsidiary, White Mountains Insurance Company ("White Mountains"), in the sale
of property-casualty insurance. White Mountains is expected to expand its
operations to other states as additional approvals are obtained.
Fund American also owns an investment portfolio consisting mainly of common
equity securities.
Prospectively, Fund American intends to further develop or pursue
investments in or acquisitions of one or more operating businesses, primarily in
the insurance or other financial services industries in which management has
knowledge and experience.
<PAGE>
JOHN J. BYRNE
Chairman
March 30, 1995
Dear Shareholders:
I would like to invite all shareholders to attend the 1995 Annual Meeting
of Fund American Enterprises Holdings, Inc., to be held on May 24, 1995, at 9:00
a.m. This year's meeting will again take place across the street from our cozy
corporate office in Norwich, Vermont, at the historic Norwich Inn. I welcome
you all to join me for the morning in our Vermont home.
We will begin the meeting with a discussion and shareholder vote on the
proposals set forth in the accompanying Proxy Statement and on such other
matters properly brought before the meeting. At the meeting you will be asked
to consider and vote on the following issues:
1) the election of four directors;
2) an amendment to the Company's long-term incentive plan;
3) ratification of my new five-year employment agreement with the
Company; and
4) ratification of the appointment of our independent auditors.
Whether or not you plan to attend the meeting, you can ensure that your
shares are properly represented at the meeting by promptly completing, signing,
dating and returning your proxy card in the enclosed envelope.
Respectfully submitted,
John J. Byrne
Fund American Enterprises Holdings, Inc.
The 1820 House, Main Street
Norwich, Vermont 05055-0850
<PAGE>
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
NOTICE OF 1995 ANNUAL MEETING OF SHAREHOLDERS
MAY 24, 1995
March 30, 1995
Notice is hereby given that the 1995 Annual Meeting of Shareholders of Fund
American Enterprises Holdings, Inc. will be held on Wednesday, May 24, 1995, at
9:00 a.m. at the Norwich Inn, Main Street, Norwich, Vermont 05055-0850. At the
meeting you will be asked to consider and vote upon the following proposals:
(a) to elect one director to Class III with a term ending in 1997 and three
directors to Class I with terms ending in 1998;
(b) to amend the Fireman's Fund 1985 Long-Term Incentive Plan by (i)
extending its current expiration date from September 23, 1995 to May
24, 2005, (ii) increasing to 500,000 (from 353,762) the number of
shares of the Company's Common Stock which may be granted thereunder,
and (iii) renaming the plan the Fund American Long-Term Incentive Plan;
(c) to ratify a new five-year employment agreement between the Company's
Chairman, President and Chief Executive Officer, John J. Byrne, and the
Company;
(d) to appoint Ernst & Young LLP as Independent Auditors for the 1995 audit
examination; and
(e) to transact such other business, if any, as may be properly brought
before the meeting.
Shareholders of record on the record date, March 27, 1995, (i) who are
individuals, may attend and vote at the meeting in person or by proxy or (ii)
which are corporations or other entities, may be represented and vote at the
meeting by a duly authorized representative or by proxy. A list of all
shareholders entitled to vote at the meeting will be open for public examination
by shareholders during regular business hours from May 1, 1995, until 12:00 noon
on May 24, 1995, at the corporate office of Fund American Enterprises Holdings,
Inc., The 1820 House, Main Street, Norwich, Vermont.
All shareholders are cordially invited to attend this meeting.
By Order of the Board of Directors,
Dennis P. Beaulieu
Corporate Secretary
SHAREHOLDERS ARE INVITED TO COMPLETE AND SIGN THE ACCOMPANYING PROXY CARD
TO BE RETURNED TO FUND AMERICAN ENTERPRISES HOLDINGS, INC., C/O FIRST CHICAGO
TRUST COMPANY OF NEW YORK, POST OFFICE BOX 8085, EDISON, NEW JERSEY 08818-9052,
IN THE ENVELOPE PROVIDED, WHETHER OR NOT THEY EXPECT TO ATTEND THE MEETING.
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD BE COMPLETED AND RETURNED
PROMPTLY.
2
<PAGE>
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Company's Board of Directors (the "Board") for the 1995
Annual Meeting of Shareholders (the "1995 Annual Meeting"), to be held on May
24, 1995. The solicitation of proxies will be made primarily by mail, and this
Proxy Statement and proxy materials will be distributed to registered
shareholders on or about April 3, 1995.
Holder of shares of the Company's voting stock ("Voting Stock") registered
in their name as of the close of business on March 27, 1995, the record date,
are entitled to vote at the meeting. Holders of shares of the Company's Common
Stock, par value $1.00 per share ("Shares"), are entitled to one vote per Share.
Holders of Voting Preferred Stock Series D, par value $1.00 per share ("Series D
Preferred Stock"), are entitled to 100 votes per share. As of March 27, 1995,
American Express Company ("American Express") beneficially owned all the 20,833
outstanding shares of Series D Preferred Stock.
You can ensure that your shares of Voting Stock are properly voted at the
meeting by completing, signing, dating and returning the enclosed proxy card in
the envelope provided. A shareholder has the right to appoint another person
(who need not be a shareholder) to represent the shareholder at the meeting by
completing an alternative form of proxy which can be obtained from the Corporate
Secretary or by notifying the Inspectors of Election. Shareholders have the
right to revoke their proxies, at any time prior to the time their shares are
actually voted, by (i) filing a written notice of revocation with the Corporate
Secretary, (ii) presenting another proxy with a later date or (iii) notifying
the Inspectors of Election in writing of such revocation. Sending in a signed
proxy will not affect your right to attend the meeting and vote. If a
shareholder attends the meeting and votes in person, his or her proxy is
considered revoked.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board is divided into three classes (each a "Class").
At the 1995 Annual Meeting Mr. Cochran is nominated to be elected to Class
III with a term ending in 1997, and Messrs. Clark, Kemp and Macklin are
nominated to be elected to Class I with terms ending in 1998. THE BOARD
RECOMMENDS A VOTE FOR PROPOSAL 1 WHICH CALLS FOR THE ELECTION OF THE 1995
NOMINEES.
The current members and terms of each Class are set forth below:
<TABLE>
<CAPTION>
-------------------------------------------------
Director
Director Age since
-------------------------------------------------
<S> <C> <C>
Class I - Terms Ending in 1995
Howard L. Clark* 78 1985
K. Thomas Kemp* 54 1994
Gordon S. Macklin* 66 1987
-------------------------------------------------
Class II - Terms Ending in 1996
John J. Byrne 62 1985
George J. Gillespie, III 64 1986
-------------------------------------------------
Class III - Terms Ending in 1997
Howard L. Clark, Jr. 51 1986
Robert P. Cochran* 45 1994
Arthur Zankel 63 1992
=================================================
</TABLE>
* Nominee at the 1995 Annual Meeting
The following information with respect to the principal occupation,
business experience and other affiliations of the nominees and directors has
been furnished to the Company by the nominees and directors.
3
<PAGE>
CLASS I
HOWARD L. CLARK was a director of the Company from 1981 until 1983 and
became a director again in 1985. Mr. Clark served as an advisor to the Board of
Directors of American Express from 1979 to 1993 and was that company's Chairman
of the Executive Committee from 1977 to 1979, when he retired, and Chief
Executive Officer from 1960 to 1977. Mr. Clark is also a director of Stone &
Webster, Inc. Subsidiaries of American Express beneficially own all
outstanding shares of the Series D Preferred Stock. See "Voting Securities and
Principal Holders Thereof." American Express and its affiliates provide various
services to Fund American from time to time. See "Compensation Committee
Interlocks and Insider Participation in Compensation Decisions."
K. THOMAS KEMP has been a director of the Company since November 1994. Mr.
Kemp has served as Executive Vice President, Treasurer and Secretary since 1993,
as Vice President, Treasurer and Secretary since 1991 and was a Vice President
of Fireman's Fund Insurance Company ("Fireman's Fund") from 1990 to January 2,
1991. Prior to joining Fireman's Fund, Mr. Kemp was President of Resolute
Reinsurance Company. Mr. Kemp is also a director of Source One, FSA, White
Mountains, American Direct Business Insurance and Main Street America Holdings,
Inc.
GORDON S. MACKLIN has been a director of the Company since 1987. Mr.
Macklin served as Chairman of Hambrecht & Quist, Inc., a venture capital and
investment banking company, from 1987 until 1992. Prior to that, Mr. Macklin
served as President of the National Association of Securities Dealers, Inc. from
1970. He is currently Chairman of White River Corporation ("White River"), a
director of Martin Marietta Corporation, MCI Communications Corporation,
InfoVest Corporation, MedImmune Inc., Fusion Systems Corporation and a trustee,
director or managing general partner (as the case may be) of 51 of the
investment companies in the Franklin Templeton Group of Funds. White River was
formerly a subsidiary of the Company and has performed certain services for Fund
American from time to time. See "Compensation Committee Interlocks and Insider
Participation in Compensation Decisions."
CLASS II
JOHN J. BYRNE has been Chairman of the Company since 1985. Mr. Byrne has
also served as President and Chief Executive Officer since 1990, as Chief
Executive Officer from 1985 to 1990 and was Chief Executive Officer of Fireman's
Fund from 1989 through January 2, 1991. Prior to that, he was Chairman and
Chief Executive Officer of GEICO Corporation from 1976 to 1985. Mr. Byrne is
also a director of Source One, FSA, White Mountains, Lehman Brothers Holdings,
Inc., Terra Nova (Bermuda) Holdings Ltd., Mid America Apartment Communities and
Zurich Reinsurance Centre Holdings, Inc.
GEORGE J. GILLESPIE, III has been a director of the Company since 1986. He
is a Partner in the law firm of Cravath, Swaine & Moore, which position he has
held since 1963. He is also a director of The Washington Post Company. Cravath,
Swaine & Moore has been retained by Fund American from time to time to perform
legal services. See "Compensation Committee Interlocks and Insider
Participation in Compensation Decisions."
CLASS III
HOWARD L. CLARK, JR. was a director of the Company from 1986 until 1990,
and was an advisor to the Board from 1990 to 1993 when he was re-elected as a
director. He is Vice Chairman of Lehman Brothers Inc. and was Chairman and
Chief Executive Officer of Shearson Lehman Brothers, Inc. from 1990 to 1993.
Prior to joining Shearson Lehman Brothers, Inc., Mr. Clark was Executive Vice
President and Chief Financial Officer of American Express. He is also a
director of The Maytag Corporation, Plasti-Line, Inc. and the Securities
Industry Association. Mr. Clark, Jr. is the son of Howard L. Clark, who is also
a director of the Company. Lehman Brothers provides various services to Fund
American from time to time. See "Compensation Committee Interlocks and Insider
Participation in Compensation Decisions."
4
<PAGE>
ROBERT P. COCHRAN has been a director of the Company since November 1994.
Mr. Cochran was a founding principal of FSA and has served FSA in various
capacities since 1985. He has been President and Chief Executive Officer and a
director of FSA since 1990. He is also Chairman of Financial Security Assurance
Inc. and Financial Security Assurance (U.K.) Ltd.
ARTHUR ZANKEL has been a director of the Company since August 1992. He is
presently Co-Managing Partner of First Manhattan Co., an investment advisor and
broker-dealer. He has been a General Partner at First Manhattan Co. since 1965.
Mr. Zankel is also a director of The Travelers Inc. and VICORP Restaurants, Inc.
First Manhattan Co. has been retained by Fund American from time to time to
perform various brokerage and advisory services. See "Compensation Committee
Interlocks and Insider Participation in Compensation Decisions."
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee, comprised entirely of nonemployee directors (Messrs.
Clark, Clark Jr., Gillespie, Macklin and Zankel), has general responsibility for
the oversight and surveillance of the accounting, reporting and financial
control practices of Fund American. The Audit Committee annually reviews the
qualifications of the Independent Auditors; makes recommendations to the Board
as to their selection; and reviews the plan, fees and results of their audit.
The Audit Committee also reviews the plans of Source One's internal audit
department each year and the results of its audits. Mr. Clark, Jr. is Chairman
of the Audit Committee.
The Human Resources Committee, comprised entirely of nonemployee directors
(Messrs. Clark, Clark Jr., Gillespie, Macklin and Zankel), oversees Fund
American's compensation and benefit policies and programs, including
administration of the Fireman's Fund 1985 Long-Term Incentive Plan (the
"Incentive Plan"), the Fund American Voluntary Deferred Compensation Plan (the
"Deferred Compensation Plan") and the Fund American Deferred Benefit Plan (the
"Deferred Benefit Plan").
The Human Resources Committee also sets the annual salaries and bonuses for
elected officers and certain other key employees. Mr. Macklin is Chairman of
the Human Resources Committee.
Fund American does not have a standing Nominating Committee of the Board.
MEETINGS OF THE BOARD OF DIRECTORS
During 1994 the following meetings of the Board were held: eight meetings
of the full Board, including four special meetings, two meetings of the Audit
Committee and one meeting of the Human Resources Committee. In 1994 each
director attended more than 75% of all meetings of the Board and each member of
the Audit Committee and the Human Resources Committee attended more than 75% of
all such committee meetings, except Mr. Clark and Mr. Zankel who were each
unable to attend one of the two 1994 meetings of the Audit Committee.
PROCEDURES FOR NOMINATING DIRECTORS
Under the Company's Bylaws, any shareholder entitled to vote for the
election of directors that is a qualified holder of record of shares of Voting
Stock having an aggregate market value of at least $1,000 may nominate persons
for election as director, but only if the following procedures are followed:
In general, the shareholder must give written notice to the Corporate
Secretary not later than (i) 120 days in advance of the meeting with respect to
an election to be held at an annual meeting of shareholders, and (ii) with
respect to an election to be held at a special meeting of shareholders, the
close of business on the seventh day following the date on which notice of such
meeting is first given to shareholders.
The notice must include: (i) the name and address of the shareholder who
intends to make the nomination and the name and address of the person or persons
to be nominated; (ii) a representation that the shareholder is a qualified
holder of record of shares of Voting Stock having an aggregate market value of
at least $1,000 and that the shareholder intends to appear at the meeting, in
person or by proxy, to nominate the person or persons
5
<PAGE>
specified in the notice; (iii) a description of all arrangements or
understandings between the shareholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination, or
nominations, are to be made by the shareholder; (iv) such other information
regarding each nominee proposed by such shareholder as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission (the "SEC") had each nominee been nominated,
or intended to be nominated, by the Company; and (v) the consent of each nominee
to serve as a director of the Company if so elected.
VOTING SECURITIES AND PRINCIPAL
HOLDERS THEREOF
As of March 27, 1995, the Company's Voting Stock consisted of 7,659,937
outstanding Shares, each Share entitled to one vote, and 20,833 outstanding
shares of Series D Preferred Stock, each share of Series D Preferred Stock
entitled to 100 votes. The Shares and the Series D Preferred Stock vote
together as a single class.
The Series D Preferred Stock carries a cumulative 8.75% annual dividend
yield. The Series D Preferred Stock is redeemable in cash or, at the Company's
option, in Shares (based on the then current market value of Shares) on July 31,
1995. The Company has the right to extend the redemption date by one year,
which would require an increase in the dividend rate to 9.75%.
To the knowledge of the Company, there was no person or entity beneficially
owning more than 5% of any class of the Voting Stock as of March 27, 1995,
except as shown on the following page.
6
<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Number Percent of
Name and address of shares Percent of total voting
Title of class of beneficial owner owned class (e) power (f)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock John J. Byrne (a) 1,820,224 20.7% 6.9%
The 1820 House
Norwich, VT 05055
Heine Securities Corporation (c) 1,057,095 13.8% 10.8%
51 John F. Kennedy Parkway
Short Hills, NJ 07078
Fireman's Fund Insurance Companies 969,480 12.7% 10.0%
Incentive Savings Plan (b)
777 San Marin Drive
Novato, CA 94998
Smith Barney Inc. 674,424 8.8% 6.9%
The Travelers Inc. (c)
65 East 55th Street
New York, NY 10022
Harris Associates L. P. (c) 506,200 6.6% 5.2%
2 North LaSalle Street, Suite 500
Chicago, IL 60602
Voting Preferred American Express Company (d) 20,833 100.0% 21.4%
Stock Series D American Express Tower
World Financial Center
New York, NY 10285
=====================================================================================================================
</TABLE>
(a) Includes warrants to purchase 1,150,000 Shares, which warrants Mr. Byrne
purchased from American Express in 1985. The warrants are exercisable at
$21.66 per Share through January 2, 1996. Proposal 3 calls for approval of
a five-year employment agreement between Mr. Byrne and the Company and the
extension of the term of 1,000,000 of the warrants to January 2, 2002.
Proposal 3 provides that Mr. Byrne shall not exercise any of the 1,000,000
warrants extended until the day after his employment by the Company is
terminated. See "Proposal 3". Mr. Byrne has sole voting and investment
power (or shares such power with his spouse) with respect to the Shares for
which he claims beneficial ownership. Does not include 211,500 Shares
donated to charitable foundations for which Mr. Byrne disclaims beneficial
ownership, but for which his spouse retains voting power.
(b) Represents Shares beneficially owned by employees of Fireman's Fund
pursuant to an incentive savings plan which is sponsored by Fireman's Fund.
The trustee for such plan votes the Shares held by the plan in accordance
with directions given by the participating Fireman's Fund employees to
whose accounts Shares have been allocated.
(c) According to filings by such holders with the SEC, the Shares beneficially
owned by the holders named above were acquired solely for investment
purposes on behalf of client investment advisory accounts of such holders.
(d) American Express has sole voting and investment power with respect to the
shares of Series D Preferred Stock it beneficially owns.
(e) Determined based on the beneficial ownership provisions specified in Rule
13d-3(d)(1) of the Securities Exchange Act of 1934 (the "Exchange Act").
(f) As of March 27, 1995, the total voting power of Voting Stock was 9,743,237
votes. Percent of total voting power is based on actual beneficial
ownership of Voting Stock as of the record date. Warrants held by Mr.
Byrne are not included in this calculation.
7
<PAGE>
BENEFICIAL STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of March 27, 1995, beneficial ownership of
Shares by each director of the Company, by each of the "Named Executive
Officers" as defined herein, and by all directors and executive officers as a
group.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
Percent of
Name and address Number of Percent of total voting
Title of class of beneficial owner Shares owned class (d) power (e)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock John J. Byrne 1,820,224(a) 20.7% 6.9%
Howard L. Clark 2,000 * *
Howard L. Clark, Jr. 1,000 * *
Robert P. Cochran 0 0 0
James A. Conrad 772 * *
George J. Gillespie, III 1,000 * *
K. Thomas Kemp 23,537(b) .3% .2%
Gordon S. Macklin 5,000 * *
Robert W. Richards 831 * *
Allan L. Waters 8,755(b) .1% *
Arthur Zankel 12,600(c) .2% .1%
All directors and executive
officers as a group 1,876,440(a)(b) 21.3% 7.4%
=================================================================================================================
</TABLE>
* Represents less than .1% of the outstanding Shares and the total voting
power of Voting Stock, as applicable.
(a) Includes warrants to purchase 1,150,000 Shares, which warrants Mr. Byrne
purchased from American Express in 1985. The warrants are exercisable at
$21.66 per Share through January 2, 1996. Proposal 3 calls for approval of
a five-year employment agreement between Mr. Byrne and the Company and the
extension of the term of 1,000,000 of the warrants to January 2, 2002.
Proposal 3 provides that Mr. Byrne shall not exercise any of the 1,000,000
warrants extended until the day after his employment by the Company is
terminated. See "Proposal 3". Mr. Byrne has sole voting and investment
power (or shares such power with his spouse) with respect to the Shares for
which he claims beneficial ownership. Does not include 211,500 Shares
donated to charitable foundations for which Mr. Byrne disclaims beneficial
ownership, but for which his spouse retains voting power.
(b) Includes currently exercisable stock options held by Mr. Kemp, Mr. Waters
and all executive officers as a group to purchase 2,000; 2,855 and 4,855
Shares, respectively.
(c) Does not include 156 Shares for which Mr. Zankel disclaims beneficial
ownership. First Manhattan Co., a partnership in which Mr. Zankel is Co-
Managing Partner, has investment and/or voting discretion with respect to
such Shares.
(d) Determined based on the beneficial ownership provisions specified in Rule
13d-3(d)(1) of the Exchange Act. Except to the extent indicated above, all
executive officers and directors have (or share with their spouse) sole
voting and investment power with respect to the Shares for which they claim
beneficial ownership.
(e) As of March 27, 1995, the total voting power of Voting Stock was 9,743,237
votes. Percent of total voting power is based on actual beneficial
ownership of Voting Stock as of the record date. Stock options and
warrants held by employees are not included in this calculation.
COMPENSATION OF DIRECTORS
Directors who are not officers of Fund American received a retainer of
$45,000 for 1994 and a fee of $1,000 for each Board meeting attended. Messrs.
Clark, Jr. and Macklin also received an additional retainer of $3,000 for 1994
as Chairman of the Audit Committee and Chairman of the Human Resources
Committee, respectively. Each non-employee director also received an additional
$1,000 for each committee meeting attended.
Any non-management director who retires from the Board with at least five
years of service as a director of the Company is entitled to an annual
retirement benefit equal to 50% of the amount of the annual retainer for the
year in which the retirement occurs. Eligible directors are entitled to receive
the annual benefit for a period of years equal to the number of years of service
or, if sooner, until death.
Directors who are officers of Fund American do not receive any compensation
for their services as directors. Directors do not receive any additional fees or
compensation for services as director of any subsidiary of the Company.
8
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following tables set forth certain information regarding the salary,
incentive compensation and benefits paid by Fund American to its Chief Executive
Officer and four of its most highly compensated executive officers other than
the Chief Executive Officer (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
The following table reflects the cash and non-cash compensation for the
Named Executive Officers.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
Annual compensation Long-term compensation
------------------------------------------- ----------------------
Awards Payouts
-------- -------
Other
annual
Name and compen- Options/ LTIP All other
principal position Year Salary Bonus sation SARs (#) payouts (a) compensation
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
JOHN J. BYRNE 1994 $550,000 $ 74,000 $ 0 0 $ 0 $ 104,499(d)
Chairman, President & 1993 550,000 165,000 0 0 4,748,975 96,002(d)
Chief Executive Officer 1992 607,500 169,000 1,575(b) 0 0 2,157,194(d)(e)
JAMES A. CONRAD 1994 219,212 75,000 32,718(c) 0 0 4,500(f)
President & Chief Executive 1993 209,958 0 191,261(c) 26,123 0 0
Officer of Source One 1992 204,048 72,000 36,463(c) 0 921,122 5,815(f)
ROBERT W. RICHARDS 1994 211,528 72,000 25,295(c) 0 0 4,500(f)
Chairman of 1993 202,728 0 176,345(c) 24,149 0 0
Source One 1992 197,028 65,000 21,999(c) 0 890,362 5,878(f)
K. THOMAS KEMP 1994 180,000 30,000 0 0 0 30,366(d)
Executive Vice President 1993 135,000 59,400 0 0 1,304,345 15,313(d)
1992 130,000 35,000 350(b) 0 0 7,540(d)
ALLAN L. WATERS 1994 175,000 40,000 0 0 0 17,791(d)
Senior Vice President & 1993 160,000 57,750 0 0 1,363,938 106,464(d)
Chief Financial Officer 1992 134,600 40,000 7,358(b) 0 0 6,810(d)
===================================================================================================================================
</TABLE>
(a) Includes cash payments and the total market or appraisal value of shares
distributed.
(b) Amounts represent temporary state tax reimbursements.
(c) Amounts for 1994 include $25,638 and $18,611 for Messrs. Conrad and
Richards, respectively, reflecting interest reimbursements on amounts paid
to purchase stock appreciation rights ("SARs") and reimbursements of
automobile expenses. Amounts for 1993 include $156,414 and $149,495 for
Messrs. Conrad and Richards, respectively, reflecting reimbursements of
individual income taxes resulting from exchanges of shares of Common Stock
of Source One ("Source One Shares") for SARs. Amounts for 1993 and 1992
also include interest reimbursements on amounts paid to purchase Source One
Shares and reimbursements of automobile expenses.
(d) Amounts for 1994 and 1993 represent principal credited to the Deferred
Benefit Plan. For Mr. Waters, the 1993 amount also includes reimbursements
of $90,625 for relocation expenses. Amounts for 1992 include principal
credited to the Company's 401(k) incentive savings plan and other
retirement plans.
(e) On December 30, 1992, pursuant to a request from the Board, Mr. Byrne
agreed to an early exercise of stock options and warrants to purchase
1,000,000 Shares. The Board's request reflected concerns regarding proposed
tax legislation which could have limited or eliminated the Company's tax
benefits from certain employee stock options and warrants exercised in 1993
and thereafter. To encourage early exercise of the stock options and
warrants, the Company provided a $30 million secured loan to Mr. Byrne. The
non-recourse loan bears interest at 4% and matures on October 23, 1995. The
$2,148,168 difference between the face value and the initial estimated fair
value of the loan has been reported as compensation and benefits expense in
the Company's income statement for the year ended December 31, 1992.
(f) Represents amounts allocated to the accounts of Messrs. Conrad and Richards
pursuant to Source One's employee stock ownership plan.
9
<PAGE>
OPTIONS AND WARRANTS
The following table summarizes, for the Named Executive Officers,
exercises of stock options and warrants during the Company's latest fiscal year,
and the number and in-the-money value of stock options and warrants outstanding
as of the end of the fiscal year.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1994
--------------------------------------------------------------------
Stock option, warrant and SAR Number of unexercised stock In-the-money value of all
exercises during the year ended options, warrants outstanding stock options,
Deember 31, 1994 and SARs (a) warrants and SARs (a)
------------------------------- ------------------------------ -----------------------------------
Shares Value Not Not
Name acquired realized Exercisable exercisable Exercisable exercisable
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John J. Byrne 130,000 $5,775,478 1,150,000 0 $56,883,888(c) $0
James A. Conrad 0 0 26,123 0 45,369 0
Robert W. Richards 0 0 24,149 0 41,941 0
K. Thomas Kemp 0 0 3,000(b) 0 110,750(b) 0
Allan L. Waters 0 0 7,688(b) 0 288,641(b) 0
===============================================================================================================================
</TABLE>
(a) Unless otherwise noted, amounts represent options, warrants or SARs
pertaining to Fund American Shares.
(b) Amounts include 1,000 and 2,563 stock options for Messrs. Kemp and Waters,
respectively, and $20,510 and $53,317 of in-the-money value for Messrs.
Kemp and Waters, respectively, pertaining to stock options to acquire from
the Company shares of Common Stock of White River ("White River Shares").
Such stock options were issued pursuant to certain anti-dilution provisions
of the Incentive Plan which were triggered by the distribution of
approximately 74% of the outstanding White River Shares to Fund American's
shareholders on December 22, 1993 (the "Distribution").
(c) Amount is presented net of Mr. Byrne's basis in his unexercised warrants.
Proposal 3 calls for approval of a five-year employment agreement between
Mr. Byrne and the Company and the extension of the term of 1,000,000 of the
warrants from January 2, 1996 to January 2, 2002. Proposal 3 provides that
Mr. Byrne shall not exercise any of the 1,000,000 warrants extended until
the day after his employment by the Company is terminated. See "Proposal
3".
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
The following table summarizes the Incentive Plan awards made to the Named
Executive Officers during the latest fiscal year. Such awards consisted
entirely of performance shares.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
Number of
performance Performance Estimated future payouts in Shares:
shares period for -------------------------------------
Name awarded payout Threshold Target Maximum
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John J. Byrne 0 0 0 0 0
James A. Conrad 26,677(a) 6 yrs. 0 26,677 53,354
Robert W. Richards 19,055(a) 6 yrs. 0 19,055 38,110
K. Thomas Kemp 0 0 0 0 0
Allan L. Waters 0 0 0 0 0
===============================================================================================================================
</TABLE>
(a) Represents the conversion, as of January 1, 1994, of outstanding Source One
performance shares to Fund American performance shares. Such conversion
was made at a ratio of 1.91 Fund American performance shares for each
Source One performance share previously held. The related performance
criteria is the attainment of an economic return on equity ("EROE") as
measured by growth in the estimated economic value per share of Source One
common stock. The performance shares may be earned based on a pre-defined
fixed formula in four equal tranches over four overlapping three-year
periods. Each tranche represents 6,669 and 4,764 performance shares at the
target EROE for Messrs. Conrad and Richards, respectively. The first
tranche may be earned over the performance period beginning January 1, 1994
and ending December 31, 1996. The target and maximum EROE's for the first
tranche are 12.8% and 19.8%, respectively. No performance shares would be
payable from the first tranche if the EROE is less than 6.8%. The
performance period for the second performance share tranche is January 1,
1995 through December 31, 1997, and the related target and maximum EROE's
are 14.8% and 21.8%, respectively. No performance shares would be payable
from the second tranche if the EROE is less than 8.8%.
10
<PAGE>
OTHER COMPENSATION ARRANGEMENTS
Fund American has no formal severance policy. However, the Company has
guaranteed payment of the salaries for Messrs. Kemp and Waters through December
31, 1996. As of December 31, 1994, such guaranteed salary amounts totalled
$360,000 and $350,000 for Messrs. Kemp and Waters, respectively. On February 15,
1995, the Board approved, subject to shareholder approval pursuant to Proposal 3
herein, a new five-year employment agreement between the Company and John J.
Byrne (see "Proposal 3"). Additionally, pursuant to the Incentive Plan, under
some circumstances such as a "Change in Control" followed by a termination
without cause, constructive termination or an "Adverse Change" in the Incentive
Plan, stock options will generally become fully exercisable and performance
shares will become partially or fully payable. Such circumstances are more
fully described in the Incentive Plan.
CERTAIN TRANSACTIONS
Fund American from time to time uses aircraft owned by Haverford
Transportation Inc. ("HTI") for corporate travel purposes. Messrs. Byrne and
Kemp are the sole shareholders of HTI. Fund American reimburses HTI for certain
of its operating costs associated with Fund American's use of HTI aircraft.
During 1994 Fund American paid HTI a total of $190,150 for aircraft usage. Fund
American believes that its arrangement with HTI is on terms that are more
favorable to Fund American than would generally be available if secured through
an arrangement with a third party.
Source One has made mortgage loans in the ordinary course of business to
employees of Fund American, including certain of its Executive Officers. The
terms of such mortgage loans made to Executive Officers are substantially
similar to those provided to other employees of Fund American and to the public.
In December 1993, BYRNE & sons, l.p. ("BYRNE & sons"), a partnership in
which Mr. Byrne is the sole general partner, made its initial investment in the
Merastar Partners Limited Partnership and the Southern Heritage Limited
Partnership (the "Partnerships"). The Partnerships are involved in various
property and casualty insurance ventures.Shortly after making its initial
investment, BYRNE & sons offered one-third of its interest in the Partnerships
to Fund American on equal terms and conditions. In May 1994 Fund American
accepted the offer and paid BYRNE & sons a total of $338,558 representing
reimbursement for one-third of Byrne & sons' cost for the Partnerships including
interest of $5,225 at a 6.0% annual rate.
REPORTS OF THE COMPENSATION
COMMITTEES ON EXECUTIVE
COMPENSATION
Compensation for Messrs. Byrne, Kemp and Waters is established by the Human
Resources Committee of the Board (the "Committee"). Compensation for Messrs.
Conrad and Richards is established by the Human Resources Committee of the
Source One Board of Directors (the "Source One Committee") which is comprised
solely of Fund American executive officers.
FUND AMERICAN COMMITTEE
The Committee is comprised solely of non-employee directors. The Committee
has responsibility for developing, administering and monitoring the executive
compensation policies of the Company.
Fund American's executive compensation policies are designed with one goal
in mind--maximization of shareholder value over long periods of time. The
Committee believes that this goal is best pursued by utilizing a pay-for-
performance program which serves to attract and retain superior executive talent
and provide management with performance-based incentives to maximize shareholder
value. Through the compensation program, the Committee seeks to maximize
shareholder value by aligning closely the financial interests of Fund American's
management with those of the Company's shareholders.
The Committee believes that the most appropriate indicator of shareholder
return is the Company's return on equity ("ROE") as measured by growth in value
per Share. The Committee believes that, over long periods of time, maximizing
the Company's ROE will optimize shareholder returns.
11
<PAGE>
The Committee believes that the performance-based compensation of the
Company's executive officers should be payable only if the Company achieves
truly superior returns for its shareholders. Therefore, many of Fund American's
performance-based compensation programs are directly linked to achievement of an
annualized ROE for the Company of 13% to 15%. The Committee believes that such
returns are a challenging target for the Company in its current form.
Compensation of Fund American's management team, including the Named
Executive Officers, consists primarily of three components: base salary, annual
bonus and long-term incentive awards. When establishing each element of
compensation, the Committee considers the total compensation earned by or
potentially available to each member of management.
BASE SALARY. Base salary for each Named Executive Officer is established
annually, generally as of January 1. When establishing base salaries of the
Named Executive Officers, the Committee considers numerous factors including:
qualifications of the executive; the corporate responsibilities of the
executive; the executive's performance since his or her last salary adjustment;
and, for all executives except Mr. Byrne, the recommendations of Mr. Byrne.
ANNUAL BONUS. For 1994, the target annual bonus pool for all eligible employees
of the Company was equal to 25% of eligible base salary at a 13% annual ROE.
The aggregate size of the annual bonus pool could vary from 0% to 50% of
eligible salary. When establishing the aggregate size of the annual bonus pool,
the Committee considers numerous factors including performance versus the
objectives set forth in the Company's Annual Business Plan, in particular the
Company's financial performance for the latest fiscal year as measured by ROE,
and the recommendations of Mr. Byrne. The Committee reviews the Annual Business
Plan with management near the beginning of the year and approves the plan after
changes required by the Committee, if any, are made.
After establishing the aggregate size of the annual bonus pool, the
Committee then considers the distribution of the bonus pool among the executive
officers and certain other key employees of the Company. Each participant's
allocation of the pool is determined after considering numerous factors
including individual achievements as compared to objectives included in the
Annual Business Plan, the contribution of such achievements to the Company's
overall financial performance, and the recommendations of Mr. Byrne. Mr. Byrne
receives an annual bonus, as a percent of his salary, equal to no more than the
average bonus percentage received by all other employees eligible to participate
in the bonus pool.
For 1994, the Committee determined that the financial results of the
Company warranted a bonus pool equal to 13.6% of aggregate base salary. The
principal factors considered by the Committee in determining the size of the
1994 pool were: (i) the Company's poor 1994 ROE performance, as measured by
change in value per share, versus a 13% target ROE (the predominant factor);
(ii) the progress made in re-deploying the Company's passive investment
portfolio into strategic operating investments; and (iii) overall favorable
results versus certain specific objectives contained in the 1994 Annual Business
Plan.
LONG-TERM INCENTIVE AWARDS. The Incentive Plan provides for granting to
executive officers and certain other key employees of the Company various types
of stock-based incentive awards including stock options and performance shares.
Stock options are rights to purchase a specified number of Shares at or
above the fair market value of Shares at the time the option is granted. Stock
options generally vest over a four-year period and expire no later than ten
years after the date on which they are granted.
Performance shares are conditional grants (payable subject to the
achievement of specific financial goals) of a specified maximum amount of cash,
payable generally at the end of three- to five-year periods or as otherwise
determined by the Committee.
12
<PAGE>
The Committee believes that stock-based awards made pursuant to the
Incentive Plan are the most effective method of providing incentives for
management to strive to maximize shareholder value over the long term. The
Committee's conclusion is based on the following factors: (i) such awards vest
or are earned over multi-year periods; (ii) such awards are generally made in
the form of Shares or derivatives thereof, which helps to align the interests of
management with those of the Company's shareholders; and (iii) the majority of
Incentive Plan awards made over the last three fiscal years are linked to the
achievement of a 13% to 15% ROE over the applicable performance period.
The Incentive Plan is scheduled to expire on September 23, 1995. On
February 15, 1995, the Committee approved, subject to the approval of the
Company's shareholders, a series of amendments to the Incentive Plan. Such
amendments are designed to enable the Company to continue to provide the same
long-term incentives to executive officers and other employees of the Company,
through May 2005, as are currently available under the Incentive Plan. See
"Proposal 2".
For 1994 there were no new stock-based awards made to Messrs. Byrne, Kemp
or Waters. As of December 31, 1994, Messrs. Byrne, Kemp and Waters had: (i)
37,500, 6,750 and 8,250 performance shares outstanding, respectively, which may
become payable subject to the attainment of a 15% target ROE over the four-year
period ending December 31, 1996 (the "15% Performance Shares"); and (ii) 0,
17,000 and 14,000 performance shares outstanding, respectively, which may become
payable subject to the attainment of a 13% target ROE over the three-year period
ending December 31, 1996 (the "13% Performance Shares"). At an actual ROE less
than the target, the percentage of performance shares payable could decline to
0%.
As a result of certain anti-dilution provisions of the Incentive Plan which
were triggered by the Distribution, each 15% Performance Share paid out would
entitle the holder to receive an amount of cash equal to the market value of one
Fund American Share plus one-half the market value of one White River Share.
Each 13% performance share paid out would entitle the holder to receive an
amount of cash equal to the market value of one Fund American Share.
NEW EMPLOYMENT CONTRACT. On February 15, 1995, the Committee approved, subject
to approval by the Company's shareholders, a new five-year employment agreement
between John J. Byrne and the Company. The Committee believes, among other
things, that Mr. Byrne plays a key role in the finding and development of
strategic investment opportunities for the Company and therefore approved the
new five-year agreement to retain Mr. Byrne's active involvement with the
Company for the next five years. See "Proposal 3".
Gordon S. Macklin, Chairman
Howard L. Clark
Howard L. Clark, Jr.
George J. Gillespie, III
Arthur Zankel
SOURCE ONE COMMITTEE
Source One's compensation programs include three components: base salary,
annual bonus and long-term incentive awards. Emphasis is placed on the two
performance-based components -- annual bonus and long-term incentive awards.
Maximization of shareholder return, as measured by certain indicators of Source
One's financial performance selected by the Source One Committee, are the
primary factors used by the Source One Committee to determine pay-for-
performance compensation for Messrs. Conrad and Richards.
13
<PAGE>
The Source One Committee also considers the relative achievement towards
goals established in Source One's Annual Business Plan when determining
compensation amounts for Messrs. Conrad and Richards. Source One's Annual
Business Plan is submitted to, reviewed by and approved by the Source One Board
of Directors near the beginning of each year. Copies of the Source One Annual
Business Plan are then provided to the Fund American Board.
BASE SALARY. The philosophy of Source One's salary program is to provide
individual salaries that properly reflect the responsibilities of each position
and assure that salary levels maintain a competitive relationship while offering
appropriate recognition for performance. The base salaries of Messrs. Conrad and
Richards are considered and established annually by the Source One Committee.
Among the factors considered by the Source One Committee are the qualifications
of the executive, the corporate responsibilities of the executive, the
performance of the executive since his or her last salary adjustment, and the
recom-mendations of Mr. Byrne.
ANNUAL BONUS. Annual bonuses are paid under an executive incentive compensation
plan which is designed to attract and retain the services of selected key
officers who are in a position to make a material contribution to the successful
operation of Source One. Incentive compensation awards are made on the basis of
individual performance during the plan year from an award pool. When determining
the amounts to be awarded to a participant (including Messrs. Conrad and
Richards), the Source One Committee considers each individual's contribution
towards attainment of goals established in Source One's Annual Business Plan.
These goals are principally focused towards the achievement of specified
operating earnings and EROE targets. For 1994, the Source One Committee
determined that the financial results of Source One warranted a bonus pool of
17.0%. The principal factors considered by the Committee in determining the size
of the 1994 bonus pool were: (i) a shortfall in Source One's reported operating
earnings versus the Source One 1994 Annual Business Plan (the predominant
factor); (ii) the attainment of a favorable 13.5% EROE; and (iii) overall
favorable results versus certain specific objectives contained in Source One's
1994 Annual Business Plan.
LONG-TERM INCENTIVE AWARDS. These awards are made primarily pursuant to Source
One's performance share plan, the purpose of which is to advance the interests
of Source One by providing equity-based incentives to certain key employees.
Payout of such awards is primarily based on the achievement of certain
predefined corporate EROE goals.
For 1994 there were no new stock-based awards made to Messrs. Conrad and
Richards. As of December 31, 1994, Messrs. Conrad and Richards held 26,123 and
24,149 SARs, respectively. The value of each SAR is equal to the positive
difference between (i) $86.625 and (ii) the closing price of one Share on the
date preceding the exercise of the SAR multiplied by a factor of 1.223. The
SARs are fully vested and expire upon termination of employment.
As of December 31, 1994, Messrs. Conrad and Richards had 26,677 and 19,055
performance shares outstanding, respectively. The performance shares may be
earned based on a pre-defined fixed formula in four equal tranches over four
overlapping three-year periods. Each tranche represents 6,669 and 4,764
performance shares at the target ROE for Messrs. Conrad and Richards,
respectively. The first tranche may be earned over the performance period
beginning January 1, 1994 and ending December 31, 1996. The target and maximum
EROE's for the first tranche are 12.8% and 19.8%, respectively. No performance
shares would be payable from the first tranche if the EROE is less than 6.8%.
The performance period for the second performance share tranche is January 1,
1995 through December 31, 1997, and the related target and maximum EROE's are
14.8% and 21.8%, respectively. No performance shares would be payable from the
second tranche if the EROE is less than 8.8%.
Terry L. Baxter, Chairman
John J. Byrne
K. Thomas Kemp
14
<PAGE>
SHAREHOLDER RETURN GRAPH
The following graph shows the five-year cumulative total return for a
shareholder who invested $100 in Shares at the close of business on December 31,
1989, assuming re-investment of dividends. For comparison, cumulative returns
for the five-year period ended December 31, 1994, are also shown for the
Standard & Poor's 500 Stocks Capitalization Weighted Index and the Standard &
Poor's Financial Services Index.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG FUND AMERICAN, S&P 500 INDEX AND S&P FINANCIAL SERVICES INDEX
<CAPTION>
Measurement Period FUND S&P S&P FINANCIAL
(Fiscal Year Covered) AMERICAN 500 INDEX SERVICES INDEX
------------------- ---------- --------- --------------
<S> <C> <C> <C>
Measurement Pt-
12/31/89 $100.0 $100.0 $100.0
FYE 12/31/90 $151.2 $ 96.9 $ 78.6
FYE 12/31/91 $205.7 $126.4 $118.4
FYE 12/31/92 $212.0 $136.0 $146.1
FYE 12/31/93 $277.5 $149.8 $162.3
FYE 12/31/94 $255.4 $151.7 $156.6
</TABLE>
15
<PAGE>
COMPENSATION PLANS
RETIREMENT PLANS
All executive officers employed by the Company participate solely in Fund
American retirement plans. All executive officers employed by Source One
participate solely in Source One retirement plans.
FUND AMERICAN RETIREMENT PLANS
The Company terminated its defined benefit pension plan, supplemental
pension plan, retiree medical plan and incentive savings plan in early 1993. In
1994, Messrs. Byrne, Kemp and Waters participated in the Deferred Benefit Plan,
a nonqualified defined contribution plan established for the purpose of
providing retirement and postretirement benefits. The amount of annual
contributions to the new plan are determined using actuarial assumptions and
benefit levels similar to those of the previous plans; however, participants in
the new plan may choose between two investment options for their plan balances.
Amounts credited to the Deferred Benefit Plan accounts of such individuals have
been included in the Summary Compensation Table.
Each of Messrs. Byrne, Kemp and Waters may also participate voluntarily in
the Deferred Compensation Plan. Pursuant to the Deferred Compensation Plan,
participants may defer all or a portion of qualifying remuneration payable by
Fund American. Amounts deferred pursuant to the Deferred Compensation Plan are
included in the Summary Compensation Table. Participants in the Deferred
Compensation Plan may choose between two investment options for their plan
balances. As of December 31, 1994 the account balances of Messrs. Byrne, Kemp
and Waters included 23,296; 986 and 15,795 phantom shares, respectively. The
account value of each phantom share is equal to the market value of one Share.
Such phantom shares are payable only in cash.
SOURCE ONE RETIREMENT PLANS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
Gross annual benefit paid as a straight-life annuity
Average eligible compensation for five (to be reduced by .485% of average salary up to covered
highest paid consecutive years compensation, that is, the average of social security
in the last ten years of service wage bases for the 35 years prior to retirement)
-------------------------------------------------------------------------------------------------
15 years 20 years 25 years 30 years 35 years
<S> <C> <C> <C> <C> <C>
-------- -------- -------- -------- ----------
$100,000 $24,000 $ 32,000 $ 40,000 $ 48,000 $ 56,000
125,000 30,000 40,000 50,000 60,000 70,000
150,000 36,000 48,000 60,000 72,000 84,000
200,000 48,000 64,000 80,000 96,000 112,000
300,000 72,000 96,000 120,000 144,000 168,000
400,000 96,000 128,000 160,000 192,000 224,000
=================================================================================================
</TABLE>
Messrs. Conrad and Richards participate in Source One retirement plans
under which they are entitled to receive estimated annual retirement benefits in
accordance with the table shown above. The level of benefits shown in the table
does not reflect a reduction to be made based on compensation for which social
security taxes were paid by Source One on behalf of each participant.
16
<PAGE>
Participants in the Source One retirement plans are eligible to receive
normal retirement benefits at age 65, reduced normal retirement benefits at age
55, or a deferred vested benefit if they terminate employment prior to
retirement but after five years of service. Such benefits are based on each
participant's average eligible compensation for the five highest paid
consecutive years in his or her last ten years before retirement or termination
and on total years of credited service at retirement up to a maximum of 35
years. Annual eligible compensation for Messrs. Conrad and Richards includes
base salary plus bonus received, but is limited to not more than one and one-
third of base salary in total. Benefits for Messrs. Conrad and Richards accrued
under the Source One retirement plans are based on 1994 eligible compensation
amounts of $150,000.
Benefits under the Source One retirement plans for a single person are
computed on a straight-life basis and benefits for a married person are
generally computed on a joint and 50% survivor basis, subject to each
participant's right to elect alternative survivor benefits.
As of December 31, 1994 Messrs. Conrad and Richards had 11 and 23 whole
years of credited service, respectively, for purposes of computing their
benefits under the Source One retirement plans.
PLANS SUBJECT TO SHAREHOLDER ACTION
As further described in Proposal 2, the Board has approved, subject to
shareholder approval, certain amendments to the Incentive Plan including
changing its name to the Fund American Long-Term Incentive Plan (the "Amended
Incentive Plan"). The Amended Incentive Plan provides for granting to executive
officers and other key employees of the Company (and certain of its
subsidiaries) various types of stock-based incentive awards including stock
options, restricted stock and performance shares.
As of March 27, 1995, there were no awards granted under the Amended
Incentive Plan. All employees of the Company and its subsidiaries (excluding
Source One) are eligible to receive awards pursuant to the Amended Incentive
Plan.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION IN
COMPENSATION DECISIONS
FUND AMERICAN COMMITTEE
The Human Resources Committee of the Board is composed of the independent
outside directors, namely, Messrs. Clark, Clark Jr., Gillespie, Macklin and
Zankel. The Company notes the following relationships and transactions
pertaining to American Express and Messrs. Gillespie, Macklin and Zankel.
Mr. Gillespie is a Partner in the firm Cravath, Swaine & Moore, which has
been retained by Fund American from time to time to perform legal services.
Mr. Macklin is non-executive Chairman of White River. Through December 22,
1993 White River was a wholly-owned subsidiary of the Company. The Company
currently owns 1,014,750 White River Shares, or approximately 17.9% of the
outstanding White River Shares. White River has in the past provided various
accounting and investment advisory services to Fund American. White River has
outstanding a $50 million note payable to the Company which becomes due on March
24, 1996 and a $40 million revolving credit facility payable to the Company
which becomes due on September 25, 1995. Pursuant to the terms of the credit
agreement between White River and the Company, White River has the right to use
certain of its investment portfolio securities to repay borrowings under the
term loan and revolving credit facility.
Mr. Zankel is Co-Managing Partner of First Manhattan Co. First Manhattan
Co. has provided brokerage and non-discretionary investment advisory services to
Fund American from time to time.
American Express and its affiliates have from time to time provided various
services to Fund American including investment banking services, brokerage
services and financial consulting services. American Express beneficially owns
all outstanding shares of the Series D Preferred Stock.
17
<PAGE>
Fund American believes that all the preceding transactions were on terms
that were reasonable and competitive. Additional transactions of this nature may
be expected to take place in the ordinary course of business in the future.
SOURCE ONE COMMITTEE
Source One had no instances of compensation committee interlocks or insider
participation in compensation matters in 1994.
PROPOSAL 2
AMENDMENT TO THE 1985
LONG-TERM INCENTIVE PLAN
The Incentive Plan was adopted by the Board and approved by the Company's
sole shareholder in September 1985. On February 15, 1995, the Committee
approved, subject to the approval of the Company's shareholders, a series of
amendments to the Incentive Plan to: (i) extend the Incentive Plan's current
expiration date of September 23, 1995 to May 24, 2005, (ii) increase to 500,000
the number of Shares which may be granted to participants pursuant to the
Incentive Plan (from 353,762 unissued Shares remaining under the Incentive Plan
as of March 27, 1995), and (iii) change the name of the Incentive Plan to the
Fund American Long-Term Incentive Plan.
The purpose of the amendment is to allow the Company to continue to have a
long-term incentive plan in force as a means by which to attract and retain its
current and future key employees. The Company believes that long-term
compensation should be based on "pay for performance" and further believes that
management should act as if they were owners. With these objectives in mind,
the Committee believes that the proposed amendments to the Incentive Plan will
allow the Company to continue to closely align the financial interests of
management with those of the Company's shareholders.
A complete copy of the Incentive Plan, reflecting the proposed amendments
thereto, has been provided herewith as Appendix I. THE BOARD RECOMMENDS A VOTE
FOR PROPOSAL 2 WHICH CALLS FOR THE AMENDMENT OF THE INCENTIVE PLAN.
PROPOSAL 3
APPROVAL OF A NEW FIVE-YEAR
EMPLOYMENT AGREEMENT BETWEEN
THE COMPANY AND JOHN J. BYRNE
On February 15, 1995 the Committee approved, subject to approval by the
Company's shareholders, a new five-year employment agreement between John J.
Byrne and the Company (the "Agreement"). Upon approval by the Company's
shareholders, the Agreement would become effective for the period January 1,
1995 through December 31, 1999. The Agreement principally calls for: (i) Mr.
Byrne to continue to serve as Chairman and Chief Executive Officer of the
Company for the five-year term of the Agreement at his current salary; (ii) an
extension of the term of 1,000,000 of the 1,150,000 warrants he currently holds
to purchase Shares from January 2, 1996 to January 2, 2002 (the "Warrant
Extension"); (iii) Mr. Byrne to forego the exercise of the 1,000,000 warrants
extended until the day after his employment by the Company has ended; and (iv)
providing Mr. Byrne the right to enter into a new loan from the Company, or to
receive a Company guarantee of a loan obtained by Mr. Byrne from a third party,
in an amount up to $15 million, upon the maturity of his outstanding $30 million
loan with the Company which becomes due on October 23, 1995. The new loan would
be a recourse loan having a term ending on or before December 31, 1999, a market
interest rate and standard commercial terms.
In accordance with generally accepted accounting principles, the Warrant
Extension, if the Agreement is approved by shareholders, would result in a
second quarter 1995 charge to net income. The accounting charge to be recorded
represents the in-the-money amount of such warrants on the date the Agreement is
approved by shareholders. Based on the market value per Share of $72.375 at the
close of business on March 27, 1995, the pro forma effect of the Warrant
Extension would be a $49.6 million pretax charge to compensation expense. The
Warrant Extension is not expected to have a material adverse effect on
shareholders' equity or book value per Share on the date of the Warrant
Extension.
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A complete copy of the Agreement has been provided herewith as Appendix II.
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 3 WHICH CALLS FOR RATIFICATION OF THE
AGREEMENT.
PROPOSAL 4
APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee of the Board has recommended Ernst & Young LLP ("Ernst
& Young") for reappointment as the Independent Auditors of Fund American.
Subject to shareholder approval, the Board has appointed Ernst & Young as Fund
American's Independent Auditors for 1995. Ernst & Young has provided various
professional services to Fund American since 1974. A representative of Ernst &
Young will attend the 1995 Annual Meeting, will be provided with the opportunity
to make a statement and will be available to answer appropriate questions.
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 4 APPROVING THE APPOINTMENT OF
ERNST & YOUNG AS FUND AMERICAN'S INDEPENDENT AUDITORS FOR 1995.
OTHER MATTERS
MANNER OF VOTING PROXIES
Shares of Voting Stock represented by all valid proxies received will be
voted in the manner specified in the proxies. Where specific choices are not
indicated, the shares of Voting Stock represented by all valid proxies received
will be voted: (i) for election of the nominees named earlier in this Proxy
Statement as directors; (ii) for amendment of the Incentive Plan; (iii) for
approval of the Agreement; and (iv) for the appointment of Ernst & Young as
Independent Auditors. Should any matter not described above be acted upon at the
meeting, the persons named in the proxy card will vote in accordance with their
judgment. The Board knows of no other matters which are to be considered at the
1995 Annual Meeting.
VOTES REQUIRED FOR APPROVAL
Proposals 1, 2, 3 and 4 require a favorable vote of a majority of the votes
actually cast with respect thereto (excluding abstentions and shares of Voting
Stock not voted).
INSPECTORS OF ELECTION
First Chicago Trust Company of New York, P.O. Box 2532, Jersey City, New
Jersey 07303-2532, has been appointed as Inspectors of Election for the 1995
Annual Meeting. Representatives of First Chicago Trust Company of New York will
attend the 1995 Annual Meeting to receive votes and ballots, supervise the
counting and tabulating of all votes and ballots, and determine the results of
the vote.
COSTS OF SOLICITATION
The solicitation of proxies will be made primarily by mail; however,
directors, officers, employees and agents of the Company may also solicit
proxies by telephone, telegram or personal interview. Solicitation costs will
be paid by the Company. Upon request, the Company will reimburse banks,
brokerage houses and other custodians, nominees and fiduciaries for their
reasonable expenses incurred in forwarding proxy materials to their principals.
AVAILABLE INFORMATION
The Company and Source One are subject to the informational reporting
requirements of the Exchange Act. In accordance therewith, the Company files
reports, proxy statements and other information with the SEC, and Source One
files reports and other information with the SEC.
THE COMPANY WILL PROVIDE TO EACH PERSON TO WHOM A COPY OF THIS PROXY
STATEMENT IS DELIVERED, UPON REQUEST AND WITHOUT CHARGE, COPIES OF ALL DOCUMENTS
(EXCLUDING EXHIBITS) FILED WITH THE SEC. Written or telephone requests should be
directed to the Corporate Secretary, Fund American Enterprises Holdings, Inc.,
The 1820 House, Norwich, Vermont 05055-0850, telephone number (802) 649-3633.
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PROPOSALS BY SHAREHOLDERS FOR THE 1996 ANNUAL MEETING OF SHAREHOLDERS
If any shareholder that is a qualified holder of record of shares of Voting
Stock having an aggregate market value of at least $1,000 wishes to present a
proposal for action at the 1996 Annual Meeting of Shareholders, such proposal
must be received by the Corporate Secretary at The 1820 House, Main Street,
Norwich, Vermont 05055-0850, no later than January 26, 1996, in order to be
considered for inclusion in the Company's 1996 Proxy Statement. Under the
Company's Bylaws, a shareholder proposal shall include (in addition to any
requirements of law): (i) a brief description of the proposal and the reasons
for action upon it at the 1996 Annual Meeting of Shareholders (and in the event
that the proposal includes an amendment to the Company's Certificate of
Incorporation, the language of the proposed amendment); (ii) the name and
address of the shareholder making the proposal; (iii) a representation that the
shareholder is a qualified holder of record of shares of Voting Stock having an
aggregate market value of at least $1,000 and that the shareholder intends to
appear at the meeting, in person or by proxy; and (iv) any material interest of
the shareholder in such proposal.
By Order of the Board of Directors
Dennis P. Beaulieu
Corporate Secretary
March 30, 1995
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APPENDIX I
-----------------------------
FUND AMERICAN
-----------------------------
LONG-TERM INCENTIVE PLAN
-----------------------------
(as amended)
<PAGE>
-----------------------------
FUND AMERICAN
-----------------------------
LONG-TERM INCENTIVE PLAN
-----------------------------
(as amended)
FUND AMERICAN
LONG-TERM
INCENTIVE PLAN
(as amended)
1. PURPOSE
The purpose of the Fund American Long-Term Incentive Plan (the "Plan") is
to advance the interests of Fund American Enterprises Holdings, Inc. (the
"Company") and its stockholders by providing long-term incentives to
certain key executives of the Company and of its subsidiaries.
2. ADMINISTRATION
The Plan shall be administered by the Human Resources Committee (the
"Committee") of the Board of Directors (the "Board") of the Company. No
member of the Committee shall be an employee of the Company or a subsidiary
of the Company or shall have been eligible within one year prior to his
appointment to receive awards under the Plan ("Awards") or to receive
awards under any other plan of the Company or its subsidiaries under which
participants are entitled to acquire stock, stock options or stock
appreciation rights of the Company or any of its subsidiaries.
The Committee shall have exclusive authority to select the employees to be
granted Awards, to determine the type, size and terms of the Awards and to
prescribe the form of the instruments embodying Awards. The Committee shall
be authorized to interpret the Plan and the Awards granted under the Plan,
to establish, amend and rescind any rules and regulations relating to the
Plan and to make any other determinations which it believes necessary or
advisable for the administration of the Plan. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or
in any Award in the manner and to the extent the Committee deems desirable
to carry it into effect. Any decision of the Committee in the
administration of the Plan, as described herein, shall be final and
conclusive. The Committee may act only by a majority of its members in
office, except that the members thereof may authorize any one or more of
their number or any officer of the Company to execute and deliver documents
on behalf of the Committee. No member of the Company shall be liable for
anything done or omitted to be done by him or by any other member of the
Committee in connection with the Plan, except for his own willful
misconduct or as expressly provided by statute.
3. PARTICIPATING SUBSIDIARIES
If a subsidiary of the Company wishes to participate in the Plan and its
participation shall have been approved by the Board, the Board of Directors
of the subsidiary shall adopt a resolution in form and substance
satisfactory to the Committee authorizing participation by the subsidiary
in the Plan. As used herein, "subsidiary" shall mean a "subsidiary
corporation" as defined in Section 424 (f) of the Code.
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A subsidiary may cease to participate in the Plan at any time by action of
the Board or by action of the Board of Directors of such subsidiary, which
latter action shall be effective not earlier than the date of delivery to
the Secretary of the Company of a certified copy of a resolution of the
subsidiary's Board of Directors taking such action. Termination of
participation in the Plan shall not relieve a subsidiary of any obligations
theretofore incurred by it under the Plan.
4. AWARDS
(a) TYPE OF AWARDS. Awards shall be limited to the following four types:
(i) "Stock Options," (ii) "Stock Appreciation Rights", (iii)
"Restricted Stock" and (iv) "Performance Shares." Stock Options, which
include "Incentive Stock Options" and other stock options or
combinations thereof, are rights to purchase shares of Common Stock of
the Company having a par value of $1.00 per shares ("Shares"). A Stock
Appreciation Right is a right to receive, without payment to the
Company, cash and/or Shares in lieu of the purchase of Shares under the
Stock Option to which the Stock Appreciation Right relates.
(b) MAXIMUM NUMBER OF SHARES THAT MAY BE ISSUED. A maximum of 500,000
Shares, subject to adjustment as provided in paragraph 14, may be
issued under the Plan. For purposes of the foregoing, the exercise of a
Stock Appreciation Right shall constitute the issuance of Shares equal
to the Shares covered by the related Stock Option. Shares issued
pursuant to the Plan may be either authorized but unissued Shares or
reacquired Shares, or both. If any Shares issued as Restricted Stock
shall be repurchased pursuant to the Company's option described in
paragraph 6 below, or if any Shares issued under the Plan shall be
reacquired pursuant to restrictions imposed at the time of issuance,
such Shares may again be issued under the Plan.
(c) RIGHTS WITH RESPECT TO SHARES.
(i) An employee to whom Restricted Stock has been issued shall have
prior to the expiration of the Restricted Period or the earlier
repurchase of such Shares as herein provided, ownership of such
Shares, including the right to vote the same and to receive
dividends thereon, subject, however, to the options,
restrictions and limitations imposed thereon pursuant hereto.
(ii) An employee to whom Stock Options, Stock Appreciation Rights or
Performance Shares are granted (and any person succeeding to
such employee's rights pursuant to the Plan) shall have no
rights as a shareholder with respect to any Shares issuable
pursuant thereto until the date of the issuance of a stock
certificate (whether or not delivered) therefor. Except as
provided in paragraph 14, no adjustment shall be made for
dividends, distributions or other rights (whether ordinary or
extraordinary, and whether in cash, securities or other
property) the record date for which is prior to the date such
stock certificate is issued.
(iii) The Company, in its discretion, may hold custody during the
Restricted Period of any Shares of Restricted Stock.
5. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The Committee may grant Stock Options (including, in its discretion, Stock
Appreciation Rights) either alone or, as provided in paragraph 7, in
conjunction with Performance Shares. A maximum of 10,000 Stock Options and
Stock Appreciation Rights (not including Stock Appreciation Rights attached
to Stock Options) may be issued in one year to an employee. Each Stock
Option shall comply with the following terms and conditions:
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(a) The exercise price shall not be less than the greater of (i) the fair
market value of the Shares subject to such Stock Option at the time of
grant, as determined in good faith by the Committee, or (ii) the par
value of such Shares. However, the exercise price of an Incentive Stock
Option granted to an employee who owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the
Company or of a subsidiary (a "Ten Percent Employee") shall not be less
than the greater of 110% of such fair market value, or the par value of
such Shares.
(b) The Committee shall initially determine the number of Shares to be
subject to each Stock Option. The number of Shares subject to a Stock
Option will subsequently be reduced (i) on a share-for-share basis to
the extent that Shares under such Stock Option are used to calculate
the cash and/or Shares received pursuant to exercise of a Stock
Appreciation Right attached to such Stock Option, and (ii) on a
one-for-one basis to the extent that any Performance Shares granted in
conjunction with such Stock Option pursuant to subparagraph 7(a) are
paid, such reduction to be made in accordance with the provisions of
subparagraph 7(e)(ii).
(c) The Stock Option shall not be transferable by the optionee otherwise
than by will or the laws of descent and distribution, and shall be
exercisable during his lifetime only by him.
(d) The Stock Option shall not be exercisable:
(i) in case of any Incentive Stock Option as defined in Section 422
(b) of the Code, after the expiration of ten years from the date
it is granted, and in the case of any other Stock Option, after
the expiration of ten years from the date it is granted. Any
Stock Option may be exercised during such period only at such
time or times as the Committee may establish;
(ii) unless payment in full is made for the Shares being acquired
thereunder at the time of exercise (including any federal, state
or local income or other taxes which the Committee determines
are required to be withheld in respect of such shares); such
payment shall be made (A) in United States dollars by cash or
check, or (B) by tendering to the Company Shares owned by the
person exercising the Stock Option and having a fair market
value equal to the cash exercise price thereof, such fair market
value to be determined in such reasonable manner as may be
provided for from time to time by the Committee or as may be
required in order to comply with or to conform to the
requirements of any applicable or relevant laws or regulations,
or (C) by a combination of United States dollars and Shares as
aforesaid;
(iii) unless the person exercising the Stock Option has been, at all
times during the period beginning with the date of grant of the
Stock Option and ending on the date three months prior to such
exercise, an officer or employee of the Company or a subsidiary,
or of a corporation, or a parent or subsidiary of a corporation,
issuing or assuming the Stock Option in a transaction to which
Section 424 (a) of the Internal Revenue Code of 1986, as amended
(the "Code"), is applicable, except that:
(A) if such person shall cease to be an officer or employee of
the Company or one of its subsidiary corporations solely by
reason of a period of Related Employment as defined in
paragraph 9, he may, during such period of Related
Employment (but in no event after the Stock Option has
expired under the provisions of subparagraph 5(d)(i)
hereof), exercise such Stock Option as if he continued to
be such an officer or employee; or
3
<PAGE>
(B) if an optionee shall become disabled as defined in
paragraph 8 he may, at any time within three years of the
date he becomes disabled (but in no event after the Stock
Option has expired under the provisions of subparagraph
5(d)(i) hereof), exercise the Stock Option with respect to
(i) any Shares as to which he could have exercised the
Stock Option on the date he became disabled and (ii) if the
Stock Option is not fully exercisable on the date he
becomes disabled, the number of additional Shares as to
which the Stock Option would have become exercisable had he
remained an employee through the next two dates on which
additional Shares were scheduled to become exercisable
under the Stock Option; or
(C) if an optionee shall die while holding a Stock Option, his
executors, administrators, heirs or distributees, as the
case may be, at any time within one year after the date of
such death (but in no event after the Stock Option has
expired under the provisions of subparagraph 5(d)(i)
hereof), may exercise the Stock Option with respect to (i)
any Shares as to which the decedent could have exercised
the Stock Option at the time of his death, and (ii) if the
Stock Option is not fully exercisable on the date of his
death, the number of additional Shares as to which the
Stock Option would have become exercisable had he remained
an employee through the next two dates on which additional
Shares were scheduled to become exercisable under the Stock
Option provided, however, that if death occurs during the
three-year period following a disability as described in
subparagraph 5(d)(iv)(B) hereof, the three-year period
following a retirement as described in subparagraph
5(d)(iv)(D) hereof or any period following a voluntary
termination in respect of which death, the number of
additional Shares as to which the Stock Option would have
become exercisable had he remained an employee through the
next date or, if applicable, two dates on which additional
Shares were scheduled to become exercisable under the Stock
Option provided, however, that if death occurs during the
three-year period following a disability as described in
subparagraph 5(d)(iv)(B) hereof, the three-year period
following a retirement as described in subparagraph
5(d)(iv)(D) hereof or any period following a voluntary
termination in respect of which the Board has exercised its
discretion to grant continuing exercise rights as provided
in subparagraph 5(d)(iv)(E) hereof, the Stock Option shall
not become exercisable as to any Shares in addition to
those as to which the decedent could have exercised the
Stock Option at the time of his death; or
(D) if such person shall retire under an approved retirement
program of the Company or a subsidiary (or such other plan
as may be approved by the Committee, in its sole
discretion, for this purpose) while holding a Stock Option
which has not expired and has not been fully exercised,
such person, at any time within three years after his
retirement (but in no event after the Stock Option has
expired under the provisions of subparagraph 5(d)(i)
hereof), may exercise the Stock Option with respect to any
Shares as to which he could have exercised the Stock Option
on the date he retired; or
(E) if such person shall voluntarily terminate his employment
with the Company, the Board may determine that the optionee
may exercise the Stock Option with respect to some or all
of the Shares subject to the Stock Option as to which it
would not otherwise be exercisable on the date of his
voluntary termination provided, however, that in no event
may such exercise take place after the Stock Option has
expired under the provisions of subparagraph 5(d)(i)
hereof.
4
<PAGE>
(e) (i) The aggregate fair market value of Shares (determined at the time
of grant of the Stock Option pursuant to subparagraph 5(a) of the Plan)
for which any employee may be granted Incentive Stock Options under the
Plan in any calendar year prior to 1987, may not exceed $100,000, plus
the applicable carryover amount. The carryover amount for an employee
from any prior year is one-half of the amount by which $100,000 exceeds
the aggregate fair market value of Shares (at the time of grant) for
which Incentive Stock Options were granted to such employee in such
prior year, provided that (x) such amounts may be carried over for no
more than three years, and (y) Incentive Stock Options granted in any
year shall use up the $100,000 current year limitation first, and then
use up the carryover amount or amounts from the year or years
available, the earliest being taken first.
(ii) The aggregate fair market value of Shares (determined at the time
of grant of the Stock Option pursuant to subparagraph 5(a) of the Plan)
with respect to which Incentive Stock Options granted after December
31, 1986, to any employee under the Plan are exercisable, for the first
time, by such employee during any calendar year may not exceed
$100,000.
(f) If the Committee, in its discretion, so determines, there may be
related to the Stock Option, either at the time of grant or by
amendment, a Stock Appreciation Right which shall be subject to such
terms and conditions, not inconsistent with the Plan, as the Committee
shall impose, including the following :
(i) A Stock Appreciation Right may be exercised only
(A) to the extent that the Stock Option to which it relates is
at the time exercisable, and
(B) if
(1) in the case of a Stock Option other than an Incentive
Stock Option only, such Stock Option will expire by
its terms within 30 days (90 days if the optionee is
at the time an officer of the Company who is required
to file reports pursuant to Section 16(a) of the
Securities and Exchange Act of 1934, as amended (the
"Exchange Act"));
(2) the optionee has become disabled or ceased to be an
officer or employee by reason of his retirement under
an approved retirement program of the Company or a
subsidiary (or such other plan as may be approved by
the Committee, in its sole discretion, for this
purpose); or
(3) the optionee has died.
However, if the Stock Option to which the Stock
Appreciation Right relates is exercisable and if the
optionee is at the time an officer of the Company who
is required to file reports pursuant to Section 16(a)
of the Exchange Act, the Stock Appreciation Right may,
subject to the approval of the Committee, be exercised
during such periods, as may be specified by the
Committee;
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<PAGE>
(ii) A Stock Appreciation Right shall entitle the optionee (or any
person entitled to act under the provisions of subparagraph
5(d)(iv)(C) hereof) to surrender unexercised the related Stock
Option (or any portion of such Option) to the Company and to
receive from the Company in exchange therefor that number of
Shares having an aggregate value equal to the excess of the
value of one Share (provided that, if such value exceeds 150% of
the Stock Option price per share specified in such Stock Option,
such value shall be deemed to be 150% of such Stock Option
price) over the Stock Option price per share, times the number
of Shares subject to the Stock Option, or portion thereof, which
is so surrendered. The Committee shall be entitled to elect to
settle the obligation arising out of the exercise of a Stock
Appreciation Right by the payment or cash equal to the aggregate
value of the Shares it would otherwise be obligated to deliver
or partly by the payment of cash and partly by the delivery of
Shares. Any such election shall be made within 15 business days
after the receipt by the Committee of written notice of the
exercise of the Stock Appreciation Right. The value of a Share
for this purpose shall be the fair market value thereof on the
last business day preceding the date of the election to exercise
the Stock Appreciation Right, provided that if notice of such
election is received by the Committee more than three business
days after the date of such election (as such date of election
is stated in the notice of election), the Committee may, but
need not, determine the value of a Share as of the day preceding
the date on which the notice of election is received;
(iii) No fractional Shares shall be delivered under this subparagraph
5(f), but in lieu thereof a cash adjustment shall be made; and
(iv) In the case of a Stock Appreciation Right attached to an
Incentive Stock Option, such Stock Appreciation Right shall only
be transferable when such Incentive Stock Option is transferable
pursuant to Section 5 (c) hereof.
(g) Notwithstanding anything herein to the contrary:
(i) in the event an Unfriendly Change in Control of the Company, as
defined in subparagraph 10(b), occurs, then as of the
Acceleration Date, as defined in subparagraph 10(b), each Stock
Option granted hereunder shall be exercisable in full; provided,
however, that in the case of an officer subject to Section 16(b)
of the Exchange Act, no Stock Option shall become exercisable
until the expiration of the period ending six months after the
date of grant of the Stock Option hereunder; and
(ii) in the event a Change in Control as defined in subparagraph
10(a) occurs and within 24 months thereafter: (A) there is a
Termination Without Cause, as defined in paragraph 11, of an
optionee's employment; or (B) there is a Constructive
Termination as defined in paragraph 12, of an optionee's
employment; or (C) there occurs an Adverse Change in the Plan,
as defined in paragraph 13, in respect of an optionee affecting
any Award held by such optionee and if the optionee then holds a
Stock Option,
1. In the case of a Termination Without Cause or a Constructive
Termination, the optionee may exercise the entire Stock
Option, at any time within 30 days of such Termination
Without Cause or such Constructive Termination (but in no
event after the option has expired under the provisions of
subparagraphs (5)(d)(i)), and
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2. in the case of an Adverse Change in the Plan, the optionee
may exercise the entire Stock Option at any time after such
Adverse Change in the Plan in respect of him and prior to
the date 30 days following his termination of employment as
a result of a Termination Without Cause or a Constructive
Termination (but in no event after the option has expired
under the provisions of subparagraph 5(d) (i)).
Notwithstanding anything in this subparagraph 5(g) to the
contrary, (x) in the case of an officer subject to Section
16(b) of the Exchange Act, no Stock Option shall become
exercisable until the expiration of the period ending six
months after the date of grant of the Stock Option
hereunder.
6. RESTRICTED STOCK
Each Award of Restricted Stock shall comply with the following terms and
conditions:
(a) The Committee shall determine the number of Shares to be issued to a
participant pursuant to the Award.
(b) Shares issued may not be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or the laws of
descent and distribution, for such period from the date on which the
Award is granted (the "Restricted Period") as the Committee shall
determine. The Company shall have the option to repurchase the Shares
subject to the Award at such price as the Committee shall have fixed,
in its sole discretion, when the Award was made, which option will be
exercisable if the participant's continuous employment with the Company
or a subsidiary shall terminate for any reason, except solely by reason
of an event described in paragraph 6(c), prior to the expiration of the
Restricted Period or the earlier lapse of the option. Such option shall
be exercisable on such terms, in such manner and during such period as
shall be determined by the Committee when the Award is made.
Certificates for Shares issued pursuant to Restricted Stock Awards
shall bear an appropriate legend referring to the foregoing option and
other restrictions. Any attempt to dispose of any such Shares in
contravention of the foregoing option and other restrictions shall be
null and void and without effect. If Shares issued pursuant to a
Restricted Stock Award shall be repurchased pursuant to the option
described above, the participant to whom the Award was granted, or in
the event of his death after such option become exercisable, his
executor or administrator, shall forthwith deliver to the Secretary of
the Company any certificates for the Shares awarded to the participant,
accompanied by such instruments of transfer, if any, as may reasonably
be required by the Secretary of the Company. If the option described
above is not exercised by the Company, such option and the restriction
imposed pursuant to the first sentence of this subparagraph 6(b) shall
terminate and be of no further force and effect. Notwithstanding
anything to the contrary in this paragraph 6 (b), neither any
Restricted Period nor any option shall lapse to the extent the Company
or any subsidiary would be unable to take a deduction with respect to
such lapse by reason of Section 162 (m) of the Code.
(c) If a participant who has been in the continuous employment of the
Company or of a subsidiary shall,
(i) die or become disabled (as defined in paragraph 8) during the
Restricted Period, the option of the Company to repurchase (and
any and all other restrictions on) all Shares awarded to him
under such Award shall lapse and cease to be effective as of the
date on which his death or disability occurs, or
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<PAGE>
(ii) voluntarily terminate his employment with the Company or retire
under an approved retirement plan of the Company or of a
subsidiary (or such other retirement plan as may be approved by
the Committee, in its sole discretion, for this purpose) during
Restricted Period, the Board may determine that the option to
repurchase and any and all other restrictions on some or all of
the Shares awarded to him under such Award, if such option and
other restrictions are still in effect, shall lapse and cease to
be effective as the date on which such voluntary termination or
retirement occurs.
(d) In the event within 24 months after a Change in Control as defined in
subparagraph 10(a) and during the Restricted Period
(i) there is a Termination Without Cause, as defined in paragraph
11, of the employment of a participant;
(ii) there is a Constructive Termination, as defined in paragraph 12,
of the employment of a participant; or
(iii) there occurs an Adverse Change in the Plan, as defined in
paragraph 13, in respect of a participant, the option to
repurchase (and any and all other restrictions on) all Shares
awarded to him under his Award shall lapse and cease to be
effective as of the date on which such event occurs.
7. PERFORMANCE SHARES
The Award of Performance Shares to a participant will entitle him to
receive, without payment to the Company, all or part of a specified amount
(the "Actual Value") determined by the Committee, if the terms and
conditions specified herein and in the Award are satisfied. Payment in
respect of an Award shall be made as provided in subparagraph 7(e). Each
Award of Performance Shares shall be subject to the following terms and
conditions:
(a) The Committee shall determine the number of Performance Shares to be
granted to each participant and whether or not such Performance Shares
are granted in conjunction with a Stock Option (the "Associated Stock
Option"). The "Maximum Value" of each Performance Share shall be the
market value per Share on the date the award is paid or becomes payable
to participants. Performance Shares may be issued in different classes
or series having different terms and conditions. In the case of any
Performance Shares granted in conjunction with an Associated Stock
Option, the number of Performance Shares shall initially be equal to
the number of Shares which are subject to the Associated Stock Option,
but the number of such performance Shares shall be reduced on a one for
one basis to the extent that (A) Shares are purchased upon exercise of
the Associated Stock Option, or (B) Shares may no longer be purchased
under the Associated Stock Option because the Associated Stock Option
or a part thereof has been surrendered unexercised pursuant to exercise
of a Stock Appreciation Right attached to such Associated Stock Option.
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(b) The award period ("Award Period") in respect of any Award of
Performance Shares shall be such period as the Committee shall
determine commencing as of the beginning of the fiscal year of the
Company in which such Award is made. An Award Period may contain a
number of performance periods; each performance period shall commence
on or after the first day of the Award Period and shall end no later
than the last day of the Award Period. At the time each Award is made,
the Committee shall establish performance objectives to be attained
within the performance periods as the means of determining the Actual
Value. The performance objectives shall be based on the Company's
growth in intrinsic business value, as outlined below, for each of
the fiscal years comprising the performance period(s). The Actual Value
of a Performance Share shall be equal to its Maximum Value only if the
performance objectives are attained in full, but the Committee shall
specify the manner in which the Actual Value of a Performance Share
shall be a portion of such Maximum Value if the performance objectives
are met in part. In determining Actual Value, the Committee may either
(i) multiply the total number of Shares available for payout at that
time with respect to the participant by the Actual Value of each
individual Share or (ii) multiply the Maximum Value of each individual
Share by a number of Shares equal to or less than the total number of
Shares available for payout, provided that products obtained in (i) and
(ii) are the same. The Company's growth in intrinsic business value for
any performance period shall be measured individually or as a
combination of the following measurement factors: (i) the sum of the
Company's return on equity (computed in accordance with generally
accepted accounting principles ("GAAP")) for any fiscal years in the
performance period divided by the number of fiscal years in the
performance period, (ii) the growth in market value per Share for any
fiscal years in the performance period divided by the number of fiscal
years in the performance period, or (iii) the sum of the Company's
economic return on equity (computed as the Company's GAAP return on
equity adjusted for changes in the intrinsic value of assets whose
value differs from their GAAP carrying value) for any fiscal years in
the performance period divided by the number of fiscal years in the
performance period. The Committee shall determine, no later than the
award date and prior to the commencement of the performance period of
such award, which of the above measurement factor(s) will be the
relevant performance objectives for each award.
(c) Performance Shares shall be cancelled if the participant's continuous
employment with the Company or any of its subsidiaries shall terminate
for any reason prior to the end of the Award Period (in which event the
Associated Stock Option, if any, shall continue in effect in accordance
with its terms), except solely by reason of a period of Related
Employment as defined in paragraph 9, and except as otherwise specified
in this subparagraph 7(c) or in subparagraph 7(d). Notwithstanding the
foregoing an without regard to subparagraph 7(b), if a participant
shall,
(i) while in such employment, die or become disabled as described in
paragraph 8 prior to the end of the Award Period, the
Performance Shares shall be cancelled at the end of the next
ending performance period and he, or his legal representative,
as the case may be, shall receive payment in respect of such
Shares which he would have received had he been in continuous
employment with the Company through the end of that period and
had the individual performance objectives, if any, that were
imposed been achieved; provided, however, that no such
continuation shall be deemed to have occurred for purposes of
applying subparagraph 7(d) in the event of an Adverse Change in
the Plan in respect of the participant following a Change in
Control; or
(ii) retire under an approved retirement program of the Company or a
subsidiary (or such other plan as may be approved by the
Committee, in its sole discretion, for this purpose) prior to
the end of the Award Period, and
(A) at the time of his retirement, the participant is 65 years
old or older, the Performance Shares shall be cancelled at
the end of the next ending performance period, and he shall
receive the Maximum Value in respect to such Shares, at the
date of cancellation,
(B) at the time of his retirement the participant is less than
65 years old and his retirement occurs prior to the end of
the first performance period, and before 24 months have
elapsed since the first day of the Award Period, the
participant shall receive payment with respect to the
Actual Value of one-ninth of the Performance Shares awarded
to him under the Award, and
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(C) at the time of his retirement the participant is less than
65 years old and his retirement occurs prior to the end of
the first performance period and after at least 24 months
have elapsed since the first day of the Award Period, the
participant shall receive payment with respect to the
Actual Value of two-ninths of the Performance Shares
awarded to him under the Award.
(d) If within 24 months after a Change in Control of the Company as defined
in subparagraph 10(a) and prior to the end of an Award Period:
(i) there is a Termination Without Cause, as defined in paragraph
11, of the employment of a participant;
(ii) there is a Constructive Termination, as defined in paragraph 12,
of the employment of a participant; or
(iii) there occurs an Adverse Change in the Plan, as defined in
paragraph 13, in respect of a participant, then:
(A) the participant shall receive the Maximum Value of:
(1) that number of Performance Shares which is in the same
proportion to the total number of Performance Shares
awarded to the participant under such Award as
(x) the number of full months which have elapsed
since the first day of the Award Period to the
end of the first month in which occurs one of the
events described in clauses (i), (ii) or (iii) of
subparagraph 7(d) is to
(y) the total number of months in the Award Period,
less
(2) the number of Performance Shares awarded to the
participant under the Award in respect of which
payment has already been made to the participant, and
(B) if the number of Performance Shares determined pursuant to
subclause (1) of clause (A) is less than the number of
Performance Shares subject to the particular Award, the
participant shall receive the Actual Value of the remaining
Performance Shares. The Actual Value of the remaining
Performance Shares shall be determined as follows:
(x) if the Board shall have determined, prior to the
Change in Control and based on the most recent
performance status reports, that the performance
objectives for the particular Award were being met at
the date of the determination, the Actual Value of the
remaining Performance Shares subject to the particular
Award shall be equal to their Maximum Value, and
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(y) if the determination of the Board was that the
performance objectives for the particular Award were
not being met at the date of the determination, the
Actual Value of the remaining Performance Shares
subject to the particular Award shall be such amount
as shall have been determined by the Board as provided
above in this subparagraph 7(d), but in no event shall
Actual Value be less than fifty percent (50%) of
Maximum Value. Payment of any amount in respect of
Performance Shares as described above in this
subparagraph 7(d) shall be made as promptly as
possible after the occurrence of one of the events
described in clauses 7(d)(i) through 7(d)(iii).
Notwithstanding anything herein to the contrary, if,
following a Change in Control of the Company as
defined in subparagraph 10(a), a participant's
employment remains continuous through the end of a
performance period, then the participant shall be paid
with respect to those Performance Shares for which he
would have been paid had there not been a Change in
Control and the Actual Value of those Shares shall be
determined in accordance with subparagraph 7(e).
(e) Except as otherwise provided in subparagraph 7(d), as soon as
practicable after the end of the performance period or such earlier
date as the Committee in its sole discretion may designate, the
Committee shall determine whether the conditions of subparagraphs 7(b)
and/or 7(c) hereof have been met and, if so, shall certify such fact to
the Board of Directors and shall ascertain the Actual Value of the
Performance Shares. If the Performance Shares:
(i) were not awarded in conjunction with an Associated Stock Option,
the Committee shall cause an amount equal to the Actual Value of
the Performance Shares earned by the participant to be paid to
him or his beneficiary; or
(ii) were awarded in conjunction with an Associated Stock Option, the
Committee shall determine, in accordance with criteria specified
by the Committee when the Award was made, (A) to cancel the
Performance Shares, in which event no amount in respect thereof
shall be paid to the participant or his beneficiary, and the
Associated Stock Option shall continue in effect in accordance
with its terms, (B) to pay the Actual Value of the Performance
Shares to the participant or his beneficiary, in which event the
Associated Stock Option shall be cancelled, or (C) to pay to the
participant or his beneficiary the Actual Value of only a
portion of the Performance Shares, in which event (1) all such
Performance Shares shall be cancelled and (2) the Associated
Stock Option shall be cancelled only as to a number of Shares
equal to the number of Performance Shares so paid. Such
determination by the Committee shall, if practicable, be made
during the three-month period following the end of the
performance period, or during such earlier period as shall be
designated by the Committee and shall be made pursuant to
criteria, specified by the Committee, which shall be uniform for
all Awards having the same performance period.
Payment of any amount in respect of the Performance Shares shall
be made by the Company as promptly as practicable or shall be
deferred to such other time or times as the Committee shall
determine, and may be made in cash, in Shares, or partly in cash
and partly in Shares as determined by the Committee. Such
deferred payments may be made by undertaking to pay cash in the
future, together with such additional amounts as may accrue
thereon until the date or dates of payment, as determined by the
Committee in its discretion.
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8. DISABILITY
For the purposes of this Plan, a participant shall be deemed to be disabled
if the Committee shall determine that (i) the physical or mental condition
of the participant is such as would entitle him to payment of monthly
disability benefits under the Source One Long-Term Disability Income Plan
or any disability plan of the Company or a subsidiary in which he is a
participant or (ii) he is not a participant in any such plan but his
physical or mental condition would entitle him to benefits under the Source
One Long-Term Disability Income Plan if he were a participant therein.
9. RELATED EMPLOYMENT
For the purposes of this Plan, Related Employment shall mean the employment
of an individual by an employer which is neither the Company nor a
subsidiary provided: (i) such employment is undertaken by the individual
and continued at the request of the Company or a subsidiary; (ii)
immediately prior to undertaking such employment, the individual was an
officer or employee of the Company or a subsidiary, or was engaged in
Related Employment as herein defined; and (iii) such employment is
recognized by the Committee, in its sole discretion, as Related Employment
for the purposes of this paragraph 9. The death or disability of an
individual during a period of Related Employment as herein defined shall be
treated, for purposes of this Plan, as if the death or onset of disability
had occurred while the individual was an officer or employee of the
Company.
10. CHANGE IN CONTROL
(a) For purposes of this Plan, a "Change in Control of the Company" within
the meaning of this subparagraph 10(a) shall occur if:
(i) any person or group (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act), other than John J. Byrne or the
Company, becomes the beneficial owner (within the meaning of
Rule 13d-3 under the exchange Act) of thirty-five percent (35%)
or more of the Company's then outstanding Shares;
(ii) the Continuing Directors, as defined in subparagraph 10(c),
cease for any reason to constitute a majority of the Board of
the Company; or
(iii) the business of the Company for which the participant's services
are principally performed is disposed of by the Company pursuant
to a sale or other disposition of all or substantially all of
the business or business related assets of the Company
(including stock of a subsidiary of the Company). A Change in
Control of the Company within the meaning of this subparagraph
10(a) also may constitute an Unfriendly Change in Control of the
Company within the meaning of this subparagraph 10(b).
(b) A Change in Control of the Company shall be deemed an "Unfriendly
Change in Control of the Company" if:
(i) any person or group (within the meaning of Section 13(d) and
14(d)(2) of the Exchange Act), other than American Express
Company or the Company, becomes the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of thirty-five
percent (35%) or more of the Company's then outstanding Shares
through a transaction that is opposed by the Company's Chairman
and Chief Executive Officer, and
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(ii) a majority of the Company's Continuing Directors, as defined in
subparagraph 10(c), by resolution adopted within 30 days
following the date the Company becomes aware that subparagraph
10(b)(i) has been satisfied, determines that a Change in Control
has occurred.
For purposes of subparagraph 5(g), "Acceleration Date" shall mean the date
on which a majority of the Company's Continuing Directors adopts a
resolution (or takes other action) making the determination that a Change
in Control of the Company has occurred.
(c) For the purposes of this Plan, "Continuing Director" shall mean a
member of the Board (A) who is not an employee of the Company or its
subsidiaries or of a holder of, or an employee or an affiliate of an
entity or group that holds, thirty-five percent (35 %) or more of the
Company's Shares and (B) who either was a member of the Board on
September 4, 1985, or who subsequently became a director of the Company
and whose election, or nomination for election, by the Company's
shareholders was approved by a vote of a majority of the Continuing
Directors then on the Board (which term, for purposes of this
definition, shall mean the whole Board and not any committee thereof).
Any action, approval of which shall require the approval of a majority
of the Continuing Directors, may be authorized by one Continuing
Director, if he is the only Continuing Director on the Board, but no
such action may be taken if there are not Continuing Directors on the
Board.
11. TERMINATION WITHOUT CAUSE
For purposes of this Plan, "Termination Without Cause" shall mean a
termination of the participant's employment with the Company or a
subsidiary by the Company or the subsidiary other than (i) for disability
as described in paragraph 8 or (ii) for Cause. "Cause" shall mean (a) an
act or omission by the participant that constitutes a felony or any crime
involving moral turpitude; or (b) willful gross negligence or willful gross
misconduct by the participant in connection with his employment by the
Company or by a subsidiary which causes, or is likely to cause, material
loss or damage to the Company.
12. CONSTRUCTIVE TERMINATION
"Constructive Termination" shall mean a termination of employment with the
Company or a subsidiary at the initiative of the participant that the
participant declares by prior written notice delivered to the Secretary of
the Company to be a Constructive Termination by the Company or a subsidiary
and which follows (a) a material decrease in his salary or (b) a material
diminution in the authority, duties or responsibilities of his position
with the result that the participant makes a determination in good faith
that he cannot continue to carry out his job in substantially the same
manner as it was intended to be carried out immediately before such
diminution. Notwithstanding anything herein to the contrary, Constructive
Termination shall not occur within the meaning of this paragraph 12 until
and unless 30 days have elapsed from the date the Company receives such
written notice without the Company curing or causing to be cured the
circumstance or circumstances described in this paragraph 12 on the basis
of which the declaration of Constructive Termination is given.
13. ADVERSE CHANGE IN THE PLAN
An "Adverse Change in the Plan" shall mean
(a) termination of the Plan pursuant to subparagraph 19(a);
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(b) amendment of the Plan pursuant to paragraph 18 that materially
diminishes the value of Awards that may be granted under the Plan,
either to individual participants or in the aggregate, unless there is
substituted concurrently authority to grant long-term incentive awards
of comparable value to individual participants in the Plan or in the
aggregate, as the case may be; or
(c) in respect of any holder of an Award a material diminution in his
rights held under such Award (except as may occur under the terms of
the Award as originally granted) unless there is substituted
concurrently a long-term incentive award with a value at least
comparable to the loss in value attributable to such diminution in
rights.
14. DILUTION AND OTHER ADJUSTMENTS
In the event of any change in the Outstanding Shares of the Company by
reason of any stock split, stock dividend, recapitalization, merger,
consolidation, reorganization, combination or exchange of Shares or other
similar event, and if the Committee shall determine, in its sole
discretion, that such change equitably requires an adjustment in the number
or kind of Shares that may be issued under the Plan pursuant to
subparagraph 4(b), in the number or kind of Shares subject to, or the Stock
Option price per share under, any outstanding Stock Option, in the number
or kind of Shares which have been awarded as Restricted Stock or in the
repurchase option price per share relating thereto, in the number of
Maximum Value or Actual Value of Performance Shares which have been awarded
to any participant, or in any measure of performance, then such adjustment
shall be made by the Committee and shall be conclusive and binding for all
purposes of the Plan.
15. DESIGNATION OF BENEFICIARY BY PARTICIPANT
A participant may name a beneficiary to receive any payment to which he may
be entitled in respect of Performance Shares under the Plan in the event of
his death, on a form to be provided by the Committee. A participant may
change his beneficiary from time to time in the same manner. If no
designated beneficiary is living on the date on which any amount becomes
payable to a participant's executors or administrators, the term
"beneficiary" as used in the Plan shall include such person or persons.
16. FINANCIAL ASSISTANCE
If those members of the Board who are ineligible to receive Awards under
the Plan determine that such action is advisable, the Company may assist
any person to whom an Award has been granted in obtaining financing from
the Company under a program of the Company or a subsidiary approved
pursuant to applicable law or regulation, or from a bank or other third
party, in such amount as is required to permit the payment of taxes in
respect of such Award (or, in the case of an Award of a Stock Option, to
permit the exercise thereof and/or the payment of any taxes in respect
thereof) to the extent that such taxes (and Stock Option price) exceed the
cash portion, if any, of the Award. Such assistance may take any form that
the Committee deems appropriate, including but not limited to a direct loan
from the Company or a subsidiary, a guarantee of the obligation by the
Company or a subsidiary, or the maintenance by the Company or a subsidiary
of deposits with such bank or third party.
17. MISCELLANEOUS PROVISIONS
(a) No employee or other person shall have any claim or right to be granted
an Award under the Plan. Neither the Plan nor any action taken
hereunder shall be construed as giving an employee any right to be
retained in the employ of the Company or any subsidiary.
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(b) A participant's rights and interest under the Plan may not be assigned
or transferred in whole or in part either directly or by operation of
law or otherwise (except in the event of a participant's death),
including but not limited to, execution, levy, garnishment, attachment,
pledge, bankruptcy or in any other manner and no such right or interest
of any participant in the Plan shall be subject to any obligation or
liability or such participant.
(c) No Shares shall be issued hereunder unless counsel for the Company
shall be satisfied that such issuance will be in compliance with
applicable Federal and state securities laws.
(d) The Company and its subsidiaries shall have the right to deduct from
any payment made under the Plan any federal, state or local income or
other taxes required by law to be withheld with respect to such
payment. It shall be a condition to the obligation of the Company to
issue Shares upon exercise of a Stock Option, upon settlement of a
Stock Appreciation Right, or upon payment of a Performance Share that
the participant (or any beneficiary or person entitled to payment under
subparagraph 5(d)(iii)(C) hereof) pay to the Company, upon its demand,
such amount as may be required by the Company for the purpose of
satisfying any liability to withhold Federal, state or local income or
other taxes. If the amount requested is not paid, the Company may
refuse to issue Shares.
(e) The expenses of the Plan shall be borne by the Company. However, if an
Award is made to an employee of a subsidiary:
(i) if such Award results in payment of cash to the participant,
such subsidiary shall pay to the Company an amount equal to such
cash payment; and
(ii) if the Award results in the issuance to the participant of
Shares, such subsidiary shall pay to the Company an amount equal
to fair market value thereof, as determined by the Committee, on
the date such Shares are issued (or, in the case of issuance of
Restricted Stock or of Shares subject to transfer and forfeiture
conditions, equal to the fair market value thereof on the date
on which such Shares are no longer subject to applicable
restriction), minus the amount, if any received by the Company
in exchange for such Shares.
(f) 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 assets to assure the payment of any Award under the Plan.
(g) By accepting any Award or other benefit under the Plan, each
participant and each person claiming under or through him shall be
conclusively deemed to have indicated his acceptance and ratification
of, and consent to, any action taken under the Plan by the Company, the
Board or the Committee.
18. AMENDMENT
The Plan may be amended at any time and from time to time by the Board, but
no amendment which increases the aggregate number of Shares which may be
issued pursuant to the Plan or the class of employees eligible to
participate shall be effective unless and until the same is approved by the
shareholders of the Company. No amendment of the Plan shall adversely
affect any right of any participant with respect to any Award previously
granted without such participant's written consent.
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19. TERMINATION
This Plan shall terminate upon the earlier of the following dates or events
to occur:
(a) the adoption of a resolution of the Board terminating the Plan; or
(b) ten years from the date the Plan is initially or subsequently approved
and adopted by the shareholders of the Company in accordance with
paragraph 20 hereof.
No termination of the Plan shall alter or impair any of the rights or
obligations of any person, without his consent, under any Award previously
granted under the Plan.
20. SHAREHOLDER ADOPTION
The Plan shall be submitted to the shareholders of the Company for their
approval or adoption. The Plan shall not be effective and no Award shall be
made hereunder unless and until the Plan has been so approved and adopted
by the shareholders in the manner required by the laws of the State of
Delaware.
As originally approved by the Board of Directors, September 4, 1985
and adopted by the sole shareholder September 23, 1985. The Plan
was further amended by the Board of Directors, August 13, 1986 and
February 15, 1995.
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APPENDIX II
EMPLOYMENT AGREEMENT dated as of
February, 1995, between FUND AMERICAN
ENTERPRISES HOLDINGS, INC., a Delaware
corporation ("Fund American"), and
JOHN J. BYRNE ("Executive").
WHEREAS Executive is now employed by Fund American and Fund American
desires for Executive to remain so employed; and
WHEREAS Fund American and Executive desire to establish in this Agreement
certain terms and conditions concerning, the employment of Executive.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements hereinafter set forth, the parties hereto have agreed, and do hereby
agree, as follows:
1. Term of Employment; Duties. (a) Fund American shall employ Executive
for the period (the "Term") beginning as of January 1, 1995, and ending on
December 31, 1999, as the Chief Executive Officer of Fund American and, at the
discretion of the Board of Directors of Fund American (the "Board"), as the
Chairman of the Board, and Executive shall work for Fund American in such
capacities.
(b) Upon the request of the Board, Executive shall, during the Term, serve
as a member of any board of directors (or similar governing body) and/or as an
officer of any subsidiary of Fund American, any business to which Fund American
or any of its subsidiaries has, at any time during the Term, the right to
designate one or more members (including Financial Security Assurance Inc.) or
any other company in which Fund American has made an Investment that the Board
deems "significant" and (ii) at the request of any such board of directors, as
the chairman of such board. All compensation (including options, warrants,
stock appreciation rights or other securities or other ownership interests in
any such business or company and including all director fees and any other
compensation) received by Executive in his capacity as an officer or director of
any such business or company (other than cash compensation for serving as an
officer or a director of a subsidiary of Fund American) shall promptly be turned
over and assigned (without recourse) to, and shall be the property of, Fund
American.
(c) Anything herein to the contrary notwithstanding, nothing shall preclude
Executive from (i) subject to the approval of the Fund American Board of
Directors, serving on the boards of directors of other corporations or the
boards of trade associations or charitable organizations, (ii) engaging in
charitable activities and community affairs and (iii) managing his personal
investments and affairs, provided that such activities do not materially
interfere with the performance of Executive's duties hereunder.
(d) Executive represents and warrants, that Executive is free to be
employed by Fund American upon the terms contained in this Agreement.
2. Compensation. (a) For all services rendered by Executive to Fund
American in any capacity during Executive's employment under this Agreement,
Fund American agrees to pay or cause to be paid to Executive a base salary at
the rate of $550,000 per annum (the "Base Salary"), payable in equal
installments in accordance with the ordinary salary payment practices of Fund
American in effect from time to time. During the Term, Executive's Base Salary
will not be increased or decreased.
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(b) As additional compensation for the services to be rendered by Executive
hereunder, Executive will be eligible to receive an annual bonus (the "Bonus")
to the extent, and at such time and in such amount, awarded by the Board in its
discretion.
(c) Executive shall be entitled to participate in any benefit plans and
programs available to Fund American's other executive officers as in effect from
time to time.
3. Reimbursement for Expenses. Executive is authorized to incur
reasonable and necessary traveling expenses and other disbursements for or on
behalf of Fund American in the performance of Executive's duties during
executive's employment under this Agreement. Fund American, according to its
practices (including with regard to class of service), will reimburse Executive
for all such expenses upon presentation of a properly itemized account of such
expenditures, setting forth the business reasons for such expenditures.
4. Termination of Employment. (a) The employment of Executive under this
Agreement shall be deemed to have been terminated by Fund American if Executive
voluntarily terminates his employment following one or more of the following
occurrences:
(i) an assignment to Executive of duties materially inconsistent with
those assigned to Executive immediately prior to the date hereof or a
material diminution in Executive's authority, duties or responsibilities
from those assigned to or held by Executive immediately prior to the date
hereof;
(ii) any removal or effective removal of Executive from Executive's
position as Chairman of the Board and Chief Executive Officer of Fund
American;
(iii) a "Change of Control of the Company" (as defined in the Fireman's
Fund Corporation 1985 Long-Term Incentive Plan) shall have occurred;
(iv) a reduction by Fund American in the total amount of Executive's
Base Salary without Executive's consent; or
(v) any material breach of this Agreement by Fund-American.
(b) Notwithstanding any other provision of this Agreement, in the event of
the death or Disability (as defined below) of Executive, this Agreement shall be
terminated as of the date of such death or Disability. The term "Disability"
shall mean the inability of Executive, due to illness, accident, or any other
physical or mental incapacity, to perform Executive's duties in a normal manner
for a period of 180 days (whether or not consecutive) in any 12-month period
during the Term. Whether or not a Disability of Executive exists shall in each
case be determined by the Board, and any determination so made in good faith
shall be conclusive.
(c) Notwithstanding any other provision of this Agreement, Executive's
employment by Fund American hereunder may be terminated by Fund American at any
time in its sole discretion.
5. Compensation upon Termination. (a) In the event that Executive's
employment is terminated (or deemed to have been terminated) pursuant to Section
4, Executive shall be entitled to Base
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<PAGE>
Salary accrued but unpaid through the date of termination of Executive's
employment and any benefits which may then be due Executive under any of the
benefit or other plans referred to in Section 2(c), but Executive shall forfeit
Executive's right to any Bonus and shall not be entitled to any further
compensation or benefits hereunder.
(b) Notwithstanding the foregoing, in the event that (1) Executive's
employment is deemed to have been terminated hereunder following the occurrence
of an event specified in clause (iii), (iv) or (v) of Section 4(a) or (2)
Executive's employment hereunder is otherwise terminated (or deemed to have been
terminated) by Fund American without cause (including following Fund American,
without cause, taking any of the actions specified in clause (i) or (ii) of
Section 4(a)), Executive shall be entitled to, and Fund American shall provide
to Executive, in addition to the amounts referred to in the preceding paragraph
(a) and to any Bonus awarded by the Board but unpaid, the following severance
benefits:
(i) Cash Payment. Executive shall be entitled to a cash payment in an
amount equal to the aggregate Base Salary that he would have received
hereunder during the remainder of the Term following the termination of
Executive's employment (the "Compensation Period"). Such cash payment shall
be paid to Executive in a lump sum without discount within 30 days
following such termination.
(ii) Welfare Benefits. During the Compensation Period, Executive will be
provided with substantially the same welfare benefits afforded by the
employee benefit plans and programs maintained by Fund American in which
Executive participated immediately prior to Executive's termination,
including group life insurance, accidental death and dismemberment
insurance and health insurance.
6. Amendment of Warrant Agreement. In order to induce Executive to
continue his employment by Fund American and to enter into this Agreement, and
in consideration thereof, the Common Stock Warrant Agreement with respect to
Shares of the Common Stock of Fireman's Fund Corporation dated as of October 17,
1985, is being amended by an agreement in the form of Exhibit A to this
Agreement being executed and delivered simultaneously with the execution and
delivery hereof.
7. Extension or Guarantee of Loan. On October 23, 1995, at Executive's
option, Fund American will make a loan to Executive or Executive shall have the
right to receive a Fund American guarantee of a loan obtained by Executive from
a third party, in an amount not in excess of $15,000,000. Such loan, if made,
will be made on a recourse basis and will have a term ending no later than
December 31, 1999, a market interest rate and standard commercial terms. In
order to exercise the foregoing option to obtain the loan or the guarantee,
Executive shall notify Fund American thereof no later than October 13, 1995.
8. Indemnification. (a) Fund American agrees that if Executive is
made a party, or is threatened to be made a party, to any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that he is or was a director, officer or
employee of Fund American or is or was serving at the request of Fund American
as a director, officer, member, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether or not the basis of such Proceeding
is the Executive's alleged action in an official capacity while serving as a
director, officer, member, employee or agent, Executive shall be indemnified and
held harmless by Fund American to the fullest extent permitted
3
<PAGE>
or authorized by Fund American's certificate of incorporation or bylaws or, if
greater, by the-laws of the State of Delaware, against all cost, expense,
liability and loss (including, without limitation, attorney's fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by Executive in connection
therewith, and such indemnification shall continue as to Executive even if he
has ceased to be a director, member, employee, or agent of Fund American or
other entity and shall inure to the benefit of Executive's heirs, executors and
administrators. Fund American shall advance to Executive all reasonable costs
and expenses incurred by him in connection with a Proceeding within 20 days
after receipt by Fund American of a written request for such advance. Such
request shall include an undertaking by Executive to repay the amount of such
advance if it shall ultimately be determined that he is not entitled to be
indemnified against such costs and expense.
(b) Neither the failure of Fund American (including its board of
directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of any proceeding concerning payment of
amounts claimed by Executive under Section 8(a) that indemnification of
Executive is proper because he has met the applicable standard of conduct, nor a
determination by Fund American (including the Board or its independent legal
counsel or stockholders) that Executive has not met such applicable standard of
conduct, shall create a presumption that Executive has not met the applicable
standard of conduct.
(c) Fund American agrees to maintain a directors' and officers'
liability insurance policy covering Executive to the extent Fund American
provides such coverage for its other executive officers.
9. Successors and Assigns. This Agreement is personal in its nature
and neither of the parties hereto shall, without the consent of the other,
assign or transfer this Agreement or any rights or obligations hereunder, and
any attempted transfer or assignment in violation of this Section 9 shall be
null, void and of no effect; provided, however, that the provisions hereof shall
inure to the benefit of, and be binding upon, each successor of Fund American,
whether by merger, consolidation, transfer of all or substantially all assets,
or otherwise. Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation or to exclusion,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.
10. Severability; Enforceability. To the extent that it may effectively
do so under applicable law, each party hereto hereby waives any provision of law
which renders any provision of this Agreement invalid, void or unenforceable in
any respect. If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and obligations
set forth herein shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
11. Waivers, Amendments, etc. No failure or delay on the part of the
parties hereto in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. No amendment, modification or waiver of any provision of
this Agreement nor consent to any departure by any party therefrom shall in any
event be effective unless the same shall be in writing, and signed by each
4
<PAGE>
party hereto, and then any such waiver or consent shall be effective only in the
specific instance and for the purpose for which given.
12. Descriptive Headings. Descriptive headings are for convenience only
and shall not control or affect the meaning or construction of this Agreement.
13. Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original and all of which shall together constitute
one and the same instrument.
14. Waiver of Jury Trial. Each party waives, to the fullest extent
permitted by applicable law, any right it may have to a trial by jury in respect
of any litigation arising out of or relating to this Agreement and Executive's
employment hereunder. Each party (i) certifies that no representative, agent or
attorney of the other party has represented, expressly or otherwise, that such
other party would not, in the event of litigation, seek to enforce the foregoing
waiver and (ii) acknowledges that it has been induced to enter into this
Agreement by, among other things, the mutual waivers and certifications set
forth in this Section.
15. Notices. All notices and other communications provided for herein
shall be dated and in writing and shall be deemed to have been duly given (i)
when sent, if by registered or certified mail, return receipt requested, postage
prepaid and (ii) when received, if delivered personally or otherwise, to the
party to whom it is directed:
If to Fund American, to the following address:
The 1820 House
Norwich, VT 05055-0850
Attention: Executive Vice President
If to Executive, to Executive at the address set forth below:
35 Rope Ferry Road
Hanover, NH 03755
Attention: John J. Byrne
With copies to:
Robert Snyder, CPA
P.O. Box 1018
Norwich, VT 05055
or at such other address as the parties hereto shall have specified by notice in
writing to the other parties; provided that such notice of change of address
shall be deemed to have been duly given only when actually received.
16. Survivorship. The respective rights and obligations of the parties
hereto shall survive any termination of Executive's employment to the extent
necessary to the intended preservation of such rights and obligations.
5
<PAGE>
17. Beneficiaries. Executive shall be entitled to select (and change to
the extent permitted under any applicable law) a beneficiary or beneficiaries to
receive any compensation or benefit payable hereunder following Executive's
death by giving Fund American written notice thereof. In the event of
Executive's death or a judicial determination of his incompetence, reference in
this Agreement to Executive shall be deemed when appropriate, to refer to his
beneficiary, estate or other legal representative.
18. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York without
reference to principles of conflicts of laws.
19. Effectiveness. This Agreement shall become immediately effective
upon the approval of shareholders entitled to vote a majority of the shares of
common stock of Fund American of the terms and provisions of this Agreement and
the amendment referred to in Section 6 hereof.
IN WITNESS WHEREOF, the parties, have executed this Agreement as of the day
and year first above written.
FUND AMERICAN ENTERPRISES
HOLDINGS, INC.
by ______________________________________
Name:
Title:
EXECUTIVE:
_________________________________________
John J. Byrne
6
<PAGE>
EXHIBIT A TO THE
EMPLOYMENT AGREEMENT
AMENDMENT dated as of February 15, 1995, to the Common Stock
Warrant Agreement with respect to Shares of the Common Stock of
Fireman's Fund Corporation dated as of October 17, 1985 (the
"Warrant Agreement"), between FUND AMERICAN ENTERPRISES HOLDINGS,
INC., a Delaware corporation ("Fund American"), and JOHN J. BYRNE
(the "Executive").
WHEREAS Fund American, formerly known as Fireman's Fund Corporation, has
entered into the Warrant Agreement with respect to it's common stock with
Executive (capitalized terms used but not defined herein have the meanings
assigned thereto in the Warrant Agreement);
WHEREAS 1,150,000 of the Warrants issued under the Warrant Agreement remain
outstanding, all of which are held by Executive;
WHEREAS Executive is employed by Fund American and Fund American desires
for Executive to remain so employed and, accordingly, desires to enter into the
Employment Agreement dated as of February 15, 1995 (the "Employment Agreement"),
with Executive being executed and delivered simultaneously herewith;
WHEREAS Fund American and Executive desire to amend certain provisions of
the Warrant Agreement in connection with the execution and delivery of the
Employment Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements hereinafter set forth, the parties hereto have agreed, and do hereby
agree, as follows:
1. Extension of Warrant Termination Date.
Notwithstanding anything in the Warrant Agreement, but subject to the provisions
of Section 1.03(c) thereof (which may accelerate the Warrant Termination Date in
the event of Executive's death prior to January 2, 2002), the Warrant
Termination Date with respect to 1,000,000 of the Warrants is hereby extended to
January 2, 2002. The Warrant Termination Date with respect to the 150,000
remaining outstanding Warrants shall continue to be January 2, 1996, in
accordance with the terms of the Warrant Agreement.
2. Agreement Regarding Exercise of Warrants. Notwithstanding anything
in the Warrant Agreement, Executive shall not exercise any of the Warrants until
the day after his employment by Fund American is terminated or deemed to have
been terminated in accordance with the terms of the Employment Agreement.
7
<PAGE>
3. Other Terms Unaffected. Other than as provided above, all other
terms, conditions and provisions of the Warrants shall continue as set forth in
the Warrant Agreement.
4. Headings and Governing Law. The descriptive headings of the several
Sections of this Amendment are inserted for convenience only and do not
constitute a part of this Amendment. This Amendment shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the laws of the State of New York.
5. Effectiveness. This Agreement shall become immediately effective
upon approval of shareholders entitled to vote a majority of the shares of
common stock of Fund American of the terms and provisions of this Agreement and
the Employment Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
FUND AMERICAN ENTERPRISES
HOLDINGS, INC.
by ______________________________________
Name:
Title:
EXECUTIVE:
_________________________________________
John J. Byrne
8
<PAGE>
PROXY
----- FUND AMERICAN ENTERPRISES HOLDINGS, INC. -----
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR THE
ANNUAL MEETING MAY 18, 1994
The undersigned hereby appoints John J. Byrne and Howard L. Clark, and each
of them, proxies, with full power of substitution, to vote all Shares of
the undersigned at the 1994 Annual Meeting of shareholders to be held May
18, 1994, and at any adjournment thereof, upon all subjects that may
properly come before the meeting including the matters described in the
proxy statement furnished herewith, subject to any directions indicated on
the reverse of this card or below. IF NO DIRECTIONS ARE GIVEN, THE PROXIES
WILL VOTE FOR THE ELECTION OF DIRECTORS, FOR THE APPOINTMENT OF ERNST &
YOUNG AS INDEPENDENT AUDITORS, AND AT THEIR DISCRETION ON ANY OTHER MATTER
THAT MAY PROPERLY COME BEFORE THE MEETING.
(Change of Address/Comments)
Your vote for the Election of Directors may
be indicated on the reverse. The following ----------------------------
Directors are being nominated at this meeting
for election to terms ending in the year ----------------------------
indicated.
----------------------------
1995. Howard L. Clark ----------------------------
1997. Howard L. Clark, Jr. (If you have written in the
Arthur Zankel above space, please mark the
corresponding box on the
reverse side of this card).
YOUR VOTE IS IMPORTANT! PLEASE SIGN AND DATE ON THE REVERSE SIDE AND RETURN
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR OTHERWISE TO FIRST CHICAGO
TRUST COMPANY OF NEW YORK, POST OFFICE BOX 8085, EDISON, NEW JERSEY 08812-
9052.
PLEASE RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE
SEE REVERSE
SIDE
<PAGE>
[X] PLEASE MARK YOUR 7612
VOTES AS IN THIS
EXAMPLE.
This proxy when properly executed will be voted in the manner directed herein.
If no directions are made, this proxy will be voted FOR the Election of
Directors FOR Amendment of the Incentive Plan, FOR Approval of the Agreement
and FOR the Appointment of Independent Auditors.
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 AND 4.
--------------------------------------------------------------------------------
1 Election of Directors (see reverse)
FOR WITHHELD
[_] [_]
FOR, except vote withheld from the following nominee(s)
---------------------------------------------------------
2. Amendment of the Incentive Plan
FOR AGAINST ABSTAIN
[_] [_] [_]
Change of Address
Comments on [_]
Reverse Side
3. Approval of the Agreement
FOR AGAINST ABSTAIN
[_] [_] [_]
4. Appointment of Independent Auditors
FOR AGAINST ABSTAIN
[_] [_] [_]
The signer hereby revokes all proxies heretofore given by the signer to vote at
said meeting or any adjournment thereof.
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
------------------------------------------
SIGNATURE(S) DATE
<PAGE>
PROXY
----- FUND AMERICAN ENTERPRISES HOLDINGS, INC. -----
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR THE
ANNUAL MEETING MAY 24, 1995
The undersigned hereby appoints John J. Byrne and Howard L. Clark, and each of
them, proxies, with full power of substitution, to vote all Shares of the
undersigned at the 1995 Annual Meeting of shareholders to be held May 24, 1995,
and at any adjournment thereof, upon all subjects that may properly come before
the meeting including the matters described in the proxy statement furnished
herewith, subject to any directions indicated on the reverse of this card or
below. IF NO DIRECTIONS ARE GIVEN, THE PROXIES WILL VOTE FOR THE ELECTION OF
DIRECTORS, FOR AMENDMENT OF THE INCENTIVE PLAN, FOR APPROVAL OF THE AGREEMENT,
FOR THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS, AND AT THEIR
DISCRETION ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING.
(Change of Address/Comments)
Your vote for the Election of Directors may
be indicated on the reverse. The following ------------------------------
Directors are being nominated at this meeting
for election to terms ending in the year ------------------------------
indicated.
------------------------------
1997. Robert P. Cochran ------------------------------
1998. Howard L. Clark (If you have written in the
K. Thomas Kemp above space, please mark the
Gordon S. Macklin corresponding box on the
reverse side of this card).
YOUR VOTE IS IMPORTANT! PLEASE SIGN AND DATE ON THE REVERSE SIDE AND RETURN
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR OTHERWISE TO FIRST CHICAGO
TRUST COMPANY OF NEW YORK, POST OFFICE BOX 8085, EDISON, NEW JERSEY 08818-9052.
PLEASE RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE
-----------
SEE REVERSE
SIDE
-----------
<PAGE>
--
[X] PLEASE MARK YOUR 0278
VOTES AS IN THIS
EXAMPLE.
This proxy when properly executed will be voted in the manner directed herein.
If no directions are made, this proxy will be voted FOR the Election of
Directors FOR Amendment of the Incentive Plan, FOR Approval of the Agreement
and FOR the Appointment of Independent Auditors.
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 AND 4.
--------------------------------------------------------------------------------
1 Election of Directors (see reverse)
FOR WITHHELD
[_] [_]
FOR, except vote withheld from the following nominee(s)
-------------------------------------------------------
2. Amendment ofthe Incentive Plan
FOR AGAINST ABSTAIN
[_] [_] [_]
Change of Address
Comments on [_]
Reverse Side
3. Approval of the Agreement
FOR AGAINST ABSTAIN
[_] [_] [_]
4. Appointment of Independent Auditors
FOR AGAINST ABSTAIN
[_] [_] [_]
The signer hereby revokes all proxies heretofore given by the signer to vote at
said meeting or any adjournment thereof.
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
---------------------------------------------
---------------------------------------------
SIGNATURE(S) DATE
