<PAGE>
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. )
Filed by the registrant / x /
Filed by a party other than the registrant
/ / Preliminary proxy statement
/ x / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c)
or Rule 14A-12
AMERICAN FINANCIAL GROUP, INC.
(Name of Registrant as Specified in Its Charter)
James C. Kennedy
(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(j)(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: ftnt. 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.
<PAGE>
(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.
<PAGE>
AMERICAN FINANCIAL GROUP, INC.
One East Fourth Street
Cincinnati, Ohio 45202
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held on June 4, 1996
To our Shareholders:
The Annual Meeting of Shareholders of American Financial Group, Inc.
will be held on Tuesday, June 4, 1996, at 10:30 a.m., at The Cincinnatian
Hotel, 601 Vine Street, Cincinnati, Ohio. The purposes of the meeting are:
1. To elect eight directors;
2. To approve the Company's Non-Employee
Directors' Compensation Plan; and
3. To transact such other business as may
properly come before the meeting or any
adjournment thereof.
Only shareholders of record at the close of business on April 15, 1996
are entitled to receive notice of and to vote at the meeting or any
adjournment thereof.
You are invited to be present at the meeting so that you can vote in
person. Whether or not you plan to attend the meeting, please date, sign and
return the accompanying proxy form in the enclosed, postage-paid envelope.
If you do attend the meeting, you may either vote by proxy or revoke your
proxy and vote in person. You may also revoke your proxy at any time before
the vote is taken at the meeting by written revocation or by submitting a
later-dated proxy form.
Sincerely,
Carl H. Lindner
Chairman of the Board and
Chief Executive Officer
Cincinnati, Ohio
April 22, 1996
<PAGE>
AMERICAN FINANCIAL GROUP, INC.
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of American Financial Group, Inc. ("AFG"
or the "Company") for use at the Annual Meeting of Shareholders (the
"Meeting") to be held on Tuesday, June 4, 1996, at 10:30 a.m. and any
adjournment thereof. The approximate mailing date of this Proxy Statement and
accompanying proxy form is April 22, 1996. At the Meeting, shareholders will
be asked to elect eight directors, to approve the Company's Non-Employee
Directors' Compensation Plan and to transact such other business as may
properly come before the Meeting or any adjournment thereof.
The Company was formed for the purpose of acquiring American Premier
Underwriters, Inc. ("APU") and American Financial Corporation ("AFC") in
merger transactions completed on April 3, 1995 (the "Mergers"). Following
shareholder approval at the Company's 1995 Annual Meeting of Shareholders in
June 1995, the Company changed its name from American Premier Group, Inc. to
American Financial Group, Inc. As used herein, unless the context otherwise
indicates, the terms "Company" and "AFG" refer to American Financial Group,
Inc., as the successor company, for the period after the Mergers and refer to
APU, as the predecessor company, for the period prior to the Mergers.
VOTING AT THE MEETING
Record Date; Shares Outstanding
As of April 15, 1996, the record date for determining shareholders
entitled to notice of and to vote at the Meeting (the "Record Date"), the
Company had outstanding one class of voting securities, its common stock,
$1.00 par value ("Common Stock"). At the Record Date, 59,456,659 shares of
Common Stock were outstanding, excluding 18,666,614 shares beneficially owned
by AFC and 1,372,803 shares held by APU, each subsidiaries of the Company.
Under state law, the shares held by subsidiaries are not entitled to vote and
are therefore not considered to be outstanding for purposes of the Meeting.
Each share of outstanding Common Stock is entitled to one vote on each matter
to be presented at the Meeting. Abstentions (including instructions to
withhold authority to vote for one or more nominees) and broker non-votes are
counted for purposes of determining a quorum but will not be cast with
respect to any item voted on at the Meeting. Broker non-votes will have no
effect on the outcome of any matter; abstentions will have the effect of a
negative vote on Proposal 2.
<PAGE>
Cumulative Voting
All shareholders have cumulative voting rights in the election of
directors and one vote per share on all other matters. Cumulative voting
allows a shareholder to multiply the number of shares owned on the Record
Date by the number of directors to be elected and to cast the total for one
nominee or distribute the votes among the nominees as the shareholder
desires. Nominees who receive the greatest number of votes will be elected.
In order to invoke cumulative voting, notice of cumulative voting must be
given in writing to the President, a Vice President or the Secretary of the
Company not less than 48 hours before the time fixed for the holding of the
Meeting.
Proxies
If a choice is specified on a properly executed proxy form, the shares
will be voted accordingly. If a proxy form is signed without a preference
indicated, those shares will be voted "FOR" the election of the eight
nominees proposed by the Board of Directors and in favor of Proposal 2. The
authority solicited by this Proxy Statement includes discretionary authority
to cumulate votes in the election of directors. If any other matters
properly come before the Meeting or any adjournment thereof, each properly
executed proxy form will be voted in the discretion of the proxies named
therein.
Shareholders may vote in person or by proxy at the Meeting. Proxies
given may be revoked at any time by filing with the Company either a written
revocation or a duly executed proxy bearing a later date, or shareholders may
appear at the Meeting and vote in person.
Solicitation of proxies is being made by management at the direction
of the Company's Board of Directors, without additional compensation, through
the mail, in person, by facsimile or by telephone. The cost will be borne by
the Company. In addition, the Company will request brokers and other
custodians, nominees and fiduciaries to forward proxy soliciting material to
the beneficial owners of shares held of record by such persons, and the
Company will reimburse them for their expenses in so doing. The Company has
also retained Morrow & Co., Inc. to aid in the solicitation of proxies for a
fee estimated at $4,000 plus out of pocket expenses.
Adjournment and Other Matters
Approval of a motion for adjournment or other matters brought before
the Meeting requires the affirmative vote of a majority of the shares voting
at the Meeting. Management knows of no other matters to be presented at the
Meeting other than those stated in the Notice.
<PAGE>
Principal Shareholders
The following shareholders are the only persons known by the Company
to own beneficially 5% or more of its outstanding Common Stock as of March
31, 1996:
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership
-------------------------------------------------------
Obtainable
Name and Address upon Exercise
of Common Stock of Options Percent of
Beneficial Owner Held (a) (b) Total Class (c)
- ---------------- ------------ ------------- --------- ----------
<S> <C> <C> <C> <C>
Carl H. Lindner 6,761,403 (d) 31,818 6,793,221 11.4%
One East Fourth Street
Cincinnati, Ohio 45202
Carl H. Lindner III 4,714,129 (e) 378,182 5,092,311 8.5%
One East Fourth Street
Cincinnati, Ohio 45202
S. Craig Lindner 4,714,130 (f) 89,455 4,803,585 8.1%
One East Fourth Street
Cincinnati, Ohio 45202
Keith E. Lindner 4,712,957 (g) 80,000 4,792,957 8.1%
250 East Fifth Street
Cincinnati, Ohio 45202
Lou Ann Flint, Trustee 4,973,101 (h) - - - 4,973,101 8.4%
49 East Fourth Street
Cincinnati, Ohio 45202
FMR Corp. 3,807,700 (i) - - - 3,807,700 (i) 6.4%
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
(a) Unless otherwise noted, the holder has sole voting and
dispositive power with respect to the shares listed.
<PAGE>
(b) Represents shares of Common Stock which may be acquired within
60 days of March 31, 1996 through the exercise of options granted under the
Company's Stock Option Plan. The Lindner family members listed above hold
options (both vested and unvested) to purchase the following numbers of
shares of Common Stock:
Carl H. Lindner 51,818
Carl H. Lindner III 400,000
S. Craig Lindner 400,000
Keith E. Lindner 400,000
(c) The percentages of outstanding shares of Common Stock
beneficially owned (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934) by Carl H. Lindner III, S. Craig Lindner and Keith E.
Lindner are 7.4%, 6.8% and 10.4%, respectively, after attributing the shares
held in various trusts for the benefit of the minor children of Carl H.
Lindner III and S. Craig Lindner (for which Keith E. Lindner acts as trustee
with voting and dispositive power) to Keith E. Lindner.
(d) Includes 1,009,812 shares held by his spouse, but excludes
4,972,901 shares held in a trust for the benefit of his family for which Lou
Ann Flint acts as trustee with voting and dispositive power. Also includes
110 shares held in his account in a Company retirement plan over which
account he has dispositive power but not the power to vote.
(e) Includes 587 shares held by his spouse, 17,941 shares held by
a trust over which his spouse has voting and dispositive power and 644,104
shares which are held in various trusts for the benefit of his minor children
for which Keith E. Lindner acts as trustee with voting and dispositive power.
Excludes 1,026 shares held in his account in a Company retirement plan over
which account he has neither dispositive power nor the power to vote.
(f) Includes 68,574 shares held by his spouse as custodian for
their minor children or in a trust over which his spouse has voting and
dispositive power and 775,714 shares which are held in various trusts for the
benefit of their minor children for which Keith E. Lindner acts as trustee
with voting and dispositive power.
(g) Excludes 1,419,818 shares (described in footnotes (e) and (f)
above) which are held in various trusts for the benefit of the minor children
of his brothers, Carl H. Lindner III and S. Craig Lindner, over which Keith
E. Lindner has sole voting and dispositive power but no pecuniary interest.
(h) Includes 4,972,901 shares (described in footnote (d) above)
which are held in a trust for the benefit of the family of Carl H. Lindner
over which Lou Ann Flint has sole voting and dispositive power as trustee but
no pecuniary interest. Also includes 200 shares held by Ms. Flint as
custodian for her minor children.
<PAGE>
(i) Of this amount, 3,401,500 shares were held by various funds
managed by Fidelity Management & Research Company, a Massachusetts
corporation ("Fidelity"), a portfolio of an investment company registered
under Section 8 of the Investment Company Act of 1940, as amended. Fidelity
is an investment adviser registered under Section 203 of the Investment
Advisers Act of 1940 and provides investment advisory services to various
funds which hold shares of Common Stock. Additionally, 406,200 shares were
held in various institutional accounts for which Fidelity Management Trust
Company, a bank as defined in Section 3(a)(6) of the Securities Exchange Act
of 1934, serves as investment manager. Fidelity and Fidelity Management
Trust Company are wholly-owned subsidiaries of FMR Corp., a Massachusetts
corporation. This information was derived from a Fidelity Schedule 13G dated
February 14, 1996 containing information as of December 31, 1995.
Carl H. Lindner, Carl H. Lindner III, S. Craig Lindner, Keith E.
Lindner and trusts for their benefit (collectively, the "Lindner Family") are
the beneficial owners of approximately 44% of the Company's Common Stock.
The Lindner Family may be deemed to be controlling persons of the Company.
PROPOSAL NO. 1 Election of Directors
The Board of Directors has nominated eight directors to hold office
until the next Annual Meeting of Shareholders and until their successors are
elected and qualified. If any of the nominees should become unable to serve
as a director, the proxies will be voted for any substitute nominee
designated by the Board of Directors but, in any event, no proxy may be voted
for more than eight nominees. The eight nominees who receive the greatest
number of votes will be elected.
The nominees for election to the Board of Directors are CARL H.
LINDNER, CARL H. LINDNER III, S. CRAIG LINDNER, KEITH E. LINDNER, THEODORE H.
EMMERICH, JAMES E. EVANS, THOMAS M. HUNT and WILLIAM R. MARTIN. All of these
nominees were elected directors at the Company's last Annual Meeting of
Shareholders held on June 6, 1995. Alfred W. Martinelli, formerly a director
of the Company, resigned on March 20, 1996. See "Management" below for
information concerning the background, securities holdings, remuneration and
certain other matters relating to the nominees. Each of the nominees for
director is also a director of APU and AFC.
<PAGE>
The Board of Directors recommends that shareholders vote FOR the
election of these eight nominees as directors.
PROPOSAL NO. 2 Approval of the Non-Employee Directors' Compensation Plan
On March 27, 1996, the Board of Directors adopted the Non-Employee
Directors' Compensation Plan (the "Directors' Plan"), subject to approval by
the Company's shareholders. The purpose of the Directors' Plan is to align
further the interests of the Company's non-employee directors with the
interests of shareholders by providing that a minimum of 50% of such
directors' annual retainers are paid through the issuance of shares of Common
Stock.
If the Director's Plan is approved, all directors who are not officers
or employees of the Company initially would be paid the following fees: an
annual retainer of $40,000 ("Board Retainer"); an additional annual retainer
of $12,000 for each Board Committee on which the non-employee director serves
("Committee Retainer"); and an attendance fee of $1,000 for each Board or
Committee meeting attended ("Meeting Fees"). Non-employee directors who
become directors during the year will receive a pro rata portion of these
annual retainers. The retainers and fees to be paid under the Directors'
Plan will be reviewed by the Board of Directors from time to time and are
subject to change at its discretion without shareholder approval.
<PAGE>
The following is a description of the material provisions of the
Directors' Plan.
Payment Terms. Annual retainers and fees shall be paid by the Company
quarterly, in arrears. The quarterly portion of the Board Retainer and
Committee Retainer shall be paid 50% in cash and 50% in shares of Common
Stock. The number of shares of Common Stock to be issued shall be determined
by dividing the dollar value of the amount to be paid in Common Stock by the
average of the high and low daily trading price of such Common Stock for the
ten trading days prior to the end of the prior quarter, as reported on the
New York Stock Exchange Composite Tape. The Meeting Fees accrued during any
quarter, if any, shall be paid by the Company in cash, along with the cash
portion of the applicable quarterly retainers.
Election by Non-Employee Directors to Receive Cash Portion of Their
Compensation in Additional Common Stock. Each non-employee director may
elect to receive all or a portion (in 20% increments) of the quarterly cash
portion of their applicable retainers for Board service in shares of Common
Stock. Such election shall be irrevocable for each quarter and shall be made
at least six months in advance of the date the non-employee director is to
receive the quarterly payment.
Effective Date; Expiration of Plan; Amendments. If approved at the
Meeting, the Directors' Plan will become effective on July 1, 1996 (the
"Effective Date"). Unless earlier terminated by the Board, the Plan shall
terminate on the tenth anniversary of the Effective Date. Subject to certain
conditions, the Board may suspend or terminate the Directors' Plan or any
portion of it at any time, and may amend it from time to time in such
respects as the Board may deem advisable.
Shares Subject to the Plan. One hundred thousand shares of Common
Stock are authorized for issuance under the Plan.
The following table sets forth the cash compensation paid in 1995 to
the Company's non-employee directors as well as the compensation which would
have been paid during 1995 under the Directors' Plan as proposed.
<PAGE>
<TABLE>
<CAPTION>
1995
Actual 1995 Compensation under New Plan (a)
------ ---------------------------------------
Dollar Value Dollar Value of Total
Dollar of Cash Common Stock Paid Dollar
Name and Position Value Compensation (b) Value
- ----------------- ------- ------------ ----------------- ---------
<S> <C> <C> <C> <C>
All Non-Employee $254,000 $127,500 $127,500 $255,000
Directors as a
group
(4 persons)
</TABLE>
(a) Indicates amounts which would have been paid or granted in
1995 if the proposed Directors' Plan had been in effect on January 1, 1995,
using the retainer and fee amounts recently adopted by the Board of
Directors.
(b) This amount would be paid in the form of shares of Common
Stock having a fair market value equal to the compensation amount payable.
This illustration assumes that none of the non-employee directors elected to
take a portion of their cash compensation in the form of Common Stock or
deferred any compensation to subsequent years.
The affirmative vote of the holders of at least a majority of the
shares of Common Stock present at the Meeting in person or by proxy will be
required to approve Proposal 2 to adopt the Directors' Plan. Abstentions will
have the same effect as a vote against the Proposal.
The Board of Directors recommends that shareholders vote FOR the
proposal to approve the Non-Employee Directors' Compensation Plan.
<PAGE>
<TABLE>
<CAPTION>
MANAGEMENT
The directors, nominees and executive officers of the Company are:
Director or
Age* Position Officer Since
---- ----------------------------------------- -------------
<S> <C> <C> <C>
Carl H. Lindner 76 Chairman of the Board and Chief
Executive Officer 1982
Carl H. Lindner III 42 Co-President and a Director 1991
S. Craig Lindner 41 Co-President and a Director 1985
Keith E. Lindner 36 Co-President and a Director 1995
Theodore H. Emmerich 69 Director 1988
James E. Evans 50 Senior Vice President and General Counsel
and a Director 1985
Thomas M. Hunt 72 Director 1982
William R. Martin 67 Director 1994
Neil M. Hahl 47 Senior Vice President 1982
Thomas E. Mischell 48 Senior Vice President - Taxes 1995
Fred J. Runk 53 Senior Vice President and Treasurer 1995
*As of March 31, 1996
</TABLE>
Carl H. Lindner (Chairman of the Board and Chief Executive Officer;
Chairman of the Executive Committee) Mr. Lindner has been Chairman of the
Board and Chief Executive Officer of the Company for more than five years.
During the past five years, Mr. Lindner has also been Chairman of the Board
and Chief Executive Officer of AFC, a diversified financial services company
which became a subsidiary of the Company as a result of the Mergers. He is
Chairman of the Board of Directors of American Annuity Group, Inc. ("AAG"),
American Financial Enterprises, Inc. ("AFEI"), Chiquita Brands International,
Inc. ("Chiquita") and Citicasters Inc. Mr. Lindner is the father of Carl H.
Lindner III, S. Craig Lindner and Keith E. Lindner.
Carl H. Lindner III (Co-President; Member of the Executive Committee)
Mr. Lindner was President of the Company from February 1992 until he become
Co-President in March 1996. During the last five years, Mr. Lindner has been
President of Great American Insurance Company ("Great American"), the
principal property and casualty insurance company subsidiary of AFC. Mr.
Lindner is also a director of AFC and APU.
<PAGE>
S. Craig Lindner (Co-President; Member of the Executive Committee)
Since March 1993, Mr. Lindner has been President of AAG, an 81%-owned
subsidiary of AFC that markets tax-deferred annuities principally to
employees of educational institutions. Mr. Lindner was elected President of
American Money Management Corporation ("AMMC"), a subsidiary of AFC which
provides investment services for the Company and its affiliated companies, in
January 1996. For over five years prior thereto, he had served as Senior
Executive Vice President of AMMC. Mr. Lindner is also a director of AAG,
AFC, APU and Citicasters.
Keith E. Lindner (Co-President; Member of the Executive Committee)
During the last five years, Mr. Lindner has been President and Chief
Operating Officer and a director of Chiquita, a worldwide marketer and
producer of bananas and other food products in which the Company has a 44%
ownership interest. Mr. Lindner is also a director of AFC and APU.
Theodore H. Emmerich (Chairman of the Audit Committee; Member of the
Compensation Committee) Until his retirement in 1986, Mr. Emmerich was
managing partner of the Cincinnati office of the independent accounting firm
of Ernst & Whinney. He is also a director of AFC, APU, Citicasters Inc.,
Carillon Fund, Inc., Carillon Investment Trust, Gradison Custodial Trust,
Gradison-McDonald Municipal Custodial Trust, Gradison-McDonald Cash Reserve
Trust and Summit Investment Trust.
James E. Evans (Senior Vice President and General Counsel) During the
past five years, Mr. Evans has been Vice President and General Counsel of
AFC. Mr. Evans is also a director of AFC, AFEI, APU and Citicasters.
Thomas M. Hunt (Member of the Compensation Committee.) During the
past five years, Mr. Hunt has been Chairman of the Board of Hunt Petroleum
Corporation, an oil and gas production company. He is also a director of AFC
and APU.
William R. Martin (Chairman of the Compensation Committee; Member of
the Audit Committee.) During the past five years, Mr. Martin has been
Chairman of the Board (since 1993) and President and Chief Executive Officer
(until 1993) of MB Computing, Inc., a computer software and services company.
Mr. Martin is also a director of AAG, AFC and APU.
Neil M. Hahl has served as a Senior Vice President of the Company for
more than five years.
Thomas E. Mischell is Senior Vice President - Taxes of the Company.
He has served as a Vice President of AFC for over five years.
Fred J. Runk is Senior Vice President and Treasurer of the Company.
He has served as Vice President and Treasurer of AFC for more than five
years.
<PAGE>
In December 1993, Great American Communications Company, which
subsequently changed its name to Citicasters Inc., completed a comprehensive
financial restructuring that included a prepackaged plan of reorganization
filed in November of that year under Chapter 11 of the Bankruptcy Code.
Messrs. Carl H. Lindner, Mischell and Runk had been executive officers of
that company within two years before its bankruptcy reorganization.
Securities Ownership
The following table sets forth information, as of March 31, 1996,
concerning the beneficial ownership of equity securities of the Company and
its subsidiaries by each director, nominee for director, the executive
officers named in the Summary Compensation Table (see "Compensation" below)
and by all directors and executive officers as a group. Such information is
based on data furnished by the persons named. Except as set forth in the
following table, no director or executive officer beneficially owned 1% or
more of any class of equity security of the Company or any of its
subsidiaries outstanding at March 31, 1996.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership (a) (b)
-------------------------------------------------
Shares ofCommon Stock
Shares of Common Obtainable on Exercise
Name of Beneficial Owner Stock Held of Options(c)
- ------------------------- ----------------- ----------------------
<S> <C> <C>
Carl H. Lindner (d) 6,761,403 (e) 31,818
Carl H. Lindner III (d) 4,714,129 (f) 378,182
S. Craig Lindner (d) 4,714,130 (g) 89,455
Keith E. Lindner (d) 4,712,957 (h) 80,000
Theodore H. Emmerich 3,400 12,819
James E. Evans 41,846 1,000
Thomas M. Hunt 3,000 12,819
William R. Martin - - - 6,000
All directors and
executive officers
as a group (d) 21,033,892 928,035
</TABLE>
(a) Unless otherwise indicated, the persons named have sole voting
and dispositive power over the shares reported.
(b) Does not include the following ownership interests in
subsidiaries of the Company: Messrs. Emmerich, Evans, Hunt and S.C. Lindner
and all directors and executive officers as a group beneficially own 561,
19,638, 382, 45,308 and 76,588 shares, respectively, of the common stock of
American Annuity Group, Inc.; Mr. Evans and all directors and executive
officers as a group beneficially own 116,000 and 279,194 shares,
respectively, of the common stock
<PAGE>
of AFEI; and Mr. Martin and all directors and executive officers as a group
beneficially own 38,508 and 54,780 shares, respectively, of the preferred
stock of AFC. Also excludes the following interests in Chiquita and
Citicasters: Messrs. Emmerich, C.H. Lindner, K.E. Lindner, S.C. Lindner and
all directors and executive officers as a group beneficially own 200, 41,081,
39,806, 42,645 and 211,969 shares, respectively, of the common stock of
Chiquita; and Messrs. Emmerich, Evans, C.H. Lindner, S.C. Lindner and all
directors and executive officers as a group beneficially own 7,425, 94,500,
3,432,666, 85,500 and 3,695,673 shares, respectively, of the common stock of
Citicasters.
(c) Consists of shares of Common Stock purchasable within 60 days
of March 31, 1996 through the exercise of the vested portion of stock options
granted under the Company's Stock Option Plan.
(d) The shares set forth for Carl H. Lindner, Carl H. Lindner III,
S.C. Lindner and Keith E. Lindner and all directors and officers as a group
constituted 11.4%, 8.5%, 8.1%, 8.1% and 36.4%, respectively, of the Common
Stock outstanding at March 31, 1996. For information as to the percentage of
outstanding shares beneficially owned (within the meaning of Rule 14d-3 under
the Securities Exchange Act of 1934) by such Lindner family members, see
"Principal Shareholders."
(e) Includes 1,009,812 shares held by his spouse and 110 shares
held in his account in a Company retirement plan over which account shares he
has dispositive power but not the power to vote. Excludes 4,972,901 shares
held in a trust for the benefit of his family for which a third party serves
as trustee.
(f) Includes 587 shares held by his spouse, 17,941 shares held by
a trust over which his spouse has voting and dispositive power and 644,104
shares which are held in various trusts for the benefit of his minor children
for which Keith E. Lindner acts as trustee with voting and dispositive power.
Excludes 1,026 shares held in his account in a Company retirement plan over
which account shares he has neither dispositive power nor the power to vote.
(g) Includes 68,574 shares held by his spouse as custodian for
their minor children or in a trust over which his spouse has voting and
dispositive power and 775,714 shares which are held in various trusts for the
benefit of their minor children for which Keith E. Lindner acts as trustee
with voting and dispositive power.
(h) Excludes 1,419,818 shares (described in footnotes (f) and
(g)), which are held in various trusts for the benefit of the minor children
of his brothers, Carl H. Lindner III and S. Craig Lindner, over which Keith
E. Lindner has sole voting and dispositive power but no pecuniary interest.
<PAGE>
COMPENSATION
The following table summarizes the aggregate cash compensation for
1995, 1994 and 1993 of the Company's Chairman of the Board and Chief
Executive Officer and its four other most highly compensated executive
officers during 1995 (such five executive officers being herein referred to
as the "Named Executive Officers"). Such compensation includes amounts paid
by AFC, APU and their subsidiaries and certain affiliates during 1995,
including the period prior to the Mergers.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
--------------------------------- ----------------
Name Other Annual Securities Underlying All Other
and Salary Compensation Options Granted Compensation
Principal Position (a) Year (b)(c) Bonus (c) (d) (# of Shares) (e)
- ---------------------- ---- ------- -------- ------------- ------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Carl H. Lindner 1995 $1,364,000 $900,000 $254,000 --- $169,000
Chairman of the Board and 1994 981,000 800,000 --- --- 87,000
Chief Executive Officer 1993 894,000 1,000,000 --- 50,000 125,000
Carl H. Lindner III 1995 $1,076,000 $900,000 $223,000 --- $ 2,000
Co-President 1994 1,011,000 800,000 --- --- 53,000
1993 879,000 1,000,000 --- 105,000 99,000
S. Craig Lindner (a) 1995 $1,121,000 $900,000 $142,000 388,181 (f) $ 83,000
Co-President
Keith E. Lindner (a) 1995 $935,000 $900,000 $ --- 400,000 $ 30,000
Co-President
James E. Evans (a) 1995 $948,000 $850,000 $ 10,000 50,000 $ 58,000
Senior Vice President and
General Counsel
</TABLE>
(a) S. Craig Lindner, Keith E. Lindner and James E. Evans became
executive officers of the Company in April 1995. In March 1996, Messrs. Carl
H. Lindner III (formerly President), S. Craig Lindner and Keith E. Lindner
(each formerly a Vice Chairman) were elected to the position of Co-President.
(b) Overall, the 1995 annual cash compensation paid by the
Company and its affiliates to the four Lindner family members listed above
was substantially less than they received prior to the Mergers from AFC and
its affiliates, including the Company. The 1996 base annual salary for the
Chief Executive Officer and Co-Presidents has been set at $900,000.
(c) The salary column includes with respect to Carl H. Lindner and
Keith E. Lindner, $269,000 and $935,000, respectively, representing salary
paid to these individuals during 1995 by Chiquita.
<PAGE>
(d) This column includes amounts for (i) personal homeowners and
automobile insurance coverage, and (ii) the use of corporate aircraft and
value of automobiles. AFG business requires AFG executives to travel
frequently. To assure security and to minimize travel time, AFG requires or
encourages certain executives and their families to utilize corporate
aircraft for personal travel. AFG does not incur significant additional cost
for such personal use and reports such use as additional compensation for
income tax purposes.
Aircraft &
Name Year Insurance Automobile
--------------------- ---- --------- -----------
Carl H. Lindner 1995 $18,000 $236,000
Carl H. Lindner III 1995 $17,000 $206,000
S. Craig Lindner 1995 $20,000 $122,000
Keith E. Lindner 1995 -- --
James E. Evans 1995 -- $10,000
(e) Consists of Company or subsidiary contributions or allocations
under the (i) defined contribution retirement plans and (ii) employee savings
plan in which the following Named Executive Officers participate (and related
accruals for their benefit under the Company's benefit equalization plan
which generally makes up certain reductions caused by Internal Revenue Code
limitations in the Company's contributions to certain of the Company's
retirement plans) and Company paid group life insurance, as follows:
<TABLE>
<CAPTION>
Retirement Savings Directors' Term
Name Year ESORP Plan Plan Fees Life
- ----------------- ---- ------- ---------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Carl H. Lindner 1995 $30,000 $56,000 $18,000 $25,000 $40,000
1994 -- 49,000 -- -- 38,000
1993 -- 100,000 -- -- 25,000
Carl H. Lindner III 1995 $30,000 67,000 -- -- $6,000
1994 -- 51,000 -- -- 2,000
1993 -- 97,000 -- -- 2,000
S. Craig Lindner 1995 $30,000 -- -- $51,000 $2,000
Keith E. Lindner 1995 $30,000 -- -- -- --
James E. Evans 1995 $30,000 -- -- $25,000 $3,000
</TABLE>
(f) Does not include 75,000 AAG Stock appreciation rights granted
and cancelled in 1995.
<PAGE>
Stock Options
The tables set forth below disclose stock options granted to, or
exercised by, the Named Executive Officers during 1995, as well as the number
and value of unexercised options held by them at December 31, 1995.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN 1995
Individual Grants
---------------------------------------------
Potential Realizable
Exercise Value at Assumed Annual
Percent Price Rates of Stock Price
Number of of total Per Share Appreciation for Option
Securities Options fair Term (b)
Underlying Granted market ------------------------
Granted (a) to value at
Employees date of Expiration
Name (# of shares) in 1995 grant) date 5% 10%
- ----------------------- ------------- -------- ------- --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Carl H. Lindner - - - - - -
Carl H. Lindner III (c) - - - - - -
S. Craig Lindner AFG 388,181 18.1% $23.97 4/10/05
$5,851,675 $14,829,293
AAG 75,000 21.0% $9.28 2/14/05 (d) (d)
Keith E. Lindner AFG 400,000 18.7% $23.97 4/10/05
$6,029,842 $15,280,803
James E. Evans AFG 150,000 7.0% $30.06 12/25/05
$2,835,686 $7,186,185
</TABLE>
(a) The options were granted under the Company's Stock Option Plan
and cover Company Common Stock. They vest (become exercisable) to the extent
of 20% per year, beginning one year from the respective dates of grant, and
become fully exercisable in the event of death, disability or retirement or
in the event of involuntary termination of employment without cause within
one year after a change of control of the Company.
(b) Represents the hypothetical future values that would be
realizable if all of the options were exercised immediately prior to their
expiration in 2005 and the market price of the Company's Common Stock had
appreciated in value through the year 2005 at the annual rate of 5% (to
$39.04 per share for the April grants and $48.96 per share for the December
grant) or 10% (to $62.17 per share for the April grants and $77.97 per share
for the December grant). Such hypothetical future values have not been
discounted to their respective present values, which are lower.
<PAGE>
(c) On April 7, 1995, Carl H. Lindner III surrendered to the
Company (for no consideration) options to purchase 250,450 shares of Common
Stock. Following that action and the option grants to S. Craig Lindner and
Keith E. Lindner, each of these executive officers held the same number of
Company employee stock options.
(d) In May 1995, S. Craig Lindner agreed to cancel these SARs in
connection with the exercise of his vested SARs.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN 1995 AND 1995 YEAR-END OPTION VALUES
SAR Number of Securities
Shares Underlying Un- Value of Unexercised
Acquired exercised Options In-the-Money Options
on at Year End at Year End (a)
Exercise --------------- -----------------------
Comp- (# of Value Exer- Unexer- Exer- Unexer-
Name any Shares) Realized cisable cisable cisable cisable
- ---------------- ------ ------- ---------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Carl H. Lindner AFG 652,722 $6,340,557 21,818 20,000 $249,375 $73,050
Carl H. Lindner III AFG - - 378,182 21,818 $2,511,309 $150,575
S. Craig Lindner AFG - - 11,819 388,181 $93,702 $2,583,345
AAG 85,000 52,675 - - - -
Keith E. Lindner AFG - - - 400,000 - $2,662,000
James E. Evans AFG 10,819 $66,654 1,000 150,000 - $84,750
AFEI - - 115,000 - $93,750 -
(b)
</TABLE>
(a) The value of unexercised in-the-money options is calculated
based on the closing market price on December 29, 1995 (the last trading day
of the year) for: the Company's Common Stock on the New York Stock Exchange
of $30.625 per share and AFEI's common stock on the Pacific Stock Exchange of
$21.75 per share.
(b) American Financial Enterprises, Inc., an 83%-owned subsidiary
of the Company.
<PAGE>
Compensation Committee Report
The Compensation Committee of the Board of Directors consists of three
directors, none of whom is an employee of the Company or any of its
subsidiaries. The Committee's functions include reviewing, and making
recommendations to the Board of Directors with respect to the compensation of
the Company's senior executive officers, as defined from time to time by the
Board. For 1995, the term senior executive officers included the Chairman of
the Board and Chief Executive Officer (the "CEO"), the Co-Presidents
(formerly the President and Vice Chairmen of the Board) and each other
executive officer whose annual base salary exceeded $350,000. During 1995,
the Board generally delegated to the CEO the authority to approve the
compensation of the executive officers whose base salary is less than
$350,000. However, the Compensation Committee has the exclusive authority to
grant stock options under the Company's Stock Option Plan to employees of the
Company and its subsidiaries, including senior executive officers.
Compensation of Executive Officers. The Company's compensation system
for executive officers of the Company has three principal components: annual
base salary, annual incentive bonuses and stock option grants.
Before making decisions regarding salaries, bonuses and option grants
for senior executives, the Committee's practice is first to discuss such
matters with the CEO and the Co-Presidents and then to solicit their
recommendations based on such discussions. After the Committee has
deliberated and formed its recommendations, its practice is to present them
to the full Board for its approval (except in the case of stock option
grants, which are not subject to Board approval). The compensation decisions
discussed in this report conformed with recommendations made by the
Committee, the CEO and the Co-Presidents.
After completion of the Mergers, a new Compensation Committee
consisting entirely of independent directors was formed and, in addition to
the functions described above, was charged with developing an annual bonus
system for the CEO, the Co-Presidents and the senior executive officers that
would make a substantial portion of their total compensation dependent on the
Company's performance, including achievement of pre-established earnings per
share targets.
Shortly after the Mergers, the Board acted on the recommendation of
the Committee and fixed the annual base salary for the CEO and the Co-
Presidents at $900,000. For each such executive officer, the Company salary
is reduced by the amount of salary and director fee payments received from
affiliates of the Company. The amounts shown in the Summary Compensation
Table are greater than $900,000 as a result of the higher salaries for the
CEO and the Co-Presidents prior to the Mergers.
<PAGE>
In August 1995, the Committee determined that it was not practical to
implement an annual bonus system for 1995 based on objective criteria. This
determination was made primarily because the Mergers were not consummated
until the second quarter of 1995. Although the debt reductions and operating
efficiencies resulting from the Mergers were effected as soon as practicable
after the Mergers, much of the savings from such measures could not be
realized until later in 1995. The Committee determined that 1995 bonuses
paid to senior executives (including the CEO and the Co-Presidents) would be
determined by the Committee in its sole discretion.
In January 1996, the Committee developed an annual bonus system for
1996 that will make 60% of each participant's annual bonus dependent on the
Company attaining certain earnings per share targets and 40% on the Company's
overall performance, as determined by the Committee. A significant aspect of
the 1996 annual bonus system is that 25% of any bonuses will be paid in
Common Stock. As in the grant of stock options discussed below, the
Committee believes that payment of a substantial portion of annual bonuses in
Common Stock will align further the Company's senior executives' interests
with those of shareholders. The Committee also selected the executives whose
annual bonus will be subject to this system, including the CEO, the Co-
Presidents and the Senior Vice Presidents. The Committee established the
earnings per share targets that are to be the measure for the greater part of
such bonus payments. The Board adopted all of the Committee's
recommendations with respect to the annual bonus system for 1996.
Annual Base Salaries. The Committee's policy is to approve annual
base salaries and salary increases for senior executive officers that are
appropriate, in the Committee's subjective judgment, for their respective
positions and levels of responsibilities.
Annual Bonuses. The bonuses awarded to senior executive officers for
1995 (which are disclosed in the Summary Compensation Table) were based on
assessments of both Company performance and individual performance during
1995. The Committee awarded each such executive officer a 1995 bonus of
$900,000 and bonuses to other senior executives substantially equivalent to
their 1994 bonus awards. As explained below under the discussion of the
CEO's compensation, after reviewing a number of objective and subjective
factors, the Committee made a qualitative judgment that the Company's
performance and accomplishments in 1995 warranted bonuses in the amounts
awarded. In determining the 1995 bonuses, the Committee did not specifically
relate any measure of performance or any accomplishment to the level of
bonuses awarded. Nor did the Committee assign relative weight to any
specific performance factor. Rather, the Committee members made the
subjective determination that the bonuses awarded were appropriate in view of
their qualitative judgment that 1995 represented a year of significant
achievement for the Company that was in large part attributable to the
talents and efforts of its senior executives.
<PAGE>
In determining the annual base salaries and 1995 bonuses to the CEO
and the Co-Presidents, the Committee was fully aware that the 1995 cash
compensation received by such executives is substantially less than the
aggregate annual compensation they have received from AFC, its subsidiaries
and affiliates in recent years. The annual base salary and bonuses received
by the CEO and the Co-Presidents from the Company and its affiliates are
virtually identical because the Committee views them as working as a
management team whose skills and areas of expertise complement each other.
In 1993, Congress enacted a $1 million ceiling on tax-deductible
remuneration paid after January 1, 1994 to the five most highly compensated
executive officers of a publicly held corporation. The limitation does not
apply to remuneration payable solely on account of the attainment of one or
more performance goals pursuant to a plan approved by the compensation
committee of outside directors and by shareholders. The Committee intends to
review the 1996 annual bonus system with regard to the tax deductibility of
compensation paid pursuant to such system. The Company does not anticipate
that this limitation will apply to the compensation paid to any of its
employees in 1996.
Stock Option Grants. Stock options represent an important part of the
company's performance-based compensation system. The Committee believes that
Company shareholders' interests are well served by aligning the Company's
senior executives' interests with those of its shareholders through the grant
of stock options. Options under the Company's Stock Option Plan are granted
at exercise prices equal to the fair market value of Common Stock on the date
of grant and vest at the rate of 20% per year. The Committee believes that
these features provide an optionee with substantial incentive to maximize the
Company's long-term success. The stock option tables included in this Proxy
Statement, including the table disclosing options granted in 1995, reflect
the Committee's policy of granting options to executive officers that are
commensurate, in the Committee's subjective judgment, with their respective
positions and ability to positively impact the Company's performance. As
stated above, the Committee views the CEO and the Co-Presidents collectively
acting as a management team and, as a result, each of the Co-Presidents now
has stock options to purchase the same number of shares of Common Stock. In
deciding the sizes of the stock option grants to other executive officers in
1995, the Committee took into account the sizes and dates of previous option
grants to other executive officers.
Compensation of the CEO. Shortly after the Mergers were completed,
the CEO's annual base salary was set at $900,000 for the reasons discussed
above. The annual bonus awarded for 1995 to the CEO was determined on the
basis described above under "Compensation of Executive Officers - Annual
Bonuses." More specifically, the Committee evaluated the Company's
achievements, both financial and non-financial, for the year and the CEO's
contributions to those achievements. The Committee first concluded that 1995
was a year of significant achievement for the Company. The Committee based
this conclusion
<PAGE>
primarily on the following: an increase in the Company's shareholders' equity
and a decrease in the debt to total capital ratio since the completion of the
Mergers; strong earnings; and the growth in premium volume of the Company's
insurance businesses, other than its California workers' compensation
insurance subsidiary. Second, the Company completed the Mergers, allowing APU
to fulfill its strategic objective of complementing its existing insurance
operations by combining with AFC's high-quality property and casualty
insurance businesses. Additionally, the Mergers enabled the Company to make
profitable use of most of its substantial cash and temporary investments
through the early retirement of relatively expensive AFC and APU debt. The
Committee concluded that the CEO's leadership contributed substantially to
these accomplishments and made the qualitative judgment that the size of
bonus awarded to the CEO for 1995 was warranted.
Members of the Compensation Committee: William R. Martin, Chairman
Theodore H. Emmerich
Thomas H. Hunt
Performance Graph
The following graph compares the cumulative total shareholder return
on the Company's Common Stock with the cumulative total return of the
Standard & Poor's ("S&P") 500 Stock Index and the S&P Property-Casualty
Insurance Index from the end of 1990 to the end of 1995.
<TABLE>
<CAPTION>
Base
Index Name Period Indexed Returns
- -------------------- ------- ---------------------------------------------------
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
American Financial 100.00 135.26 144.27 193.04 159.81 194.55
Group, Inc.
S & P Index 100.00 130.47 140.41 154.56 156.60 215.45
S & P Property- 100.00 125.19 146.61 144.02 151.07 204.54
Casualty Insurance
Index
</TABLE>
Assumes $100 invested on December 31, 1990 in APU Common Stock (as the
predecessor to AFG), the S&P 500 Stock Index and the S&P Property-Casualty
Insurance Index, including reinvestment of dividends.
<PAGE>
Certain Transactions
AFG and its subsidiaries have had and expect to continue to have
transactions with AFG's directors, officers, principal shareholders, their
affiliates and members of their families. AFG believes that the financial
terms of these transactions are comparable to those that would apply to
unrelated parties and are fair to AFG.
On April 3, 1995, the Mergers were consummated, resulting in AFG
acquiring all of the common stock of AFC and APU. In connection with the
Mergers, (i) each then outstanding share of APU common stock was converted
into one share of common stock of the Company, (ii) each then outstanding
share of AFC common stock was converted into 1.435 shares of common stock of
the Company, and (iii) APU and AFC become subsidiaries of the Company.
In the Mergers, 28.3 million shares of Common Stock were issued to the
former shareholders of AFC, consisting of Carl H. Lindner, members of his
family and trusts for their benefit. The Mergers were approved by APU's
Board of Directors based on the recommendation of a special committee of
APU's independent directors. In making its recommendation, the special
committee relied on an opinion of Furman Selz Incorporated that the number of
shares of Common Stock of the Company to be issued to the shareholders of AFC
was fair to the shareholders of APU (other than AFC) from a financial point
of view. The Mergers were approved by the shareholders of APU at a Special
Meeting of Shareholders held on March 23, 1995.
During the first three months of 1995, the Company's insurance
subsidiaries received approximately $38.5 million in premiums from Great
American and its insurance company subsidiaries under various reinsurance
arrangements.
Prior to the Mergers, the Company's subsidiaries provided various risk
management and real estate management services to AFC and its subsidiaries
and affiliates. Operating costs for services provided under these
arrangements have been allocated to AFC based upon estimated hourly rate
charges for salary and fringe benefits, supplies and rental expense in
respect of the services performed. AFC and its subsidiaries and affiliates
were billed approximately $75,000 in the aggregate for the services of such
Company subsidiaries in the first three months of 1995.
The Company's Stock Option Loan Program permits officers, employees
and directors who are participants in the Stock Option Plan to borrow from
the Company up to 95% of the purchase price for the Company shares acquired
upon exercise of an option (plus any applicable withholding taxes payable
upon exercise). Under the terms of such Program, the interest rate of such
loans is the applicable federal rate for loans compounded semiannually in
effect under Section 7872 of the Internal Revenue Code as of the date of the
loan. Since January 1, 1995, loans under this Program have been outstanding
to executive officers of the Company as follows:
<PAGE>
<TABLE>
<CAPTION>
Largest Amount
Outstanding Amount Annual
Date of Since Outstanding Interest
Name Loan January 1, 1995 at Record Date Rate
- -------------------- -------- ---------------- -------------- --------
<S> <C> <C> <C> <C>
Neil M. Hahl 9/29/92 $123,269 $123,269 3.98%
11/22/93 161,099 161,099 3.65
12/27/94 197,006 197,006 6.55
12/27/94 189,992 189,992 7.75
12/21/95 244,637 244,637 5.57
Robert W. Olson (a) 2/8/91 120,802 -- 7.06
9/29/92 107,221 -- 3.98
11/22/93 214,770 -- 3.65
12/27/94 147,722 -- 6.55
</TABLE>
(a) Resigned as an executive officer of the Company in August
1995.
In March 1996, Alfred W. Martinelli repaid approximately $8.9 million
in secured notes payable to the Company. These notes were delivered in 1985
and 1986 by Mr. Martinelli in payment of the purchase price for convertible
Preference Stock of APU issued to him under the Company's now-terminated
Career Share Purchase Plan.
Also in March 1996, the Company sold the stock of its subsidiary,
Buckeye Management Company ("Buckeye"), to an investment group consisting of
members of Buckeye's management (including Mr. Martinelli) and Buckeye's
employees, for approximately $63 million in cash. Mr. Martinelli is the
Chairman of the Board and Chief Executive Officer of Buckeye.
The Company leases office space for its headquarters in The Provident
Tower building in Cincinnati, Ohio, which is owned by AFC. Rental amounts
paid to AFC under the lease were approximately $300,000 or the first three
months of 1995. Under the lease terms, the Company also paid a proportionate
share of operating and tax expense increases.
<PAGE>
In the first three months of 1995, the Company utilized the services
of Provident Travel Corporation, an AFC subsidiary which is a travel agency,
to facilitate business travel by Company employees on terms and conditions
customarily offered by commercial travel agencies in the area. The Company
purchased airline tickets and accomodations through Provident Travel in the
amount of approximately $150,000 during that period.
AFC provides security guard and surveillance services at the main
office of Provident Bancorp, Inc. ("Provident") for which Provident paid
$100,000 in 1995. Members of the Lindner family are the majority owners of
Provident. Provident leases its main banking and corporate office from AFC.
During 1995, the lease agreements were rewritten and extended to the year
2010, with Provident receiving $1.2 million, which represents the net present
value of the difference between payments of the old and current lease
agreements. Provident paid rent under the leases of $1,397,000 in 1995.
In December 1995, AFG and Richard E. Lindner, a brother of Carl H.
Lindner, purchased 49% and 11%, respectively, of the common stock of a
Florida homebuilder. AFG invested $3.6 million and Richard E. Lindner
invested $825,000.
Directors' Compensation
Pending shareholder approval and implementation of the Company's 1996
Directors' Compensation Plan, the fee schedule for the Company's directors,
paid only to directors who are not officers or employees of the Company, is
as follows: annual fee, $37,000; attendance fee for each Board of Directors
meeting, $1,250; annual committee fee, $7,000; attendance fee for each
committee meeting, $1,000; and annual committee chairmanship fee for the
Audit Committee, $10,000, and the Compensation Committee, $10,000. In
addition, directors not also officers or employees of the Company are
compensated $1,500 per day and reimbursed for related out-of-pocket expenses
for special services requested of them by the Chief Executive Officer beyond
the normal responsibilities of a member of the Board of Directors or of a
Board committee.
The Board of Directors has a program under which a retiring Company
director (other than an officer or employee of the Company or any of its
subsidiaries) will, if he has met certain eligibility requirements, receive
upon his retirement (in a lump sum or, at his election, in deferred payments)
an amount equal to five times the then current annual director's fee. For
purposes of this program, retirement means resignation as a Company director
or not being nominated for reelection by shareholders as a Company director.
To be eligible for the retirement benefit, a person must have served as a
Company director for at least four years while not an officer or employee of
the Company or any of its subsidiaries. In addition, a Company director will
not become eligible for the retirement benefit until reaching age 55. A
director
<PAGE>
who receives a retirement benefit must provide consulting services to the
Company on request for five years following retirement without further
compensation (except reimbursement for expenses). Under the program, a death
benefit equal to the retirement benefit will be paid (in lieu of any
retirement benefit under the program) to the designated beneficiary or legal
representative of any person who dies while serving as a Company director,
whether or not eligible for a retirement benefit at time of death. This
death benefit will not be available to a director who at any time during the
two years immediately preceding death was an officer or employee of the
Company or any of its subsidiaries.
In addition to providing for the grant of stock options to key
employees, the Stock Option Plan provides for automatic annual grants of
options to each non-employee director of the Company. During 1995, each non-
employee director was granted an option under the foregoing provisions of the
Stock Option Plan to purchase 1,000 shares at an exercise price of $24.75 per
share on June 1, 1995, the exercise price being the fair market value of the
Company's Common Stock on the date of grant.
In December 1994, APU formed a special committee of the Board of
Directors to evaluate the terms of the proposed Mergers and make a
recommendation to the Board as to the fairness of the Mergers to the
Company's public shareholders. For their work on this committee, the members
of the special committee were paid the following amounts by the Company: Mr.
Martinelli, Chairman of the Committee ($40,000), Messrs. Emmerich, Hunt and
Martin, members of the committee ($30,000 each).
Committees and Meetings of the Board of Directors
The Company's Board of Directors held six meetings and took action in
writing two times in 1995. The Company's Board of Directors has an Executive
Committee, an Audit Committee and a Compensation Committee. There is no
Nominating Committee.
Executive Committee: The Executive Committee consists of Carl
H. Lindner (Chairman), Carl H. Lindner III, S. Craig Lindner and Keith E.
Lindner. The Committee's functions include analyzing the future development
of the business affairs and operations of the Company, including further
expansion of businesses in which the Company is engaged and acquisitions and
dispositions of businesses. With certain exceptions, the Executive Committee
is generally authorized to exercise the powers of the Board of Directors
between meetings of the Board of Directors. The Executive Committee
consulted among themselves informally many times throughout the year and took
action in writing on seven occasions in 1995.
<PAGE>
Audit Committee. The Audit Committee consists of Theodore H.
Emmerich (Chairman) and William R. Martin. Neither is an officer or employee
of the Company or any of its subsidiaries. The Committee's functions include
recommending to the Board of Directors the engagement of independent
accounting firms to audit the financial statements of the Company and its
subsidiaries and to provide other audit-related services and recommending the
terms of such firms' engagements; reviewing the engagement of independent
accounting firms to provide non-audit services, including the terms of their
engagements; reviewing the adequacy and implementation of the Company's
internal audit function; reviewing the policies, procedures and principles of
the management of the Company for purposes of conformity to the standards
required by the Foreign Corrupt Practices Act; establishing procedures
designed to provide and encourage timely access to the Committee by the
independent accounting firms engaged by the Company, its internal audit
department and its principal financial officers; and conducting such
investigations relating to the Company's financial affairs as the Committee
or the Board of Directors deems desirable. The Committee's functions also
include supervising, reviewing and reporting to the Board of Directors on the
performance of management committees of the Company responsible for the
administration and the management of the investments of the employee benefit
plans of the Company and its subsidiaries. The Audit Committee met four
times and took action in writing on one occasion in 1995.
Compensation Committee The Compensation Committee consists of
William R. Martin (Chairman), Theodore H. Emmerich and Thomas M. Hunt. The
functions of the Compensation Committee are discussed under "Compensation -
Compensation Committee Report." The Compensation Committee met five times in
1995.
INDEPENDENT AUDITORS
The accounting firm of Ernst & Young LLP served as the Company's
independent auditors for the fiscal year ended December 31, 1995.
Representatives of that firm will attend the Meeting and will be given the
opportunity to comment, if they so desire, and to respond to appropriate
questions that may be asked by shareholders. No auditor has yet been
selected for the current year because it is generally the practice of the
Company not to select independent auditors prior to the annual shareholders
meeting.
In August 1995, pursuant to a recommendation of the Audit Committee,
the Company engaged Ernst & Young LLP to be its principal independent
accountants for purposes of performing the 1995 audit of the Company's
financial statements and informed its previous principal independent
accountants, Deloitte & Touche LLP, of its action. Management of the Company
felt that this would enable the Company to better coordinate financial
reporting matters with AFC (its predecessor for accounting and reporting
purposes). Ernst & Young LLP has been the auditor for all major subsidiaries
and investees of the Company, except APU.
<PAGE>
In connection with the audit of the Company's balance sheet as of
December 9, 1994 (date of inception) and during the subsequent interim
periods, there have been no disagreements on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope,
or procedures with Deloitte & Touche LLP, which disagreements if not resolved
to the satisfaction of Deloitte & Touche LLP would have caused them to make
reference in their opinion to the subject matter of the disagreement. The
report of Deloitte & Touche LLP on the December 9, 1994 Balance Sheet of the
Company did not contain an adverse opinion, or a disclaimer of opinion, and
was not qualified as to uncertainty, audit scope or accounting principles.
NOMINATIONS AND SHAREHOLDER PROPOSALS
In accordance with the Company's Code of Regulations (the
"Regulations"), the only candidates eligible for election at a meeting of
shareholders are candidates nominated by or at the direction of the Board of
Directors and candidates nominated at the meeting by a shareholder who has
complied with the procedures set forth in the Regulations. Shareholders will
be afforded a reasonable opportunity at the 1996 Annual Meeting to nominate
candidates for the office of director. However, the Regulations require that
a shareholder wishing to nominate a director candidate must have first given
the Secretary of the Company at least five and not more than thirty days
prior written notice setting forth or accompanied by (a) the name and
residence of the shareholder and of each nominee specified in the notice, (b)
a representation that the shareholder was a holder of record of the Company's
voting stock and intended to appear, in person or by proxy, at the meeting to
nominate the persons specified in the notice and (c) the consent of each such
nominee to serve as director if so elected.
If a shareholder desires to have a proposal included in the proxy
statement for the 1997 annual shareholders meeting, such proposal must be
received by the Company's Secretary at his office by December 31, 1996 in
order to be considered for inclusion.
<PAGE>
REQUESTS FOR FORM 10-K
The Company will send, upon written request, without charge, a copy of
the Company's most current Annual Report on Form 10-K to any shareholder who
writes to Fred J. Runk, Senior Vice President and Treasurer, American
Financial Group, Inc., One East Fourth Street, Cincinnati, Ohio 45202.
By order of the Board of Directors,
James C. Kennedy
Secretary
Cincinnati, Ohio
April 22, 1996
AMERICAN FINANCIAL GROUP, INC.
NON-EMPLOYEE DIRECTORS' COMPENSATION PLAN
P R E A M B L E
The purpose of the Non-Employee Directors' Compensation Plan ("Plan")
of American Financial Group, Inc. (the "Company") is to align further the
interests of the Company's non-employee directors with the interests of
shareholders by providing that a minimum of 50% of such directors' annual
retainers are paid through the issuance of shares of the Company's Common
Stock, $1.00 par value ("Common Stock").
Directors who are not employees of the Company or a Company
subsidiary are paid an annual retainer ("Board Retainer"), an additional
annual Board Committee retainer ("Committee Retainer") and an attendance fee
for each Board or Committee meeting attended ("Meeting Fees"), in amounts
which shall be set by the Board of Directors. The initial amounts
established by the Board of Directors for the retainers and fees is set forth
on the attached Schedule 1. These amounts may be changed by the Board of
Directors from time to time without shareholder approval.
1. PAYMENT OF COMPENSATION TO NON-EMPLOYEE DIRECTORS.
The Board Retainer and Committee Retainer shall be paid by the
Company quarterly, in arrears, as soon as practicable following the end of
each calendar quarter. The quarterly portion of the Board Retainer and
Committee Retainer (if applicable) shall be paid 50% in cash and 50%, or in
such proportion as an eligible director may elect pursuant to Section 3
below, in the form of shares of the Company's Common Stock.
The number of shares of Common Stock to be issued to each non-
employee director pursuant to this Plan shall be determined by dividing the
amount of the retainers payable in Common Stock by the average of the per
share Fair Market Value of the Common Stock (as defined in Section 3 below)
for the ten trading days ending on the last business day of each calendar
quarter; the resulting number shall then be rounded up to the nearest share.
The Meeting Fees accrued during each calendar quarter, if any, shall
be paid by the Company at the end of such quarter in cash, together with the
cash portion of the applicable quarterly retainers.
2. ELECTION BY NON-EMPLOYEE DIRECTORS TO RECEIVE CASH PORTION OF THEIR
COMPENSATION IN ADDITIONAL COMPANY COMMON STOCK.
<PAGE>
Each non-employee director may elect to receive all or a portion (in
20% increments) of the quarterly cash portion of their applicable retainers
for service on the Board of Directors in shares of Common Stock. Such
election shall be irrevocable for each quarter and shall be made at least six
months in advance of the date the non-employee director is to receive the
quarterly payment.
3. FAIR MARKET VALUE OF COMPANY COMMON STOCK.
The "Fair Market Value" of a share of Common Stock shall be the mean
between the high and low prices of the shares on such date on the New York
Stock Exchange Composite Tape (or the principal market in which the Common
Stock is traded, if the shares are not listed on that Exchange on such date)
or, if the shares were not traded on such date, then the mean between the
high and low prices of the shares on the next preceding trading day during
which the shares were traded.
4. RESTRICTIVE LEGEND; HOLDING PERIOD FOR SHARES OF COMMON STOCK.
In order to comply with certain provisions of the Federal securities
laws, including Section 16(b) of the Securities Exchange Act of 1934 all
certificates representing shares of Common Stock issued pursuant to the Plan
shall bear the following restrictive legend which will prevent the recipient
from disposing of such shares for six months from the date of issuance:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE MAY
NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE ASSIGNED UNTIL THE EXPIRATION OF THE SIX MONTH
PERIOD BEGINNING ON THE DATE OF ORIGINAL ISSUANCE BY AMERICAN
FINANCIAL GROUP, INC. (THE "COMPANY") AS PROVIDED BY SECTION 4
OF THE COMPANY'S DIRECTORS' COMPENSATION PLAN EFFECTIVE AS OF
, 1996, A COMPLETE AND CORRECT COPY OF THE FORM OF WHICH WILL
BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON REQUEST.
When the legend requirement imposed by this Section shall terminate,
the holder of shares of Common Stock for which such legend requirement has
terminated may request that the Company (at its expense) promptly issue a
replacement certificate representing such shares without such legend.
5. NO RIGHT TO CONTINUANCE AS A DIRECTOR.
Neither the action of the Company in establishing the Plan nor the
issuance of Common Stock hereunder shall be deemed to create any obligation
on the part of the Board of Directors to nominate any non-employee director
for reelection by the Company's shareholders or to be evidence of any
agreement or understanding, express or implied, that the non-employee
director has a right to continue as a director for any period of time or at
any particular rate of compensation.
<PAGE>
6. SHARES SUBJECT TO THE PLAN.
One hundred thousand shares of Common Stock are authorized for
issuance under the Plan in accordance with the provisions hereof. The
Company shall at all times during the term of the Plan retain as authorized
and unissued Common Stock at least the number of shares from time to time
required under the provisions of the Plan, or otherwise assure itself of its
ability to perform its obligations hereunder.
7. EFFECTIVE DATE AND EXPIRATION OF PLAN.
The Plan is subject to approval by a majority of the votes cast at
the next Annual Meeting of Shareholders of the Company by the holders of
shares of Common Stock entitled to vote thereon, and, if so approved, shall
be effective beginning on the first day of the calendar quarter immediately
following such vote (the "Effective Date"). Unless earlier terminated by
the Board of Directors pursuant to Section 9, the Plan shall terminate on the
tenth anniversary of the Effective Date. No shares of Common Stock shall be
issued pursuant to the Plan after its termination date.
8. PAYMENT IN EVENT OF DEATH.
If a non-employee director dies (before or after his ceasing to be a
Company director), any portion of his compensation pursuant to the Plan
(whether or not deferred) then unpaid shall be paid to the beneficiaries of
the director named in the most recent beneficiary designation filed with the
Secretary of the Company. In the absence of such a designation, such
compensation shall be paid to, or as directed by, the director's personal
representative, in one or more installments as the non-employee director may
have elected in writing.
9. AMENDMENT, SUSPENSION AND TERMINATION OF PLAN.
The amount, pricing and timing of Company Common Stock issuances
pursuant to the Plan shall not be amended more than once every six months,
other than to comport with changes in the Internal Revenue Code of 1986, as
amended, the Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder.
The Board of Directors may suspend or terminate the Plan or any
portion of it at any time, and may amend it, subject only to the preceding
paragraph, from time to time in such respects as the Board may deem advisable
in order that any awards hereunder shall conform to any change in applicable
laws or regulations or in any other respect the Board may deem to be in the
best interests of the Company; provided, however, that no such amendment
shall, without the further approval of the shareholders of the Company by the
<PAGE>
affirmative vote of shareholders entitled to cast at least a majority of the
total number of votes represented at a meeting of shareholders of the
Company, increase the number of shares of Common Stock which may be issued
under the Plan, materially modify the requirements as to eligibility for
participating in the Plan, or extend the termination date of the Plan.
<PAGE>
SCHEDULE 1
Annual Board Retainer $40,000
Annual Board Committee Retainer $12,000
Attendance Fee per Meeting $1,000
