ASCENT ASSURANCE, INC.
110 WEST SEVENTH STREET
FORT WORTH, TEXAS 76102
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
THURSDAY, MAY 11, 2000
To the Holders of Common Stock of Ascent Assurance, Inc.:
The Annual Meeting of Stockholders of Ascent Assurance, Inc. (the
"Company") will be held on Thursday, May 11, 2000 at 10:00 A.M., New York time,
at the offices of Milbank, Tweed, Hadley and McCloy LLP, 1 Chase Manhattan
Plaza, 54th Floor Conference Center, New York, New York, for the following
purposes:
(1) To elect two (2) directors of the Company, each to serve for a
term of three (3) years.
(2) To ratify the selection by the Board of Directors, of
PricewaterhouseCoopers LLP as independent accountants.
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only holders of Common Stock of record at the close of business on
April 7, 2000 are entitled to notice of and to vote at the meeting. A list of
such stockholders may be examined at the offices of the Company during regular
business hours for ten full days prior to the meeting as well as at the meeting.
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE.
YOU HAVE THE POWER TO REVOKE SUCH PROXY AT ANY TIME BEFORE IT IS VOTED, AND THE
GIVING OF ANY SUCH PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU
ATTEND THE MEETING. ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING
IN PERSON.
By Order of the Board of Directors,
/S/ PATRICK J. MITCHELL
Patrick J. Mitchell
Chairman of the Board and
Chief Executive Officer
Fort Worth, Texas
April 6, 2000
<PAGE>
ASCENT ASSURANCE, INC.
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is being furnished to the stockholders of Ascent
Assurance, Inc., a Delaware corporation ("Ascent" or the "Company"), in
connection with the solicitation by the Board of Directors of the Company (the
"Board") of proxies for use at the Annual Meeting of Stockholders of the Company
to be held on Thursday, May 11, 2000 at 10:00 A.M., New York time, at the
offices of Milbank, Tweed, Hadley and McCloy LLP, 1 Chase Manhattan Plaza, 54th
Floor Conference Center, New York, New York, or any postponements or
adjournments thereof (the "Meeting"). The mailing address of the Company is 110
West Seventh Street, Suite 300, Fort Worth, Texas 76102 and its telephone number
is (817) 878-3300.
At the Meeting, the stockholders of the Company will be asked (i) to
elect two (2) directors of the Company, each to serve for a term of three years
and (ii) to ratify the selection by the Board of PricewaterhouseCoopers LLP to
serve as the Company's independent accountants for 2000.
This Proxy Statement and the enclosed form of proxy are expected to be
mailed on or about April 14, 2000. The cost of solicitation of proxies will be
borne by the Company. The Company will reimburse its transfer agent, LaSalle
National Bank, for the reasonable expenses incurred by it in mailing the
material for the solicitation of proxies to stockholders of record, and will
reimburse nominees for the reasonable expenses incurred by them in mailing the
material for the solicitation of proxies to each of their customers who are the
beneficial holders of the Company's Common Stock (the "Common Stock") registered
in the names of such nominees. In addition to solicitation by mail, officers and
employees of the Company may solicit proxies by telephone, facsimile, or in
person. Proxies in the form enclosed, properly executed by stockholders and
returned to the Company and not revoked, will be voted at the Meeting. The proxy
may be revoked at any time before it is exercised by giving notice of revocation
to the Secretary of the Company, by executing a later-dated proxy or by
attending and voting in person at the Meeting.
VOTING, RECORD DATE AND QUORUM
Proxies will be voted as specified or, if no direction is indicated on
the proxy, it will be voted "FOR" the election of the two (2) nominees named
under the caption "Election of Directors" and "FOR" the ratification of the
selection of PricewaterhouseCoopers LLP as independent accountants for 2000. As
to any other matter or business which may be brought before the Meeting, a vote
may be cast pursuant to the proxy in accordance with the judgment of the person
or persons voting the same, but the Board does not know of any such other matter
or business.
The close of business on April 7, 2000 has been fixed as the record
date for the determination of stockholders entitled to vote at the Meeting. As
of March 29, 2000, 6,500,000 shares of Common Stock were outstanding and will be
entitled to be voted at the Meeting together with any shares issued from March
30, 2000 through the record date. Each stockholder will be entitled to cast one
vote, in person or by proxy, for each share of Common Stock held. The presence,
in person or by proxy, of the holders of at least a majority of the outstanding
shares of Common Stock is necessary to constitute a quorum at the
<PAGE>
Meeting. The affirmative vote of the holders of a plurality of the shares of
Common Stock represented at the Meeting (not including abstentions and broker
non-votes) is required for the election of directors, and the affirmative vote
of the holders of a majority of the shares of Common Stock represented at the
meeting (including abstentions but not including broker non-votes) is required
for the ratification of PricewaterhouseCoopers LLP as the Company's independent
accountants. The Board recommends the election of the two (2) nominees named
under "Election of Directors" and the ratification of the selection of
PricewaterhouseCoopers LLP as independent accountants.
ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation and
Bylaws provide that the members of the Board shall be divided into three classes
with approximately one-third of the directors to stand for election each year
for three-year terms. The total number of directors comprising the Company's
Board is currently set by the Board pursuant to the Company's Bylaws at seven
(7). Of this number, two (2) members of the Board have terms expiring and are
nominees for election at the 2000 Annual Meeting of Stockholders, three (3)
members of the Board have terms expiring at the 2001 Annual Meeting of
Stockholders, and two (2) members of the Board have terms expiring at the 2002
Annual Meeting of Stockholders.
If the enclosed proxy card is duly executed and received in time for
the Meeting, and if no contrary specification is made as provided therein, it
will be voted in favor of the election as directors of the two (2) nominees
named below. Should any nominee for director become unable or unwilling to
accept election, proxies will be voted for a nominee selected by the Board, or
the size of the Board may be reduced accordingly. The Board has no reason to
believe that any of the nominees will be unable or unwilling to serve if elected
to office and, to the knowledge of the Board, such nominees intend to serve the
entire term for which election is sought. Any vacancy occurring during the term
of office of any director may be filled by the remaining directors for the
balance of such unexpired term. All the nominees for directors are presently
directors of the Company.
The Board recommends that the stockholders vote "FOR" the two (2)
nominees named below. The following information concerning each of the two (2)
nominees as director, and each current director in the classes continuing in
office, is provided as of March 29, 2000:
NOMINEES FOR THREE-YEAR TERMS EXPIRING IN 2003
RICHARD H. HERSHMAN, age 50, has been a director of Ascent since 1999. In
January 2000, Mr. Hershman joined DataTreasury(TM) Corporation as Executive Vice
President and Chief Financial Officer. Mr. Hershman was Executive Vice President
and Chief Financial Officer of Decision Strategies/Fairfax International, LLC
during 1999. Prior to that, Mr. Hershman was Executive Vice President and Chief
Financial Officer of Risk Enterprise Management Limited from 1995 to 1998.
ROBERT A. PEISER, age 51, has been a director of Ascent since 1999. Mr. Peiser
has been President and Chief Executive Officer of Vitality Beverages, Inc. since
1999. Prior to that date, Mr. Peiser served as Chairman of CVSI, Inc. from 1998
to 1999, President and Chief Executive Officer of Western Pacific Airlines from
1996 to 1998 and Vice Chairman and Chief Executive Officer of FoxMeyer Drug
Company from August 1996 through November 1996. In addition, Mr. Peiser was
Executive Vice President - Finance and Chief Financial Officer of Trans World
Airlines, Inc. from August 1994 through August 1996.
<PAGE>
DIRECTORS CONTINUING IN OFFICE UNTIL 2001
PATRICK J. MITCHELL, age 41, has been a director of Ascent since 1997. Mr.
Mitchell has served as Chairman of the Board and Chief Executive Officer since
September 1998 and as President and Chief Operating Officer since October 1997.
He also served as Chief Financial Officer and Treasurer from October 1997
through February 1999. Mr. Mitchell served as Executive Vice President, Chief
Financial Officer and Treasurer since May 1996 and joined the company in August
1995 as Vice President, Chief Financial Officer and Treasurer. Prior to joining
the Company, he served as Vice President, Finance for Bankers Life and Casualty
Company.
JAMES K. STEEN, age 59, has been a director of Ascent since 1999. Mr. Steen has
served as President of Stony Creek Enterprises, Inc. since 1992. Stony Creek
Enterprises, Inc. is a private financial advisory firm specializing in insurance
company financings and acquisitions. From 1988 through 1992, Mr. Steen was a
managing director with John Head & Partners L.P., a private merchant banking
firm in New York City, specializing in financial advisory services to insurance
businesses and insurance company financings and acquisitions.
PAUL E. SUCKOW, age 53, has been Executive Vice President and Chief Investment
Officer, Fixed Income at Delaware Investment Advisers, Inc. since 1993 where he
manages a $10.5 billion portfolio of fixed income assets. Prior to 1993, Mr.
Suckow was Director of Fixed Income Securities for Oppenheimer Management
Corporation for eight years.
DIRECTORS CONTINUING IN OFFICE UNTIL 2002
JOHN H. GUTFREUND, age 70, has been a director of Ascent since 1999. Mr.
Gutfreund is President of Gutfreund & Company, Inc., a New York based financial
consulting firm which specializes in advising select corporations and financial
institutions in the United States, Europe and Asia. Mr. Gutfreund was the former
Chairman and Chief Executive Officer of Salomon Brothers from 1981 to 1991. He
also currently serves as a director of Aqua Penn Spring Water Company, Inc.,
Baldwin Piano & Organ Company, Foamex International Inc., LCA-Vision, Inc., The
Universal Bond Fund and Montetiore Medical Center, New York City.
MICHAEL A. KRAMER, age 31, has been a director of Ascent since 1999. Mr. Kramer
is a Managing Director in Houlihan, Lokey, Howard & Zukin's New York office
where he has led many of the Firm's largest restructuring and M&A engagements.
Mr. Kramer joined Houlihan, Lokey, Howard & Zukin in 1989 after earning his B.S.
in Business Administration from California State University at Northridge.
<PAGE>
STOCK OWNERSHIP
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of March 29, 2000, the name and
address of each person known by the Company to own beneficially, directly or
indirectly, more than five percent of the outstanding shares of Common Stock
(its only class of voting securities):
NUMBER
NAME AND ADDRESS OF SHARES PERCENT
Credit Suisse First Boston (1)........ 7,859,164 56.6
11 Madison Avenue
New York, New York 10010-3629
.........
(1) Based on information included in the Schedule 13D filed by Credit Suisse
First Boston ("CSFB") dated April 5, 1999. Includes 3,093,999 shares
outstanding and 4,765,165 shares beneficially owned (through ownership of
23,257 shares of Convertible Preferred Stock) by Special Situations
Holdings, Inc. - Westbridge, a wholly-owned subsidiary of CSFB. The
Convertible Preferred Stock may be converted at any time at a conversion
price of $4.88 per share.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth as of March 29, 2000 (except for shares
owned by executive officers through participation in the Company's 401(k) Plan,
which are as of February 29, 2000), the number and percentage of shares of
Common Stock owned by the directors of the Company and all nominees as director,
each of the executive officers named in the table under "Summary of
Compensation" and all executive officers and directors as a group. To the
Company's knowledge, each of the persons listed below has sole voting and
investment power as to all shares indicated as owned by them.
NUMBER OF
NAME SHARES OWNED (1) PERCENT
Patrick J. Mitchell ............................ 19,439 *
Patrick H. O'Neill.............................. 14,003 *
John S. Enright................................. 10,349 *
Konrad H. Kober................................. 392 *
Cynthia B. Koenig............................... 10,426 *
John H. Gutfreund(2)............................ 11,250 -
Richard H. Hershman(2).......................... 11,250 -
Michael A. Kramer(2)............................ 11,250 -
Robert A. Peiser(2)............................. 11,250 -
James K. Steen(2)............................... 11,250 -
Paul E. Suckow(2)............................... 11,250 -
All executive officers and directors as a group. 122,109 *
(1) Includes shares held through the Company's 401(k) plan as follows: Mr.
Mitchell, 589 shares; Mr. O'Neill, 353 shares; Mr. Enright, 322 shares; Mr.
Kober, 392 shares and Ms. Koenig, 426 shares.
(2) Represents shares which may be acquired upon the exercise of outstanding
stock options that are currently exercisable or that will become exercisable
within 60 days after April 4, 2000.
* Less than 1%
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who own
more than 10% of the Common Stock, to file with the Securities and Exchange
Commission (the "SEC") reports of ownership and changes in ownership of the
Common Stock. Directors, executive officers and greater-than-10% stock-holders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) reports they file. Based solely on review of the copies of such
reports furnished to the Company or written representations that no other
reports were required, the Company believes that, during 1999, the Company's
directors, executive officers and greater-than-10% stockholders complied with
the foregoing requirements.
CERTAIN INFORMATION REGARDING THE BOARD OF DIRECTORS
ATTENDANCE
The Board of Directors met five times during 1999. All of the directors,
attended at least 75% of the aggregate number of meetings of the Board and of
the committees of the Board on which they served, in each case held during the
period for which such director served in such capacity.
BOARD COMMITTEES
The Compensation Committee is composed of Mr. Kramer (Chairman), Mr.
Gutfreund and Mr. Suckow. The Compensation Committee is responsibile for
reviewing and approving salaries, bonuses and other compensation and benefits of
executive officers, and advising management regarding benefits and other terms
and conditions of compensation for executive officers.
The Audit Committee of the Board is composed of Mr. Hershman (Chairman),
Mr. Steen and Mr. Peiser. The Audit Committee recommends to the Board the firm
to be employed as the Company's independent accountants, reviews details of each
audit engagement and audit reports, including all management reports by the
independent accountants regarding internal controls, and reviews resolution of
any material matters with respect to appropriate accounting principles and
practices to be used in preparation of the Company's financial statements.
The Board does not have an Executive or Nominating Committee.
DIRECTOR'S COMPENSATION
Each member of the Board receives: a $15,000 annual retainer fee, Board
meeting fees of $2,000 and reimbursement of all reasonable out-of-pocket
expenses. In addition, committee meeting fees of $1,000 per committee member and
chairman of committee fees of $1,500 are paid as applicable.
In 1999, each non-employee director was granted a stock option to
acquire 22,500 shares of Common Stock under the Company's 1999 Stock Option
Plan. Such stock option grants have an exercise price of $3.00, a term of three
years and vest 50% after one year of service and 100% after two years of
service; provided, however, if a non-employee director stands for re-election to
the staggered board prior to the expiration of three years of service and such
director is not re-elected, then all unvested options held by such director
immediately vest.
<PAGE>
CERTAIN INFORMATION REGARDING THE EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
The following is certain information, as of March 29, 2000, concerning
each executive officer of the Company who is not also a director. Except as
indicated below under "Employment Agreements", there are no arrangements or
understandings between any executive officer and any other person pursuant to
which such executive officer was appointed.
PATRICK H. O'NEILL, age 49, joined the Company in September 1997 as Senior Vice
President, General Counsel and Secretary. In November 1997, he was promoted to
Executive Vice President. Prior to joining the Company and since 1990, he served
as founder and President of the Law Offices of Patrick H. O'Neill, P.C.
JOHN S. ENRIGHT, age 44, was appointed Executive Vice President in April 1999.
In February 1998, he joined the Company as Vice President and Marketing Director
of NationalCare(R) Marketing, Inc. In addition, since September 1995, Mr.
Enright has served as President of Health Care One Insurance Agency, Inc., a
marketing subsidiary of the Company in San Diego, California in which Mr.
Enright holds a 50% ownership interest.
KONRAD H. KOBER, age 41, was promoted to Senior Vice President and Chief
Administration Officer in March 1999. In July 1990, he joined the Company as
Assistant Vice President of Claims Review/Communications and was promoted in
June 1994 to Vice President of Claims Administration.
CYNTHIA B. KOENIG, age 43, joined the Company in March 1999 as Senior Vice
President, Chief Financial Officer and Treasurer. From 1993 to 1998, she held
various finance positions at TIG Holdings, Inc. and its subsidiary, TIG
Insurance Company, most recently Vice President-Controller and Chief Accounting
Officer.
SUMMARY OF COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company and its subsidiaries for services in all capacities during each of the
last three years by (1) the Company's Chief Executive Officer and (2) the four
most highly compensated executive officers of the Company or its subsidiaries,
other than the Chief Executive Officer, (collectively, the "Named Executive
Officers") for the year ended December 31, 1999.
<PAGE>
<TABLE>
<CAPTION>
Long-Term
Compensation
Name and Annual Compensation Securities All Other
Principal Position Year Salary Bonus Underlying Options Compensation (1)
<S> <C> <C> <C> <C> <C>
Patrick J. Mitchell (2)(4) 1999 $ 400,525 $ 60,000 200,000 $ 109,530
Chairman of the Board and 1998 $ 400,575 $ 296,000 0 $ 2,400
Chief Executive Officer 1997 $ 279,958 $ 0 0 $ 3,225
Patrick H. O'Neill (3)(4) 1999 $ 275,500 $ 38,000 160,000 $ 79,977
Executive Vice President, 1998 $ 275,500 $ 204,000 0 $ 1,382
General Counsel and 1997 $ 72,890 $ 0 0 $ 0
Secretary
John S. Enright (5) 1999 $ 250,500 $ 35,000 160,000 $ 79,708
Executive Vice President 1998 $ 183,433 $ 50,000 $ 24,865
1997 $ 120,000
Konrad H. Kober (4) 1999 $ 125,500 $ 16,700 75,000 $ 2,058
Senior Vice President, 1998 $ 100,000 $ 40,000 0 $ 505
Chief Administration 1997 $ 97,400 $ 0 0 $ 525
Officer
Cynthia B. Koenig (6) 1999 $ 123,429 $ 28,500 75,000 $ 752
Senior Vice President,
Chief Financial Officer
and Treasurer
</TABLE>
(1) Represents matching contributions of the Company credited to the named
executive officers under the Company's 401(k) except as indicated in notes
(2), (4) and (5) below.
(2) Patrick J. Mitchell was named Chairman of the Board and Chief Executive
Officer effective September 15, 1998. The 1998 bonus was accrued and earned
in 1998. $148,000 of the 1998 bonus was paid on March 24, 1999 and the
remaining $148,000 was paid on March 24, 2000. For 1999, all other
compensation includes $107,130 for the value of unrestricted stock issued
to Mr. Mitchell on March 24, 1999 pursuant to his Employment Agreement as
described below.
(3) Patrick H. O'Neill joined the Company in September 1997. The 1998 bonus was
accrued and earned in 1998. $102,000 of the 1998 bonus was paid on March
24, 1999 and the remaining $102,000 was paid on March 24, 2000. For 1999,
all other compensation includes $77,577 for the value of unrestricted stock
issued to Mr. O'Neill on March 24, 1999 pursuant to his Employment
Agreement as described below.
(4) On January 1, 1997, Mr. Mitchell and Mr. Kober received restricted stock
grants of 45,000 shares and 10,000 shares, respectively. In September 1997,
Mr. O'Neill received a restricted stock grant of 30,000 shares. All
outstanding grants of restricted stock were canceled pursuant to
Westbridge's Plan of Reorganization, which became effective on March 24,
1999.
(5) John S. Enright joined the Company in February 1998. For 1999 and 1998, all
other compensation includes commission payments of $77,308 and $24,865,
respectively. For 1997, all other compensation includes commission payments
of $120,000 from Health Care One Insurance Agency, Inc., a marketing
subsidiary of the Company in which Mr. Enright holds a 50% ownership
interest.
(6) Cynthia B. Koenig joined the Company in March 1999.
<PAGE>
OPTION GRANTS DURING 1999
The following table summarizes information concerning options granted during the
Company's fiscal year ended December 31, 1999 to each of the Named Executive
Officers.
<TABLE>
<CAPTION>
% of Total Options
Securities Granted to Exercise Price Expiration Grant Date
Underlying Employees in 1999 ($/Share) Date Present Value
Options Granted
------------------- -------------------- ---------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Patrick J. Mitchell 75,000 8% $ .01 3/24/09 $ 249,750
Patrick J. Mitchell 125,000 13% $ 4.39 3/24/09 335,000
Patrick H. O'Neill 60,000 6% $ .01 3/24/09 199,800
Patrick H. O'Neill 100,000 11% $ 4.39 3/24/09 268,000
John S. Enright 60,000 6% $ .01 3/24/09 199,800
John S. Enright 100,000 11% $ 4.39 3/24/09 268,000
Konrad H. Kober 28,000 3% $ .01 3/24/09 93,240
Konrad H. Kober 57,000 6% $ 4.39 3/24/09 152,760
Cynthia B. Koenig 28,000 3% $ .01 3/24/09 93,240
Cynthia B. Koenig 57,000 6% $ 4.39 3/24/09 152,760
------------------- -------------------- ---------------
670,000 73% $ 2,012,350
=================== ==================== ===============
</TABLE>
OPTION VALUES AT YEAR END 1999
The following table summarizes information with respect to the number of
unexercised options held by the Named Executive Officers as of December 31,
1999. No options become exercisable until March 24, 2002.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options
Options at December 31, 1999 at December 31, 1999(1)
------------------------------ ------------------------
UNEXERCISABLE UNEXERCISABLE
<S> <C> <C>
Patrick J. Mitchell 200,000 $ 132,844
Patrick H. O'Neill 160,000 $ 106,275
John S. Enright 160,000 $ 106,275
Konrad H. Kober 75,000 $ 49,595
Cynthia B. Koenig 75,000 $ 49,595
</TABLE>
(1)Valued at $1.78 per share, the closing bid price per share of Common Stock on
December 31, 1999.
<PAGE>
EMPLOYMENT AGREEMENTS
The Company and its wholly-owned subsidiary, Ascent Management, Inc.
(formerly, Westbridge Management Corp.) (collectively, the "Company"), have
entered into a separate employment agreement with each of Patrick J. Mitchell
and Patrick H. O'Neill (each, an "Employee" and collectively, the "Employees"),
pursuant to which Mr. Mitchell is employed as the Chairman of the Board,
President and Chief Executive Officer of the Company and Mr. O'Neill is employed
as Executive Vice President, General Counsel, and Secretary of the Company (the
"Employment Agreements"). The Company has agreed to employ each of the Employees
for a period of two years commencing on September 15, 1998. Each Employee's
employment period may be extended for one year thereafter unless an Employee
gives notice to the contrary or unless the Company fails to give notice of its
desire to extend the Employment Agreements.
Mr. Mitchell and Mr. O'Neill have base salaries of $400,000 and
$275,000, respectively, and such base salaries will be reviewed annually for
increase at the sole discretion of the Board or the Compensation Committee
thereof. In addition to base salary, each employee is entitled to receive an
annual cash bonus, determined by the Board of Directors of the Company or the
Compensation Committee thereof, payable at such time as similar bonuses are
payable to senior management of the Company and its subsidiaries. The Employees
are also entitled to participate in and receive all benefits under any other
short-term or long-term incentive program ("LTIP"), savings and retirement
plans, and welfare benefit plans, practices, policies and programs maintained or
provided by the Company and/or its subsidiaries for the benefit of senior
executives.
In recognition of and as compensation for the Employees' job
performance from November 17, 1997 through the date of execution of the
Employment Agreement, the Employees received a one-time bonus (the "Retention
Bonus") paid by the Company as follows: (1) for Mr. Mitchell, a cash payment of
$296,000 and for Mr. O'Neill a cash payment of $204,000, of which 50% was paid
on March 24, 1999 and 50% was paid on March 24, 2000, and (2) issuance on March
24, 1999 of 0.29% (18,850 shares) to Mr. Mitchell and 0.21% (13,650 shares) to
Mr. O'Neill of the new Common Stock of the Company. In recognition of the
federal income tax consequences of the equity consideration of this part of the
Retention Bonus, the Company made such equity consideration federal income tax
neutral to the Employees.
If an Employee's employment is terminated by reason of death, or
"disability" (as defined in the Employment Agreements), such Employee, his
estate or legal representative will receive (a) a lump sum payment equal to any
accrued but unpaid Base Salary, (b) a lump sum payment of any incentive bonus,
annual bonus, LTIP award awarded but not yet paid as of the termination date,
(c) immediate vesting of all stock options previously awarded to the Employee by
the Company, (d) in the case of death, any other compensation and benefits as
may be provided in accordance with the terms and provisions of any applicable
plans and programs of the Company, except any other severance benefit of the
Company, and (e) in the case of disability, (x) continuation of the Employee's
health and welfare benefits at the level in effect on the termination date
through the end of the one-year period following the termination of the
Employee's employment due to disability (or the Company shall provide the
economic equivalent thereof), and (y) any other compensation and benefits as may
be provided in accordance with the terms and provisions of any applicable plans
and programs of the Company, except any other severance benefit of the Company.
If an Employee's employment is terminated by the Company for "cause"
(as defined in the Employment Agreements), such Employee will be entitled to,
among other things, (a) a lump sum payment equal to any accrued but unpaid base
salary, (b) a lump sum payment of any incentive bonus, annual bonus, LTIP award
awarded but not yet paid as of the termination date, (c) any other compensation
and benefits as may be provided in accordance with the terms and provisions of
any applicable plans and programs of the Company, except any other severance
benefit of the Company.
<PAGE>
If an Employee's employment is terminated by the Company "without
cause" or for "good reason" (as defined in the Employment Agreements), such
Employee will be entitled to, among other things, (a) a lump sum payment equal
in amount to 117% of the sum of (i) the Employee's Base Salary and (ii) the
highest of either the incentive bonus or annual bonus awarded to the Employee
within five (5) years prior to the termination date, (b) a lump sum payment of
any Base Salary accrued, incentive bonus or LTIP award awarded but not yet paid
as of the termination date, (c) immediate vesting of all stock options
previously awarded to the Employee by the Company, and (d) any other
compensation and benefits as may be provided in accordance with the terms and
provisions of any applicable plans and programs of the Company, except any other
severance benefit of the Company.
If an Employee's employment is terminated "voluntarily" by the Employee
(as defined in the Employment Agreements), such Employee will be entitled to,
among other things, (a) a lump sum payment equal to any accrued but unpaid base
salary, (b) a lump sum payment of any annual bonus, incentive bonus, and LTIP
award awarded but not yet paid as of the termination date, and (c) any other
compensation and benefits as may be provided in accordance with the terms and
provisions of any applicable plans and programs of the Company, except any other
severance benefit of the Company.
If the Employment Agreement is allowed to "expire" (as defined in the
Employment Agreements), such Employee will be entitled to, among other things,
(a) a lump sum payment equal in amount to 117% of the sum of (i) the Employee's
Base Salary and (ii) the highest of either the incentive bonus or annual bonus
awarded to the Employee within five (5) years prior to the expiration date, (b)
a lump sum payment of any Base Salary accrued, incentive bonus or LTIP award
awarded but not yet paid as of the termination date, (c) immediate vesting of
all stock options previously awarded to the Employee by the Company, and (d) any
other compensation and benefits as may be provided in accordance with the terms
and provisions of any applicable plans and programs of the Company, except any
other severance benefit of the Company.
If any payment or distribution to the Employee by the Company or any
subsidiary or affiliate would be subject to any "golden parachute payment"
excise tax or similar tax, and if, and only if, such payments less the excise
tax or similar tax is less than the maximum amount of payments which could be
payable to the Employee without the imposition of the excise tax or similar tax
and after taking into account any reduction in the total payments provided by
reason of Section 280G of the Internal Revenue Code, (a) any cash payments under
the Employment Agreement shall first be reduced (if necessary, to zero), and (b)
all other non-cash payments shall next be reduced.
If an Employee's employment is terminated by the Company for cause or
voluntarily by an Employee, for a period of twelve months from the termination
date, such Employee shall not (i) directly or indirectly divert, solicit or take
away the patronage of (a) any customers or agents of the Company or any
affiliate as of the relevant termination date, or (b) any prospective customers
or agents of the Company or any affiliate whose business the Company was
actively soliciting on the relevant termination date, and with which the
Employee had business contact while employed by the Company, or (ii) directly or
indirectly induce or solicit any employees or agents of the Company or any
affiliate to leave or terminate their employment or agency relationship with the
Company.
<PAGE>
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Compensation Committee (the "Committee") is composed
entirely of independent non-employee directors. The Committee is responsible for
supervising the Company's compensation policies, approving executive officers'
salaries and bonuses and reviewing the salaries and bonuses of other senior
management. The following report on compensation policies applicable to the
Company's executive officers with respect to compensation reported for the year
ended December 31, 1999 was prepared by the Committee.
EXECUTIVE COMPENSATION PHILOSOPHY AND POLICIES
The overriding objective of the Committee's executive compensation
policies is to attract and retain superior executives. The policies are also
designed to: (1) align the interests of executive officers and stockholders by
encouraging stock ownership by executive officers and by making a significant
portion of executive compensation dependent upon the Company's financial
performance; (2) reward individual results by recognizing performance through
salary, annual cash incentives and long-term incentives; and (3) manage
compensation based on the level of skill, knowledge, effort and responsibility
needed to perform the job successfully. For 1999, executive compensation
consisted of the following components:
BASE SALARY - The minimum salary to which Mr. Mitchell and Mr. O'Neill
are entitled is specified in their respective employment agreements and is
subject to annual review and increase when deemed appropriate by the Committee.
It is the Committee's and management's view that executive officer salaries
should not be regularly adjusted on an annual basis to reflect cost-of-living or
other similar increases. Salary increases, if any, are made, with Committee
involvement, on an individual basis to reflect promotions or to maintain the
competitiveness of an executive's salary or to recognize an increase in the
executive's responsibilities.
INCENTIVE BONUS - The employment agreements of Mr. Mitchell and Mr.
O'Neill provide for an annual cash bonus to be awarded at the determination of
the Committee. For 1999, a cash bonus program was approved by the Board for all
officers of the Company and its subsidiaries, including the Named Executive
Officers. Bonus eligibility was based upon the attainment of specified
performance goals for pre-tax income, new business production, and general and
administrative expense levels.
STOCK OPTIONS - Stock option awards are intended to retain and motivate
executive officers to achieve superior market performance of the Company's
stock. On March 24, 1999, the Board adopted the Ascent Assurance, Inc. 1999
Stock Option Plan. Stock options to acquire 922,250 shares of Common Stock were
granted under such plan to employees of the Company and its subsidiaries,
including 670,000 shares to executive officers of the Company during 1999.
SECTION 162(M) OF THE INTERNAL REVENUE CODE - Section 162(m) of the
Internal Revenue Code (the "Code"), prevents publicly traded companies from
receiving a tax deduction for compensation paid to proxy-named executive
officers in excess of $1 million in any taxable year. The Company has not
awarded any compensation that is non-deductible under Section 162(m) of the Code
and does not anticipate doing so in the foreseeable future. In the event that
the Company determines to award compensation in an amount in excess of the
amount which may be deducted under Section 162(m), the Company will determine
whether it will conform its compensation to qualify for exceptions available
under Section 162(m).
<PAGE>
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Mr. Mitchell's employment with the Company is governed by an employment
agreement entered into in September 1998 (see "Certain Information Regarding the
Executive Officers - Employment Agreements"). The minimum salary to which Mr.
Mitchell is entitled is specified in such employment agreement and is subject to
annual review and increase when deemed appropriate by the Committee. In
addition, the annual cash bonus and benefits from long term incentive plans
provided for under Mr. Mitchell's agreement are determined by the Committee.
SUBMITTED BY THE COMPENSATION COMMITTEE
Michael A. Kramer John H. Gutfreund Paul E. Suckow
<PAGE>
PERFORMANCE GRAPH
The following line graph demonstrates the performance of the cumulative
total return to the holders of the Company's Common Stock in comparison to the
cumulative total return on the Russell 2000 Index and with the SNL <$250M
Insurance Asset-Size Index for the period commencing May 28, 1999 (the date the
Company's new Common Stock began trading on the OTC Bulletin Board after its
emergence from Chapter 11 reorganization proceedings on March 24, 1999) through
December 31, 1999.
Graph Data
Period Ending
Index 5/28/99 6/30/99 9/30/99 12/31/99
Ascent Assurance, Inc. 100.00 87.50 48.44 44.53
Russell 2000 100.00 104.52 97.91 115.97
SNL<$250M Insurance
Asset-Size Index 100.00 110.85 78.68 86.80
Assumes $100 invested at the close of trading on May 28, 1999 in Ascent common
stock, the Russell 2000Index and SNL<$250M Insurance Asset-Size Index.
Source: SNL Securities
<PAGE>
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board has selected the firm of PricewaterhouseCoopers LLP as the
independent accountants of the Company for the fiscal year ending December 31,
2000. PricewaterhouseCoopers LLP has acted for the Company in such capacity
since 1982. The Board proposes that the stockholders ratify such selection at
the Meeting.
If the stockholders do not ratify the selection of PricewaterhouseCoopers
LLP by the affirmative vote of a majority of the votes cast at the Meeting on
this proposal, the selection of independent accountants will be reconsidered by
the Board.
Representatives of PricewaterhouseCoopers LLP are expected to be present at
the Meeting and will be afforded the opportunity to make a statement if they so
desire and to respond to appropriate questions.
The Board recommends that the stockholders vote "FOR" The ratification of
the Company's selection of independent accountants.
PROPOSALS OF STOCKHOLDERS
Proposals that stockholders wish to include in the Company's proxy
materials relating to the 2001 Annual Meeting of Stockholders of the Company
must be received by the Company no later than January 1, 2001.
OTHER MATTERS
The Board does not intend to present any matter for action at the Meeting
other than the matters referred to in the accompanying Notice, and knows of no
other matter to be presented that is a proper subject for action by the
stockholders at the Meeting. However, if any other matter should properly come
before the Meeting, it is intended that votes will be cast pursuant to the
authority granted by the enclosed proxy, in accordance with the best judgement
of the person acting under the proxy.
A form of proxy is enclosed for your use. Please date, sign, and return the
proxy at your earliest convenience. A prompt return of your proxy will be
appreciated.
By Order of the Board of Directors,
/S/ PATRICK H. O'NEILL
Patrick H. O'Neill
Executive Vice President,
General Counsel and Secretary
