<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:
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<PAGE> 2
(ARGONAUT GROUP, INC. LOGO)
1800 AVENUE OF THE STARS
SUITE 1175
LOS ANGELES, CALIFORNIA 90067
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 25, 1995
The Annual Meeting of Shareholders of Argonaut Group, Inc. will be held on
Tuesday, April 25, 1995, at 11:00 a.m. at Argonaut Insurance Company, 250
Middlefield Road, Menlo Park, California 94025.
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 17,
1995, 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.
The vote of each shareholder is important. I urge you to sign, date, and
return the enclosed proxy card as promptly as possible. In this way, you can be
sure your shares will be voted at the meeting.
By Order of the Board of Directors
James B Halliday
Secretary
March 10, 1995
REGARDLESS OF WHETHER YOU PLAN TO BE PRESENT AT THE MEETING, YOU ARE REQUESTED
TO SIGN, DATE, AND RETURN THE ENCLOSED PROXY SO THAT YOUR SHARES WILL BE
REPRESENTED.
<PAGE> 3
(ARGONAUT GROUP, INC. 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 25, 1995, at 11:00 a.m. at Argonaut Insurance Company,
250 Middlefield Road, Menlo Park, California 94025, 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
10, 1995.
1
<PAGE> 4
VOTING SECURITIES
SECURITIES OUTSTANDING
February 17, 1995 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 24,930,259 shares
of Common Stock issued, of which 24,742,843 were outstanding and entitled to
vote; and 187,416 shares were owned by the Company and were not 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 17, 1995, 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 4,663,056(1) 18.8%
335 Maple Drive
Beverly Hills, CA 90210
Fayez S. Sarofim 1,931,343(2) 7.8%
Two Houston Center, Suite 2907
Houston, TX 77010
Leon G. Cooperman 1,358,700(3) 5.5%
One New York Plaza, 30th Floor
New York, NY 10004
</TABLE>
- ------------
(1) Sole voting and dispositive powers.
(2) Based upon information contained in an amendment to Schedule 13G dated
February 14, 1995 filed under the Securities Exchange Act of 1934, Mr.
Sarofim may be deemed to be the beneficial owner of 1,931,343 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 1,131,018 shares and shared dispositive power as to 1,282,567
shares. Of the securities which are not subject to sole voting and
dispositive powers,
2
<PAGE> 5
704,378 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 3,047 shares as to which Mr. Sarofim shares voting and
dispositive powers but has no beneficial interest.
(3) Based upon information as of March 6, 1995, Mr. Cooperman may be deemed to
be the beneficial owner of 1,358,700 shares of Argonaut Group Common Stock.
Of these shares, Mr. Cooperman has sole voting and dispositive powers with
respect to 1,067,100 shares which are owned beneficially by him, and may be
deemed to have shared voting and dispositive powers as to 291,600 shares.
Of the securities which are not subject to sole voting and dispositive
powers, 130,000 are held by Mr. Cooperman's spouse, 134,600 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, and 27,000 are held by The
Leon & Toby Cooperman Foundation, a charitable family trust, of which Mr.
Cooperman is one of four family trustees.
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............... 383,548(2) 1.6%
George A. Roberts............... 272,614(3) 1.1%
Arthur Rock..................... 190,266 (9)
Fayez S. Sarofim................ 1,931,343(1) 7.8%
Henry E. Singleton.............. 4,663,056 18.8%
James B Halliday................ 52,920(4) (9)
Michael J. Crall................ 35,274(5) (9)
Norman H. Burdick............... 3,550(6) (9)
Randall J. Mellin............... 6,356(7) (9)
All directors and executive
officers as a group (9
persons)...................... 7,538,927(1)(2)(3)(8) 30.5%
</TABLE>
- ------------
(1) Stock ownership is presented as of February 17, 1995, except that Mr.
Sarofim's stock ownership is presented as of February 14, 1995. See also
footnote (2) to the preceding table. Percentages are based on the number of
shares outstanding and entitled to vote on the record date, February 17,
1995.
(2) Includes 79,456 shares as to which Mr. Rinsch has sole voting and
dispositive power. The total set forth above also includes 289,000 shares
which Mr. Rinsch has the right to acquire within 60 days of February 17,
1995 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 5,449 shares owned by Dr. Roberts' spouse and with respect to which
Dr. Roberts disclaims beneficial ownership.
(4) Includes 46,700 shares which Mr. Halliday has the right to acquire within 60
days of February 17, 1995 through the exercise of options.
(5) Includes 7,200 shares which Mr. Crall has the right to acquire within 60
days of February 17, 1995 through the exercise of options.
(6) Includes 3,000 shares which Mr. Burdick has the right to acquire within 60
days of February 17, 1995 through the exercise of options.
(7) Includes 5,700 shares which Mr. Mellin has the right to acquire within 60
days of February 17, 1995 through the exercise of options.
(8) Includes an aggregate of 351,600 shares which the officers have the right to
acquire within 60 days of February 17, 1995 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, 62
and Director(1)(3)
George A. Roberts............ Director(1)(2)(3)(4) 76
Arthur Rock.................. Director(2)(4) 68
Fayez S. Sarofim............. Director(2)(4) 66
Henry E. Singleton........... Chairman of the Board(1)(2)(3)(4) 78
</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 for more than five years.
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
Intel Corporation and AirTouch Communications.
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.
He is a director of Teledyne, Inc. and Unitrin, Inc.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During 1994, 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, 1994, and December 31, 1994, the Board of Directors met
four times, the Executive Committee met two times, 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.
COMPENSATION OF DIRECTORS
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 62
Officer
James B Halliday..................... Vice President, Secretary and 47
Treasurer
Michael J. Crall..................... Vice President; President, 51
Argonaut Insurance
Norman H. Burdick.................... President, Great Central 44
Insurance
Randall J. Mellin.................... Vice President 47
</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, Secretary, and Treasurer of
Argonaut Group for more than five years.
Michael J. Crall has been President of Argonaut Insurance for more than
five years. 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, 1994, 1993, and 1992, of those persons who were, at December
31, 1994, 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 1994 $ 443,750 $119,000 75,000 $ 3,063
President and Chief 1993 $ 418,750 $140,000 -- $ 4,017
Executive Officer 1992 $ 399,617 $120,000 75,000 $ 4,364
James B Halliday 1994 $ 127,500 $ 43,000 15,000 $ 2,934
Vice President, 1993 $ 117,000 $ 35,000 -- $ 2,633
Secretary and Treasurer 1992 $ 105,885 $ 30,000 9,000 $ 2,309
Michael J. Crall 1994 $ 196,750 $ 55,000 15,000 $ 3,498
Vice President; President, 1993 $ 184,000 $ 55,000 -- $ 3,616
Argonaut Insurance 1992 $ 173,750 $ 45,000 9,000 $ 3,475
Norman J. Burdick 1994 $ 120,654 $ 38,000 -- $ 2,715
President, Great 1993 $ 108,287 $ 27,500 6,000 $ 2,461
Central Insurance(4)
Randall J. Mellin 1994 $ 121,500 $ 45,000 10,000 $ 121
Vice President(5) 1993 $ 112,000 $ 20,000 -- $ 2,388
</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.
7
<PAGE> 10
OPTION GRANTS
The following table sets forth information on stock option grants in 1994
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......... 75,000 29.4% $ 26.250 04/26/05 $572,250
James B Halliday.......... 15,000 5.9% $ 26.250 04/26/05 $114,450
Michael J. Crall.......... 15,000 5.9% $ 26.250 04/26/05 $114,450
Norman H. Burdick......... -- -- -- -- --
Randall J. Mellin......... 10,000 3.9% $ 26.250 04/26/05 $ 76,300
</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 (0.244),
risk-free rate of return (7.41%), dividend yield (3.96%), and date of
exercise (04/26/05). 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.
8
<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.... -- -- 289,000 159,000 $4,462,875 $ 325,500
James B Halliday..... -- -- 44,900 29,400 $ 641,078 $ 78,276
Michael J. Crall..... -- -- 5,400 29,400 $ 22,113 $ 78,276
Norman H. Burdick.... -- -- 2,400 8,400 $ 27,156 $ 3,000
Randall J. Mellin.... -- -- 4,500 14,500 $ 47,655 $ 35,720
</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. The Pension Plan benefit after 30 years of
participation is equal to 40% of an individual's average total cash compensation
over the sixty consecutive months of the highest cash compensation during the
one hundred twenty months preceding termination of employment. The benefit is
prorated for less than 30 years of participation in the Pension Plan.
In the case of employees who were employed by Teledyne before October 1,
1991, Pension Plan participation will include participation in the Teledyne,
Inc. Retirement Plan (the "Teledyne Plan"). Compensation for participation
accrued under the Teledyne Plan will be based on cash compensation earned during
the period of Teledyne employment. If an employee's participation in the Pension
Plan includes participation in the Teledyne Plan and that employee will receive
a benefit from the Teledyne Plan, the benefit calculated under the Pension Plan
will be reduced by the benefit payable under the Teledyne Plan.
Benefits are payable to unmarried individuals in the form of a single life
annuity unless the employee elects another form of benefit. Benefits are payable
to married individuals in the form of a joint and 50% survivor annuity unless
another form of benefit is elected. For retirement prior to age
9
<PAGE> 12
65, benefits are reduced on an actuarial basis according to age. 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
225,000............................ 45,000 60,000 75,000 90,000
250,000............................ 50,000 66,667 83,333 100,000
300,000............................ 60,000 80,000 100,000 120,000
400,000............................ 80,000 106,667 133,333 160,000
450,000............................ 90,000 120,000 150,000 180,000
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 ("Code") limits the amount of
benefits payable under tax-qualified retirement plans such as the Pension Plan.
For calendar year 1994, the limit was $118,800. In addition, the Code imposes an
annual limit upon the amount of compensation which may be included in the
calculation of a benefit from a tax-qualified plan. In 1994, the maximum
includable compensation was $150,000. These limits are adjusted periodically for
increases in the cost of living. The Company has adopted the Argonaut Group,
Inc. Pension Equalization Plan ("Pension Equalization Plan") to restore
retirement benefits which would be payable under the Pension Plan (set forth in
the preceding table) but for the limits imposed by the Code. An employee's
benefit under the Pension Equalization Plan will be the difference between the
amount calculated under the Pension Plan without limitation and the amount
calculated under the Pension Plan with limitation. If an employee's
participation in the Pension Plan includes participation in the Teledyne Plan
and that employee will receive a benefit from both the Pension Equalization Plan
and the Teledyne Pension Equalization Plan, the benefit calculated under the
Pension Equalization Plan will be reduced by the benefit payable under the
Teledyne Pension Equalization Plan.
The Company has agreed to pay Mr. Rinsch, upon retirement, an amount to
compensate him for a portion of his Teledyne employment which did not count as
participation in the Teledyne Plan because of a break in service. The benefit
will be equal to the difference between the amount calculated under the Pension
Plan if his participation had included this service and without limitation
10
<PAGE> 13
and the amount calculated under the Pension Plan without limitation. The benefit
will be reduced by a benefit payable from a Teledyne supplemental retirement
agreement with Mr. Rinsch.
The number of years of service credited toward the determination of
benefits under the Pension Plan, Predecessor Plan and Pension Equalization Plan
as of December 31, 1994 for Charles E. Rinsch is 25.9 years, James B Halliday is
20.3 years, Michael J. Crall is 7.7 years, Norman H. Burdick is 8.5 years, and
Randall J. Mellin is 7.3 years.
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.
COMPENSATION AND STOCK OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
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, this Compensation and Stock Option Committee Report on
Executive Compensation and the Performance Graph on page 17 shall not be
incorporated by reference into any such filings.
11
<PAGE> 14
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 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.
COMPENSATION PHILOSOPHY
The Board's compensation philosophy is that compensation for the chief
executive officer and other executive officers should encourage and reward
annual and long-term corporate and individual performance, as measured by the
attainment of specific goals for the creation of long-term shareholder value.
Also, the level of compensation should allow 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.
COMPENSATION PACKAGE
For 1994, the compensation package of the Company's executive officers
consisted of annual base salary, discretionary bonuses, and stock options. In
setting 1994 compensation, the Committee considered the specific factors
discussed below, as well as how the total annual cash compensation levels of the
Company's executive officers compared to that of executives at other
comparable-sized and publicly-traded property and casualty insurance companies.
The companies selected for comparison were those with written premium volumes of
$250 to $500 million, as reported by A. M. Best, an 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 Index are larger, and compensation data would not be
comparable. The Committee set the 1994 base salary of the Company's executive
officers within the range of these companies, but towards the lower end,
consistent with Argonaut Group's premium volume of $284 million.
Base Salary
In setting the executive officers' base salaries for 1994 (effective April
1), the Committee considered the performance of the executive officers'
respective business units, as well as executive officers' individual
performance. The entire Company was the business unit of certain executive
officers, while subsidiaries or departments for which they were responsible were
the business units of other executive officers. Specific factors considered were
the same as those described below for consideration of a bonus award.
12
<PAGE> 15
Bonus Awards
While bonuses to executive officers are discretionary, the Committee has
established specific goals for each executive officer to measure both individual
performance and Company performance. In particular, the Committee considers the
performance of the executive officer's business unit as well as his success in
achieving specific personal goals. Targets for measuring both business unit
results and achievement of personal goals are set at the beginning of the year,
after review by the officer's immediate superior and the Committee. Areas
considered include achieving specific objectives such as operating income, net
cash flow from operations, profitable new business, retention of current
business, and the efficient operation of the executive officer's department.
Bonuses are generally awarded in April of a given year for service in the
preceding year. Bonuses have not yet been determined or awarded for 1994
service.
For 1993 service of the other executive officers, Mr. Rinsch assessed
specific results achieved by the Company, each executive officer's business
unit, and each executive officer's success in achieving previously agreed upon
personal goals. Based on this evaluation, Mr. Rinsch made recommendations to the
Committee for bonus awards. The Committee members also reviewed Mr. Rinsch's
performance as measured by similar previously set objectives.
After completing its review and analysis of the foregoing factors and
recommendations, the Committee determined the amount of bonus to be awarded to
the executive officers. The specific weight given to each factor varied
depending on the responsibilities of the executive officer, but was primarily
weighted toward business unit 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.
In determining the amount of options, if any, to be granted in a fiscal
year under the stock option plan, the Committee has considered the same factors
set forth above, as well as the executive officer's shareholdings in the Company
and the amount of options previously granted.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Rinsch's annual base salary for 1994 was set at $450,000 (effective
April 1), an increase of $25,000. As discussed above, the Committee has not yet
determined or awarded bonuses for 1994 service. In 1994, Mr. Rinsch received a
bonus of $119,000 relating to 1993 performance. In setting
13
<PAGE> 16
Mr. Rinsch's 1994 base salary, the Committee considered the same items discussed
above, focusing primarily on 1993 performance.
The bonus award was determined after considering six factors: Combined
ratio of continuing operations (35% weight), net income from continuing
operations (15%), cash flow from continuing operations (20%), retention of
profitable accounts (5%), premium increase (5%), and factors relating to overall
efficiency and productivity (20%). Mr. Rinsch was eligible for a bonus ranging
from 0 to 50% of base salary, evaluated against specific targets for each factor
constituting a "fair", "good", "excellent", or "superior" result.
In addition to the foregoing, in April 1994, Mr. Rinsch was granted options
to purchase 75,000 shares of the Company's Common Stock at an exercise price of
$26.25 per share (the fair market value on the date of grant), exercisable in
annual installments of 20 percent except that no exercise is permitted until two
years after the date of grant. As noted in the Option Grants table on page 8,
the named executives also were granted stock options on the same terms. These
options were issued based on consideration of all the factors listed above.
COMPENSATION AND STOCK
OPTION COMMITTEE:
Henry E. Singleton, Chairman
George A. Roberts
Arthur Rock
Fayez S. Sarofim
14
<PAGE> 17
COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
TELEDYNE, INC.
Three of the directors of Argonaut Group, George A. Roberts, Fayez S.
Sarofim and Henry E. Singleton are also directors of Teledyne, Inc.
("Teledyne"). 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.
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 future payments to or from Teledyne
may be required. During 1994, Argonaut Insurance paid to Teledyne $2.1 million
pursuant to certain retrospective rating provisions of these policies. 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.
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 1994, Teledyne leased two of these properties in
Los Angeles, California for a total annual rental of approximately $1.3 million.
The leases for the foregoing properties provide that Teledyne assume obligations
for real property taxes, assessments, repairs, maintenance, and insurance. They
also provided for a five year term with a renewal option for an additional five
years. The lease rates are subject to periodic adjustment in accordance with a
formula based on the Consumer Price Index.
During 1994, Teledyne provided Argonaut Group certain investment trade
execution services. For 1994, Argonaut Group paid Teledyne approximately
$134,000 for these services.
The Company believes that the transactions described above have been
entered into on terms no less favorable than could have been negotiated with
non-affiliated third parties.
15
<PAGE> 18
UNITRIN, INC.
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 Unitrin.
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
$1.6 million in 1994.
The Company believes that the transaction described above have been entered
into on terms no less favorable than could have been negotiated with
non-affiliated third parties.
16
<PAGE> 19
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
GENERAL
INSURANCE
MEASUREMENT PERIOD ARGONAUT S&P 500 INDUSTRY
(FISCAL YEAR COVERED) GROUP, INC. INDEX GROUP
- --------------------- ----------- ------- ----------
<S> <C> <C> <C>
1989 100 100 100
1990 95 97 85
1991 108 126 108
1992 143 136 127
1993 147 150 130
1994 142 152 129
</TABLE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen & Co. has been selected as the Company's independent public
accountants for the year 1995. 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.
17
<PAGE> 20
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, 1994. 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, 1994, 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 10, 1995. Shareholder
proposals should be submitted to James B Halliday, Secretary, Argonaut Group,
Inc., 1800 Avenue of the Stars, Suite 1175, Los Angeles, California 90067.
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 10, 1995
18
<PAGE> 21
ARGONAUT GROUP, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P
R MARCH 10, 1995
O
X The undersigned shareholder of Argonaut Group, Inc. (the "Company"),
Y 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 17, 1995, at the 1995
Annual Meeting of Shareholders of the Company to be held on Tuesday, April
25, 1995 at 11:00 a.m., at Argonaut Insurance Company, 250 Middlefield
Road, Menlo Park, California 94025, and any adjournments or postponements
thereof.
-----------
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
-----------
<PAGE> 22
PLEASE MARK
/X/ 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 10, 1995.
1. ELECTION OF DIRECTORS
NOMINEES: Charles E. Rinsch, George A. Roberts, Arthur Rock, Fayez S. Sarofim,
and Henry E. Singleton.
FOR WITHHELD
/ / / /
/ /______________________________________
FOR ALL NOMINEES EXCEPT AS NOTED ABOVE
2. In their discretion, the proxyholders are authorized to vote upon such other
business as may properly come before the meeting, or any adjournments or
postponements thereof.
MARK HERE
FOR ADDRESS / /
CHANGE AND
NOTE AT LEFT
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN.
TRUSTEES AND OTHERS ACTING IN A REPRESENTATIVE CAPACITY SHOULD INDICATE THE
CAPACITY IN WHICH THEY SIGN AND GIVE THEIR FULL TITLE. IF A CORPORATION,
PLEASE SIGN IN 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 --------------
