UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 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
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
THE ADAMS EXPRESS COMPANY
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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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
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Notes:
The Adams Express Company
Seven St. Paul Street
Baltimore, Maryland 21202
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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February 14, 2003
To the Stockholders of
THE ADAMS EXPRESS COMPANY:
Notice is hereby given that the Annual Meeting of Stockholders of THE ADAMS
EXPRESS COMPANY, a Maryland corporation (the "Company"), will be held at the
Hyatt Regency O'Hare, 9300 W. Bryn Mawr Avenue, Rosemont, IL 60018 on Tuesday,
March 25, 2003, at 11:00 a.m., for the following purposes:
(1) to elect directors as identified in the Proxy Statement for the ensuing
year;
(2) to consider and vote upon the ratification of the selection of
PricewaterhouseCoopers LLP as the firm of independent accountants to audit the
books and accounts of the Company for or during the year ending December 31,
2003;
(3) to consider and vote upon a proposal to approve an amendment to the
Stock Option Plan for the Company as set forth and described in the Proxy
Statement;
(4) acting upon a stockholder proposal recommending that the Board of
Directors consider placing certain limitations on when stock option grants may
be awarded to the Company's investment personnel; and
(5) to transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record, as shown by the transfer books of the Company, at
the close of business on February 14, 2003, are entitled to notice of and to
vote at this meeting.
By order of the Board of Directors,
LAWRENCE L. HOOPER, JR.
Vice President, Secretary and
General Counsel
Baltimore, MD
Note: Stockholders who do not expect to attend the meeting are requested to
fill in, sign, date and return the accompanying proxy in the enclosed envelope
without delay. Telephone and Internet voting are also offered.
The Adams Express Company
Seven St. Paul Street
Baltimore, Maryland 21202
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Proxy Statement
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The Annual Meeting of Stockholders of The Adams Express Company, a Maryland
corporation (the "Company"), will be held Tuesday, March 25, 2003, for the
purposes set forth in the accompanying Notice of Annual Meeting. This statement
is furnished in connection with the solicitation by the Board of Directors of
proxies to be used at the meeting and at any and all adjournments thereof and
is first being sent to stockholders on or about February 21, 2003.
At the Annual Meeting, action is to be taken on (1) the election of a Board
of Directors; (2) the ratification of the selection of independent accountants;
(3) the approval of an amendment to the Stock Option Plan of the Company; (4)
if presented, a stockholder proposal recommending that the Board of Directors
consider placing certain limitations on when stock option grants may be awarded
to the Company's investment personnel; and (5) the transaction of such other
business as may properly come before the meeting.
Except for Proposals (1), (2), (3) and (4) referred to above, the proxies
confer discretionary authority on the persons named therein or their
substitutes with respect to any business that may properly come before the
meeting. Stockholders retain the right to revoke executed proxies at any time
before they are voted by written notice to the Company, by executing a later
dated proxy, or by appearing and voting at the meeting. All shares represented
at the meeting by proxies in the accompanying form will be voted, provided that
such proxies are properly signed. In cases where a choice is indicated, the
shares represented will be voted in accordance with the specifications so made.
In cases where no specifications are made, the shares represented will be voted
for the election of directors and for Proposals (2) and (3), and against
Proposal (4). Under Maryland law, there are no appraisal or other dissenter
rights with respect to any matter to be voted on at the Annual Meeting that is
described herein.
The Company will pay all costs of soliciting proxies in the accompanying
form. See "Other Matters" below. Solicitation will be made by mail, and
officers, regular employees, and agents of the Company may also solicit proxies
by telephone or personal interview. The Company expects to request brokers and
nominees who hold stock in their names to furnish this proxy material to their
customers and to solicit proxies from them, and will reimburse such brokers and
nominees for their out-of-pocket and reasonable clerical expenses in connection
therewith.
Shares Outstanding and Entitled to be Voted at Meeting
Only stockholders of record at the close of business February 14, 2003, may
vote at the Annual Meeting. The total number of shares of Common Stock of the
Company outstanding and entitled to be voted on the record date was 84,083,150.
Each share is entitled to one vote. The Company has no other class of security
outstanding. For Proposal (1), referred to above, directors shall be elected by
a plurality of the votes cast at the meeting. Proposals (2), (3), and (4),
referred to above, require the affirmative vote of a majority of the votes cast
at the meeting. Unless otherwise required by the Company's Articles of
Incorporation or By-laws, or by applicable Maryland law, any other matter
properly presented for a vote at the meeting will require the affirmative vote
of a majority of the votes
1
cast at the meeting. Proxies received by the Company that are marked "withhold
authority" or abstain, or that constitute a broker non-vote, are counted as
present for purposes of determining a quorum at the meeting. Broker non-votes
are shares held in the name of a broker or nominee for which the broker or
nominee indicates that instructions have not been received from the beneficial
owner or person entitled to vote and the broker or nominee does not have
discretionary voting power. Proxies marked "withhold authority", abstentions
and broker non-votes do not count as votes cast with respect to any proposal,
and therefore, such proxies would have no effect on the outcome of Proposals
(1), (2), (3) and (4), above.
As of December 31, 2002, the Company knows of no person or group of persons
that owns beneficially more than 5 percent of the outstanding Common Stock of
the Company, except as set forth immediately below. According to information he
has provided to the Company, Erik E. Bergstrom and related persons, directly
and indirectly, own 6,313,617 shares of Common Stock of the Company, which
represents 7.5% of the Company's outstanding Common Stock. Mr. Bergstrom
disclaimed beneficial ownership of certain of these shares. Mr. Bergstrom's
address is P.O. Box 126, Palo Alto, CA 94302.
(1) NOMINEES FOR ELECTION AS DIRECTORS
Unless contrary instructions are given by the stockholder signing a proxy,
it is intended that each proxy in the accompanying form will be voted at the
Annual Meeting for the election of the following nominees to the Board of
Directors for the ensuing year, all of whom have consented to serve if elected:
Enrique R. Arzac W. D. MacCallan John J. Roberts
Daniel E. Emerson W. Perry Neff Susan C. Schwab
Edward J. Kelly, III Douglas G. Ober* Robert J. M. Wilson
Thomas H. Lenagh Landon Peters
If for any reason one or more of the nominees above named shall become
unable or unwilling to serve (which is not now expected) when the election
occurs, proxies in the accompanying form will, in the absence of contrary
instructions, be voted for the election of the other nominees above named and
may be voted for substitute nominees in the discretion of the persons named as
proxies in the accompanying form. The directors elected will serve until the
next annual meeting or until their successors are elected, except as otherwise
provided in the By-laws of the Company.
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* Mr. Ober is an "interested person," as defined by the Investment Company Act
of 1940, because he is an officer of the Company.
2
Information as to Nominees for Election as Directors (as of December 31, 2002)
Set forth below with respect to each nominee for director are his or her
name and age, any positions held with the Company, other principal occupations
during the past five years, other directorships and business affiliations, the
year in which he or she first became a director, and the number of shares of
Common Stock of the Company beneficially owned by him or her. Also set forth
below is the number of shares of Common Stock beneficially owned by all the
directors and officers of the Company as a group. A separate table is provided
showing the dollar value range of the shares beneficially owned by each
director.
Shares of
Common
Has Stock
been a Beneficially
Name, Age, Positions with the Company, Other Director Owned
Principal Occupations and Other Affiliations since (a)(b)(c)(d)
-------------------------------------------- -------- ------------
Independent Directors
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Enrique R. Arzac, 61, Professor of Finance and Economics, formerly, Vice Dean of Academic Affairs 1983 9,658
of the Graduate School of Business, Columbia University. Director of Petroleum & Resources
Corporation* and Credit Suisse Asset Management Funds (8 funds) (investment companies).
Daniel E. Emerson, 78, Retired Executive Vice President of NYNEX Corporation (communications), 1982 20,832
retired Chairman of the Board of both NYNEX Information Resources Co. and NYNEX Mobile
Communications Co. Previously, Executive Vice President and Director of New York Telephone
Company. Presently, Chairman, The National YMCA Fund, Inc., and Director of Petroleum &
Resources Corporation.
Edward J. Kelly, III, 49, President and Chief Executive Officer of Mercantile Bankshares Corporation 2001 1,047
since March 2001. Formerly, Managing Director with J.P. Morgan Chase & Co. (investment bank
and global financial institution) from February 1996 to January 2001. Director of Petroleum &
Resources Corporation, Hartford Financial Services Group, Constellation Energy Group, CIT
Group (commercial finance), and CSX Corporation (transportation); and member of Board of
Trustees of Johns Hopkins University.
Thomas H. Lenagh, 84, Financial Advisor, Chairman of the Board, Inrad Corp. (crystals) since 1968 2,855
August 1999. Formerly, Chairman of the Board and Chief Executive Officer of Greiner
Engineering Inc. (formerly Systems Planning Corp.) (consultants). Formerly, Treasurer and Chief
Investment Officer of the Ford Foundation (charitable foundation). Director of Gintel Fund,
Cornerstone Funds, Inc. (3 funds), and Petroleum & Resources Corporation (investment
companies).
W. D. MacCallan, 75, Retired Chairman of the Board and Chief Executive Officer of the Company. 1971 147,420
Director, former Chairman of the Board and Chief Executive Officer of Petroleum & Resources
Corporation. Formerly, consultant to the Company and Petroleum & Resources Corporation.
W. Perry Neff, 75, Private Financial Consultant. Retired Executive Vice President of Chemical Bank. 1987 5,778
Director of Petroleum & Resources Corporation.
Landon Peters, 72, Private Investor. Formerly, Investment Manager, Y.M.C.A. Retirement Fund, and 1974 4,583
Executive Vice President and Treasurer and prior thereto Senior Vice President and Treasurer of
The Bank of New York. Director of Petroleum & Resources Corporation.
John J. Roberts, 80, Senior Advisor to American International Group, Inc. (insurance) since 1976 8,996
September 1997, and formerly, Vice-Chairman, External Affairs, American International Group,
Inc. from May 1989 to September 1997. Formerly, Chairman and Chief Executive Officer of
American International Underwriters Corporation (insurance). Previously, President of American
International Underwriters Corporation-U.S./Overseas Operations. Honorary Director of American
International Group, Inc., and Director of Petroleum & Resources Corporation.
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* Non-controlled affiliate of the Company.
3
Shares of
Common
Has Stock
been a Beneficially
Name, Age, Positions with the Company, Other Director Owned
Principal Occupations and Other Affiliations since (a)(b)(c)(d)
-------------------------------------------- -------- ------------
Susan C. Schwab, 47, Dean of the School of Public Affairs at the University of Maryland, College
Park, since 1995. Formerly, Director of Corporate Business Development at Motorola, Inc.
(electronics). Director of Calpine Corp. (energy) and Petroleum & Resources Corporation. 2000 1,415
Robert J. M. Wilson, 82, Retired President of the Company. Director and retired President of
Petroleum & Resources Corporation. 1975 45,814
Interested Director
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Douglas G. Ober, 56, Chairman of the Board and Chief Executive Officer of the Company since
April 1, 1991. Chairman of the Board, Chief Executive Officer and Director of Petroleum &
Resources Corporation. 1989 98,022(e)
Directors and executive officers of the Company as a group. 751,690
The address for each director is the Company's office, shown on page 1
hereof.
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(a) To the Company's knowledge, other than shares referred to in footnote (c)
below, each director and officer had sole investment and sole voting power
with respect to the shares shown opposite his or her name, except Mr.
Lenagh, who has only investment power.
(b) Of the amount shown as beneficially owned by the directors and executive
officers as a group, 290,560 shares were held by the Trustee under the
Employee Thrift Plan of the Company and the Employee Thrift Plan of
Petroleum & Resources Corporation.
(c) The amounts shown include shares subject to option under the Company's
Stock Option Plan (see "Stock Option Plan" below) held by Mr. Ober (51,753
shares) and directors and executive officers as a group (210,203 shares).
Mr. Ober and the other officers with shares subject to option all disclaim
beneficial ownership of those shares.
(d) Calculated on the basis of 84,536,250 shares outstanding on December 31,
2002, each director owned less than 1.0% of the Common Stock outstanding.
The directors and executive officers as a group owned 0.9% of the Common
Stock outstanding.
(e) Of the amount shown, 46,168 shares beneficially owned by Mr. Ober were held
by the Trustee under the Employee Thrift Plan of the Company.
Independent Directors Dollar Value of Shares Owned
--------------------- ----------------------------
Enrique R. Arzac greater than $100,000
Daniel E. Emerson greater than $100,000
Edward J. Kelly, III $10,001-$50,000
Thomas H. Lenagh $10,001-$50,000
W. D. MacCallan greater than $100,000
W. Perry Neff $50,001-$100,000
Landon Peters $50,001-$100,000
John J. Roberts greater than $100,000
Susan C. Schwab $10,001-$50,000
Robert J. M. Wilson greater than $100,000
Interested Director
-------------------
Douglas G. Ober greater than $100,000
The nominees for election as directors of the Company identified above are
also the nominees for election to the Board of Directors of Petroleum &
Resources Corporation ("Petroleum"), the Company's non-controlled affiliate, of
which the Company owned 1,985,996 shares or approximately 9.2% of the
outstanding Common Stock on December 31, 2002.
4
Section 16(a) Beneficial Ownership Reporting Compliance
Each director and officer of the Company who is subject to Section 16 of the
Securities Exchange Act of 1934 is required to report to the Securities and
Exchange Commission by a specified date his or her beneficial ownership of or
transactions in the Company's securities. Based upon a review of filings with
the Securities and Exchange Commission and written representation that no other
reports are required, the Company has no reason to believe that any such
directors and officers have not filed all requisite reports with the Securities
and Exchange Commission on a timely basis during 2002.
Information as to Other Executive Officers
Set forth below are the names, ages and positions with the Company of all
executive officers of the Company other than those who also serve as directors.
Executive officers serve as such until the election of their successors.
Mr. Lawrence L. Hooper, Jr., 50, has served as Vice President since March
30, 1999, and as Secretary and General Counsel since April 1, 1997. Prior
thereto, he was a partner in Tydings & Rosenberg L.L.P., a Baltimore, Maryland
law firm.
Ms. Maureen A. Jones, 55, has served as Vice President since January 1,
1998, and as Treasurer since January 1, 1993. She was elected Chief Financial
Officer on March 26, 2002.
Mr. Richard F. Koloski, 58, has served as Executive Vice President since
January 1, 1986. As previously announced, Mr. Koloski intends to retire at the
end of March 2003.
Mr. Joseph M. Truta, 58, has served as President since April 1, 1986.
Shares of
Common Stock
Security Ownership of Management of the Company (a) Beneficially Owned
Name (b)(c)(d)(e)
---- ------------------
Lawrence L. Hooper, Jr...................................... 24,803
Maureen A. Jones............................................ 32,666
Richard F. Koloski.......................................... 120,261
Joseph M. Truta............................................. 227,540
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(a) As of December 31, 2002. Share ownership of directors and executive
officers as a group is shown in the table beginning on page 3 and footnotes
thereto.
(b) To the Company's knowledge, each officer had sole investment and voting
power with respect to the shares shown opposite his or her name above other
than shares referred to in footnote (d) below.
(c) Of the amounts shown, the following shares beneficially owned by the
respective officer were held by the Trustee under the Employee Thrift Plan
of the Company and the Employee Thrift Plan of Petroleum: Mr. Hooper (8,797
shares), Ms. Jones (12,714 shares), Mr. Koloski (50,938 shares), and Mr.
Truta (171,943 shares).
(d) The amounts shown include shares subject to option under the Company's
Stock Option Plan (see "Stock Option Plan" below), held by Mr. Hooper
(15,956 shares), Ms. Jones (19,952 shares), Mr. Koloski (69,323 shares),
and Mr. Truta (53,219 shares). These officers disclaim beneficial ownership
of those shares.
(e) Calculated on the basis of 84,536,250 shares of Common Stock outstanding on
December 31, 2002, each of the officers listed above owned less than 1.0%
of the Common Stock outstanding.
5
Board Meetings and Committees of the Board
Overall attendance at the twelve meetings of the Board held in 2002 was
approximately 95%. Each Director attended at least 88% of the total of all (i)
meetings of the Board and (ii) meetings of Committees of the Board on which he
or she served in 2002.
Audit Committee
Messrs. Arzac, MacCallan, Neff and Roberts, each of whom is an independent
director, as such is defined by the Rules of the New York Stock Exchange,
constitute the membership of the Board's standing Audit Committee, which met
three times in 2002. The Board has adopted a written charter under which the
Audit Committee operates, which was most recently amended in January 2001. Set
forth below is the report of the Audit Committee:
Audit Committee Report
The purposes of the Committee are set forth in the Committee's written
charter. As provided in the charter, the role of the Committee is to assist the
Board of Directors in its oversight on matters relating to accounting,
financial reporting, internal control, auditing, and regulatory compliance
activities, and other matters the Board deems appropriate. The Committee also
recommends to the Board the selection of the Company's independent accountants.
Management, however, is responsible for the preparation, presentation and
integrity of the Company's financial statements, and for the procedures
designed to assure compliance with accounting standards and applicable laws and
regulations. The independent accountants are responsible for planning and
carrying out proper audits and reviews.
In fulfilling its responsibilities, the Committee has reviewed and discussed
the audited financial statements contained in the 2002 Annual Report of the
Company with the Company's management and the independent accountants. In
addition, the Committee has discussed with the independent accountants the
matters required to be discussed pursuant to Statement of Auditing Standards
No. 61, as modified or supplemented. The Committee has also received from the
independent accountants the written statement regarding independence as
required by Independence Standards Board Standard No. 1, considered whether the
provision of nonaudit services by the independent accountants is compatible
with maintaining the accountants' independence, and discussed with the
accountants the accountants' independence.
In reliance on the reviews and discussions with management and the
independent accountants referred to above, and subject to the limitations on
the responsibilities and role of the Committee set forth in the charter and
discussed above, the Committee recommended to the Board of Directors that the
audited financial statements be included in the Company's 2002 Annual Report,
for filing with the Securities and Exchange Commission.
Respectfully submitted on February 14, 2003 by the members of the Audit
Committee of the Board of Directors:
Enrique R. Arzac
W. D. MacCallan
W. Perry Neff, Chairman
John J. Roberts
6
Compensation Committee
Messrs. Emerson, Lenagh, Peters, Wilson, and Ms. Schwab constitute the
membership of the Board's standing Compensation Committee, which met three
times during 2002. The Compensation Committee reviews and recommends changes in
the salaries of directors, executive officers, officers, and employees, and
advises upon the compensation and stock option plans in which the executive
officers, officers, and employees of the Company are eligible to participate.
Executive Committee
Messrs. Emerson, Kelly, Neff, Ober*, Peters, Wilson, and Ms. Schwab
constitute the membership of the Board's standing Executive Committee, which
met three times during 2002. The Committee has the authority of the Board of
Directors between meetings of the Board except as limited by law, the Company's
By-laws, or Board resolution. The Executive Committee, minus Mr. Ober, also
performs the duties of a nominating committee. It recommends to the full Board
candidates for directorship. It is the policy of the Executive Committee not to
consider unsolicited nominations for director.
Retirement Benefits Committee
Messrs. Arzac, Kelly, Lenagh, MacCallan, and Roberts are the director members
of the standing Retirement Benefits Committee of the Company, which administers
the Employees' Retirement Plan, Supplemental Retirement Plan and the Employee
Thrift Plan of the Company. This Committee met twice during 2002.
Board of Directors Compensation
During 2002, each director who is not an interested person received an annual
retainer fee of $10,000 and a fee of $500 for each Board meeting attended. All
members of each Committee, except executive officers and/or interested persons,
receive an additional annual retainer fee of $1,500 for each committee
membership and a fee of $500 for each meeting attended; the Chairman of each
committee, except for the Executive Committee, receives an additional fee of
$500 for each committee meeting attended. The total amount of fees paid to the
independent directors in 2002 was $209,750.
Transactions with Petroleum & Resources Corporation
The Company shares certain expenses for research, accounting services and
other office services (including proportionate salaries and other employee
benefits), rent and related expenses, and miscellaneous expenses such as office
supplies, postage, subscriptions and travel, with Petroleum, of which all of
the above-named nominees are also directors. These expenses were paid by the
Company and, on the date the payment was made, Petroleum simultaneously paid to
the Company its allocated share of such expenses, based on either the
proportion of the size of the investment portfolios of the two companies, or,
where possible, on an actual usage basis. In 2002, Petroleum's share of such
expenses was $478,113.
Audit Fees
The aggregate fees paid and accrued by the Company for professional services
rendered by its independent accountants, PricewaterhouseCoopers LLP, for the
audits of the Company's annual and semi-annual financial statements for 2002
and the reviews of the financial statements contained in the First and Third
Quarter reports in 2002 was $56,579.
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* Mr. Ober is an "interested person."
7
Financial Information Systems Design and Implementation Fees
No such fees were billed to the Company by its accountants during 2002.
All Other Fees
The aggregate fees billed for services to the Company by
PricewaterhouseCoopers LLP, other than the services referenced above, for 2002
was $2,250.
The Board's Audit Committee has considered the provision by
PricewaterhouseCoopers LLP of the services covered in this All Other Fees
section and found that they are compatible with maintaining
PricewaterhouseCoopers LLP's independence.
8
Remuneration of Directors and Others
The following table sets forth for each of the persons named below the
aggregate current remuneration received from the Company during the fiscal year
ended December 31, 2002, for services in all capacities:
Pension or
Retirement Estimated
Benefits Accrued Annual
Aggregate During the Last Benefits upon
Name of Person Position Remuneration (1) (2) (3) (4) Fiscal Year (5) Retirement
----------------------- ---------------- ---------------------------- ---------------- -------------
Douglas G. Ober Chairman of the
Board and Chief
Executive
Officer (A) $353,002 -- $214,992
Joseph M. Truta President 229,280 -- 136,470
Lawrence L. Hooper, Jr. Vice President,
Secretary &
General Counsel 141,120 -- 50,500
Enrique R. Arzac Director (B)(D) 21,000 N/A N/A
Daniel E. Emerson Director (A)(C) 20,000 N/A N/A
Edward J. Kelly, III Director (A)(D) 18,750 N/A N/A
Thomas H. Lenagh Director (C)(D) 22,000 N/A N/A
W. D. MacCallan Director (B)(D) 21,500 N/A N/A
W. Perry Neff Director (A)(B) 22,500 N/A N/A
Landon Peters Director (A)(C) 20,500 N/A N/A
John J. Roberts Director (B)(D) 21,500 N/A N/A
Susan C. Schwab Director (A)(C) 21,000 N/A N/A
Robert J. M. Wilson Director (A)(C) 21,000 N/A N/A
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(A) Member of Executive Committee
(B) Member of Audit Committee
(C) Member of Compensation Committee
(D) Member of Retirement Benefits Committee
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(1) Of the amounts shown, direct salaries paid by the Company to Messrs. Ober,
Truta and Hooper were $270,720, $180,000, and $108,000, respectively.
(2) Of the Company's direct salaries, $8,641 for Mr. Ober, $8,640 for Mr.
Truta, and $6,480 for Mr. Hooper, was deferred compensation under the
Company's Employee Thrift Plan. Under the Employee Thrift Plan, the Company
also makes contributions to match the contributions made by eligible
employees (see "Employee Thrift Plan" below). Of the amounts shown,
$17,282, $17,280, and $12,960 were plan contributions for Messrs. Ober,
Truta, and Hooper, respectively. The non-employee Directors do not
participate in the Employee Thrift Plan.
(3) Of the amounts shown, $65,000, $32,000, and $20,160 were incentive
compensation accrued for Messrs. Ober, Truta, and Hooper, respectively, in
2002 and deferred until January 2003.
(4) In addition, $157,679 for Mr. Ober, and $519,913 for Mr. Truta was the net
gain realized by them upon the exercise of stock appreciation rights during
2002 granted under the Company's Stock Option Plan (see "Stock Option Plan"
below). These sums are in addition to the aggregate remuneration amounts
shown in this summary table.
(5) The Company has a noncontributory Employees' Retirement Plan. No
contributions were made by the Company to this plan in 2002.
Messrs. Ober, Truta, and Hooper also received direct salaries, deferred
compensation, thrift plan contributions, and incentive compensation from
Petroleum, which amounts had been included in this summary table in years prior
to 2000.
9
Equity Compensation Plan Information
The following table provides information as of December 31, 2002, about
shares of Common Stock that may be issued upon the exercise of options,
warrants and rights granted to employees, consultants or directors under the
Company's Stock Option Plan, which is the Company's only equity compensation
plan. The shares indicated in the table represent shares outstanding under the
Company's Stock Option Plan.
Number of Weighted- Number of Securities
Securities to be Average Remaining Available for
Issued upon Exercise Price Future Issuance under
Exercise of of Outstanding Equity Compensation
Outstanding Options, Plans (excluding
Options, Warrants Warrants and Securities reflected in
and Rights Rights Column (a))
(a) (b) (c)
----------------- -------------- -----------------------
Equity compensation plans approved
by shareholders................. 259,023(1) $11.1902 1,256,531
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(1) Of this amount, 56,255 shares relate to options currently exercisable.
Stock Option Plan
On December 12, 1985, the Company's Board of Directors adopted a Stock
Option Plan (the "Plan"), which was approved by the stockholders at the March
26, 1986 Annual Meeting of Stockholders and was amended at the March 29, 1994
Annual Meeting of Stockholders. The Plan provides for the grant to "key
employees" (as defined in the Plan) of options to purchase shares of Common
Stock of the Company, together with related stock appreciation rights. As of
December 31, 2002, (i) the number of shares subject to outstanding options
under the Plan was 259,023 and (ii) the number of shares available for future
grants under the Plan was 1,256,531. All options granted or to be granted under
the Plan are treated as non-qualified stock options under the Internal Revenue
Code. The Plan is administered by the Compensation Committee of the Board of
Directors, which consists of five members of the Board, none of whom is
eligible to receive grants under the Plan. The grant of options is at the
discretion of the Compensation Committee.
The Plan, as proposed to be amended, is summarized beginning on page 14. The
only difference between the current Plan and the Plan, as proposed to be
amended, is that under the current Plan options and stock appreciation rights
may be granted until December 8, 2003, whereas under the Plan, as proposed to
be amended, that date would be extended to December 8, 2006.
Employee Thrift Plan
Employees of the Company who have completed six months of service may elect
to have 2% to 6% of their base salary deferred as a contribution to a thrift
plan instead of being paid to them currently (see table set forth on page 9
regarding 2002 contributions for the officers and directors identified
therein). The Company (subject to certain limitations) contributes for each
employee out of net investment income an amount equal to 200% of each
employee's contribution or to the maximum permitted by law. Employees may also
contribute an additional 10% of base salary to the thrift plan, but these
post-tax contributions are not matched by the Company. All employee
contributions are credited to the employee's individual account. Employees may
elect that their salary deferral and other contributions be invested in Common
Stock of the Company, or of Petroleum, or several mutual funds, or a
combination thereof. Fifty percent of the Company's matching contributions is
invested in
10
the Company's Common Stock, and the remaining fifty percent is invested in the
same manner that the employee has elected for his or her contributions. An
employee's interest in amounts derived from the Company's contributions becomes
non-forfeitable upon completion of 36 months of service or upon death or
retirement. Payments of amounts not withdrawn or forfeited under the thrift
plan may be made upon retirement or other termination of employment in a single
distribution, in ten equal installments, or in an annuity.
Employees' Retirement Plan
The employees of the Company with one or more years of service participate
in a retirement plan pursuant to which contributions are made solely by the
Company on behalf of, and benefits are provided for, employees meeting certain
age and service requirements. The plan provides for the payment of benefits in
the event of an employee's retirement at age 62 or older. Upon such retirement,
the amount of the retirement benefit is 2% of an employee's highest thirty-six
months average out of the employee's final sixty months annual salary,
including incentive compensation, multiplied by years of service. Retirement
benefits cannot exceed 60% of the highest thirty-six months' average out of the
employee's final sixty months annual salary including incentive compensation.
Benefits are payable in several alternative methods, each of which must be the
actuarial equivalent of a pension payable for the life of the employee only.
Retirement benefits (subject to any applicable reduction) are also payable in
the event of an employee's early or deferred retirement, disability or death.
Contributions are made to a trust to fund these benefits.
On March 10, 1988, the Board of Directors of the Company unanimously
approved a supplemental retirement benefits plan (the "Supplemental Plan") for
employees of the Company. On June 11, 1998, the Supplemental Plan was amended
and restated as of January 1, 1998. The purpose of the Supplemental Plan is to
provide deferred compensation in excess of benefit limitations imposed by the
Internal Revenue Code on tax-qualified defined benefit plans, including the
retirement plan of the Company described above. In accordance with such
limitations, the annual benefit payable under the Company's retirement plan may
not exceed the lesser of $160,000 for 2003 and the employee's average total
compensation paid during the three highest-paid consecutive calendar years of
employment. The $160,000 limit will be adjusted by the Secretary of the
Treasury to reflect cost-of-living increases.
The Supplemental Plan authorizes the Company to pay annual retirement
benefits in an amount equal to the difference between the maximum benefits
payable under the retirement plan described above and the benefits that would
otherwise be payable but for the Internal Revenue Code's limitations on annual
retirement benefits. All amounts payable under the Supplemental Plan will be
paid from the general funds of the Company as benefits become due. The Company
has established a funding vehicle using life insurance policies owned by the
Company for the Supplemental Plan. Payment of benefits under the Supplemental
Plan will be made concurrently with and in the same form as payment of benefits
under the Company's retirement plan. During 2002, the Company made payments of
$18,844 under the Supplemental Plan.
Brokerage Commissions
During the past fiscal year, the Company paid brokerage commissions in the
amount of $758,603 on the purchase and sale of portfolio securities traded on
the New York Stock Exchange, the American Stock Exchange, and the National
Association of Securities Dealers Automated Quotation System, substantially all
of which were paid to brokers providing research and other investment services
to the Company. The average per share commission rate paid by the Company was
$0.058. No commissions were paid to an affiliated broker.
11
Portfolio Turnover
The portfolio turnover rate (purchases or sales, whichever is lower, as a
percentage of weighted average portfolio value) for the past three years has
been as follows:
2002 2001 2000
---- ---- ----
17.93% 19.15% 12.74%
Expense Ratio
The ratio of expenses to the average net assets of the Company for the past
three years has been as follows:
2002 2001 2000
---- ---- ----
0.34% 0.19% 0.24%
(2) RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Investment Company Act of 1940 (the "Act") requires, in effect, that the
Company's independent accountants be selected by a majority of the members of
the Board of Directors who are not "interested persons" (as defined by the Act)
of the Company; that such selection may be submitted for ratification or
rejection at the annual meeting of stockholders; and that the employment of
such independent accountants be conditioned on the right of the Company, by
vote of the holders of a majority of its outstanding voting securities, to
terminate such employment at any time without penalty. In accordance with such
provisions, PricewaterhouseCoopers LLP, 250 W. Pratt Street, Baltimore,
Maryland, independent accountants, which firm was the Company's principal
auditor during the year 2002, has been selected as independent accountants of
the Company to audit the books and accounts of the Company for or during the
year ending December 31, 2003, by a majority of those members of the Board of
Directors who were not "interested persons" of the Company, voting in person,
and their selection is submitted to the stockholders for ratification by the
affirmative vote of a majority of all the votes cast at the meeting.
Representatives of PricewaterhouseCoopers LLP are expected to be present at the
meeting to make a statement if they so desire and to respond to appropriate
questions. The Company has been informed that PricewaterhouseCoopers LLP does
not have any direct financial or any material indirect financial interest in
the Company.
The Board of Directors unanimously recommends ratification of the selection
of PricewaterhouseCoopers LLP.
(3) PROPOSAL OF THE BOARD OF DIRECTORS TO AMEND THE STOCK OPTION PLAN OF THE
COMPANY
The Board of Directors has adopted an amendment, subject to approval by the
stockholders, to extend the term of the Stock Option Plan of The Adams Express
Company (the "Plan") for an additional 3 years. If approved by the
stockholders, the amendment shall extend from December 8, 2003 to December 8,
2006, the last date on which options may be granted under the Plan. The
amendment makes no other changes to the Plan. The Plan, as proposed to be
amended, is attached as Exhibit A, and is also described generally below. The
description below is qualified in its entirety by reference to Exhibit A.
Current Plan
The Plan was initially adopted by the Board of Directors in 1985 and was
approved by the stockholders at the 1986 Annual Meeting. At that time, 850,000
shares of Common Stock were authorized
12
for option grants pursuant to the Plan and options could be granted until
December 11, 1995. At the 1994 Annual Meeting, the stockholders approved
amendments to the Plan that made an additional 1.2 million shares of Common
Stock available for future option awards, which number was adjusted upward in
2000 to reflect the 3-for-2 stock split the Company conducted at that time. The
1994 amendments also extended the time period during which such options may be
granted to December 8, 2003. Since 1985, options for 1,172,765 shares have been
granted to key employees by the Compensation Committee of the Board of
Directors.
As of February 14, 2003, 1,199,131 shares remain available for future grants
under the Plan until December 8, 2003, and if the proposed amendment is
adopted, such shares will remain available for future grants until December 8,
2006. No additional shares will be added to the Plan by the amendment.
Proposed Amendment
The purpose of the Plan is to aid the Company in securing and retaining key
employees of outstanding ability by making it possible to offer them an
incentive, in the form of a proprietary interest in the Company, to join or
continue in the service of the Company, and to increase their efforts for its
success. In the judgment of the Board of Directors, since its adoption in 1985,
the Plan has contributed effectively to the Company's achievement of these
purposes, without an adverse impact on the Company's stockholders. The grant of
stock options under the Plan has helped the Company to attract and retain the
key employees who comprise the dedicated staff of research analysts, portfolio
managers, and senior administrative executives employed by the Company. Because
of their equity interest in the Company resulting from the options granted to
them under the Plan, these key employees' interests are more closely attuned to
and aligned with the interests of the stockholders.
The number of options that can be granted in any one year under the Plan is
effectively limited due to the restrictions that the Securities and Exchange
Commission imposed when it granted an exemption under the Investment Company
Act of 1940 to permit the Company to adopt a stock option plan in 1985. Under
the restrictions, in essence, an employee can be granted options in any one
year for shares valued (at the time of grant) at no more than $100,000. By the
Board of Directors' calculation, there are sufficient shares authorized under
the Plan to cover option grants for a number of years. However, the Plan does
not permit any options to be awarded after December 8, 2003, despite the
availability of ample shares under the Plan as it now stands.
To ensure that the objectives of the Plan may continue to be met for the
near-term by enabling the Compensation Committee to continue to grant options
under the Plan, in its discretion, to key employees after December 8, 2003, the
Board of Directors deems it advisable to extend for an additional 3 years the
time period during which such options may be granted. The Board of Directors is
not proposing to increase the number of shares that remain available for future
grants or to change any of the other provisions of the Plan. During the
proposed three-year extension period, the Board of Directors intends to analyze
the Plan further and to update it as deemed appropriate to meet the future
needs of the Company.
It should be noted that the Company has always been required to show in its
financial statements, as an expense, the monetary impact of the options and
rights that have been granted, commonly known as "expensing" the options.
Stockholders have been able to gauge the financial impact on the Company and
its stockholders of the options and rights granted under the Plan in each of
the shareholder reports that the Company has issued since the Plan's adoption.
The Company has disclosed this information long before the recent controversy
surfaced concerning other companies' disclosure of the expenses attributable to
stock options.
13
Plan Benefits
The following table reflects the number of shares subject to options awarded
under the Plan for the fiscal year ended December 31, 2002:
Stock Option Plan
Current Per
Share Option Number of Shares
Name and Position Exercise Price* Subject to Options
----------------- --------------- ------------------
Douglas G. Ober,
Chairman of the Board and
Chief Executive Officer $13.775 6,971
Joseph M. Truta,
President $13.775 6,971
Richard Koloski,
Executive Vice President $13.775 6,971
Executive Group $13.775 32,065
Non-Executive Officer
Employee Group $13.545** 24,856
Non-Executive Director
Group N/A 0
----------
* The original exercise price was $14.345 and has been adjusted to reflect the
$0.57 per share the Company paid out in capital gains in 2002.
** This is a weighted-average per share option exercise price.
Future awards are subject to the availability of shares for issuance under
the Plan and are issued at the discretion of the Compensation Committee. The
Plan restricts the number of options receivable by any individual participant
(see below under the heading "Description of the Plan, as Amended").
Description of the Plan, as Amended
The following is a description of the Plan, as proposed to be amended.
The Plan, after giving effect to the 3-for-2 stock split in 2000, provides
that 1,199,131 shares currently remain available for stock option grants until
December 8, 2003. If the proposed amendment is adopted, the same number of
shares will be available for grants, but the time will be extended until
December 8, 2006. The number of shares available for stock option grants is
subject to adjustment to reflect stock dividends, stock splits and other
changes to the stock of the Company or the structure of the Company itself. The
aggregate fair market value (determined as of the date a stock option is
granted) of the shares with respect to which options are exercisable for the
first time by an optionee in any calendar year under all the plans of the
Company and its subsidiaries shall not exceed $100,000. No individual shall
receive options or rights with respect to more than 35% of the shares of Common
Stock which may be issued under the Plan nor shall persons who are Company
employees at the time the Plan is adopted receive options or rights with
respect to more than 66 2/3% of the shares of Common Stock which may be issued
under the Plan. Any shares optioned that cease to be subject to an option
(other than by reason of the exercise thereof) will again be available for
option under the Plan; provided, however, that any shares subject to option
under an option (or part thereof) that is
14
cancelled upon exercise of a stock appreciation right shall be treated as if
the option (or part thereof) itself were exercised, and such shares shall no
longer be available for grant.
The Plan is administered by the Compensation Committee of the Board of
Directors (the "Committee") appointed by the Board of Directors and consisting
of at least three members of the Board, none of whom shall be eligible to be
selected for the grant of an option or right under the Plan. The Committee
shall have the power and authority to administer, enforce and interpret the
Plan, to make rules for carrying it out and to make changes in such rules. The
designation of the key employees to whom options and stock appreciation rights
may be granted and, within the limits set forth in the Plan as described
herein, the number of shares that may be optioned to any such key employee is
to be made by the Committee. Approximately eleven persons are currently
eligible to receive awards under the Plan.
The Board of Directors, including those constituting the Committee, will
review periodically the potential impact that the grant or exercise of options
or rights could have on the Company's expenses and earnings and net asset value
per share. Such reviews will take place prior to any decisions to grant options
or rights, but in no event less frequently than annually. The Board of
Directors will have the authority to take steps to assure that the grant or
exercise of options or rights will not have an adverse effect on the Company's
stockholders. All grants of options and rights will be made on the basis that
such grants are in the best interests of the Company and its stockholders.
Under the Plan (a) the option price per share shall not be less than fair
market value at the time of grant, except that the option price per share will
be reduced after grant of the option to reflect capital gain distributions to
the Company's stockholders, provided that no such reduction shall be made which
will reduce the option price below 25% of the original option price, (b) an
option will not become exercisable until the optionee shall have remained in
the employ of the Company for at least one year after the date of grant and may
be exercised for ten years from the date of grant unless an earlier expiration
date is stated in the option, (c) no stock appreciation right shall be
exercisable within two years of its date of grant, (d) payment in full of the
option price shall be made upon exercise of each option, either in cash, shares
of Common Stock of the Company with a fair market value on the date of exercise
equal to the option price, or by a combination of cash and such shares equal in
the aggregate to the option price, (e) no option or stock appreciation right
shall be granted after December 8, 2006, but options and stock appreciation
rights theretofore granted may extend beyond that date, (f) an option or stock
appreciation right may not be exercised by any person other than the optionee
during his lifetime, and may not be transferable other than by will or the laws
of descent and distribution, and (g) a stock appreciation right may not be
transferred except to the transferee of the related option. If any optionee's
employment terminates for reasons other than death or disability, the option
will expire at the earlier of the expiration date set forth in the option or
three months from the date of termination. If an optionee dies or is disabled
while still employed by the Company, the option will expire at the earlier of
the expiration date set forth in the option or one year from the date of death
or disability. The option price per share and the number of shares will be
adjusted to reflect reorganizations, recapitalizations, stock splits, stock
dividends, capital gain distributions and other such events. No disposition of
shares of Common Stock acquired as the result of the exercise of an option or
stock appreciation right may be made within the later of two years of the date
of the option and one year of the acquisition of such shares.
The Plan permits the grant of stock appreciation rights in conjunction with
the grant of an option, either at the time of the option grant or thereafter
and in respect of all or part of such option, provided that the optionee is a
key employee at the time of grant of the stock appreciation rights. Stock
appreciation rights permit an optionee to request to receive (a) shares of
Common Stock of the
15
Company with a fair market value, at the time of exercise of any such right,
equal to the amount by which the fair market value of all shares subject to the
option (or part thereof) in respect of which a stock appreciation right was
granted exceeds the exercise price of such option (or part thereof), (b) in
lieu of such shares, the fair market value thereof in cash, or (c) a
combination of shares and cash. The final determination whether a stock
appreciation right will be settled in stock, cash or a combination thereof will
be made by the Committee in its discretion. Cash and shares will be paid upon
exercise of a stock appreciation right, however, only if and to the extent that
it would not result in a greater dilution of the interests of existing
stockholders of the Company than would result if the related options were
exercised. No stock appreciation right shall be exercisable prior to two years
from the date of its grant. To the extent an option is exercised in whole or
part, any stock appreciation right granted in respect of such option (or part
thereof) shall terminate and cease to be exercisable. To the extent a stock
appreciation right is exercised in whole or part, the option (or part thereof)
in respect of which such stock appreciation right was granted shall terminate
and cease to be exercisable.
The Board of Directors has the power to amend the Plan at any time. It does
not have the power, however, except as may be otherwise provided in the Plan,
to (a) increase the maximum number of shares authorized for the Plan, (b)
change the class of eligible employees to other than key employees, (c) reduce
the basis upon which the minimum option price is determined, (d) extend the
period within which options or stock appreciation rights under the Plan may be
granted, (e) change the basis upon which shares or cash may be distributed upon
exercise of a stock appreciation right, (f) provide for an option exercisable
during a period of less than one year from the date of its grant, except as
provided in the Plan, or exercisable more than ten years from the date of
grant, or (g) provide for a stock appreciation right exercisable during a
period of less than two years from the date of its grant or more than ten years
from the date the related option is granted. Other than its authority under the
Plan to take steps to assure that the grant or exercise of options or rights
will not have an adverse effect on, and are in the best interest of, the
Company's stockholders, the Board of Directors shall have no power except to
the extent, if any, provided in the option, to change the terms of any
previously granted option in a manner that would adversely affect the rights of
the holder thereof without the consent of such holder.
During the period that stock appreciation rights are outstanding, the
Company will accrue as an expense the amount, if any, by which the fair market
value of Common Stock subject to stock appreciation rights exceeds the exercise
price of the related options.
The Board of Directors may suspend or terminate the Plan at any time. No
such suspension or termination, however, shall affect options or stock
appreciation rights then in effect.
The proceeds received by the Company upon the exercise of options granted
under the Plan will be used for general corporate purposes. The closing price
per share of Common Stock of the Company on the New York Stock
Exchange--Composite Transactions on February 3, 2003 was $10.64.
Federal Income Tax Consequences
The following is a brief summary of the material United States federal
income tax consequences of nonqualified stock options and stock appreciation
rights granted under the Plan. Options granted under the Plan currently do not
meet the requirements to qualify as incentive stock options under the Internal
Revenue Code, due to the downward adjustment of the option price to reflect
capital gain distributions.
(a) The grant of a nonqualified stock option will not result in any
immediate tax consequence to the Company or the optionee. Upon exercise of a
nonqualified stock option, the optionee will
16
realize ordinary income in an amount equal to the excess of the fair market
value of the stock acquired at the time of exercise less the option exercise
price. The Company will be entitled to a deduction upon exercise of a
nonqualified option equal to the amount of ordinary income realized at the
time by the optionee.
(b) The grant of a stock appreciation right will not result in any
immediate tax consequence to the Company or to the optionee. Upon the
exercise of a stock appreciation right, any cash received and the fair
market value on the exercise date of any stock received will constitute
ordinary income to the optionee. The Company will be entitled to a deduction
upon exercise of a stock appreciation right equal to the amount of ordinary
income realized at that time by the optionee.
Resolution
The resolution to approve the amendment to the Plan is as follows:
"RESOLVED, that the following amendment to the Stock Option Plan of The
Adams Express Company be, and hereby is, approved effective December 8, 2003:
(1) Paragraph (a) of Section 8 is hereby amended by deleting the words
'December 8, 2003' and substituting therefor the words 'December 8, 2006';
and
(2) Paragraph (c) of Section 8 is hereby amended by deleting the words
'December 8, 2003' and substituting therefor the words 'December 8, 2006'."
The Board of Directors unanimously recommends that you vote FOR the adoption
of this amendment to the stock option plan.
(4) STOCKHOLDER PROPOSAL
John R. Stewart, 9716 Brawley Drive, Las Vegas, NV 89134, owner of 6,327
shares of Common Stock, has given notice that he intends to submit a proposal
at the Annual Meeting and has requested that it be included in this year's
proxy material. The Board of Directors unanimously recommends that you vote
AGAINST the proposal. The reasons for the Board's opposition to the proposal
are set forth in the Board's statement of opposition that appears immediately
after the proposal and its supporting statement.
Stockholder Proposal
"RESOLVED: The shareholders of The Adams Express Company request the Board
of Directors to consider issuing stock options, under the Company's Stock
Option Plan, to officers and other employees of the Company whose main function
is to select and/or evaluate investments for the fund, only when 1) the net
asset value of the fund out performs the Standard & Poor's 500 stock index by
at least 1 percentage point, and 2) the fund has a positive performance for the
same time period. The time period shall be for a calendar year or a fiscal
year, to be determined by the Board of Directors. Both the stock index and the
fund net asset value to be adjusted by any distributions. This proposal shall
not apply to employees who are not directly involved in the investment
selection process."
17
Proponent's Supporting Statement
"The individuals who make the decisions on fund investments should not be in
a position to receive stock option awards when the shareholders have a loss.
These key people are very well paid and stock options should only be granted
for both a positive performance and an out performance when compared to the S&P
500 Index."
The Board of Directors believes that your vote AGAINST the proposal will be
in the best interests of the stockholders.
The Board of Directors' Statement of Opposition
The Board opposes this proposal because it goes against the long-term
incentive focus behind the grants made under the Company's Stock Option Plan
(the "Plan"). The proposal would require the Compensation Committee of the
Board, comprised entirely of independent directors who are ineligible to
receive any stock option grants themselves, to focus solely on the short-term
results of the Company when awarding stock option grants to the Company's team
of portfolio managers and research analysts. The Plan, however, has always been
used to provide long-term incentives to those employees, as well as to other
key employees, and to closely align their interests with those of our
stockholders. The grants are used to motivate the investment personnel to
remain with the Company, and to concentrate their efforts on the long-term
investment results of the Company's portfolio holdings. The Compensation
Committee considers a number of factors, including the most recent performance
as well as the longer-term performance of the Company's portfolio, in making
stock option awards. The Board believes that changing to a short-term
consideration that looks only at the last year's results when granting options
that have a 10-year life is inconsistent with the purposes of the Plan and
would be counterproductive.
In addition, requiring the Company's performance both to beat that of the
Standard & Poor's 500 index and to produce a positive return for the investment
personnel to be eligible for stock option grants would unfairly punish them in
years such as the past three where the overall markets have experienced
substantial negative returns, and would not be in the best interest of our
stockholders as it could encourage a short-term perspective that creates more
risk for the portfolio. After the fact, it turned out that to have produced a
positive return in 2000, 2001, or 2002, the investment personnel would have to
have taken a more risky approach by concentrating the portfolio in a limited
number of economic sectors or a relatively small number of stocks, or to have
converted the portfolio primarily to cash and/or bonds. This would have been
contrary to the lower risk diversification approach that has been a successful
hallmark of the Company for decades.
Moreover, the Compensation Committee uses the ability to award stock options
as an incentive in hiring new investment personnel for the Company. If the
Company's short-term performance does not satisfy the parameters set out in the
proposal, then the Company would not be able to offer stock option grants to
prospective portfolio managers and analysts, which would greatly handicap the
Company's ability to hire the caliber of investment personnel needed to do the
intensive research required to manage the portfolio of an internally-managed
fund such as ours.
The proposal will not be adopted unless the votes cast in favor of it exceed
the votes cast against it, with a quorum being present. Abstentions and broker
non-votes will not be counted as either for or against the proposal. If not
otherwise specified, proxies will be voted AGAINST the proposal.
The Board of Directors recommends you vote AGAINST this stockholder proposal
for the reasons set forth above.
18
(5) OTHER MATTERS AND ANNUAL REPORT
As of the date of this proxy statement, management knows of no other
business that will come before the meeting. Should other business be properly
brought up, it is intended that proxies in the accompanying form will be voted
thereon in accordance with the judgment of the person or persons voting such
proxies.
The Annual Report of the Company for the year ended December 31, 2002,
including financial statements, is being mailed with this Proxy Statement to
all stockholders entitled to notice of and and to vote at the annual meeting to
be held on March 25, 2003. A copy of the Company's Annual Report will be
furnished to stockholders, without charge, upon request. You may request a copy
by telephoning Lawrence L. Hooper, Jr., Vice President, Secretary and General
Counsel, at (800) 638-2479 or by sending Mr. Hooper an e-mail message at
contact@adamsexpress.com.
The Company has retained Georgeson Shareholder Communications Inc. ("GS") to
assist in the solicitation of proxies. The Company will pay GS a fee for its
services not to exceed $5,000 and will reimburse GS for its expenses, which the
Company estimates will not exceed $2,500.
Stockholder Proposals for 2004 Annual Meeting
Stockholder proposals for inclusion in the proxy statement and form of proxy
relating to the 2004 Annual Meeting must be received at the office of the
Company, Seven St. Paul Street, Baltimore, MD 21202, no later than October 24,
2003.
In addition, pursuant to the Company's By-laws, stockholder proposals for
consideration at the 2004 Annual Meeting which are not to be included in the
Company's proxy statement and form of proxy must be received at the office of
the Company at the address listed in the preceding paragraph no later than
January 23, 2004, in order to be eligible for presentation at the 2004 Annual
Meeting. Should the Company determine to allow a stockholder proposal that is
received by the Company after January 23, 2004 to be presented at the 2004
Annual Meeting nevertheless, the persons named as proxies in the accompanying
form will have discretionary voting authority with respect to such stockholder
proposal.
19
EXHIBIT A
THE ADAMS EXPRESS COMPANY
STOCK OPTION PLAN
(Amended and Restated)
1. Purpose of Plan.
The purpose of this Stock Option Plan (the "Plan") is to aid The Adams
Express Company (the "Company") in securing and retaining key employees of
outstanding ability by making it possible to offer them an increased incentive,
in the form of a proprietary interest in the Company, to join or continue in
the service of the Company and increase their efforts for its welfare. The Plan
is to be used to reward both present and future key employees for excellence in
performance of their duties and to serve as an incentive for maintaining such
performance and thereby enhancing the investment results of the Company and its
stockholders. It is not a substitute for annual compensation for present and
future employees. Moreover, it will be used to attract additional talented
personnel to employment.
2. Definitions.
As used in the Plan, the following words shall have the following meanings:
(a) "Board of Directors" means the Board of Directors of the Company;
(b) "Common Stock" means common stock of the Company;
(c) "fair market value" means the fair market value of the Common Stock, as
shall be determined in good faith by the Board of Directors;
(d) "Option" means a stock option to purchase shares of Common Stock;
(e) "Key Employee" means any person, including officers and directors, in
the regular full-time employment of the Company or any subsidiary who, in the
opinion of the Committee referred to in Section 3, is or is expected to be
primarily responsible for the management, growth or protection of some part or
all of the business of the Company, provided that an employee of a subsidiary
shall not be deemed a Key Employee unless such employee performs management,
administrative or advisory services for the Company.
(f) "Participant" means a person to whom an Option is granted that has not
terminated and ceased to be exercisable under the Plan; and
(g) "Right" means a stock appreciation right to elect to receive shares of
Common Stock with a fair market value, at the time of any exercise of such
stock appreciation right, equal to the amount by which the fair market value of
all shares subject to the Option (or part thereof) in respect of which such
stock appreciation right was granted exceeds the exercise price of said Option
(or part thereof) or to receive from the Company, in lieu of such shares, the
fair market value thereof, as provided in Section 7.
3. Administration of the Plan.
(a) The Plan shall be administered by the Compensation Committee of the
Board of Directors (the "Committee") appointed by the Board of Directors and
consisting of members of the Board of Directors who are not interested persons
of the Company and in no event less than three in number.
A-1
None of the members of the Committee shall be eligible to be selected for the
grant of any Option or Right under the Plan. The Committee shall have the power
and authority to administer, construe and interpret the Plan, to make rules for
carrying it out and to make changes in such rules. The action of a majority of
the Committee, taken at a meeting or taken without a meeting by a writing
signed by such majority, shall constitute action by the Committee.
(b) The Board of Directors, including the members thereof constituting the
Committee, shall review periodically the potential impact that the grant or
exercise of Options or Rights could have on the Company's expenses and earnings
and net asset value per share, such reviews to take place prior to any
decisions to grant Options or Rights but in no event less frequently than
annually. Adequate procedures and records shall be maintained to permit such
review and the Board of Directors, including the members thereof constituting
the Committee, shall have the authority to take appropriate steps if necessary
to assure that neither the grant nor exercise of Options or Rights would have
an adverse effect on the Company's stockholders. Such authority shall include,
in addition to the authority to prevent or limit the grant of additional
Options or Rights, the authority to limit the number of Options or Rights
exercised in a given period of time should the directors conclude that the
adverse effect on the Company's expenses or earnings would be contrary to the
interests of stockholders or that the net asset value per share might be
excessively diluted. All grants of Options and Rights shall be made on the
basis that such issuance is in the best interests of the Company and its
stockholders.
4. Granting of Options.
The Committee may from time to time grant Options under the Plan to such Key
Employees and for such number of shares as the Committee may determine. The
Committee may impose such conditions as it deems advisable on the grant of an
Option. The aggregate fair market value, determined at the time an Option is
granted, of the shares with respect to which Options are exercisable for the
first time by a Participant in any calendar year under all the plans of the
Company and its subsidiaries shall not exceed $100,000.
5. Granting of Rights.
The Committee, at the time of grant of an Option or at any time prior to the
expiration of its term, also may grant to the Participant, subject to the terms
and conditions of the Plan, Rights in respect of all or part of such Option to
the Participant who has been granted the Option, provided that at such time the
Participant is a Key Employee. No Right shall be exercisable prior to two years
from the date of grant.
6. Terms of Options.
The term of each Option granted under the Plan shall be determined from time
to time by the Committee and shall be set forth in a Stock Option Agreement in
a form approved by the Committee, consistent however with the following:
(a) The Option price per share shall not be less that the fair market value
at the time the Option is granted. The Option price per share will be reduced
after grant of the Option to reflect capital gain distributions to the
Company's stockholders; provided that no such reduction shall be made which
will reduce the Option price below 25% of the original Option price.
A-2
(b)(i) To the extent that exercise of an Option will not result in the
exercise by the Participant of Options exercisable for the first time during
any calendar year with respect to shares having a fair market value (determined
at the date of grant) of more than $100,000, an Option shall be exercisable in
whole or in part from time to time during the period beginning from the time
the optionee shall have remained in the employment of the Company for at least
one year from the date of grant of the Option and ending at the expiration of
ten years from the date of grant of the Option, unless an earlier expiration
date shall be stated in the Option or the Option shall cease to be exercisable
pursuant to paragraph (d) of this Section 6.
(ii) In the event an Option is granted to a Key Employee who owns more than
ten percent of the outstanding voting securities of the Company, or of a parent
or subsidiary of the Company, the Option price per share must be at least 110%
of the fair market value of a share of the Common Stock on the date of grant,
and the Option may not be exercised after the expiration of five years from the
date of grant.
(c) Payment in full of the Option price shall be made upon exercise of each
Option and may be made in cash, by the delivery of shares of Common Stock with
a fair market value at the date of exercise equal to the Option price, or by a
combination of cash and shares whose fair market value together with such cash
shall equal the Option price.
(d) If a Participant's employment with the Company terminates other than by
reason of the Participant's death or disability, the Participant's Option shall
terminate and cease to be exercisable at the earlier of the expiration date set
forth in the Option or three months from the date of termination. If a
Participant's employment with the Company terminates by reason of death or
disability, the Participant's Option shall terminate and cease to be
exercisable at the earlier of the expiration date set forth in the Option or
one year from the date of death or disability.
7. Exercise of Options and Rights.
(a) The holder of an Option or Right who decides to exercise the Option or
Right in whole or in part shall give notice to the Secretary of the Company of
such exercise in writing. A notice exercising a Right shall also specify the
extent, if any, to which the Participant elects to receive cash, and shall be
subject to the determination by the Committee as provided in paragraph (d) of
this Section 7. Any exercise shall be effective as of the date payment in full
of the Option price is actually received and in the hands of the Secretary of
the Company, or as of such later date specified in the notice of exercise.
(b) To the extent an Option is exercised in whole or in part, any Right
granted in respect of such Option (or part thereof) shall terminate and cease
to be exercisable. To the extent a Right is exercised in whole or in part, the
Option (or part thereof) in respect of which such Right was granted shall
terminate and cease to be exercisable.
(c) A Right shall be exercisable only during the period in which the Option
(or part thereof) in respect of which such Right was granted is exercisable.
(d) The Committee shall have the sole discretion to determine the form in
which payment will be made following the exercise of a Right. All or any part
of the obligation arising out of an exercise of a Right may be settled:
(i) by payment in shares of Common Stock with a fair market value equal
to cash that would otherwise be paid,
A-3
(ii) by payment in cash, or
(iii) by payment in a combination of such shares and cash;
provided that such payment shall be made only if and to the extent that it
would not result in a greater dilution of the interests of existing
stockholders of the Company than would result if the related Options were
exercised.
8. Limitations and Conditions.
(a) The total number of shares of Common Stock that may be subject to
Options under the Plan is 2,050,000,* of which (i) 850,000 shares may be made
subject to Options granted between December 12, 1985 and December 11, 1995, and
(ii) 1,200,000* shares may be made subject to Options granted between December
9, 1993 and December 8, 2006. Such total number of shares may consist, in whole
or in part, of unissued shares or reacquired shares. The foregoing number of
shares may be increased or decreased by the events set forth in Section 10
hereof. No individual shall receive Options or Rights with respect to more than
35% of the shares of Common Stock which may be issued under the Plan nor shall
persons who are Company employees at the time the Plan is adopted receive
Options or Rights with respect to more than 66 2/3% of the shares of Common
Stock which may be issued under the Plan.
(b) Any shares that have been optioned that cease to be subject to an Option
(other than by reason of exercise of the Option) shall again be available for
option and shall not be considered as having been theretofore optioned. Any
shares subject to option under an Option (or part thereof) that is canceled
upon exercise of a Right shall be treated as if the Option itself were
exercised and such shares shall no longer be available for grant.
(c) No Option or Right shall be granted under the Plan after December 8,
2006, but Options and Rights theretofore granted may extend beyond that date.
At the time an Option or Right is granted or amended or the terms or conditions
of an Option or Right are changed, the Committee may provide for limitations or
conditions on the exercisability of the Option or Right.
(d) An Option or Right shall not be transferable by the Participant
otherwise than by will or by the laws of descent and distribution. A Right
shall never be transferred except to the transferee of the related Option.
During the lifetime of the Participant, an Option or right shall only be
exercisable by the Participant.
(e) No person shall have any rights of a stockholder
(i) as to shares under option until, after proper exercise of the Option,
such shares shall have been recorded on the Company's official stockholder
records as having been issued or transferred, or
(ii) as to shares to be delivered following exercise of a Right until,
after proper exercise of the Right and determination by the Committee to
make payment therefor in shares, such shares shall have been recorded on the
Company's official stockholder records as having been issued or transferred.
----------
* These numbers are before giving effect to the 3-for-2 stock split conducted
by the Company in 2000. As of February 14, 2003, and after giving effect to
the 3-for-2 stock split, there are 1,199,131 shares currently available for
future grants.
A-4
(f) No disposition of shares of Common Stock acquired as the result of the
exercise of an Option or Right may be made within two years of the date of
grant of the Option or within one year of the acquisition of such shares upon
exercise of the Option or Right, whichever is later.
9. Transfers and Leaves of Absence.
For the purposes of the Plan: (a) a transfer of a Participant's employment
without an intervening period from the Company to a subsidiary or vice versa
shall not be deemed a termination of employment, and (b) a Key Employee who is
granted in writing a leave of absence shall be deemed to have remained in the
employ of the Company during such leave of absence.
10. Stock and Price Adjustments.
If there shall be any change in or affecting the Common Stock or the Options
through merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, combination or capital gain distributions, the Committee
may make appropriate adjustments in the aggregate number of shares subject to
the Plan and the number of shares and the price per share subject to the
outstanding Options, may assume old Options or substitute new Options for old
Options, regardless of whether the Option price is less than the fair market
value of the subject shares, and may make such adjustments in the number of
Rights as it shall deem appropriate in the circumstances.
11. Amendment and Termination.
(a) The Board of Directors shall have the power to amend the Plan. It shall
not, however, except as otherwise provided in the Plan, increase the maximum
number of shares authorized for the Plan, nor change the class of eligible
employees to other than Key Employees, nor reduce the basis on which the
minimum Option price is determined, nor change the basis upon which shares or
cash may be distributed upon exercise of a Right, nor extend the period within
which Options or Rights under the Plan may be granted, nor provide for an
Option that is exercisable during a period of less than one year, except in the
event of death, or more than ten years from the date it is granted, nor provide
for a Right that is exercisable during a period of less than two years from the
date it is granted or more than ten years from the date the related Option is
granted. It shall have no power (without the consent of the person or persons
at the time entitled to exercise the Option) to change the terms and conditions
of any Option in a manner that would adversely affect the rights of such person
or persons except to the extent, if any, provided in the Option. All
determinations, interpretations and actions by the Board of Directors shall be
final, conclusive and binding upon all persons.
(b) The Board of Directors may suspend or terminate the Plan at any time. No
such suspension or termination shall affect Options or Rights then in effect.
12. Effective Date.
The Plan, as originally approved by the stockholders of the Company, was
effective on and as of December 12, 1985. The Plan, as amended and restated,
shall be effective as of December 8, 2003.
A-5
Two Alternate Ways to Vote Your Proxy
VOTE BY TELEPHONE OR INTERNET
24 Hours a Day - 7 Days a Week
Save Your Company Money - It's Fast and Convenient
TELEPHONE
---------
1-866-593-3357
.. Use any touch-tone telephone.
.. Have your Proxy Form in hand.
.. Enter the Control Number located in the box below.
.. Follow the simple recorded instructions.
OR
INTERNET
--------
https://www.proxyvotenow.com/adx
.. Go to the website address listed above.
.. Have your Proxy Form in hand.
.. Enter the Control Number located in the box below.
.. Follow the simple instructions.
OR
MAIL
----
.. Mark, sign and date your Proxy Card.
.. Detach card from Proxy Form.
.. Return the card in the postage-paid envelope provided.
Your telephone or internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned the proxy card. If you
have submitted your proxy by telephone or the internet there is no need for you
to mail back your proxy.
-------------------------------------
CONTROL NUMBER FOR
TELEPHONE OR INTERNET VOTING
-------------------------------------
1-866-593-3357
CALL TOLL-FREE TO VOTE
. DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET .
[_] Sign, Date and Return the
Proxy Card Promptly Using [X]
the Enclosed Envelope. Votes must be indicated
(x) in Black or Blue ink.
THE BOARD OF DIRECTORS RECOMMENDS VOTES FOR: PROPOSALS (1), (2) and (3)
1. ELECTION OF DIRECTORS:
FOR [_] WITHHOLD
ALL FOR ALL [_] EXCEPTIONS [_]
Nominees: 01 - Enrique R. Arzac, 02 - Daniel E. Emerson,
03 - Edward J. Kelly, III, 04 - Thomas H. Lenagh,
05 - W. D. MacCallan, 06 - W. Perry Neff,
07 - Douglas G. Ober*, 08 - Landon Peters, 09 - John J. Roberts,
10 - Susan C. Schwab, 11 - Robert J. M. Wilson *Mr. Ober is an
"interested person", as defined by the Investment Company Act of 1940,
because he is an officer of the Company.
FOR AGAINST ABSTAIN
2. THE SELECTION OF PricewaterhouseCoopers LLP [_] [_] [_]
as independent public accountants.
3. APPROVAL OF AMENDMENT to extend the term [_] [_] [_]
of the Company's Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL (4).
4. Recommend that the Board consider placing [_] [_] [_]
limitations on when stock option grants may
be awarded.
(Instructions: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
+Exceptions_____________________________________________________________________
In their discretion, the Proxies are authorized to vote upon all other business
that may properly come before the Meeting with all the powers the undersigned
would possess if personally present.
-------------------------------------
S C A N L I N E
-------------------------------------
NOTE: The signature(s) should correspond with the name of the stockholder(s) as
it appears hereon.
Date Share Owner sign here Co-Owner sign here
------------------------------------------ --------------------------------
------------------------------------------ --------------------------------
THE ADAMS EXPRESS COMPANY -- PROXY FOR 2003 ANNUAL MEETING
Solicited on Behalf of the Board of Directors
The undersigned hereby appoints THOMAS H. LENAGH, W. D. MacCALLAN and
LANDON PETERS, the proxies, and each of them (with power to act without the
others and with power of substitution) the proxy of the undersigned, for and in
the name of the undersigned, to vote at the Annual Meeting of Stockholders of
The Adams Express Company to be held at the Hyatt Regency O'Hare, 9300 W. Bryn
Mawr Avenue, Rosemont, IL 60018, on the 25th day of March, 2003 at 11:00 a.m.,
and at any adjournment thereof, the shares of stock which the undersigned would
be entitled to vote if personally present.
The undersigned hereby ratifying all action of said proxies, or any of
them, or their or his substitutes or substitute by virtue hereof; and hereby
revoking any authorization to vote such shares heretofore given by the
undersigned to anyone. The undersigned hereby acknowledges receipt of the Notice
of Annual Meeting of Stockholders dated February 14, 2003, and the Proxy
Statement furnished therewith.
If the undersigned fails to specify herein how such shares are to be voted
on said proposals (1), (2), (3) and (4), they shall be voted "FOR" proposals
(1), (2) and (3), and "AGAINST" proposal (4).
(over)
THE ADAMS EXPRESS COMPANY
P.O. BOX 11147
NEW YORK, N.Y. 10203-0147
To change your address, please mark this box. [_]
Attend Annual Meeting mark here. [_]