SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
X Filed by the registrant
Filed by a party other than the registrant
Check the appropriate box:
Preliminary proxy statement
X Definitive proxy statement
Definitive additional materials
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
AVEMCO CORPORATION
(Name of Registrant as Specified in Its Charter)
William P. Condon
____________________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
X $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
$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 transactions applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:1
(4) Proposed maximum aggregate value of transaction:
____________________________________________________________________________
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:
__________________
1 Set forth the amount on which the filing fee is calculated and
state how it was determined
AVEMCO CORPORATION
Frederick Municipal Airport, 411 Aviation Way
Frederick, Maryland 21701
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 4, 1995
TO THE STOCKHOLDERS OF AVEMCO CORPORATION:
Notice is hereby given that the Annual Meeting of Stockholders
of AVEMCO Corporation will be held at the Corporate Headquarters,
Frederick Municipal Airport, 411 Aviation Way, Frederick,
Maryland, on Thursday, May 4, 1995, at 8:30 a.m.(EDT), for the
following purposes:
1. To elect two directors to serve for a term of three years,
expiring in 1998, or until their successors are elected and qualified;
2. To consider and act upon a proposal to ratify the selection
of KPMG Peat Marwick as independent auditors for 1995; and
3. To transact such other business as may properly come before
the meeting, or any adjournment thereof.
By resolution of the Board of Directors, the close of business
on March 14, 1995, has been fixed as the record date for the
determination of stockholders entitled to notice of, and to vote
at, such meeting and any adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Thomas H. Chero
Secretary
March 21, 1995
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING
IN PERSON OR BY PROXY. IF YOU DO NOT EXPECT TO ATTEND THE
MEETING, PLEASE SIGN, DATE, AND RETURN THE ENCLOSED PROXY
PROMPTLY. THE ENVELOPE FURNISHED NEEDS NO POSTAGE IF MAILED IN
THE UNITED STATES.
AVEMCO CORPORATION
411 Aviation Way
Frederick, Maryland 21701
March 21, 1995
PROXY STATEMENT
For Annual Meeting of Stockholders to be held May 4, 1995
This proxy statement is furnished to the holders of the Common
Stock of AVEMCO Corporation (hereafter called the "Company") in
connection with the solicitation of proxies for use at the 1995
Annual Meeting of Stockholders of the Company to be held at the
time and place and for the purposes set forth in the foregoing
Notice of Annual Meeting of Stockholders.
Your proxy is solicited by the Board of Directors of the
Company. Any stockholder giving such proxy has the power to
revoke it by written notice received by the Secretary of the
Company before it is exercised. Execution of a proxy given in
response to this solicitation will not affect a stockholder's
right to attend the meeting and to vote in person. Presence at
the meeting of a stockholder who has signed a proxy does not
alone revoke a proxy. Any stockholder giving a proxy may revoke
it at any time before it is exercised by giving notice thereof to
the Company in writing. Unless so revoked, the shares
represented by proxies will be voted at the meeting and at any
adjournments thereof. Where a stockholder specifies a choice by
means of the ballot provided with the proxy, the shares will be
voted in accordance with such specification.
The cost of soliciting proxies, including the cost of preparing
and mailing the proxy material, will be borne by the Company.
The solicitation will be made primarily by mail and may be made
by the directors, officers, and employees of the Company,
personally or by mail, facsimile, or telephone. In addition, the
Company may retain the services of a proxy soliciting firm to
assist in the solicitation. Brokers, custodians, and other like
parties will be requested to send proxy material to beneficial
owners of stock, and the Company will defray reasonable expenses
incurred in forwarding such material.
A majority of the stock issued and outstanding and entitled to
vote at the meeting, present in person or represented by proxy,
constitutes a quorum. Shares represented by proxies received by
the Company which have not been revoked will be counted for
purposes of establishing a quorum, regardless of how or whether
such shares are voted on any specific proposal. Votes withheld
in connection with the election of one or more of the nominees
for director will not be counted as votes cast for such
individuals. An abstention may be specified on any proposal
except for the election of directors and will have the effect of
a vote against each proposal as to which the abstention is
specified. Where stockholders of record who hold stock as
nominees for others do not vote on a proposal because they did
not receive specific voting instructions on the proposal from the
beneficial owners of such shares ("broker non-votes"), such
broker non-votes will not be treated as votes cast on the
proposal and will not be counted for purposes of determining
whether the proposal has been approved. On March 1, 1995, the
outstanding stock of the Company entitled to vote consisted of
8,854,520 shares of Common Stock. Each share is entitled to one
vote.
The details of the Company's operations in 1994 are set forth
in the enclosed Annual Report of the Company, which is not part
of this proxy statement.
SECURITY OWNERSHIP
Principal Shareholders
The following table sets forth information based upon the
records of the Company and filings with the Securities and
Exchange Commission with respect to each beneficial owner of more
than 5% of the Company's outstanding voting stock as of March 1,
1995.
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
__________________________________________________________________________
Common Stock Vanguard/PRIMECAP Fund,Inc. 650,000 shares(1) 7.3%
P.O. Box 1100
Valley Forge, PA 19482
Common Stock Markel Corporation and Subsidiaries 600,000 shares(2) 6.8%
4551 Cox Road
Glen Allen, VA 23060
Common Stock Group consisting of: 600,000 shares(3) 6.8%
Century Capital Management, Inc., and
Massachusetts Fiduciary Advisors, Inc.
One Liberty Square
Boston, MA 02109
Common Stock David L. Babson & Co., Inc. 502,500 shares(4) 5.7%
One Memorial Drive
Cambridge, MA 02142
______________________________________________________________________________
(1) Vanguard/PRIMECAP Fund, Inc. reported that it has sole voting
power and shared dispositive power over 650,000 shares of Common
Stock of the Company.
(2) Markel Corporation reported that it has sole voting power and sole
dispositive power over 600,000 shares of Common Stock of the Company
through its ownership and control of various subsidiaries of Markel
which hold the stock directly.
(3) Century Capital Management, Inc. and Massachusetts Fiduciary Advisors,
Inc. reported that they are the beneficial owners of 500,000 and
100,000 shares of Common Stock of the Company, respectively. The
two entities have reported that they are members of a "group" owning
more than five percent of the Company's securities.
(4) David L. Babson & Co., Inc. reported that it is an investment advisor
with sole dispositive power over 502,500 shares of Common Stock
of the Company with sole voting power over 320,600 of those shares
and shared voting power over the remaining 181,900 shares.
Security Ownership of Management
The following is a table showing the shares of the Company's
Common Stock beneficially owned as of March 1, 1995, by each
director and nominee, each of the executive officers named below,
and directors and officers of the Company as a group.
Name of Amount Percent Name of Amount Percent
Beneficial Owner Owned of Class Beneficial Owner Owned of Class
__________________________________________________________________________
Michael Collins 8,000 * Thomas J. Schwab(2) 8,751 *
William P. Condon(1)(4) 213,297 2.4 John F. Shettle, Jr.(1)(4) 165,899 1.9
H. Lowell Davis 9,500 * Clifton F. von Kann 2,000 *
Paul J. Hanna(5) 25,950 * Thomas H. Chero(1) 38,450 *
Arnold H. Johnson 88,550 1.0 Dan L. Jonson(1) 14,225 *
Steven A. Markel(3) 5,000 * John R. Yuska(1)(4) 89,648 1.0
* less than 1% All Directors and
Officers as a Group(6) 709,995 7.8
________________________________________________________________________
(1) Includes shares of Common Stock which as of March 1, 1995, were
subject to outstanding stock options exercisable within 60 days,
held by the named executive officers as follows: Condon 83,250,
Shettle, Jr. 51,000, Yuska 73,975, Cherno 36,000, and Jonson 14,225.
(2) Includes 814 shares owned by Mr. Schwab's wife.
(3) Mr. Markel's shares do not include 600,000 shares owned by Markel
Corporation and Subsidiaries, of which Mr. Markel is Vice Chairman.
Mr. Markel disclaims beneficial ownership of these shares.
(4) Includes shares of Common Stock held by the AVEMCO
Corporation Profit Sharing Trust that each of the following individuals
who serve as Trustee are deemed to own indirectly by virtue of
being a beneficiary of the Trust, calculated on the basis of his
proportional beneficial interest in the Trust, as follows:
Condon 32,247, Shettle, Jr. 4,899, Yuska 10,673. The Trust
holds 297,500 shares in the aggregate, over which the three Trustees
share voting and dispositive power.
(5) Includes 450 shares owned by the Hanna Foundation Trust.
(6) Includes 299,075 shares of Common Stock which as of March 1,
1995, were subject to outstanding stock options exercisable
within 60 days.
Section 16 of the Securities Exchange Act
Section 16 of the Securities Exchange Act of 1934, as amended,
requires the Company's officers, directors and persons who own
greater than 10% of a registered class of the Company's equity
securities to file reports of ownership and changes in ownership
with the Securities and Exchange Commission and New York Stock
Exchange. Based on a review of the Forms 3, 4, and 5 it has
received, and/or on written representations from certain
reporting persons that no Form 5 was required for them, the
Company believes that during 1994 all Section 16 filing
requirements applicable to its officers, directors and 10%
beneficial owners were complied with by such persons.
1. ELECTION OF DIRECTORS
By resolution of the Board of Directors, the number of
directors of the Company has been fixed at nine. Pursuant to the
Company's Bylaws, the Board of Directors is divided into three
classes, with the term of office of one class to expire each
year. The terms of two directors, Michael Collins and John F.
Shettle, Jr., expire in 1995. Therefore, two places on the Board
are to be filled at the 1995 Annual Meeting of Stockholders. It
is intended that votes will be cast pursuant to the enclosed
proxy (unless authority is specifically withheld) for election of
Messrs. Collins and Shettle, Jr. as directors for terms expiring
in 1998. They have agreed to serve as directors if elected. If
either of them should become unable or unwilling to serve (an
event which the Board of Directors does not anticipate), it is
intended that the enclosed proxy will be voted for the election
of such person, if any, as the Board of Directors may designate.
The affirmative vote of a majority of the outstanding stock of
the Company is required to elect each director.
The following table lists certain information with respect to
the Company's directors and nominees.
Name, Age and Year First Other Positions and Offices With The Company,
Served as a Director Principal Occupation, Business Experience
During Past 5 Years and Term
Other Directorships In Public Companies Expires
______________________________________________________________________________
Michael Collins (a,b,d) President, Michael Collins Associates 1995
Age: 64 (consulting firm); Trustee: National
Director since 1986 Geographic Society; Former Astronaut;
Vice President, Washington Operations of LTV\
Aerospace and Defense Company (1980-85).
John F. Shettle, Jr. (c) President and Chief Operating Officer of the 1995
Age: 40 Company; Chairman, Eastern Aviation & Marine
Director since 1993 Underwriters, Inc. a subsidiary of the Company;
Board member and officer of various other
subsidiaries of the Company.
William P. Condon (a,c,) Chairman of the Board of Directors and Chief 1996
Age: 57 Executive Officer of the Company; Chairman of the
Director since 1973 Boards of various subsidiaries of the Company.
Arnold H. Johnson (a,c,d) Until retirement in 1982, Chairman of the 1996
Age: 77 Board of Directors and Chief Executive Officer
Director since 1965 of the Company and Chairman of the Boards of
its subsidiaries.
Thomas J. Schwab (b,c) Attorney; partner with law firm of Wald, 1996
Age: 67 Harkrader and Ross until 1984; Secretary of the
Director since 1987 Company until April 1987.
Clifton F. von Kann (b,d) Major General, U.S. Army (retired); Chairman 1996
Age: 79 of the Board Emeritus, National Aeronautic
Director since 1980 Association; President of Honour, Federation
Aeronautique Internationale; Director and voting
trustee: VEXCEL Corporation; Chairman: Traverse
Technologies International, Inc.
Name, Age and Year First Other Positions and Offices With The Company,
Served as a Director Principal Occupation, Business Experience
During Past 5 Years and Term
Other Directorships In Public Companies Expires
______________________________________________________________________________
H. Lowell Davis (a,c,) Vice Chairman, Chief Financial Officer and 1997
Age: 62 Director, Potomac Electric Power Company.
Director since 1985
Paul J. Hanna (a,c) Until retirement in 1986, Vice Chairman and 1997
Age: 79 Director, GEICO Corporation.
Director since 1980
Steven A. Markel (b,d) Vice Chairman, Markel Corporation; Director: 1997
Age: 46 Fairfax Financial Holdings, Ltd. (Canada); Director:
Director since 1994 Morden & Helwig Group, Inc. (Canada).
______________________________________________________________________________
(a) Member of the Executive Committee
(b) Member of the Audit Committee
(c) Member of the Investment Committee
(d) Member of the Compensation and Stock Option Committee
The Board of Directors of the Company met four times during
1994. In addition, the Company has the following committees of
the Board:
Executive Committee. The Executive Committee has the authority
to act during intervals between meetings of the Board of
Directors and to exercise all powers of the Board except those
reserved to the Board by statute, the Certificate of
Incorporation or Bylaws. It also functions to advise the Board
on all matters pertaining to Board nominations and membership.
This function was previously performed by a separate Nominating
Committee, but the function was assumed by the Executive
Committee during 1994 and the Nominating Committee (which met
one time in 1994) was discontinued as a separate standing
committee. The Executive Committee will not consider
recommendations for Board membership from shareholders. The
Committee did not meet during 1994.
Audit Committee. The Audit Committee, composed entirely of
outside directors, serves as a liaison between the Board and
the Company's auditors, to discuss with the auditors before
their examination its scope and approach, and to discuss with
them after their examination its results. The Committee met
two times in 1994.
Investment Committee. The Investment Committee serves to
review the investment policy and investment guidelines of the
Company, and makes recommendations to the Board of Directors.
The Committee met four times during 1994.
Compensation and Stock Option Committee. The Compensation and
Stock Option Committee is responsible for recommendations to
the Board in decisions affecting compensation to employees,
including salaries of officers and allocation of awards under
the Executive Performance Compensation Plan, and is responsible
for the awarding of stock options under the Company's stock
option plans. The Committee met two times in 1994.
All directors attended at least 75 percent of the meetings of
the Board and Committees of which they were members.
Director Compensation
The Company's current arrangement for compensation of directors
is that those directors who are not employees of the Company, or
a subsidiary, receive an annual retainer of $18,000. For each
Board and Executive Committee meeting attended, non-employee
members receive $1,200 ($1,400 for the Chairman of the Executive
Committee). For all other Committee meetings attended, members
receive $900 ($1,000 if Chairman of the Committee). The Company
also reimburses directors for travel expenses incurred in
attending meetings.
The Company has a plan whereby non-employee directors may defer
their annual retainer fees until age 70-1/2 or until their
service with the Board terminates. The Company also has a
consulting plan for directors, pursuant to which directors
retiring from the Board after age 65 and after at least ten years
of service on the Board may continue to receive between 50% and
100% of the annual retainer (but not the per meeting fees) they
would receive as active directors, the percentage depending on
years of service as a director. The fee at the 50% level would
be payable for a minimum of 10 years of active service on the
Board, 75% for a minimum of 15 years of active service, and 100%
fee for a minimum of 20 years of active service.
Arnold H. Johnson also serves as consultant to the Company
under the terms of a consulting agreement which provides for
payments of an annual consulting fee of $37,000. All payments
under the agreement are deferred for five years from the time
earned, and such deferrals accrue interest at the rate of 8% per
annum. The agreement may be terminated prior to its May 1, 1997,
expiration by either party for cause, upon 90 days' notice.
Compensation Committee Interlocks and Insider Participation
Arnold H. Johnson, a director and member of the Compensation
and Stock Option Committee, was formerly Chairman of the Board
and Chief Executive Officer of the Company. He also serves as
consultant to the Company under the terms of a consulting
agreement which provides for an annual consulting fee of $37,000
as stated immediately above.
The Board of Directors recommends a vote "FOR" Messrs. Collins
and Shettle, Jr., nominees for the Board of Directors. Proxies
solicited by the Board of Directors will be voted for these
nominees unless the stockholder specifies otherwise.
Executive Compensation
The following table sets forth the annual and long-term
compensation for the Company's Chief Executive Officer and the
four highest-paid executive officers, as well as all other
compensation paid or awarded to each such individual for the
Company's last three fiscal years.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
Name and Securities All Other
Principal Underlying Compensation
Position Year Salary($) Bonus($)(1) Options/SARs(#) ($)(2)
William P. Condon 1994 390,000 155,000 7,500 10,237
Chairman & Chief 1993 390,000 240,000 -- 12,066
Executive Officer 1992 390,000 103,000 -- 7,497
Age: 57
John F. Shettle, Jr. 1994 145,500 76,000 5,000 9,193
President & Chief 1993 131,500 90,000 6,000 8,227
Operating Officer 1992 131,500 44,500 -- 6,102
Age: 40
John R. Yuska 1994 123,000 61,000 3,000 9,409
Senior Vice President 1993 18,000 75,000 4,000 7,304
& Chief Financial 1992 18,000 30,000 -- 6,771
Officer
Age: 50
Thomas H. Chero 1994 95,000 58,000 3,000 9,193
Senior Vice President-1993 91,000 72,000 4,000 5,726
Legal & Corporate 1992 91,000 27,000 -- 4,924
Secretary
Age: 44
Dan Jonson 1994 86,000 32,000 1,500 8,261
Senior Vice President-1993 82,000 38,000 3,000 5,724
Strategic Systems 1992 82,000 23,000 4,000 3,916
Development
Age: 51
(1)"Bonus" consists of Performance Compensation awarded for
1994 performance, but which was paid in early 1995. Similar
timing also applies for the previous two years shown.
(2) "All Other Compensation" consists of the employer
contribution to the defined contribution Profit Sharing Plan
and Group Term Life Plan for Messrs. Condon, Shettle, Jr.,
Yuska, Chero, and Jonson respectively, as follows: (i)
Profit Sharing: $8,887; $8,887; $8,887; $8,887; $7,397. (ii)
Term Life: $1,350; $306; $522; $306; $864.
Note: All of the executive officers listed have been with the
Company, or a subsidiary of the Company, for more than five
years.
Option/SAR Grants
The following table sets forth certain information concerning
options/SARs granted during 1994 to the named executives:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term(1)
% of Total
Number of Options/SARs
Securities Granted Exercise
Underlying to Employees or Base
Options/SAR in Fiscal Price Expiration
Name Granted(2) Year ($/Sh) Date 5%($) 10%($)
William P. Condon 7,500 14.7 13.625 12/15/2004 64,265 162,861
John F. Shettle, Jr. 5,000 9.8 13.625 12/15/2004 42,843 108,574
John R. Yuska 3,000 5.9 13.625 12/15/2004 25,706 65,144
Thomas H. Chero 3,000 5.9 13.625 12/15/2004 25,706 65,144
Dan L. Jonson 1,500 2.9 13.625 12/15/2004 12,853 35,572
(1) Potential realizable value is the net gain realizable based
on an assumption that the price of the Common Stock
appreciates at the annual compounded rate shown from the
date of grant until the end of the ten-year option term.
These numbers are calculated based upon the requirements
promulgated by the Securities and Exchange Commission and do
not reflect the Company's estimate of future stock price
growth.
(2) Options granted were under the Company's Nonstatutory Stock
Option Plan and vest at the rate of 25% each year,
commencing on the one-year anniversary of the date of grant.
Option/SAR Exercises and Values
The following table summarizes options/SARs exercised during
1994, and presents the value of unexercised options/SARs held by
the named executives at fiscal year end:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Value of Unexercised
Securities Underlying In-the-Money(1)
Unexercised Options/SARs Options/SARs
Shares Value at Fiscal Year-End (#) at Fiscal Year-End ($)
Acquired on Realized Exercisable(E) Exercisable(E)/
Name Exercise (#) ($) Unexercisable(U) Unexercisable(U)
William P. Condon-0- -0- 73,250 E 211,164 E
37,500 U 13,125 U
John F. Shettle, Jr. -0- -0- 48,575 E 104,535 E
13,425 U 8,750 U
John R. Yuska -0- -0- 65,500 E 196,414 E
17,300 U 5,250 U
Thomas H. Chero -0- -0- 12,525 E 10,470 E
34,425 U 5,250 U
Dan L. Jonson -0- -0- 12,825 E 5,235 E
8,150 U 2,625 U
(1)In-the-money option value is the fair market share value at
fiscal 1994 year-end ($15.375 per share) less the option
exercise price times the number of shares.
Profit Sharing Plan
The Company has a qualified defined contribution Profit Sharing
Plan, which became effective October 1, 1969, and in which
substantially all employees of the Company and its subsidiaries
who have completed a qualifying year of service may participate.
The Company and its subsidiaries contribute each year 5% of
"consolidated net profits before taxes," as defined in the Plan,
(but not in excess of 15% of the compensation paid to
participating employees during the year), to a trust fund. The
Company's contribution each year is allocated to active
participants on a pro rata basis based upon W-2 compensation for
the year (excluding compensation from stock option exercises),
subject to individual compensation limits imposed by the federal
government ($150,000 for 1994). The entire amount in the Profit
Sharing Plan to the employee's credit is distributable to the
employee upon retirement or to the employee's designee upon
death. Upon withdrawal as a participant prior to retirement, the
employee receives amounts contributed by the employee, if any,
adjusted for investment results on such amounts, plus 20% of the
remaining amount to the employee's credit for each year of
employment after the third year of employment, not to exceed 100%
of such amount at the end of the seventh year of employment. The
total Company contribution to the Profit Sharing Plan for the
year ended December 31, 1994, was $709,000. The Company's
contribution with respect to the five executive officers is shown
in a footnote in the Summary Compensation Table.
Pension Plan
The Company has a noncontributory defined benefit Pension Plan
covering substantially all employees of the Company and its
subsidiaries who have attained age 21 and have completed one year
of qualifying service. The Pension Plan, funded through an
insurance company, provides for a retirement benefit at age 65,
which is integrated with Social Security, based upon the
employee's highest five consecutive years average W-2
compensation at the rate of .6% of such five-year average up to
"covered compensation" as defined in the Plan plus 1.1% of such
five-year average compensation in excess of "covered
compensation", all multiplied by years of credited service. W-2
compensation used to calculate an employee's final average
compensation was capped by federal law at $150,000 for Plan year
1994, but is indexed for inflation for subsequent plan years.
Compensation attributable to the exercise of stock options is not
includable for benefit determinations. Vesting for Plan benefits
is 100% after five years of service with 0% for less than five
years of service.
PENSION PLAN TABLE
Years of Service
Remuneration 15 20 25 30 35
$125,000 $18,802 $25,069 $ 31,336 $37,603 $43,870
150,000 22,927 30,570 38,212 45,854 53,497
*175,000 22,927 30,570 38,212 45,854 53,497
*200,000 22,927 30,570 38,212 45,854 53,497
*225,000 22,927 30,570 38,212 45,854 53,497
*250,000 22,927 30,570 38,212 45,854 53,497
*300,000 22,927 30,570 38,212 45,854 53,497
*400,000 22,927 30,570 38,212 45,854 53,497
*450,000 22,927 30,570 38,212 45,854 53,497
*500,000 22,927 30,570 38,212 45,854 53,497
* The 1994 compensation is limited to $150,000 for the benefit
determinations. The Company does not have a nonqualified or
other pension plan that would apply in excess of the
remuneration shown.
The pension table shows maximum annual benefits which would
be payable for a person retiring in 1994 at age 65 in accordance
with the Plan provisions on a straight life annuity basis, with
average earnings shown as "Remuneration".
A retiree's Social Security benefit is integrated into the
Plan's step-rate formula and there is no additional reduction to
the amount shown in the table as a result of Social Security
payments. However, for a person who reaches age 65 after 1994
with the same renumeration and years of service shown in the
table, their benefit will be reduced from that shown as a result
of the integration of Social Security into the formula. The
Plan's "covered compensation" level for 1994 utilized in the
table was $24,312 for a person retiring at age 65.
For 1994, the Company's pension cost was approximately 2.67%
of total compensation of Plan participants covered by the Plan.
The amount expended by the Company for financial reporting
purposes for the Pension Plan is excluded from the Summary
Compensation Table because the contribution with respect to a
specified person cannot be readily separated or individually
calculated by the actuary of the Plan.
The compensation of Messrs. Condon, Shettle, Jr., Yuska,
Chero, and Jonson covered by the Pension Plan in 1994 was
$631,350, $235,803, $198,522, $167,306, and $124,864
respectively. These amounts are based upon W-2 compensation for
1994 as provided for by the Plan, whereas the Summary
Compensation Table includes the executive officers' performance
compensation paid early in 1995 for fiscal 1994 work performed,
which award will not be included in the Plan computation until
1995. As of December 31, 1994, Messrs. Condon, Shettle, Jr.,
Yuska, Chero, and Jonson had credited service under the Plan of
33, 11, 17, 18, and 14 years, respectively. No compensation in
excess of $150,000 is considered in calculating benefits for 1994
for any of these individuals.
Performance Compensation Plan
Under the Company's Performance Compensation Plan, between 3%
and 9% of the Company's net earnings (as defined in the Plan), in
excess of a minimum earnings amount (determined by formula in the
Plan), is set aside in a pool each year. No performance
compensation may be awarded under the Plan for any year during
which a dividend is not paid to the shareholders, and no
performance compensation is available for award until the minimum
earnings amount is achieved. For 1994, 48 persons including the
named executive officers (but excluding the Chief Executive
Officer) participated in and received awards under the Plan.
Stock Option Plans
The Company's Nonstatutory Stock Option (NSO) Plan, adopted in
1990, authorizes the grant from time to time of NSOs on the
Company's Common Stock to eligible employees, up to a total of
375,000 shares. 20,000 NSOs were granted to five named executive
officers for 1994 performance. As of March 1, 1995, NSOs
representing 369,700 shares of Common Stock were outstanding.
The Plan is administered by the Compensation and Stock Option
Committee of the Company's Board of Directors, which Committee
determines which employees are to be granted NSOs and the number
of shares covered by the award. Any employee of the Company or a
subsidiary who owns less than 10% of the Company's outstanding
Common Stock may be granted an NSO.
The exercise price of shares covered by NSOs must be 100% of
the fair market value of such shares on the date of grant. The
NSO exercise period is determined by the Committee, but may not
exceed ten years from the date of grant. NSOs are not
exercisable during the first year after grant, and the Plan
states that NSOs may provide that only a portion of the shares
covered by an NSO may be exercisable during each year after the
first year after grant. Option vesting is normally over a four-
year period (25% per year), but the Committee may reduce or
extend the period from between one and ten years. There are
exceptions to the rules on exercise pertaining to such matters as
reorganization, mergers, and changes of control of the Company.
The Company had an Incentive Stock Option (ISO) Plan which
expired in December 1992 with respect to new grants. ISOs
representing 536,125 shares of Common Stock were outstanding as
of March 1, 1995.
Neither the NSO nor the ISO Plan provides for the issuance of
SARs, nor does the Company have a separate SAR Plan. Any
reference to "Options/SARs" in this proxy is to options granted
under the stock option plans.
Employment Contracts
1. Executive Officers (other than the Chief Executive
Officer). Executive officers (including those listed on the
Summary Compensation Table) are under written contract with the
Company for their employment services. Such contracts provide
for a fixed salary subject to annual review for potential
increase. In addition, such contracts provide that such officers
are eligible to participate in the Performance Compensation Plan
and Stock Option Plans described elsewhere in this proxy. No
award is guaranteed under any such plan and such plans may be
modified or terminated by the Board of Directors at any time.
While the employment agreements generally cover terms from one to
three years, each of them is terminable by either the officer or
the Company upon 30 to 90 days' written notice, with or without
cause. After the effective date of termination by either party,
no additional compensation is payable regardless of the term.
In order to be eligible to participate in the
Performance Compensation Plan and Stock Option Plans, executive
officers must agree not to compete with the Company for two years
after employment is terminated. This noncompete applies if
employment is terminated by the executive officer for any reason,
or by the Company for cause. The agreements also provide that in
the event of a change of control of the Company, being the
acquisition of 40% or more of the Company's voting stock by
another entity and its affiliates, not approved by two-thirds of
the directors who are not affiliated with the party attempting to
change control ("disinterested directors"), the two-year
noncompete does not apply. In the event of such a change in
control of the Company, stock option awards also become fully
vested and exercisable as provided for in the Plans.
2. Chief Executive Officer. Mr. Condon is employed under
written contract with the Company which was entered into in 1993
and expires on December 31, 1997. It provides for a fixed base
annual salary of $390,000 subject to annual review for potential
increase and/or the addition of other compensation as may be
deemed appropriate by the Board of Directors. In addition, such
contract provides for an annual performance compensation of 2% of
net earnings above a minimum earnings amount calculated as set
forth in the agreement. Net earnings and the minimum earnings
amount are calculated for the purposes of the agreement in the
same manner as described in the Performance Compensation Plan for
officers, including executive officers. The contract provides
that Mr. Condon's total compensation from salary and performance
compensation for any calendar year is limited to one million
dollars, but it also provides that the Board, in its sole
discretion, may award some or all of the additional performance
compensation that would cause total compensation to exceed one
million dollars, whether tax deductible or not. Mr. Condon also
participates in the Company's stock option plans.
The employment agreement provides for termination by
Mr. Condon upon 180 days' notice, with or without cause, or by
the Company upon breach by Mr. Condon of his obligations under
the agreement or for cause. In addition, the Company may
terminate his services at any time if it agrees to pay him the
base salary and annual performance compensation he would
otherwise have been entitled to receive had the contract not been
terminated. In this event, the noncompetition provision
described below would apply during the remainder of the term.
The agreement contains a two-year noncompetition
provision which the Board of Directors may elect to invoke
subsequent to the expiration of the Agreement provided it gives
at least 12 months' prior notice and agrees to continue to pay
Mr. Condon one-half of his base salary during that two-year
period. The Board may also invoke this provision if Mr. Condon
elects to terminate prior to expiration.
The contract also has a provision that, in the event of
a change of control of the Company of more than 30% of the
Company's outstanding voting stock that is not approved by two-
thirds of the disinterested directors (as described above), Mr.
Condon may elect to terminate the contract upon 30 days' written
notice, in which event the two-year noncompete would not apply
and Mr. Condon would receive such salary and performance
compensation as he would otherwise be entitled to receive for the
remaining term. In the event of a change in control of the
Company of 40% or more of the Company's voting stock by another
entity and its affiliates that is not approved by two-thirds of
the disinterested directors, stock option awards also become
fully vested and exercisable as provided for in the Plans.
3. Chief Executive Officer and Executive Officers. All
employees of the Company, including executive officers, whether
under written employment contract or not, are eligible to
participate in the Company's group life, health, disability, and
retirement programs, including the AVEMCO Corporation Pension
Plan (defined benefit plan) and the AVEMCO Corporation Profit
Sharing Plan (defined contribution plan) according to the terms
of those plans, both of which are described elsewhere in this
proxy statement.
Report of the Compensation and Stock Option Committee
1. Executive Officers (other than Chief Executive Officer
("CEO"). The cash compensation of executive officers consists of
annual salary and performance compensation, pursuant to a
contract (described elsewhere herein) which each executive
officer has with the Company.
Salaries. The salaries of executive officers are based
upon the officer's current position in the Company and the
officer's responsibilities. Prior experience in the executive's
field, as well as with the Company, is also taken into
consideration. The Committee, in establishing salary
recommendations, also looks at prevailing salaries of executive
officers of other companies, particularly insurance companies,
having comparable positions, but in making those comparisons it
takes into consideration the fact that the Company's compensation
policy since adoption of the Performance Compensation Plan
(initially adopted as the Executive Bonus Plan in 1974) has been
that performance compensation should constitute a significant
portion of total cash compensation of the Company's executive
officers. Accordingly, salaries are generally set at levels that
are substantially less than what total compensation, including
performance compensation, is expected to be.
With respect to annual salary adjustments, the
Committee gives substantial consideration to the recommendations
of the CEO and considers each executive officer's salary in
relationship to certain factors, including the officer's prior
year's salary, changes in the cost of living, changes in
responsibilities, and how such officer was rated by the CEO and
in an annual superior and peer review evaluation process that has
been utilized by the Company for many years. The Committee does
not use any specific corporate performance measures or weighting,
and determination is therefore largely subjective in nature. For
1994, the Committee in making its determination to increase
salaries also took into consideration the fact that for 1993 the
named executive officers, including the CEO, had suggested as a
group to the Committee, that in a cost savings measure their
salaries not be increased for 1993, and having acted on that
suggestion, no salary increases were awarded for 1993.
Performance Compensation. The Committee's initial role
in setting performance compensation, which constitutes a
significant portion of total cash compensation, is to recommend
to the Board of Directors the percentage of from 3% to 9% of
defined net earnings to be used to create the performance
compensation pool. For 1994, the percentage recommended by the
Committee to the Board, and accepted by the Board, was 9%, which
resulted in a performance compensation pool of $698,000 for the
48 participants.
In determining the percentage of net earnings
comprising the pool each year, the Committee, pursuant to the
terms of the Plan, considers certain factors including net
earnings, return on equity, the Company's Common Stock dividend
and its market price over time, the number of participants in the
Plan (the Plan covers generally all officers of the Company,
excluding the CEO, and its subsidiaries and not just executive
officers), the total compensation of participants, both base and
performance, compensation for comparable employees in other
firms, particularly insurance-related firms, market and economic
conditions, cycles of the Company's business, and employee
morale. In determining individual awards and, in particular,
awards to the executive officers from such pool, the Committee
considers a proposal given to it by the CEO for allocating the
pool, and also considers each executive's duties and
responsibilities, total compensation, evaluations by both the CEO
and by the executive officer's superiors and peers, contributions
to the financial success of the Company, and years of service.
While the Committee looks at the factors set forth, its
determination is largely subjective in nature.
Stock Options. The Committee administers the Company's
stock option plans. Its policy has been to utilize the benefits
it believes accrue to the Company and its stockholders by the
grant of stock options to executive officers and others. All
stock options require that the underlying Common Stock be
purchased at 100% of its market value on the grant date of the
options, and no exercise price of an outstanding option has ever
been lowered. The Committee determines the number of options to
be granted each year, taking into consideration the amount of
stock available under the stock option plans, as well as the
general performance criteria described elsewhere with respect to
performance compensation. The CEO's recommendations as to the
allocation of stock options among executive officers, which takes
into consideration an evaluation of each executive's contribution
to the Company's overall performance, as well as the evaluation
given to the executive under the annual superior and peer review
process referred to above, are normally accepted by the
Committee. As with performance compensation, while the Committee
looks at these factors, its determination is largely subjective
in nature, except that a numerical superior and peer evaluation
score cutoff was used by the Committee, below which no stock
option awards were made.
2. Chief Executive Officer. The cash compensation of the Chief
Executive Officer consists of an annual salary and an annual
performance compensation of 2% of net earnings in excess of a
minimum earnings level, pursuant to a contract (previously
described) which Mr. Condon has with the Company.
Salary. In recommending Mr. Condon's salary to the
Board, the Committee considers his past salary, salaries of CEOs
of comparable insurance companies, the cost of living, and the
Company's net earnings. As it does in setting the percentage
under the Performance Compensation Plan for executives, the
Committee considers the performance of the Company, in absolute
terms and relative to its competitors, how it considers the CEO
has dealt with competitive factors compared with other CEOs in
the industry, and how shareholders have fared. It also considers
the CEO's performance in planning for ways of enhancing the
future earnings and value of the Company. The Committee does not
use any specific corporate performance measures or weighting, but
return on equity is given significant consideration.
Determination is thus largely subjective in nature.
For 1994, Mr. Condon suggested to the Committee that
his salary not be increased from its current level. The
Committee so recommended to the Board, which agreed, and the
CEO's salary for 1994 was not increased over its 1993 level.
Performance Compensation. Pursuant to the terms of the
Company's contract with Mr. Condon, described under "Employment
Contracts", Mr. Condon's performance compensation is determined
strictly by formula based upon earnings, except when total
compensation from salary and performance compensation would
exceed one million dollars. Since it did not for 1994, the
Committee made no additional decisions regarding Mr. Condon's
performance compensation.
Stock Options. The Committee determines the stock
options to be awarded to Mr. Condon. It considers the same
factors that are utilized in its review for salary increase.
While the Committee looks at these factors, its determination is
largely subjective in nature. For 1994, the Committee in
awarding Mr. Condon 7,500 options also considered the fact that
for the previous year, Mr. Condon received no options whereas the
remaining executive officers did.
3. General Considerations. Salary recommendations for
each year are made prior to the beginning of the year, while
performance compensation and stock options awards are determined
at the end of the year and are based on the financial and other
results for that year. Accordingly, changes in salaries do not
necessarily coincide with changes in performance compensation or
stock option awards.
The Committee's approach to executive compensation as
described above has been in effect for many years. The Committee
believes that this approach, which blends the objective
determinations, such as formulas and peer and superior
evaluations, with the subjective determinations described above,
provides a flexibility that is in the best interests of the
Company and its shareholders.
The Compensation and Stock Option Committee
Clifton F. von Kann, Chairman
Michael Collins
Arnold H. Johnson
Steven A. Markel
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG AVEMCO CORPORATION, THE S & P 500 INDEX
AND THE S & P PROPERTY-CASUALTY INSURANCE INDEX
Cumulative Total Return
(Dollars)
COMPANY/INDEX 12/89 12/90 12/91 12/92 12/93 12/94
AVEMCO Corp 100 107 162 154 127 106
S & P 500 100 97 126 136 150 152
S & P Property-Casualty Ins. 100 98 122 143 141 148
* $100 invested on 12/31/89 in stock or Index
including reinvestment of dividends.
Fiscal year ending December 31.
(This is tabular representation of
graphical chart for EDGAR filing.)
2. RATIFICATION OF SELECTION OF AUDITORS
Upon recommendation of the Audit Committee and subject to
ratification by the stockholders, the Board of Directors has
selected the firm of KPMG Peat Marwick to examine and audit the
business, books of account, and other records of the Company and
its subsidiaries for the year ending December 31, 1995. The
affirmative vote of the holders of a majority of the shares of
the Common Stock present in person or represented by proxy at the
meeting is required for such ratification. If not ratified, the
selection will be reconsidered by the Board.
This firm of certified public accountants has acted in such
capacity for the Company and its subsidiaries since 1968 and has
reported that neither the firm nor any of its partners has any
direct financial interest or any material indirect financial
interest in the Company or any of its subsidiaries, other than as
independent auditors. A representative of the firm is expected
to be present at the meeting with an opportunity to make a
statement if so desired and to be available to respond to
appropriate questions.
The Board of Directors recommends a vote "FOR" Proposal 2.
Proxies solicited by the Board of Directors will be voted for
adoption of the Proposal unless the stockholder specifies
otherwise.
3. OTHER MATTERS
As of this date, the Board of Directors knows of no business
which will come before the meeting in addition to the matters
referred to above, but if any other matters properly come before
the meeting, the persons named as proxies will vote on them in
accordance with their best judgment, and discretionary authority
to do so is included in the proxy.
STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the
1996 Annual Meeting of Stockholders and to be included in the
Company's proxy statement and form of proxy relating to that
meeting must be received by the Company on or before November 14,
1995. Any such proposal must meet the applicable requirements of
the Securities and Exchange Act of 1934 and the rules and
regulations thereunder.
Stockholders are urged to send in their proxies without
delay. Prompt response is helpful, and your cooperation will be
appreciated.
By Order of the Board of Directors
March 21, 1995
WILLIAM P. CONDON
Chairman of the Board
AVEMCO CORPORATION
Proxy for 1995 Annual Meeting
SOLICITED BY THE BOARD OF DIRECTORS ("the Board")
The undersigned hereby constitutes William P. Condon, John
R. Yuska, and Thomas H. Chero, or any one or more of them, as
Proxies, with full power of substitution, to represent the
undersigned at the Annual Meeting of Stockholders of AVEMCO
Corporation to be held in Frederick, Maryland, on May 4, 1995,
and any adjournments thereof, and to vote the shares of said
Company standing in the name of the undersigned with all powers
the undersigned would possess if personally present at such
meeting, including discretionary authority to act on any matters
properly coming before the Meeting of which the Board is not
aware at the date of the Notice and Proxy Statement relating to
the Meeting, receipt of which is hereby acknowledged.
1. ELECTION OF FOR all nominees listed below (except WITHHOLD AUTHORITY to
DIRECTORS as marked to the contrary below) vote as to all
nominees listed below
NOMINEES: Michael Collins, John F. Shettle, Jr.
(INSTRUCTIONS: Authority to vote for any of the aforementioned
persons may be withheld by lining through or
striking the name.
2. RATIFYING THE SELECTION OF KPMG PEAT MARWICK AS AUDITORS FOR
1995.
For Against Abstain
THIS PROXY WILL BE VOTED AS SPECIFIED, OR IF NO SPECIFICATION IS
MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE BOARD'S
NOMINEES AS DIRECTORS AND FOR PROPOSAL 2.
(continued and to be SIGNED on other side)
(Continued from other side)
Dated:_______________________
Signature_____________________________________
(see note below)
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR HEREON.
JOINT OWNERS SHOULD EACH SIGN PERSONALLY. WHEN SIGNING AS AN
ATTORNEY, EXECUTOR, TRUSTEE OR GUARDIAN, PLEASE GIVE YOUR FULL
TITLE AS SUCH.
IMPORTANT: PLEASE SIGN, DATE AND RETURN PROMPTLY
