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RELIANCE INSURANCE COMPANY
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
AND INFORMATION STATEMENT
- --------------------------------------------------------------------------
TIME: Tuesday, May 31, 1994
10:00 A.M.
PLACE: Reliance Insurance Company
National Headquarters
4 Penn Center Plaza
Philadelphia, Pennsylvania
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RELIANCE INSURANCE COMPANY
4 PENN CENTER PLAZA, PHILADELPHIA, PA 19103
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 31, 1994
----------
The annual meeting of stockholders of RELIANCE INSURANCE COMPANY, a
Pennsylvania corporation, will be held at the offices of Reliance
Insurance Company, 4 Penn Center Plaza, Philadelphia, Pennsylvania, on
Tuesday, May 31, 1994 at 10:00 A.M. for the purposes of electing a board
of fifteen directors for the ensuing year and considering and acting upon
any other matters which may properly come before the meeting or any
adjournments thereof.
Only stockholders of record at the close of business on March 31, 1994
will be entitled to notice of, and to vote at, this meeting. The books for
the transfer of stock will not be closed.
Your attention is directed to the accompanying information statement.
No proxies are being solicited for the meeting by the Board of Directors.
By order of the Board of Directors,
RELIANCE INSURANCE COMPANY,
LEE H. ROUTLEDGE,
Secretary
Dated: April 28, 1994
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INFORMATION STATEMENT
RELIANCE INSURANCE COMPANY
4 PENN CENTER PLAZA, PHILADELPHIA, PA 19103
----------
ANNUAL MEETING OF STOCKHOLDERS
MAY 31, 1994
----------
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY
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INFORMATION STATEMENT AND ANNUAL REPORT
The annual meeting of stockholders will be held at the offices of
Reliance Insurance Company ("Reliance Insurance"), 4 Penn Center Plaza,
Philadelphia, Pennsylvania on Tuesday, May 31, 1994 at 10:00 A.M. The
annual report of Reliance Insurance for the year ended December 31, 1993
and this information statement are being mailed commencing on April 28,
1994 to stockholders of record as of March 31, 1994.
The agenda for the meeting includes the election of the fifteen
directors nominated by the Board of Directors and such other matters as
may properly come before the meeting or any adjournments thereof.
VOTING SECURITIES AND PRINCIPAL HOLDERS
Holders of record at the close of business on March 31, 1994 of common
stock, par value $1.00 per share, and $2.68 Series A preferred stock, par
value $1.00 per share, will be entitled to vote at the meeting. On such
date, there were 44,586,703 shares of common stock and 1,075,114 shares of
Series A preferred stock issued and outstanding. Each stockholder is
entitled to one vote for each share of common stock and one vote for each
share of Series A preferred stock held by such stockholder except with
respect to the election of directors. With respect to the election of
directors, cumulative voting entitles each share of common stock and each
share of Series A preferred stock to fifteen votes which may be voted for
one nominee or distributed among any number of nominees. The common stock
holds 97.6% of the combined voting power of the common stock and the
Series A preferred stock.
All of the common stock is owned of record by Reliance Financial
Services Corporation ("Reliance Financial") and is pledged to secure
certain indebtedness of Reliance Financial. The principal executive
offices of Reliance Financial are located at Park Avenue Plaza, 55 East
52nd Street, New York, New York 10055. Reliance Financial is a
wholly-owned subsidiary of Reliance Group Holdings, Inc. ("RGH").
Approximately 49% of the common stock of RGH is owned by Saul P.
Steinberg, members of his family and affiliated trusts (the "Steinberg
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Group"). As a result of his ownership of common stock of RGH, Saul P.
Steinberg may be deemed to control Reliance Financial.
The only beneficial owner of more than five percent of the Reliance
Insurance Series A preferred stock is Zenith National Insurance Corp.
(21255 Califa Street, Woodland Hills, California 91367) which, to the best
knowledge of Reliance Insurance, together with a wholly-owned subsidiary,
had at February 15, 1994, sole voting and dispositive power over 240,856
shares, constituting 22.4% of the total outstanding shares of such class.
As of February 15, 1994, Reliance Insurance and its subsidiaries owned
6,574,445 shares of common stock of Zenith National Insurance Corp.,
constituting 34.4% of the total outstanding shares of such class.
NOMINEES FOR ELECTION AS DIRECTORS
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PROPOSAL 1-ELECTION OF DIRECTORS
The fifteen persons named below (all of whom are presently Directors
of Reliance Insurance, Reliance Financial and RGH) have been nominated by
the Board of Directors for election as Directors of the Company to serve
until the next annual meeting of stockholders and until their successors
are duly elected and shall qualify. Directors will be elected by a
plurality of the votes cast.
Saul P. Steinberg, 54, has been a Director of Reliance Insurance since
1968 and is Chairman of both the Executive and Finance Committee and the
Compensation Committee of the Board of Directors. Mr. Steinberg founded
and has been the Chief Executive Officer and a Director of RGH and
predecessors of RGH since 1961. He has served Telemundo Group, Inc. as
Chairman of the Board of Directors since February 1987, as Chief
Executive Officer from February 1990 until May 1992, and as President
from February 1990 until February 1991. Mr. Steinberg is also a Director
of Symbol Technologies, Inc. and Zenith National Insurance Corp. He is a
member of the Board of Trustees of the University of Pennsylvania;
Chairman of The Wharton School Board of Overseers; a member of the Board
of Overseers of Cornell University Medical College; a member of the
Board of Trustees of the Long Island Jewish Medical Center; a Director
of New York Hospital-Cornell Medical Center; a Trustee of the New York
Public Library; and a Director of the New York City Partnership. He is
the brother of Mr. Robert M. Steinberg. On July 30, 1993, Telemundo
Group, Inc. consented to the entry of an order for relief under Chapter
11 of the United States Bankruptcy Code and its reorganization case
remains pending in the United States Bankruptcy Court for the Southern
District of New York.
Robert M. Steinberg, 51, has been a Director of Reliance Insurance since
1978. In October 1984, Mr. Steinberg was elected Chairman of the Board
and Chief Executive Officer of Reliance Insurance. Mr. Steinberg is a
member of the Executive and Finance Committee and the Compensation
Committee of the Board of Directors. Mr. Steinberg became a Director of
RGH in 1981 and President and Chief Operating Officer of RGH in 1982. He
has held various positions with predecessors of RGH since 1965. He is a
Director of Telemundo Group, Inc. and Zenith National Insurance Corp. He
1
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is a Trustee of the Mount Sinai Medical Center, The Robert Steel
Foundation for Pediatric Cancer Research and Bank Street College. Mr.
Steinberg is the brother of Mr. Saul P. Steinberg.
George R. Baker, 64, has been a Director of Reliance Insurance since 1975
except for the period February 1982 through January 1983. Mr. Baker is
Chairman of the Special Compensation Committee of the Board of Directors
and a member of the Audit Committee of the Board of Directors. Since
July 1985 his principal business activity has been serving as a
Corporate Director/Advisor to various business enterprises. Mr. Baker is
a Director of The Midland Company, WMS Industries Inc. and W.W.
Grainger, Inc. He is a Member of the Board of Trustees of The Field
Museum of Chicago; the Board of Trustees of Children's Memorial
Hospital, Chicago; and the Board of Trustees of Coe College, Cedar
Rapids, Iowa.
George E. Bello, 58, has been a Director of Reliance Insurance since 1982
and is a member of the Executive and Finance Committee and the
Compensation Committee of the Board of Directors. Mr. Bello became
Executive Vice President and Controller and a Director of RGH in 1982.
He has held various positions with predecessors of RGH since 1968. He is
a Director of Take Care, Inc., Telemundo Group, Inc. and Zenith National
Insurance Corp.
Carter Burden, 52, became a Director of Reliance Insurance in December
1993. He has been Chairman of the Board of CRB Broadcasting Corp., a
company which owns and operates radio stations, since 1981 and Managing
General Partner of William A. M. Burden & Co., a private investment
partnership, since 1989. Mr. Burden is a Trustee of The New York Public
Library, the Pierpont Morgan Library and the New York City Ballet. He is
also a member of the Committee to Visit the Art Museums and the
University Libraries Committee at Harvard University; Founder and
Chairman Emeritus of The Burden Center For the Aging; and Director of
the Florence V. Burden Foundation.
Dennis A. Busti, 51, became a Director of Reliance Insurance in August
1991. He has been President and Chief Executive Officer of Reliance
National, a principal operating unit of Reliance Insurance, since June
1987.
Dean W. Case, 57, became a Director of Reliance Insurance in January 1986.
In July 1988, he was elected President and Chief Operating Officer of
Reliance Insurance and President and Chief Executive Officer of United
Pacific Insurance Company, a subsidiary of Reliance Insurance. From June
1981 until April 1990, Mr. Case was Chief Executive Officer of General
Casualty Company of Wisconsin, a former subsidiary of Reliance
Insurance. Prior thereto he held various positions with Reliance
Insurance since 1973. Mr. Case is a member of the Board of Governors of
the National Association of Independent Insurers.
Lowell C. Freiberg, 54, has been a Director of Reliance Insurance since
1982 and is a member of the Executive and Finance Committee of the Board
of Directors. Mr. Freiberg has been a Senior Vice President and a
Director of RGH since 1982 and Chief Financial Officer of RGH since
1985. Mr. Freiberg also served as Treasurer of RGH from 1982 until March
2
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1994. Mr. Freiberg has held various positions with predecessors of RGH
since 1969. He is a Director of Telemundo Group, Inc. and Symbol
Technologies, Inc. He is a Director of the Dance Theater of Harlem.
Dr. Thomas P. Gerrity, 52, became a Director of Reliance Insurance in
December 1993. He has been Dean of the Wharton School of the University
of Pennsylvania since 1990. Dr. Gerrity was Chairman and Chief Executive
Officer of Index Group, Inc., an information technology consulting
company he founded, from 1969 to 1989 and was President of CSC
Consulting, the commercial professional services group of Computer
Sciences Corporation, from 1989 to 1990. He is a Director of Digital
Equipment Corporation, Federal National Mortgage Association and Sun
Company, Inc., and a member of the Executive Committee of Technology
Leaders L.P.
Jewell Jackson McCabe, 48, became a Director of Reliance Insurance in
August 1991. She has been the President of Jewell Jackson McCabe
Associates, consultants specializing in strategic planning and
communications, since 1984 and Chair of the New York State Jobs Training
Partnership council, a federally funded training program for
disadvantaged workers, since 1983. Ms. McCabe is the Founder and Chair
of the National Coalition of 100 Black Women; Chair of the Coro
Foundation; and a Director or Trustee of the National Alliance of
Business, South Street Seaport Museum, United Hospital Fund, New York
City Partnership and the Phelps Stokes Fund. She is also a member of The
Wharton School Board of Overseers, the Government Relations Committee of
the United Way of America and of the Executive Committee of the
Association for a Better New York.
Irving Schneider, 74, became a Director of Reliance Insurance in 1979 and
is a member of the Audit Committee of the Board of Directors. He has
been Executive Vice President of Helmsley-Spear, Inc., a real estate
management corporation, for over ten years. Mr. Schneider is also
Chairman of the Long Island Jewish Medical Center and Vice Chairman of
the Association for a Better New York and the Board of Trustees of
Brandeis University. He is Life Trustee of United Jewish Appeal
Federation of New York.
Bernard L. Schwartz, 68, became a Director of Reliance Insurance in 1968.
He has been Chairman of the Board, President and Chief Executive Officer
of Loral Corporation, a defense electronics and communications
corporation, since 1972. Since 1989, he has been Chairman and Chief
Executive Officer of K & F Industries, Inc., a manufacturer of aircraft
wheels and brakes. He is a Director of First Data Corporation and Sorema
North American Reinsurance Company, a Trustee of New York University
Medical Center and a member of the Advisory Board of The City College of
New York School of Engineering.
Richard E. Snyder, 61, became a Director of Reliance Insurance in March
1994. Mr. Snyder has been Chief Executive Officer and Chairman of the
Board of Directors of Paramount Publishing, the publishing division of
Paramount Communications, Inc., a majority owned subsidiary of Viacom,
Inc., since 1979. Mr. Snyder is a member of the Board of Directors of
the National Book Awards. Mr. Snyder is also a member of the Society of
Fellows of the American Museum of Natural History, the Council on
3
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Foreign Relations, the Economic Club of New York and the Board of
Overseers for the University Libraries of Tufts University.
Thomas J. Stanton, Jr., 66, became a Director of Reliance Insurance in
1972. Mr. Stanton is Chairman of the Audit Committee of the Board of
Directors and a member of the Special Compensation Committee of the
Board of Directors. He is Chairman Emeritus of National Westminster Bank
NJ, and served as Chairman of the Board of Directors or President of
National Westminster Bank NJ or its predecessor from 1967 through
January 1990. He is a Director of Loral Corporation. He is Treasurer and
Director of the New Jersey State Chamber of Commerce and a Director or
Trustee of Hudson County Chamber of Commerce & Industry and the National
Conference of Christians and Jews. He is a member of the Board of
Regents of Saint Peter's College and of Partnership for New Jersey. He
is Vice Chairman of the Regional Plan Association of New York; Chairman
of the Regional Plan Association of New Jersey; Chairman of Hudson
County Tax Research Council Executive Committee; Trustee of Montclair
Museum, Liberty Science Center, Saint Peter's Prep and Stevens Institute
of Technology, Hoboken; and Chairman and Treasurer of the Foundation of
the University of Medicine and Dentistry of New Jersey.
James E. Yacobucci, 42, became a Director and Senior Vice
President-Investments of Reliance Insurance in May 1989. He became
Senior Vice President-Investments of RGH in December 1990. From January
1982 through April 1989, Mr. Yacobucci was a general partner of
Cumberland Associates, a private investment manager.
Board of Directors and Committees
The Board of Directors, the Audit Committee and the Compensation
Committee held 6, 3, and 8 meetings, respectively, during 1993. The Board
of Directors also has a Special Compensation Committee, which held one
meeting in 1993. Reliance Insurance does not have a nominating committee.
All directors, except for Dennis A. Busti and Bernard L. Schwartz,
attended at least 75% of the aggregate number of meetings of the board
(during the period they served as Directors) and those committees of which
they are members. Mr. Jerome H. Carr, a Corporate Senior Vice President
and the Chief Financial Officer of Reliance Insurance, failed to timely
file one Form 4 with respect to the redemption of Series A preferred stock
owned by him. Forms 3 for each of Dr. Thomas P. Gerrity and Carter Burden
required to be filed within 10 days of their election as Directors of
Reliance Insurance were filed after the date they were due (and showed no
ownership of equity securities).
The Audit Committee's activities include approval of the scope of the
annual audit and related fee proposals, periodic meetings with both
internal auditors and independent auditors to discuss the results of audit
examinations and review of current developments in financial reporting and
accounting.
The Compensation Committee is authorized to review and approve
salaries and salary increases for any Reliance Insurance employee (other
than those persons described in the next sentence) whose annual salary
rate is $l25,000 or higher and to approve and administer the management
incentive plans. The Special Compensation Committee is responsible for
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reviewing the compensation of the Chairman of the Executive and Finance
Committee, the Chairman of the Board of Directors and the Senior Vice
President-Investments.
Compensation of Directors
Each member of the Board of Directors who is not compensated as a
senior executive officer of Reliance Insurance, its parents or
subsidiaries, receives director's fees of $20,000 per year from Reliance
Insurance for services as a director of Reliance Insurance.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of February 15, 1994
with respect to beneficial ownership of RGH common stock by each Director
of Reliance Insurance and by all executive officers and directors of
Reliance Insurance as a group. The persons named below held sole voting
and investment power with respect to the shares shown opposite their
names, unless otherwise indicated.
<TABLE>
<CAPTION>
Number of Shares
and Nature of Percent
Beneficial of
Name of Beneficial Owner Ownership Class(1)
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Saul P. Steinberg .................................... 44,038,331(2)(3)(4) 39.5%
Robert M. Steinberg .................................. 18,514,547(2)(3)(5)(6)(10) 16.6%
George R. Baker ...................................... 3,625(3) *
George E. Bello ...................................... 2,138,087(7)(8)(10) 1.9%
Carter Burden ........................................ 26,676(9) *
Dennis A. Busti ...................................... 56,000(10) *
Dean W. Case.......................................... 25,625 *
Lowell C. Freiberg ................................... 884,726(2)(5)(10) *
Thomas P. Gerrity..................................... 3,000 *
Jewell J. McCabe ..................................... 0 *
Irving Schneider...................................... 174,500 *
Bernard L. Schwartz................................... 14,350(9) *
Thomas J. Stanton, Jr................................. 1,000 *
James E. Yacobucci.................................... 1,941,169(2)(5)(7)(10) 1.7%
All Executive Officers and Directors as a Group
(other than Saul P. Steinberg and Robert M.
Steinberg).......................................... 3,531,372(2)(5)(7)(8) 3.1%
(9)(10)(11)(12)(13)
</TABLE>
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(1) An asterisk indicates that the shares owned are less than 1% of the
class.
(2) Includes 182,900 shares owned by, and 56,072 shares based on the
assumed exercise of warrants to purchase RGH common stock owned by,
the Reliance Group Holdings, Inc. Pension Trust. Saul P. Steinberg,
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Robert M. Steinberg, Lowell C. Freiberg and James E. Yacobucci are
the trustees thereof. Voting and dispositive power with respect to
such shares and warrants (including the power to exercise the
warrants) has been transferred by the trustees to LaSalle National
Trust, N.A. ("LaSalle"), as independent fiduciary. The trustees may
revoke the authority of LaSalle on 30 days' notice. Each trustee
disclaims beneficial ownership of all of the shares described in this
Note 2.
(3) Includes with respect to each of Saul P. Steinberg and Robert M.
Steinberg, and excludes with respect to George R. Baker, 12,280,830
shares owned by the Article III Residuary Trust under the will of
Julius Steinberg. Saul P. Steinberg, Robert M. Steinberg, their
mother and George R. Baker are the trustees thereof and have the
shared power to vote and otherwise deal with the shares. Saul P.
Steinberg, Robert M. Steinberg and their two sisters are equal
beneficiaries under the trust.
(4) Includes 55,340 shares held by Saul P. Steinberg as custodian for his
children, as to which he disclaims beneficial ownership. Includes
75,180 shares owned by Saul P. Steinberg's mother, 336,300 shares
owned by his wife, 15,200 shares held by his wife as custodian for
their child and 100,000 shares held by trusts for children of Saul P.
Steinberg (for which Robert M. Steinberg serves as the sole trustee),
as to all of which Saul P. Steinberg disclaims beneficial ownership.
Includes 910,000 shares held by the Saul & Gayfryd Steinberg
Foundation, Inc. Includes 116,456 shares allocable to Saul P.
Steinberg's contributions under the Reliance Insurance Company
Savings Incentive Plan (the "SIP") as to which he has dispositive
power. All of the RGH common stock held under the SIP will be voted
by the trustee of the SIP, Continental Trust Company, in its sole
discretion, in accordance with the fiduciary standards of the
Employee Retirement Income Security Act of 1974, as amended.
(5) Includes 314,100 shares owned by, and 94,154 shares based on the
assumed exercise of warrants to purchase RGH common stock owned by,
the Commonwealth Land Title Insurance Company Pension Trust. Robert
M. Steinberg, Lowell C. Freiberg, James E. Yacobucci and one other
person are the trustees thereof. Voting and dispositive power with
respect to such shares and warrants (including the power to exercise
the warrants) has been transferred by the trustees to LaSalle, as
independent fiduciary. The trustees may revoke the authority of
LaSalle on 30 days' notice. Messrs. Steinberg, Freiberg and Yacobucci
each disclaims beneficial ownership of all of the shares described in
this Note 5.
(6) Includes 101,730 shares held by Robert M. Steinberg as custodian for
his children and 100,000 shares held by trusts for children of Saul
P. Steinberg, for which Robert M. Steinberg serves as sole trustee,
as to all of which Robert M. Steinberg disclaims beneficial
ownership. Includes 25,921 shares allocable to Robert M. Steinberg's
contributions under the SIP, as to which he has dispositive power.
(7) Includes 933,300 shares owned by, and 310,643 shares based on the
assumed exercise of warrants to purchase RGH common stock owned by,
the Reliance Insurance Company Employee Retirement Trust. George E.
Bello, James E. Yacobucci and one other person are the trustees
thereof. Voting and dispositive power with respect to such shares and
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warrants (including the power to exercise the warrants) has been
transferred by the trustees to LaSalle, as independent fiduciary. The
trustees may revoke the authority of LaSalle on 30 days' notice.
Messrs. Bello and Yacobucci each disclaims beneficial ownership of
all of the shares described in this Note 7.
(8) Includes shares allocable to employee contributions under the SIP as
to which the employee has dispositive power, as follows: George E.
Bello - 14,593 shares, and all executive officers and directors as a
group (other than Saul P. and Robert M. Steinberg) - 52,565 shares.
(9) Includes shares based on the assumed exercise of warrants to purchase
RGH common stock as follows: Carter Burden - 21,676 shares, Bernard
L. Schwartz - 4,350 shares, and all executive officers and directors
as a group (other than Saul P. and Robert M. Steinberg) - 486,895
shares.
(10) Includes shares based on the assumed exercise of currently
exercisable options to purchase RGH common stock owned through RGH's
1986 Stock Option Plan as follows: Robert M. Steinberg - 250,000,
George E. Bello - 175,000, Dennis A. Busti - 55,000, Lowell C.
Freiberg - 175,000, James E. Yacobucci - 50,000 and all executive
officers and directors as a group (other than Saul P. and Robert M.
Steinberg) - 557,500.
(11) Excludes 12,280,830 shares owned by the Article III Residuary Trust
under the will of Julius Steinberg. See Note 3.
(12) Richard E. Snyder became a Director of Reliance Insurance in March
1994. He did not own any shares of RGH common stock on February 15,
1994.
(13) Includes 8,000 shares and options to purchase 7,500 shares owned by
an executive officer of Reliance Insurance who resigned in April
1994.
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The following table sets forth information as of February 15, 1994
with respect to beneficial ownership of warrants to purchase RGH common
stock by each Director of Reliance Insurance and by all executive officers
and directors of Reliance Insurance as a group.
<TABLE>
<CAPTION>
Number of Warrants
and Nature of Percent of
Name of Beneficial Owner Beneficial Ownership Class (1)
---------------------------------------------------------------------------------------------------
<S> <C> <C>
George E. Bello............................................... 310,643(2) 6.2%
Carter Burden ................................................ 21,676 *
Lowell C. Freiberg............................................ 150,226(3)(4) 3.0%
Bernard L. Schwartz .......................................... 4,350 *
Robert M. Steinberg........................................... 150,226(3)(4) 3.0%
Saul P. Steinberg............................................. 56,072(3) 1.1%
James E. Yacobucci ........................................... 460,869(2)(3)(4) 9.2%
All Executive Officers and Directors as a Group............... 486,895(2)(3)(4) 9.7%
</TABLE>
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(1) An asterisk indicates that the securities owned are less than 1% of
the class.
(2) Includes 310,643 warrants to purchase RGH common stock owned by the
Reliance Insurance Company Employee Retirement Trust. George E. Bello,
James E. Yacobucci and one other person are the trustees thereof.
Dispositive power with respect to such warrants (including the power
to exercise them) and voting power with respect to the underlying RGH
common stock has been transferred by the trustees to LaSalle, as
independent fiduciary. The trustees may revoke the authority of
LaSalle on 30 days' notice. Messrs. Bello and Yacobucci each disclaims
beneficial ownership of the warrants described in this Note 2.
(3) Includes 56,072 warrants to purchase RGH common stock owned by the
Reliance Group Holdings, Inc. Pension Trust. Lowell C. Freiberg,
Robert M. Steinberg, Saul P. Steinberg and James E. Yacobucci are the
trustees thereof. Dispositive power with respect to such warrants
(including the power to exercise them) and voting power with respect
to the underlying RGH common stock has been transferred by the
trustees to LaSalle, as independent fiduciary. The trustees may revoke
the authority of LaSalle on 30 days' notice. Each trustee disclaims
beneficial ownership of the warrants described in this Note 3.
(4) Includes 94,154 warrants to purchase RGH common stock owned by the
Commonwealth Land Title Insurance Company Pension Trust. Lowell C.
Freiberg, Robert M. Steinberg, James E. Yacobucci and one other person
are the trustees thereof. Dispositive power with respect to such
warrants (including the power to exercise them) and voting power with
respect to the underlying RGH common stock has been transferred by the
trustees to LaSalle, as independent fiduciary. The trustees may revoke
the authority of LaSalle on 30 days' notice. Each trustee disclaims
beneficial ownership of the warrants described in this Note 4.
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The following table sets forth information as of February 15, 1994
with respect to beneficial ownership of equity securities of Reliance
Insurance and Telemundo Group, Inc. ("Telemundo") by each Director of
Reliance Insurance and by all executive officers and directors of Reliance
Insurance as a group. Of the outstanding common stock of Telemundo Group,
Inc., approximately 34.9% is owned by Reliance Insurance and approximately
41.5% is owned by a limited partnership, the general partner of which is a
limited partnership which has as its general partner a wholly-owned
subsidiary of Reliance Insurance. In July 1993, Telemundo consented to the
entry of an order for relief under Chapter 11 of the United States
Bankruptcy Code. Reliance Insurance wrote-off its investment in Telemundo
(and the partnerships described above) in 1991.
<TABLE>
<CAPTION>
Number of Shares
Name of and Nature of Percent of
Title of Class Beneficial Owner Beneficial Ownership Class(1)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reliance Insurance Company $2.68
Series A Cumulative Preferred
Stock, $1.00 par value ........... Robert M. Steinberg........... 4,500 *
All Executive Officers and
Directors as a Group......... 5,970 *
Telemundo Group, Inc.
Common Stock, $.01 par value ..... Saul P. Steinberg............. 2,435(2) *
George E. Bello............... 228,900 *
Dean W. Case.................. 500 *
All Executive Officers and *
Directors as a Group......... 231,935
</TABLE>
----------
(1) An asterisk indicates that the securities owned are less than 1% of
the class.
(2) These securities are owned by Mr. Steinberg's wife and he disclaims
beneficial ownership.
OTHER MATTERS TO COME BEFORE THE MEETING
The Board of Directors knows of no other matter to be presented which
is a proper subject for action by the stockholders at the meeting.
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EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the compensation for services rendered
in all capacities to Reliance Insurance for the fiscal years ended
December 31, 1993, 1992 and 1991 by the Chief Executive Officer and the
four other most highly compensated executive officers of Reliance
Insurance (the "named executive officers").
<TABLE>
<CAPTION>
Annual Compensation (1) Long Term Compensation
-----------------------------------------------------------
Awards Payouts
Other ------------------------
Annual Securities
Name and Compen- Underlying LTIP Payouts All Other
Principal Position Year Salary($) Bonus($) sation Options/SARs(#) ($) Compensation($)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Saul P. Steinberg.... 1993 $ 438,750 $ 438,750 $57,000(3) 0 $ 0 $ 70,000(6)
Chairman of the 1992 438,750 438,750 -(4) 0 0 88,000
Executive and
Finance 1991 487,500 487,500 - 0 0 -
Committee of the
Board
Robert M. Steinberg.. 1993 270,000 270,000 - 0 0 50,000(6)
Chairman of the
Board and 1992 270,000 270,000 - 1,000,000(5) 0 68,000
Chief Executive
Officer 1991 300,000 300,000 - 0 0 -
Dennis A. Busti...... 1993 360,000 1,000,000 - 0 0 7,075(7)
President and Chief 1992 360,000 2,730,567 - 220,000(5) 0 6,553
Executive Officer 1991 360,000 728,466 - 0 0 -
of Reliance National
James E. Yacobucci... 1993 1,125,000 0 - 0 0 7,075(7)
Senior Vice
President- 1992 1,125,000 400,000 - 200,000(5) 0 7,336
Investments 1991 1,250,000 0 - 0 1,103,000 -
Dean W. Case......... 1993 450,000 333,900(2) - 0 0 7,075(7)
President and Chief 1992 450,000 471,600(2) - 390,000(5) 0 9,057
Operating Officer 1991 450,000 171,000 - 0 0 -
</TABLE>
----------
(1) Effective January 1, 1994, the annual base salaries of Saul P.
Steinberg and Robert M. Steinberg were reduced by $154,375 and
$40,000, respectively, and the annual base salary of James E.
Yacobucci was increased by $125,000. The bonuses for 1994 for Saul P.
Steinberg and Robert M. Steinberg will be paid in accordance with the
terms of the Reliance Group Holdings, Inc. Executive Bonus Plan,
assuming such plan is approved by the stockholders of RGH at their
10
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<PAGE> 14
annual meeting on May 12, 1994. Such plan provides for a maximum bonus
equal to 115% of annual base salary if certain preestablished,
objective performance goals are achieved. The bonus for 1994 for James
E. Yacobucci will be paid in accordance with the terms of the
Executive Bonus Plan for James E. Yacobucci, assuming such plan is
approved by the stockholders of RGH at their annual meeting on May 12,
1994. Such plan provides that, subject to the discretion of the
Special Compensation Committee of the Board of Directors of RGH to
reduce or eliminate the bonus, Mr. Yacobucci may earn a maximum annual
bonus of 400% of his "base salary," which for purposes of such plan
is defined as being $1,000,000, if a preestablished, objective
performance goal is achieved.
(2) The amount disclosed represents the estimate by Reliance Insurance of
the bonus compensation earned for the fiscal year. The bonus earned
for the fiscal year is subject to change for the subsequent two fiscal
years, to allow for the future development of business results in
respect of policies written during the fiscal year. The amount
disclosed will be adjusted, if necessary, in future Information
Statements of Reliance Insurance in which compensation for this fiscal
year is disclosed.
(3) Represents certain personal use of corporate aircraft.
(4) This mark throughout the table indicates information not required to
be reported under the rules of the Securities and Exchange Commission.
(5) Represents options/SARs to purchase shares of RGH common stock that
were granted in connection with the surrender of an equal number of
outstanding RGH options/SARs and represents compensation for services
rendered to Reliance Insurance and, in the case of Robert M.
Steinberg, to RGH.
(6) Represents directors' fees paid by companies on whose boards the
executives serve at the request of Reliance Insurance.
(7) Represents 1993 contributions by Reliance Insurance to Reliance
Insurance's Savings Incentive Plan for the named executive officers.
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<PAGE> 15
Aggregated Option/SAR Exercises in 1993 and Fiscal 1993 Year-End
Option/SAR Values
The following table sets forth the number of shares of common stock of
RGH covered by stock options and stock appreciation rights held by the
named executive officers at December 31, 1993 and also shows the values
for "in-the-money" options and stock appreciation rights at that date.
No named executive officer was granted stock options or stock appreciation
rights during 1993. The stock options and stock appreciation rights
reported in this table represent compensation for services rendered to
Reliance Insurance and, in the case of Robert M. Steinberg, to RGH.
<TABLE>
<CAPTION>
Number of Securities Underlying
Unexercised Options/SARs Value of Unexercised
Held at In the Money Options/SARs At
Shares December 31, 1993 December 31, 1993($)(1)
Acquired Value --------------------------------------------------------------
Name on Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Saul P. Steinberg ... 0 $ 0 0 0 $ 0 $ 0
Robert M. Steinberg . 0 0 250,000 750,000 1,044,000 3,131,000
Dennis A. Busti ..... 0 0 55,000 165,000 230,000 689,000
James E. Yacobucci .. 0 0 50,000 150,000 209,000 626,000
Dean W. Case ........ 97,500 310,000 0 292,500 0 1,221,000
</TABLE>
----------
(1) Options and stock appreciation rights are classified as
"in-the-money" if the fair market value of the underlying common
stock exceeds the exercise or base price of the option or stock
appreciation right. The value of such in-the-money options and stock
appreciation rights is the difference between the exercise or base
price and the fair market value of the underlying common stock as of
December 31, 1993. The fair market value of the common stock of RGH on
December 31, 1993 was $8.00 per share.
12
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<PAGE> 16
Pension Plan Table
The following table sets forth the approximate annual pension that a
named executive officer may receive under Reliance Insurance's pension
plan (the "Pension Plan") and Reliance Insurance's supplemental pension
plan (the "Supplemental Pension Plan"), assuming selection of a single
life annuity, retirement at age 65 and the current level of covered
compensation, based on the indicated assumptions as to salary and years of
service. Under the Internal Revenue Code of 1986, as amended (the
"Code") the maximum annual benefit allowed under the Pension Plan is
presently $118,800 and the maximum annual amount of compensation, for
years beginning with 1994, that may be taken into account under the
Pension Plan is presently $150,000. Amounts shown on the following table
in excess of $118,800 are payable only to persons participating in the
Supplemental Pension Plan, including Saul P. Steinberg, Robert M.
Steinberg and Dean W. Case.
<TABLE>
<CAPTION>
Years of Service
Salary 5 10 15 20 25 30 35
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000 $ 8,470 $ 16,940 $ 25,410 $ 33,880 $ 42,350 $ 50,820 $ 59,290
$200,000 17,720 35,440 53,160 70,880 88,600 106,320 124,040
$300,000 26,970 53,940 80,910 107,880 134,850 161,820 188,790
$400,000 36,220 72,440 108,660 144,880 181,100 217,320 253,540
$500,000 45,470 90,940 136,410 181,880 227,350 272,820 318,290
$600,000 54,720 109,440 164,160 218,880 273,600 328,320 383,040
</TABLE>
As of January 1, 1994, for purposes of calculating pension benefits
under the Pension Plan and the Supplemental Pension Plan, Saul P.
Steinberg, Robert M. Steinberg, James E. Yacobucci, Dennis A. Busti and
Dean W. Case had 17, 5, 4, 7 and 20 years of credited service,
respectively, and had salaries of $284,375, $230,000, $150,000, $150,000
and $450,000, respectively. Benefits under each of the above named plans
are calculated on the basis of a single life annuity and are not subject
to any deduction for Social Security benefits or other offset amounts.
Employment Contracts
Saul P. Steinberg has an employment agreement with Reliance Insurance
to act as Chairman of the Executive and Finance Committee of Reliance
Insurance for a five-year term, which commenced January 1, 1992, at a
salary of $284,375 per annum (reduced from $438,750 per annum effective
January 1, 1994), subject to increases as approved by the Special
Compensation Committee of the Board of Directors of Reliance Insurance.
Mr. Steinberg was entitled under this agreement to an annual bonus for
1993, not to exceed 100% of his salary for 1993, based on the
determination by the Special Compensation Committee of the Board of
Directors of Reliance Insurance of the relative contribution of Mr.
Steinberg to the business, operations and financial results of Reliance
Insurance during such year and on objective criteria determined by the
Special Compensation Committee of the Board of Directors of Reliance
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<PAGE>
<PAGE> 17
Insurance. Mr. Steinberg's bonus for 1994 from Reliance Insurance will be
paid in accordance with the terms of the Reliance Group Holdings, Inc.
Executive Bonus Plan, assuming such plan is approved by the stockholders
of RGH at their annual meeting on May 12, 1994. Such plan provides for a
maximum bonus equal to 115% of annual base salary if certain
preestablished, objective performance goals are achieved.
Robert M. Steinberg has an employment agreement with Reliance
Insurance to act as Chairman of the Board and Chief Executive Officer of
Reliance Insurance for a five-year term, which commenced January 1, 1994,
at a salary of $230,000 per annum (reduced from $270,000 per annum under
his prior employment agreement, which agreement expired September 30,
1993), subject to increases as approved by the Special Compensation
Committee of the Board of Directors of Reliance Insurance. Under his prior
employment agreement, Mr. Steinberg was entitled to an annual bonus for
1993, not to exceed 100% of his salary for 1993, based on the
determination by the Special Compensation Committee of the Board of
Directors of Reliance Insurance of the relative contribution of Mr.
Steinberg to the business, operations and financial results of Reliance
Insurance during such year and on objective criteria determined by the
Special Compensation Committee of the Board of Directors of Reliance
Insurance. Mr. Steinberg's bonus for 1994 from Reliance Insurance will be
paid in accordance with the terms of the Reliance Group Holdings, Inc.
Executive Bonus Plan, assuming such plan is approved by the stockholders
of RGH at their annual meeting on May 12, 1994. Such plan provides for a
maximum bonus equal to 115% of annual base salary if certain
preestablished, objective performance goals are achieved.
James E. Yacobucci serves as Senior Vice President - Investments of
Reliance Insurance, a position he has held since May 1, 1989. Until
December 31, 1993, Mr. Yacobucci's employment was governed by an
employment agreement with Reliance Insurance. Under such agreement, Mr.
Yacobucci received an annual salary of $1,125,000 for 1993 and was
eligible for an annual bonus in an amount determined by the Special
Compensation Committee of the Board of Directors of Reliance Insurance and
not to exceed 100% of Mr. Yacobucci's base salary. Mr. Yacobucci was also
entitled under such agreement to "Distributable Portfolio Profits"
(defined as 15% of the amount by which the total return earned on a
portion of the consolidated investment portfolio of Reliance Insurance
exceeded the amount which would have been earned on such portion of the
portfolio if its performance matched the total return on the Standard &
Poor's 500) for the period from July 1, 1989 through December 31, 1993.
Pursuant thereto, Mr. Yacobucci was paid $1,234,000 in early 1994, an
amount equal to the excess of (i) Distributable Portfolio Profits, over
(ii) the aggregate amount of advances against Distributable Portfolio
Profits previously paid to him. Mr. Yacobucci's bonus for 1994 will be
paid in accordance with the terms of the Executive Bonus Plan for James E.
Yacobucci, assuming such plan is approved by the stockholders of RGH at
their annual meeting to be held on May 12, 1994. Such plan provides that,
subject to the discretion of the Special Compensation Committee of the
Board of Directors of RGH to reduce or eliminate the bonus, Mr. Yacobucci
may earn a maximum annual bonus of 400% of his "base salary," which for
purposes of such plan is defined as being $1,000,000, if a preestablished,
objective performance goal is achieved.
14
<PAGE>
<PAGE> 18
Dennis A. Busti has an employment agreement with Reliance Insurance to
act as President and Chief Executive Officer of Reliance National, a
principal operating unit of Reliance Insurance, at a current salary of
$360,000 per year. Under his employment agreement, Mr. Busti is entitled
to a termination payment of $1,000,000 payable on the earlier of (i)
disability while an employee or (ii) death while an employee.
Report of Compensation Committees of the Board
Two separate committees of the Board of Directors of Reliance
Insurance and one committee of the Board of Directors of RGH had
responsibility for reviewing and determining the overall compensation of
executive officers of Reliance Insurance. The Compensation Committee is
responsible for reviewing and determining the compensation of executive
officers except as noted below. The Special Compensation Committee is
responsible for reviewing and determining the compensation of certain
executive officers, including the Chairman of the Executive and Finance
Committee, the Chairman of the Board of Directors and the Senior Vice
President-Investments. These committees are together referred to below as
the "Compensation Committees." In addition, the Stock Option Committee
of the Board of Directors of RGH makes determinations as to the award of
stock options and stock appreciation rights under the RGH 1986 Stock
Option Plan for executive officers of Reliance Insurance. Both the Special
Compensation Committee and the Stock Option Committee are composed solely
of outside Directors.
I. Executive Compensation Philosophy
The executive compensation policies of Reliance Insurance, as applied
by the Compensation Committees and the Stock Option Committee during 1993,
are designed to align compensation with the interests of Reliance
Insurance's stockholders. The goals of Reliance Insurance are to attract
and retain executives whose abilities are critical to the success of
Reliance Insurance, to support a performance-oriented environment that
rewards individual initiative and achievement, to establish a relationship
between compensation and the attainment of corporate objectives and to
reward executives for the enhancement of long-term stockholder value. The
Compensation Committees and the Stock Option Committee specifically
endorse the position that stock-based compensation and stock ownership by
executives are an important element in aligning the interests of
executives with the stockholders and in enhancing stockholder value.
II. Elements of Executive Compensation
The compensation package for executive officers of Reliance Insurance,
including Reliance Insurance's Chief Executive Officer, consists of the
following basic elements.
A. Base Salary. The base salaries of executive officers of Reliance
Insurance are set on an individual basis and are designed to enhance
Reliance Insurance's ability to attract and retain highly qualified key
executives. Salaries bear a direct relationship to the executive's level
of responsibility and reflect his individual talents and skills. The base
salaries of Saul P. Steinberg, Robert M. Steinberg and Dennis A. Busti are
15
<PAGE>
<PAGE> 19
subject to the terms of individual employment agreements. See "Employment
Contracts".
B. Annual Bonus. The annual bonus paid to executive officers is a
critical element of compensation designed to reward the achievement of
short-term corporate goals, as well as individual productivity and
performance. The Compensation Committees determine the amounts of the
bonuses, based upon the plans and arrangements described below. Except
with respect to Dennis A. Busti, an executive's maximum bonus potential is
a fixed percentage of his base salary. Such percentage is generally
between 66% and 110% of base salary except as described below.
C. Stock Options. Stock option awards under RGH's 1986 Stock Option
Plan provide the most significant element of long-term compensation to
executives. Since all the shares of common stock of Reliance Insurance are
owned indirectly by RGH, executive officers of Reliance Insurance
participate in RGH's 1986 Stock Option Plan. Stock options provide
compensation in a manner that is intrinsically related to long-term
corporate performance and stockholder value, because the value of stock
options is determined solely by movements in RGH's stock price over the
term of the option. Awards under the RGH 1986 Stock Option Plan are
granted at the discretion of the Stock Option Committee, which makes its
determinations based on a variety of factors, including the level of
responsibility and performance of the executive and his ability to affect
stockholder value and the amount of past option grants to the executive.
The RGH 1986 Stock Option Plan also permits the award of stock
appreciation rights.
D. Retirement Plans. Reliance Insurance has designed a retirement
benefit program to provide executives with retirement compensation that is
competitive within its industry and which promotes the long-term
employment of its executives. The program includes the SIP, which enables
participants to contribute a portion of their compensation on a pre-tax
and an after-tax basis and provides for matching contributions. In
addition, Reliance Insurance maintains the Pension Plan, a tax-qualified
plan, and the Supplemental Pension Plan, which together provide a
retirement benefit that is a function of an executive's compensation and
years of service with Reliance Insurance.
III. 1993 Compensation of Executive Officers Other than the CEO
The Compensation Committees and the Stock Option Committee took
actions with respect to executive compensation during 1993 that were
consistent with Reliance Insurance's compensation philosophy, and
reflected an emphasis on performance-based compensation.
A. Base Salary. None of the named executive officers received an
increase in base salary for 1993. Other executive officers of Reliance
Insurance received increases in base salary in 1993 as determined by the
Compensation Committee. Effective January 1, 1994, the annual base
salaries of Saul P. Steinberg and Robert M. Steinberg were reduced by
$154,375 and $40,000, respectively, and the annual base salary of James E.
Yacobucci was increased by $125,000.
16
<PAGE>
<PAGE> 20
B. 1993 Bonuses. The amount of the bonuses of executive officers,
other than those referred to below, are determined pursuant to the terms
of various incentive plans established for Reliance Insurance, Reliance
National and Reliance Surety, a unit of Reliance Insurance. The plan of
Reliance Insurance takes into account three factors: (i) the executive
officer's performance compared to personal objectives as determined by the
Compensation Committee, (ii) combined ratios under a formula contained in
such plan, and (iii) operating profit under a formula contained in such
plan. Under the three factors, an executive officer may receive a maximum
bonus of 20% of base salary, 60% of base salary and 30% of base salary,
respectively. All three factors contributed favorably to the determination
of bonuses for 1993. The plan of Reliance Surety takes into account three
factors: (i) combined ratio under a formula contained in such plan, (ii)
premium income under a formula contained in such plan, and (iii) operating
expense under a formula contained in such plan. Under the three factors,
an executive officer may receive a maximum bonus of 60% of base salary,
25% of base salary and 15% of base salary, respectively. All three factors
contributed favorably to the determination of bonuses for 1993. The plan
of Reliance National determines the amount of bonus payment based upon
Reliance National's pre-tax operating profit (as defined) under a formula
contained in such plan.
Mr. Yacobucci did not receive a bonus for 1993 in light of the long
term incentive payout which he received in early 1994. See "Employment
Contracts". The 1993 bonus of Saul P. Steinberg was limited under his
employment agreement to 100% of his 1993 salary and was determined based
on significant business accomplishments during the year and certain
criteria of business performance during the year that were also used for
Reliance Insurance's Chief Executive Officer and which are discussed
below. The 1994 bonus of James E. Yacobucci will be paid in accordance
with the terms of the Executive Bonus Plan for James E. Yacobucci,
assuming such plan is approved by the stockholders of RGH at their annual
meeting on May 12, 1994. Such plan provides that, subject to the
discretion of the Special Compensation Committee of the Board of Directors
of RGH to reduce or eliminate the bonus, Mr. Yacobucci may earn a maximum
annual bonus equal to 400% of his "base salary," which for purposes of
such plan is defined as being $1,000,000, if a preestablished, objective
performance goal is achieved. The 1994 bonus of Saul P. Steinberg will be
paid in accordance with the terms of the Reliance Group Holdings, Inc.
Executive Bonus Plan, assuming such plan is approved by the stockholders
of RGH at their annual meeting to be held on May 12, 1994. Such plan
provides a maximum bonus equal to 115% of annual base salary if certain
preestablished, objective performance goals are achieved.
C. 1993 Stock Option Grants. No stock options were granted to any
executive officer during 1993 in light of the stock options granted during
1992.
17
<PAGE>
<PAGE> 21
IV. 1993 Chief Executive Officer Compensation
The compensation of Robert M. Steinberg, Reliance Insurance's Chief
Executive Officer, is determined by the Special Compensation Committee.
During 1993, Mr. Steinberg was paid a base salary of $270,000 pursuant to
an employment agreement with Reliance Insurance which has expired.
Effective January 1, 1994, Mr. Steinberg's annual base salary was reduced
by $40,000 to $230,000.
Under his employment agreement, Mr. Steinberg's annual bonus for 1993
was limited to 100% of base salary. The amount of Mr. Steinberg's annual
bonus for 1993 was determined by the Special Compensation Committee by
taking into account significant business accomplishments during the year
and certain criteria of business performance during the year, and the role
of Mr. Steinberg in enabling Reliance Insurance to achieve such
accomplishments and performance. Among the significant business
accomplishments recognized by the Special Compensation Committee were: the
sale of United Pacific Life Insurance Company to General Electric Capital
Corporation; the upgrading of the claims-paying ability ratings of
Reliance Insurance; the continued transformation of Reliance Insurance's
property and casualty operations toward the strategic focus on specialty
commercial lines; the significant improvement in property and casualty
underwriting results; the record earnings of Reliance Insurance's title
operations; and the expansion of Reliance Insurance's title operations.
The criteria of business performance considered by the Special
Compensation Committee were: the calendar year combined ratio of Reliance
Insurance's consolidated property and casualty insurance subsidiaries as
compared to the comparable combined ratio of the property and casualty
stock insurance industry, the performance of Reliance Insurance's combined
investment portfolios (both fixed income and equity), the amount of
Reliance Insurance's realized capital gains, Reliance Insurance's
consolidated net premiums written and Commonwealth Land Title Insurance
Company's pre-tax operating income compared to budget. The Special
Compensation Committee did not assign objective or relative weights to the
business accomplishments or performance criteria, all of which contributed
favorably in the determination of Mr. Steinberg's annual bonus for 1993.
Mr. Steinberg's annual bonus for 1994 will be paid in accordance with
the terms of the Reliance Group Holdings, Inc. Executive Bonus Plan,
assuming such plan is approved by the stockholders of RGH at their annual
meeting to be held on May 12, 1994. Such plan provides a maximum bonus
equal to 115% of annual base salary if certain preestablished, objective
performance goals are achieved.
V. Compensation Deduction Limitation
Beginning in 1994, a new federal law disallows corporate tax
deductibility for certain compensation in excess of $1,000,000 paid to
executive officers who are "covered employees" of "publicly held
corporations." For this purpose, Reliance Insurance is not a publicly
held corporation whose executive officers, as such, are covered employees
under the $1,000,000 limit. However, all compensation paid by Reliance
Insurance to Saul P. Steinberg, Robert M. Steinberg and James E.
Yacobucci, each of whom is a covered employee with respect to RGH for
purposes of the $1,000,000 limit, will be taken into account in
18
<PAGE>
<PAGE> 22
determining the application of the $1,000,000 limit. As a result, a
portion of the 1994 salaries of Robert M. Steinberg and James E. Yacobucci
will not be deductible, which will not have a material effect on Reliance
Insurance's 1994 tax liability.
<TABLE>
<CAPTION>
Special Compensation Committee Compensation Committee Stock Option Committee of RGH
------------------------------------------------------------------------------------------
<S> <C> <C>
George R. Baker Saul P. Steinberg George R. Baker
Thomas J. Stanton, Jr. Robert M. Steinberg Jewell Jackson McCabe
George E. Bello Irving Schneider
</TABLE>
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors, consists of Saul
P. Steinberg, Robert M. Steinberg and George E. Bello. Saul P. Steinberg
and Robert M. Steinberg are officers and employees of Reliance Insurance
and RGH and George E. Bello is an officer and employee of RGH. The Special
Compensation Committee of the Board of Directors consists of George R.
Baker and Thomas J. Stanton, Jr. The Stock Option Committee of the Board
of Directors of RGH consists of George R. Baker, Jewell Jackson McCabe and
Irving Schneider.
RELATED PARTY TRANSACTIONS
During 1993, C.D. Alternatives of America Corporation ("CD
Alternatives") received approximately $5,500 in commissions, at standard
commission rates, as a managing general agent for a subsidiary of Reliance
Insurance and received $60,000 in servicing fees from such subsidiary. In
October 1992, a subsidiary of Reliance Insurance lent $100,000 to CD
Alternatives, which loans are payable on demand, bear interest at the rate
of 6% per annum and are guaranteed by the founder of CD Alternatives (who
has never been affiliated with Reliance Insurance). Half of the common
stock of CD Alternatives is owned by Terry L. Kendall, a director of
Reliance Insurance until May 1993.
In March 1993, RGH purchased from Prometheus Funding Corp., a wholly
owned subsidiary of Reliance Insurance ("Prometheus"), 1,085,082 shares
of RGH common stock for $7.00 per share, the fair market value of the
shares at the time. The price per share paid by Prometheus to acquire the
shares from RGH in December 1992 was $6.875, the fair market value of the
shares at the time. The proceeds of the sale to RGH were applied by
Prometheus to the principal amount outstanding of a promissory note from
Prometheus to RGH. The note, with a remaining principal amount outstanding
of $5,458,826, was contributed by RGH to Reliance Insurance in March 1993.
The note matures on March 1, 1995 and bears interest at a rate of 7% per
annum.
During September, 1993, Reliance Insurance purchased an office
building from a wholly owned subsidiary of RGH for a purchase price of
$10,500,000. The purchase price represented the fair market value of the
office building on the date of purchase.
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<PAGE> 23
Reliance Insurance believes that the consideration received by it for
the related party transactions described above represented fair market
value to Reliance Insurance. The consideration received by Reliance
Insurance was determined by negotiations between the parties involved in
each transaction.
20
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<PAGE> 24
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Board of Directors of Reliance Insurance has selected Deloitte &
Touche as the independent public accountants to audit the consolidated
financial statements of Reliance Insurance to be included in the annual
report to stockholders for the year 1994.
Representatives of Deloitte & Touche are expected to be present at the
annual meeting of stockholders, will have the opportunity to make a
statement if they so desire and are expected to be available to respond to
appropriate questions.
By order of the Board of Directors,
RELIANCE INSURANCE COMPANY,
LEE H. ROUTLEDGE,
Secretary
April 28, 1994
21
<PAGE>
