<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-K/A
Amendment No. 2 to
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended Commission file number 1-9828
December 31, 1998
GAINSCO, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-1617013
(State of Incorporation) (I.R.S. Employer
Identification No.)
500 Commerce Street
Fort Worth, Texas 76102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (817) 336-2500
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
Common Stock ($.10 par value) The New York Stock Exchange
<PAGE> 2
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in Form 10-K/A Amendment No. 1 filed on May
14, 1999 is amended to read as follows:
The following are the names and ages of all directors of the Company,
the period during which they have served as such and their business experience
during at least the last five years, including all Company positions held. The
term of each director expires at the next annual shareholders meeting.
Management has not as yet nominated any person for the position of director
during the coming year.
Mr. Joel C. Puckett, age 55, has served as a director
of the Company since 1979 and Chairman of the Board of
Directors since April, 1998. Mr. Puckett is a certified public
accountant with offices located in Minneapolis, Minnesota. Mr.
Puckett has been engaged in the private practice of accounting
since 1973.
Mr. Glenn Anderson, age 47, has served as President,
Chief Executive Officer and Director of the Company since
April 1998. Prior to assuming these positions, Mr. Anderson
served as Executive Vice President of USF&G Corporation and as
President of the Commercial Insurance Group of United States
Fidelity & Guaranty Company, positions which he held since
1996. From 1995 to 1996 he served as Executive Vice President,
Commercial Lines of that company. Mr. Anderson served from
1993 to 1995 as Senior Vice President, Commercial Lines Middle
Market, for USF&G Corporation. Mr. Anderson has been engaged
in the property and casualty business since 1975.
Mr. Dan Coots, age 47, has served as Vice President,
Treasurer and Chief Financial Officer of the Company since
1987. In 1991 Mr. Coots was promoted to Senior Vice President.
Mr. Coots has been engaged in the property and casualty
insurance business since 1983. He has served as director of
the Company since 1997.
Mr. John C. Goff, age 43, has served as a director of
the Company since 1997. From 1987 to April 1994, Mr. Goff
served as a senior investment advisor to and investor with Mr.
Richard Rainwater. From inception through late 1996 he served
as Chief Executive Officer of Crescent Real Estate Equities,
Inc. ("Crescent") and since late 1996 he has served as Vice
Chairman of the Board of Crescent, which is a real estate
investment company (CEI on the NYSE). Mr. Goff is also Vice
Chairman of the Board of Crescent Operating, Inc. an
investment company (COPI on the NASDAQ) and sits on the Boards
of Texas Capital Bank and The Staubach Company. Mr. Goff
currently is managing principal of Goff Moore Strategic
Partners, a private investment firm.
Mr. Robert J. McGee, Jr., age 44, has served as a
director of the Company since 1997. Since 1992, Mr. McGee has
served as Chairman and Chief Executive Officer of KBK Capital
Corporation, a 36-year old commercial finance company. From
1989 to 1992 Mr. McGee served as Chairman of the Board and
Chief Executive Officer of Texas Commerce Bank-Tarrant County
and Vice Chairman, Texas Commerce Bank, N.A.
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Mr. Sam Rosen, age 63, has served as the Secretary
and a director of the Company since 1983. Mr. Rosen is a
partner with the law firm of Shannon, Gracey, Ratliff &
Miller, LLP. He has been a partner in that firm or its
predecessor since 1966. Mr. Rosen is a director of Aztec
Manufacturing Co.
Mr. Harden Wiedemann, age 45, has served as a
director of the Company since 1989. Mr. Wiedemann has been
Chairman and Chief Executive Officer of Assurance Medical,
Incorporated, a company providing independent oversight of
drug testing, since 1991.
Mr. John H. Williams, age 65, has served as a
director of the Company since 1990. Mr. Williams is a Senior
Vice President, Investments, with Everen Securities, Inc. and
has been a principal of that firm or its predecessors since
May 1987. Prior to that time, Mr. Williams was associated with
Thomson McKinnon Securities, Inc. and its predecessors from
1967. Mr. Williams is a director of Clear Channel
Communications, Inc.
The information required by this Item 10 with regard to Executive
Officers is included in Part 1 of the Form 10-K Report.
EMPLOYMENT CONTRACTS
By Employment Agreement effective as of April 17, 1998 (the
"Agreement"), the Company employed Glenn W. Anderson as President and Chief
Executive Officer for a four year period. That term was extended for a one-year
period on April 17, 1999 and will be extended for additional one year periods on
each anniversary of April 17, 1998, unless either party delivers written notice
to the other at least thirty (30) days prior to the applicable anniversary date.
Under the Agreement, Mr. Anderson will receive an annual base salary of $340,000
and will be eligible to receive annual management incentive bonuses as may be
provided in management bonus plans. He received a bonus of $260,000 at the end
of his first full year of employment.
Under the Agreement, Mr. Anderson was granted non-qualified stock
options to purchase 579,710 shares of Common Stock at an exercise price of $5.25
per share which was the lowest closing price during the first five trading days
after the pubic announcement of the Company's results of operations for the
quarter ended June 30, 1998. The options were fully vested and exercisable upon
grant and have a term of five years.
The Agreement provides unaccountable relocation expenses of $50,000 and
an allowance not to exceed $110,000 for relocation, home sale, temporary housing
and moving expenses actually incurred. The Agreement additionally provides
fifteen days of paid vacation annually, a $2,000,000 term life insurance policy,
the right to participate in any Company group health and disability program, a
monthly automobile allowance of $700, a club membership in accordance with
Company policy and reimbursement of all appropriate and reasonable expenses
incurred by Mr. Anderson in the performance of his duties. The Agreement permits
termination of Mr. Anderson for cause with payment of salary accrued to the date
of termination. If Mr. Anderson's employment is terminated without cause, he
will be entitled to an amount equal to thirty-six times 150% of his then current
monthly rate of base salary. The Company has entered into a Change in Control
Agreement with Mr. Anderson in substantially the same form entered into with
other executive officers of the Company (see Change in Control Agreements below)
and if he is terminated without cause within twenty-four months of a change in
control of the Company, he shall be entitled to the greater of (i) the amount he
would be entitled to upon such termination in the absence of a change in control
or (ii) the amount called for by the Change in Control Agreement.
Section 162(m) of the Internal Revenue Code of 1986, as amended,
imposes a $1,000,000 limit on the amount of compensation that will be deductible
by the Company with respect to each of the chief executive officer and the four
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other most highly compensated executive officers. Performance based compensation
that meets certain requirements will not be subject to the deduction limit.
Because they were not approved by the shareholders before vesting, the
nonqualified stock options granted to Mr. Anderson pursuant to the Agreement are
not excluded from the deduction limits of Section 162(m). Therefore, if the
exercise of these options by Mr. Anderson results in income to him in excess of
$1,000,000 in any one year, that portion over $1,000,000 will not be tax
deductible by the Company.
Under an arrangement between the Company and Mr. Joel C. Puckett, he is
compensated for his services as non-executive Chairman of the Board based upon
the time that he is required to devote to those duties. Mr. Puckett's
compensation is determined by applying the portion of his total time which is
devoted to the Company's business to an amount equal to the base salary of the
Company's chief executive officer. During the period that Mr. Puckett is
compensated under this arrangement he will not receive fees paid to other
independent directors. Under this arrangement Mr. Puckett received $109,083 for
services rendered from April 1998 through the end of 1998.
CHANGE IN CONTROL AGREEMENTS
The Named Executives each have Severance Agreements which are
automatically extended for one additional year from each December 31st unless
sooner terminated by the Company. The Severance Agreements provide for the
payment of benefits if the Named Executive is actually or "constructively"
terminated following a change in control of the Company. A "change in control of
the Company" is generally deemed to occur if: (A) any person becomes the
beneficial owner of 25% or more of the Company's voting securities; (B) during a
two-year period the majority of the Board of Directors of the Company changes
without approval by two-thirds of the directors who either were directors at the
beginning of the period, or whose election was previously approved; (C) the
shareholders of the Company approve a merger or consolidation with another
company in which the Company's voting securities do not continue to represent at
least 75% of the surviving entity; or (D) the shareholders approve a
liquidation, sale or disposition of all or substantially all of the Company's
assets.
No benefits are payable if a Named Executive quits or is terminated for
cause and no benefits beyond those otherwise provided by the Company are
provided if a Named Executive is terminated by reason of death, disability or
retirement.
If, within two years following a change in control, a Named Executive
is terminated by the Company for reasons other than cause, or if the Named
Executive terminates employment for "good reason," the Named Executive will be
paid a lump sum cash payment in an amount equal to two times the Named
Executive's base salary; provided, however, such payment shall not be less than
1.25 times the amount reported on the Named Executive's Form W-2 issued by the
Company with respect to the year preceding the date of actual or constructive
termination. In the event such payment would not be deductible, in whole or in
part, by the Company as a result of Section 280G of the Internal Revenue Code,
such payment shall be reduced to the extent necessary to make the entire payment
deductible.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee until February of
1998 were Messrs. Joel C. Puckett, John C. Goff, and Joseph D. Macchia. Members
of that committee since February, 1998 have been Messrs. John H. Williams,
Chairman, Robert J. McGee, Jr., Harden Wiedemann and John C. Goff. Mr. Puckett
continued to serve on the committee until July 1998.
No executive officer of the Company served as a member of the
compensation committee of or as a director of another entity, one of whose
executive officers served on the Compensation Committee or the Board of
Directors of the Company.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Mr. Glenn W. Anderson failed to file a Form 3 on a timely basis when he
became an executive officer of the company but such filing has since been made.
Mr. Harden H. Wiedemann, a director of the Company failed to file a Form 4 on a
timely basis in connection with sales made by him during the months of
September, October, and December, 1998. This information was, however, corrected
by the timely filing of a Form 5.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in Form 10-K/A Amendment No. 1 filed on May
14, 1999 is amended to read as follows:
SUMMARY COMPENSATION TABLE
The individuals named below (the "Named Executives") include the
Company's chief executive officer and the other four most highly compensated
executive officers of the Company for the fiscal year ending December 31, 1998.
Information is provided for the fiscal years ending on December 31 of the three
years shown in the table below.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------------------------------------------------------
Other Restricted
Annual Stock LTIP All Other
Name and Salary Bonus Compen- Award(s) Options/ Payouts Compensation
Principal Position Year ($) ($) sation ($) ($) SARs (#) ($) ($)(2)
------------------ ---- ------- ------- ---------- ---------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GLENN W. ANDERSON 1998 238,436 245,000 105,397(1) 579,710 - -
President and Chief 1997 - - - - - -
Executive Officer 1996 - - - - - -
RICHARD M. BUXTON 1998 156,000 54,700 - - 34,164 - -
Vice President 1997 149,519 47,366 - - 54,521(4) - -
1996 - - - - - - -
DANIEL J. COOTS 1998 140,173 36,500 - - 35,135 - -
Senior Vice 1997 122,400 25,551 - - - - 13,893
President, Treasurer 1996 110,475 152,696 - - - - 20,668
and Chief Financial
Officer
CAROLYN E. RAY 1998 123,361 31,900 - - 34,192 - -
Senior Vice President 1997 98,699 19,848 - - - - 13,843
1996 87,975 77,328 - - - - 20,668
J. LANDIS GRAHAM 1998 121,594 31,900 - - 19,567 - -
Senior Vice President 1997 97,910 14,064 - - - - 11,975
1996 94,599 63,650 - - - - 20,668
JOSEPH D. MACCHIA(3) 1998 95,109 -0- - - - - -
1997 220,550 131,514 - - - - 13,893
1996 210,000 756,891 - - - - 20,668
</TABLE>
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(1) Amounts reimbursed for relocation and car allowance.
(2) Amounts contributed to or accrued for the Named Executive under the
Profit Sharing Plan of the Company.
(3) Mr. Macchia retired as Chairman of the Board, President and Chief
Executive Officer of the Company on April 18, 1998.
(4) These options were canceled in connection with the grant of options in
1998.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table shows information on stock options awarded to Named
Executives during the fiscal year ended December 31, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants (1)
------------------------------------------------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise or Grant Date
Options Granted Employees in Base Price Present Value (2)
Name (#) Fiscal Year ($/Sh) Expiration Date ($/Sh)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Glenn W. Anderson 579,710 71.6 5.75 04/25/03 3.50
Richard M. Buxton 34,164 4.2 6.03125 05/10/06 4.38
Daniel J. Coots 35,135 4.3 6.03125 05/10/06 4.38
Carolyn E. Ray 34,192 4.2 6.03125 05/10/06 4.38
J. Landis Graham 19,567 2.4 6.03125 05/10/06 4.38
</TABLE>
(1) Stock options are awarded at the fair market value of shares of Common
Stock at the date of grant.
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(2) Options are valued using a Black-Scholes pricing model. The model
assumes historic one-year stock price volatility and dividend yield, a
risk-free 5.53% interest rate and a ten year option term. No
adjustments are made for risk of forfeiture or nontransferability.
These values have been calculated in a manner permitted by Securities
and Exchange Commission regulations but the Company disavows the
ability of this or any other valuation model to predict or estimate the
Company's future stock price or to place a reasonably accurate present
value on the options because all models depend on assumptions about the
future, which is simply unknown.
(3) Joseph D. Macchia was not granted stock options during 1998 and held no
stock options at the end of that year.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table summarizes for each of the Named Executives the
number of stock options, if any, exercised during the fiscal year ended December
31, 1998, the aggregate dollar value, if any, realized upon exercise, if any,
the total number of unexercised stock options held at December 31, 1998 and the
aggregate dollar value of the unexercised options held at December 31, 1998.
Value realized upon exercise is the difference between the fair market value of
the underlying stock on the exercise date and the exercise price of the option.
Value of unexercised options at fiscal year-end is the difference between the
exercise price of the stock options and the fair market value of the underlying
stock at December 31, 1998, the latter of which was $6.125 per share. These
values, unlike the amounts, if any, set forth in the column headed "Value
Realized," have not been, and may never be, realized. The options have not been,
and may not be, exercised. Actual gains, if any, on exercise will depend on the
value of the Company's stock on the date of exercise. There can be no assurance
that the values shown will be realized.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES VALUE OF UNEXERCISED
ACQUIRED ON VALUE NUMBER OF UNEXERCISED IN-THE-MONEY
NAME EXERCISE (#) REALIZED ($) OPTIONS AT FY-END OPTIONS AT FY-END ($)
---- ------------ ------------ ----------------- ---------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
GLENN W. ANDERSON - - 579,710 - $217,391 -
President and Chief
Executive Officer
RICHARD M. BUXTON - - 20,499 13,665 $1,922 $1,281
Vice President
DANIEL J. COOTS - - 62,216(1) 14,054 $157,169 $1,318
Senior Vice President,
Treasurer and Chief
Financial Officer
CAROLYN E. RAY - - 59,574(2) 13,676 $157,436 $1,282
Senior Vice President
J. LANDIS GRAHAM - - 11,741 7,826 $1,101 $734
Senior Vice President
</TABLE>
(1) Options to purchase 37,398 shares are exercisable at approximately
$2.14 per share, options to purchase 3,737 shares are exercisable at
approximately $4.44 per share and options to purchase 21,081 shares are
exercisable at approximately $6.03 per share.
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(2) Options to purchase 39,058 shares are exercisable at approximately
$2.14 per share and options to purchase 20,516 are exercisable at
approximately $6.03 per share.
(3) Joseph D. Macchia exercised no stock options during 1998 and held no
stock options at the end of 1998.
COMPENSATION OF DIRECTORS
Beginning with the meeting of the Board of Directors following the 1998
annual shareholders meeting each independent director receives a retainer of
$2,000 per quarter and a fee of $2,000 for each in person meeting of the Board.
No additional fee is paid for participation in committee meetings.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GAINSCO, INC.
(Registrant)
/s/ Glenn W. Anderson
- ----------------------------------
By: Glenn W. Anderson, President
Date: 05/17/99
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
Joel C. Puckett * Chairman of the Board 05/17/99
- ------------------------------ -------------------
Joel C. Puckett
/s/ Glenn W. Anderson President and Chief 05/17/99
- ------------------------------ Executive Officer -------------------
Glenn W. Anderson
/s/ Daniel J. Coots Senior Vice President and 05/17/99
- ------------------------------ Chief Financial Officer -------------------
Daniel J. Coots
/s/ Sam Rosen Secretary and Director 05/17/99
- ------------------------------ -------------------
Sam Rosen
John C. Goff* Director 05/17/99
- ------------------------------ -------------------
John C. Goff
Robert J. McGee, Jr.* Director 05/17/99
- ------------------------------ -------------------
Robert J. McGee
Harden W. Wiedemann* Director 05/17/99
- ------------------------------ -------------------
Harden H. Wiedemann
John H. Williams* Director 05/17/99
- ------------------------------ -------------------
John H. Williams
</TABLE>
*By: /s/ Glenn W. Anderson
-------------------------------
Glenn W. Anderson,
Attorney-in-fact
Under Power of Attorney
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