Name	Age	Present Position with Company or Principal Occupation and Prior History	First Elected Director
Erwin Cheldin	76	President and Chief Executive Officer since 1969. Chairman of the Board since 1987.	1969
Cary L. Cheldin	51	Executive Vice President since 1991. Vice President 1986 to 1991 and Secretary 1987 to 1991.	1983
Lester A. Aaron, CPA	62	Treasurer and Chief Financial Officer since 1985. Secretary 1991 to 1992.	1985
Terry L. Kinigstein	62	Nominated to serve on the Board of Directors. General Counsel since 2002. Vice President and Secretary since 2008. Mr. Kinigstein has 30 years of experience as an attorney in private practice performing transactional work and litigation prior to joining the Company.	-
George C. Gilpatrick	63	Retired from the Company in April 2008. Formerly Vice President, Management Information Systems since 1981 and Secretary since 1982.	1985
David A. Lewis, CPCU	86	Retired insurance executive with over 40 years’ insurance experience. The last 27 years were with the Transamerica Group of insurance companies.	1989
Warren D. Orloff	73	Retired actuary with over 40 years’ experience specializing in retirement plans. From 1990 until retiring in 1997, he was an independent actuarial consultant for pension administration firms. He is a Fellow of Society of Actuaries, Fellow of Conference of Consulting Actuaries, and member of Academy of Actuaries.	2001
Donald B. Urfrig	66	Consulting engineer in the areas of project management and integrated product development since 1996. In addition, he is also a private investor and owner of commercial and agricultural businesses for the past 35 years. From 1963 to 1996 he worked in the aerospace industry in both technical and management positions.	2001
Jon P. Kocourek	53	Nominated to serve on the Board of Directors. Simi-retired insurance executive with over 28 years experience in the reinsurance business. The last 7 years were with Willis Re, Inc., reinsurance brokers. Currently works part-time as a consultant in the insurance/reinsurance industry.	-

Messrs. Erwin Cheldin, ~~75 President and Chief Executive Officer 1969 since 1969. Chairman of the Board since 1987.~~ Cary L. Cheldin, ~~50 Executive Vice President since 1991. 1983 Vice President 1986 to 1991~~Aaron and ~~Secretary 1987 to 1991. Lester A. Aaron, CPA 61 Treasurer and Chief Financial Officer 1985 since 1985. Secretary 1991 to 1992. George C.~~ Gilpatrick ~~62 Vice President, Management Information 1985 Systems, since 1981. Secretary since 1992. David A. Lewis, CPCU 85 Retired insurance~~constituted all of the executive ~~with over 40 1989 years' insurance experience. The last 27 years were with~~officers of the ~~Transamerica Group~~Company during 2007. Mr. Gilpatrick ceased being an executive officer of ~~insurance companies. Warren D. Orloff 72 Retired actuary with over 40 years' 2001 experience specializing~~the Company upon his retirement in retirement plans. From 1990 until retiring in 1997, he was an independent actuarial consultant for pension administration firms. He is a Fellow of Society of Actuaries, Fellow of Conference of Consulting Actuaries, and member of Academy of Actuaries. Donald B. Urfrig 65 Consulting engineer in the areas of 2001 project management and integrated product development since 1996. In addition, he is also a private investor and owner of commercial and agricultural businesses for the past 35 years. From 1963 to 1996 he worked in the aerospace industry in both technical and management positions.April 2008. Except for Cary L. Cheldin, who is the son of Erwin Cheldin, none of the executive officers or directors of the Company are related to any other officer or director of the Company. The executive officers of the Company are elected by the Board of Directors. ~~Each of the executive officers, other than Erwin~~Messrs. Cary L. Cheldin and Lester A. Aaron each serves in his present office pursuant to an employment agreement with the Company. The employment agreement of Cary L. Cheldin terminates ~~May 15, 2011,~~December 31, 2012, and the employment ~~agreements~~agreement of ~~Messrs.~~Mr. Aaron ~~and Gilpatrick expire May 15, 2009.~~expires December 31, 2010. Erwin Cheldin serves as President, Chairman of the Board of Directors, and Chief Executive Officer of the Company at the pleasure of the Board of Directors

Committees of the Board of Directors

The Company does not have a Nominating Committee of the Board of Directors. The Board of Directors ~~presently consists~~will, as of ~~only seven members and has not added a new member since 2001.~~the Annual Meeting of Shareholders, consist of nine members. Since ~~the~~four directors, of which three are presently executive officers, control approximately 50% of the voting power of the outstanding common stock of the Company, ~~and occupy four of the seven seats on the Board of Directors,~~ the Board of Directors believes that it is appropriate not to have a Nominating Committee. If there were a new nominee for Director to be considered, it is expected that all of the ~~Directors~~directors would participate in the process. Executive officers of the Company recommended to the Board of Directors that Terry L. Kinigstein and Jon P. Kocourek be nominated to be elected directors to fill the vacancies to be created by the increase in the number of directors from seven to nine effective with the Annual Meeting of Shareholders scheduled for May 22, 2008. The Board of Directors does not have a formal policy with regard to the consideration of any director candidates recommended by shareholders. The Board of Directors, however, would consider qualified nominees recommended by shareholders. Shareholders who wish to recommend a qualified nominee should submit complete information as to the identity and qualifications of the person recommended to the Secretary of the Company at 23251 Mulholland Drive, Woodland Hills, California 91364-2732. Absent special circumstances, the Board of Directors will continue to nominate qualified incumbent ~~Directors~~directors whom the Board of Directors believes will continue to make important contributions to the Board of Directors. The Board generally requires that nominees be persons of sound ethical character, be able to represent all shareholders fairly, have no material conflicts of interest, have demonstrated professional achievement, have meaningful experience, and have a general appreciation of the major business issues facing the Company. The Board of Directors does not have a formal process for identifying and evaluating nominees for ~~Director.~~ director.

The following table sets forth, as of April ~~6, 2007,~~11, 2008, the names and holdings of all persons who are known by the Company to own beneficially more than 5% of its outstanding common stock, its only class of outstanding voting securities, and the beneficial ownership of such securities held by each ~~Director,~~director, nominee for ~~Director,~~director, and all Executive Officers and ~~Directors~~nominees for director as a group. Unless otherwise indicated, the Company believes that each of the persons and entities set forth below has the sole power to vote and dispose of the shares listed opposite his or its name as beneficially owned by him or it. Amount Percent Beneficially Of Name and Address of Beneficial Owner Owned Class - ------------------------------------ ----- ----- Certain Beneficial Owners - ------------------------- Erwin Cheldin (1) 2,339,850 41.8% 23251 Mulholland Drive, Woodland Hills, CA 91364 Schwartz Investment Counsel, Inc., and Schwartz 513,845 9.2% Investment Trust, on behalf of its series Funds, Schwartz Value Fund, and Ave Maria Catholic Values Fund (2) 3707 W. Maple Rd., Suite 100, Bloomfield Hills, MI 48301 Dimensional Fund Advisors, Inc. (3) 507,843 9.1% 1299 Ocean Avenue, Santa Monica, CA 90401 FMR Corp. (4) 309,000 5.5% 82 Devonshire Street, Boston, MA 02109 Executive Officers, Directors, and Nominees for Director Erwin Cheldin (1) 2,339,850 41.8% Cary L. Cheldin (1) 204,860 3.7% Lester A. Aaron (1) 150,567 2.7% George C. Gilpatrick (1) 104,717 1.9% David A. Lewis 3,000 0.1% Warren D. Orloff 0 0.0% Donald B. Urfrig 25,000 0.4% All executive officers & directors as a group (7 persons) 2,827,994 50.5% (1) Messrs. Erwin Cheldin, Cary L. Cheldin, Lester A. Aaron and George C. Gilpatrick have agreed to vote all of the shares of common stock owned by them aggregating 2,799,994 shares or approximately 50.03% of the outstanding common stock so as to elect each of them to the Board of Directors and to vote on all other matters as they may agree. The agreement terminates upon the earlier of such time as the group owns less than 50% of the outstanding shares of the common stock of the Company or April 15, 2019. (2) Per Schedule 13G dated February 12, 2007. (3) Per Schedule 13G dated February 8, 2007. (4) Per Schedule 13G dated February 14, 2000. Of the 309,000 shares beneficially owned, FRM Corp. does not have sole or shared voting power over the shares and has sole power to dispose or to direct the disposition of 309,000 shares.

EXECUTIVE COMPENSATION AND OTHER INFORMATION - -------------------------------------------- Compensation Discussion and Analysis - ------------------------------------ Objectives and Overview - ----------------------- Our compensation package for executive officers at present primarily consists of a base salary, an annual incentive bonus and contributions under the Profit Sharing and Money Purchase Plans. Our executive compensation program is designed to retain and reward individuals who are capable of leading the Company in achieving its business objectives. Our philosophy is to maintain a competitive base salary for executive officers 4 and to provide an incentive program that rewards executive officers based upon their contribution to the Company's operational and financial performance. Base compensation is determined on a calendar year basis, annual incentive bonuses are paid in December of each year, and other incentives are determined when deemed appropriate. The Compensation Committee reviews annually the compensation of executive officers and submits its compensation recommendations to the entire Board of Directors for its approval. In December 2006, the Compensation Committee made its recommendations to the Board of Directors as to incentive bonuses for 2006. These recommendations were approved by the Board of Directors. The Compensation Committee usually makes its annual base compensation recommendations to the Board of Directors sometime early in the applicable year. We have entered into employment agreements with Cary L. Cheldin, Lester A. Aaron, and George C. Gilpatrick. These employment agreements provide for minimum base compensation and minimum annual incentive bonus compensation. Erwin Cheldin, our president and chief executive officer, is not covered by an employment agreement. Base Compensation - ----------------- When determining its recommendations to the Board of Directors as to base compensation for the executive officers, the Compensation Committee takes into account the executive officer's duties and responsibilities and the competitive pay levels in the industry with its emphasis on the median of the survey data. The Committee recommends to the Board of Directors adjustments to base compensation when it determines that an executive officer's base compensation is not competitive after taking into account his duties and responsibilities and the Company contributions under the Profit Sharing Plan and Money Purchase Plan. In 2006, taking into account these factors, the Compensation Committee determined that Erwin Cheldin's base compensation was competitive and recommended that his base compensation for 2006 not be increased. It also recommended that Cary L. Cheldin, Lester A. Aaron, and George C. Gilpatrick each receive an increase in 2006 base compensation of approximately 5% over the prior year. The Board of Directors approved these recommendations. Annual Incentive Bonus - ---------------------- In determining its recommendations as to incentive bonuses for the executive officers, the Compensation Committee first evaluates, and gives primary weight to, the operational and financial performance of the executive management team as a group. After the team results are evaluated, individual effectiveness in contributing to the achievement of those results is considered. The financial results, which are reviewed by the Compensation Committee, include the Company's net income, revenues and expenses for the four fiscal quarters ending September 30. The Compensation Committee does not quantify any single element in its bonus recommendations to the Board of Directors. The Compensation Committee aggregates all elements reviewed and subjectively determines its recommendation based on all information available. The Compensation Committee in determining its recommendations as to bonuses to be paid to the executive officers in December 2006 considered and evaluated our operating results for the three years ended December 31, 2005, as well as the improvements in results through the third quarter of 2006. Primarily due to the improved results reported in 2005 and the nine months ended September 30, 2006, the Compensation Committee recommended that a $30,000 bonus be paid to Erwin Cheldin, the chief executive officer, for the year ended December 31, 2006. The Compensation Committee also considered the contributions of Cary L. Cheldin, executive vice president, to the improvement in operating results and the minimum bonus provided under his employment agreement. Cary L. Cheldin also serves as the president of Crusader Insurance Company, the Company's insurance company subsidiary. Crusader Insurance Company accounted for approximately 89% of the Company's 2006 consolidated net revenues and primarily accounted for the Company's improved operating results. The Compensation Committee also considered that no stock options were granted to him since a grant of incentive options covering 25,000 shares were granted to him on June 24, 1994. Taking these factors into consideration, the Committee recommended a bonus should be paid to Cary L. Cheldin in the amount of $300,000 for the year ended December 31, 2006. Considering the improved results and their performance and contributions, the Committee also recommended that the bonuses to be paid to Messrs. Aaron and Gilpatrick for the year ended December 31, 2006 be $114,000 and $81,500, respectively. Section 162(m) of the Internal Revenue Code - ------------------------------------------- Section 162(m) of the Internal Revenue Code, enacted as part of the Omnibus Budget Reconciliation Act of 1993 (OBRA) limits to $1,000,000 the deductibility for any year beginning after December 31, 1993, of compensation paid by a public corporation to the chief executive officer and the next four most highly compensated executive officers unless such compensation is performance based within the meaning of Section 162(m) and the regulations thereunder. For the year ended December 31, 2006, we do not contemplate that there will be nondeductible compensation paid the executive officers of the Company as a result of Section 162(m). 5

(1)	See All Other ~~Name and Principal Position Year Salary Bonus~~ Compensation (1) Total - --------------------------- ---- ------ ----- ------------- ----- ($) ($) ($) ($) --- --- --- --- Erwin Cheldin 2006 309,000 30,000 62,919 401,919 President, Chief Executive Officer and Chairman of the Board Cary L. Cheldin 2006 297,400 300,000 59,165 656,565 Executive Vice President Lester A. Aaron Treasurer and Chief Financial Officer 2006 204,820 114,000 53,798 372,618 George C. Gilpatrick Vice President and Secretary 2006 188,500 81,500 52,776 322,776 table below.

The table below summarizes All Other Compensation paid or earned by the named executive officers of the Company. Perquisites and Contributions Other Personal to Retirement Name Year Benefits (1) Plans (2) Total - ---- ---- ------------ --------- ----- $ $ $ - - - Erwin Cheldin 2006 18,919 44,000 62,919 Cary L. Cheldin 2006 15,165 44,000 59,165 Lester A. Aaron 2006 9,798 44,000 53,798 George C. Gilpatrick 2006 8,776 44,000 52,776 (1) Represents payments for health insurance of $15,165 and club dues of $3,754 for Erwin Cheldin. Represents payments for health insurance for Cary L. Cheldin, Lester A. Aaron, and George C. Gilpatrick (2) Represents amounts contributed or accrued to the person's account under the Company's Profit Sharing Plan and the Company's Money Purchase Plan, all of which are vested. During the year 2006, the amount contributed to each executive officer's account under the Profit Sharing Plan and Money Purchase Plan was $31,500 and $12,500 respectively. The Company's Profit Sharing Plan and Money Purchase Plan both have a March 31 fiscal year end (see "Retirement Plans"). Employment Agreements - ---------------------- The Company has employment agreements with Cary L. Cheldin, Lester A. Aaron, and George C. Gilpatrick. Cary L. Cheldin. The Company entered into an employment agreement with Cary L. Cheldin that became effective on May 15, 2006. The agreement has a term of five years. This agreement is terminable by the Company or Mr. Cheldin at any time upon written notice. Mr. Cheldin's agreement provides for, among other things: o An annual base salary of no less than $297,400. The annual base salary is subject to increase from time to time at the discretion of the Board of Directors. o An annual bonus provided that the Company's consolidated net income (prior to deductions for income taxes and current bonuses paid to all executive officers of Company, including Mr. Cheldin, but after deducting discretionary bonuses paid to all employees) for the most recent four fiscal quarters ending prior to such payment date is equal to or greater than $4 million. The amount of the bonus is determined by the Board of Directors, in its discretion, but it is not to be less than the amount of the aggregate bonuses paid to the employee during the immediately preceding calendar year, less any amounts paid as a discretionary bonus since the immediately preceding January. The agreement does not prevent the Board of Directors 6 from electing, in its discretion, to grant a discretionary bonus in the event the net income goal of $4 million is not met. o Mr. Cheldin is entitled to employment benefits, including holidays, personal leave, sick leave, vacation, health insurance, disability insurance, life insurance,years ended December 31, 2007, and pension plans as provided by the Company's policies in effect from time to time. The disability insurance is required to be in an amount sufficient to provide compensation to Mr. Cheldin, if disabled, equal to 70% of the compensation that Mr. Cheldin would be entitled to under the agreement. Benefits cannot be reduced from those provided to Mr. Cheldin as of May 15, 2006. If the agreement is terminated by the Company for cause or by Mr. Cheldin for other than a breach by the Company, payments of base salary, bonus, and benefits shall cease. Mr. Cheldin is entitled only to payments of accrued but unpaid salary and vacation for periods or partial periods that occurred prior to the date of termination. Cause, as defined in the agreement, includes chronic alcohol or drug addiction by Mr. Cheldin, fraud or unlawful appropriation of any money or other assets or properties of the Company by Mr. Cheldin, a material breach by Mr. Cheldin of the terms of his employment agreement which is not cured within ten (10) days after the Company has given Mr. Cheldin written notice describing such material breach, the conviction of Mr. Cheldin of any felony involving moral turpitude or any other serious crime involving moral turpitude, Mr. Cheldin's gross moral turpitude relevant to his office or employment with the Company, and Mr. Cheldin's willful engagement in misconduct which is demonstrably and materially injurious to the Company. o If the agreement is terminated by the Company without cause or by Mr. Cheldin on account of a breach of the agreement by the Company, Mr. Cheldin is entitled to (a) immediate payment in full of his salary for the remainder of the term of the agreement, without discount or mitigation, (b) his bonus for the remainder of the term of the agreement (without giving effect to the termination) and (c) his benefits for the remainder of the term of the agreement (without giving effect to the termination). o The Company has the option to terminate the agreement if Mr. Cheldin becomes permanently disabled and is no longer able to perform the essential functions of his position with reasonable accommodation, provided that the Company has provided the required disability insurance benefit as part of his benefits. The agreement terminates on the death of Mr. Cheldin which is not considered a termination by the Company without cause. The following table quantifies estimated payments and benefits described above to which Mr. Cheldin would be entitled to under his employment agreement if his employment had been terminated on December 31, 2006 ~~by the Company without cause or by Mr. Cheldin on~~

Cary L. Cheldin - The Company entered into an employment agreement with Cary L. Cheldin that became effective on May 15, 2006. The agreement has a term of three years. This agreement is terminable by the Company or Mr. Aaron at any time upon written notice. Mr. Aaron's agreement provides for, among other things: o An annual base salary of no less than $199,500. The annual base salary is subject to increase from time to time at the discretion of the Board of Directors. o An annual bonus provided that the Company's consolidated net income (prior to deductions for income taxes and current bonuses paid to all executive officers of Company, including Mr. Aaron, but after deducting discretionary bonuses paid to all employees) for the most recent four fiscal quarters ending prior to such payment date is equal to or greater than $4 million. The amount of the bonus is determined by the Board of Directors, in its discretion, but it is not to be less than the amount of the aggregate bonuses paid to the employee during the immediately preceding calendar year, less any amounts paid as a discretionary bonus since the immediately preceding January. The agreement does not prevent the Board of Directors from electing, in its discretion, to grant a discretionary bonus in the event the net income goal of $4 million is not met. o Mr. Aaron is entitled to employment benefits, including holidays, personal leave, sick leave, vacation, health insurance, disability insurance, life insurance, and pension plans as provided by the Company's policies in effect from time to time. The disability insurance is required to be in an amount sufficient to provide compensation to Mr. Aaron, if disabled, equal to 70% of the compensation that Mr. Aaron would be entitled to under the agreement. Benefits cannot be reduced from those provided to Mr. Aaron as of May 15, 2006. That agreement had a term of five years. On March 17, 2008, the Company entered into a new employment agreement with Cary L. Cheldin that became effective on December 15, 2007. The new agreement supersedes the prior employment agreement. The agreement is for a term beginning December 15, 2007, and ending December 31, 2012. This agreement is terminable by the Company or Mr. Cheldin at any time upon written notice. Mr. Cheldin’s agreement provides for, among other things:

7 only to payments of accrued but unpaid salary and vacation for periods or partial periods that occurred prior to the date of termination. Cause, as defined in the agreement, includes chronic alcohol or drug addiction by Mr. Aaron, fraud or unlawful appropriation of any money or other assets or properties of the Company by Mr. Aaron, a material breach by Mr. Aaron of the terms of his employment agreement which is not cured within ten (10) days after the Company has given Mr. Aaron written notice describing such material breach, the conviction of Mr. Aaron of any felony involving moral turpitude or any other serious crime involving moral turpitude, Mr. Aaron's gross moral turpitude relevant to his office or employment with the Company, and Mr. Aaron's willful engagement in misconduct which is demonstrably and materially injurious to the Company. o If the agreement is terminated by the Company without cause or by Mr. Aaron on account of a breach of the agreement by the Company, Mr. Aaron is entitled to (a) immediate payment in full of his salary for the remainder of the term of the agreement, without discount or mitigation, (b) his bonus for the remainder of the term of the agreement (without giving effect to the termination) and (c) his benefits for the remainder of the term of the agreement (without giving effect to the termination). o The Company has the option to terminate the agreement if Mr. Aaron becomes permanently disabled and is no longer able to perform the essential functions of his position with reasonable accommodation, provided that the Company has provided the required disability insurance benefit as part of his benefits. The agreement terminates on the death of Mr. Aaron which is not considered a termination by the Company without cause. The following table quantifies estimated payments and benefits described above to which Mr. Aaron would be entitled to under his employment agreement if his employment had been terminated on December 31, 2006 by the Company without cause or by Mr. Aaron on account of a breach of the agreement by the Company. Salary $490,438 Bonus 228,000 Benefits 37,483 Pension Plans 132,000 ------- Total $887,921 ======= George C. Gilpatrick. The Company entered into an employment agreement with George C. Gilpatrick which became effective on May 15, 2006. The agreement has a term of five years. This agreement is terminable by the Company or Mr. Gilpatrick at any time upon written notice. Mr. Gilpatrick's agreement provides for, among other things: o An annual base salary of no less than $188,500. The annual base salary is subject to increase from time to time at the discretion of the Board of Directors. o An annual bonus provided that the Company's consolidated net income (prior to deductions for income taxes and current bonuses paid to all executive officers of Company, including Mr. Gilpatrick, but after deducting discretionary bonuses paid to all employees) for the most recent four fiscal quarters ending prior to such payment date is equal to or greater than $4 million. The amount of the bonus is determined by the Board of Directors, in its discretion, but it is not to be less than the amount of the aggregate bonuses paid to the employee during the immediately preceding calendar year, less any amounts paid as a discretionary bonus since the immediately preceding January. The agreement does not prevent the Board of Directors from electing, in its discretion, to grant a discretionary bonus in the event the net income goal of $4 million is not met. o Mr. Gilpatrick is entitled to employment benefits, including holidays, personal leave, sick leave, vacation, health insurance, disability insurance, life insurance, and pension plans as provided by the Company's policies in effect from time to time. The disability insurance is required to be in an amount sufficient to provide compensation to Mr. Gilpatrick, if disabled, equal to 70% of the compensation that Mr. Gilpatrick would be entitled to under the agreement. Benefits cannot be reduced from those provided to Mr. Gilpatrick as of May 15, 2006. If the agreement is terminated by the Company for cause or by Mr. Gilpatrick for other than a breach by the Company, payments of base salary, bonus, and benefits shall cease. Mr. Gilpatrick is entitled only to payments of accrued but unpaid salary and vacation for periods or partial periods that occurred prior to the date of termination. Cause, as defined in the agreement, includes chronic alcohol or drug addiction by Mr. Gilpatrick, fraud or unlawful appropriation of any money or other assets or properties of the Company by Mr. Gilpatrick, a material breach by Mr. Gilpatrick of the terms of his employment agreement which is not cured within ten (10) days after the Company has given Mr. Gilpatrick written notice describing such material breach, the conviction of Mr. Gilpatrick of any felony involving moral turpitude or any other serious crime involving moral turpitude, Mr. Gilpatrick's gross moral 8 turpitude relevant to his office or employment with the Company, and Mr. Gilpatrick's willful engagement in misconduct which is demonstrably and materially injurious to the Company. o If the agreement is terminated by the Company without cause or by Mr. Gilpatrick on account of a breach of the agreement by the Company, Mr. Gilpatrick is entitled to (a) immediate payment in full of his salary for the remainder of the term of the agreement, without discount or mitigation, (b) his bonus for the remainder of the term of the agreement (without giving effect to the termination) and (c) his benefits for the remainder of the term of the agreement (without giving effect to the termination). o The Company has the option to terminate the agreement if Mr. Gilpatrick becomes permanently disabled and is no longer able to perform the essential functions of his position with reasonable accommodation, provided that the Company has provided the required disability insurance benefit as part of his benefits. The agreement terminates on the death of Mr. Gilpatrick which is not considered a termination by the Company without cause. The following table quantifies estimated payments and benefits described above to which Mr. Gilpatrick would be entitled to under his employment agreement if his employment had been terminated on December 31, 2006 by the Company without cause or by Mr. Gilpatrick on account of a breach of the agreement by the Company. Salary $463,396 Bonus 163,000 Benefits 34,971 Pension Plans 132,000 ------- Total $793,367 =======

Employees, consultants, advisors, and directors of the Company are eligible to participate in the 1999 Plan. However, only employees are entitled to receive ~~"incentive~~“incentive stock ~~options"~~options” (as provided in Section 422 of the Internal Revenue Code of 1986, as amended) under the Stock Option Program. Under the Stock Option Program, both incentive stock options and options which do not qualify as incentive stock options may be granted. The term of an option may not exceed ten years (or five years in the case of the grant of an incentive stock option to a holder of more than ten percent (10%) of the outstanding common stock). The exercise price per share of common stock under an option may not be less than the fair market value of the common stock on the date of the option grant. In the case of the grant of an incentive stock option to a holder of more than 10% of the outstanding common stock, the exercise price may not be less than 110% of the fair market value of the common stock on the date of the option grant. Under the Stock Appreciation Program, stock appreciation rights may be granted separately or in tandem with a stock option. Stock appreciation rights entitle the holder thereof to receive upon exercise of such right without payment to the Company an amount which is not greater than the fair market value of a share of common stock on the date of exercise of the stock appreciation right over the fair market value of a share of common stock on the date of grant of the stock appreciation right. Under the Restricted Stock Program, the Company may issue shares of its common stock directly to eligible persons for consideration consisting of 9 cash, notes, or past services rendered by the recipient. The purchase price of the shares may not be less than the fair market value of the ~~Company's~~Company’s common stock on the date of issue. If a recipient terminates his or her employment or other arrangements with the Company before the shares are fully vested, then the recipient is required to surrender to the Company for cancellation all unvested shares and the Company must repay the recipient cash or cash equivalent consideration paid by him or her for those unvested shares and cancel the unpaid principal balance, if any, on any promissory notes attributable to surrender the shares.

In the event of a ~~"change~~“change of control ~~event"~~event” as defined in the 1999 Plan, all unvested options, stock appreciation rights and restricted stock issuances will immediately become exercisable or vest, as the case may be. The 1999 Plan administrator may override the acceleration of these rights either in the agreement setting forth those rights or prior to the ~~"change~~“change of control event."” A ~~"change~~“change of control ~~event"~~event” occurs if (a) more than twenty percent (20%) of the ~~Company's~~Company’s common stock or combined voting power is acquired by a person or entity other than Mr. Erwin Cheldin, the Company or an employee benefit plan of the Company, but not including any acquisition directly from the Company; (b) a majority of the ~~Company's~~Company’s Board of Directors ceases to consist of the present directors or persons whose election or nomination was approved by a majority of the then incumbent Board of Directors (excluding any director who assumes his or her position as a result of an actual or threatened proxy contest); (c) the Company is reorganized, merged, or consolidated into another entity; or (d) the shareholders approve the liquidation or dissolution of the Company or the sale of all or substantially all of its assets; unless with respect to (c) or (d), after the event more than eighty percent (80%) of the common stock or the outstanding voting securities of the Company, the surviving company or the company that purchases the ~~Company's~~Company’s assets is still held by persons who were formerly the shareholders of the Company, and no person or entity other than Mr. Erwin Cheldin, the Company, any employee benefit plan of the Company or the resulting company or a twenty percent (20%) shareholder prior to the transaction holds more then twenty percent (20%) of such ~~company's~~company’s common stock or combined voting power.

During the year ended December 31, 1999, the Company adopted the Unico American Corporation Money Purchase Plan. This plan covers the ~~present~~named executive officers of the ~~Company; namely Erwin Cheldin, Cary L. Cheldin, Lester A. Aaron,~~Company and George C. Gilpatrick. Pursuant to the terms of such Plan, the Company annually contributes to the account of each participant an amount equal to a percentage of the participant's eligible compensation as determined by the Board of Directors. However, amounts contributed to the Unico American Corporation Profit Sharing Plan will be considered first in determining the actual amount available under the Internal Revenue Service maximum contribution limits. Participants must be employed by the Company on the last day of the plan year to be eligible for contribution. Participants are entitled to receive distribution of benefits under the Plan upon retirement, termination of employment, death, or disability. Compensation Committee Interlocks and Insider Participation in Compensation Decisions - --------------------------------------------------------------------------- The Compensation Committee consists of the following Company directors: Cary L. Cheldin, Lester A. Aaron, and Warren D. Orloff. Cary Cheldin is the son of Erwin Cheldin, the President, Chief Executive Officer and Chairman of the Board. During the year ended December 31, 2006, Cary Cheldin was the Executive Vice President of the Company and Mr. Aaron was Treasurer and Chief Financial Officer of the Company. Compensation Committee Report - ----------------------------- The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis including in the Proxy Statement with management. Based on such review and discussions, the Compensation committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company's Proxy Statement for the 2007 Annual Meeting of Shareholders THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS /s/ Cary L. Cheldin /s/ Lester A. Aaron /s/ Warren D. Orloff

Management is responsible for the ~~Company's~~Company’s financial reporting process including its system of internal control and for the preparation of consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP). The ~~Company's~~Company’s independent auditors are responsible for auditing those financial statements. Our responsibility is to monitor and oversee these processes. It is not our duty or our responsibility to conduct auditing or accounting reviews or auditing or accounting procedures. We are not employees of the Company; and we may not be, and we may not represent ourselves to be or to serve as, accountants or auditors by profession or experts in the fields of accounting or auditing. Therefore, we have relied on ~~management's~~management’s representation that the financial statements have been prepared with integrity and objectivity and in conformity with GAAP and on the representations of the independent auditors included in their report on the ~~Company's~~Company’s financial statements. Our oversight does not provide us with an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or policies, or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, our considerations and discussions with management and the independent auditors do not assure that the ~~Company's~~Company’s financial statements are presented in accordance with GAAP, that the audit of the ~~Company's~~Company’s financial statements has been carried out in accordance with auditing standards generally accepted in the United States of America, or that the ~~Company's~~Company’s independent accountants are in fact ~~"independent."~~ “independent.”

The Company presently occupies a 46,000 square foot building located at 23251 Mulholland Drive, Woodland Hills, California, under a master lease expiring March 31, 2012. Erwin Cheldin, the Company's president, chairman, and principal stockholder, is the owner of the building. The Company signed an extension to the lease with a 4% increase in rent effective April 1, 2007. The lease provides for an annual gross rent of $1,025,952 through March 31, 2007, and $1,066,990 from April 1, 2007, through March 31, 2012. In addition, the lease extension provides for two five year options with a rent increase of 5% for each option period. The Company believes that at the inception of the lease agreement and at each subsequent extension, the terms of the lease were at least as favorable to the Company as could have been obtained from non-affiliated third parties. The Company utilizes for its own operations approximately 100% of the space it leases. RELATED PARTY TRANSACTION APPROVAL POLICY ----------------------------------------- The Board of Directors recognizes that related party transactions can present conflicts of interest and questions as to whether the transactions are in the best interest of the Company. Accordingly, the Board has adopted a policy for the review, approval and ratification of such transactions by the Audit Committee. Under this policy, a transaction shall be consummated or continued if the Audit Committee approves or ratifies the transaction in accordance with the guidelines and determines that the transaction is on terms comparable to those that could be obtained in arm's length dealings with an unrelated third party or the transaction involves compensation approved by the Compensation Committee. For purposes of this policy, a "related party transaction" is a transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, that is reportable under the Securities and Exchange Commission's rules regarding related party transactions.

Chairman of the Board, President

and Chief Executive Officer

Woodland Hills, California

April ~~20, 2007 13~~ APPENDIX A ---------- CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF UNICO AMERICAN CORPORATION I. AUDIT COMMITTEE PURPOSE - -------------------------- The Audit Committee has been established by the Board of Directors of Unico American Corporation (the "Company") to monitor and oversee the accounting and financial reporting procedures of the Company and the audits of the Company's financial statements. In that regard, the Audit Committee shall be directly responsible for the appointment, compensation, retention and oversight of the work of the independent accountants engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company. The Audit Committee has the authority to conduct any investigation appropriate to fulfilling its responsibilities and it has direct access to the independent auditors as well as anyone in the organization. The Audit Committee has the authority to engage or retain, at the Company's expense, independent legal, accounting, or other consultants, experts or advisers it deems necessary to carry out duties. II. AUDIT COMMITTEE COMPOSITION AND MEETINGS - -------------------------------------------- The Audit Committee shall meet the size, membership, independence and experience requirements under applicable statutes, rules and regulations and all applicable requirements of the NASDAQ Stock Market for NASDAQ National Market issuers in effect from time to time. Audit Committee members shall be members of and appointed by the Board. III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES - ------------------------------------------------ Review Procedures - ----------------- 1) Review and reassess the adequacy of this Charter at least annually and recommend any proposed changes to the Board for approval. 2) Meet with the independent accountants following the annual audit to (a) review with the independent accountants any problems or difficulties the accountants may have encountered in connection with the audit, the adequacy of the internal accounting controls, the financial and accounting personnel and, if a management letter was provided by the independent accountants, the management letter and the Company's response to that letter, (b) discuss any significant changes to the Company's auditing or accounting principles and practices and discuss any items required to be communicated by the independent auditors in accordance with SAS 61, and (c) review and discuss with management and the independent accountants the annual audited financial statements, including the disclosures made in the management's discussion and analysis. Additionally, the Audit Committee shall recommend to the Board whether or not to include the audited financial statements in the Company's Form 10-K for the applicable fiscal year. 3) In consultation with the management and the independent auditors, consider the integrity of the Company's financial reporting processes and controls. Discuss and review significant financial risk exposures and the steps management has taken to monitor, control and report such exposures. Review significant findings prepared by the independent auditors together with management's responses. Review with management the adequacy of internal controls and procedures that could materially affect the Company's financial statements. Such reviews should include discussion with management and independent auditors of significant issues regarding accounting principles, practices and judgments. 4) Review with management and the independent accountants any material financial reporting issues and judgments made in connection with the preparation of the Company's financial statements. 5) Discuss with management and the independent accountants any disagreements that may arise between them regarding financial reporting. The Audit Committee shall be responsible for resolving such disagreements. 6) Review and discuss with management and the independent accountants the Company's quarterly financial statements prior to the filing of the related Form 10-Q. A-1 Independent Auditors - -------------------- 7) Select, appoint (subject, if applicable, only to shareholder ratification) and retain independent accountants for the Company. The Audit Committee shall also pre-approve all services to be performed by and fees to be paid to the independent accountants and the terms of their engagement, including both audit and non-audit services. To the extent required by law, the Company shall provide for appropriate funding as determined by the Audit Committee for payment of compensation to the independent accountants so engaged by the Audit Committee and for ordinary administrative expenses necessary or appropriate in carrying out the Audit Committee's duties. The Audit Committee may delegate to one or more Audit Committee members the authority to pre-approve non-audit services between regularly scheduled meetings of the Audit Committee provided that such approvals are reported to the Audit Committee at the next meeting. The independent accountants shall report directly to the Audit Committee. 8) Receive and review periodic written reports from the independent auditors delineating all relationships between the independent auditors and the Company. On an annual basis, review and discuss with the independent auditors all significant relationships they have with the Company that could impair the auditors' independence. Discuss such reports and relationships with the independent accountants, and, if so determined by the Audit Committee, take appropriate action to satisfy itself as to the independence of the independent accountants. 9) Receive periodic reports from the independent accountants relating to, among other things, critical accounting polices and practices, alternative treatments under GAAP, communications between the independent accountants and management of the Company and reports of the effectiveness of the Company's internal controls and/or other reports which may be required to be given by the independent accountants to the Company and/or the Audit Committee. 10) Prior to the audit, review the independent auditors audit plan. 11) Consider the independent auditors' judgments about the quality and appropriateness of the Company's accounting principles as applied in its financial reporting. 12) Evaluate the performance of the independent accountants and, if so determined by the Audit Committee, replace the independent accountants. 13) Meet periodically with the independent accountants in separate private sessions to discuss any matters that the Audit Committee or the independent accountants believe should be discussed. Other Audit Committee Responsibilities - -------------------------------------- 14) Meet at any time or from time to time with management personnel of the Company or its subsidiaries, either individually (which sessions may be private) or with one or more members thereof, to discuss any matters that the Audit Committee or any one or more of such persons believes should be discussed. 15) Establish procedures for (a) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters; and (b) the confidential, anonymous submission by employees of the Company or any of its subsidiaries of concerns regarding questionable accounting or auditing matters. 16) Meet with such frequency as the Audit Committee believes is reasonably necessary and appropriate, taking into account appropriate circumstances. The Audit Committee meetings may be separate and private as the Audit Committee may determine. 17) Prepare the report required by the rules of the Securities and Exchange Commission to be included in the Company's Annual Proxy Statement. 18) Perform any other activities consistent with this Charter, the Company's By-laws and governing law, as the Committee or the Board deems necessary or appropriate. 19) Maintain minutes of meetings and periodically report to the Board of Directors on significant results of the foregoing activities. A-2 21, 2008

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants, and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)	(c)
Equity compensation plans approved by security holders:
1999 Omnibus Stock Plan	124,650	$6.065	225,500

Equity compensation plans not approved by security holders:	0	0	0

Total	124,650	$6.065	225,500

Name	Fees Earned or Paid in Cash $	Total $

David A. Lewis, CPCU	9,000	9,000
Warren D. Orloff	9,000	9,000
Donald B. Urfrig	9,000	9,000

Name and Address of Beneficial Owner	Amount Beneficially Owned		Percent Of Class

Certain Beneficial Owners
Erwin Cheldin (1) 23251 Mulholland Drive, Woodland Hills, CA 91364		2,352,545		41.8	%

Schwartz Investment Counsel, Inc., and Schwartz Investment Trust, on behalf of its series Funds, Schwartz Value Fund, and Ave Maria Catholic Values Fund (2) 3707 W. Maple Rd., Suite 100, Bloomfield Hills, MI 48301		527,245		9.4	%

Dimensional Fund Advisors, Inc. (3) 1299 Ocean Avenue, Santa Monica, CA 90401		506,077		9.0	%

FMR Corp. (4) 82 Devonshire Street, Boston, MA 02109		309,000		5.5	%

Executive Officers, Directors, and Nominees for Director
Erwin Cheldin (1)		2,352,545		41.8	%
Cary L. Cheldin (1)		204,860		3.6	%
Lester A. Aaron (1)		150,567		2.7	%
George C. Gilpatrick (1)		104,717		1.9	%
David A. Lewis		3,000		0.1	%
Warren D. Orloff		0		0.0	%
Donald B. Urfrig		25,000		0.4	%
Terry L. Kinigstein		0		0.0	%
Jon P. Kocourek		0		0.0	%

All executive officers and director nominees as a group (9 persons)		2,840,689		50.5	%

Name and Principal Position	Year	Salary		Bonus		All Other Compensation (1)		Total
		($)		($)		($)		($)

Erwin Cheldin	2007		309,000		27,000		63,036		399,036
President, Chief Executive Officer, and Chairman of the Board	2006		309,000		30,000		62,919		401,919

Cary L. Cheldin	2007		308,777		54,000		63,036		425,813
Executive Vice President	2006		297,400		300,000		59,165		656,565

Lester A. Aaron	2007		207,346		49,500		57,391		314,237
Treasurer and Chief Financial Officer	2006		204,820		114,000		53,798		372,618

Name	Year	Perquisites and Other Personal Benefits (1)		Contributions to Retirement Plans (2)		Total
			$		$		$

Erwin Cheldin	2007		17,036		46,000		63,036
	2006		18,919		44,000		62,919

Cary L. Cheldin	2007		17,036		46,000		63,036
	2006		15,165		44,000		59,165

Lester A. Aaron	2007		11,391		46,000		57,391
	2006		9,798		44,000		53,798

Salary	$1,487,000
Bonus	270,000
Benefits	85,180
Pension Plans	230,000
Total	$2,072,180

Salary	$598,500
Bonus	148,500
Benefits	34,173
Pension Plans	138,000
Total	919,173