SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
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Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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(1) Title of each class of securities to which transaction applies:
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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.
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Notes:
-----------------------------------------
Notice of 1996
Annual Meeting
of Shareholders
and Proxy Statement
-----------------------------------------
Table of Contents
- ---------------------------------------------------------------------------------------
Page
----
LETTER FROM THE CHAIRMAN........................................................ 1
NOTICE OF 1996 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............ 10
Shareholder Return Graph.................................................... 14
Compensation Plans.......................................................... 15
Compensation Committee Interlocks and Insider Participation
in Compensation Decisions.................................................. 16
PROPOSAL 2: APPOINTMENT OF INDEPENDENT AUDITORS............................... 16
OTHER MATTERS.................................................................. 17
=======================================================================================
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 activities are conducted principally
through its wholly-owned operating subsidiaries: (i) White Mountains Holdings,
Inc. (a newly formed insurance holding company) and its affiliates ("White
Mountains") and (ii) 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 property and casualty insurer; (iv) a 19% voting interest in
Financial Security Assurance Holdings Ltd. ("FSA"), a New York-based Aaa/AAA
writer of financial guarantee insurance; and (v) a 33% stake in Main Street
America Holdings, Inc., a unit of National Grange Mutual Insurance Company, a
New Hampshire-based property and casualty insurer.
Fund American also owns an 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 businesses in which management has
knowledge 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.
- -------- John J. Byrne
Fund Chairman
American
- --------
March 29, 1996
Dear Shareholders:
I would like to invite all shareholders to attend the 1996 Annual Meeting
of Fund American Enterprises Holdings, Inc., to be held on Thursday, May 16,
1996, at 9:00 a.m. This year's meeting will take place on the campus of
Dartmouth College, not far from our new corporate office in Hanover, New
Hampshire. I welcome you all to join me for the morning in our new home state.
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 two 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 03755-2053
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
NOTICE OF 1996 ANNUAL MEETING OF SHAREHOLDERS
May 16, 1996
March 29, 1996
Notice is hereby given that the 1996 Annual Meeting of Shareholders of Fund
American Enterprises Holdings, Inc. will be held on Thursday, May 16, 1996, at
9:00 a.m. at Byrne Hall, Amos Tuck School of Business at Dartmouth College,
Hanover, New Hampshire 03755-2053. At the meeting you will be asked to consider
and vote upon the following proposals:
(a) to elect two directors to Class II with terms ending in 1999;
(b) to appoint Ernst & Young LLP as Independent Auditors for the 1996 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 18, 1996, (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 April 22, 1996, until 12:00
noon on May 16, 1996, 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,
Dennis P. Beaulieu
Corporate Secretary
Shareholders are invited to complete and sign the accompanying proxy card
to be returned to Fund American Enterprises Holdings, Inc., c/o First Chicago
Trust Company of New York, Post Office Box 8085, Edison, New Jersey 08818-9052,
in the envelope provided, whether or not they expect to attend the meeting.
It is important that the enclosed proxy card be completed and returned
promptly.
2
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 1996
Annual Meeting of Shareholders (the "1996 Annual Meeting"), to be held on May
16, 1996. 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 1, 1996.
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 18,
1996, 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").
At the 1996 Annual Meeting Messrs. Byrne and Gillespie are nominated to be
elected to Class II with terms ending in 1999. The Board recommends a vote FOR
Proposal 1 which calls for the election of the 1996 nominees.
The current members and terms of each Class are set forth below:
- ---------------------------------------------------------
Director
Director Age since
- ---------------------------------------------------------
Class I - Terms Ending in 1998
Howard L. Clark 80 1985
K. Thomas Kemp 55 1994
Gordon S. Macklin 67 1987
- ---------------------------------------------------------
Class II - Terms Ending in 1996
John J. Byrne* 63 1985
George J. Gillespie, III* 65 1986
- ---------------------------------------------------------
Class III - Terms Ending in 1997
Howard L. Clark, Jr. 52 1986
Robert P. Cochran 46 1994
Arthur Zankel 64 1992
=========================================================
* Nominee at the 1996 Annual Meeting
The following information with respect to the principal occupation,
business experience and other affiliations of the nominees and directors has
been furnished to the Company by the nominees and directors.
Class I
Howard L. Clark was a director of the Company from 1981 until 1983 and
became a director again in 1985. Mr. Clark served as an advisor to the Board of
Directors of American Express 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. American Express and
its affiliates provide various services to Fund American from time to time. See
"Compensation Committee Interlocks and Insider Participation in Compensation
Decisions."
3
K. Thomas Kemp has been a director of the Company since November 1994. Mr.
Kemp has also served as Executive Vice President, Treasurer and Secretary since
1993, as Vice President, Treasurer and Secretary since 1991 and was a Vice
President of Fireman's Fund Insurance Company ("Fireman's Fund") from 1990 to
January 2, 1991. Prior to joining Fireman's Fund, Mr. Kemp was President of
Resolute Reinsurance Company. Mr. Kemp is also a director of FSA, White
Mountains, WMIC, Valley, Charter, American Direct Business Insurance, SDN
Bancorp, Main Street America Holdings, Inc. and Fund American Enterprises, Inc.
("FAE"), a wholly-owned subsidiary of the Company.
Gordon S. Macklin has been a director of the Company since 1987. Mr.
Macklin served as Chairman of Hambrecht & Quist, Inc., a venture capital and
investment banking company, from 1987 until 1992. Prior to that, Mr. Macklin
served as President of the National Association of Securities Dealers, Inc. from
1970. He is currently Chairman of White River Corporation ("White River"), a
director of Source One, MCI Communications Corporation, InfoVest Corporation,
MedImmune Inc., Fusion Systems Corporation and a trustee, director or managing
general partner (as the case may be) of 53 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."
Class II
John J. Byrne has been Chairman of the Company since 1985. Mr. Byrne has
also served as President and Chief Executive Officer since 1990, as Chief
Executive Officer from 1985 to 1990 and was Chief Executive Officer of Fireman's
Fund from 1989 through January 2, 1991. Prior to that, he was Chairman and
Chief Executive Officer of GEICO Corporation from 1976 to 1985. Mr. Byrne is
also a director of FAE, FSA, White Mountains and Terra Nova (Bermuda) Holdings
Ltd.
George J. Gillespie, III has been a director of the Company since 1986. He
is a Partner in the law firm of Cravath, Swaine & Moore, which position he has
held since 1963. He is also a director of The Washington Post Company. Cravath,
Swaine & Moore has been retained by Fund American from time to time to perform
legal services. See "Compensation Committee Interlocks and Insider
Participation in Compensation Decisions."
Class III
Howard L. Clark, Jr. was a director of the Company from 1986 until 1990,
and was an advisor to the Board from 1990 to 1993 when he was re-elected as a
director. He is Vice Chairman of Lehman Brothers Inc. and was Chairman and
Chief Executive Officer of Shearson Lehman Brothers, Inc. from 1990 to 1993.
Prior to joining Shearson Lehman Brothers, Inc., Mr. Clark was Executive Vice
President and Chief Financial Officer of American Express. He is also a
director of The Maytag Corporation, Plasti-Line, Inc. and 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."
Robert P. Cochran has been a director of the Company since November 1994.
Mr. Cochran was a founding principal of FSA and has served FSA in various
capacities since 1985. He has been President and Chief Executive Officer and a
director of FSA since 1990. He is also Chairman of Financial Security Assurance
Inc. and Financial Security Assurance (U.K.) Ltd. and is a director of White
Mountains.
Arthur Zankel has been a director of the Company since August 1992. He is
presently Co-Managing Partner of First Manhattan Co., an investment advisor and
broker-dealer. He has been a General Partner at First Manhattan Co. since 1965.
Mr. Zankel is also a director of The Travelers Inc. and VICORP Restaurants, Inc.
First Manhattan Co. has been retained by Fund American from time to time to
perform various brokerage and advisory services. See "Compensation Committee
Interlocks and Insider Participation in Compensation Decisions."
4
Committees of the Board of Directors
The Audit Committee, comprised entirely of nonemployee directors (Messrs.
Clark; Clark, Jr.; Gillespie; Macklin and Zankel), has general responsibility
for the oversight and surveillance of the accounting, reporting and financial
control practices of Fund American. The Audit Committee annually reviews the
qualifications of the Independent Auditors; makes recommendations to the Board
as to their selection; and reviews the plan, fees and results of their audit.
Mr. Clark, Jr. is Chairman of the Audit Committee.
The Human Resources Committee, comprised entirely of nonemployee directors
(Messrs. Clark; Clark, Jr.; Gillespie; Macklin and Zankel), oversees Fund
American's compensation and benefit policies and programs, including
administration of the Long-Term Incentive Plan (the "Incentive Plan"), the Fund
American Voluntary Deferred Compensation Plan (the "Deferred Compensation Plan")
and the Fund American Deferred Benefit Plan (the "Deferred Benefit Plan"). The
Human Resources Committee also sets the annual salaries and bonuses for elected
officers and certain other key employees. Mr. Macklin is Chairman of the Human
Resources Committee.
Meetings of the Board of Directors
During 1996 the following meetings of the Board were held: five meetings of
the full Board, including one special meeting; two meetings of the Audit
Committee; and two meetings of the Human Resources Committee. In 1995 each
director attended more than 75% of all meetings of the Board and each member of
the Audit Committee and the Human Resources Committee attended more than 75% of
all such committee meetings, except Mr. Clark, Jr. who was unable to attend one
of the two 1995 Audit Committee and 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.
5
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of March 18, 1996, there were 7,673,622 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 18,
1996, except as shown below:
Principal Holders of Shares
- -----------------------------------------------------------------------------------------------------------------
Number
of shares
Name and address of beneficial owner owned Percent (d)
- -----------------------------------------------------------------------------------------------------------------
JOHN J. BYRNE 80 South Main Street, Hanover, NH 03755 (a) 1,820,224 21.0%
HEINE SECURITIES CORPORATION 51 JFK Parkway Short Hills, NJ 07078 (b) 1,245,195 16.2%
ALLIANZ ASSET ACCUMULATION PLAN 777 San Marin Drive, Novato, CA 94998 (c) 861,394 11.2%
GSB INVESTMENT MANAGEMENT, INC. 301 Commerce Street, Fort Worth, TX 76102 (b) 804,530 10.5%
HARRIS ASSOCIATES L. P. 2 North LaSalle Street, Suite 500, Chicago, IL 60602 (b) 528,800 6.9%
=================================================================================================================
(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. 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 176,500 Shares donated to
charitable foundations for which Mr. Byrne disclaims beneficial ownership,
but for which his spouse retains voting power.
(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").
6
Beneficial Stock Ownership of Directors and Executive Officers
The following table sets forth, as of March 18, 1996, beneficial ownership of
Shares by each director of the Company, by each of the "Named Executive
Officers" as defined herein, and by all directors and executive officers as a
group.
- -----------------------------------------------------------------------------------------------------------------
Number of
Name and address of beneficial owner Shares owned Percent (d)
- -----------------------------------------------------------------------------------------------------------------
JOHN J. BYRNE 80 South Main Street, Hanover, NH 03755 1,820,224 (a) 21.0%
HOWARD L. CLARK 80 South Main Street, Hanover, NH 03755 2,000 *
HOWARD L. CLARK, JR. 80 South Main Street, Hanover, NH 03755 1,000 *
ROBERT P. COCHRAN 350 Park Avenue, New York, NY 10022 0 0
JAMES A. CONRAD 27555 Farmington Road, Farmington Hills, MI 48334 836 *
GEORGE J. GILLESPIE, III 80 South Main Street, Hanover, NH 03755 1,000 *
K. THOMAS KEMP 80 South Main Street, Hanover, NH 03755 23,537 (b) .3%
GORDON S. MACKLIN 80 South Main Street, Hanover, NH 03755 8,000 .1%
ROBERT W. RICHARDS 27555 Farmington Road, Farmington Hills, MI 48334 894 *
ALLAN L. WATERS 80 South Main Street, Hanover, NH 03755 6,900 (b) *
ARTHUR ZANKEL 80 South Main Street, Hanover, NH 03755 12,600 (c) .2%
All directors and executive officers as a group 1,877,712 (a)(b)(c) 21.6%
=================================================================================================================
* Represents less than .1% of the outstanding Shares.
(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. 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 176,500 Shares donated to
charitable foundations for which Mr. Byrne disclaims beneficial ownership,
but for which his spouse retains voting power.
(b) Includes currently exercisable stock options held by Mr. Kemp, Mr. Waters
and all executive officers as a group to purchase 2,000, 1,000 and 3,000
Shares, respectively.
(c) Does not include 156 Shares for which Mr. Zankel disclaims beneficial
ownership. First Manhattan Co., a partnership in which Mr. Zankel is Co-
Managing Partner, has Investment and/or voting discretion with respect to
such Shares.
(d) Determined based on the beneficial ownership provisions specified in Rule
13d-3(d)(1) of the Exchange Act. Except to the extent indicated above, all
executive officers and directors have (or share with their spouse) sole
voting and investment power with respect to the Shares for which they
claim beneficial ownership.
COMPENSATION OF DIRECTORS
Directors who are not officers of Fund American received a retainer of $45,000
for 1995 and a fee of $1,000 for each Board meeting attended. Messrs. Clark,
Jr. and Macklin also received an additional retainer of $3,000 for 1995 as
Chairman of the Audit Committee and Chairman of the Human Resources Committee,
respectively. Each non-employee director also received an additional $1,000 for
each committee meeting attended.
Any non-management director who retires from the Board with at least five
years of service as a director of the Company is entitled to an annual
retirement benefit equal to 50% of the amount of the annual retainer for the
year in which the retirement occurs. Eligible directors are entitled to receive
the annual benefit for a period of years equal to the number of years of service
or, if sooner, until death.
Directors who are officers of Fund American do not receive any compensation
for their services as directors.
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 and four of its most highly compensated executive officers other than
the Chief Executive Officer (collectively, the "Named Executive Officers").
Summary Compensation Table
The following table reflects the cash and non-cash compensation for the Named
Executive Officers.
- -----------------------------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------------------
John J. Byrne 1995 $550,000 $247,500 $ 0 0 $ 724,688 $202,370(c)
Chairman, President & 1994 550,000 74,000 0 0 0 139,999(c)
Chief Executive Officer 1993 550,000 165,000 0 0 4,748,975 130,502(c)
K. Thomas Kemp 1995 222,000 116,000 0 0 130,444 70,469(c)
Executive Vice 1994 180,000 30,000 0 0 0 30,366(c)
President 1993 135,000 59,400 0 0 1,304,345 15,313(c)
Allan L. Waters 1995 200,000 107,000 0 0 159,431 41,320(c)
Senior Vice President & 1994 175,000 40,000 0 0 0 17,791(c)
Chief Financial Officer 1993 160,000 57,750 0 0 1,363,938 106,464(c)
James A. Conrad 1995 222,627 38,000 40,034 (b) 0 0 4,500(d)
President & Chief Executive 1994 219,212 75,000 32,718 (b) 0 0 4,500(d)
Officer of Source One 1993 209,958 0 191,261 (b) 26,123 0 0
Robert W. Richards 1995 218,059 36,000 32,099 (b) 0 0 4,500(d)
Chairman of 1994 211,528 72,000 25,295 (b) 0 0 4,500(d)
Source One 1993 202,728 0 176,345 (b) 24,149 0 0
==================================================================================================================================
(a) Includes cash payments and the total market value of awards distributed.
(b) Amounts for 1995 include $32,578 and $23,661 for Messrs. Conrad and
Richards, respectively, reflecting interest reimbursements on amounts paid
to purchase investment contracts with stock appreciation rights ("SARs")
and reimbursements of automobile expenses. Amounts for 1994 include
$25,638 and $18,611 for Messrs. Conrad and Richards, respectively,
reflecting interest reimbursements on amounts paid to purchase SARs and
reimbursements of automobile expenses. Amounts for 1993 include $156,414
and $149,495 for Messrs. Conrad and Richards, respectively, reflecting
reimbursements of individual income taxes resulting from exchanges of
shares of Common Stock of Source One ("Source One Shares") for SARs,
interest reimbursements on amounts paid to purchase Source One Shares and
reimbursements of automobile expenses.
(c) Amounts for 1995, 1994 and 1993 principally represent principal credited
to the Deferred Benefit Plan. The 1995, 1994 and 1993 amounts for Mr.
Byrne also include $38,500, $35,500 and $34,500, respectively, and for Mr.
Kemp $16,625, $0 and $0, respectively, in annualized director fees 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. For
Mr. Waters, the 1993 amount also includes reimbursements of $90,625 for
relocation expenses.
(d) Represents amounts allocated to the accounts of Messrs. Conrad and
Richards pursuant to Source One's employee stock ownership plan.
8
Options and Warrants
The following table summarizes, for the Named Executive Officers,
exercises of stock options and warrants during the Company's latest fiscal year,
and the number and in-the-money value of stock options and warrants outstanding
as of the end of the fiscal year.
- ----------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1995
---------------------------------------------------------------
Stock option, warrant and SAR Number of unexercised stock In-the-money value of all
exercises during the year ended options, warrants outstanding stock options,
December 31, 1995 (a) and SARs (a) warrants and SARs (a)
--------------------------------- ----------------------------- -----------------------------
Shares Value Not Not
Name acquired realized Exercisable exercisable Exercisable exercisable
- ----------------------------------------------------------------------------------------------------------------------------------
John J. Byrne 150,000 $6,699,638 1,000,000 0 $51,714,250(e) $0
K. Thomas Kemp 0 0 3,000(d) 0 123,000(d) 0
Allan L. Waters 6,188(b) 255,772 1,500(d) 0 55,000(d) 0
James A. Conrad 9,323 0(c) 16,800 0 75,407 0
Robert W. Richards 5,345 0(c) 18,804 0 84,402 0
==================================================================================================================================
(a) Unless otherwise noted, amounts represent options, warrants or SARs
pertaining to Fund American Shares.
(b) Includes 2,063 stock options to acquire from the Company shares of Common
Stock of White River ("White River Shares"). Such stock options were issued
pursuant to certain anti-dilution provisions of the Incentive Plan which
were triggered by the distribution of approximately 74% of the outstanding
White River Shares to Fund American's shareholders on December 22, 1993
(the "Distribution").
(c) Represents the forfeiture of an out-of-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. During 1995 Messrs. Conrad and Richards exercised a portion
of their investment contracts and, as a result, forfeited 9,323 and 5,345
out-of-the-money SARs, respectively.
(d) Amounts include 1,000 and 500 stock options for Messrs. Kemp and Waters,
respectively, and $38,500 and $19,250 of in-the-money value for Messrs.
Kemp and Waters, respectively, pertaining to stock options to acquire from
the Company White River Shares. Such stock options were issued as a result
of the Distribution.
(e) 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 Plans - Awards in Last Fiscal Year
The following table summarizes the Incentive Plan awards made to the Named
Executive Officers during the latest fiscal year. Such awards consisted
entirely of performance shares.
- -----------------------------------------------------------------------------------------------
Number of
performance Performance
shares period for Estimated future payouts in Shares:
Name awarded payout Threshold Target Maximum
- -----------------------------------------------------------------------------------------------
John J. Byrne 10,000(a) 3 yrs. 0 10,000 10,000
K. Thomas Kemp 8,928(a) 3 yrs. 0 8,928 8,928
Allan L. Waters 7,500(a) 3 yrs. 0 7,500 7,500
James A. Conrad 0 0 0 0 0
Robert W. Richards 0 0 0 0 0
===============================================================================================
(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 award. The target performance criteria for Messrs. Byrne and
Waters' 1995 performance share award and for 7,500 of Mr. Kemp's 1995
performance share award is the attainment of a corporate annualized return
on equity ("ROE") of 15%. 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 ROE equal to or in excess of 15%, the
performance shares will become 100% payable. At a ROE of less than 15% the
percentage of performance shares payable could decline to 0%. For the
balance of Mr. Kemp's 1995 performance share award, the target performance
criteria is the attainment of various key insurance measures ("Insurance
Goals") applicable to White Mountains. Meeting or exceeding the Insurance
Goals will result in the such performance shares becoming 100% payable.
Insurance Goal shortfalls could cause the percentage of such performance
shares payable to decline to 0%.
9
Other Compensation Arrangements
Fund American has no formal severance policy. However, the Company has
guaranteed payment of the salaries for Messrs. Kemp and Waters through December
31, 1996. As of December 31, 1995, such guaranteed salary amounts totalled
$300,000 and $250,000 for Messrs. Kemp and Waters, respectively.
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 calls 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, Mr. Byrne's annual salary was
set at $400,000.
Pursuant to the Incentive Plan, under some circumstances such as a "Change in
Control" followed by a termination without cause, constructive termination or an
"Adverse Change" in the Incentive Plan, stock options will generally become
fully exercisable and performance shares will become partially or fully payable.
Such circumstances are more fully described in the Incentive Plan.
Certain Transactions
Fund American has entered into a "dry lease" for the use of aircraft owned by
Haverford Transportation Inc. ("HTI") for corporate travel purposes. Messrs.
Byrne and Kemp are the sole shareholders of HTI. During 1995 Fund American paid
HTI a total of $183,563 pursuant to the dry lease arrangement. Fund American
believes that its arrangement with HTI is on terms that are more favorable to
Fund American than would generally be available if secured through an
arrangement with an unaffiliated third party.
Source One has made mortgage loans in the ordinary course of business to
employees of Fund American, including certain of its Named Executive Officers.
The terms of such mortgage loans made to Named Executive Officers are
substantially similar to those provided to other employees of Fund American and
to the public.
In December 1993, BYRNE & sons, l.p. ("BYRNE & sons"), a partnership in which
Mr. Byrne is the sole general partner, made its initial investment in the
Merastar Partners Limited Partnership and the Southern Heritage Limited
Partnership (the "Partnerships"). The Partnerships are involved in various
property and casualty insurance ventures. Shortly after making its initial
investment, BYRNE & sons offered one-third of its interest in the Partnerships
to Fund American on equal terms and conditions. In May 1994 Fund American
accepted the offer and paid BYRNE & sons a total of $338,558 representing
reimbursement for one-third of Byrne & sons' cost for the Partnerships including
interest of $5,225 at a 6.0% annual rate.
REPORTS OF THE COMPENSATION
COMMITTEES ON EXECUTIVE
COMPENSATION
Compensation for Messrs. Byrne, Kemp and Waters is established by the Human
Resources Committee of the Board (the "Committee"). Compensation for Messrs.
Conrad and Richards is established by the Human Resources Committee of the
Source One Board of Directors (the "Source One Committee") which is comprised of
Messrs. Gordon S. Macklin, Terry L. Baxter (President of FAE) and Roger K.
Taylor (Chief Operating Officer of FSA).
Fund American Committee
The Committee is comprised solely of non-employee directors. The Committee
has responsibility for developing, administering and monitoring the executive
compensation policies of the Company.
10
Fund American's executive compensation policies are designed with one goal in
mind - maximization of shareholder value over long periods of time. The
Committee believes that this goal is best pursued by utilizing a pay-for-
performance program which serves to attract and retain superior executive talent
and provide management with performance-based incentives to maximize shareholder
value. Through the compensation program, the Committee seeks to maximize
shareholder value by aligning closely the financial interests of Fund American's
management with those of the Company's shareholders.
The Committee believes that the most appropriate indicator of shareholder
return is the Company's ROE as measured by growth in market value, book value
and economic value per Share. The Committee believes that, over long periods of
time, maximizing the Company's ROE will optimize shareholder returns.
The Committee believes that the performance-based compensation of the
Company's executive officers should be payable only if the Company achieves
truly superior returns for its shareholders. Therefore, many of Fund American's
performance-based compensation programs are directly linked to achievement of an
annualized ROE for the Company of 13% to 15%. The Committee believes that such
returns are a challenging target for the Company in its current form.
Compensation of Fund American's management team, including the Named Executive
Officers, consists primarily of three components: base salary, annual bonus and
long-term incentive awards. When establishing each element of compensation, the
Committee considers the total compensation earned by or potentially available to
each member of management.
Base Salary. Base salary for each Named Executive Officer is established
annually, generally as of March 1. When establishing base salaries of the Named
Executive Officers, the Committee considers numerous factors including:
qualifications of the executive; the corporate responsibilities of the
executive; the executive's performance since his or her last salary adjustment;
and, for all executives except Mr. Byrne, the recommendations of Mr. Byrne.
Annual Bonus. For 1995 the target annual bonus pool for all eligible employees
of the Company was equal to 50% of eligible base salary at a 15% annual ROE.
The aggregate size of the annual bonus pool could vary from 0% to 100% of
eligible salary. When establishing the aggregate size of the annual bonus pool,
the Committee considers numerous factors including performance versus the
objectives set forth in the Company's Annual Business Plan, in particular the
Company's financial performance for the latest fiscal year as measured by ROE,
and the recommendations of Mr. Byrne. The Committee reviews the Annual Business
Plan with management near the beginning of the year and approves the plan after
changes required by the Committee, if any, are made.
After establishing the aggregate size of the annual bonus pool, the Committee
then considers the distribution of the bonus pool among the executive officers
and certain other key employees of the Company. Each participant's allocation
of the pool is determined after considering numerous factors including
individual achievements as compared to objectives included in the Annual
Business Plan, the contribution of such achievements to the Company's overall
financial performance, and the recommendations of Mr. Byrne. Mr. Byrne
receives an annual bonus, as a percent of his salary, equal to no more than the
average bonus percentage received by all other employees eligible to participate
in the bonus pool.
For 1995 the Committee determined that the financial results of the Company
warranted a bonus pool equal to 45.0% of aggregate base salary. The principal
factors considered by the Committee in determining the size of the 1995 pool
were: (i) the Company's superior 1995 ROE performance of 21.1%, as measured by
change in book value per share with dividends reinvested, versus a 15% target
ROE (the predominant factor); (ii) the progress made in re-deploying the
Company's passive investment portfolio into strategic operating investments; and
(iii) overall favorable results versus certain specific objectives contained in
the 1995 Annual Business Plan, partially offset by; (iv) less than favorable ROE
performance, as measured by change in market value per share and economic value
per share.
11
Long-Term Incentive Awards. The Incentive Plan provides for granting to
executive officers and certain other key employees of the Company various types
of stock-based incentive awards including stock options and performance shares.
Stock options are rights to purchase a specified number of Shares at or above
the fair market value of Shares at the time the option is granted. Stock
options generally vest over a four-year period and expire no later than ten
years after the date on which they are granted.
Performance shares are conditional grants (payable subject to the achievement
of specific financial goals) of a specified maximum amount of cash, payable
generally at the end of three- to five-year periods or as otherwise determined
by the Committee.
The Committee believes that stock-based awards made pursuant to the Incentive
Plan are the most effective method of providing incentives for management to
strive to maximize shareholder value over the long term. The Committee's
conclusion is based on the following factors: (i) such awards vest or are
earned over multi-year periods; (ii) such awards are generally made in the form
of Shares or derivatives thereof, which helps to align the interests of
management with those of the Company's shareholders; and (iii) the majority of
Incentive Plan awards made over the last three fiscal years are linked to the
achievement of a 13% to 15% ROE over the applicable performance period.
In 1995 Messrs. Byrne, Kemp and Waters were granted 10,000, 8,928 and 7,500
performance shares, respectively, which were awarded by the Committee at its
February 15, 1995 meeting. The performance period for such awards began on
January 1, 1995 and will continue through December 31, 1997. The target
performance criteria for Messrs. Byrne and Waters' 1995 performance share award
and for 7,500 of Mr. Kemp's 1995 performance share award is the attainment of a
15% ROE. For the balance of Mr. Kemp's 1995 performance share award, the target
performance criteria is the attainment of various key insurance-based measures
applicable to White Mountains.
As of December 31, 1995 Messrs. Byrne, Kemp and Waters had 18,750, 3,375 and
4,125 performance shares eligible for payout on December 31, 1995subject to the
attainment of a 15% target ROE. The performance shares eligible for payout in
1995 were part of a 1993 grant and represented 50% of the performance shares
outstanding pursuant to that grant. All remaining and unpaid performance shares
outstanding pursuant to the 1993 grant will be eligible for payout on December
31, 1996. During the 1993 to 1995 performance period, the Company attained an
ROE of 9.1% as measured in accordance with the Incentive Plan. In light of the
ROE shortfall to target, the Committee at its February 21, 1996 meeting
determined that 40% of such performance shares would become immediately payable.
As a result of certain anti-dilution provisions of the Incentive Plan which were
triggered by the Distribution, the performance shares paid in February 1996 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.
Gordon S. Macklin, Chairman
Howard L. Clark
Howard L. Clark, Jr.
George J. Gillespie, III
Arthur Zankel
Source One Committee
Source One's compensation programs include three components: base salary,
annual bonus and long-term incentive awards. Emphasis is placed on the two
performance-based components -- annual bonus and long-term incentive awards.
Maximization of shareholder return, as measured by certain indicators of Source
One's financial performance selected by the Source One Committee, are the
primary factors used by the Source One Committee to determine pay-for-
performance compensation for Messrs. Conrad and Richards.
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.
12
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.
Annual Bonus. Annual bonuses are paid under an executive incentive compensation
plan which is designed to attract and retain the services of selected key
officers who are in a position to make a material contribution to the successful
operation of Source One. Incentive compensation awards are made on the basis of
individual performance during the plan year from an award pool. When determining
the amounts to be awarded to a participant (including Messrs. Conrad and
Richards), the Source One Committee considers each individual's contribution
towards attainment of goals established in Source One's Annual Business Plan.
These goals are principally focused towards the achievement of specified
operating earnings and economic return on equity ("EROE") targets. For 1995, the
Source One Committee determined that the financial results of Source One
warranted a bonus pool of 12.5%. The principal factors considered by the
Committee in determining the size of the 1995 bonus pool were: (i) an
unfavorable EROE for 1995 (the predominant factor), partially offset by;
(ii) reported operating earnings exceeding Source One's 1995 Annual Business
Plan; and (iii) overall favorable results versus certain specific objectives
contained in Source One's 1995 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 1995 there were no new stock-based awards made to Messrs. Conrad and
Richards. As of December 31, 1995 Messrs. Conrad and Richards held 16,800 and
18,804 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 1995 Messrs.
Conrad and Richards exercised a portion of their investment contracts and, as a
result, forfeited 9,323 and 5,345 out-of-the-money SARs, respectively.
As of December 31, 1995 Messrs. Conrad and Richards had 26,677 and 19,055
performance shares outstanding, respectively. The performance shares may be
earned based on a pre-defined fixed formula in four equal tranches over four
overlapping three-year periods. Each tranche represents 6,669 and 4,764
performance shares at the target EROE for Messrs. Conrad and Richards,
respectively.
The first tranche may be earned over the performance period beginning January
1, 1994 and ending December 31, 1996. The target and maximum EROE's for the
first tranche are 12.8% and 19.8%, respectively. No performance shares would be
payable from the first tranche if the EROE is less than 6.8%. The performance
period for the second tranche is January 1, 1995 through December 31, 1997, and
the related target and maximum EROE's are 14.8% and 21.8%, respectively. No
performance shares would be payable from the second tranche if the EROE is less
than 8.8%. The performance period for the third tranche is January 1, 1996
through December 31, 1998, and the related target and maximum EROE's are 12.6%
and 18.6%, respectively. No performance shares would be payable from the third
tranche if the EROE is less than 6.6%.
Terry L. Baxter, Chairman
Gordon S. Macklin
Roger K. Taylor
13
SHAREHOLDER RETURN GRAPH
The following graph shows the five-year cumulative total return for a
shareholder who invested $100 in Shares at the close of business on December 31,
1990, assuming re-investment of dividends. For comparison, cumulative returns
for the five-year period ended December 31, 1995, are also shown for the
Standard & Poor's 500 Stocks Capitalization Weighted Index and the Standard &
Poor's Financial Services Index.
Five-Year Cumulative Total Return
(value of $100 invested December 31, 1990)
[GRAPH APPEARS HERE]
1990 1991 1992 1993 1994 1995
------------------------------------------------------
FFC $100.0 $136.0 $140.1 $183.5 $168.8 $174.6
S&P 500 100.0 130.5 140.4 154.6 156.6 215.5
S&P FIN 100.0 150.7 186.0 206.6 199.3 307.0
------------------------------------------------------
14
COMPENSATION PLANS
Retirement Plans
All Named Executive Officers employed by the Company participate solely in
Fund American retirement plans. All Named Executive Officers employed by Source
One participate solely in Source One retirement plans.
Fund American Retirement Plans
In 1995 Messrs. Byrne, Kemp and Waters participated in the Deferred Benefit
Plan, a nonqualified defined contribution plan established for the purpose of
providing retirement and postretirement benefits. The amount of annual
contributions to the Deferred Benefit Plan are determined using actuarial
assumptions which, through 1994, were similar to those of Source One's
Retirement Plans (which are described below). In 1995 the Committee eliminated
the limit on salary and bonus (previously equal to 135% of salary) which is
considered to calculate annual contributions to the Deferred Benefit Plan.
Participants in the Deferred Benefit Plan may choose between four investment
options for their plan balances. Amounts credited to the Deferred Benefit Plan
accounts of such individuals have been included in the Summary Compensation
Table.
Each of Messrs. Byrne, Kemp and Waters may also participate voluntarily in
the Deferred Compensation Plan. Pursuant to the Deferred Compensation Plan,
participants may defer all or a portion of qualifying remuneration payable by
Fund American. Amounts deferred pursuant to the Deferred Compensation Plan are
included in the Summary Compensation Table. Participants in the Deferred
Compensation Plan may choose between four investment options for their plan
balances.
As of December 31, 1995 the account balances of Messrs. Byrne, Kemp and Waters
under both the Deferred Benefit Plan and Deferred Compensation Plan included
25,496, 1,932 and 16,350 phantom shares, respectively, of which 5,115, 1,719,
and 1,103 phantom shares, respectively, are valued as being equal to the market
value of one Share with the balance of the phantom shares being equal to one
Share plus one-half White River Share. Such phantom shares are payable only in
cash.
Source One Retirement Plans
Messrs. Conrad and Richards participate in Source One retirement plans under
which they are entitled to receive estimated annual retirement benefits in
accordance with the table shown 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
-------- -------- -------- -------- --------
$100,000 $ 24,000 $ 32,000 $ 40,000 $ 48,000 $ 56,000
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
==================================================================================================
15
Participants in the Source One retirement plans are eligible to receive normal
retirement benefits at age 65, reduced normal retirement benefits at age 55, or
a deferred vested benefit if they terminate employment prior to retirement but
after five years of service. Such benefits are based on each participant's
average eligible compensation for the five highest paid consecutive years in his
or her last ten years before retirement or termination and on total years of
credited service at retirement up to a maximum of 35 years. Annual eligible
compensation for Messrs. Conrad and Richards includes base salary plus bonus
received, but is limited to not more than one and one-third of base salary in
total. Benefits for Messrs. Conrad and Richards accrued under the Source One
retirement plans are based on 1995 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, 1995 Messrs. Conrad and Richards had 12 and 24 whole years
of credited service, respectively, for purposes of computing their benefits
under the Source One retirement plans.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS
Fund American Committee
The Human Resources Committee of the Board is composed of the independent
outside directors, namely, Messrs. Clark; Clark, Jr.; Gillespie; Macklin and
Zankel. The Company notes the following relationships and transactions
pertaining to American Express, Lehman Brothers Inc. and Messrs. Gillespie,
Macklin and Zankel.
Mr. Gillespie is a Partner in the firm Cravath, Swaine & Moore, which has been
retained by Fund American from time to time to perform legal services.
Mr. Macklin is non-executive Chairman of White River. Through December 22,
1993 White River was a wholly-owned subsidiary of the Company. The Company
currently owns 1,014,750 White River Shares, or approximately 20.7% of the
outstanding White River Shares. White River had outstanding a $50 million term
note and a $40 million revolving loan payable to the Company which were repaid
on various dates during 1995.
Mr. Zankel is Co-Managing Partner of First Manhattan Co. First Manhattan Co.
has provided brokerage, discretionary investment management and non-
discretionary investment advisory services to Fund American from time to time.
American Express and its former affiliate Lehman Brothers Inc. have, 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. Clark was formerly Chairman of American
Express and Mr. Clark, Jr. is Vice Chairman of Lehman Brothers Inc.
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 1995.
PROPOSAL 2
APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee of the Board has recommended Ernst & Young LLP ("Ernst &
Young") for reappointment as the Independent Auditors of Fund American. Subject
to shareholder approval, the Board has appointed Ernst & Young as Fund
American's Independent Auditors for 1996. Ernst & Young has provided various
professional services to Fund American since 1974. A representative of Ernst &
Young will attend the 1996 Annual Meeting, will be provided with the opportunity
to make a statement and will be available to answer appropriate questions.
16
The Board recommends a vote FOR Proposal 2 approving the appointment of Ernst
& Young as Fund American's Independent Auditors for 1996.
OTHER MATTERS
Manner 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 be voted: (i) for election of the
nominees named earlier in this Proxy Statement as directors; and (ii) for the
appointment of Ernst & Young as Independent Auditors. Should any matter not
described above be acted upon at the meeting, the persons named in the proxy
card will vote in accordance with their judgment. The Board knows of no other
matters which are to be considered at the 1996 Annual Meeting.
Votes 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 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 1996
Annual Meeting. Representatives of First Chicago Trust Company of New York will
attend the 1996 Annual Meeting to receive votes and ballots, supervise the
counting and tabulating of all votes and ballots, and determine the results of
the vote.
Costs of Solicitation
The solicitation of proxies will be made primarily by mail; however,
directors, officers, employees and agents of the Company may also solicit
proxies by telephone, telegram or personal interview. Solicitation costs will
be paid by the Company. Upon request, the Company will reimburse banks,
brokerage houses and other custodians, nominees and fiduciaries for their
reasonable expenses incurred in forwarding proxy materials to their principals.
Available Information
The Company and Source One are subject to the informational reporting
requirements of the Exchange Act. In accordance therewith, the Company files
reports, proxy statements and other information with the SEC, and Source One
files reports and other information with the SEC.
The Company will provide to each person to whom a copy of this Proxy Statement
is delivered, upon request and without charge, copies of all documents
(excluding exhibits) filed with the SEC. Written or telephone requests should
be directed to the Corporate Secretary, Fund American Enterprises Holdings,
Inc., 80 South Main Street, Hanover, New Hampshire 03755-2053, telephone number
(603) 643-1567.
Proposals by Shareholders for the 1997 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 1997 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 14, 1997 in order to be considered
for inclusion in the Company's 1997 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 1997 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
Dennis P. Beaulieu, Corporate Secretary
March 29, 1996
17
PROXY
----- FUND AMERICAN ENTERPRISES HOLDINGS, INC. -----
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR THE
ANNUAL MEETING MAY 16, 1996
The undersigned hereby appoints John J. Byrne and Howard L. Clark, and each
of them, proxies, with full power of substitution, to vote all Shares of
the undersigned at the 1996 Annual Meeting of shareholders to be held May
16, 1996, and at any adjournment thereof, upon all subjects that may
properly come before the meeting including the matters described in the
proxy statement furnished herewith, subject to any directions indicated on
the reverse of this card or below. IF NO DIRECTIONS ARE GIVEN, THE PROXIES
WILL VOTE FOR THE ELECTION OF DIRECTORS, FOR THE APPOINTMENT OF ERNST &
YOUNG LLP AS INDEPENDENT AUDITORS, AND AT THEIR DISCRETION ON ANY OTHER
MATTER THAT MAY PROPERLY COME BEFORE THE MEETING.
(Change of Address/Comments)
Your vote for the Election of Directors
may be indicated on the reverse. The --------------------------------
following Directors are being nominated
at this meeting for election to terms --------------------------------
ending in the year indicated.
--------------------------------
1999. John J. Byrne --------------------------------
George J. Gillespie, III (If you have written in the
above space, please mark the
corresponding box on the
reverse side of this card).
YOUR VOTE IS IMPORTANT! PLEASE SIGN AND DATE ON THE REVERSE SIDE AND RETURN
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR OTHERWISE TO FIRST CHICAGO
TRUST COMPANY OF NEW YORK, POST OFFICE BOX 8085, EDISON, NEW JERSEY 08818-9052.
--------
SEE
REVERSE
SIDE
--------
PLEASE RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE
7612
[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.
- -------------------------------------------------------------------------------
1 Election of Directors (see reverse)
FOR WITHHELD
[_] [_]
FOR, except vote withheld from the following nominee(s)
- ---------------------------------------------------------
2. Appointment of Independent Auditors
FOR AGAINST ABSTAIN
[_] [_] [_]
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.
- --------------------------------
- --------------------------------
SIGNATURE(S) DATE
PROXY
----- FUND AMERICAN ENTERPRISES HOLDINGS, INC. -----
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR THE
ANNUAL MEETING MAY 16, 1996
The undersigned hereby appoints John J. Byrne and Howard L. Clark, and each
of them, proxies, with full power of substitution, to vote all Shares of
the undersigned at the 1996 Annual Meeting of shareholders to be held May
16, 1996, and at any adjournment thereof, upon all subjects that may
properly come before the meeting including the matters described in the
proxy statement furnished herewith, subject to any directions indicated on
the reverse of this card or below. IF NO DIRECTIONS ARE GIVEN, THE PROXIES
WILL VOTE FOR THE ELECTION OF DIRECTORS, FOR THE APPOINTMENT OF ERNST &
YOUNG LLP AS INDEPENDENT AUDITORS, AND AT THEIR DISCRETION ON ANY OTHER
MATTER THAT MAY PROPERLY COME BEFORE THE MEETING.
(Change of Address/Comments)
Your vote for the Election of Directors
may be indicated on the reverse. The ----------------------------------
following Directors are being nominated
at this meeting for election to terms ----------------------------------
ending in the year indicated.
----------------------------------
1999. John J. Byrne
George J. Gillespie, III ----------------------------------
(If you have written in the above
space, please mark the
corresponding box on the reverse
side of this card).
YOUR VOTE IS IMPORTANT! PLEASE SIGN AND DATE ON THE REVERSE SIDE AND RETURN
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR OTHERWISE TO FIRST CHICAGO
TRUST COMPANY OF NEW YORK, POST OFFICE BOX 8085, EDISON, NEW JERSEY 08818-9052.
-------
PLEASE RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE SEE
REVERSE
SIDE
-------
0278
[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.
- --------------------------------------------------------------------------------
1 Election of Directors (see reverse)
FOR WITHHELD
[_] [_]
FOR, except vote withheld from the following nominee(s)
- -------------------------------------------------------
2. Appointment of Independent Auditors
FOR AGAINST ABSTAIN
[_] [_] [_]
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.
- --------------------------------
- --------------------------------
SIGNATURE(S) DATE
