<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
ALLEGHANY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
ALLEGHANY CORPORATION
- --------------------------------------------------------------------------------
(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 transactions 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 registrations 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
ALLEGHANY CORPORATION
PARK AVENUE PLAZA
NEW YORK, NEW YORK 10055
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 22, 1994 AT 2:00 P.M., LOCAL TIME
------------------
CORPORATION TRUST CENTER
1209 ORANGE STREET
WILMINGTON, DELAWARE
Notice is hereby given that the 1994 Annual Meeting of Stockholders of
Alleghany Corporation (the "Company") will be held at Corporation Trust Center,
1209 Orange Street, Wilmington, Delaware, on Friday, April 22, 1994 at 2:00
p.m., local time, for the following purposes:
1. To elect three directors for terms expiring in 1997.
2. To consider and take action upon a proposal to approve the Company's
Amended and Restated Directors' Stock Option Plan.
3. To consider and take action upon a proposal to ratify the selection of
KPMG Peat Marwick, independent certified public accountants, as auditors
for the Company for the year 1994.
4. To transact such other business as may properly come before the meeting,
or any adjournment or adjournments thereof.
Holders of common stock of the Company 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 March 1, 1994 as the record date
for the determination of stockholders entitled to notice of, and to vote at, the
Annual Meeting and any adjournments thereof.
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 voting at the
meeting in person.
By order of the Board of Directors
JOHN E. CONWAY
Vice President, Secretary and Treasurer
March 28, 1994
<PAGE> 3
ALLEGHANY CORPORATION
PARK AVENUE PLAZA
NEW YORK, NEW YORK 10055
PROXY STATEMENT
------------------
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 22, 1994
------------------
This statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Alleghany Corporation (the "Company") from holders
of the Company's outstanding shares of common stock ("Common Stock") entitled to
vote at the 1994 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. These proxy materials
are being mailed to stockholders on or about March 28, 1994.
The Board of Directors has fixed the close of business on March 1, 1994 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, said meeting. Holders of Common Stock are entitled to one vote for
each share held of record on the record date with respect to each matter to be
acted on at the 1994 Annual Meeting.
On March 1, 1994, there were outstanding and entitled to vote 6,626,610
shares of Common Stock. The number of shares of Common Stock as of March 1,
1994, and the share ownership information provided elsewhere herein, do not
include shares to be issued by the Company in respect of the dividend of one
share of Common Stock for every 50 shares of Common Stock outstanding, to be
paid by the Company on April 26, 1994 to stockholders of record at the close of
business on April 1, 1994.
PRINCIPAL STOCKHOLDERS
As of March 1, 1994, approximately 38.9 percent* of the Company's
outstanding Common Stock was believed to be beneficially owned by F.M. Kirby,
Allan P. Kirby, Jr. and their sisters, Grace Kirby Culbertson and Ann Kirby
Kirby, primarily through a number of family trusts.
- ---------------
* See Note (4) on page 3.
<PAGE> 4
The following table sets forth the beneficial ownership of Common Stock as
of March 1, 1994 of certain persons believed by the Company to be the beneficial
owners of more than 5 percent of such class of securities.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
-------------------------------------------------------------------
SOLE VOTING SHARED VOTING
NAME AND ADDRESS POWER AND SOLE POWER AND/OR SHARED PERCENT
OF BENEFICIAL OWNER INVESTMENT POWER INVESTMENT POWER TOTAL OF CLASS
- ---------------------------------------- ------------------- -------- --------
<S> <C> <C> <C> <C>
F.M. Kirby.............. 270,992 586,872 857,864(1) 12.9
17 DeHart Street
P.O. Box 151
Morristown, NJ 07963
Allan P. Kirby, Jr. .... 633,363 -- 633,363(2) 9.5
14 E. Main Street
P.O. Box 90
Mendham, NJ 07945
Grace Kirby
Culbertson............ 130,301 248,920 379,221(3) 5.7
Blue Mill Road
Morristown, NJ 07960
Ann Kirby Kirby......... 317,881 392,786 710,667(4) 10.7
c/o Carter,
Ledyard & Milburn
2 Wall Street
New York, NY 10005
Southeastern Asset
Management, Inc....... (5) (5) 634,212(5) 9.6
860 Ridgelake
Boulevard
Suite 301
Memphis, TN 38120
Neuberger & Berman...... 254,000 510,478 510,478(6) 7.7
605 Third Avenue
New York, NY 10158
</TABLE>
- ---------------
(1) Includes 110,344 shares of Common Stock held by F.M. Kirby as sole trustee
of trusts for the benefit of his children; 399,316 shares held by a trust of
which Mr. Kirby is co-trustee and primary beneficiary; and 187,556 shares
held by trusts for the benefit of his children and his children's
descendants as to which Mr. Kirby was granted a proxy and, therefore, had
shared voting power. Mr. Kirby disclaims
2
<PAGE> 5
beneficial ownership of the Common Stock held for the benefit of his
children and for the benefit of his children and his children's descendants.
Mr. Kirby held 160,648 shares directly.
(2) Includes 110,919 shares of Common Stock held by the children of Allan P.
Kirby, Jr. as to which Mr. Kirby holds an irrevocable power of attorney;
305,655 shares held by a trust of which Mr. Kirby is co-trustee and
beneficiary; and 6,094 shares issuable under stock options granted pursuant
to the Directors' Stock Option Plan (the predecessor of the Amended and
Restated Directors' Stock Option Plan discussed below). Mr. Kirby disclaims
beneficial ownership of the Common Stock held by his children. Mr. Kirby
held 210,695 shares directly.
(3) Includes 38,700 shares of Common Stock held by Grace Kirby Culbertson as co-
trustee of trusts for the benefit of her children; and 210,220 shares held
by trusts for the benefit of Mrs. Culbertson and her descendants, of which
Mrs. Culbertson is co-trustee. Mrs. Culbertson held 130,301 shares directly.
(4) Ann Kirby Kirby has disclaimed being a controlling person or member of a
controlling group with respect to the Company, and has declined to supply
information with respect to her ownership of Common Stock. However, Mrs.
Kirby filed a statement on Schedule 13D dated April 5, 1982 with the
Securities and Exchange Commission reporting beneficial ownership, both
direct and indirect through various trusts, of 710,667 shares of the common
stock of Alleghany Corporation, a Maryland corporation and the predecessor
of the Company ("Old Alleghany"). Upon the liquidation of Old Alleghany in
December 1986, stockholders received $43.05 in cash and one share of Common
Stock for each share of Old Alleghany common stock. The stock ownership
information provided herein as to Mrs. Kirby is based solely on her
statement on Schedule 13D and does not reflect the two-percent stock
dividends paid in each of the years 1985 through 1993 by Old Alleghany or
the Company; if Mrs. Kirby continued to hold the 710,667 shares together
with all stock dividends received in consequence through the date hereof,
her beneficial ownership would have increased by 138,641 shares. The Company
has not received any reports from Mrs. Kirby regarding changes in her
ownership of the Company's Common Stock; therefore, it does not know whether
she has beneficially owned more than ten percent of its Common Stock since
January 1, 1993 nor whether she was required to file such reports with the
Securities and Exchange Commission, the New York Stock Exchange and the
Company pursuant to the rules governing the reporting of securities
transactions by directors, officers and ten-percent stockholders.
3
<PAGE> 6
(5) According to an amendment dated February 11, 1994 to a Schedule 13G
statement filed by Southeastern Asset Management, Inc. ("Southeastern"), an
investment advisor, Southeastern had sole voting power over 466,941 shares,
shared voting power over 129,738 shares and no voting power over 37,533
shares, for a total of 634,212 shares. Its dispositive power with respect to
such shares was reported as follows: sole dispositive power over 503,393
shares, shared dispositive power over 129,738 shares and no dispositive
power over 1,081 shares. O. Mason Hawkins, Chairman of the Board and
President of Southeastern, joined in the filing of Southeastern's amendment
to its Schedule 13G statement in the event that he could be deemed to be a
controlling person of Southeastern as a result of his official positions
with Southeastern or ownership of its voting securities. Mr. Hawkins
expressly disclaimed such control. Southeastern's amendment to its Schedule
13G statement indicated that all shares set forth therein were owned legally
by clients of Southeastern and no such shares were owned directly or
indirectly by Southeastern or Mr. Hawkins, both of whom disclaimed
beneficial ownership of such shares. The statement also indicated that some
or all of the 129,738 shares over which Southeastern had shared voting and
dispositive power were owned by two separate series of Southeastern Asset
Management Funds Trust, an open-end management investment company registered
under the Investment Company Act of 1940, as amended. Neither series owned 5
percent or more of these securities.
(6) According to a Schedule 13G statement filed by Neuberger & Berman, a broker-
dealer and investment advisor, which statement was most recently amended on
January 31, 1994, Neuberger & Berman had sole voting power over 254,000
shares and shared dispositive power over 510,478 shares, which number
included those shares over which it had sole voting power. The statement
indicated that Neuberger & Berman was deemed to be a beneficial owner since
it has the power to make investment decisions over securities for many
unrelated clients, but it disclaimed any economic interest in such
securities, stating that its clients were the actual owners of the
securities and had the sole right to receive and the power to direct the
receipt of dividends from or proceeds from the sale of such securities. None
of these clients had an interest that related to 5 percent or more of these
securities. The statement also indicated that the shares reported therein as
being beneficially owned did not include 39,328 shares owned by partners of
Neuberger & Berman in their own personal securities accounts.
4
<PAGE> 7
1. ELECTION OF DIRECTORS
Pursuant to the Company's certificate of incorporation and by-laws, the
Board of Directors is divided into three separate classes of directors, which
are required to be as nearly equal as practicable. At each annual meeting of
stockholders, one class of directors is elected to a term of three years. On
June 16, 1992, the Board of Directors, pursuant to the Company's certificate of
incorporation and by-laws, approved an increase in the total number of directors
from seven to nine.
John J. Burns, Jr., Dan R. Carmichael and William K. Lavin have been
nominated by the Board of Directors for election as directors at the 1994 Annual
Meeting, each to serve for a term of three years, until the 1997 Annual Meeting
of Stockholders and until his successor is duly elected and qualified. Mr. Burns
was last elected by stockholders of the Company at their Annual Meeting on April
26, 1991. Mr. Carmichael was elected by the Board of Directors effective October
19, 1993 for a term expiring in 1994, filling a vacancy resulting from the
resignation in July 1993 of Thomas S. Johnson, a director of the Company since
1992. (Mr. Johnson became Chief Executive Officer of Green Point Savings Bank
and, due to regulatory restrictions applicable to depository institutions, could
no longer serve as a director of the Company.) Mr. Lavin was elected by the
Board of Directors effective September 15, 1992 to fill a vacancy resulting from
the increase in the number of directors of the Company.
Proxies in the enclosed form received from holders of Common Stock will be
voted for the election of the three nominees named above as directors of the
Company unless stockholders indicate otherwise. If any of the foregoing nominees
is unable to serve for any reason (which event is not anticipated), the shares
represented by the enclosed proxy may be voted for such other person or persons
as may be determined by the holders of such proxy unless stockholders indicate
otherwise. Directors will be elected by an affirmative vote of a plurality of
the shares of Common Stock present in person or represented by proxy and
entitled to vote at the 1994 Annual Meeting. Thus, those nominees who receive
the highest, second-highest and third-highest numbers of votes for their
election as directors will be elected, regardless of the number of shares that
are not voted for the election of such nominees. Shares with respect to which
authority to vote for any nominee or nominees is withheld will not be counted in
the total number of shares voted for such nominee or nominees.
The following information includes the age, the year in which first elected
a director of the Company or Old Alleghany, the principal occupation (in
italics), and other directorships of each of the nominees named for election as
directors, and of the other current directors of the Company whose terms will
not expire until 1995 or 1996.
5
<PAGE> 8
<TABLE>
<S> <C> <C>
-------------------
Nominee for Election: President, Alleghany Corporation; director,
John J. Burns, Jr. Armco Inc., Chicago Title and Trust Company,
Age 62 Chicago Title Insurance Company, Sacramento
Director since 1968 (PHOTO) Savings Bank, Mineral Holdings Inc., World
Minerals Inc., and URC Holdings Corp. and its
subsidiaries. Chairman of the Nominating Com-
mittee and member of the Executive Committee.
-------------------
-------------------
Nominee for Election: President and Chief Executive Officer and
Dan R. Carmichael (PHOTO) director, Anthem P&C Holdings, Inc.
Age 49 (insurance).
Director since 1993
-------------------
-------------------
Nominee for Election: Chairman of the Board and Chief Executive
William K. Lavin (PHOTO) Officer, Woolworth Corporation (retailing).
Age 49 Chairman of the Audit Committee and member of
Director since 1992 the Compensation Committee.
-------------------
-------------------
Allan P. Kirby, Jr. President, Liberty Square, Inc.
Age 62 (investments); management of family and
Director since 1963 (PHOTO) personal affairs; director, Chicago Title and
Term expires in 1995 Trust Company and Chicago Title Insurance
Company. Chairman of the Executive Committee.
-------------------
-------------------
John E. Tobin Retired Partner, law firm of Dorsey &
Age 70 (PHOTO) Whitney. Member of the Executive and Audit
Director since 1968 Committees.
Term expires in 1995
-------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<S> <C> <C>
-------------------
James F. Will President and Chief Executive Officer and
Age 55 (PHOTO) director, Armco Inc. (steel manufacturing and
Director since 1992 metals processing). Member of the Audit
Term expires in 1995 Committee.
-------------------
-------------------
F.M. Kirby Chairman of the Board, Alleghany Corporation;
Age 74 (PHOTO) director, Sacramento Savings Bank and World
Director since 1958 Minerals Inc. Member of the Executive
Term expires in 1996 Committee.
-------------------
-------------------
Paul F. Woodberry Financial Consultant; director, Sacramento
Age 66 (PHOTO) Savings Bank, BF Enterprises, Inc., World
Director since 1979 Minerals Inc. and one of its subsidiaries,
Term expires in 1996 and URC Holdings Corp. and its subsidiaries.
-------------------
-------------------
S. Arnold Zimmerman Retired Senior Vice President, General
Age 74 (PHOTO) Counsel and Secretary, Avon Products, Inc.
Director since 1971 (beauty products). Chairman of the
Term expires in 1996 Compensation Committee and member of the
Nominating Committee.
-------------------
</TABLE>
All of the foregoing persons have had the principal occupations indicated
throughout the last five years (or have retired from the principal occupations
indicated), except as follows. Mr. Carmichael became President and Chief
Executive Officer of Anthem P&C Holdings, Inc. (and Chairman of its subsidiary
The Shelby Insurance Company) on February 1, 1993; prior thereto, he was
President and Chief Executive Officer of The Shelby Insurance Company. The
Shelby Insurance Company was owned by the Company from 1986 through 1991. Mr.
Lavin became Chairman of the Board and Chief Executive Officer of Woolworth
Corporation effective July 1, 1993; he served as Executive Vice
7
<PAGE> 10
President -- Finance and Administration and Chief Financial Officer from May
1991 to June 30, 1993 and as Executive Vice President -- Finance and Chief
Financial Officer prior thereto. Mr. Will joined Armco Inc. on April 24, 1992 as
President and Chief Operating Officer upon the merger of a wholly owned
subsidiary of Armco Inc. and Cyclops Industries, Inc., and became President and
Chief Executive Officer effective January 1, 1994. Prior to April 24, 1992, Mr.
Will was employed by Cyclops Industries, Inc. (steel manufacturing) as President
and Chief Executive Officer. Mr. Woodberry's principal occupation prior to his
becoming a financial consultant in February 1991 was Executive Vice President
and Chief Financial Officer of BF Enterprises, Inc. (real estate), a position in
which Mr. Woodberry continues to serve.
F.M. Kirby and Allan P. Kirby, Jr. are brothers, and are among the
principal stockholders of the Company.
The Board of Directors held eight meetings in 1993. Each director attended
more than 75 percent of the meetings of the Board of Directors held during the
period of his service in 1993. Each director attended 100 percent of the
meetings of the committees of the Board on which he served that were held during
the period of his service in 1993.
The Executive Committee may exercise certain powers of the Board of
Directors regarding the management and direction of the business and affairs of
the Company when the Board of Directors is not in session. All action taken by
the Executive Committee is reported to and reviewed by the Board of Directors.
The Audit Committee of the Board of Directors reviews and makes reports and
recommendations to the Board of Directors with respect to the selection of the
independent auditors of the Company and its subsidiaries, the arrangements for
and the scope of the audits to be performed by them, and the internal audit
activities, accounting procedures and controls of the Company and its
subsidiaries, and reviews the annual consolidated financial statements of the
Company and its subsidiaries. This committee held three meetings in 1993.
The Compensation Committee of the Board of Directors reviews the annual
recommendations of the chief executive officer and the Chairman of the Board
concerning the compensation of officers of the Company and of certain of the
most highly paid employees of its division and makes recommendations to the
Board of Directors with respect thereto; and reviews the annual adjustments
proposed to be made to the compensation of certain of the most highly paid
officers of the Company's subsidiaries, reports to the Board of Directors with
respect thereto, and makes such recommendations to the Board of Directors with
respect thereto as the committee may deem appropriate.
8
<PAGE> 11
This committee, which held one meeting in 1993, also administers the Company's
1983 Long-Term Incentive Plan (under which the right to make awards of incentive
compensation terminated on December 31, 1992) and the Company's 1993 Long-Term
Incentive Plan.
The Nominating Committee of the Board of Directors screens candidates and
makes recommendations to the Board of Directors as to persons to be nominated by
the Board of Directors for election thereto by the stockholders or to be chosen
by the Board of Directors to fill newly created directorships or vacancies on
the Board of Directors. This committee held one meeting in 1993.
The following table sets forth the beneficial ownership of Common Stock as
of March 1, 1994 of each of the nominees named for election as a director, each
of the other current directors and each of the executive officers named in the
Summary Compensation Table below.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
-----------------------------------------------------------------
SOLE VOTING SHARED VOTING
POWER AND POWER AND/OR
NAME OF SOLE INVESTMENT SHARED INVESTMENT PERCENT
BENEFICIAL OWNER POWER POWER TOTAL OF CLASS
- -------------------------- --------------- ----------------- ------- --------
<S> <C> <C> <C> <C>
John J. Burns, Jr......... 17,033 -- 17,890(1) 0.27
Dan R. Carmichael......... -- 584 584 *
William K. Lavin.......... 204 -- 204 *
Allan P. Kirby, Jr........ 633,363 -- 633,363(2) 9.55
John E. Tobin............. 7,259 -- 7,259(3) 0.11
James F. Will............. -- -- -- *
F.M. Kirby................ 270,992 586,872 857,864(4) 12.95
Paul F. Woodberry......... 6,094 13,179 19,273(3) 0.29
S. Arnold Zimmerman....... 5,089 -- 5,089(3) 0.08
David B. Cuming........... 19,987 -- 19,987 0.30
Richard P. Toft........... 3,974 -- 3,974 0.06
Theodore E. Somerville.... 9,725 -- 9,725 0.15
</TABLE>
- ---------------
* Represents less than 0.01 percent of the outstanding Common Stock.
(1) Includes 857 shares of Common Stock owned by Mr. Burns's wife or held by her
as custodian for their daughter. Mr. Burns had no voting or investment power
over these shares, and he disclaims beneficial ownership of them.
(2) See Note (2) on page 3.
9
<PAGE> 12
(3) Includes 6,094 shares of Common Stock in the case of Messrs. Woodberry and
Tobin, and 3,864 shares of Common Stock in the case of Mr. Zimmerman,
issuable under stock options granted pursuant to the Directors' Stock Option
Plan (the predecessor of the Amended and Restated Directors' Stock Option
Plan discussed below).
(4) See Note (1) on page 2.
All directors and executive officers as a group (14 persons) beneficially
owned 1,578,619 shares, or 23.7 percent, of the outstanding Common Stock
(adjusted to include shares of Common Stock issuable upon exercise of stock
options); such directors and executive officers had sole voting and investment
power with respect to 973,720 shares, shared voting and/or investment power with
respect to 604,042 shares and no voting or investment power with respect to 857
shares.
10
<PAGE> 13
EXECUTIVE COMPENSATION
The information under this heading relates to the chief executive officer
and the four other most highly compensated executive officers of the Company in
1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION
------------------------------------------------ LONG-TERM ALL
OTHER ANNUAL INCENTIVE OTHER
NAME AND PRINCIPAL BONUS COMPENSATION PLAN PAYOUTS COMPENSATION
POSITION YEAR SALARY (1) (2)(3) (4) (6)(3)
- ----------------------- ----- --------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John J. Burns, Jr., 1993 $ 500,000 $ 257,930 $ 2,515 $ 631,960 $ 78,120
President and, since 1992 483,500 220,404 3,048 1,275,507(5) 74,640
July 1, 1992, chief 1991 432,280 199,332 474,376
executive officer
F.M. Kirby, 1993 $ 300,000 $ 148,005 $ 12,073 $ 798,840 $ 60,472
Chairman of the 1992 468,500 314,265 15,934 1,735,965(5) 85,808
Board and, prior to 1991 596,000 294,000 708,747
July 1, 1992, chief
executive officer
David B. Cuming, 1993 $ 252,000 $ 117,162 $ 1,223 $ 301,560 $ 39,101
Senior Vice 1992 240,000 108,418 1,512 591,934(5) 37,010
President 1991 215,000 98,385 237,133
Richard P. Toft, 1993 $ 377,500 $ 254,812 $ 1,670 $ 721,511 $ 99,991
Senior Vice 1992 372,500 295,310 1,659 614,079(5) 81,947
President; President, 1991 393,750 1,236,877 79,035
Chief Executive
Officer and, since
January 25, 1994,
Chairman of Chicago
Title and Trust
Company ("CT&T");
Chairman and, prior to
January 25, 1994, Chief
Executive Officer of
Chicago Title Insurance
Company
Theodore E. Somerville, 1993 $ 231,000 $ 81,217 $ 850 $ 274,120 $ 35,182
Vice President and 1992 220,000 75,977 707 591,934(5) 36,458
General Counsel 1991 206,000 65,167 237,133
</TABLE>
- ---------------
(1) Except for amounts listed for Mr. Toft, these amounts represent bonuses paid
under the Company's Management Incentive Plan, which is a short-term
incentive plan designed to reward officers (other than Mr. Toft) for
achieving specified net earnings per share and/or individual objectives.
Amounts listed for Mr. Toft repre-
11
<PAGE> 14
sent (i) bonuses paid under the Presidents' Plan of CT&T, which is a
short-term incentive plan designed to reward Mr. Toft for CT&T's achievement
of specified after-tax operating income and Mr. Toft's achievement of
specified individual objectives (such bonuses do not include additional
amounts earned under such plan in each of the reported years, payment of
which was deferred and is subject to adjustment to reflect title insurance
policy claims experience in the year of the deferral and for three years
thereafter, as more fully explained in note (3) to the table relating to
long-term incentive plans; the deferred amount for 1993 is reported below in
such table); (ii) awards of shares of Common Stock under the Company's 1983
Long-Term Incentive Plan (the "1983 Plan") valued at $44,744 in 1992 and
$47,500 in 1991; and (iii) $1,000,000 in 1991 under an incentive arrangement
with the Company for the sale of the Company's former property and casualty
insurance subsidiary, The Shelby Insurance Company.
(2) These amounts represent payments for reimbursement of taxes incurred by the
named individuals as a result of (i) the payment by the Company (or, in the
case of Mr. Toft, by CT&T) of premiums on life insurance policies maintained
on their behalf, and (ii) the reimbursement itself.
(3) Amounts for 1991 are omitted pursuant to Securities and Exchange Commission
rules.
(4) Except for amounts listed for Mr. Toft, these amounts represent payouts in
settlement of performance shares awarded under the 1983 Plan. Except as
described below, performance shares entitle the holder thereof to payouts of
cash and/or Common Stock (in such proportion as is determined by the
Compensation Committee) up to a maximum amount equal to the value of one
share of Common Stock on the payout date, depending upon the average annual
compound growth in the Company's Earnings Per Share (as defined pursuant to
the 1983 Plan) in a four-year award period commencing with the year
following that in which the performance shares were awarded; payouts have
been made one-half in cash and one-half in Common Stock. The terms of the
performance shares paid in 1991 were adjusted in light of the spin-off of
Cyclops Industries, Inc. ("Cyclops"), a wholly owned subsidiary of the
Company, to the Company's stockholders in June 1987; for each such
performance share with respect to which full payment was made, the Company
paid, in addition to all other payouts due with respect thereto, an amount
equal to the value, on the payment date, of one share of Cyclops common
stock. Mr. Kirby's payouts for the 1988-91 and 1987-90 award periods were
deferred under the Company's Deferred Compensation Plan and thereafter were
paid in cash. Amounts listed for Mr. Toft in 1993 and 1992 represent payouts
in settlement of performance
12
<PAGE> 15
units awarded under CT&T's Performance Unit Incentive Plan of 1989 (the
"CT&T 1989 Plan"). Each performance unit entitled the holder thereof to a
payout of $1.00 in cash for each $1 million of cumulative operating income
(after provision for taxes and for annual dividends equal to 6 percent of
each year's beginning net worth) of CT&T and its subsidiaries in a
three-year award period commencing with the year in which the performance
unit was awarded. Payouts under the CT&T 1989 Plan were increased or
decreased by the application of a multiplier based on CT&T's return on
equity and a second multiplier based on dividends actually or constructively
paid by CT&T. The former multiplier ranged from a maximum of 1.75 for a
return on equity of 21 percent or higher to a minimum of 1.0 for a return on
equity of 12 percent or lower; the latter ranged from 1.30 for dividends
equalling 12 percent or more of CT&T's operating equity to 0.85 percent for
dividends equalling 3 percent or less of CT&T's operating equity. In
addition, the amounts listed for Mr. Toft in 1993 and 1992 include $227,360
and $131,598, respectively, in settlement of performance shares awarded
under the 1983 Plan; each such amount was paid one-half in cash and one-half
in Common Stock. The 1993 and 1992 amounts also include amounts representing
earlier bonus deferrals under the Presidents' Plan of CT&T, as follows: (i)
the 1993 amount includes $33,394 representing the portion of Mr. Toft's
bonus that was deferred in 1990 and was subject to reduction to reflect
unfavorable title insurance policy claims during 1990-93, $9,621
representing interest earned thereon during such period, and $111,754
representing a related incentive payment; and (ii) the 1992 amount includes
$67,469 representing the portion of Mr. Toft's bonus that was deferred in
1989 and was subject to reduction to reflect unfavorable title insurance
policy claims during 1989-92, $20,874 representing interest earned thereon
during such period, and $112,077 representing a related incentive payment;
this deferral program is more fully explained in note (3) to the table
relating to long-term incentive plans. The amount listed for Mr. Toft in
1991 represents a final payout of an award made under an individual
incentive arrangement which was established because Mr. Toft did not
participate in the predecessor to the CT&T 1989 Plan. Pursuant to this
individual arrangement, Mr. Toft was entitled to receive cash payouts equal
to 1 1/4 percent of the operating income (after provision for taxes and for
annual dividends equal to 6 percent of each year's beginning net worth) of
CT&T and its subsidiaries in 1989 and 1990, respectively. Payouts to Mr.
Toft were subject to increase by the application of a multiplier based on
CT&T's actual performance as compared with its Financial Plan in effect on
the date of the award, ranging from a maximum of 2.0 for actual results of
150 percent or more of plan to a minimum of 1.0 for actual results equal to
or less than plan. To reflect Mr. Toft's increasing participation in the
CT&T 1989 Plan, payouts for 1989 and 1990 under this individual
13
<PAGE> 16
arrangement were reduced by one-third and two-thirds, respectively. Since
1990 was the last year covered by the predecessor to the CT&T 1989 Plan,
this individual arrangement for Mr. Toft likewise terminated at the end of
1990, and the final payout thereunder was made in 1991.
(5) These amounts represent payouts for two award periods (ending in 1991 and
1992, respectively), whereas the 1993 amounts represent payouts for only one
award period (ending in 1993) and the 1991 amounts represent payouts for
only one award period (ending in 1990). The payouts for the award period
ending in 1992 would ordinarily have been made in early 1993 but were
accelerated into December 1992 in view of an anticipated increase in
individual tax rates in 1993 and a proposal to implement a $1 million
limitation on the amount of compensation deductible by the Company or CT&T
with respect to any single individual. The payouts for the award period
ending in 1993 would ordinarily have been made in early 1994 but were
accelerated into December 1993 in view of the enactment of the Revenue
Reconciliation Act of 1993 which removed a cap, formerly at $135,000, on
earnings received after December 31, 1993 that would be subject to the
Medicare hospital insurance payroll tax payable by the Company and its
employees. Accordingly, no payouts of long-term incentive compensation under
the 1983 Plan or the successor to the CT&T 1989 Plan are scheduled to be
made in 1994.
(6) The 1993 amounts, except for the amount listed for Mr. Toft, represent (i)
savings benefits of $75,000, $45,000, $37,725 and $34,581 for Messrs. Burns,
Kirby, Cuming and Somerville, respectively, credited pursuant to the
Company's Deferred Compensation Plan; and (ii) benefits, valued at $3,120,
$15,472, $1,376 and $601 pursuant to Securities and Exchange Commission
rules, of life insurance policies maintained by the Company on behalf of
Messrs. Burns, Kirby, Cuming and Somerville, respectively. The 1993 amount
listed for Mr. Toft represents (i) $61,270 accrued under the CT&T Executive
Salary Continuation Plan, which is a retirement plan designed to encourage
key employees to remain with CT&T until retirement and which provides
post-retirement monthly income of 2 percent of final monthly income at
retirement multiplied by the number of years of participation in the plan,
up to a maximum of 10 percent of final monthly salary; (ii) $31,964 credited
to Mr. Toft's account under the CT&T Savings and Profit Sharing Plan, which
is a 401(k) plan offering CT&T employees an opportunity to save a portion of
their income on a tax-deferred basis, and providing for matching CT&T
contributions, as follows: (a) $0.25 for every $1.00, up to 6 percent, of
salary that such an employee contributes to the plan (within Internal
Revenue Service limits), (b) up to an additional $1.25 for every such $1.00,
depending on the profitability of CT&T, and (c) a supplemental bonus in
14
<PAGE> 17
an amount equal to the additional amount (if any) that CT&T would have
contributed but for Internal Revenue Service regulations which limit the
amount that an employee may contribute to a 401(k) plan; and (iii) benefits,
valued at $9,276 pursuant to Securities and Exchange Commission rules, of a
split-dollar insurance arrangement maintained by CT&T on behalf of Mr. Toft
and a group life insurance policy maintained by CT&T on behalf of its
employees, including Mr. Toft.
LONG-TERM INCENTIVE PLANS -- AWARDS IN 1993
<TABLE>
<CAPTION>
PERFORMANCE OR
OTHER PERIOD
NUMBER OF UNTIL ESTIMATED FUTURE PAYOUTS(1)
SHARES, UNITS MATURATION -----------------------------------
NAME OR DOLLARS(1) OR PAYOUT THRESHOLD TARGET MAXIMUM
- ------------------------------- ------------- --------------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
John J. Burns, Jr.............. 4,575 1994-97 $ 1,601 -- $640,500
F.M. Kirby..................... 2,110 1994-97 $ 739 -- $295,400
David B. Cuming................ 2,251 1994-97 $ 788 -- $315,140
Richard P. Toft................ 4,000(2) 1994-96 -- $863,487(2) --
$77,860(3) 1993-96 -- $293,252(3) --
Theodore E. Somerville......... 1,767 1994-97 $ 618 -- $247,380
</TABLE>
- ---------------
(1) Except for amounts listed for Mr. Toft, these amounts represent performance
shares awarded under the Company's 1993 Long-Term Incentive Plan (the "1993
Plan"). Such amounts do not reflect antidilution adjustments made in respect
of the dividend of one share of Common Stock for every 50 shares of Common
Stock outstanding, to be paid by the Company on April 26, 1994 to
stockholders of record at the close of business on April 1, 1994.
Performance shares entitle the holder thereof to payouts of cash and/or
Common Stock (in such proportion as is determined by the Compensation
Committee) up to a maximum amount equal to the value of one share of Common
Stock on the payout date. Maximum payouts will be made in respect of these
performance shares only if average annual compound growth in the Company's
Earnings Per Share (as defined pursuant to the 1993 Plan) equals or exceeds
12 percent in the award period 1994-97, measured from a base of $9.21, and
no payouts will be made if such growth is 8 percent or less; payouts for
growth between 8 percent and 12 percent will be determined by interpolation.
The calculations of estimated future threshold payouts (at 8.01 percent
growth) and maximum payouts (at 12 percent growth) use $140.00 as the value
of one share of Common Stock, which is the mean of the high and low sales
prices of Common Stock on the
15
<PAGE> 18
date of the awards. There is no estimated future target payout because under
the 1993 Plan no performance target for these performance shares is
specified.
(2) These amounts represent performance units awarded under the 1993 Plan. These
performance units entitle the holder thereof to payouts based upon the same
performance and other criteria as would have applied if they had been
awarded under CT&T's Executive Performance Unit Plan of 1992 (the "CT&T 1992
Plan"). The CT&T 1992 Plan provides for payouts of performance units for the
award period 1994-96, in a combination of cash and Common Stock, based upon
the amount of CT&T's net operating income as defined, the achievement of
specified levels of CT&T's return on equity and the application of a
multiplier relating to CT&T's expense ratio in each year of the award
period. The formula for determining the annual value of each performance
unit (before the application of the multiplier) is as follows:
<TABLE>
<CAPTION>
ANNUAL VALUE PER
$1 MILLION OF CT&T'S
RETURN ON EQUITY NET OPERATING INCOME
------------------ --------------------
<S> <C>
6.99% or less $ 0.00
7.0 % to 14.99% $ 2.00
15.0 % or more $ 4.50
</TABLE>
The annual value of a performance unit is increased or decreased by the
application of a multiplier relating to CT&T's expense ratio, ranging from
a maximum of 1.25 for an expense ratio of 85 percent or less to a minimum
of 0.75 for an expense ratio of 91 percent or more. The total value of a
performance unit is the sum of its annual values (as so increased or
decreased) for the three years of the award period. In the event that a
return on equity of at least 7 percent is not achieved in any year of the
award period, then the percentage return on equity needed to achieve an
annual value of $4.50 in the two remaining years of the award period will
be increased by one-third of the difference between 7 percent and the
actual return on equity in the year in which there is a shortfall. No
payout will be made for an award period in which a return on equity of at
least 7 percent is not achieved in two of the three years of such award
period. One-quarter of Mr. Toft's payout will be made in shares of Common
Stock, valued at 110 percent of the mean of the high and low sales prices
of Common Stock on the date of the award (i.e., by $140.00), subject to a
limitation on the maximum number of shares of Common Stock which will be
made available for payouts of this award and awards granted for the 1994-96
award period under the CT&T 1992 Plan. The remainder of the total value of
Mr. Toft's payout will be paid
16
<PAGE> 19
in cash. The target value shown is a representative amount, calculated
using CT&T's planned return on equity, expense ratio and net operating
income in 1994, 1995 and 1996 as set forth in CT&T's Financial Plan in
effect at 1993 year-end. These performance units do not have threshold or
maximum payout amounts.
(3) These amounts represent the portion of the cash bonus earned by Mr. Toft
under the Presidents' Plan of CT&T in 1993 which was deferred and is subject
to reduction to reflect unfavorable title insurance claims experience during
1993-96 for policies written in 1993. If such experience compares favorably
with (i) a pre-established hypothetical claims experience deemed acceptable
by the Board of Directors of CT&T, and/or (ii) the historical claims
experience during 1990-95 for policies written in 1990, 1991 and 1992, Mr.
Toft will be entitled to receive such deferred amount in full with interest
at a rate during the deferral period equal to the average of the prime rates
of the nation's largest banks and the three-year U.S. Treasury note yield as
of June 30 and December 31 of each year, each as published in The Wall
Street Journal; in addition, Mr. Toft will be entitled to a related
incentive payment, limited to four times the amount of the deferral. The
target value shown is a representative amount, assuming that title insurance
policy claims experience in 1993-96 for policies written in 1993 will be
identical to such experience in 1990-93 for policies written in 1990, and
further assuming identical interest rates in the two periods. This award
does not have threshold or maximum payout amounts.
PENSION PLAN TABLES
The Company's Retirement Plan
The Company's Retirement Plan provides for designated employees, including
all of its current executive officers other than Mr. Toft, retirement benefits
in the form of an annuity for the participant's life or alternative, actuarially
equivalent forms of benefit, including a lump sum.
The annual retirement benefit under the Company's Retirement Plan, if paid
in the form of a life annuity to an officer participant who retires on reaching
age 65 with 15 years of service, is equal to 52.7625 percent of the
participant's average salary, which is defined as the highest average annual
base salary (not including any non-cash compensation, annual incentive bonuses,
long-term incentive bonuses, restricted stock or other extraordinary
compensation, payments, allowances or reimbursements) over a consecutive
three-year period during the last ten years of employment (base salaries being
the amounts that would appear in the salary column of the Summary Compensation
Table for
17
<PAGE> 20
the relevant years); however, such benefit is reduced by 33.5 percent of his
unreduced primary Social Security benefit and by 67 percent of his accrued
benefit under a previously terminated retirement plan of the Company. A
participant may retire as early as age 55, but the benefit payable at that time
will be actuarially reduced to reflect the commencement of benefit payments
prior to age 65. The benefit payable to a participant who retires after 65 is
increased by the greater of (i) adjustments to reflect salary increases through
the date of retirement, with actuarial adjustments through the later of a
participant's 65th birthday or January 1, 1989, or (ii) actuarial adjustments
through the date of retirement, with adjustments to reflect salary increases
through the later of a participant's 65th birthday or January 1, 1989.
Since the funds accumulated under the Company's Retirement Plan to provide
for each participant's annual retirement benefit are currently taxable to each
participant, the plan provides for the payment to the appropriate tax
authorities as withholding tax on behalf of each participant of an amount equal
to the income and employment tax liabilities imposed upon the participant by
reason of his participation in the plan. As a result, benefits payable in the
form of a lump sum are not taxable at the time of payment. Benefits payable in
the form of an annuity are taxable in part; the Retirement Plan provides that
such benefits will be increased to offset the impact of any such tax liability,
and the estimated benefits set forth below include such increase. The Company is
entitled to deduct the amounts of its contributions and tax payments under the
plan in the year in which such contributions and payments are taxable to the
participant.
The following table shows the estimated annual retirement benefit payable
under the Company's Retirement Plan (without giving effect to the Social
Security offset or the offset for benefits accrued under the previously
terminated retirement plan) to a participant who, upon retirement on January 1,
1994 at age 65, had achieved the average salary and years of service indicated.
The amounts shown assume payment in the form of a straight life annuity.
18
<PAGE> 21
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE -------------------------
SALARY 10 15 OR MORE
------- -------- ----------
<S> <C> <C>
$125,000.............................. $ 53,788 $ 80,682
150,000.............................. 64,546 96,819
175,000.............................. 75,303 112,955
200,000.............................. 86,061 129,091
225,000.............................. 96,819 145,228
250,000.............................. 107,576 161,364
300,000.............................. 129,091 193,637
400,000.............................. 172,122 258,183
450,000.............................. 193,637 290,456
500,000.............................. 215,152 322,729
600,000.............................. 258,183 387,274
700,000.............................. 301,213 451,820
800,000.............................. 344,244 516,366
</TABLE>
As of December 31, 1993, the credited years of service for Messrs. Burns,
Kirby, Cuming and Somerville were 25.8, 26.3, 17 and 20.8, respectively. As of
December 31, 1993, the average salary of each of Messrs. Burns, Kirby, Cuming
and Somerville for purposes of the plan was $471,904, $596,000, $235,667 and
$219,000, respectively.
CT&T's Pension Plan
CT&T'S Pension Plan provides to employees who meet its eligibility
requirements, including Mr. Toft, retirement income in the form of monthly life
annuity payments after their retirement.
The following table shows the estimated annual retirement benefit payable
under CT&T's Pension Plan (reflecting the Social Security offset described
below) to a participant who, upon retirement on January 1, 1994 at age 65, had
achieved the final average annual covered remuneration and years of service
indicated. The amounts shown include additional sums payable under an excess
pension plan maintained by CT&T to compensate those employees, including Mr.
Toft, whose benefits are limited under CT&T's Pension Plan due to Internal
Revenue Service regulations. The amounts shown assume payment in the form of a
straight life annuity, with payment continuing for a period of ten years from
retirement if the participant dies during such period.
19
<PAGE> 22
<TABLE>
<CAPTION>
FINAL AVERAGE YEARS OF SERVICE
ANNUAL COVERED ----------------------------------------------------------
REMUNERATION 15 20 25 30 35
- -------------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
$125,000 $ 28,926 $ 38,567 $ 48,209 $ 57,851 $ 67,493
$150,000 $ 35,301 $ 47,067 $ 58,834 $ 70,601 $ 82,368
$175,000 $ 41,676 $ 55,567 $ 69,459 $ 83,351 $ 97,243
$200,000 $ 48,051 $ 64,067 $ 80,084 $ 96,101 $ 112,118
$225,000 $ 54,426 $ 72,567 $ 90,709 $ 108,851 $ 126,993
$250,000 $ 57,190 $ 76,253 $ 95,316 $ 114,380 $ 133,443
$300,000 $ 57,190 $ 76,253 $ 95,316 $ 114,380 $ 133,443
</TABLE>
A participant's accrued benefit under CT&T's Pension Plan, expressed as a
monthly annuity starting at age 65, is calculated by multiplying his final
average annual covered remuneration by 1.7 percent, dividing by twelve and
multiplying the result by his years of credited service not exceeding
thirty-five. Final average annual covered remuneration is defined as the highest
average monthly base salary (excluding bonuses and overtime pay and subject to
certain tax limitations, but including any amount by which an employee's
compensation is reduced to make before-tax contributions under CT&T's Savings
and Profit Sharing Plan or any similar plan) over a consecutive 60-month period
during the last 120 months of employment, multiplied by twelve. Such salary is
determined using amounts which would appear in the salary column in the Summary
Compensation Table for the relevant years, reduced by Internal Revenue Service
regulations which limit the amount of covered remuneration under CT&T's Pension
Plan and by similar limitations in the excess pension plan. The benefit is
reduced by a portion of the participant's Social Security benefits. A
participant may retire as early as age 55, but the benefit payable to him at
that time will be actuarially reduced to reflect the commencement of benefit
payments prior to age 65, unless he has reached age 62 and has at least twenty
years of service.
As of December 31, 1993, Mr. Toft's credited years of service were 32.25,
and his average annual covered remuneration was $235,840.
COMPENSATION ARRANGEMENTS UPON RESIGNATION,
RETIREMENT OR OTHER TERMINATION; EMPLOYMENT AGREEMENT
In addition to the Company's Retirement Plan, which is described above,
Messrs. Burns, Kirby, Cuming and Somerville participate in a death benefit plan
which provides that a participant who dies after completion of at least five
years of service will receive a
20
<PAGE> 23
death benefit equal to twice the amount of his highest annual salary in the
preceding five years.
Mr. Toft has an employment agreement with CT&T and the Company, with an
initial term from January 1, 1992 to December 31, 1994. Thereafter, the
agreement will be automatically extended from year to year unless either party
gives notice to the contrary at least 180 days before the end of any year. If
the agreement is not renewed at 1994 year-end due to action by CT&T and Mr.
Toft's employment by CT&T terminates, Mr. Toft is entitled to a lump sum equal
to two times (i) his then-current salary plus (ii) his average annual bonus in
the preceding three years. If the agreement is not renewed at 1995 year-end due
to action by CT&T and Mr. Toft's employment by CT&T terminates, Mr. Toft is
entitled to a lump sum equal to his then-current annual salary plus his average
annual bonus in the preceding three years.
The agreement entitles Mr. Toft to be employed as Chief Executive Officer
of CT&T, to receive a salary at an annual rate of at least $357,500 from January
1, 1992 through April 2, 1992 and at an annual rate of at least $377,500
thereafter, to participate in all CT&T incentive and benefit plans, and to enjoy
specified fringe benefits.
During the term of the agreement, CT&T may terminate Mr. Toft's employment
only for "good cause," which is defined to mean acts of dishonesty or wrongdoing
or material breach of the agreement. Mr. Toft may terminate his employment only
for "good reason," which is defined to mean material breach of the agreement by
CT&T. However, Mr. Toft may not terminate his employment for any reason prior to
October 1, 1994, and may terminate his employment with or without good reason
between October 1, 1994 and December 30, 1994 (inclusive). Further, Mr. Toft is
entitled to terminate his employment without good reason in the event of a
change in control (as defined in the agreement) of CT&T or the Company (after
which he would be obligated to provide consulting services to CT&T and the
Company for one year).
If Mr. Toft's employment is terminated by CT&T for any reason not
constituting good cause, or by himself with good reason at any time, with or
without good reason between October 1, 1994 and December 30, 1994 (inclusive),
or following a change in control, he is entitled to receive all accrued and
vested benefits under CT&T's incentive and benefit plans, and a severance
payment equal to two times (i) his then-current salary plus (ii) his average
annual bonus in the preceding three years. These benefits would be reduced if
necessary to prevent their treatment as parachute payments under the Internal
Revenue Code of 1986, as amended. If Mr. Toft terminates his employment between
October 1, 1994 and October 30, 1994 (inclusive), his annual bonus and long-term
incentive payouts for 1994 will be calculated on a pro rata basis. If he
terminates his
21
<PAGE> 24
employment between October 31, 1994 and December 30, 1994 (inclusive), his
annual bonus and long-term incentive payouts for 1994 will be calculated as
though his service continued throughout 1994.
If Mr. Toft dies, CT&T is required to pay a death benefit equal to three
times his annual salary in effect at the time of death, reduced by the present
value of the death benefits payable under CT&T's generally applicable benefit
plans (other than death benefits that have been paid for by Mr. Toft himself, or
are provided under a split-dollar insurance arrangement with a current death
benefit of $279,835 which is maintained by CT&T for Mr. Toft), and to provide
dependent benefits and insurance coverages for three years after death. If Mr.
Toft is disabled, CT&T is required to pay his salary for three years, and a
bonus for each of those years equal to the annual average of his bonuses for the
three years preceding his becoming disabled. Employee and dependent health,
dental, disability, accident and life insurance coverages would also continue
for the three years. His disability benefits under the agreement would, however,
be reduced by the amount of any disability benefits available under any CT&T
benefit plan, social security or similar program.
Mr. Toft is prohibited, for a period of two years after the initial or any
renewal term of the agreement, from being involved in a business which competes
with CT&T and from soliciting customers or employees of CT&T. He is permitted to
return to his former employer, Lincoln National Corporation, but is barred for
two years from involvement in any title insurance business conducted by Lincoln
National. Mr. Toft is also prohibited forever from disclosing confidential
information of CT&T.
The Company is a guarantor of CT&T's obligations under the agreement in the
event that there is a change in control of CT&T and CT&T thereafter defaults on
its obligations.
In addition to CT&T's Pension Plan, CT&T's excess pension plan and Mr.
Toft's employment agreement, which are described above, Mr. Toft participates in
CT&T's Executive Salary Continuation Plan, which is a retirement plan designed
to encourage key employees to remain with CT&T until retirement. The plan
provides post-retirement monthly income of two percent of final monthly income
at retirement multiplied by the number of years of participation in the plan, up
to a maximum of 10 percent of final monthly salary. Benefits are actuarially
reduced for early retirement between the ages of 55 and 65. No benefits are
payable upon retirement prior to age 55, or upon retirement prior to age 65 if
the retiree has not completed five years of service. Payments under the plan are
payable for life or ten years, whichever is greater. If a participant dies prior
to retirement, annual payments of 25 percent of final salary are payable until
what would have been the employee's 65th birthday or for ten years, whichever is
greater.
22
<PAGE> 25
COMPENSATION OF DIRECTORS
Each director of the Company who is not an officer thereof receives an
annual retainer of $18,000, as well as $1,000 for each board meeting attended in
person and $500 for each conference telephone meeting attended. In addition, the
Chairman of the Executive Committee receives an annual fee of $25,000, and each
other member thereof who is not an officer of the Company receives an annual fee
of $7,500. The Chairman of the Audit Committee receives an annual fee of $4,500,
and each other member thereof receives an annual fee of $3,600. The Chairman of
the Compensation Committee receives an annual fee of $3,500, and each other
member thereof receives an annual fee of $3,000. Each member of the Nominating
Committee who is not an officer of the Company receives $1,000 for each meeting
attended and $500 for each conference telephone meeting attended.
Pursuant to the Amended and Restated Directors' Stock Option Plan, each
director of the Company who is not an employee of the Company or any of its
subsidiaries receives annually, as of the first business day after the
conclusion of each Annual Meeting of Stockholders of the Company, an option to
purchase 1,000 shares of Common Stock (subject to antidilution adjustments) at a
price equal to the fair market value (as defined in the plan) of such shares on
the date of grant. On April 26, 1993, each such director (other than Mr.
Carmichael, who was elected to the Board of Directors subsequently) received an
option to purchase 1,000 shares of Common Stock at a price of $147.00 per share,
conditioned upon stockholder approval of the plan. The plan is being submitted
to the stockholders of the Company for their consideration at the 1994 Annual
Meeting. See "Amended and Restated Directors' Stock Option Plan" below.
Pursuant to the Non-Employee Directors' Retirement Plan, each person who
has served as a non-employee director of the Company after July 1, 1990 is
entitled to receive, after his retirement from the Board of Directors, an annual
retirement benefit equal to the annual retainer payable to directors of the
Company at the time of such retirement. To be entitled to this benefit, the
director must have served as such for at least five years, and must have
continued so to serve either until the time he is required to retire by the
Company's retirement policy for directors or until he has attained age 70. The
benefit is paid from the date of the director's retirement from the Board of
Directors until the end of a period equal to his length of service thereon or
until his death, whichever occurs sooner.
Each of the non-employee directors of the Company's subsidiaries CT&T and
Chicago Title Insurance Company, including Allan P. Kirby, Jr., receives an
annual retainer of $15,000 for his services as such, as well as $650 for each
board meeting
23
<PAGE> 26
attended. In addition, each member of the Finance and Audit Committees of these
boards, including Mr. Kirby, receives $650 for each committee meeting attended.
In 1993, Mr. Kirby received a total of $23,588 for services in these capacities.
Each of the non-employee directors of the Company's subsidiary Sacramento
Savings Bank, including Paul F. Woodberry, receives an annual retainer of $7,500
for his services as such, as well as $600 for each board meeting attended in
person and $300 for each conference telephone meeting attended. In addition,
each member of the Audit Committee of the Sacramento Savings Bank board,
including Mr. Woodberry, receives $500 for each committee meeting attended. In
1993, Mr. Woodberry received a total of $13,400 for services in these
capacities. Each of the non-employee directors of the Company's subsidiary URC
Holdings Corp. and its subsidiaries, including Mr. Woodberry, receives an annual
retainer of $18,000 for his services as such, as well as $750 for each board
meeting or conference telephone meeting attended. In addition, each member of
the Compensation Committee of these boards, including Mr. Woodberry, receives
$750 for each committee meeting attended. In 1993, Mr. Woodberry received a
total of $6,000 for services in these capacities. Mr. Woodberry also provides
consulting services to the Company and certain of its subsidiaries and received
$282,083 in respect of such services performed in 1993.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
John J. Burns, Jr., the Company's President and chief executive officer,
serves on the Compensation Committee of the Board of Directors of Armco Inc.
("Armco"). James F. Will, who is a director of the Company, is President and
Chief Executive and a director of Armco.
As of March 1, 1994, the Company and its subsidiaries owned 5,643,355
shares of Armco common stock, or 5.4 percent of the outstanding common stock of
Armco. A portion of such shares was acquired upon the merger in April 1992 of
Cyclops Industries, Inc., formerly a wholly owned subsidiary of the Company
("Cyclops"), into a wholly owned subsidiary of Armco. As a condition of the
merger, the Company and certain of its affiliates agreed to refrain from
acquiring more than 15 percent of the outstanding voting securities of Armco for
five years from the date of the merger.
24
<PAGE> 27
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is currently composed of the two non-employee directors whose names
appear at the end of this report.
An important objective of the Compensation Committee is to ensure that the
compensation practices of the Company are competitive and effectively designed
to attract, retain and motivate highly-qualified personnel. In performing its
functions, the Compensation Committee in recent years has obtained and utilized
information and advice furnished by a recognized national compensation
consulting firm.
Compensation paid to the executive officers of the Company for 1991, 1992
and 1993 consisted chiefly of annual compensation in the form of salary and cash
bonuses under short-term incentive plans, and compensation paid under long-term
incentive plans. Most of the cash bonuses paid under the short-term incentive
plans were tied to the financial results of the Company (or in the case of Mr.
Toft, who is President and Chief Executive Officer of CT&T, the financial
results of CT&T). All the compensation paid under the long-term incentive plans
was tied both to the price of the Common Stock* and to the financial results of
the Company (except that in the case of Mr. Toft a substantial part of such
compensation was tied solely to the financial results of CT&T). These
relationships between the executive officers' compensation, on the one hand, and
the financial results of the Company (or CT&T) and the price of the Common
Stock, on the other, help to link the interests of the Company's executive
officers with the interests of the Company's stockholders.
- ---------------
* The long-term incentive plan payouts in the Summary Compensation Table on page
11 (other than those made to Mr. Toft) reflect appreciation in the market
price of the Common Stock (adjusted for stock dividends) from the beginning
of the respective award periods through the respective payment dates as
follows:
<TABLE>
<CAPTION>
MARKET PRICE
AT BEGINNING MARKET PRICE
YEAR OF PAYOUT AWARD PERIOD OF AWARD PERIOD ON PAYMENT DATE
-------------- ------------ ---------------- ---------------
<S> <C> <C> <C>
1993 1990-93 $84.07 $140.00
1992 1989-92 $63.97 $119.00
1992 1988-91 $64.49 $116.90
1991 1987-90 $59.20 $ 90.23
</TABLE>
25
<PAGE> 28
The Revenue Reconciliation Act of 1993 added Section 162(m) to the Internal
Revenue Code of 1986, as amended. Section 162(m), which became effective for tax
years beginning January 1, 1994, disallows a deduction to the Company for any
compensation paid to a "covered employee" in excess of $1 million per year,
subject to certain exceptions. In general, "covered employees" include the chief
executive officer and the four other most highly compensated executive officers
of the Company who are in the employ of the Company at the end of the tax year.
Among other exceptions, the deduction limit does not apply to compensation that
meets the specified requirements for "performance-based" compensation. Those
requirements include the establishment of objective performance goals by a
committee of the Board of Directors composed of outside directors, stockholder
approval of the material terms of the compensation and the criteria upon which
the performance goals are based prior to payment of such compensation, and
certification by the committee that the performance goals have been achieved.
Since Section 162(m) has been newly enacted and final regulations have not
yet been adopted thereunder, many uncertainties surround its interpretation and
application; and the Compensation Committee has not attempted to prescribe any
policy with respect to qualifying future awards of executive incentive
compensation for deductibility thereunder. The Committee has, however, attempted
to ensure that the awards of long-term incentive compensation made in December
1993 will so qualify. To that end, the Committee (which is composed of outside
directors) established objective performance goals for the payout of the awards,
made the awards to the executive officers named in the Summary Compensation
Table on page 11 above conditional upon stockholder approval, and made the
payout of the awards to such officers conditional upon certification by the
Compensation Committee that the performance goals have been achieved.
Annual Compensation
Salary adjustments for executive officers are generally made annually, and
are based on salaries for the prior year, executive salary movements nationally,
individual performance, length of service and internal comparability
considerations. Additional adjustments in the salaries of Messrs. Burns and
Kirby were made in mid-1992, however, to reflect their changed responsibilities
when Mr. Burns became chief executive officer of the Company, succeeding Mr.
Kirby in that capacity. For 1993, Messrs. Burns, Kirby and Toft, at their
request, received no increase in salary from 1992 year-end levels. For 1994,
Messrs. Burns and Kirby, at their request, received no increase in salary from
1993 levels.
Annual cash bonuses are paid to executive officers under the Company's
Management Incentive Plan or, with respect to Mr. Toft, the Presidents' Plan of
CT&T. Both plans
26
<PAGE> 29
are designed to reward officers for the achievement of specified corporate
and/or individual objectives. Bonus opportunities under these short-term
incentive plans are generally adjusted from year to year in proportion to
changes in salaries. Maximum annual bonus opportunities for 1993, measured as a
percentage of the salaries simultaneously established for that year, ranged from
90 percent in the case of Mr. Toft, 55 percent in the case of Mr. Burns and 49
percent in the case of Mr. Kirby to 25 percent in the case of the most junior
executive officer. Except in the case of Mr. Toft, these bonus opportunities as
a percentage of salaries are believed to be modest relative to prevailing
practices in a broad cross-section of American industry and reflect the
Company's policy of emphasizing long-term corporate performance and, hence,
long-term incentive compensation.
For 1993, the portion of the cash bonus opportunities which depends on
corporate objectives ranged from 100 percent of Mr. Kirby's bonus opportunity to
50 percent of the cash bonus opportunity of the most junior executive officer of
the Company. The corporate objective under the Management Incentive Plan was the
achievement by the Company of a specified level of net earnings per share, which
was based on the planned net earnings per share for the year as approved by the
Board of Directors and included in the Alleghany Strategic Plan 1993-1997.
Target amounts were to be earned if plan net earnings per share were achieved,
and maximum amounts were to be earned at 110 percent of plan. Net earnings per
share were required to exceed 80 percent of plan for any amounts to be earned.
The corporate objective applicable to Mr. Toft under the Presidents' Plan
of CT&T for 1993 was the achievement by CT&T of a specified after-tax operating
income, which was based on planned after-tax operating income for the year as
contained in CT&T's Financial Plan in effect at 1992 year-end. The target amount
was to be earned if plan after-tax operating income was achieved, the threshold
amount was to be earned at target income minus $5,000,000, and the maximum
amount was to be earned at target income plus $5,000,000. No amount was to be
earned if after-tax operating income was less than the threshold amount.
The remainder of the cash bonus opportunities of the executive officers of
the Company under the short-term incentive plans for 1993 was based on
achievement of individual objectives. Individual objectives for the executive
officers of the Company (other than Mr. Burns) were determined, and the
performance of such officers was assessed, by the chief executive officer upon
authority delegated by the Board of Directors, subject, in Mr. Toft's case, to
the approval of the CT&T Board of Directors. Individual objectives for Mr. Burns
were determined, and his performance was assessed,
27
<PAGE> 30
by the Board of Directors upon the recommendation of the Compensation Committee,
which received the recommendation of the Chairman of the Board with respect
thereto.
Eighty percent of Mr. Burns's opportunity was based on the corporate
objective of net earnings per share, as discussed above. The remaining 20
percent was based on his achievements with respect to his individual objectives,
including the consummation of a significant investment in an operating company
and the development of several alternative plans for the strategic
recapitalization of the Company.
Long-Term Incentive Plans
In addition to annual compensation, the Company provides to its executive
officers long-term incentives under the Company's 1993 Long-Term Incentive Plan
(the "1993 Plan")*. This plan provides for long-term incentives based upon
objective, quantifiable measures of the Company's performance over a period of
time. With only four exceptions, all awards to the Company's executive officers
under the 1993 Plan and the 1983 Plan have been made in the form of performance
shares, which entitle the holder thereof to payouts in cash and/or Common Stock
(in such proportion as is determined by the Compensation Committee) up to a
maximum amount equal to the value of one share of Common Stock on the payout
date for each performance share awarded. Payouts have been generally made
one-half in cash and one-half in Common Stock. Maximum payouts with respect to
currently outstanding performance shares will be made only if average annual
compound growth in the Company's Earnings Per Share (as defined pursuant to the
1993 Plan and the 1983 Plan) equals or exceeds 12 percent, as measured from a
specified base, in the four-year award period commencing with the year following
that in which the performance shares were awarded, and no payouts will be made
if such growth is 8 percent or less; payouts for growth between 8 percent and 12
percent will be determined by interpolation. The Board of Directors and its
Compensation Committee have provided for antidilution adjustments with respect
to performance shares. The specified base Earnings Per Share has been determined
by reference to the projected earnings per share for the year in which the
performance shares were awarded, as adjusted to eliminate non-recurring items.
Subject to certain limitations, the Compensation Committee may provide for
adjustments in the cash and/or Common Stock to be paid with respect to
performance share awards in order to adjust for the effect upon
- ---------------
* The 1993 Plan replaced the Company's 1983 Long-Term Incentive Plan (the "1983
Plan"), which was substantially similar to the 1993 Plan. The right to make
awards of incentive compensation under the 1983 Plan terminated on December
31, 1992.
28
<PAGE> 31
Earnings Per Share of transactions of an extraordinary, unusual or non-recurring
nature, capital gains, or any purchase, pooling of interests, disposal or
discontinuance of any operations, change in accounting rules or practices,
retroactive restatement of earnings, or the like.
In December 1993, the Compensation Committee accelerated the payout of the
performance shares for the 1990-93 award period from early 1994 to December 1993
in view of the enactment of the Revenue Reconciliation Act of 1993 which removed
a cap, formerly at $135,000, on earnings received after December 31, 1993 that
would be subject to the Medicare hospital insurance payroll tax payable by the
Company and its employees. Maximum payouts were made in respect of such
performance shares, including those held by Mr. Burns, based upon a planned
growth in Earnings Per Share in the 1990-93 award period of more than 12
percent. (Each of the executive officers of the Company who received such
payouts entered into an agreement with the Company providing for the repayment
of any amount in excess of the amount to which he was entitled upon completion
of the Company's audited financial statements.) Accordingly, no payouts of
long-term incentive compensation under the 1983 Plan are scheduled to be made in
1994.
In determining the number of performance shares awarded each year, the
Compensation Committee has sought to achieve reasonable continuity. The number
of performance shares awarded to an executive officer in 1993 for the 1994-97
award period was determined by adjusting the prior year's award for the change
in his salary from 1993 to 1994, and the change in the price of the Common Stock
from late 1992 to late 1993; awards to Messrs. Burns and Kirby were adjusted
based on the salary increases that they would have received for 1994 had they
not requested that they be granted no increases, in addition to the change in
the price of the Common Stock. Consequently, the performance share awards made
in 1993 (as measured by the market value of the Common Stock at the time of
grant) to executive officers other than Messrs. Burns and Kirby bore the same
general relationship to such officers' salaries in 1994 as the performance share
awards made in 1992 bore to such officer's salaries in 1993. Maximum payouts on
performance shares awarded for the 1994-97 award period (assuming that the
market price of the Common Stock on the payment date is the same as on the date
of the award), expressed as a percentage of the salaries simultaneously
established for 1994, would be 128 percent in the case of Mr. Burns, 98 percent
in the case of Mr. Kirby and 124 percent in the case of the most junior
executive officer. In the case of the Company's most senior executive officers,
these long-term incentive compensation opportunities are believed to be close to
the prevailing practices in a broad cross-section of American industry; in the
case of the Company's more junior executive officers, such opportunities
29
<PAGE> 32
are believed to be liberal relative to such practices. The awards reflect the
Company's policy of emphasizing long-term corporate performance and long-term
incentive compensation opportunities over short-term results and short-term
incentive compensation opportunities.
Mr. Toft participates in various long-term incentive plans offered by CT&T.
Like the 1993 Plan, the CT&T plans provide for long-term incentives based upon
objective, quantifiable measures of corporate performance over a period of time,
but they utilize measures of CT&T's performance rather than measures of the
Company's performance.
As more fully explained in note (4) to the Summary Compensation Table,
payouts under CT&T's Performance Unit Incentive Plan of 1989 (the "CT&T 1989
Plan") were based upon CT&T's cumulative operating income over a three-year
period (as adjusted by a multiplier based on CT&T's return on equity and by a
second multiplier based on dividends actually or constructively paid by CT&T).
The committee administering the CT&T 1989 Plan has discretion to change the
provisions relating to awards made thereunder in order to adjust for the effect
upon the final value of such awards of transactions of an extraordinary, unusual
or non-recurring nature.
In December 1993, with the approval of the Board of Directors upon the
recommendation of the Compensation Committee, and with the approval of the CT&T
Board of Directors, CT&T accelerated the payout of the performance units awarded
to Mr. Toft under the CT&T 1989 Plan for the 1991-93 award period, due to the
implementation in 1994 of the $1 million limitation on deductibility of
compensation described above. (Such payouts were based on planned financial
results of CT&T for 1993; Mr. Toft entered into an agreement with CT&T providing
for the repayment of any amount in excess of the amount to which he was entitled
upon completion of CT&T's audited financial statements.) Accordingly, no payout
of long-term incentive compensation under the CT&T 1989 Plan or its successor is
scheduled to be made in 1994.
In 1993, Mr. Toft was awarded performance units under the 1993 Plan for the
1994-96 award period. However, because Mr. Toft is President and Chief Executive
Officer of CT&T, his payout with respect thereto is based upon the same
performance criteria as would have applied if such performance units had been
awarded under CT&T's Executive Performance Unit Plan of 1992 (the "CT&T 1992
Plan"), which is the successor to the CT&T 1989 Plan. In addition to CT&T's net
operating income and return on equity, the CT&T 1992 Plan also uses CT&T's
expense ratio in the determination of payouts, in recognition that expense
control is a key factor in CT&T's success. The formula is more fully explained
in note (2) to the table relating to long-term incentive plans. In order more
closely to align the interests of participants in the CT&T 1992 Plan
30
<PAGE> 33
with those of the stockholders of the Company, the CT&T 1992 Plan provides for
payouts in cash and Common Stock, rather than solely in cash, for the 1994-96
award period (as well as for the 1993-95 award period).
The value of the award to Mr. Toft under the 1993 Plan at the target level
of performance, measured as of the time of grant and based upon planned levels
of operating income, return on equity and expense ratio for 1994-96 as set forth
in CT&T's Financial Plan in effect at 1993 year-end, would be 229 percent of his
1993 salary. Since payout is dependent upon the level of CT&T's operating
income, there is no maximum limit.
Pursuant to the Presidents' Plan of CT&T, a portion of the cash bonus
payable thereunder is deferred for three years and is subject to title insurance
claims experience during such three-year period, in an effort to encourage
better underwriting and claims control at CT&T. This formula is explained in
note (3) to the table relating to long-term incentive plans.
The Company also provides to its executive officers other benefits, such as
retirement income, death benefits and savings credits, including those described
elsewhere in this proxy statement. The amounts of these benefits generally are
tied directly to salaries, as variously defined in the relevant plans. Such
additional benefits are believed to be typical of the benefits provided by other
public companies to their executives.
William K. Lavin
S. Arnold Zimmerman
Compensation Committee
of the Board of Directors
31
<PAGE> 34
PERFORMANCE GRAPH
The following is a graph which compares for the years 1989-93 the
cumulative total stockholder return on the Common Stock, the cumulative total
return on the Standard & Poor's 500 Stock Index (the "S&P 500") and the
cumulative total return on the common stock of a group of "peer" issuers.
The Company is a moderately diversified business enterprise with the
majority of its revenues currently generated by its title insurance, reinsurance
and consumer banking operations and most of the remainder from its industrial
minerals and steel fastener operations. Except for the steel fastener
operations, all of these businesses were acquired within the last ten years and
are conducted through subsidiaries.
The group of "peer" issuers includes publicly held, diversified financial
services companies which were selected for their similarities to the Company in
terms of lines of business, recent history of acquisitions and dispositions,
holding company structure and/or concentration of ownership; nevertheless, the
Company believes that the "peer" issuers are significantly different from each
other and from the Company due to the individual characteristics of their
businesses. In addition to the Company, the group of "peer" issuers consists of
the following: American Express Company, Loews Corporation, Old Republic
International Corp., Transamerica Corporation, Kemper Corporation, Lincoln
National Corporation, ITT Corporation and Penn Central Corporation.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Alleghany S&P 500 Peer Group
- --------------------- --------- ------- ----------
<S> <C> <C> <C>
1988 100.00 100.00 100.00
1989 134.08 131.69 138.32
1990 129.78 127.61 132.94
1991 176.06 166.49 111.48
1992 220.72 179.18 154.06
1993 241.54 197.27 214.11
</TABLE>
32
<PAGE> 35
The foregoing performance graph is based on the following assumptions: (i)
cash dividends are reinvested at the end of the month in which such dividends
are received and the Company's annual two-percent stock dividends are included
in the cumulative total stockholder return on the Common Stock; and (ii) total
returns on the common stock of "peer" issuers are weighted by stock market
capitalization at the beginning of each year.
2. AMENDED AND RESTATED DIRECTORS' STOCK OPTION PLAN
The Directors' Stock Option Plan, which was adopted by the Board of
Directors in June 1987, was scheduled to expire on April 22, 1993 in accordance
with its terms, although at that time 38,818 shares of Common Stock which were
available for award thereunder had not been awarded. The Board of Directors
believes it to be in the best interests of the Company and its stockholders to
continue to encourage increased share ownership by directors who are not
employees of the Company or any of its subsidiaries, in order to promote
long-term stockholder value through continuing ownership of shares of the
Company's Common Stock. To provide for such increased share ownership, the
Board of Directors has adopted the Alleghany Corporation Amended and Restated
Directors' Stock Option Plan (the "Plan"), effective as of April 20, 1993. The
Plan, which is substantially similar to the Directors' Stock Option Plan,
provides for the automatic grant of nonqualified stock options ("Options") to
purchase 1,000 shares of Common Stock of the Company in each year as of the
first business day after the conclusion of each annual meeting of stockholders
of the Company to each director of the Company who is not an employee thereof
or of any of its subsidiaries. No consideration will be paid to the Company
upon the grant of the Options. There are currently seven directors of the
Company who are not employees thereof or of any of its subsidiaries. The Plan
provides that it shall be submitted to the stockholders of the Company for
their approval.
The Plan is administered by the Board of Directors. The Board of Directors
shall, subject to the provisions of the Plan, grant Options under the Plan, and
has authority, within the limits of the Plan, to prescribe the form of agreement
embodying awards of Options, to construe the Plan, to determine all questions
arising thereunder and to adopt and amend such rules and regulations for the
administration of the Plan as it may deem desirable.
Awards under the Plan shall include only Options to purchase shares of
Common Stock of the Company. A maximum of 75,000 shares of Common Stock may be
issued under the Plan pursuant to the exercise of Options, subject to
antidilution and other adjustments in certain events specified in the Plan. Such
shares of Common Stock may be either authorized but unissued shares or shares
held by the Company as treasury
33
<PAGE> 36
shares. On March 1, 1994, the fair market value (as defined in the Plan) of
shares of Common Stock of the Company was about $144.25 per share, or about
$10,818,750 in the aggregate for the 75,000 shares of Common Stock subject to
the Plan.
The Plan provides that no Option granted under the Plan shall be
exercisable more than ten years after its grant and the price at which shares of
Common Stock may be purchased under any such Option shall be the fair market
value of such shares on the date such Option is granted, which is defined as the
average of the high and low sales prices of a share of the Company's Common
Stock on the date of grant as reported on the New York Stock Exchange Composite
Transactions Tape or, if the New York Stock Exchange is closed on that date, on
the last preceding date on which the New York Stock Exchange was open for
trading. Upon exercise of an Option, the Option price is required to be paid in
cash or by check, or in shares of Common Stock valued at the fair market value
thereof on the date of exercise, or by a combination of cash and shares of
Common Stock.
The Board of Directors may amend or terminate the Plan at any time,
provided, however, that no such action shall materially and adversely affect any
right of any participant with respect to any Option theretofore granted under
the Plan without his written consent, and provided, further, that no amendment,
without the further approval of the stockholders, shall increase the maximum
number of shares of Common Stock as to which Options may be granted under the
Plan, reduce the minimum Option exercise price described in the Plan, extend the
period during which Options may be granted or exercised under the Plan or change
the class of persons eligible to receive Options under the Plan. In addition, in
order to comply with rules and regulations promulgated by the Securities and
Exchange Commission, certain provisions of the Plan may not be amended more than
once every six months other than to comport with changes in the Internal Revenue
Code of 1986, as amended, the Employee Retirement Income Security Act of 1974,
as amended, or the rules under either of such laws.
The Plan is effective as of April 20, 1993. However, Options granted under
the Plan prior to stockholder approval were conditioned upon such approval. No
awards may be granted under the Plan after December 31, 1999.
On April 26, 1993, Options to purchase 7,000 shares of Common Stock of the
Company were granted under the Plan to seven directors of the Company who were
not employees thereof or of any of its subsidiaries. The price at which such
shares may be purchased is the fair market value (as defined in the Plan) of
such shares on the date of grant, which was $147.00 per share. The dollar value
of benefits received or to be
34
<PAGE> 37
received by non-employee directors of the Company are not determinable as of the
date hereof.
All Options issued under the Plan are "nonqualified" for federal income tax
purposes. In general, a recipient of an Option will recognize no income on the
grant of the Option. A recipient will recognize income upon the exercise of the
Option in an amount equal to the excess of the fair market value of the shares
of Common Stock on that date over the exercise price of the Option. The Company
will be entitled to a deduction for such amount in the year in which the
recipient recognizes such amount as income.
A copy of the Plan is set forth in full in Exhibit A to this proxy
statement. The foregoing description is a summary of some, but not all, of the
essential provisions of the Plan, and is qualified by reference to the full text
of the Plan.
An affirmative vote of a majority of the shares of Common Stock present in
person or represented by proxy and entitled to vote at the 1994 Annual Meeting
is required to approve the Plan. Shares which are voted against the approval of
the Plan, shares the holders of which abstain from voting for the approval of
the Plan, and shares held in street name which are not voted will not be counted
in the total number of shares voted for the approval of the Plan.
Management recommends a vote "FOR" the approval of the Plan. Proxies
solicited by the Board of Directors will be so voted unless stockholders specify
a contrary vote.
3. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick, independent
certified public accountants, as independent auditors for the Company for the
year 1994. A resolution will be submitted to stockholders at the meeting for
ratification of such selection. Although ratification by stockholders is not a
prerequisite to the ability of the Board of Directors to select KPMG Peat
Marwick as the Company's independent auditors, the Company believes such
ratification to be desirable. If the stockholders do not ratify the selection of
KPMG Peat Marwick, the selection of independent auditors will be reconsidered by
the Board of Directors; however, the Board of Directors may select KPMG Peat
Marwick notwithstanding the failure of the stockholders to ratify its selection.
The Board of Directors recommends a vote "FOR" this resolution. Proxies
solicited by the Board of Directors will be so voted unless stockholders specify
a contrary vote. The resolution may be adopted by a majority of the votes cast
with respect thereto.
35
<PAGE> 38
KPMG Peat Marwick were Old Alleghany's auditors since 1947 and the
Company's auditors since its incorporation in November 1984.
It is expected that a representative of KPMG Peat Marwick will be present
at the meeting, will have an opportunity to make a statement if he desires to do
so, and will be available to respond to appropriate questions.
4. ALL OTHER MATTERS THAT MAY COME BEFORE THE MEETING
As of the date of this statement, the Board of Directors knows of no
business that will be presented for consideration at the meeting other than that
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.
5. STOCKHOLDER NOMINATIONS AND PROPOSALS
The Nominating Committee of the Board of Directors will receive at any time
and will consider from time to time suggestions from stockholders as to persons
to be nominated by the Board of Directors for election thereto by the
stockholders or to be chosen by the Board of Directors to fill newly created
directorships or vacancies on the Board of Directors.
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 by or at the direction of the Board of
Directors), as well as the submission of a proposal (other than a proposal
submitted by or at the direction of the Board of Directors), 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 generally not less than 30 days prior to the meeting. A
copy of the applicable by-law provisions may be obtained, without charge, upon
written request to the Secretary of the Company at its principal executive
offices.
In accordance with the rules of the Securities and Exchange Commission, any
proposal of a stockholder intended to be presented at the Company's 1995 Annual
Meeting of Stockholders must be received by the Secretary of the Company by
November 28, 1994 in order for the proposal to be considered for inclusion in
the Company's
36
<PAGE> 39
notice of meeting, proxy statement and proxy relating to the 1995 Annual
Meeting, scheduled for Friday, April 28, 1995.
6. ADDITIONAL INFORMATION
At any time prior to their being voted, the enclosed proxies are revocable
by written notice to the Secretary of the Company or by appearance at the
meeting and voting in person.
Solicitation of proxies will be made by mail, telephone and, to the extent
necessary, by telegrams and personal interviews. Expenses in connection with
the solicitation of proxies will be borne by the Company. Brokers, custodians
and fiduciaries will be requested to transmit proxy material to the beneficial
owners of Common Stock held of record by such persons, at the expense of the
Company. The Company has retained Kissel-Blake Inc. to aid in the solicitation
of proxies, and for its services the Company expects to pay fees of
approximately $7,500 plus expenses.
By order of the Board of Directors
JOHN E. CONWAY
Vice President, Secretary and Treasurer
March 28, 1994
37
<PAGE> 40
EXHIBIT A
ALLEGHANY CORPORATION
AMENDED AND RESTATED
DIRECTORS' STOCK OPTION PLAN
1. PURPOSE. The purpose of the Alleghany Corporation Amended and Restated
Directors' Stock Option Plan (the "Plan") is to advance the interests of
Alleghany Corporation (the "Company") and its stockholders by encouraging
increased stock ownership by members of the Board of Directors (the "Board") of
the Company who are not employees of the Company or any of its subsidiaries, in
order to promote long-term stockholder value through continuing ownership of the
Company's common stock.
2. ADMINISTRATION. The Plan shall be administered by the Board. The Board
shall have all the powers vested in it by the terms of the Plan, such powers to
include authority (within the limitations described herein) to prescribe the
form of the agreement embodying awards of nonqualified stock options made under
the Plan ("Options"). The Board shall have the power to construe the Plan, to
determine all questions arising thereunder and, subject to the provisions of the
Plan, to adopt and amend such rules and regulations for the administration of
the Plan as it may deem desirable. Any decision of the Board in the
administration of the Plan shall be final and conclusive. The Board may act only
by a majority of its members in office, except that the members thereof may
authorize any one or more of their number or the Secretary or any other officer
of the Company to execute and deliver documents on behalf of the Company. No
member of the Board shall be liable for anything done or omitted to be done by
him or by any other member of the Board in connection with the Plan, except for
his own willful misconduct or as expressly provided by statute.
3. PARTICIPATION. Each member of the Board of the Company who is not an
employee of the Company or any of its subsidiaries (a "Non-Employee Director")
shall be eligible to receive an Option in accordance with Paragraph 5 below. As
used herein, the term "subsidiary" means any corporation at least 40 percent of
whose outstanding voting stock is owned, directly or indirectly, by the Company.
4. AWARDS UNDER THE PLAN.
(a) Types of Awards. Awards under the Plan shall consist only of Options,
which are rights to purchase shares of common stock, par value $1.00 per share,
of the Company
A-1
<PAGE> 41
(the "Common Stock"). Such Options are subject to the terms, conditions and
restrictions specified in Paragraph 5 below.
(b) Maximum Number of Shares That May Be Issued. There may be issued under
the Plan pursuant to the exercise of Options granted after April 20, 1993 an
aggregate of not more than 75,000 shares of Common Stock, subject to adjustment
as provided in Paragraph 6 below.
(c) Rights With Respect to Shares. A Non-Employee Director to whom an
Option is granted (and any person succeeding to such a Non-Employee Director's
rights pursuant to the Plan) shall have no rights as a stockholder with respect
to any shares of Common Stock issuable pursuant to any such Option until the
date of the issuance of a stock certificate to him for such shares. Except as
provided in Paragraph 6 below, no adjustment shall be made for dividends,
distributions or other rights (whether ordinary or extraordinary, and whether in
cash, securities or other property) for which the record date is prior to the
date such stock certificate is issued.
5. NONQUALIFIED STOCK OPTIONS. Each Option granted under the Plan shall be
evidenced by an agreement in such form as the Board shall prescribe from time to
time in accordance with the Plan and shall comply with the following terms and
conditions:
(a) The Option exercise price shall be the fair market value of the shares
of Common Stock subject to such Option on the date the Option is granted, which
shall be the average of the high and the low sales prices of a share of Common
Stock on the date of grant as reported on the New York Stock Exchange Composite
Transactions Tape or, if the New York Stock Exchange is closed on that date, on
the last preceding date on which the New York Stock Exchange was open for
trading.
(b) The term of any Option shall be determined by the Board of Directors,
but in no event shall any Option be exercisable more than ten years after the
date on which it was granted.
(c) As of the first business day after the conclusion of each annual
meeting of stockholders of the Company, each Non-Employee Director shall
automatically receive an Option for 1,000 shares of Common Stock; provided,
however, that any Options granted under the Plan prior to any required approval
by the stockholders of the Company shall be conditioned upon such approval.
(d) Prior to stockholder approval of the Plan, the Option shall not be
transferable by the optionee. Thereafter, the Option shall be transferable only
by will or the laws of
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descent and distribution, and shall be exercisable during the optionee's
lifetime only by him.
(e) The Option shall not be exercisable:
(i) before the expiration of one year from the date it is granted or
after the expiration of ten years from the date it is granted and, subject
to prior stockholder approval in accordance with Paragraph 10 below, may be
exercised during such period as follows: one-third (33 1/3 percent) of the
total number of shares of Common Stock covered by the Option shall become
exercisable each year beginning with the first anniversary of the date it
is granted; provided that an Option shall automatically become immediately
exercisable in full when the Non-Employee Director ceases to be a
Non-Employee Director for any reason other than death;
(ii) unless payment in full is made for the shares of Common Stock
being acquired thereunder at the time of exercise; such payment shall be
made
(A) in United States dollars by cash or check, or
(B) in lieu thereof, by tendering to the Company shares of Common
Stock owned by the person exercising the Option and having a fair market
value equal to the cash exercise price applicable to such Option, such
fair market value to be the average of the high and the low sales prices
of a share of Common Stock on the date of exercise as reported on the
New York Stock Exchange Composite Transactions Tape, or, if the New York
Stock Exchange is closed on that date, on the last preceding date on
which the New York Stock Exchange was open for trading, or
(C) by a combination of United States dollars and shares of Common
Stock as aforesaid; and
(iii) unless the person exercising the Option has been, at all times
during the period beginning with the date of grant of the Option and ending
on the date of such exercise, a Non-Employee Director of the Company,
except that
(A) if such person shall cease to be such a Non-Employee Director
for reasons other than death, while holding an Option that has not
expired and has not been fully exercised, such person, at any time
within one year of the date he ceased to be such a Non-Employee Director
(but in no event after the Option has expired under the provisions of
subparagraph 5(e)(i) above), may exercise the Option with respect to any
shares of Common Stock as to which he has not
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<PAGE> 43
exercised the Option on the date he ceased to be such a Non-Employee
Director; or
(B) if any person to whom an Option has been granted shall die
holding an Option that has not been fully exercised, his executors,
administrators, heirs or distributees, as the case may be, may, at any
time within one year after the date of such death (but in no event after
the Option has expired under the provisions of subparagraph 5(e)(i)
above), exercise the Option with respect to any shares of Common Stock
as to which the decedent could have exercised the Option at the time of
his death.
6. DILUTION AND OTHER ADJUSTMENTS. In the event of any change in the
outstanding shares of Common Stock of the Company by reason of any stock split,
stock dividend, recapitalization, merger, consolidation, reorganization,
combination or exchange of shares or other similar event (including without
limitation the stock dividend to be paid by the Company on April 26, 1993), the
number or kind of shares that may be issued under the Plan pursuant to
subparagraphs 4(a) and 4(b) above shall be automatically adjusted to give effect
to the occurrence of such event, and the number or kind of shares subject to, or
the Option price per share under, any outstanding Option (including without
limitation the Options to be granted on April 26, 1993) shall be automatically
adjusted so that the proportionate interest of the participant shall be
maintained as before the occurrence of such event; such adjustment in
outstanding Options shall be made without change in the total Option exercise
price applicable to the unexercised portion of such Options and with a
corresponding adjustment in the Option exercise price per share, and such
adjustment shall be conclusive and binding for all purposes of the Plan.
7. MISCELLANEOUS PROVISIONS.
(a) Except as expressly provided for in the Plan, no Non-Employee Director
or other person shall have any claim or right to be granted an Option under the
Plan. Neither the Plan nor any action taken hereunder shall be construed as
giving any Non-Employee Director any right to be retained in the service of the
Company.
(b) A participant's rights and interest under the Plan may not be assigned
or transferred in whole or in part either directly or by operation of law or
otherwise (except, in the event of a participant's death, by will or the laws of
descent and distribution), including, but not by way of limitation, execution,
levy, garnishment, attachment, pledge, bankruptcy or in any other manner, and no
such right or interest of any participant in the Plan shall be subject to any
obligation or liability of such participant.
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<PAGE> 44
(c) No shares of Common Stock shall be issued hereunder unless counsel for
the Company shall be satisfied that such issuance will be in compliance with
applicable federal, state and other securities laws.
(d) It shall be a condition to the obligation of the Company to issue
shares of Common Stock upon exercise of an Option, that the participant (or any
beneficiary or person entitled to act under subparagraph 5(e)(iii)(B) above) pay
to the Company, upon its demand, such amount as may be requested by the Company
for the purpose of satisfying any liability to withhold federal, state, local or
foreign income or other taxes. If the amount requested is not paid, the Company
may refuse to issue shares of Common Stock.
(e) The expenses of the Plan shall be borne by the Company.
(f) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the issuance of shares upon exercise of any Option under the
Plan and issuance of shares upon exercise of Options shall be subordinate to the
claims of the Company's general creditors.
(g) By accepting any Option or other benefit under the Plan, each
participant and each person claiming under or through him shall be conclusively
deemed to have indicated his acceptance and ratification of, and consent to, the
Plan, the terms and conditions of any agreement embodying awards of Options and
any action taken under the Plan by the Company or the Board.
(h) The masculine pronoun means the feminine and the singular means the
plural wherever appropriate.
(i) The appropriate officers of the Company shall cause to be filed any
reports, returns or other information regarding Options hereunder or any shares
of Common Stock issued pursuant hereto as may be required by Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, or any other applicable
statute, rule or regulation.
8. AMENDMENT OR DISCONTINUANCE. The Plan may be amended at any time and from
time to time by the Board as the Board shall deem advisable, provided, however,
that (a) except as provided in Paragraph 6 above, the Board may not, without
further approval by the stockholders of the Company in accordance with Paragraph
10 below, increase the maximum number of shares of Common Stock as to which
Options may be granted under the Plan, reduce the minimum Option exercise price
described in subparagraph 5(a) above, extend the period during which Options may
be granted or exercised under the
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<PAGE> 45
Plan or change the class of persons eligible to receive Options under the Plan;
and (b) Paragraph 3 and subparagraphs 5(a) and 5(d) shall not be amended more
than once every six months, other than to comport with changes in the Internal
Revenue Code of 1986, as amended, the Employee Retirement Income Security Act of
1974, as amended, or the rules under either of such laws. No amendment of the
Plan shall materially and adversely affect any right of any participant with
respect to any Option theretofore granted without such participant's written
consent.
9. TERMINATION. The Plan shall terminate upon the earlier of the following
dates or events to occur:
(a) upon the adoption of a resolution of the Board terminating the Plan; or
(b) December 31, 1999.
No termination of the Plan shall materially and adversely affect any of the
rights or obligations of any person, without his consent, under any Option
theretofore granted under the Plan.
10. STOCKHOLDER APPROVAL. The Plan shall be submitted to the stockholders of
the Company for their approval. Except to the extent otherwise required by the
Company's Restated Certificate of Incorporation or the Company's By-Laws, the
stockholders shall be deemed to have approved the Plan if and when it is
approved at a meeting of the stockholders by a majority of the voting power of
the Voting Stock (all as defined in the Company's Restated Certificate of
Incorporation) present in person or represented by proxy and entitled to vote at
such meeting.
Amended and Restated
April 20, 1993
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<PAGE> 46
ALLEGHANY CORPORATION
PROXY FOR ANNUAL MEETING ON APRIL 22, 1994
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints F.M. Kirby, John J. Burns, Jr. and John
E. Tobin proxies, each with the power to appoint his substitute and with
authority in each to act in the absence of the other, to represent and to vote
all shares of stock of Alleghany Corporation which the undersigned is entitled
to vote at the Annual Meeting of Stockholders of Alleghany Corporation to be
held at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware, on
Friday, April 22, 1994 at 2:00 p.m., local time, and any adjournments thereof,
as indicated on the proposals described in the Proxy Statement, and on all
other matters properly coming before the meeting.
Dated__________________, 1994
_____________________________________
Signature
_____________________________________
Signature
Please sign exactly as your name or
names appear hereon. For joint
accounts, both owners should sign.
When signing as executor,
administrator, attorney, trustee or
guardian, etc., please give your
full title.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
<TABLE>
<S> <C>
WITHHOLD
A vote FOR items 1, 2 and 3 FOR all nominees AUTHORITY
is recommended by the Board listed below (except as to vote for all
of Directors marked to the contrary) nominees
/ / / / FOR AGAINST ABSTAIN
P 1. Election of Directors 2. Approval of the Company's / / / / / /
Amended and Restated Directors'
R John J. Burns, Jr. Dan R. Carmichael William K. Lavin Stock Option Plan.
FOR AGAINST ABSTAIN
O Instruction: To withhold authority to vote for an individual 3. Ratification of appointment / / / / / /
nominee, write that nominee's name in the following space: of KPMG Peat Marwick as
X independent auditors for the
____________________________________________________________ year 1994.
Y
</TABLE>
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
SPECIFICATIONS MADE. IF NO CHOICES ARE INDICATED,
THIS PROXY WILL BE VOTED FOR ITEMS 1, 2 AND 3.
IMPORTANT--This proxy must be signed and dated on the reverse side.
