§4.104 PROXY STATEMENTS:STRATEGY & FORMS
4-107D© 1992 Jefren Publishing Company, Inc.
Offer to Purchase for Cash
by
THE FUND AMERICAN COMPANIES, INC. 12,500,000 Shares of its Common Stock At a Purchase Price
Not in Excess of $56 Nor Less Than $47 Per Share
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, FEBRUARY 11, 1991, UNLESS THE OFFER IS
EXTENDED.
The Fund American Companies, Inc., a Delaware corporation (the “Company”), hereby invites its shareholders to tender
shares of its Common Stock, par value $1.00 per share (“Shares”), to the Company at prices, not i n excess of $56 nor less
than $47 per Share, in multiples of $.25, specified by such shareholders, upon the terms and subject to the conditions set
forth in this Offer to Purchase and in the related Letter of Transmittal (which togethe r constitute the “Offer”). The
Company will determine a single per Share price (not in excess of $56 nor less than $47) that it will pay for Shares
properly tendered pursuant to the Offer (the “Purchase Price”) taking into account the number of Shares so tendered and
the prices specified by tendering shareholders. The Company will select the Purchase Price which will enable it to
purchase 12,500,000 Shares (or such lesser number of Shares as are properly tendered at prices not in e xcess of $56 nor
less than $47) pursuant to the Offer. All Shares properly tendered at prices at or below the Purchase Price and not
withdrawn will be purchased at the Purchase Price, net to the seller in cash, upon the terms and subject to the conditions
of the Offer, including the proration provisions described herein. The Company reserves the right, in i ts sole discretion, to
purchase more than 12,500,000 Shares pursuant to the Offer, but the Company does not, in any event, inte nd to purchase
more Shares than can be purchased for an aggregate purchase price of $700 million. ____________________
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 6. ____________________
The Offer is the first distribution of assets to common shareholders pursuant to the Plan of Com plete Liquidation of the
Company (the “Liquidation Plan”), which provides, among other things, for the sale, exchange or ot her disposition of all
the assets of the Company by January 2, 1996, and the distribution of all the Company's assets to its shareholders,
including proceeds of sales, exchanges and other dispositions, after making adequate provision for the liabilities of the
Company. See “Background and Recent Developments” and Section 11 for a discussion of the Li quidation Plan. The
Offer provides shareholders with the opportunity to sell all or a portion of their Shares at the price or prices (not in excess
of $56 nor less than $47 per Share) which such shareholders determine to be in their best intere sts, rather than to wait for
future distributions by the Company to common shareholders pursuant to the Liquidation Plan. See Section 8. ____________________
The Shares are listed and principally traded on the New York Stock Exchange (the “NYSE”) and are also listed and traded
on the Pacific Stock Exchange. On January 11, 1991, the last hall trading day before the announcem ent and
commencement of the Offer, the reported closing sales price of the Shares on the NYSE Com posite Tape was $515/8 per
Share. Shareholders are urged to obtain a current market quotation for the Shares. ____________________
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY
RECOMMENDATION AS TO WHETHER ANY SHAREHOLDER SHOULD TENDER ANY OR ALL
OF SUCH SHAREHOLDER'S SHARES PURSUANT TO THE OFFER. EACH SHAREHOLDER
MUST MAKE SUCH SHAREHOLDER'S OWN DECISION WHETHER TO TENDER SHARES AND,
IF SO, HOW MANY SHARES TO TENDER AND AT WHAT PRICE OR PRICES. ____________________
The Dealer Manager for the Offer is:
SALE OR PURCHASE OF CAPITAL STOCK§4.104
April/May 19924-107 E
LEHMAN BROTHERS
January 14, 1991
SALE OR PURCHASE OF CAPITAL STOCK§4.104
April/May 19924-107E
IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's Shares should either (1) complet e and sign the
Letter of Transmittal or a facsimile copy thereof in accordance with the instruc tions in the Letter of Transmittal, mail or
deliver it and any other documents required by the Letter of Transmittal to First Chi cago Trust Company of New York,
the depositary for the Offer (the “Depositary”), and either mail or deliver the certifi cates for such Shares to the Depositary
along with the Letter of Transmittal or follow the procedure for book-entry transfer set fort h in Section 3, or (2) request
such shareholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such
shareholder. A shareholder having Shares registered in the name of a broker, dealer, commercia l bank, trust company or
other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if such shareholder
desires to tender such Shares.
A shareholder who desires to tender Shares and whose certificates for such Shares are not im mediately available (or who
cannot follow the procedure for book-entry transfer on a timely basis) or who cannot transmit the L etter of Transmittal
and all other required documents to the Depositary before the Expiration Date (as defi ned in Section 1) should tender such
Shares by following the procedure for guaranteed delivery set forth in Section 3.
IN ORDER TO PROPERLY TENDER SHARES, SHAREHOLDERS MUST COMPLETE THE
SECTION OF THE LETTER OF TRANSMITTAL RELATING TO THE PRICE OR PRICES AT
WHICH THEY ARE TENDERING SHARES. IF A SHAREHOLDER DESIRES TO TENDER
SHARES AT MORE THAN ONE PRICE, SUCH SHAREHOLDER MUST COMPLETE A SEPARATE
LETTER OF TRANSMITTAL FOR EACH PRICE AT WHICH SUCH SHAREHOLDER IS
TENDERING SHARES, EXCEPT THAT THE SAME SHARES CANNOT BE TENDERED (UNLESS
PROPERLY WITHDRAWN PREVIOUSLY IN ACCORDANCE WITH THE TERMS OF THE
OFFER) AT MORE THAN ONE PRICE.
____________________
Any questions or requests for assistance or for additional copies of this Offer to Purchase, the Lett er of Transmittal or the
Notice of Guaranteed Delivery may be directed to the Information Agent or the Deale r Manager at their respective
addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Shareholders m ay also contact
their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. ____________________
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF
THE COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH
THE OFFER OTHER THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE
LETTER OF TRANSMITTAL. IF MADE OR GIVEN, SUCH RECOMMENDATION AND SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
§4.104 PROXY STATEMENTS:STRATEGY & FORMS
4-107F© 1992 Jefren Publishing Company, Inc.
TABLE OF CONTENTS
Section Page
Introduction ................................................................................................................................................ 1
Background and Recent Developments ..................................................................................................... 2
Sale of Fireman's Fund Insurance Company and Related Transactions .............................................. 2
Liquidation of the Company ................................................................................................................ 4
The Offer ..................................................................................................................................................... 5 1. Number of Shares; Proration; Extension of the Offer ................................................................... 5
2. Tenders by Holders of Fewer than 100 Shares ............................................................................. 6
3. Procedure for Tendering Shares ..................................................................................................... 7
Proper Tender of Shares ......................................................................................................... 7
Signature Guarantees and Methods of Delivery ..................................................................... 7
Federal Backup Withholding .................................................................................................. 8
Book-Entry Delivery .............................................................................................................. 8
Guaranteed Delivery ............................................................................................................... 8
Determination of Validity; Rejection of Shares; Waiver of Defects;No Obligation to Give Notice of Defects ............................................................................ 8
Employee Benefit Plans ......................................................................................................... 9
4. Withdrawal Rights ........................................................................................................................ 9
5. Acceptance for Payment of Shares and Payment of Purchase Price ............................................. 9
6. Certain Conditions of the Offer .................................................................................................... 10
7. Price Range of Shares; Dividends ................................................................................................. 12
8. Purpose of the Offer; Certain Effects of the Offer ........................................................................ 13
9. Certain Information Concerning the Company ............................................................................. 14
The Mortgage Company ......................................................................................................... 14
Summary Historical Consolidated Financial Information ...................................................... 16
Common Equity Securities ..................................................................................................... 17
Pro Forma Financial Information (Unaudited) ....................................................................... 19
Shareholder Rights Plan ......................................................................................................... 27
Additional Information ........................................................................................................... 28
10. Source and Amount of Funds ........................................................................................................ 28
11. The Liquidation ............................................................................................................................. 29 Principal Terms of the Plan .................................................................................................... 29
Conduct of the Company During the Liquidation Period ...................................................... 30
Continued Operation of the Mortgage Company ................................................................... 32
Distributions to Shareholders ................................................................................................. 32
Limitations on Distributions to Shareholders ......................................................................... 35
Regulation of the Company During the Liquidation .............................................................. 35
12. Certain Federal Income Tax Considerations ................................................................................. 36 Gain or Loss Recognition ....................................................................................................... 36
Recent Changes in Tax Rates ................................................................................................. 36
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April/May 19924-107G
Backup Withholding ....................................................................................................... 36
Foreign Shareholder Withholding .................................................................................. 36
State, Local and Foreign Taxes ...................................................................................... 37
13. Transactions and Arrangements Concerning the Shares ...................................................... 37
14. Certain Legal Matters; Regulatory and Foreign Approvals .................................................. 37
15. Employee Benefit Plans ........................................................................................................ 38 Employee Stock Ownership Plan ................................................................................... 38
Incentive Savings Plan ................................................................................................... 38
16. Extension of Tender Period; Termination; Amendments ..................................................... 38
17. Fees and Expenses ................................................................................................................ 39
18. Miscellaneous ....................................................................................................................... 40
§4.104 PROXY STATEMENTS:STRATEGY & FORMS
4-107H© 1992 Jefren Publishing Company, Inc.
To the Holders of Common Stock of
The Fund American Companies, Inc.:
INTRODUCTION
The Fund American Companies, Inc., a Delaware corporation (the “Company”), hereby invites its shareholders to tender
shares of its Common Stock, par value $1.00 per share (“Shares”), to the Company at prices, not i n excess of $56 nor less
than $47 per Share, in multiples of $.25, specified by such shareholders, upon the terms and subject to the conditions set
forth in this Offer to Purchase and in the related Letter of Transmittal (which together constitute the “Offer”).
The Company will determine a single per Share price (not in excess of $56 nor less than $47) that it will pay for Shares
properly tendered pursuant to the Offer (the “Purchase Price”) taking into account the number of Shares so tendered and
the prices specified by tendering shareholders. The Company will select the Purchase Price which will enable it to
purchase 12,500,000 Shares (or such lesser number of Shares as are properly tendered at prices not in e xcess of $56 nor
less than $47) pursuant to the Offer. All Shares properly tendered at prices at or below the Purchase Price and not
withdrawn will be purchased at the Purchase Price, net to the seller in cash, upon the terms and subject to the conditions
of the Offer, including the proration provisions described herein. The Company reserves the right, in i ts sole discretion, to
purchase more than 12,500,000 Shares pursuant to the Offer, but the Company does not, in any event, inte nd to purchase
more Shares than can be purchased for an aggregate purchase price of $700 million. See Section 16.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS (THE “BOARD”) MAKES ANY
RECOMMENDATION AS TO WHETHER ANY SHAREHOLDER SHOULD TENDER ANY OR ALL
OF SUCH SHAREHOLDER'S SHARES PURSUANT TO THE OFFER. EACH SHAREHOLDER
MUST MAKE SUCH SHAREHOLDER'S OWN DECISION WHETHER TO TENDER SHARES AND,
IF SO, HOW MANY SHARES TO TENDER AND AT WHAT PRICE OR PRICES.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 6.
As of January 8, 1991, there were approximately 31,001,869 Shares outstanding. Pursuant to the Company's 1985 Long-
Term Incentive Plan (the “Incentive Plan”), as of January 8, 1991, an additional 2,316,373 Shares were issuable upon the
exercise of outstanding employee stock options and up to 186,588 Shares were issuable with respect t o performance
shares (conditional grants of a specified maximum number of Shares payable subject to the achievement of specific
financial goals and individual performance), depending on how many of such performance shares are pa id in Shares rather
than in cash. Also, as of January 8, 1991, an additional 86,625 employee stock options to acquire Shares were outstanding
which were not exercisable at that time and an additional 197,250 performance shares were outstanding that are
potentially payable with respect to performance periods commencing after December 31, 1990, in each case, pursuant to
the Incentive Plan. In addition to the Shares potentially issuable pursuant to the Incent ive Plan, another 1,700,000 Shares
were issuable as of January 8, 1991, upon the exercise of warrants held by John J. Byrne, Chairman and C hief Executive
Officer of the Company. The 12,500,000 Shares which the Company is offering to purchase in the Offer repre sent
approximately 40.3 percent of the Shares outstanding as of January 8, 1991, and approximately 35.2 percent of the sum of
the Shares then outstanding and all Shares which may be issued upon exercise of outstanding options or receipt of
outstanding performance shares (whether or not presently exercisable or receivable) pursuant to the Incentive Plan and
upon exercise of outstanding warrants as of such date. Holders of options and warrants would have to exercise such
options or warrants and convert them into Shares in order to tender such Shares pursuant to the Offer. T he amounts and
forms of any payments with respect to all performance shares held by officers and key empl oyees of Fireman's Fund
Insurance Company, a California corporation (“FFIC”), and its subsidiaries (collectively, “Fi reman's Fund”) will be
determined by Fireman's Fund. Certain holders of options or warrants and certain recipients of performa nce shares may be
subject to limitations imposed by Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (collectively, the “Exchange Act”). Neither the Company nor the Board makes any
recommendation to any holder of options, warrants or performance shares as to whether to exercise any or all such
options or warrants or to receive any or all such performance shares in the form of Shares or to tende r any or all
Shares issuable upon such exercise or receipt.
SALE OR PURCHASE OF CAPITAL STOCK§4.104
April/May 19924-107I
If before the Expiration Date (as defined in Section 1), a greater number of Shares are properly tendered at or below the
Purchase Price and not withdrawn than will be accepted for purchase by the Company, the C ompany will accept Shares
for purchase, first, from all Shares properly tendered at or below the Purchase Price by any Odd Lot Holder (as defined in
Section 1) who tenders at or below the Purchase Price all Shares beneficially owned by suc h Odd Lot Holder and, then,
from all other Shares properly tendered on a pro rata basis. See Sections 1 and 2. All Shares not purchased pursuant to the
Offer, including Shares tendered at prices in excess of the Purchase Price and Shares not purc hased because of proration,
will be returned to the tendering shareholders at the Company's expense. Tendering shareholders wil l not be obligated to
pay brokerage commissions, solicitation fees or, subject to Instruction 7 of the Letter of Tra nsmittal, stock transfer taxes
on the purchase of Shares by the Company. The Company will pay all reasonable charges and expenses incurred by First
Chicago Trust Company of New York, which has been appointed as the depositary (the “Depositary”) and the information
agent for the Offer (the “Information Agent”). See Section 17. The Company will also pay the fees and expenses of
Lehman Brothers, a division of Shearson Lehman Brothers, Inc. (“Lehman Brothers”), which has bee n appointed as the
dealer manager for the Offer (the “Dealer Manager”) in the manner set forth in Section 17.
The Shares are listed and principally traded on the New York Stock Exchange (the “NYSE”) and are also listed and traded
on the Pacific Stock Exchange (the “PSE”). On January 11, 1991, the last full trading day before the announcement and
commencement of the Offer, the reported dosing sales price of the Shares on the NYSE Composi te Tape was $515/8 per
Share. See Section 7. Shareholders are urged to obtain a current market quotation for the Shares.
Participants in the Fireman's Fund Employee Stock Ownership Plan (the “ESOP”) and the Firem an's Fund Incentive
Savings Plan (the “ISP”) may direct the trustee of the ESOP or the ISP, as the case ma y be, to tender any or all Shares
allocated to their respective accounts in the ESOP or the ISP, as the case may be, pursuant to the Offer. See Sections 3 and
15.
BACKGROUND AND RECENT DEVELOPMENTS
Sale of Fireman's Fund Insurance Company and Related Transactions.
On August 1, 1990, the Company entered into a Stock Purchase Agreement (the “Original Stock Purchase Agreement”)
with Allianz Aktiengesellschaft Holding, a German limited liability company (“Al lianz”), and Allianz of America, Inc., a
Delaware corporation and majority-owned subsidiary of Allianz (“Allianz America”), pursuant to which the Company
agreed to a transaction (the “Sale”) in which the Company would (i) acquire certai n assets (“Distributable Assets”) of
FFIC, the Company's then principal subsidiary, and certain of FFIC's subsidiaries for $2,190 million, subje ct to
adjustment, and (ii) sell the capital stock of FFIC to Allianz America for $3,315 m illion, subject to adjustment. The
Original Stock Purchase Agreement also provided that the Company would sell to Allianz America certain receivables
arising out of the insurance operations of FFIC and its subsidiaries that had previously been purcha sed by the Company
from FFIC and such subsidiaries.
The Original Stock Purchase Agreement was amended in a number of respects on or before January 2, 1991 (as it was
amended through January 2,1991, the “Stock Purchase Agreement”). The collective effect of those amendments was to
reduce the purchase price payable by Allianz America for the stock of FFIC by approximatel y $25 million, although
approximately $20 million of such reduction is expected to be recouped through payments to be made by Allianz America
to the Company on or before September 5, 1992, relating to the exercise of options to acquire Sha res held by Fireman's
Fund employees. Those amendments also provided for the Company's purchase of certain additional receivables arising
out of the insurance operations of FFIC and certain of its subsidiaries, which were not subject to the Original Stock
Purchase Agreement, together with the Company's sale of such receivables to Allianz Ame rica at the time of the sale of
the stock of FFIC (such receivables, together with the receivables which were subject to the Original Stock Purchase
Agreement, the “Receivables”).
During the period between August 1, 1990, and January 2, 1991, the Company received $208 million of Distri butable
Assets in the form of cash dividends from FFIC and purchased all non-cash Distributable Assets from FFIC and its
subsidiaries for an aggregate purchase price of approximately $1,582 million. Such purchases were financ ed with $1,180
million of borrowings under a bridge loan facility (the “Bridge Loan Facility”) wit h a syndicate of commercial banks, the
issuance of approximately $99 million in principal amount of notes (“Purchase Money Notes”) to certain subsidiaries of
FFIC that sold Distributable Assets to the Company, borrowings under the Company's commercial pa per program and
§4.104 PROXY STATEMENTS:STRATEGY & FORMS
4-107J© 1992 Jefren Publishing Company, Inc.
cash on hand at the Company. On January 2,1991, there were approximately $241 million of Distributable Assets in the
form of cash still held by Fireman's Fund.
SALE OR PURCHASE OF CAPITAL STOCK§4.104
April/May 19924-107K
On January 2, 1991, National Surety Corporation, a subsidiary of FFIC, transferred two insurance subsidiaries (the “New
Jersey Insurance Subsidiaries”) that were domiciled in the State of New Jersey to the Company for aggregate
consideration of approximately $9 million. Such transfers were necessitated by the fact t hat the New Jersey Department of
Insurance had not acted on Allianz America's application to acquire control of the Ne w Jersey Insurance Subsidiaries in
connection with its purchase of the capital stock of FFIC. In connection with the transfe r of the New Jersey Insurance
Subsidiaries, those subsidiaries' reinsurance agreements with FFIC were modified to provide that FFIC will reinsure the
New Jersey Insurance Subsidiaries' policies issued on or before January 2, 1991, or with an effective dat e on or before
March 31, 1991, which were bound or issued on or before January 2, 1991, together with renewals thereof. The Company
has indicated to Allianz that it remains interested in selling the New Je rsey Insurance Subsidiaries to Allianz America or
FFIC, and Allianz has indicated that it remains interested in such a sale, if t he necessary regulatory approvals can be
obtained. The Company and Allianz are presently exploring how such regulatory approvals could best be obtained.
On January 2, 1991, following the completion of the transactions discussed above, the Company sold all the capital stock
of FFIC to Allianz America for approximately $2,909 million and sold the Receivables t o Allianz America for
approximately $146 million. The Company applied a portion of the proceeds of those sales (i) to repay in full the amounts
outstanding under the Bridge Loan Facility, the Purchase Money Notes and approximately $46 m illion in notes previously
issued by the Company to purchase Receivables from Fireman's Fund, (ii) to repay $15 milli on of commercial paper then
maturing and (iii) to deposit approximately $535 million with the trustee for the holde rs of the $475 million in outstanding
principal amount of debentures (the “Debentures”) issued by the Company, which amount is suffici ent to pay the
redemption price (including the redemption premium and accrued interest) for the Debe ntures on February 1, 1991. The
Company simultaneously called the Debentures for redemption on February 1, 1991.
Immediately following the sale of the stock of FFIC and the Receivables to Allianz America and the application of a
portion of the proceeds in the manner described above, the Company repurchased (the “IFINT Repurcha se”) all 300,000
shares of its Convertible Preferred Stock Series A, par value $1.00 per share (the “Series A Stoc k”), from TRIFIN B.V., a
Netherlands corporation (“TRIFIN”), which is a subsidiary of IFINT S.A., a Luxembourg corporation (“IFINT”), for a
price of approximately $434 million (including accumulated and unpaid dividends), pursuant to a Stock Purchase
Agreement dated as of July 31, 1990, among the Company, TRIFIN and IFINT. The Series A Stock was then retired.
Also on January 2, 1991, the Company purchased the remaining loans made by the bank lenders to the ESOP for
approximately $37 million and immediately sold such loans to FFIC for the same amount; whereupon FFIC waived all
rights it might have received under the Company's guaranty of such loans. On January 7, 1991, the Com pany repaid the
loans of approximately $15 million that were made by certain lenders to the Company, the proceeds of which were loaned
to the “ESOP portion” (the “ISP/ESOP”) of the ISP. The approximately $9 million outstanding balance of the loan from
the Company to the ISP/ESOP is scheduled to be repaid to the Company in February 1991.
The net cash proceeds to the Company of the sale of the stock of FFIC and the Recei vables and the subsequent
transactions described above were approximately $735 million. The Company expects to apply a portion of that amount to
repay all the commercial paper under its commercial paper program, of which $185 million was outstanding at the close
of business on January 2, 1991, and all of which will fall due on or before February 15, 1991.
Following the Sale and related transactions, the Company's assets consist in large part of portfolio securities, and the
center of its remaining operations is located in New York. In light of those factors (as well as a contractual obligation on
the part of IFINT and TRIFIN to cause the directors nominated by IFINT to resign upon the closi ng of the IFINT
Repurchase), nine of the Company's fourteen directors—Kenneth J. Arrow, Joseph W. Brown, Jr., Howard L. Clark, Jr.,
Willie D. Davis, Mario Garraffo, Gianluigi Gabetti, Gordon L. Hough, William F. Miller and Ale xander M. Wilson—
resigned, effective as of January 2, 1991. On January 3, 1991, the Board reduced its size to five direc tors and amended the
By-laws of the Company to do so. The five remaining directors are John J. Byrne, Chairman, Howard L . Clark, Andrew
Delaney, George J. Gillespie III and Gordon S. Macklin.
The transactions described above under this subheading are collectively referred to as the “Sale and Related
Transactions”.
§4.104 PROXY STATEMENTS:STRATEGY & FORMS
4-107L© 1992 Jefren Publishing Company, Inc.
Liquidation of the Company
The Sale and Related Transactions were the first step in a Plan of Complete Liquidation of the Company (the “Liquidation
Plan”) adopted by the Board on September 26, 1990, and approved by the Company's shareholders on December 18,
1990. The Liquidation Plan, in addition to providing for the Sale, provides for the sale, excha nge or other disposition of
all the assets of the Company remaining after the Sale (consisting primarily of the Distributable Assets) over a period
ending on January 2, 1996 (the “Liquidation Period”), and the distribution of all the Company's asse ts to its shareholders,
including proceeds of sales, exchanges and other dispositions, after making adequate provision for t he Company's
liabilities (the “Liquidation”). It is currently anticipated that the Liqui dation will take approximately three to five years to
complete. The Liquidation Plan provides that distributions to shareholders may be made by way of pro rata dividends or
other distributions of cash, securities or other property, tender or exchange offers for shares of the C ompany's capital
stock or repurchases or redemptions of, or privately negotiated exchanges of the Company's assets for, suc h shares of
capital stock. The Offer constitutes the first distribution to holders of Shares pursuant to the Liquidation Plan. The
Liquidation Plan is discussed more fully in Section 11.
As the result of the Sale and Related Transactions, the Company's assets consist primari ly of (i) a portfolio of common
equity securities held by the Company and its subsidiaries with an aggregate market value as of December 31, 1990, of
$990 million, (ii) approximately 23.6 percent of the outstanding common stock of MBIA Inc., a m unicipal bond insurer,
which is classified as an “other long-term investment” on the Company's balance sheet , is carried on the Company's books
using the equity method of accounting and had an aggregate market value as of December 31, 1990, of $255 million, (iii)
interests in certain partnerships, trusts and preferred equity securities classified on the balance sheet as “other long-term
investments” and having an aggregate book value as of November 30, 1990, of $169 million, (iv) approxima tely 95.2
percent of the outstanding common stock of Fireman's Fund Mortgage Corporation, a Delaware corporation (“ FFMC”
and, with its subsidiaries, the “Mortgage Company”), (v) all the outstanding capital stock of the New Jersey Insurance
Subsidiaries and (vi) cash and other short-term investments in the amount of $959 million as of the close of business on
January 2, 1991 (before giving effect to the repayment of $185 million of then outstanding commercial paper).
The Company's portfolio of common equity securities consists in great part of large blocks of securities of a small number
of issuers, many of them in the energy, natural resources and related industries. See “Comm on Equity Securities” in
Section 9. This concentration may make the value of the Company's portfolio more volati le than the value of a more
diversified portfolio. Moreover, because many of the common equity securities in the Company's portfolio are relatively
illiquid, including the common stock of MBIA Inc., the ultimate amounts that the Company would realize on the sale of
such securities in the Liquidation could be significantly less than the quoted values of such securities on the markets on
which they are traded. The Company's portfolio of common equity securities sustained $23 mill ion of net realized and
unrealized losses aftertax during the period January 1, 1991, through January 10, 1991. The market value of the
Company's investment in the common stock of MBIA Inc., which is not classified with common equity securities on the
Company's balance sheet but is carried at its equity value determined in accordanc e with generally accepted accounting
principles (“GAAP”) in other long-term investments, also declined during that period to $222 mil lion as of January 10,
1991. After January 10, 1991, the value of the Company's portfolio of common equity securities and other long-term
investments may increase or decrease, depending on market conditions and other relevant factors.
The stock of FFMC, along with a portion of the Company's consolidated portfolio of common equity securities with a
market value of approximately $393 million as of December 31, 1990, are owned by the Company through a wholly
owned subsidiary, Fund American Enterprises, Inc., a Delaware corporation (“FAE”). The Mortgage Company engages
primarily in the business of producing, selling and servicing residential mortgage loans. For a discussion of the business
of the Mortgage Company and the plans with respect to the Mortgage Company in connection wi th the Liquidation, see
Sections 9 and 11. The Mortgage Company's business constitutes the principal remaining operati ng business of the
Company and FAE, although the Company continues to conduct a small insurance business through the New Jersey
Insurance Subsidiaries.
In light of the composition of the Company's assets and the attendant uncertainties regarding their net realizable
value in the Liquidation, it is impracticable to predict the aggregate net amount ultimately distributable to
shareholders in the Liquidation. Notwithstanding those uncertainties, the
SALE OR PURCHASE OF CAPITAL STOCK§4.104
April/May 19924-107M
Company's management believes that the amount which will be received on the sale of its assets will be adequate to
provide for the Company's obligations, liabilities, expenses and claims (including continge nt liabilities) and to make
distributions to shareholders beyond the Offer and the dividend on Shares to be paid on March 20, 1991. See Se ction 7.
The Company's book value per Share, both before and after the Offer, and related matters are discussed below in Sections
8, 9 and 11.
THE OFFER
1. Number of Shares; Proration; Extension of the Offer
Upon the terms and subject to the conditions of the Offer, the Company will accept for pa yment (and thereby purchase)
12,500,000 Shares or such lesser number of Shares as are properly tendered (and not withdrawn in accordance wit h
Section 4) before the Expiration Date at a price (determined in the manner set fort h below) not in excess of $56 nor less
than $47 per Share. The term “Expiration Date” shall mean 12:00 Midnight, New York City time, on Monday, February
11, 1991, unless and until the Company shall have extended the period of time for which t he Offer is open, in which event
the term “Expiration Date” shall refer to the latest time and date at which the Offer, as so extended by the Company, shall
expire. For a description of the Company's rights to extend the period of time during which the Offer is open and to delay,
terminate or amend the Offer, see Section 16. See also Section 6. Subject to the purc hase of Shares properly tendered and
not withdrawn by Odd Lot Holders as set forth in Section 2, if the Offer is oversubscribed, Shares tendered before the
Expiration Date at or below the Purchase Price will be subject to proration. The prorat ion period also expires on the
Expiration Date.
The Company reserves the right, in its sole discretion, at any time or from time t o time, to extend the period of time
during which the Offer is open by giving oral or written notice of such extension to the Deposita ry and making a public
announcement thereof. See Section 16. There can be no assurance, however, that the Company will exercise its right to
extend the Offer.
The Offer is not conditioned upon any minimum number of Shares being tendered. The Offer is, however, subject
to certain other conditions. See Section 6.
The Company will, upon the terms and subject to the conditions of the Offer, determine a single Purchase Price (not in
excess of $56 nor less than $47) that it will pay for Shares properly tendered pursuant to the Offer taking into account the
number of Shares so tendered and the prices specified by tendering shareholders. The Company will select the Purchase
Price which will enable it to purchase 12,500,000 Shares (or such lesser number of Shares as are properl y tendered at
prices not in excess of $56 nor less than $47) pursuant to the Offer.
All Shares purchased pursuant to the Offer will be purchased at the Purchase Price, net t o the seller in cash. The Company
reserves the right, in its sole discretion, to purchase more than 12,500,000 Shares pursuant to the Offer, but the Company
does not, in any event, intend to purchase more Shares than can be purchased for an aggregate purchase price of $700
million. If (a) the Company (i) increases or decreases the range of prices at which Share s may be properly tendered, (ii)
increases the number of Shares being sought and any such increase exceeds 2 percent of the out standing Shares or (iii)
decreases the number of Shares being sought, and (b) the Offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from and including the date that noti ce of such increase or
decrease is first published, sent or given in the manner specified in Section 16, the Offer will be extended until the
expiration of such ten business day period. For the purposes of the Offer, a “business day” means any day other than a
Saturday, Sunday or Federal holiday and consists of the time period from 12:01 A.M. through 12:00 Midnight, New York
City time.
In accordance with Instruction 5 of the Letter of Transmittal, each shareholder desiring to tender Share s must
specify the price or prices (not in excess of $56 nor less than $47 per Share, in multiples of $.25) at which such
shareholder is willing to have such shareholder's Shares purchased by the Company. All Shares not purchased
pursuant to the Offer, including Shares tendered at prices in excess of the Purchase Price a nd Shares not purchased
because of proration, will be returned to the tendering shareholders at the Company's expense as promptly as practicable
(which, in the event of proration, is expected to be approximately 12 NYSE trading days) following the Expiration Date.
If the number of Shares properly tendered at or below the Purchase Price and not withdrawn before the Expiration Date is
§4.104 PROXY STATEMENTS:STRATEGY & FORMS
4-107N© 1992 Jefren Publishing Company, Inc.
less than or equal to 12,500,000 Shares (or such greater number of Shares as the
SALE OR PURCHASE OF CAPITAL STOCK§4.104
April/May 19924-107O
Company may elect to purchase pursuant to the Offer), the Company, upon the terms and subject to the conditions of the
Offer, will purchase at the Purchase Price all Shares so tendered and not withdrawn.
If the number of Shares properly tendered at or below the Purchase Price and not withdrawn before the Expiration Date is
greater than 12,500,000 Shares (or such greater number of Shares as the Company may elect to purcha se pursuant to the
Offer), the Company, upon the terms and subject to the conditions of the Offer, will accept Sha res for purchase in the
following order of priority:
(a) first, all Shares properly tendered at or below the Purchase Price and not withdrawn before t he Expiration Date by any
shareholder who beneficially owned as of the close of business on January 8, 1991, and who continues to own
beneficially until the Expiration Date an aggregate of fewer than 100 Shares (each an “Odd Lot Holder”) who:
(1) tenders at or below the Purchase Price all Shares beneficially owned by such Odd Lot Hol der (partial tenders
will not qualify for this preference ); and
(2) completes the box captioned “Odd Lots” on the Letter of Transmittal and, if appli cable, on the Notice of
Guaranteed Delivery; and
(b) then, after purchase of all the foregoing Shares, all other Shares properly tendered at or below the Purchase Price and
not withdrawn before the Expiration Date on a pro rata basis, if necessary (with adjustment s to avoid purchases of
fractional Shares).
In the event that proration of tendered Shares is required, the Company will determine t he final proration factor as
promptly as practicable after the Expiration Date. Although the Company does not expect that it will be able to announce
the final proration factor until approximately seven NYSE trading days after the Expirat ion Date, it will announce
preliminary results of proration by press release as promptly as practicable after the Expi ration Date. Shareholders may
obtain such preliminary information from the Information Agent or the Dealer Manager and ma y be able to obtain such
information from their brokers or financial advisors.
On November 11, 1987, the Board declared a dividend distribution of one Right (each, a “Right”) for each Share
outstanding on November 25, 1987. In addition, each Share issued subsequent to November 25, 1987, automatical ly
receives a Right. The Rights expire on November 25, 1997, unless redeemed earlier by the C ompany. Each Right entitles
its registered holder to purchase from the Company 1/1000th of a share of Series A Participat ing Cumulative Preferred
Stock, par value $1.00 per share (the “Participating Stock”), at a price of $105, subject t o adjustment to prevent dilution.
The Rights currently are not exercisable and trade together with the Shares associate d therewith, and will not become
exercisable or separately tradeable as a result of the Offer. Absent the occurrence of c ircumstances causing the Rights to
become exercisable or separately tradeable before the Expiration Date, the tende r of any Shares pursuant to the Offer will
include the tender of the Rights associated therewith. No separate consideration will be paid for such Rights. Upon the
purchase of Shares by the Company pursuant to the Offer, shareholders selling those Shares will no l onger own the Rights
associated with such purchased Shares. See Section 9.
2. Tenders by Holders of Fewer than 100 Shares
The Company, upon the terms and subject to the conditions of the Offer, will accept for purc hase, without proration, all
Shares properly tendered at or below the Purchase Price and not withdrawn before the Expiration Da te by or on behalf of
Odd Lot Holders. See Section 1. To avoid proration, however, an Odd Lot Holder must properly tender at or below the
Purchase Price all Shares that such Odd Lot Holder beneficially owns. Partial tenders wi ll not qualify for this preference.
This preference is not available to owners of 100 or more Shares even if such owners have separa te stock certificates for
fewer than 100 Shares. Any Odd Lot Holder wishing to tender all Shares beneficially owned by such Odd Lot Holder
pursuant to the Offer and qualify for this preference must complete the box captioned “ Odd Lots” on the Letter of
Transmittal and, if applicable, on the Notice of Guaranteed Delivery. See Section 3.
§4.104 PROXY STATEMENTS:STRATEGY & FORMS
4-107P© 1992 Jefren Publishing Company, Inc.
3. Procedure for Tendering Shares
Proper Tender of Shares. For Shares to be properly tendered pursuant to the Offer:
(a) the certificates for such Shares (or confirmation of receipt of such Shares pursuant to the procedure for book-entry
transfer set forth below), together with a properly completed and duly executed Letter of T ransmittal (or a facsimile
copy thereof) with any required signature guarantees, and any other documents required by the Letter of Transmittal,
must be received before the Expiration Date by the Depositary at one of its addresses se t forth on the back cover of
this Offer to Purchase; or
(b) the tendering shareholder must comply with the guaranteed delivery procedure set forth below.
As specified in Instruction 5 of the Letter of Transmittal, each shareholder desiring to tender Shares pursuant to the Offer
must properly indicate in the section captioned “Price (In Dollars) Per Share At Whi ch Shares Are Being Tendered” on
the Letter of Transmittal the price (in multiples of $.25 per Share) at which suc h shareholder's Shares are being tendered.
If a shareholder desires to tender Shares at more than one price, such shareholder must comple te a separate Letter of
Transmittal for each price at which such shareholder is tendering Shares, except tha t the same Shares cannot be tendered
(unless properly withdrawn previously in accordance with the terms of the Offer) at more than one price. For a tender of
Shares to be proper, one price box, but only one price box, on each Letter of Transmittal must be c hecked. If no
price box is checked, or more than one price box is checked, on the Letter of Transmittal, the tender of Shares will
not be proper.
It is a violation of Section 14(e) of the Exchange Act, and Rule 14e-4 promulgated thereunder, for a person to tender
Shares for such person's own account unless the person so tendering:
(a) owns such Shares; or
(b) owns an option, warrant or right to purchase such Shares and intends to acquire Shares for tender by exercise of
such option, warrant or right.
Section 14(e) and Rule 14e-4 provide a similar restriction applicable to the tender or guarantee of a tender on behalf of
another person.
A tender of Shares made pursuant to any method of delivery set forth herein will constitute a binding agreement between
the tendering shareholder and the Company upon the terms and subject to the conditions of t he Offer, including the
tendering shareholder's representation that (i) such shareholder owns the Shares being tendered wit hin the meaning of
Rule 14e-4 promulgated under the Exchange Act and (ii) the tender of such Shares complies with Rule 14e-4.
Signature Guarantees and Methods of Delivery. No signature guarantee is required on the Letter of Transmittal if the
Letter of Transmittal is signed by the registered owner of the Shares (which term, for purposes of this Section, includes
any participant in The Depository Trust Company, Midwest Securities Trust Company or Philade lphia Depository Trust
Company (collectively, the “Book-Entry Transfer Facilities”) whose name appears on a sec urity position listing as the
owner of the Shares) tendered therewith, and payment and delivery are to be made directl y to such registered owner at
such owner's address shown on the records of the Company, or if Shares are tendered for the account of a m ember firm of
a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office, branch or agency in the United States (each such entity being
hereinafter referred to as an “Eligible Institution”). In all other cases, all signat ures on the Letter of Transmittal must be
guaranteed by an Eligible Institution. See Instruction 1 of the Letter of Transmittal . If a certificate representing Shares is
registered in the name of a person other than the person signing a Letter of Transmittal , or if payment is to be made, or
certificates for Shares not purchased or tendered are to be issued, to a person other than t he registered owner, the
certificate must be endorsed or accompanied by an appropriate stock power, in either c ase signed exactly as the name of
the registered owner appears on the certificate, with the signature on the certifica te or stock power guaranteed by an
Eligible Institution. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made
only after timely receipt by the Depositary of certificates for such Shares (or a tim ely confirmation of a book-entry
transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Faciliti es), a properly completed
and duly executed Letter of Transmittal (or a facsimile thereof) and any other doc uments required by the Letter of
Transmittal.
SALE OR PURCHASE OF CAPITAL STOCK§4.104
April/May 19924-107Q
The method of delivery of all documents, including stock certificates, the Letter of Transmittal and any other required
documents, is at the election and risk of the tendering shareholder. If delivery is by mai l, registered mail with return
receipt requested, properly insured, is recommended.
Federal Backup Withholding. Unless an exemption applies under the applicable law concerning “backup withholding” of
Federal income tax, the Depositary will be required to withhold, and will withhold, 20 percent of the gross proceeds
otherwise payable to a shareholder (or other payee) pursuant to the Offer unless the shareholder (or ot her payee) provides
such person's tax identification number (social security number or employer identification number) and certifies that such
number is correct. Each tendering shareholder, other than a noncorporate foreign shareholder, should c omplete and sign
the main signature form and the Substitute Form W-9 included as part of the Letter of Transmittal so as to provide the
information and certification necessary to avoid backup withholding, unless an applicabl e exemption exists and is proved
in a manner satisfactory to the Company and the Depositary. Noncorporate foreign shareholders genera lly should
complete and sign a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in
order to avoid backup withholding.
For a discussion of certain other Federal income tax consequences of the Offer, see Section 12.
Book-Entry Delivery . The Depositary will establish an account with respect to the Shares at each of t he Book-Entry
Transfer Facilities for purposes of the Offer within two business days after the date of this Offe r to Purchase. Any
financial institution that is a participant in a Book-Entry Transfer Facility's syste m may make book-entry delivery of the
Shares by causing such facility to transfer such Shares into the Depositary's account in accorda nce with such facility's
procedure for such transfer. Even though delivery of Shares may be effected through book-entry transfer int o the
Depositary's account at one of the Book-Entry Transfer Facilities, a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof), with any required signature guarantees and other re quired documents, must, in any
case, be transmitted to and received by the Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase before the Expiration Date, or the guaranteed delivery procedure set forth below m ust be followed. Delivery of
the Letter of Transmittal and any other required documents to one of the Book-Entry Transfer Facilities does not
constitute delivery to the Depositary.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to the Offer and such shareholder's stock
certificates are not immediately available (or the procedure for book-entry transfer c annot be followed on a timely basis)
or time will not permit the Letter of Transmittal and all other required doc uments to reach the Depositary before the
Expiration Date, such Shares may nevertheless be tendered provided that all the following conditions are satisfied:
(a) such tender is made by or through an Eligible Institution;
(b) the Depositary receives (by hand, mail or facsimile transmission) before the Expirati on Date, a properly
completed and duly executed Notice of Guaranteed Delivery (indicating the price at which the Shares are being tendered)
substantially in the form the Company has provided with this Offer to Purchase; and
(c) the certificates for all tendered Shares in proper form for transfer (or confirmation of book-ent ry transfer of such
Shares into the Depositary's account at one of the Book-Entry Transfer Facilities), togethe r with a properly completed and
duly executed Letter of Transmittal (or a facsimile thereof) and any other docume nts required by the Letter of Transmittal,
are received by the Depositary within five NYSE trading days after the date of executi on of such Notice of Guaranteed
Delivery.
Determination of Validity; Rejection of Shares; Waiver of Defects; No Obligation to Give Notice of Defects. All
questions as to the number of Shares to be accepted, the price to be paid therefor and the validity, form, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Company, in its
sole discretion, which determination shall be final and binding on all parties. The C ompany reserves the absolute right to
reject any or all tenders determined by it not to be in proper form or the acceptanc e for payment of which may, in the
opinion of the Company's counsel, be unlawful. The Company also reserves the absolute right to wa ive any of the
conditions of the Offer (except as otherwise provided in Section 6) and any defect or irregula rity in the tender of any
particular Shares. No tender of Shares will be deemed properly made until all defects or irregularities have been cured or
waived. None of the Company, the Depositary, the Information Agent, the Dealer
§4.104 PROXY STATEMENTS:STRATEGY & FORMS
4-107R© 1992 Jefren Publishing Company, Inc.
Manager or any other person is or will be obligated to give notice of any defects or irregularities in tenders, and none of
them will incur any liability for failure to give any such notice.
Employee Benefit Plans. Participants in the ESOP and the ISP who wish to have the trustee of the ESOP or the t rustee of
the ISP, as the case may be, tender Shares allocated to their accounts under the ESOP or the ISP should so indicate by
completing, executing and returning to the appropriate trustee the instruction form for ESOP pa rticipants or for ISP
participants, respectively, included in the notices sent to such participants. Partic ipants in the ESOP or the ISP may not
use the Letter of Transmittal to direct the respective trustees of the ESOP or the ISP to tender Shares allocated to such
shareholders under the ESOP or the ISP, as the case may be, but must use the separate instruct ion form sent to them.
Participants in the ESOP or the ISP or both are urged to read, as appropriate, the separate instruction forms and related
materials sent to them carefully. Shares held by the ESOP or the ISP and allocated to participants' accounts for
which no instructions are received will not be tendered pursuant to the Offer. See Section 15.
4. Withdrawal Rights
Except as otherwise provided in this Section 4, a tender of Shares pursuant to the Offer is irrevocable. Shares tendered
pursuant to the Offer may be withdrawn at any time before the Expiration Date and, unl ess theretofore accepted for
payment by the Company, after 12:00 Midnight, New York City time, on Tuesday, March 12, 1991.
For a withdrawal to be effective, the Depositary must timely receive (at one of i ts addresses set forth on the back cover of
this Offer to Purchase) a written or facsimile transmission notice of withdrawal. Any notice of withdrawal must specify
the name of the person having tendered the Shares to be withdrawn, the number of Shares to be wit hdrawn and, if
different from the name of the person who tendered the Shares, the name of the registered owner of such Shares. If the
certificates have been delivered or otherwise identified to the Depositary, then, pri or to the release of such certificates, the
tendering shareholder must also submit the serial numbers shown on the particular certific ates evidencing such Shares and
the signature on the notice of withdrawal must be guaranteed by an Eligible Institution (except in the case of Shares
tendered by an Eligible Institution). If Shares have been delivered pursuant to the procedure for book-entry transfer set
forth in Section 3, the notice of withdrawal must specify the name and the number of the account at the applicable Book-
Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with the procedures of such
facility.
All questions as to the form and validity (including time of receipt) of notices of wit hdrawal will be determined by the
Company, in its sole discretion, which determination shall be final and binding on all parties. None of the Company, the
Depositary, the Information Agent, the Dealer Manager or any other person is or will be obligate d to give any notice of
any defects or irregularities in any notice of withdrawal, and none of them will incur a ny liability for failure to give any
such notice. A withdrawal of a tender may not be rescinded and Shares properly withdrawn sha ll thereafter be deemed not
to be validly tendered for purposes of the Offer. Withdrawn Shares, however, may be retendered before t he Expiration
Date by again following one of the procedures described in Section 3.
5. Acceptance for Payment of Shares and Payment of Purchase Price
Upon the terms and subject to the conditions of the Offer, the Company will determine the Purchase Price it will pay for
properly tendered Shares taking into account the number of Shares so tendered and the prices specified by tendering
shareholders and will accept for payment (and thereby purchase) Shares properly tendered at or bel ow the Purchase Price
and not withdrawn as soon as practicable after the Expiration Date. For purposes of the Offe r, the Company will be
deemed to have accepted for payment (and thereby purchased), subject to proration, Shares which are tendered at or below
the Purchase Price and not withdrawn when, as and if the Company gives oral or written not ice to the Depositary of the
Company's acceptance of such Shares for payment pursuant to the Offer. Upon the terms and subject to the conditions of
the Offer, the Company will purchase and pay for 12,500,000 Shares (subject to increase or decrease as provided in
Sections 1 and 16) or such lesser number of Shares as are properly tendered and not withdrawn a s permitted in Section 4
at prices, not in excess of $56 nor less than $47 per Share, as soon as practicable after the Expiration Date.
In the event of proration, the Company will determine the proration factor and pay for t hose tendered Shares accepted for
payment as soon as practicable after the Expiration Date. The Company, however, does not expect to be able to announce
the final results of any such proration until at least approximately
SALE OR PURCHASE OF CAPITAL STOCK§4.104
April/May 19924-107S
seven NYSE trading days after the Expiration Date. Certificates for all Shares not purchased pursuant to the Offer,
including Shares tendered at pric
