<PAGE>
SCHEDULE 14A INFORMATION
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 Section 240.14a-11(c) or Section 240.14a-12
Anchor Pacific Underwriters, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of 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)(4) 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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(4) Date Filed:
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<PAGE>
ANCHOR PACIFIC UNDERWRITERS, INC.
1800 Sutter Street, Suite 400
Concord, California 94520
----------------
Notice of Annual Meeting of Shareholders
Tuesday, May 23, 2000
----------------
The Annual Meeting of Shareholders of Anchor Pacific Underwriters, Inc. (the
"Company" or "Anchor") will be held at the Lakeview Club, 300 Lakeside Drive,
28th Floor, Oakland, California, on May 23, 2000, at 10:00 a.m. for the
following purposes:
1. To elect seven directors, the names of whom are set forth in the
accompanying Proxy Statement, to serve until the 2001 Annual Meeting.
2. To ratify the reappointment of Odenberg, Ullakko, Muranishi & Co. as
independent auditors of the Company.
3. To transact such other business as may properly come before the meeting.
Only shareholders of record at the close of business on March 24, 2000, are
entitled to vote at this meeting and any adjournment or postponement thereof.
The meeting will be open to shareholders of record, proxyholders and others by
invitation only. Beneficial owners of shares held by a broker or nominee must
present proof of such ownership to attend the meeting.
A copy of the Company's Annual Report for the fiscal year ended December 31,
1999, containing financial statements, is included with this mailing.
By Order of the Board of Directors,
/s/ CAROL J. HAYNOSCH
Carol J. Haynosch,
Secretary
Concord, California
April 24, 2000
PLEASE USE THE ENCLOSED STAMPED ENVELOPE TO RETURN YOUR PROXY.
RETURNING YOUR PROXY WILL NOT PREVENT YOU FROM VOTING IN PERSON AT THE
ANNUAL MEETING. YOUR PROMPT RESPONSE WILL HELP YOUR COMPANY ASSURE A
QUORUM AND AVOID ADDITIONAL EXPENSE FOR PROXY SOLICITATION.
<PAGE>
ANCHOR PACIFIC UNDERWRITERS, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROXY STATEMENT............................................................. 1
Shareholder Proposals for Next Annual Meeting............................. 2
Outstanding Voting Securities............................................. 2
Transaction with Ward North America Holding, Inc. ........................ 2
Principal Shareholders.................................................... 3
ELECTION OF DIRECTORS....................................................... 4
Committees and Meetings of the Board of Directors......................... 7
Section 16(a) Beneficial Ownership Reporting Compliance................... 8
Stock Ownership Table..................................................... 8
Executive Compensation.................................................... 10
Employment Agreement with James R. Dunathan............................... 11
Employment Agreement with Thomas O. Hedford............................... 11
Employment Agreement with Earl Wiklund.................................... 11
The 1994 Stock Option Plan (the "1994 Plan").............................. 12
Certain Relationships and Transactions.................................... 12
DIRECTORS' PROPOSALS........................................................ 14
Directors' Proposal to Ratify the Appointment of Independent Auditors..... 14
ANNUAL REPORT AND FINANCIAL STATEMENTS...................................... 14
</TABLE>
<PAGE>
ANCHOR PACIFIC UNDERWRITERS, INC.
1800 Sutter Street, Suite 400
Concord, California 94520
----------------
PROXY STATEMENT
----------------
Annual Meeting of Shareholders
May 23, 2000
The enclosed proxy is solicited on behalf of the Board of Directors of
Anchor Pacific Underwriters, Inc. (the "Company" or "Anchor"), a Delaware
corporation, for use at the Annual Meeting of Shareholders to be held at 10:00
a.m. at the Lakeview Club, 300 Lakeside Drive, 28th Floor, Oakland,
California, on May 23, 2000, and at any adjournment or postponement thereof.
Only holders of the Company's common stock of record on March 24, 2000, will
be entitled to vote. At the close of business on the record date, there were
4,710,055 shares of common stock and 1,853,300 shares of Series A Convertible
Preferred ("Series A Preferred") stock outstanding. The Series A Preferred
shares are convertible into 18,533,000 shares of common stock and have the
right to vote with the Company's common stock on an "as converted" basis.
Holders of common stock are entitled to one vote for each share held,
except each shareholder has cumulative voting rights for the election of
directors under California law applicable to the Company. Cumulative voting
rights entitle each shareholder to cast that number of votes which equals the
number of shares held by such shareholder multiplied by the number of
directors to be elected. Each shareholder may cast all of his or her votes for
a single candidate or distribute such votes among any or all of the candidates
as he or she chooses. No shareholder will be 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 such candidate's or
candidates' name(s) have been placed in nomination prior to the voting, and
the shareholder has given notice at the 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 candidates in
nomination. An opportunity will be given at the meeting prior to the voting
for any shareholder who desires to do so to announce his or her intention to
cumulate his or her votes. The proxyholders are given discretionary authority,
under the terms of the proxy, to cumulate votes represented by shares for
which they are named in the proxy.
The presence in person or by proxy of a majority of the shares entitled to
vote is necessary to constitute a quorum at the Annual Meeting of
Shareholders. Any person giving a proxy in the form accompanying this Proxy
Statement has the power to revoke it prior to its exercise. A proxy may be
revoked by filing with the Secretary of the Company prior to the meeting, an
instrument revoking it or a duly executed proxy bearing a later date, or by
attending the meeting and electing to vote in person.
The shares represented by a duly executed and unrevoked proxy in the form
accompanying this Proxy Statement will be voted in accordance with the
specifications contained therein, and in the absence of specifications will be
voted FOR the nominees for directors named herein and the ratification of
appointment of Odenberg, Ullakko, Muranishi & Co. ("Odenberg") as independent
auditors of the Company, and according to the discretion of the proxyholders
on any other matters that properly come before the meeting.
This Proxy Statement and the accompanying proxy were first sent to
shareholders on approximately April 28, 2000. The cost of this solicitation is
being borne by Anchor. Anchor may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation material to such beneficial owners. Proxies may also be solicited
personally or by telephone, facsimile or telegram, by certain of Anchor's
directors, officers and regular employees, without additional compensation.
1
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Shareholder Proposals for Next Annual Meeting
Subject to Securities and Exchange Commission ("SEC") regulations,
proposals of shareholders intended to be presented at the 2001 Annual Meeting
must be received by the Secretary of Anchor not later than December 3, 2000,
to be included in the 2001 Proxy Statement.
Outstanding Voting Securities
Only shareholders of record at the close of business on March 24, 2000, are
entitled to vote at the Annual Meeting. On that day, there were issued and
outstanding 4,710,055 shares of common stock and 1,853,300 Series A Preferred
stock convertible into 18,533,000 shares of the Company's common stock
(representing 62.6% of Company's outstanding shares on a fully diluted basis).
Each share entitles the holder thereof to one vote.
Transaction with Ward North America Holding, Inc.
On November 29, 1999, Anchor and Ward North America Holding, Inc. ("Ward")
executed a letter of intent whereby Ward would acquire a controlling ownership
interest in Anchor and nominees of Ward would assume a majority of the seats
on Anchor's Board of Directors. The November 29, 1999 letter of intent was
further modified by the parties pursuant to a February 18, 2000 binding Letter
Agreement that specifically bound the parties to certain funding and
structural commitments.
Effective March 9, 2000, Anchor and Ward entered into a Securities Purchase
Agreement ("Agreement") which superseded and replaced in its entirety the
binding Letter Agreement dated February 18, 2000 and letter of intent dated
November 29, 1999. The basic terms of the Agreement provide that Ward would
purchase from Anchor a package of debt and equity securities and that it would
make available a $1,000,000 loan facility. The specific securities and loan
facility are described below:
(a) Series E Convertible Debentures (the "Series E Debentures") in the
principal amount of $500,000; two year maturity with a provision that
provides for repayment on July 1, 2000, if requested by Ward; conversion
price of $0.50 per share; "Piggyback" registration rights for three years;
for each $5,000 of Series E Debentures acquired, Ward received a five year
warrant to acquire 3,000 shares of Anchor common stock at an exercise price
of $0.50 per share; and subordination provisions that subordinates the
Series E Debentures to Anchor's "Senior Debt" (as defined in the Series E
Debentures). The Series E Debentures are superior to all other debentures
of the Company, including without limitation the Series A, B, C and D
debentures previously issued by Anchor, and shall constitute "Senior Debt"
for purposes of those debentures. As of March 24, 2000, Ward has invested
$500,000 in the Series E Debentures;
(b) a $200,000 bridge loan facility to Anchor evidenced by a promissory
note ("Bridge Loan"); bearing interest at the rate of 10% per annum with a
maturity date of July 1, 2000. The principal amount and all accrued
interest under the Bridge Loan were, at the election of Ward, applied
toward the purchase of Series A Preferred stock, described below;
(c) 1,853,300 shares of Series A Preferred stock at a purchase price of
$2,000,000, which would constitute 62.6% of Anchor's common stock on a
fully diluted basis; and
(d) a $1,000,000 convertible loan facility (the "Convertible Loan")
which was made available immediately following the closing of the purchase
of the Series A Preferred. The Convertible Loan shall be convertible, at
Ward's option, into shares of Series A Preferred stock which are further
convertible into a number of shares of common stock, which, when added to
the shares of common stock issued or issuable pursuant to the Series E
Debentures (not including the warrants accompanying the Series E
Debentures) and other shares of Series A Preferred issued to Ward, would
constitute 73.5% of Anchor's common stock on a fully-diluted basis
following such conversion, assuming the maximum amount of $1,000,000 was
borrowed by Anchor pursuant to the Convertible Loan.
2
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Under the terms of the Agreement, Ward agreed that during the 36 month
period following the closing of the transaction neither Ward or its affiliates
would make any further acquisitions of Anchor's securities unless Ward first
made a tender offer (the "Tender Offer") to buy all of the shares of Anchor's
common stock not then owned by Ward or its affiliates at a purchase price
equal to the greater of: (i) $0.80 per share (as adjusted for stock splits,
combinations or dividends with respect to such shares) or (ii) the price per
share determined by assuming the value of Anchor to be equal to Anchor's
earnings before income taxes ("EBIT") for the 12 full calendar months
preceding the month in which the offer is made, multiplied by six and divided
by the number of shares outstanding of the Company on a fully diluted basis.
Ward is a San Diego, California based company that provides outsourced
claims management, loss control, field adjusting and catastrophe support to
the Insurance and Alternative Risk markets.
Principal Shareholders
The following table shows the name, address, number of shares held, and
percentage of shares held as of March 24, 2000, by each person or entity known
to Anchor to be the beneficial owner of more than five percent of the
Company's common stock.
<TABLE>
<CAPTION>
Amount and Nature Percent
Name and Address of Ownership of Class
---------------- ----------------- --------
<S> <C> <C>
Ward North America Holding, Inc................. 22,053,000(1) 74.5%(1)
510 West Ash Street, Suite 1500
San Diego, CA 92101
James R. Dunathan............................... 363,297(2) 7.44%(2)
1800 Sutter Street, Suite 400
Concord, CA 94520
Steven A. Gonsalves............................. 244,479(3) 5.06%(3)
5151 Port Chicago Highway
Concord, CA 94520
Donald B. Putnam................................ 568,846(4) 11.90%(4)
1800 Sutter Street, Suite 500
Concord, CA 94520
James P. Wieking................................ 490,578(5) 10.28%(5)
1800 Sutter Street, Suite 500
Concord, CA 94520
Earl Wiklund.................................... 241,296(6) 5.03%(6)
P. O. Box 4101
Concord, CA 94520
Guarantee Life Insurance Company................ 828,444(7) 17.02%(7)
8001 Indian Hills Drive
Omaha, Nebraska 68114
</TABLE>
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(1) Assumes that Ward: (a) converts 1,853,300 shares of Series A Preferred
stock into 18,533,000 shares of common stock; (b) converts the Series E
Debentures into 1,000,000 shares of common stock at a conversion price of
$0.50 per share; (c) exercises warrants to acquire 300,000 shares of
common stock at a purchase price of $0.50 per share; and (d) the
$1,000,000 Convertible Loan is fully drawn down and Ward converts the
Convertible Loan into 222,000 shares of Series A Preferred which, in turn
are converted into 2,220,000 shares of common stock.
(2) Includes 193,547 shares of common stock, 123,350 shares of common stock
issuable upon the exercise of stock options, 18,000 shares of common stock
issuable upon the conversion of certain debentures at a conversion price
of $0.50 per share, 2,000 shares of common stock issuable upon exercise of
warrants at a purchase price of $1.35 per share, and 26,400 shares of
common stock issuable upon exercise of warrants at a purchase price of
$0.50 per share. Mr. Dunathan has sole dispositive power over such shares
of common
3
<PAGE>
stock. The identified percentage assumes that Ward has not converted any of
its Series A Preferred stock or Series E Debentures into shares of common
stock or exercised any warrants to acquire shares of common stock.
(3) Includes 132,424 shares of common stock, 16,500 shares of common stock
issuable upon the exercise of stock options, 10,000 shares of common stock
issuable upon exercise of warrants at a purchase price of $1.35 per share,
and 85,555 shares of common stock issuable upon exercise of warrants at a
purchase price of $0.90 per share. Mr. Gonsalves shares voting power over
132,424 shares of common stock with Debra Gonsalves, his wife. Mr.
Gonsalves shares voting power with Gonsalves & Santucci, Inc., as
President and majority shareholder, over the remaining 21,875 shares of
common stock. The identified percentage assumes that Ward has not
converted any of its Series A Preferred stock or Series E Debentures into
shares of common stock or exercised any warrants to acquire shares of
common stock.
(4) Includes 499,013 shares of common stock, 26,500 shares of common stock
issuable upon the exercise of stock options, 4,000 shares of common stock
issuable upon the exercise of warrants at a purchase price of $1.35 per
share, 33,333 shares of common stock issuable upon exercise of warrants at
a purchase price of $0.90 per share, and 6,000 shares of common stock
issuable upon exercise of warrants at a purchase price of $0.50 per share.
Mr. Putnam shares voting power over such shares of common stock with
Alexandra Putnam, his wife, as co-trustee of a revocable living trust. The
identified percentage assumes that Ward has not converted any of its
Series A Preferred stock or Series E Debentures into shares of common
stock or exercised any warrants to acquire shares of common stock.
(5) Includes 426,301 shares of common stock, 26,500 shares of common stock
issuable upon the exercise of stock options, 4,000 shares of common stock
issuable upon exercise of warrants at a purchase price of $1.35 per share,
27,777 shares of common stock issuable upon exercise of warrants at a
purchase of $0.90 per share, and 6,000 shares of common stock issuable
upon exercise of warrants at a purchase price of $0.50 per share. Mr.
Wieking has sole dispositive power over such shares of common stock. The
identified percentage assumes that Ward has not converted any of its
Series A Preferred stock or Series E Debentures into shares of common
stock or exercised any warrants to acquire shares of common stock.
(6) Includes 158,130 shares of common stock, 46,500 shares of common stock
issuable upon the exercise of stock options, 2,000 shares of common stock
issuable upon exercise of warrants at a purchase price of $1.35 per share,
16,666 shares of common stock issuable upon exercise of warrants at a
purchase price of $0.90 per share, and 3,000 shares of common stock
issuable upon exercise of warrants at a purchase price of $0.50 per share.
Mr. Wiklund has sole dispositive power over such shares of common stock.
The identified percentage assumes that Ward has not converted any of its
Series A Preferred stock or Series E Debentures into shares of common
stock or exercised any warrants to acquire shares of common stock.
(7) Includes 672,444 shares of common stock, 120,000 shares of common stock
issuable upon the conversion of certain debentures at a conversion price
of $0.50 per share and 36,000 shares of common stock issuable upon
exercise of warrants at a purchase price of $0.50 per share. Guarantee
Life Insurance Company has sole dispositive power over such shares of
common stock. The identified percentage assumes that Ward has not
converted any of its Series A Preferred stock or Series E Debentures into
shares of common stock or exercised any warrants to acquire shares of
common stock.
1. Election of Directors
As set by the Board of Directors pursuant to the Bylaws of Anchor, the
authorized number of directors to be elected is seven. Directors will hold
office from the time of their election until the next Annual Meeting of
Shareholders and until successors are elected and qualified. The seven
nominees receiving the highest number of affirmative votes of the shares
present in person or represented by proxy and entitled to vote for them, shall
be elected as directors. Only votes cast FOR a nominee will be counted in
determining whether that nominee has been elected as a director. A shareholder
may withhold authority from the proxyholders to vote for the entire slate as
nominated or, by striking a line through the name of an individual nominee in
the space provided on the proxy card, withhold the authority to vote for any
individual nominee. Instructions on the accompanying proxy card to withhold
authority to vote for one or more of the nominees will result in such nominees
receiving fewer votes.
4
<PAGE>
As described above, on March 14, 2000 Anchor completed a financing
transaction with Ward. In connection with this transaction, all of Anchor's
directors except Mr. Dunathan resigned. As the sole remaining director,
Mr. Dunathan appointed one representative for Anchor (William R. Beasley) and
five representatives of Ward (Jeffrey S. Ward, Kevin P. Jasper, Gerard A.C.
Bakker, John F. Darden and Russ A. Whitmarsh) to the Board of Directors.
The following seven persons have been selected by the Board of Directors as
nominees for election to the Board: Jeffrey S. Ward, James R. Dunathan, Kevin
P. Jasper, Gerard A.C. Bakker, William R. Beasley, John F. Darden and Russ A.
Whitmarsh. All of the nominees are incumbent directors. If any of the nominees
should decline or be unable to act as a director, the shares may be voted for
such substitute nominees as the proxyholders may in their discretion
determine. Shares represented by the enclosed proxy will be voted FOR the
election of these nominees, unless authority to vote for one or more nominees
is withheld.
The experience and background of each of the directors and nominees are set
forth below.
<TABLE>
<CAPTION>
Year First
Became a
Name Age Director Positions with Anchor
---- --- ---------- ---------------------
<S> <C> <C> <C>
Jeffrey S. Ward......................... 40 2000 Chairman and Director
Gerard A.C. Bakker...................... 55 2000 Director
William R. Beasley...................... 59 2000 Director
John F. Darden.......................... 54 2000 Director
James R. Dunathan....................... 63 1987 Director
Kevin P. Jasper......................... 47 2000 Director
Russ A. Whitmarsh....................... 40 2000 Director
</TABLE>
Jeffrey S. Ward. Mr. Ward is Chairman and CEO of San Diego based Ward North
America, Inc. ("Ward N.A.") and CEO of its subsidiaries Ward North America,
Inc., Spectrum Managed Care, Inc. and Ward-Interspect, Ltd. in Toronto. These
firms specialize in providing a diverse array of claims management solutions
to the Insurance and Alternative Risk markets through over 70 offices in the
United States and Canada. Mr. Ward began his career in 1980 as a multi-line
adjuster for a regional adjusting firm in Southern California, A.L. Wisdom &
Associates ("Wisdom"). From 1985 to 1988, Mr. Ward served as Vice President of
Operations for Wisdom. In 1988, he formed J.S. Ward & Co., which operated as a
third party administrator for self-insured's and simultaneously led a
management buyout of Wisdom. In 1991, both J.S. Ward & Co. and Wisdom were
acquired by Swiss-Re owned Thomas Howell Group; an international loss
adjusting firm based in London, and merged together to form Ward-THG. Mr. Ward
served as CEO of Ward-THG, Inc. from 1991 to 1995. In 1995, Mr. Ward was
appointed President of the General Claims Services operation of Atlanta-based
Thomas Howell Group (Americas), Inc., which included Gay & Taylor, Inc. one of
the largest adjusting companies in the United States, founded in 1928. Later
that year he formed Ward North America Holding, Inc. and led the management
buy-out of Ward-THG and Atlanta based Gay & Taylor from Swiss-Re. Mr. Ward
holds a Bachelor's degree in Business Administration from the University of
San Diego. He is also a member of the San Diego Chapter of the Young
Presidents Organization.
Gerard A.C. Bakker. In February 2000, Mr. Bakker joined Ward North America,
Inc. ("Ward") as Senior Vice President. Ward specializes in providing claims
management, loss control, field adjusting and catastrophe support to the
Insurance and Alternative Risk markets. Mr. Bakker began his career 30 years
ago in Switzerland in a troubleshooting and consulting capacity for a
multinational industrial company. Subsequently he worked as Vice President for
Walter E. Heeler and Company, a U.S. financial corporation in Europe from
1978-1982. From 1982-1989, he served as a partner in one of the oldest
European loss adjusting firms, A. Kiewit working out of Antwerp, Belgium.
After the acquisition of A. Kiewit and Thomas Howell Group ("THG") in 1991 by
Swiss Re he became responsible for all adjusting operations in Europe and
subsequently became COO in 1994 of THG (Americas) in which capacity he
assisted Ward-THG with the buy-out in 1995 of Ward-THG and Gay & Taylor from
Swiss Re. Mr. Bakker holds a Bachelor's degree in Business Administration from
the University of Public and Business Administration in St. Gall, Switzerland
and a MBA from Northwestern's School of Management.
5
<PAGE>
William R. Beasley. Mr. Beasley began his insurance career in 1962 as a
group insurance representative with Aetna Life and Casualty. During this time
he worked in Portland, Oregon and San Francisco, California while obtaining
his C.L.U. designation. In 1972 he joined Marsh and McClennan as an Assistant
Vice President in the Employee Benefit and Program divisions. Mr. Beasley
later became a member of the Board of Directors and Managing Director of
Seabury and Smith's (a Marsh and McClennan company) San Francisco Office where
in he retired in 1996. He then joined Acordia of California as Executive Vice
President and head of the Program division where he remained in that role
until retiring in the fall of 1999. Since his retirement, Mr. Beasley has
severed as a consultant in the insurance industry. Mr. Beasley graduated in
1962 from Santa Clara University.
John F. Darden. In April 2000, Mr. Darden joined Ward North America, Inc.
("Ward N.A.") as Senior Vice President and Chief Financial Officer. Ward
specializes in providing claims management, loss control, field adjusting and
catastrophe support to the Insurance and Alternative Risk markets. Mr. Darden
began his career in 1974 with the United States operating company for Societe
Generale de Surveillance S.A., SGS Control Services, Inc. as the Vice
President and Chief Financial Officer for SGS North America, Inc., a wholly
owned subsidiary of Societe Generale de Surveillance S.A. From 1986 until
joining Ward, Mr. Darden served as Executive Vice President, Chief Financial
Officer and Director for GAB Robins North America, Inc. GAB Robins is a
leading independent insurance services provider offering loss adjusting,
investigation services, third party administration, medical care management,
catastrophe response services and data information services to self-insured
businesses and the insurance industry. Mr. Darden is a Certified Public
Accountant and holds a B.S. in Accounting from St. Francis College. He is a
member of the American Institute of Certified Public Accountants, the New York
State Society of Certified Public Accountants and the Financial Executive
Institute.
James R. Dunathan. Mr. Dunathan has over 40 years of experience in the
insurance industry and his family has been involved in the insurance industry
since 1880. He joined Harden in 1985 as President and Chief Executive Officer
and initiated the formation of Anchor in late 1986. Mr. Dunathan resigned all
of his executive capacities at both Harden and Anchor effective March 31,
2000. Mr. Dunathan served as a member of the Board of Directors of the
Professional Insurance Agents Association for 11 years and as President of
such Association from 1975 to 1976. Currently Mr. Dunathan serves on the
Business Leaders Alliance for Contra Costa County, an appointment made by the
County Board of Supervisors. He also serves as a Director of the Barbara
Milliff Children's Center in Concord, California, a non-profit school for
children with developmental disabilities. Mr. Dunathan completed his
undergraduate studies at Ohio State University; and served actively in the
U.S. Navy as a naval aviator while he continued graduate work at the U.S.
Armed Forces Institute in Japan.
Kevin P. Jasper. Mr. Jasper is Executive Vice President of Ward North
America Holding, Inc. (Ward N.A.") a San Diego based holding company with
operating subsidiaries engaged in loss claims administration and adjusting,
risk management services, accident, health and dental plan administration,
medical cost containment and other out-source services to Insurance and
Alternative Risk markets. Mr. Jasper joined Ward N.A. in 1997 as Vice
President--Strategic Planning and since that time has served as Senior Vice
President and Chief Administrative Officer until assuming his current position
this year. From 1993 to 1997, Mr. Jasper was self-employed and developed and
operated multi-family real estate projects in California for his own account.
Prior to 1993, Mr. Jasper was involved as a principal in 3 start-up business
enterprises. From 1989 through 1992 he co-founded and held executive
management positions, including President--Manufacturing, in Gigatek Memory
Systems, Inc., a manufacturer of computer memory storage products. In 1991,
Mr. Jasper co-founded and served as a director of Sassaby, Inc. a manufacturer
of cosmetic accessories and developer of a branded cosmetics line, JANE. That
same year he also co-founded and served as a director of the predecessor
entity to Trega Biosciences, Inc. (Nasdaq National Market--"TRGA"). Mr. Jasper
holds a B.S. in Accounting from San Diego State University and is a Magna Cum
Laude graduate of California Western School of Law. He was admitted to the
California Bar in 1979.
Russ A. Whitmarsh. Mr. Whitmarsh began his career in 1983 as a multi-line
field adjuster for A.L.Wisdom & Associates. In 1988 he became a partner with
Jeffrey S. Ward in A.L. Wisdom & Associates and J.S. Ward & Co. He currently
directs the Field Claims Services division of Ward North America, Inc.,
("Ward") a San Diego based holding company with operating subsidiaries engaged
in loss claims administration and
6
<PAGE>
adjusting, risk management services, accident, health and dental plan
administration, medical cost containment and other out-source services to
Insurance and Alternative Risk markets, while overseeing Catastrophe
operations and the SIU department. Mr. Whitmarsh also manages the Far West
District and supports the Chief Executive Officer with a variety of corporate
administration functions.
None of the directors of Anchor hold directorships in any company (other
than Anchor) with a class of securities registered pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended. No director or executive
officer of Anchor has a family relationship to another director or executive
officer of Anchor.
Committees and Meetings of the Board of Directors
The Board of Directors held twelve (12) regularly scheduled or special
meetings during the fiscal year ended December 31, 1999. During 1999 all of
the members of the Board of Directors attended at least 75% of the meetings of
the Board of Directors and of the committees on which they served except for
Steven Gonsalves, Lawrence Hayes, Donald Putnam and Michael Sanford. The Board
of Directors has two standing committees: (1) the Audit, Budget and Finance
Committee ("Audit Committee"); and (2) the Compensation and Personnel
Committee ("Compensation Committee"). The Executive Committee of the Board of
Directors considers and nominates individuals for election as Directors.
Audit, Budget and Finance Committee
During 1999, the Audit Committee, which was comprised of Earl Wiklund,
Chairman, Audie J. Dudum, James R. Dunathan, R. William MacCullough and
Michael Sanford, held one meeting during the Fiscal Year. In connection with
the Ward transaction, on March 9, 2000, R. William MacCullough resigned from
the Board of Directors and on March 14, 2000, Earl Wiklund, Audie J. Dudum and
Michael Sanford resigned from the Board of Directors. The current Audit
Committee will be appointed by the Board of Directors at the next board
meeting which is scheduled for Mary 23, 2000 immediately following the Annual
Shareholder's Meeting. Members are appointed annually by the full Board. The
functions of the Audit Committee include review of internal controls of
Anchor, accounting compliance generally, and the sufficiency of Anchor's
financial reporting. In connection with these reviews it can meet alone with
appropriate Anchor financial personnel as well as with the independent
auditors, who have free access to the Audit Committee at any time. Anchor's
Accounting/Finance Departments, report directly to the Chairman of the Audit
Committee. The Audit Committee recommends to the Board for its approval and
for ratification by the shareholders the engagement of the Company's
independent auditors to examine the accounts of Anchor. The Audit Committee
also annually reviews the independence of the independent auditors as a factor
in these recommendations.
Compensation and Personnel Committee
During 1999, the Compensation Committee, which was comprised of Steven A.
Gonsalves, Chairman, Audie J. Dudum, James R. Dunathan and Carol Haynosch (ex-
officio), did not meet during the past Fiscal Year. In connection with the
Ward transaction, on March 14, 2000, Steven A. Gonsalves and Audie J. Dudum
resigned from the Board of Directors. The new Compensation Committee will be
appointed by the Board of Directors at the next board meeting which is
scheduled for Mary 23, 2000 immediately following the Annual Shareholder's
Meeting. Members are appointed annually by the full Board. The Compensation
Committee reviews, in consultation with management, existing and proposed
compensation plans, programs and arrangements for officers of Anchor. The
Compensation Committee then prepares its recommendation for submission and
approval of the Board of Directors.
Directors' Fees and Expenses
Directors of Anchor do not receive any fees for their service as Board or
Committee members. Anchor reimburses reasonable out-of-pocket expenses
incurred by Directors performing services for Anchor.
7
<PAGE>
Pursuant to a nondiscretionary formula set forth in the 1994 Company's
Stock Option Plan, non-employee Directors receive stock options covering
15,000 shares upon their initial election to the Board (the "Initial Grant"),
and automatically receive supplemental options covering 1,000 shares on each
subsequent re-election (the "Annual Grant"). The Initial Grant and Annual
Grant are cumulatively exercisable to the extent of 25% of the shares subject
to the option on the first, second, third and fourth anniversaries of the date
of grant, becoming 100% exercisable on the fourth anniversary of the date of
grant. Each such option is granted with an exercise price at fair market value
on the date of grant (or 110% of fair market value in the case of an optionee
who owns stock representing more than 10% of the total combined voting power
of all classes of the stock of Anchor). These options expire on the earlier of
ten years from the grant date or thirty months following termination of the
Director's tenure on the Board.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires Anchor's directors and executive officers, and any
person who owns more than ten percent of Anchor's common stock, to file with
the SEC initial reports of ownership and reports of changes in ownership of
Anchor's common stock. Directors, executive officers and greater than ten-
percent shareholders are required by SEC regulations to furnish Anchor with
copies of all Section 16(a) forms they file. To Anchor's knowledge, based
solely on review of the copies of such reports furnished to Anchor and written
representations that no other reports were required, during the fiscal year
ended December 31, 1999, all such persons required to file reports were in
compliance with the applicable Section 16(a) filing requirements.
Stock Ownership Table
The table below indicates the number of shares of Anchor's common stock
beneficially owned as of March 24, 2000, by (a) incumbent directors and the
nominees nominated by the Board of Directors for election as directors; (b)
executive officers who are not also directors; and (c) by all directors and
executive officers as a group. Except as otherwise indicated, each person has
sole investment and voting powers with respect to the shares shown as
beneficially owned. Ownership information is based upon information furnished
by the respective individuals.
Directors, Nominees and Named Executive Officers
<TABLE>
<CAPTION>
Common Stock
Beneficially
Owned as of Percent
Name March 24, 2000 of Class
---- -------------- --------
<S> <C> <C>
(a) Directors/Nominees:
Gerard A.C. Bakker(1)............................ 15,000 0.32%
William R. Beasley(2)............................ 15,000 0.32%
James R. Dunathan(3)............................. 363,297 7.44%
Kevin P. Jasper(4)............................... 15,000 0.32%
Jeffrey S. Ward(5)............................... 15,000 0.32%
Russ A. Whitmarsh(6)............................. 15,000 0.32%
(b) Executive Officers:
Carol J. Haynosch(7)............................. 10,000 0.21%
Thomas O. Hedford(8)............................. 48,500 1.02%
Raymond P. Petersen(9)........................... 16,250 0.34%
Stuart Rosendahl(10)............................. 13,500 0.29%
Earl Wiklund(11)................................. 241,296 5.03%
(c) All directors and executive officers as a
group.......................................... 767,843 15.93%
</TABLE>
- --------
(1) Includes 15,000 shares of common stock issuable upon the exercise of
stock options. Excludes 22,053,000 shares of common stock issuable to
Ward upon the conversion or exercise of certain securities issued by the
Company to Ward. See "Principal Shareholders" above.
8
<PAGE>
(2) Includes 15,000 shares of common stock issuable upon the exercise of
stock options. Excludes 22,053,000 shares of common stock issuable to
Ward upon the conversion or exercise of certain securities issued by the
Company to Ward. See "Principal Shareholders" above.
(3) Includes 193,547 shares of common stock, 123,350 shares of common stock
issuable upon the exercise of stock options, 18,000 shares of common
stock issuable upon the conversion of certain debentures at a conversion
price of $0.50 per share, 2,000 shares of common stock issuable upon
exercise of warrants at a purchase price of $1.35 per share, and 26,400
shares of common stock issuable upon exercise of warrants at a purchase
price of $0.50 per share. Mr. Dunathan has sole dispositive power over
such shares of common stock. Mr. Dunathan resigned all of his executive
capacities effective March 31, 2000.
(4) Includes 15,000 shares of common stock issuable upon the exercise of
stock options. Excludes 22,053,000 shares of common stock issuable to
Ward upon the conversion or exercise of certain securities issued by the
Company to Ward. See "Principal Shareholders" above.
(5) Includes 15,000 shares of common stock issuable upon the exercise of
stock options. Excludes 22,053,000 shares of common stock issuable to
Ward upon the conversion or exercise of certain securities issued by the
Company to Ward. See "Principal Shareholders" above.
(6) Includes 15,000 shares of common stock issuable upon the exercise of
stock options. Excludes 22,053,000 shares of common stock issuable to
Ward upon the conversion or exercise of certain securities issued by the
Company to Ward. See "Principal Shareholders" above.
(7) Includes 10,000 shares of common stock issuable upon the exercise of
stock options.
(8) Includes 12,500 shares of common stock issuable upon the exercise of
stock options, 30,000 shares of common stock issuable upon the conversion
of certain debentures at a conversion prioce of $0.50 per share, and
6,000 shares of common stock issuable upon exercise of warrants at a
purchase price of $0.50 per share.
(9) Includes 6,250 shares of common stock and 10,000 shares of common stock
issuable upon the exercise of stock options. Mr. Petersen resigned all of
his executive capacities effective March 31, 2000.
(10) Includes 7,500 shares of common stock issuable upon the exercise of stock
options, and 6,000 shares of common stock issuable upon exercise of
warrants at a purchase price of $0.50 per share.
(11) Includes 158,130 shares of common stock, 46,500 shares of common stock
issuable upon the exercise of stock options, 2,000 shares of common stock
issuable upon exercise of warrants at a purchase price of $1.35 per
share, 16,666 shares of common stock issuable upon exercise of warrants
at a purchase price of $0.90 per share, and 3,000 shares of common stock
issuable upon exercise of warrants at a purchase price of $0.50 per
share. Mr. Wiklund has sole dispositive power over such shares of common
stock. Mr. Wiklund resigned all of his executive capacities effective
March 31, 2000.
9
<PAGE>
Executive Compensation
The following table shows for the fiscal years ended December 31, 1999,
1998 and 1997, the compensation paid to the executive officers of Anchor, the
executive officers of its subsidiary, Harden-CA's division, PHA and the
executive officers of its former subsidiary, PKW, who performed significant
policy making functions for Anchor, whose aggregate salaries and bonuses
exceeded $100,000.
Summary Annual Compensation Table
<TABLE>
<CAPTION>
Name and Principal All Other
Position Year Salary ($)(1) Bonus ($) Compensation ($)
------------------ ---- ------------- --------- ----------------
<S> <C> <C> <C> <C>
James R. Dunathan......... 1999 $142,437 $ 9,343(2) $ --
President and Chief 1998 132,999 38,062(2) 5,807(5)
Executive Officer 1997 137,237 -- 14,735(5)
Earl Wiklund.............. 1999 114,023 10,759(2) --
Senior Vice President, 1998 108,685 21,081(2) --
Chief Financial Officer
and Secretary 1997 112,311 -- --
Thomas O. Hedford......... 1999 111,354 2,500(3) --
President of PHA 1998 110,000 16,000(3) --
Stuart Rosendahl.......... 1999 84,375 2,200(4) 23,687(6)
Vice President Marketing
of PHA 1998 84,000 1,500(4) 21,276(6)
Donald B. Putnam.......... 1998 99,999 -- --
Chairman of the Executive
Committee of PKW 1997 99,999 -- --
James P. Wieking.......... 1998 109,999 -- --
Executive Vice President
of PKW 1997 125,679 -- --
</TABLE>
- --------
(1) Includes compensation earned and received by the named persons, as well as
amounts earned but deferred at the election of such persons pursuant to
Anchor's 401(k) Plan.
(2) Represents incentive compensation paid to Mr. Dunathan and Mr. Wiklund
during 1999 based on Anchor's financial performance for 1998. Said bonus
is equal to 4% of Anchor's operating results ("EBITDA", earnings before
income taxes, depreciation and amortization) and was calculated semi-
annually for the period ended December 31, 1998.
(3) Represents incentive compensation paid to Mr. Hedford based on PHA's
financial performance. Said bonus for 1999 is equal 50% of 3% of PHA's
operating results ("EBITDA", earnings before income taxes, depreciation
and amortization) and was calculated quarterly for the period ended
December 31, 1998, respectively.
(4) Represents incentive compensation paid to Mr. Rosendahl based on PHA's
overall financial performance during 1998.
(5) Represents amount paid to Mr. Dunathan for commissions related to certain
of Mr. Dunathan's insurance brokerage clients.
(6) Represents amount paid to Mr. Rosendahl for commissions related to certain
of Mr. Rosendahl's third-party administration clients.
10
<PAGE>
Aggregated Option/SAR Exercises in the Last Fiscal Year
and Fiscal Year-End Option/SAR Values(1)
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Options/SARs at 12/31/99 at 12/31/99
----------------------------- -----------------------------
Name (Exercisable) (Unexercisable) (Exercisable) (Unexercisable)
---- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
James R. Dunathan....... 121,850 1,500 O O
Earl Wiklund............ 46,500 1,500 O O
Carol J. Haynosch....... 10,000 O O O
Lynn A. Boyd............ 10,000 O O O
Raymond P. Petersen..... 10,000 O O O
Thomas O. Hedford....... 3,125 9,375 O O
Stuart Rosendahl........ 1,875 5,625 O O
Robert H. Rath.......... 5,000 5,000 O O
Jerry Turney............ 1,250 3,750 O O
</TABLE>
- --------
(1) No options were exercised during 1999. Anchor's 1994 Stock Option Plan
does not provide for stock appreciation rights ("SARs"). The dollar value
reported in the table was determined by multiplying the average of the
high and low bid prices on the OTC Bulletin Board of Anchor's common stock
on December 31, 1999 by the number of shares subject to the options minus
the aggregate exercise price.
Employment Agreement with James R. Dunathan
In 1997, to assure itself of his continued services and in recognition of
Mr. Dunathan's past contributions to Anchor and his expected contribution to
its future performance, Anchor entered into an five-year employment agreement
("Agreement") with James R. Dunathan. Among other things, the Agreement
provides for the payment to Mr. Dunathan of one times his annual cash
compensation if his employment is involuntarily or constructively terminated
without cause. The Agreement was amended and restated effective May 1, 1999,
to extend the term of Mr. Dunathan's employment agreement to April 30, 2004
and to amend his incentive compensation to reflect that he would be eligible
to receive an annual bonus equal to 5% of Harden Group's operating results,
which are based upon EBITDA (earnings before interest, taxes, depreciation and
amortization). Mr. Dunathan resigned all of his executive capacities effective
March 31, 2000.
Employment Agreement with Thomas O. Hedford
In 1998, to assure itself of his continued services and in recognition of
Mr. Hedford's past contributions to Harden and his expected contribution to
its future performance, Harden entered into a four-year employment agreement
("Agreement") with Thomas O. Hedford. Among other things, the Agreement
provides for the payment to Mr. Hedford of an amount equal to nine months of
his annual cash compensation if his employment is involuntarily or
constructively terminated without cause. The Agreement was amended and
restated effective May 1, 1999, to extend the term of Mr. Hedford's employment
agreement to April 30, 2004, and to amend his incentive compensation to
reflect that he would be eligible to receive an annual bonus equal to 4% of
Harden Group's operating results, which are based upon EBITDA (earnings before
interest, taxes, depreciation and amortization).
Employment Agreement with Earl Wiklund
In 1999, to assure itself of his continued services and in recognition of
Mr. Wiklund's past contributions to Harden and his expected contribution to
its future performance, Harden entered into a five-year employment agreement
("Agreement") with Earl Wiklund. Among other things, the Agreement provides
for the payment to Mr. Wiklund equal to nine months of his annual cash
compensation if his employment is involuntarily or constructively terminated
without cause. The Agreement was amended and restated effective May 1, 999, to
extend the term of Mr. Wiklund's employment agreement to April 30, 2004 and to
amend his incentive
11
<PAGE>
compensation to reflect that he would be eligible to receive an annual bonus
equal to 5% of Harden Group's operating results, which are based upon EBITDA
(earnings before interest, taxes, depreciation and amortization). Mr. Wiklund
resigned all of his executive capacities effective March 31, 2000, and
received payment in full under the terms of the Agreement.
The 1994 Stock Option Plan (the "1994 Plan")
No options were exercised by the directors or executive officers of Anchor
during Anchor's last fiscal year. As of March 24, 2000 there were options to
purchase 592,450 shares of Anchor common stock outstanding. Except with
respect to options to be granted to non-employee directors, the amount of
options that will be granted in the future is not presently determinable.
During 1999 no options were granted under the 1994 Plan.
Under the terms of the 1994 Plan, option grants have an exercise price
equal to 100% of the fair market value of Anchor common stock as of the date
of grant (except for options granted to persons who own stock possessing more
than 10% of the voting power of Anchor's common stock, which have an exercise
price equal to 110% of the fair market value as of the date of grant). Options
under the 1994 Plan are exercisable in 25% increments over a four year period.
All such options would have had a term of 10 years.
Certain Relationships and Related Transactions
Interested Transactions with Management. There are no material transactions
since January 1, 1999, or any currently proposed transactions, to which Anchor
was or is to be a party, in which the amount involved exceeds $60,000 and in
which any director, executive officer, five percent or more shareholder, or
any associate of any of the foregoing persons had, or will have, a direct or
indirect material interest, except as follows:
In 1995, Anchor issued $370,000 of 10% Convertible Subordinated Debentures
(the "Debentures"). Subsequent qualified investors holding $270,000 of the
Debentures, including one member of the Board of Directors (Mr. Dunathan who
held $20,000) converted the Debentures into shares of Anchor's common stock at
$1.35 per share. These conversions reduced Anchor's outstanding indebtedness
by $270,000 and, in turn, increased shareholders' equity by $270,000.
Director, Mr. Dunathan was repaid $10,000 in December 1996 and the remaining
$10,000 in February 1997. On March 15, 2000, Anchor repaid the remaining
outstanding Debentures ($60,000) with the proceeds from the Series A Preferred
shares purchased by Ward.
During 1996, Anchor raised $225,000 from one member of the Board of
Directors (Mr. Dunathan who held $10,000) and other qualified investors
through the issuance of 10% Subordinated Bridge Notes with a Warrant to
Purchase Shares of Anchor Common Stock ("Bridge Notes"). The basic terms of
the Bridge Notes were: (a) 10% interest per annum, paid in arrears; (b) one
year term; (c) for every $10,000 of principal invested, the purchaser received
a five year warrant to purchase 1,000 shares of Anchor common stock at a
purchase price of $1.75 per share; (d) "piggyback" registration rights for
three years; and (e) subordination provisions that subordinate the Bridge
Notes to Anchor's "Senior Debt" (as defined in the Bridge Notes).
In February 1997, Anchor offered the purchasers of said Bridge Notes an
opportunity to either change the terms of the warrants underlying the Bridge
Notes or to participate in the 1997 Offering (discussed below), by exchanging
the Bridge Notes. The basic terms of the two alternatives were: (a) in lieu of
receiving a five year warrant to purchase 1,000 shares of Anchor common stock
at a purchase price of $1.75 per share, for every $10,000 in principal
invested, the purchaser would receive a five year warrant to purchase 2,000
shares of Anchor common stock at a purchase price of $1.35 per share; or (b)
be allowed to participate in the 1997 Offering by exchanging the Bridge Notes
and receiving in return (i) interest at the rate of 10% per annum up to the
date of conversion; (ii) Anchor common stock in place of the Bridge Notes at a
conversion price equal to $0.90 per share; and (iii) a five year warrant,
equal to the number of shares issued in place of the Bridge Notes, with the
right to purchase Anchor's common stock at a purchase price of $0.90 per
share. Purchasers representing $180,000 (including Director, Mr. Dunathan who
held $10,000) of said Bridge Notes chose alternative (a) above, and the
remaining $45,000 chose alternative (b) above. Certain purchasers agreed to
extend the term of the
12
<PAGE>
Bridge Notes. On March 15, 2000, Anchor repaid the remaining $80,000 of said
Bridge Notes ($10,000 of which was repaid to Director, Mr. Dunathan) with the
proceeds from the Series A Preferred shares purchased by Ward.
During 1997, Anchor raised $305,000 from qualified investors through a
private offering of Anchor common stock along with warrants to acquire shares
of Anchor common stock (the "1997 Offering"). Anchor utilized a substantial
portion of the proceeds from the 1997 Offering to support current and future
working capital needs of Anchor. The basic terms of the 1997 Offering were:
(a) up to 555,000 shares of Anchor common stock available at a purchase price
of $0.90 per share; (b) five year warrants to acquire one share of Anchor
common stock for each share of Anchor common stock purchased at an exercise
price of $0.90 per share; (c) "piggyback" registration rights for three years;
and (d) anti-dilution protection for stock splits, stock dividends,
recapitalizations and reorganizations.
At the end of the third quarter 1998, Anchor commenced raising additional
funds from qualified investors by offering 10% Convertible Subordinated
Debentures, Series B (the "Series B Debentures"). At the close of said
offering, January 25, 1999, Anchor had raised $495,000 from one member of the
Board of Directors (Mr. Dunathan who held $15,000) and other qualified
investors. Anchor has utilized a substantial portion of the proceeds from the
Series B Debentures to support current working capital needs. The basic terms
of the Series B Debentures were: (a) 10% interest, payable semi-annually in
arrears; (b) two year maturity; (c) conversion price of $0.50 per share; (d)
"Piggyback" registration rights for three shares years; (e) for each $5,000 of
Series B Debentures acquired, an investor received a five year warrant to
acquire 2,000 shares of Anchor common stock at an exercise price of $0.50 per
share; and (f) subordination provisions that subordinate the Series B
Debentures to Anchor's "Senior Debt" (as defined in the Series B Debentures).
The Series B Debentures contained a provision that permitted Anchor to redeem
all or a portion of the Series B Debentures, at par, plus any outstanding
interest, in the event Anchor sold Putnam, Knudsen & Wieking, Inc. ("PKW") for
an amount in excess of $2 million. As a result of the December 31, 1998 sale
of PKW in excess of $2 million, Anchor repurchased $230,000 of the Series B
Debentures including $200,000 repurchased from its primary lender. On March
15, 2000, Anchor repaid $145,000 ($15,000 of which was repaid to Director, Mr.
Dunathan) of the outstanding Series B Debentures with the proceeds from the
Series A Preferred shares purchased by Ward. As of March 24, 2000, $120,000 of
the Series B Debentures remained outstanding.
During the first nine months of 1999, Anchor raised $179,000 from one
member of the Board of Directors (Mr. Dunathan who held $9,000) and other
qualified investors by offering 10% convertible Subordinated Debentures,
Series C (the "Series C Debentures"). Anchor utilized a substantial portion of
the proceeds from the Series C Debentures to support current working capital
needs. The basic terms of the Series C Debentures were: (a) 10% interest,
payable semi-annually in arrears; (b) two year maturity; (c) conversion price
of $0.60 per share; (d) "Piggyback" registration rights for three years; (e)
for each $5,000 of Series C Debentures acquired, an investor received a five
year warrant to acquire 2,000 shares of Anchor common stock at an exercise
price of $0.60 per share; and (f) subordination provisions that subordinated
the Series C Debentures to Anchor's "Senior Debt" (as defined in the Series C
Debentures).
In September 1999, Anchor offered the investors of said Series C Debentures
the opportunity to either remain as investors in the Series C Debentures or to
convert their Series C Debentures into the Series D Debentures (discussed
below). The basic terms of the two alternatives were: (a) remain as an
investor of the Series C Debentures; or (b) exchange the Series C Debentures
and Warrants and receive in return (i) Series D Debentures at a conversion
price of $0.50 per share; and (ii) for each $5,000 of debentures originally
purchased a Warrant to acquire 3,000 shares of Anchor's common stock at a
purchase price of $0.50 per share. All of the Series C Debentures investors,
including Director, Mr. Dunathan chose alternative (b) above.
During the last three months of 1999, Anchor raised an additional $100,000
from other qualified other qualified investors by offering 10% Convertible
Subordinated Debentures, Series D (the "Series D Debentures). Anchor utilized
a substantial portion of the proceeds from the Series D Debentures to support
current working capital needs. The basic terms of the Series D Debentures
were: (a) 10% interest, payable semi-annually in arrears; (b) two year
maturity; (c) conversion price of $0.50 per share; (d) "Piggyback"
registration rights for
13
<PAGE>
three years; (e) for each $5,000 of Series D Debentures acquired, an investor
received a five year warrant to acquire 3,000 shares of Anchor common stock at
an exercise price of $0.50 per share; and (f) subordination provisions that
subordinates the Series D Debentures to Anchor's "Senior Debt" (as defined in
the Series D Debentures). Of the $244,000 Series D Debentures that remain
outstanding as of March 24, 2000, one member of the Board of Directors, Mr.
Dunathan, holds $9,000.
2. Ratification of Appointment of Independent Auditors
Subject to ratification by the shareholders, the Board of Directors has
reappointed Odenberg, Ullakko, Muranishi & Co., ("Odenberg") as independent
auditors to audit the financial statements of the Company for the fiscal year
beginning January 1, 2000 and ending December 31, 2000.
Representatives of the firm of Odenberg are expected to be present at the
Annual Meeting and will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS RATIFY THE
REAPPOINTMENT OF ODENBERG AS INDEPENDENT AUDITORS TO AUDIT THE FINANCIAL
STATEMENTS OF ANCHOR FOR THE CURRENT FISCAL YEAR ENDING DECEMBER 31, 2000.
Annual Report and Financial Statements
The 1999 Annual Report of Anchor, which includes its audited financial
statements for the fiscal year ended December 31, 1999, has accompanied or
preceded this Proxy Statement.
As of the date of this Proxy Statement, the Board of Directors is not
informed of any matters, other than the election of directors and ratification
of the appointment of Odenberg as independent auditors of Anchor, that may be
brought before the meeting. The persons named in the enclosed form of proxy or
their substitutes will vote with respect to any such matters in accordance
with their best judgment.
14
<PAGE>
ANCHOR PACIFIC UNDERWRITERS, INC.
Annual Meeting of Shareholders
May 23, 2000
This Proxy is solicited on behalf of the Board of Directors
The undersigned appoints Jeffrey S. Ward and James R. Dunathan and each of
them as proxies for the undersigned, with full power of substitution to
represent and to vote all the stock of the undersigned on the following matters
as described in the Proxy Statement accompanying the Notice of Meeting, receipt
of which is hereby acknowledged, and according to their discretion on all other
matters that may be properly presented for action at the Annual Meeting of
Shareholders of Anchor Pacific Underwriters, Inc. to be held on Tuesday, May
23, 2000, and at any adjournment(s) or postponement(s) thereof. The above named
proxyholders are hereby granted discretionary authority to cumulate votes
represented by the shares covered by this Proxy in the election of Directors.
The undersigned may revoke this proxy at any time prior to its exercise or may
attend the meeting and vote in person. If properly executed, this proxy shall
be voted in accordance with the instructions given. TO THE EXTENT NO DIRECTIONS
ARE GIVEN, THE PROXYHOLDERS WILL VOTE FOR PROPOSALS 1 AND 2, AND IN THE
DISCRETION OF THE PROXYHOLDERS ON OTHER MATTERS WHICH MAY PROPERLY BE PRESENTED
AT THE MEETING.
1. ELECTION OF DIRECTORS:
[_] FOR all nominees listed below (except as marked to the
contrary below)
[_] WITHHOLD AUTHORITY to vote for all nominees listed below
Gerard A.C. Bakker, William R. Beasley, John F. Darden, James R. Dunathan,
Kevin P. Jasper, Jeffrey S. Ward and Russ A. Whitmarsh.
(Instruction: To withhold authority to vote for any individual nominee strike
a line through the nominee's name in the list above.)
2. PROPOSAL TO RATIFY THE REAPPOINTMENT OF ODENBERG, ULLAKKO, MURANISHI CO. as
independent auditors of Anchor.
[_] FOR [_] AGAINST [_] ABSTAIN
<PAGE>
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [_]
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE PRE-PAID ENVELOPE.
Date: _______________, 2000
---------------------------
---------------------------
Signature(s) of
Shareholder(s)
Please sign exactly as the
name or names appear in
this proxy. If the stock
is issued in the name of
two or more persons, all
of them should sign the
proxy. A proxy executed by
a corporation should be
signed in its name by an
authorized officer.
Executors, administrators
and trustees so indicate
when signing.
