<PAGE> 1
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
ARGONAUT GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
JAMES B. HALLIDAY
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 2
[LOGO]
1800 AVENUE OF THE STARS
SUITE 1175
LOS ANGELES, CALIFORNIA 90067
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 26, 1994
The Annual Meeting of Shareholders of Argonaut Group, Inc. will be held on
Tuesday, April 26, 1994, at 11:00 a.m. at The Westin Hotel, San Francisco
Airport, 1 Old Bayshore Highway, Millbrae, California 94030.
The Meeting is called for the following purposes:
1. To elect Directors;
2. To consider and act upon such other business as may properly come
before the meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on February 18,
1994, as the record date for determining those shareholders who will be entitled
to vote at the meeting. A list of such shareholders will be open to examination
by any shareholder at the meeting and for a period of ten days prior to the date
of the meeting during ordinary business hours at the Argonaut Group, Inc.
Corporate Offices, 1800 Avenue of the Stars, Suite 1175, Los Angeles, California
90067.
By Order of the Board of Directors
James B Halliday
Secretary
March 11, 1994
IF YOU ARE UNABLE TO BE PRESENT AT THE MEETING, YOU ARE REQUESTED TO SIGN AND
RETURN THE ENCLOSED PROXY SO THAT YOUR SHARES WILL BE REPRESENTED.
<PAGE> 3
[LOGO]
CORPORATE OFFICES:
1800 AVENUE OF THE STARS
SUITE 1175
LOS ANGELES, CALIFORNIA 90067
------------------------
PROXY STATEMENT
This statement is furnished in connection with the solicitation by Argonaut
Group, Inc. ("Argonaut Group" or the "Company") of the enclosed proxy to vote
shares of the Company's Common Stock at the Annual Meeting of Shareholders to be
held on Tuesday, April 26, 1994, at 11:00 a.m. at The Westin Hotel, San
Francisco Airport, 1 Old Bayshore Highway, Millbrae, California 94030, and at
any postponements or adjournments thereof.
Shares represented by duly executed proxies in the accompanying form
received before the meeting will be voted at the meeting. Any shareholder giving
a proxy has the power to revoke it at any time before it is voted by filing with
the Secretary of the Company either an instrument revoking the proxy or a duly
executed proxy bearing a later date. Proxies may also be revoked by any
shareholder present at the meeting who expresses a desire to vote in person. If
a shareholder specifies a choice on any matter to be acted upon by means of the
ballot provided in the accompanying proxy, the shares will be voted accordingly.
If no specification is made, the shares represented by the proxy will be voted
in favor of election of the nominees specified herein.
The principal solicitation of proxies is being made by mail; however,
additional solicitation may be made by directors, officers, and regular
employees of the Company and its subsidiaries. The Company has retained the
services of W. F. Doring & Co. to aid in the solicitation of proxies. Fees and
expenses to be incurred by the Company in this connection are estimated not to
exceed $10,000. The total expense of this solicitation will be borne by the
Company and will include reimbursement paid to brokerage firms and others for
their expenses in forwarding soliciting material. This proxy statement and the
accompanying form of proxy are being mailed to shareholders on or about March
11, 1994.
1
<PAGE> 4
VOTING SECURITIES
SECURITIES OUTSTANDING
February 18, 1994 has been fixed as the record date for the determination
of shareholders entitled to notice of and to vote at the meeting or any
adjournments or postponements thereof. On that date there were 25,675,467 shares
of Common Stock issued and outstanding and entitled to vote. The Company has no
other voting securities outstanding. Each shareholder of record is entitled to
one vote per share held on all matters submitted to a vote of shareholders.
Under Delaware law and the Company's Certificate of Incorporation and
Bylaws, directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors. Since there is no particular percentage of either the
outstanding shares or the shares represented at the meeting required to elect a
director, abstentions and broker non-votes will have the same effect as the
failure of shares to be represented at the meeting, except that the shares
subject to such abstentions or non-votes will be counted in determining whether
there is a quorum for taking shareholder action.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table provides information as of February 18, 1994, as to
each person who, to the Company's knowledge, beneficially owns more than 5
percent of the outstanding shares of Argonaut Group Common Stock.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL NUMBER OF
BUSINESS ADDRESS OF ARGONAUT GROUP PERCENT OF
BENEFICIAL OWNER SHARES OWNED CLASS
---------------------------------- ---------------- -----------
<S> <C> <C>
Henry E. Singleton 4,662,864(1) 18.2%
335 Maple Drive
Beverly Hills, CA 90210
Fayez S. Sarofim 2,061,850(2) 8.0%
Two Houston Center, Suite 2907
Houston, TX 77010
Leon G. Cooperman 1,293,600(3) 5.0%
One New York Plaza, 30th Floor
New York, NY 10004
</TABLE>
- ------------
(1) Sole voting and dispositive powers.
(2) Based upon information as of December 31, 1993, contained in an amendment to
Schedule 13G filed under the Securities Exchange Act of 1934, Mr. Sarofim
may be deemed to be the beneficial owner of 2,061,850 shares of Argonaut
Group Common Stock. Of those shares, Mr. Sarofim has sole voting and
dispositive powers with respect to 648,776 shares which are owned
beneficially and of record by him, and may be deemed to have shared voting
power as to 1,252,957 shares and shared dispositive power as to 1,413,074
shares. Of the securities which are not subject to sole voting and
2
<PAGE> 5
dispositive powers, 834,564 are held in accounts managed for numerous
clients by Fayez Sarofim & Co., an Investment Adviser registered under the
Investment Advisers Act of 1940, of which Mr. Sarofim is Chairman of the
Board, President and the majority shareholder, 409,506 are held by Fayez
Sarofim & Co. for its own account, and 165,636 are held in client accounts
managed by its wholly-owned subsidiary, Sarofim Trust Co. Trusts of which
Mr. Sarofim is a trustee own 3,368 shares as to which Mr. Sarofim shares
voting and dispositive powers but has no beneficial interest.
(3) Based upon information as of January 15, 1993, contained in Schedule 13D
filed under the Securities Exchange Act of 1934, Mr. Cooperman may be
deemed to be the beneficial owner of 1,293,600 shares of Argonaut Group
Common Stock. Of these shares, Mr. Cooperman has sole voting and
dispositive powers with respect to 1,062,800 shares which are owned
beneficially by him, and may be deemed to have shared voting and
dispositive powers as to 230,800 shares. Of the securities which are not
subject to sole voting and dispositive powers, 157,000 are held by Mr.
Cooperman's spouse and 73,800 are held in an account managed for an
unrelated third party by Omega Advisors, Inc., a corporation engaged in
providing investment management, of which Mr. Cooperman is President and
majority shareholder.
The following table sets forth the number and percentages of shares of
Argonaut Group Common Stock beneficially owned by each director, nominee for
director, and executive officer of Argonaut Group and by the directors, nominees
for director, and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF
NAME OF ARGONAUT GROUP PERCENT OF
BENEFICIAL OWNER SHARES OWNED(1) CLASS(1)
-------------------------------- ------------------ ----------
<S> <C> <C>
Charles E. Rinsch............... 356,648(2) 1.4%
George A. Roberts............... 313,014(3) 1.2%
Arthur Rock..................... 190,266 (9)
Fayez S. Sarofim................ 2,061,850(1) 8.0%
Henry E. Singleton.............. 4,662,864 18.2%
James B Halliday................ 49,320(4) (9)
Michael J. Crall................ 31,674(5) (9)
Norman H. Burdick............... 3,768(6) (9)
Randall J. Mellin............... 6,043(7) (9)
All directors and executive
officers as a group (9
persons)...................... 7,675,447(1)(2)(3)(6) 29.9%
</TABLE>
- ------------
(1) Stock ownership is presented as of February 18, 1994, except that Mr.
Sarofim's stock ownership is presented as of December 31, 1993. See also
footnote (2) to the preceding table. Percentages are based on the number of
shares outstanding on the record date, February 18, 1994.
(2) Includes 79,556 shares as to which Mr. Rinsch has sole voting and
dispositive power. The total set forth above also includes 262,000 shares
which Mr. Rinsch has the right to acquire within 60 days of February 18,
1994 through the exercise of options. Also included in the total set forth
above are 15,092 shares as to which Mr. Rinsch disclaims any voting or
dispositive powers. 1,640 of these shares are owned by Mr. Rinsch's spouse;
the remaining 13,452 shares are held in accounts administered by Mr.
Rinsch's spouse, the economic benefits of which accrue to his sons.
3
<PAGE> 6
(3) Includes 4,449 shares owned by Dr. Roberts' spouse and with respect to which
Dr. Roberts disclaims beneficial ownership.
(4) Includes 43,100 shares which Mr. Halliday has the right to acquire within 60
days of February 18, 1994 through the exercise of options.
(5) Includes 3,600 shares which Mr. Crall has the right to acquire within 60
days of February 18, 1994 through the exercise of options.
(8) Includes an aggregate of 315,600 shares which the officers have the right to
acquire within 60 days of February 18, 1994 through the exercise of
options.
(9) Owns less than 1%.
ELECTION OF DIRECTORS
(PROPOSAL 1)
Five directors are to be elected at the meeting to serve for a term of one
year or until the election and qualification of their successors. Returned
proxies will be voted in favor of electing the five nominees named below as
directors of Argonaut Group unless authority to so vote is withheld. Each
nominee is currently a director. Proxies will be voted for substitute nominees
in the event that any of the present nominees is unwilling or unable to serve.
Argonaut Group is not presently aware of the unwillingness or inability of any
nominee to serve. The five nominees receiving the greatest number of votes cast
will be elected directors. The table set forth below lists the name and age of
each of the nominees for election as director, and the positions and offices
that each such person holds with the Company.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME WITH COMPANY AGE
----------------------------- -------------------------------------- ---
<S> <C> <C>
Charles E. Rinsch............ President, Chief Executive Officer, 61
and Director(1)(3)
George A. Roberts............ Director(1)(2)(3)(4) 75
Arthur Rock.................. Director(2)(4) 67
Fayez S. Sarofim............. Director(2)(4) 65
Henry E. Singleton........... Chairman of the Board(1)(2)(3)(4) 77
</TABLE>
- ------------
(1) Member of the Executive Committee of the Board of Directors.
(2) Member of the Audit Committee of the Board of Directors.
(3) Member of the Investment Committee of the Board of Directors.
(4) Member of the Compensation and Stock Option Committee of the Board of
Directors.
The Board of Directors recommends a vote FOR election of the nominees listed
above as directors.
4
<PAGE> 7
BUSINESS EXPERIENCE OF NOMINEES
Charles E. Rinsch has been President and Chief Executive Officer of
Argonaut Group since January 1988.
George A. Roberts, a private investor, was Chairman of the Board of
Teledyne, Inc. from January 1991 to April 1993, when he retired as an officer
and employee of Teledyne, Inc. Prior to January 1991, he was President of
Teledyne, Inc. for more than five years and had served as Chief Executive
Officer from April 1986 to January 1991. He is a director of Teledyne, Inc. and
Unitrin, Inc.
Arthur Rock has been a private investor for more than five years. He is a
principal of Arthur Rock & Co., a venture capital firm. He is a director of
Teledyne, Inc., Intel Corporation, and PacTel Corporation.
Fayez S. Sarofim is the Chairman of the Board and President of Fayez
Sarofim & Co., a registered investment advisor. He has held these positions for
more than five years. He is a director of Teledyne, Inc., Unitrin, Inc.,
Imperial Holly Corporation, and Mesa, Inc.
Henry E. Singleton is a rancher and investor. Dr. Singleton has been
Chairman of the Board of Directors of the Company since its inception in 1986.
Prior to January 1991, he was Chairman of the Board of Teledyne, Inc. for more
than 5 years. He is a director of Teledyne and Unitrin, Inc.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During 1993, the standing Committees of the Board of Directors were the
Executive Committee, the Audit Committee, the Investment Committee, and the
Compensation and Stock Option Committee. The Company does not have a nominating
committee; this function is handled by the full Board of Directors. Except for
certain powers which, under Delaware law, may only be exercised by the full
Board of Directors, the Executive Committee may exercise all powers and
authority of the Board of Directors in the management of the business of the
Company. The Audit Committee reviews the scope of the audit and non-audit
assignments and the related fees, the accounting principles being applied by the
Company in financial reporting, the scope of internal auditing procedures, and
the adequacy of internal controls. The Audit Committee meets periodically with
management, the independent public accountants, and the internal auditors. The
Investment Committee sets the Company's investment policy. All investment
transactions are ratified by the Board of Directors. The Compensation and Stock
Option Committee is responsible for approving and reporting to the Board of
Directors on the annual compensation of the executive officers. This committee
has assumed the functions formerly held by the Stock Option Committee to grant
stock options or stock appreciation rights pursuant to the Company's 1986 Stock
Option Plan, and to determine the exercise price, vesting provisions, duration
and other terms of such options or rights, consistent with the 1986 Stock Option
Plan.
5
<PAGE> 8
Between January 1, 1993, and December 31, 1993, the Board of Directors met
four times, the Executive Committee did not meet, the Audit Committee met four
times, the Compensation and Stock Option Committee met three times, and the
Investment Committee met four times. During that time, all directors attended 75
percent or more of the meetings of the Board of Directors and Committees of the
Board on which they serve.
Directors who are not employees of the Company or its subsidiaries receive
an annual fee of $18,000 for service on the Board.
EXECUTIVE OFFICERS
The following table sets forth, for each executive officer of the Company,
such person's name, age, and positions with the Company and its principal
subsidiaries.
<TABLE>
<CAPTION>
NAME POSITION AGE
------------------------------------- --------------------------------- ---
<S> <C> <C>
Charles E. Rinsch.................... President and Chief Executive 61
Officer
James B Halliday..................... Vice President, Secretary and 46
Treasurer
Michael J. Crall..................... Vice President; President, 50
Argonaut Insurance
Norman H. Burdick.................... President, Great Central 43
Insurance
Randall J. Mellin.................... Vice President 46
</TABLE>
- ------------
The position stated is with Argonaut Group unless otherwise indicated. Argonaut
Group includes two insurance subsidiaries, Argonaut Insurance Company ("Argonaut
Insurance") and Great Central Insurance Company ("Great Central Insurance").
BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS
Mr. Rinsch's business experience during the last five years is described
under "Business Experience of Nominees," above.
James B Halliday has been Vice President of Argonaut Group and Treasurer
since June 1988. He was appointed Secretary in December 1989.
Michael J. Crall has been President of Argonaut Insurance since October
1986. He was appointed Vice President of Argonaut Group in April 1990.
Norman H. Burdick has been President of Great Central Insurance since June
1993. From December 1989 to June 1993, he was Resident Vice President of the
Argonaut Insurance Chicago Division. From June 1987 to December 1989, he was
Senior Vice President of Argonaut Insurance.
6
<PAGE> 9
Randall J. Mellin joined Argonaut Insurance as Assistant Vice President in
1986. He was appointed Vice President in 1988 and Senior Vice President in 1991.
He was appointed Vice President of Argonaut Group in April 1993.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth compensation paid during each of the years
ended December 31, 1993, 1992, and 1991, of those persons who were, at December
31, 1993, the Chief Executive Officer and each Argonaut Group executive officer
whose salary plus bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ----------- ALL OTHER
NAME AND PRINCIPAL ------------------------ OPTIONS COMPENSATION
POSITION(1) YEAR SALARY($)(2) BONUS($)(2) (#) ($)(3)
- ----------------------------- ----- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Charles E. Rinsch 1993 $ 418,750 $140,000 -- $ 4,017
President and Chief 1992 $ 399,617 $120,000 75,000 $ 4,364
Executive Officer 1991 $ 394,023 $120,000 -- (6)
James B Halliday 1993 $ 117,000 $ 35,000 -- $ 2,633
Vice President, 1992 $ 105,885 $ 30,000 9,000 $ 2,309
Secretary and Treasurer 1991 $ 101,806 $ 32,000 9,000 (6)
Michael J. Crall 1993 $ 184,000 $ 55,000 -- $ 3,616
Vice President; President, 1992 $ 173,750 $ 45,000 9,000 $ 3,475
Argonaut Insurance 1991 $ 167,500 $ 55,000 9,000 (6)
Norman J. Burdick 1993 $ 108,287 $ 27,500 6,000 $ 2,461
President, Great
Central Insurance(4)
Randall J. Mellin 1993 $ 112,000 $ 20,000 -- $ 2,388
Vice President(5)
</TABLE>
- ------------
(1) The position stated is with Argonaut Group unless otherwise indicated.
(2) Amounts include cash compensation earned and received by executive officers
as well as amounts deferred under a 401(k) Retirement Savings Plan.
(3) Amounts shown are all derived from the Company contribution to the 401(k)
Retirement Savings Plan.
(4) Mr. Burdick was appointed President of Great Central Insurance on June 11,
1993.
(5) Mr. Mellin was appointed Vice President on April 27, 1993.
(6) In accordance with the transitional provisions to the applicable rules of
the Securities and Exchange Commission, disclosure not called for.
7
<PAGE> 10
OPTION GRANTS
The following table sets forth information on stock option grants in 1993
to the named executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------
PERCENT OF
TOTAL OPTIONS EXERCISE
OPTIONS GRANTED TO OR BASE GRANT DATE
GRANTED EMPLOYEES PRICE EXPIRATION PRESENT
NAME (#)(1) IN FISCAL YEAR ($/SHARE)(2) DATE VALUE($)(3)
- -------------------------- ------- -------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Charles E. Rinsch......... -- -- -- -- --
James B Halliday.......... -- -- -- -- --
Michael J. Crall.......... -- -- -- -- --
Norman H. Burdick......... 6,000 7.6% $ 31.250 07/14/04 $ 58,800
Randall J. Mellin......... -- -- -- -- --
</TABLE>
- ---------------
(1) The options granted are exercisable in annual installments of 20 percent
except that no exercise is permitted until two years after the date of
grant.
(2) The exercise price must be paid in full either in cash or by delivery of
already owned Argonaut Group Common Stock valued at market value.
(3) In using the Black-Scholes option pricing model to calculate grant date
present value, certain assumptions are used: expected volatility (0.257),
risk-free rate of return (6.26%), dividend yield (3.20%), and date of
exercise (07/14/04). Use of this model should not be viewed as a forecast of
the future performance of the Company's stock, which will be determined by
future events and unknown factors.
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<PAGE> 11
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth information with respect to the named
executive officers concerning the exercise of options during the last year and
unexercised options held as of the end of the year.
AGGREGATED OPTION EXERCISES IN LAST YEAR AND YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
YEAR-END YEAR-END
SHARES ACQUIRED VALUE (#) ($)
ON EXERCISE REALIZED -------------------------- --------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles E. Rinsch.... 38,000 $845,375 202,000 171,000 $3,790,500 $ 1,882,125
James B Halliday..... 2,500 $ 51,417 32,300 25,200 $ 592,859 $ 273,225
Michael J. Crall..... -- -- 1,800 16,200 $ 15,900 $ 102,975
Norman H. Burdick.... -- -- 2,400 9,600 $ 21,500 $ 25,750
Randall J. Mellin.... -- -- 3,000 6,000 $ 50,625 $ 42,000
</TABLE>
PENSION PLAN
Employees of Argonaut Group and subsidiaries are provided retirement
benefits under the Argonaut Group, Inc. Retirement Plan ("Pension Plan"), a
defined benefit retirement plan and successor to the Teledyne Retirement Plan
for Salaried Employees ("Predecessor Plan"). Benefits under the Pension Plan
depend upon an individual's total cash compensation over the sixty consecutive
months of the highest cash compensation during the one hundred twenty months
preceding termination of employment, and upon the number of years such
individual has participated in the Pension Plan and, in the case of employees
who were employed by Teledyne until the spin-off of Argonaut Group, the
Predecessor Plan. Benefits are payable as a straight-life annuity and are not
subject to deduction for any Social Security benefits. For retirement prior to
age 65, benefits are also reduced on an actuarial basis according to age. The
benefit is prorated for less than 30 years of
9
<PAGE> 12
participation in the Pension Plan and the Predecessor Plan. Annual Plan benefits
at age 65 or later retirement are illustrated as follows:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------------
AVERAGE ANNUAL 30 OR
CASH COMPENSATION 15 20 25 MORE
-------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$125,000............................ $ 25,000 $ 33,333 $ 41,667 $ 50,000
150,000............................ 30,000 40,000 50,000 60,000
175,000............................ 35,000 46,667 58,333 70,000
200,000............................ 40,000 53,333 66,667 80,000
250,000............................ 50,000 66,667 83,333 100,000
300,000............................ 60,000 80,000 100,000 120,000*
375,000............................ 75,000 100,000 125,000* 150,000*
500,000............................ 100,000 133,333* 166,667* 200,000*
625,000............................ 125,000* 166,667* 208,333* 250,000*
</TABLE>
- ---------------
* Section 415 of the Internal Revenue Code limits the amount of benefits payable
under tax-qualified retirement plans such as the Pension Plan. For calendar
year 1993, the limit was $115,641, such limit to be adjusted annually for
increases in the cost of living.
The number of years credited toward the determination of benefits under the
Pension Plan and Predecessor Plan as of December 31, 1993 for Charles E. Rinsch
is 24.9 years, James B Halliday is 19.3 years, Michael J. Crall is 6.7 years,
Norman H. Burdick is 7.5 years, and Randall J. Mellin is 6.3 years.
The Company has agreed to pay Mr. Rinsch and Mr. Halliday, upon retirement,
an amount to compensate each of them for the loss, if any, of pension benefits
arising from each resigning his position at Teledyne to become employed by
Argonaut Group. The amount of the total monthly benefit would be equal to the
amount which would have been payable to each of them for such month under the
Argonaut Group, Inc. Retirement Plan if he had been employed by Argonaut Group
for the period during which he was employed by Teledyne (at the same
compensation), as well as during the period of his actual Argonaut Group
employment. Argonaut Group will pay the amount of this monthly benefit less the
sum of the amounts payable under the Teledyne Retirement Plan, the Teledyne
Supplemental Retirement Agreement (Mr. Rinsch only) and the Argonaut Group, Inc.
Retirement Plan.
Argonaut has a nonqualified, non-funded pension plan for highly-compensated
employees (the "Equalization Plan"). The Equalization Plan provides Pension Plan
participants whose benefits are limited by Section 415 of the Internal Revenue
Code with additional benefits equal to the difference
10
<PAGE> 13
between payments actually received under the Pension Plan and payments that
would have been received without regard to the limitations imposed by Section
415. Payments under the Equalization Plan are paid on the same terms and
conditions and with the same adjustments specified in the Pension Plan.
INDEMNITY AGREEMENTS
Prior to 1990, the Company entered into indemnity agreements (the
"Indemnity Agreements") with certain key employees. The purpose of the Indemnity
Agreements is to give to such employees the full benefit of certain
unexercisable options which would become exercisable in the event of a change in
control of the Company, without reduction by reason of any excise tax payable
pursuant to Sections 280G and 4999 of the Internal Revenue Code. Pursuant to the
Indemnity Agreements, the Company has agreed that it will pay to such executives
such amounts as are necessary to reimburse them on an after-tax basis, for any
such excise tax payable by them.
INDEMNIFICATION
Under its Certificate of Incorporation, Argonaut Group is obligated to
indemnify its directors and officers to the fullest extent permitted by Delaware
law. The Certificate of Incorporation makes such indemnification rights contract
rights and entitles directors and officers to initiate legal action against
Argonaut Group to enforce such indemnification rights.
Argonaut Group's Certificate of Incorporation also provides that, to the
fullest extent permitted by Delaware law, a director shall not be liable to
Argonaut or its shareholders for monetary damages for breach of fiduciary duty
as a director. However, the Certificate of Incorporation does not eliminate a
director's liability for breach of the duty of loyalty, acts or omissions not in
good faith, certain payments not permitted under Delaware General Corporation
Law, or transactions in which the director derives an improper benefit.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Exchange
Act that might incorporate future filings, including this Proxy Statement, in
whole or in part, the following report and the Performance Graph on page 12
shall not be incorporated by reference into any such filings.
REPORT ON EXECUTIVE COMPENSATION
GENERAL
In October 1992, the Securities and Exchange Commission adopted substantial
amendments to its disclosure rules relating to executive compensation. In order
to adequately address and comply
11
<PAGE> 14
with these new rules, the Argonaut Group Board of Directors established a
Compensation and Stock Option Committee (the "Committee") composed entirely of
independent non-employee directors who have no interlocking relationships as
defined by the Securities and Exchange Commission.
COMPENSATION PHILOSOPHY
The Board's compensation philosophy for the chief executive officer and
other executive officers is to align compensation with the attainment of
specific goals for the creation of long-term shareholder value, and to provide a
level of compensation which allows the Company to attract, retain, and reward
executive officers who contribute to the long-term success of the Company. The
compensation of the chief executive officer and other executive officers of the
Company comprises cash compensation and long-term incentive compensation in the
form of stock options.
CASH COMPENSATION
Cash compensation consists of base salary plus an annual performance bonus.
Base salary for the Company's executive officers is competitively set relative
to comparable positions at comparable companies. The annual performance bonus is
based upon Company, business unit, and individual performance.
STOCK OPTIONS
The purpose of the Company's stock option plan is to provide long-term
incentives for the executive officers to maximize shareholder value by creating
a direct link between executive compensation and long term shareholder return.
The Committee meets to discuss the grant of stock options at least annually,
with each executive officer being considered for an award periodically at the
sole discretion of the Committee depending on individual performance, and the
number, value, and timing of past grants. The number of shares granted is based
on the level of responsibility within the organization, and also on the number,
value, and timing of past grants.
CHIEF EXECUTIVE OFFICER COMPENSATION
In evaluating the performance of Charles Rinsch, President and Chief
Executive Officer of Argonaut Group, Inc., for the year ended December 31, 1992,
the Committee reviewed a summary of compensation data reported in the proxy
statements of other comparably-sized and publicly-traded property and casualty
insurance companies. The Committee does not, however, target a specific point
within the range represented by these companies. The companies selected for
comparison were based on premium volume $300 million to $600 million as reported
by A M Best, the leading insurance company rating agency. While some of these
companies are included in the Media General Insurance Industry Group Index for
performance comparison, many of the companies in the Media General
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<PAGE> 15
Index are larger, and compensation data would not be comparable. The Committee
also reviewed the success of Company operations during 1992 based on net income
from continuing operations, cash flow from continuing operations, the level of
premium income attained, and the combined ratio (losses plus expenses) of
continuing operations. For 1992, no specific targets had been set for these
factors.
Based on these discussions and the process described above, the Committee
set Mr. Rinsch's base salary at $425,000, an increase of $25,000, in April,
1993, and awarded him a performance bonus of $140,000. No stock options were
granted during 1993. Additionally, specific performance targets were defined for
1993 in the areas listed above plus targets related to operating efficiencies
and productivity of the Company and retention of profitable accounts. A
performance bonus based on 1993 performance will be considered by the Committee
at its April, 1994 meeting.
The Committee also established the base compensation of Argonaut Group's
other executive officers for 1993, and awarded performance bonuses related to
1992 results and accomplishments, following the principles and procedures
outlined in this report.
COMPENSATION AND STOCK
OPTION COMMITTEE:
Henry E. Singleton, Chairman
George A. Roberts
Arthur Rock
Fayez S. Sarofim
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PERFORMANCE GRAPH
Note: The stock price performance shown on the graph below is not
necessarily indicative of future price performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
MEDIA GEN-
ERAL INSUR-
MEASUREMENT PERIOD ARGONAUT S&P 500 IN- ANCE INDUSTRY
(FISCAL YEAR COVERED) GROUP, INC. DEX GROUP
<S> <C> <C> <C>
1988 100 100 100
1989 160 132 128
1990 151 128 109
1991 172 166 138
1992 228 179 163
1993 235 197 167
</TABLE>
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<PAGE> 17
TRANSACTIONS WITH TELEDYNE, INC. AND UNITRIN, INC.
Four of the directors of Argonaut Group, George A. Roberts, Arthur Rock,
Fayez S. Sarofim and Henry E. Singleton are also directors of Teledyne, Inc.
("Teledyne"). Three of the directors of Argonaut Group, George A. Roberts, Fayez
S. Sarofim, and Henry E. Singleton are also directors of Unitrin, Inc.
("Unitrin"). Directors, nominees for director, and executive officers of
Argonaut Group as a group may be deemed to beneficially own in the aggregate
more than 20% of the outstanding common stock of Teledyne and Unitrin as well as
approximately 30% of the outstanding common stock of Argonaut.
In prior years, pursuant to contractual arrangements, Argonaut Insurance
insured Teledyne and its subsidiaries for certain coverages including workers
compensation, general liability, automobile liability, and excess liability
exposures. On November 1, 1987, Argonaut Insurance discontinued writing new
insurance for Teledyne, but Argonaut Insurance continues to be subject to claims
on policies written prior to November 1, 1987. These policies include
retrospective rating provisions under which Teledyne may be liable to Argonaut
Insurance in the future if losses develop beyond expectations. Total premiums
paid by Teledyne and its subsidiaries to Argonaut Insurance were $1.5 million in
1993. These premiums were a result of such retrospective rating provisions.
Argonaut Insurance has obtained reinsurance from Trinity Universal Insurance
Company, a subsidiary of Unitrin, covering any excess losses that may develop.
Teledyne has reimbursed Argonaut Insurance for the cost of this reinsurance.
With regard to insurance covering the period from and after November 1, 1986, a
subsidiary of Unitrin has reinsured 100% of these insurance coverages. Teledyne
has guaranteed payment to Argonaut Insurance of such obligations under these
policies.
During 1992, Argonaut Insurance entered into a Settlement Agreement with
Teledyne whereby Argonaut Insurance agreed to pay Teledyne $2,490,558 for a
release of all past, present, and future claims against Argonaut Insurance for
coverage of environmental losses under general liability policies for 1973-1975
and Teledyne agreed to pay Argonaut Insurance $550,000 for a release of all
claims for recovery of defense costs incurred in connection with certain
environmental coverage lawsuits. A motion for an order that the Settlement
Agreement constitutes a good faith settlement was heard before the Superior
Court of the State of California, County of San Francisco in March 1993, and was
granted.
AGI Properties, Inc. ("AGI Properties"), a non-insurance subsidiary of
Argonaut Insurance, owns several buildings and the real property on which these
buildings are located. During 1993, Teledyne leased two of these properties in
Los Angeles, California and one property in Torrance, California for a total
annual rental of approximately $1.2 million. The leases for the foregoing
properties provide that Teledyne assume obligations for real property taxes,
assessments, repairs, maintenance, and insurance. They also provide for a five
year term except the Torrance lease which
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<PAGE> 18
was on a month-to-month basis and is no longer leased by Teledyne. One of the
Los Angeles leases provides for a renewal option for an additional three years.
The lease rates are subject to periodic adjustment in accordance with a formula
based on the Consumer Price Index.
During 1993, Teledyne provided Argonaut Group certain investment trade
execution services. For 1993, Argonaut Group paid Teledyne approximately
$128,000 for these services.
Argonaut Group has in effect an agreement with Unitrin, pursuant to which
Unitrin provides the Company with certain data processing services. Unitrin has
agreed to provide Argonaut Group with data processing services for an indefinite
period of time, subject to nine months cancellation notice. Charges are based on
actual computer usage. Payments to Unitrin for data processing services were
approximately $1.2 million in 1993.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen & Co. has been selected as the Company's independent public
accountants for the year 1994.
It is expected that a representative of Arthur Andersen & Co. will be
present at the meeting. Such representative will be afforded an opportunity to
make a statement if he or she desires to do so and will be available for the
purpose of responding to appropriate questions.
FORM 10-K
Prior to the mailing of this proxy statement, the Company has furnished to
each of its shareholders a copy of its Annual Report to Shareholders for the
fiscal year ended December 31, 1993. Shareholders entitled to vote at the Annual
Meeting may obtain a copy of the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, without charge, upon written request to James B
Halliday, Secretary, Argonaut Group, Inc., 1800 Avenue of the Stars, Suite 1175,
Los Angeles, California 90067.
SHAREHOLDER PROPOSALS AT THE NEXT
ANNUAL MEETING OF SHAREHOLDERS
Shareholders of the Company who intend to submit proposals to the Company's
shareholders for a vote at the next annual meeting of shareholders must submit
such proposals to Argonaut Group no later than November 11, 1994. Shareholder
proposals should be submitted to James B Halliday, Secretary, Argonaut Group,
Inc., 1800 Avenue of the Stars, Suite 1175, Los Angeles, California 90067.
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<PAGE> 19
OTHER MATTERS
The management of the Company knows of no other matters which may come
before the meeting. However, if any matters other than the election of Directors
should properly come before the meeting, it is the intention of the persons
named in the enclosed proxy to vote all proxies in accordance with their best
judgment.
By Order of the Board of Directors
JAMES B HALLIDAY
Secretary
March 11, 1994
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<PAGE> 20
ARGONAUT GROUP, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
March 11, 1994
The undersigned shareholder of Argonaut group, Inc. (the "Company"), hereby
appoints CHARLES E. RINSCH and JAMES B. HALLIDAY and each of them, with power
of substitution to each, true and lawful attorneys, agents and proxyholders of
the undersigned, and hereby authorizes them to represent and vote, as specified
herein, all the shares of Common Stock of the Company held of record by the
undersigned on February 18, 1994, at the 1994 Annual Meeting of Shareholders of
the Company to be held on Tuesday, April 26, 1994 at 11:00 a.m., at The Westin
Hotel, San Francisco Airport, 1 Old Bayshore Highway, Millbrae, California
94030, and any adjournments or postponements thereof.
/X/ Please mark
votes as in
This example.
The shares represented by this proxy will be voted in the manner directed, in
the absence of any direction, the shares will be voted FOR Proposal 1.
The undersigned acknowledges receipt of the Notice of Annual Meeting and Proxy
Statement dated March 11, 1994.
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS 2. In their discretion, the proxyholders are authorized to vote
Nominees: Charles E. Rinsch, George A. Roberts upon such other business as may properly come before the
Arthur Rock, Fayez S. Sarofim, and Henry E. Singleton meeting, or Postponemnets therof.
FOR WITHHELD MARK HERE
/ / / / FOR ADDRESS / /
CHANGE AND
/ /_______________________________________ NOTE AT LEFT
For all nominees except as noted above
Please sign exactly as name appears hereon. Joint owners should
each sign trustees and other each sign. Trustees and others acting
in a represenattive capacity should indicate the capacity in
which they sign and give their full corporate name by an authorized
officer. If a partnership, please sign in partnership name by
an authorized person.
Please mark, sign and date this proxy and return it promptly
whether you plan to attend the meeting or not. If you do attend,
you may vote in person if you desire.
Signature: ___________________________________ Date_________________
Signature: ___________________________________ Date_________________
</TABLE>
