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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
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. ___)
[x] Filed by the Registrant
[_] Filed by a Party other than the Registrant
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Leucadia National Corporation
- ---------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- ---------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-
6(i)(2) or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined.):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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LEUCADIA NATIONAL CORPORATION
315 PARK AVENUE SOUTH
NEW YORK, NEW YORK 10010
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 1996
------------------------
April 18, 1996
To Our Common Shareholders:
You are cordially invited to attend the Annual Meeting of
Shareholders (the "Meeting") of Leucadia National Corporation (the
"Company") to be held on May 14, 1996, at 1:00 p.m., at Chase
Manhattan Bank, 270 Park Avenue, 11th Floor, New York, New York:
1. To elect six directors.
2. To consider and act upon an amendment to the Company's 1992
Stock Option Plan to limit to 300,000 the maximum number of the
Company's common shares, par value $1.00 per share (the "Common
Shares"), with respect to which options and/or rights may be granted
under the 1992 Stock Option Plan to any individual in any one taxable
year.
3. To ratify the selection of Coopers & Lybrand LLP as
independent auditors to audit the Consolidated Financial Statements of
the Company and its subsidiaries for the year ended December 31, 1996.
4. To transact such other business as may properly come before
the Meeting or any adjournments of the Meeting.
Only holders of record of the Common Shares at the close of
business on April 12, 1996 will be entitled to notice of and to vote
at the Meeting. Please sign, date and mail the enclosed proxy so that
your shares may be represented at the Meeting if you are unable to
attend and vote in person.
By Order of the Board of Directors.
RUTH KLINDTWORTH
Secretary
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LEUCADIA NATIONAL CORPORATION
315 PARK AVENUE SOUTH
NEW YORK, NEW YORK 10010
--------------------------
PROXY STATEMENT
--------------------------
ANNUAL MEETING OF SHAREHOLDERS
--------------------------
April 18, 1996
This Proxy Statement is being furnished to the Shareholders (the
"Shareholders") of Leucadia National Corporation, a New York
corporation (the "Company"), in connection with the solicitation of
proxies by the Board of Directors for use at the Annual Meeting of
Shareholders (the "Meeting") of the Company to be held on May 14, 1996
and at any adjournments thereof.
At the Meeting, Shareholders will be asked:
1. To elect six directors.
2. To consider and act upon an amendment to the Company's 1992
Stock Option Plan to limit to 300,000 the maximum number of the
Company's common shares, par value $1.00 per share (the "Common
Shares"), with respect to which options and/or rights may be granted
under the 1992 Stock Option Plan to any individual in any one taxable
year (the "Amendment").
3. To ratify the selection of Coopers & Lybrand LLP as
independent auditors to audit the Consolidated Financial Statements of
the Company and its subsidiaries for the year ended December 31, 1996.
4. To transact such other business as may properly come before
the Meeting or any adjournments of the Meeting.
The Board of Directors has fixed the close of business on April
12, 1996 as the record date for the determination of the holders of
Common Shares entitled to notice of and to vote at the Meeting. Each
such Shareholder will be entitled to one vote for each Common Share
held on all matters to come before the Meeting and may vote in person
or by proxy authorized in writing. At the close of business on April
12, 1996, there were 60,253,006 Common Shares entitled to vote.
All references in this Proxy Statement to the Common Shares and
to prices of the Common Shares reflect a two-for-one stock split
effective on November 15, 1995.
This Proxy Statement and the accompanying form of proxy are first
being sent to holders of the Common Shares on or about April 18, 1996.
THE MEETING
DATE, TIME AND PLACE
The Meeting will be held on May 14, 1996, at 1:00 p.m., local
time, at Chase Manhattan Bank, 270 Park Avenue, 11th Floor, New York,
New York.
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MATTERS TO BE CONSIDERED
At the Meeting, Shareholders will be asked to consider and vote
to elect six directors and to approve the Amendment and to ratify the
selection of independent auditors. See "ELECTION OF DIRECTORS,"
"PROPOSED AMENDMENT TO 1992 STOCK OPTION PLAN" and "RATIFICATION OF
SELECTION OF INDEPENDENT AUDITORS". The Board of Directors knows of
no matters that are to be brought before the Meeting other than as set
forth in the Notice of Meeting. If any other matters properly come
before the Meeting, the persons named in the enclosed form of proxy or
their substitutes will vote in accordance with their best judgment on
such matters.
RECORD DATE; SHARES OUTSTANDING AND ENTITLED TO VOTE
Shareholders as of the Record Date (i.e., the close of business
on April 12, 1996) are entitled to notice of and to vote at the
Meeting. As of the Record Date, there were 60,223,006 Common Shares
outstanding and entitled to vote, with each share entitled to one
vote.
REQUIRED VOTES
Election of Directors. Under New York law, the affirmative vote
of the holders of a plurality of the Common Shares voted at the
Meeting is required to elect each director. Consequently, only shares
that are voted in favor of a particular nominee will be counted toward
such nominee's achievement of a plurality. Shares present at the
Meeting that are not voted for a particular nominee or shares present
by proxy where the Shareholder properly withheld authority to vote for
such nominee (including broker non-votes) will not be counted toward
such nominee's achievement of a plurality.
Other Matters. Under the Internal Revenue Code of 1986, as
amended (the "Code"), shareholder approval of the Amendment is
required. Under New York law, the affirmative vote of the holders of
a majority of all outstanding Common Shares entitled to vote thereon
is required to approve the Amendment. Abstentions and broker non-
votes are considered in determining the number of votes required to
attain a majority of the outstanding shares in connection with the
proposal to approve the Amendment. Because abstentions and broker
non-votes are not affirmative votes for the matter, they will have the
same effect as votes against the matter.
The ratification of the selection of Coopers & Lybrand LLP as
independent auditors is being submitted to Shareholders because the
Board of Directors believes that such action follows sound corporate
practice and is in the best interests of the Shareholders. If the
Shareholders do not ratify the selection by the affirmative vote of
the holders of a majority of the Common Shares voted at the Meeting,
the selection of independent auditors will be reconsidered by the
Board. If the Shareholders ratify the selection, the Board, in its
discretion, may still direct the appointment of new independent
auditors at any time during the year if the Board believes that such a
change would be in the best interests of the Company and its
Shareholders. Abstentions and broker non-votes are not counted in
determining the votes cast in connection with the ratification of
auditors, but do have the effect of reducing the number of affirmative
votes required to achieve a majority for such matter by reducing the
total number of shares from which the majority is calculated.
Ian M. Cumming, Chairman of the Board of Directors, beneficially
owns 10,285,402 or approximately 17.1% of the Common Shares out-
standing at the Record Date, Joseph S. Steinberg, a Director and
President, beneficially owns 9,277,340 or approximately 15.4% of the
Common Shares outstanding at the Record Date and two trusts for the
benefit of Mr. Steinberg's minor children (the "Steinberg Children
Trusts") beneficially own 1,127,400 or approximately 1.9% of the
Common Shares outstanding at the Record Date. Mr. Steinberg disclaims
beneficial ownership of the Common Shares held by the Steinberg
Children Trusts. The Cumming Foundation and the Joseph S. and Diane
H. Steinberg 1992 Charitable Trust, private charitable foundations
independently established by Messrs. Cumming and Steinberg,
respectively, beneficially own 273,094 or approximately .5% (excluding
194,747 Common Shares which The Cumming Foundation has the right to
2
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acquire upon conversion of the Company's 5-1/4% Convertible
Subordinated Debentures due 2003 (the "Debentures")) and 190,246 or
approximately .3% (excluding 169,008 Common Shares which the Joseph S.
and Diane H. Steinberg 1992 Charitable Trust has the right to acquire
upon conversion of the Company's Debentures) of the Common Shares
outstanding at the Record Date, respectively. Mr. Cumming and Mr.
Steinberg each disclaims beneficial ownership of the Common Shares
held by their respective private charitable foundations. Messrs.
Cumming and Steinberg have advised the Company that they intend to
cause all Common Shares that they beneficially own to be voted in
favor of each nominee named herein, in favor of the Amendment and in
favor of ratification of selection of independent auditors. In
addition to Messrs. Cumming and Steinberg, all other directors and
officers of the Company beneficially own approximately .7% of the
Common Shares outstanding at the Record Date (excluding Common Shares
which such directors and officers have the right to acquire upon
exercise of currently exercisable options). ACCORDINGLY, ASSUMING ALL
OF SUCH DIRECTORS AND OFFICERS AND THE STEINBERG CHILDREN TRUSTS AND
THE TWO PRIVATE CHARITABLE FOUNDATIONS CAUSE ALL COMMON SHARES
BENEFICIALLY OWNED BY THEM (EXCLUDING COMMON SHARES ACQUIRABLE UPON
THE EXERCISE OF OPTIONS AND THE CONVERSION OF DEBENTURES) TO BE VOTED
IN FAVOR OF EACH NOMINEE NAMED HEREIN, IN FAVOR OF APPROVAL OF THE
AMENDMENT AND IN FAVOR OF RATIFICATION OF SELECTION OF INDEPENDENT
AUDITORS, APPROVAL OF THE AMENDMENT WILL REQUIRE THE AFFIRMATIVE VOTE
OF AN ADDITIONAL APPROXIMATELY 14.2% OF THE OUTSTANDING COMMON SHARES.
THE ADDITIONAL 14.2% OF THE OUTSTANDING COMMON SHARES WILL BE OBTAINED
IF 22.2% OF THE COMMON SHARES HELD BY THE PUBLIC ARE VOTED IN FAVOR OF
THE AMENDMENTS. ELECTION OF EACH NOMINEE AND RATIFICATION OF THE
SELECTION OF INDEPENDENT AUDITORS WILL BE ASSURED UNLESS MORE THAN
71.9% OF THE OUTSTANDING COMMON SHARES ARE VOTED ON SUCH MATTERS.
VOTING AND REVOCATION OF PROXIES
Shareholders are requested to complete, date, sign and promptly
return the accompanying form of proxy in the enclosed envelope.
Common Shares represented by properly executed proxies received by the
Company and not revoked will be voted at the Meeting in accordance
with the instructions contained therein. If instructions are not
given, proxies will be voted FOR election of each nominee for director
---
named herein and FOR ratification of selection of independent
---
auditors.
Any proxy signed and returned by a Shareholder may be revoked at
any time before it is voted by filing with the Secretary of the
Company, at the address of the Company set forth herein, written
notice of such revocation or a duly executed proxy bearing a later
date or by attending the Meeting and voting in person. Attendance at
the Meeting will not in and of itself constitute revocation of a
proxy.
PROXY SOLICITATION
The Company will bear the costs of solicitation of proxies for
the Meeting. In addition to solicitation by mail, directors, officers
and regular employees of the Company may solicit proxies from Share-
holders by telephone, telegram, personal interview or otherwise. Such
directors, officers and employees will not receive additional
compensation, but may be reimbursed for out-of-pocket expenses in
connection with such solicitation. Brokers, nominees, fiduciaries and
other custodians have been requested to forward soliciting material to
the beneficial owners of Common Shares held of record by them, and
such custodians will be reimbursed for their reasonable expenses.
INDEPENDENT AUDITORS
The Company has been advised that representatives of Coopers &
Lybrand LLP, the Company's independent auditors for 1995, will attend
the Meeting, will have an opportunity to make a statement if they
desire to do so and will be available to respond to appropriate
questions.
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ELECTION OF DIRECTORS
At the Meeting, six directors are to be elected to serve until
the next Meeting or until their successors are elected and qualified.
The Board of Directors has determined not to fill the vacancy left by
the resignation of John W. Jordan II as a director of the Company in
June 1995, and accordingly, has fixed the number of directors
constituting the full Board of Directors at six. The persons named in
the enclosed form of proxy have advised that, unless contrary
instructions are received, they intend to vote FOR the six nominees
---
named by the Board of Directors and listed on the following table.
The Board of Directors does not expect that any of the nominees will
be unavailable for election as a director. However, if by reason of
an unexpected occurrence one or more of the nominees is not available
for election, the persons named in the form of proxy have advised that
they will vote for such substitute nominees as the Board of Directors
of the Company may propose. The following information is as of
April 12, 1996.
Age, period served as director, other business
Name and present position experience during the last five years and
if any, with the Company family relationships, if any
------------------------- -----------------------------------------
Ian M. Cumming,
Chairman of the Board . Mr. Cumming, 55, has served as a director and
Chairman of the Board of the Company since June
1978. In addition, he is a director of Allcity
Insurance Company ("Allcity") and MK Gold
Company ("MK Gold"). Allcity, a consolidated
subsidiary of the Company, is a property and
casualty insurer. MK Gold, approximately 46%
of the common stock of which is beneficially
owned by the Company, is an international gold
mining company. Mr. Cumming is also a director
of Skywest, Inc., a Utah-based regional air
carrier.
Paul M. Dougan . . . . . Mr. Dougan, 58, has served as a director of
the Company since May 1985. He has been a
director and President and Chief Executive
Officer of Equity Oil Company ("Equity Oil"),
a company engaged in oil and gas exploration
and production, since January 1994. Prior
thereto, he served as corporate secretary and
manager of corporate development of Equity
Oil since May 1968.
Lawrence D. Glaubinger. . Mr. Glaubinger, 70, has served as a director of
the Company since May 1979. He has been
Chairman of the Board of Stern & Stern
Industries, Inc., a New York corporation,
primarily engaged in the manufacture and sale
of textiles, since November 1977. He has also
been President of Lawrence Economic Consulting
Inc., a management consulting firm, since
January 1977. Mr. Glaubinger is a director of
Marisa Christina Inc., an importer of women's
clothing.
James E. Jordan . . . . . Mr. Jordan, 52, has served as a director of
the Company since February 1981. Since
October 1986, he has been President of The
William Penn Corporation ("William Penn").
William Penn, approximately 19.7% of the
common stock of which is beneficially owned
by the Company, is a holding company for an
investment advisor to The William Penn family
of mutual funds. Mr. Jordan is a director of
three mutual funds in The William Penn
family, Penn Square Mutual Fund, William Penn
Interest Income Fund and Scottish Widows
International Fund, and a director of
Mezzanine Capital & Income Trust 2001 PLC, a
British investment trust company.
4
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Age, period served as director, other business
Name and present position experience during the last five years and
if any, with the Company family relationships, if any
------------------------- -----------------------------------------
Jesse Clyde Nichols, III . Mr. Nichols, 56, has served as a director of
the Company since June 1978. He has been
President, since May 1974, of Nichols
Industries, Inc., a holding company engaged,
through subsidiaries, in manufacturing.
Joseph S. Steinberg,
President . . . . . . . Mr. Steinberg, 52, has served as a director
of the Company since December 1978 and as
President of the Company since January 1979.
He is also a director of Allcity, MK Gold and
Jordan Industries, Inc. ("JII"), a public
company, approximately 11% of the common
stock of which is beneficially owned by the
Company, which owns and manages manufacturing
companies.
The Board of Directors recommends a vote FOR the above named
nominees.
5
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INFORMATION CONCERNING
THE BOARD OF DIRECTORS AND BOARD COMMITTEES
MEETINGS AND COMMITTEES
During 1995, the Board of Directors held four meetings.
The Board of Directors has a standing Audit Committee, Executive
Committee and Employee Benefits Committee.
The functions of the Audit Committee are to recommend to the Board
independent auditors for the Company, to analyze the reports and
recommendations of such auditors and to review internal audit
procedures and controls. The Audit Committee met once during 1995 and
consists of Messrs. Dougan (Chairman), Nichols and Glaubinger.
The functions of the Executive Committee are to exercise the
authority of the Board of Directors in the management of the business
of the Company at such times as the full Board of Directors is
unavailable. The Executive Committee, which did not meet during 1995,
consists of Messrs. Cumming, Steinberg and Glaubinger.
The functions of the Employee Benefits Committee are to review
compensation of the Chairman of the Board and President, and employee
benefit and incentive plans and to present recommendations thereon to the
Board. The Employee Benefits Committee also functions as the Option
Committee under the Company's 1982 Stock Option Plan, as amended, and under
the Company's 1992 Stock Option Plan. The Employee Benefits Committee,
which met twice during 1995, consists of Messrs. Nichols (Chairman),
Dougan and Jordan.
All directors attended at least 75% of the meetings of the Board
and committees of the Board on which they served.
CERTAIN LITIGATION
On May 11, 1994, a shareholder of the Company filed a purported
derivative action entitled Pinnacle Consultants, Ltd. v. Leucadia
-------------------------- --------
National Corporation, et al. (C.A. No. 94 Civ. 3496) against the
----------------------------
Company's current Board of Directors and two former directors, John W.
Jordan II and Melvin Hirsch. The action, which was filed in the
United States District Court for the Southern District of New York,
alleged certain Racketeer Influence and Corrupt Organizations Act,
securities law, conversion and fraud claims that were dismissed with
prejudice by the Court and two state law claims of waste and breach of
fiduciary duty that were dismissed by the Court for lack of
jurisdiction. On January 11, 1996, plaintiff filed a notice of appeal
with the Second Circuit Court of Appeals.
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PRESENT BENEFICIAL OWNERSHIP OF COMMON SHARES
Set forth below is certain information as of April 12, 1996 with
respect to the beneficial ownership of
Common Shares by (i) each person who, to the knowledge of the Company,
is the beneficial owner of more than 5% of the outstanding Common
Shares (the Company's only class of voting securities), (ii) each
director and nominee for director, (iii) each of the executive
officers named in the Summary Compensation Table under "EXECUTIVE
COMPENSATION," (iv) the Steinberg Children Trusts and private
charitable foundations established by Mr. Cumming and Mr. Steinberg
and (v) all officers and directors of the Company as a group.
Number of Shares
Name and Address and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
------------------- ---------------------- --------
Group consisting of
Travelers Group Inc.
and Smith Barney
Holdings Inc. (a) 3,515,295 (b) 5.8%
Group consisting of
CMCO, Inc., Robert
Davidoff, Edwin S.
Marks, Nancy A.
Marks, Boas GRAT
No. 1 Trust, Marks
Family Foundation,
Mark Claster and Andrew
Boas (c)(d) 3,269,784 5.4%
Paul J. Borden 4,800 (e) *
Ian M. Cumming 10,285,402 (f)(g) 17.1%
Paul M. Dougan 2,000 (h) *
Lawrence D. Glaubinger 73,000 (i) .1%
Lawrence S. Hershfield 37,950 (j) *
James E. Jordan 37,000 (k) *
Thomas E. Mara 133,944 (l) .2%
Jesse Clyde Nichols, III 62,837 (m) .1%
David K. Sherman 14,400 (n) *
Joseph S. Steinberg 9,277,340 (g)(o) 15.4%
The Steinberg Children
Trusts 1,127,400 (p) 1.9%
Cumming Foundation 467,841 (q) .8%
The Joseph S. and Diane
H. Steinberg 1992
Charitable Trust 359,254 (r) .6%
All directors and officers as
a group (12 persons)(s) 20,054,895 (t) 33.3%
___________________
* Less than .1%.
(a) The business address of this beneficial owner is 388 Greenwich
Street, New York, New York 10013.
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(b) According to a Statement on Schedule 13G dated February 5,
1996, filed by Travelers Group Inc. and its wholly owned
subsidiary, Smith Barney Holdings Inc., beneficial ownership of
such Common Shares assumes the conversion of certain securities
not specified in the Schedule 13G. Such entities disclaim
beneficial ownership of such Common Shares.
(c) The business address of this beneficial owner is c/o CMCO,
Inc., 135 East 57th Street, New York, New York 10022.
(d) Based upon Amendment No. 1 to a Statement on Schedule 13D dated
December 1, 1992 filed by CMCO, Inc., Robert Davidoff, Edwin S.
Marks, Nancy A. Marks, Boas GRAT No. 1 Trust, Marks Family
Foundation, Mark Claster and Andrew Boas and information
provided by CMCO, Inc.
(e) Includes 2,400 Common Shares that may be acquired upon the
exercise of currently exercisable stock options.
(f) Includes 413,112 (.7%) Common Shares beneficially owned by Mr.
Cumming's wife (directly and through trusts for the benefit of
Mr. Cumming's children of which Mr. Cumming's wife is trustee
(the "Trusts")) as to which Mr. Cumming may be deemed to be the
beneficial owner.
(g) Messrs. Cumming and Steinberg have an oral agreement pursuant
to which they will consult with each other as to the election
of a mutually acceptable Board of Directors of the Company.
(h) Consists of 2,000 Common Shares that may be acquired upon the
exercise of currently exercisable stock options.
(i) Includes 500 Common Shares that may be acquired upon the
exercise of currently exercisable stock options.
(j) Includes 15,000 Common Shares that may be acquired upon the
exercise of currently exercisable stock options.
(k) Includes 5,000 Common Shares that may be acquired upon the
exercise of currently exercisable stock options.
(l) Includes (i) 20,000 Common Shares that may be acquired upon the
exercise of currently exercisable stock options and (ii) 49,200
(less than .1%) Common Shares owned by Mr. Mara's wife and
minor daughter as to which Mr. Mara disclaims beneficial
ownership.
(m) Includes 11,400 Common Shares that may be acquired upon the
exercise of currently exercisable stock options.
(n) Includes 12,000 Common Shares that may be acquired upon the
exercise of currently exercisable stock options.
(o) Includes 46,400 (less than .1%) Common Shares beneficially
owned by Mr. Steinberg's wife and minor daughter as to which
Mr. Steinberg may be deemed to be the beneficial owner.
(p) Mr. Steinberg disclaims beneficial ownership of the Common
Shares held by the Steinberg Children Trusts.
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(q) Includes 194,747 Common Shares that may be acquired by this
private charitable foundation upon conversion of the Company's
Debentures. Mr. Cumming is a trustee and President of the
foundation and disclaims beneficial ownership of the Common
Shares held by the foundation.
(r) Includes 169,008 Common Shares that may be acquired by this
private charitable foundation upon conversion of the Company's
Debentures. Mr. Steinberg and his wife are the trustees of the
foundation. Mr. Steinberg disclaims beneficial ownership of
the Common Shares held by the foundation.
(s) Excludes Lawrence S. Hershfield, who, effective October 30,
1995, in connection with his relocation to Moscow, ceased to be
an executive officer of the Company.
(t) Includes 49,200 Common Shares owned of record by the wife and
minor daughter of Mr. Mara as to which he disclaims beneficial
ownership. In addition, because they may be acquired within 60
days, includes (i) 18,900 Common Shares that may be acquired by
directors pursuant to the exercise of currently exercisable
stock options; and (ii) 46,800 Common Shares that may be
acquired by certain officers pursuant to the exercise of
currently exercisable stock options.
As of April 12, 1996, Cede & Co. held of record 34,861,475 Common
Shares (approximately 57.9% of the total number of Common Shares
outstanding). Cede & Co. held such shares as a nominee for broker-
dealer members of The Depository Trust Company, which conducts
clearing and settlement operations for securities transactions
involving its members.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information in respect of the
compensation of the Chairman of the Board, the President, each of the
other three most highly compensated current executive officers of the
Company in 1995 and one former executive officer, for services in all
capacities to the Company and its subsidiaries in 1995, 1994 and 1993.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
-----------------------------------------------------------------------------------------------
Options/
Name and Principal Other Annual Warrants All Other
Position(s) Year Salary Bonus (1) Compensation (# of shares) Compensation
-------------------- ---- ------ --------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Ian M. Cumming, 1995 $504,808 $290,545(2) $174,759(4) -- $76,644(5)
Chairman of the Board 1994 491,497 950,000(3) 306,906(4) -- 71,975
1993 477,365 2,214,505 300,345(4) -- 57,313(6)
Joseph S. Steinberg, 1995 $505,960 $354,944(2) $254,443(4) -- $80,280(5)
President 1994 491,500 950,000(3) 270,722(4) -- 60,120
1993 477,365 2,214,505 271,603(4) -- 58,083(6)
Thomas E. Mara, 1995 $210,000 $856,300 -- -- $19,250(5)
Executive Vice 1994 205,006 506,150 -- -- 9,500
President and 1993 199,923 406,000 -- 20,000 4,497
Treasurer
David K. Sherman, 1995 $96,150 $252,885 -- -- $3,750(7)
Vice President 1994 93,540 252,775 -- -- 2,382
1993 89,769 182,700 -- 6,000 4,497
Paul J. Borden, 1995 $106,000 $203,180 -- -- $3,750(7)
Vice President 1994 103,012 203,090 -- -- 2,652
1993 99,923 202,000 -- 6,000 4,497
Lawrence S. 1995 $210,000(9) $1,039,900(9) $170,884(4) -- $52,350(11)
Hershfield(8) 1994 205,004 656,150(10) 86,442(4) -- 3,750
1993 175,653 556,000 -- 30,000 4,497
<FN>
______________________
(1) Generally, performance bonuses for Messrs. Cumming and Steinberg
for services rendered during a year are considered at the
organizational meeting of the Board of Directors for the
following year (which is generally held during the second fiscal
quarter). However, in response to federal tax laws affecting the
tax consequences associated with certain executive compensation
in excess of $1,000,000 per year, performance bonuses for Messrs.
Cumming and Steinberg for services rendered in 1993 were
determined and paid in 1993, and portions of the performance
bonuses for Messrs. Cumming and Steinberg for services rendered
in 1994 and 1995 were determined and paid in 1994 and 1995,
respectively, as described below.
(2) To permit the Company to fully utilize the maximum deduction
available for compensation paid to Messrs. Cumming and Steinberg
in 1995, the Board of Directors accelerated into 1995 the payment
of a portion of the 1995 performance bonus for each of Messrs.
Cumming and Steinberg necessary to bring up to $1,000,000 the
total compensation paid (for tax purposes) to each of them in
1995. The Employee Benefits Committee of the Board of Directors
intends to consider the payment of an additional 1995 performance
bonus to each of Messrs. Cumming and Steinberg at the Board of
Directors meeting to
10
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<PAGE>
be held following the 1996 Annual Meeting. See "Report of the
Compensation Committee of the Board of Directors--Compensation of
Messrs. Cumming and Steinberg."
(3) Includes $373,990 and $348,008 (net of withholding taxes already
paid by Messrs. Cumming and Steinberg) for each of Messrs.
Cumming and Steinberg, respectively, out of the $2,500,000 placed
in escrow in 1992 for the benefit of each of Messrs. Cumming and
Steinberg (the "1992 Escrows") by Leucadia, Inc., a wholly owned
subsidiary of the Company ("LI"), pursuant to agreements dated as
of December 28, 1992 between LI and each of Messrs. Cumming and
Steinberg (the "1992 Escrow Agreements"). These amounts were paid
in May 1995 to fund a portion of the 1994 performance bonuses,
net of withholding taxes already paid by Messrs. Cumming and
Steinberg. The 1992 Escrow Agreements are identical to those
described in footnote (6) below, except (i) such funds vest at
the rate of 20% for each full calendar year after December 31,
1992 during which Messrs. Cumming and Steinberg continue to be
employed by the Company or any of its subsidiaries, (ii) in the
event of the death or disability of Mr. Cumming or Mr. Steinberg,
the funds would be 100% vested and (iii) amounts vested are to be
paid to Messrs. Cumming and Steinberg on January 1, 1998, unless
payment is accelerated by the Board. As of December 31, 1995,
Messrs. Cumming and Steinberg each have vested with respect to an
aggregate of $1,500,000 of the 1992 Escrow. The funds paid out of
the 1992 Escrow reflected in this table were paid out of vested
amounts. See "Report of the Compensation Committee of the Board
of Directors-- Compensation of Messrs. Cumming and Steinberg."
(4) Consists of non-cash compensation valued in accordance with the
disclosure rules of the Securities and Exchange Commission, as
follows: personal use of corporate aircraft (Mr. Cumming:
$165,645, $305,995 and $299,434 in 1995, 1994 and 1993,
respectively, and Mr. Steinberg: $248,971, $264,338 and $265,219
in 1995, 1994 and 1993, respectively); and relocation expenses
(Mr. Hershfield: $151,044 representing housing and certain other
expenses related to Mr. Hershfield's assignment to Moscow in 1995
and $79,607 representing expenses incurred in connection with Mr.
Hershfield's relocation to New York in 1994). The value of such
other compensation for federal tax purposes may differ.
(5) Included in this amount is the annual premium on a term life
insurance policy paid by the Company for the benefit of such
person ($15,540 for Mr. Cumming and $18,530 for Mr. Steinberg),
directors' fees from affiliates of the Company ($57,354 for Mr.
Cumming, $58,000 for Mr. Steinberg and $15,500 for Mr. Mara) and
a contribution of $3,750 made by the Company, to a defined
benefit plan on behalf of the named person.
(6) Excludes $4,000,000 placed in escrow in 1993 (the "1993 Escrow")
by the Company for the benefit of each of Ian M. Cumming and
Joseph S. Steinberg pursuant to agreements dated as of December
28, 1993 between the Company and each of Messrs. Cumming and
Steinberg (the "1993 Escrow Agreements"). The funds vest at the
rate of 20% for each full calendar year after December 31, 1997
during which Messrs. Cumming and Steinberg, respectively,
continue to be employed by the Company or any of its
subsidiaries. Each of Messrs. Cumming and Steinberg is entitled
to be 50% vested upon his death or disability, and 100% vested
upon (i) termination without cause, (ii) the merger of the
Company with another corporation which results in a change of
control of the Company, the sale of all or substantially all of
the Company's assets or the acquisition by a person or group of
persons of more than 50% of the Common Shares, or (iii) the
Company becoming subject to bankruptcy, insolvency or similar
proceedings. The vesting and payment schedule is also subject to
acceleration at the sole discretion of the Board of Directors,
excluding Messrs. Cumming and Steinberg, upon recommendation of
the Employee Benefits Committee. Amounts vested are to be paid to
Messrs. Cumming and Steinberg on January 1, 2003, unless payment
is accelerated by the Board. Any amount unvested will be returned
to the Company. The amounts in the escrow accounts are invested
at the direction of the Company, which is entitled to receipt of
the investment income.
11
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<PAGE>
As required under the agreements, Messrs. Cumming and Steinberg
timely filed a tax election resulting in their 1993 recognition
for tax purposes of the full $4,000,000 placed in escrow. As a
result, for tax purposes Messrs. Cumming and Steinberg reported
income equal to the amount of the escrowed funds, and the Company
deducted that amount for 1993. As permitted under the agreements,
Messrs. Cumming and Steinberg directed that the Company's tax
withholding obligation be paid with funds from the escrow
accounts, leaving a reduced amount available for actual
distribution to Messrs. Cumming and Steinberg from the escrow
accounts as bonus compensation. The application of the escrow
funds toward satisfaction of the Company's withholding obligation
had no affect on the vesting schedule; accordingly, in the event
either Mr. Cumming or Mr. Steinberg does not ultimately become
fully vested in the respective amount placed in escrow, to the
extent the funds remaining in escrow are less than the unvested
portion for such person, Mr. Cumming and/or Mr. Steinberg, as the
case may be, will be obligated to repay such deficiency to the
Company.
The funds placed in escrow will be reported in the table in the
appropriate columns for those years in which amounts are released
from the escrow accounts.
(7) Consists of contributions by the Company to a defined
contribution 401(k) plan.
(8) Effective October 30, 1995, in connection with his relocation to
Moscow, Mr. Hershfield ceased to be an executive officer of the
Company. See "Certain Relationships and Related Transactions,"
below.
(9) The Company and Mr. Hershfield have entered into an agreement
pursuant to which all but $88,154 of such compensation has been
deferred. Amounts deferred bear interest at a rate equal to the
1-year Treasury bill rate, reset quarterly, and are payable to
Mr. Hershfield in the year immediately following the last
calendar year in which he is treated as a Russian resident for
Russian tax purposes, subject to prepayment at the Company's
option in certain circumstances.
(10) Includes (i) $73,000 which has been deferred under the same terms
as described in footnote (9) above and (ii) $100,000 placed in
escrow by the Company for the benefit of Mr. Hershfield in
connection with his relocation to Moscow. The escrowed funds will
not vest in Mr. Hershfield until the first day of the calendar
year in which Mr. Hershfield is no longer treated as a Russian
resident for tax purposes. The amounts in the escrow account will
be invested at the direction of the Company, which will be
entitled to receipt of the investment income.
(11) Consists of $3,750 of contributions by the Company to a defined
contribution 401(k) plan and, in connection with the relocation
of Mr. Hershfield and his family to Moscow, $4,500 monthly rental
for the lease of Mr. Hershfield's United States residence.
</TABLE>
12
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AGGREGATE OPTION/WARRANT EXERCISES IN 1995 AND
OPTION/WARRANT VALUES AT DECEMBER 31, 1995
The following table provides information as to options and
warrants exercised by each of the named executives in 1995 and the
value of options and warrants held by such executives at year end
measured in terms of the last reported sale price for the Common
Shares on December 29, 1995 ($25.00, as reported on the New York Stock
Exchange Composite Tape).
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options/
Options/Warrants Warrants at December 31,
at December 31, 1995 1995
-------------------- ----------------------
Number of Shares
Underlying Options/ Exercisable/ Exercisable/
Name Warrants Exercised Value Realized Unexercisable Unexercisable
---- ------------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Ian M. Cumming 1,580,000 $27,995,625 0/0 $0/0
Joseph S. Steinberg 1,592,000 28,204,750 0/0 $0/0
Thomas E. Mara 26,000 486,375 47,728/16,000 $803,696/$130,250
David K. Sherman -- -- 12,000/6,000 $195,150/$61,725
Paul J. Borden 3,600 63,975 3,600/4,800 $33,600/$39,075
Lawrence S. Hershfield -- -- 15,000/21,000 $201,000/$138,750
</TABLE>
RETIREMENT PLAN
The Company and certain of its affiliated companies maintain a
retirement plan, as amended December 31, 1995 (the "Retirement Plan"),
for certain of its employees and employees of these affiliated
companies. The Retirement Plan is intended to qualify under the
provisions of Section 401 of the Code. Benefits under the Retirement
Plan are provided by an insurance company separate account which
receives and invests company contributions. Participants are not
required to make any contributions under the Retirement Plan.
An employee is eligible for participation in the Retirement Plan
after he is at least age 21 and has completed one year of service.
For a participant employed by the Company retiring at normal
retirement (age 65 with at least five years of service), the
Retirement Plan provides a retirement benefit payable for life, equal
to 1.25% of his final average pay up to the Covered Compensation level
plus 1.75% of his final average pay in excess of the Covered
Compensation level (subject to the limitations of Section 415 of the
Code), times his years of credited service. The Covered Compensation
level is the average of the maximum Social Security taxable wage base
in the 35 years preceding retirement or termination. Final average
pay is the average of the five highest consecutive years of
compensation in the last ten years before retirement or termination.
Years of credited service include all calendar years during which an
employee has at least 1,000 hours of service while employed by the
Company or an affiliate participating in the plan, but not before
January 1, 1989.
The Retirement Plan contains provisions for optional forms of
payment and provides that the normal form of benefit in the case of a
married participant is a benefit actuarially equivalent to an annuity
for the life of the participant payable in the form of a 50% joint and
survivor annuity for the participant and his spouse.
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<PAGE>
A participant employed by the Company becomes 100% vested in his
accrued benefit under the Retirement Plan after he has five years of
service. If he terminates employment with less than five years of
service, he will forfeit any benefits under the Retirement Plan.
A participant employed by the Company with 10 or more years of
service, who is age 55 or over, but less than age 65, and who has
retired from the Company or a participating affiliate, may elect to
receive an early retirement benefit. A participant with less than 10
years of service or who is under age 55, who has terminated employment
with the Company or a participating affiliate may elect to receive an
early deferred vested benefit. The amount of such benefits are
actuarially reduced to reflect payment before age 65.
The projected annual retirement benefits under the Retirement
Plan of the executive officers named in the Summary Compensation
Table, expressed in the form of a straight life annuity with no
reduction for early commencement, and assuming continuous employment
until age 65, are estimated as follows:
Ian M. Cumming . . . . . . $17,052*
Joseph S. Steinberg. . . . 22,122*
Thomas E. Mara . . . . . . 11,097*
David K. Sherman . . . . . 84,549*
Paul J. Borden . . . . . . 62,800*
Lawrence S. Hershfield . . 78,966*
____________________
* The benefits shown take into account limitations contained in
Section 415 of the Code, and other limits on plan benefits that exist
because of distributions received from a prior plan terminated as of
December 31, 1988.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with Messrs. Cumming and
Steinberg that provide for Mr. Cumming's employment as Chairman of the
Board and Chief Executive Officer of the Company and for Mr.
Steinberg's employment as President and Chief Operating Officer of the
Company through June 30, 2003 at annual salaries of $500,000 (subject
to cost of living adjustments), plus such additional compensation as
may be voted by the Board of Directors of the Company. Messrs.
Cumming and Steinberg are entitled to participate in all incentive
plans of the Company and other subsidiary and affiliated companies,
and the Company has agreed to carry at its expense term life insurance
policies on their lives in the amount of $1,000,000 each, payable to
such beneficiaries as each of Messrs. Cumming and Steinberg shall
designate. Under the agreements, if there is a change in control of
the Company and if either the employment of Messrs. Cumming or
Steinberg is terminated by the Company without cause or Messrs.
Cumming or Steinberg terminates his employment within one year of
certain occurrences (such as the appointment or election of another
person to his offices, the occurrence of the aggregate compensation
and other benefits to be received by him for any twelve full calendar
months falling below 115% of that received by him during the
comparable preceding period, or a change in the location of his
principal place of employment), Messrs. Cumming or Steinberg will be
entitled to receive a severance allowance equal to the remainder of
the aggregate annual salary (as adjusted for increases in the cost of
living) that he would have received under his employment agreement.
In addition, the Company or its successors will continue to carry
through the scheduled termination of the employment agreements the
life insurance payable to the beneficiaries of Messrs. Cumming and
Steinberg.
For information concerning certain compensation awards placed in
escrow for the benefit of Messrs. Cumming and Steinberg, see footnotes
(3) and (6) to the Summary Compensation Table, above.
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<PAGE>
COMPENSATION OF DIRECTORS
Directors who are also employees of the Company receive no
remuneration for services as a member of the Board or any committee of
the Board. In 1995, each director who was not an employee of the
Company received a retainer of $18,000 plus $500 for each meeting of
the Board and $300 for each meeting of a committee of the Board
($400 if a committee chairman) that he attended. In addition, under
the terms of the 1992 Stock Option Plan, each non-employee director is
automatically granted options to purchase 1,000 Common Shares on the
date on which the annual meeting of the Company's shareholders is held
each year. The purchase price of the Common Shares covered by such
options is the fair market value of such Common Shares on the date of
grant. These options become exercisable at the rate of 25% per year
commencing one year after the date of grant. As a result of this
provision, options to purchase 1,000 Common Shares (pre-stock split)
at an exercise price of $46.50 (pre-stock split) per Common Share were
awarded to each of Messrs. Paul M. Dougan, Lawrence D. Glaubinger,
James E. Jordan and Jesse Clyde Nichols, III on May 3, 1995.
For additional information, see "Certain Relationship and Related
Transactions" and "Compensation Committee Interlocks and Insider
Participation" below.
INDEMNIFICATION
Pursuant to a contract of insurance dated December 4, 1995 with
National Union Fire Insurance Company of Pittsburgh, Pennsylvania, 70
Pine Street, New York, New York 10270, the Company maintains a
$20,000,000 indemnification insurance policy covering all directors
and officers of the Company and its named subsidiaries. The annual
premium for such insurance is $939,000. During 1995, no payments were
received under the Company's indemnification insurance.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to an agreement dated as of August 1, 1988 among the
Company, Ian M. Cumming and Joseph S. Steinberg, upon the death of
either Mr. Cumming or Mr. Steinberg, the Company has agreed to
purchase from the respective estate up to 55% of his direct and/or
indirect interest in the Company, subject to reduction in certain
circumstances, not to exceed $50,000,000 in value. The agreement
provides that Mr. Cumming's and Mr. Steinberg's interests in the
Company will be valued at the higher of the average closing price of
the Common Shares on the NYSE for the 40 trading days preceding the
date of death or the net book value of the Common Shares at the end of
the fiscal quarter preceding the date of death. The Company has
agreed to fund the purchase of Common Shares pursuant to this
Agreement by purchasing and maintaining insurance on the life of each
of Messrs. Cumming and Steinberg in the aggregate face amount of
$50,000,000 per individual. This agreement will expire in December
1997 (subject to earlier termination in certain circumstances). The
Company has purchased the life insurance contemplated by this
agreement, the premiums for which aggregated approximately $369,800 in
1995. These amounts are not included in the Summary Compensation
Table appearing elsewhere in this Proxy Statement.
For information concerning certain compensation awards placed in
escrow for the benefit of Messrs. Cumming and Steinberg, see footnotes
(3) and (6) to the Summary Compensation Table above.
For additional information, see "Compensation Committee
Interlocks and Insider Participation", below.
15
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<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS*
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS (OTHER THAN IAN M.
CUMMING AND JOSEPH S. STEINBERG)
The Employee Benefits Committee of the Board of Directors (the
"Committee"), consisting of Mr. Nichols (Chairman), Mr. Dougan and Mr.
Jordan, each of whom is a non-employee director, awards stock options
upon the recommendation of Messrs. Cumming and Steinberg, Chairman of
the Board and President of the Company, respectively and recommends to
the Board of Directors the compensation of Messrs. Cumming and
Steinberg. Salary and bonus compensation of executive officers of the
Company are determined by Messrs. Cumming and Steinberg under
authority of the Board of Directors.
The Company's compensation package for executive officers
consists of four basic elements: (1) base salary; (2) annual bonus
compensation; (3) long-term incentives in the form of stock options
granted pursuant to the Company's 1992 Stock Option Plan; and (4)
retirement benefits pursuant to the Company's Retirement Plan. Other
elements of compensation include a defined contribution 401(k) plan
and medical and life insurance benefits available to employees,
generally.
Each element of compensation has a different purpose. Salary and
bonus payments are mainly designed to reward current and past
performance. Stock options are primarily designed to provide strong
incentive for superior long-term future performance and are directly
linked to shareholders' interests because the value of the awards will
increase or decrease based upon the future price of the Common Shares.
Retirement benefits generally are designed to reward prior service.
Base compensation of executive officers is determined by Messrs.
Cumming and Steinberg consistent with the executive's office and level
of responsibility, with annual salary increases, which generally
amount to a small percentage of the executive's prior base salary,
primarily reflecting cost of living increases. However, where
appropriate to reflect an executive's increase in office and/or
responsibility, annual salary increases may be significant.
The Company's executive compensation policy emphasizes
performance based compensation. Accordingly, a large percentage of
annual compensation consists of bonus compensation. This ensures that
compensation paid to an executive reflects the individual's specific
contributions to the success of the Company, as well as the level and
degree of complexity involved in his contributions to the Company
(which historically often have involved restructuring newly acquired
enterprises, the success of which may not be evident for several
years). Bonus compensation is determined on the basis of Messrs.
Cumming's and Steinberg's subjective assessment of an executive's
performance, the Company's performance and each individual's
contribution thereto. Bonus compensation is not based on any specific
formula.
The Company, by means of the 1992 Stock Option Plan, seeks to
retain the services of persons now holding key positions and to secure
the services of persons capable of filling such positions. From time
to time, stock options may be awarded which, under the terms of the
1992 Stock Option Plan, permit the executive officer or other employee
to purchase Common Shares at not less than the fair market value of
the Common Shares on the date of grant. The extent to which the
employee realizes any gain is, therefore, directly related to
increases in the price of the Common Shares and hence, shareholder
value, during the period of the option. Options granted to executive
officers generally become exercisable at the rate of 20% per year,
commencing one year after the date of grant. As with base salary and
_______________________
* The disclosure contained in this section of the Proxy
Statement is not incorporated by reference into any filings by
the Company under the Securities Act of 1933 or the Securities
Exchange Act of 1934 that incorporated filings or portions
thereof (including this Proxy Statement or the "Executive
Compensation" section of this Proxy Statement) without specific
reference to the incorporation of this section of the Proxy
Statement.
16
<PAGE>
<PAGE>
bonuses, the amount of stock options awarded to an executive officer is not
based on any specific formula, but rather on a subjective assessment
of the executive's performance and the Company's performance.
Under the provisions of Section 162(m) of the Code, the Company
would not be able to deduct compensation to its executive officers
whose compensation is required to be disclosed in the Company's proxy
statement for such year in excess of $1,000,000 per year unless such
compensation was within the definition of "performance-based
compensation" or meets certain other criteria. To qualify as
"performance-based compensation," compensation generally must be paid
pursuant to a pre-established objective performance criteria or
standard that precludes the exercise of discretion. The Committee
believes that the lack of flexibility in determining executive
compensation under these requirements would not be in the best
interest of the Company and accordingly, other than the 1992 Stock
Option Plan (as proposed to be amended at the 1996 Annual Meeting),
the Company has determined to retain its flexibility with respect to
employee compensation.
The Company believes the executive compensation program has
enabled it to attract, motivate and retain senior management by
providing a competitive total compensation opportunity based on
performance. Base salaries, combined with annual variable performance
based bonus awards that reflect the individual's level of
responsibility, performance and contribution to the Company are
important elements of the Company's cash compensation philosophy.
Together with the Company's executive stock ownership, the Company's
total executive compensation program not only aligns the interest of
executive officers and shareholders, but permits the Company to
attract talented senior management. Messrs. Cumming and Steinberg and
the Board believe the program strikes an appropriate balance between
short- and long-term performance objectives.
COMPENSATION OF MESSRS. CUMMING AND STEINBERG
The base compensation of Messrs. Ian M. Cumming and Joseph S.
Steinberg, Chairman of the Board and President of the Company,
respectively, is set pursuant to employment agreements between the
Company and each of Messrs. Cumming and Steinberg entered into as of
December 28, 1993 covering the period from July 1, 1994 through June
30, 2003. See "Employment Agreements." The base salary of Messrs.
Cumming and Steinberg provided for in the current employment
agreements was determined by the Committee, which presented its
recommendation to the entire Board of Directors (with Messrs. Cumming
and Steinberg abstaining) and represents an increase over their prior
base salaries, primarily reflecting cost of living increases. The
Committee reviews other compensation for each of Messrs. Cumming and
Steinberg and presents its recommendations thereon to the entire Board
of Directors.
The Committee met twice in 1995 to consider compensation payable
to Messrs. Cumming and Steinberg. In May 1995, in connection with the
1995 Annual Shareholders Meeting, the Committee met to consider the
1994 performance bonus for Messrs. Cumming and Steinberg. As
disclosed in the 1995 proxy statement, a portion of the 1994
performance bonus ($326,700 for Mr. Cumming and $330,800 for Mr.
Steinberg) was determined and paid in 1994. This had been done to
permit the Company to take advantage of the maximum 1994 federal
deduction available to the Company resulting from the application of
Section 162(m) of the Code, which limits to $1 million per employee
per year the deductibility of non-performance based compensation
payable to each of the Company's five most highly compensated
employees.
The Committee's ultimate determination of 1994 performance
bonuses for Messrs. Cumming and Steinberg was based upon their
subjective assessment of the performance of Messrs, Cumming and
Steinberg and the performance of the Company. In making this
assessment, the Committee reviewed certain financial information,
including information concerning the historical relationship between
the Company's audited pre-tax income and annual bonuses paid to
Messrs. Cumming and Steinberg. The Committee determined that a
performance bonus of $950,000 (representing approximately .95% of 1994
audited pre-tax income for each of Messrs. Cumming and Steinberg,
which was not inconsistent with the relationship between prior years'
17
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<PAGE>
performance bonuses awarded to Messrs. Cumming and Steinberg and the
audited pre-tax income for such years) was appropriate for 1994.
Thereafter, the Committee unanimously recommended to the Board of
Directors that such annual bonuses be awarded to Messrs. Cumming and
Steinberg.
The Committee then considered whether to use the funds in the
1992 Escrow to pay the unpaid portion of the recommended 1994
performance bonus (after giving effect to the 1994 bonus payment made
in 1994). The Committee noted that the Escrows were established to
provide the Company with a fund for which the Company had already
received a tax deduction (and on which Messrs. Cumming and Steinberg
had already paid their respective withholding taxes) from which
compensation in excess of the Section 162(m) deduction limitation
could be paid. The Committee also noted that any payments from the
1992 Escrow would not be applied toward the Section 162(m) deduction
limitation threshold. The Committee was advised that funds had vested
under the 1992 Escrow to each of Messrs. Cumming and Steinberg and
that no funds had vested under the 1993 Escrow. After considering the
acceleration and vesting provisions of the 1992 Escrow and various
payment alternatives, the Committee determined to pay the balance of
the recommended 1994 performance bonus out of the 1992 Escrow and
recommended the acceleration of payment of such bonus out of
previously vested funds from the 1992 Escrow (after giving effect to
withholding taxes previously paid by each of Messrs. Cumming and
Steinberg).
Thereafter, based upon the Committee's recommendation and the
factors considered by the Committee, the Board of Directors approved
(with Messrs. Cumming and Steinberg abstaining) the recommended 1994
performance bonus and the acceleration of payment from the 1992 Escrow
of so much of the previously vested amount necessary to pay such
bonuses to Messrs. Cumming and Steinberg.
To permit the Company to take full advantage of the maximum 1995
federal tax deduction available to the Company in respect of
compensation to Messrs. Cumming and Steinberg, the Committee met again
in December 1995 to consider the acceleration and payment of a portion
of the expected 1995 performance bonus for each of Messrs. Cumming and
Steinberg.
At its December 1995 meeting, the Committee was advised that
without acceleration of any bonus payments into 1995, total
compensation (including the tax value of perquisites) to be paid in
1995 to each of Messrs. Cumming and Steinberg would be approximately
$660,000, thereby falling short of the $1 million maximum amount
deductible by the Company. The Committee determined that the
performance bonus ultimately to be paid to each of Messrs. Cumming and
Steinberg for 1995 would be at least $340,000 and that total 1996
compensatory payments (including bonuses) to each of Messrs. Cumming
and Steinberg would likely be at least equal to $1 million. In view
of the foregoing, the Committee determined that it would be prudent
for the Company to accelerate into 1995 the payment and deductibility
of approximately $340,000 of the 1995 bonus amounts for each of
Messrs. Cumming and Steinberg. If the $340,000 amount had not been
accelerated, assuming amounts paid to Messrs. Cumming and Steinberg in
1996 and any subsequent year will exceed $1 million, the Company would
have forfeited an opportunity to avail itself of the full $1 million
allowable deduction for 1995. The Committee determined not to
recommend early vesting and payment of any funds in the 1992 Escrow or
the 1993 Escrow, each of which was established to fund compensatory
payments to Messrs. Cumming and Steinberg in excess of deductible
amounts, because 1995 payments to each of Messrs. Cumming and
Steinberg did not exceed deductible amounts and use of such funds
would not provide the Company with any tax deductions (all of which
were taken by the Company in the year in which each such escrow was
created). Furthermore, failure to accelerate payment of a portion of
the 1995 bonus likely would have placed the Company in a position to
withdraw funds prematurely from the 1992 Escrow or the 1993 Escrow,
thereby unnecessarily depleting the availability of such funds for use
in future years. For additional information with respect to the escrow
accounts referred to above, see "Executive Compensation -- Summary
Compensation Table" above.
18
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The Committee unanimously approved the payment to each of Messrs.
Cumming and Steinberg of so much of the performance bonus to be paid
for services rendered to the Company for 1995 as is necessary to bring
up to $1 million the total compensation (for tax purposes) paid to
each of Messrs. Cumming and Steinberg in 1995 (approximately $275,245
for Mr. Cumming and $339,644 for Mr. Steinberg) and recommended that
the Board of Directors approve such action.
Thereafter, based upon the Committee's recommendation and the
factors considered by the Committee, the Board of Directors, acting by
unanimous written consent, approved the recommended award of a portion
of the 1995 performance bonuses to each of Messrs. Cumming and
Steinberg. The consent noted that the signatures of Messrs. Cumming
and Steinberg appeared solely to permit the Board of Directors to act
by unanimous written consent, that Messrs. Cumming and Steinberg would
have abstained on the matters approved thereby had they been
considered at a meeting of the Board, that Messrs. Cumming and
Steinberg were consenting to the subject action based solely upon the
consent of the other members of the Board and that the signatures of
Messrs. Cumming and Steinberg would not be effective unless and until
the consent was signed by all other members of the Board of Directors.
The Committee and the Board of Directors intend to consider the
full 1995 performance bonus for each of Messrs. Cumming and Steinberg
at the 1996 organizational meeting of the Board following the Meeting.
In so doing, the Committee intends to consider amounts held in the
1992 Escrow and the 1993 Escrow for each of Messrs. Cumming and
Steinberg. Accelerated payments from these escrows are intended to be
included as part of bonus compensation that is paid to Messrs. Cumming
and Steinberg and is not intended as compensation in addition to
salaries and bonuses. As provided in the Escrow Agreements, given the
underlying objective of the arrangements, in deciding upon early
vesting and payment, the Board and the Committee can consider tax law
changes, if any, actually enacted and the costs and benefits to the
Company of initiating and maintaining the arrangements and of
accelerating payments and vesting thereunder.
The Committee consists of Jesse Clyde Nichols, III, Chairman,
Paul M. Dougan and James E. Jordan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Committee consists of Jesse Clyde Nichols, III, Chairman,
Paul M. Dougan and James E. Jordan.
In January 1994, the Company acquired 50% of Symskaya
Exploration, Inc. ("SEI"), a company engaged in the exploration and
development of oil and gas in the Krasnoyarsk region of eastern
Siberia. Equity Oil (of which Paul Dougan, a director of the Company,
is President and Chief Executive Officer) owns the remaining 50% of
SEI. In connection with such acquisition, the Company entered into a
shareholders' agreement with Equity Oil, pursuant to which the Company
has agreed to match Equity Oil's contributions to SEI, up to $6
million, for SEI's projects through the initial five year term of the
agreement. Through December 31, 1995, the Company invested
approximately $4,261,000 in SEI.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who
beneficially own more than ten percent of a registered class of the
Company's equity securities, to file reports of ownership and changes
in ownership with the Securities and Exchange Commission, the New York
Stock Exchange and the Pacific Stock Exchange. Based solely upon a
review of the copies of such forms furnished to the Company and
written representations from the Company's executive officers,
directors and greater than 10% beneficial shareholders, the Company
believes that during the year ended December 31, 1995, all persons
subject to the reporting requirements of Section 16(a) filed the
required reports on a timely basis, except that one transaction was
not timely reported by David K. Sherman. Mr. Sherman subsequently
filed a Form 4 to report the transaction.
19
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SHAREHOLDER RETURN PERFORMANCE GRAPH**
Set forth below is a graph comparing the cumulative total
shareholder return on Common Shares against cumulative total return of
the Standard & Poor's 500 Stock Index (the "S&P 500 Index") and the
Standard & Poor's Financial (Multi-Line Insurance Companies) Index
(the "S&P Insurance Index") for the five year period commencing
December 31, 1990 (as required by the Securities and Exchange
Commission). The data was furnished by Standard & Poor's Compustat
Services, Inc.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN OF THE COMPANY, S&P
500 INDEX AND S&P INSURANCE INDEX
The following graph assumes that $100 was invested on December
31, 1990 in each of the Common Shares, the S&P 500 Index and the S&P
Insurance Index and that all dividends were reinvested.
[GRAPHIC MATERIAL OMITTED: THE COMPANY'S SHAREHOLDER RETURN PERFORMANCE
GRAPH IS DESCRIBED IN TABULAR DATA FORM BELOW]
Value at Year End
--------------------------------------------------
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
The Company $100 $162.11 $349.04 $364.59 $397.94 $451.59
S&P 500 Index 100 130.47 140.41 154.56 156.60 215.45
S&P Insurance Index 100 133.46 152.35 170.38 179.22 263.44
_______________________
** The disclosure contained in this section of the Proxy
Statement is not incorporated by reference into any prior filings
by the Company under the Securities Act of 1933 or the Securities
Exchange Act of 1934 that incorporated future filings or portions
thereof (including this Proxy Statement or the "Executive
Compensation" section of this Proxy Statement).
20
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<PAGE>
PROPOSED AMENDMENT TO 1992 STOCK OPTION PLAN
The Board of Directors has recommended that Shareholders approve
an amendment to the 1992 Stock Option Plan to limit to 300,000 the
maximum number of Common Shares with respect to which Options and or
rights ("Rights") may be granted under the 1992 Stock Option Plan to
any employee in any one taxable year.
The Amendment is designed to permit stock options awarded under
the 1992 Stock Option Plan to qualify as "performance based"
compensation under Section 162(m) of the Code, thereby preserving the
deductibility for federal income tax purposes of compensation that may
be attributable to the exercise of Options and Rights awarded under
the 1992 Stock Option Plan. As previously discussed, under Section
162(m), compensation in excess of $1 million per year paid to any of
the Company's executive officers whose compensation is required to be
disclosed in the Company's proxy statement generally is not deductible
unless it is "performance based" compensation. Compensation under a
stock option plan will qualify as "performance based" compensation if,
among other requirements, the plan limits the maximum number of shares
as to which options may be granted to an employee during any calendar
year, and such limitation has been approved by the company's
shareholders. Other than this requirement, the Company believes the
1992 Stock Option Plan meets the requirements for compensation
attributable to the 1992 Stock Option Plan to qualify as "performance
based" under Section 162(m).
The Board of Directors believes that it is important for the
Company to take all steps reasonably necessary to ensure that the
Company will be able to take all available tax deductions with respect
to compensation resulting from Options or Rights. The Amendment was
approved by the Board of Directors on November 17, 1993, subject to
Shareholder approval if required to comply with final regulations
relating to Section 162(m). Pursuant to such regulations (which were
finalized in December 1995), Shareholder approval is required and,
accordingly, is being sought at the Annual Meeting.
If the Amendment is approved by the Company's Shareholders, it
will be effective on May 14, 1996. If the Amendment is not approved
by Shareholders, it will not become effective and the Company may, in
the future, be unable to deduct certain compensation paid to or
attributable to the 1992 Stock Option Plan in respect of certain of
its executive officers.
The following summary of the 1992 Stock Option Plan as it is
proposed to be amended (the "Amended Plan") is qualified in its
entirety by reference to the Amended Plan, the full text of which is
set forth in Annex A hereto.
AMENDED PLAN SUMMARY
The Amended Plan provides for the granting of Options or Rights
to purchase or acquire, in the aggregate, up to 1,000,000 Common
Shares (which number is subject to adjustment in the event of stock
dividends, stock splits and other contingencies) (the "Shares") during
the ten-year period from June 30, 1992 through June 29, 2002. The
Shares with respect to which Options or Rights may be granted may be
made available from either authorized and unissued shares or treasury
shares.
The Amended Plan is administered by the Committee, which has the
authority, in its discretion and subject to the express provisions of the
Amended Plan (including the provisions regarding automatic grants of
Options to Non-Employee Directors of the Company), to determine, among
other things, the persons to receive Options or Rights, the date of grant
of such Options or Rights, the number of Shares to be subject to each
Option or Right, the purchase price of each Share subject to such Options
or Rights and the terms and provisions of the respective Options or Rights
(which need not be identical). In determining the persons to whom Options
or Rights are to be granted under the Amended Plan, the Committee will
consider the employee's length of service, the amount of such employee's
earnings and such employee's responsibilities andduties. The Company will
receive no monetary consideration for the granting of Options or Rights
under the Amended Plan.
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<PAGE>
Incentive Options and Rights may be granted only to salaried key
employees of the Company or any subsidiary or parent corporation
thereof now existing or hereafter formed or acquired. Non-Qualified
Options and Rights may be granted to salaried key employees of the
Company or any subsidiary or parent corporation thereof now existing
or hereafter formed or acquired. Non-Qualified Options will be
granted to Non-Employee Directors of the Company as discussed below.
The aggregate number of Shares with respect to which Options and/or
Rights may be granted under the Amended Plan to any employee in any
one taxable year is 300,000.
The purchase price of Shares issuable upon exercise of each
Option granted pursuant to the Amended Plan will be not less than 100%
of the fair market value of such Shares on the date the Option is
granted, as determined by the Committee in accordance with the Amended
Plan. Any Option granted under the Amended Plan may be exercised upon
such terms and conditions as may be determined by the Committee,
except that no Incentive Option may be exercisable more than ten years
after the date on which it is granted. The Committee has the right to
accelerate, in whole or in part, rights to exercise any Option granted
under the Amended Plan. In the discretion of the Committee, a Right
may be granted (i) alone, (ii) simultaneously with the grant of an
Option (either Incentive or Non-Qualified) and in conjunction
therewith or (iii) subsequent to the grant of a Non-Qualified Option
and in conjunction therewith or in the alternative thereto.
Each Non-Employee Director of the Company (a "Director
Participant") automatically is granted a Non-Qualified Option to
purchase 1,000 Shares on the date on which the annual meeting of the
Company's Shareholders (including any adjournments thereof) is held in
each year. The purchase price of the Shares covered by the Non-
Qualified Options is the fair market value of the Shares at the date
of the grant. Non-Qualified Options granted to Director Participants
may not be exercised for the twelve-month period immediately following
the grant of such Non-Qualified Option. Thereafter, such Non-Quali-
fied Option will be exercisable for the period ending five years from
the date of grant of such Non-Qualified Option, subject to limitations
or restrictions pursuant to the terms of the Amended Plan.
The Amended Plan permits, in certain circumstances, the exercise
of Options and Rights for a limited period following termination of
employment due to death, retirement, disability or dismissal other
than for cause.
Subject to certain amendment provisions relating to Non-Qualified
Options granted to Director Participants, the Amended Plan may be
amended from time to time by the Board of Directors, provided that no
amendment will be made, without the approval of the Shareholders, that
will (i) increase the total number of Shares reserved for Options and
Rights under the Amended Plan (other than an increase resulting from
an adjustment for changes in capitalization such as a stock dividend
or stock split), (ii) reduce the exercise price of any Incentive
Option granted below the price required by the Amended Plan, (iii)
modify the provisions of the Amended Plan relating to eligibility or
(iv) materially increase the benefits accruing to participants under
the Amended Plan.
It is intended that the cash proceeds to be received by the
Company from the sale of Shares pursuant to the Amended Plan will be
used by the Company for general corporate purposes.
The Board of Directors may at any time suspend or terminate the
Amended Plan, provided that rights and obligations under any Option or
Right granted while the Amended Plan is in effect may not be altered
or impaired by suspension or termination of the Amended Plan, except
upon the consent of the person to whom the Option or Right was
granted.
22
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<PAGE>
In the event of any change in the outstanding Shares through
merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares, or other like change in capital structure
of the Company, appropriate adjustments will be made by the Committee
to each outstanding Option and Right under the Amended Plan and to the
maximum number of Shares which may be acquired pursuant to the
exercise of Options and Rights, and the number of Shares and price per
Share subject to outstanding Options or Rights as shall be equitable
to prevent dilution or enlargement of rights under such Options or
Rights, and the determination of the Committee as to these matters
will be conclusive. Notwithstanding the foregoing, (i) each such
adjustment with respect to an Incentive Option and any related Right
shall comply with the rules of Section 424(a) of the Code (or any
successor provision), and (ii) in no event shall any adjustment be
made which would render any Incentive Option granted under the Amended
Plan other than an "incentive stock option" for purposes of Section
422 of the Code.
In the event of a "change in control" of the Company, as
described in the Amended Plan, all then outstanding Options and Rights
shall immediately become exercisable. The Committee, in its sole
discretion, may determine that, upon the occurrence of a change in
control, each Option or Right then outstanding will terminate within a
specified number of days after notice to the holder, and such holder
will receive, with respect to each Share subject to such Option or
Right, cash in an amount equal to the excess of the fair market value
of such Share immediately prior to the occurrence of such transaction
over the exercise price per Share of such Option or Right. The
provisions contained in the preceding sentence will be inapplicable to
an Option or Right granted within six (6) months before the occurrence
of a transaction described above if the holder of such Option or Right
is subject to the reporting requirements of Section 16(a) of the
Exchange Act.
Options or Rights granted under the Amended Plan are non-
transferable, except by will or the laws of descent and distribution.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Options. Incentive Options under the Amended Plan are
intended to meet the definitional requirements of Section 422(b) of
the Code for "incentive stock options."
Under the Code, the grantee of an Incentive Option generally is
not subject to regular income tax upon the receipt or exercise of the
Incentive Option. Special rules apply to an employee who exercises an
Incentive Option by delivering Shares previously acquired pursuant to
the exercise of an Incentive Option.
For purposes of computing any alternative minimum tax liability,
an employee who exercises an Incentive Option generally would be
required to increase his or her "alternative minimum taxable income"
by an amount equal to the excess of the fair market value of a Share
at the time the Option is exercised over the exercise price and must
compute his or her tax basis in the acquired Share as if such Share
had been acquired through the exercise of a Non-Qualified Option (as
described below). The amount of any minimum tax liability
attributable to the exercise of an Incentive Option generally will be
allowed as a credit offsetting regular tax liability in subsequent
years.
If, subsequent to the exercise of an Incentive Option (whether paid
for in cash or in shares), the optionee holds the Shares received upon
exercise for a period that exceeds the longer of two years from the date of
grant or one year from the date of transfer pursuant to the exercise of
such Option (the "applicable holding period"), the difference (if any)
between the amount realized from the sale of such Shares and their tax
basis to the holder will be taxed as long-term capital gain or loss
(provided that such shares were held by the optionee as a capital asset at
the time). If the holder is subject to the alternative minimum tax in the
year of disposition, his or her tax basis in the Shares will be determined,
for alternative minimum tax purposes, as described in the preceding
paragraph. If, however, an optionee does not hold the Shares so acquired
for the applicable holding period, thereby making a "disqualifying
disposition," the optionee would realize ordinary income in the year of the
23
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<PAGE>
disqualifying disposition on the excess of the fair market value of the
Shares at the date the Incentive Option was exercised over the exercise
price and the balance, if any, of income would be long-term capital gain
(provided the holding period for the Shares exceeded one year and the
optionee held the Shares as a capital asset at such time).
A deduction will not be allowed to the employer corporation for
federal income tax purposes with respect to the grant or exercise of
an Incentive Option or the disposition, after the applicable holding
period, of Shares acquired upon exercise of an Incentive Option. In
the event of a disqualifying disposition, a federal income tax
deduction will be allowed to the employer corporation in an amount
equal to the ordinary income included by the optionee, provided that
such amount constitutes an ordinary and necessary business expense to
the employer corporation and is reasonable and the limitations of
Sections 162(m) (as described above) and 280G of the Code (as
described below) do not apply.
Non-Qualified Options and Stock Appreciation Rights. A Non-
Qualified Option is one that is not intended to qualify as an
incentive stock option under Section 422(b) of the Code. An
individual who receives a Non-Qualified Option will not recognize any
taxable income upon the grant of such Non-Qualified Option. In
general, upon exercise of a Non-Qualified Option an individual will be
treated as having received ordinary income in an amount equal to the
excess of (i) the fair market value of the Shares at the time of
exercise over (ii) the exercise price.
An individual who receives a Right will not recognize any taxable
income upon the grant of such Right. Generally, upon the receipt of
cash or the transfer of Shares pursuant to the exercise of a Right, an
individual will recognize ordinary income in an amount equal to the
sum of the cash and the fair market value of the Shares received. In
certain cases, a Right may be deemed for federal income tax purposes
to have been exercised prior to actual exercise.
In view of Section 16(b) of the Exchange Act, the timing of
income recognition may be deferred (i.e., the "Deferral Period") for
any optionee who is an officer or director of the Company or a
beneficial owner of more than ten percent (10%) of any class of equity
securities of the Company following the exercise of a Non-Qualified
Option or Right. Absent a written election (pursuant to Section 83(b)
of the Code) filed with the Internal Revenue Service within 30 days
after the date of transfer of the Shares pursuant to the exercise of
the Option or Right to include in income, as of the transfer date, the
excess (on such date) of the fair market value of such Shares over
their exercise price, recognition of income by the individual will be
deferred until the expiration of the Deferral Period, if any.
The ordinary income recognized with respect to the transfer of
Shares or receipt of cash upon exercise of a Non-Qualified Option or a
Right under the Amended Plan will be subject to both wage withholding
and employment taxes. In addition to the customary methods of
satisfying the withholding tax liabilities that arise upon the
exercise of a Right for Shares or upon the exercise of a Non-Qualified
Option, an individual may satisfy the liability in whole or in part by
directing its employer corporation to withhold Shares from those that
would otherwise be issuable to the individual or by tendering other
Common Shares owned by the individual, valued at their fair market
value as of the date that the tax withholding obligation arises. A
deduction for federal income tax purposes will be allowed to the
employer corporation in an amount equal to the ordinary income
included by the individual, provided that such amount constitutes an
ordinary and necessary business expense and is reasonable and the
limitations of Section 162(m) and 280G of the Code do not apply.
Change in Control. As described above, upon a "change in
control" of the Company (as defined in the Amended Plan), all the then
outstanding Options and Rights shall immediately become exercisable.
In general, if the total amount of payments to certain individuals in
the nature of compensation that are contingent upon a "change in
control" of the Company (as defined in Section 280G of the Code)
equals or exceeds three times the recipient's "base amount"
(generally, such recipient's average annual compensation for the five
years preceding the change in control), then, subject to certain
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exceptions, the payments may be treated as "parachute payments" under the
Code, in which case a portion of such payments would be nondeductible to
the employer corporation and the recipient would be subject to a 20%
excise tax on such portion of the payments.
REGULATION
The Amended Plan is neither qualified under the provisions of
Section 401(a) of the Code, nor subject to any of the provisions of
ERISA.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors recommends that the Shareholders
ratify the selection of Coopers & Lybrand LLP, certified public
accountants, as independent auditors to audit the accounts of the
Company and its subsidiaries for 1996. The selection of Coopers &
Lybrand LLP was recommended to the Board of Directors by its Audit
Committee. Coopers & Lybrand LLP are currently independent auditors
for the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
ANNUAL REPORT
A copy of the Company's 1995 Annual Report to Shareholders
is being furnished to Shareholders concurrently herewith.
PROPOSALS BY SHAREHOLDERS
Proposals that Shareholders wish to include in the Company's
Proxy Statement and form of proxy for presentation at the Company's
1997 Annual Meeting of Shareholders must be received by the Company at
315 Park Avenue South, New York, New York 10010, Attention of Ruth
Klindtworth, Secretary, no later than December 20, 1996.
By Order of the Board of Directors
Ruth Klindtworth
Secretary
25
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ANNEX A
LEUCADIA NATIONAL CORPORATION
1992 STOCK OPTION PLAN, AS AMENDED NOVEMBER 17, 1993
A-1
<PAGE>
<PAGE>
LEUCADIA NATIONAL CORPORATION
1992 STOCK OPTION PLAN, AS AMENDED NOVEMBER 17, 1993
Article
-------
I. Purposes . . . . . . . . . . . . . . . . . . . . . A-3
II. Amount of Stock Subject to the Plan . . . . . . . . A-3
III. Administration . . . . . . . . . . . . . . . . . . A-4
IV. Eligibility . . . . . . . . . . . . . . . . . . . . A-5
V. Option Price and Payment . . . . . . . . . . . . . A-5
VI. Terms of Options and Limitations on the Right of
Exercise . . . . . . . . . . . . . . . . . . . . . A-6
VII. Stock Appreciation Rights . . . . . . . . . . . . . A-7
VIII. Termination of Employment . . . . . . . . . . . . . A-8
IX. Exercise of Options . . . . . . . . . . . . . . . . A-10
X. Stock Option Grants to Director Participants . . . A-10
XI. Director Participant's Exercise of Options . . . . A-10
XII. Director Participant's Termination . . . . . . . . A-11
XIII. Director Participant's Ineligibility for Other Grants A-12
XIV. Amendment of Director Participant Provisions . . . A-12
XV. Use of Proceeds . . . . . . . . . . . . . . . . . . A-12
XVI. Non-Transferability of Options and Stock Appreciation
Rights . . . . . . . . . . . . . . . . . . . . . . A-12
XVII. Adjustment of Shares; Effect of Certain Transactions A-12
XVIII. Right to Terminate Employment . . . . . . . . . . . A-13
XIX. Purchase for Investment . . . . . . . . . . . . . . A-13
XX. Issuance of Stock Certificates; Legends; Payment of
Expenses . . . . . . . . . . . . . . . . . . . . . A-14
XXI. Withholding Taxes . . . . . . . . . . . . . . . . . A-14
XXII. Listing of Shares and Related Matters . . . . . . . A-15
XXIII. Amendment of the Plan . . . . . . . . . . . . . . . A-15
XXIV. Termination or Suspension of the Plan . . . . . . . A-15
XXV. Savings Provision . . . . . . . . . . . . . . . . . A-16
XXVI. Governing Law . . . . . . . . . . . . . . . . . . . A-16
XXVII. Partial Invalidity . . . . . . . . . . . . . . . . A-16
XXVIII. Effective Date . . . . . . . . . . . . . . . . . . A-16
A-2
<PAGE>
<PAGE>
LEUCADIA NATIONAL CORPORATION
1992 STOCK OPTION PLAN, AS AMENDED NOVEMBER 17, 1993
I. PURPOSES
Leucadia National Corporation (the "Company") desires to
afford its directors and certain of its key employees and certain key
employees of any subsidiary corporation or parent corporation of the
Company now existing or hereafter formed or acquired who are
responsible for the continued growth of the Company an opportunity to
acquire a proprietary interest in the Company, and thus to create in
such directors and key employees an increased interest in and a
greater concern for the welfare of the Company and its subsidiaries.
The stock options ("Options") and stock appreciation rights
("Rights") offered pursuant to this 1992 Stock Option Plan (the
"Plan") are a matter of separate inducement and are not in lieu of any
salary or other compensation for the services of any director or key
employee.
The Company, by means of the Plan, seeks to retain the
services of persons now holding directorships and key positions and to
secure and retain the services of persons capable of filling such
positions.
The Options granted under the Plan are intended to be
either incentive stock options ("Incentive Options") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or options that do not meet the requirements for
Incentive Options ("Non-Qualified Options"), but the Company makes no
warranty as to the qualification of any Option as an Incentive Option.
II. AMOUNT OF STOCK SUBJECT TO THE PLAN
The total number of Common Shares of the Company which
either may be purchased pursuant to the exercise of Options granted
under the Plan or acquired pursuant to the exercise of Rights granted
under the Plan shall not exceed, in the aggregate, One Million
(1,000,000) of the currently authorized Common Shares, $1.00 par value
per share, of the Company (the "Shares"), such number to be subject to
adjustment in accordance with Article XVII of the Plan. Shares that
are the subject of Rights and related Options shall be counted only
once in determining whether the maximum number of Shares that may be
purchased or awarded under the Plan has been exceeded.
Shares which may be acquired under the Plan may be either
authorized but unissued Shares, Shares of issued stock held in the
Company's treasury, or both, at the discretion of the Company. If and
to the extent that Options or Rights granted under the Plan expire or
terminate without having been exercised, the Shares covered by such
expired or terminated Options or Rights may again be subject to an
Option or Right under the Plan.
Except as provided in Articles X through XIV, XXIV, and
XXVIII hereof, the Company may, from time to time during the period
beginning on June 30, 1992 (the "Effective Date") and ending on June
29, 2002 (the "Termination Date"), grant to certain key employees and
directors of the Company, or certain key employees of any subsidiary
corporation or parent corporation of the Company now existing or
hereafter formed or acquired, Incentive Options, Non-Qualified Options
and/or Rights under the terms hereinafter set forth.
A-3
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<PAGE>
Provisions of the Plan that pertain to Options or Rights granted
to a director or employee shall apply to Options, Rights or any combination
thereof.
As used in the Plan, the term "parent corporation" and
"subsidiary corporation" shall mean a corporation coming within the
definition of such terms contained in Sections 424(e) and 424(f) of the
Code, respectively.
III. ADMINISTRATION
The board of directors of the Company (the "Board of Directors")
shall designate from among its members an option committee (the
"Committee") to administer the Plan. The Committee shall consist of no
fewer than three members of the Board of Directors, each of whom shall be a
"disinterested person" within the meaning of Rule 16b-3 (or any successor
rule or regulation) promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). A majority of the members of the Committee
shall constitute a quorum, and the act of a majority of the members of the
Committee shall be the act of the Committee. Any member of the Committee
may be removed at any time either with or without cause by resolution
adopted by the Board of Directors, and any vacancy on the Committee at any
time may be filled by resolution adopted by the Board of Directors.
Any or all powers and functions of the Committee may be exercised
at any time and from time to time by the Board of Directors or an executive
committee of the Board of Directors (the "Executive Committee"; references
below to the Committee shall be deemed to include references to the Board
of Directors and the Executive Committee, except as the context otherwise
requires); provided, however, that all of the members of the Board of
-------- -------
Directors or the Executive Committee, as the case may be, are
"disinterested persons" within the meaning of Rule 16b-3 (or any successor
rule or regulation) promulgated under the Exchange Act.
Subject to the express provisions of the Plan, including, without
limitation, Articles X through XIV hereof, the Committee shall have
authority, in its discretion, to determine the persons to whom Options or
Rights shall be granted, the time when such persons shall be granted
Options or Rights, the number of Shares which shall be subject to each
Option or Right, the purchase price of each Share which shall be subject to
each Option or Right, the period(s) during which such Options or Rights
shall be exercisable (whether in whole or part), and the other terms and
provisions thereof (which need not be identical). In determining the
persons to whom Options or Rights shall be granted and the number of Shares
for which Options or Rights are to be granted to each person, the Committee
shall give consideration to the length of service, the amount of earnings
and the responsibilities and duties of such person.
Subject to the express provisions of the Plan, including, without
limitation, Articles X through XIV hereof, the Committee also shall have
authority to construe the Plan and the Options and Rights granted
thereunder, to amend the Plan and the Options and Rights granted
thereunder, to prescribe, amend and rescind rules and regulations relating
to the Plan, to determine the terms and provisions of the Options (which
need not be identical) and Rights (which need not be identical) and to make
all other determinations necessary or advisable for administering the Plan.
The Committee also shall have the authority to require, in its discretion,
as a condition of the granting of any such Option or Right, that the
employee agree (a) not to sell or otherwise dispose of Shares acquired
pursuant to the exercise of such Option or Right for a period of six (6)
months following the date of the acquisition of such Option or Right and
(b) that in the event of termination of employment of such employee, other
than as a result of dismissal without cause, such employee will not, for a
period to be fixed at the time of the grant of the Option or Right, enter
into any other employment or participate directly or indirectly in any
other business or enterprise which is competitive with the business of the
Company or any subsidiary corporation or parent corporation of the
A-4
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<PAGE>
Company, or enter into any employment in which such employee will be called
upon to utilize special knowledge obtained through employment with the
Company or any subsidiary corporation or parent corporation thereof. In no
event will an employee or a director who is subject to the reporting
requirements of Section 16(a) of the Exchange Act be entitled to sell or
otherwise dispose of any Shares acquired pursuant to exercise of any such
Options or Rights for a period of six (6) months from the date of the
acquisition of such Options or Rights.
The determination of the Committee on matters referred to
in this Article III shall be conclusive.
The Committee may employ such legal or other counsel,
consultants and agents as it may deem desirable for the administration
of the Plan and may rely upon any opinion or computation received from
any such counsel, consultant or agent. Expenses incurred by the
Committee in the engagement of such counsel, consultant or agent shall
be paid by the Company. No member or former member of the Board of
Directors, the Executive Committee or the Committee shall be liable
for any action or determination made in good faith with respect to the
Plan or any award of Options or Rights granted hereunder.
IV. ELIGIBILITY
Options and Rights may be granted only to salaried key
employees of the Company or any subsidiary corporation or parent
corporation of the Company now existing or hereafter formed or
acquired, except as hereinafter provided, and Non-Qualified Options
shall be granted to non-employee directors of the Company (including
former officers or key employees) ("Director Participants") only
pursuant to and in accordance with the provisions of Articles X
through XIV hereof. Any person who shall have retired from the active
employment by the Company or any subsidiary corporation or parent
corporation of the Company, although such person shall have entered
into a consulting contract with the Company or a subsidiary
corporation or parent corporation of the Company, shall not be
eligible to receive an Option or Right.
The Plan does not create a right in any person to
participate in the Plan, nor does it create a right in any person to
have any Options or Rights granted to him or her.
The aggregate number of Shares with respect to which
Options and/or Rights may be granted under the Plan to any employee in
any one taxable year is 300,000.
V. OPTION PRICE AND PAYMENT
The price for each Share purchasable under any Option
granted hereunder shall be such amount as the Committee shall, in its
best judgment, determine to be not less than one hundred percent
(100%) of the fair market value per Share at the date the Option is
granted; provided, however, that in the case of an Incentive Option
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granted to a person who, at the time such Option is granted, owns
shares of the Company or any subsidiary corporation or parent
corporation of the Company possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company
or of any subsidiary corporation or parent corporation of the Company,
the purchase price for each Share shall be such amount as the
Committee, in its best judgment, shall determine to be not less than
one hundred ten percent (110%) of the fair market value per Share at
the date the Option is granted. In determining the stock ownership of
an employee for any purpose under the Plan, the rules of Section
424(d) of the Code shall be applied, and the Committee may rely on
representations of fact made to it by the employee and believed by it
to be true.
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If the Shares are listed on a national securities exchange
in the United States on any date on which the fair market value per
Share is to be determined, the fair market value per Share shall be
deemed to be the closing quotation at which such Shares are sold on
such national securities exchange on the date such Option is granted.
In the event that the Shares are listed on a national securities
exchange in the United States on such date but the Shares are not
traded on such date, or such national securities exchange is not open
for business on such date, the fair market value per Share shall be
determined as of the closest preceding date on which such exchange
shall have been open for business and the Shares were traded. If the
Shares are listed on more than one national securities exchange in the
United States on the date any such Option is granted, the Committee
shall determine which national securities exchange shall be used for
the purpose of determining the fair market value per Share.
If on the date any Option is granted a public market exists
for the Shares but such Shares are not listed on a national securities
exchange in the United States, the fair market value per Share shall
be deemed to be the average of the closing bid and asked quotations in
the over-the-counter market for such Shares in the United States on
the date such Option is granted. In the event that there are no bid
and asked quotations in the over-the-counter market in the United
States for such Shares on the date such Option is granted, the fair
market value per Share shall be deemed to be the average of the
closing bid and asked quotations in the over-the-counter market in the
United States for such shares on the closest date preceding the date
such Option is granted for which such quotations are available.
For purposes of this Plan, the determination by the
Committee of the fair market value of a Share shall be conclusive.
Upon the exercise of an Option granted hereunder, the
Company shall cause the purchased Shares to be issued only when it
shall have received the full purchase price for the Shares in cash;
provided, however, that in lieu of cash, the holder of an Option may,
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if the terms of such Option so provide and to the extent permitted by
applicable law, exercise an Option (a) in whole or in part, by
delivering to the Company Common Shares of the Company (in proper form
for transfer and accompanied by all requisite stock transfer tax
stamps or cash in lieu thereof) owned by such holder having a fair
market value equal to the cash exercise price applicable to that
portion of the Option being exercised by the delivery of such shares,
the fair market value of the Common Shares so delivered to be
determined as of the date immediately preceding the date on which the
Option is exercised, or as may be required in order to comply with or
to conform to the requirements of any applicable laws or regulations,
or (b) in part, by delivering to the Company an executed promissory
note on such terms and conditions as the Committee shall determine, at
the time of grant, in its sole discretion; provided, however, that (i)
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the principal amount of such note shall not exceed ninety percent
(90%) (or such lesser percentage as would be permitted by applicable
margin regulations) of the aggregate purchase price of the Shares then
being purchased pursuant to the exercise of such Option and (ii)
payment for shares with a promissory note is permissible under
applicable law.
VI. TERMS OF OPTIONS AND LIMITATIONS ON THE RIGHT OF EXERCISE
Any Option granted hereunder shall be exercisable at such
times, in such amounts and during such period or periods as the
Committee shall determine at the date of the grant of such Option;
provided, however, that an Incentive Option shall not be exercisable
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after the expiration of ten (10) years from the date such Option is
granted; provided, further, that in the case of an Incentive Option
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granted to a person who, at the time such Incentive Option is granted,
owns stock of the Company or any subsidiary corporation or parent
corporation of the Company possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company
or of any subsidiary corporation or parent corporation of the Company,
such Incentive Option shall not be exercisable after the expiration of five
(5) years from the date such Incentive Option is granted.
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The Committee shall have the right to accelerate, in whole
or in part, from time to time, conditionally or unconditionally,
rights to exercise any Option granted hereunder.
To the extent that an Option is not exercised within the
period of exercisability specified therein, it shall expire as to the
then unexercised part.
Except to the extent otherwise provided under the Code, to
the extent that the aggregate fair market value of stock for which
Incentive Options (under all stock option plans of the Company and of
any parent corporation or subsidiary corporation of the Company) are
exercisable for the first time by an employee during any calendar year
exceeds one hundred thousand dollars ($100,000), such Options shall be
treated as Non-Qualified Options. For purposes of this limitation,
(a) the fair market value of stock is determined as of the time the
Option is granted, (b) the limitation will be applied by taking into
account Options in the order in which they were granted, and (c)
Incentive Options granted before 1987 shall not be taken into account.
In no event shall an Option granted hereunder be exercised
for a fraction of a Share.
A person entitled to receive Shares upon the exercise of an
Option shall not have the rights of a stockholder with respect to such
Shares until the date of issuance of a stock certificate to him for
such Shares; provided, however, that until such stock certificate is
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issued, any holder of an Option using previously acquired Shares in
payment of an option exercise price shall continue to have the rights
of a stockholder with respect to such previously acquired Shares.
VII. STOCK APPRECIATION RIGHTS
In the discretion of the Committee, a Right may be granted
(a) alone, (b) simultaneously with the grant of an Option (either
Incentive or Non-Qualified) and in conjunction therewith or in the
alternative thereto or (c) subsequent to the grant of a Non-Qualified
Option and in conjunction therewith or in the alternative thereto.
The exercise price of a Right granted alone shall be
determined by the Committee but shall not be less than one hundred
percent (100%) of the fair market value of one Share on the date of
grant of such Right. A Right granted simultaneously with or
subsequent to the grant of an Option and in conjunction therewith or
in the alternative thereto shall have the same exercise price as the
related Option, shall be transferable only upon the same terms and
conditions as the related Option, and shall be exercisable only to the
same extent as the related Option; provided, however, that a Right, by
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its terms, shall be exercisable only when the fair market value of the
Shares subject to the Right and related Option exceeds the exercise
price thereof.
Upon exercise of a Right granted simultaneously with or
subsequent to an Option and in the alternative thereto, the number of
Shares for which the related Option shall be exercisable shall be
reduced by the number of Shares for which the Right shall have been
exercised. The number of Shares for which a Right shall be
exercisable shall be reduced upon any exercise of a related Option by
the number of Shares for which such Option shall have been exercised.
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Any Right shall be exercisable upon such additional terms
and conditions as may from time to time be prescribed by the
Committee.
A Right shall entitle the holder upon exercise thereof to
receive from the Company, upon a written request filed with the
Secretary of the Company at its principal offices (the "Request"), a
number of Shares (with or without restrictions as to substantial risk
of forfeiture and transferability, as determined by the Committee in
its sole discretion), an amount of cash, or any combination of Shares
and cash, as specified in the Request (but subject to the approval of
the Committee, in its sole discretion, at any time up to and including
the time of payment, as to the making of any cash payment), having an
aggregate fair market value equal to the product of (a) the excess of
the fair market value, on the day of such Request, of one Share over
the exercise price per Share specified in such Right or its related
Option, multiplied by (b) the number of Shares for which such Right
shall be exercised; provided, however, that the Committee, in its
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discretion, may impose a maximum limitation on the amount of cash, the
fair market value of Shares, or a combination thereof, which may be
received by a holder upon exercise of a Right.
Any election by a holder of a Right to receive cash in full
or partial settlement of such Right, and any exercise of such Right
for cash, may be made only by a Request filed with the Corporate
Secretary of the Company during the period beginning on the third
business day following the date of release for publication by the
Company of quarterly or annual summary statements of earnings and
ending on the twelfth business day following such date. Within thirty
(30) days after the receipt by the Company of a Request to receive
cash in full or partial settlement of a Right or to exercise such
Right for cash, the Committee shall, in its sole discretion, either
consent to or disapprove, in whole or in part, such Request.
If the Committee disapproves in whole or in part any
election by a holder to receive cash in full or partial settlement of
a Right or to exercise such Right for cash, such disapproval shall not
affect such holder's right to exercise such Right at a later date, to
the extent that such Right shall be otherwise exercisable, or to elect
the form of payment at a later date, provided that an election to
receive cash upon such later exercise shall be subject to the approval
of the Committee. Additionally, such disapproval shall not affect
such holder's right to exercise any related Option or Options granted
to such holder under the Plan.
A holder of a Right shall not be entitled to request or
receive cash in full or partial payment of such Right during the first
six (6) months of its term; provided, however, that such prohibition
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shall not apply if the holder of such Right is not subject to the
reporting requirements of Section 16(a) of the Exchange Act. In no
event will a holder of a Right who is subject to the reporting
requirements of Section 16(a) of the Exchange Act be entitled to make
such a request or receive cash in full or partial payment of such
Right until the Company shall have satisfied the applicable
requirements of Rule 16b-3(e)(1) promulgated under the Exchange Act
for the specified periods.
For all purposes of this Article VII, the fair market value
of Shares shall be determined in accordance with the principles set
forth in Article V hereof.
VIII. TERMINATION OF EMPLOYMENT
Upon termination of employment of any employee with the
Company and all subsidiary corporations and parent corporations of the
Company, any Option or Right previously granted to the employee,
unless otherwise specified by the Committee in the Option or Right,
shall, to the extent not theretofore exercised, terminate and become
null and void; provided, however, that:
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(a) if the employee shall die while in the employ of such
corporation or during either the three (3) month or one (1) year
period, whichever is applicable, specified in clause (b) below
and at a time when such employee was entitled to exercise an
Option or Right as herein provided, the legal representative of
such employee, or such person who acquired such Option or Right
by bequest or inheritance or by reason of the death of the
employee, may, not later than one (1) year from the date of
death, exercise such Option or Right, to the extent not
theretofore exercised, in respect of any or all of such number
of Shares as specified by the Committee in such Option or Right;
and
(b) if the employment of any employee to whom such Option
or Right shall have been granted shall terminate by reason of
the employee's retirement (at such age or upon such conditions
as shall be specified by the Committee), disability (as
described in Section 22(e)(3) of the Code) or dismissal by the
employer other than for cause (as defined below), and while such
employee is entitled to exercise such Option or Right as herein
provided, such employee shall have the right to exercise such
Option or Right so granted in respect of any or all of such
number of Shares as specified by the Committee in such Option or
Right, at any time up to and including (i) three (3) months
after the date of such termination of employment in the case of
termination by reason of retirement or dismissal other than for
cause, and (ii) one (1) year after the date of termination of
employment in the case of termination by reason of disability.
In no event, however, shall any person be entitled to
exercise any Option or Right after the expiration of the period of
exercisability of such Option or Right, as specified therein.
If an employee voluntarily terminates his or her
employment, or is discharged for cause, any Option or Right granted
hereunder shall, unless otherwise specified by the Option Committee in
the Option or Right, forthwith terminate with respect to any
unexercised portion thereof.
If an Option or Right granted hereunder shall be exercised
by the legal representative of a deceased grantee or by a person who
acquired an Option or Right granted hereunder by bequest or
inheritance or by reason of the death of any employee or former
employee, written notice of such exercise shall be accompanied by a
certified copy of letters testamentary or equivalent proof of the
right of such legal representative or other person to exercise such
Option or Right.
For the purposes of the Plan, the term "for cause" shall
mean (a) with respect to an employee who is a party to a written
employment agreement with, or, alternatively, participates in a
compensation or benefit plan of the Company or a subsidiary
corporation or parent corporation of the Company, which agreement or
plan contains a definition of "for cause" or "cause" (or words of like
import) for purposes of termination of employment thereunder by the
Company or such subsidiary corporation or parent corporation of the
Company, "for cause" or "cause" as defined therein; or (b) in all
other cases, as determined by the Committee or the Board of Directors,
in its sole discretion, (i) the willful commission by an employee of
an act that causes or may cause substantial damage to the Company or a
subsidiary corporation or parent corporation of the Company; (ii) the
commission by an employee of an act of fraud in the performance of
such employee's duties on behalf of the Company or a subsidiary
corporation or parent corporation of the Company; (iii) conviction of
the employee for commission of a felony in connection with the
performance of his duties on behalf of the Company or a subsidiary
corporation or parent corporation of the Company, or (iv) the
continuing failure of an employee to perform the duties of such
employee to the Company or a subsidiary corporation or parent
corporation of the Company after written notice thereof and a
reasonable opportunity to be heard and cure such failure are given to
the employee by the Committee.
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For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and a corporation if, at the time of
the determination, the individual was an "employee" of such corporation for
purposes of Section 422(a) of the Code. If an individual is on leave of
absence taken with the consent of the corporation by which such individual
was employed, or is on active military service, and is determined to be an
"employee" for purposes of the exercise of an Option or Right, such
individual shall not be entitled to exercise such Option or Right during
such period and while the employment is treated as continuing intact unless
such individual shall have obtained the prior written consent of such
corporation, which consent shall be signed by the chairman of the board of
directors, the president, a senior vice-president or other duly authorized
officer of such corporation.
A termination of employment shall not be deemed to occur by
reason of (i) the transfer of an employee from employment by the Company to
employment by a subsidiary corporation or a parent corporation of the
Company or (ii) the transfer of an employee from employment by a subsidiary
corporation or a parent corporation of the Company to employment by the
Company or by another subsidiary corporation or parent corporation of the
Company.
In the event of the complete liquidation or dissolution of a
subsidiary corporation, or if such corporation ceases to be a subsidiary
corporation, any unexercised Options or Rights theretofore granted to any
person employed by such subsidiary corporation will be deemed cancelled
unless such person is employed by the Company or by any parent corporation
or another subsidiary corporation after the occurrence of such event. If an
Option or Right is to be cancelled pursuant to the provisions of the
previous sentence, notice of such cancellation will be given to each
employee holding unexercised Options, and such holder will have the right
to exercise such Options or Rights in full (without regard to any
limitation set forth or imposed pursuant to Article VI) during the thirty
(30) day period following notice of such cancellation.
IX. EXERCISE OF OPTIONS
Options granted under the Plan shall be exercised by the optionee
as to all or part of the Shares covered thereby by the giving of written
notice of the exercise thereof to the Corporate Secretary of the Company at
the principal business office of the Company, specifying the number of
Shares to be purchased and accompanied by payment of the purchase price.
Subject to the terms of Articles XIX, XX and XXII hereof, the Company shall
cause certificates for the Shares so purchased to be delivered at the
principal business office of the Company, against payment of the full
purchase price, on the date specified in the notice of exercise.
X. STOCK OPTION GRANTS TO DIRECTOR PARTICIPANTS
Subject to the terms and conditions of Articles X through XIV
hereof, commencing with the Annual Meeting of stockholders of the Company
to be held in 1992, each Director Participant of the Company shall
automatically be granted a Non-Qualified Option to purchase 1,000 Shares on
the date on which the annual meeting of the Company's stockholders
including any adjournments thereof is held in each year. The purchase price
of the Shares covered by the Non-Qualified Options granted pursuant to this
Article X shall be the fair market value of such Shares on the date of
grant.
XI. DIRECTOR PARTICIPANT'S EXERCISE OF OPTIONS
A Non-Qualified Option granted to any Director Participant of the
Company shall not be exercisable for the twelve-month period immediately
following the grant of such Non-Qualified Option. Thereafter, the
Non-Qualified Option shall be exercisable for the period ending five years
from the date of grant of such Non-Qualified Option, except to the extent
such exercise is further limited or restricted pursuant to the provisions
hereof.
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If, in any year of the Non-Qualified Option, such Non-
Qualified Option shall not be exercised for the total number of Shares
available for purchase during that year, the Non-Qualified Option
shall not thereby terminate as to such unexercised portion, but shall
be cumulative. As used herein, the term "year of the Non-Qualified
Option" shall mean a one (1) year period commencing with the date of,
or the anniversary of the date of, the granting of such Non-Qualified
Option.
XII. DIRECTOR PARTICIPANT'S TERMINATION
If a Director Participant's service as a director of the
Company is terminated any Non-Qualified Option previously granted to
such Director Participant shall, to the extent not theretofore
exercised, terminate and become null and void; provided, however,
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that:
(a) if a Director Participant holding an outstanding Non-
Qualified Option dies, such Non-Qualified Option shall, to the
extent not theretofore exercised, remain exercisable for one (1)
year after such Director Participant's death, by such Director
Participant's legatee, distributee, guardian or legal or
personal representative; and
(b) if the service of a Director Participant to whom such
Non-Qualified Option shall have been granted shall terminate by
reason of (i) such Director Participant's disability (as
described in Section 22(e)(3) of the Code), (ii) voluntary
retirement from service as a director of the Company, or (iii)
failure of the Company to retain or nominate for re-election
such Director Participant who is otherwise eligible, unless due
to any act of (A) fraud or intentional misrepresentation, or (B)
embezzlement, misappropriation or conversion of assets or
opportunities of the Company or any direct or indirect
subsidiary of the Company, while such Director Participant is
entitled to exercise such Non-Qualified Option as herein
provided, such Director Participant shall have the right to
exercise such Non-Qualified Option so granted in respect of any
or all of such number of Shares subject to such Non-Qualified
Option at any time up to and including (X) three (3) months
after the date of such termination of service in the case of
termination by reason of voluntary retirement or failure of the
Company to retain or nominate for re-election such Director
Participant who is otherwise eligible, unless due to any act of
(1) fraud or intentional misrepresentation, or (2) embezzlement,
misappropriation or conversion of assets or opportunities of the
Company or any direct or indirect subsidiary of the Company, and
(Y) one (1) year after the date of termination of service in the
case of termination by reason of disability; and
(c) if the Director Participant shall die during either
the three (3) month or one (1) year period, whichever is
applicable, specified in clause (b) above and at a time when
such Director Participant was entitled to exercise a Non-
Qualified Option as herein provided, the legal representative of
such Director Participant, or such person who acquired such Non-
Qualified Option by bequest or inheritance or by reason of the
death of the Director Participant may, not later than one (1)
year from the date of death, exercise such Non-Qualified Option,
to the extent not theretofore exercised, in respect of any or
all of such number of Shares subject to such Non-Qualified
Option.
In no event, however, shall a Director Participant be
entitled to exercise any Option after the expiration of the period of
exercisability of such Option, as specified therein.
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XIII. DIRECTOR PARTICIPANT'S INELIGIBILITY FOR OTHER GRANTS
Any Director Participant eligible to receive an Option
pursuant to Article X hereof shall be ineligible to receive any other
grant or award under any other Article of this Plan.
XIV. AMENDMENT OF DIRECTOR PARTICIPANT PROVISIONS
Articles X through XIV of the Plan shall not be amended
more than one time in any six month period, other than to comport with
changes in the Code, the Employee Retirement Income Security Act of
1974, as amended, or the rules promulgated thereunder.
XV. USE OF PROCEEDS
The cash proceeds of the sale of Shares subject to the
Options granted hereunder are to be added to the general funds of the
Company and used for its general corporate purposes as the Board of
Directors shall determine.
XVI. NON-TRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
Neither an Option nor a Right granted hereunder shall be
transferable, whether by operation of law or otherwise, other than by
will or the laws of descent and distribution, and any Option or Right
granted hereunder shall be exercisable, during the lifetime of the
holder, only by such holder. Except to the extent provided above,
Options and Rights may not be assigned, transferred, pledged,
hypothecated or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or
similar process.
XVII. ADJUSTMENT OF SHARES; EFFECT OF CERTAIN TRANSACTIONS
Notwithstanding any other provision contained herein, in
the event of any change in the Shares subject to the Plan or to any
Option or Right granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, split-
up, split-off, spin-off, combination of shares, exchange of shares, or
other like change in capital structure of the Company), appropriate
adjustments shall be made by the Committee as to the maximum number of
Shares which may be acquired under the Plan pursuant to the exercise
of Options and Rights, the maximum number of shares for which Options
or Rights may be granted to any one employee or the directors of the
Company as a group, and the number of Shares and price per Share
subject to outstanding Options or Rights as shall be equitable to
prevent dilution or enlargement of rights under such Options or
Rights, and the determination of the Committee as to these matters
shall be conclusive; provided, however, that (a) each such adjustment
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with respect to an Incentive Option and any related Right shall comply
with the rules of Section 424(a) of the Code (or any successor
provision), and (b) in no event shall any adjustment be made which
would render any Incentive Option granted hereunder other than an
"incentive stock option" as defined in Section 422 of the Code.
In the event of a "change in control" of the Company, all
then outstanding Options and Rights shall immediately become
exercisable. For purposes of the Plan, a "change in control" of the
Company occurs if (a) more than fifty percent (50%) of the total
combined voting power of all classes of stock of the Company normally
entitled to vote for the election of directors of the Company is
acquired by another person, firm or corporation or by a cooperating
group of such individuals or entities, (b) the Board of Directors
approves the sale of all or substantially all of the property or
assets of the Company, or (c) the Board of Directors approves a
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consolidation or merger of the Company with another corporation, the
consummation of which would result in the occurrence of an event
described in clause (a) above.
The Committee, in its sole discretion, may determine that,
upon the occurrence of a transaction described in the preceding
paragraph, each Option or Right outstanding hereunder shall terminate
within a specified number of days after notice to the holder, and such
holder shall receive, with respect to each Share subject to such
Option or Right, an amount equal to the excess of the fair market
value of such Shares immediately prior to the occurrence of such
transaction over the exercise price per Share of such Option or Right;
such amount shall be payable in cash, in one or more of the kinds of
property payable in such transaction, or in a combination thereof, as
the Committee in its discretion shall determine. The provisions
contained in the preceding sentence shall be inapplicable to an Option
or Right granted within six (6) months before the occurrence of a
transaction described above if the holder of such Option or Right is
subject to the reporting requirements of Section 16(a) of the Exchange
Act.
XVIII. RIGHT TO TERMINATE EMPLOYMENT
The Plan shall not impose any obligation on the Company or
on any subsidiary corporation or parent corporation thereof to
continue the employment or directorship of any holder of an Option or
Right and it shall not impose any obligation on the part of any holder
of an Option or Right to remain in the employ of the Company or of any
subsidiary corporation or parent corporation thereof. Termination of
service of a Director Participant shall be governed by the provisions
of Article XII hereof.
XIX. PURCHASE FOR INVESTMENT
Except as hereinafter provided, the Committee may require
the holder of an Option or Right granted hereunder, as a condition of
exercise of such Option or Right, to execute and deliver to the
Company a written statement, in form satisfactory to the Committee, in
which such holder represents and warrants that such holder is
purchasing or acquiring the Shares acquired thereunder for such
holder's own account, for investment only and not with a view to the
resale or distribution thereof, and agrees that any subsequent resale
or distribution of any of such Shares shall be made only pursuant to
either (i) a Registration Statement on an appropriate form under the
Securities Act of 1933, as amended (the "Securities Act"), which
Registration Statement has become effective and is current with regard
to the Shares being sold, or (ii) a specific exemption from the
registration requirements of the Securities Act, but in claiming such
exemption the holder shall, prior to any offer of sale or sale of such
Shares, obtain a prior favorable written opinion of counsel, in form
and substance satisfactory to counsel for the Company, as to the
application of such exemption thereto. The foregoing restriction
shall not apply to (x) issuances by the Company so long as the Shares
being issued are registered under the Securities Act and a prospectus
in respect thereof is current or (y) reofferings of Shares by
affiliates of the Company (as defined in Rule 405 or any successor
rule or regulation promulgated under the Securities Act) if the Shares
being reoffered are registered under the Securities Act and a
prospectus in respect thereof is current.
Nothing herein shall be construed as requiring the Company
to register Shares subject to any Option or Right under the Securities
Act. In addition, if at any time the Committee shall determine that
the listing or qualification of the Shares subject to such Option or
Right on any securities exchange or under any applicable law, or the
consent or approval of any governmental regulatory body, is necessary
or desirable as a condition of, or in connection with, the granting of
an Option or Right, or the issuance of Shares thereunder, such Option
or Right may not be exercised in whole or in part unless such listing,
qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee.
A-13
<PAGE>
<PAGE>
XX. ISSUANCE OF STOCK CERTIFICATES; LEGENDS; PAYMENT OF EXPENSES
Upon any exercise of an Option or Right which may be
granted hereunder and, in the case of an Option, payment of the
purchase price, a certificate or certificates for the Shares shall be
issued by the Company in the name of the person exercising the Option
or Right and shall be delivered to or upon the order of such person.
The Company may endorse such legend or legends upon the
certificates for Shares issued pursuant to the Plan and may issue such
"stop transfer" instructions to its transfer agent in respect of such
Shares as the Committee, in its discretion, determines to be necessary
or appropriate to (a) prevent a violation of, or to perfect an
exemption from, the registration requirements of the Securities Act,
(b) implement the provisions of the Plan and any agreement between the
Company and the optionee or grantee with respect to such Shares, or
(c) permit the Company to determine the occurrence of a disqualifying
disposition, as described in Section 421(b) of the Code, of Shares
transferred upon exercise of an Incentive Option granted under the
Plan.
The Company shall pay all issue or transfer taxes with
respect to the issuance or transfer of Shares, as well as all fees and
expenses necessarily incurred by the Company in connection with such
issuance or transfer, except fees and expenses which may be
necessitated by the filing or amending of a Registration Statement
under the Securities Act, which fees and expenses shall be borne by
the recipient of the Shares unless such Registration Statement has
been filed by the Company for its own corporate purposes (and the
Company so states) in which event the recipient of the Shares shall
bear only such fees and expenses as are attributable solely to the
inclusion of the Shares he or she receives in the Registration
Statement.
All Shares issued as provided herein shall be fully paid
and nonassessable to the extent permitted by law.
XXI. WITHHOLDING TAXES
The Company may require an employee exercising a Right or a
Non-Qualified Option granted hereunder, or disposing of Shares
acquired pursuant to the exercise of an Incentive Option in a
disqualifying disposition (within the meaning of Section 421(b) of the
Code), to reimburse the corporation that employs such employee for any
taxes required by any government to be withheld or otherwise deducted
and paid by such corporation in respect of the issuance or disposition
of such Shares. In lieu thereof, the corporation that employs such
employee shall have the right to withhold the amount of such taxes
from any other sums due or to become due from such corporation to the
employee upon such terms and conditions as the Committee shall
prescribe. The corporation that employs such employee may, in its
discretion, hold the stock certificate to which such employee is
entitled upon the exercise of an Option as security for the payment of
such withholding tax liability, until cash sufficient to pay that
liability has been accumulated. In addition, at any time that the
Company becomes subject to a withholding obligation under applicable
law with respect to the exercise of a Right or Non-Qualified Option
(the "Tax Date"), except as set forth below, a holder of a Right or
Non-Qualified Option may elect to satisfy, in whole or in part, the
holder's related personal tax liabilities (an "Election") by (a)
directing the Company to withhold from Shares issuable in the related
exercise either a specified number of Shares or Shares having a
specified value (in each case not in excess of the related personal
tax liabilities), (b) tendering Shares previously issued pursuant to
the exercise of an Option or Right or other shares of the Company's
common stock owned by the holder or (c) combining any or all of the
foregoing options in any fashion. An Election shall be irrevocable.
The withheld Shares and other Shares tendered in payment should be
valued at their fair market value (determined in accordance with the
principles set forth in Article V hereof) on the Tax Date. The
Committee may disapprove of any Election, suspend or terminate the
A-14
<PAGE>
<PAGE>
right to make Elections or provide that the right to make Elections
shall not apply to particular Shares or exercises. The Committee may
impose any additional conditions or restrictions on the right to make
an Election as it shall deem appropriate. In addition, the Company
shall be authorized to effect any such withholding upon exercise of a
Non-Qualified Option or Right by retention of shares issuable upon
such exercise having a fair market value at the date of exercise (as
determined under Article V) which is equal to the amount to be
withheld; provided, however, that the Company shall not be authorized
-------- -------
to effect such withholding without the prior written consent of the
employee if such withholding would subject such employee to liability
under Section 16(b) of the Exchange Act. The Committee may prescribe
such rules as it determines with respect to employees subject to the
reporting requirements of Section 16(a) of the Exchange Act to effect
such tax withholding in compliance with the Rules established by the
Securities and Exchange Commission (the "Commission") under Section 16
of the Exchange Act and the positions of the staff of the Commission
thereunder expressed in no-action letters exempting such tax
withholding from liability under Section 16(b) of the Exchange Act.
XXII. LISTING OF SHARES AND RELATED MATTERS
The Board of Directors may delay any issuance or delivery
of Shares if it determines that listing, registration or qualification
of Shares covered by the Plan upon any national securities exchange or
under any state or federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition
of, or in connection with, the sale or purchase of Shares under the
Plan, until such listing, registration, qualification, consent or
approval shall have been effected or obtained, or otherwise provided
for, free of any conditions not acceptable to the Board of Directors.
XXIII. AMENDMENT OF THE PLAN
The Board of Directors may, from time to time, amend the
Plan, provided that no amendment shall be made, without the approval
of the stockholders of the Company, that will (a) increase the total
number of Shares reserved for Options and Rights under the Plan (other
than an increase resulting from an adjustment provided for in Article
XVII hereof), (b) reduce the exercise price of any Incentive Option
granted hereunder, (c) modify the provisions of the Plan relating to
eligibility, or (d) materially increase the benefits accruing to
participants under the Plan. The Committee shall be authorized to
amend the Plan and the Options granted thereunder to permit the
Incentive Options granted thereunder to qualify as incentive stock
options within the meaning of Section 422 of the Code and the Treasury
regulations promulgated thereunder. The rights and obligations under
any Option or Right granted before amendment of the Plan or any
unexercised portion of such Option or Right shall not be adversely
affected by amendment of the Plan or the Option or Right without the
consent of the holder of such Option or Right. Amendment of the Plan
relating to Director Participants shall be governed by Article XIV
hereof.
XXIV. TERMINATION OR SUSPENSION OF THE PLAN
The Board of Directors may at any time suspend or terminate
the Plan. The Plan, unless sooner terminated under Article XXVIII or
by action of the Board of Directors, shall terminate at the close of
business on the Termination Date. Options and Rights may not be
granted while the Plan is suspended or after it is terminated. Rights
and obligations under any Option or Right granted while the Plan is in
effect shall not be altered or impaired by suspension or termination
of the Plan, except upon the consent of the person to whom the Option
or Right was granted. The power of the Committee to construe and
administer any Options or Rights granted prior to the termination or
suspension of the Plan under Article III nevertheless shall continue
after such termination or during such suspension.
A-15
<PAGE>
<PAGE>
XXV. SAVINGS PROVISION
With respect to persons subject to Section 16 of the
Exchange Act, transactions under the Plan are intended to comply with
all applicable conditions of Rule 16b-3 or its successors under the
Exchange Act. To the extent any provision of the Plan or action by
the Committee fails to so comply, it shall be deemed null and void, to
the extent permitted by law and deemed advisable by the Committee.
XXVI. GOVERNING LAW
The Plan, such Options and Rights as may be granted
hereunder and all related matters shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York
from time to time obtaining.
XXVII. PARTIAL INVALIDITY
The invalidity or illegality of any provision herein shall
not be deemed to affect the validity of any other provision.
XXVIII. EFFECTIVE DATE
The Plan shall become effective at 9:00 A.M., New York City
time, on the Effective Date; provided, however, that if the Plan is
-------- -------
not approved by a vote of the stockholders of the Company at an annual
meeting or any special meeting or by unanimous written consent within
twelve (12) months after the Effective Date, the Plan and any Options
or Rights granted thereunder shall terminate.
A-16
NYFS04...:\30\76830\0001\1980\PLN2296K.570
<PAGE>
PROXY
LEUCADIA NATIONAL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS, MAY 14, 1996 AT 1:00 P.M.
The undersigned shareholder of Leucadia National Corporation (the
"Company") hereby appoints Ian M. Cumming, Joseph S. Steinberg and Ruth
Klindtworth and each of them, as attorneys and proxies, each with power of
substitution and revocation, to represent the undersigned at the Annual Meeting
of Shareholders of Leucadia National Corporation to be held at Chase Manhattan
Bank, 270 Park Avenue, 11th Floor, New York, New York on May 14, 1996 at 1:00
p.m., and at any adjournment or postponement thereof, with authority to vote all
shares held or owned by the undersigned in accordance with the directions
indicated herein.
Receipt of the Notice of Annual Meeting of Shareholders dated April 18,
1996, the Proxy Statement furnished herewith, and a copy of the Annual Report to
Shareholders for the year ended December 31, 1995 is hereby acknowledged.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR ITEMS 1, 2 AND 3 AND PURSUANT TO ITEM 4.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE>
<PAGE>
Please mark your
votes as indicated [X]
in this example
ITEM 1. Election of Directors. FOR all nominees listed WITHHOLD AUTHORITY to
THE BOARD OF DIRECTORS below (except as marked vote for all nominees
RECOMMENDS A VOTE FOR THE to the contrary hereon). listed below.
NOMINEES LISTED BELOW.
[ ] [ ]
NOMINEES: IAN M. CUMMING, PAUL M. DOUGAN, LAWRENCE D. GLAUBINGER, JAMES E.
JORDAN, JESSE CLYDE NICHOLS, III AND JOSEPH S. STEINBERG. (Instructions: To
withhold authority to vote for any individual nominee write that nominee's name
in the space provided below.)
- -----------------------------------------------------------------
ITEM 2. Approval of an amendment to the Company's
1992 Stock Option Plan to limit to 300,000 the
maximum number of the Company's common shares, par FOR AGAINST ABSTAIN
value $1.00 per share, with respect to which
options and/or rights may be granted under the [ ] [ ] [ ]
1992 Stock Option Plan to any individual in any
one taxable year.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR SUCH APPROVAL.
---
ITEM 3. Ratification of the selection of Coopers & FOR AGAINST ABSTAIN
Lybrand as independent auditors of Leucadia for
1996. [ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR SUCH RATIFICATION.
---
ITEM 4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly be presented to the meeting or any adjournment thereof.
SIGNATURE(S)_________________________________________________DATE: _____________
NOTE:THE SIGNATURE SHOULD AGREE WITH THE NAME ON YOUR STOCK
CERTIFICATE. IF ACTING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE, GUARDIAN, ETC., YOU SHOULD SO
INDICATE WHEN SIGNING. IF THE SIGNER IS A CORPORATION,
PLEASE SIGN THE FULL CORPORATE NAME BY DULY AUTHORIZED
OFFICER. IF SHARES ARE HELD JOINTLY, EACH SHAREHOLDER
SHOULD SIGN.
