Notice of the Annual Meeting of Shareholders
To be held May 23, 1997
To the Shareholders of
OLD REPUBLIC INTERNATIONAL CORPORATION
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of OLD
REPUBLIC INTERNATIONAL CORPORATION will be held in Room 2300 at the offices of
the Company, 307 North Michigan Avenue, Chicago, Illinois 60601, on Friday, May
23, 1997 at 3:00 P.M. Central Daylight Savings Time, for the purpose of
considering and acting upon the following matters:
1. To elect four Class 1 directors; and
2. To act upon a stockholder proposal, if properly presented at the
meeting, concerning the eligibility of directors to be nominated or
renominated for election after attaining age 70.
3. To transact such other business as may properly come before the meeting.
Shareholders of record at the close of business on March 21, 1997 will
be entitled to vote, either in person or by proxy. Shareholders who do not
expect to attend in person are urged to execute and return the accompanying
proxy in the envelope enclosed.
The annual report of the Company for the year 1996 is being mailed to
all shareholders of record with this Notice and the Proxy Statement.
By order of the Board of Directors.
SPENCER LEROY III
Secretary
Chicago, Illinois
March 31, 1997
<PAGE>
Proxy Statement
OLD REPUBLIC INTERNATIONAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
May 23, 1997
GENERAL INFORMATION
This proxy statement is being furnished to the shareholders of Old
Republic International Corporation, a Delaware corporation (the "Company"), 307
North Michigan Avenue, Chicago, Illinois 60601, in connection with the
solicitation of proxies by its Board of Directors for use at the annual meeting
of shareholders to be held on May 23, 1997 and any adjournments thereof. The
approximate date on which this proxy statement and the accompanying proxy are
first being sent to the shareholders is March 31, 1997.
The proxy is revocable at any time before it is voted by written
notification to the persons named therein as proxies, which may be mailed or
delivered to the Company at the above address. All shares represented by
effective proxies will be voted at the meeting and at any adjournments thereof.
If the enclosed proxy is properly executed and returned in time for
voting with a choice specified thereon, the shares represented thereby will be
voted as indicated thereon. If no specification is made, the proxy will be voted
by the proxy committee for the election as directors of the nominees named below
(or substitutes therefor if any nominees are unable or refuse to serve), against
the stockholder proposal, if properly presented, and in its discretion upon such
matters not presently known or determined which may properly come before the
meeting.
The Company has two classes of stock outstanding, Preferred Stock,
1(cent) par value per share ("Preferred Stock"), and Common Stock, $1.00 par
value per share ("Common Stock"). The voting Preferred Stock is composed of
Series D Cumulative Convertible Preferred Stock ("Series D Preferred Stock") and
Series G Convertible Preferred Stock and Series G-2 Convertible Preferred Stock
(collectively "Series G Preferred Stock"). On February 28, 1997 33,502,462
shares of Series D Preferred Stock, 172,491 shares of Series G Preferred Stock
and 93,803,310 shares of Common Stock were outstanding and entitled to one vote
each on all matters considered at the meeting. Shareholders of record as of the
close of business on March 21, 1997 are entitled to notice of and to vote at the
meeting. There are no cumulative voting rights with respect to the election of
directors.
PRINCIPAL HOLDERS OF SECURITIES
The following tabulation shows with respect to (i) each person who is
known to be the beneficial owner of more than 5% of any series of the voting
Preferred Stock or the Common Stock of the Company; (ii) each director and
executive officer of the Company; and (iii) all directors and executive
officers, as a group: (a) the total number of shares of Preferred Stock or
Common Stock beneficially owned as of February 28, 1997 and (b) the percent of
the class of stock so owned as of the same date:
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<TABLE>
Amount and
Nature of Percent
Name Beneficial of
Title of Class of Beneficial Owner Ownership Class(*)
-------------- ------------------- ---------- --------
<S> <C> <C>
Series D Preferred ...........Old Republic International Corporation 32,575,883 (1) 97.2
Employees Savings and Stock
Ownership Plan
Messrs. Legg, Sursa and Zucaro
as members of The Administration
Committee
307 North Michigan Avenue
Chicago, Illinois 60601
Paul D. Adams 26,661 (2) 0.1
Anthony F. Colao 39,664 (2) 0.1
Jimmy A. Dew 86,833 (2) 0.3
Peter Lardner 18,507 (2) 0.1
Spencer LeRoy III 6,949 (2) **
William A. Simpson 89,294 (2) 0.3
A. C. Zucaro 458,849 (2) 1.4
All executive officers and
directors, as a group 726,757 (2) 2.2
Series G Preferred ...........Anthony F. Colao 54,057 (3) 31.3
Peter Lardner 21,789 (3) 12.6
Vincent R. Serrecchia 39,105 (3) 22.7
A. C. Zucaro 21,009 (3) 12.2
All executive officers and
directors, as a group 135,960 (3) 78.8
Common Stock
Shareholders' beneficial
ownership of more than 5% of the
Common Stock (excluding direc-
tors) ...........American Business & Mercantile 6,740,460 (4) 7.2
Insurance Group, Inc.
307 North Michigan Avenue
Chicago, Illinois 60601
Old Republic International Corporation 6,746,468 (1) 6.7
Employees Savings and Stock
Ownership Plan
Messrs. Legg, Sursa and Zucaro as
members of The Administration
Committee
307 North Michigan Avenue
Chicago, Illinois 60601
Invesco PLC 4,703,020 (5) 5.0
11 Devonshire Square
London EC2M 4YR
England
Sanford C. Bernstein & Co., Inc. 4,662,332 (5) 5.0
767 Fifth Avenue
New York, New York 10153
(Continued)
</TABLE>
2
<PAGE>
<TABLE>
Other Shares Percent
Name of Shares Subject to Shares Held by Beneficially of
Title of Class Beneficial Owner Stock Options(*) Employee Plans(*) Owned(*) Total Class*
- - - -------------- ---------------- ----------------- ----------------- ------------ ----- -------
<S> <C> <C> <C> <C> <C> <C>
Directors' and Paul D. Adams 61,680 612 (2) 29,475 91,767 0.1
executive officers' Harrington Bischof -- -- 7,197 (6) 7,197 **
beneficial Anthony F. Colao 31,380 1,981 (2) 60,711 (7) 94.072 0.1
ownership Jimmy A. Dew 66,150 25 (2) 199,905 (8) 266,080 0.3
Kurt W. Kreyling -- -- 239,568 (9) 239,568 0.3
Peter Lardner 41,514 12,125 (2) 114,373 (10) 168,012 0.2
Wilbur S. Legg -- -- 32,328 (11) 32,328 **
Spencer LeRoy III 28,125 1,023 (2) 6,547 (12) 35,695 **
John W. Popp -- -- 3,000 3,000 **
William A. Simpson 84,330 25 (2) 152,411 (13) 236,766 0.3
Arnold L. Steiner -- -- 675,897 (14) 675,897 0.7
David Sursa -- -- 382,054 (15)(16) 382,054 0.4
William G. White, Jr. -- -- 31,008 31,008 **
A. C. Zucaro 252,300 16,923 (2) 92,730 (15)(17) 361,953 0.4
All executive officers
and directors,as a group 565,479 32,714 2,027,204 2,625,397 2.8
- - - ---------------------------------------------------------------------------------------------------------------------------
* Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act of
1934. Unless otherwise stated below, each such person has sole voting and
investment power with respect to all such shares. Under Rule 13d-3(d),
shares not outstanding which are subject to options, warrants, rights or
conversion privileges exercisable within 60 days are deemed outstanding for
the purpose of calculating the number and percentage owned by such person,
but are not deemed outstanding for the purpose of calculating the
percentage owned by each other person listed. Common shares used for
calculation purposes include 6,740,460 shares held by American Business &
Mercantile Insurance Group, Inc. and its subsidiary (See Note 4), and
equivalent common shares that may be issued upon conversion by the
beneficial owner of all series of Preferred Stock convertible within 60
days.
** Less than one-tenth of one percent.
(1) 32,575,883 shares of Series D Preferred Stock and 231,292 shares of Common
Stock are held by the Old Republic International Corporation Employees
Savings and Stock Ownership Plan ("ESSOP"). Under the terms of the ESSOP, a
participant is entitled to vote the Company stock held by the ESSOP the
value of which has been allocated to the participant's account. The
Administration Committee appointed pursuant to the ESSOP is authorized to
vote the Company stock held by the ESSOP until such time as the value of
such stock has been allocated to a participant's account or where a
participant fails to exercise his or her voting rights. The value of a
portion of the shares of the Series D Preferred Stock and Common Stock has
been allocated to the accounts of ESSOP participants. Additionally, the
Administration Committee may be deemed to have investment power with
respect to stock held by the ESSOP. The Administration Committee is
composed of Messrs. Legg, Sursa and Zucaro, all directors of the Company.
Under the rules of the Securities and Exchange Commission, each of them may
be deemed to be the beneficial owner of such shares of Series D Preferred
Stock and Common Stock by virtue of such shared voting and investment
power.
The Series D Preferred Stock held by the Old Republic International
Corporation Employees Savings and Stock Ownership Plan is convertible at
any time into 6,515,176 shares of Company Common Stock. Accordingly, under
the rules of the Securities and Exchange Commission, Messrs. Legg, Sursa
and Zucaro each may be deemed to be the beneficial owners of 6,746,468
shares of Common Stock (The shares that would be obtained on the conversion
of the Series D Preferred Stock plus the 231,292 shares of Common Stock
actually owned by the Plan). The foregoing presentation should not be
construed as an admission of beneficial ownership, and such persons
disclaim beneficial ownership of shares held by the ESSOP.
(2) Includes only the shares that have been allocated to the account of the
director or the executive officer as a participant in the ESSOP. Excludes
those shares for which the director may be deemed to have investment and
voting power as a result of being a member of the Administration Committee
of the ESSOP.
(3) The Company's employees who hold stock options may exercise their options
for shares of either Common Stock or Series G Preferred Stock. Each share
of Series G Preferred Stock is convertible at any time after six months
from the date of issuance into 0.95 share of Common Stock, and accordingly,
under the rules of the Securities and Exchange Commission, Messrs. Colao,
Collopy, Lardner, and Zucaro are deemed to be the beneficial owners of
51,354, 4,619, 20,699 and 19,958 shares, respectively, of Common Stock
issuable upon conversion of their Series G Preferred Stock.
(4) American Business & Mercantile Insurance Group, Inc. ("AB&M Group") and its
wholly-owned subsidiary, American Business & Mercantile REassurance
Company, own 6,740,460 shares of the Company's Common Stock. Voting control
of AB&M Group is divided between American Business & Personal Insurance
Mutual, Inc. ("AB&P Mutual"), which through a subsidiary, owns 60% of AB&M
Group's voting stock, and the Company, which through a subsidiary, owns 40%
of AB&M Group's voting stock. At February 28, 1997, the Company held 98.8%,
AB&P Mutual .1%, and public shareholders 1.1% of the total voting and
non-voting equity securities of AB&M Group. AB&P Mutual is a property and
liability mutual insurer affiliated with the Company through management
agreements, and is owned by its policyholders. Mr. Zucaro is Chairman,
President and Chief Executive Officer of AB&P Mutual and AB&M Group.
Messrs. Colao, Kreyling, Legg, Steiner, Sursa, and Zucaro are directors of
AB&M Group. Through subsidiaries, AB&P Mutual also owns 289,555 shares of
Series D Preferred Stock.
(5) Reflects the number of shares shown in the most recent Schedule 13-G
filings with the Securities and Exchange Commission through February 28,
1997. Shares reported as owned by Sanford C. Bernstein & Co., Inc.
represent shares for which the firm has sole dispositive power. It has sole
voting power for 2,142,912 shares and shared voting power for 439,349
shares.
3
<PAGE>
(6) Includes 3,000 shares held in trust for Mr. Bischof's benefit.
(7) Includes 51,354 shares that would be issued if Mr. Colao converted his
Series G Preferred Stock to Common Stock.
(8) Includes 36,036 shares owned by Mr. Dew's wife.
(9) Includes 238,095 shares owned by or in trust for Mr. Kreyling's wife of
which Mr. Kreyling disclaims beneficial ownership.
(10) Includes 74,071 shares held in a living trust of which Mr. Lardner's wife
is the trustee for which Mr. Lardner disclaims beneficial ownership and
20,699 shares that would be issued if Mr. Lardner converted his Series G
Preferred Stock to Common Stock.
(11) Includes 27,735 shares owned jointly by Mr. Legg and his wife and 2,952
shares owned by Mr. Legg's wife of which Mr. Legg disclaims beneficial
ownership.
(12) Includes 3,772 shares held in trust for Mr. LeRoy's benefit.
(13) Includes 47,876 shares owned by Mr. Simpson's wife.
(15) Messrs. Legg, Sursa and Zucaro are members of the Administration Committee
of the Old Republic International Corporation Salaried Employees Restated
Retirement Plan ("Retirement Plan"). As such, they are entitled to vote
245,241 shares of Common Stock owned by the Retirement Plan. Under the
rules of the Securities and Exchange Commission each of them may be deemed
to be the beneficial owner of this Common Stock by virtue of such shared
voting power. However, the foregoing presentation should not be construed
as an admission of beneficial ownership. The members of the Administration
Committee disclaim beneficial ownership of the Common Stock held by the
Retirement Plan and these shares are not reflected in this table as shares
beneficially owned by each of them.
(16) Includes 198,785 shares owned by E.F.S. Investments, Inc., in which Mr.
Sursa and his wife have a beneficial interest.
(17) Includes 19,958 shares that would be issued if Mr. Zucaro converted his
Series G Stock to Common Stock.
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than ten
percent of the Company's Common Stock, to file reports of ownership and changes
in ownership with the Securities and Exchange Commission and the New York Stock
Exchange. Based solely on reports and other information submitted by executive
officers, directors and such other persons required to file, the Company
believes that during the year ended December 31, 1996, and prior fiscal years,
all reports required by Section 16(a) have been properly filed.
THE BOARD OF DIRECTORS AND ITS STANDING COMMITTEES
The Company's Board of Directors has the responsibility to review the
overall operations of the Company. The Board members are kept informed of the
Company's results of operations and proposed plans and business objectives
through periodic reports sent to them by the Company's management or presented
at Board and Committee meetings. The Board met four times last year, once each
quarter. Each incumbent director attended at least 75% of the aggregate of the
meetings of the Board of Directors and Committees on which each served during
1996, except for Mr. Bischof who did not become a director until 1997.
Directors' Compensation
Directors of the Company (other than full time employees) receive an
annual retainer of $12,000 plus $1,000 for each Board or Committee meeting they
attend. Directors of the Company or any of its subsidiaries who are full time
employees receive $1,000 for each meeting they attend of the Board or a
Committee of the Company (other than meetings of the Executive Committee).
Board Committees
The Board of Directors has four principal standing committees.
4
<PAGE>
The Executive Committee is empowered to exercise the authority of the
Board of Directors in the management of the business and affairs of the Company
between the meetings of the Board, except as provided in the By-laws or limited
by the provisions of the General Corporation Law of the State of Delaware. The
Committee, which is currently composed of Messrs. Kreyling, Legg, Steiner, Sursa
and Zucaro, met four times during 1996 and took action by unanimous written
consent on two occasions. Mr. Zucaro is Chairman of the Committee.
The Company has no standing nominating committee of the Board of
Directors. This function is performed by the Executive Committee of the Board of
Directors itself. The Executive Committee has not established any formal policy
or procedure for considering nominees recommended by shareholders.
The Audit Committee recommends to the Executive Committee the
appointment of the independent certified public accountants for the following
year. The Committee reviews with the accountants the scope of the Company's
annual audit, the annual financial statements of the Company, and the auditors'
comments relative to the adequacy of the Company's system of internal controls
and accounting systems. The Committee, which reports directly to the Executive
Committee, is currently composed of five non-employee directors, Messrs. Legg,
Popp, Steiner, Sursa and White. The Committee met four times during 1996. Mr.
Steiner is Chairman of the Committee.
The Pension Committee is empowered with the supervision of the Company's
pension plan and is charged with a fiduciary responsibility to act solely in the
interest of the participants and beneficiaries of the Plan. The Pension
Committee is appointed by the Board of Directors and its members serve at its
pleasure. The Committee, which is currently composed of Messrs. Legg, Sursa and
Zucaro, met once during 1996. Mr. Zucaro is Chairman of the Committee.
The Compensation Committee, whose Report follows, is composed of five
non-employee directors and reports directly to the Executive Committee. The
Committee, which is currently composed of Messrs. Kreyling, Legg, Popp, Sursa
and White, met three times during 1996. Mr. Sursa is Chairman of the Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee has ever served as an
officer or employee of the Company or any of its subsidiaries nor has any
executive officer of the Company served as a director or member of a
compensation committee for any company that employs any director of the Company
or member of the Compensation Committee.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE MANAGEMENT
COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
of Old Republic International Corporation (the "Company") evaluates and approves
the overall compensation, policies and practices which govern the annual base
salaries of the Company's management, including its Chief Executive Officer
("CEO") and other executive officers, and the Company's incentive programs,
including the Key Employees Performance Recognition Plan ("KEPRP"), the Stock
Option Plan, and the Employees Savings and Stock Ownership Plan ("ESSOP").
The Committee reviews and evaluates the Company's corporate performance
and executive management com pensation once each year. In making its
evaluations, the Committee considers a large number of factors including those
set forth under "Compensation Policies" herein, together with other matters such
as the inflation rate, and the Company's past performance, generally over
consecutive five-year time frames. The Committee does not consider such factors
based upon any scientific or other formula nor on any quantitative analysis of
the relationship among such factors. Rather, the Committee's evaluation is best
described as subjective since each Committee member is expected to exercise
common sense and reasonable business judgment in attaching varying degrees of
importance each year to each such factor.
5
<PAGE>
Compensation Policies
The Company's compensation policies and practices, particularly as they
apply to its executive officers, including the CEO, are intended to achieve the
following major objectives:
1. To set base annual salaries (base income) for key executive officers
at amounts which: a) are deemed reasonably competitive in the context
of prevailing salary scales within the insurance industry in
particular; and (b) in the Committee's judgment provide a fixed,
reasonable source of current income during the period of employment.
Other sources of executive compensation discussed in separate sections
hereunder are not taken into account when setting base annual
salaries. Among the factors considered in varying degrees, as
previously noted, are business size, level of responsibility,
complexity of operations, long term performance, loyalty, commitment
to Old Republic's long term objectives, and future prospects.
Additionally, the Committee also takes into account prevailing salary
scales in the insurance industry in particular. It monitors trends in
salary levels by reference to published compilations and reports as
well as Company compilations of data contained in the proxy statements
of publicly held insurance organizations whose assets, revenues, and
net income are larger, smaller, or approximately the same as the
Company's. These insurance organizations include but are not limited
to those that are a part of the Peer Group comparisons on page 13 of
this Proxy Statement, and have significant interests in commercial
property and liability insurance. Based on a review and evaluation of
all such data, the Committee believes that the base salaries of the
CEO and key executives tend to be within a range encompassed by the
25th percentile and median salaries of the above mentioned insurance
organizations.
2. To afford personnel an opportunity and incentive to increase their
base income over time through participation in incentive compensation
and related stock option and savings programs. With respect to all
such programs the Committee approves various criteria, the objectives
of which are to:
a) Establish tangible means of evaluating the overall financial
performance of the Company or individual profit centers;
b) Align performance criteria with shareholders' interests by
establishing minimum requirements relative to such performance
indicators as return on equity, return or profit margin on revenues,
and increases in earnings;
c) Encourage a long-term commitment to the organization.
In addition, the Committee considers a variety of intangible and other
subjective factors such as each person's likely future contribution to the
Company's successful growth, his or her level and years of experience, the
current state and prospects of the industry or segment(s) thereof, and the
Company's long-term goals and strategies which might from time to time require
temporary investment in personnel resources in the absence of immediate positive
results. Further, the Committee considers the compensation and benefits
previously paid to its executive officers.
In making its performance evaluations, the Committee takes the
shareholders' interests into account from the standpoints of both total market
return for the Common Stock as well as the Company's intrinsic performance as
such and relative to the Company's Peer Group. However, the Committee places
greater emphasis on the latter two factors since total market return is
influenced materially by the vagaries of the securities markets.
The Committee has not adopted any policy with respect to qualifying
compensation paid to executive officers under Section 162(m) of the Internal
Revenue Code. No executive officer has been paid compensation in excess of the
level referred to in such Section 162(m).
Compensation of the Chief Executive Officer
into account all of the factors and ob jectives discussed above. In addition,
special emphasis is also placed on such other considerations as the CEO's vision
and planning for the Company's future and the strategies implemented for their
realization, his leadership qualities and judgment, and his commitment to and
abilities in setting and promoting the character of the organization in the best
interests of its insurance subsidiaries, insurance beneficiaries, and
shareholders. The Committee's evaluation of the CEO's performance takes place
without his presence.
6
<PAGE>
Mr. Zucaro joined the Company in 1976 as Executive Vice President and
Chief Financial Officer. He was promoted to President in 1981, to Chief
Executive Officer in 1990, and to Chairman in 1993 while retaining his offices
as President and Chief Executive Officer. Until 1989, Mr. Zucaro's cash
compensation consisted solely of a base annual salary and a small amount of fees
earned in his capacity as a director of a number of the Company's subsidiaries.
His other compensation was fully deferred pursuant to his participation in the
Company's KEPRP, ESSOP, and stock option plans. Since 1990,his cash compensation
has been enhanced by 50% of the awards granted to him under the Company's KEPRP
pursuant to the revised terms of that plan.
The following table reflects certain key data pertaining to the
Company's performance during the past three years together with the CEO's
compensation during the period. The Company's performance is a significant
factor in the Committee's evaluation of the CEO's and other executives' cash and
deferred compensation. It is only one of the many factors cited under
"Compensation Policies" above, the relative significance of which is left to the
subjective business judgment of the Committee. In comparing this data, it should
be noted that trends in the CEO's compensation to some extent lag, up or down,
trends in the Company's performance, since compensation reviews and salary and
incentive awards are made several months following the end of each calendar
year.
<TABLE>
Summary of Company Performance Indicators
versus
CEO Compensation
1994 to 1996
- - - ----------------------------------------------------------------------------------------------------------------------------------
Amounts % of Change
------------------------------------------------ ------------------------------------
1996 1995 1994 '96 vs '95 '95 vs '94 '96 vs '94
---- ---- ---- ---------- ---------- ----------
Company Performance Indicators (a)
($ in Millions)
<S> <C> <C> <C> <C> <C> <C>
Consolidated assets $ 6,656.2 $ 6,593.5 $ 6,262.9 1.0% 5.3% 6.3%
Common shareholders' equity 1,900.0 1,612.5 1,329.3 17.8% 21.3% 42.9%
Net revenues 1,803.9 1,695.9 1,679.0 6.4% 1.0% 7.4%
Net operating income 225.0 180.4 146.0 24.7% 23.5% 54.1%
Net income 230.3 212.7 151.0 8.3% 40.8% 52.5%
Percent return on equity 14.3% 16.0% 12.0%
Per Share Data:
(in dollars and cents)
Book value 21.85 20.37 17.19 7.2% 18.5% 27.1%
Net operating income (fully diluted) 2.33 1.93 1.58 20.7% 22.1% 47.5%
Net income (fully diluted) 2.39 2.28 1.63 4.8% 39.9% 46.6%
CEO Compensation (b)
1. Cash compensation
Base salary $ 493,333 $ 473,333 $ 453,333 4.2% 4.4% 8.8%
Incentive 367,324 100,000 225,000 267.3% (55.6%) 63.3%
Directors fees & other 31,410 26,560 20,510 18.3% 29.5% 53.1%
Total 892,067 599,893 698,843 48.7% (14.2%) 27.6%
2. Deferred incentive compensation 371,812 101,800 230,840 265.2% (55.9%) 61.1%
Incentive stock options:
3. Valued at 5% appreciation: -- 767,970 -- -- --
4. Valued at 10% appreciation: -- 1,938,210 -- -- --
5. Total cash & deferred incentive
compensation with options, if any,
valued at:
6. 5% appreciation (1 +2+3) 1,263,679 1,469,663 929,683 (14.0%) 58.1% 35.9%
7. 10% appreciation (1 +2+4) 1,263,679 2,639,903 929,683 (52.1%) 184.0% 35.9%
(a) Data taken from the Company's audited financial statements and stock
market tables as applicable. Return on equity is calculated by
dividing each year's net income by the common shareholders' equity
balance at the beginning of the year. Net operating income is defined
as net income before fresh start tax credits, extraordinary items,
realized investment gains or losses and accounting changes; both net
operating income and net income per share are shown after deduction of
Preferred Stock dividends, as applicable.
7
<PAGE>
(b) In this table, Deferred Incentive Compensation includes the deferred
portion, which is non-interest bearing, of awards granted under the
Company's KEPRP and the employer matching contribution to the ESSOP;
Incentive Stock Options have been valued alternatively by assuming
that the market value of the Common Stock subject to options will
compound at a 5% and a 10% annual rate (or 63% and 159%, respectively,
in the aggregate) over the 10-year term of the options. Of course, the
actual future value of such options may be higher or lower than these
arbitrary estimates. Also see "Summary Compensation Table".
</TABLE>
Employee Benefit Plans
In addition to determining base salaries, the Committee also
administers the Company's employee benefit plans. The employee benefit plans are
an important part of the Company's compensation structure and provide employees,
including the CEO and other executive officers, with an opportunity and
incentive to increase their base income.
Key Employee Performance Recognition Plan ("KEPRP"): Under the Company's KEPRP,
a performance recognition pool is established each year for allocation among
eligible key employees of the Company and its participating subsidiaries,
including the CEO and other executive officers. Employees eligible to share in
this pool are selected annually by the Committee in consultation with the CEO.
However, the CEO does not consult with the Committee with regard to the
performance, eligibility or award for himself. After prior plan participants are
credited with a certain portion, if any, of each year's pool the CEO may
recommend the allocation of the balance of the pool to participants in the plan,
other than himself, or may recommend to carry forward up to 50% of such amount
for up to three years for later allocation. In designating eligible employees
and determining amounts to be allocated, the Committee consults with the CEO and
considers the positions and responsibilities of the employees, the perceived
value of their accomplishments to the Company, their expected future
contributions to Old Republic and other relevant factors. The Committee's
evaluation of all such factors is subjective.
The pool amount is established in accordance with a complex formula
which takes into account (a) the eligible participating employees' annual
salaries, (b) the current year's earnings of the Company in excess of the prior
year's earnings (excluding income from realized investment gains or losses),
multiplied by a factor determined by the increase in the Company's earnings per
share, and (c) the latest year's return on equity in excess of a minimum target
return on equity equal to two times the mean of the five year average post-tax
yield on 10 year and 30 year U.S. Treasury Securities. Each year's pool is in
turn limited to a percentage of plan participants' aggregate annual base
salaries, ranging from 25% to 85%, depending upon the amount by which the
current year's actual return on equity exceeds the minimum target return on
equity for such year. There is no prescribed limit as to how much of each year's
available pool may be awarded to each participant.
There is an immediate payment in cash of 50% of any award made, as well
as 50% of the multiplier factor applied to the deferred balances of prior years'
participants; the balance of each vests at the rate of 10% per year of
participation. The deferred balance(s) do not bear interest. Pursuant to the
plan, participants become vested in their account balances upon total and
permanent disability or death, or upon the earlier of attaining age 55 or being
employed for 10 years after first becoming eligible. Benefits are payable in
installments, beginning no earlier than age 55 and/or following termination of
employment, death, disability or retirement.
In addition to the KEPRP, the Company also maintains a number of
separate plans for several individual subsidiaries or separate profit centers.
Such plans similarly provide for the achievement of certain financial results
and objectives as to each such subsidiary or profit center.
Stock Option Plan: To encourage growth in shareholder value and a long-term
commitment to the business and promote its success, the Company believes that
key employees, including the CEO and other executive officers, who are in a
position to make a substantial contribution to the long-term success of the
Company should have a stake in its on-going success. As a result, the Company
maintains a non-qualified stock option plan (the "Plan") for key employees of
the Company and its participating subsidiaries. The decision to award stock
options pursuant to the Plan and the factors that contribute to the amount of
such awards are the same factors as those set forth under "Compensation
Policies" herein.
Accordingly, the performance factors the Committee considers include
the achievements of the individual key employee, the overall performance of the
Company and the likelihood of future contributions to the Company's successful
growth by the individual key employee. The relative significance of these and
all other factors with respect to awards granted to the CEO and other executive
officers is determined subjectively by the Committee. The Plan provides for the
8
<PAGE>
issuance of options for up to 5% of the Common Stock issued and outstanding
at any one time. The purchase price per share of Common Stock subject to an
option under the Plan is fixed by the Committee. However, such purchase price
may not be less than the mean high and low sale price or the last reported sale
price of the Company's Common Stock as reported on the New York Stock Exchange
on the date immediately preceding the date the option is granted. Optionees may
exercise their options for shares of either Common Stock or Series G Preferred
Stock. The term of each option may not be for more than 10 years from the date
of grant. Under ordinary circumstances, options may be exercised to the extent
of 10% of the number of shares covered thereby on and after the date of grant
and cumulatively to the extent of an additional 10% on and after each of the
first through ninth years after the date of grant. Under the Plan and certain
other previously granted options with vesting acceleration prices, optionees may
exercise their options to the extent of 10% of the number of shares covered by
the option for each year that the optionee has been employed by the Company or
its subsidiaries once the vesting acceleration price is reached. The vesting
acceleration price is established by the Committee at the time of grant at 150%
of the option purchase price per share.
Under certain options previously granted, the Company may extend 15
year loans at a prevailing market rate of interest for a portion of the exercise
price. Under certain options, but not under options granted in accordance with
the Company's 1992 Option Plan, the employee's right to exercise options is
accelerated if the Company is dissolved or liquidated, merged, or consolidated
with another company and the Company is not the surviving corporation, or more
than 50% of the members of the Board of Directors of the Company change in any
one year unless one or more of the new directors was nominated by the Board of
Directors of the Company.
Employees Savings and Stock Ownership Plan ("ESSOP"): The Company's ESSOP allows
eligible employees with one or more years of service with the Company or
participating subsidiaries ("employers") to save a minimum of 1% up to a maximum
of 15% of their total compensation. Employees' savings up to 6% are matched by
employer contributions ranging from 20% to 140% of such savings in accordance
with a formula based upon the percentages saved and the increase in the
Company's average net operating earnings per share for the five years ending
with the calendar year immediately prior to the year for which the contribution
is being made. Under the terms of the ESSOP, employer contributions are invested
exclusively in Preferred or Common Stock of the Company except that employees
over age 55 and with 10 years of service credited under the Plan may diversify a
portion of the employer's contributions out of the Company's Stock and into
alternative investments. These alternative investments are all publicly managed
mutual funds that either focus on short-term securities maturities,
intermediate-term securities maturities or capital appreciation. Likewise, under
the terms of the ESSOP, employee savings may be invested, at the employee's
direction, in publicly managed mutual funds that focus on long term capital
appreciation, long term capital growth, long term growth of capital and income,
long term growth through investments in common stocks of non-U.S. companies and
in short to intermediate term bonds and other fixed income securities. Further,
employee savings may be invested in funds managed by the ESSOP trustee or ESSOP
Administration Committee. One fund provides for a diversified investment
portfolio and the other fund was established for more speculative , equity
oriented investments. A participant becomes vested in the account balance
allocated from employer contributions upon being totally and permanently
disabled, dying, or upon the earlier of attaining age 65 or being employed for 7
years. Vesting also occurs in increments of 20% a year, beginning after two
years of service. Benefits are payable upon termination of service, death or
disability, or following retirement. At the election of the participant,
benefits derived from employer contributions are payable either in cash or in
Common Stock.
RMIC Key Employee Performance Recognition Plan ("KEPRP") and Profit-Sharing Plan
("Profit Sharing Plan"): Mr. Simpson does not participate in the Company's KEPRP
but participates instead in the KEPRP of Republic Mortgage Insurance Company
("RMIC"), as well as in RMIC's Profit Sharing Plan. RMIC's KEPRP is a
performance recognition pool that operates much like the Company's KEPRP. The
pool is established according to a detailed formula which takes into account the
increase in RMIC's earnings and its return on equity, among other factors. The
RMIC Profit Sharing Plan covers substantially all employees of RMIC and its
affiliates. Contributions to the plan are determined annually by RMIC's Board of
Directors, and voluntary contributions of up to 10% of annual income are
permitted. Plan participants' interests vest in increments of 10% of contributed
amounts beginning with 40% after one year and extending to 100% after seven
years. Account balances are payable upon death or permanent disability. Normal
retirement is at age 65 and the plan provides for early retirement at age 50
with ten years of service. With the consent of RMIC, retirement may be deferred.
Benefits upon retirement may be received as a monthly annuity, periodic cash
payments, or in a lump-sum distribution, at the participant's election.
Compensation Committee
David Sursa, Chairman
Kurt W. Kreyling
Wilbur S. Legg
John W. Popp
William G. White Jr.
9
<PAGE>
The foregoing Report of the Compensation Committee on Executive Management
Compensation shall not be deemed to be incorporated by reference into any filing
of the Company under the Securities Act of 1933 or the Securities Exchange Act
of 1934, except to the extent that the Company specifically incorporates such
information by reference.
Executive Compensation
The following table sets forth certain information regarding the
compensation paid or accrued by the Company to or for the account of the Chief
Executive Officer and each of the three other executive officers of the Company
for services rendered in all capacities during each of the Company's fiscal
years ended December 31, 1996, 1995 and 1994:
<TABLE>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
----------------------------- ------------
(a) (b) (c) (d) (e) (f)
Securities
Name and Underlying
Principal Option All Other
Position Year Salary(1) Bonus(2) Awards(3) Compensation(4)
- - - ---------- ---- --------- -------- --------- ---------------
<S> <C> <C> <C> <C> <C>
A.C. Zucaro 1996 $ 518,983 $ 734,648 -- $ 10,248
President 1995 494,133 200,000 50,000 7,560
Chief Executive 1994 468,083 450,000 -- 11,600
Officer
Paul D. Adams 1996 260,833 156,890 -- 7,080
Senior Vice 1995 250,000 100,000 5,000 4,373
President, 1994 242,500 115,000 -- 7,353
Chief Financial
Officer & Treasurer
Spencer LeRoy III 1996 277,172 113,942 -- 7,080
Senior Vice 1995 266,667 75,000 7,500 3,366
President, Secretary 1994 256,667 80,000 -- 7,406
& General Counsel
William A. Simpson 1996 247,433 492,256 -- 21,018 (6)
Senior Vice 1995 242,325 (5) 325,000 25,000 17,777 (6)
President 1994 230,308 (5) 250,000 -- 20,840 (6)
- - - ---------------------------------------------------------------------------------------------------------------------------
(1) Includes fees paid for services as a director of certain of the
Company's subsidiaries.
(2) This column includes combined cash and deferred incentive compensation
awards granted under the Company's KERP and similar plans maintained
for different profit centers. Awards thereunder are typically made 50%
in cash and 50% deferred. The deferred amounts included in this column
are usually not payable before the person retires at 55 years of age or
later; the amount deferred does not accrue interest and it is included
in this column without a present value discount. None of the awards
shown differed in any respect from the Company's regular compensation
policies and practices.
(3) Number of shares of Common Stock subject to options granted during the
year indicated.
(4) Represents employer matching contribution to the Company's ESSOP and
the amount of premium for the Company's group term life insurance plan
attributed to the compensation of executive officers of the Company.
For 1996, the Company's matching contribution for each was $4,488. For
1996, $5,760, $2,592, $2,592, and $1,530 were attributed to the
compensation of Messrs. Zucaro, Adams, LeRoy, and Simpson,
respectively, for group term life insurance premiums paid by the
Company.
(5) Includes $6,600 paid under an agreement with the Company's subsidiary,
Republic Mortgage Insurance Company ("RMIC"), which requires such a
payment for each year through 1995 which Mr. Simpson is employed by
RMIC at year end.
(6) Includes $15,000, $15,000 and $15,000 as the vested amount accrued for
Mr. Simpson in the RMIC Profit Sharing Plan for 1996, 1995 and 1994,
respectively.
</TABLE>
10
<PAGE>
Retirement Plans
The Company maintains the Old Republic International Corporation
Salaried Employees Restated Retirement Plan (the "Company Plan") for its
employees and those of participating subsidiaries. The Company Plan, which is
noncontributory, provides for benefits based upon 1.5% of the participant's
"Final Average Monthly Earnings" (1/60th of the aggregate earnings of the
employee during the period of the five consecutive years of service out of the
last ten consecutive years of service which results in the highest "Final
Average Monthly Earnings") multiplied by the participant's years of service.
Earnings equal base salary and commissions but excludes cash and deferred
incentive compensation awards granted under the Company's KEPRP.
The following table sets forth the estimated annual benefits payable
under the Company Plan to an employee, upon retirement at December 31, 1996, at
age 65 after specified years of service:
<TABLE>
Highest Average
Annual Earnings of
the 5 Consecutive Estimated Annual Retirement Income for
Plan Years Out of the ------------------------ Representative Years of Credited Service* ----------------------
Last 10 Plan Years 5 10 15 20 25 30
--------------------- - -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
$150,000 $11,250 $22,500 $33,750 $45,000 $56,250 $67,500
200,000 15,000 30,000 45,000 60,000 75,000 90,000
250,000 18,750 37,500 56,250 75,000 93,750 112,500
300,000 22,500 45,000 67,500 90,000 112,500 135,000
350,000 26,250 52,500 78,750 105,000 131,250 157,000
400,000 30,000 60,000 90,000 120,000 150,000 180,000
450,000 33,750 67,500 101,250 135,000 168,750 202,500
500,000 37,500 75,000 112,500 150,000 187,500 225,000
550,000 41,500 82,500 123,750 165,000 206,250 247,500
- - - ---------------------------------------------------------------------------------------------------------------------------
*Amounts shown in the table above which exceed $125,000 - - the maximum benefit
allowed by law for a qualified plan in 1997 - - would only be payable to a
qualified participant under the Old Republic International Corporation
Executive's Excess Benefit Plan described below.
</TABLE>
The amounts shown in the chart are computed on the basis of straight
life annuity amounts and are not subject to offsets for any Social Security
payments. At December 31, 1996, Mr. Zucaro was credited with 20 years of
service, Mr. Adams was credited with 7 years of service and Mr. LeRoy was
credited with 4 years of service, for purposes of the Company Plan. However, Mr.
LeRoy's participation under the Plan will not vest until July 1, 1997. Mr.
Simpson did not participate because employees of RMIC participate in the RMIC
Profit-Sharing Plan instead of the Company Plan. At December 31, 1996, the
highest average annual earnings for purposes of the above computations under the
Company Plan were approximately $453,333 for Mr. Zucaro, $243,033 for Mr. Adams
and $262,500 for Mr. LeRoy. The differences between such amounts and the Annual
Compensation amounts shown for Messrs. Zucaro, Adams and LeRoy in the Summary
Compensation Table on page 10 are threefold: the figures above are averages of
annual base salaries over the past 5 years (4 years for Mr. LeRoy) and do not
include either directors' fees or any form of incentive compensation awards.
The Company also maintains the Old Republic International Corporation
Executive's Excess Benefit Plan to provide certain key executives with pension
benefits in excess of the benefits provided by the Company Plan. The plan is
administered by the Pension Committee of the Board of Directors, which selects
the employees to participate in the plan from those who are participants in the
Company Plan. As of May 1, 1997, Mr. Zucaro and Mr. Adams are the only
executives who will qualify and will have been approved for participation under
this plan. The benefits payable under this plan equal the excess of the amount
otherwise payable under the terms of the Company Plan over the reduced benefits
required by applicable law. Benefits under this plan are payable at the time
benefits are payable under the Company Plan. The plan is a non-qualified
deferred compensation plan.
11
<PAGE>
Option Grants in 1996
No options to purchase shares of Common Stock were granted to the executive
officers of the Company listed in the Executive Compensation Table during the
Company's 1996 fiscal year. As such, no table of Option Grants in 1996 is
included.
Aggregate Options Exercised in 1996 and Option Values at December 31, 1996
The following table sets forth certain information regarding options to
purchase shares of Common Stock exercised during the Company's 1996 fiscal year
and the number and value of exercisable and unexercisable options to purchase
shares of Common Stock held at the end of the Company's 1996 fiscal year by the
executive officers of the Company named in the Executive Compensation Table:
<TABLE>
Aggregated Option Exercises in 1996
and Option Values at December 31, 1996
- - - -------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
12/31/96 12/31/96
Shares Acquired Exercisable/ Exercisable/
Name on Exercise Value Realized(1) Unexercisable Unexercisable (2)
- - - ------------- ---------------- ----------------- ---------------- -------------------------
<S> <C> <C> <C> <C>
A. C. Zucaro 21,009 $ 396,850 252,300 / 0 $ 3,498,921 / $ 0
Paul D. Adams 3,363 63,525 61,680 / 0 893,292 / 0
Spencer LeRoy III 0 0 19,500 / 29,250 243,485 / 365,227
William A. Simpson 12,606 241,273 84,330 / 0 1,010,820 / 0
- - - -------------------------------------------------------------------------------------------------------------------
(1) Value realized is equal to the difference between the fair market value per
share of Common Stock on the date of exercise and the option exercise price
per share multiplied by the number of shares acquired upon exercise of an
option.
(2) Value of exercisable/unexercisable in-the-money options is equal to the
difference between the fair market value per share of Common Stock at
December 31, 1996 and the option exercise price per share multiplied by the
number of shares subject to options.
</TABLE>
Comparative Five-Year Total Market Returns
The following table, prepared on the basis of market and related data
furnished by Standard & Poor's Compustat Services, reflects total market return
data for the most recent five calendar years ended December 31, 1996. For
purposes of the presentation, the information is shown in terms of $100 invested
at the close of trading on the last trading day preceding the first day of the
fifth preceding year. The $100 investment is deemed to have been made either in
Old Republic Common Stock, in the S&P 500 Index of common stocks, or in an
aggregate of the common shares of a Peer Group of nine publicly held insurance
businesses selected by Old Republic. In each instance the cumulative total
return assumes reinvestment of cash dividends.
12
<PAGE>
The information utilized to prepare this table has been obtained from
sources believed to be reliable, but no representation is made that it is
accurate or complete in all respects.
<TABLE>
Comparison of Five Year Total Market Return
OLD REPUBLIC INTERNATIONAL CORPORATION vs. S&P 500 vs. Peer Group
(For the five years ended December 31, 1996)
[INSERT CHART HERE]
Compounded value of $100 investment at
Year Ended
December 31st 1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
ORI $100.00 $142.57 $131.98 $126.66 $215.46 $247.86
S&P 500 100.00 107.62 118.46 120.03 165.13 203.05
Peer Group 100.00 116.22 123.54 128.45 185.23 213.39
======= ======= ======= ======= ======= =======
</TABLE>
The Peer Group of companies selected by Old Republic consists of:
American International Group, Inc., Chubb Corporation, CNA Financial
Corporation, CIGNA Corporation, Lincoln National Corporation, Ohio
Casualty Corporation, SAFECO Corporation, St. Paul Companies, Inc.,
and USF&G Corporation. The companies in the Peer Group have been
approved by the Compensation Committee. The Peer Group of companies
was changed for 1996 to delete Aetna Life & Casualty Company because
that company's mix of business has changed materially including its
exit from property and casualty insurance lines.
The foregoing table shall not be deemed to be incorporated by
reference into any filing of the Company under the Securities Act of
1933 or the Securities Exchange Act of 1934, except to the extent that
the Company specifically incorporates such information by reference.
13
<PAGE>
PROPOSAL I - ELECTION OF DIRECTORS
The following tabulation lists all nominees and continuing directors of
the Company. Four Class 1 directors are to be elected to hold office for a term
of three years and until their successors are elected and qualified. The
nominees are presently Class 1 directors. It is intended that, in the absence of
contrary specifications, votes will be cast pursuant to the enclosed proxies for
the election of such nominees. Should any of the nominees become unable or
unwilling to accept nomination or election, it is intended, in the absence of
contrary specifications, that the proxies will be voted for the balance of those
named and for a substitute nominee or nominees. However, the Company now knows
of no reason to anticipate such an occurrence. All of the nominees have
consented to be named as nominees and to serve as directors if elected.
Following the death of Mr. William R. Stover last year, Mr. A. C. Zucaro, who
was then a Class 1 director, was named a Class 3 director. This was done in
order to evenly distribute the current directors among the Company's three
classes of directors as is required by the Company's By-laws. At the Company's
Board of Directors' Meeting on March 13, 1997, Mr. Harrington Bischof was
elected a director of the Company. At the same meeting, the Board was advised
that Mr. John C. Collopy would retire from service as a member and would not
stand for re-election at the May 23, 1997 meeting.
<TABLE>
Positions with Company,
Business Experience, and
Name Age Other Directorships
- - - ---- --- ------------------------
Nominees for Election
- - - ---------------------
<S> <C> <C>
CLASS 1 (Term expires in 1997)
Harrington Bischof 62 Director since March, 1997; President of Pandora Capital
Corporation since July, 1996; formerly Senior Advisor Prudential
Securities, Inc. 1991 to June, 1996.
Anthony F. Colao 69 Director since 1987; Senior Vice President of the Company since
1987; formerly Partner of Coopers & Lybrand L.L.P.,
accountants, for more than five years. Mr. Colao's former firm
has been retained by the Company as independent accountants
during more than the last two fiscal years.
Kurt W. Kreyling 75 Director since 1974; Retired for more than the last five years;
formerly President and Treasurer of Kreyling Company,
wholesaler of floor coverings, Evansville, Indiana.
William G. White, Jr. 68 Director since 1993; Retired; formerly President of The First
Federal Savings Bank, Winston-Salem, North Carolina; Consultant
to Southern National Bank, Winston-Salem, North Carolina;
Director of Republic Mortgage Insurance Company, a subsidiary
of the Company for more than the past five years. Director of
Savers Life Insurance Company, Winston-Salem, North Carolina.
14
<PAGE>
Positions with Company,
Business Experience, and
Name Age Other Directorships
- - - ---- --- ------------------------
Continuing Members
- - - ------------------
CLASS 2 (Term expires in 1998)
Jimmy A. Dew 56 Director since 1980; Executive Vice President of Republic
Mortgage Insurance Company, a subsidiary of the Company, for
more than the past five years.
Wilbur S. Legg 74 Director since 1969; Retired; formerly Partner of Lord, Bissell
& Brook, attorneys, Chicago, Illinois. Mr. Legg's former firm
has been retained by the Company as counsel during more than the
last two fiscal years.
John W. Popp 74 Director since 1993; Retired for more than the past five years;
formerly Partner of KPMG Peat Marwick, L.L.P., accountants.
David Sursa 71 Director since 1969; Retired, formerly Chairman of the Board,
NBD Bank, N.A., Muncie, Indiana, for more than the past five
years prior to his retirement in 1994.
- - - -----------------------------------------------------------------------------------------------------------------------------------
CLASS 3 (Term expires in 1999)
Peter Lardner 65 Director since 1985; Chairman and Chief Executive Officer of
Bituminous Casualty Corporation, a subsidiary of the Company,
for more than the past five years.
William A. Simpson 55 Director since 1980; Senior Vice President of the Company and
President of Republic Mortgage Insurance Company, a subsidiary
of the Company, for more than the past five years. Director of
Salem Trust Bank, Winston-Salem, North Carolina.
Arnold L. Steiner 59 Director since 1974; Retired for more than the past five years;
formerly President of Steiner Bank, Birmingham, Alabama.
A. C. Zucaro 57 Director since 1976; Chairman of the Board of the Company and
various subsidiaries since 1993; Chief Executive Officer and
President of the Company and various subsidiaries for more than
the past five years.
- - - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Board of Directors Recommendation
The Board of Directors recommends a vote FOR the Class 1 directors that are
listed as nominees. Proxies solicited by the Board of Directors will be voted
for the election of these nominees unless shareholders specify to the contrary
in their proxies.
PROPOSAL II - SHAREHOLDER PROPOSAL
The Secretary of the Company has received a written notice that a
shareholder of record intends to introduce a resolution at the Company's Annual
Meeting of Shareholders. The name, address and number of shares of voting
securities held by the shareholder will be furnished by the Company upon
request. The resolution proposed is as follows:
15
<PAGE>
RESOLUTION
That the shareholders of Old Republic International Corporation recommend
that the Board of Directors in Class 1,2, and 3 not be renominated nor be
initially eligible for election as directors should he or she be 70 years of age
or older.
SUPPORTING STATEMENT
Many New York Stock Exchange listed corporations restrict directors
continuing to serve after age 70. The 1996 Board of Directors of Old Republic
International Corporation lists 6 out of the total 13 directors who are age 70
or older.
STATEMENT IN OPPOSITION TO SHAREHOLDER PROPOSAL
The Board of Directors Opposes This Proposal
The Board of Directors does not think it would be in the Company's best
interests to make age a sole determining factor in an individual's eligibility
or qualification to serve as a director.
To adopt an age restriction would adversely affect the Company's ability to
attract and retain the services of qualified individuals as directors. The Board
of Directors believes that a director's contributions to the deliberative
process of the Board of Directors depend to a large extent on such factors as
the individual's experience, judgment and business acumen. The type of
experience and business knowledge required of the directors of a diverse,
multi-line insurance holding company such as the Company make continuity of
service an important element in the value of a director's contributions. In the
Board's opinion, it would be a mistake to assume that individuals under the age
of 70 are invariably better able to contribute to the Board's functions than
older members would be, or that individuals age 70 and older, are invariably
less able to contribute than their younger counterparts.
The shareholder's proposal is not mandatory but only advisory. It would not
obligate the Board of Directors to change its By-laws or its eligibility
requirements for the election of directors. Further, no members of the Class 1
directors slated for election would be prevented from serving as directors, if
elected at the Annual Meeting, as the shareholder's resolution, if adopted,
would be applied prospectively and would not be used to bar the election of any
of these individuals at the Annual Shareholders' Meeting. The sole effect of the
adoption of the shareholder's proposal would be to require the Board to review
its policy regarding the eligibility of directors based solely upon age. The
Board of Directors believes this effort would be pointless as it has considered
this recommendation and believes it would not be in the best interest of the
Company or its shareholders.
Board of Directors Recommendation
The Board of Directors recommends a vote "AGAINST" this proposal. Unless
otherwise directed on the proxy form, proxies solicited by the Board of
Directors will be voted against adoption of this proposal.
VOTING PROCEDURES
The General Corporation Law of the State of Delaware specifies that in the
absence of contrary requirements in a corporation's Certificate of Incorporation
or By-laws, the votes on matters at Shareholders' Meetings are decided as
follows: (1) Directors are elected by a plurality of the shares present in
person or by proxy at the meeting and who are entitled to vote in the election,
and (2) all other matters are determined by the affirmative vote of the majority
of the shares present in person or by proxy at the meeting and who are entitled
to vote on the subject matter.
The Company's Restated Certificate of Incorporation and By-laws do not
require any different treatment for matters to be considered at the Company's
Annual Shareholders' Meeting.
16
<PAGE>
The Company's Restated Certificate of Incorporation and its By-laws are
silent on the mechanics of voting. As a result, the General Corporation Law of
the State of Delaware is controlling. Under Delaware law the votes at the
Company's Annual Shareholders' Meeting will be counted by the inspectors of
election required to be appointed at the meeting. The inspectors are charged
with ascertaining the number of shares outstanding, the number of shares
present, whether in person or by proxy, and the validity of all proxies. The
inspectors are entitled to rule on any voting challenges and are responsible for
the tabulation of the voting results.
Under Delaware law, abstentions are counted in determining the quorum of
the meeting and as having voted on any proposal on which an abstention is voted.
As a result, on those proposals which require a plurality vote of the shares at
the meeting that are entitled to vote, the vote of an abstention has no effect.
However, on those proposals which require an affirmative vote of the majority of
shares present in person or by proxy at the meeting, the vote of an abstention
has the effect of a vote against the proposal.
In the event of a broker non-vote arising from the absence of
authorization by the beneficial owner to vote on a proposal, the shares reported
are counted for the determination of a quorum for the meeting but they are not
counted as having voted on the proposal where there is a non-vote. As a result,
on those proposals which require a plurality vote of the shares at the meeting
that are entitled to vote, a non-vote will have no effect. However, on the
proposals which require an affirmative vote of the majority of the shares
present, a non-vote has the effect of a vote against the proposal.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company's consolidated financial statements for the year ended
December 31, 1996 were examined by Coopers & Lybrand L.L.P., independent
certified public accountants. No decision has as yet been made with respect to
the selection of independent certified public accountants for fiscal 1997. A
member of Coopers & Lybrand L.L.P. is expected to attend the annual meeting with
an opportunity to make an appropriate statement if the representative desires to
do so and will be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
In order for a proposal by a shareholder of the Company to be included in
the Company's proxy statement and form of proxy for the 1998 Annual Meeting of
Shareholders, the proposal must be received by the Company no later than
December 1, 1997.
OTHER MATTERS
The Company knows of no matters, other than those referred to herein, which
will be presented at the meeting. If, however, any other appropriate business
should properly be presented at the meeting, the proxies named in the enclosed
form of proxy will vote the proxies in accordance with their best judgment.
EXPENSES OF SOLICITATION
All expenses incident to the solicitation of proxies by the Company will be
paid by the Company. In addition to solicitation by mail, the Company has
retained Georgeson & Co. (with respect to street name holders) and D.F. King &
Company, Inc. (with respect to individual shareholders) both of New York City,
to assist in the solicitation of proxies, including delivery of proxy materials.
Fees for this solicitation are expected to be approximately $12,000. The Company
intends to reimburse brokerage houses and other custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses incurred in forwarding copies
of solicitation material to beneficial owners of Common Stock held of record by
such persons. In a limited number of instances, regular employees of the Company
may solicit proxies in person or by telephone.
By order of the Board of Directors.
SPENCER LEROY III
Secretary
Chicago, Illinois
March 31, 1997
17
OLD REPUBLIC INTERNATIONAL CORPORATION
Proxy Solicited on Behalf of the Board of Directors
P
R
O
X
Y
The undersigned hereby appoints PAUL D. ADAMS, SPENCER LEROY III and
A. C. ZUCARO or any one of them (with full power of substitution in
each) the proxy or proxies of the undersigned to vote, as designated
below, all shares of Old Republic International Corporation Common and
Preferred Stock that the undersigned is entitled to vote at the annual
meeting of the shareholders to be held in Room 2300 at the offices of
Old Republic International Corporation, 307 North Michigan Avenue,
Chicago, Illinois 60601, on May 23, 1997, at 3:00 P.M., Chicago Time,
or at any adjournment thereof.
Election of four Class 1 Directors. Nominees:
Harrington Bischof, Anthony F. Colao, Kurt W. Kreyling
and William G. White, Jr.
This proxy is revocable at any time before it is exercised.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy
will be voted for proposal 1 and against proposal 2, and in the proxy's
discretion upon such other business as may properly come before the
meeting or any adjournment thereof.
(continued, and to be signed and dated, on reverse side)
Please mark your votes as in this example
This proxy when properly executed will be voted in the manner
directed herein by the undersigned shareholder. If no direction
is made, the proxy will be voted FOR proposal 1 and AGAINST
proposal 2.
The Board of Directors recommends a vote FOR Proposal 1 and AGAINST Proposal 2
FOR WITHHELD
1. Election of Directors [ ] [ ]
- - - ------------------------------------------
For, except vote withheld from the following nominee(s):
FOR AGAINST ABSTAIN
2. To recommend that directors [ ] [ ] [ ]
not be nominated or renominated
for election after attaining age 70
3. In their discretion upon such other business as may properly come
before the meeting or any adjournment thereof.
Please sign exactly as your name or names appears hereon. Joint
owners should each sign personally. If signing in fiduciary or
representative capacity, give full title as such.
__________________________________________________
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Signature Date
VOTING INSTRUCTIONS TO LASALLE NATIONAL BANK,
TRUSTEE UNDER THE OLD REPUBLIC INTERNATIONAL CORPORATION
EMPLOYEE SAVINGS & STOCK OWNERSHIP PLAN
Dear Old Republic International Corporation ESSOP participant:
Enclosed with these voting instructions are Old Republic International
Corporation's Annual Report to Shareholders for 1996 and the Proxy Statement for
the 1997 Meeting of Shareholders. Please read both documents before deciding how
to vote.
Management and the Board of Directors have recommended a vote FOR the Class 1
nominees for the Board of Directors named in the Proxy Statement and AGAINST the
shareholder proposal concerning the eligibility of directors to be nominated or
renominated for election after attaining age 70. To vote on these matters, you
need only sign and date the enclosed voting instructions and return them to
First Chicago Trust Company in the return envelope provided.
As of the record date of the Annual Meeting, 231,292 shares of Old Republic
International Corporation Common Stock and 32,575,883 shares of Old Republic
International Corporation Series D Preferred Stock are held in the ESSOP Trust,
each of which is entitled to one (1) vote. Of these shares, 204,491 shares of
Common and 26,844,209 shares of Series D Preferred Stock have been allocated to
participants' accounts. Shares which have not yet been allocated to
participants' accounts are unallocated shares. The ESSOP plan document provides
that the Old Republic International Corporation ESSOP Administration Committee
will direct the Trustee on how to vote the unallocated shares and the allocated
shares for which no participant instructions are received.
Participants who give timely voting instructions determine how the allocated
shares will be voted. On the other hand, participants who do not give timely
voting instructions will have their shares treated as unallocated shares for
voting purposes. If First Chicago Trust Company does not receive your signed
voting instructions by May 16, 1997, the Old Republic International Corporation
ESSOP Administration Committee will effectively exercise the voting rights which
the ESSOP makes available to you. LaSalle encourages all ESSOP participants to
exercise their right to vote their allocated ESSOP shares by returning their
voting instructions promptly. Your voting instructions are confidential and your
employer will not know how you vote or whether you vote at all.
To be effective, these voting instructions must be signed and mailed to First
Chicago Trust Company in the accompanying return envelope in time to be received
by the close of business on May 16, 1997.
Sincerely,
LASALLE NATIONAL BANK,
Trustee of the Old Republic International Corporation
Employee Savings & Stock Ownership Plan
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Old Republic International Corporation
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Old Republic International Corporation
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0.11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
---------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
- - - ------------
1 Set forth the amount on which the filing fee is calculated and state
how it was determined
[ ] 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.
<PAGE>
1) Amount Previously Paid:
---------------------------------------------
2) Form, Schedule or Registration Statement No.:
---------------------------------------------
3) Filing Party:
---------------------------------------------
4) Date Filed:
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