ORION CAPITAL CORP, DEF 14A, 1995-04-12

ORION CAPITAL CORP
DEF 14A, 1995-04-12
FIRE, MARINE & CASUALTY INSURANCE

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<PAGE> 1

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
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

ORION CAPITAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)

Payment of filing fee (Check the appropriate box):

/X/ $125 per Exchange Act Rule 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:

- --------------------------------------------------------------------------------
/ / 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:

- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:

- --------------------------------------------------------------------------------
(3) Filing party:

- --------------------------------------------------------------------------------
(4) Date filed:

- --------------------------------------------------------------------------------

- ---------------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
[ORION CAPITAL CORPORATION LETTERHEAD]
ALAN R. GRUBER
Chairman
&
Chief Executive Officer

April 12, 1995

Dear Stockholder:

On behalf of the Board of Directors and management, I cordially invite you
to the Annual Meeting of Stockholders to be held on Wednesday, May 31, 1995, at
Chemical Bank, 270 Park Avenue, 3rd Floor Auditorium, New York, New York,
commencing at 11:30 A.M. Your Board of Directors and management look forward to
greeting in person those stockholders able to attend. The formal notice of this
meeting and the Proxy Statement accompany this letter.

Resolutions pertaining to the annual election of your Board of Directors,
approval of the adoption of the 1994 Stock Option Plan for Non-Employee
Directors and ratification of the appointment of independent accountants for
1995 will be acted upon at this year's meeting. In addition to the matters
covered by the attached notice, the meeting will give us an opportunity to
review with you the business and affairs of your Company during 1994 and to
provide a current report on the progress being made by the Company in 1995 and
the Company's prospects for the future. A discussion period will follow the
report, during which stockholders are invited to raise matters of interest about
the Company.

Your vote is important, regardless of the number of shares you may own. TO
BE SURE YOUR SHARES ARE VOTED AT THE MEETING, IF YOU ARE UNABLE TO ATTEND IN
PERSON, PLEASE TAKE A MOMENT NOW TO SIGN, DATE AND MAIL YOUR PROXY IN THE
ENCLOSED POSTAGE PAID ENVELOPE. This will not prevent you from voting your
shares in person if you attend the meeting. Your cooperation in mailing your
proxy promptly will be greatly appreciated.

Thank you for your continued support. We look forward to seeing you on
Wednesday, May 31.

Very truly yours,

/s/ Alan R. Gruber
<PAGE> 3

ORION CAPITAL CORPORATION
600 FIFTH AVENUE
NEW YORK, NEW YORK 10020-2302
------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

MAY 31, 1995 AT 11:30 A.M., EASTERN DAYLIGHT SAVING TIME

CHEMICAL BANK
270 PARK AVENUE
3RD FLOOR AUDITORIUM
NEW YORK, NEW YORK

Notice is hereby given that the Annual Meeting of Stockholders of Orion
Capital Corporation (the "Company") will be held at Chemical Bank, 270 Park
Avenue, 3rd Floor Auditorium, New York, New York, on Wednesday, May 31, 1995 at
11:30 A.M., Eastern Daylight Saving Time, for the following purposes:

1. To elect a Board of Directors to serve until the 1996 Annual
Meeting of Stockholders and until their successors are elected and qualify.

2. To act upon a proposal to approve the adoption of the 1994 Stock
Option Plan for Non-Employee Directors.

3. To act upon a proposal to ratify the selection of Deloitte & Touche
LLP, independent certified public accountants, as auditors for the Company
for the year 1995.

4. To transact such other business as may properly come before the
Annual Meeting or any adjournment or adjournments thereof.

Holders of the Company's Common Stock are entitled to vote for the election
of directors and on each of the other matters set forth above.

The stock transfer books of the Company will not be closed. The Board of
Directors has fixed the close of business on April 3, 1995 as the record date
for the determination of stockholders entitled to notice of, and to vote at, the
Annual Meeting and any adjournment thereof. A complete list of all stockholders
entitled to vote at the Annual Meeting will be available for examination by any
stockholder, for any purpose germane to the Annual Meeting, at the Company's
offices, 600 Fifth Avenue, 24th Floor, New York, New York 10020-2302, during the
ten-day period preceding the meeting.

You are cordially invited to be present. Stockholders who do not expect to
attend in person are requested to sign and return the enclosed form of proxy in
the envelope provided. At any time prior to their being voted, proxies are
revocable by written notice to the Secretary of the Company or by attendance at
the meeting and voting in person. The immediate return of your proxy will be of
great assistance in preparing for the meeting and is therefore urgently
requested.
By order of the Board of Directors,
April 12, 1995
MICHAEL P. MALONEY
Vice President, General Counsel
and Secretary
<PAGE> 4

ORION CAPITAL CORPORATION
600 FIFTH AVENUE
NEW YORK, NEW YORK 10020-2302

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 31, 1995

This statement is furnished in connection with the solicitation of proxies
by your Board of Directors (the "Board") from holders of the outstanding shares
of Common Stock, $1.00 par value (the "Common Stock"), of Orion Capital
Corporation (the "Company") entitled to vote at the Annual Meeting of
Stockholders of the Company (and at any and all adjournments thereof) for the
purposes referred to below and set forth in the accompanying Notice of Annual
Meeting of Stockholders. This Proxy Statement and enclosed proxy are first being
mailed to stockholders on or about April 12, 1995. A copy of the Company's
Annual Report for 1994 is being mailed to all stockholders with this Proxy
Statement.

The Company's Board has fixed the close of business on April 3, 1995 as the
record date for the determination of stockholders entitled to notice of, and to
vote at, the Annual Meeting and any adjournment thereof. On that date, there
were outstanding and entitled to vote 14,072,001 shares of Common Stock (which
number excludes 1,265,649 shares owned by the Company and its subsidiaries).
Holders of Common Stock are entitled to one vote for each share held of record
on the record date with respect to matters on which such holder is entitled to
vote.

The presence, in person or by proxy, of a majority in number of the
outstanding shares of Common Stock as of the record date constitutes a quorum
and is required in order for the Company to conduct business at the Annual
Meeting. Such majority being present, the election of each nominee for Director
requires a plurality of the votes cast, and the affirmative vote of the holders
of a majority of the shares of Common Stock represented in person or by proxy at
the Annual Meeting is required to approve the adoption of the 1994 Stock Option
Plan for Non-Employee Directors and to ratify the appointment of the Company's
independent accountants. Abstentions and broker non-votes are counted towards a
quorum. Abstentions are counted in the tabulations of the votes cast, but broker
non-votes are not counted in such tabulations for purposes of determining
whether a proposal has been approved. Thus, abstentions on the Company's
proposals to approve the 1994 Stock Option Plan for Non-Employee Directors and
to ratify the appointment of the Company's independent accountants will have the
effect of a vote against such proposals, but any broker non-votes will have no
effect on the outcome of such matters.

1. ELECTION OF DIRECTORS

Pursuant to the Company's By-Laws, the Board has fixed the number of
Directors at twelve. Directors are to be elected by the holders of the Company's
Common Stock to serve until the 1996 Annual Meeting of Stockholders and until
their successors are elected and qualify. Each nominee was reelected by the
stockholders at the last Annual Meeting of Stockholders. Unless instructions to
the contrary are received, proxies received in response to this solicitation
will be voted in favor of the nominees listed below to be Directors of the
Company. If any nominee should become unavailable for election (which is not
anticipated), the shares represented by the enclosed proxy will be voted for
such substitute nominee as may be proposed by the Board. If you do not wish your
shares to be voted for particular nominees, please so indicate on the proxy
card.
<PAGE> 5

The following information with respect to principal occupation and business
experience has been furnished to the Company by the respective nominees:

John C. Colman, 68....... March 31, 1976 Private investor and consultant. Director:
Director Premier Industrial Corp.

Alan R. Gruber, 67....... March 31, 1976 Chairman of the Board and Chief Executive
Chairman of the Board Officer of the Company, 1976-present.
and Chief Executive Director: Guaranty National Corporation,
Officer, Orion Capital Trenwick Group Inc. and trustee of six trusts
Corporation which manage the Neuberger & Berman family of
equity mutual funds.

Larry D. Hollen, 49...... March 20, 1992 President and Chief Operating Officer of the
President and Chief Op- Company since March 1, 1994; Executive Vice
erating Officer, Orion President and Assistant Chief Operating
Capital Corporation Officer of the Company from December 1, 1992
to February 28, 1994, Senior Vice President
from 1990 to 1992 and Vice President from 1988
to 1990; President of the EBI Companies,
wholly-owned subsidiaries of the Company, from
January 1990 to May 31, 1993. Director:
Guaranty National Corporation.

Robert H. Jeffrey, 65.... March 31, 1976 Chairman of the Board, Jeflion Investment Com-
Director pany, 1994-present, President from 1974 to
1994; Chairman of the Board, The Jeffrey
Company (a privately held investment company
which is the parent of Jeflion Investment
Company), 1994-present, President from 1973 to
1994.

Warren R. Lyons, 49...... September 9, 1992 President, Avco Financial Services (a
Director financial services company and a subsidiary of
Textron Inc.), 1989-present.

James K. McWilliams, 67.. January 7, 1981 Proprietor of McWilliams & Company and general
Director partner of McWilliams Associates (investment
counselors), 1967-present; General Partner,
Mt. Eden Vineyards, 1986-present.

Ronald W. Moore, 50...... April 1, 1991 Adjunct Professor of Business Administration,
Director Graduate School of Business Administration,
Harvard University, 1990-present; Managing
Director of Shearson Lehman Brothers Inc.
(investment bankers) 1984 to 1990. Director:
CMAC Investment Corporation.

Robert B. Sanborn, 66.... June 3, 1987 Senior Executive Consultant to the Company
Senior Executive Con- since March 1, 1995; Vice Chairman of the
sultant, Orion Board of the Company from March 1, 1994 to
Capital Corporation February 28, 1995; President and Chief
Operating Officer of the Company from 1987 to
1994; Chairman of the American Insurance
Association (a property and casualty in-
surance company trade group) from January 1993
to January 1994. Director: Guaranty National
Corporation, HCG Lloyd's Investment Trust plc
and Intercargo Corporation.
</TABLE>

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<PAGE> 6

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION, FIVE-YEAR
NAME, AGE AND POSITION BUSINESS EXPERIENCE AND OTHER
WITH THE COMPANY DIRECTOR SINCE CORPORATE DIRECTORSHIPS
- ------------------------- ------------------ ----------------------------------------------
<S> <C> <C>
William J. Shepherd, 68.. September 22, 1976 Private investor; Chairman, Chemical New
Director Jersey Holdings (a bank holding company),
1990-1991, Chairman and Chief Executive
Officer, 1989-1990; Chairman, Chemical Bank
New Jersey (a commercial bank), 1989-1991;
Chairman, Princeton Bank and Trust Company (a
commercial bank), 1989-1991. Director:
Guaranty National Corporation.

John R. Thorne, 69....... April 18, 1977 Morgenthaler Professor of Entrepreneurship,
Director Graduate School of Industrial Administration
of Carnegie Mellon University, 1986-present;
Chairman, The Enterprise Corporation of
Pittsburgh (a private, non-profit corporation
encouraging and supporting entrepreneurial
businesses), 1983-present; a general partner
of Pittsburgh Venture Partners, the general
partner of the Pittsburgh Seed Fund (a private
venture capital fund), 1985-present. Direc-
tor: Medrad Inc.

Roger B. Ware, 60........ November 1, 1988 President and Chief Executive Officer of
Director Guaranty National Corporation (a property and
casualty insurance company), 1983-present;
Senior Vice President of the Company from 1988
to November 1991. Director: Guaranty National
Corporation.
</TABLE>

The Board of Directors has an Audit Committee, the current members of which
are Messrs. Colman (Chairman), Moore, Cohn and Thorne, none of whom is an
employee of the Company. The Audit Committee confers periodically with
management, the Company's internal auditors and the Company's independent
accountants in connection with the preparation of financial statements and
audits thereof and the maintenance of proper financial records and controls. The
Audit Committee also reviews the nature and extent of any non-audit services
provided by the Company's independent accountants. The Audit Committee makes
recommendations to the Board with respect to the foregoing and brings to the
attention of the Board any criticisms and recommendations that the independent
accountants may have or any suggestions of the Audit Committee itself. During
1994, the Audit Committee held two meetings.

The Board has a Compensation Committee, the current members of which are
Messrs. Shepherd (Chairman), Jeffrey, Lyons and McWilliams, none of whom is an
employee of the Company. The Compensation Committee reviews the amount and terms
of compensation paid to the principal executive officers of the Company and of
the Company's subsidiaries and may authorize, or recommend to the Board the
authorization of, such salary levels, employment agreements and general
incentive compensation arrangements as the Compensation Committee may deem
appropriate. Based on the Committee's ongoing review of the performance of the
Company's key executives and of alternative forms of current incentive and
performance-based compensation, the Board may authorize the adoption of one or
more of the available alternatives in addition to or in substitution for one or
more of the present components of the Company's compensation arrangements. The
Company does not have a standing nominating committee, but the Compensation
Committee is authorized to act as a search and nomination committee to recommend
nominees to the full Board for membership on the Company's Board of Directors.
Nominees suggested by stockholders (accompanied by biographical material and the
candidate's written consent to nomination) sent to the Company in care of the
Secretary will be considered by the Compensation Committee. During 1994, the
Compensation Committee held two meetings.

The Board also has an Executive Committee, the members of which are Messrs.
Gruber (Chairman), Shepherd and Cohn. The Executive Committee, during intervals
between meetings of

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<PAGE> 7

the Board, may exercise all of the powers of the Board in the management and
control of the business of the Company, except as limited by law and except with
respect to matters within the powers of the Audit Committee or Compensation
Committee. Actions taken by the Executive Committee are reported to the Board at
the next meeting of the Board. During 1994, the Executive Committee held no
meetings.

The Board held nine meetings in 1994. Each Director attended at least 75%
of the aggregate number of meetings of the Board and of all committees on which
he served.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company's subsidiaries hold slightly less than 50% of the outstanding
common stock of Guaranty National Corporation ("Guaranty"). The Company and
Guaranty have entered into a shareholder agreement with respect to the
composition of the Board of Directors and committees of Guaranty. So long as the
Company or its subsidiaries beneficially own in the aggregate 30% or more of the
voting securities of Guaranty, the Company has the right to designate three
nominees to the Guaranty Board (one of whom will be the Chairman of Guaranty's
Board), and so long as the Company or its subsidiaries beneficially own 20% or
more of such Guaranty securities, the Company has the right to designate two
such nominees. The Company may require that Guaranty's Compensation Committee
include the Company's nominees to the Guaranty Board. The shareholder agreement
was amended in March 1995 to permit an increase in the number of directors of
Guaranty from ten to eleven members. At that time Mr. Hollen was elected to fill
the new seat on the Guaranty Board as one of Orion's three designees. Currently,
Messrs. Gruber, Hollen and Shepherd serve as Orion's designated directors on
Guaranty's Board. The March amendment to the shareholder agreement also
permitted Mr. Sanborn, Mr. Hollen's predecessor as Chief Operating Officer of
the Company, to remain on Guaranty's Board. Messrs. Gruber, Sanborn and Shepherd
represent three of the four members of Guaranty's Compensation Committee. The
Company's Compensation Committee is composed of Messrs. Shepherd, Jeffrey,
Lyons, and McWilliams. Mr. Shepherd is the Chairman of both the Company's
Compensation Committee and Guaranty's Compensation Committee. Roger B. Ware,
Guaranty's President and Chief Executive Officer, serves as a member of the
Company's Board of Directors but is not a member of any of its committees. Mr.
Ware receives the regular fees paid to all non-employee Directors of the
Company.

DIRECTORS' COMPENSATION

Fees: Each Director who is not an officer of the Company receives a
retainer fee of $18,000. The Chairman of the Audit Committee and of the
Compensation Committee of the Board each receives an additional fee of $10,000.
Also, each Director receives an attendance fee of $1,000 for each meeting of the
Board and each meeting of a committee actually attended, except that a fee of
$300 is paid for a committee meeting held on the same day as a meeting of the
Board. Officers of the Company who serve as Directors do not receive either a
retainer or any attendance fee for such service. The Company reimburses all
Directors and officers for travel, lodging and related expenses which they incur
in attending Directors' and committee meetings.

Directors' Retirement Plan: Since 1990, the Company has had a pension plan
for the non-employee Directors of the Company. Under the terms of the plan, a
Director is entitled on retirement to receive an annual payment equal to one
half the annual retainer fee (excluding meeting fees, fees paid to chairmen and
expenses) for Directors of the Company in effect on the date of his retirement.
This retirement benefit is to be paid to the Director, or his beneficiaries, for
fifteen years or the number of years that the individual served as a Director of
the Company, whichever is less. In addition, benefits under the plan will be
paid out as a lump sum following a Change in Control (as defined in the plan) of
the Company. The plan was amended, as of September 12, 1994, to require that any
director newly elected after that date must serve at least five years as a Board
member in order to be entitled to the benefits under the plan. The plan is not
qualified under the Employee Retirement Income Security Act of 1974 and is not
funded.

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<PAGE> 8

Under the Company's Deferred Compensation Plan (the "Deferred Plan"),
non-employee Directors may elect to defer receipt of all or a portion of fees to
be earned in the next succeeding year and have such fees accrue either (i) at
the interest rate determined by the Compensation Committee (currently, 9%
compounded quarterly) or (ii) as units equivalent to shares of the Company's
Common Stock to which amounts equivalent to dividends paid on such shares are
credited quarterly. A participating non-employee Director will receive all
amounts deferred and accrued under the Deferred Plan, either in one payment or
as ten equal annual installments, starting in the first month of the year
following the year in which the participant ceased to be a Director.

The Company's nine eligible non-employee Directors were each awarded
Options for 5,000 shares of the Company's Common Stock pursuant to the 1994
Stock Option Plan for Non-Employee Directors (the "Option Plan") which is
described on Page 18, subject to approval of the Option Plan by the
stockholders. Each year an Option to purchase 1,000 shares will be granted to
each such eligible Director immediately following the Company's Annual Meeting.

SECURITY OWNERSHIP OF DIRECTORS, OFFICERS

AND PRINCIPAL BENEFICIAL OWNERS

The following table sets forth information concerning the shares of the
Company's Common Stock beneficially owned by all Directors, by each of the
executive officers named in the Summary Compensation Table on page 8 and all
Directors and officers of the Company as a group, and each person or group who
is known by the Company to be the beneficial owner of more than five percent of
the total number of shares of the Company's Common Stock outstanding and
entitled to vote.(1) All such information is given as of April 3, 1995, unless
otherwise indicated.

<TABLE>
<CAPTION>
PERCENT
NAME OF AMOUNT AND NATURE OF
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS
------------------------------------------- ----------------------- -------
<S> <C> <C>
Bertram J. Cohn............................ 7,812(2) .06%
John C. Colman............................. 12,822(3) .09%
Alan R. Gruber............................. 242,005(4) 1.72%
Larry D. Hollen............................ 45,534(5) .32%
Raymond W. Jacobsen........................ 18,016(6) .13%
Robert H. Jeffrey.......................... 3,437(2) .02%
Warren R. Lyons............................ 933(7) .01%
James K. McWilliams........................ 4,687(2) .03%
Ronald W. Moore............................ 1,087(2) .01%
Robert B. Sanborn.......................... 94,617(8) .67%
Raymond J. Schuyler........................ 31,212(9) .22%
William J. Shepherd........................ 15,625(2) .11%
John R. Thorne............................. 10,936(10) .08%
Roger B. Ware.............................. 2,918(2) .02%
All Directors and officers as a group (20
persons)................................. 698,342(11) 4.96%
Neuberger & Berman......................... 1,248,648(12) 8.87%
605 Third Ave,
New York, New York 10158
Orion Capital Corporation Employees' Stock
Savings and Retirement Plan.............. 727,908(11) 5.17%
600 Fifth Avenue
New York, New York 10020
</TABLE>

- ---------------

(1) Excludes 1,265,649 shares owned by the Company and its subsidiaries and the
shares covered by the Options awarded to the Company's non-employee
Directors under the Option Plan, as described above.

(2) Indicates sole voting and investment power.

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<PAGE> 9

(3) Includes 3,204 shares held in trust for Mr. Colman's children, over which
he has shared voting and investment power, and 1,643 shares held by Mrs.
Colman. Mr. Colman disclaims beneficial ownership of the shares held by his
wife and held in trust for his children.

(4) Includes 129,025 shares as to which Mr. Gruber has sole voting and
investment power, 85,938 shares which Mr. Gruber has a right to purchase as
of June 30, 1995 pursuant to the terms of the 1982 Long-Term Performance
Incentive Plan ("Performance Incentive Plan") and approximately 27,042
shares which represent his proportionate interest in shares held by the
Trustee under the Company's Employees' Stock Savings and Retirement Plan
("Savings and Retirement Plan") as of December 31, 1994.

(5) Includes 15,468 shares as to which Mr. Hollen has sole voting and
investment power, 5,391 shares which Mr. Hollen has a right to purchase as
of June 30, 1995 pursuant to the terms of the Performance Incentive Plan,
12,733 shares of Restricted Stock held pursuant to the terms of the
Performance Incentive Plan and approximately 11,510 shares which represent
his proportionate interest in shares held by the Trustee under the Savings
and Retirement Plan as of December 31, 1994. Also includes 432 shares held
by Mrs. Hollen, as to which Mr. Hollen disclaims beneficial ownership.

(6) Includes 3,809 shares as to which Mr. Jacobsen has sole voting and
investment power, 3,516 shares which Mr. Jacobsen has a right to purchase
as of June 30, 1995 pursuant to the terms of the Performance Incentive
Plan, 8,877 shares of Restricted Stock held pursuant to the terms of the
Performance Incentive Plan and approximately 1,814 shares which represent
his proportionate interest in shares held by the Trustee under the Savings
and Retirement Plan as of December 31, 1994.

(7) Includes 702 shares as to which Mr. Lyons has sole voting and investment
power and 231 shares owned by Mrs. Lyons. Mr. Lyons disclaims beneficial
ownership of the shares owned by Mrs. Lyons.

(8) Includes 23,178 shares as to which Mr. Sanborn has sole voting and
investment power, 61,657 shares which Mr. Sanborn has a right to purchase
as of June 30, 1995 pursuant to the terms of the Performance Incentive Plan
and approximately 7,282 shares which represent his proportionate interest
in shares held by the Trustee under the Savings and Retirement Plan as of
December 31, 1994. Also includes 2,500 shares held by Mrs. Sanborn, as to
which Mr. Sanborn disclaims beneficial ownership.

(9) Includes 17,537 shares as to which Mr. Schuyler has sole voting and
investment power, 2,735 shares which Mr. Schuyler has a right to purchase
as of June 30, 1995 pursuant to the terms of the Performance Incentive
Plan, 781 shares of Restricted Stock held pursuant to the terms of the
Performance Incentive Plan and approximately 10,159 shares which represent
his proportionate interest in shares held by the Trustee under the Savings
and Retirement Plan as of December 31, 1994.

(10) Includes 8,593 shares as to which Mr. Thorne has sole voting and investment
power and 2,343 shares owned by the Estate of Mrs. Thorne. Mr. Thorne
disclaims beneficial ownership of the shares owned by his wife's estate.

(11) Includes 86,285 shares which represent the group's proportionate interest
in shares held by the Trustee under the Savings and Retirement Plan as of
December 31, 1994, 170,645 shares which the group has rights to acquire as
of June 30, 1995 pursuant to the Performance Incentive Plan and 25,241
shares of Restricted Stock held pursuant to the terms of the Performance
Incentive Plan. As of December 31, 1994, the Savings and Retirement Plan,
as a whole, held 727,908 shares (5.17%) of the Company's Common Stock.
Shares of the Company's Common Stock held by the Savings and Retirement
Plan Trustee will be voted in accordance with the instructions of the
employees for whose account the shares are held. If no such instructions
are received, the Savings and Retirement Plan Trustee will vote such shares
in the same proportion as it votes shares for which it does receive
instructions from other participating employees.

(12) Neuberger & Berman ("N&B") reported in an amendment to its Schedule 13G
filed with the Securities and Exchange Commission on February 10, 1995 that
it held 1,248,648 shares of the

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<PAGE> 10

Company's Common Stock with shared power to dispose or direct the
disposition of all such shares, sole voting power with respect to 268,636
shares and shared voting power as to 666,875 of such shares. N&B has
reported that it holds such shares for many unrelated clients, none of whom
has an interest relating to five percent or more of the Company's Common
Stock. The number reported in the table excludes 70,781 shares of Common
Stock held by certain partners of N&B in their own personal securities
accounts. N&B disclaims beneficial ownership of such shares owned directly
by N&B partners. Mr. Gruber is a trustee of six trusts which manage the
Neuberger & Berman family of equity mutual funds.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT.

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's Directors and executive officers to file
with the Securities and Exchange Commission (the "SEC") and the New York Stock
Exchange initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers and Directors
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.

To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations from reporting
persons that they were not required to file Form 5, all of its officers and
Directors have complied with all filing requirements applicable to them with
respect to transactions during 1994 except for initial reports on Form 3 for
Messrs. W. Marston Becker and Arthur B. McHugh, both newly elected Senior Vice
Presidents of the Company, which were filed eight days late on August 8, 1994.

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<PAGE> 11

EXECUTIVE COMPENSATION

The information presented in this section and elsewhere in this Proxy
Statement with respect to the Company's Common Stock market prices, number of
shares of Restricted Stock, number of shares of Common Stock covered by Options,
Option exercise prices and number of Performance Units have been adjusted to
reflect the effect of the 5-for-4 stock splits paid on both November 15, 1993
and December 7, 1992.

SUMMARY COMPENSATION TABLE

The Summary Compensation Table shows information concerning the annual and
long-term compensation for services in all capacities to the Company for the
years ended December 31, 1994, 1993 and 1992 of those persons who were at
December 31, 1994 (1) the chief executive officer and (2) the other four most
highly compensated executive officers of the Company who were serving as
executive officers at the end of 1994. (The chief executive officer and the
other four most highly compensated executive officers are referred to
collectively as the "Named Officers.") On March 1, 1994, Mr. Sanborn became Vice
Chairman of the Board of Directors of the Company and Mr. Hollen became
President and Chief Operating Officer. On March 1, 1995, Mr. Sanborn ceased
being Vice Chairman of the Board and became a Senior Executive Consultant to the
Company.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------------------
AWARDS PAYOUTS
--------------------------------- ------------
ANNUAL COMPENSATION RESTRICTED STOCK LONG-TERM
-------------------- STOCK OPTIONS INCENTIVE ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY $ BONUS $ AWARD(S)$(1)(2) (SHARES)(2)(3) PAYOUTS $(4) COMPENSATION $(5)
- --------------------------- ---- -------- -------- --------------- -------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alan R. Gruber............. 1994 479,496 410,000 -0- 25,000 94,702 72,663
Chairman of the Board & 1993 466,794 370,000 -0- -0- 87,891 74,272
Chief Executive Officer 1992 445,548 325,000 -0- 23,438 312,487 74,357

Robert B. Sanborn.......... 1994 323,892 250,000 -0- -0- 53,033 36,282
Vice Chairman 1993 312,450 235,000 -0- -0- 63,052 40,318
1992 294,948 225,000 -0- 14,063 55,714 43,626

Larry D. Hollen............ 1994 252,546 200,000 -0- 22,500 75,707 42,583
President & Chief 1993 212,450 150,000 -0- -0- 22,116 35,527
Operating Officer 1992 175,133 100,000 375,000 7,031 22,282 31,753

Raymond Jacobsen........... 1994 169,469 125,000 270,000 8,000 20,203 27,690
Senior Vice President 1993 147,700 90,000 -0- 1,563 14,194 20,539
of the Company 1992 134,825 60,000 -0- 5,469 12,698 20,213
and President of the
EBI Companies

Raymond J. Schuyler........ 1994 177,354 90,000 -0- 6,400 18,940 33,457
Vice President -- 1993 169,700 85,000 -0- -0- 19,169 33,040
Investments 1992 160,700 75,000 -0- 5,469 24,374 34,916
</TABLE>

- ---------------

(1) Represents the value of shares of Restricted Stock awarded to the Named
Officers pursuant to the terms of the Performance Incentive Plan. Pursuant
to Mr. Jacobsen's employment agreement, 8,000 shares of Restricted Stock
were awarded to him on July 19, 1994, based on a market price per share of
$33.75. Pursuant to Mr. Hollen's employment agreement, he was awarded 15,625
shares of Restricted Stock on December 1, 1992, based on a market price per
share of $24.00. Each award of Restricted Stock vests in four equal
installments beginning on the second anniversary of each award. Awards of
Restricted Stock are subject to restrictions on transfer and will be
forfeited if the Named Officer terminates his employment prior to the fifth
anniversary of the date of each award. If a Change in Control (as defined in
the Performance Incentive Plan) were to occur before the shares of
Restricted Stock were fully vested, all of such shares would become
immediately vested. Dividends on Restricted Stock are paid when and as paid
on the Company's Common Stock.

8
<PAGE> 12

The aggregate total of Restricted Stock holdings of each of the Named
Officers, valued as of December 31, 1994, at a market price of $35.25 per
share are as follows:

<TABLE>
<CAPTION>
RESTRICTED STOCK
-------------------
NAME SHARES VALUE $
------ -------
<S> <C> <C>
Larry D. Hollen........................................... 12,733 448,838
Raymond W. Jacobsen....................................... 8,877 312,914
Raymond J. Schuyler....................................... 781 27,530
</TABLE>

(2) Awards of Restricted Stock or Options are made in tandem with awards of
Performance Units pursuant to the terms of the Performance Incentive Plan.
The value of a Performance Unit under the Performance Incentive Plan will be
equal at any time to the book value per share of the Company's Common Stock.
However, the right of any Named Officer to receive payment in respect of a
Performance Unit award is contingent upon (a) whether the Named Officer
remains an employee of the Company (except in the case of retirement,
disability or death) throughout the applicable period ("Performance
Period"), and (b) whether the applicable target ("Performance Target"), as
established at the time of award by the Compensation Committee, has been
achieved. The Compensation Committee has determined that all Performance
Units awarded to date will have a Performance Target of an 11% compound
annual increase in the Company's book value per share during a five-year
Performance Period to achieve the maximum payout. If the compound annual
increase in the Company's book value per share during the Performance Period
does not exceed 6%, no payout is made. If a Change in Control (as defined)
were to occur before the Performance Units were fully vested, all such Units
would become immediately vested and the Compensation Committee may, in its
sole discretion, declare the Performance Units immediately payable in such
amounts as the Committee may determine.

On March 9, 1994, 1,875 Performance Units were awarded to Mr. Hollen; on
July 19, 1994, 4,000 Performance Units were awarded to Mr. Jacobsen; and on
September 12, 1994, 6,250, 3,750, 2,000 and 1,600 Performance Units were
awarded to Messrs. Gruber, Hollen, Jacobsen and Schuyler, respectively. On
June 2, 1993, 391 Performance Units were awarded to Mr. Jacobsen. On
December 1, 1992, 7,812.5 Performance Units were awarded to Mr. Hollen; on
September 9, 1992, 5,859.4, 3,515.6, 1,757.8, 1,367.2 and 1,367.2
Performance Units were awarded to Messrs. Gruber, Sanborn, Hollen, Jacobsen
and Schuyler, respectively.

(3) Options awarded to the Named Officers are granted pursuant to the terms of
the Performance Incentive Plan. To the maximum possible extent, all stock
options have been structured to qualify as Incentive Stock Options. No
Option may be exercised more than ten years from the date of grant, and the
exercise price may not be less than 100% of the fair market value on the
date of grant of the shares covered thereby. When an Option is exercised,
the full exercise price must be paid in cash and/or by the surrender, at
fair market value, of shares of the Company's Common Stock. Generally, each
Option is exercisable in installments, as follows: 25% of the shares of
Common Stock covered by the Option may be purchased on and after the first
anniversary of the date of grant and additional 25% installments on and
after each of the second, third and fourth anniversaries of the date of
grant. If a Change in Control (as defined) were to occur before the Option
is exercisable in full, the Option would become immediately exercisable for
all shares of Common Stock covered by such Option.

(4) Cash value of Performance Units granted under the Performance Incentive Plan
for Performance Periods ended December 31, 1994, 1993 and 1992. In addition,
during 1992 the Company terminated its 1979 Performance Unit Plan (the "Old
Unit Plan") and distributed to all participants their vested benefits under
the Old Unit Plan. As a result of that termination, Mr. Gruber received a
distribution of all his benefits under the Old Unit Plan in the amount of
$216,002.

9
<PAGE> 13

(5) Detail of amounts reported in the "All Other Compensation" column for 1994
is provided in the table below.

<TABLE>
<CAPTION>
ITEM MR. GRUBER MR. SANBORN MR. HOLLEN MR. JACOBSEN MR. SCHUYLER
- --------------------------------------------------- ---------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
- - Company Contributions to the Supplemental
Benefits Plan (see below)........................ $ 48,664 $22,676 $ 21,768 $ 9,304 $ 5,639
- - Company Contributions to Savings and Retirement
Plan............................................. 13,606 13,606 13,606 12,669 13,351
- - Split Dollar Insurance Premium................... -- -- 7,209 5,717 14,467
- - Term Life Insurance Premium...................... 10,393 -- -- -- --
---------- ----------- ---------- ------------ ------------
Total All Other Compensation................ $ 72,663 $36,282 $ 42,583 $ 27,690 $ 33,457
=========== =========== ========== ============ ============
</TABLE>

The Savings and Retirement Plan is a qualified 401(k) savings plan in which
all employees of the Company are eligible to participate. The Company makes
matching contributions to the Plan of up to 6% of a participating employee's
base salary, unless limited by federal tax regulations. The Company
contributes to the Supplemental Benefits Plan ("Supplemental Plan") that
portion of the Company's contribution in the Savings and Retirement Plan
that an employee failed to receive because of federal tax regulations
limiting such contributions. All benefits under the Supplemental Plan are
fully vested but no benefits are paid until the January of the year
following the year employment terminates. The Supplemental Plan is not
qualified under the Employee Retirement Income Security Act of 1974 and is
not funded.

OPTION GRANTS, EXERCISES AND FISCAL YEAR-END VALUES

Option Grants in Last Fiscal Year

The following table sets forth information with respect to options granted
to the Named Officers in 1994:

<TABLE>
<CAPTION>
NUMBER OF POTENTIAL REALIZABLE VALUE
SECURITIES % OF TOTAL AT ASSUMED ANNUAL RATES
UNDERLYING OPTIONS EXERCISE OF STOCK PRICE APPRECIATION
OPTIONS GRANTED TO OR BASE FOR OPTION TERM$(2)
GRANTED EMPLOYEES IN PRICE EXPIRATION -------------------------------
NAME (#)(1) FISCAL YEAR ($/SH) DATE 0%($) 5%($) 10%($)
- ------------------------------ ----------- ------------- ---------- ----------- ----- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Alan R. Gruber................ 25,000 19.3 32.75 9/12/04 -0- 514,907 1,304,877
Larry D. Hollen............... 7,500 5.8 32.50 3/9/04 -0- 153,293 388,475
15,000 11.6 32.75 9/12/04 -0- 308,944 782,926
Raymond W. Jacobsen........... 8,000 6.2 32.75 9/12/04 -0- 164,770 417,561
Raymond J. Schuyler........... 6,400 4.9 32.75 9/12/04 -0- 131,816 334,048
</TABLE>

- ---------------
(1) For a description of the material terms of the Options and the Performance
Units awarded in tandem therewith, see footnotes 2 and 3 on page 9.

(2) Calculations are based on hypothetical annual compounded rates of stock
price appreciation of 0%, 5% and 10% over the full ten year term of the
Options. Using the same assumptions and based on 14,040,816 shares
outstanding as of December 31, 1994, the total dollar gains for all
shareholders as a group would be $289.2 million (5%) and $732.9 million
(10%) based on the September 12, 1994 price per share of $32.75, and $287.0
million (5%) and $727.3 million (10%) based on the March 9, 1994 price per
share of $32.50.

10
<PAGE> 14

Aggregate Option Exercises in Last Fiscal Year and Year End Option Values

The following table provides information with respect to the unexercised
options to purchase Common Stock granted in prior years under the Performance
Incentive Plan and under the Company's 1979 Stock Option Plan for each of the
Named Officers and held by them at December 31, 1994.

<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT DECEMBER 31, 1994 AT DECEMBER 31, 1994 $(2)
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED $(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ------------ ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alan R. Gruber............... 12,438 195,341 85,938 36,719 1,811,481 195,276
Robert B. Sanborn............ 16,178 303,472 61,657 7,031 1,257,164 79,661
Larry D. Hollen.............. -0- -0- 3,516 26,015 39,836 97,950
Raymond W. Jacobsen.......... -0- -0- 3,126 11,906 32,102 54,316
Raymond J. Schuyler.......... 3,125 56,500 2,735 9,134 30,988 46,976
</TABLE>

- ---------------

(1) Represents difference between exercise price and market value on date of
exercise. For a description of the material terms of Options and the
Performance Units awarded in tandem therewith, see footnotes 2 and 3 on page
9.

(2) Based on the closing price on the New York Stock Exchange -- Composite
Transactions of the Company's Common Stock on that date ($35.25).

Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Exchange
Act that might incorporate future filings, including this Proxy Statement, in
whole or in part, the following Report of the Compensation Committee and the
Performance Graph on page 15 shall not be incorporated by reference into any
such filing.

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee, currently composed of four members of the Board
of Directors, is a standing committee of the Board and only "outside"
non-employee Directors serve on this Committee. Among its duties the
Compensation Committee is charged with the responsibilities of establishing and
administering the Company's policies concerning the compensation of management,
including the Chief Executive Officer and all other key officers. In discharging
such duties, the Compensation Committee is responsible for annually determining,
and recommending to the full Board, the annual base salary and bonus for each of
the Company's officers and for awarding grants under the Company's Performance
Incentive Plan.

GENERAL

The Company's stated objective is to achieve superior growth in stockholder
value by being the best specialty property and casualty insurer in each of its
businesses. In furtherance of that mission the Committee attempts to provide
incentives to motivate management to superior performance in order to enhance
the profitability of the Company (and, thus, stockholder value). Such incentives
also enable the Company to attract and retain qualified executives who will
contribute significantly to the long-term success of the Company.

Executive compensation consists of a base salary, annual bonus and
long-term incentive compensation. Guidelines for executive compensation at the
Company are at levels which are generally at about the median of the range of
salaries paid to peer executives at other companies of generally similar size
that are engaged in similar businesses. The Committee emphasizes variable
compensation programs and believes that compensation should be based upon the
attainment of individual and Company goals and should make possible total
compensation levels in excess of industry averages if the Company's or business
unit's performance is above average. The program is intended to cause management
to focus on managing the Company from an owner's perspective of enhancing value
and achieving long-term financial success and earnings growth.

11
<PAGE> 15

In the first quarter of 1995 the Compensation Committee reviewed material
provided by Messrs. Gruber and Hollen and the Company's staff in connection with
recommendations for bonuses with respect to services provided in the prior year
and for adjustments in base salaries. The process involves an evaluation of many
diverse elements.

ANNUAL COMPENSATION

The Committee believes that it is important to encourage a
performance-based environment that motivates individual performance by
recognizing the past year's results and by providing incentives for improvements
in the future. This includes an evaluation of an executive's ability to
implement the Company's business plans as well as to react to unanticipated
external factors that can have a significant impact on the Company's
performance. In making its recommendations for base salaries and annual bonuses
for key officers, the Compensation Committee considers a variety of factors,
including material on salary movements for peer executives at other companies,
each executive's success in meeting both personal and Company objectives, level
of responsibility, length of service, knowledge and potential for advancement,
although none of these factors is assigned a specific weight. Industry
compensation statistics are based on a survey completed by an outside consultant
of 14 public property and casualty companies, including three of the 13
companies in the Dow Jones Property and Casualty Index that compete with the
Company in one or more of its lines of business and range in size from twice to
one-half of the Company in total assets. The Committee also gives consideration
to its assessment of the quality of services rendered by the executive during
the year, the Company's success compared to its competitors, and the internal
comparability of compensation among the Company's executives. The Committee in
its discretion subjectively weighs the above factors in determining appropriate
salary levels.

All cash bonuses awarded to officers in respect of fiscal 1994 were awarded
pursuant to the Company's Annual Incentive Plan, a target-oriented bonus
program. While bonuses to executive officers are discretionary, a variety of
financial and project targets are established for each senior officer to measure
both individual performance and Company performance. These targets may include
one or more of the following measurements: return on stockholders' equity,
operating earnings, premium growth, loss and expense ratios, control of expenses
and completion of specific projects. Awards are generally based on the degree to
which the targets are attained and on individual performance during the year.
Target annual bonus awards, as a percentage of base salary, range from 25% for
certain vice presidents to 40% and 45% for the President and the Chairman,
respectively. Depending on performance, an individual could receive no bonus or
an amount equal to as much as twice his or her target bonus. In addition,
personal performance is measured against other relevant non-quantitative
factors, such as customer satisfaction, work efficiency or degree of skill
required to perform the task. In determining the size of a bonus, the Committee
subjectively weighs a variety of these factors. The Compensation Committee, when
it deems appropriate, may authorize the payment of an individual bonus award
even if the individual's targets are not achieved. After the Company's year-end
results have been audited by its independent certified public accountants,
payments under the program are made in cash. During 1994, the Company's
performance exceeded almost all goals.

Certain of the Named Officers are employed under employment agreements that
provide for minimum base compensation. Determinations as to bonus levels and
salary increases for these Named Officers, as well as those without employment
agreements, have been discretionary and have not been made on the basis of a
formulaic weighing of the factors described above.

CEO'S COMPENSATION

Mr. Gruber has an employment agreement with the Company (see "Employment
Agreements" below), pursuant to which he was paid a base salary of $480,000 for
the twelve month period beginning April 1, 1994. In determining bonus and the
increase in base salary for Mr. Gruber for 1995, the Committee considered the
Company's outstanding performance during 1994 which met or exceeded agreed upon
objectives, including among other factors, in order of importance, the Company's
high return on equity, low combined ratios over each of the past five years,
the 10.6% increase in the market price of the Company's stock from the end of
1993 and a 3.4% increase in operating earnings. The relative weight assigned to
each factor, or component

12
<PAGE> 16

thereof, is not quantified. Based on the above factors, Mr. Gruber was awarded a
cash bonus for 1994 of $410,000, an increase of 10.8% over the bonus awarded for
services rendered in 1993. Mr. Gruber's base salary was increased to $500,000
per year beginning March 28, 1995, a 4.2% increase over his 1994 base salary.

In determining the bonus awards to other key officers, the Committee
reviewed with Messrs. Gruber and Hollen recommendations of management based on
individual performance of each officer as well as the evaluation of general
factors substantially comparable to those considered in establishing the award
for Mr. Gruber.

Pursuant to the Company's usual practice of making awards under the
Performance Incentive Plan every two years, in September 1994, Mr. Gruber was
granted an Option to purchase 25,000 shares of the Company's Common Stock at an
exercise price of $32.75 per share, which is equal to the market value of the
stock on the date of grant. The amount of the Option granted was determined by
the Committee based on the general practices of other comparable companies and
taking into consideration other subjective factors including Mr. Gruber's level
of responsibilities and his past and expected future contributions to the
Company. Beyond these general factors, there is no particular formula governing
the number of shares awarded. In addition to the Option, Mr. Gruber was awarded
on the same date 6,250 Performance Units.

LONG-TERM INCENTIVES

Long-term incentives for the Company's Chief Executive Officer and other
key officers are provided through the Company's Performance Incentive Plan. The
Committee grants awards under the Performance Incentive Plan to individuals that
the Company believes have the ability to influence its long-term growth and
profitability. Generally, the Committee grants larger awards commensurate with
higher position level and that reflect competitive practices within the property
and casualty insurance industry. The awards can be in the form of Stock Options
and Performance Units or Restricted Stock and Performance Units. Awards under
the Performance Incentive Plan are usually made every two years. Since the last
awards were made in 1992, awards were made in September 1994. In addition, as a
result of his promotion to President and Chief Operating Officer of the Company,
Mr. Hollen was awarded an option on March 9, 1994 covering 7,500 shares of
Common Stock at an exercise price of $32.50 per share and 1,875 Performance
Units and, as a result of Mr. Jacobsen's promotion to Senior Vice President in
July 1994 and his performance as President of the EBI Companies, the Committee
awarded him 8,000 shares of Restricted Stock and 4,000 Performance Units. In
general, prior to 1992, awards of Options were limited to Mr. Gruber and Mr.
Sanborn, with all other officers receiving awards of Restricted Stock. However,
based in part on a study completed in 1992 by an outside consultant, the Company
now as a general rule awards Stock Options, rather than Restricted Stock, to the
top 11 officers of the Company. The basis for determining the amount of awards
was subjective and was not based upon the amount and terms of Options already
held; however, the Compensation Committee did consider the results of the
Company's performance and the executive officer's contribution to that
performance as well as expected future contributions to the success of the
Company in determining the amount of individual awards. Future awards may be
granted on the same basis. Performance Unit awards are made in tandem with
Option and Restricted Stock awards. The number of Stock Options or shares of
Restricted Stock granted is, in general, based on the grade level of an
executive's position and the most recent assessment of the executive's
performance. The number of Performance Units awarded is usually equal to a
quarter of the number of shares covered by an Option or one half of the number
of shares of Restricted Stock.

The Committee has the authority to determine the individuals to whom awards
are made, the type of awards (Options or Restricted Stock), the conditions of
the awards, the number of shares of Restricted Stock, the number of shares
covered by an Option and number of Performance Units. In general, it is through
the award of Options and Restricted Stock that the Company attempts to align
management's interests with those of the stockholders and to provide an
opportunity to its key officers to build a meaningful stake in the Company. The
Option exercise price must be no less than the fair market value of the
Company's stock on the date of grant. The Committee has never repriced an
Option's exercise price. Thus, the value of each stockholder's investment in the
Company must

13
<PAGE> 17

appreciate before an optionee receives any benefit from the Option. Maximum
payout on awards of Performance Units is made only if the Company achieves an
11% compound annual increase in its book value per share during the Performance
Period. As a result, as with Options, the value of the Performance Unit to the
executive will be realized only with the creation of value for stockholders.

The Committee believes that these non-cash awards emphasize the Committee's
position that a significant equity stake in the Company connects an executive's
compensation to future enhancement of stockholder value.

OTHER BENEFITS

Executive officers may also participate in the Company's Employees' Stock
Savings and Retirement Plan which includes the Company's contributions to that
Plan, a Supplemental Benefits Plan under which certain executives are entitled
to additional benefits that cannot be awarded under qualified plans due to
Internal Revenue Code limitations, as well as other benefits that are generally
available to all employees.

DEDUCTIBILITY OF COMPENSATION

Section 162 (m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1 million
paid to the Company's Chief Executive Officer and the four other most highly
compensated executive officers. Qualifying performance-based compensation will
not be subject to the deduction limit if certain requirements are met. No
executive officer was subject to the limitations of Section 162 (m) in 1994. The
Committee intends to structure any compensation for executive officers so that
it qualifies for deductibility under Section 162(m) to the extent feasible.
However, to maintain a competitive position within the Company's peer group of
companies, the Committee retains the authority to authorize payments, including
salary and bonus, that may not be deductible.

Compensation Committee
William J. Shepherd, Chairman
Robert H. Jeffrey
Warren R. Lyons
James K. McWilliams

14
<PAGE> 18

PERFORMANCE GRAPH

Set forth below is a line graph comparing the cumulative total stockholder
return on the Company's Common Stock, based on the market price of the Common
Stock and assuming reinvestment of dividends, with the cumulative total return
of companies on the Standard & Poor's 500 Stock Index and the Dow Jones Property
and Casualty Index.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* AMONG THE
COMPANY'S COMMON STOCK,
THE STANDARD & POOR'S 500 STOCK INDEX AND THE DOW JONES
PROPERTY AND CASUALTY INDEX

<TABLE>
<CAPTION>
MEASUREMENT PERIOD DOW JONES P &
(FISCAL YEAR COVERED) S&P 500 C ORION CAPITAL
<S> <C> <C> <C>
1989 100 100 100
1990 96.9 95.8 81.2
1991 126.3 118.7 151.5
1992 135.9 145.1 217.3
1993 149.5 146.3 249.8
1994 151.5 153.8 282.7
</TABLE>

- ---------------
* Assumes that the investment in the Corporation's Common Stock and each index
was $100 on December 31, 1989 and that all dividends were reinvested.

There can be no assurance that the Company's stock performance will
continue into the future with the same or similar trends depicted in the graph
above. The Company will not make or endorse any predictions as to future stock
performance.

EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS

The Company has employment agreements with four of its current executive
officers: Alan R. Gruber, Robert B. Sanborn, Larry D. Hollen and Raymond W.
Jacobsen.

Messrs. Gruber and Sanborn: The Company entered into employment agreements
with Messrs. Gruber and Sanborn as of March 19, 1993. The contracts are similar
in most material respects except as noted below.

Mr. Gruber's agreement provides for a minimum base annual compensation
beginning March 28, 1995 of not less than $500,000 with such salary increases as
may from time to time be approved by the Board and requires that the Company
provide Mr. Gruber with term life insurance in the amount of $500,000. The
contract has an Initial Term ending on December 31, 1996, during which Mr.
Gruber

15
<PAGE> 19

will serve as Chairman and Chief Executive Officer, and a Successive Term of
five years during which Mr. Gruber will be a Senior Executive Consultant.

On February 28, 1995, Mr. Sanborn retired as Vice Chairman of the Company's
Board of Directors and became a Senior Executive Consultant. On that date the
Initial Term of Mr. Sanborn's contract ended and the Successive Term of six
years started. Mr. Sanborn's contract provides for a minimum base annual
compensation under the Successive Term beginning March 1, 1995 of not less than
$125,000 with such salary increases as may from time to time be approved by the
Board.

The Initial Term of Mr. Gruber's contract may be shortened by either the
Company or Mr. Gruber in certain circumstances; the Successive Term would then
start at such earlier date. The Company may terminate the Initial Term of Mr.
Gruber's contract at any time on two years' notice and Mr. Gruber may terminate
it on three months' notice. In addition, either the Company or Mr. Gruber may
terminate the Initial Term of his contract at any time after the end of four
months following a change in effective voting control of the Company, effective
ten days after notice. A change in effective voting control shall be deemed to
have occurred upon (i) acquisition by any person or group of 40% or more of the
Company's Common Stock, (ii) a merger or consolidation in which the Company is
not a survivor or (iii) any time a majority of the members of the Board are
persons who were not members of the Board twelve months prior to that time. If
there is a change in effective voting control of the Company and at any time
thereafter Mr. Gruber terminates his employment or if Mr. Gruber receives
written notice of termination, he (or his beneficiary) would be entitled to
receive, until the termination date of his agreement, base salary (at the level
in effect on the date of notice), a bonus equal to the bonus which would have
been payable to him in the year in which notice is given if he had achieved
target performance, and other usual employee benefits provided by the Company.

If the Initial Term of Mr. Gruber's contract is ended on notice, as
described above, all previously unexercised Stock Options will be deemed to be
exercisable and all unexpired periods of performance with respect to any
Performance Units or awards will be deemed to have expired. The executive will
be entitled to receive the value of such Performance Units at the end of the
month during which termination occurs on the basis of an equitable pro-rating of
the Performance Period, Performance Target and award amount.

Mr. Gruber's contract provides that in the event of his death during the
Initial Term, his beneficiaries would be entitled to receive his base salary to
date of death, a pro-rata portion of any bonus that would have been payable to
him with respect to the fiscal year in which he dies and other usual death
benefits provided by the Company. If he becomes disabled, he will be entitled to
receive, for the remainder of the Initial Term, disability compensation of not
less than 50% of base salary plus other usual employee benefits provided by the
Company.

Upon commencement of the Successive Term, the cash compensation to be paid
to Mr. Gruber will be reduced. Mr. Gruber's base compensation will be reduced to
an amount equal to (i) one-half his average salary and bonus compensation during
the five years preceding the start of the Successive Term minus (ii) the
annuitized present value of all amounts credited to him by the Company under its
former Pension Plan, under the Company's Savings and Retirement Plan and under
the Company's Supplemental Benefits Plan. Such reduced level of compensation
shall continue for Mr. Gruber's life. It is currently estimated that, assuming
continued appreciation of the Company's Common Stock and other factors, the
actuarially determined net present value of the aggregate benefits is
approximately $900.000. Mr. Gruber can elect actuarially-equivalent survivor
benefits prior to the start of the Successive Term. Mr. Gruber will not be
eligible to participate in the Company's bonus, option and other benefit plans
for its employees after the second year of his contract's Successive Term.

The Company agreed to purchase an annuity to fund the payments to be made
to Mr. Gruber following termination of the Initial Term. It will also purchase
an annuity to fund a joint-and-survivor benefit of $48,000 per year to Mr.
Sanborn and his spouse, commencing upon completion of the Successive Term of his
contract. If either executive chooses a payment option other than the one
provided in his contract, the amount payable per month will be actuarially
adjusted. Unless a "transfer event" shall occur (by reason of a change of
effective voting control or of certain reductions of the Company's credit
standing), each annuity shall be the property of the Company. If a transfer
event occurs, ownership of the annuity contract will be transferred to

16
<PAGE> 20

the designated beneficiary, if any, and the income tax cost to the recipient of
that transfer will be borne by the Company, subject to recoupment as and to the
extent payments are subsequently made under the annuity contracts.

Messrs. Hollen and Jacobsen: The Company entered into an employment
agreement with Mr. Hollen as of December 1, 1992. The agreement with Mr. Hollen
currently provides for a base salary of $290,000 with such salary increases as
may from time to time be approved by the Company. Pursuant to the agreement, Mr.
Hollen was granted, as of December 1, 1992, 15,625 shares of Restricted Stock
and 7,812.5 Performance Units in accordance with the terms of the Performance
Incentive Plan.

The Company also entered into an employment agreement with Mr. Jacobsen as
President and Chief Executive Officer of the EBI Companies on July 19, 1994,
when Mr. Jacobsen was promoted to Senior Vice President of the Company. The
agreement currently provides for a base salary of $210,000 with such salary
increases as may from time to time be approved by the Company. Pursuant to the
agreement, Mr. Jacobsen was granted 8,000 shares of Restricted Stock and 4,000
Performance Units in accordance with the terms of the Performance Incentive
Plan. Each of Mr. Hollen and Mr. Jacobsen is referred to as "Executive" below.

The term of each agreement is for five years and is automatically renewed
yearly until either party thereto gives notice of termination. Any notice of
termination other than for death, cause or disability must be given two years in
advance in writing. The agreements will not be terminated by any merger,
consolidation, sale of assets or voluntary or involuntary dissolution in which
the Company is not the survivor. The agreements may be terminated by the Company
only in the event the Executive becomes disabled, is convicted of a felony or a
misdemeanor, engages in conduct which is materially injurious to the Company or
willfully fails to substantially perform his duties with the Company. During the
term of the agreements, and for two years thereafter, the Executive agrees not
to compete with the Company.

Each agreement provides that in the event of the Executive's death while
employed, his beneficiaries would be entitled to receive his base salary to date
of death, a pro-rata portion of any bonus that would have been payable to him
with respect to the fiscal year in which he dies and other usual death benefits
provided by the Company. If the Executive becomes disabled, he would be entitled
to receive disability compensation in accordance with the terms of the Company's
disability insurance program, a pro-rata portion of any bonus as described
above, plus other usual employee benefits provided by the Company. In addition,
if the Executive dies or becomes disabled prior to the complete vesting of the
shares of Restricted Stock and Performance Units awarded to him under the
agreement, such awards will nevertheless continue to vest as if he were fully
employed by the Company.

Severance Policy: The Board of Directors has adopted a severance policy
applicable to the executive officers of the Company including the Named
Officers. Pursuant to this policy, such officers will be entitled to receive one
year's notice of termination, except in the event of termination for cause. This
policy currently applies to the executive officers of the Company, including Mr.
Schuyler, who do not have an individual employment agreement with the Company.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company and certain of its subsidiaries have a policy of making loans
to key officers, in connection with hiring or transfer to new locations, to
assist such personnel in purchasing new residences. During 1989, Larry D. Hollen
was required to move his residence from Illinois to Connecticut. In connection
with this move, the Company loaned Mr. Hollen an aggregate of $150,000, secured
by a mortgage on his Connecticut residence, for fifteen years, with interest at
10% per year. During 1994, W. Marston Becker, a Senior Vice President of the
Company, was required to move his residence from West Virginia to California. In
connection with the move, the Company loaned Mr. Becker an aggregate of $250,000
secured by a mortgage on his California residence, for 5 years, with interest at
7.75% per year.

At the 1987 Annual Meeting of Stockholders of the Company, the stockholders
authorized the execution by the Company of indemnification agreements with its
Directors and executive officers. Subsequently, the Company entered into
indemnification agreements with each of its Directors and executive officers
which,

17
<PAGE> 21

among other things, contractually confirmed the indemnity provided under the
Company's Restated Certificate of Incorporation, its By-Laws and under the
Delaware General Corporation law.

The Company and its subsidiaries have entered into several agreements with
Guaranty. Mr. Ware, a director of the Company, is Guaranty's President and Chief
Executive Officer. Pursuant to one such agreement, Messrs. Gruber, Hollen,
Sanborn, and Shepherd serve on Guaranty's board of directors (see Compensation
Committee Interlocks and Insider Participation, at page 4). Also, the Company
and Guaranty have an investment management agreement pursuant to which a portion
of Guaranty's investment portfolio is managed by the Company's investment
managers (under the direction and supervision of Guaranty) for a fee of $550,000
for 1995. In addition, the Company's insurance subsidiaries have entered into
certain reinsurance agreements and a trade name agreement with Guaranty.

In the ordinary course of business, Guaranty's wholly-owned insurance
subsidiaries reinsure certain risks with other companies. In 1994, certain of
Guaranty's subsidiaries entered into a 100% reinsurance agreement with one of
the Company's insurance subsidiaries. During that year, $643,000 in premiums
were ceded under that reinsurance agreement and Guaranty was paid $15,000 for
fees and expenses. Also, pursuant to other reinsurance agreements, a Guaranty
insurance subsidiary assumed business written through the Company's insurance
subsidiaries totaling $30,921,000 in premiums in 1994. Guaranty paid $666,000 in
fees and reimbursed the Company's subsidiaries $774,000 of actual expenses
incurred in conjunction with those reinsurance agreements. Also, a subsidiary of
the Company is an agent for Guaranty and produced $516,000 in premiums for
Guaranty and was paid $90,000 in commissions in 1994.

The Company has committed to invest up to $5,000,000 in Insurance Partners
L.P., a partnership formed to make equity investments of up to $550 million in
the insurance industry. Guaranty has committed to participate in the Company's
commitment in an aggregate amount not to exceed $1,500,000. Insurance Partners
L.P. is managed by Insurance Partners Advisors L.P., of which Steven B. Gruber,
a son of Mr. Gruber, is a managing director.

2. APPROVAL OF THE 1994 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS

The 1994 Stock Option Plan for Non-Employee Directors (the "Option Plan")
is intended to promote the interests of the Company and its stockholders by
strengthening the Company's ability to attract and retain the services of
experienced and knowledgeable non-employee Directors and by encouraging such
Directors to acquire an increased proprietary interest in the Company.

The proposal will be adopted if it is approved by the affirmative vote of a
majority of the votes duly cast in person or by proxy at the Annual Meeting.

The full text of the 1994 Stock Option Plan for Non-Employee Directors is
set forth in Appendix A attached hereto. A summary of the Option Plan is set
forth below.

Administration. The Option Plan is to be administered by the Compensation
Committee (the "Committee") of the Company's Board of Directors. Subject to the
terms of the Option Plan, the Committee shall have the power to construe the
provisions of the Option Plan, to determine all questions arising thereunder,
and to adopt and amend such rules and regulations for administering the Option
Plan as the Committee deems desirable.

Participation in the Option Plan. Each member of the Company's Board of
Directors who is not otherwise an employee of the Company or any subsidiary of
the Company is eligible to participate in the Option Plan. There are currently
nine eligible Directors of the Company.

Shares Subject to the Option Plan. An aggregate of 100,000 shares of
Common Stock of the Company are reserved for Option grants under the Option
Plan, subject to any capital adjustment which may result from a split-up or
consolidation of shares or the payment of any stock dividend, or other increase
or decrease in the number of issued shares. Any Option shares granted under the
Option Plan that expire or terminate unexercised for any reason will be
available for reissuance.

Eligibility and Option Terms. Each individual who was an eligible Director
on September 12, 1994 was granted an initial option to purchase 5,000 shares,
and each individual who becomes an eligible Director thereafter will be granted
an initial Option to purchase 5,000 shares immediately following the Annual

18
<PAGE> 22

Meeting at which such Director is first elected to be a Director. Each year, an
Option to purchase 1,000 shares will be granted immediately following the
Company's Annual Meeting to each eligible Director at such time. All Options
granted under the Option Plan are non-statutory options and do not qualify under
Section 422 of the Internal Revenue Code of 1986, as amended.

Each Option granted under the Option Plan shall expire ten years from the
date of grant and be evidenced by an Option Agreement which shall include the
exercise price per share, which is not to be less than 100% of the fair market
value per share at the close of business on the day of the grant of the Option.
Options granted immediately following an Annual Meeting shall vest and become
exercisable and non-forfeitable on the day of the next Annual Meeting, if the
optionee has continued to serve as a Director until that meeting. Options
granted other than immediately following an Annual Meeting shall vest and become
exercisable and non-forfeitable on the first anniversary of the day on which
such Option is granted, if the optionee has continued to serve as a Director
until that day.

Payment of the Option exercise price shall be made in cash, bank certified,
cashier's or personal check, or payment may be made in whole or in part by (a)
transfer to the Company of shares of Common Stock having a fair market value
equal to the Option price at the time of exercise or (b) delivery of
instructions to the Company to withhold shares that would otherwise be issued on
such exercise of the Option.

If termination of the optionee's service as a Director occurs by reason of
voluntary mid-term retirement, declining to stand for re-election, becoming a
full-time employee of the Company or a subsidiary of the Company or becoming
disabled, all unvested Options shall automatically expire and all vested Options
shall continue to be exercisable until the stated expiration date of such
Options. In the event of the death of an optionee while the optionee is a
director, the then-outstanding Options of such optionee that have vested shall
be exercisable for one year from the date of the death of the optionee or until
the stated grant expiration date, whichever is earlier. However, all Options
which have not vested shall automatically expire and shall not be exercisable.
If the termination of an optionee's service as a Director by the Board of
Directors occurs for cause or if a Director fails to be re-elected, the
Committee in its sole discretion can cancel the then-outstanding Options. No
Option shall be assignable or transferable other than by will or the laws of
descent and distribution.

Termination and Amendment of the Option Plan. The Board may amend,
terminate or suspend the Option Plan at any time, in its sole and absolute
discretion, provided that no amendment is made more than once every six months
that would change the amount, price or timing of the initial and annual grants
and no amendment is made that would materially increase the number of shares
that may be issued under the Option Plan, materially modify the requirements as
to eligibility for participation in the Option Plan or would otherwise
materially increase the benefits accruing to participants under the Option Plan
without the approval of the Company's stockholders.

Federal Income Tax Consequences to the Company and the
Participant. Options granted under the Option Plan under current Federal income
tax laws will be subject to the following tax treatment: (i) The grant of an
Option will not result in income to the optionee or any deduction allowed to the
Company; (ii) The exercise of an Option will generally result in ordinary income
to the optionee in an amount equal to the excess of the fair market value of the
shares at the time of exercise over the Option price; (iii) A deduction from
income will be allowed to the Company in an amount equal to the amount of
ordinary income recognized by the optionee; (iv) A subsequent disposition of the
shares will result in a long-term or short-term capital gain (or loss) equal to
the difference between the amount received and the tax basis of the shares,
usually fair market value at the time of exercise.

The Federal income tax consequences described in this section are based on
laws and regulations in effect on December 31, 1994. Future changes in those
laws and regulations may affect the tax consequences described herein. No
discussion of State income tax treatment has been included.

Grants Approved by the Board of Directors on September 12, 1994. The
Committee recommended and the Board approved, subject to approval and
ratification by the stockholders, the Option Plan and an award of Options for
5,000 shares each to the nine eligible non-employee Directors serving on the
Board as of the

19
<PAGE> 23

effective date of the Option Plan. The Options were awarded at an exercise price
per share of $32.75, which was the closing market price per share of the
Company's Common Stock on September 12, 1994.

If the Option Plan is approved by the Company's stockholders at the Annual
Meeting, the grants described above will become effective as of September 12,
1994. Immediately following the Annual Meeting, all non-employee Directors shall
automatically be granted Options to purchase 1,000 shares. The exercise price
per share of Common Stock subject to the Option shall not be less than 100% of
the per share fair market value of the underlying Common Stock at the close of
business on the day of the grant of the Option.

The benefits under the 1994 Stock Option Plan for Non-Employee Directors as
a group are set forth below. Calculations are based on hypothetical annual
compounded rates of stock price appreciation of 0%, 5% and 10% over the full
ten-year term of the Options.

1994 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS BENEFITS

<TABLE>
<CAPTION>
DOLLAR VALUE
($)(1)
-----------------------------
0% 5% 10% NUMBER OF SHARES
--- ------- --------- ----------------
<S> <C> <C> <C> <C>
Non-Employee Directors as a
group (9 individuals)......................... 0 926,800 2,343,800 45,000
</TABLE>

- ---------------
(1) Using the same assumptions and based on 14,040,816 shares outstanding as of
December 31, 1994, the total dollar gains for all stockholders as a group
would be $0(0%), $289.1 million (5%) and $732.9 million (10%) based on the
September 12, 1994 price per share of $32.75, the date of the initial awards
under the 1994 Stock Option Plan for Non-Employee Directors. These
hypothetical appreciation rates are not intended to forecast possible future
appreciation, if any, of the Common Stock.

The Board of Directors believes that the proposal to approve the adoption
of the 1994 Stock Option Plan for Non-Employee Directors is in the best interest
of the Company and its stockholders.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.

3. RATIFICATION OF SELECTION OF AUDITORS

The Board has selected Deloitte & Touche LLP, independent certified public
accountants, as independent auditors for the Company for the year 1995. A
resolution will be submitted to stockholders at the meeting for ratification of
such selection and the accompanying proxy will be voted for such ratification,
unless instructions to the contrary are indicated therein. Although ratification
by stockholders is not a legal prerequisite to the Board's selection of Deloitte
& Touche LLP as the Company's independent certified public accountants, the
Company believes such ratification to be desirable. If the stockholders do not
ratify the selection of Deloitte & Touche LLP, the selection of independent
certified public accountants will be reconsidered by the Board; however, the
Board may select Deloitte & Touche LLP, notwithstanding the failure of the
stockholders to ratify its selection.

The Board expects that a representative of Deloitte & Touche LLP will be
present at the meeting, will have an opportunity to make a statement if he or
she so desires, and will be available to respond to appropriate questions.

Deloitte & Touche LLP has been the Company's independent certified public
accountants since March 31, 1976. During the fiscal year ended December 31,
1994, Deloitte & Touche LLP performed audit services for the Company, including
attendance at meetings with the Audit Committee and the Board on matters related
to the audit, consultations during the year on matters related to accounting,
tax and financial reporting and review of financial and related information
included in filings with the SEC and other regulatory agencies.

20
<PAGE> 24

The appointment of auditors is approved annually by the Board. The decision
of the Board is based upon the recommendation of the Audit Committee of the
Board. In making its recommendation as to the appointment of auditors, the Audit
Committee has regularly reviewed both the proposed audit scope and the estimated
audit fees for the coming year.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.

4. MISCELLANEOUS MATTERS

As of the date of this Proxy Statement, the Board knows of no business that
will be presented for consideration at the meeting other than that which has
been referred to above. As to other business, if any, that may come before the
meeting, proxies in the enclosed form will be voted in accordance with the
judgment of the person or persons voting the proxies.

STOCKHOLDER NOMINATIONS AND PROPOSALS

The Company's By-Laws require that there be furnished to the Company
written notice with respect to the nomination of a person for election as a
Director (other than a person nominated at the direction of the Board), as well
as the submission of a proposal (other than a proposal submitted at the
direction of the Board), at a meeting of stockholders. In order for any such
nomination or submission to be proper, the notice must contain certain
information concerning the nominating or proposing stockholder, and the nominee
or the proposal, as the case may be, and must be furnished to the Company not
later than March 29, 1996. A copy of the applicable provisions of the By-Laws
may be obtained by a stockholder, without charge, upon written request to the
Secretary of the Company at its principal executive offices.

In addition to the foregoing, in accordance with the rules of the SEC, any
proposal of a stockholder intended to be presented at the Company's 1996 Annual
Meeting of Stockholders must be received by the Secretary of the Company by
December 14, 1995, in the form required under and subject to the other
requirements of the applicable rules of the SEC, in order for the proposal to be
considered for inclusion in the Company's notice of meeting, proxy statement and
proxy relating to the 1996 Annual Meeting, scheduled for Wednesday, May 29,
1996.

COST OF PROXY SOLICITATION

The Company will bear the cost of the solicitation of proxies, including
the charges and expenses of brokerage firms and others for forwarding
solicitation material to beneficial owners of shares of Common Stock. In
addition to solicitation by mail, officers and regular employees of the Company
may solicit proxies personally or by telephone. No compensation other than their
regular compensation will be paid to officers or employees for any solicitation
which they may make. The Company has retained D.F. King & Co., Inc., New York,
New York to assist in the solicitation of proxies for an estimated fee of $9,000
plus reimbursement of out-of-pocket expenses.

At any time prior to being voted, the enclosed proxy is revocable by
written notice to the Secretary of the Company or by attendance at the meeting
and voting in person.

By order of the Board of Directors,
April 12, 1995
Michael P. Maloney
Vice President, General Counsel
and Secretary

21
<PAGE> 25

APPENDIX A

ORION CAPITAL CORPORATION
1994 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS

1. PURPOSE. The purpose of the Orion Capital Corporation 1994 Stock Option
Plan for Non-Employee Directors (the "Plan") is to promote the interests of
Orion Capital Corporation (the "Company") and its stockholders by strengthening
the Company's ability to attract and retain the services of experienced and
knowledgeable non-employee Directors and by encouraging such Directors to
acquire an increased proprietary interest in the Company.

2. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided in
Article 7, the total number of shares of common stock (the "Common Stock") of
the Company for which options may be granted under the Plan shall be 100,000
shares of Common Stock (the "Shares"). The Shares shall be shares currently
authorized but unissued or currently held or subsequently acquired by the
Company as treasury shares, including shares purchased in the open market or in
private transactions. If any option granted under the Plan expires or terminates
for any reason without having been exercised in full, the Shares subject to, but
not delivered under, such options may become available for the grant of other
options under the Plan. No shares delivered to the Company in full or partial
payment of an option exercise price payable pursuant to Section 6.3 shall become
available for the grant of other options under the Plan.

3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Compensation Committee of the Company's Board of Directors (the "Committee"),
subject to Articles 9 and 10. Subject to the terms of the Plan, the Committee
shall have the power to construe the provisions of the Plan, to determine all
questions arising thereunder, and to adopt and amend such rules and regulations
for administering the Plan as the Committee deems desirable.

4. PARTICIPATION IN THE PLAN. Each member of the Company's Board of
Directors (a "Director") who is not otherwise an employee of the Company or any
subsidiary of the Company (an "Eligible Director") shall be eligible to
participate in the Plan.

5. NONSTATUTORY STOCK OPTIONS. All options granted under the Plan shall be
nonstatutory options not intended to qualify under Section 422 of the Internal
Revenue Code of 1986, as amended.

6. OPTION TERMS. Each option granted to an Eligible Director under the
Plan and the issuance of Shares thereunder shall be subject to the following
terms:

6.1 Option Agreements. Each option granted under the Plan shall be
evidenced by an option agreement (an "Agreement") duly executed on behalf of the
Company and by the Eligible Director to whom such option is granted and dated as
of the applicable date of grant. Each Agreement shall be signed on behalf of the
Company by an officer or officers delegated such authority by the Committee
using either manual or facsimile signature. Each Agreement shall comply with and
be subject to the terms and conditions of the Plan. Any Agreement may contain
such other terms, provisions and conditions not inconsistent with the Plan as
may be determined by the Committee.

6.2 Option Grant Size and Grant Dates.

6.2.1 Initial Grants. An option to purchase 5,000 Shares as adjusted
pursuant to Article 7 (an "Initial Grant") shall be granted to

a. each Director who is an Eligible Director on the Effective Date (as
hereinafter defined), and

b. each other Eligible Director immediately following the Annual
Meeting at which such Director is first elected to be a Director; provided,
that if an Eligible Director who previously received an Initial Grant
terminates service as a Director and is subsequently elected or appointed
to the Board, such Director shall not be eligible to receive a second
Initial Grant, but shall be eligible to receive only Annual Grants as
provided in Section 6.2.2.

A-1
<PAGE> 26

6.2.2 Annual Grants. An option to purchase 1,000 Shares as adjusted
pursuant to Article 7 (an "Annual Grant"), shall be granted automatically each
year, immediately following the Annual Meeting, to each Director who is an
Eligible Director at such time.

6.3 Option Exercise Price. Each Agreement shall state the exercise price
per share of the shares of Common Stock to which it relates. The exercise price
per share of Common Stock subject to an option shall not be less than 100% of
the fair market value ("Fair Market Value") per share of such Common Stock at
the close of business on the day of the grant of the option. For purposes of
this Plan, Fair Market Value on any date shall be the closing price per share of
Common Stock on such date as reported on the New York Stock Exchange composite
tape.

6.4 Exercisability. Subject to Section 6.7, an option shall become
exercisable on the first anniversary of the day on which such option was
granted, if the optionee has continued to serve as a Director until that day.

6.5 Time and Manner of Option Exercise. Any vested and exercisable option
is exercisable in whole or in part at any time or from time to time during the
term of the option period by giving written notice, signed by the person
exercising the option, to the Company stating the number of Shares with respect
to which the option is being exercised, accompanied by payment in full of the
option exercise price for the number of Shares to be purchased and by the
payment or making provision satisfactory to the Company for the payment of any
taxes which the Company is obligated to collect with respect to the issue or
transfer of the Shares upon such exercise. The date both such notice and payment
are received by the office of the Secretary of the Company shall be the date of
exercise for the stock option as to such number of Shares. No option may at any
time be exercised with respect to a fractional Share.

6.6 Payment of Exercise Price. Payment of the option exercise price may be
in cash or payment may be in whole or part by

a. transfer to the Company of shares of Common Stock having a Fair
Market Value equal to the option exercise price at the time of such
exercise, or

b. delivery of instructions to the Company to withhold Shares, that
would otherwise be issued on such exercise of the option, having a Fair
Market Value at the time of such exercise equal to the total option
exercise price of the options being exercised.

If the Fair Market Value of the number of whole shares transferred or the
number of whole option Shares surrendered is less than the total exercise price
of the option being exercised, the shortfall must be made up in cash.

6.7 Terms of Options. Each option shall expire ten years from its date of
grant, but shall be subject to earlier termination as follows:

a. In the event of the termination of an optionee's services as a
Director by reason of voluntary mid-term retirement, declining to stand for
re-election, becoming a full time employee of the Company or a subsidiary
of the Company or becoming disabled, all options granted pursuant to this
Plan but unexercisable pursuant to Section 6.4 shall automatically expire
and shall not be exercisable and all options exercisable pursuant to
Section 6.4 but unexercised shall continue to be exercisable until the
stated expiration date of such options.

b. In the event of the death of an optionee while the optionee is a
Director, the then outstanding options of such optionee that have vested
pursuant to Section 6.4 shall be exercisable for one year from the date of
the death of the optionee or until the stated grant expiration date,
whichever is earlier, by his/her successors in interest, in accordance with
the paragraph below. However, all options which have been granted, but have
not become exercisable pursuant to Section 6.4, shall automatically expire.

A-2
<PAGE> 27

c. In the event of the termination of an optionee's service as a
Director by the Board of Directors for cause or the failure of such
Director to be re-elected (other than for the reasons set forth in Section
6.7(a) or (b), the Committee in its sole discretion can cancel the then-
outstanding options of such optionee, including those options which are
exercisable and such options shall automatically expire and become
non-exercisable on the effective date of such termination.

Exercise of a deceased optionee's options that are still exercisable shall
be by the estate of such optionee or by a person or persons whom the optionee
has designated in writing filed with the Company, or, if no such designation has
been made, by the person or persons to whom the optionee's rights have passed by
will or the laws of descent and distribution.

6.8 Transferability.. The right of any optionee to exercise an option
granted under the Plan shall, during the lifetime of such optionee, be
exercisable only by the optionee and shall not be assignable or transferable by
such optionee other than by will or the laws of descent and distribution.

6.9 Limitation of Rights.

6.9.1 Limitation as to Shares. Neither the recipient of an option
under the Plan nor an optionee's successor or successors in interest shall
have any rights as a stockholder of the Company with respect to any Shares
subject to an option granted to such person until the date of issuance of a
stock certificate for such Shares.

6.9.2 Limitation as to Directorship. Neither the Plan, nor the
granting of an option, nor any other action taken pursuant to the Plan
shall constitute or be evidence of any agreement or understanding, express
or implied, that an Eligible Director has a right to continue as a Director
for any period of time or at any particular rate of compensation.

6.10 Regulatory Approval and Compliance. The Company shall not be required
to issue any certificate or certificates for Shares upon the exercise of an
option granted under the Plan or to record as a holder of record of Shares the
name of the individual exercising an option under the Plan, without obtaining to
the complete satisfaction of the Committee the approval of all regulatory bodies
deemed necessary by the Committee and without complying, to the Committee's
complete satisfaction, with all rules and regulations under federal, state, or
local law deemed applicable by the Committee.

7. CAPITAL ADJUSTMENTS. The aggregate number and class of Shares subject
to and authorized by the Plan, the number of class of Shares with respect to
which an option may be granted to an Eligible Director under the Plan as
provided in Article 6, the number and class of Shares subject to each
outstanding option, and the exercise price per share specified in each such
option shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a split-up or
consolidation of shares or any like capital adjustment or the payment of any
stock dividend, or other increase or decrease in the number of such Shares
effected without receipt of consideration by the Company.

8. EFFECTIVENESS OF THE PLAN. The Plan shall be effective as of September
12, 1994 (the "Effective Date"), subject to the approval by the Company's
stockholders. All options issued prior to the date of the approval of the Plan
by the Company's stockholders shall be issued subject to such approval. The Plan
shall continue in effect until it is terminated by action of the Board or the
Company's stockholders, but such termination shall not affect the terms of any
then outstanding options.

9. TERMINATION AND AMENDMENT OF THE PLAN. The Board may amend, terminate
or suspend the Plan at any time, in its sole and absolute discretion; provided,
however, that if required to qualify the Plan under Rule 16b-3 promulgated under
Section 16, of the Securities Exchange Act of 1934, as amended, ("Rule 16b-3")
no amendment shall be made more than once every six months that would change the
amount, price or timing of the Initial and Annual Grants, other than to comport
with changes in the Internal Revenue Code of 1986, as amended, or the rules and
regulations promulgated

A-3
<PAGE> 28

thereunder; and provided, further, that if required to qualify the Plan under
Rule 16b-3, no amendment that would

a. materially increase the number of Shares that may be issued under
the Plan,

b. materially modify the requirements as to eligibility for
participation in the Plan, or

c. otherwise materially increase the benefits accruing to participants
under the Plan

shall be made without the approval of the Company's stockholders.

10. COMPLIANCE WITH RULE 16B-3. Other provisions of the Plan
notwithstanding, neither the Committee nor any other person (other than an
Eligible Director acting in conformity with the terms of the Plan) shall have
any discretionary authority to make determinations regarding the Plan required
by Rule 16b-3 to be afforded exclusively to "disinterested persons" as defined
thereunder.

Adopted by the Board of Directors on September 12, 1994.

A-4
<PAGE> 29
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ORION CAPITAL CORPORATION

PROXY FOR HOLDERS OF COMMON STOCK - ANNUAL MEETING MAY 31, 1995

The undersigned holder of Common Stock of Orion Capital Corporation
hereby appoints Alan R. Gruber, Larry D. Hollen and Michael P. Maloney, and
each of them, with full power of substitution to each of them, and with
authority in each to act in the absence of the other, as attorneys and
proxies of the undersigned to vote, as designated below, all the shares of
Common Stock which the undersigned could vote if personally present at the
Annual Meeting of Stockholders of Orion Capital Corporation to be held at
11:30 A.M., Eastern Daylight Saving Time, Wednesday, May 31, 1995, at Chemical
Bank, 270 Park Avenue, 3rd Floor Auditorium, New York, New York, and at any
adjournments thereof.

PROXIES WILL BE VOTED AS SPECIFIED. WHERE NO SPECIFICATION IS GIVEN, PROXIES
WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR PROPOSALS 2 AND 3. IF ANY
NOMINEE FOR DIRECTOR SHOULD BECOME UNAVAILABLE FOR ELECTION, THIS PROXY WILL
BE VOTED FOR SUCH SUBSTITUTE NOMINEE AS MAY BE PROPOSED BY THE BOARD OF
DIRECTORS.

(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)

PROXIES WILL BE VOTED AS SPECIFIED. WHERE NO SPECIFICATION IS GIVEN, PROXIES
WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS AND "FOR" PROPOSALS 2 AND 3.
IF ANY NOMINEE FOR DIRECTOR SHOULD BECOME UNAVAILABLE FOR ELECTION, THIS PROXY
WILL BE VOTED FOR SUCH SUBSTITUTE NOMINEE AS MAY BE PROPOSED BY THE BOARD OF
DIRECTORS.
Please mark your
/X/ votes as this

____________
Common

THE BOARD RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
WITHHOLD
FOR AUTHORITY
1. ELECTION OF DIRECTORS for all nominees listed / / / /
(except as marked)
B. Cohn, J. Colman, A. Gruber, L. Hollen, R. Jeffrey,
W. Lyons, J. McWilliams, R. Moore, R. Sanborn,
W. Shepherd, J. Thorne, R. Ware

(INSTRUCTIONS: To withhold authority to vote for any
individual nominee write that nominee's name in the
space provided below.)
FOR AGAINST ABSTAIN
2. APPROVAL OF STOCK OPTION PLAN FOR NON-EMPLOYEE / / / / / /
DIRECTORS. A proposal to approve the adoption
of the 1994 Stock Option Plan for Non-Employee
Directors.

3. APPROVAL OF AUDITORS. A proposal to ratify the / / / / / /
selection of Deloitte & Touche LLP, independent
certified public accountants, as auditors for the
Company for the year 1995.

4. Upon such other business as may properly come
before the meeting, or any adjournments thereof.

The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders, the Proxy Statement for such meeting and Annual
Report of the Company for 1994.

I PLAN TO / /
ATTEND
MEETING

Signature(s)___________________________________________________ Date ________
NOTE: Please sign exactly as your name appears hereon. All joint owners must
sign. When signing as executor, administrator, attorney, trustee or guardian,
please give full title for each. If a corporation, please sign in full
corporation name by president, vice president or other authorized person.
If a partnership, please sign in partnership name by a partner. PLEASE SIGN,
DATE AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.

<PAGE> 30
VOTING INSTRUCTIONS TO VANGUARD FIDUCIARY TRUST COMPANY AS TRUSTEE

UNDER THE ORION CAPITAL CORPORATION

EMPLOYEE'S STOCK SAVINGS AND RETIREMENT PLAN

I hereby direct that at the Annual Meeting of Stockholders of Orion
Capital Corporation on May 31, 1995, and at any adjournments thereof, the
voting rights pertaining to my pro rata share of Orion Capital Corporation
Common Stock held by the Trustee under the Employee's Stock Savings and
Retirement Plan shall be exercised in accordance with the Proxy Statement
for the election of the persons nominated as directors (unless such authority
is withheld as provided on this card) and with respect to all the additional
proposals as checked on this card, or if not checked, for such proposals.

(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)

____________
Common

THE BOARD RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2 AND 3.
WITHHOLD
FOR AUTHORITY
1. ELECTION OF DIRECTORS for all nominees listed / / / /
(except as marked)
B. Cohn, J. Colman, A. Gruber, L. Hollen, R. Jeffrey,
W. Lyons, J. McWilliams, R. Moore, R. Sanborn,
W. Shepherd, J. Thorne, R. Ware

3. APPROVAL OF AUDITORS. A proposal to ratify the / / / / / /
selection of Deloitte & Touche LLP, independent
certified public accountants, as auditors for the
Company for the year 1995.

4. Upon such other business as may properly come
before the meeting, or any adjournments thereof.

The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders, the Proxy Statement for such meeting and Annual
Report of the Company for 1994.

I PLAN TO / /
ATTEND
MEETING

Signature(s)___________________________________________________ Date ________
PLEASE SIGN AND RETURN THIS CARD PROMPTLY. As to any matters coming before
the Meeting (whether or not specifically mentioned above) for which no
written direction is received by the Trustee prior to the date of the Meeting,
the Trustee shall exercise voting rights on your behalf in the same proportions
as the Trustee was instructed to vote with respect to the shares for which it
received instructions. PLEASE SIGN, DATE AND RETURN YOUR PROXY IN THE ENCLOSED
ENVELOPE.