<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
GAINSCO, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
GAINSCO, INC.
500 Commerce Street
Fort Worth, Texas 76102
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 9, 1999
TO THE SHAREHOLDERS:
The Annual Meeting of the Shareholders of GAINSCO, INC. ("Meeting") will be
held in the Pecos II Room at the Renaissance Worthington Hotel, 200 Main Street,
Fort Worth, Texas, on December 9, 1999, at 9:00 a.m. (C.S.T.) for the following
purposes:
1. To elect a Board of Directors consisting of nine persons.
2. To approve the appointment of KPMG LLP as independent auditors for the
current fiscal year.
3. To transact such other business as may properly come before the Meeting
or any adjournment(s) thereof.
Only shareholders of record as of the close of business on October 25,
1999, will be entitled to notice of or to vote at this Meeting or any
adjournment or adjournments thereof. A copy of the Annual Report to
Shareholders for the fiscal year ended December 31, 1998, has been mailed to
shareholders of record at the record date.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING,
PLEASE EITHER COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY
OR VOTE YOUR SHARES BY USING THE INTERNET OR TELEPHONE IN ACCORDANCE WITH THE
INSTRUCTIONS CONTAINED ON THE ENCLOSED FORM OF PROXY TO ASSURE THAT YOUR SHARES
ARE REPRESENTED AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS PROVIDED IN THE EVENT YOU CHOOSE TO MAIL YOUR
PROXY. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU
ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF
RECORD BY A BROKER, BANK, OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING,
YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
By Order of the Board of Directors
Sam Rosen,
Secretary
Fort Worth, Texas
November 17, 1999
<PAGE>
GAINSCO, INC.
500 Commerce Street
Fort Worth, Texas 76102
PROXY STATEMENT
For The
ANNUAL MEETING OF SHAREHOLDERS
To Be Held on December 9, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of GAINSCO, INC. (the "Company")
for use at the Annual Meeting of the Shareholders of the Company (the "Meeting")
to be held in the Pecos II Room at the Renaissance Worthington Hotel, 200 Main
Street, Fort Worth, Texas, on December 9, 1999, at 9:00 a.m. (C.S.T.) and at any
adjournment thereof. This Proxy Statement and the form of proxy were first
mailed to security holders on or about November 17, 1999.
The cost of soliciting proxies is being paid by the Company. In addition
to the mails, the Company's officers, directors and other regular employees,
without additional compensation, may solicit proxies personally or by other
appropriate means. It is also contemplated that, for a fee of approximately
$4,500 plus certain expenses, additional solicitation will be made by personal
interview, telephone or other appropriate means under direction of Morrow & Co.,
Inc., 909 Third Avenue, New York, NY 10022-4799.
If the enclosed proxy is properly executed and returned, the shares
represented thereby will be voted in the manner specified. If no specification
is made in the proxy, then the shares shall be voted in favor of the
recommendations of the Board. A proxy may be revoked by a shareholder at any
time prior to the actual exercise thereof by written notice to the Secretary of
the Company, by submission of another proxy bearing a later date or by attending
the Meeting and voting in person. However, if your shares are held of record by
a broker, bank or other nominee and you wish to vote at the Meeting, you must
obtain from the recordholder a proxy issued in your name.
RECORD DATE AND VOTING SECURITIES
Only holders of record as of the close of business on October 25, 1999 (the
"Record Date") of shares of the Company's common stock, par value $.10 per share
("Common Stock"), and Series A Convertible Preferred Stock ("Series A Preferred
Stock") will be entitled to vote on matters presented at the Meeting.
Each share of Common Stock outstanding on the Record Date is entitled to
one vote on each matter to come before the Meeting. Each share of Series A
Preferred Stock is entitled to vote on each matter on which the Common Stock may
vote and is entitled to one vote per share of Common Stock into which it is
convertible on the Record Date. The Common Stock and the Series A Preferred
Stock vote as a single class on all matters expected to come before the Meeting.
1
<PAGE>
On the Record Date there were outstanding 20,899,888 shares of Common Stock
and 31,620 shares of Series A Preferred Stock, which shares of Series A
Preferred Stock were convertible into an aggregate of 6,200,000 shares of Common
Stock. Together these shares constituted all of the outstanding shares entitled
to vote at the meeting (collectively, the "Voting Stock"). References herein to
numbers of shares of Voting Stock are references to the combined number of
shares of Common Stock outstanding on the Record Date and the number of shares
of Common Stock then issuable upon conversion of the Series A Preferred Stock.
A majority of the shares of Voting Stock outstanding on the Record Date
constitutes a quorum. Cumulative voting is not permitted.
Directors are elected by plurality vote and, therefore, the nine nominees
receiving the highest number of affirmative votes shall be elected as directors
provided a quorum is present. All shares of Voting Stock represented at the
Meeting in person or by proxy are counted in determining the presence of a
quorum, but only the affirmative vote of the holders of a majority of the shares
voting 'FOR" or "AGAINST" any matter other than the election of directors is
required for its approval. Abstentions and broker non-votes are not counted and
will be treated as shares not entitled to vote.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of October 25, 1999, the number of shares
of Common Stock beneficially owned (as defined by the rules of the Securities
and Exchange Commission (the "SEC")) by (i) each person who is known to the
Company to be the beneficial owner of more than five percent of the outstanding
Common Stock, (ii) Goff Moore Strategic Partners, L.P. ("GMSP"), (iii) each
director of the Company, (iv) the Chief Executive Officer and each of the other
four most highly compensated executive officers of the Company for the year
ended December 31, 1998, and (v) all of the executive officers of the Company as
a group.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership/(1)/
-----------------------------------------
Number of Percent of
Name of Beneficial Owner Shares/(2)/ Voting Stock/(3)/
- ------------------------ ------ ------------
<S> <C> <C>
Goff Moore Strategic Partners, L.P., John C. Goff
and J. Randall Chappel 10,197,600 /(4)/ 33.7%
I.G. Investment Management, Ltd. 1,924,800 /(5)/ 7.1%
The Millers Mutual Fire Insurance Company 1,559,900 /(6)/ 5.8%
Dimensional Fund Advisors, Inc. 1,381,842 /(7)/ 5.1%
Joseph D. Macchia 1,361,988 /(8)/ 5.0%
Glenn W. Anderson 599,925 /(9)/ 2.2%
Joel C. Puckett 480,021/(10)/ 1.8%
Sam Rosen 226,372/(11)/ *
Carolyn E. Ray 128,763/(12)/ *
Daniel J. Coots 117,898/(13)/ *
John H. Williams 54,162/(14)/ *
Harden H. Wiedemann 44,185/(15)/ *
Richard M. Buxton 43,312/(16)/ *
J. Landis Graham 31,632/(17)/ *
Robert J. McGee 25,200/(18)/ *
Directors and executive officers
as a group (15 persons) 11,984,173/(19)/ 38.1%
</TABLE>
- -----------------------
(*) Less than %
3
<PAGE>
(1) Each person named below has the sole investment and voting power with
respect to all shares of common stock shown as beneficially owned by the
person, except (a) with respect to shares shown as held for a person's
account in the Company's Profit Sharing Plan, the person has sole
investment power but no voting power and (b) as otherwise indicated below.
(2) Under applicable SEC rules, a person is deemed the "beneficial owner" of a
security with regard to which the person, directly or indirectly, has or
shares (a) the voting power, which includes the power to vote or direct the
voting of the security, or (b) the investment power, which includes the
power to dispose, or direct the disposition of the security, in each case
irrespective of the persons' economic interest in the security. Under these
SEC rules, a person is deemed to beneficially own securities which the
person has the right to acquire within sixty days (x) through the exercise
of any option or warrant or (y) through the conversion of another security.
(3) In determining the Percent of Voting Stock owned by a person, (a) the
numerator is the number of shares of Common Stock beneficially owned by the
person, including shares the beneficial ownership of which may be acquired
within sixty days upon the exercise of options or warrants or conversion of
convertible securities, and (b) the denominator is the sum of (i) the
combined number of shares of Common Stock outstanding and those then
issuable upon conversion of the Series A Preferred Stock and (ii) any
shares of Common Stock which the person has the right to acquire within
sixty days upon the exercise of options or warrants. The denominator does
not include shares which may be issued upon the exercise of any other
options or warrants.
(4) Includes (a) 6,200,000 shares of Common Stock which GMSP may acquire upon
conversion of 31,620 shares of the Series A Preferred Stock, (b) 3,100,000
shares of Common Stock issuable upon exercise of presently exercisable
warrants to purchase shares of Common Stock, (c) 864,000 shares of Common
Stock beneficially owned by GMSP, (d) 25,200 shares of Common Stock that
Mr. Goff has the right to acquire within 60 days through exercise of
options granted under the 1995 Stock Option Plan, and (e) 8,400 shares of
Common Stock that Mr. Chappel has the right to acquire within 60 days
through exercise of options granted under the 1995 Stock Option Plan. See
"Election of Directors-Certain Transactions" for information regarding GMSP
and the relationship of Messrs. Goff and Chappel to GMSP.
(5) Based on information set forth in a Schedule 13G/A, dated November 2, 1999,
these shares were reported, as of June 4, 1999, to be beneficially owned by
I.G. Investment Management, Ltd., Investors Group Inc., Investors Group
Trustco Inc., Investors Group Trust Co. Ltd. and Investors U.S.
Opportunities Fund (the "IGIM Reporting Persons"). All of the IGIM
Reporting Persons have their principal place of business at One Canada
Centre, 447 Portage Avenue, Winnipeg, Manitoba R3C 3B6. All of the IGIM
Reporting Persons reported beneficial ownership of these shares with shared
voting and dispositive power.
(6) Based on information set forth in a Schedule 13D, dated May 6, 1998, these
shares were reported, as of April 27, 1998, to be beneficially owned by The
Millers Mutual Fire Insurance Company, 300 Burnett Street, Fort Worth,
Texas 76102. The Millers Mutual Fire Insurance Company reported beneficial
ownership of these shares with sole voting and dispositive power.
(7) Based on information set forth in a Schedule 13G, dated February 11, 1999,
these shares were reported, as of December 31, 1998, to be beneficially
owned by Dimensional Fund Advisors Inc., 1299 Ocean Avenue, 11/th/ Floor,
Santa Monica, California 90401. Dimensional Fund Advisors Inc. reported
beneficial ownership of these shares with sole voting and dispositive
power.
(8) Based on information set forth in a Schedule 13D/A, dated September 13,
1999, these shares were reported, as of September 10, 1999, to be
beneficially owned by Joseph D. Macchia, 1409 Indian Creek Drive, Fort
Worth, Texas 76107-3520. Mr. Macchia reported beneficial ownership of these
shares with sole voting and dispositive power.
4
<PAGE>
(9) Includes 579,710 shares of Common Stock that Mr. Anderson has the right to
acquire within 60 days through the exercise of options granted pursuant to
his Employment Agreement with the Company and 215 shares of Common Stock
held by the Profit Sharing Plan of the Company for the account of Mr.
Anderson as beneficiary.
(10) Includes 51,927 shares of Common Stock held by the Joel Puckett Self-
Employed Retirement Trust and 176,901 shares of Common Stock that Mr.
Puckett has the right to acquire within 60 days through the exercise of
options granted under the 1990 Stock Option Plan and 1995 Stock Option
Plan.
(11) Includes 3,163 shares of an IRA of Mr. Rosen's wife. Mr. Rosen disclaims
beneficial ownership of those shares. Also includes 35,065 shares held for
the benefit of Mr. Rosen by the Shannon, Gracey, Ratliff & Miller, L.L.P.
Profit Sharing Plan, 3,163 shares of Common Stock held by Mr. Rosen's IRA
and 107,264 shares of Common Stock that Mr. Rosen has the right to acquire
within 60 days through the exercise of options granted under the 1990 Stock
Option Plan and 1995 Stock Option Plan. Mr. Rosen is a partner in the law
firm of Shannon, Gracey, Ratliff & Miller, L.L.P. That firm, or its
predecessors, has been general counsel to the Company since 1979. The
Company intends to retain that firm as its general counsel during the
current fiscal year.
(12) Includes 11,611 shares of Common Stock held by the Profit Sharing Plan of
the Company for the account of Ms. Ray as beneficiary and 66,412 shares of
Common Stock that Ms. Ray has the right to acquire within 60 days through
the exercise of options granted under the 1990 Stock Option Plan and 1995
Stock Option Plan.
(13) Includes 40,134 shares of Common Stock held by the Profit Sharing Plan of
the Company for the account of Mr. Coots as beneficiary and 69,243 shares
of Common Stock that Mr. Coots has the right to acquire within 60 days
through the exercise of options granted under the 1990 Stock Option Plan
and 1995 Stock Option Plan.
(14) Includes 33,600 shares of Common Stock that Mr. Williams has the right to
acquire within 60 days through the exercise of options granted under the
1990 Stock Option Plan and 1995 Stock Option Plan.
(15) Includes 40,320 shares of Common Stock that Mr. Wiedemann has the right to
acquire within 60 days through the exercise of options granted under the
1990 Stock Option Plan and 1995 Stock Option Plan.
(16) Includes 980 shares of Common Stock held by the Profit Sharing Plan of the
Company for the account of Mr. Buxton as beneficiary and 27,332 shares of
Common Stock that Mr. Buxton has the right to acquire within 60 days
through the exercise of options granted under the 1990 Stock Option Plan
and 1995 Stock Option Plan.
(17) Includes 7,367 shares of Common Stock held by the Profit Sharing Plan of
the Company for the account of Mr. Graham as beneficiary and 23,963 shares
of Common Stock that Mr. Graham has the right to acquire within 60 days
through the exercise of options granted under the 1990 Stock Option Plan
and 1995 Stock Option Plan.
(18) Includes 25,200 shares of Common Stock that Mr. McGee has the right to
acquire within 60 days through the exercise of options granted under the
1990 Stock Option Plan and 1995 Stock Option Plan.
(19) Includes (a) 60,917 shares of Common Stock held by the Profit Sharing Plan
of the Company for the account of executive officers, (b) 1,215,682 shares
of Common Stock that directors and executive officers of the Company have
the right to acquire within 60 days through the exercise of options granted
under the 1990 Stock Option Plan and 1995 Stock Option Plan and pursuant to
Mr. Anderson's Employment Agreement with the Company, (c) 6,2000,000 shares
of Common Stock which GMSP may acquire upon conversion of 31,620 shares of
the Series A Preferred Stock, (d) 3,100,000 shares of Common Stock issuable
upon exercise of presently exercisable warrants to purchase Common Stock
held by GMSP, and (e) 864,000 shares of Common Stock that GMSP has advised
the Company are beneficially owned by GMSP, of which Mr. Goff and Mr.
Chappel are principals.
5
<PAGE>
ELECTION OF DIRECTORS
(Proposal No. 1)
Nominees
The bylaws of the Company provide that the Board of Directors shall consist
of nine directors. The Board of Directors has nominated the following nine
candidates for election as directors to serve until the next annual meeting of
shareholders and until their respective successors are duly elected and
qualified. Each candidate is currently serving as a director and is currently
serving on the Board committees indicated in the following list.
<TABLE>
<CAPTION>
Director
Name Age Since
- ---- --- -----
<S> <C> <C> <C>
Glenn W. Anderson /(1)(2)/ 47 1998 Mr. Anderson has served as President and Chief
Executive Officer of the Company since April 17,
1998. Prior to joining Company, 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.
J. Randall Chappel 33 1999 Mr. Chappel is a principal of GMSP, and has been
associated with Richard E. Rainwater and his affiliated
companies since 1987. Mr. Chappel participated in the
purchase of properties that led to the creation of
Crescent Real Estate Equities, Inc.(NYSE - CEI), as
well as other significant Rainwater investments. Mr.
Chappel has been active in the formation of G2
Opportunity Fund and various GMSP investments. Mr.
Chappel serves as a director of OpenConnect Systems,
a Dallas-based technology company.
Daniel J. Coots /(2)/ 47 1997 Mr. Coots has served as Senior Vice President and
Chief Financial Officer of the Company since 1991.
Mr. Coots has been an Officer of the Company since
1987 and has been engaged in the property and casualty
insurance business since 1983.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Director
Name Age Since
- ---- --- -----
<S> <C> <C> <C>
John C. Goff /(1)(3)/ 43 1997 Mr. Goff is President, Chief Executive Officer and
Vice Chairman of the Board of Crescent Real Estate
Equities, Inc. ("Crescent") (NYSE-CEI) and is
Managing Principal of GMSP. From 1987 to April
1994, Mr. Goff served as a senior investment advisor to
and investor with Richard E. Rainwater. Beginning in
1990, Mr. Goff was responsible for the development of
Mr. Rainwater's real estate business, including the
initial public offering of Crescent in May 1994. From
inception through late 1996 he served as Chief
Executive Officer of Crescent and since late 1996 he
has served as Vice Chairman of the Board of Crescent.
During June 1999, Mr. Goff resumed his role as
President and Chief Executive Officer of Crescent. Mr.
Goff is also President, Chief Executive Officer and
Vice Chairman of the Board of Crescent Operating,
Inc., an investment company (NASDAQ - COPI),
which was spun off from Crescent in 1997, and sits on
the Boards of Texas Capital Bank and The Staubach
Company.
Robert J. McGee, Jr. /(2)(3)(4)(5)/ 44 1997 Mr. McGee has served since 1992 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.
Joel C. Puckett/(1)(2)(4)(5)/ 56 1979 Mr. Puckett has served as Chairman of the Board of
Directors of the Company 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.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Director
Name Age Since
- ---- --- -----
<S> <C> <C> <C>
Sam Rosen 64 1983 Mr. Rosen has served as the Secretary 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. (NYSE - AZZ).
Harden H. Wiedemann/(3)(4)(5)/ 45 1989 Mr. Wiedemann has been Chairman and Chief
Executive Officer of Assurance Medical, Incorporated,
a company providing independent oversight of drug
testing, since 1991.
John H. Williams/(1)(2)(3)(4)(5)/ 65 1990 Mr. Williams served until his retirement on July 31,
1997, as a Senior Vice President, Investments, with
Everen Securities, Inc. and had 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 currently managing his personal
investments, and is a director of Clear Channel
Communications, Inc. (NYSE - CCU).
</TABLE>
_________________________
(1) Member of the Executive Committee.
(2) Member of the Investment Committee.
(3) Member of the Compensation Committee.
(4) Member of the Audit Committee.
(5) Member of Nominating Committee.
All of the nominees have expressed their willingness to serve, but if
because of circumstances not contemplated, one or more of the nominees is not
available for election, the proxy holders named in the enclosed proxy form
intend to vote for such other person or persons as the Board of Directors may
nominate. No family relationship exists among the directors, executive officers
or nominees.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
ELECTION AS DIRECTORS OF THE NINE PERSONS NOMINATED BY MANAGEMENT.
8
<PAGE>
Organization of the Board; Meetings
The Company has an Executive Committee, an Investment Committee, an Audit
Committee, and a Compensation Committee. During 1999, the Board established a
Nominating Committee of independent directors of the Company. The function of
the Executive Committee is to act in an emergency or on routine matters when it
is impractical to assemble the entire Board for a meeting. The Executive
Committee, during intervals between meetings of the Board, has the authority to
exercise all the powers of the full Board other than matters coming specifically
within the purview of other committees of the Board and certain extraordinary
corporate matters. The Investment Committee's functions include, when
applicable, review of the management of the Company's portfolio of investment
securities. All portfolio decisions were made at the insurance company
subsidiary level in 1998. The Audit Committee's functions include recommending
to the Board of Directors the engagement of the Company's independent certified
public accountants, reviewing the results of their auditing findings, and
monitoring on a periodic basis the internal controls of the Company. The
Compensation Committee establishes the compensation of officers of the Company,
administers the 1990 Stock Option Plan, the 1995 Stock Option Plan, and the
1998 Long-Term Incentive Plan, prepares recommendations to the Board of
Directors on the adoption of stock option plans, and grants stock options.
During 1998, there were a total of 21 meetings of the Board of Directors.
During that year, one of the Company's directors, Robert J. McGee, Jr., was
unable to attend certain meetings, and as a result, attended fewer than 75
percent of the aggregate of: (1) the total number of meetings of the Board of
Directors and (2) the total number of meetings held by all committees of the
Board on which he served. During 1998, there was one meeting of the Executive
Committee, four meetings of the Audit Committee, and one meeting of the
Compensation Committee.
Compensation of Directors
Each director of the Company who is not a full time employee of the Company
receives a quarterly retainer and a meeting fee for each in person meeting, plus
expenses incurred in attending meetings of the Board of Directors. In 1998,
each director received $2,000 as a quarterly retainer and $2,000 as a meeting
fee. Following the 1999 annual meeting of shareholders, the quarterly retainer
will increase to $3,000, and will increase to $4,000 per quarter following the
2000 annual meeting of shareholders. Directors who are also full time employees
of the Company are not separately compensated for their service as director.
Mr. Joel C. Puckett was appointed non-executive Chairman of the Board of
the Company on April 20, 1998. For his services in this capacity, and in lieu of
the fees the other outside directors receive, Mr. Puckett receives a monthly fee
equivalent to 25% of the monthly base compensation of the Chief Executive
Officer or such greater amount as might result from the application of an hourly
formula. In 1998, Mr. Puckett received $109,083 for his service as Chairman of
the Board. Mr. Puckett is not an officer or employee of the Company.
Each current director who is not a full time employee of the Company
participated in the 1995 Stock Option Plan on a formula basis. Each such
current director was awarded options to purchase a minimum of 42,000 shares,
plus 8,400 shares for each year of service in excess of five years, up to a
maximum of an additional 42,000 shares of Common Stock, at the market price on
the date of grant. One-fifth of those options become exercisable immediately
and a like number become exercisable on each anniversary of the grant date, if
the optionee continues to be a director on those dates. The 1995 Stock Option
Plan was approved by the shareholders on May 10, 1996.
9
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Common Stock to file with the SEC and the New York Stock Exchange initial
reports of ownership and reports of changes in ownership of Common Stock.
Officers, directors and greater than ten-percent beneficial owners are required
by SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
The periodic reporting rules under the Securities Exchange Act of 1934
require that an initial report of beneficial ownership of Common Stock be filed
within ten days of the first date on which a person becomes subject to those
rules. Due to the scope of Company activity at the time that Mr. Anderson
assumed the position of President and Chief Executive Officer, the initial
filing was not timely made, but such filing has since been made. Mr. 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.
Certain Transactions
Glenn W. Anderson Employment Agreement. On April 17, 1998 Mr. Anderson
assumed the position of President and Chief Executive Officer of the Company
under an employment agreement (the "Anderson Employment Agreement") negotiated
between Mr. Anderson and the outside directors prior to his agreeing to join the
Company. The Anderson Employment Agreement provided that Mr. Anderson was to
receive an annual base salary of $340,000 (of which $238,436 was accrued and
paid in 1998), a guaranteed first year bonus of $260,000 (of which $195,000 was
accrued in 1998 and paid in 1999), payment of relocation expenses and various
other benefits aggregating $155,397 in 1998, and a non-qualified stock option to
purchase 579,710 shares of Common Stock at an exercise price initially fixed at
$8.625 per share. The Anderson Employment Agreement provided that, if on any
trading day within five business days after the public announcement of the
Company's results of operations for the quarter ended June 30, 1998 the last
reported sales price for the Common Stock on the New York Stock Exchange was
below the initial price, Mr. Anderson's option was to be canceled and replaced
with a new option for the same number of shares and with an exercise price equal
to the lowest closing price during that five day period. In accordance with
those provisions, on July 24, 1998 Mr. Anderson was issued a replacement non-
qualified stock option to purchase 579,710 shares of Common Stock for $5.75,
subject to typical anti-dilution provisions. The options were fully vested and
exercisable upon grant and had a term of five years.
The Anderson Employment Agreement provided for an initial four year term.
On each anniversary of its making, the Anderson Employment Agreement
automatically extends for an additional one year period, unless either the
Company or Mr. Anderson delivers written notice to the other at least thirty
days prior to the anniversary. The Anderson Employment Agreement permits
termination of Mr. Anderson for cause with payment of salary accrued to 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 currently
monthly rate of base salary. The Company also entered into a change in control
agreement with Mr. Anderson in substantially the same form as those entered into
with other executive officers of the Company. See "Executive Compensation -
Change in Control Agreements" below. If Mr. Anderson is terminated without
cause, he will be entitled to the greater of (i) the amount he would
10
<PAGE>
be entitled to upon such termination under the Anderson Employment Agreement in
the absence of a change in control or (ii) the amount called for by his change
in control agreement.
Transactions with Goff Moore Strategic Partners, L.P. On October 4, 1999,
the Company consummated the sale of shares of Series A Preferred Stock and
warrants to purchase Common Stock to GMSP pursuant to a Securities Purchase
Agreement ("Purchase Agreement") between the Company and GMSP dated effective
June 29, 1999 (the "GMSP Transaction"). At the closing, the Company sold to
GMSP for cash consideration of $31,620,000 (i) 31,620 shares of the Series A
Preferred Stock, which are convertible into shares of the Common Stock at a
conversion price of $5.10 per share (subject to adjustment), currently for a
total of 6,200,000 shares of Common Stock, (ii) a five year Warrant (the "Series
A Warrant") to purchase an aggregate of 1,550,000 shares of Common Stock at an
exercise price of $6.375 per share (subject to adjustment), and (iii) a seven
year Warrant (the "Series B Warrant") to purchase an aggregate of 1,550,000
shares of Common Stock at an exercise price of $8.50 per share (subject to
adjustment). At the closing, the Company and certain of the Company's
subsidiaries entered into Investment Management Agreements with GMSP, pursuant
to which GMSP will manage the consolidated investment portfolios of the Company
and its insurance company subsidiaries.
The Series A Preferred Stock issued to GMSP is immediately convertible
into, and the Series A Warrant and Series B Warrant are immediately exercisable
for, shares of Common Stock at the option of the holder. Assuming the Series A
Preferred Stock is fully converted and the Series A Warrant and Series B Warrant
are fully exercised on the Record Date, GMSP would own directly and have the
power to vote 10,164,000 shares of Common Stock (approximately 33.7% of the then
outstanding Common Stock). Each share of Series A Preferred Stock is entitled
to vote with the Common Stock as a single class on all matters for which the
Common Stock may vote on the basis of one vote per share of Common Stock into
which it is convertible. The shares underlying the Series A Warrant and the
Series B Warrant are not currently outstanding and do not have voting rights.
The Purchase Agreement generally prohibits GMSP, its affiliates, associates, and
employees from beneficially owning in the aggregate more than 35% of the fully-
diluted Common Stock, other than as a result of repurchases of stock by the
Company or pursuant to the acquisition of additional shares of Common Stock
pursuant to the Company's 1990 Stock Option Plan, 1995 Stock Option Plan, or
1998 Long-Term Incentive Plan.
GMSP was formed in February 1998, to serve as the primary investment
vehicle for its principals, as well as Richard E. Rainwater and his family who
are limited partners. GMSP is principally a long-term investor in companies
that it deems to have superior management and attractive growth prospects. The
partnership's Managing Principals are John C. Goff, a partner of Mr. Rainwater's
for over 12 years, and Darla D. Moore, who is Mr. Rainwater's wife and a former
Managing Director of the Chase Manhattan Bank. J. Randall Chappel is a
principal of GMSP and has been associated with Mr. Rainwater and his affiliated
companies for 12 years. Mr. Goff owns approximately 44.9% of the limited
partnership interests of GMSP Operating Partners, L.P., the general partner of
GMSP. GMSP Operating Partners, L.P. owns approximately 14.3% of the partnership
interests of GMSP. Mr. Goff also owns 50% of the membership interests of GMSP,
L.L.C., the general partner of GMSP Operating Partners, L.P. GMSP, L.L.C. owns
1% of the partnership interests and is the general partner of GMSP Operating
Partners, L.P.
The Purchase Agreement provides that GMSP is entitled to designate two
directors as long as GMSP and its affiliates, associates and employees maintain
ownership of 75% of its current security holdings in the Company or 20% of the
fully diluted Common Stock, and one director by maintaining ownership of 50% of
its current security holdings or 5% of the fully diluted Common Stock. GMSP has
designated Messrs. Goff and Chappel as its
11
<PAGE>
representatives on the Board. Any substitute for Messrs. Goff or Chappel must be
acceptable to the members of the Board not affiliated with GMSP, its affiliates,
associates or employees.
Pursuant to the Purchase Agreement, the Company and each of its insurance
company subsidiaries entered into Investment Management Agreements with GMSP
which provide GMSP will manage the investments of the holding and insurance
company funds of the type listed under the categories "Investments" on the
Company's reports filed with the SEC. Under the Investment Management
Agreements, GMSP is to receive investment management fees equal on an annual
basis to (i) 30 basis points multiplied by the fair market value with respect to
any portion of the portfolio invested in short term debt or investment grade
debt obligations at the end of a given calendar month or during a majority of
the days in the given calendar month and (ii) 100 basis points multiplied by the
fair market value with respect to any portion of the portfolio invested in
equity securities or other alternative investments in securities which are not
investment grade debt obligations. No fees are payable with respect to the
portions of the portfolio held in cash. Accrued fees will be paid monthly,
based on the fair value of the investments at the end of each calendar month and
subject to a minimum monthly fee of $75,000 in the aggregate under all the
Investment Management Agreements.
EXECUTIVE COMPENSATION
Summary Compensation Table
The individuals named below (the "Named Executives") include the Company's
chief executive officer and the other four most highly compensated executive
officers of the Company for the fiscal year ending December 31, 1998.
Information is provided for the fiscal years ending on December 31 of the three
years shown in the table below.
12
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
---------------------------------------
Annual Compensation Awards Payouts
--------------------------------------------------- ---------------------------------------
All
Other Restricted Other
Annual Stock LTIP Compens
Name and Salary Bonus Compen- Award(s) Options/ Payouts a-tion
Principal Position Year ($) ($) sation ($) ($) SARs (#) ($) ($)/(3)/
- ------------------ ---- ------------ ------------ ----------- ---------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Glenn W. Anderson 1998 238,436/(1)/ 195,000/(1)/ 155,397/(2)/ - 579,710 - -
President and Chief 1997 - - - - - - -
Executive Officer 1996 - - - - - - -
Richard M. Buxton 1998 156,000 54,700 - - 34,164 - -
Senior Vice President- 1997 149,519 47,366 - - 54,521/(5)/ - -
Mergers and 1996 - - - - - - -
Acquisitions, Investor
Relations
Daniel J. Coots 1998 140,173 36,500 - - 35,135 - -
Senior Vice President, 1997 122,400 25,551 - - - - 13,893
Treasurer and Chief 1996 110,475 152,696 - - 61,895/(5)/ - 20,668
Financial Officer
Carolyn E. Ray 1998 123,361 31,900 - - 34,192 - -
Senior Vice President- 1997 98,699 19,848 - - - - 13,843
Underwriting 1996 87,975 77,328 - - 60,234/(5)/ - 20,668
J. Landis Graham 1998 121,594 31,900 - - 19,567 - -
Senior Vice President- 1997 97,910 14,064 - - - - 11,975
Claims 1996 94,599 63,650 - - 34,471/(5)/ - 20,668
Joseph D. Macchia/(4)/ 1998 95,109 -0- - - - - -
1997 220,550 131,514 - - - - -
1996 210,000 756,891 - - 133,107/(6)/ - -
</TABLE>
(1) Represents pro rata part accrued in 1998 of $340,000 annual salary and
$260,000 first year bonus provided in the Anderson Employment Agreement
described above.
(2) Amounts paid principally for relocation expenses under the Anderson
Employment Agreement..
(3) Amounts contributed to or accrued for the Named Executive under the Profit
Sharing Plan of the Company.
(4) Mr. Macchia resigned as Chairman of the Board, President and Chief Executive
Officer of the Company on April 17, 1998.
(5) These options were canceled in connection with the repricing of options in
1998.
(6) These options expired after Mr. Macchia's retirement in 1998.
13
<PAGE>
OPTIONS/SAR/GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Grant Date
Individual Grants (a) Present Value (b)
--------------------------------------------------------------------------------------------------
Number of Percent of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise of Grant Date Present
Name Granted (#) Fiscal Year Base Price ($/Sh) Expiration Date Value ($/Sh)
<S> <C> <C> <C> <C> <C>
Glenn W. Anderson (c) 579,710 71.6 5.75 04/25/03 3.50
Richard M. Buxton (d) 34,164 4.2 6.03125 12/31/06 4.38
Daniel J. Coots (d) 35,135 4.3 6.03125 05/10/06 4.38
Carolyn E. Ray (d) 34,192 4.2 6.03125 05/10/06 4.38
J. Landis Graham (d) 19,567 2.4 6.03125 05/10/06 4.38
</TABLE>
(a) Stock options are awarded at the fair market value of shares of Common
Stock at the date of grant.
(b) 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 term equal to the remaining term
of the respective options (five-year term in the case of Mr.
Anderson). No adjustments are made for risk of forfeiture or
nontransferability. These values have been calculated in a manner
permitted by SEC 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 are simply unknown.
(c) The options granted to Mr. Anderson were pursuant to the Anderson
Employment Agreement described above under "Election of Directors -
Certain Transactions."
(d) See "Report of the Compensation Committee" below.
Aggregate 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, if any, 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 $6.125 per share.
These values, unlike the amounts, if any, set forth in the column headed "Value
Realized," have not been, and may never be, realized. The options have not been,
and may not be, exercised. Actual gains, if any, on exercise will depend on the
value of the Common Stock on the date of exercise. There can be no assurance
that the values shown will be realized.
14
<PAGE>
AGGREGATED OPTION EXERCISES IN THE LAST
--------------------------------------
FISCAL YEAR AND FY-END OPTION VALUES
------------------------------------
<TABLE>
<CAPTION>
Shares Value of Unexercised
Acquired on Value Number of Unexercised In-The-Money
Name Exercise (#) Realized ($) 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
Senior Vice President-
Mergers and
Acquisitions, Investor
Relations
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-
Underwriting
J. LANDIS GRAHAM - - 11,741 7,826 $1,101 $734
Senior Vice President-
Claims
</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.
(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
$6.03 per share.
15
<PAGE>
TEN YEAR OPTIONS/SAR REPRICINGS
-------------------------------
<TABLE>
<CAPTION>
Number of Length of
Securities Original Option
Underlying Market Price of Term Remaining
Options/SARs Stock at Time of Exercise Price at at Date of
Repriced or Repricing or Time of Repricing New Exercise Repricing or
Name Date Amended (#) Amendment ($) or Amendment ($) Price ($) Amendment
<S> <C> <C> <C> <C> <C> <C>
Glenn W. Anderson 07/24/98 579,710 (A) 5.75 8.63 5.75 5 yrs
President and Chief
Executive Officer
Richard M. Buxton 07/24/98 34,164 (b) 6.03 9.63 6.03 8.44 yrs
Senior Vice President-
Mergers and Acquisitions,
Investor Relations
Daniel J. Coots 07/24/98 35,135 (b) 6.03 10.63 6.03 7.75 yrs
Senior Vice President,
Treasurer and Chief
Financial Officer
Carolyn E. Ray 07/24/98 34,192 (b) 6.03 10.63 6.03 7.75 yrs
Senior Vice President-
Underwriting
J. Landis Graham 07/24/98 19,567 (b) 6.03 10.63 6.03 7.75 yrs
Senior Vice President-
Claims
</TABLE>
(a) The actions taken with respect to Mr. Anderson's options were taken
pursuant to the Anderson Employment Agreement described above under
"Election of Directors - Certain Transactions" and were part of an
inducement for him to join the Company.
(b) See "Report of the Compensation Committee" below.
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.
16
<PAGE>
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. Under the terms of the Anderson Employment Agreement described above
under "Election of Directors - Certain Transactions," if Mr. Anderson is
terminated without cause, he will be entitled to the greater of, (i) the amount
he would be entitled to upon such termination under the Anderson Employment
Agreement in the absence of a change in control or (ii) the amount called for by
his change in control agreement.
The GMSP Transaction constituted a "change in control of the Company"
solely for purposes of the severance agreements when GMSP became the beneficial
owner of 25% or more of the Company's voting securities. However, no payments
are due at this time since no Named Executives were terminated by the Company,
and no Named Executives terminated employment for "good reason."
Compensation Committee Interlocks and Insider Participation
The members of the Company's Compensation Committee until February of
1998 were John C. Goff, Joseph D. Macchia, and Joel C. Puckett. Members of that
committee from February, 1998 have been John C. Goff, Robert J. McGee, Jr.,
Harden Wiedemann, and John H. Williams, Chairman. 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.
Report of the Compensation Committee
The 1998 year was a transition year for the Company. During the year
the Company had a change in the person holding each of the positions of Chairman
of the Board, President and Chief Executive Officer. The new Chief Executive
Officer introduced a new operating plan which was adopted by the Board.
Additionally, on August 28, 1998 the Company announced that the Board had
embarked on a strategic alternatives review process to seek out additional ways
to maximize shareholder value, including the possible sale of the Company. These
events affected the compensation received by (i) the persons who served as Chief
Executive Officer of the Company during the year and (ii) the four other most
highly compensated executive officers of the Company.
The policy of the Compensation Committee (the "Committee") for 1998
was to offer competitive compensation packages in order to (i) secure a Chief
Executive Office capable of leading the Company into a new phase of its
development for the benefit of its shareholders and (ii) retain key employees
during the Board's strategic review process. With the strategic review process
culminating in the consummation of the Goff Moore Strategic Partners, L.P.
transaction on October 4, 1999, the Committee will be setting compensation
policies designed to motivate its executive officers to meet Company goals for
enhancement of shareholder value through internal growth and acquisitions.
17
<PAGE>
The compensation of $95,109 received by Joseph D. Macchia, former
Chief Executive Officer of the Company, for his services during the period from
January 1 to April 17, 1998, the date of his resignation from all positions held
with the Company, was established based on his 1997 salary plus a cost of living
increase and included an amount for accrued vacation.
On April 17, 1998, Glenn W. Anderson assumed the position of President
and Chief Executive Officer of the Company under the Anderson Employment
Agreement described under "Election of Directors - Certain Transactions" which
was approved by the unanimous vote of the Board. The terms of Mr. Anderson's
employment were based on arms length negotiations prior to Mr. Anderson agreeing
to join the Company and the competition for experienced insurance executives
qualified for service as President and Chief Executive Officer of the Company.
The need to retain the services of the four most highly paid executive
officers other than the Chief Executive Officer (the "Staff Executives"), as
well as other executives and employees, during the Company's strategic
alternatives review process resulted in a review of compensation policies. This
review led to the termination of the Company's Executive Incentive Compensation
Plan, which formerly had been the primary source of short term cash incentive
compensation for the Staff Executives. That plan was replaced during the year by
short term incentive programs, tied to performance during the second six months
of the year. The bonus payments to the Staff Executives disclosed in the Summary
Compensation Table reflect the amounts earned under these programs. Mr. Anderson
did not participate in these programs because his bonus compensation for 1998
had been fixed by the Anderson Employment Agreement.
The policies of the Committee call for the inclusion in the
compensation packages of Company executives of not only competitive salary and
short term incentive elements, but also an element providing incentive through
the long-term enhancement of Common Stock value. The Committee determined that
this latter element was no longer being met by previously granted stock options
because of developments in the transition period that followed the change in
Chief Executive Officer described above and a drop in the market price of the
Common Stock, and that equity incentives were needed in order to induce the
Staff Executives to remain in the employ of the Company during this period of
unusual uncertainties and to motivate them as the Company restructured under the
leadership of the new Chief Executive Officer. The Committee concluded that the
needed equity incentives could be best provided by reducing the exercise price
of options granted under the 1995 Stock Option Plan as shown above under
"Executive Compensation - Ten Year Options/SAR Repricings," and no other options
were granted to the Staff Executives in 1998. The repricing formula adopted by
the Committee also resulted in the number of options held by the Staff
Executives being reduced by the same proportion that the exercise price was
reduced. The expiration date of the options was unchanged. The Company's 1998
Long-Term Incentive Plan prohibits the repricing of options granted thereunder.
No stock options or other awards were granted under the 1998 Long-Term Incentive
Plan in 1998.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), denies a deduction with respect to the aggregate compensation of a
company's chief executive officer and its four other highest compensated
officers with respect to compensation which exceeds $1,000,000 in the aggregate
for any taxable year for any one of such employees. Compensation resulting from
the grant, exercise or disposition of awards is potentially subject to the Code
Section 162(m) limitation, while certain "qualified performance based
compensation" is excepted from the Section 162(m) limitation. Although it is the
basic policy of the Committee to attempt to preserve the deductibility of
compensation provided by the Company, its ability to do so depends on the timing
of the need to provide compensation awards and other factors beyond the control
of the Committee. The option granted to Mr.
18
<PAGE>
Anderson under the Anderson Employment Agreement does not satisfy the
requirements of Section 162m because it was impracticable to obtain shareholder
approval thereof prior to his joining the Company. The Committee will continue
to consider available alternatives, if any, to preserve the deductibility of
compensation and benefits to the extent reasonably practicable under the
circumstances.
John H. Williams, Chairman
John C. Goff
Bobby J. McGee, Jr.
Harden H. Wiedemann
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934 that might incorporate future filings, including this Proxy
Statement, in whole or in part, the preceding report and the Performance Graph
on Page 20 shall not be incorporated by reference into any such filings.
Share Investment Performance
The following graph shows changes over the past five-year period in
the value of $100.00 invested in: (1) the Company's Common Stock; (2) the
Standard & Poor's Property-Casualty Insurance Index; and (3) the Standard &
Poor's 500 Index. The year-end value of each one of the hypothetical investments
is based on share price appreciation plus stock dividends plus cash dividends,
with the cash dividends reinvested on the date they were paid. The calculations
exclude trading commission and taxes. Total shareholder returns for each
investment, whether measured in dollars or percent, can be calculated from the
year-end investment values shown beneath the graph.
19
<PAGE>
Five-Year Cumulative Total Return
Value of $100 Invested 12/31/93
For Fiscal Years Ended December 31
[PERFORMANCE GRAPH APPEARS HERE]
--------------------------------------------------
GAINSCO, INC. S&P P&C INDEX S&P 500 INDEX
------------------------------------------------------------------
1993 $100 $100 $100
------------------------------------------------------------------
1994 $100 $105 $101
------------------------------------------------------------------
1995 $153 $141 $139
------------------------------------------------------------------
1996 $130 $172 $170
------------------------------------------------------------------
1997 $116 $245 $227
------------------------------------------------------------------
1998 $84 $223 $291
------------------------------------------------------------------
20
<PAGE>
APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
(Proposal No. 2)
Action is to be taken by the shareholders at the Meeting with respect
to the approval of the selection, by the Company's Board of Directors, of KPMG
LLP to be the independent auditors of the Company for the current fiscal year.
KPMG LLP, or its predecessor, has served as the Company's independent auditors
since 1984. The Company has been advised that KPMG LLP has no relationship with
the Company or its subsidiaries other than that arising from the firm's
employment as auditors. Neither the Company, nor any officer, director, or
associate of the Company, has any interest in KPMG LLP.
A representative of KPMG LLP will be present at the Meeting and will
have the opportunity to make a statement if he or she so desires and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
APPROVAL OF SUCH APPOINTMENT.
ACTION TO BE TAKEN UNDER THE PROXY
The accompanying proxy will be voted "FOR" the election of the nine
persons recommended by the Board of Directors and named under "ELECTION OF
DIRECTORS" as nominees for director of the Company and "FOR" approval of the
appointment of KPMG LLP as the Company's independent auditors unless the proxy
is marked in such a manner as to withhold authority to so vote. The accompanying
proxy will also be voted in connection with the transaction of such other
business as may properly come before the Meeting or any adjournment or
adjournments thereof. The Board of Directors knows of no matters, other than the
election of directors and the approval of the appointment of KPMG LLP to be
considered at the Meeting. If, however, any other matters properly come before
the Meeting or any adjournment or adjournments thereof, the persons named in the
accompanying proxy will vote such proxy in accordance with their best judgment
on any such matter. The persons named in the accompanying proxy will also, if in
their judgment it is deemed to be advisable, vote to adjourn the Meeting from
time to time.
DATE OF RECEIPT OF SHAREHOLDER PROPOSALS
Rule 14a-8 under the Securities Exchange Act of 1934 addresses when a
company must include a shareholder proposal in its proxy statement for the
purpose of an annual or special meeting. Pursuant to the rule, in order for a
shareholder proposal to be considered for inclusion in the proxy statement for
the 2000 annual meeting of shareholders of the Company, a proposal must be
received at the principal executive offices of the Company on the date in the
year 2000 that corresponds to the date that is not less than 120 calendar days
before the date that this Proxy Statement was released to shareholders in
connection with the 1999 annual meeting. However, if the date of the 2000 annual
meeting of shareholders changes by more than 30 days from the date of the 1999
meeting, the deadline is a reasonable time before the Company begins to print
and mail its proxy materials.
If a proposal is submitted outside the process provided by Rule 14a-8,
shareholder proposals must meet the requirements of Section 2.12 of the Bylaws
of the Company. Section 2.12 of the Bylaws provides that to be timely, a
proposal must be delivered to or mailed and received not less than 50 days nor
more than 75 days prior to the meeting; provided, that, if less than 65 days
notice or public disclosure of the meeting is given or made to
21
<PAGE>
shareholders, notice must be received not later than the close of business on
the 15/th/ day following the day on which notice of the date of the annual
meeting was mailed or public disclosure was made.
ANNUAL REPORTS
Form 10-K
The Company will furnish to each person whose proxy is being
solicited, upon written request of any such person, and without charge, a copy
of the Annual Report of the Company on Form 10-K for the fiscal year ended
December 31, 1998, and all amendments thereto, as filed with the SEC, including
the financial statements and schedules thereto. Such report was filed with the
SEC on March 31, 1999, and amended thereafter. Requests for copies of such
report should be directed to Investor Relations, 500 Commerce Street, Fort
Worth, Texas 76102, (817)336-2500. This form 10-K Report, as well as the
Company's other filings with the SEC may be read and copied at the SEC's public
reference rooms located at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. These SEC filings are also available to the public on
the SEC's web site at http://www.sec.gov. Copies of these reports, proxy
statements, and other information can also be inspected at the offices of the
New York Stock Exchange at 20 Broad Street, New York, New York 10005.
1998 Annual Report to Shareholders
The Annual Report to Shareholders of the Company for the fiscal year
ended December 31, 1998 has been mailed to Shareholders of record at the Record
Date. The Annual Report, which includes audited financial statements, does not
form any part of the material for the solicitation of proxies.
PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR MAILING IN THE
UNITED STATES. A PROMPT RETURN OF YOUR PROXY WILL BE APPRECIATED, AS IT WILL
SAVE THE EXPENSE OF FURTHER MAILING. YOU MAY ALSO VOTE YOUR SHARES BY USING THE
INTERNET OR TELEPHONE IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED ON THE
ENCLOSED FORM OR PROXY.
22
<PAGE>
PROXY BY MAIL
PLEASE MARK
YOUR VOTES [ X ]
LIKE THIS
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN, AND IN THE ABSENCE OF SPECIFIC DIRECTIONS TO THE CONTRARY, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 AND 2.
<TABLE>
<CAPTION>
FOR WITHHELD FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C>
1. Election of Directors [ ] [ ] 2. Appointment of independent accountants. [ ] [ ] [ ]
(INSTRUCTION: To withhold authority to vote for any individual nominee strike a line through the nominee's name below)
01 Glenn W. Anderson, 02 J. Randall Chappel, 03 Daniel J. Coots, 04 John C. Goff, 05 Robert J.
McGee, Jr., 06 Joel C. Puckett, 07 Sam Rosen, 08 Harden H. Wiedemann, and 09 John H. Williams.
Change
of [ ]
Address
</TABLE>
- ---------------------------------------------------------------------
IF YOU WISH TO VOTE ELECTRONICALLY PLEASE READ THE INSTRUCTIONS BELOW
- ---------------------------------------------------------------------
======================
COMPANY NUMBER:
PROXY NUMBER:
ACCOUNT NUMBER:
=======================
Signature Signature Date
---------------------- ---------------------- ---------
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, pleae
give full title as such.
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
--------------------------------------
VOTE BY TELEPHONE OR INTERNET
QUICK *** EASY *** IMMEDIATE
--------------------------------------
GAINSCO, INC.
. You can now vote your shares electronically through the Internet or the
telephone.
. This eliminates the need to return the proxy card.
. Your electronic vote authorizes the named proxies to vote your shares in the
same manner as if you marked, signed, dated and returned the proxy card.
TO VOTE YOUR PROXY BY INTERNET
- ------------------------------
www.continentalstock.com
Have your proxy card in hand when you access the above website. You will be
prompted to enter the company number, proxy number and account number to create
an electronic ballot. Follow the prompts to vote your shares.
TO VOTE YOUR PROXY BY MAIL
- --------------------------
Mark, sign and date your proxy card above, detach it and return it in the
postage-paid envelope provided.
TO VOTE YOUR PROXY BY PHONE
- ---------------------------
1-800-293-8533
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter the company number, proxy number
and account number. Follow the voting instructions to vote your shares.
PLEASE DO NOT RETURN THE ABOVE CARD IF VOTED
-------------------------------------------
ELECTRONICALLY
--------------
<PAGE>
GAINSCO, INC.
P PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON DECEMBER 9, 1999
R
The undersigned hereby appoints Joel C. Puckett, Glenn W. Anderson and
O Daniel J. Coots, and each of them, proxies with full power of substitution
and with discretionary authority, to vote all share of Common Stock that
X the undersigned is entitled to vote at the Annual Meeting of Shareholders
of GAINSCO, INC. to be held on December 9, 1999, at 9:00 a.m. at the
Y Renaissance Worthington Hotel, 200 Main Street, Fort Worth, Texas 76102,
or at any adjournment therof, hereby revoking any proxy heretofore given.
In their discretion the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(USE ONLY FOR CHANGE OF ADDRESS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(If you have written in the above space, please mark the corresponding box on
the reverse side of this card)
The undersigned hereby acknowledges receipt of the Notice of the aforesaid
Annual Meeting.
(Continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
