----------------------------------
Notice of 1997
Annual Meeting
of Shareholders
andSCHEDULE 14A INFORMATION
Proxy Statement ----------------------------------Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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240.14a-12
Fund American Enterprises Holdings, Inc.
- --------------------------------------------------------------------------------
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Table of Contents-------------------------------
NOTICE OF 1998
ANNUAL MEETING
OF SHAREHOLDERS
AND PROXY STATEMENT
-------------------------------
TABLE OF CONTENTS
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Page
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LETTER FROM THE PRESIDENT AND CEO. . . . . . . . . . . . . . . . . . . 1
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS. . . . . . . . . . . . . 2
PROXY STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
PROPOSAL 1: ELECTION OF DIRECTORS. . . . . . . . . . . . . . . . . 3
Procedures for Nominating Directors. . . . . . . . . . . . . . . 7
Voting Securities and Principal Holders Thereof. . . . . . . . . 8
Compensation of Directors. . . . . . . . . . . . . . . . . . . . 9
Compensation of Executive Officers . . . . . . . . . . . . . . . 10
Reports of the Compensation Committees on Executive Compensation 15
Shareholder Return Graph . . . . . . . . . . . . . . . . . . . . 19
Compensation Plans . . . . . . . . . . . . . . . . . . . . . . . 20
Compensation Committee Interlocks and Insider Participation in
Compensation Decisions . . . . . . . . . . . . . . . . . . . . . 21
PROPOSAL 2: APPOINTMENT OF INDEPENDENT AUDITORS. . . . . . . . . . 21
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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LETTER FROM THE CHAIRMAN.................................................... 1
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS............................... 2
PROXY STATEMENT............................................................. 3
PROPOSAL 1: ELECTION OF DIRECTORS....................................... 3
Procedures for Nominating Directors.................................... 5
Voting Securities and Principal Holders Thereof........................ 6
Compensation of Directors.............................................. 7
Compensation of Executive Officers..................................... 8
Reports of the Compensation Committees on Executive Compensation....... 11
Shareholder Return Graph............................................... 15
Compensation Plans..................................................... 16
Compensation Committee Interlocks and Insider Participation in
Compensation Decisions................................................ 17
PROPOSAL 2: APPOINTMENT OF INDEPENDENT AUDITORS......................... 18
OTHER MATTERS............................................................ 18
================================================================================
Fund American Enterprises Holdings, Inc. (the "Company" and, together with
its subsidiaries, "Fund American") is a New Hampshire-based financial services
holding company. The Company's business activitiesprincipal businesses are conducted principally
through its wholly-owned operating subsidiaries: (i) White
Mountains Holdings, Inc. and its affiliatesoperating subsidiaries ("White Mountains").
White Mountains' insurance operations are conducted through its subsidiaries and
(ii)affiliates in the businesses of property and casualty insurance, reinsurance and
financial guaranty insurance. White Mountains' mortgage banking operations are
conducted through Source One Mortgage Services Corporation one of the nation's largest mortgage banking companies, and its subsidiaries
("Source One").
White Mountains' insurance operations principally include: (i) Valley
Insurance Company ("Valley"), an Oregon-based property and casualty insurance
company; (ii) Charter Indemnity Company ("Charter"), a Texas-based non-standard
automobile insurer; (iii) White Mountains Insurance Company ("WMIC"), a New
Hampshire-based commercial property and casualty insurer; (iv) a 25% economic
interest in Financial Security Assurance Holdings Ltd. ("FSA"), a New York-based
Aaa/AAA writer of financial guarantee insurance; (v) a 50% interest in
Folksamerica Holding Company, Inc. ("Folksamerica"), a New York-based broker-
market reinsurer; and (vi) a 33% stake in Main Street
America Holdings, Inc. ("MSA"), a unit of National Grange Mutual Insurance
Company, a New Hampshire-
basedHampshire-based property and casualty insurer.
Fund American also ownsinsurer; (v) a passive investment portfolio consisting mainly of
common equity securities. Prospectively, management's primary strategic goal is
to either (i) reinvest Fund American's passive investments, together with other
resources available to Fund American, into operating businesses50% interest
in which
management has knowledgeFolksamerica Holding Company, Inc. ("Folksamerica"), a New York-based
broker-market reinsurer; and experience (if appropriate opportunities can be
found) or (ii) return excess capital to shareholders through common stock
repurchases. Fund American believes that this strategy will, over time, further
enhance shareholder value.(vi) a 16% interest in ML (Bermuda) Limited
("Murray Lawrence"), a Bermuda-based managing agency group in the Lloyd's
insurance market.
- --------
Fund
American John J. ByrneFUND
AMERICAN
- -------- ChairmanK. THOMAS KEMP
PRESIDENT AND CHIEF EXECUTIVE OFFICER
March 31, 199730, 1998
Dear Shareholders:
I would like to invite all shareholders to attend the 19971998 Annual Meeting of Fund
American Enterprises Holdings, Inc., to be held on Thursday, May 29, 1997,28, 1998, at
9:00 a.m. This year's meeting will take place on the campus of Dartmouth
College, not far from our corporate office in Hanover, New Hampshire. I welcome
you all to join me for the morning in our home state.beautiful New Hampshire.
We will begin the meeting with a discussion and shareholder vote on the
proposals set forth in the accompanying Proxy Statement and on such other
matters properly brought before the meeting. At the meeting you will be asked
to consider and vote on the following issues:
1) the election of three directors;
and
2) ratification of the appointment of our independent auditors.
Whether or not you plan to attend the meeting, you can ensure that your
shares are properly represented at the meeting by promptly completing, signing,
dating and returning your proxy card in the enclosed envelope.
Respectfully submitted,
John J. Byrne
Fund American Enterprises Holdings, Inc.
80 South Main Street
Hanover, New Hampshire 03755-2053K. THOMAS KEMP
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
NOTICE OF 19971998 ANNUAL MEETING OF SHAREHOLDERS
May 29, 1997MAY 28, 1998
March 31, 199730, 1998
Notice is hereby given that the 19971998 Annual Meeting of Shareholders of Fund
American Enterprises Holdings, Inc. will be held on Thursday, May 29, 1997,28, 1998, at
9:00 a.m. at Byrne Hall, Amos Tuck School of Business at Dartmouth College,
Hanover, New Hampshire 03755.Hampshire. At the meeting you will be asked to consider and vote
upon the following proposals:
(a) to elect three directors to Class IIII with terms ending in 2000;2001;
(b) to appoint KPMG Peat Marwick LLP as Independent Auditors for the 19971998
audit examination; and
(c) to transact such other business, if any, as may be properly brought
before the meeting.
Shareholders of record on the record date, March 31, 1997,30, 1998, (i) who are
individuals, may attend and vote at the meeting in person or by proxy or (ii)
which are corporations or other entities, may be represented and vote at the
meeting by a duly authorized representative or by proxy. A list of all
shareholders entitled to vote at the meeting will be open for public examination
by shareholders during regular business hours from May 5, 1997,4, 1998, until 12:00 noon
on May 29, 1997,28, 1998, at the corporate office of Fund American Enterprises Holdings,
Inc., 80 South Main Street, Hanover, New Hampshire 03755-2053.
All shareholders are cordially invited to attend this meeting.
By Order of the Board of Directors,
DennisDENNIS P. BeaulieuBEAULIEU
Corporate Secretary
Shareholders are invited to complete and sign the accompanying proxy card to
be returned to Fund American Enterprises Holdings, Inc.SHAREHOLDERS ARE INVITED TO COMPLETE AND SIGN THE ACCOMPANYING PROXY CARD
TO BE RETURNED TO FUND AMERICAN ENTERPRISES HOLDINGS, INC., c/o First Chicago Trust
Company of New York, Post Office BoxC/O FIRST CHICAGO
TRUST COMPANY OF NEW YORK, POST OFFICE BOX 8085, Edison, New JerseyEDISON, NEW JERSEY 08818-9052,
in the
envelope provided, whether or not they expect to attend the meeting.
It is important that the enclosed proxy card be completed and returned
promptly.IN THE ENVELOPE PROVIDED, WHETHER OR NOT THEY EXPECT TO ATTEND THE MEETING.
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD BE COMPLETED AND RETURNED
PROMPTLY.
2
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Company's Board of Directors (the "Board") for the 19971998
Annual Meeting of Shareholders (the "1997"1998 Annual Meeting"), to be held on May
29, 1997.28, 1998. The solicitation of proxies will be made primarily by mail, and this
Proxy Statement and proxy materials will be distributed to registered
shareholders on or about April 4, 1997.3, 1998.
Holders of shares of the Company's Common Stock, par value $1.00 per share
("Shares"), registered in their name as of the close of business on March 31,
1997,30,
1998, the record date, are entitled to vote at the meeting. Holders of Shares
are entitled to one vote per Share.
You can ensure that your Shares are properly voted at the meeting by
completing, signing, dating and returning the enclosed proxy card in the
envelope provided. A shareholder has the right to appoint another person (who
need not be a shareholder) to represent the shareholder at the meeting by
completing an alternative form of proxy which can be obtained from the Corporate
Secretary or by notifying the Inspectors of Election. Shareholders have the
right to revoke their proxies, at any time prior to the time their shares are
actually voted, by (i) filing a written notice of revocation with the Corporate
Secretary, (ii) presenting another proxy with a later date or (iii) notifying
the Inspectors of Election in writing of such revocation. Sending in a signed
proxy will not affect your right to attend the meeting and vote. If a
shareholder attends the meeting and votes in person, his or her proxy is
considered revoked.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board is divided into three classes (each a "Class").
The Company has been notified that Messrs. Howard L. Clark and Arthur
Zankel intend to retire from active service as directors effective as of the
date of the 1998 Annual Meeting and will become Advisory Directors to the Board.
The Board gratefully acknowledges the valuable contributions of Messrs. Clark
and Zankel to the Company during their tenure as directors.
At the 19971998 Annual Meeting Messrs. Clark, Jr., CochranPatrick Byrne, Kemp and ZankelMacklin are
nominated to be elected to Class IIII with terms ending in 2000. The Board
recommends2001. Mr. Clark,
currently a voteClass I director, will not stand for re-election at the 1998 Annual
Meeting. THE BOARD RECOMMENDS A VOTE FOR ProposalPROPOSAL 1 which calls for the election of the 1997
nominees.WHICH CALLS FOR THE
ELECTION OF THE 1998 NOMINEES.
The current members and terms of each Class are set forth below:
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Director--------------------------------------------------
Director Age since
- -------------------------------------------------------
- --------------------------------------------------
Class I - Terms Ending in 1998
Patrick M. Byrne* 35 1997
Howard L. Clark 8182 1985
K. Thomas Kemp 56Kemp* 57 1994
Gordon S. Macklin 68Macklin* 69 1987
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Class II - Terms Ending in 1999
John J. ("Jack") Byrne 6465 1985
George J. Gillespie, III 6667 1986
Frank A. Olson 6465 1996
- ---------------------------------------------------------------------------------------------------------
Class III - Terms Ending in 19972000
Howard L. Clark, Jr.* 53 54 1986
Robert P. Cochran* 47Cochran 48 1994
Arthur Zankel* 65Zankel 66 1992
=======================================================- --------------------------------------------------
- --------------------------------------------------
*Nominee* Nominee at the 19971998 Annual Meeting to a term ending in 2001.
3
The following information with respect to the principal occupation,
business experience and other affiliations of the nominees and directors has
been furnished to the Company by the nominees and directors.
ClassCLASS I
HowardPATRICK M. BYRNE has been a director of the Company since October 1997.
Mr. Byrne serves as President and CEO of Fecheimer Bros. Co (a wholly-owned
subsidiary of Berkshire Hathaway Inc.), a manufacturer of uniforms and
accessories, and President and CEO of Centricut, LLC, a manufacturer of
industrial torch consumable parts. In addition, since 1991, Mr. Byrne has been
the managing general partner of a number of limited partnerships investing in
real estate, gaming, insurance and international trade. Mr. Byrne is a director
of White Mountains and White River Corporation ("White River"). White River was
formerly a subsidiary of the Company. Mr. Byrne is the son of Chairman John J.
Byrne. See "Compensation Committee Interlocks and Insider Participation in
Compensation Decisions."
HOWARD L. ClarkCLARK was a director of the Company from 1981 until 1983 and
became a director again in 1985. Mr. Clark served as an advisor to the Board of
Directors of American Express Company ("American Express") from 1979 to 1993 and
was that company's Chairman of the Executive Committee from 1977 to 1979, when
he retired, and Chief Executive Officer from 1960 to 1977. Mr. Clark's son,
Howard L. Clark, Jr., is also a director of the Company. See "Compensation
Committee Interlocks and Insider Participation in Compensation Decisions." 3
Mr.
Clark has announced that he will retire from the Board in May 1998 and is not
standing for re-election.
K. Thomas KempTHOMAS KEMP has been a director of the Company since 1994. Mr. Kemp serveshas
served as the Company's President and Chief Executive Vice PresidentOfficer since October 1997
and is also White Mountains' Chairman and Chief Executive Officer. Mr. Kemp
has also served as the Company's Executive Vice President from 1993 to 1997, Vice
President, Treasurer and Secretary sincefrom 1991 to 1993 and was formerly a Vice
President of Fireman's Fund Insurance Company ("Fireman's Fund") from 1990 to January 2, 1991. Prior to
joining Fireman's Fund, Mr. Kemp was President of Resolute Reinsurance Company.. Mr. Kemp is
also a director of FSA, MSA, Folksamerica, WMIC, Valley, Charter, Folksamerica,
American Direct Business Insurance, SDNCommerce Security Bancorp,
MSA,Murray Lawrence and Fund American Enterprises, Inc. ("FAE"), a wholly-owned
subsidiary of the Company.
GordonGORDON S. MacklinMACKLIN has been a director of the Company since 1987. Mr.
Macklin served as Chairman of Hambrecht and Quist Group, a venture capital and
investment banking company, from 1987 until 1992. Prior to that, Mr. Macklin
served as President of the National Association of Securities Dealers, Inc. from
1970. He is currently Chairman, President and CEO of White River Corporation ("White River");and is a
director of Source One, MCI Communications Corporation, MedImmune Inc., CCC Information
Services Group, Inc., Shoppers Express, Inc.Real 3D and Spacehab, Inc.; and is a trustee, director or
managing general partner (as the case may be) of 5352 of the investment companies
in the Franklin Templeton Group of Funds. White River
was formerly a subsidiary of the Company. See "Compensation Committee Interlocks
and Insider Participation in Compensation Decisions."
ClassCLASS II
JohnJOHN J. ByrneBYRNE has been Chairman of the Company since 1985.1985 and retired from
his officer positions in October 1997. Mr. Byrne
has also4
served as President and Chief Executive Officer sincefrom 1990 to 1997 and as Chief
Executive Officer from 1985 to 19901990. Mr. Byrne is Vice Chairman of FSA and was Chief Executive Officeris a
director of Fireman's Fund from
1989 through January 2, 1991. Prior to that, he was ChairmanWhite Mountains and Chief
Executive OfficerTravelers Property Casualty Corp. and is an
advisory director of GEICO Corporation from 1976 to 1985.Terra Nova (Bermuda) Holdings Ltd. Mr. Byrne's son,
Patrick M. Byrne, is also a director of FAE, FSA, White Mountains, Terra Nova (Bermuda) Holdings Ltd. and
Travelers Property Casualty Corp.
Georgethe Company.
GEORGE J. Gillespie,GILLESPIE, III has been a director of the Company since 1986. He
is a Partner in the law firm of Cravath, Swaine & Moore, which position he has
held since 1963. He is also a director of The Washington Post Company.
Cravath, Swaine & Moore has been retained by Fund American from time to time to
perform legal services. See "Compensation Committee Interlocks and Insider
Participation in Compensation Decisions."
FrankFRANK A. OlsonOLSON has been a director of the Company since November 1996. He is
Chairman and Chief Executive Officer of The Hertz Corporation and has been with
that company since 1964. He is also a director of Becton Dickinson and Company,
Cooper Industries and Commonwealth Edison Co. and was formerly Chairman and
Chief Executive Officer of Allegis Corporation and United Airlines.
ClassCLASS III
HowardHOWARD L. Clark, Jr.CLARK, JR. was a director of the Company from 1986 until 1990,
and was an advisor to the Board from 1990 to 1993 when he was re-elected as a
director. He is Vice Chairman of Lehman Brothers Inc. and was Chairman and
Chief Executive Officer of Shearson Lehman Brothers Inc. from 1990 to 1993.
Prior to joining Shearson Lehman Brothers Inc., Mr. Clark was Executive Vice
President and Chief Financial Officer of American Express. He is also a
director of The Maytag Corporation, Plasti-Line, Inc.Compass International Services Corporation
and Walter Industries, Inc. Mr. Clark, Jr. is the son of Howard L. Clark, who
is also a director of the Company. Lehman Brothers Inc. provides various
services to Fund American from time to time. See "Compensation Committee
Interlocks and Insider Participation in Compensation Decisions."
RobertROBERT P. CochranCOCHRAN has been a director of the Company since 1994. Mr.
Cochran was a founding principal of FSA and has served FSA in various capacities
since 1985. He has been President and Chief Executive Officer and a director of
FSA since 1990.1990 and became Chairman of FSA in 1997. He is also Chairman of
Financial Security Assurance Inc. and Financial Security Assurance (U.K.) Ltd.
and is a director of White Mountains. FSA has been retained by Fund American to
manage portions of its fixed maturityincome investment portfolio. See "Compensation
Committee Interlocks and Insider Participation in Compensation Decisions."
Arthur ZankelARTHUR ZANKEL has been a director of the Company since 1992. He is
presently Co-Managinga General Partner of First Manhattan Co., an investment advisor and
broker-
4
dealer.broker-dealer. He has been a General Partner atof First Manhattan Co. since 1965.1965
and was Co-Managing Partner of First Manhattan from 1979 to 1997. Mr. Zankel is
also a director of Travelers Group Inc.,TravelersGroup, Travelers Property Casualty Corp. and VICORP
Restaurants, Inc. First Manhattan Co. has been retained from time to time by
Fund American to perform various brokerage and advisory services. See
"Compensation Committee Interlocks and Insider Participation in Compensation
Decisions." Committees ofMr. Zankel has announced that he will retire from the Board of Directorsin May
1998.
5
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee, comprised of certain nonemployee directors (Messrs.
Clark; Clark, Jr.; Olson and Zankel), has general responsibility for the
oversight and surveillance of the accounting, reporting and financial control
practices of Fund American. The Audit Committee annually reviews the
qualifications of the Independent Auditors; makes recommendations to the Board
as to their selection; and reviews the plan, fees and results of their audit.
Mr. Clark, Jr. is Chairman of the Audit Committee.
The Compensation Committee, comprised of certain nonemployee directors
(Messrs. Patrick Byrne; Clark; Cochran; Macklin and Olson), oversees Fund
American's stock-
basedstock-based compensation and benefit policies and programs, including
administration of the Long-Term Incentive Plan (the "Incentive Plan"), the Fund
American Voluntary Deferred Compensation Plan (the "Deferred Compensation Plan")
and the Fund American Deferred Benefit Plan (the "Deferred Benefit Plan"). Mr.
Macklin is Chairman of the Compensation Committee.
The Human Resources Committee, comprised of certain nonemployee directors
(Messrs. Patrick Byrne; Clark; Clark, Jr.,; Cochran; Gillespie, Macklin,Gillespie; Macklin; Olson
and Zankel), sets the annual salaries and bonuses for elected officers and
certain other key employees. Mr. Macklin is Chairman of the Human Resources
Committee.
MeetingsThe Finance Committee, comprised of Messrs. Jack Byrne, Gillespie, Macklin
and Zankel, was formed in November 1997 and has general responsibility for the
oversight of the Boardinvesting, financing, tax and acquisition/disposition
activities of DirectorsFund American. Mr. Jack Byrne is Chairman of the Finance
Committee.
6
MEETINGS OF THE BOARD OF DIRECTORS
During 19961997 the following meetings of the Board were held: fourfive meetings of
the full Board; two meetings of the Audit Committee; one meetingtwo meetings of the
Compensation Committee and threetwo meetings of the Human Resources Committee. During
1997 no meetings of the Finance Committee were held. In 19961997 each director
attended more than 75% of all meetings of the Board and each member of the Audit
Committee, Compensation Committee and the Human Resources Committee attended
more than 75% of all such committee meetings, except Mr. Clark who was unable to
attend twothree of the fourfive Board meetings, one of the two 19961997 Audit Committee
meetings, the Compensation Committee meeting and one of the threetwo Human Resources
Committee meetings.
PROCEDURES FOR NOMINATING DIRECTORS
Under the Company's Bylaws, any shareholder entitled to vote for the
election of directors that is a qualified holder of record of Shares having an
aggregate market value of at least $1,000 may nominate persons for election as
director,
but only if the following procedures are followed:
In general, the shareholder must give written notice to the Corporate
Secretary not later than (i) 90 days in advance of the meeting with respect to
an election to be held at an annual meeting of shareholders, and (ii) with
respect to an election to be held at a special meeting of shareholders, the
close of business on the seventh day following the date on which notice of such
meeting is first given to shareholders.
The notice must include: (i) the name and address of the shareholder who
intends to make the nomination and the name and address of the person or persons
to be nominated; (ii) a representation that the shareholder is a qualified
holder of record of Shares having an aggregate market value of at least $1,000
and that the shareholder intends to appear at the meeting, in person or by
proxy, to nominate the person or persons specified in the notice; (iii) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination, or nominations, are to be made by the
shareholder; (iv) such other information regarding each nominee proposed by such
shareholder as would have been required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission (the
"SEC") had each nominee been nominated, or intended to be nominated, by the
Company; and (v) the consent of each nominee to serve as a director of the
Company if so elected.
57
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of March 31, 1997,30, 1998, there were 6,894,6915,857,730 Shares outstanding, each Share
entitled to one vote. To the knowledge of the Company, there was no person or
entity beneficially owning more than 5% of Shares outstanding as of March 31,
1997,30,
1998, except as shown below:
PRINCIPAL HOLDERS OF SHARES
Principal Holders of Shares
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Number
of Shares
Name and address of beneficial owner beneficially owned Percent (d)
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
JOHN J. BYRNE 80 South Main Street, Hanover, NH 03755 (a) 1,464,882 18.6%1,722,429 25.1%
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
FRANKLIN MUTUAL ADVISORS, INC. 777 Mariners Island Blvd., San Mateo, CA 94403 (b) 1,243,895 18.0%1,219,371 20.8%
GSB INVESTMENT MANAGEMENT, INC. 301 Commerce Street, Fort Worth, TX 76102 (b) 759,431 11.0%672,746 11.5%
ALLIANZ ASSET ACCUMULATION PLAN 777 San Marin Drive, Novato, CA 94998 (c) 736,260 10.7%
========================================================================================================================614,711 10.5%
(a) Includes warrants to purchase 1,000,000 Shares, which warrants Mr. Byrne
purchased from American Express in 1985. The warrants are exercisable at
$21.66 per Share through January 2, 2002; however, Mr. Byrne shall not
exercise any of the warrants until the day after his employment by the
Company is terminated.2002. Mr. Byrne has sole voting and
investment power (or shares such power with his spouse) with respect to the
Shares for which he claims beneficial ownership. Does not include 146,5006,500
Shares donated to charitable foundations for which Mr. Byrne disclaims
beneficial ownership, but for which his spouse retains voting power. Does not include vested cash-
only Share equivalents ("Phantom Shares") held pursuant to the Deferred
Compensation Plan and the Deferred Benefit Plan. See "Compensation Plans -
Fund American Retirement Plans".
(b) According to filings by such holders with the SEC, the Shares beneficially
owned by the holders named above were acquired solely for investment
purposes on behalf of client investment advisory accounts of such holders.
(c) Represents Shares beneficially owned by employees of Fireman's Fund
pursuant to an employee incentive savings plan. The trustee for such plan
votes the Shares held by the plan in accordance with directions given by
the participating Fireman's Fund employees to whose accounts Shares have
been allocated.
(d) Determined based on the beneficial ownership provisions specified in Rule
13d-3(d)(1) of the Securities Exchange Act of 1934 (the "Exchange Act").
68
Beneficial Stock Ownership of Directors and Executive OfficersBENEFICIAL STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of March 31, 1997,30, 1998, beneficial ownership
of Shares by each director of the Company, by each of the "Named Executive
Officers" as defined herein currently holding office, and by all directors and
executive officers as a group.
- -------------------------------------------------------------------------------------------------------------
Number of Name and address of beneficial owner Shares owned
Percent (e)-----------------------------------
Directors and Executive Officers Beneficially (a) Economically (b)
- -------------------------------------------------------------------------------------------------------------
RAYMOND BARRETTE 1,585 10,702
TERRY L. BAXTER 80 South Main Street, Hanover, NH 03755 43(a) *140 26,354
JOHN J. BYRNE 80 South Main Street, Hanover, NH 03755 1,464,882(a)(b) 18.6%(c)(d) 1,722,429 1,805,930
PATRICK M. BYRNE (d) 105,000 105,000
HOWARD L. CLARK 80 South Main Street, Hanover, NH 03755 2,000 *2,000
HOWARD L. CLARK, JR. 80 South Main Street, Hanover, NH 03755 1,000 *1,000
ROBERT P. COCHRAN 350 Park Avenue, New York, NY 10022 0(a) 0 JAMES A. CONRAD 27555 Farmington Road, Farmington Hills, MI 48334 921 *1,406
MORGAN W. DAVIS 7,002 45,326
GEORGE J. GILLESPIE, III 80 South Main Street, Hanover, NH 03755 1,000 *
K.1,000K.
THOMAS KEMP 80 South Main Street, Hanover, NH 03755 23,537(a)(c) .3%(e) 23,679 80,799
GORDON S. MACKLIN 80 South Main Street, Hanover, NH 03755 8,000 .1%8,000
FRANK A. OLSON 80 South Main Street, Hanover, NH 03755 500 *500
MICHAEL S. PAQUETTE 221 12,750
ALLAN L. WATERS 80 South Main Street, Hanover, NH 03755 5,900(a) *3,272 20,824
ARTHUR ZANKEL 80 South Main Street, Hanover, NH 03755 12,600(d) .2%12,600 12,600
All directorsDirectors and executive officersExecutive Officers as a group 1,521,704(a)(b)(c)(d) 19.3%
=============================================================================================================(17 persons) 1,833,428 2,093,532
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
* Represents(a) The beneficial ownership positions of Messrs Jack Byrne, Patrick Byrne and
all Directors and Executive Officers as a group represent 25.1%, 1.8% and
26.7% of the total Shares outstanding at March 30, 1998, respectively. All
other Directors and Executive Officers beneficially owned less than .1%1% of
the total Shares outstanding Shares.
(a) Does notat that date. Percentages are determined
based on the beneficial ownership provisions specified in Rule 13d-3(d)(1)
of the Exchange Act.
(b) Shares shown as economically owned by Directors and Executive Officers
include Phantom Sharesunvested performance share awards and vested phantom shares held
pursuant to the Deferred Compensation Plan and the Deferred Benefit Plan.
See "Compensation Plans - Fund American Retirement Plans". (b)Each
performance share and each phantom share are economically equivalent to one
Share. Unvested performance shares outstanding at March 30, 1998
represented 8,500, 19,500, 10,000, 0, 21,500, 35,000, 10,600, 0 and 119,100
Shares for Messrs. Barrette, Baxter, Jack Byrne, Cochran, Davis, Kemp,
Paquette, Waters and all Directors and Officers as a group, respectively.
(c) Includes warrants to purchase 1,000,000 Shares, which warrants Mr. Byrne
purchased from American Express in 1985. The warrants are exercisable at
$21.66 per Share through January 2, 2002; however, Mr. Byrne shall not
exercise any of the warrants until the day after his employment by the
Company is terminated. Mr. Byrne has sole voting and investment power (or
shares such power with his spouse) with respect to the Shares for which he
claims beneficial ownership.2002. Does not include 146,5006,500 Shares
donated to charitable foundations for which Mr. Byrne disclaims beneficial
ownership, but for which his spouse retains voting power.
(c)(d) The individual ownership positions of Mr. Jack Byrne and Mr. Patrick Byrne
each include 55,000 Shares owned by BYRNE & sons lp, a partnership in which
they share beneficial ownership and control. The 55,000 Shares owned by
BYRNE & sons lp have been included only once in arriving at Shares owned by
all Directors and Executive Officers as a group.
(e) Includes currently exercisable stock options held by Mr. Kemp to purchase
2,000 Shares.
(d) Does not include 56 Shares for which Mr. Zankel disclaims beneficial
ownership. First Manhattan Co., a partnership in which Mr. Zankel is Co-
Managing Partner, has investment and/or voting discretion with respect to
such Shares.
(e) Determined based on the beneficial ownership provisions specified in Rule
13d-3(d)(1) of the Exchange Act. Except to the extent indicated above, all
executive officers and directors have (or share with their spouse) sole
voting and investment power with respect to the Shares for which they claim
beneficial ownership.
COMPENSATION OF DIRECTORS
Directors who are not officers of Fund American received a retainer of
$45,000$48,000 for 19961997 (or in the case of Messrs. Jack Byrne and Patrick Byrne, a pro
rata amount for less than a full years' service) and a fee of $1,000 for each
Board meeting attended. Messrs. Jack Byrne, Clark, Jr. and Macklin also
received an additional retainer of $3,000 for 19961997 as Chairman of the Board,
Chairman of the Audit Committee and Chairman of the Compensation Committee and
Human Resources Committee, respectively. Each non-employee director also
received an additional $1,000 for each committee meeting attended. In addition,
Messrs.Mr. Cochran and MacklinMr. Patrick Byrne received $16,000 and $33,500, respectively,a retainer of $18,000 for 1997 for
their service as directors on certaina director of White Mountains and meeting fees of up to $1,750
per meeting attended. For 1998, Mr. Jack Byrne will receive a $100,000
all-inclusive annual retainer for his services as Chairman of the Board and his
9
participation in Fund AmericanAmerican's various committees and subsidiary boards.boards of
directors. It is expected that Messrs. Clark and Zankel will become Advisory
Directors to the Board upon their retirement in May 1998 and are expected to
each receive a $10,000 retainer per annum for their services in this capacity.
Any non-management director who retires from the Board with at least five
years of service as a director of the Company is entitled to an annual
retirement benefit equal to 50% of the amount of the annual retainer for the
year in which the retirement occurs. Eligible directors are entitled to receive
the annual benefit for a period of years equal to the number of years of service
or, if sooner, until death.
Directors who are officers of Fund American do not receive any compensation
for their services as directors.
7
COMPENSATION OF EXECUTIVE OFFICERS
The following tables set forth certain information regarding the salary,
incentive compensation and benefits paid by Fund American to its Chief Executive
Officer, its four most highly compensated executive officers other than the
Chief Executive Officer and antwo executive officerofficers who retired in 1996are no longer executive
officers of the Company (collectively, the "Named Executive Officers").
Summary Compensation TableSUMMARY COMPENSATION TABLE
The following table reflects the cash and non-cash compensation for the
Named Executive Officers.
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Long-term
Annual compensation Long-term compensation
-------------------------------------- --------------------------------------------- -----------------------
Awards Payouts
----------- ----------------- -------
Other
annual
Name and compen- Options/ LTIP All other
principal position Year Salary Bonus sation SARs (#) payouts (a) compensation (b)
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
John J. Byrne 1996 $425,000 $240,000K. THOMAS KEMP 1997 $312,692 $241,500 $ 0 0 $3,552,413 $139,288(c)
Chairman,$1,152,957 $164,948
President &and 1996 288,300 171,000 0 0 1,896,903 135,455
CEO 1995 222,000 116,000 0 0 130,444 87,094
JOHN J. BYRNE 1997 307,692 227,500 0 0 1,291,250 0
President and CEO 1996 425,000 240,000 0 0 3,552,413 139,288
(retired October 5, 1997) 1995 550,000 247,500 0 0 724,688 202,370(c)
Chief Executive Officer 1994 550,000 74,000202,370
TERRY L. BAXTER 1997 195,000 200,000 0 0 516,500 65,964
President of 1996 194,200 200,000 0 0 739,688 47,238
White Mountains 1995 162,500 63,000 0 0 0 139,999(c)
K. Thomas Kemp 1996 288,300 171,00049,944
10
MORGAN W. DAVIS 1997 233,462 155,000 0 0 1,896,300 135,455(c)
Executive1,475,770 25,708
Senior Vice 1995 222,000 116,000 0 0 130,444 87,094(c)
President 1994 180,000 30,000of 1996 218,000 112,500 0 0 0 30,366(c)
Allan22,309
White Mountains 1995 180,000 90,000 0 0 0 54,744
ALLAN L. WatersWATERS 1997 223,558 0 0 0 0 33,000
Senior Vice President and CFO 1996 242,500 175,000 0 0 1,817,093 76,760(c)
Senior Vice President &76,760
(resigned October 8, 1997) 1995 200,000 107,000 0 0 159,431 41,320(c)
Chief Financial Officer 1994 175,000 40,00041,320
MICHAEL S. PAQUETTE 1997 123,423 97,500 0 0 387,375 15,344
Senior Vice President and 1996 115,600 70,500 0 0 810,735 10,980
Controller 1995 102,700 55,000 0 0 14,494 17,350
RAYMOND BARRETTE 1997 28,846 25,000 0 0 0 17,791(c)
Terry L. Baxter28,769
Executive Vice President and CFO 1996 194,200 200,000 0 0 739,688 47,238(c)
President of FAE, 1995 162,500 63,000 0 0 0 49,944(c)
Non-Executive
Chairman of Source One 1994 150,000 24,000 0 0 0
33,536(c)
James A. Conrad 1996 237,936 110,000 7,481(b)(began November 17, 1997) 1995 0 0 7,500(d)
President & Chief Executive 1995 222,627 38,000 40,034(b) 0 0 4,500(d)
Officer of Source One 1994 219,212 75,000 32,718(b) 0 0
4,500(d)
Robert W. Richards 1996 116,829 0 4,652(b) 0 0 442,500(e)
Chairman of 1995 218,059 36,000 32,099(b) 0 0 4,500(d)
Source One (retired 1996) 1994 211,528 72,000 25,295(b) 0 0 4,500(d)
==================================================================================================================================- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
(a) Includes cash payments and the total market value of awards distributed.
(b) The amounts for 1996, 1995 and 1994, respectively, include $2,309, $32,578
and $25,638 for Mr. Conrad, and $2,252, $23,661 and $18,611 for Mr.
Richards, reflecting interest reimbursements on amounts paid to purchase
investment contracts with stock appreciation rights ("SARs") and
reimbursements of automobile expenses.
(c) Amounts for 1997, 1996 1995 and 19941995 primarily represent principal credited to
the Deferred Benefit Plan. The amounts for 1997, 1996 1995 and 1994,1995,
respectively, also include: $61,900, $54,230 and $16,625 for Mr. Kemp; $0,
$38,500$0 and $35,500$38,500 for Mr. Byrne; $54,230,
$16,625$20,300, $22,380, and $0$16,000 for Mr. Kemp;Baxter
and $33,000, $35,500 $0 and $0 for Mr. Waters and $22,380,
$16,000 and $0 for Mr. Baxter in annualized director fees and retainers
paid by companies for which Fund American is entitled to board
representation as a result of the Company's sizable ownership position in
such companies.
(d) Represents amounts allocated to the accounts of Messrs. Conrad and Richards
pursuant to Source One's employee stock ownership plan.
(e) Represents post-retirement consulting fees paid to Mr. Richards for the
period from June 1996 through December 1996 of $42,500 and a payment
pursuant to a agreement between Mr. Richards and Source One dated June 5,
1996. See "Other Compensation Arrangements".
811
Options and WarrantsOPTIONS AND WARRANTS
The following table summarizes, for the Named Executive Officers, exercises
of stock options and warrants during the Company's latest fiscal year, and the
number and in-the-money value of stock options and warrants outstanding as of
the end of the fiscal year. The Company has not issued stock options since
1990.
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1996
-------------------------------------------------------------------------1997
Stock option, warrant and -----------------------------------------------------------
SAR exercises during the Number of unexercised stock In-the-money value of all
exercises during the year ended December 31, stock options, warrants outstanding stock options,
December 31, 1996(a)1997 (a) and SARs (a) warrants and SARs (a)
--------------------------------------------------------- --------------------------- ---------------------------
Shares Value Not Not
Name acquired realized Exercisable exercisable Exercisable exercisable
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
K. Thomas Kemp 0 $ 0 3,000(b) 0 $ 257,000(b) 0
John J. Byrne 0 $ 0 1,000,000 0 $72,964,250(d)98,214,250(c) $0
K. Thomas Kemp 0 0 3,000(c) 0 181,500(c) 0
Allan L. Waters 0 0 1,500(c) 0 84,250(c) 0
Terry L. Baxter 0 0 0 0 0 0
James A. Conrad 12,800 92,432(b) 4,000 0 121,909 0
RobertMorgan W. Richards 18,804 151,020(b)Davis 0 0 0 0 ====================================================================================================================================0 0
Allan L. Waters 1,500(b) 88,125(b) 0 0 0 0
Michael S. Paquette 0 0 0 0 0 0
Raymond Barrette 0 0 0 0 0 0
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
(a) Unless otherwise noted, amounts represent options, warrants or SARs
pertaining to Fund American Shares.
(b) Represents the exercise of an in-the-money SAR attached to an investment
contract. The investment contracts were awarded to Messrs. Conrad and
Richards in 1993 in exchange for all their shares of Source One common
stock.
(c) Amounts include 1,000 and 500 stock options for Messrs. Kemp and Waters,
respectively, and $44,260$69,260 and $21,095$23,595 of in-the-money value for Messrs.
Kemp and Waters, respectively, pertaining to stock options to acquire from
the Company Shares of Common Stock of White River ("White River Shares").
Such stock options were issued as a result of the distribution of
approximately 74% of the outstanding White River Shares to Fund American's
shareholders in December 1993 (the "Distribution").
(d)1993.
(c) Amount is presented net of Mr. Byrne's basis in his unexercised warrants.
The warrants are exercisable through January 2, 2002; however, Mr. Byrne
shall not exercise any of the warrants until the day after his employment
by the Company is terminated.
Long-Term Incentive Plans2002.
LONG-TERM INCENTIVE PLANS - Awards in Last Fiscal YearAWARDS IN LAST FISCAL YEAR
The following table summarizes the Incentive Plan awards made to the Named
Executive Officers during the latest fiscal year. Such awards consisted
entirely of performance shares. Since 1991, all long-term incentive
compensation awards have been in the form of performance shares.
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Number of
performance Performance
shares period for Estimated future payouts in Shares:
awarded payoutshares period for -----------------------------------
Name awarded(a) payout Threshold Target Maximum
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
K. Thomas Kemp 10,000 3 yrs. 0 10,000 20,000
John J. Byrne 5,000(a)5,000 3 yrs. 0 5,000 5,000
K. Thomas Kemp 15,000(a)10,000
Terry L. Baxter 6,000 3 yrs. 0 15,000 15,0006,000 12,000
Morgan W. Davis 6,000 3 yrs. 0 6,000 12,000
Allan L. Waters 11,000(a)(b) 6,000 3 yrs. 0 11,000 11,000
Terry L. Baxter 7,000(a) 3 yrs. 0 7,000 7,000
James A. Conradyrs 0 0 0
Michael S. Paquette 2,600 3 yrs 0 2,600 5,200
Raymond Barrette 1,000 3 yrs 0 Robert W. Richards 0 0 0 0 0
========================================================================================1,000 2,000
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
(a) Such performance shares are payable upon completion of pre-defined business
goals and are payable in cash based on the market value of Shares at the
time of payment. The target"Target" performance criteria for Messrs. Byrne, Kemp,
Waters and Baxter's 1996the 1997 performance share
award is the attainment of a corporate annualized return on equity ("ROE")
of 13%. The determination of ROE considers the rate of growth of
12
the book value, market value and economic value of Shares with dividends
reinvested. At a ROE equal to or in
excess of 13%, the performance shares will become 100% payable. At aan ROE of 6% or less than 13%("Threshold") the percentage of
performance shares payable could declinewill be 0% and at an ROE of 20% or more
("Maximum") the percentage of performance shares payable will become 200%
of Target. Straight-line interpolations are used for ROE results that fall
between Threshold and Target or between Target and Maximum.
(b) Mr. Waters forfeited the right to 0%.
9receive any future payouts of performance
shares upon his voluntary resignation in October 1997.
13
Other Compensation ArrangementsOTHER COMPENSATION ARRANGEMENTS
At the Company's 1995 Annual Meeting, shareholders approved a five-year
employment agreement between the Company and John J. Byrne (the "Agreement").
The Agreement principally callscalled for: (i) Mr. Byrne to continue to serve as
Chairman and Chief Executive Officer of the Company until December 31, 1999 at
an annual salary of no more than $550,000; (ii) an extension of the term of
1,000,000 warrants he currently holds to purchase Shares to January 2, 2002;
(iii) Mr. Byrne to forego the exercise of the 1,000,000 warrants extended until
the day after his employment by the Company has ended; and (iv) a Company
guarantee of a recourse loan obtained by Mr. Byrne from a third party, in an
amount up to $15.0 million. As of March 1, 1996,In 1997 the Board agreed to release Mr. Byrne's annual salary was
set at $400,000.
InByrne from
his remaining employment obligations under the Agreement in connection with the June 1996 retirement of Mr. Richardshis
desire to retire as Chairman of
Source OnePresident and pursuant to a certain agreement among him and Source One dated
JuneChief Executive Officer on October 5, 1996, Source One agreed to pay Mr. Richards (who is currently 54 years
of age) the following: (i) retirement benefits that would have accrued to Mr.
Richard's benefit under Source One's qualified pension plan as if he had retired
at age 58 (representing 30 years of credited service), (ii) a consulting fee of
$5,000 per month from June 1996 to December 1996, (iii) a lump sum payment of
not less than $400,000 in satisfaction of any claims he would have been entitled
to pursuant to Source One's various incentive compensation plans, and (iv)
certain medical and dental benefits.1997.
Pursuant to the Incentive Plan, under some circumstances such as a "Change
in Control" followed by a termination without cause, constructive termination or
an "Adverse Change" in the Incentive Plan, stock options will generally become
fully exercisable and performance shares will become partially or fully payable.
Such circumstances are more fully described in the Incentive Plan.
Certain TransactionsCERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For corporate travel purposes Fund American jointly owns two short-range
aircraft with Haverford Utah, LLC ("Haverford"). Messrs. Jack Byrne, Patrick
Byrne and Kemp are principals of Haverford. Both aircraft were acquired from
unaffiliated third parties during 1996. In exchange for Haverford's 20%
ownership interest in the aircraft, Haverford contributed capital equal to 20%
of the total initial cost of the aircraft and Haverford bears the full costs of
its usage and maintenance of the aircraft pursuant to a Joint Ownership
Agreement dated September 16, 1996.
Prior to the Joint Ownership Agreement, Fund American was a party to a "dry
lease" agreement dated January 2, 1995 for the use of aircraft owned by
Haverford Transportation Inc. ("HTI") for corporate travel purposes. Messrs.
Jack Byrne and Kemp are the sole shareholders of HTI. During 1996 1995 and 19941995 Fund
American paid HTI a total of $279,739 $183,563 and $190,150,$183,563, respectively, pursuant to
the dry lease arrangement. The terms of the agreement provided for the use of
HTI's aircraft (excluding pilot and fuel) for a fixed hourly charge of $200 for
a single engine piston aircraft and $800 to $1,000 for a twin engine turbine
aircraft. Based on the Company's experience in operating comparable aircraft,
the hourly operating charges incurred by Fund American pursuant to the HTI dry
lease are considered to be representative of the actual hourly costs of
operating HTI's aircraft. Fund American believes that its arrangement with HTI
was on terms that were no less favorable to Fund American than would generally
be available if secured through an arrangement with an unaffiliated third party.
In December 1993, BYRNE & sons, l.p. ("BYRNE & sons"), a partnership in which
Mr. Byrne is the sole general partner, made an investment in the Merastar
Partners Limited Partnership and the Southern Heritage Limited Partnership (the
"Partnerships"). The Partnerships are involved in various property and casualty
insurance ventures. Shortly after making its investment, BYRNE & sons offered
one-third of the investment in the Partnerships to Fund American on equal terms
and conditions. In May 1994 Fund American accepted the offer and paid BYRNE &
sons a total of $338,558 representing reimbursement for one-third of Byrne &
sons' cost for its investment in the Partnerships including interest of $5,225
at a 6.0% annual rate.
10
Compliance With SectionCOMPLIANCE WITH SECTION 162(m) of the Internal Revenue CodeOF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for certain compensation over $1
million. The Compensation Committee intends to preserve the Company's deduction
for compensation paid by mandating that all Named Executive Officers
automatically defer any potentially nondeductible compensation payable in any
given year in excess of $1 million into the Deferred
14
Compensation Plan until such a time as the compensation would be fully
deductible by the Company.
REPORTS OF THE COMPENSATION
COMMITTEES ON EXECUTIVE
COMPENSATION
Salary and bonus compensation for Messrs. Byrne, Kemp, Waters and Baxter is established by the Human Resources
Committee of the Board. Stock based compensation for Messrs. Byrne, Kemp, Waters and Baxter is established by the
Compensation Committee of the Board.
All compensation matters for Messrs.
Conrad and Richards are established by the Human Resources Committee of the
Source One Board of Directors (the "Source One Committee") which is comprised of
Messrs. Terry L. Baxter, Gordon S. Macklin and Roger K. Taylor (Chief Operating
Officer of FSA).
Fund American CompensationFUND AMERICAN COMPENSATION
The Human Resources Committee and the Compensation Committee (collectively,
the "Committees") are comprised entirely of certain non-employee directors. The
Committees have responsibilityare responsible for developing, administering and monitoring the
executive compensation policies of the Company.
Fund American's executive compensation policies are designed with one goal
in mind - maximization of shareholder value over long periods of time. The
Committees believe that this goal is best pursued by utilizing a
pay-for-performance program which serves to attract and retain superior
executive talent and provide management with performance-based incentives to
maximize shareholder value. Through the compensation program, the Committees
seek to maximize shareholder value by aligning closely the financial interests
of Fund American's management with those of the Company's shareholders.
The Committees believe that the most appropriate indicator of shareholder
return is the Company's ROE as measured by growth in market value, book value
and economic value per Share, each measured with dividends reinvested. The
Committees believe that, over long periods of time, maximizing the Company's ROE
will optimize shareholder returns.
The Committees believe that the performance-based compensation of the
Company's executive officerskey employees should be payable only if the Company achieves truly
15
superior returns for its shareholders. Therefore, the target of many of Fund
American's performance-based compensation programs are directly linked to
achievement of an annualized ROE for the Company at least equal to the market
yield available from ten-year United States Treasury notes plus 700 basis
points, a total return which has been in the 13% to 15% range in recent years.
The Committees believe that such returns are a challenging target for the
Company in its current form.
Compensation of Fund American's management team, including the Named
Executive Officers, consists primarily of three components: base salary, annual
bonus and long-term incentive awards.
When establishing each element of compensation, the
Committees consider the total compensation earned by or potentially available to
each member of management.
Human Resources Committee
- -------------------------
Base Salary.HUMAN RESOURCES COMMITTEE
BASE SALARY. Base salary for each Named Executive Officer is established
annually, generally as of March 1. When establishing base salaries of the Named
Executive Officers, the Human Resources Committee considers numerous factors
including: qualifications of the executive; the corporate responsibilities of
the executive; the executive's performance since his or her last salary
adjustment; and, for all executives except Mr. Byrne,Kemp, the recommendations of Mr.
Byrne.
11
Annual Bonus.Kemp.
ANNUAL BONUS. For 19961997 the target annual bonus pool for all eligible employeesofficers of the
Company was equal to 50% of eligible base salary at a 13% annual ROE.
The aggregate size ofROE and the
annualmaximum bonus pool could vary from 0%attainable was equal to 100% of eligible salary.base salary at a 20%
annual ROE. When establishing the aggregate size of the annual bonus pool, the
Human Resources Committee considers numerous factors including performance
versus the objectives set forth in the Company's Annual Business Plan, in
particular the Company's financial performance for the latest fiscal year as
measured by ROE, and the recommendations of Mr. Byrne.Kemp. The Human Resources
Committee reviews the Annual Business Plan with management near the beginning of
the year and approves the plan after changes required by the Human Resources
Committee, if any, are made.
After establishing the aggregate size of the annual bonus pool, the
Human Resources Committee then considers the distribution of the bonus pool
among the executive officers and certain other key employees of the Company. Each participant's allocation of the
pool is determined after considering numerous factors including individual
achievements as compared to objectives included in the Annual Business Plan,
the contribution of such achievements to the Company's overall financial
performance, and the recommendations of Mr. Byrne. Mr. ByrneKemp. The Chief Executive Officer
receives an annual bonus,bonuses, as a percent of his salary in effect at the time the
bonus percentage is determined, equal to no more than the average bonus percentage
received by all other employeesofficers eligible to participate in the bonus pool. For
19961997, Messrs. Jack Byrne and Kemp each received a bonus that was determined
using the average bonus percentage for the period in which they served as
Chief Executive Officer.
For 1997 the Human Resources Committee determined that the financial
results of the Company warranted a bonus pool equal to 60%65% of aggregate base
salary. The principal factors considered by the Human Resources Committee in
determining the size of the 19961997 pool were: (i) the Company's 19961997 ROE
performance of 27.4%13.1%, as measured by change in economic value per share, versus
a 13% target ROE (the predominant factor); (ii) the Company's 19961997 ROE
performance of 29.6%27.3% as measured by change in market value per share; (iii) the
Company's 1997 ROE performance of 13.5%, as measured by change in book value per
share; (iv) the progress made in re-
deployingre-deploying the Company's passive investment
portfolio into strategic operating investments; and (iv)(v) overall favorable
results versus certain
16
specific objectives contained in the 19961997 Annual Business Plan, partially offset by; (v)
less than target ROE performance of 10.0%, as measured by change in book value
per share.
GordonPlan.
GORDON S. Macklin,MACKLIN, Chairman
HowardPATRICK M. BYRNE
HOWARD L. Clark
HowardCLARK
HOWARD L. Clark, Jr.
RobertCLARK, JR.
ROBERT P. Cochran
GeorgeCOCHRAN
GEORGE J. Gillespie,GILLESPIE, III
FrankFRANK A. Olson
Arthur Zankel
Compensation Committee
- ----------------------
Long-Term Incentive Awards.OLSON
ARTHUR ZANKEL
COMPENSATION COMMITTEE
LONG-TERM INCENTIVE AWARDS. The Incentive Plan provides for granting to
executive officers and certain other key employees of the Company various types
of stock-based incentive awards including stock options and performance shares.
Stock options are rights to purchase a specified number of Shares at or
above the fair market value of Shares at the time the option is granted. Stock
options generally vest over a four-year period and expire no later than ten
years after the date on which they are granted.
Performance shares are conditional grants (payable subject to the
achievement of specific financial goals) of a specified maximum number of
Shares, payable generally at the end of three- to five-year periods or as
otherwise determined by the Compensation Committee. Although performance shares
are denominated in Shares at market value, they are generally paid in cash.
The Compensation Committee believes that stock-based awards made pursuant
to the Incentive Plan are the most effective method of providing incentives for
management to strive to maximize shareholder value over the long term. The
Compensation Committee's conclusion is based on the following factors: (i) such
awards vest or are earned over multi-year periods; (ii) such awards are
generally made in the form of Shares or derivatives thereof, which helps to
align the interests of management with those of the Company's shareholders; and
(iii) the majority of Incentive Plan awards made over the last three fiscal
years are linked to the achievement of a 13% to 15% ROE over the applicable
performance period.
1217
In 19961997 Messrs. Kemp, Jack Byrne, Kemp,Baxter, Davis, Waters, Paquette and
BaxterBarrette were granted 10,000, 5,000, 15,000,
11,0006,000, 6,000, 0, 2,600 and 7,0001,000
performance shares, respectively, which were awarded by the Compensation
Committee at its February 21, 1996 meeting.Committee. The performance period for such awards began on January 1, 19961997 and
will continue through December 31, 1998.1999. The target"target" performance criteria for Messrs. Byrne, Kemp, Waters and
Baxter's 1996the 1997
performance share award is the attainment of a ROE of 13% ROE.. The determination of
ROE considers the rate of growth of the book value, market value and economic
value of Shares with dividends reinvested. At a "threshold" ROE of 6% or less
the percentage of performance shares payable will be 0% and at a "maximum" ROE
of 20% or more the percentage of performance shares payable will become 200% of
target. Straight-line interpolations are used for ROE results that fall between
threshold and target or between target and maximum.
As of December 31, 19961997 Messrs. Kemp, Jack Byrne, Kemp,Baxter, Davis, Paquette,
Waters and BaxterBarrette had, pursuant to a 19931995 grant of performance shares, 30,000, 5,400, 6,6008,929,
10,000, 4,000, 11,429, 3,000, 0 and 0 performance shares eligible for payout,
respectively, on December 31, 19961997 subject to the attainment of a 15% target
ROE. The performance shares eligible for payout in 1996 represented
60% of the performance shares originally granted in 1993. During the 19931995 to 19961997 performance period, the Company attained an ROE of
15.2%14.6%, 16.0%20.1% and 10.4%14.9% as measured by the change economic value (the predominant
factor), market value and book value, respectively, calculated in accordance
with the Incentive Plan. In light of the ROE's attained, the Compensation
Committee at its January 24,
1997February 23, 1998 meeting determined that 91%100% of such
performance shares would become immediately payable and that all unearnedwere paid on February
26, 1998. The performance shares grantedshare payouts are included in 1993
would be cancelled. As a resultthe Summary
Compensation Table. Outstanding performance share awards of certain anti-dilution provisions ofemployees who
voluntarily left the Incentive Plan which were triggered by the Distribution, such performance shares
paid in JanuaryCompany during 1997 were valued as being equal to the market value of one Fund
American Share plus one-half the market value of one White River Share.
As of December 31, 1996 Messrs. Byrne, Kemp, Waters and Baxter had, pursuant
to a 1994 grant of performance shares, 0, 17,000, 14,000 and 10,000 performance
shares eligible for payout on December 31, 1996 subject to the attainment of a
13% target ROE. The performance shares eligible for payout in 1996 represented
100% of the performance shares originally granted in 1994. During the 1994 to
1996 performance period, the Company attained an ROE of 14.3%, 8.4% and 6.8% as
measured by the change economic value (the predominant factor), market value and
book value, respectively, calculatedcancelled without payment in
accordance with the terms of the Incentive Plan.
In
light of the ROE's attained, the Compensation Committee at its January 24, 1997
meeting determined that 75% of such performance shares would become immediately
payable and that all unearned performance shares granted in 1994 would be
cancelled. Such performance shares paid in January 1997 were valued as being
equal to the market value of one Fund American Share.
GordonGORDON S. Macklin,MACKLIN, Chairman
HowardPARTRICK M. BYRNE
HOWARD L. Clark
RobertCLARK
ROBERT P. Cochran
FrankCOCHRAN
FRANK A. Olson
Source One Compensation
Source One's compensation programs include three components: base salary,
annual bonus and long-term incentive awards. Emphasis is placed on the two
performance-based components -- annual bonus and long-term incentive awards.
Maximization of shareholder return, as measured by certain indicators of Source
One's financial performance selected by the Source One Committee, are the
primary factors used by the Source One Committee to determine pay-for-
performance compensation for Messrs. Conrad and Richards.
The Source One Committee also considers the relative achievement towards goals
established in Source One's Annual Business Plan when determining compensation
amounts for Messrs. Conrad and Richards. Source One's Annual Business Plan is
submitted to, reviewed by and approved by the Source One Board of Directors near
the beginning of each year. Copies of the Source One Annual Business Plan are
then provided to the Fund American Board.
Base Salary. The philosophy of Source One's salary program is to provide
individual salaries that properly reflect the responsibilities of each position
and assure that salary levels maintain a competitive relationship while offering
appropriate recognition for performance. The base salaries of Messrs. Conrad and
Richards are considered and established annually by the Source One Committee.
Among the factors considered by the Source One Committee are the qualifications
of the executive, the corporate responsibilities of the executive, the
performance of the executive since his or her last salary adjustment, and the
recommendations of Mr. Baxter.
13
Annual Bonus. Annual bonuses are paid under an incentive compensation plan
which is designed to attract and retain the services of selected key officers
who are in a position to make a material contribution to the successful
operation of Source One. Incentive compensation awards are made on the basis of
individual performance during the plan year from an award pool. When determining
the amounts to be awarded to a participant (including Messrs. Conrad and
Richards), the Source One Committee considers each individual's contribution
towards attainment of goals established in Source One's Annual Business Plan.
These goals are principally focused towards the achievement of specified
operating earnings and economic return on equity ("EROE") targets. For 1996, the
Source One Committee determined that the financial results of Source One
warranted a bonus pool of 25%. The principal factors considered by the Source
One Committee in determining the size of the 1996 bonus pool were: (i) an
attained EROE for 1996 of 14.3% (the predominant factor), partially offset by;
(ii) reported operating earnings below Source One's 1996 Annual Business Plan;
and (iii) overall favorable results versus certain specific objectives contained
in Source One's 1996 Annual Business Plan.
Long-Term Incentive Awards. These awards are made primarily pursuant to Source
One's performance share plan, the purpose of which is to advance the interests
of Source One's shareholder by providing equity-based incentives to certain key
employees. Payout of such awards is primarily based on the achievement of
certain predefined corporate EROE goals.
For 1996 there were no new stock-based awards made to Messrs. Conrad and
Richards. As of December 31, 1996 Messrs. Conrad and Richards held 4,000 and 0
SARs, respectively. The value of each SAR is equal to the positive difference
between (i) $86.625 and (ii) the closing price of one Share on the date
preceding the exercise of the SAR multiplied by a factor of 1.223. The SARs are
fully vested and expire upon termination of employment or upon exercise of their
related investment contracts to which the SAR is attached. The investment
contracts were awarded to Messrs. Conrad and Richards in 1993 in exchange for
all their shares of Source One common stock. During 1996 Messrs. Conrad and
Richards exercised a portion of their investment contracts and, as a result,
realized $92,432 and $151,020 in the form of in-of-the-money SARs, respectively.
As of December 31, 1996 Messrs. Conrad and Richards had 20,007 and 0
performance shares outstanding, respectively. The outstanding performance
shares may be earned based on a pre-defined fixed formula in four equal tranches
over three overlapping three-year periods. Each tranche remaining represents
6,669 and 0 performance shares at the target EROE for Messrs. Conrad and
Richards, respectively.
The actual EROE achieved for the first tranche, as measured over the
performance period beginning January 1, 1994 and ending December 31, 1996, was
determined to be 5.6% which was less than the required minimum EROE of 6.8%.
Accordingly, no performance shares were paid for 1996 and such performance
shares were cancelled. The performance period for the second tranche is January
1, 1995 through December 31, 1997, and the related minimum, target and maximum
EROE's are 8.8%, 14.8% and 21.8%, respectively. The performance period for the
third tranche is January 1, 1996 through December 31, 1998, and the related
minimum, target and maximum EROE's are 6.6%, 12.6% and 19.6%, respectively. The
performance period for the fourth tranche is January 1, 1997 through December
31, 2000, and the related minimum, target and maximum EROE's are 7.4%, 13.4% and
20.4%, respectively.
Terry L. Baxter, Chairman
Gordon S. Macklin
Roger K. Taylor
14OLSON
18
SHAREHOLDER RETURN GRAPH
The following graph shows the five-year cumulative total return for a
shareholder who invested $100 in Shares (New York Stock Exchange symbol "FFC")
at the close of business on December 31, 1991, assuming re-investment of
dividends. For comparison, cumulative returns for the five-year period ended
December 31, 1996,1997, are also shown for the Standard & Poor's 500 Stocks (Property
& Casualty) Capitalization Weighted Index ("S&P P&C") ,and the Standard & Poor's
500 Stocks Capitalization Weighted Index ("S&P 500") and the Standard & Poor's
Financial Services Index ("S&P FIN").
The S&P P&C has been presented below for the first time in the 1997 Proxy
Statement. The Company believes that this index provides a more relevant
comparison against the Company's performance than the S&P FIN given the fact
that the Company's investment in Source One (which is primarily a financial
services company) has significantly decreased in recent years and the Company's
investment in White Mountains (primarily a property and casualty insurance
company) has significantly increased over the same period. The Company intends
to present its performance only against the S&P P&C and S&P 500 in its future
filings.
[LINE GRAPH APPEARS HERE]
Five-Year Cumulative Total ReturnFIVE YEAR CUMULATIVE TOTAL RETURN
(value of $100 invested December 31, 1991)
[GRAPH]
1991
1992 1993 1994 1995 1996 ------------------------------------------------1997
FFC $100.0 $103.0 $134.9 $124.1 $128.4 $166.5$130.9 $120.5 $124.6 $161.6 $205.7
S&P P&C 100.0 117.1 115.0 120.7 163.4 198.598.2 103.0 139.5 169.5 246.6
S&P 500 100.0 107.6 118.5 120.0 165.1 203.1
S&P FIN 100.0 123.4 137.1 132.2 204.1 275.9
------------------------------------------------110.1 111.5 153.5 188.7 251.6
1519
COMPENSATION PLANS
Retirement Plans
All Named Executive Officers employed by the Company participate solely in
Fund AmericanRETIREMENT PLANS
In 1997 Messrs. Kemp, Baxter, Davis, Paquette and Barrette received
retirement plans. All Named Executive Officers employed by Source
One participate solely in Source One retirement plans.
Fund American Retirement Plans
In 1996 Messrs. Byrne, Kemp, Waters and Baxter participated inbenefits pursuant to the Deferred Benefit Plan, aan unfunded,
nonqualified, defined contribution plan established for the purpose of providing
retirement and postretirement benefits. The amount of annual contributions to
the Deferred Benefit Plan are determined using actuarial assumptions which, through 1994, were similar to thoseand are
based on the present value of Source One's
Retirement Plansthe benefit table figures presented below.
Eligible compensation (which are described below). In 1995 the Committee eliminated
the limit onincludes salary and bonus (previously equal to 135%bonus) is computed as the
average of salary) which is
considered to calculate annual contributions to the Deferred Benefit Plan.five highest paid consecutive years in the last ten years of
service. Participants in the Deferred Benefit Plan may choose between four
investment options for their plan balances.balances including Phantom Shares. Amounts
credited to the Deferred Benefit Plan accounts of such individuals have been
included in the Summary Compensation Table.
Each of
- ---------------------------------------------------------------------------------------------------
Eligible compensation Gross annual benefit paid as a straight-life annuity
- -------------------------- ---------------------------------------------------------------------
15 years 20 years 25 years 30 years 35 years
--------- --------- --------- --------- ---------
$125,000 $ 24,540 $ 33,137 $ 42,984 $ 52,831 $ 62,678
150,000 29,915 40,387 52,359 64,331 76,303
175,000 35,290 47,637 61,734 75,831 89,928
200,000 40,665 54,887 71,109 87,331 103,553
225,000 46,040 62,137 80,484 98,831 117,178
250,000 51,415 69,387 89,859 110,331 130,803
300,000 62,165 83,887 108,609 133,331 158,053
400,000 83,665 112,887 146,109 179,331 212,553
450,000 94,415 127,387 164,859 202,331 239,803
500,000 105,165 141,887 183,609 225,331 267,053
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Also in 1997 Messrs. Kemp, Jack Byrne, Baxter, Davis, Paquette, Waters,
Barrette and Cochran Kemp, Waters and Baxter may also participateparticipated voluntarily in the Deferred Compensation Plan.Plan,
an unfunded, nonqualified, deferred compensation savings plan. Pursuant to the
Deferred Compensation Plan, Executive Officers and Directors may defer all or a
portion of qualifying remuneration payable by Fund American. Amounts deferred
pursuant to the Deferred Compensation Plan are included in the Summary
Compensation Table. Participants in the Deferred Compensation Plan may choose
between four investment options including Phantom Shares for their plan
balances.
As of December 31, 1996 the account balances of Messrs. Byrne, Cochran, Kemp,
Waters and Baxter under both the Deferred Benefit Plan and Deferred Compensation
Plan included 27,171; 737; 4,436; 18,614 and 824 Phantom Shares, respectively.
Such Phantom Shares are payable only in cash.
Source One Retirement Plans
Mr. Conrad participates in Source One retirement plans under which they are
entitled to receive estimated annual retirement benefits in accordance with the
table shown below. The level of benefits shown in the table does not reflect a
reduction to be made based on compensation for which social security taxes were
paid by Source One on behalf of each participant.
- -------------------------------------------------------------------------------------------------------------
Gross annual benefit paid as a straight-life annuity
Average eligible compensation for five (to be reduced by .485% of average salary up to covered
highest paid consecutive years compensation, that is, the average of social security
in the last ten years of service wage bases for the 35 years prior to retirement)
- ------------------------------------------ ---------------------------------------------------------------
15 years 20 years 25 years 30 years 35 years
---------- --------- --------- --------- ---------
$125,000 $ 30,000 $ 40,000 $ 50,000 $ 60,000 $ 70,000
150,000 36,000 48,000 60,000 72,000 84,000
175,000 42,000 56,000 70,000 84,000 98,000
200,000 48,000 64,000 80,000 96,000 112,000
225,000 54,000 72,000 90,000 108,000 126,000
250,000 60,000 80,000 100,000 120,000 140,000
300,000 72,000 96,000 120,000 144,000 168,000
400,000 96,000 128,000 160,000 192,000 224,000
450,000 108,000 144,000 180,000 216,000 252,000
500,000 120,000 160,000 200,000 240,000 280,000
=============================================================================================================
16
Participants in the Source One retirement plans are eligible to receive normal
retirement benefits at age 65, reduced normal retirement benefits at age 55, or
a deferred vested benefit if they terminate employment prior to retirement but
after five years of service. Such benefits are based on each participant's
average eligible compensation for the five highest paid consecutive years in his
or her last ten years before retirement or termination and on total years of
credited service at retirement up to a maximum of 35 years. Annual eligible
compensation for Mr. Conrad includes base salary plus bonus received, but is
limited to not more than one and one-third of base salary in total. Benefits
for Mr. Conrad accrued under the Source One retirement plans are based on 1996
eligible compensation amounts of $150,000.
Benefits under the Source One retirement plans for a single person are
computed on a straight-life basis and benefits for a married person are
generally computed on a joint and 50% survivor basis, subject to each
participant's right to elect alternative survivor benefits.
As of December 31, 1996 Mr. Conrad had 13 whole years of credited service for
purposes of computing his benefits under the Source One retirement plans.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION IN
COMPENSATION DECISIONS
Fund American CommitteeFUND AMERICAN COMMITTEE
The Company notes the following relationships and transactions pertaining
to Messrs. Patrick Byrne, Clark, Jr., Cochran, Gillespie, Macklin and Zankel who
are members of the Compensation Committee and/or the Human Resources Committee.
Mr. Clark, Jr. is Vice Chairman of Lehman Brothers Inc. Lehman Brothers
Inc. has, from time to time, provided various services to Fund American
including investment banking services, brokerage services, underwriting of debt
and equity securities and financial consulting services.
Mr. Cochran is Chairman and Chief Executive Officer of FSA. As of December
31, 19961997 Fund American had a 23.0%24% voting interest in FSA. During 1996,1997, Mr. Kemp
served as the Chairman of FSA's compensation committee which determines Mr.
Cochran's compensation. FSA has also been retained by Fund American to manage
portions of its fixed maturity portfolio.
Mr. Gillespie is a Partner in the firm Cravath, Swaine & Moore, which has
been retained by Fund American from time to time to perform legal services.
Mr. Macklin is non-executive Chairman, President and CEO of White River. White River was
formerly a wholly-owned subsidiary of the Company. The Company currently owns
1,014,7501,014,250 White River Shares, or approximately 20.8%21% of the outstanding White
River Shares. Mr. Patrick Byrne is also a director of White River.
Mr. Zankel is Co-Managinga General Partner of First Manhattan Co. First Manhattan Co.
has provided brokerage, discretionary investment management and
non-
discretionarynon-discretionary investment advisory services to Fund American from time to
time.
Fund American believes that all the preceding transactions were on terms
that were reasonable and competitive. Additional transactions of this nature
may be expected to take place in the ordinary course of business in the future.
Source One Committee
Source One had no instances of compensation committee interlocks or insider
participation in compensation matters during 1996.
Certain FilingsCERTAIN FILINGS
Pursuant to SEC rules relating to the reporting of changes in beneficial
ownership of the Company, Mr. Jack Byrne inadvertently failedamended two Form 5 filings on January
17, 1998 that served to file a Form 4
pertaining to shares he gifted in Novembercorrect filings originally made during 1997 and 1995. Upon discovery of this
oversight, Mr. Byrne properly reported the transaction in 1996.
17
PROPOSAL 2
APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee of the Board has recommended KPMG Peat Marwick LLP
("KPMG") for appointment as the Independent Auditors of Fund American. Subject
to shareholder approval, the Board has appointed KPMG as Fund American's
Independent Auditors for 1997. Representatives1998. A representative from KPMG and Ernst & Young LLP
(the Company's auditors for 1996) will attend the 19971998
Annual Meeting and will be provided with the opportunity to make a statement and
will be available to answer appropriate questions.
The Board recommends a voteTHE BOARD RECOMMENDS A VOTE FOR ProposalPROPOSAL 2 approving the appointment ofAPPROVING THE APPOINTMENT OF
KPMG as Fund American's Independent Auditors for 1997.AS FUND AMERICAN'S INDEPENDENT AUDITORS FOR 1998.
OTHER MATTERS
Manner of Voting ProxiesMANNER OF VOTING PROXIES
Shares represented by all valid proxies received will be voted in the
manner specified in the proxies. Where specific choices are not indicated, the
Shares represented by all valid proxies received will
21
be voted: (i) for election of the nominees named earlier in this Proxy
Statement as directors; and (ii) for the appointment of KPMG as Independent
Auditors. Should any matter not described above be acted upon at the meeting,
the persons named in the proxy card will vote in accordance with their judgment.
The Board knows of no other matters which are to be considered at the 19971998
Annual Meeting.
Votes Required for ApprovalVOTES REQUIRED FOR APPROVAL
The proposals require a favorable vote of a majority of the votes actually
cast with respect thereto (excluding abstentions and Shares not voted).
Inspectors of ElectionINSPECTORS OF ELECTION
First Chicago Trust Company of New York, P.O. Box 2532, Jersey City, New
Jersey 07303-2532, has been appointed as Inspectors of Election for the 19971998
Annual Meeting. Representatives of First Chicago Trust Company of New York will
attend the 19971998 Annual Meeting to receive votes and ballots, supervise the
counting and tabulating of all votes and ballots, and determine the results of
the vote.
Costs of SolicitationCOSTS OF SOLICITATION
The solicitation of proxies will be made primarily by mail; however,
directors, officers, employees and agents of the Company may also solicit
proxies by telephone, telegram or personal interview. Solicitation costs will
be paid by the Company. Upon request, the Company will reimburse banks,
brokerage houses and other custodians, nominees and fiduciaries for their
reasonable expenses incurred in forwarding proxy materials to their principals.
Available InformationAVAILABLE INFORMATION
The Company and Source One are subject to the informational reporting
requirements of the Exchange Act. In accordance therewith, the Company files
reports, proxy statements and other information with the SEC, and Source One
files reports and other information with the SEC.
The Company will provide to each person to whom a copy of this Proxy Statement
is delivered, upon request and without charge, copies of all documents
(excluding exhibits) filed by the Company with theTHE COMPANY WILL PROVIDE TO EACH PERSON TO WHOM A COPY OF THIS PROXY
STATEMENT IS DELIVERED, UPON REQUEST AND WITHOUT CHARGE, COPIES OF ALL DOCUMENTS
(EXCLUDING EXHIBITS) FILED BY THE COMPANY WITH THE SEC. Written or telephone
requests should be directed to the Corporate Secretary, Fund American
Enterprises Holdings, Inc., 80 South Main Street, Hanover, New Hampshire
03755-
2053,03755-2053, telephone number (603) 643-1567.
1822
Proposals by ShareholdersWWW.FUNDAMERICAN.COM
All reports, including press releases, SEC filings and other information
for the 1998 Annual Meeting of ShareholdersCompany, its subsidiaries and its affiliates are available for viewing
or download at our new website. PLEASE VISIT US!
PROPOSALS BY SHAREHOLDERS FOR THE 1999 ANNUAL MEETING OF SHAREHOLDERS
If any shareholder that is a qualified holder of record of Shares having an
aggregate market value of at least $1,000 wishes to present a proposal for
action at the 19981999 Annual Meeting of Shareholders, such proposal must be
received by the Corporate Secretary at 80 South Main Street, Hanover, New
Hampshire 03755-2053, no later than February 27, 199828, 1999 in order to be considered
for inclusion in the Company's 19981999 Proxy Statement. Under the Company's
Bylaws, a shareholder proposal shall include (in addition to any requirements of
law): (i) a brief description of the proposal and the reasons for action upon it
at the 19981999 Annual Meeting of Shareholders (and in the event that the proposal
includes an amendment to the Company's Certificate of Incorporation, the
language of the proposed amendment); (ii) the name and address of the
shareholder making the proposal; (iii) a representation that the shareholder is
a qualified holder of record of Shares having an aggregate market value of at
least $1,000 and that the shareholder intends to appear at the meeting, in
person or by proxy; and (iv) any material interest of the shareholder in such
proposal.
By Order of the Board of Directors
DennisDENNIS P. Beaulieu,BEAULIEU, Corporate Secretary
March 29, 1997
1930, 1998
23
-----
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
P -----
R
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
P
THE COMPANY FOR THE O ANNUAL MEETING MAY 29, 1997
X
Y28, 1998
R
The undersigned hereby appoints John J. ByrneHoward L. Clark, Jr. and Gordon S. Macklin,K. Thomas Kemp,
0 and each of them, proxies with full power of substitution, to vote all
Shares of the undersigned at the 19971998 Annual Meeting of shareholders to
X be held May 29, 1997,28, 1998, and at any adjournment thereof, upon all subjects
that may properly come before the meeting including the matters described
Y in the proxy statement furnished herewith, subject to any directions
indicated on the reverse of this card or below. IF NO DIRECTIONSDIRECTORS ARE
GIVEN, THE PROXIES WILL VOTE FOR THE ELECTION OF DIRECTORS, FOR THE
APPOINTMENT OF KPMG PEATPEAR MARWICK LLP AS INDEPENDENT AUDITORS, AND AT
THEIR DISCRETION ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE
MEETING.
(Change of
Address/Comments)
Your vote for the Election of Directors may
be indicated on the ----------------
reverse. The following
----------------
Directors are being ----------------
nominated at this (Change of address/comments)
meeting ---------------- for election to terms (If you have
ending in
the year indicated. _____________________________
2001. Patrick M. Byrne _____________________________
K. Thomas Kemp
Gordon S. Macklin _____________________________
_____________________________
(If you have written in the
indicated.
above space, please mark the
corresponding box on the
reverse side of this card).
2000. Howard L. Clark, Jr.
Robert P. Cochran
Arthur Zankelcard.)
YOUR VOTE IS IMPORTANT! PLEASE SIGN AND DATE
ON THE REVERSE SIDE AND RETURN
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR OTHERWISE TO FIRST
CHICAGO TRUST COMPANY OF NEW YORK, POST OFFICE BOX 8085, EDISON, NEW
JERSEY 08818-9052.
SEE
REVERSE
SIDE
PLEASE RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE -----------
|SEE REVERSE|
| SIDE |
-----------
- --
X PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
This proxy when properly executed will
be voted in the manner directed herein.
If no directions are made, this proxy
will be voted FOR the Election of
Directors and FOR the Appointment of
Independent Auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
- --------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of Directors
(see reverse)
2. Appointment of Independent Auditors
FOR, except vote withheld from the following nominee(s)
- ------------
Change
of
Address
Comments
on
Reverse
Side
The signer hereby revokes all proxies heretofore given by the signer to vote at
said meeting or any adjournment thereof.
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
|
----- Please mark your | 278
| X | votes as in this CLEAR AREA |----
----- example.
This proxy when properly executed will be voted in the manner directed herein. If no directions
are made, this proxy will be voted FOR the Election of Directors and FOR the Appointment
of Independent Auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of -------- -------- 2. Appointment of -------- -------- --------
Directors | | | | Independent | | | | | |
(see reverse) | | | | Auditors | | | | | |
-------- -------- -------- -------- --------
FOR, except vote withheld from the Change of Address --------
following nominees(s): Comments on | |
Reverse Side | |
- ------------------------------------- --------
The signer hereby revokes all proxies heretofore
given by the signer to vote at said meeting or
any adjournment thereof.
Please sign exactly as name appears hereon. Joint
owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian,
please give full title as such.
__________________________________________________
__________________________________________________
SIGNATURE(S)DATE