SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
The Enstar Group, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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2
(ENSTAR LOGO)
April 16, 2004
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
The Enstar Group, Inc. to be held on Friday, May 21, 2004, at the Montgomery
Civic Center at 300 Bibb Street, Montgomery, Alabama 36104. The meeting will
begin promptly at 9:00 a.m., local time, and we hope you will be able to attend.
The Notice of Annual Meeting of Shareholders outlines the business to be
conducted at the meeting.
It is important that your shares be voted whether or not you plan to be
present at the meeting. You should specify your choices by marking the
appropriate boxes on the proxy, and date, sign and return your proxy in the
enclosed envelope as promptly as possible. If you date, sign and return your
proxy without specifying your choices, your shares will be voted in accordance
with the recommendation of the Board of Directors.
I am looking forward to seeing you at the meeting.
Sincerely,
-s- Nimrod T. Frazer
NIMROD T. FRAZER
Chairman of the Board
and Chief Executive Officer
(ENSTAR LETTERHEAD)
THE ENSTAR GROUP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 21, 2004
To the Shareholders of The Enstar Group, Inc.:
The Annual Meeting of Shareholders of The Enstar Group, Inc. (the
"Company") will be held on Friday, May 21, 2004, at 9:00 a.m., local time, at
the Montgomery Civic Center at 300 Bibb Street, Montgomery, Alabama 36104, for
the following purposes:
(i) to elect three (3) directors to three-year terms expiring at the
annual meeting of shareholders in 2007 or until their successors are duly
elected and qualified;
(ii) to ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company to serve for 2004; and
(iii) to transact such other business as may properly come before the
Annual Meeting of Shareholders or any adjournment thereof.
The Board of Directors has fixed the close of business on April 1, 2004 as
the record date (the "Record Date") for determination of shareholders entitled
to receive notice of, and to vote at, the Annual Meeting of Shareholders and any
adjournment thereof. A list of shareholders as of the Record Date will be open
for examination during the Annual Meeting of Shareholders.
Your attention is directed to the Proxy Statement submitted with this
Notice. This Notice is being given at the direction of the Board of Directors.
By Order of the Board of Directors
-s- CHERYL D. DAVIS
CHERYL D. DAVIS
Chief Financial Officer,
Vice-President of Corporate Taxes and
Secretary
Montgomery, Alabama
April 16, 2004
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF
YOU ATTEND THE MEETING, YOU MAY REVOKE THE PROXY AND VOTE IN PERSON IF YOU WISH,
EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY.
THE ENSTAR GROUP, INC.
401 MADISON AVENUE
MONTGOMERY, ALABAMA 36104
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PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 21, 2004
---------------------
INTRODUCTION
GENERAL
This Proxy Statement is being furnished to the shareholders of The Enstar
Group, Inc. (the "Company") in connection with the solicitation of proxies by
the Board of Directors of the Company (the "Board") for use at the Annual
Meeting of Shareholders to be held on Friday, May 21, 2004 (the "Annual
Meeting"), at the Montgomery Civic Center at 300 Bibb Street, Montgomery,
Alabama 36104, 9:00 a.m., local time, and at any adjournment thereof.
RECORD DATE
The Board has fixed April 1, 2004 as the record date (the "Record Date")
for the determination of shareholders entitled to notice of, and to vote at, the
Annual Meeting. Only holders of common stock, par value $.01 per share, of the
Company ("Common Stock") as of the Record Date are entitled to vote at the
Annual Meeting or any adjournment thereof. On the Record Date, the Company had
issued and outstanding 5,465,753 shares of Common Stock. Each share of Common
Stock is entitled to one vote at the Annual Meeting. No cumulative voting rights
are authorized, and appraisal rights for dissenting shareholders are not
applicable to the matters being proposed. It is anticipated that this Proxy
Statement will be first mailed to shareholders of the Company on or about April
16, 2004.
VOTING AND PROXIES
When the enclosed form of proxy is properly executed and returned, the
shares it represents will be voted as directed at the Annual Meeting and any
adjournment thereof or, if no direction is indicated, such shares will be voted
in favor of the proposals set forth in the notice attached hereto. Any
shareholder giving a proxy has the power to revoke it at any time before it is
voted. All proxies delivered pursuant to the solicitation are revocable at any
time at the option of the persons executing them by giving written notice to the
Secretary of the Company, by delivering a later-dated proxy or by voting in
person at the Annual Meeting. If Common Stock owned by a shareholder is
registered in the name of more than one person, each such person should sign the
enclosed proxy. If the proxy is signed by an attorney, executor, administrator,
trustee, guardian or by any other person in a representative capacity, the full
title of the person signing the proxy should be given and a certificate should
be furnished showing evidence of appointment. Any beneficial owner of shares of
Common Stock as of the Record Date who intends to vote such shares in person at
the Annual Meeting must obtain a legal proxy from the record owner and present
such proxy at the Annual Meeting in order to vote such shares. Votes cast by
proxy or in person at the Annual Meeting will be tabulated by the inspector of
elections appointed for the meeting who will also determine whether a quorum is
present for the transaction of business.
The presence in person or by proxy of holders of a majority of the shares
of Common Stock outstanding on the Record Date will constitute a quorum for the
transaction of business at the Annual Meeting or any adjournment thereof. The
affirmative vote of a plurality of the shares of Common Stock present in person
or by proxy and entitled to vote is required to elect directors. The affirmative
vote of the majority of the shares of Common Stock represented at the Annual
Meeting and entitled to vote on the subject matter is required with
respect to the ratification of the appointment of Deloitte & Touche LLP as the
Company's independent auditors and any other matter that may properly come
before the Annual Meeting. At the Annual Meeting, votes cast for or against any
matter may be cast in person or by proxy. Shares of Common Stock held by
nominees for beneficial owners will be counted for purposes of determining
whether a quorum is present if the nominee has the discretion to vote on at
least one of the matters presented, even if the nominee may not exercise
discretionary voting power with respect to other matters and voting instructions
have not been received from the beneficial owner (a "broker non-vote"). Broker
non-votes will not be counted as votes for or against matters presented for
shareholder consideration. Abstentions with respect to a proposal are counted
for purposes of establishing a quorum. If a quorum is present, abstentions have
the effect of a negative vote against any proposal, except for the election of
directors.
As of the date of this Proxy Statement, management of the Company has no
knowledge of any business other than that described herein which will be
presented for consideration at the Annual Meeting. In the event any other
business is properly presented at the Annual Meeting, it is intended that the
persons named in the enclosed proxy will have authority to vote such proxy in
accordance with their judgment on such business.
ELECTION OF DIRECTORS
(ITEM 1)
BOARD OF DIRECTORS
In accordance with the Bylaws of the Company, the Board currently consists
of seven members. The Company's Articles of Incorporation divide the Board into
three classes. Directors for each class are elected at the annual meeting of
shareholders held in the year in which the term for such class expires to serve
a term of three years. Nominees for vacant or newly created director positions
stand for election at the next annual meeting following the vacancy or creation
of such director positions, to serve for the remainder of the term of the class
in which their respective positions are apportioned. To fill the vacancy created
by the increase in the size of the Board from six to seven members, in July 2003
the Board appointed Gregory L. Curl as a director in the class of directors with
a term expiring in 2007. The terms of J. Christopher Flowers and Jeffrey S.
Halis expire at the Annual Meeting. Jeffrey S. Halis has notified the Board that
he will retire from the Board, effective immediately prior to the Annual
Meeting, and so is not standing for reelection. At the Annual Meeting, J.
Christopher Flowers, Gregory L. Curl and Paul J. Collins will stand for election
to serve as directors for three-year terms expiring at the 2007 annual meeting
of shareholders, or until their successors are duly elected and qualified. In
accordance with the Bylaws of the Company, a director who is not also an
employee of the Company may serve as a director only until the next annual
meeting following such director's 70th birthday.
The Board has no reason to believe that any of the nominees for the office
of director will be unavailable for election as directors. However, if at the
time of the Annual Meeting any nominee should be unable or decline to serve, the
persons named in the proxy will vote as recommended by the Board either (i) to
elect a substitute nominee recommended by the Board, (ii) to allow the vacancy
created thereby to remain open until filled by the Board or (iii) to reduce the
number of directors for the ensuing year. In no event, however, can a proxy be
voted to elect more than three directors. The election of the nominees to the
Board requires the affirmative vote of a plurality of the shares held by
shareholders present and voting at the Annual Meeting in person or by proxy.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board recommends a vote FOR J. Christopher Flowers, Gregory L. Curl and
Paul J. Collins to hold office until the 2007 annual meeting of shareholders, or
until their successors are duly elected and qualified.
2
NOMINEES FOR ELECTION -- TERMS EXPIRING 2007
J. Christopher Flowers was elected to the position of director in October
of 1996. Mr. Flowers became a General Partner of Goldman, Sachs & Co. in 1988
and a Managing Director in 1996. He resigned from Goldman, Sachs & Co. as of
November 27, 1998 in order to pursue his own business interests. Mr. Flowers was
named Vice Chairman of the Board effective December 1, 1998; Mr. Flowers
resigned from such position in July 2003 but remains a member of the Board. He
is also a director of Shinsei Bank, Ltd., formerly Long-Term Credit Bank of
Japan, Ltd. Mr. Flowers is President of J.C. Flowers & Co., LLC, a financial
services investment fund. Mr. Flowers is 46 years old.
Gregory L. Curl was elected to the position of director in July of 2003.
Mr. Curl has been Director of Corporate Planning and Strategy for Bank of
America since December 1998. Previously, Mr. Curl was Vice Chairman of Corporate
Development and President of Specialized Lending for Bank of America from 1997
to 1998. Mr. Curl is 55 years old.
Paul J. Collins retired as a Vice Chairman and member of the Management
Committee of Citigroup Inc., in September 2000. From 1985 to 2000, Mr. Collins
served as a director of Citicorp and its principal subsidiary, Citibank; from
1988 to 1998 he also served as Vice Chairman of such entities. Mr. Collins
joined Citicorp in 1961 and served in its investment management group for
fourteen years, five as chief investment officer. He subsequently headed
corporate planning, finance and administration, and the financial markets group,
and served as Senior Corporate Officer first for North America and later for
Europe and the Middle East. He was also responsible for Citicorp's proprietary
and customer investment activities and for the strategic management of the
company's Emerging Markets corporate banking business, which encompass local,
regional and global corporate customers in over 70 countries. Mr. Collins
currently serves as a director of Nokia Corporation and BG Group and as a
trustee of the University of Wisconsin Foundation and the Glyndebourne Arts
Trust. He is also a member of the Advisory Board of Welsh, Carson, Anderson &
Stowe, a private equity firm. Mr. Collins is 67 years old.
CONTINUING DIRECTORS -- TERMS EXPIRING 2005
Nimrod T. Frazer was elected to the position of director in August of 1990.
Mr. Frazer is Chairman of the Board and Chief Executive Officer. Mr. Frazer was
named Chairman of the Board, Acting President and Chief Executive Officer on
October 26, 1990 and served as President from May 26, 1992 to June 6, 2001. Mr.
Frazer is 74 years old.
John J. Oros was appointed to the position of director in March of 2000 and
subsequently elected to the position of director by the Company's shareholders
in May of 2000. Mr. Oros was named to the position of Executive Vice President
in March of 2000. On June 6, 2001, Mr. Oros was named President and Chief
Operating Officer. Before joining the Company, Mr. Oros was an investment banker
at Goldman, Sachs & Co. in the Financial Institutions Group. Mr. Oros joined
Goldman, Sachs & Co. in 1980 and was made a General Partner in 1986. Mr. Oros is
57 years old.
CONTINUING DIRECTORS -- TERMS EXPIRING 2006
T. Whit Armstrong was elected to the position of director in June of 1990.
Mr. Armstrong has been President, Chief Executive Officer and Chairman of the
Board of The Citizens Bank, Enterprise, Alabama, and its holding company,
Enterprise Capital Corporation, Inc. in excess of five years. Mr. Armstrong is
also a director of Alabama Power Company of Birmingham, Alabama. Mr. Armstrong
is 56 years old.
T. Wayne Davis was elected to the position of director in June of 1990. Mr.
Davis was Chairman of the Board of General Parcel Service, Inc., a parcel
delivery service, from January of 1989 to September of 1997 and was Chairman of
the Board of Momentum Logistics, Inc. from September of 1997 to March of 2003.
He also is a director of Winn-Dixie Stores, Inc. and MPS Group, Inc. Mr. Davis
is 57 years old.
3
CODE OF CONDUCT; CODE OF ETHICS
The Company has a Code of Conduct which is applicable to all directors,
officers and employees of the Company. The Company has an additional Code of
Ethics for Senior Executive and Financial Officers (the "Code of Ethics"), which
contains provisions specifically applicable to the chief executive officer,
chief financial officer and chief accounting officer and persons performing
similar functions. The Code of Ethics is attached as an exhibit to the Company's
Annual Report on Form 10-K for the year ended December 31, 2003. Upon request to
the following address, the Company will furnish without charge a copy of the
Code of Conduct and the Code of Ethics:
THE ENSTAR GROUP, INC.
401 Madison Avenue
Montgomery, Alabama 36104
Attention: Amy M. Dunaway
Treasurer and Controller
THE BOARD OF DIRECTORS
The Board has determined that each of T. Whit Armstrong, T. Wayne Davis,
Jeffrey S. Halis and Gregory L. Curl is, and that upon his election Paul J.
Collins will be, an "independent director" as such term is defined in Rule
4200(a)(15) of the National Association of Securities Dealers (the "NASD").
During 2003, the Company had an Audit Committee which was composed of T.
Whit Armstrong, Chairman, T. Wayne Davis, Gregory L. Curl and Jeffrey S. Halis.
The Board has determined that each Audit Committee member meets the independence
standards for audit committee members, as set forth in the Sarbanes-Oxley Act of
2002 and the NASD listing standards, and the NASD's financial knowledge
requirements. The Board has determined that Mr. Curl is an "audit committee
financial expert," as such term is defined in SEC regulations, and that Mr. Curl
and Mr. Armstrong meet the NASD's professional experience requirements. The
Audit Committee is responsible for, among other things, appointing (subject to
shareholder ratification) the accounting firm that will serve as independent
auditors for the Company and reviewing and pre-approving all audit and non-audit
services provided to the Company by its independent auditors. The Audit
Committee is also responsible for overseeing the Company's financial reporting
and accounting practices and monitoring the adequacy of internal accounting,
compliance and control systems. The Board has adopted a written charter for the
Audit Committee (the "Audit Committee Charter") which complies with the
applicable requirements of the Sarbanes-Oxley Act of 2002 and related rules of
the SEC and the NASD. The Audit Committee Charter is attached to this Proxy
Statement as Annex A.
During 2003, the Company had a Compensation Committee which was composed of
T. Wayne Davis, Chairman, T. Whit Armstrong, J. Christopher Flowers and Jeffrey
S. Halis. Mr. Halis' resignation from the Committee was accepted by the Board in
November 2003. The Board appointed Mr. Flowers to the Committee in July 2003.
Other than Mr. Flowers, each director who served on the Compensation Committee
during fiscal 2003 qualifies as a "non-employee director" as such term is
defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and an "independent director" as such term is
defined in NASD Rule 4200(a)(15). Mr. Flowers served as an officer of the
Company until July 2003. In addition, as described below under the heading
"Certain Transactions," Mr. Flowers and the Company have entered into numerous
transactions, directly and indirectly. The Board has determined that Mr.
Flowers' membership on the Committee is in the best interests of the Company and
its shareholders, because as the Company's largest shareholder and as one who is
well acquainted with the Company's officers and employees, Mr. Flowers is in a
unique position to determine the contributions made by each such officer and
employee. The Compensation Committee is responsible for, among other things,
reviewing, determining and establishing, upon the recommendation of the Chief
Executive Officer (with the exception of the compensation of the Chief Executive
Officer) salaries, bonuses and other compensation for the Company's executive
officers and for administering the Company's stock option plans.
4
The Company does not have a nominating committee or a nominating committee
charter. It is the position of the Board that, given the small size of the
Board, it is appropriate for the independent directors, rather than a separate
committee comprised of most or all of such independent directors, to recommend
director candidates. In November 2003, the Board adopted a resolution regarding
the nomination of directors. Pursuant to such resolution, director nominees must
be recommended to the Board by a majority of the "independent directors" as such
term is defined in NASD Rule 4200(a)(15). The Board has determined that each of
T. Wayne Davis, T. Whit Armstrong, Jeffrey S. Halis and Gregory L. Curl is, and
upon his election Paul J. Collins will be, an independent director (the
"Independent Directors"). When identifying and reviewing director nominees the
Independent Directors consider the nominees' personal and professional
integrity, ability and judgment and other factors deemed appropriate by the
Independent Directors. For incumbent directors, the Independent Directors review
each director's overall service to the Company during such director's term,
including the number of meetings attended, level of participation and quality of
performance. The Independent Directors considered and nominated the candidates
proposed for election as directors at the Annual Meeting, with the Board
unanimously agreeing on all actions taken in this regard.
During 2003, the Board held a total of 4 meetings, the Audit Committee held
a total of 4 meetings and the Compensation Committee held a total of 4 meetings.
All directors attended all of the meetings of the Board and all committees on
which they served during 2003. Directors are encouraged but not required to
attend the Annual Meeting. All directors attended the 2003 annual meeting of
shareholders.
COMMUNICATIONS WITH THE BOARD
Shareholders may communicate with the Board by sending an email to
treasurer@enstargroup.com or by sending a letter to Enstar Board of Directors,
c/o the Treasurer, 401 Madison Avenue, Montgomery, Alabama 36104. The Treasurer
will receive the correspondence and forward it to the Chairman of the Audit
Committee or to any individual director or directors to whom the communication
is directed. The Treasurer has the authority to discard or disregard any
inappropriate communications or to take other appropriate actions with respect
to such inappropriate communications.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive a quarterly retainer
fee of $6,250 and per meeting fees as follows: (i) $2,500 for each Board meeting
attended other than a telephone Board meeting; (ii) $1,000 for each telephone
Board meeting attended; (iii) $1,000 for each Committee meeting attended; and
(iv) $1,500 for each Committee meeting attended by a Committee Chairperson. In
addition, each Committee Chairperson receives a quarterly retainer fee of $500.
Such outside directors' fees are payable at the election of the director either
in cash or in stock units under the Company's Deferred Compensation and Stock
Plan for Non-Employee Directors (the "Deferred Plan"). If the director elects to
receive stock units instead of cash, the stock units shall be payable only upon
the director's termination. The number of shares to be distributed in connection
with such termination would be equal to one share of Common Stock for each stock
unit and cash would be paid for any fractional units. The distribution of stock
units is also subject to acceleration upon certain events constituting a change
in control of the Company. All current non-employee directors, other than
Gregory L. Curl, have elected to receive 100% of their compensation in stock
units in lieu of cash payments for the retainer and meeting fees. Mr. Curl has
elected to receive a portion of his compensation in cash. As of December 31,
2003, a total of $695,313 in stock compensation had been deferred under this
plan. In addition, directors are entitled to reimbursement for out-of-pocket
expenses incurred in attending all meetings.
Upon becoming a director in July 2003, Gregory L. Curl was granted options
to purchase 5,000 shares of Common Stock at an exercise price of $40.00 per
share. During 2003, no other options to purchase shares of Common Stock were
granted to directors for their service as directors; however, as described below
under "Stock Option Grants," Nimrod T. Frazer and John J. Oros were granted
options to purchase shares of Common Stock for their service as officers and
employees of the Company.
5
COMMON STOCK OWNERSHIP BY MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of April 1, 2004 by (i) each of the executive
officers named below (the "Named Executive Officers"), (ii) each of the
directors and the nominees for director of the Company and (iii) all directors
and executive officers of the Company as a group.
SHARES OF COMMON STOCK PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) CLASS(2)
------------------------ ---------------------- ----------
NAMED EXECUTIVE OFFICERS
Nimrod T. Frazer...................................... 405,001(3) 7.09%
John J. Oros.......................................... 360,000(4) 6.40%
Cheryl D. Davis....................................... 3 *
Amy M. Dunaway........................................ 87(5) *
DIRECTORS OF THE COMPANY
Nimrod T. Frazer...................................... 405,001(3) 7.09%
T. Whit Armstrong..................................... 58,514(6) 1.06%
Paul J. Collins....................................... 0 *
Gregory L. Curl....................................... 458(7) *
T. Wayne Davis........................................ 161,222(8) 2.92%
J. Christopher Flowers................................ 1,224,816(9) 22.29%
Jeffrey S. Halis...................................... 317,992(10) 5.76%
John J. Oros.......................................... 360,000(4) 6.40%
All executive officers and directors of the Company as
a group (9 persons)................................. 2,528,093 41.70%
---------------
* Less than 1%.
(1) Under the rules of the Securities and Exchange Commission (the
"Commission"), a person is deemed to be a "beneficial owner" of a security
if that person has or shares "voting power," which includes the power to
vote or to direct the voting of such security, or "investment power," which
includes the power to dispose of or to direct the disposition of such
security. A person also is deemed to be a beneficial owner of any
securities which that person has the right to acquire within sixty (60)
days. Under these rules, more than one person may be deemed to be a
beneficial owner of the same securities and a person may be deemed to be a
beneficial owner of securities as of which he or she has no economic or
pecuniary interest. Except as set forth in the footnotes below, the persons
named above have sole voting and investment power with respect to all
shares of Common Stock shown as being beneficially owned by them.
(2) Based on an aggregate of 5,465,753 shares of Common Stock issued and
outstanding as of April 1, 2004. Assumes that all options beneficially
owned by the person are exercised and all stock units beneficially owned by
the person are redeemed for shares of Common Stock. The total number of
shares outstanding used in calculating this percentage assumes that none of
the options beneficially owned by other persons are exercised and none of
the stock units beneficially owned by other persons are redeemed for shares
of Common Stock.
(3) Includes 250,000 shares that are not currently outstanding, but that may be
acquired within sixty (60) days upon the exercise of stock options granted
under the 1997 Amended CEO Stock Option Plan (the "CEO Plan") and the
Incentive Plan.
(4) Includes 200,000 shares owned indirectly by Mr. Oros through Brittany Ridge
Investment Partners, L.P. and 160,000 shares that are not currently
outstanding, but that may be acquired within sixty (60) days upon the
exercise of stock options granted under the Incentive Plan.
6
(5) Includes 54 shares which Ms. Dunaway holds jointly and shares voting and
investment power with her spouse.
(6) Includes 13,342 stock units granted under the Deferred Plan. Also includes
40,000 shares that are not currently outstanding, but that may be acquired
within sixty (60) days upon the exercise of stock options granted under the
1997 Amended Outside Directors' Stock Option Plan (the "1997 Outside
Directors' Plan") and the 2001 Outside Directors' Stock Option Plan (the
"2001 Outside Directors' Plan").
(7) Consists of 458 stock units granted under the Deferred Plan.
(8) Includes 2,783 shares held by Mr. Davis' wife, 16,762 shares held in trust,
81,025 shares held in a private foundation for which Mr. Davis has voting
and investment power but is not a beneficiary and 12,652 stock units
granted under the Deferred Plan. Also includes 40,000 shares that are not
currently outstanding, but that may be acquired within sixty (60) days upon
the exercise of stock options granted under the 1997 Outside Directors'
Plan and 2001 Outside Directors' Plan.
(9) Includes 3,261 stock units granted under the Deferred Plan prior to Mr.
Flowers becoming an officer of the Company as well as subsequent to Mr.
Flowers resigning as an officer of the Company. Also includes 25,000 shares
that are not currently outstanding, but that may be acquired within sixty
(60) days upon the exercise of stock options granted under the 1997 Outside
Directors' Plan.
(10) Includes 12,132 stock units granted under the Deferred Plan, 260,860 shares
which Mr. Halis shares voting and investment power with his wife and 5,000
shares held in a private foundation for which Mr. Halis has voting and
investment power but is not a beneficiary. Also includes 40,000 shares that
are not currently outstanding, but that may be acquired within sixty (60)
days upon the exercise of stock options granted under the 1997 Outside
Directors' Plan and 2001 Outside Directors' Plan.
EMPLOYMENT AGREEMENTS
The Compensation Committee approved severance agreements for Nimrod T.
Frazer, Cheryl D. Davis and Amy M. Dunaway in March 1998 (the "Severance
Agreements"). The Severance Agreements provide that Mr. Frazer, Ms. Davis and
Ms. Dunaway will receive their base salary for a period of twelve months
following a termination of employment, other than for "cause," as defined in the
Severance Agreements, or a voluntary termination.
The Compensation Committee also approved an employment agreement with John
J. Oros in March 2000 (the "Employment Agreement"). The Employment Agreement
provides for an initial one year term and automatic renewal for successive one
year terms thereafter, subject to earlier termination as provided in the
Employment Agreement. The Employment Agreement provides an annual base salary to
Mr. Oros in an amount to be determined by the Board and reimbursement of up to
$50,000 annually for office related expenses incurred by Mr. Oros in connection
with the performance of his duties with the Company. The Employment Agreement
also provides that the Board may award to Mr. Oros such bonuses, and in such
amounts, as the Board shall determine in its sole discretion. In fiscal 2003,
Mr. Oros received an annual base salary of $347,308.
7
PRINCIPAL SHAREHOLDERS
The table below sets forth certain information as of April 1, 2004
concerning persons known to the Board to be "beneficial owners," as such term is
defined by the rules of the Commission, of more than 5% of the outstanding
shares of the Common Stock.
SHARES OF COMMON STOCK PERCENT OF
NAME AND ADDRESS BENEFICIALLY OWNED(1) CLASS(2)
---------------- ---------------------- ----------
J. Christopher Flowers................................ 1,224,816(3) 22.29%
399 Park Avenue
27th Floor
New York, New York 10022
Nimrod T. Frazer...................................... 405,001(4) 7.09%
401 Madison Avenue
Montgomery, Alabama 36104
Jeffrey S. Halis...................................... 317,992(5) 5.76%
153 E. 53rd Street
55th Floor
New York, New York 10022
John J. Oros.......................................... 360,000(6) 6.40%
401 Madison Avenue
Montgomery, Alabama 36104
---------------
(1) See Note (1) under "Common Stock Ownership by Management" elsewhere herein.
(2) Based on an aggregate of 5,465,753 shares of Common Stock issued and
outstanding as of April 1, 2004. Assumes that all options beneficially owned
by the person are exercised and all stock units beneficially owned by the
person are redeemed for shares of Common Stock. The total number of shares
outstanding used in calculating this percentage assumes that none of the
options beneficially owned by other persons are exercised and none of the
stock units beneficially owned by other persons are redeemed for shares of
Common Stock.
(3) Includes 3,261 stock units granted under the Deferred Plan prior to Mr.
Flowers becoming an officer of the Company as well as subsequent to Mr.
Flowers resigning as an officer of the Company. Also includes 25,000 shares
that are not currently outstanding, but that may be acquired within sixty
(60) days upon the exercise of stock options granted under the 1997 Outside
Directors' Plan.
(4) Includes 250,000 shares that are not currently outstanding, but that may be
acquired within sixty (60) days upon the exercise of stock options granted
under the 1997 CEO Plan and the Incentive Plan.
(5) Includes 12,132 stock units granted under the Deferred Plan, 260,860 shares
which Mr. Halis shares voting and investment power with his wife and 5,000
shares held in a private foundation for which Mr. Halis has voting and
investment power but is not a beneficiary. Also includes 40,000 shares that
are not currently outstanding, but that may be acquired within sixty (60)
days upon the exercise of stock options granted under the 1997 Outside
Directors' Plan and 2001 Outside Directors' Plan.
(6) Includes 200,000 shares owned indirectly by Mr. Oros through Brittany Ridge
Investment Partners, L.P. and 160,000 shares that are not currently
outstanding, but that may be acquired within sixty (60) days upon the
exercise of stock options granted under the Incentive Plan.
8
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning the
compensation paid for the years ended December 31, 2003, 2002 and 2001, for the
Company's Chief Executive Officer and each of the other Named Executive Officers
(determined as of December 31, 2003).
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
--------------------------- OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS# COMPENSATION($)
--------------------------- ---- --------- -------- --------------- ------------ ---------------
Nimrod T. Frazer............ 2003 347,308 -- -- 60,000 2,632(1)
Chairman of the Board 2002 250,000 -- -- -- 2,604(1)
and Chief Executive
Officer 2001 250,000 -- -- 100,000 2,354(1)
John J. Oros................ 2003 347,308 -- -- 100,000 9,201(2)
President and Chief 2002 250,000 -- -- -- 8,508(2)
Operating Officer 2001 211,538 -- -- 100,000 5,754(2)
Cheryl D. Davis............. 2003 174,665 -- -- -- 10,101(3)
Chief Financial Officer, 2002 162,546 -- -- -- 9,604(3)
Vice-President of 2001 153,285 -- -- -- 6,850(3)
Corporate Taxes and
Secretary
Amy M. Dunaway.............. 2003 102,796 -- -- -- 10,281(3)
Treasurer and Controller 2002 95,429 -- -- -- 9,437(3)
2001 89,991 -- -- -- 6,400(3)
---------------
(1) Amount shown represents premiums paid by the Company for health and dental
insurance for Mr. Frazer.
(2) Amount shown represents premiums paid by the Company for health and dental
insurance for Mr. Oros.
(3) Amounts shown for Ms. Davis and Ms. Dunaway are for premiums paid by the
Company for term life insurance and health and dental insurance.
9
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of December 31, 2003 with
respect to shares of Common Stock to be issued upon the exercise, and the
weighted-average exercise price, of all outstanding options and rights granted
under the Company's equity compensation plans, as well as the number of shares
available for future issuance under such plans.
WEIGHTED-AVERAGE NUMBER OF SECURITIES REMAINING
NUMBER OF SECURITIES TO BE ISSUED EXERCISE PRICE OF AVAILABLE FOR FUTURE ISSUANCE
UPON EXERCISE OF OUTSTANDING OUTSTANDING OPTIONS, UNDER EQUITY COMPENSATION PLANS
OPTIONS, WARRANTS AND RIGHTS WARRANTS AND RIGHTS (EXCLUDING SECURITIES REFLECTED IN
PLAN CATEGORY (A) (B) COLUMN (A)) (C)
------------- --------------------------------- -------------------- ----------------------------------
Equity Compensation
Plans Approved by
Security
Holders(1).......... 760,000(2) $19.88(2) 57,500
Equity Compensation
Plans Not Approved
by Security
Holders(3).......... N/A(4) N/A(4) 33,155
Total............... 760,000 $19.88 90,655
---------------
(1) Equity compensation plans approved by security holders are the 2001 Outside
Directors' Plan, the 1997 Outside Directors' Plan, the CEO Plan, the
Incentive Plan and an Investment Agreement, dated October 20, 1998 (the
"Investment Agreement"), whereby the Company sold 1,158,860 shares of Common
Stock to Mr. Flowers.
(2) Excludes a total of 1,158,860 shares of Common Stock issued by the Company
pursuant to the Investment Agreement.
(3) Equity compensation plans not approved by security holders are the Deferred
Plan and two agreements (the "Stock Purchase Agreements") entered into by
the Company with Messrs. Frazer and Oros in June 2001 to sell a total of
200,000 shares (100,000 per individual) of Common Stock to Messrs. Frazer
and Oros. For a description of the terms of the Deferred Plan and the Stock
Purchase Agreements, see Note 7 in Item 8 "Financial Statements and
Supplementary Data" contained in the Company's Annual Report on Form 10-K
accompanying this Proxy Statement, incorporated herein by reference thereto.
(4) Excludes a total of 41,845 stock units granted to non-employee directors
under the Deferred Plan and 200,000 shares of Common Stock purchased by
Messrs. Frazer and Oros pursuant to the Stock Purchase Agreements.
10
EXECUTIVE OFFICERS
Certain information concerning the executive officers of the Company is set
forth below:
NAME AGE POSITION EXECUTIVE OFFICER SINCE
---- --- -------- -----------------------
Nimrod T. Frazer............. 74 Director, Chairman of the 1990
Board and Chief Executive
Officer
John J. Oros................. 57 Director, President and Chief 2000
Operating Officer
Cheryl D. Davis.............. 44 Chief Financial Officer, Vice 1991
President of Corporate Taxes
and Secretary
Amy M. Dunaway............... 47 Treasurer and Controller 1991
Mr. Frazer is Chairman of the Board and Chief Executive Officer. Mr. Frazer
was named Chairman of the Board, Acting President and Chief Executive Officer on
October 26, 1990 and served as President from May 26, 1992 to June 6, 2001.
Mr. Oros was named Executive Vice President in March of 2000, and President
and Chief Operating Officer on June 6, 2001. Before joining the Company, Mr.
Oros was an investment banker at Goldman, Sachs & Co. in the Financial
Institutions Group. Mr. Oros joined Goldman, Sachs & Co. in 1980, and was made a
General Partner in 1986.
Ms. Davis was named Chief Financial Officer and Secretary in April of 1991
and Vice President of Corporate Taxes in 1989. Ms. Davis has been employed with
the Company since April of 1988.
Ms. Dunaway was named Treasurer and Controller in April of 1991. Ms.
Dunaway has been employed with the Company since September of 1990.
STOCK OPTION GRANTS
INDIVIDUAL GRANTS
---------------------------------- POTENTIAL REALIZABLE VALUE
PERCENT OF TOTAL AT ASSUMED ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE APPRECIATION FOR
SECURITIES GRANTED TO EXERCISE OPTION TERM(1)
UNDERLYING EMPLOYEES IN PRICE PER -----------------------------
NAME OPTIONS GRANTED FISCAL YEAR SHARE EXPIRATION DATE 5% 10%
---- --------------- ---------------- --------- --------------- ------------- -------------
Nimrod T. Frazer..... 60,000(2) 37.5% $40.00 August 18, 2013 $1,509,600 $3,825,000
John J. Oros......... 100,000(2) 62.5% $40.00 August 18, 2013 $2,516,000 $6,375,000
---------------
(1) The amounts shown represent certain assumed rates of appreciation only.
Actual gains, if any, on stock option exercises are dependent as the future
performance of the Common Stock and overall market conditions. The amounts
set forth in this table may not necessarily be achieved.
(2) These options will vest and become exercisable in four equal annual
installments, beginning January 1, 2005.
STOCK OPTION EXERCISES
None of the Named Executive Officers exercised any stock options during
2003. The table below shows the number of shares of Common Stock covered by both
exercisable and unexercisable stock options held by the Named Executive Officers
as of December 31, 2003. The table also reflects the values for in-the-money
options based on the positive spread between the exercise price of such options
and the last reported sale price of the Common Stock on December 31, 2003, the
last trading date in 2003 for the Common Stock.
11
AGGREGATED OPTION EXERCISES
IN 2003 AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 2003 DECEMBER 31, 2003(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
Nimrod T. Frazer..................... 250,000 60,000 $8,312,500 $ 420,000
John J. Oros......................... 160,000 140,000 5,127,500 1,835,000
Cheryl D. Davis...................... -- -- -- --
Amy M. Dunaway....................... -- -- -- --
---------------
(1) Based on the closing price of $47.00 per share of Common Stock on December
31, 2003.
12
REPORT OF COMPENSATION COMMITTEE
The Compensation Committee of the Board (the "Compensation Committee") was
created in 1996 and currently consists of Messrs. Davis, Armstrong and Flowers.
The Compensation Committee is responsible for (i) establishing the compensation
of the Company's Named Executive Officers upon the recommendation of the Chief
Executive Officer (with the exception of the compensation of the Chief Executive
Officer) and (ii) considering the issuance of stock options for executive
officers and directors. Mr. Frazer, the Company's Chief Executive Officer, is
responsible for recommending to the Compensation Committee the compensation for
the other executive officers of the Company. The Compensation Committee has
reviewed the applicability of Section 162(m) of the Internal Revenue Code of
1986. Section 162(m) may in certain circumstances deny a federal income tax
deduction for compensation to an executive officer in excess of $1 million per
year. It is not anticipated that compensation to any executive officer of the
Company during 2004 will exceed the $1 million threshold.
Compensation Policy and Overall Objectives. The Company's executive
compensation policy is designed to attract, retain and motivate executive
officers needed to achieve the Company's strategic objectives and to maximize
the Company's performance and shareholder value.
The Company supports these goals through a compensation strategy
principally involving competitive salaries and long-term incentive
opportunities. Compensation consists of both fixed pay elements (base salary and
benefits) and long-term incentives to encourage and reward distinctive
contributions to the success of the organization. Salary and benefit levels
reflect position, responsibilities and strategic importance and are targeted at
market median base salary levels. Total cash compensation has been below market
median levels because the Company has not paid annual bonuses. Long-term
incentive opportunities reward key executives for financial and non-financial
performance that enhances shareholder value. Long-term incentive opportunities
have been at or above market median levels.
The Company retained an independent compensation consulting firm to assist
it in analyzing its executive compensation program for 1997 and thereafter. The
consulting firm recommended that the Company adopt a policy of providing a
significant percentage of certain executive officers' total compensation based
on the Company's performance. In addition, the consultant provided the
Compensation Committee with an analysis of senior executive compensation using
published survey data for the financial services industry. In 2003, the
Compensation Committee again retained an independent compensation consulting
firm, which provided it with an updated analysis of senior executive
compensation using published industry data. The Compensation Committee has
considered these recommendations and the compensation analyses in establishing
the base salaries for the Chief Executive Officer, the Chief Operating Officer
and the other executive officers for 2004 and prior years.
Base Salary. Each executive officer's base salary, including Mr. Frazer's
base salary, is determined based upon a number of factors including the
executive officer's responsibilities, contribution to the achievement of the
Company's business plan goals, demonstrated leadership skills and overall
effectiveness and length of service. Base salaries are also designed to be
competitive with those offered in the various markets in which the Company
competes for executive talent and are analyzed with a view towards desired base
salary levels over a three-year to five-year time period. Each executive
officer's salary is reviewed annually and although these and other factors are
considered in setting base salaries, no specific weight is given to any one
factor.
Cash Bonuses. The Company did not pay any cash bonuses to the Named
Executive Officers during 2003.
Long-Term Incentives. Long-term incentives are provided pursuant to the
CEO Plan, the 1997 Outside Directors' Plan, the 2001 Outside Directors' Plan,
the Incentive Plan, as amended, and the Deferred Plan. Stock option plans are
designed to encourage and reward distinctive contributions to the Company's
success and to align executives' and shareholders' interest in the enhancement
of shareholder value. Stock options are used by the Company to encourage
long-term service by executives. Stock options were granted in 2003 under the
Incentive Plan, as amended, to Messrs. Frazer and Oros to reward them for their
important contributions
13
to the Company's success and to ensure their continued efforts on the Company's
behalf. Mr. Frazer was granted options to purchase 60,000 shares of Common Stock
and John J. Oros was granted options to purchase 100,000 shares of Common Stock,
all at an exercise price of $40.00 per share.
Severance and Employment Agreements. The Compensation Committee approved
severance agreements for Nimrod T. Frazer, Cheryl D. Davis and Amy M. Dunaway in
March 1998 (the "Severance Agreements"). The Severance Agreements provide that
Nimrod T. Frazer, Cheryl D. Davis and Amy M. Dunaway will receive their base
salary for a period of twelve months following a termination of employment,
other than for "cause," as defined in the Severance Agreements, or a voluntary
termination.
The Compensation Committee also approved an employment agreement with John
J. Oros in March 2000 (the "Employment Agreement"). The Employment Agreement
provides for an initial one year term and automatic renewal for successive one
year terms thereafter, subject to earlier termination as provided in the
Employment Agreement. The Employment Agreement provides an annual base salary to
Mr. Oros to be determined by the Board and reimbursement of up to $50,000
annually for office related expenses incurred by Mr. Oros in connection with the
performance of his duties with the Company. The Employment Agreement also
provides that the Board may award to Mr. Oros such bonuses, and in such amounts,
as the Board shall determine in its sole discretion. In fiscal 2003, Mr. Oros
received an annual base salary of $347,308.
Chief Executive Officer Compensation. Mr. Frazer does not have an
employment agreement with the Company. The Compensation Committee is responsible
for determining Mr. Frazer's compensation annually. In fiscal 2003, Mr. Frazer
received an annual base salary of $347,308. Mr. Frazer's base salary was based
on, among other things, his responsibilities, his length of service, his
contributions to the business and his overall leadership skills.
COMPENSATION COMMITTEE:
T. Wayne Davis, Chairman
T. Whit Armstrong
J. Christopher Flowers
THE FOREGOING REPORT SHOULD NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY
GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY
FILING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (TOGETHER, THE "ACTS"), EXCEPT TO THE EXTENT
THAT THE COMPANY SPECIFICALLY INCORPORATES THIS INFORMATION BY REFERENCE, AND
SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As described earlier in this Proxy Statement, the Company has a
Compensation Committee of the Board composed of T. Wayne Davis, Chairman, T.
Whit Armstrong and J. Christopher Flowers. Jeffrey S. Halis was also a member of
the Compensation Committee until November 2003, when his resignation from the
Committee was accepted by the Board. Mr. Flowers served as an officer of the
Company until July 2003, and did not join the Compensation Committee until after
resigning as an officer. In addition, as described below under the heading
"Certain Transactions", Mr. Flowers and the Company have entered into numerous
transactions, directly and indirectly. The Company believes that the terms of
such transactions are no less favorable to the Company than would have been the
case had such transactions been consummated with unrelated parties. The Board
was made aware of all such transactions.
AUDIT COMMITTEE REPORT
The Audit Committee reviews the Company's financial reporting process on
behalf of the Board. Management is responsible for the financial statements and
the reporting process, including the system of internal controls. The
independent auditors are responsible for reviewing the Company's quarterly
financial
14
statements and for expressing an opinion on the conformity of the audited
financial statements with accounting principles generally accepted in the United
States.
Members of the Audit Committee rely, without independent verification, on
the information provided to them and on the representations made by management
and the opinions and communications of the Company's independent auditors.
Accordingly, the Audit Committee's review does not provide an independent basis
to determine that management has maintained appropriate accounting and financial
reporting principles or appropriate internal controls and procedures designed to
assure compliance with accounting standards and applicable laws and regulations.
Furthermore, the Audit Committee's activities do not assure that the audit of
the Company's financial statements has been carried out in accordance with
generally accepted auditing standards, that the financial statements are
presented in accordance with accounting principals generally accepted in the
United States of America or that the Company's independent auditors are in fact
independent.
In fulfilling its responsibilities:
- The Audit Committee reviewed and discussed the audited financial
statements contained in the 2003 Annual Report on Form 10-K with the
Company's management and the independent auditors prior to the filing of
the Form 10-K with the Commission.
- The Audit Committee reviewed and discussed the unaudited financial
statements contained in the Company's Quarterly Reports on Form 10-Q for
each of the quarters ended in 2003 with the Company's management and the
independent auditors prior to the filing thereof with the Commission.
- The Audit Committee discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61
(Communications with Audit Committees) and Rule 2-07 of Regulation S-X.
- The Audit Committee received from the independent auditors written
disclosures regarding the auditors' independence, as required by
Independence Standards Board Standard No. 1 (Independence Discussions
with Audit Committees), and discussed with the auditors their
independence from the Company and its management.
In reliance on the reviews and discussions noted above and subject to the
limitations set forth above, the Audit Committee approved the inclusion of the
audited financial statements in the Company's Annual Report on Form 10-K for the
year ended December 31, 2003, for filing with the Commission.
AUDIT COMMITTEE
T. Whit Armstrong, Chairman
T. Wayne Davis
Gregory L. Curl
Jeffrey S. Halis
THE FOREGOING REPORT SHOULD NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY
GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY
FILING UNDER THE ACTS, EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY
INCORPORATES THIS INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED
FILED UNDER SUCH ACTS.
15
PRINCIPAL ACCOUNTING FIRM FEES
The following table sets forth the aggregate fees billed to the Company for
the fiscal years ended December 31, 2003 and December 31, 2002 by the Company's
principal accounting firm, Deloitte & Touche LLP, the member firms of Deloitte
Touche Tohmatsu, and their respective affiliates (collectively, "Deloitte").
DECEMBER 31, 2003
Audit Fees.................................................. $133,500
Audit-Related Fees.......................................... 1,000(1)
Tax Fees.................................................... 81,944(2)
All Other Fees.............................................. --
--------
Total............................................. $216,444
---------------
(1) Represents fees related to the Company's participation, through JCF CFN LLC
and JCF CFN II LLC, in transactions with Green Tree Investment Holdings LLC
and related entities.
(2) Represents fees related to the preparation of the Company's federal and
state income tax returns, consultation on federal tax planning and other
income tax issues.
DECEMBER 31, 2002
Audit Fees.................................................. $ 90,000
Audit-Related Fees.......................................... 9,284(1)
Tax Fees.................................................... 8,500(2)
All Other Fees.............................................. --
--------
Total....................................................... $107,784
---------------
(1) Represents fees related to the audit and review of specific financial
information in connection with the acquisition of Hudson Reinsurance Company
Limited, a standby purchase commitment for the purchase of ordinary shares
of Zurich Financial Services and the Company's listing on the Nasdaq
National Market.
(2) Represents fees related to the preparation of the Company's federal and
state income tax returns, consultation on federal tax planning and other
income tax issues.
PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES
The amended and restated Charter of the Audit Committee, adopted on May 29,
2003, charges the Audit Committee with review of all aspects of the Company's
relationship with Deloitte, including the provision of and payment for all
services. All audit and non-audit services provided by Deloitte are pre-approved
by the Audit Committee, which concluded that the provision of non-audit services
was compatible with maintaining the accountants' independence in the conduct of
its auditing functions.
16
PERFORMANCE GRAPH
The graph below reflects the cumulative shareholder return (assuming the
reinvestment of dividends) on the Common Stock compared to the return on the
Center for Research in Security Prices Total Return Index for the Nasdaq Stock
Market (U.S. Companies) (the "Nasdaq Composite, U.S.) and the Company's peer
group index (the "Peer Group Index") for the periods indicated. The graph
reflects the investment of $100.00 on December 31, 1998 in the Common Stock, the
Nasdaq Composite, U.S., and the Peer Group Index. The Peer Group Index consists
of Annuity and Life Re Holdings, Berkshire Hathaway Inc. (Class A), ESG Re Ltd.,
Everest Re Group Ltd., IPC Holdings Ltd., Max Re Capital Ltd., Odyssey Re
Holdings Corp., PXRE Group Ltd., RenaissanceRe Holdings Ltd. and Transatlantic
Holdings, Inc., which are publicly-traded companies identified by Bloomberg L.P.
in 2003 as comparable to the Company based on certain similarities in their
principal lines of business with the Company's reinsurance operations.
(PERFORMANCE GRAPH)
--------------------------------------------------------------------------------
DEC-98 DEC-99 DEC-00 DEC-01 DEC-02 DEC-03
--------------------------------------------------------------------------------
The Enstar Group,
Inc. $100 $100 $115 $181 $227 $358
NASDAQ U.S. $100 $185 $112 $ 89 $ 61 $ 92
Peer Group Index $100 $ 80 $104 $112 $106 $125
Source: Georgeson Shareholder Communications Inc.
THE PERFORMANCE GRAPH SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY
GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY
FILING UNDER THE ACTS, EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY
INCORPORATES THIS INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED
FILED UNDER SUCH ACTS.
CERTAIN TRANSACTIONS
In February 2002, the Company entered into an agreement with J.C. Flowers &
Company, LLC, running through November 2005, for the use of certain office space
and administrative services from J.C. Flowers & Company, LLC for an annual
payment of $66,000. J.C. Flowers & Company, LLC is managed by Mr. Flowers, a
member of the Board and the Company's largest shareholder.
In November 2002, the Company received a commitment fee of approximately
$208,000 in connection with a standby purchase commitment entered into by the
Company through a newly-formed Canadian limited partnership with J.C. Flowers I
LP, Shinsei Bank, Ltd. ("Shinsei") and Fitzwilliam (SAC) Insurance Limited
("Fitzwilliam"). The Company's share of the commitment, in the amount of
approximately
17
$10 million, was for the purchase of ordinary shares of Zurich Financial
Services ("Zurich"), a Swiss company engaged in providing insurance based
financial services, to be issued in connection with a rights offering by Zurich
to its existing shareholders. The commitment was never required to be executed
and no funds were contributed by the Company. J.C. Flowers I LP is a private
investment fund managed by Mr. Flowers. Mr. Flowers also is a director of
Shinsei. Fitzwilliam is a wholly owned subsidiary of Castlewood Holdings Limited
("Castlewood Holdings"). The Company holds a 33 1/3% economic interest in
Castlewood Holdings and 50% of Castlewood Holdings' voting stock.
No fees were paid by the Company or will be payable by the Company to J.C.
Flowers I LP, JCF Associates I LLC, or Mr. Flowers in connection with the
Company's standby purchase commitment to Zurich.
In January 2003, the Company announced a $10 million commitment to JCF CFN
LLC and related entities (collectively, the "JCF CFN Entities"). The JCF CFN
Entities are controlled by JCF Associates I LLC, the managing member of which is
Mr. Flowers. Approximately $3 million of the Company's commitment was funded in
January 2003 from cash on hand. In June 2003, the Company increased its
commitment to $15.3 million, resulting in the Company holding a 60% interest in
the JCF CFN Entities. In addition, in June, 2003 Castlewood Holdings became a
member of the JCF CFN Entities and made a $10.2 million commitment, in exchange
for a 40% interest. Both the Company and Castlewood Holdings fully funded their
commitments to the JCF CFN Entities. The Company owns a one-third economic
interest in Castlewood Holdings and 50% of its voting stock.
In June 2003, the JCF CFN Entities invested in Green Tree Investment
Holdings LLC (formerly known as CFN Investment Holdings LLC) and related
entities (collectively, "Green Tree"), together with affiliates of J.C. Flowers
I LP, affiliates of Fortress Investment Group LLC and affiliates of Cerberus
Capital Management, L.P. J.C. Flowers I LP is a private investment fund, the
general partner of which is JCF Associates I LLC. The JCF CFN Entities invested
approximately $25.1 million in exchange for a 3.995% interest in Green Tree.
Green Tree completed the purchase of certain assets of Conseco Finance Corp.
("Conseco Finance") for approximately $630 million in cash plus certain assumed
liabilities. The assets consist primarily of a portfolio of home equity and
manufactured housing loan securities as well as the associated servicing
businesses. The JCF CFN Entities also invested in FPS DIP LLC, a second limited
liability company formed by the members of Green Tree to provide, together with
one of Conseco Finance's existing lenders, up to $125 million of
debtor-in-possession financing to Conseco Finance. The JCF CFN Entities
accounted for these investments under the equity method of accounting.
In March 2004, the JCF CFN Entities, along with certain affiliates of J.C.
Flowers I LP, signed a definitive agreement for the sale of their entire
interests in Green Tree for cash to FIT CFN Holdings LLC, an affiliate of
Fortress Investment Group LLC, or its assigns. In exchange for its entire
interest, the JCF CFN Entities will receive approximately $40 million in cash.
Of this amount, the Company will receive approximately $24 million and
Castlewood Holdings will receive approximately $16 million. A partial
distribution of approximately $6.2 million has been received by the JCF CFN
Entities, from which the Company and Castlewood received approximately $3.7
million and approximately $2.5 million, respectively, as their proportionate
share. This and any additional distributions which may be made by Green Tree
prior to closing of the sale will reduce the amount to be received at closing.
The sale is expected to close in the third quarter of 2004. The Company
anticipates a realized gain on the sale.
No fees were paid by the Company or will be payable by the Company to J.C.
Flowers I LP, JCF Associates I LLC, or Mr. Flowers in connection with the
Company's investment in JCF CFN.
In March 2003, the Company announced that Castlewood Holdings and Shinsei
acquired The Toa-Re Insurance Company (UK) Limited, a London-based subsidiary of
The Toa Reinsurance Company, Limited, for approximately $46 million. The
acquisition was effected through a newly formed Bermuda company, which is
jointly owned by Castlewood Holdings and Shinsei. Castlewood Holdings has a
50.1% economic and 50% voting interest in the newly formed Bermuda company.
18
In May 2003, the Company received a commitment fee of approximately $82,000
in connection with a standby purchase commitment entered into by the Company
through a newly-formed Cayman Islands limited partnership with J.C. Flowers I
LP, Shinsei and Castlewood Holdings. The commitment was for the purchase of new
shares of Allianz Aktiengesellschaft ("Allianz"), a German company, to be issued
in connection with a rights offering by Allianz to its existing shareholders.
The commitment was never executed and no funds were contributed by the Company.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(ITEM 2)
The Audit Committee has appointed the firm of Deloitte & Touche LLP to
serve as independent auditors of the Company for the year ending December 31,
2004, subject to ratification of this appointment by the shareholders of the
Company. Deloitte & Touche LLP has served as independent auditors of the Company
from 1990 through 2003 and is considered by management of the Company to be well
qualified. The Company has been advised by Deloitte & Touche LLP that neither it
nor any member thereof has any financial interest, direct or indirect, in the
Company or any of its subsidiaries in any capacity. One or more representatives
of Deloitte & Touche LLP will be present at the Annual Meeting, will have an
opportunity to make a statement if he or she desires to do so and will be
available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board recommends a vote FOR the proposal to ratify the appointment of
Deloitte & Touche LLP as independent auditors of the Company for 2004.
OTHER MATTERS
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires officers and directors of the Company and persons who
beneficially own more than ten percent of the Company's Common Stock to file
with the Commission certain reports, with respect to each such person's
beneficial ownership of the Company's equity securities. In 2003, based solely
upon a review of copies of reports and certain representations of our executive
officers and directors, all of the Company's reporting persons filed their
Section 16(a) reports on a timely basis with the exception of the following
reports: Mr. Halis filed one late Form 4 relating to the award of stock units to
Mr. Halis under the Deferred Plan and three late Form 4s relating to gifts of
stock to Mr. Halis' family foundation and to sales of stock by such family
foundation. Mr. Davis filed one late Form 4 relating to the purchase of stock by
Mr. Davis and two late Form 4s relating to the award of stock units to Mr. Davis
under the Deferred Plan. Mr. Armstrong filed two late Form 4s relating to the
award of stock units to Mr. Armstrong under the Deferred Plan. Mr. Oros filed
one late Form 4 relating to the award of stock options to Mr. Oros under the
Incentive Plan.
ANNUAL REPORT ON FORM 10-K
The Company has provided herewith to each shareholder as of the Record Date
a copy of the Company's Annual Report on Form 10-K for the year ended December
31, 2003 (the "2003 10-K"), including the financial statements and financial
statement schedules, as filed with the Commission, except exhibits thereto
(other than Exhibit 99.1). The 2003 10-K and the exhibits filed with it are
available through the Company's website at www.enstargroup.com. Upon request by
an eligible shareholder to the following address, the
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Company will furnish a copy of the 2003 10-K, without exhibits, without charge,
and a copy of any or all of the exhibits to the 2003 10-K will be furnished for
a reasonable fee:
THE ENSTAR GROUP, INC.
401 Madison Avenue
Montgomery, Alabama 36104
Attention: Amy M. Dunaway
Treasurer and Controller
SHAREHOLDER NOMINATIONS FOR ELECTION OF DIRECTORS
Under the Company's Articles of Incorporation and Bylaws, only persons
nominated in accordance with the procedures set forth therein will be eligible
for election as directors. Shareholders are entitled to nominate persons for
election to the Board only if the shareholder is otherwise entitled to vote
generally in the election of directors and only if timely notice in writing is
sent to the Secretary of the Company. To be timely, a shareholder's notice must
be received at the principal executive offices of the Company at least 60 days
but not more than 90 days prior to the annual meeting. Such shareholder's notice
should set forth (i) the qualifications of the nominee and the other information
that would be required to be disclosed in connection with the solicitation of
proxies for the election of directors pursuant to Regulation 14(a) under the
Exchange Act and (ii) with respect to such shareholder giving such notice, (a)
the name and address of such shareholder and (b) the number of shares of Common
Stock beneficially owned by such shareholder. The Company may require any
proposed nominee to furnish such other information as may reasonably be required
by the Company to determine the eligibility of such proposed nominee to serve as
a director of the Company.
SHAREHOLDER PROPOSALS
Any shareholder proposals intended to be presented at the Company's 2005
annual meeting of shareholders must be received no later than December 16, 2004
in order to be considered for inclusion in the proxy statement for the 2005
annual meeting of shareholders. Notice of any shareholder proposals intended to
be presented at the Company's 2005 annual meeting of shareholders submitted
outside the processes of Rule 14a-8 discussed above must be received no later
than March 1, 2005 to be considered timely.
EXPENSES OF SOLICITATION
The cost of solicitation of proxies by the Board in connection with the
Annual Meeting will be borne by the Company. As part of its services as the
Company's transfer agent, American Stock Transfer & Trust Company will assist in
the solicitation of proxies. No specific fee has been allocated to services
provided in connection with the solicitation of proxies. The Company will
reimburse brokers, fiduciaries and custodians for reasonable expenses incurred
by them in forwarding proxy materials to beneficial owners of Common Stock held
in their names.
By Order of the Board of Directors
-s- CHERYL D. DAVIS
CHERYL D. DAVIS
Chief Financial Officer,
Vice-President of
Corporate Taxes and Secretary
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ANNEX A
THE ENSTAR GROUP, INC.
AUDIT COMMITTEE CHARTER
(AS AMENDED AND RESTATED MAY 29, 2003)
The Board of Directors of The Enstar Group, Inc. (the "Company") has
constituted and established an Audit Committee (the "Committee") with the
authority, responsibility and specific duties as described herein. This Charter
and the composition of the Committee are intended to comply with applicable law,
including the securities laws, and the rules of The Nasdaq Stock Market, Inc.
("Nasdaq"). This document replaces and supercedes in its entirety the previous
Charter of the Committee.
PURPOSE
The Committee is appointed by the Board of Directors to assist the Board of
Directors in its oversight of: (1) the integrity of the Company's financial
statements and the Company's systems of internal controls regarding finance,
accounting and ethics established by management and the Board of Directors, (ii)
the Company's compliance with legal and regulatory requirements, (iii) the
independent auditor's qualifications and independence and (iv) the performance
of independent auditors, including the Company's auditing, accounting and
financial reporting process generally. The Committee shall also prepare the
report of the Committee to be included in the Company's annual proxy statement.
In doing so, it is the responsibility of the Committee to:
- serve as an independent and objective party to monitor the Company's
financial statements and the financial reporting process and systems of
internal financial and accounting controls;
- review and appraise the audit efforts of the Company's independent
auditors; and
- maintain open communication among the independent auditors, management,
employees and the Board of Directors.
The independent auditor is ultimately accountable to the Board of Directors
and the Committee, as representatives of the Company's stockholders, and shall
report directly to the Committee. The Committee has the sole authority and
direct responsibility to select, appoint, evaluate, compensate and oversee the
work, and, if necessary, terminate and replace the independent auditor (subject,
if applicable, to shareholder ratification). The Committee shall have authority
to conduct or authorize investigations into any matters within its scope of
responsibilities. Any independent auditors retained by the Company are
ultimately accountable to the Committee and shall report directly to the
Committee.
DUTIES AND RESPONSIBILITIES
The primary duties and responsibilities of the Committee are to oversee, on
behalf of the Board of Directors, the independent auditors, the Company's
internal accounting controls and auditing functions, and the financial reporting
process and to report the results of its activities to the Board of Directors.
Management is responsible for preparing the Company's financial statements and
the independent auditors are responsible for auditing those financial
statements. The Committee's role is not to provide expert or special assurance
as to the Company's financial statements or any professional certification as to
the independent auditor's work.
This Charter is intended to be flexible so that the Committee is able to
meet changing conditions. The Committee is authorized to take such further
actions as are consistent with the following responsibilities and to perform
such other actions as applicable law, the applicable rules of Nasdaq, the
Securities Exchange Act of 1934 (the "Exchange Act"), the rules and regulations
of the Securities and Exchange Commission (the "Commission"), the Company's
charter documents and/or the Board of Directors may require.
In discharging its primary responsibilities and functions, the Committee is
authorized to:
A. INDEPENDENT AUDITORS
- Retain and terminate the Company's independent auditors, approve all
audit engagement terms and fees, oversee all work performed by the
independent auditors and resolve any disagreements between management and
the Company's independent auditors regarding financial reporting.
- Pre-approve all audit services and all permissible non-audit services
(including tax services) to be performed for the Company by its
independent auditors, subject to the de minimis exceptions for non-audit
services described in the Exchange Act which are approved by the
Committee prior to the completion of the audit. The Committee may
delegate to one or more of its members the authority to pre-approve audit
services and permissible non-audit services; provided, however, that all
pre-approved services must be disclosed by such delegate to the full
Committee at its next scheduled meeting.
- Evaluate the independent auditors, including the independent auditors'
qualifications, performance and independence, the competence, experience
and qualifications of the lead partner and senior members of the
independent auditor team, and the quality control procedures of the
independent auditors. The Committee also shall ensure the rotation of the
audit partners as required by law.
- Discuss with the independent auditors the overall scope and plans for
their audits, including the adequacy of staffing.
- At least annually, obtain and review a report from the independent
auditors which describes (a) the audit firm's internal quality-control
procedures, (b) any material issues raised by the most recent internal
quality-control review, or peer review, of the audit firm, or by any
inquiry or investigation by governmental or professional authorities,
within the last five years, respecting one or more independent audits
carried out by the audit firm, and any steps taken to address any such
issues, and (c) all relationships between the audit firm and the Company.
At least annually, obtain and review the written disclosures and the
letter from the independent auditors required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees) and
discuss with the independent auditors their independence.
- Discuss with the independent auditors any problems or difficulties the
independent auditors may have encountered and any management letter
provided by the independent auditors and the Company's response. Such
review should include any difficulties encountered in the course of the
audit work, including any restrictions on the scope of activities or
access to required information, and any disagreements with management.
- Discuss with the independent auditors, at least annually, the matters
required to be discussed by Statement on Auditing Standards No. 61
(Codification of Statements on Auditing Standards, AU sec. 380) relating
to the conduct of the audit.
- Obtain from the independent auditors assurance that Section 10A(b) of the
Exchange Act (generally relating to the auditors' identification of
illegal acts and related party transactions) has not been implicated.
- Establish clear policies and guidelines for the Company's hiring of
employees or former employees of the independent auditors.
- Annually prepare the report required by the rules of the Commission to be
included in the Company's annual proxy statement.
B. FINANCIAL REPORTING PROCESS
- Review and discuss with management and the independent auditors the
Company's annual audited financial statements and disclosures set forth
in Management's Discussion and Analysis in the Company's Annual Report on
Form 10-K prior to filing with the Commission or public distribution,
including (i) their judgment about the quality of the Company's
accounting principles as applied in its
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financial reporting, (ii) the reasonableness of significant judgments,
and (iii) the clarity of the disclosures in the financial statements.
Recommend, based on its review and discussion, that the audited financial
statements be included in the Company's Form 10-K for the last fiscal
year for filing with the Commission.
- Review and discuss with management and the independent auditors the
interim financial statements and disclosures set forth in Management's
Discussion and Analysis in the Company's Quarterly Report on Form 10-Q
and the results of the independent auditors' reviews of the quarterly
financial statements prior to the filing of the Company's Quarterly
Report on Form 10-Q with the Commission and/or the Company's release of
earnings.
- Obtain and review a report made to the Committee by the Chief Executive
Officer and Chief Financial Officer of the Company during their
certification processes for the Form 10-K and each Form 10-Q which
describes, if any, (a) all significant deficiencies in the design or
operation of the Company's internal controls which could adversely affect
the Company's ability to record, process and report financial data, and
(b) any fraud (whether or not material) involving management or other
employees who have a significant role in the Company's internal controls.
- Discuss with management and the independent auditors the adequacy and
effectiveness of the Company's accounting and financial processes and
controls. The Committee may meet separately with management and with the
independent auditors to discuss these matters.
- Review with management and independent auditors the financial reporting
and disclosure issues, including material correcting adjustment and
off-balance sheet financing and relationships, if any, discuss
significant judgment matters made in connection with the preparation of
the Company's financial statements and ascertain that any significant
disagreements among them have been satisfactorily resolved, and ascertain
that no restrictions were placed by management on implementation of the
independent or internal auditors' examinations. Regularly scheduled
executive sessions will be held for this purpose.
- Review significant changes to the Company's auditing and accounting
principles and practices proposed by the independent auditors or
management.
- Review with management and the independent auditors the effect of
regulatory and accounting initiatives as well as any off-balance sheet
structures on the Company's financial statements.
- Review policies with respect to risk assessment and risk management.
Discuss significant financial risks and exposures and the steps taken by
management to monitor and minimize such risks.
- Discuss generally, in terms of types of information to be disclosed and
the type of presentation to be made, the Company's earnings press
releases as well as financial information and earnings guidance provided
to analysts and rating agencies.
C. ETHICAL/LEGAL COMPLIANCE AND OTHER REVIEW PROCEDURES
- Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding the Company's accounting,
internal accounting controls or auditing matters and confidential,
anonymous submission by employees of concerns regarding accounting
questions or auditing matters.
- Develop, review or recommend to the Board of Directors for its approval
those provisions of the Code of Business Conduct and Ethics that relate
to areas that the Committee is responsible for overseeing, including
conflicts of interest.
- Review the programs and policies of the Company designed to ensure
compliance with applicable laws and regulations and monitoring the
results of those compliance efforts.
- Review with the Company's executive officer with oversight of legal
matters of the Company any legal matters that could have a material
impact on the financial statements, the Company's compliance policies and
any material reports or inquiries received from governmental agencies or
regulators.
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- Review and, as required by Nasdaq, approve all related-party
transactions.
- Establish and review whistleblower procedures.
D. OTHER RESPONSIBILITIES
- Review and reassess the adequacy of this Charter at least annually and
recommend any proposed changes to the Board of Directors for approval.
- Conduct an annual performance evaluation of the Committee.
- Report periodically to the Board of Directors, which report may include
issues that arise with respect to (a) the quality and integrity of the
Company's financial statements, (b) the Company's compliance with legal
or regulatory requirements, (c) the performance and independence of the
Company's independent auditors or (d) the performance of the internal
audit function.
- As appropriate, obtain advice and assistance from independent legal,
accounting or other advisors. The Committee shall approve the fees paid
by the Company to any independent advisor retained by the Committee.
MEMBERSHIP
The Committee shall be elected by the Board of Directors and shall be
composed solely of a minimum of 3 independent non-employee directors who are
independent as defined in, and to the extent required by, the applicable rules
of Nasdaq, the Exchange Act and the rules and regulations of the Commission. The
Board of Directors shall affirmatively conclude that the members of the
Committee are independent, as required. Each member of the Committee shall be
able to read and understand financial statements at the time of their
appointment. At least one member of the Committee shall have past employment
experience in finance or accounting, requisite professional certification in
accounting or any other comparable experience or background which results in the
individual's financial sophistication, including being or having been a chief
executive officer, chief financial officer or other senior officer with
financial oversight responsibilities. The Board of Directors shall determine
whether the Committee has an audit committee financial expert as defined by the
Commission. The Chairman of the Committee shall be selected from among the
Committee members by the Board of Directors.
MEETINGS
The Committee shall meet quarterly, and at such additional times as deemed
appropriate by the Chairman of the Committee, any two members of the Committee,
or the Chief Executive Officer. A quorum for the transaction of any business by
the Committee shall be a majority of the members of the Committee. The act of a
majority of the directors serving at any meeting of the Committee at which a
quorum is present shall be the act of the Committee. All meetings of the
Committee will be held pursuant to the Bylaws of the Company with regard to
notice and waiver thereof, and written minutes of each meeting will be duly
filed in the Company records. Reports of meetings of the Committee shall be made
to the Board of Directors at its next regularly scheduled meeting, following the
Committee meeting accompanied by any recommendations to the Board of Directors
approved by the Committee.
AUTHORITY
The Committee is authorized to confer with Company management and other
employees to the extent it may deem necessary or appropriate to fulfill its
duties and discharge its responsibilities. The Committee has the authority to
investigate any matters brought to its attention, within the scope of its
duties, with full access to all Company books, records, facilities, personnel
and independent auditors, along with the power to retain, at the Company's
expense, such independent counsel, auditors or other experts as the Committee
deems necessary or appropriate.
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THE ENSTAR GROUP, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS ON MAY 21, 2004
The undersigned hereby appoints Nimrod T. Frazer and Cheryl D. Davis, and
each of them, proxies, with full power of substitution and resubstitution, for
and in the name of the undersigned, to vote all shares of Common Stock of The
Enstar Group, Inc. (the "Company") which the undersigned would be entitled to
vote if personally present at the Annual Meeting of Shareholders to be held on
Friday, May 21, 2004, at 9:00 a.m., local time, at the Montgomery Civic Center
at 300 Bibb Street, Montgomery, Alabama 36104, or at any adjournment thereof,
upon the matters described in the accompanying Notice of Annual Meeting of
Shareholders and Proxy Statement, receipt of which is hereby acknowledged, and
upon any other business that may properly come before the Annual Meeting or any
adjournment thereof. Said proxies are directed to vote on the matters described
in the Notice of Annual Meeting of Shareholders and Proxy Statement as follows,
and otherwise in their discretion upon such other business as may properly come
before the meeting or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1 AND "FOR" PROPOSAL 2.
(1) To elect three (3) directors to three-year terms expiring at the 2007
annual meeting of shareholders or until their successors are duly elected
and qualified:
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY for [ ] FOR all except (see
all nominees instructions below)
[ ] J. Christopher
Flowers
[ ] Gregory L. Curl
[ ] Paul J. Collins
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S), MARK
"FOR ALL EXCEPT" AND FILL IN THE CIRCLE NEXT TO EACH NOMINEE YOU WISH TO
WITHHOLD, AS SHOWN HERE: (__)
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(2) To ratify the appointment of Deloitte & Touche LLP as independent auditors
of the Company to serve for 2004.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued, and to be signed, on the other side)
(Continued from other side)
THIS PROXY WILL BE VOTED AS INDICATED, BUT IF NO DIRECTION IS INDICATED,
THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1 AND 2.
Date: , 2004
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Please sign exactly as your name or names
appear on this proxy. For more than one
owner as shown above, each should sign. When
signing in a fiduciary or representative
capacity, please give full title. If this
proxy is submitted by a corporation, it
should be executed in the full corporate
name by a duly authorized officer; if a
partnership, please sign in partnership name
by authorized person.
Please complete, date and sign this proxy and return it promptly in the
enclosed envelope, whether or not you plan to attend the annual meeting. If you
attend the annual meeting, you may vote in person if you wish, even if you have
previously returned your proxy.