ACAP CORPORATION
10555 Richmond Avenue
Houston, Texas 77042
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 4, 1998
To Our Stockholders:
The Annual Meeting of Stockholders of Acap Corporation (the
"Company") will be held Monday, May 4, 1998, at 8:00 a.m.,
local time, at the offices of the Company, 10555 Richmond
Avenue, Houston, Texas.
The purposes of the meeting are:
1. To elect a Board of Directors to serve for the ensuing
year;
2. To consider and act upon such other matters as may
properly come before the meeting or any adjournment thereof.
Holders of the Company's Common Stock of record at the close of
business on March 23, 1998, are entitled to receive notice of
and to vote at the meeting.
The accompanying Information Statement is furnished on behalf
of the Board of Directors of the Company to provide notice of
the Company's Annual Meeting of Stockholders.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO
SEND US A PROXY.
For the Board of Directors
/s/H. Kathleen Musselwhite
--------------------------
H. Kathleen Musselwhite,Secretary
Houston, Texas
April 6, 1998
<PAGE>
TABLE OF CONTENTS
General Information. . . . . . . . . . . . . . . . . . 1
Voting . . . . . . . . . . . . . . . . . . . . . . . . 1
Election of Directors. . . . . . . . . . . . . . . . . .1
Meetings and Committees. . . . . . . . . . . . . . . . 2
Security Ownership of Certain Owners . . . . . . . . . 3
Executive Officers . . . . . . . . . . . . . . . . . . 3
Security Ownership of Management . . . . . . . . . . . 4
Beneficial Ownership Reporting . . . . . . . . . . . . 5
Executive Compensation . . . . . . . . . . . . . . . . 5
Certain Relationships and Related Transactions . . . . 7
Independent Auditors . . . . . . . . . . . . . . . . . 7
Quorum for Meeting . . . . . . . . . . . . . . . . . . 8
Submission of Stockholder Proposals. . . . . . . . . . 8
ACAP CORPORATION
10555 Richmond Avenue
Houston, Texas 77042
INFORMATION STATEMENT
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
GENERAL INFORMATION
This Information Statement is furnished on behalf of the Board
of Directors of Acap Corporation (the "Company") to provide
notice of the Company's Annual Meeting of Stockholders to be
held Monday, May 4, 1998, at 8:00 a.m., local time, at the
offices of the Company, 10555 Richmond Avenue, Houston, Texas.
This Information Statement is first being sent or given to
stockholders of the Company on or about April 6, 1998.
VOTING
The common stock, $.10 par value (the "Common Stock"), of the
Company is the only outstanding class of voting securities of
the Company. Only stockholders of record at the close of
business on March 23, 1998, the record date, are entitled to
vote at the Annual Meeting. As of the record date, there were
7,440 shares of Common Stock outstanding (excluding shares held
by the Company's subsidiary, which are not voted) and
approximately 785 holders of the Common Stock. Each share of
the Company's Common Stock is entitled to one vote.
The shares owned by InsCap Corporation, the controlling
stockholder of the Company, will be voted for the election of
directors recommended by the Board of Directors.
ELECTION OF DIRECTORS
A Board of Directors consisting of three members will be
elected at the Annual Meeting, each member to serve until the
next Annual Meeting and until a successor shall be elected and
shall qualify. If, for any reason not known at present, any
nominee is not available for election, InsCap Corporation will
vote for such substitute persons, if any, as shall be
designated by the Board of Directors.
The affirmative vote of a majority of the shares of Common
Stock represented at the Annual Meeting is required to elect a
director.
Brief statements setting forth the age (at March 23, 1998), the
business experience during the past five years, the year in
which first elected a director, which includes any period
during which such nominee served as a director of American
Capitol Insurance Company ("American Capitol") prior to the
Company's formation, and other information concerning each
nominee appear below. All such nominees are members of the
present Board of Directors.
R. WELLINGTON DANIELS (83): Mr. Daniels has served as a
director since 1987 and is a member of the Audit Committee.
Before his retirement in 1979, Mr. Daniels served as Director
of National Accounts, American Cyanamid Corporation. Mr.
Daniels has also served as a director of InsCap since 1990.
WILLIAM F. GUEST (66): Mr. Guest has served as a director
since 1984 and is Chairman of the Board. Mr. Guest has served
as Chairman of the Board and President of the Company since
1985. Mr. Guest is the Chairman of the Board and Chief
Executive Officer of each of the Company's life insurance
subsidiaries and is a director and the President of InsCap.
Mr. Guest is an attorney and prior to joining the Company and
its affiliates was engaged in the private practice of law in
Houston, Texas for many years.
C. STRATTON HILL, JR., M.D. (69): Dr. Hill has served as a
director since 1984 and is a member and the Chairman of the
Audit Committee. Dr. Hill is also the Medical Director of the
Company's life insurance subsidiaries. Dr. Hill is a physician
and has been engaged in the practice of medicine in Houston,
Texas for many years.
MEETINGS AND COMMITTEES OF THE BOARD
During 1997 the Board of Directors of the Company held four
meetings. In addition, there is one standing committee of the
Board of Directors which has the authority and responsibilities
and which met during 1996 as described below. Each incumbent
director attended at least 75% of the total number of meetings
of the Board of Directors and the committee of the Board of
Directors on which he served.
AUDIT COMMITTEE. The Audit Committee has the authority and
responsibility to oversee the work of the independent public
accountants for the Company and to meet with such accountants
from time to time to determine the adequacy of the Company's
accounting systems and controls and audit procedures. Two
meetings of the Audit Committee were held in 1997.
OTHER FUNCTIONS. There is no standing nominating committee or
compensation committee of the Board of Directors, nor is there
any committee of the Board of Directors performing similar
functions. American Capitol maintains a standing compensation
committee which has the responsibility of recommending the
amount and form of compensation and benefits for officers and
other key employees of American Capitol. The Company does not
provide separate or additional compensation for its officers,
all of whom are also officers of American Capitol, but is
obligated to reimburse American Capitol for services provided
to the Company by such persons in accordance with the terms of
an intercompany service agreement.
DIRECTOR COMPENSATION. Directors who are also officers of the
Company do not receive directors' fees or other amounts in
compensation for participation on the Board of Directors or a
committee of the Board of Directors. All other directors are
each paid a fee of $500 plus travel expenses for each meeting
of the Board of Directors attended. In addition, each director
who serves as a member of the Audit Committee of the Board of
Directors is paid a fee of $500 plus travel expenses for each
meeting of such committee attended, unless such meeting is held
in conjunction with a meeting of the Board of Directors held on
the same day.
SECURITY OWNERSHIP OF CERTAIN OWNERS
Set forth below is information with respect to each person,
entity or group known to have been the beneficial owner of more
than 5% of the Company's Common Stock, its sole voting class of
securities, as of March 23, 1998.
- ---------------------------------------------------------------
Name and Address of Shares Beneficially Percent of
Beneficial Owner Owned(1) Class
- ---------------------------------------------------------------
InsCap Corporation 3,317 44.58%
10555 Richmond Avenue
Houston, Texas 77042
William F. Guest 3,570 (2) 47.98%
10555 Richmond Avenue
Houston, Texas 77042
(1) Except as otherwise indicated, the beneficial owner of the
shares exercises sole voting and investment powers.
(2) Mr. Guest owns directly and indirectly 455,514 shares, or
51.75%, of InsCap's issued and outstanding Common Stock, the
sole voting class of securities of InsCap, and as the
controlling stockholder of InsCap is deemed to be the
beneficial owner of the shares of the Company owned by InsCap.
In addition to the shares of Company Common Stock owned
indirectly through InsCap, Mr. Guest directly owns 126 shares
of Company Common Stock and is the beneficial owner of 127
shares of Company Common Stock through a trust for which he
acts as trustee.
EXECUTIVE OFFICERS
The By-Laws of the Company provide for the election of
executive officers annually at the meeting of the Board of
Directors following the annual meeting of stockholders.
Executive officers serve until their successors are chosen and
qualified or until their death, resignation or removal.
Brief statements setting forth the age (at March 23, 1998), the
offices held and the business experience during the past five
years of each executive officer appear below.
WILLIAM F. GUEST (66): Chairman of the Board and President.
For the biography of Mr. Guest see "Election of Directors."
JOHN D. CORNETT (39): Mr. Cornett has served as Executive Vice
President of the Company since 1989 and as Treasurer of the
Company since 1985. Mr. Cornett is a director and the
Secretary of InsCap and the President and Chief Operating
Officer and a director of each of the Company's life insurance
subsidiaries. Mr. Cornett is a certified public accountant
and, prior to joining the Company and its affiliates in 1984,
Mr. Cornett held positions with American General Life Insurance
Company and Prudential Insurance Company of America.
H. KATHLEEN MUSSELWHITE (41): Ms. Musselwhite has served as
Assistant Treasurer of the Company since June 1995 and as
Secretary of the Company since March 1997. Ms. Musselwhite is
also the Treasurer and Controller, the Secretary and a director
of each of the Company's life insurance subsidiaries. Ms.
Musselwhite is a certified public accountant and, prior to
joining the Company and its affiliates in 1995, Ms. Musselwhite
served as Assistant Controller of American General Corporation
(1987-June 1995).
SECURITY OWNERSHIP OF MANAGEMENT
Set forth below is information with respect to shares of each
class of equity securities of the Company and InsCap
beneficially owned by directors of the Company, naming them,
and by all directors and officers of the Company as a group, as
of March 23, 1998.
- --------------------------------------------------------------
Name of Beneficial Amount and Nature Percent of
Owner (1) of Beneficial Ownership (2) Class (3)
- --------------------------------------------------------------
The Company
Common Stock
William F. Guest 3,570 (4) 47.98%
John D. Cornett 198 2.66%
C. Stratton Hill, Jr. 6 (6) *
All Officers and Directors 3,774 50.73%
Series A Preferred Stock
William F. Guest 12,000 (4) 16.22%
R. Wellington Daniels 2,000 (5) 2.70%
All Officers and Directors 14,000 18.92%
InsCap
Common Stock
William F. Guest 455,514 (4) 51.75%
R. Wellington Daniels 37,000 4.20%
John D. Cornett 11,000 1.25%
All Officers and Directors 503,514 57.20%
(1) The address of each of the officers and directors is c/o
Acap Corporation, 10555 Richmond Avenue, Houston, Texas 77042.
(2) Except as otherwise indicated, the beneficial owner of the
shares exercises sole voting and investment powers.
(3) Percentages are calculated on the basis of the amount of
outstanding securities plus, for each person or group, any
securities that person or group has the right to acquire within
60 days pursuant to option, conversion privileges or other
rights. An asterisk signifies less than 1%.
(4) The Company Common Stock shown as owned by Mr. Guest
includes 126 shares he owns directly, 127 shares owned
indirectly by him through a trust for which he acts as trustee,
and 3,317 shares owned indirectly by him through InsCap, the
Company's parent, of which company Mr. Guest is the controlling
stockholder. The Series A Preferred Stock of the Company shown
as owned by Mr. Guest includes 7,300 shares owned directly by
him, 900 shares indirectly owned by him through a trust for
which Mr. Guest acts as trustee, and 3,800 shares owned
indirectly by him through InsCap. Mr. Guest has pledged
certain of his InsCap shares as security for loans which, in
the event of default, could result in a change of control in
InsCap, and therefore the Company.
(5) The 2,000 shares of the Company's Series A Preferred Stock
shown as owned by Mr. Daniels are owned by Mr. Daniels' wife.
(6) All such shares of Company Common Stock are owned by Dr.
Hill's children.
BENEFICIAL OWNERSHIP REPORTING
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's officers and directors and beneficial owners of
more than 10% of a registered class of the Company's equity
securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC")
and the National Association of Securities Dealers, Inc.
Officers, directors and greater than 10% stockholders are
required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely upon a review of such forms furnished to the
Company during or with respect to its fiscal year ended
December 31, 1997 by the persons and entities filing same, the
Company believes that during its fiscal year ended December 31,
1997 all beneficial ownership reports required to be filed
pursuant to Section 16(a) by directors and officers of the
Company and by beneficial owners of more than 10% of the
Company's outstanding Common Stock have been filed on a timely
basis.
EXECUTIVE COMPENSATION
The compensation paid by the Company and its affiliates for
each of the last three completed fiscal years to (i) the Chief
Executive Officer ("CEO") and (ii) each of the four most highly
compensated executive officers, other than the CEO, whose total
annual salary and bonus exceeded $100,000, (the "Named
Executive Officers" was as follows:
- ---------------------------------------------------------------
Name and Shares
Principal Underlying All
Position Year Salary Bonus Options(#) Other($)
- ---------------------------------------------------------------
William F. Guest, 1997 230,000 -- 100 --
CEO 1996 180,000 -- -- --
1995 180,000 18,000 -- --
John D. Cornett, 1997 120,000 -- 100 17,628*
Treasurer 1996 100,000 -- -- 17,643*
1995 100,000 10,000 -- 17,658*
* The Company advanced Mr. Cornett $17,628, $17,643, and
$17,658 during 1997, 1996 and 1995, respectively, toward the
payment of the premium on life insurance on Mr. Cornett's life
and for which the Company is not the beneficiary. The advance
will be repaid to the Company out of the cash value of such
policy or the death proceeds from such policy. The advance is
not compensation to Mr. Cornett to the extent that it is
subject to repayment to the Company.
The preceding table excludes club memberships and certain other
benefits in an aggregate amount of less than 10% of the
officer's annual salary.
In August 1997, American Capitol entered into a disability
income agreement with Mr. Guest which provides for cash
payments to Mr. Guest or for his benefit in the event that he
becomes disabled while employed by American Capitol. In such
event, Mr. Guest's salary will be continued at 100% of his
salary at the time of disability up to one year and will be
continued at 80% of his salary at the time of disability for up
to five years. In addition to the foregoing time limitations,
the disability payments stop upon Mr. Guest's recovery or upon
Mr. Guest's reaching the age of 75.
In April 1997, American Capitol renewed for a period of three
years an employment agreement with Mr. Cornett pursuant to
which Mr. Cornett serves as President and Chief Operating
Officer of American Capitol. The agreement provides for an
annual compensation of $120,000. In the event Mr. Cornett's
employment is terminated during the term of the agreement other
than for cause, the salary payable thereunder, under specified
conditions and subject to certain limitations, will continue
for up to 18 months, less any amounts earned by Mr. Cornett
from other employment during such period. In addition, in
April 1997, American Capitol renewed a stock purchase agreement
with Mr. Cornett which provides that in the event of a change
of control of American Capitol, Mr. Cornett shall have the
right to sell certain shares of Company Common Stock owned by
him to American Capitol at a price per share determined by
reference to the consideration involved in the change of
control.
The following table reflects certain information regarding
individual grants of stock options made to the Named Executive
Officers during fiscal 1997.
- ---------------------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees in Price Expiration
Name Granted(#) Fiscal Year ($/Sh) Date
- ---------------------------------------------------------------
William F. Guest 100 20% 264 9/2/02
John D. Cornett 100 20% 240 9/2/07
The stock options noted in the table above are incentive stock
options. Mr. Guest's options vest four years from the date of
grant and Mr. Cornett s options vest five years from the date
of grant, September 2, 1997.
The following table reflects certain information with respect
to the Named Executive Officers regarding stock options
exercised during fiscal year 1997 and the number of unexercised
options and the value of unexercised options outstanding at
December 31, 1997. None of the unexercised options were
exercisable at December 31, 1997.
- ---------------------------------------------------------------
Number of
Shares Securities Value of
Acquired Unexercised Unexercised
on Value Options at In-the-Money
Exercise Realized 12/31/97 Options at
Name (#) ($) (#) 12/31/97($)
- ---------------------------------------------------------------
William F. Guest 34 1,785 100 9,900
John D. Cornett 34 1,785 100 12,300
The value of unexercised in-the-money options shown in the
table above equals difference between the closing bid price of
the Company Common Stock at December 31, 1997 and the exercise
price of the options multiplied by the number of options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
InsCap is the immediate parent of the Company. See "Security
Ownership of Certain Owners" for the basis of control and the
percentage of voting securities owned.
INDEPENDENT AUDITORS
Financial statements of the Company and its consolidated
subsidiaries are included in the Company's Annual Report to
Stockholders for 1997. KPMG Peat Marwick has served as the
independent auditors for the Company for the fiscal year ended
December 31, 1997. The Company anticipates that KPMG Peat
Marwick will be selected to serve in such capacity for the
fiscal year ending December 31, 1998, subject to formal
approval of such engagement by the Company's Audit Committee.
Representatives of KPMG Peat Marwick are expected to be present
at the Annual Meeting and will have the opportunity to make a
statement if they desire to do so and are also expected to be
available to respond to appropriate questions.
QUORUM FOR MEETING
The By-Laws of the Company require, for a quorum, the presence
at the meeting, in person or by proxy, of the holders of a
majority of the shares of capital stock of the Company entitled
to vote.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any proposal intended to be presented by a stockholder at the
Company's 1999 Annual Meeting of Stockholders must be received
in writing at the Company's principal executive offices by
December 7, 1998 so that it may be considered by the Company
for inclusion in the proxy statement and form of proxy or in
the information statement relating to that meeting.
By Order of the Board of Directors
/s/H. Kathleen Musselwhite
----------------------------------
H. Kathleen Musselwhite
Secretary
April 6, 1998
