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 ' 240.14a-11(c) or ' 240.14a-12
Acceptance Insurance Companies 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)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
____________________________________________________________
2) Aggregate number of securities to which transaction applies:
____________________________________________________________
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):
____________________________________________________________
4) Proposed maximum aggregate value of transaction:
____________________________________________________________
<PAGE>
5) Total fee paid:
____________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
ACCEPTANCE INSURANCE COMPANIES INC.
222 South 15th Street
Suite 600 North
Omaha, NE 68102
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Dear Shareholders:
You are invited to attend the Annual Meeting of Shareholders of Acceptance
Insurance Companies Inc. (the "Company") at the Doubletree Hotel, 1616 Dodge
Street, Omaha, Nebraska, on May 24, 2000, at 9:00 a.m., local time and to vote
on the following matters:
1. To elect seven directors to hold office until the next Annual Meeting or
until the election and qualification of their successors;
2. To approve the adoption of the Company's 2000 Stock Option Plan;
3. To ratify the grant of stock options to Michael R. McCarthy, the Company's
Chairman;
4. To ratify the grant of stock options to John E. Martin, the Company's
President and Chief Executive Officer;
5. To ratify the appointment of Deloitte & Touche LLP as the Company's
principal independent accountants; and
6. To consider and act upon any other matters that may properly come before
the Annual Meeting or any adjournment thereof.
The Board of Directors fixed the close of business on March 25, 2000 as
the record date for determining the shareholders having the right to vote at
the meeting or any adjournment thereof. A list of such shareholders will be
available for examination by a shareholder for any purpose germane to the
meeting during ordinary business hours at the offices of the Company at
222 South 15th Street, Suite 600 North, Omaha, Nebraska during the 10 days
prior to the Annual Meeting.
Please date, sign and return the enclosed Proxy which is solicited by the
Board of Directors of the Company and will be voted in accordance with the
directions you give therein. Where no directions are indicated Proxies will be
voted "for" each of the proposals set forth in the accompanying Proxy
Statement. A return envelope is provided which requires no postage if mailed
in the United States. The giving of this Proxy will not affect your right to
revoke such Proxy by appropriate written notice, or to vote in person if you
choose to attend the meeting.
By Order of the Board of Directors,
J. Michael Gottschalk, Secretary
Omaha, Nebraska
April 28, 2000
<PAGE>
ACCEPTANCE INSURANCE COMPANIES INC.
222 South 15th Street
Suite 600 North
Omaha, NE 68102
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 24, 2000
I. INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Acceptance Insurance Companies Inc., a Delaware
corporation (the "Company"), of Proxies in the accompanying form for the Annual
Meeting of the Shareholders of the Company to be held at 9:00 a.m., local time,
May 24, 2000, at the Doubletree Hotel, 1616 Dodge Street, Omaha, Nebraska, or
at any adjournment thereof (the "Annual Meeting" or the "Meeting"). The
principal offices of the Company are located at 222 South 15th Street,
Suite 600 North, Omaha, Nebraska 68102. This Proxy Statement and the
accompanying form of Proxy were first sent to shareholders on or about
April 28, 2000.
VOTING AND PROXIES
Record Date; Voting Rights
Only holders of record of the Company's Common Stock at the close of
business on March 25, 2000 (the "Record Date"), will be entitled to notice of
and to vote at the Annual Meeting or any adjournment thereof. Shareholders of
record on the Record Date are entitled to one vote per share on any matter that
may properly come before the Annual Meeting. As of the Record Date, there were
14,294,649 shares of Common Stock, $.40 par value, outstanding and entitled to
vote. The presence, either in person or by properly executed Proxy, of the
holders of a majority of the outstanding shares of Common Stock is necessary to
constitute a quorum at the Meeting.
Shares of Common Stock entitled to vote and represented by properly
executed, returned and unrevoked Proxies will be considered present at the
meeting for purposes of determining a quorum, including shares with respect to
which votes are withheld, abstentions are cast or there are broker nonvotes.
Matters to be Voted Upon; Vote Required
At the Annual Meeting, shareholders will be asked to vote on the
following matters:
(1) To elect seven directors to hold office until the next Annual Meeting
or until the election and qualification of their successors;
(2) To approve the adoption of the Company's 2000 Stock Option Plan;
(3) To ratify the grant of stock options to Michael R. McCarthy, the
Company's Chairman;
(4) To ratify the grant of stock options to John E. Martin, the Company's
President and Chief Executive Officer;
(5) To ratify the appointment of Deloitte & Touche LLP as the Company's
principal independent accountants; and
(6) To consider and act upon any other matters that may properly come
before the Annual Meeting or any adjournment thereof.
Nominees receiving the affirmative vote by the holders of a plurality
of the shares of Common Stock present in person or represented by Proxy at the
Meeting will be elected as directors of the Company. Consequently, votes
withheld and broker nonvotes will have no impact on the election of directors.
Approval of the Company's 2000 Stock Option Plan, ratification of the grant of
stock options to Michael R. McCarthy and John E. Martin and ratification of the
appointment of the accountants requires an affirmative vote by holders of a
majority of the shares of Common Stock present in person or represented by
Proxy at the Meeting. Approval of the grant of options to Mr. Martin requires
the approval of shareholders with respect to both the grant of the option and
the adoption of the Company's 2000 Stock Option Plan. If either the Company's
2000 Stock Option Plan or the option grant to Mr. Martin is not approved by the
required vote, the stock options will not be granted to Mr. Martin.
Abstentions will have the same effect as a vote against these approvals and
ratifications. Broker non-votes will not be considered shares entitled to vote
and will not be counted as votes for or against these approvals or
ratifications.
<PAGE>
Directors and certain executive officers of the Company and
their affiliates own 4,200,576 shares of Common Stock, approximately 29.4% of
the total outstanding shares, and have advised the Company that they intend to
vote FOR the election of the director nominees, the approval of the Company's
2000 Stock Option Plan, the ratification of the grant of stock options to
Michael R. McCarthy, the ratification of the grant of stock options to
John E. Martin and ratification of the appointment of Deloitte & Touche LLP as
the Company's principal independent public accountants.
Solicitation of Proxies
The Company has borne and will bear all costs of this solicitation.
Following the original mailing of this Proxy Statement and accompanying
materials, directors and officers and other employees of the Company may
solicit, without additional compensation, or may engage others to solicit,
Proxies by any appropriate means, including personal interview, mail, telephone
and facsimile or telegraph. Arrangements also will be made with brokerage
houses and other custodians, nominees and fiduciaries, which are holders of
record of the Company's Common Stock, to forward Proxy soliciting material to
the beneficial owners of such shares, and the Company will reimburse such
holders of record for their reasonable expenses incurred in connection
therewith.
Any Proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by
(i) filing with the Secretary of the Company, at or before the Annual Meeting,
a written notice of revocation bearing a later date than the Proxy, (ii) duly
executing a Proxy relating to the same shares, bearing a later date, and
delivering it to the Secretary of the Company at or before the Annual Meeting,
or (iii) attending the Annual Meeting and voting in person (although attendance
at the Annual Meeting will not in and of itself constitute a revocation of the
Proxy).
Board Recommendation
Properly executed Proxies will be voted in accordance with
shareholders' directions. If no directions are given, Proxies will be voted
FOR the election of the director nominees, the approval of the Company's 2000
Stock Option Plan, the ratification of the grant of stock options to Michael
R. McCarthy, the ratification of the grant of stock options to John E. Martin
and the ratification of the appointment of the Company's principal independent
public accountants. The Board of Directors recommends a vote FOR each of the
matters submitted to shareholders for approval and ratification at the Annual
Meeting.
SUBMISSION OF SHAREHOLDER PROPOSALS
Any proposal which a holder of Common Stock intends to present at next
year's annual meeting of shareholders must be received by the Secretary of the
Company, at the address appearing on the first page of this Proxy Statement, no
later than December 29, 2000, in order to be included in the Proxy Statement
and the form of Proxy relating to that meeting.
II. MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
At the Annual Meeting the shareholders will consider and vote upon:
(1) election of directors to hold office until the next Annual Meeting or until
the election and qualification of their successors; (2) approval of the
Company's 2000 Stock Option Plan; (3) ratification of the grant of stock
options to Michael R. McCarthy, the Company's Chairman; (4) ratification of the
grant of stock options to John E. Martin, the Company's President and Chief
Executive Officer; and (5) ratification of the appointment of Deloitte & Touche
LLP as the Company's principal independent accountants.
PROPOSAL 1 - ELECTION OF DIRECTORS
At the Annual Meeting, shareholders will be asked to elect a board of
seven directors to hold office until the next Annual Meeting or until the
election and qualification of their successors. The following table sets forth
information regarding nominees for election to the Company's Board of
Directors. All of the nominees currently serve as directors of the Company.
If a nominee is unable to serve or, for good cause, will not serve, the Proxy
confers discretionary authority to vote with respect to the election of any
person to the Board.
<PAGE>
Nominees
Position, Principal Occupations
Name and Age and Other Directorships
____________________ ________________________________
Jay A. Bielfield, 54 Mr. Bielfield has been a director of
the Company since December 1992.
Mr. Bielfield is an employee of Little
Caesar International, Inc.
Edward W. Elliott, Jr.(2), 56 Mr. Elliott has been a director of the
Company since December 1992. Mr. Elliott
is Vice-Chairman and Chief Financial Officer
of Franklin Enterprises, Inc., a private
investment management firm located in
Deerfield, Illinois. Mr. Elliott also
serves as a director of Warehouse Club, Inc.
Michael R. McCarthy(2), 48 Mr. McCarthy has been a director of the
Company since December 1992 and Chairman of
the Company since December 1999.
Mr. McCarthy has been Chairman and a
director of McCarthy & Co., a firm engaged
in the investment banking business in Omaha,
Nebraska, since it was organized in 1986.
He also is a director and Chairman of
McCarthy Group, Inc., an investment and
merchant banking firm and the parent of
McCarthy & Co.
John P. Nelson(1), 59 Mr. Nelson has been a director since
August 1993 and was President and Chief
Operating Officer of the Company from
March 1994 until December 1999. Mr. Nelson
is Chairman of Silverstone Group.
R. L. Richards(1), 51 Mr. Richards has been a director of the
Company since January 1991. Mr. Richards
serves as Managing Director of RDT Limited,
a private investment company located in
Dublin, Ohio. Prior to the organization of
RDT Limited in December 1994 he served as
President and director of its predecessor
and has held various positions with that
company since 1978. Mr. Richards also
serves as a director of United Magazine
Company.
David L. Treadwell(2), 45 Mr. Treadwell has been a director of the
Company since December 1992. Mr. Treadwell
is President of Prechter Holdings, Inc.,
which is responsible for a portfolio of
investments including operating businesses
in automotive supply, newspaper publishing,
real estate development and residential
construction.
Doug T. Valassis(1), 47 Mr. Valassis has been a director of the
Company since December 1992. Mr. Valassis
is President and Chief Operating Officer,
and a director, of Franklin Enterprises,
Inc., an investment management firm in
Deerfield, Illinois, and is a director of
Warehouse Club, Inc. He also serves as a
director and officer of Lindner Investments,
Massachusetts Trust, a complex of six
investment funds; and as a director of each
of the six funds.
(1) Member of the Audit Committee of the Company.
(2) Member of the Executive and Compensation Committees of the Company.
<PAGE>
Kenneth C. Coon, 49, resigned as Chairman, Chief Executive Officer and
director of the Company in December 1999. He was a director of the Company
since December 1992. He served as Interim Chief Executive Officer of the
Company beginning in February 1992, and as Chairman and President from
December 1992 until March 1994 when he was elected Chairman and Chief
Executive Officer. Mr. Coon was President and Chief Executive Officer, and a
director, of Acceptance Insurance Holdings Inc. since its formation and of each
of its subsidiaries since their formation or acquisition. Since August 1993 he
also served as a director of The Redland Group, Inc. and each of its
subsidiaries, all of which are subsidiaries of the Company.
Robert LeBuhn, 66, has been a director of the Company since December 1992
and was a member of the Compensation Committee of the Company. Mr. LeBuhn has
determined not to seek reelection and his term of office will expire at the
conclusion of the Meeting. Mr. LeBuhn is a private investor. He was Chairman
of Investor International (U.S.), Inc., an investment firm in New York, New
York, until September 1994. Mr. LeBuhn serves as a director of USAir Group,
Inc., Cambrex Corp., and Enzon, Inc.
Nominees receiving the affirmative vote by the holders of a plurality of
the shares of Common Stock present in person or represented by Proxy at the
Annual Meeting will be elected as directors of the Company. The Board of
Directors recommends a vote "FOR" the election of all nominees.
PROPOSAL 2 - APPROVE COMPANY'S 2000 STOCK OPTON PLAN
General
The Board of Directors of the Company is seeking shareholder approval of
the Acceptance Insurance Companies Inc. 2000 Stock Option Plan (the "Plan"). A
copy of the Plan is attached hereto as Exhibit A and should be consulted for
detailed information. All statements made in this Proxy Statement regarding the
Plan are only intended to summarize the Plan and are qualified in their
entirety by reference to the Plan. If approved by the shareholders, the 2000
Stock Option Plan will supersede the 1996 Stock Option Plan and the Company
will no longer make grants or awards under the 1996 Stock Option Plan. Grants
and awards that are outstanding under the 1996 Stock Option Plan will not be
affected by the adoption and approval of the 2000 Stock Option Plan.
Purpose of the Plan
The purpose of the Plan is to advance the interests of the Company by
providing directors and employees of the Company and its affiliates with the
opportunity to acquire shares of Common Stock. By encouraging such stock
ownership the Company seeks to attract, retain and motivate the best available
personnel for positions of substantial responsibility, and to provide
additional incentive to directors and employees of the Company and its
affiliates to promote the success of the business.
Description of the Plan
Effective Date. The Plan was adopted effective as of April 1, 2000 (the
"Effective Date"), subject to its approval by the affirmative vote of a
majority of the votes cast at the Meeting.
Administration. The Plan is administered by the Compensation Committee
(the "Committee") of the Board of Directors. The Committee has discretionary
authority to select participants and grant stock options, to determine the
form and content of any stock options granted under the Plan, to interpret the
Plan, to prescribe, amend and rescind rules and regulations relating to the
Plan, and to make other decisions necessary or advisable for the administration
of the Plan. All decisions, determinations and interpretations of the
Committee are final and conclusive on all persons affected thereby. Members of
the Committee will be indemnified to the full extent permissible under the
Company's governing instruments in connection with any claims or other actions
relating to any action taken under the Plan. The Committee currently consists
of Directors McCarthy, Elliott and Treadwell.
Eligible Persons; Types of Grants. Under the Plan, the Committee has
discretionary authority to grant incentive stock options ("ISOs") as defined in
Section 422 of the Internal Revenue Code, and nonqualified options ("NQSOs")
(collectively, "Options") to any Company employee or director. The Company has
seven nonemployee directors and, as of March 1, 2000, the Company had 798
employees.
Shares Available for Grants. The Plan reserves 1,000,000 shares of Common
Stock for issuance upon the exercise of Options, representing approximately
7.0% of the total number of Common Stock outstanding as of March 25, 2000.
Such shares may be authorized but unissued shares or shares held in treasury.
In the event of any merger, consolidation, recapitalization, reorganization,
reclassification, stock dividend, split-up, combination of shares, or similar
event in which the number or kind of shares is changed without receipt or
payment of consideration by the Company, the Committee will adjust the number
and kind of shares reserved for issuance under the Plan, the number of and kind
of shares subject to outstanding Options, and the exercise prices of Options.
To the extent Options expire, become unexercisable, or are forfeited for any
reason without having resulted in the issuance of Common Stock to Option
holders, those shares shall, unless the Plan shall have been terminated, be
available for the grant of additional Options.
Exercise Price. The exercise price as to any ISO may not be less than the
fair market value of the optioned shares on the date of grant, which the Plan
provides is the closing price of the Common Stock on the New York Stock
Exchange on the day the Option is granted, or on the first business day
following the date of the grant if the date of the grant is not a business day.
The exercise price as to any NQSO may be less than the fair market value of the
optioned shares on the date of grant. The last reported sale price of the
Common Stock as reported on the NYSE composite tape on April 10, 2000 was
$4.875 per share. In the case of a participant who owns more than 10% of the
outstanding Common Stock on the date of receiving an ISO grant, its exercise
price may not be less than 110% of fair market value of the shares. As
required by federal tax laws, to the extent that the aggregate fair market
value (determined when an ISO is granted) of the Common Stock with respect to
which ISOs are exercisable by a participant for the first time during any
calendar year (under all stock option plans of the Company and of any
subsidiary) exceeds $100,000, the Options granted in excess of $100,000 will
be treated as NQSOs.
Exercise of Options. The exercise of Options will be subject to such
terms and conditions as are established by the Committee in a written agreement
between the Committee and the participant. Only Common Stock is subject to
purchase upon exercise of the Options, and an Option may not be exercised for
a fractional share. Options may not be exercised until "vested." In the
absence of Committee action to the contrary, Options typically will vest after
three years of service with the Company following date of grant.
Method for Exercise. A participant may exercise Options, subject to
provisions relative to their termination and limitations on their exercise,
only by (i) written notice of intent to exercise the Option with respect to a
specified number of shares of Common Stock, and (ii) payment to the Company
(contemporaneously with delivery of such notice) in cash, in Common Stock, or
a combination of cash and Common Stock (as elected by the participant), of the
amount of the exercise price for the number of shares with respect to which the
Option is then being exercised. Common Stock utilized in full or partial
payment of the exercise price for Options shall be valued at its market value
at the date of exercise, and may consist of shares subject to the Option being
exercised.
Effect of Termination of Service. In the absence of Committee action to
the contrary, an otherwise unexpired Option shall cease to be exercisable upon
(i) a participant's termination of employment for "just cause" as defined in
the Plan, (ii) the date that is three months after a participant's termination
of service for a reason other than just cause or death, or (iii) the date that
is one year after a participant's death.
Conditions on Issuance of Shares. The Committee will have the
discretionary authority to impose, in agreements with participants, such
conditions and continuing restrictions on shares of Common Stock issued
pursuant to the Plan as it may deem appropriate or desirable, including but not
limited to the authority to impose a right of first refusal, repurchase rights
or other conditions or restrictions.
Nontransferability. Participants may transfer NQSOs to family members or
trusts under specified circumstances. Options may not otherwise be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other
than by will or by the laws of descent and distribution. In addition, Common
Stock that is purchased upon the exercise of an Option may not be sold within
the six-month period following the grant date of that Option, except in the
event of the participant's death or disability or such other event as the
Board of Directors may specifically deem appropriate.
Effect of Dissolution and Related Transactions. Upon the termination of
employment of an Option holder within 12 months following a change in control
(as defined in the Plan), unless such termination was for "just cause," all
Options issued to such Option holder will become fully exercisable. In the
event of (i) the liquidation or dissolution of the Company, (ii) a merger or
consolidation in which the Company is not the surviving entity, or (iii) the
sale or disposition of all or substantially all of the Company's assets (any of
the foregoing to be referred to herein as a "Transaction"), all outstanding
Options, together with the exercise prices thereof, will be equitably adjusted
for any change or exchange of shares for a different number or kind of shares
or other securities which results from the Transaction. However, any such
adjustment will be made in such a manner as to not constitute a modification,
within the meaning of Section 424(h) of the Internal Revenue Code, of
outstanding ISOs.
Duration of the Plan and Grants. The Plan has a term of 10 years from the
Effective Date, after which date no Options may be granted. The maximum term
for an Option is 10 years from the date of grant, except that the maximum term
of an ISO may not exceed five years if the participant owns more than 10% of
the Common Stock on the date of grant. The expiration of the Plan, or its
termination by the Committee, will not affect any Option then outstanding.
Modification of Options. At any time, and from time to time, the Board
may authorize the Committee to modify any outstanding Option, provided that no
such modification may confer on the holder of the Option any right or benefit
which could not be conferred on him by the grant of a new Option, or impair the
Option without his consent.
Amendment and Termination of the Plan. The Board of Directors may from
time to time amend the terms of the Plan and, with respect to any shares at the
time not subject to Options, suspend or terminate the Plan. No amendment,
suspension, or termination of the Plan will, without the consent of any
affected participant, alter or impair any rights or obligations under any
Options previously granted.
Financial Effects of Options. The Company will receive no monetary
consideration for the granting of Options under the Plan. It will receive no
monetary consideration, other than the exercise price for shares of Common
Stock issued to participants, upon the exercise of their Options. Cash
proceeds from the sale of Common Stock issued pursuant to the exercise of
Options will be added to the general funds of the Company to be used for
general corporate purposes.
Under the intrinsic value method that the Company follows under applicable
accounting standards, recognition of compensation expense is not required when
Options are granted at an exercise price equal to or exceeding the fair market
value of the Common Stock on the date the Option is granted, but disclosure may
be required in financial statement footnotes regarding pro forma effects on
earnings and earnings per share of recognizing as a compensation expense an
estimate of the fair value of such stock-based awards.
New Plan Benefits. The following table sets forth the number of options
currently granted under the 2000 Stock Option Plan to Mr. Martin, subject to
approval by the shareholders of the 2000 Stock Option Plan and the options
granted to Mr. Martin. The Company believes that stock options may be granted
to other officers, directors or employees. At this time, however, the Company
does not know when options will be granted, to whom they will be granted or the
terms and conditions of those specific grants. The Committee is authorized to
select the participants and make grants under the Plan.
<PAGE>
NEW PLAN BENEFITS
2000 STOCK OPTION PLAN
Name and Position Dollar Value ($) Option for Number
of Shares of
Common Stock
John E. Martin
President and Chief
Executive Officer $128,125(1) 200,000
Other officers, directors
and employees (2) (2)
(1) Represents the aggregate market value (market price of the Common Stock on
April 1, 2000, the date the option was granted subject to shareholder approval
of the 2000 Stock Option Plan and the grant of the stock option), less the
exercise price of $4.2698 per share for 100,000 shares, $5.2698 per share for
50,000 shares and $6.2698 for 50,000 shares. See Proposal 4 for a description
of the prices, expiration dates and other material conditions upon which the
option may be exercised. See "Federal Income Tax Consequences" for a
description of the federal income tax consequences of the grant and the
exercise of the Options, some of which are ISOs and some of which are NQSOs as
described under Proposal 4, to the Company and Mr. Martin.
(2) The number of options, if any, to be granted to other officers, directors
and employees is not determinable at this time.
On April 10, 2000, the last sale price of the Common Stock was $4.875,
as reported on the New York Stock Exchange composite tape.
Federal Income Tax Consequences
Summarized below are the federal income tax consequences that the
Company expects (based on current tax laws, rules, and interpretations) with
respect to Options.
Date of Grant. The recipient of an Option will not recognize taxable
income upon its grant, nor will the grant entitle the Company to a current
deduction.
Subsequent Events. The subsequent tax consequences for Option recipients
differ depending on the type of Option. In general, however, the Company will
be entitled to a deduction for federal income tax purposes at the same time
and in the same amount as the ordinary income recognized by the Option holder.
ISOs. If an Option holder holds the shares purchased upon exercise of an
ISO for at least two years from the date the ISO is granted, and for at least
one year from the date the ISO is exercised, any gain realized on the sale of
the shares received upon exercise of the ISO is taxed as long-term capital
gain. However, the difference between the fair market value of the Common
Stock on the date of exercise and the exercise price of the ISO will be treated
by the holder as an item of tax preference in the year of exercise for purposes
of the alternative minimum tax. If a holder disposes of the shares before the
expiration of either of the two special holding periods noted above, the
disposition is a "disqualifying disposition." In this event, the holder will
be required, at the time of the disposition of the Common Stock, to treat the
lesser of the gain realized or the difference between the exercise price and
the fair market value of the Common Stock at the date of exercise, as ordinary
income and the excess, if any, as capital gain.
The Company will not be entitled to any deduction for federal income tax
purposes as the result of the grant or exercise of an ISO, regardless of
whether or not the exercise of the ISO results in liability to the holder for
alternative minimum tax. However, if a participant recognizes ordinary income
taxable as compensation as a result of a disqualifying disposition, the Company
will be entitled to deduct an equivalent amount.
NQSOs. A holder will recognize ordinary income upon the exercise of the
NQSOs in an amount equal to the difference between the fair market value of the
shares on the date of exercise and the option price. Upon a subsequent
disposition of such shares, any amount received by the holder in excess of the
fair market value of the shares as of the exercise will be taxed as capital
gain.
Recommendation and Vote Required
The Board of Directors has determined that the Plan is desirable, cost
effective, and produces incentives that will benefit the Company and its
shareholders. The Plan more closely aligns the long-term economic interests
of the persons who receive options with those of shareholders. The Board of
Directors adopted the Plan on March 16, 2000, effective as of April 1, 2000 and
subject to shareholder approval. The Plan will not become effective unless it
is approved by the holders of record of at least a majority of the shares of
Common Stock present in person or represented by Proxy at the annual meeting.
Unless otherwise instructed, it is the intention of the persons named in the
accompanying form of Proxy to vote the shares represented therein in favor of
the Plan. The Board of Directors is seeking shareholder approval of the Plan
in order to satisfy the requirements of the Internal Revenue Code for favorable
tax treatment of ISOs and to satisfy the requirements of the New York Stock
Exchange.
Shareholder approval of the Plan requires the affirmative vote of the
holders of a majority of the shares of Common Stock present in person or
represented by Proxy at the Annual Meeting with respect to the Plan. The Board
of Directors recommends a vote "FOR" approval of the Plan.
PROPOSAL 3 - RATIFY GRANT OF STOCK OPTONS TO MICHAEL R. MCCARTHY
On January 26, 2000 the Board of Directors granted Mr. McCarthy an option to
purchase 200,000 shares of Common Stock, subject to shareholder approval of
this grant, under the 1996 Stock Option Plan. The purpose of the option to
Mr. McCarthy is to compensate him for his services as Chairman of the Company
and is in lieu of any cash or other compensation for his services in that
capacity. This stock option is exercisable as of the date of grant and for
10 years thereafter at an exercise price of $3.5625 per share. This option
will be a NQSO for federal income tax purposes. See "Federal Income Tax
Consequences" under Proposal 2 for a description of the federal income tax
consequences of the grant and exercise of the option to Mr. McCarthy and the
Company. On the date of the grant, the Common Stock closed at $3.5625 per
share as reported on the New York Stock Exchange composite tape.
Shareholder approval of the grant of this stock option to Mr. McCarthy
requires the affirmative vote of the holders of a majority of the shares of
Common Stock present in person or represented by Proxy at the Annual Meeting
with respect to the grant of these options. The Board of Directors recommends
a vote "FOR" approval of this proposal.
PROPOSAL 4 - RATIFY GRANT OF STOCK OPTONS TO JOHN E. MARTIN
Pursuant to an agreement dated December 14, 1999 employing John E. Martin as
the Company's President and Chief Executive Officer, the Board of Directors of
the Company agreed to grant Mr. Martin an option to purchase 200,000 shares of
Common Stock subject to shareholder approval. This option was granted
effective April 1, 2000, subject to shareholder approval. Under the agreement
the exercise price with respect to 100,000 shares was the lower of $5.50 a
share or the average trading price per share during the first quarter of 2000.
The average trading price per share during the first quarter of 2000 was
$4.2698 per share. Accordingly, Mr. Martin may exercise the option for
100,000 shares after December 1, 2000 for $4.2698 per share. Mr. Martin may
exercise the option with respect to 50,000 shares after December 1, 2001 at an
exercise price of $5.2698 per share and, with respect to the remaining 50,000
shares, after December 1, 2002 at an exercise price of $6.2698 per share. This
option is exercisable for a period of 10 years from the date of the grant. If
the Company declares a dividend in shares of Common Stock, subdivides its
outstanding stock into a greater number of shares, or issues by
reclassification of its shares of Common Stock other securities of the Company,
the number of shares purchasable upon exercise of this option shall be adjusted
so that Mr. Martin shall be entitled to receive the kind and number of shares
or other securities of the Company that he would have owned or been entitled to
receive, without dilution, under this option. The option granted to Mr. Martin
would be exercisable immediately by Mr. Martin at the exercise prices stated
above upon a change of control of the Company.
If shareholders do not approve this option, the Company will pay Mr. Martin
a sum which will be the economic equivalent of this option, grossed up for
applicable taxes. The amount and timing of this payment will be agreed to by
the parties after reasonably taking into consideration tax and related
consequences. In the event of Mr. Martin's death, this option shall be
exercisable by the personal representative of his estate. The option for the
100,000 shares exercisable after December 1, 2000, for the 50,000 shares
exercisable after December 1, 2001 and for 31,177 of the shares exercisable
after December 1, 2002 will be an NQSO. The option for 18,823 shares
exercisable after December 1, 2002 will be an ISO. See "Federal Income Tax
Consequences" under Proposal 2 for a description of the federal income tax
consequences of the grant and exercise of the option to Mr. Martin and the
Company.
Shareholder approval of the grant of this stock option to Mr. Martin requires
the affirmative vote of the holders of a majority of the shares of Common Stock
present in person or represented by Proxy at the Annual Meeting with respect to
both the grant of these options and the ratification of the adoption of the
Company's 2000 Stock Option Plan pursuant to Proposal 2. If either Proposal 4
or Proposal 2 is not approved by the required vote, this stock option will not
be granted to Mr. Martin. The Board of Directors recommends a vote "FOR"
approval of this proposal.
PROPOSAL 5 - RATIFY APPOINTMENT OF INDEPENDENT
PUBLIC ACCOUNTANTS
At the Annual Meeting shareholders will be asked to ratify the Board of
Director's appointment of Deloitte & Touche LLP as the Company's principal
independent accountants. The appointment of independent accountants by the
Board of Directors is submitted for ratification by the shareholders. Although
shareholder approval is not required, if the shareholders do not ratify the
appointment, the Board of Directors will reconsider the matter.
Representatives of Deloitte & Touche LLP will be present at the Annual
Meeting, will have an opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions presented by
shareholders.
Shareholder ratification of the appointment of independent public
accountants requires the affirmative vote of the holders of a majority of the
shares of Common Stock present in person or represented by Proxy at the Annual
Meeting with respect to ratification of the appointment. The Board of
Directors recommends a vote "FOR" ratification of the appointment of the
independent public accountants.
III. INFORMATION ABOUT THE COMPANY, DIRECTORS AND
EXECUTIVE OFFICERS
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES THEREOF
The Board of Directors met nine times in 1999. All of the nominees for
director served on the Board of Directors throughout 1999. Throughout 1999
there were three committees of the Board: an Executive Committee, an Audit
Committee and a Compensation Committee.
The Executive Committee may exercise certain limited powers of the Board of
Directors. It met four times in person and two additional times by
teleconference in 1999. The Audit Committee has authority to review internal
audit and financial controls, and to recommend to the Board the independent
public accountants to serve as auditors, review with the independent auditors
the annual audit plan, the financial statements, the auditors' report and their
evaluation and recommendations concerning the Company's internal controls, and
approve the types of professional services for which the Company may retain the
independent auditors. The Audit Committee met once in 1999. The Compensation
Committee reviews the compensation of the executive officers of the Company,
and makes recommendations to the Board of Directors regarding such compensation
and awards under the various compensation plans adopted by the Company. The
Compensation Committee met once in 1999.
During 1999, each director participated in at least 75% of the meetings or
actions by consent of the Board of Directors and each committee on which
he sat.
COMPENSATION OF DIRECTORS
Members of the Board of Directors who are not full-time employees of the
Company receive an annual retainer of $10,000 plus $1,000 for attendance at
each meeting of the Board of Directors, $1,000 for attendance at each meeting
of a Committee on which the director sits occurring other than on a day when
the directors meet, and $500 for each such meeting occurring on a day when the
directors meet. Nonemployee directors who serve as Chairman of a Board
Committee, receive an additional $3,000 annual retainer. Pursuant to the
Company's 1996 Stock Option Plan, each of the nonemployee directors
(Messrs. Bielfield, Elliott, LeBuhn, McCarthy, Richards, Treadwell and
Valassis) were granted an option for 1,500 shares of Common Stock on May 28,
1999. The exercise price for these options is $15.69 per share, the average
of the mean between the highest and lowest reported sales price on the New York
Stock Exchange on May 28, 1999. These options have a term of 10 years and
become exercisable upon the expiration of each director's current term, which
is immediately after the Meeting.
EXECUTIVE OFFICERS
The individuals identified below are the executive officers of the Company.
The President and Chief Executive Officer and the Secretary normally are
appointed annually by the Board of Directors and serve at the pleasure of the
Board. Other executive officers normally are appointed annually by the Chief
Executive Officer and serve at the pleasure of the Chief Executive Officer.
John E. Martin, 53 President and Chief Executive Officer of the
Company since December 1999. From 1997
until prior to joining the Company,
Mr. Martin was executive vice president and
chief operating officer for Ag America,
FCB/Western Farm Credit Bank located in
Sacramento, California. From 1994 until
1997 Mr. Martin was executive vice
president, chief operating officer and chief
credit officer for Ag America, FCB in
Spokane, Washington. Mr. Martin also served
as executive vice president, chief operating
officer and chief credit officer at Farm
Credit Bank of Omaha, Nebraska from 1987
until 1994 and as a senior vice president of
FirsTier Bank of Omaha, Nebraska prior to
joining Farm Credit Bank of Omaha.
Kim R. Gibson, 42 President, American Agrisurance and certain
subsidiaries since January 1996. Vice
President of Redland Insurance Company and
American Growers since 1990. Mr. Gibson
joined American Agrisurance as an adjuster
in 1981 and has held various positions in
that company.
Stephen T. Fitzpatrick, 53 Chief Underwriting Officer of the Company
since February 1999. Mr. Fitzpatrick joined
Acceptance Insurance Company in 1994 to
establish the Company's Itasca, Illinois
office, which he continues to manage. He
previously held various local, regional and
national underwriting and other positions
with Nordstern Insurance Company, Home
Insurance Company and Chubb Insurance
Companies.
J. Michael Gottschalk, 55 Chief Legal Officer, General Counsel and
Secretary of the Company since August 1998.
For 25 years prior to joining the Company
Mr. Gottschalk was a member of the Kutak
Rock law firm in Omaha, Nebraska and engaged
in the private practice of law.
Georgia M. Mace, 50 Treasurer and Chief Financial Officer of the
Company since May 1992. Ms. Mace has been
Treasurer and Chief Financial Officer of
Acceptance Insurance Company since its
formation and of each of the Acceptance
subsidiaries since their formation or
acquisition. She also has served as a
director of Acceptance Insurance Company
and Phoenix Indemnity Insurance Company
since their formation. Ms. Mace formerly
was Treasurer of Cornhusker Casualty, a
division of Berkshire Hathaway.
Raymond N. Siebert, 52 Chief Administrative Officer for the Company
since May 1995. Prior to joining the
Company, Mr. Siebert was an Assistant Vice
President for Systems and Operations for the
Home Insurance Company. Mr. Siebert held
various administrative and operations
support positions at Home Insurance for
13 years. He also has held positions in a
similar capacity for the Illinois FAIR Plan,
Chubb and Son, and Allstate Insurance Co.,
beginning in 1975.
Charles E. "Duffy" Boyle, 46 Chief Information Officer for the Company
since April 1, 2000. Prior to joining the
Company, Mr. Boyle was Senior Vice
President-Information Systems and Services
of The Guarantee Life Companies Inc. since
February 1998, and prior thereto, Vice
President-Information Systems and Services
of Guarantee Life since November 1997. From
1995 until November 1997, Mr. Boyle held the
position of Vice President-Applications
Development with Guarantee Life. From 1990
until joining Guarantee Life, Mr. Boyle
served in a variety of positions with First
Data Corporation, with the most recent
position of Director of Applications
Development. Previously, he held positions
in a similar capacity for Nielsen Marketing
Research.
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth for each of the three years ended
December 31, 1999, the compensation paid by the Company to its Chief Executive
Officer and the four most highly compensated executive officers receiving total
compensation in excess of $100,000 annually, who were serving in such positions
as of December 31, 1999. The table also includes the compensation paid by the
Company to the person who served as its Chief Executive Officer for most of
1999 and two other executive officers no longer serving in that capacity on
December 31, 1999, but who otherwise would have been included in the table if
they were serving as executive officers of the Company at year end.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long Term Compensation
Securities
Underlying
Restricted Options/
Name and Stock Awards SARs All Other
Principal Position Year Salary Bonus(1) $ # Compensation(2)
____________________ _________ _______ _________ __________ _________ _______________
<S> <C> <C> <C> <C> <C> <C>
John E. Martin (3) 1999 $12,340 $50,000 $0 $0 $0
President and Chief
Executive Officer
Kim R. Gibson 1999 158,168 90,000 0 0 12,375
President, American 1998 148,883 86,000 0 0 11,712
Agrisurance, Inc. 1997 139,750 98,467 0 0 9,020
Stephen T. Fitzpatrick 1999 185,198 36,827 0 0 11,041
Sr. Vice President, 1998 123,192 39,282 0 15,000 11,969
Acceptance Insurance Company 1997 118,766 14,830 0 0 11,592
J. Michael Gottschalk(4) 1999 182,300 22,050 0 0 8,000
Chief Legal Officer, 1998 73,074 0 0 35,000 0
General Counsel and
Secretary
Georgia M. Mace 1999 133,882 39,112 0 0 8,000
Treasurer and Chief 1998 123,650 64,483 0 0 8,000
Financial Officer 1997 120,080 63,607 0 0 128,383 (9)
Kenneth C. Coon (5) 1999 291,286 0 0 0 74,190 (10)
Previous Chairman, Chief 1998 280,176 479,600 0 0 324,676(6)
Executive Officer and 1997 274,374 414,283 0 0 372,938(6)
Director
John P. Nelson (7) 1999 270,482 0 0 0 39,574 (11)
Director and Previous 1998 259,100 330,000 0 0 29,376
President and Chief 1997 252,088 285,885 0 0 26,899
Operating Officer
Thomas D. Stamm (8) 1999 249,807 41,760 0 0 14,547
Previous Sr. Vice 1998 173,807 79,466 0 0 12,630
President, Acceptance 1997 166,339 56,700 0 0 11,152
Insurance Company
<FN>
(1) Reflects amounts paid under the Management Incentive Compensation Plan
adopted by the Company pursuant to which cash bonuses may be awarded
to executives and key employees of the Company and its subsidiaries
measured principally on Company earnings and individual performance.
Amounts paid during a given year reflect incentive compensation earned
during the prior year.
(2) Except where indicated, these amounts reflect the Company's
contribution on behalf of such persons to Defined Contribution Plans
maintained by the Company.
(3) Mr. Martin became President and Chief Executive Officer on December
14, 1999. The amounts shown in the salary and bonus columns were
earned in 1999 and paid in 2000.
(4) Mr. Gottschalk joined the Company in August 1998.
(5) Mr. Coon resigned from these positions effective December 14, 1999.
(6) Includes $254,978 paid in 1998 and $300,957 paid in 1997 to Mr. Coon
for the income tax benefit received by the Company for its recognition
of compensation to him in connection with the exercise of nonqualified
stock options.
(7) Mr. Nelson resigned from the positions he held previously effective
December 14, 1999.
(8) Mr. Stamm resigned from this position effective December 31, 1999.
(9) Includes $120,383 paid in 1997 to Ms. Mace for the income tax benefit
received by the Company for its recognition of compensation to her in
connection with the exercise of nonqualified stock options.
(10) Includes a discretionary contribution of $56,824 under the Company's
Executive Deferred Compensation Plan.
(11) This is a discretionary contribution under the Company's Executive
Deferred Compensation Plan.
</FN>
</TABLE>
Stock Options and Stock Appreciation Rights
During the year ended December 31, 1999 the Company did not grant stock
options or stock appreciation rights to any executive officer of the Company.
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information concerning options
exercised during 1999, and the number and value of unexercised options at the
end of 1999, for executive officers of the Company whose compensation is
reported in the summary compensation table.
<TABLE>
<CAPTION>
Name Number of Value Number of Securities Value* of Unexercised
Shares Acquired Realized Underlying Unexercised In-the-Money Options by
on Exercise Options at Fiscal FY-End
Year End Exercisable/Unexercisable
_______________________ ________________ ________ ___________________________ __________________________
<S> <C> <C> <C> <C>
John E. Martin 0 0 0 Exercisable Options 0
President and Chief 0 Unexercisable Options 0
Executive Officer
Kim R. Gibson 0 0 52,000 Exercisable Options 0
President, American 28,000 Unexercisable Options 0
Agrisurance, Inc.
Stephen T. Fitzpatrick 0 0 3,000 Exercisable Options 0
Sr. Vice President, 12,000 Unexercisable Options 0
Acceptance Insurance
Company
J. Michael Gottschalk 0 0 7,000 Exercisable Options 0
Chief Legal Officer, 28,000 Unexercisable Options 0
General Counsel and
Secretary
Georgia M. Mace 0 0 29,000 Exercisable Options 0
Treasurer and Chief 1,000 Unexercisable Options 0
Financial Officer
Kenneth C. Coon 0 0 288,000 Exercisable Options 0
Previous Chairman, Chief 112,000 Unexercisable Options 0
Executive Officer and
Director
John P. Nelson (1) 0 0 162,000 Exercisable Options 0
Director and Previous 88,000 Unexercisable Options 0
President and Chief
Operating Officer
Thomas D. Stamm (2) 0 0 53,000 Exercisable Options 0
Previous Sr. Vice 22,000 Unexercisable Options 0
President, Acceptance
Insurance Company
<FN>
* Calculated as the difference between the option exercise price and the
closing price per share on the New York Stock Exchange on December 31,
1999.
(1) All of Mr. Nelson's options expired on March 15, 2000.
(2) All of Mr. Stamm's options expired on March 31, 2000.
</FN>
</TABLE>
<PAGE>
Employment Contracts and Termination of Employment Agreements
John E. Martin, President and Chief Executive Officer of the Company, is
employed under an employment agreement dated December 14, 1999. Under this
agreement, Mr. Martin receives a base annual salary of $250,000, subject to
increase upon review and approval of the Board at least annually, all benefits
available to the Company's employees from time to time, including the 2000
Stock Option Plan, if approved by the shareholders, the Company's Management
Incentive Compensation Plan and any other stock plan, deferred compensation
plan or similar plan established by the Company for its employees and senior
executives and the grant of stock options described under Proposal 4 if
approved by the shareholders. The employment agreement is in effect through
December 14, 2002, unless earlier terminated for cause or upon the death or
permanent disability of Mr. Martin and is automatically renewable for
successive one-year terms unless notice of nonrenewal is provided at least 60
days prior to the end of any term of the agreement. If the agreement is
terminated for any reason other than cause before December 14, 2002, Mr. Martin
or his estate will receive the balance of any compensation and benefits that he
would have received through that date. Mr. Martin has agreed not to compete
with the Company or any of its affiliates for two years after the end of his
employment under this agreement. Upon a change of control of the Company, the
options granted to Mr. Martin described in Proposal 4 will become exercisable
immediately, if the grant of the options to Mr. Martin and the 2000 Stock
Option Plan are approved by the shareholders.
J. Michael Gottschalk, Chief Legal Officer, General Counsel and Secretary of
the Company, is employed under an employment agreement dated August 1, 1998.
Under this Agreement, Mr. Gottschalk received an initial base annual salary of
$175,000, was eligible initially for a maximum bonus of 60% of his base salary
under the Company's Management Incentive Compensation Plan, was eligible for
inclusion in the Company's stock option, deferred compensation and similar
plans established for employees and senior executives and was included, to the
extent eligible, in all other benefit plans for employees and senior executive
officers. The employment agreement is in effect through July 31, 2000, unless
earlier terminated for cause or upon the death of Mr. Gottschalk and is
automatically renewable for successive one-year terms unless notice of
nonrenewal is provided no later than April 30 of any year during the term of
the agreement. Mr. Gottschalk has agreed not to compete with the Company or
any of its affiliates for up to one year after the end of his employment under
this agreement.
In connection with his resignation as Chairman and Chief Executive Officer
of the Company, Kenneth C. Coon and the Company entered into an interim
agreement dated December 14, 1999, which superseded the Employment Agreement
Mr. Coon and the Company entered into effective February 19, 1990. Under this
interim agreement, Mr. Coon and the Company acknowledged the February 19, 1990
Employment Agreement entitled Mr. Coon to receive a severance payment of
$1,546,200 upon the termination of his employment prior to the expiration of
that agreement on December 31, 2001. The interim agreement provided that
Mr. Coon would remain an officer of the Company, complete certain special
projects and be paid a salary based on an annualized amount of $250,000 until
his resignation from all positions with the Company and its affiliates.
Mr. Coon resigned from all positions and severed his employment with the
Company on April 14, 2000. Mr. Coon received all employee benefits through
that date and will receive a severance payment of $1,546,200 pursuant to his
employment agreement dated February 19, 1990. In addition, Mr. Coon will
retain and be entitled to his vested interest in the Company's 401(k) plan,
Employee Stock Ownership Plan and nonqualified Executive Compensation Plan to
the extent allowed by those plans; the Company will match Mr. Coon's
contributions to the Company's 401(k) plan in 1999 and 2000 to the maximum
extent allowed under the plan; if Mr. Coon elects COBRA coverage for health
insurance the Company will pay the portion of the premium it would have paid if
Mr. Coon had remained employed until he becomes covered by other health
insurance or 18 months, whichever is earlier; if Mr. Coon is not covered by
other health insurance after 18 months the Company will pay him an amount
equal to its share of the COBRA premium through December 31, 2001 net of
withholding for taxes; the Company has agreed to indemnify and hold harmless
Mr. Coon against a judgment, settlement, penalty or fine, including an excise
tax on an employee benefit plan, incurred with respect to any action, suit,
debarment or proceeding related to his acts, services or duties as a director,
officer, employee or agent of the Company or its affiliates or as a director,
officer, partner, trustee, employee or agent of another entity at the request
of the Company or its affiliates; the Company has agreed to keep in force for
the benefit of Mr. Coon current errors and omissions liability insurance
policies or replacement policies providing substantially identical coverage and
limits of coverage; and the Company has agreed to pay Mr. Coon $1,500 per day
and to reimburse him for his reasonable out-of-pocket expenses for services he
performs in connection with the orderly transfer of pending matters or any
audit, examination or litigation affecting the Company. The Company and
Mr. Coon also have entered into a month-to-month consulting agreement dated
April 11, 2000 and terminable by either party at any time upon written notice.
Under this agreement, Mr. Coon will provide general consulting services as
requested by the Company, including investigation, document review, studies and
research, will be paid $5,000 per month for all consulting services provided
and will be reimbursed for travel and other expenses incurred at the request of
the Company.
In connection with his resignation from all employee, officer and
director positions with the Company and its subsidiaries and affiliates, other
than as a director of the Company, the Company and John P. Nelson entered into
an agreement dated December 14, 1999 that supersedes his July 2, 1993
employment agreement. Under the December 14, 1999 agreement, Mr. Nelson will
continue to serve as a director of the Company and has agreed to provide
information, advice and consulting services regarding previous operations of
the Company, regulatory issues and other matters relating to the Company as
the Company may from time to time request, and to prepare for and provide
testimony if he is subpoenaed as a witness in any suit, claim or investigation
because of his employment with the Company or on account of claims, suits or
investigations against the Company (the "Future Services"). The Company has
agreed to provide, at its cost, all clerical, legal and technical support
reasonably necessary for Mr. Nelson to provide these services to the Company.
Mr. Nelson received a final regular salary payment computed as though he were
an employee of the Company through December 31, 1999, a salary payment for 2000
in the gross amount of $273,000 net of applicable withholdings and pursuant to
his July 2, 1993 Employment Agreement, a payment of $34,477.80 for health and
dental insurance during 2000, and a five percent Company match on the Tax
Deferred Savings Plan for each of 1999 and 2000. The Company will pay
Mr. Nelson $1,500 per day for each day that he provides Future Services and
reasonable out-of-pocket expenses paid or incurred by him in providing the
Future Services. The Company also has agreed to indemnify and hold Mr. Nelson
harmless with respect to any obligation to pay a judgment, settlement, penalty
or fine relating to any employee benefit plan and all reasonable costs incurred
with respect to any action, suit, debarment or proceeding related to his acts,
services or duties as a director, officer, employee
or agent of the Company or its affiliates, including The Redland Group, Inc. or
any of its affiliates, as the representative of the shareholders of The Redland
Group, Inc. or as a director, officer, partner, trustee, employee or agent of
another entity at the request of the Company or its affiliates. The Company
has also agreed to keep in force for the benefit of Mr. Nelson all Directors
and Officers and Errors and Omissions liability policies in effect on the date
of the agreement or replacement policies providing substantially identical
coverage and limits of coverage.
Report of the Compensation Committee on Executive Compensation
In 1993, the Compensation Committee developed a compensation program
covering the Company's Chief Executive Officer, other executive officers and
key employees. Under the program compensation is composed of a combination of
salary, incentive cash bonuses and stock option grants. The program intends
the salary portion of executive compensation to be competitive in the
marketplace for comparable positions, but not to be the principal vehicle for
rewarding high-level performance. Rather, over time, the program limits salary
increases largely to reflect inflation and increased responsibility.
The Management Incentive Compensation Plan, calling for the payment of cash
bonuses in accordance with the provisions of the Plan, is the Company's vehicle
for rewarding superior performance. The Management Incentive Compensation Plan
is based upon Company, unit and individual performance goals established
annually and tied to the Company's strategic plan. The maximum bonus payable
is established as a percentage of base salary, which ranges from 200% for the
Chief Executive Officer down to 20% for lower level key employees. The Plan
also establishes the extent to which the amount of bonus is based upon meeting
Company goals, and the extent to which the bonus is based upon meeting unit and
individual goals. Attainment of Company goals is weighted more heavily for
senior executives, while individual goals are weighted more heavily for
executives and key employees at the staff and division levels.
Effective June 1, 1996, the Company adopted an Executive Deferred
Compensation Plan. The Plan is a nonqualified deferred compensation
arrangement pursuant to which eligible employees may defer compensation by
having the Company pay selected amounts over to the Plan, and may thereby
defer income tax liability on those amounts until the employee receives the
compensation. Only key management employees designated by the Committee who
elect to participate in the Plan are eligible under the Plan. The Company
matches 100% of the first 5% of income deferred by participants in the Plan or
in the Company's 401(k) plan.
The Company has not yet adopted a policy with respect to qualifying
compensation paid to executive officers under Section 162(m) of the Internal
Revenue Code. The Committee deems it unnecessary at this time to adopt such a
policy, as it does not consider it imminent that annual compensation to any
executive officer will exceed $1 million. The Committee intends to monitor
executive compensation, including the value of compensation which may
ultimately be received by the Chief Executive Officer and other executive
officers, comprised of salary, cash bonuses and receipt of values under stock
option grants, and will address a policy to qualify compensation paid to
executive officers under Section 162(m) at the time it deems it necessary to do
so.
In all respects, the action of the Compensation Committee is subject to
approval by the Board of Directors. Applying these criteria to 1998, in 1999
the Board of Directors awarded the Chief Executive Officer a 4% salary increase
and made a discretionary contribution of $56,824 to the Executive Deferred
Compensation Plan.
The Executive and Compensation Committees of the Board were combined in
2000, and the Committee currently is reviewing the compensation policies of the
Company. The Committee has determined that the Chairman will receive no
compensation other than 200,000 options granted under the 1996 Incentive Stock
Option Plan. Compensation of the Chief Executive Officer consists of a base
salary, stock options granted by the Company subject to shareholder approval
and a discretionary bonus approved by the Committee. The Committee has
approved a pilot bonus plan for the Company's Crop Division; this pilot program
includes broad-based employee participation and specific, division-wide goals.
Currently the Committee and the Chief Executive Officer are working to develop
and implement a compensation plan that will align the long-term interests of
the stockholders and the Company managers. The plan is expected to include
cash bonuses tied to profitability and stock options tied to the public market
value of the Company's shares.
Members of the Executive and Compensation Committee are:
Michael R. McCarthy, Chairman
David L. Treadwell
Edward W. Elliott, Jr.
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the performance of the Company's Common Stock
during the past five years to the Value Line Property and Casualty Insurance
Group and the Russell 2000 Index.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Acceptance Insurance Companies Inc. $100 99.17 131.67 161.25 135.00 38.33
Russell 2000 Index $100 128.44 149.55 182.75 177.76 209.46
Insurance: Property/Casualty $100 140.52 179.66 277.08 281.31 234.89
</TABLE>
Assumes $100 invested at the close of trading December 31, 1994 in the
Company's Common Stock, Russell 2000 Index, and Insurance: Property/Casualty.
*Cumulative total return assumes reinvestment of dividends.
(Source: Value Line, Inc. Factual material is obtained from sources believed
to be reliable, but the publisher is not responsible for any errors or
omissions contained herein.)
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon the Company's review of Forms 3, 4 and 5, and amendments thereto,
furnished during or with respect to the Company's 1999 fiscal year, and
separate written representations, no persons subject to Section 16 of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), with respect to
the Company, failed to file on a timely basis reports required by Section 16(a)
of the Exchange Act during the Company's 1999 fiscal year or prior fiscal
years.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Doug T. Valassis, a director of the Company, is one of two individuals
controlling Brisbane Corporation, the Manager of VELP II, a principal
shareholder of the Company.
During the fiscal year ended December 31, 1999, the Company employed
McCarthy Group Asset Management, a wholly owned subsidiary of McCarthy Group,
Inc., to furnish investment advisory services to the Company and paid
approximately $356,000 for such services. Michael R. McCarthy, Chairman and a
director of the Company, is Chairman and the controlling shareholder of
McCarthy Group, Inc.
The Company contracts with Redland & Associates, Inc., to administer health
insurance benefits for its employees and to place property and casualty
coverages on behalf of the Company whereby Redland & Associates, Inc. receives
commissions from the insurance providers, which totaled $381,000 in 1999. In
addition, the Company pays commissions and fees to Redland & Associates, Inc.
in connection with insurance written and loss control activities, which totaled
$286,000 in 1999. Redland & Associates, Inc. reimburses the Company for an
allocable share of certain office occupancy expenses in the sum of $3,000 in
1999. John P. Nelson, a director of the Company, is Chairman of the Board and
a principal shareholder of Redland & Associates, Inc.
By virtue of the foregoing positions, relationships and interests, the
persons named above may have an indirect material interest in transactions and
business relationships between the Company and its subsidiaries and such
persons or their affiliates.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal Shareholders
The following table provides information as of April 10, 2000 with respect
to beneficial ownership of the Company's Common Stock by each person known by
the Company to be the beneficial owner of more than 5% of the outstanding
Common Stock.
<PAGE>
<TABLE>
<CAPTION>
Sole Ownership Shared Ownership Total Ownership
______________________ _____________________ _________________
Name and Address of Number of Percent Number of Percent of Number of Percent
Beneficial Owner Shares(1) of Shares(1) Class Shares(1) of
Class Class
_________________________ ____________ _________ ______________ _______ ___________ __________
<S> <C> <C> <C> <C> <C> <C>
VELP 2, L.L.C. (2)
Doug T. Valassis(3) 237,879(3) 1.7% 1,690,410(4) 11.8% 1,928,289 13.5%
D. Craig Valassis
George F. Valassis
Edward W. Elliott, Jr.
1400 N. Woodward Avenue
Suite 270
Bloomfield Hills, MI 48304
McCarthy Group, Inc. 772,628 5.4% 94,082(5) 0.7% 866,710 6.1%
Suite 450, One Pacific Place
1125 South 103rd Street
Omaha, NE 68124
Wanger Asset Management, L.P. (6) 0 0% 1,503,000 10.5% 1,503,000 10.5%
Acorn Investment Trust
227 West Monroe Street
Suite 3000
Chicago, IL 60606
Dimensional Fund Advisors Inc. (7) 1,058,938 7.4% 0% 0% 1,058,938 7.4%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Artisan Partners Limited 0 0% 980,100 6.9% 980,100 6.9%
Partnership (8)
Artisan Investment Corporation
Andrew A. Ziegler
Carlene M. Ziegler
1000 North Water Street
#1770
Milwaukee, WI 53202
<FN>
(1) The column sets forth shares of Common Stock which are deemed to be
"beneficially owned" pursuant to Rule 13d-3 under the Securities
Exchange Act of 1934, as amended. For purposes of calculating the
percentage of Common Stock beneficially owned by any beneficial owner,
but only as to such owner, the shares of Common Stock issuable to such
person under stock options or warrants exercisable within 60 days are
considered outstanding and added to the shares of Common Stock
actually outstanding.
(2) Based upon Amendment No. 5 to a Schedule 13D dated March 21, 2000 and
filed with the Securities and Exchange Commission jointly by VELP 2,
L.L.C., Doug T. Valassis, D. Craig Valassis, George F. Valassis and
Edward W. Elliott, Jr. Doug T. Valassis and Edward W. Elliott, Jr.
are directors of the Company.
(3) Doug T. Valassis directly owns 230,379 shares of Common Stock, and
immediately exercisable options to purchase 7,500 shares of Common
Stock.
(4) Includes 1,680,345 shares of Common Stock held by VELP 2, L.L.C. and
managed by Brisbane Corporation, which is owned and controlled by
Doug T. Valassis and D. Craig Valassis, 8,000 shares of Common Stock
beneficially owned by Valassis Enterprises as to which
Doug T. Valassis shares voting and dispositive powers and 2,065 shares
beneficially owned by Franklin Enterprises, Inc. as to which
Doug T. Valassis shares voting and dispositive powers.
(5) Based upon Amendment No. 1 to a Schedule 13D dated February 18, 2000
and filed with the Securities and Exchange Commission jointly by
McCarthy Group, Inc. and Fulcrum Growth Partners, L.L.C and a Form 4
filed with the Securities and Exchange Commission on April 10, 2000.
Includes 78,702 shares of Common Stock owned by McCarthy & Co., 4,080
shares of Common Stock owned by McCarthy & Co.'s 401(k) Plan, 800
shares of Common Stock managed by McCarthy & Co. d/b/a McCarthy Group
Asset Management, an investment advisor registered under Section 203
of the Investment Advisors Act of 1940, and immediately exercisable
options to purchase 10,500 shares of Common Stock owned by
Michael R. McCarthy. McCarthy & Co. is a wholly owned subsidiary of
McCarthy Group, Inc. Michael R. McCarthy, the Chairman, Chief
Executive Officer and a director of McCarthy Group, Inc., also
currently is a director of the Company.
(6) Based on Amendment No. 3 to a Schedule 13G dated February 11, 2000 and
filed with the Securities and Exchange Commission on behalf of Wanger
Asset Management, L.P., an investment advisor registered under Section
203 of the Investment Advisors Act of 1940.
(7) Based on a Schedule 13G dated February 4, 2000 and filed with the
Securities and Exchange Commission on behalf of Dimensional Fund
Advisors Inc., an investment advisor registered under Section 203 of
the Investment Advisors Act of 1940. Dimensional Fund Advisors Inc.
disclaims beneficial ownership of the securities reported.
(8) Based on a Schedule 13G dated February 14, 2000 and filed with the
Securities and Exchange Commission on behalf of Artisan Partners
Limited Partnership, an investment advisor registered under Section
203 of the Investment Advisors Act of 1940.
</FN>
</TABLE>
Management
The following table provides information as of April 10, 2000, with respect
to beneficial ownership of the Common Stock by each director and named
executive officer of the Company, individually, and by all directors and
executive officers of the Company as a Group.
<TABLE>
<CAPTION>
Common Stock
____________________________________________
Number of Shares Percent of
Beneficially Owned (1) Class (2)
_______________________ _____________
<S> <C> <C>
Jay A. Bielfield(3)............................... 22,250 *
Kenneth C. Coon(4)................................ 479,100 3.3%
Edward W. Elliott, Jr.(5)......................... 662,048 4.6%
Stephen T. Fitzpatrick(6)......................... 3,728 *
Kim R. Gibson(7).................................. 52,008 *
J. Michael Gottschalk(8).......................... 11,952 *
Robert LeBuhn(9).................................. 12,500 *
Georgia M. Mace(10)............................... 39,947 *
John E. Martin.................................... 10,000 *
Michael R. McCarthy(11)........................... 866,710 6.1%
John P. Nelson(12)................................ 487,178 3.4%
R. L. Richards(13)................................ 63,234 *
Raymond N. Siebert(14)............................ 9,432 *
David L. Treadwell(15)............................ 10,700 *
Doug T. Valassis(16).............................. 1,928,289 13.5%
All directors and officers as a group (15 persons) 4,659,076 31.6%
<FN>
* Less than one percent.
(1) The column sets forth shares of Common Stock which are deemed to be
"beneficially owned" pursuant to Rule 13d-3 under the Securities
Exchange Act of 1934, as amended. Each of the persons in the table
has sole voting and investment power with respect to all shares
beneficially owned by him or her, except as described in the following
footnotes.
(2) For purposes of calculating the percentage of Common Stock
beneficially owned by any beneficial owner, but only as to such owner,
the shares of Common Stock issuable to such person under stock options
or warrants exercisable within 60 days are considered outstanding and
added to the shares of Common Stock actually outstanding.
(3) Includes 2,500 shares owned by Mr. Bielfield's spouse and immediately
exercisable options to purchase 10,500 shares of Common Stock.
(4) Includes 1,216 shares of Common Stock owned by Mr. Coon's spouse,
12,774 shares of Common Stock held for Mr. Coon's account by the
trustee of the Employee Stock Ownership and Tax Deferred Savings Plan
("KSOP"), 1,717 shares of Common Stock held for Mrs. Coon's account by
the trustee of the KSOP, and immediately exercisable options to
purchase 288,000 shares of Common Stock.
(5) Includes 651,548 shares of Common Stock held in various trusts for
which the shareholder acts as a beneficiary, co-trustee or both, and
immediately exercisable options to purchase 10,500 shares of Common
Stock.
(6) Includes immediately exercisable options to purchase 3,000 shares of
Common Stock.
(7) Includes immediately exercisable options to purchase 52,000 shares of
Common Stock.
(8) Includes immediately exercisable options to purchase 7,000 shares of
Common Stock.
(9) Includes immediately exercisable options to purchase 10,500 shares of
Common Stock.
(10) Includes immediately exercisable options to purchase 29,000 shares of
Common Stock.
(11) Includes immediately exercisable options to purchase 10,500 shares of
Common Stock. See also Note (5) under "Security Ownership of Certain
Beneficial Owners and Management - Principal Shareholders."
(12) John P. Nelson directly owns 261,438 shares of Common Stock, 12 of
which are held by the Company's Employee Stock Ownership Plan.
Includes 117,540 shares of Common Stock held by a family corporation
controlled by Mr. Nelson, 4,500 shares of Common Stock held by
Mr. Nelson's wife, 3,700 shares of Common Stock held by a trust for
one of Mr. Nelson's children for which he is the trustee and 100,000
shares of Common Stock held by two companies controlled by Mr. Nelson
and his children.
(13) Includes immediately exercisable options to purchase 10,500 shares of
Common Stock.
(14) Includes immediately exercisable options to purchase 9,000 shares of
Common Stock.
(15) Includes immediately exercisable options to purchase 10,500 shares of
Common Stock.
(16) Includes immediately exercisable options to purchase 7,500 shares of
Common Stock. Also see Notes (2), (3), and (4) under "Security
Ownership of Certain Beneficial Owners and Management - Principal
Shareholders."
</FN>
</TABLE>
IV. OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of the
Company does not know of any matters to be presented at the Annual Meeting
other than those specifically set forth herein. However, if other proper
matters should come before the Annual Meeting, or any adjournment thereof, the
persons named in the enclosed Proxy intend to vote the shares represented by
all Proxies held by them in accordance with their best judgment.
The Proxy for the 2001 annual meeting of shareholders will confer on the
Proxy holders discretionary authority to vote on any matter proposed by any
shareholder for consideration at the meeting. The Proxy Statement for the
2001 annual meeting will state how the Proxy holders will vote with respect to
any matter proposed by a shareholder if the Company receives written notice of
the proposal from the proponent on or before March 13, 2001. The notice must
be submitted in writing and mailed by certified mail to the Company Secretary
at the Company's principal executive offices.
The Company's Annual Report, including financial statements, is being
mailed, together with this Proxy Statement, to all stockholders entitled to
vote at the Annual Meeting. Such Annual Report is not to be considered,
however, part of this Proxy solicitation material. Any stockholder who wishes
to receive a copy of the Form 10-K filed by the Company with the Securities and
Exchange Commission may obtain a copy without charge by writing to the Company.
Requests should be directed to the Secretary at the Company's principal
executive offices.
Shareholders are urged to complete, sign and date the enclosed Proxy and
return it as promptly as possible in the envelope enclosed for that purpose.
The Proxy does not affect the right to vote in person at the Annual Meeting.
By Order of the Board of Directors
J. Michael Gottschalk, Secretary
Omaha, Nebraska
April 28, 2000
<PAGE>
EXHIBIT A
ACCEPTANCE INSURANCE COMPANIES INC.
2000 STOCK OPTION PLAN
1. Purpose of the Plan.
The purpose of this Plan is to advance the interests of the Company
through providing Directors and selected Employees of the Company and its
Affiliates with the opportunity to acquire Shares. By encouraging ownership of
Common Stock, the Company seeks to attract, retain and motivate the best
available personnel for positions of substantial responsibility and to provide
additional incentives to Directors and Employees of the Company or any
Affiliate to promote the success of the business.
2. Definitions.
As used herein, the following definitions shall apply.
(a) "Affiliate" has the meaning set forth in Rule 12b-2 of the
General Rules and Regulations of the Securities Exchange Act of 1934, as
amended.
(b) "Agreement" shall mean a written agreement entered into in
accordance with Paragraph 5(c).
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Change in Control" shall mean any one of the following events:
(1) the acquisition of ownership, holding or power to vote more than 51% of the
Company's voting stock, (2) the acquisition of the ability to control the
election of a majority of the Company's directors, or (3) the acquisition of a
controlling influence over the management or policies of the Company by any
person or by persons acting as a "group" (within the meaning of Section 13(d)
of the Securities Exchange Act of 1934). For purposes of defining Change in
Control, the term "person" refers to an individual or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of entity not
specifically listed herein. The decision of the Committee as to whether a
Change in Control has occurred shall be conclusive and binding.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) "Committee" shall mean the Compensation Committee of the Board.
(g) "Common Stock" shall mean the common stock of the Company.
(h) "Company" shall mean Acceptance Insurance Companies Inc.
(i) "Continuous Service" shall mean the absence of any interruption or
termination of service as an Employee or Director of the Company or an
Affiliate. Continuous Service shall not be considered interrupted in the case
of (1) sick leave, military leave or any other leave of absence approved by the
Company, (2) transfers between payroll locations of the Company or between the
Company, an Affiliate or a successor, (3) a Director's performance of services
in an emeritus or advisory capacity, or (4) changes between a Participant's
status as an Employee or Director provided the Participant is continuously
performing services for the Company or an Affiliate.
<PAGE>
(j) "Director" shall mean any member of the Board and any member of
the board of directors of any Affiliate that the Board has by resolution
designated as being eligible for participation in this Plan.
(k) "Disability" shall mean a physical or mental condition, which in
the sole and absolute discretion of the Committee, is reasonably expected to be
of indefinite duration and to substantially prevent a Participant from
fulfilling his or her duties or responsibilities to the Company or an
Affiliate.
(l) "Effective Date" shall mean the date specified in Paragraph 12
hereof.
(m) "Employee" shall mean any person employed by the Company or an
Affiliate.
(n) "Exercise Price" shall mean the price per Optioned Share at which
an Option may be exercised.
(o) "ISO" means an option to purchase Common Stock, which meets the
requirements, set forth in the Plan, and which an Agreement identifies as an
"incentive stock option" within the meaning of Section 422 of the Code.
(p) "Market Value" shall mean the fair market value of the Common
Stock, as determined under Paragraph 7(b) hereof.
(q) "Non-Employee Director" shall have the meaning provided in
Rule 16b-3.
(r) "NQSO" means an option to purchase Common Stock that meets the
requirements set forth in the Plan but which an Agreement identifies as not
being an ISO.
(s) "Option" means an ISO and/or a NQSO.
(t) "Optioned Shares" shall mean Shares subject to an Option granted
pursuant to this Plan.
(u) "Participant" shall mean any person who receives an Option
pursuant to the Plan.
(v) "Plan" shall mean this Acceptance Insurance Companies Inc. 2000
Stock Option Plan.
(w) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended.
(x) "Share" shall mean one share of Common Stock.
(y) "Year of Service" shall mean a full 12-month period, measured from
the grant date of an Option and each annual anniversary of that date, during
which a Participant has not terminated Continuous Service for any reason.
3. Term of the Plan and Options.
(a) Term of the Plan. This Plan shall remain in effect until
terminated by the Board. Termination of the Plan shall not affect any Options
previously granted, and such Options shall remain valid and in effect until
they have been earned and paid, or by their terms expire or are forfeited. No
Option shall be granted under the Plan after 10 years from the Effective Date.
(b) Term of Options. The term of each Option granted under the Plan
shall be established by the Committee, but shall not exceed 10 years; provided,
however, that in the case of an Employee who owns Shares representing more than
10% of the outstanding Common Stock at the time an ISO is granted, the term of
such ISO shall not exceed five years.
4. Shares Subject to the Plan.
Except as otherwise required under Section 9, the aggregate number of
Shares deliverable pursuant to Options shall be 1,000,000 Shares. Such Shares
may either be authorized but unissued Shares, Shares held in treasury, or
Shares held in a grantor trust created by the Company. If any Option should
expire, become unexercisable, or be forfeited for any reason, the Shares
subject to the Option shall, unless the Plan shall have been terminated, be
available for the grant of additional Options under the Plan.
5. Administration of the Plan.
(a) Composition of the Committee. The Committee shall administer the
Plan. In the absence at any time of a duly appointed Committee, those members
of the Board who are Non-Employee Directors shall administer the Plan.
(b) Powers of the Committee. Except as limited by the express
provisions of the Plan or by resolutions adopted by the Board, the Committee
shall have sole and complete authority and discretion (i) to select
Participants and grant Options, (ii) to determine the form and content of
Options to be issued under the Plan, (iii) to interpret the Plan, (iv) to
prescribe, amend and rescind rules and regulations relating to the Plan, and
(v) to make other determinations necessary or advisable for the administration
of the Plan. The Committee shall have and may exercise such other power and
the Board may delegate authority as to it from time to time. A majority of the
entire Committee shall constitute a quorum and the action of a majority of the
members present at any meeting at which a quorum is present, or acts approved
in writing by a majority of the Committee without a meeting, shall be deemed
the action of the Committee.
(c) Agreement. Each Option granted by the Committee shall be
evidenced by a written agreement containing such provisions as may be approved
by the Committee. Each such Agreement shall constitute a binding contract
between the Company and the Participant and every Participant who enters into
an Agreement shall be bound by the terms and restrictions of the Plan and of
such Agreement. The terms of each Agreement shall be in accordance with the
Plan, but each Agreement may include such additional provisions and
restrictions as the Committee, in its discretion may determine, provided that
such additional provisions and restrictions are not inconsistent with the terms
of the Plan. In particular, the Committee shall set forth in each Agreement
(i) the Exercise Price of the Option, (ii) the number of Shares subject to, and
the expiration date of, the Option, (iii) the manners, times and rates
(cumulative or otherwise) of exercise or vesting of such Option, and (iv) the
restrictions, if any, placed upon such Option or upon Shares which may be
issued upon exercise of such Option.
The Chairman of the Committee and such other Directors and officers as
shall be designated by the Committee are hereby authorized to execute
Agreements on behalf of the Company and to cause them to be delivered to the
recipients of the Options.
(d) Effect of the Committee's Decisions. All decisions,
determinations and interpretations of the Committee shall be final and
conclusive on all persons affected thereby.
(e) Indemnification. In addition to such other rights of
indemnification as they may have, the members of the Committee shall be
indemnified by the Company in connection with any claim, action, suit or
proceeding relating to any action taken or failure to act under or in
connection with the Plan or any Option granted hereunder to the full extent
provided for under the Company's governing instruments with respect to the
indemnification of Directors.
6. Grant of Options.
(a) General Rule. The Committee shall have the discretion to grant
Directors (including members of the Committee) and Employees Options to
purchase Optioned Shares, which shall be subject to any restrictions or
conditions imposed pursuant to Section 15 of this Plan.
(b) Special Rules for ISOs. The aggregate Market Value, as of the
date the Option is granted, of the Shares with respect to which ISOs are
exercisable for the first time by an Employee during any calendar year (under
all incentive stock option plans, as defined in Section 422 of the Code, of the
Company or any present or future Affiliate of the Company) shall not exceed
$100,000. Notwithstanding the foregoing, the Committee may grant Options in
excess of the foregoing limitations, in which case such Options granted in
excess of such limitation shall be Options that are NQSOs.
7. Exercise Price for Options.
(a) Limits on Committee Discretion. The Exercise Price as to any
particular ISO shall not be less than 100% of the Market Value of the Optioned
Shares on the date of grant. In the case of an Employee who owns Shares
representing more than 10% of the Company's outstanding Shares of Common Stock
at the time an ISO is granted, the Exercise Price shall not be less than 110%
of the Market Value of the Optioned Shares at the time the ISO is granted.
(b) Standards for Determining Market Value. The Market Value per
Share of the Optioned Shares shall be the closing price of the Common stock on
the New York Stock Exchange on the day the Option is granted or, if the Option
is granted on a nonbusiness day then on the first business day following the
day the option is granted.
8. Exercise of Options.
(a) Generally. Unless the Committee specifically eliminates any
vesting requirement or imposes a different vesting schedule in an Agreement
granting an Option, each Option Participant shall became vested in the right to
exercise his or her Options according to the following schedule:
Vested Percentage
Years of Service Following (Applied to Optioned Shares)
Grant Date
Less than 3 0%
3 or More 100%
Notwithstanding the foregoing, each Participant shall become (100%)
vested immediately (i) upon termination of the Participant's Continuous Service
due to the Participant's Disability or death, or (ii) termination of the
Participant's Continuous Service within 12 months following a Change in
Control, unless such termination was for "Just Cause" as defined in Section
8(c) below. An Option may not be exercised for a fractional Share.
(b) Procedure for Exercise. A Participant may exercise an Option,
subject to provisions relative to its termination and limitations on its
exercise, only by (i) written notice of intent to exercise the Option with
respect to a specified number of Shares, and (ii) payment to the Company
(contemporaneously with delivery of such notice) in cash, in Common Stock, or a
combination of cash and Common Stock, of the amount of the Exercise Price for
the number of Shares with respect to which the Option is then being exercised.
Each such notice (and payment where required) shall be delivered, or mailed by
prepaid registered or certified mail, addressed to the Treasurer of the Company
at its executive offices. Common Stock utilized in full or partial payment of
the Exercise Price for Options shall be valued at its Market Value at the date
of exercise.
(c) Period of Exercisability. Except to the extent otherwise
provided herein or in the terms of an Agreement, an Option may be exercised by
a Participant only while he or she has maintained Continuous Service from the
date of the grant of the Option, or within three months after termination of
such Continuous Service (but not later than the date on which the Option would
otherwise expire). Notwithstanding the foregoing, the Participant's rights to
exercise such Option shall expire:
(1) immediately upon termination of the Participant's Continuous
Service due to "Just Cause" which for purposes hereof shall have the meaning
set forth in any unexpired employment, consulting, or severance agreement
between the Participant and the Company (and, in the absence of any such
agreement, shall mean termination because of the Participant's personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties
violation of any law, rule or regulation (other than traffic violations or
similar offenses) or entry of a final cease-and-desist order against the
Participant;
(2) immediately upon a determination by the Committee that the
Participant has violated a noncompetition provision contained in any unexpired
employment, consulting, or other written agreement between the Participant and
the Company or an Affiliate; or
(3) one year from the date on which the Participant's Continuous
Service terminates due to his or her death (but not later than the date on
which the Option would otherwise expire), during which time the Option may be
exercised (to the extent that the Participant would have been entitled to
exercise it immediately prior to his or her death) by the personal
representatives of his or her estate or person or persons to whom his or her
rights under such Option shall have passed by will or by laws of descent
distribution.
(d) Effect of the Committee's Decisions. The Committee's
determination whether a Participant's Continuous Service has ceased, and the
effective date thereof, shall be final and conclusive on all persons affected
thereby.
9. Change in Control; Effect of Changes in Common Stock Subject to
the Plan.
(a) Change in Control. Upon a termination of a Participant's
Continuous Service within 12 months of a Change in Control, all Options shall
become fully exercisable, notwithstanding any other provision of the Plan or
any Agreement.
(b) Recapitalizations; Stock Splits, Etc. The number and kind of
Shares reserved for issuance under the Plan, and the number and kind of Shares
subject to outstanding Options, and the Exercise Price thereof, shall be
proportionately adjusted for any increase, decrease, change or exchange of
Shares for a different number or kind of shares or other securities of the
Company which results from a merger, consolidation, recapitalization,
reorganization, reclassification, stock dividend, split-up, combination of
shares, or similar event in which the number or kind of shares is changed
without the receipt or payment of consideration by the Company.
(c) Transactions in Which the Company Is Not the Surviving Entity.
In the event of (i) the liquidation or dissolution of the Company, (ii) a
merger or consolidation in which the Company is not the surviving entity, or
(iii) the sale or disposition of all or substantially all of the Company's
assets (any of the foregoing to be referred to herein as a "Transaction"), all
outstanding Options, together with the Exercise Prices thereof, shall be
equitably adjusted for any change or exchange of Shares for a different number
or kind of shares or other securities which results from the Transaction, and
the forfeiture provisions set forth in subsections 8(c)(2) and 17(c) shall
automatically become null and void.
(d) Special Rule for ISOs. Any adjustment made pursuant to
subsections (a) or (b) hereof shall be made in such a manner as not to
constitute a modification, within the meaning of Section 424(h) of the Code, of
outstanding ISOs.
(e) Conditions and Restrictions on New, Additional, or Different
Shares or Securities. If, by reason of any adjustment made pursuant to this
Section, a Participant becomes entitled to new, additional, or different shares
of stock or securities, then, except as expressly provided in this Section,
such new, additional, or different shares of stock or securities shall
thereupon be subject to all of the conditions and restrictions which were
applicable to the Shares pursuant to this Plan and any applicable Agreement
before the adjustment was made.
(f) Other Issuances. Except as expressly provided in this Section,
the issuance by the Company or an Affiliate of shares of stock of any class, or
of securities convertible into Shares or stock of another class, for cash or
property or for labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, shall not affect, and no
adjustment shall be made with respect to, the number, class, or Exercise Price
of Shares then subject to Options or reserved for issuance under the Plan.
(g) Certain Special Dividends. The Exercise Price of Shares subject
to outstanding Options shall be proportionately adjusted upon the payment of a
special large and nonrecurring dividend that has the effect of a return of
capital to the stockholders.
10. Non-Transferability of ISOs.
ISOs may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution. Notwithstanding the foregoing, or any other provision of this
Plan, a Participant who holds NQSOs may transfer such NQSOs to his or her
spouse, lineal ascendants, lineal descendants, or to a duly established trust
for the benefit of one or more of these individuals. The NQSOs so transferred
may thereafter be transferred only to the Participant who originally received
the grant or to an individual or trust to whom the Participant could have
initially transferred the NQSOs pursuant to this Section 10. NQSOs which are
transferred pursuant to this Section 10 shall be exercisable or earned by the
transferee according to the same terms and conditions as applied to the
Participant.
11. Time of Granting Options.
The date of grant of an Option shall, for all purposes, be the later of
the date on which the Committee makes the determination of granting such Option
and the Effective Date. Notice of the determination shall be given to each
Participant to whom an Option is so granted within a reasonable time after the
date of such grant.
12. Effective Date.
The Plan shall become effective April 1, 2000, subject to its approval by
a favorable vote of at least a majority of the total votes cast at a duly
called meeting of the Company's stockholders held in accordance with applicable
laws.
13. Modification of Options.
At any time, and from time to time, the Board may authorize the Committee
to direct execution of an instrument providing for the modification of any
outstanding Option, provided no such modification shall confer on the holder of
said Option any right or benefit which could not be conferred on him or her by
the grant of a new Option at such time, or impair the Option without the
consent of the holder of the Option.
14. Amendment and Termination of the Plan.
The Board may from time to time amend the terms of the Plan and, with
respect to any Shares at the time not subject to Options, suspend or terminate
the Plan. No amendment, suspension or termination of the Plan shall, without
the consent of any affected holders of an Option, alter or impair any rights or
obligations under any Option theretofore granted.
15. Conditions Upon Issuance of Shares.
(a) Compliance with Securities Laws. Shares of Common Stock shall
not be issued with respect to any Option unless the issuance and delivery of
such Shares shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the rules and
regulations promulgated thereunder, any applicable state securities law, and
the requirements of any stock exchange upon which the Shares may then be
listed.
(b) Special Circumstances. The inability of the Company to obtain
approval from any regulatory body or authority deemed by the Company's counsel
to be necessary to the lawful issuance and sale of any Shares hereunder shall
relieve the Company of any liability in respect of the nonissuance or sale of
such Shares. As a condition to the exercise of an Option, the Company may
require the person exercising the Option to make such representations and
warranties as may be necessary to assure the availability of an exemption from
the registration requirements of federal or state securities law.
(c) Repurchase Right; Damages. The Company shall have the right to
forfeit Shares (in the case of Optioned Shares, in exchange for any Exercise
Price paid by the Participant) that a Participant receives pursuant to an
Option if the Participant breaches a noncompetition provision in any unexpired
employment, consulting or other written agreement between the Participant and
the Company or an Affiliate. If a Participant has disposed of such Shares, the
Company may seek compensatory damages from the Participant, as well as seek
specific performance for the sale to the Company of such other Shares that the
Participant owns or controls (but only to the extent necessary to provide the
Company with the recovery contemplated in the preceding sentence).
(d) Committee Discretion. The Committee shall have the discretionary
authority to impose in Agreements such restrictions on Shares as it may deem
appropriate or desirable, including but not limited to the authority to impose
a right of first refusal, or to establish repurchase rights, or to pay an
Optionee the in-the-money value of his or her Option in consideration for its
cancellation, or all or any combination of these or other restrictions.
16. Reservation of Shares.
The Company, during the term of the Plan, will reserve and keep available
a number of Shares sufficient to satisfy the requirements of the Plan.
17. Withholding Tax.
The Company's obligation to deliver Shares pursuant to an Option shall be
subject to the Participant's satisfaction of all applicable federal, state and
local income and employment tax withholding obligations. The Committee, in its
discretion, may permit the Participant to satisfy the obligation, in whole or
in part, by irrevocably electing to have the Company withhold Shares, or to
deliver to the Company Shares that he or she already owns, having a value equal
to the amount required to be withheld. The value of the Shares to be withheld,
or delivered to the Company, shall be based on the Market Value of the Shares
on the date the amount of tax to be withheld is determined. As an alternative,
the Company may retain, or sell without notice, a number of such Shares
sufficient to cover the amount required to be withheld.
18. No Shareholder Rights
No Participant shall have any voting or dividend rights or other rights of
a stockholder in respect of any Shares covered by an Option prior to the time
said Shares are actually distributed to him or her.
19. No Employment or Other Rights.
In no event shall an Employee's or Director's eligibility to participate
or participation in the Plan create or be deemed to create any legal or
equitable right of the Employee, Director, or any other party to continue
employment by or service with the Company or any Affiliate. No Employee or
Director shall have a right to be granted an Option or, having received an
Option, the right to again be granted an Option. An Employee or Director who
has been granted an Option however, if otherwise eligible, may be granted an
additional Option or Options.
20. Governing Law.
The Plan shall be governed by and construed in accordance with the laws of
the State of Nebraska, except to the extent that federal law shall be deemed to
apply.
REVOCABLE PROXY
ACCEPTANCE INSURANCE COMPANIES INC.
ANNUAL MEETING OF SHAREHOLDERS
May 24, 2000
The undersigned, a shareholder of Acceptance Insurance Companies Inc.
(the "Company"), hereby appoints J. Michael Gottschalk and Peter A. Knolla,
attorneys, agents and proxies, with full power of substitutions to each, for
and in the name of the undersigned to vote, as designated on the reverse side,
all shares of Common Stock of the Company which the undersigned would be
entitled to vote at the Annual Meeting of Shareholders of the Company to be
held at the Doubletree Hotel, 1616 Dodge Street, Omaha, Nebraska, on May 24,
2000, at 9:00 a.m., Local Time, and at any adjournments thereof.
ELECTION OF DIRECTORS, Nominees:
Jay A. Bielfield, Edward W. Elliott, Jr., Michael R. McCarthy,
John P. Nelson, R. L. Richards, David L. Treadwell, Doug T. Valassis
You are encouraged to specify your choices by marking the appropriate boxes,
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. The ratification of
the stock option grant to Mr. Martin is conditioned upon approval of the
2000 Stock Option Plan. The proxies cannot vote your shares unless you sign
and return this Card.
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WHEN PROPERLY
EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION
OF THE NOMINEES FOR DIRECTORS NAMED HEREIN AND FOR ALL OTHER PROPOSALS
SUBMITTED TO THE SHAREHOLDERS IN THIS PROXY. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR AND FOR ALL
OTHER PROPOSALS SUBMITTED TO SHAREHOLDERS IN THIS PROXY. IN THEIR DISCREATION,
THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING, INCLUDING THE ELECTION OF ANY PERSON TO THE BOARD OF
DIRECTORS WHERE A NOMINEE NAMED IN THE PROXY STATEMENT IS UNABLE TO SERVE, OR,
FOR GOOD CAUSE, WILL NOT SERVE.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS.
SEE REVERSE SIDE
<PAGE>
[X] Please mark your vote
as in this example.
1. To elect seven directors to hold FOR [ ] AGAINST [ ] ABSTAIN [ ]
office until the Annual Meeting
or until the election and
qualification of their successors.
For, except vote withheld from the following nominee(s):
___________________________________
2. To approve the adoption of the
Company's 2000 Stock Option Plan. FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To ratify the grant of stock
options to Michael R. McCarthy,
the Company's Chairman. FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. To ratify the grant of stock
options to John E. Martin, the
Company's President and Chief
Executive Officer. FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. To ratify the appointment of
Deloitte & Touche LLP as the
Company's principal independent
accountants. FOR [ ] AGAINST [ ] ABSTAIN [ ]
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders and the Proxy Statement dated April 28, 2000 and ratifies all that
the proxies or any of them or their substitutes may lawfully do or cause to be
done by virtue hereof and revokes all former proxies.
_______________________________________
______________________________________
Signature(s) Date
Note: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
