SCHEDULE 14A
(RULE 14A - 101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)14 (a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] CONFIDENTAL, FOR THE USE OF THE
[X] Definitive Proxy Statement COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials RULE 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11 (c)14a-11(c) or Rule 14a-12.14a-12
PICO HOLDINGS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S)PERSON (S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6 (i) 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a) (2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PICO HOLDINGS, INC.
875 PROSPECT STREET, SUITE 301
LA JOLLA, CALIFORNIA 92037
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of PICO Holdings, Inc., a California
corporation (the "Company"), will be held at the Museum of Contemporary Art,
Coast Room, 700 Prospect Street, La Jolla, California 92037 on Thursday, July
18, 200217, 2003 at 9:00 a.m. (PDT) for the following purposes:
1. To elect threetwo directors, for which positions the Board of Directors has
nominated John R. Hart, Ronald LangleyS. Walter Foulkrod, III, Esq. and JohnRichard D. WeilRuppert, MD to serve
for three years until the annual meeting of shareholders in the year 20052006
and until their respective successors have been duly elected and qualified.
2. To ratifyapprove the appointment of Deloitte & Touche LLP as the Company's
independent auditors.PICO Holdings, Inc. 2003 Stock Appreciation Rights Program.
3. To transact such other business as may be properly brought before the
meeting and any adjournment thereof.
Shareholders of record at the close of business on May 20, 200219, 2003 will be entitled
to notice of and to vote at the Annual Meeting and any adjournment thereof.
By Order of the Board of Directors
/s/ Ronald Langley
Ronald Langley
Chairman of the Board
Dated: May 28, 200227, 2003
TO ASSURE YOUR REPRESENTATION AT THE MEETING, WHETHER OR NOT YOU PLAN TO ATTEND,
PLEASE VOTE,FILL IN, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE AS PROMPTLY AS POSSIBLE. THE GIVING OF A PROXY WILL NOT AFFECT YOUR
RIGHT TO REVOKE SUCH PROXY BY APPROPRIATE WRITTEN NOTICE OR BY VOTING IN PERSON
AT THE MEETING. PLEASE NOTE THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER,
BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST BRING TO THE
MEETING A LETTER FROM THE BROKER, BANK OR OTHER NOMINEE CONFIRMING YOUR
BENEFICIAL OWNERSHIP OF THE SHARES AND YOU MUST OBTAIN FROM THE RECORD HOLDER A
PROXY ISSUED IN YOUR NAME.
[THIS PAGE INTENTIONALLY LEFT BLANK]
PICO HOLDINGS, INC.
875 PROSPECT STREET, SUITE 301
LA JOLLA, CALIFORNIA 92037
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 18, 200217, 2003
The proxy accompanying this Proxy Statement is solicited by the Board of
Directors of PICO Holdings, Inc., a California corporation (the "Company"), to
be voted at the Annual Meeting of Shareholders of the Company (the "Annual
Meeting") to be held at the Museum of Contemporary Art, Coast Room, 700 Prospect
Street, La Jolla, California at 9:00 a.m. (PDT) on Thursday, July 18, 200217, 2003 and
at any postponement or adjournment thereof. The proxy may be revoked by
appropriate written notice at any time before it is exercised or by voting in
person at the meeting.
GENERAL INFORMATION
A copy of the Company's Annual Report to Shareholders for 20012002 accompanies this
Proxy Statement. The Annual Report and these proxy solicitation materials are
being mailed on or about May 28, 200227, 2003 to all shareholders entitled to vote at
the meeting.
As of May 20, 2002,19, 2003, the record date for the determination of shareholders
entitled to vote at the Annual Meeting, 12,368,61612,379,242 shares of Common Stock of the
Company were issued and outstanding, excluding 4,415,6074,422,681 treasury shares. Each
share of Common Stock entitles the holder to one vote on all matters brought
before the Annual Meeting, except for the 4,415,6074,422,681 shares held by the Company
and subsidiaries of the Company which may not be voted. Our Bylaws provide that
the presence in person or by proxy of the holders of a majority of the shares
entitled to vote shall constitute a quorum for the transaction of business at
the Annual Meeting of Shareholders.
In voting for the election of directors, shareholders have cumulative voting
rights. Accordingly, each shareholder may cumulate such voting power as such
shareholder possesses and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of shares held by the
shareholder, or distribute such shareholder's votes on the same principle among
two or more candidates, as such shareholder sees fit. However, no shareholder is
entitled to cumulate votes (in other words, cast for any candidate a number of
votes greater than the number of shares of stock held by such shareholder)
unless at least one shareholder has given notice, at the Annual Meeting prior to
the voting, of the shareholder's intention to cumulate votes. If any shareholder
has given such notice, all shareholders may cumulate their votes for nominated
candidates.
The proxy, if returned properly executed and not subsequently revoked by written
notice delivered to the Secretary of the Company or by the shareholder voting in
person at the Annual Meeting, will be voted in accordance with the choice made
by the shareholder thereon. If a choice is not made with respect to any issue,
the proxy will be voted forin favor of the items described in this Proxy Statement.
If cumulative voting is permitted in the election of directors at the Annual
Meeting, the proxy holders shall have discretion as to the manner in which votes
represented by the proxy are to be cumulated, unless the proxy indicates the
manner in which such votes shall be cumulated.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by the
inspector of election appointed for the meeting who will also determine whether
or not a quorum is present. The inspector of election will treat abstentions,
and any shares as to which a broker or nominee has indicated that it does not
have discretionary authority to vote on a particular matter, as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum atfor the meeting,election of directors, but will not be considered as present with respect to
that matter.for the approval of the Company's
2003 Stock Appreciation Rights Program.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of April 1, 2002,2003, with respect to
the beneficial ownership of the Company's Common Stock entitled to vote by each
person known by the Company to be the beneficial owner of more than 5% of Common
Stock, and by each director, each Named Officer (as defined below)in Executive
Compensation and Other Matters) and all executive officers and directors as a
group. Except as otherwise indicated, each person has sole investment and voting
power, subject to community property laws. Unless otherwise indicated, the
business address for each person is 875 Prospect Street, Suite 301, La Jolla, CA
92037.
NUMBER OF SHARES PERCENTAGE
AND NATURE OF OWNERSHIP OF
NAME AND ADDRESS OF BENEFICIAL OWNER AND NATURE OF OWNERSHIP OF
------------------------------------ BENEFICIAL OWNERSHIP(1) VOTING SHARES
----------------------------------------------------------- -------------------- -------------
Ronald Langley(2)(4) 4,032,785 32.6%4,179,561 33.7%
John R. Hart(3)(4) 4,033,586 32.6%4,189,070 33.8%
Robert R. Broadbent(5)(6) 10,94915,949 *
Carlos C. Campbell(5) (15) 1,500 *
S. Walter Foulkrod, III, Esq.(5) 4,403 *
Richard D. Ruppert, MD(5)MD (5) (7) 8,7987,798 *
John D. Weil(5)(8) 4,179,791 33.7%4,245,796 34.2%
Richard H. Sharpe(9) 118,314 *Sharpe (9) 143,363 1.1%
Maxim C. W. Webb(10) 58,01366,345 *
James F. Mosier(11) 61,41068,425 *
PICO Equity Investors, L.P.(12) 3,333,333 26.9%
Dimensional Fund Advisors Inc.(13) 704,805 5.6%794,205 6.4%
1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401
Artisan Partners Limited Partnership, Artisan Investment Corporation,
Andrew A. Ziegler, and Carlene Murphy Ziegler(14) 1,477,473 11.9%Ziegler (14) 1,444,673 11.6%
1000 N. Water Street, Suite 1770, Milwaukee, WI 53202
Executive Officers and Directors as a Group (10 persons) 5,842,883 47.2%6,255,544 50.5%
- ------------------
*Less than one percent(1%percent (1%)
- ----------
(1) Sole voting and investment power unless otherwise indicated.
(2) Of these shares, 460,635603,279 represent beneficial ownership of stock options
exercisable within the next 60 days. 6,42110,013 shares are held in the
Company's 401(k) Plan. Mr. Langley owns a membership interest in PICO
Equity Investors Management, LLC which has voting control of 3,333,333
shares of the Company.
(3) Of these shares, 479,738631,933 represent beneficial ownership of stock options
exercisable within the next 60 days. 8,39211,681 shares are held in the
Company's 401(k) Plan. Mr. Hart owns a membership interest in PICO Equity
Investors Management, LLC, which has voting control of 3,333,333 shares of
the Company. The number of shares shown above does not include 19,940
shares of the Company held in a deferred compensation plan Rabbi Trust for
Mr. Hart.
2
(4) Mr. Langley and Mr. Hart each had 1993 call option agreements with Guinness
Peat Group plc; in August 1998, the Company assumed Guinness Peat Group's
obligations with respect to these 412,846 options. Mr. Langley exercised
57,307 of his call options in December 1998 and has 149,116 call options
remaining. Mr. Hart has not exercised any call options and has 206,423 call
options remaining.
(5) Each nonemployee director of the Company received a grant of 1,500 stock
options pursuant to the PICO Holdings, Inc. 2000 Nonstatutory Stock Option
Plan, which was approved by the Company's shareholders on October 19, 2000.
These options are vested and exercisable.
(6) The number of shares shown above does not include 7703,336 shares of the
Company held in a deferred compensation plan Rabbi Trust for Mr. Broadbent.
(7) Dr. Ruppert shares voting and investment power with his wife. The number of
shares shown above does not include 1,441 shares held in a deferred
compensation plan Rabbi Trust for Dr. Ruppert.
(8) Of these shares, 844,958884,922 are owned by a partnership which Mr. Weil
controls. Mr. Weil owns a membership interest in PICO Equity Investors
Management, LLC which has voting control of 3,333,333 shares of the
Company. The number of shares shown above does not include 7703,295 shares of
the Company held in a deferred compensation plan Rabbi Trust for Mr. Weil.
(9) Of these shares, 110,219135,268 represent beneficial ownership of stock options
exercisable within the next 60 days. 3,586 shares are held in the Company's
401(k) Plan.
(10) Mr. Webb was elected Chief Financial Officer and Treasurer of the Company
on May 14, 2001. He previously served as an executive officer of the
Company as Vice President, Investments. Of these shares, 56,13864,470 represent beneficial ownership of stock options
exercisable within the next 60 days. 1,494 shares are held in the Company's
401(k) Plan.
(11) Of these shares, 56,11163,125 represent beneficial ownership of stock exercisable
within the next 60 days. 2,371 shares are held in the Company's 401(k)
Plan.
(12) Pursuant to a rights offering conducted by the Company in March 2000, an
investment partnership named PICO Equity Investors, L.P. acquired on March
28, 2000, 3,333,333 newly issued shares which were not subscribed for in
the rights offering. PICO Equity Investors, L.P. is managed by PICO Equity
Investors Management, LLC. PICO Equity Investors Management, LLC is owned
by Mr. Langley, Mr. Hart and Mr. Weil. PICO Equity Investors Management,
LLC will exercise all voting and investment decisions with respect to these
3,333,333 shares for up to ten years. The interest of PICO Investors
Management, LLC in any profits and losses earned on this investment will be
proportional to the capital contributions made to PICO Equity Investors,
L.P. by the partners, i.e., 1,000/50,001,000. There are no other fees or
other management compensation of any kind payable to Mr. Langley, Mr. Hart,
and Mr. Weil.
(13) The Company received a Form 13-G filing from Dimensional Fund Advisors Inc.
in 20022003 for calendar year 2001.2002.
(14) The Company received a Form 13-G filing from Artisan Partners Limited
Partnership, Artisan Investment Corporation, Andrew A. Ziegler, and Carlene
Murphy Ziegler in 20022003 for calendar year 2001.2002.
(15) The number of shares shown above does not include 742 shares held in a
deferred compensation plan Rabbi Trust for Mr. Campbell.
1. ELECTION OF DIRECTORS
NOMINEES AND CONTINUING DIRECTORS
The Board of Directors is divided into three classes, with the terms of office
of each class ending in successive years. Pursuant to Section 3.2 of the
Company's By-laws,Bylaws, the total number of directors has been established as seven.
ThreeTwo directors of the Company are to be elected for terms ending at the Annual
Meeting of Shareholders in the year 20052006 or until their respective successors
have been duly elected and qualified.
3
Unless otherwise instructed, the proxy holders named on the enclosed form of
proxy intend to distribute the votes represented by proxies in such proportions
as they deem desirable to elect the two nominees named below or their
substitutes. Although it is not contemplated that any nominee will decline or be
unable to serve, if either occurs prior to the Annual Meeting, a substitute
3
nominee will be selected by the Board of Directors. See "Stock Ownership of
Certain Beneficial Owners and Management" for the number of shares of Common
Stock beneficially owned by these nominees.
The Nominating Committee has recommended that Ronald Langley, John R. HartS. Walter Foulkrod, III, Esq. and
JohnRichard D. WeilRuppert, MD be nominated for election as Directors at the Company's
Annual Meeting of Shareholders on July 18, 200217, 2003 for terms ending in 2005.2006. The
following table sets forth information regarding the nominees for election as
directors and the other directors whose terms of office as directors will
continue after the Annual Meeting, including their ages, a brief description of
their business experience, certain directorships held by each of them and the
year in which each became a director of the Company.
If a quorum is present and voting, the nominees for election as directors
receiving the highest numbers of votes shall be elected. Abstentions and broker
non-votes have no effect on the vote. THE COMPANY'S BOARD RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE NOMINEES FOR ELECTION LISTED BELOW.
DIRECTOR NAME BUSINESS EXPERIENCE AGESAGE SINCE
------------- ------------------- ---- -----
NOMINEES STANDING FOR TERMS ENDING IN 2005:
John R. Hart President and CEO and Director of the Company since 1996; President of 42 1996
Quaker Holdings Limited, an investment company, since 1991; Principal
with Detwiler, Ryan & Company, Inc., an investment bank, from 1982 to
1991; Director of Physicians since 1993; President and CEO of Physicians
since 1995; Director of HyperFeed Technologies, Inc.
Ronald Langley Chairman and Director of the Company since 1996; Director of Physicians 57 1996
since 1993; Chairman of Physicians since 1995; Director of HyperFeed
Technologies, Inc.; Director of Jungfraubahn Holding AG; Director of
Australian Oil & Gas Corporation Limited.
John D. Weil President, Clayton Management Company, an investment company; Director 61 1996
of Todd Shipyards Corporation, Oglebay Norton Company, Allied Health
Products, Inc., and Baldwin & Lyons, Inc.
DIRECTORS WITH TERMS ENDING IN 2003:2006:
S. Walter Foulkrod, III, Esq. Attorney; owner of one third of the issued and outstanding 61 1996
capital 60 1996 stock of Foulkrod Ellis Professional Corporation,
Attorneys at Law, Harrisburg, PA; sole owner of S. Walter
Foulkrod, III & Associates, Attorneys at Law, Harrisburg, PA from
1994 through 2000; President and Chairman of Foulkrod, Reynolds &
Havas, PC, from 1984 to 1994; Director of Physicians Insurance
Company of Ohio ("Physicians") since 1988.
Richard D. Ruppert, MD Physician; President of Medical College of Ohio from 1978 to 72 1996
1993; 71 1996 President of American Society of Internal Medicine from
1992 to 1993; Director of Physicians since 1988.
DIRECTORS WITH TERMS ENDING IN 2004:
Robert R. Broadbent Retail consultant since 1989; Chairman of Higbee Company from 81 1996
1984 to 80 1996 1989; President, CEO, Director and Vice Chairman of the
Higbee Company from 1979 to 1984; President and Chief Executive
Officer of Liberty House - Mainland from 1976 to 1978; Chairman
and CEO of Gimbel's from 1973 to 1976; Director of Physicians
from 1993 to 1995.
Carlos C. Campbell Chairman of Geolink Advisors, LLC;President, C. C. Campbell & Co.; Director of Resource America, 65 1998
Inc.; 64 1998 Director of Laidlaw Global Corp.Netwolves, Inc.
DIRECTORS WITH TERMS ENDING IN 2005:
John R. Hart President and CEO and Director of the Company since 1996; 43 1996
President of Quaker Holdings Limited, an investment company,
since 1991; Principal with Detwiler, Ryan & Company, Inc., an
investment bank, from 1982 to 1991; Director of Physicians since
1993; President and CEO of Physicians since 1995; Director of
HyperFeed Technologies, Inc.
Ronald Langley Chairman and Director of the Company since 1996; Director of 58 1996
Physicians since 1993; Chairman of Physicians since 1995;
Director of HyperFeed Technologies, Inc.; Director of
Jungfraubahn Holding AG.
John D. Weil President, Clayton Management Company, an investment company; 62 1996
Director of Todd Shipyards Corporation, Allied Health Products,
Inc., and Baldwin & Lyons, Inc.
4
In December 2002, Mr. Weil settled a pending civil action brought against him by
the SEC for alleged violations of the anti-fraud provisions of the federal
securities laws arising in connection with transactions in the securities of
Kaye Group Inc. involving material non-public information. Mr. Weil was not an
officer or director of Kaye Group. The transactions cited by the SEC in its
complaint involved less than one percent of the securities of Kaye Group
beneficially owned by Mr. Weil and less than one-tenth of one percent of Kaye
Group's then outstanding shares. Mr. Weil consented to the entry of a final
judgment of permanent injunction and other relief, including disgorgement of
alleged profits in the amount of $47,000 and civil penalties of like amount, but
did not admit to or deny any of the allegations in the SEC's complaint.
2. RATIFICATIONAPPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORSTHE PICO HOLDINGS, INC. 2003 STOCK APPRECIATION RIGHTS
PROGRAM
At the Annual Meeting the shareholders will be asked to approve the PICO
Holdings, Inc. 2003 Stock Appreciation Rights Program (the "SAR Program"). The
Company's Board of Directors approved the SAR Program on April 18, 2003, subject
to approval by the shareholders, to replace the Company's stock option plans and
call option agreements. As discussed more fully below, each stock option holder
(except one employee who currently has 100,000 stock options and who will
receive 20,000 stock appreciation rights) and each call option holder will
surrender their stock options and call options and will receive an equivalent
number of stock appreciation rights, at the same exercises prices for the stock
options and call options. See Report of Compensation Committee.
As discussed in "Equity Compensation Plan Information," the Company previously
granted stock options under several different stock option plans and individual
stock option arrangements. In addition, as discussed in footnote 4 under "Stock
Ownership of Certain Beneficial Owners and Management," the Company is seekingobligated
to sell shares of the Company's stock, presently held as treasury shares, to Mr.
Langley and Mr. Hart under call option agreements assumed by the Company in
August 1998.
SUMMARY OF THE SAR PROGRAM
The following summary of the SAR Program is qualified in its entirety by the
specific language of the SAR Program, a copy of which is attached as Appendix I.
GENERAL
Recently there has been much discussion regarding the cost of stock options to
shareholders with varying opinions on the correct pricing methodology. The
Company believes that stock appreciation rights provide more transparent and
understandable accounting treatment for the Company's stockholders. Approval of
the SAR Program will not change compensation to management.
The purpose of the SAR Program is to advance the interests of the Company and
its shareholders with an easily understood incentive program for directors,
officers, and consultants by providing an incentive for directors, officers,
employees, and consultants to increase shareholders' equity and provide a
mechanism whereby the participants in the SAR Program will be able to
participate in an increase in share price. The SAR Program provides for grants
of stock appreciation rights. Unlike the exercise of a stock option, which
results in the issuance of a new share of the Company's stock, the exercise of a
stock appreciation right will result only in a cash payment to the holder of
that stock appreciation right. No shares of the Company's stock will be issued
when a stock appreciation right is exercised.
The Board of Directors believes that stock appreciation rights have certain
advantages over stock options. Since no new shares of stock are issued when a
stock appreciation right is exercised, stock appreciation rights are not
dilutive to existing shareholders, unlike the exercise of stock options where
new shares of stock are issued. In addition, the accounting treatment for stock
appreciation rights is more transparent to shareholders than for stock options.
The accounting treatment for stock appreciation rights requires that all
in-the-money amounts, based on the difference between the market value of the
underlying stock and the exercise price of the stock appreciation right, be
accrued and charged to net income. If the Company's shareholders approve the
replacement of the Company's stock option plans and call option agreements with
the SAR Program, there will be a charge to net income in the approximate amount
of $3.3 million, based on the closing price of the Company's stock of $13.24 on
December 31, 2002 on the Nasdaq National Market. Liquidity of stock options has
been reduced with the recent enactment of the Sarbanes-Oxley Act of 2002 which
has made cashless exercises of stock options problematic. In addition, legal
restrictions frequently prevent the exercise of stock options due to the stock
option holder's possession of material, nonpublic information. The Company has a
relatively small average daily trading volume, which further impedes the
exercise of stock options.
5
AUTHORIZED STOCK APPRECIATION RIGHTS
A maximum of 2,042,781 stock appreciation rights may be issued under the SAR
Program. If any stock appreciation right expires, lapses or otherwise terminates
for any reason without having been exercised or settled in full, such stock
appreciation right will again become available for issuance under the SAR
Program. Appropriate adjustments will be made to the number of stock
appreciation rights reserved under the SAR Program and the terms of any
outstanding stock appreciation rights in the event of any stock dividend, stock
split, reverse stock split, recapitalization or similar change in the Company's
capital structure.
ADMINISTRATION
The SAR Program will be administered by the Compensation Committee of the Board
of Directors, or, in the absence of such committee, by the Board. Subject to the
provisions of the SAR Program and with the exception of the stock appreciation
rights to be granted as of July 17, 2003 as described below, the Committee will
determine in its discretion the persons to whom and the times at which stock
appreciation rights will be granted, the size of any stock appreciation right,
and all of their terms and conditions. The Committee will have the authority to
interpret the SAR Program and stock appreciation rights granted thereunder, and
any such interpretation by the Committee will be binding.
CALL OPTION AGREEMENTS
In 1993, Guinness Peat Group plc entered into separate, but identical, call
option agreements with Mr. Langley and Mr. Hart. These call option agreements
provided that Guinness Peat Group plc would sell a total of 412,486 shares it
owned to Mr. Langley and Mr. Hart at certain exercise prices. In August 1998,
the Company acquired these shares at their exercise prices and assumed the
obligation to sell these shares to Mr. Langley and Mr. Hart at those same
exercise prices. Mr. Langley and Mr. Hart have both agreed to irrevocably and
unconditionally surrender any and all rights pursuant to the call option
agreements, effective July 17, 2003, contingent upon shareholder ratificationapproval of
its
selectionthis proposal.
STOCK OPTION PLANS
The Company has granted stock options to directors, officers, employees, and
consultants under the Physicians Insurance Company of Deloitte & Touche LLPOhio 1995 Non-Qualified
Stock Option Plan, the PICO Holdings, Inc. 2000 Nonstatutory Stock Option Plan,
and several individual stock option arrangements (see "Equity Compensation Plan
Information"). All stock option holders have agreed to serveirrevocably and
unconditionally surrender any and all rights under these stock option plans
before July 17, 2003.
FEATURES OF SAR PROGRAM
If this proposal is approved by the Company's shareholders, each stock option
holder (except one employee who currently has 100,000 stock options and who will
receive 20,000 stock appreciation rights) and each call option holder will
receive an equivalent number of stock appreciation rights at the same exercise
prices as the current stock options and call options, and the Company will have
no stock options or call option agreements outstanding. The terms of the
proposed SAR Program are as follows:
(1) Each stock option holder (except one employee who currently has 100,000
stock options and who will receive 20,000 stock appreciation rights) and
each call option holder will receive an equivalent number of stock
appreciation rights;
(2) Each stock appreciation right shall take effect July 17, 2003 and shall not
have an expiration date. See Termination or Amendment;
(3) The SAR program shall authorize 2,042,781 stock appreciation rights, which
is the number of stock options and call options presently outstanding;
(4) All stock appreciation rights will be fully vested on July 17, 2003;
(5) Each recipient of stock appreciation rights will be able to exercise, in
any twelve month period beginning on July 17, a maximum of 20% of the
number of stock appreciation rights initially received. However, the
Company's auditorsCompensation Committee shall have authority to allow in excess of
20% of an individual's stock appreciation rights to be exercised in any
twelve month period beginning July 17, for good cause shown, in the
Committee's sole discretion. Upon a change of control of the Company, or
upon the death, disability, or retirement of the participant, all stock
appreciation rights shall be exercisable immediately;
6
(6) The exercise price for the fiscalstock appreciation rights will be the same as
for the stock options and call options; and
(7) The stock appreciation rights, when exercised, are payable only in cash by
the Company, in an amount equal to the excess of the fair market value of
the Company's stock over the exercise price.
TERMINATION OR AMENDMENT
The SAR Program will continue in effect until the first to occur of (i) its
termination by the Committee or (ii) the date on which all stock appreciation
rights available for issuance under the SAR Program have been issued and the
agreements evidencing stock appreciation rights granted under the SAR Program
have lapsed. The Committee may terminate or amend the SAR Program at any time,
provided that no amendment may be made without stockholder approval if the
Committee deems such approval necessary for compliance with any applicable tax
or securities law or other regulatory requirements, including the requirements
of any stock exchange or market system on which the Common Stock of the Company
is then listed. No termination or amendment may affect any outstanding stock
appreciation right unless expressly provided by the Committee, and, in any
event, may not adversely affect an outstanding stock appreciation right without
the consent of the participant unless necessary to comply with any applicable
law.
SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary is intended only as a general guide to the U.S. federal
income tax consequences of participation in the SAR Program and does not attempt
to describe all possible federal or other tax consequences of such participation
or tax consequences based on particular circumstances.
A participant generally will recognize no income upon the grant of a stock
appreciation right. Upon the settlement of the stock appreciation right,
participants normally will recognize ordinary income in the year endingof settlement
in an amount equal to the cash received. If the participant is an employee, such
ordinary income generally is subject to withholding of income and employment
taxes. The Company generally should be entitled to a deduction equal to the
amount of ordinary income recognized by the participant on the settlement date,
except to the extent such deduction is limited by applicable provisions of the
Internal Revenue Code.
The following table sets forth (i) the numbers of stock appreciation rights that
will be granted to directors, officers, employees, and consultants on July 17,
2003, subject to approval by shareholders of the SAR Program; and (ii) the
numbers of stock appreciation rights that would have been granted on December
31, 2002 to the directors, officers, employees, and consultants if the SAR
Program had been in effect on December 31, 2002.
Deloitte & Touche LLP has previously
served as the auditors of the Company since July 1997. It is anticipated that
representatives of Deloitte & Touche LLP will attend the Annual Meeting, will
have the opportunity to make any statements they may desire, and will be
available to respond to appropriate questions from PICO shareholders.7
NEW PLAN BENEFITS
STOCK APPRECIATION RIGHTS THAT WOULD
STOCK APPRECIATION RIGHTS GRANTED WOULD HAVE BEEN GRANTED ON
ON JULY 17, 2003, SUBJECT TO DECEMBER 31, 2002 IF THE
SHAREHOLDER APPROVAL OF THE SAR PROGRAM HAD BEEN IN
SAR PROGRAM EFFECT ON THAT DATE
------------------------------------- ------------------------------------
NUMBER OF STOCK NUMBER OF STOCK
NAME AND POSITION APPRECIATION RIGHTS APPRECIATION RIGHTS
----------------- ------------------- -------------------
John R. Hart
President and Chief Executive Officer 838,356 838,356
Ronald Langley
Chairman 752,395 752,395
Richard H. Sharpe
Chief Operating Officer 135,268 135,268
Maxim C. W. Webb
Chief Financial Officer & Treasurer 71,137 71,137
James F. Mosier
General Counsel and Secretary 63,125 63,125
Executive Group 1,860,281 1,860,281
(5 persons)
Non-Executive Director Group 7,500 7,500
(5 persons)
Non-Executive Officer Employee Group 95,000 95,000
(4 persons)
VOTE REQUIRED AND BOARD OF DIRECTORS RECOMMENDATION
Approval of this proposal requires the affirmative vote of the holders of a majority of the
shares represented and votingvoted at the Annual Meeting.Meeting, either in person or by proxy. Abstentions
and broker non-votes will not be counted as present for purposes of determining
the presence of a quorum and will have no effect on the outcome of the vote.
The Board of Directors believes that adoption of the proposed SAR Program is in
the best interests of the Company and its shareholders for the reasons stated
above. THEREFORE, THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.THE PROPOSAL TO
APPROVE THE SAR PROGRAM.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has an Executive Committee, an Audit
Committee, a Compensation Committee, and a Nominating Committee.
The Executive Committee currently consists of Messrs. Langley (Chairman), Hart,
and Weil. It did not meet in 2002. The Executive Committee may exercise
substantially all the powers vested in the Board of Directors except for certain
actions as prescribed by California law. The Nominating Committee has chosen not
to reappoint an Executive Committee, effective July 17, 2003. All matters which
previously would have been dealt with by the Executive Committee will be dealt
with thereafter by the full Board of Directors.
8
The Audit Committee consists of Messrs.Dr. Ruppert (Chairman), and Messrs. Campbell and
Foulkrod, none of whom has been or is an officer or employee of the Company. In
2001,2002, this Committee met seveneight times. The functions of the Audit Committee
include reviewing the accounting principles and practices employed by the
Company and its subsidiaries; meeting with the Company's independent auditors to
review their reports on their audits of the Company's financial statements,
their comments on the internal accounting controls of the Company and the action
taken by management with regard to such comments; reviewing auditor
independence; issuing an Audit Committee report to shareholders; and
recommending annually to the Board of Directors the appointment of the Company's
independent auditors. The Audit Committee has the authority, in its discretion,
to order interim and unscheduled audits and to perform such other duties as may
be assigned to it from time to time by the Board of Directors.
The Compensation Committee consists of Messrs. Weil (Chairman), Campbell, and
Ruppert, none of whom was or is an officer or employee of the Company. The
Compensation Committee met one timedid not meet in 2001.2002. The functions of the Compensation
Committee include reviewing and approving the overall executive compensation
program for officers of the Company and its subsidiaries, considering and
reviewing compensation levels for services as a member of the Board of
Directors, approving individual executive officer compensation packages and
recommending to the Board of Directors modifications of the compensation package
for the Chief Executive Officer. The Compensation Committee's goals are to
attract and retain qualified directors and key executives critical to the
long-term success of the Company, to reward executives for the long-term success
of the Company and the enhancement of shareholder value, and to integrate
executive compensation with both annual and long-term financial results of the
Company.
The Nominating Committee met one time in 2001.2002. Its members consist of Messrs.
Langley (Chairman), Broadbent, and Campbell. The Committee will consider
nominees recommended by shareholders; such recommendations must be submitted in
writing to the Committee.
DIRECTORS' ATTENDANCE
In 2001,2002, there were fourthree meetings of the Board of Directors of the Company. All
of the directors attended 75% or more of the aggregate of their respective Board
of Directors and Committee meetings.
DIRECTORS' COMPENSATION
Directors who are not officers or employees of the Company or its subsidiaries
receive an annual retainer plusof $30,000. For calendar year 2002, each director who
is not an officer or employee of the Company or its subsidiaries also received a
$1,000 fee for each Board and Committee meeting attended in person, and $500.00a $500
fee for each telephonic Board and Committee meeting attended.attended by telephone. There iswas a
limit of $4,000 per day in Board and Committee fees to any one director.
In line with a recent study by William M. Mercer, Incorporated,
the annual retainer for each nonemployee member ofAt its April 18, 2003 meeting, the Board of Directors was
increased from $20,000compensation to
$30,000 effective Octobera fee of $2,000 for all Board and Committee meetings attended in person or by
telephone, retroactive to January 1, 2001; see Report2003. The Board retained the limit of
$4,000 per day in Board and Committee fees for any one director. At its April
18, 2003 meeting, the Board also approved a fee of $1,000 per day plus expenses
for any director attending an educational activity or seminar on behalf of the
Compensation Committee.
5
Company.
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information concerning the compensation for the
fiscal year ended December 31, 20012002 of the (i) Chief Executive Officer of the
Company and (ii) the four other most highly compensated executive officers of
the Company as of December 31, 20012002 whose salary and bonus exceeded $100,000.
(Messrs. Langley, Hart, Sharpe, Webb, and Mosier are sometimes hereinafter
referred to as "Named Officers"). Amounts under the caption "Bonus" are amounts
earned for performance during the fiscal year indicated including amounts paid
after the end of the year.
9
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- -------------------------------------- ------------
SECURITIES
UNDERLYING
OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (SHARES) COMPENSATION
- --------------------------- ---- ------ ----- -------- ------------ Chief Executive Officer:
- -----------------------------------
Chief Executive Officer:
- -----------------------
John R. Hart(1)(2) 2002 $840,000 $730,934 -0- $22,421(7)
President and Chief 2001 $800,000 -0- -0- $21,493(7)
President and ChiefExecutive Officer 2000 $800,000 -0- 456,586(8) $20,093(7)
Executive Officer 1999 $800,000Officers
- ------------------
Ronald Langley(2) (3) 2002 $840,000 $730,934 -0- -0- $21,839(7)
Executive Officers
Ronald Langley(2)(3)$22,421(7)
Chairman of the 2001 $800,000 -0- -0- $21,493(7)
ChairmanBoard of theDirectors 2000 $800,000 -0- 427,932(8) $20,093(7)
Board of Directors 1999 $800,000 -0- -0- $21,839(7)
Richard H. Sharpe(4) 2002 $262,512 $228,427 -0- $20,077(7)
Chief Operating Officer 2001 $250,000 -0- -0- $20,118(7)
Chief Operating Officer 2000 $202,199 -0- 75,149(8) $21,814(7)
1999 $192,570 -0- -0- $21,839(7)
Maxim C. W. Webb(5) 2002 $178,500 $155,323 -0- $19,602(7)
Chief Financial Officer 2001 $162,500 -0- 20,000(9) $18,088(7)
Chief Financial Officerand Treasurer 2000 $137,500 -0- 40,472(8) $15,462(7)
and Treasurer 1999 $ 80,000 -0- -0- $11,261(7)
James F. Mosier(6)
General Counsel 2002 $152,250 $7,612 -0- $17,719(7)
and Secretary 2001 $145,000 -0- -0- $16,522(7)
and Secretary 2000 $138,500 -0- 21,042(8) $17,269(7)
1999 $131,985 -0- -0- $17,879(7)
- ----------------------
(1) Mr. Hart became President and CEO of the Company on November 20, 1996. He
became President and CEO of Physicians Insurance Company of Ohio on July
15, 1995.
(2) On December 31, 1997,January 1, 2002, Mr. Langley and Mr. Hart each signed employment
agreements with the Company. Each employment agreement provided for annual
compensation of $800,000; see Report of the Compensation Committee.
(3) Mr. Langley became Chairman of the Board of Directors of Physicians
Insurance Company of Ohio on July 15, 1995. He became Chairman of the Board
of Directors of the Company on November 20, 1996.
(4) Mr. Sharpe became Chief Operating Officer of Physicians Insurance Company
of Ohio on June 3, 1994. He became Chief Operating Officer of the Company
on November 20, 1996.
(5) Mr. Webb became Chief Financial Officer and Treasurer on May 14, 2001.
Prior to that he was Vice President, Investments of the Company.
6
(6) Mr. Mosier became General Counsel and Secretary of Physicians Insurance
Company of Ohio in 1984. He became General Counsel and Secretary of the
Company on November 20, 1996.
(7) Represents amounts contributed by the Company to the PICO Holdings, Inc.
Employees 401(k) Retirement Plan and Trust. This retirement plan conforms
to the requirements of the Employee Retirement Income Security Act.
(8) This represents stock options granted in 2000 pursuant to the PICO
Holdings, Inc. 2000 Nonstatutory Stock Option Plan.
(9) This represents a grant of nonstatutory stock options in 2001 in an
individual nonstatutory stock option agreement.
10
OPTION GRANTS IN THE LAST FISCAL YEAR
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
NUMBER OF PERCENTAGE OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------
NAME GRANTED 2001 SHARE DATE 5% 10%
---- ------- ---- ----- ---- ---------------------
Maxim C. W. Webb(1) 20,000 12.9% $15.00 8/6/2021 $459,904 $1,626,756
- ----------
(1) The above options were granted on August 6, 2001 under an individual
nonstatutory stock option agreement. One-third of these stock options
vested on August 6, 2001, one-third will vest on August 6, 2002 and the
remaining one-third will vest on August 6, 2003.
(2) The amounts reflected in this table represent certain assumed rates of
appreciation only. Actual realized values, if any, on option exercises
will be dependent on the actual appreciationNone of the Company's shares
overNamed Officers received options in the term of the options. There can be no assurances that the
Potential Realizable Values in this table will be achieved.year ended December 31, 2002.
OPTION EXERCISES AND FISCAL 20012002 YEAR-END VALUE
The following table provides information concerning stock options held as of
December 31, 20012002 by the Named Officers. No options were exercised in 20012002 by
such individuals.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY-OPTIONS
AT 12/31/01(1)02(1) AT 12/31/01(1)02 (1) (2)
-------------- ------------------------------------------------ ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
Ronald Langley(1) 460,635 142,644603,279 -0- -0- -0-
John R. Hart(1) 479,738 152,195631,933 -0- -0- -0-
Richard H. Sharpe(1) 110,219 25,049135,268 -0- -0- -0-
Maxim C. W. Webb(1) 56,138 26,82464,470 6,667 -0- -0-
James F. Mosier(1) 56,111 7,01463,125 -0- -0- -0-
- ----------
7
--------------------
(1) This applies to stock options granted by the Company in the PICO Holdings,
Inc. 2000 Nonstatutory Stock Option Plan, stock options granted by the
Company in individual nonstatutory stock option agreements and stock
options granted pursuant to the Physicians Insurance Company of Ohio 1995
Non-Qualified Stock Option Plan which were assumed by the Company in 1996, and stock options granted by Global Equity
Corporation which were assumed by the Company in 1998.1996.
(2) Based on the closing price of the Company's Common Stock on December 31,
20012002 on the Nasdaq National Market of $12.50$13.24 per share.
EQUITY COMPENSATION PLAN INFORMATION
(A) (B) (C)
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER EQUITY
ISSUED UPON EXERCISE OF EXERCISE PRICE OF COMPENSATION PLANS (EXCLUDING
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED IN
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS COLUMN (A))
------------- -------------------------- ------------------- -----------------------------
Equity compensation plans approved
by security holders. 1,177,458 $15.00 None
Equity compensation plans not
approved by security holders. (1)
(2) (3) (4) (5) 509,784 $13.59 None
---------
Total 1,687,242 None
- ------------------------
(1) The Physicians Insurance Company of Ohio 1995 Non-Qualified Stock Option
Plan was approved by Physicians' Board of Directors effective August 24,
1995. All options granted under this stock option plan are fully vested and
they all expire on August 24, 2005. When PICO Holdings, Inc. became the
sole shareholder of Physicians on November 20, 1996, PICO Holdings, Inc.
assumed those stock options. The exercise price for all options in this
plan is $13.45 per option.
11
(2) An officer of the Company was granted 10,665 stock options by the Company's
Board of Directors, effective January 1, 1999. These stock options expire
on January 1, 2009. All are vested and the exercise price is $13.25 per
option.
(3) An officer of the Company was granted 20,000 stock options by the Company's
Board of Directors, effective August 6, 2001. The exercise price is $15.00
per option and they expire on August 6, 2021. 13,333 of these options are
vested; the remaining 6,667 options will vest on August 6, 2003.
(4) An employee of the Company was granted 16,223 stock options by the
Company's Board of Directors, effective August 2, 2001. The exercise price
is $15.00 per option and they expire on August 2, 2021. 10,816 of these
options are vested; the remaining 5,407 will vest on August 2, 2003.
(5) An employee of the Company was granted 10,000 stock options by the
Company's Board of Directors, effective August 8, 2001. The exercise price
is $15.00 per option and they expire on August 8, 2021. 6,666 of these
options are vested; the remaining 3,334 will vest on August 8, 2003.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE IN CONTROL
ARRANGEMENTS
Mr. Langley and Mr. Hart each entered into employment agreements effective
December 31, 1997 with the Company. Total compensation to Mr. Langley and Mr.
Hart under these employment agreements was $800,000 each on an annual basis.
Mr. Langley and Mr. Hart entered into new employment agreements effective
January 1, 2002 with the Company for an additional four years;years for a base salary
of $800,000 each annually, subject to adjustment in January of each year. This
cash compensation was based on an amount approximately equal to 80% of peer
group salary levels in 1996. These employment agreements include a change of
control clause; see Report of the Compensation Committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to a rights offering conducted by the Company in March 2000, an
investment partnership named PICO Equity Investors, L.P. acquired on March 28,
2000, 3,333,333 newly issued shares which were not subscribed for in the rights
offering. PICO Equity Investors, L.P. is managed by PICO Equity Investors
Management, LLC. PICO Equity Investors Management, LLC is owned by Mr. Langley,
Mr. Hart and Mr. Weil. PICO Equity Investors Management, LLC will exercise all
voting and investment decisions with respect to these 3,333,333 shares for up to
ten years. The interest of PICO Investors Management, LLC in any profits and
losses earned on this investment will be proportional to the capital
contributions made to PICO Equity Investors, L.P. by the partners, i.e.,
1,000/50,001,000. There are no other fees or other management compensation of
any kind payable to Mr. Langley, Mr. Hart, and Mr. Weil.
REPORT OF THE COMPENSATION COMMITTEE
COMMITTEE MEMBERS
The three-member Compensation Committee of the Board of Directors is a standing
committee composed entirelycommittee. None of outside Directors.its members is or has been an officer or employee of the
Company. Mr. Weil is the chairman and Mr. Campbell and Dr. Ruppert are the other
members.
COMMITTEE FUNCTIONS
The Compensation Committee is responsible for assuring that all of the executive
compensation programs of the Company are developed, implemented, and
administered in a way that supports the Company's fundamental philosophy that a
significant portion of executive compensation should be effectively linked to
Company performance.
The Compensation Committee meets on a regularly scheduled basis. It reviews and
approves the overall executive compensation program which includes both base pay
and incentive compensation. It considers and approves individual executive
officer compensation packages based on recommendations of the Company's Chief
Executive Officer. It recommends, for the approval of the full Board, any
modification to the compensation package of the Company's Chief Executive
Officer.
The Compensation Committee also reviews the level of compensation paid to
nonemployee members of the Company's Board of Directors and makes
recommendations to the Board of Directors to modify the level of nonemployee
directors' compensation when appropriate.
12
EXECUTIVE COMPENSATION PHILOSOPHY
The Board of Directors of the Company's predecessor retained an independent
compensation expert, William M. Mercer, Incorporated ("Mercer"). In 1996, Mercer
conducted an analysis of marketplace executive compensation levels. The scope of
Mercer's study covered the Company's Chairman and President and Chief Executive
Officer. The objectives of Mercer's study were as follows:
8
- - Analyze the scope, responsibilities and skill requirements of the jobs
performed by Messrs. Langley and Hart and compare and contrast to
comparable benchmark executive positions found in the marketplace.
- - Develop an appropriate methodology for selecting comparable benchmark jobs,
industry categories and a peer group of companies comparable to the Company
in terms of business focus, industry classification and size; and
competition for senior executives with the skills, expertise and talent
demonstrated by the Company's top two executives.
- - For the appropriate benchmark jobs, industry category and peer company
group, collect information on marketplace compensation levels and practices
from compensation surveys and peer company proxy statements. The companies
included in the peer company group are not necessarily those included in
the Nasdaq Insurance Stock Index used to determine the most relevant
marketplace compensation levels and to compare actual Company compensation
levels.
- - Develop alternate approaches for structuring the total compensation package
for the Company's top two executives, in terms of compensation elements to
be used, the mix of total pay and how short and long termlong-term incentive
compensation might be structured to accurately reflect performance.
Mercer's study recommended to the Compensation Committee a compensation strategy
with the following objectives:
- - To provide a total compensation package that:
- is competitive with market rates for executives with similar skill,
talent and job requirements.
- is closely linked to the Company's strategy and the role of covered
executives in building shareholder value through growing the book
value and, ultimately, the market value of the Company.
- - To retain critical executive talent by:
- providing a reasonable and competitive level of current income (cash
flow).
- providing for loss of future incentive opportunity if an executive
terminates employment before unrealized investment gains are realized.
- - To link executive rewards to shareholder interests by:
- tying incentive awards to growth in book value which ultimately
translates intoand increased market
price per share (as investments are
liquidated for gains, and the Company grows earnings).
- granting additional stock options in the future.share.
The Compensation Committee believes that to accomplish these goals, the
executive compensation program should be based on three distinct components:
base pay, annual incentives, and long-term incentives. The Company obtains
industry and peer group surveys, and consults with independent experts, to
evaluate the Company's executive compensation programs in comparison with those
offered by its comparable competitors.
In March 2000,The Company has utilized stock option grants at various times beginning in 1995
to incentivize directors, officers, consultants, and certain employees. The
primary purpose of these options plans was to encourage the option holders to
increase shareholders equity, by providing a mechanism whereby the option
holders could participate in increased shareholders equity.
13
However, the Compensation Committee asked Mercerbelieves that the stock options previously
granted by the Company are no longer as favorable to examine the present
levelCompany or as desirable
to the option holders as stock appreciation rights, due to a number of factors.
These factors are: (1) the accounting treatment for stock appreciation rights is
more transparent to shareholders than for stock options; (2) the Company has a
relatively small average daily trading volume, which could act to discourage
option holders from exercising options at what the option holder might deem to
be an appropriate time; (3) option holders are frequently subject to legal
restrictions preventing the exercise of stock options granteddue to the Company's management,possession of
material, non-public information by an option holder; (4) there is substantial
doubt about the continued availability of same-day, "cashless" exercises due to
recommend an
appropriate levelthe enactment of the Sarbanes-Oxley Act of 2002. The end result is that due to
the above factors, the stock options previously granted by the Company have not
provided the liquidity to option holders that was envisioned when those stock
options were granted by the Company; and (5) since no new shares of stock are
issued when a stock appreciation right is exercised, stock appreciation rights
are not dilutive to existing shareholders, unlike the exercise of stock options
to be granted in the future towhere new shares of stock are issued.
After review and consideration of several alternatives, and after consultations
with the Company's management, and to reviewprofessional advisors, the level of compensation paid to the Company's
nonemployee directors. The Compensation Committee believed such a review by
Mercer was necessary in order to assist the Company in retainingrecommended
and attracting
qualified directors and executives, and to link executive and director rewards
to the long term interests of the Company's shareholders. Mercer's study
recommended that additional stock options be granted to management to enhance
the Company's ability to retain and attract key executives. Mercer's study also
recommended that, to enable the Company to remain competitive and to continue to
be able to retain and attract qualified members of the Board of Directors and to
align directors long term interests with those of shareholders, nonemployee
directors compensation should be increased. In line with the recent study by
Mercer, with respect to annual cash remuneration paid to nonemployee directors,
the Board approved the Compensation Committee's recommendation that the
Company's annual retainer fee be increased to $30,000 per nonemployee director
effective October 1, 2001. In addition,
9
each nonemployee director was granted 1,500 stock options in 2000 under the PICO Holdings, Inc. 2000 Nonstatutory2003 Stock
Option Plan.Appreciation Rights Program (the "SAR Program"), subject to approval by the
Company's shareholders. The Compensation Committee believes that the SAR
Program, which is described in detail in "2. Approval of the PICO Holdings, Inc.
2003 Stock Appreciation Rights Program", will provide a comparable incentive
while providing increased liquidity to participants in the SAR Program. Under
the SAR Program as recommended by the Compensation Committee and approved by the
Board of Directors on April 18, 2003, all outstanding stock options previously
granted by the Company will be irrevocably and unconditionally surrendered
before July 17, 2003. The call option agreements presently held by Mr. Langley
and Mr. Hart will also be irrevocably and unconditionally surrendered, effective
July 17, 2003, contingent upon shareholder approval of "2. Approval of PICO
Holdings, Inc. 2003 Stock Appreciation Rights Program". If such approval from
the shareholders is received, each current option holder (except one employee
who currently has 100,000 stock options and who will receive 20,000 stock
appreciation rights) and each current call option holder will receive on July
17, 2003 an equivalent number of stock appreciation rights. Each stock
appreciation right will have the same exercise price as the stock options and
call options. The stock appreciation rights will have no expiration date. All
stock appreciation rights will be fully vested on July 17, 2003. Only 20% of
each participant's initial number of stock appreciation rights may be exercised
in any twelve month period beginning on July 17, 2003 and each successive July
17; however, the Compensation Committee can authorize the holder of a stock
appreciation right to exercise more than 20% in a twelve month period for good
cause shown, in the Committee's sole discretion. Upon exercise of a stock
appreciation right, the participant will receive in cash from the Company an
amount equal to the excess of the fair market value of the Company's stock over
the exercise price.
The Compensation Committee believes that stock appreciation rights will provide
an incentive to participants to increase the Company's shareholders equity while
providing liquidity to the participants in the SAR Program.
The Compensation Committee has considered the provisions of Section 162(m) of
the Internal Revenue Code and related income tax regulations which restrict the
deductibility of certain compensation paid to the Company's Chief Executive
Officer and each of the four most highly compensated officers holding office at
the end of any year, to the extent such compensation paid to any of these
officers exceeds $1,000,000 in any year and fails to qualify for an exemption
from the restriction. In view of the Company's compensation structure, the
Committee believes it is unlikely that this will impact the Company in the near
future. The Compensation Committee will continue to monitor this.
EXECUTIVE COMPENSATION PROGRAM
The features of the executive compensation program as recommended by Mercer and
approved by the Compensation Committee are:
BASE COMPENSATION. A fixed rate, to be reviewed annually. Future adjustments
will take into account movement in executive compensation levels, changes in job
responsibilities, and the size of the Company. The base compensation was
established based on 80% of peer group cash compensation levels in 1996.
INCENTIVE AWARDS. Based on growth of book value per share in a fiscal year.
Awards are earned when a pre-determined threshold is surpassed. If book value
per share of the Company exceeds this threshold, the incentive award is equal to
5% of the increase in book value per share multiplied by the number of shares
outstanding at the beginning of the fiscal year. The threshold for 20012002 was
approximately 8.5%-0.58%.
14
In addition, the Board of Directors of Physicians granted options under the
Physicians Insurance Company of Ohio 1995 Non-Qualified Stock Option Plan. The
options granted under said option plan were designed to reinforce the
relationship between the Company's future performance and the executive's
potential future financial rewards. These options were assumed by PICO Holdings,
Inc. on November 20, 1996. In line with this philosophy of providing incentives
to executive officers, the Company agreed to convert the Global Equity options
of said officers on an economically equivalent basis, to options to purchase
shares of the Company effective with the close of the PICO/Global Equity
Combination. On April 7, 2000, PICO granted, subject to approval by the
Company's shareholders obtained on October 19, 2000, non-qualified common stock
options to employees and nonemployee directors of the Company. As previously
stated, the Compensation Committee recommended to the Board of Directors that
the Company's current stock options and call options be replaced with stock
appreciation rights.
GOALS OF COMPENSATION COMMITTEE
The Compensation Committee attempts to align executive compensation with the
value achieved by the executives for the Company's shareholders. The Company's
compensation program for executives emphasizes a combination of base salary,
discretionary bonuses, and stock optionslong-term incentives designed to attract, retain, and
motivate executives who will maximize shareholder value. The Compensation
Committee considers individual and Company performance, as well as compensation
paid by comparable companies.
Executives also participate in other employee benefit programs, including health
insurance, group life insurance, and the Company's 401(k) Plan.
DISCUSSION OF 20012002 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
No bonus was paid with respect to the Company's performance for 2001. In 1997,
the Compensation Committee recommended to the Board of Directors, and the Board
of Directors accepted the recommendation, that it was appropriate for the CEO
and the Chairman to be compensated as employees, rather than as consultants.
Accordingly, effective December 31, 1997, the CEO and Chairman entered into
employment agreements with the Company.
As stated above, the Compensation Committee believes the interest of Companythe
Company's shareholders is best served by aligning the CEO's short-term
compensation, over and above a competitive fixed annual rate of pay, which was
based on 80% of peer group cash compensation levels in 1996, with an increase in
the Company's book value per share which will ultimately be reflected inand higher market valuesvalue per share.
Specifically, a threshold was set at 80% of the S&P 500's annualized total
return for the five previous calendar years.years, including 2002. For 2001,2002, this
threshold was approximately 8.5%-0.58%. Since the Company's book value per share
did not exceed the threshold, no bonus was payable for 2001.
10
In light of Mercer's March 2000 study, the compensation committee recommended
that the Company adopt a stock option plan for the reasons stated above. The
Board of Directors approved this recommendation and approved the PICO Holdings,
Inc. 2000 Nonstatutory Stock Option Plan, which the Company's shareholders
approved on October 19, 2000. Pursuantincreased by 7.04% in 2002 prior to the PICO Holdings, Inc. 2000
Nonstatutory Stock Option Plan, the Company's CEO was granted 456,586 stock
options in 2000.accrual of bonus incentive compensation,
a bonus of $730,934 will be paid for calendar year 2002.
The Committee believes that the compensation provided by this combination of
fixed annual compensation, and short-term and long-term incentives provides a
mechanism to fairly compensate the CEO while providing the CEO with a strong
incentive to maximize shareholder value.
Mr. Langley and Mr. Hart each entered into new employment agreements effective
January 1, 2002 with the Company for an additional four years. These employment
agreements are substantially similar to the 1997 employment agreements. Total
compensation to Mr. Langley and Mr. Hart under these employment agreements is
$800,000 each on an annual basis, subject to adjustment in January of each year.
The $800,000 base salary in each employment agreement is subject to annual
adjustment in January of each year in the same percentage applicable to the
Company's other staff members in an amount deemed adequate to provide for
inflation, cost of living, and merit increases based on the Consumer Price Index
and major compensation studies.
These employment agreements include a change in control clause providing that if
there is a change of control before January 1, 2004, the Company is required to
immediately pay each employee a total lump sum of $2.4 million and an amount
equal to three times the highest annual bonus paid to the employee in the last
three years. The new employment agreements contain the same bonus, i.e.,
short-term incentive provision, as the 1997 employment agreements.
March 28, 2002April 21, 2003 Compensation Committee
John D. Weil, Chairman
Carlos C. Campbell
Richard D. Ruppert, MD
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Messrs. Weil and Campbell, and Dr. Ruppert, serve as members of the Compensation
Committee. None of these individuals are,is, or havehas been, employeesan employee of the
Company.
15
REPORT OF THE AUDIT COMMITTEE
The Audit Committee ("Committee") is comprised of three directors, each of whom,
in the judgment of the Board of Directors servesis "independent" as that term is defined in the
representativelisting standards for the Nasdaq National Market. The Committee operates
pursuant to a written Charter adopted by the Board. The members of the Board for general oversightCommittee
as of the Company's financial accounting and
reporting process, internal controls, and audit process. Management has the
responsibility for preparing the Company's financial statements and the
independent auditors have the responsibility for the examination of those
statements.
We periodically meet privately with the Company's independent auditors, which
has unrestricted access to the Audit Committee. In addition, we meet
periodically with the Company's management to consider and review the adequacy
and objectivity of the Company's financial reporting. We discuss these matters
with the Company's independent auditors and with appropriate Company financial
personnel.
We also recommend to the Board of Directors the appointment of an independent
auditing firm and review periodically its performance and independence from
management.
In this context, the Audit Committee hereby reports as follows:
(1) The Committee has reviewed and discussed with management the audited
financial statements for the fiscal year ending December 31, 2001.
(2)2002 are listed at the end of this report. The Audit
Committee has discussed with the Board the level of financial expertise of its
members and the Board has determined that the Committee, as a whole, possesses
the requisite expertise in the interpretation of financial statements. A copy of
the Committee's Charter is attached to this proxy statement as Appendix II.
Management is responsible for the Company's internal controls, the financial
reporting process and the representations set forth in the statements regarding
the financial condition of the Company. The independent auditorsauditor to the Company
is responsible for both auditing the financial statements presented by
management and verifying that such statements are produced in accordance with
generally accepted accounting principles. The Committee is responsible for those
matters set forth in its Charter. In this regard, the Committee meets separately
with management, including the Chief Financial Officer, and the auditor.
In the foregoing context, the Committee has reviewed with the auditor both the
engagement letter and its fees. The Committee has also discussed with the
auditor, with and without management present, the auditor's evaluations of the
Company's internal accounting controls and the Company's financial reporting
systems, policies, procedures and processes. The Committee has received
assurances from the auditor regarding both their adequacy and quality. The
Committee also discussed with the auditor other matters required to be discussed by the
Statement on Auditing Standards No. 61, (CommunicationsCommunication with Audit Committees).
11
(3)Committees, as
amended by SAS No. 90, Audit Committee Communications. The Committee receivedhas also
reviewed and discussed the Company's audited financial statements with
management.
In 2002, the Committee paid particular attention to the implementation dates and
the requirements of the Sarbanes-Oxley Act of 2002.
The auditor provided to the Committee the written disclosures and the letter from the
Company's independent auditor
required by Independence Standards Board Standard No. 1, (IndependenceIndependence
Discussions with Audit Committees). We
haveCommittees. The Committee discussed the auditor's
independence with the Company's independent auditors its independence
fromboth management and the Company.
(4)auditor.
Based onupon the independent representations of management and the auditor, the
Committee's review of such representations and the report of the auditor to the
Committee, the Committee's review of the audited financial statements of the
Company and its discussions noted above with management and the Company's independent auditors,auditor, the Committee
recommended to the Board of Directors that the Company's audited financial statements be included in
the Company's Annual Reportannual report on Form 10-K for the fiscal year ended December 31,
2001, for filing with the Securities and
Exchange Commission. The Committee also recommended to the Board,
subject to ratification by the Company's shareholders, the
reappointment of the independent auditors and the Board approved such
recommendation.
(5) The Audit Committee acts pursuant to a written charter adopted by the
Board of Directors.
(6) The Directors who serve on the Committee are all "independent" as
defined in the Nasdaq Stock Market listing standards.2002.
The undersigned members of the Audit Committee have submitted this Report of the
Audit Committee:
Richard D. Ruppert, MD, Chairman
Carlos C. Campbell
S. Walter Foulkrod, III, Esq.
AUDIT FEES
Aggregate fees billed to the Company for the fiscal year ended December 31, 20012002
by the Company's principal accounting firm, Deloitte & Touche LLP, the member
firms of Deloitte Touche Tohmatsu, and their respective affiliates were as
follows:
Audit Fees $ 300,580.00
Financial Information Systems Design and Implementation Fees $ 0.00
All Other Fees(1) $ 301,500.00
Audit Fees $350,000
Financial Information Systems Design and Implementation Fees -0-
All Other Fees(1) $500,000
---------------
(1) This amount includes $179,200$175,000 for statutory audit compliance fees
and $122,300$325,000 for tax services.services, including tax compliance fees.
The Audit Committee has considered the role of Deloitte & Touche in providing
tax, statutory compliance and other non-audit services to the Company and has
concluded that such services are compatible with Deloitte & Touche's
independence as the Company's auditors.
12auditor.
16
STOCK PRICE PERFORMANCE GRAPH
The graph below compares cumulative total return of the Company, the Nasdaq
Insurance Stocks Index, and the Nasdaq Stock Market (U.S. Companies) for the
period January 1, 19971998 through December 31, 2001.
[GRAPH]2002.
COMPARISON 5-YEAR CUMULATIVE TOTAL RETURN
AMONG PICO HOLDINGS, INC., NASDAQ INSURANCE STOCK INDEX, AND RUSSELL 2000 INDEX
Dec-96[GRAPH OMITTED]
Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02
------ ------ ------ ------ ------ ------
PICO Holdings 100.00 41.17 38.25 38.64 38.83 41.14
NASDAQ Insurance Stock Index 100.00 102.07 110.37 130.80 142.97 142.92
Russell 2000 Index 100.00 97.75 118.39 115.00 117.94 93.96
+++ PICO Holdings 100.00 156.06 64.24 59.70 60.30 60.61--- NASDAQ Insurance Stock Index 100.00 125.28 127.88 138.27 163.87 179.12==== Russell 2000 Index
100.00 122.06 119.31 144.50 140.37 143.95
ASSUMESAssumes $100 INVESTED ON JAN.invested on Jan. 1, 1996
FISCAL YEAR ENDING DEC.1998
Fiscal Year Ending Dec. 31, 20012002
The graph assumes $100 was invested on January 1, 19971998 in the Company's Common
Stock, the Nasdaq Stock Market (U.S. Companies) Index, and the Nasdaq Insurance
Stocks Index, and that all dividends were reinvested. The performance of PICO
Holdings, Inc. stock on this graph represents the historical performance of
shares of Citation Insurance Group, which was renamed PICO Holdings, Inc. on
November 20, 1996. It does not represent the historical stock performance of
Physicians Insurance Company of Ohio.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who beneficially own more than 10% of
the Company's Common Stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission ("SEC"). Such
persons are required by SEC regulations to furnish the Company with copies of
all Section 16(a) forms filed by such persons.
Based on a review of the copies of these reports received by the Company and
written representations from certain reporting persons that they have complied
with the relevant filing requirements, the Company believes that all filing
requirements have been complied with on a timely basis for the fiscal year ended
December 31, 2001.2002.
INDEPENDENT AUDITORSAUDITOR
Deloitte & Touche LLP was the Company's independent auditing firm for fiscal
year 2001 and has been appointed by the Board of Directors as the Company's independent auditing firm for fiscal
year 2002. Representatives of Deloitte & Touche LLP are expected to be present
at the meeting, will have the opportunity to make any statements they desire,
and will be available to respond to appropriate questions from shareholders.
1317
SOLICITATION OF PROXIES
The Board of Directors is not aware of any matters other than those specifically
stated in the Notice of Annual Meeting which are to be presented for action at
the meeting. However, should any further matter requiring a vote of the
shareholders arise, it is the intention of the persons named in the proxy to
vote the proxy in accordance with their judgment.
The cost of this solicitation of proxies is being borne by the Company. In
addition to the solicitation of proxies by use of the mails,mail, the Company may use
the services of one or more directors, officers or other regular employees of
the Company (who will receive no additional compensation for their services in
such solicitation) to solicit proxies personally and by telephone. Arrangements
will be made with brokerage firms and other custodians, nominees and fiduciaries
to forward solicitation material to the beneficial owners of the stock held of
record by such persons, and the Company will reimburse such firms or persons for
reasonable expenses actually incurred by them in so doing.
SHAREHOLDER NOMINATION OF DIRECTORS
Nominations other than those made by the directors of the Company must be in
writing and be delivered or mailed to the Secretary of the Company not less than
60 days prior to the Annual Meeting. Such nominations must include the
information regarding each nominee required by the Bylaws of the Company.
Nominations not made according to these procedures will be disregarded.
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the next annual meeting of
the stockholders of the Company must be received by the Company at its offices
no later than March 9, 2003,2004, and satisfy the conditions established by the
Securities and Exchange Commission for stockholder proposals to be included in
the Company's proxy statementProxy Statement for that meeting.
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business that the Board of
Directors intends to present or knows that others will present at the meeting is
as set forth above. If any other matter or matters are properly brought before
the meeting, or any adjournment thereof, it is the intention of the persons
named in the accompanying form of proxy to vote the proxy on such matters in
accordance with their best judgment.
May 28, 2002
1427, 2003
18
PROXY PROXYAppendix I
PICO HOLDINGS, INC.
875 PROSPECT STREET, SUITE 301
LA JOLLA, CALIFORNIA 92037
PROXY2003 STOCK APPRECIATION RIGHTS PROGRAM
1.00 PURPOSE
This Plan is intended to promote the Group's and its shareholders' interests by
implementing a compensation program that will enable the Group to attract and to
retain the services of outstanding Employees and Consultants upon whose
judgment, interest and special efforts the successful conduct of the Group's
business is largely dependent.
2.00 DEFINITIONS
When used in this Plan, the following terms have the meanings given to them in
this section unless another meaning is expressly provided elsewhere in this
document or clearly required by the context. When applying these definitions,
the form of any term or word will include any of its other forms.
2.01 ACT. The Securities Exchange Act of 1934, as amended.
2.02 ANNUAL MEETING. The annual meeting of the Company's shareholders.
2.03 AWARD. Any Stock Appreciation Right issued under the Plan.
2.04 AWARD AGREEMENT. The written agreement between the Company and each
Participant that describes the terms and conditions of each Award.
2.05 BENEFICIARY. The person a Participant designates to receive (or
exercise) any Plan benefits (or rights) that are unpaid (or unexercised) when he
or she dies. A Beneficiary may be designated only by following the procedures
described in Section 10.02; neither the Company nor the Committee is required to
infer a Beneficiary from any other source.
2.06 BOARD. The Company's Board of Directors.
2.07 CAUSE. Unless the Committee specifies otherwise in the Award Agreement,
with respect to any Participant, [1] willful failure to substantially perform
his or her duties (for reasons other than physical or mental illness) after
reasonable notice to the Participant of that failure; [2] misconduct that
materially injures the Company, the Group or any Group Member; [3] conviction
of, or entering into a plea of nolo contendere to, a felony or to a misdemeanor
originally charged as a felony; or [4] breach of any written covenant or
agreement with the Company, the Group or any Group Member.
2.08 CHANGE IN CONTROL. The occurrence of any of the following events:
[1] The members of the Board on the Effective Date ("Incumbent
Directors") cease for any reason other than death to constitute at
least a majority of the members of the Board, provided that any
director whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
then Incumbent Directors also will be treated as an Incumbent
Director; or
[2] Any "person," including a "group" [as such terms are used in Act
ss.ss.13(d) and 14(d)(2), but excluding the Company, any other Group
Member, any employee benefit plan of the Company or any Group Member]
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Act), directly or indirectly, of securities of the Company
representing more than 50 percent of the combined voting power of the
Company's then outstanding securities; or
[3] The adoption or authorization by the shareholders of the Company
of a definitive agreement or a series of related agreements [A] for
the merger or other business combination of the Company with or into
another entity of which the shareholders of the Company immediately
before the effective date of the merger or other business combination
own less than 50 percent of the voting power of the surviving business
entity immediately after the effective date of the merger or other
business combination or [B] for the sale or other disposition of all
or substantially all of the assets of the Company to another entity in
which the shareholders of the Company immediately before the effective
date of such merger or other business combination own less than 50
percent of the voting power immediately after the sale or disposition;
or
[4] The adoption by the shareholders of the Company of a plan relating
to the liquidation or dissolution of the Company into another entity
in which shareholders of the Company immediately before the effective
date of such merger or other business combination own less than 50
percent of the voting power immediately after the liquidation or
dissolution.
2.09 CHANGE IN CONTROL PRICE. The higher of [1] the highest price per share
of Stock offered in conjunction with any transaction resulting in a Change in
Control (as determined in good faith by the Committee if any part of the offered
price is payable other than in cash) or, in the case of a Change in Control
occurring solely by reason of events not related to a transfer of Stock, the
highest Fair Market Value of a share of Stock on any of the 30 consecutive
trading days ending on the last trading day before the Change in Control occurs
or [2] the Fair Market Value as of the date of the Change in Control.
2.10 CODE. The Internal Revenue Code of 1986, as amended, and any
regulations issued under the Code and any applicable regulations or rulings
issued under the Code.
2.11 COMMITTEE. The Board's Compensation Committee.
2.12 COMPANY. PICO Holdings, Inc., a California corporation, and any
successors to it.
2.13 CONSULTANT. Any person who, on an applicable Grant Date, is rendering
consulting services to the Company, the Group or any Group Member or who is a
non-employee director of the Company or any other Group Member.
2.14 DISABILITY. The Participant's inability to perform his or her normal
duties due to a physical or mental infirmity.
2
2.15 EFFECTIVE DATE. The date this Plan is approved by the Board or, if
later, the date the Plan is approved by the Company's shareholders.
2.16 EMPLOYEE. Any person who, on an applicable Grant Date, is a common law
employee of the Company, the Group or any Group Member.
2.17 EXERCISE PRICE. The price at which a Participant may exercise an Award.
2.18 FAIR MARKET VALUE. The value of one share of Stock on any relevant
date, determined under the following rules:
[1] If the Stock is traded on an exchange, the reported "closing
price" on the relevant date, if it is a trading day, otherwise on the
next trading day;
[2] If the Stock is traded over-the-counter with no reported closing
price, the mean between the lowest bid and the highest asked prices on
that quotation system on the relevant date if it is a trading day,
otherwise on the next trading day; or
[3] If neither Section 2.18[1] nor Section 2.18[2] applies, the Fair
Market Value as determined by the Committee in good faith.
2.19 GRANT DATE. The date an Award is granted to a Participant.
2.20 GROUP. A controlled group of corporations or of a commonly controlled
group of trades or businesses [as defined in Code ss.ss.414(b) and (c), as
modified by Code ss.415(h)] or of an affiliated service group [as defined in
Code ss.414(m)] or other organization described in Code ss.414(o) that includes
the Company.
2.21 GROUP MEMBER. Each entity that is a member of the Group.
2.22 PARTICIPANT. Any Employee or Consultant to whom an Award has been
granted and which has not been exercised or has not expired under the terms
of the Award Agreement or as provided in Section 7.00.
2.23 PLAN. The PICO Holdings, Inc. 2003 Stock Appreciation Rights Program.
2.24 PLAN YEAR. The Company's fiscal year.
2.25 RETIREMENT. Unless, the Committee specifies otherwise in the Award
Agreement, the date a Participant Terminates on or after the earlier of [A]
reaching age 65 or [B] reaching age 55 and completing at least 7 years of
service [as defined in the Company's tax-qualified Code ss.401(k) plan as in
effect on the Effective Date, whether or not the Participant is participating
in, or eligible to participate in, that plan].
2.26 STOCK. A common share, par value $0.001 per share, issued by the
Company.
2.27 STOCK APPRECIATION RIGHT (OR "SAR"). An Award granted under Section
6.00.
3
2.28 TERMINATION. Unless the Committee specifies otherwise in the Award
Agreement, cessation of the employee-employer or consulting relationship between
a Participant and all Group Members for any reason. However, a Participant will
not have Terminated merely because his or her status changes, without
interruption, from an Employee to a Consultant or from a Consultant to an
Employee.
3.00 PARTICIPATION
3.01 PARTICIPANTS.
[1] Consistent with the terms of the Plan and subject to Section 3.02,
the Committee will [A] decide which Employees and Consultants may
become Participants; [B] decide which Participants will be granted
Awards; and [C] specify the type of Award to be granted and the terms
upon which an Award will be granted.
[2] The Committee may establish different terms and conditions [A] for
each Award; [B] for each Participant receiving an Award; and [C] for
the same Participants for each Award the Participant receives, whether
or not those Awards are granted at different times.
3.02 CONDITIONS OF PARTICIPATION. Each Participant receiving an Award agrees
[1] to sign an Award Agreement; [2] to be bound by the terms of the Award
Agreement and the Plan; and [3] to comply with other conditions imposed by the
Committee.
4.00 ADMINISTRATION
4.01 COMMITTEE DUTIES. The Committee is responsible for administering the
Plan and has all powers appropriate and necessary to that purpose. Consistent
with the Plan's objectives, the Committee may adopt, amend and rescind rules and
regulations relating to the Plan, to the extent appropriate to protect the
Group's (or any Group Member's) interests and has complete discretion to make
all other decisions (including whether a Participant has incurred a Disability)
necessary or advisable for the administration and interpretation of the Plan.
Any action by the Committee will be final, binding and conclusive for all
purposes and upon all persons.
4.02 DELEGATION OF MINISTERIAL DUTIES. In its sole discretion, the Committee
may delegate any ministerial duties associated with the Plan to any person
(including Employees) that it deems appropriate.
4.03 AWARD AGREEMENT. At the time any Award is made, the Committee will
prepare and deliver an Award Agreement to each affected Participant. The Award
Agreement:
[1] Will describe [A] when and how the Award may be exercised; [B] the
effect of exercising the Award; and [C] the Exercise Price associated
with each Award.
4
[2] To the extent different from the terms of the Plan, will describe
[A] any conditions that must be met before the Award may be exercised;
[B] any objective restrictions or conditions that must be met before
the Award may be exercised; [c] when and how an Award may be
exercised; and [D] any other applicable terms and conditions affecting
the Award.
5.00 STOCK SUBJECT TO PLAN
5.01 NUMBER OF SHARES OF STOCK. Subject to Section 5.03, the number of
shares of Stock subject to Awards under the Plan may not be larger than
2,042,781.
5.02 CANCELLED, TERMINATED OR FORFEITED AWARDS. Any Stock subject to an
Award that, for any reason, is cancelled, terminated or otherwise settled
without the issuance of cash may again be granted under the Plan.
5.03 ADJUSTMENT IN CAPITALIZATION. If, after the Effective Date, there is a
Stock dividend or Stock split, recapitalization (including payment of an
extraordinary dividend), merger, consolidation, combination, spin-off,
distribution of assets to shareholders, exchange of shares or other similar
corporate change affecting Stock, the Committee will appropriately adjust [1]
the aggregate number of shares of Stock available for Awards under Section 5.01
or subject to outstanding Awards (as well as any share-based limits imposed
under this Plan); [2] the respective Exercise Price, number of shares and other
limitations applicable to outstanding or subsequently issued Awards; and [3]
any other factors, limits or terms affecting any outstanding or subsequently
issued Awards.
6.00 STOCK APPRECIATION RIGHTS
6.01 SAR GRANTS. Subject to the terms of the Plan, the Committee may grant
SARs to Participants at any time during the term of this Plan.
6.02 EXERCISE PRICE. The Committee will specify the Exercise Price in the
Award Agreement.
6.03 EXERCISE OF SARS. SARs will be exercisable subject to the terms
specified in the Award Agreement.
6.04 SETTLING SARS.
[1] A Participant exercising an SAR will receive a settlement
amount equal to [A] the difference between [I] the Fair Market Value of
a share of Stock on the exercise date and [II] the Exercise Price,
multiplied by [B] the number of shares of Stock with respect to which
the SAR is exercised.
[2] The value of any SAR being exercised will be settled in cash.
6.05 REESTABLISHING THE EXERCISE PRICE. In its sole discretion, the
Committee may reduce the Exercise Price associated with any SAR at any time
before the affected SAR is exercised.
5
7.00 TERMINATION
7.01 RETIREMENT. Subject to Section 7.03, unless otherwise specified in the
Award Agreement, all Awards that are outstanding (whether or not then
exercisable) when a Participant Retires may be exercised at any time before the
earlier of [1] the expiration date specified in the Award Agreement or [2] six
months beginning on the Retirement date (or any shorter period specified in the
Award Agreement).
7.02 DEATH OR DISABILITY. Unless otherwise specified in the Award
Agreement, all Awards that are outstanding (whether or not then exercisable)
when a Participant Terminates because of death or Disability may be exercised by
the Participant or the Participant's Beneficiary at any time before the earlier
of [1] the expiration date specified in the Award Agreement or [2] 12 months
beginning on the date of death or Termination because of Disability (or any
shorter period specified in the Award Agreement).
7.03 TERMINATION FOR CAUSE. Unless otherwise specified in the Award
Agreement, all Awards that are outstanding (whether or not then exercisable) if
a Participant is Terminated for Cause will be forfeited even if the date of
Termination for Cause is after the Participant qualifies for Retirement.
7.04 TERMINATION FOR ANY OTHER REASON. Unless otherwise specified in the
Award Agreement or subsequently, any Awards that are outstanding when a
Participant Terminates for any reason not described in Sections 7.01 through
7.03 and which are then exercisable, or which the Committee has, in its sole
discretion, decided to make exercisable, may be exercised at any time before the
earlier of [1] the expiration date specified in the Award Agreement or [2] 90
days beginning on the date the Participant Terminates.
8.00 CHANGE IN CONTROL
8.01 ACCELERATION AND SETTLEMENT. Subject to Section 8.02, on the date of
any Change in Control, all SARs will be deemed to be exercisable and will be
liquidated in a single lump sum cash payment equal to the Change in Control
Price multiplied by the number of Awards to be liquidated.
8.02 EFFECT OF CODE SS.280G. If the provisions of Section 8.01 generate a
benefit that is a "parachute payment" as defined in Code ss.280G and if the
value of that parachute payment, when combined with other parachute payments
accrued to a Participant on account of the same Change in Control, would
generate the penalties arising under Code ss.ss.280G and 4999, the parachute
payment arising under this section will be reduced (but not below zero) to the
extent needed to avoid those penalties but only if the value of the after-tax
amount accruing to the Participant because of that reduction is larger than the
after-tax amount that would accrue to the Participant without any reduction.
6
9.00 AMENDMENT, MODIFICATION AND TERMINATION OF PLAN
The Board or the Committee may terminate, suspend or amend the Plan at any
time without shareholder approval except to the extent that shareholder approval
is required to satisfy applicable requirements imposed by [1] Rule 16b-3 under
the Act, or any successor rule or regulation; [2] applicable requirements of the
Code; or [3] any securities exchange, market or other quotation system on or
through which the Company's securities are listed or traded. Also, no Plan
amendment may [4] result in the loss of a Committee member's status as a
"non-employee director" as defined in Rule 16b-3 under the Act, or any successor
rule or regulation, with respect to any employee benefit plan of the Company;
[5] cause the Plan to fail to meet requirements imposed by Rule 16b-3; or [6]
without the consent of the affected Participant adversely affect any Award
issued before the amendment, modification or termination.
10.00 MISCELLANEOUS
10.01 ASSIGNABILITY/DEFERRAL OF GAIN.
[1] Except as described in this section and Section 10.01[2], an Award
may not be transferred except by will or the laws of descent and
distribution and, during the Participant's lifetime, may be exercised
only by the Participant or the Participant's guardian or legal
representative. However, with the permission of the Committee, a
Participant or a specified group of Participants may transfer Awards to
a revocable inter vivos trust of which the Participant is the settlor
or may transfer Awards to any member of the Participant's immediate
family, any trust, whether revocable or irrevocable, established solely
for the benefit of the Participant's immediate family, any partnership
or limited liability company whose only partners or members are members
of the Participant's immediate family or an organization described in
Code ss.501(c)(3) ("Permissible Transferees"). Any Award transferred to
a Permissible Transferee will continue to be subject to all of the
terms and conditions that applied to the Award before the transfer and
to any other rules prescribed by the Committee. A Permissible
Transferee [other than an organization described in Code ss.501(c)(3)]
may retransfer an Award but only by operation of a will or the laws of
descent and distribution and then only to another Permissible
Transferee.
[2] Subject to rules, procedures and limitations adopted by the
Committee, a Participant who is an Employee on the exercise date (but
not a Beneficiary, a Consultant or a Permissible Transferee as defined
in Section 10.01[1]) may elect to defer the gain associated with the
exercise of an Award into and subject to the terms of any nonqualified
deferred compensation program [A] maintained by the Company, the Group
or any Group Member and [B] designated by the Committee. Any gain
attributable to an Award to be deferred under this section will be
credited to an investment fund established under the nonqualified
deferred compensation plan as directed by the deferring Participant and
will be distributed in any form permitted by that nonqualified deferred
compensation plan.
7
10.02 BENEFICIARY DESIGNATION. Each Participant may name a Beneficiary or
Beneficiaries (who may be named contingently or successively) to receive or to
exercise any Award that is unpaid or unexercised at the Participant's death.
Each designation made will revoke all prior designations made by the same
Participant, must be made on a form prescribed by the Committee and will be
effective only when filed in writing with the Committee. If a Participant has
not made an effective Beneficiary designation, the deceased Participant's
Beneficiary will be his or her surviving spouse or, if none, the deceased
Participant's estate. The identity of a Participant's designated Beneficiary
will be based only on the information included in the latest beneficiary
designation form completed by the Participant and will not be inferred from any
other evidence.
10.03 NO GUARANTEE OF EMPLOYMENT OR PARTICIPATION. Nothing in the Plan may be
construed as [1] interfering with or limiting the right of the Company, the
Group or any Group Member to Terminate any Participant at any time; [2]
conferring on any Participant any right to continue as an Employee or a
Consultant; [3] guaranteeing that any Employee or Consultant will be selected to
be a Participant; or [4] guaranteeing that any Participant will receive any
future Awards.
10.04 TAX WITHHOLDING.
[1] The appropriate Group Member will withhold from other amounts owed
to the Participant, or require a Participant to remit to that Group
Member, an amount sufficient to satisfy federal, state and local
withholding tax requirements on any Award, exercise or cancellation of
an Award or purchase of Stock. If these amounts are not to be withheld
from other payments due to the Participant (or if there are no other
payments due to the Participant), the Company will defer payment of
cash until the earlier of [A] 30 days after the date the Award is
settled or [B] the date the Participant remits the required amount.
[2] If the Participant has not remitted the required amount within 30
days after the date the Award is settled, the Company will permanently
withhold from the value of the Awards to be distributed the minimum
amount required to be withheld to comply with applicable federal, state
and local income, wage and employment taxes and distribute the balance
to the Participant.
[3] In its sole discretion, which may be withheld for any reason or for
no reason, the Committee may permit a Participant to elect, subject to
conditions the Committee establishes, to reimburse the Company for this
tax withholding obligation through one or more of the following methods
[A] by having cash otherwise distributable under the Plan withheld by
the Company (but only to the extent of the minimum amount that must be
withheld to comply with applicable state, federal and local income,
employment and wage tax laws); [B] by delivering to the Company
previously acquired shares of Stock that the Participant has owned for
at least six months; [C] by remitting cash to the Company; or [D] by
remitting a personal check immediately payable to the Company.
10.05 INDEMNIFICATION. Each individual who is or was a member of the Committee
or of the Board will be indemnified and held harmless by the Company against and
from any loss, cost, liability or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit or proceeding to which he or she may be made a
8
party or in which he or she may be involved by reason of any action taken or
failure to take action under the Plan as a Committee member and against and from
any and all amounts paid, with the Company's approval, by him or her in
settlement of any matter related to or arising from the Plan as a Committee
member or paid by him or her in satisfaction of any judgment in any action, suit
or proceeding relating to or arising from the Plan against him or her as a
Committee member, but only if he or she gives the Company an opportunity, at its
own expense, to handle and defend the matter before he or she undertakes to
handle and defend it in his or her own behalf. The right of indemnification
described in this section is not exclusive and is independent of any other
rights of indemnification to which the individual may be entitled under the
Company's organizational documents, by contract, as a matter of law or
otherwise.
10.06 NO LIMITATION ON COMPENSATION. Nothing in the Plan is to be construed
to limit the right of any Group Member to establish other plans or to pay
compensation to its Employees or Consultants, in cash or property, in a manner
not expressly authorized under the Plan.
10.07 REQUIREMENTS OF LAW. The grant of Awards will be subject to all
applicable laws, rules and regulations and to all required approvals of any
governmental agencies or national securities exchange, market or other quotation
system.
10.08 TERM OF PLAN. The Plan will be effective upon its adoption by the
Board and approval by the affirmative vote of the holders of a majority of the
shares of voting Stock present in person or represented by proxy at the first
Annual Meeting occurring after the Board approves the Plan.
10.09 GOVERNING LAW. The Plan, and all agreements hereunder, will be
construed in accordance with and governed by the laws (other than laws governing
conflicts of laws) of the State of California.
10.10 NO IMPACT ON BENEFITS. Plan Awards are incentives designed to promote
the objectives described in Section 1.00. Also, Awards are not compensation for
purposes of calculating a Participant's rights under any employee benefit plan.
9
Appendix II
Audit Committee Charter
This charter shall be reviewed, updated and approved annually by the board of
directors.
Role and Independence
The audit committee of the board of directors assists the board in fulfilling
its responsibility for oversight of the quality and integrity of the accounting,
auditing and reporting practices of PICO Holdings, Inc. (the "Company") and
other such duties as directed by the board. The membership of the committee
shall consist of at least three directors who are generally knowledgeable in
financial and auditing matters, including at least one member with accounting or
related financial management expertise. Each member shall be free of any
relationship that, in the opinion of the board, would interfere with his or her
individual exercise of independent judgment, and shall meet the director
independence requirements for serving on audit committees as set forth in the
corporate governance standards of the NASDAQ. The committee is expected to
maintain free and open communication (including private executive sessions at
least annually) with the independent accountants and the management of the
Company. In discharging this oversight role, the committee is empowered to
investigate any matter brought to its attention, with full power to retain
outside counsel or other experts for this purpose.
The board of directors shall appoint one member of the audit committee as
chairperson. He or she shall be responsible for leadership of the committee,
including preparing the agenda, presiding over the meetings, making committee
assignments and reporting to the board of directors. The chairperson will also
maintain regular liaison with the CEO, CFO, and the lead independent audit
partner.
Responsibilities
The audit committee's primary responsibilities include:
- Recommending to the board the independent accountant to be selected or
retained to audit the financial statements of the Company. In so
doing, the committee will request from the auditor a written
affirmation that the auditor is in fact independent, discuss with the
auditor any relationships that may impact the auditor's independence,
and recommend to the board any actions necessary to oversee the
auditor's independence.
- Overseeing the independent auditor relationship by discussing with the
auditor the nature and rigor of the audit process, receiving and
reviewing
audit reports, and providing the auditor full access to the
committee (and the board) to report on any and all appropriate
matters.
- Providing guidance and oversight to the internal control audit
activities of the Company including reviewing the organization, plans
and results of such activity.
- Reviewing the audited financial statements and discussing them with
management and the independent auditor. These discussions shall
include consideration of the quality of the Company's accounting
principles as applied in its financial reporting, including review of
estimates, reserves and accruals, review of judgmental areas, review
of audit adjustments whether or not recorded and such other inquiries
as may be appropriate. Based on the review, the committee shall make
its recommendation to the board as to the inclusion of the company's
audited financial statements in the company's annual report on Form
10-K.
- Reviewing with management and the independent auditor the quarterly
financial information prior to the company's filing of Form 10-Q. This
review may be performed by the committee or its chairperson.
- Discussing with management and the external auditors the quality and
adequacy of the Company's internal controls.
- Discussing with management the status of pending litigation, taxation
matters and other areas of oversight to the legal and compliance area
as may be appropriate.
- Reporting audit committee activities to the full board and issuing
annually a report to be included in the proxy statement (including
appropriate oversight conclusions) for submission to the shareholders.
000000 0000000000 0 0000
PICO HOLDINGS, INC.
000000000.000 ext
000000000.000 ext
000000000.000 ext
MR A SAMPLE 000000000.000 ext
DESIGNATION (IF ANY) 000000000.000 ext
ADD 1 000000000.000 ext
ADD 2 000000000.000 ext
ADD 3
ADD 4 Holder Account Number
ADD 5
ADD 6
C 1234567890 J N T
[BAR CODE]
[ ] Mark this box with
an X if you have made
changes to your name
or address details
above.
- --------------------------------------------------------------------------------
ANNUAL MEETING PROXY CARD
- --------------------------------------------------------------------------------
[A] ELECTION OF SHAREHOLDERSDIRECTORS PLEASE REFER TO THE REVERSE SIDE FOR INTERNET AND
TELEPHONE VOTING INSTRUCTIONS.
1. The Board of Directors recommends a vote FOR the listed nominees.
FOR WITHHOLD
01 - S. Walter Foulkrod, III, Esq. [ ] [ ]
02 - Richard D. Ruppert, MD [ ] [ ]
[B] ISSUES
The Board of Directors recommends a vote FOR the following proposal.
FOR AGAINST ABSTAIN
2. To approve the PICO Holdings, Inc.
2003 Stock Appreciation Rights Program. [ ] [ ] [ ]
3. To transact such other business as may be
properly brought before the meeting and
any adjournment thereof.
[C] AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR
INSTRUCTIONS TO BE EXECUTED.
Note: Please sign exactly as name appears on this card. Joint owners should
each sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title.
Signature 1 - Please keep signature Signature 2 - Please keep signature Date (mm/dd/yyyy)
within the box within the box
- ----------------------------------- ----------------------------------- -------------------------
/ /
- ----------------------------------- ----------------------------------- -------------------------
[ ] 1 U P X H H H P P P P 0020792 +
001CD40001 00A24B
- --------------------------------------------------------------------------------
PROXY - PICO HOLDINGS, INC.
- --------------------------------------------------------------------------------
PROXY SOLICITED BYON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John R. Hart and James F. Mosier, or either of
them acting alone, as proxies, each with the power to appoint his substitute,
and hereby authorizes them to represent, and to vote as designated below, all
the shares of Common Stock of PICO Holdings, Inc. (the "Company") held of record
by the undersigned on May 20, 200219, 2003 at the Annual Meeting of Shareholders of the
Company to be held at the Museum of Contemporary Art, Coast Room, 700 Prospect
Street, La Jolla, California 92037 on July 18, 200217, 2003 at 9:00 a.m. (PDT), and at
any adjournment thereof.
THIS PROXY,(The Board of Directors recommends a vote FOR items 1 and 2)
1. Election of two Directors for terms of three years ending in 2006. The
nominees are S. Walter Foulkrod, III, Esq. and Richard D. Ruppert, MD.
2. To approve the PICO Holdings, Inc. 2003 Stock Appreciation Rights Program.
3. To transact such other business as may be properly brought before the meeting
and any adjournment thereof.
WHEN PROPERLY EXECUTED, THESE INSTRUCTIONS WILL BE VOTED IN THE MANNER DIRECTED
HEREIN.ON THE REVERSE SIDE OF THIS CARD; IF NOYOU DO NOT PROVIDE DIRECTION, IS MADE, THIS PROXY
WILL BE VOTED FOR THE PROPOSALS
LISTED ON THE REVERSE.
EVEN IF YOU ARE PLANNING TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGNITEMS 1 AND MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT2.
YOUR STOCK MAY BE REPRESENTED
AT THE MEETING.VOTE IS IMPORTANT!
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued andENVELOPE OR VOTE BY TELEPHONE OR INTERNET PURSUANT TO THE INSTRUCTIONS BELOW.
INTERNET AND TELEPHONE VOTING INSTRUCTIONS
YOU CAN VOTE BY TELEPHONE OR INTERNET! AVAILABLE 24 HOURS A DAY 7 DAYS A WEEK!
Instead of mailing your proxy, you may choose one of the two voting methods
outlined below to be signed on the reverse side.)
vote your proxy. Have this proxy card in hand when you call.
PICO HOLDINGS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
1. Election of Three Directors- ------------------------------------------------------------ -----------------------------------------
[Phone] To vote using the Telephone (within U.S. and Canada) [Mouse] To vote using the Internet
- ------------------------------------------------------------ -----------------------------------------
- - Call toll free 1-XXX-XXX-XXXX in the United States or - Go to Serve for 3. In their discretion, the above named Proxies are
Three Year Terms until the Annual Meeting of authorized to vote upon each other item of business
Shareholders in 2005. The Board of Directors as may properly come before the meeting or any
recommends a vote FOR the listed nominees. adjournment thereof.
FOR WITHHOLD
01-John R. Hart [ ] [ ]
02-Ronald Langley [ ] [ ]
03-John D. Weil [ ] [ ]
2. The Board of Directors recommends a vote FOR AGAINST ABSTAIN
FOR the following proposal. [ ] [ ] [ ] ----------------------------------------------------
(Signatures)
To ratifyweb site:
Canada any time on a touch tone telephone. There is NO WWW.COMPUTERSHARE.COM/US/PROXY
CHARGE to you for the appointment of Deloitte &
Touche, LLP ascall.
- - Enter the Company's independent
auditors for fiscal year 2002.
---------------------------------------------------
(Signatures)
Dated:
--------------------------------------------
Please sign exactly as your name(s) appearsHOLDER ACCOUNT NUMBER (EXCLUDING THE LETTER - Enter the information requested on your stock certificate. If such stock is held by joint
tenants, both persons should sign. When signing as
attorney, executor, administrator, trustee or
guardian, please note your title as such. Ifcomputer screen
"C") and PROXY ACCESS NUMBER located below. and follow the stock is registered in the name of a corporation,
please sign in the corporation's name by the
president or any other authorized officer. If the
stock is registered in the name of a partnership,
please sign in the partnership's name by an
authorized person.simple instructions.
- - Follow the simple recorded instructions.
Option 1: To vote as the Board of Directors recommends on ALL proposals:
Press 1.
When asked, please confirm your vote by pressing 1.
Option 2: If you choose to vote on EACH proposal separately, press 0 and
follow the simple recorded instructions.
HOLDER ACCOUNT NUMBER C0123456789 PROXY ACCESS NUMBER 12345
IF YOU VOTE BY TELEPHONE OR THE INTERNET, PLEASE DO NOT MAIL BACK THIS
PROXY CARD.
PROXIES SUBMITTED BY TELEPHONE OR THE INTERNET MUST BE RECEIVED BY 12:00
MIDNIGHT, CENTRAL TIME, ON JULY 15, 2003.
THANK YOU FOR VOTING
00A25B