ALLCITY INSURANCE COMPANY
122 Fifth Avenue
New York, New York 10011
(212) 387-3000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
October 19, 1998
To the Shareholders:
The Annual Meeting of Shareholders ("Meeting") of Allcity Insurance Company
(the "Company") will be held at the offices of the Company, 122 Fifth Avenue,
New York, New York 10011 on Monday, October 19, 1998, at 10:00 a.m. for the
following purposes:
(1) To consider and act upon the election of six members of the Board of
Directors of the Company.
(2) To transact such other business as may properly come before the Meeting.
Shareholders of record as of the close of business on September 18, 1998
are entitled to vote at and take part in the business of the Meeting.
All shareholders are urged to participate either by sending in their proxies
or by attending the Meeting in person.
John R. Petrowski
Corporate Secretary
October 9, 1998
IMPORTANT FOR ALL SHAREHOLDERS
It is important that your shares be represented at the Annual Meeting of
Shareholders. To be sure your interests are represented, please sign and
return promptly the enclosed proxy in the envelope provided. No postage
is required.
<PAGE>
ALLCITY INSURANCE COMPANY
122 Fifth Avenue
New York, New York 10011
(212) 387-3000
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
October 19, 1998
This proxy statement is furnished in connection with the solicitation of
proxies for use at the Annual Meeting of Shareholders (the "Meeting") of
Allcity Insurance Company (the "Company"), to be held on October 19, 1998 at
the offices of the Company, 122 Fifth Avenue, New York, New York 10011. This
proxy statement and the accompanying form of proxy are being sent to
shareholders on or about the date hereof.
The enclosed form of proxy is being solicited by the Board of Directors of
the Company. Where the shareholder specifies a choice as provided in the
form of proxy with respect to the matter to be acted upon, the shares will
be voted in accordance with the choice so specified; otherwise they will be
voted in accordance with the Board of Directors' recommendations. A
shareholder executing and returning a proxy has the power to revoke it
before it is voted by sending written notice or a subsequently executed and
dated proxy to the Company at its principal office or by attending the
Meeting and voting in person.
The expense of solicitation of the proxies will be borne by the Company. The
solicitation will be made primarily by mail, and directors, officers and
regular employees of the Company may solicit proxies by telephone, telecopier,
telegram or in person. Brokerage houses and other custodians, nominees and
fiduciaries will be reimbursed for the expense of forwarding documents to
beneficial owners for whom they hold stock.
VOTING SECURITIES AND PRINCIPAL HOLDERS
General. Shareholders of record as of the close of business on September 18,
1998 (the "Record Date") are entitled to notice of and to vote at the Meeting.
On the Record Date, there were outstanding 7,078,625 Common Shares of the
Company which entitle shareholders to one vote in person or by proxy for each
share held. The following table sets forth, as of the Record
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<TABLE>
Date,information as to ownership of the Company's Common Shares by persons
owning more than 5% of such shares. Information as to management's ownership
of securities of the Company and the Company's parents is set forth under the
caption "ELECTION OF DIRECTORS--Security Ownership of Management."
Name and Address Amount and Nature Percent of
of Beneficial Ownership Class
<CAPTION> <C> <C>
Empire Insurance Company
("Empire")
122 Fifth Avenue
New York, New York 10011 5,987,401 * 84.6%
Baldwin Enterprises, Inc.
529 East South Temple
Salt Lake City, Utah 84102 373,607 * 5.3%
Leucadia National Corporation ("Leucadia") controls Empire and Baldwin
Enterprises, Inc. and may be considered a "parent" of the Company.
</TABLE>
[S]
ELECTION OF DIRECTORS
Pursuant to the Company's Charter, By-laws and acts of the Board of Directors,
the Board of Directors is presently comprised of 13 members who are divided
into three classes, Classes I, II and III, serving staggered three-year terms
of office. Classes I and II consist of five directors each, while Class III
consists of three directors.
At the Meeting, there will be an election of four Class II directors, who
will serve for a three-year term expiring at the 2001 Annual Meeting of
Shareholders. Martin B. Bernstein, Louis V. Siracusano, Lucius Theus and
Robert V. Toppi are the Board of Directors' nominees for the Class II
directorships. There will also be an election of two Class III directors,
who will serve until the 1999 Annual Meeting of Shareholders. James E. Jordan
and Joseph A. Orlando are the Board of Directors' nominees for the Class III
directorships. Except for Mr. Orlando, who is Vice President and Chief
Financial Officer of Leucadia, all of the nominees are presently directors
of the Company.
Although management does not contemplate that any of the nominees will be
unable to serve for any reason, in the event that a vacancy unexpectedly
occurs, shares represented by valid proxies will be voted for the election
of a substitute nominee to be designated by management.
[S]
[FN]
* Owned directly with sole voting power and investment power.
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All of the persons named as proxies in the accompanying form of
proxy have advised the Company that they intend to vote shares represented by
proxies received by them in favor of management's nominees in the election of
directors, unless the authority to do so is withheld.
Further Information about Nominees For Directors
Information about each nominee's position with the Company and
Empire and principal occupation appears below.
Class II Directorships (Term Expires at 2001 Annual Meeting of Shareholders):
MARTIN B. BERNSTEIN, 64
Position: Director of the Company and Empire since 1988.
Principal Occupation: President and Director of Ponderosa Fibres of
America, Inc. (a pulp manufacturer for paper producers) since 1980.
LOUIS V. SIRACUSANO, 51
Position: Director of the Company and Empire since 1985.
Principal Occupation: Attorney with McKenna, Fehringer, Siracusano
& Chianese (a law firm) for over six years.
LUCIUS THEUS, 75
Position: Director of the Company and Empire since 1980.
Principal Occupation: President, The U.S. Associates (consultants in
civic affairs, human resources and business management) since 1989.
Principal and Director of The Wellness Group, Inc. (a provider of
health promotion programs) since 1989; Corporate Director, Civic
Affairs, of the Allied Corporation (a diversified industrial
company) from 1981 to 1989.
ROBERT V. TOPPI, 61
Position: President, Chief Executive Officer and Director of the
Company and Empire since August 17, 1998.
Principal Occupation: President and Chief Executive Officer of the
Company and Empire since August 17,
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1998; previously Vice President
of Aetna Casualty & Surety Company, a stock property/casualty
insurer, from 1963 to 1996.
Class III Directorships (Term Expires at 1999 Annual Meeting of Shareholders):
JAMES E. JORDAN, 54
Position: Director of the Company and Empire since 1997.
Principal Occupation: Financial Consultant of the Jordan Company
since 1984; President of William Penn. Co. from 1986 to 1997.
JOSEPH A. ORLANDO, 42
Position: Nominee for Class II Director in 1998.
Principal Occupation: Vice President and Chief Financial Officer of
Leucadia; Vice President and Director of Charter National Life
Insurance Company and Intramerica Life Insurance Company, each a
life insurance subsidiary of Leucadia, since September 1997.
Further Information About Directors Continuing in Office
The following directors are continuing in office for the respective
periods indicated and until their successors are elected. Each of these
directors was elected previously by the shareholders of the Company to hold
such office. Information about each director's position with the Company and
Empire and principal occupation appears below.
Class I Directorships (Term Expires at 2000 Annual Meeting of Shareholders):
JOEL M. BERLIN, 55
Position: Director of the Company and Empire since 1996.
Principal Occupation: Senior Vice President of Marketing of the
Company and Empire since May 1996.
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Previously, Chairman of the Board and Chief Executive Officer of
Sperry & Hutchinson Co. ("S&H") from April 1993 to May 1996 and
President and Chief Operating Officer of S&H from March 1992 to May
1996.
IAN M. CUMMING, 58
Position: Director of the Company and Empire since 1988.
Principal Occupation: Chairman of the Board of Leucadia since June
1978; Director of Skywest, Inc. (a Utah-based regional air carrier)
since June 1986; Director of M.K. Gold Company (an international gold
mining company) since June 1995.
THOMAS E. MARA, 52
Position: Director of the Company and Empire since 1994.
Principal Occupation: Executive Vice Presidentof Leucadia since
May 1980 and Treasurer of Leucadia since January 1993.
JOSEPH S. STEINBERG, 54
Position: Director of the Company and Empire since 1988.
Principal Occupation: President since January 1979 and Director
since December 1978 of Leucadia; Director since June 1988 of
Jordan Industries, Inc., a holding company principally engaged
in manufacturing; Director of M.K. Gold Company since June 1995.
DANIEL G. STEWART, 79
Position: Director of the Company and Empire since 1980.
Principal Occupation: Independent consulting actuary. Previously,
Senior Vice President of Mutual Benefit Life Insurance Company
from 1985 to November 1991.
Class III Directorships (Term Expires at 1999 Annual Meeting of Shareholders):
FRANCIS M. COLALUCCI, 53
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<TABLE>
Position: Director of the Company and Empire since May 1996.
Principal Occupation: Senior Vice President, Chief Financial
Officer and Treasurer of the Company and Empire since 1996; Vice
President and Corporate Treasurer of The Continental Corporation
from 1991 to 1996.
HARRY H. WISE, 59
Position: Director of the Company and Empire since 1988.
Principal Occupation: President and Director, H.W. Associates, Inc.
(an investment advisory firm); President and Director, Madison Equity
Capital Corp. (a sponsor of private investment partnerships).
Security Ownership of Management
The following table sets forth information concerning beneficial
ownership of the Company's Common Shares as of June 30, 1998 by all directors
and nominees and by all officers and directors as a group. Each holder shown
exercises sole voting and sole investment power of the shares shown opposite
his name. Directors and nominees not listed below did not own any of the
Company's Common Shares.
<CAPTION>
Amount and Nature Percent of
Name of Beneficial Owner of Beneficial Ownership Class
<C> <C>
Ian M. Cumming (1) (1)
Joseph S. Steinberg (1) (1)
<S>
Directors and officers
as a group (16 persons)(2)
<S>
<FN>
(1) Although neither Mr. Cumming nor Mr. Steinberg directly owns any Common
Shares of the Company, by virtue of their respective approximately 16% and 14%
interest in Leucadia, each may be deemed to be the beneficial owner of a
proportionate number of the Common Shares beneficially owned by Leucadia
through its 100% ownership of Empire.
(2) Aside from the beneficial ownership described in note 1 to this table,
various directors and an officer beneficially own in the aggregate less than
1% of the common shares of Leucadia.
</TABLE>
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<TABLE>
COMPENSATION OF DIRECTORS AND OFFICERS
AND OTHER TRANSACTIONS WITH MANAGEMENT
Compensation
The Company does not remunerate its officers and directors directly.
Officers and directors of the Company are also officers and directors of the
Company's parent, Empire, which pays all salaries and directors' fees. All
such salaries and fees, and all other operating expenses, are shared by the
Company and Empire pursuant to a pooling arrangement under which 30% of such
expenses are charged to the Company.
The following table sets forth certain information for the fiscal year
ended December 31, 1997 concerning the Company's 30% share of the cash
compensation and other benefits paid to, or accrued for, Richard G. Petitt, the
Chief Executive Officer of the Company during 1997 and the only executive
officer whose compensation paid, or accrued for, under the pooling arrangement
exceeded $100,000 for 1997.
<CAPTION>
SUMMARY COMPENSATION TABLE
Name and Principal
Position Annual Compensation Long Term Compensation
Year Salary Bonus LTIP Payouts All Other Compensation
<C> <C> <C> <C> <C>
Richard G. Petitt 1997 105,969 90,000 0 6,767(a)
President and C.E.O.1996 86,674 150,000 0 8,844(b)
<S>
<FN>
(a) Includes Salary Cap Restoration Plan ($2,303), Pension Plan ($3,264) and
Company match of 401(k) plan ($1,200).
(b) Includes Salary Restoration Plan ($3,450), Pension Plan ($4,455) and
Company match of 401(k) plan ($939).
<S>
The Company does not directly remunerate directors. The directors of the
Company and Empire who are not employees of Empire and the Company were
paid an annual fee of $5,000. In addition, eligible directors receive $1,500
for each joint board meeting attended. For attendance at a meeting of a
committee of the joint board, such directors receive $1,500 per meeting. In
addition, each Chairperson of a Committee is entitled to $500 per annum. All
fees paid to such directors are shared in accordance with the pooling
arrangement.
</TABLE>
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<TABLE>
Pension Plan
Pensions for officers and employees of the Company are provided under a
trusteed non-contributory pension plan ("Plan"). Any employee is eligible
for membership in the Plan on January 1st or July 1st of any plan year after
which he has completed one full year of service, consisting of a minimum of
1,000 credited hours with Empire, provided they have attained the age of 21
years by or before such date.
Members of the Plan receive a basic pension if they work until
their normal retirement date, which is the last day of the month in which
they attain 65 years of age with 5 years of credited service. Any member
in the active employ of Empire may elect early retirement between 55 and
65. A member electing early retirement must have at least 10 years of
service. A monthly average of total compensation received over the highest
5 consecutive plan or calendar years before retirement is taken to compute
benefits as follows:
1.30% of the first $833 per month of average pay, plus
1.75% of average pay over $833 per month.
The sum of these two credits is multiplied by the years of credited service.
The basic benefit amounts listed in the table below are not subject to any
deduction for Social Security benefits or other offset amounts. The maximum
benefit payable under the pension plan is $96,400 per year.
The amounts set forth in the following table show estimated annual benefits
upon retirement to which the Company contributes 30% of such cost through
the pooling agreement.
<CAPTION>
Years of Service
Highest 5-Year
Average Compensation
at Retirement ($) 10 15 20 25 30 35
<C> <C> <C> <C> <C> <C>
10,000 1,300 1,950 2,600 3,250 3,900 4,550
25,000 3,925 5,888 7,850 9,813 11,775 13,738
50,000 8,300 12,450 16,600 20,750 24,900 29,050
75,000 12,675 19,013 25,350 31,688 38,025 44,363
100,000 17,050 25,575 34,100 42,625 51,150 59,675
160,000 27,500 41,300 55,100 69,000 82,600 96,400
</TABLE>
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Salary Cap Restoration Plan
In 1994, Empire established a Salary Cap Restoration Plan ("SCRP") for
certain corporate officers. Under the SCRP, Empire will provide these
officers with an additional benefit, to be paid in a lump-sum upon retirement,
equal to the difference between the actuarially determined lump-sum benefits,
as computed under the Pension Plan, of the officer's highest five year average
compensation (not to exceed $320,000, adjusted for the cost-of-living) at
retirement and the current maximum compensation limit of $160,000. The SCRP
is an unfunded plan. Under the pooling agreement, the Company is obligated
to pay 30% of the cost of the SCRP.
Employees' Savings Plan
Empire sponsors an Employees' Savings Plan (the "Savings Plan"), under which
each eligible employee may defer a portion of their annual compensation, subject
to limitations. Empire contributes a matching amount, subject to certain
limits. In 1995, Empire matched 65% of each participant's deferral
contribution up to a maximum matching contribution of $813. A participant
may also contribute, from his after-tax dollars, an amount, not to exceed 10%
of his annual compensation. Effective July 1996, the Savings Plan was
amended to allow Empire matching contributions equal to 50% of an employee's
contributions up to a maximum of 2.5% of the employee's salary. Empire's
contributions to the Savings Plan were $438,000, $524,000 and $435,000 in
1997, 1996 and 1995, respectively. Under the pooling agreement, the Company
is obligated to provide 30% of Empire's contributions under the Savings Plan.
Supplemental Retirement Plan
Under Empire's Supplemental Retirement Plan, eligible employees who work
until their normal retirement date, which, is the last day of the month in
which such employees attains 65 years of age, are entitled to receive monthly
benefits equal to (a) the difference between (i) one twelfth of a stipulated
percentage (the "stipulated percentage") of such participant's final average
compensation (the "base amount") and (ii) the aggregate amount of the monthly
pension and benefit entitlement such participant would receive under Empire's
Pension Plan, Savings Plan and other employee pension benefit plans if such
benefits were paid in the form of an annuity for the life of the participant
and fifty percent of the participant's monthly Social Security benefit,
multiplied, unless otherwise specified in the plan, by (b) a fraction, not
exceeding one (the "reduction factor"), the numerator
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of which is the numberof the participant's years of service and the denominator
of which is five. Final average compensation is the average annual compensation
paid during any five consecutive calendar years during which the participant's
compensation was highest. The plan provides that the minimum benefit payable
is equal to the base amount multiplied by the reduction factor. Participants
remaining in the employ of the Company after the normal retirement date
continue to accrue benefits under the plan. Early retirement, between age 55
and 65 under this plan, is permitted provided the participant electing early
retirement has at least ten years of service. Amounts payable under the
plan are payable out of the assets of the Trust to Fund Benefits under
Certain Unfunded Deferred Compensation Plans of the Company, established
effective November 1, 1987 (the "Trust Fund"). The Trust Fund is subject to
the claims of certain creditors of the Company if the Company becomes
insolvent.
OTHER MATTERS
Management knows of no other business to come before the Meeting; however, if
any other business properly comes before the Meeting, it is the intention of
the persons named in the proxy to vote in accordance with their best judgment
of what is in the best interests of the Company.
To assure representation of your interest if you cannot attend the Meeting,
please sign and return promptly the proxy in the enclosed envelope.
By Order of the Board of Directors.
John R. Petrowski
Corporate Secretary
October 9, 1998
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