ACAP CORPORATION
10555 Richmond Avenue, 2nd Floor
Houston, Texas 77042
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 3, 1999
To Our Stockholders:
The Annual Meeting of Stockholders of Acap Corporation (the "Company") will be
held Monday, May 3, 1999, at 8:00 a.m., local time, at the offices of the
Company, 10555 Richmond Avenue, 2nd Floor, 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 22, 1999, 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
H. Kathleen Musselwhite
Secretary
Houston, Texas
April 5, 1999
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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 6
Certain Relationships and Related Transactions 7
Independent Auditors 8
Quorum for Meeting 8
Submission of Stockholder Proposals 8
<PAGE>
ACAP CORPORATION
10555 Richmond Avenue, 2nd Floor
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 3, 1999, at 8:00 a.m., local
time, at the offices of the Company, 10555 Richmond Avenue, 2nd Floor,
Houston, Texas. This Information Statement is first being sent or given to
stockholders of the Company on or about April 5, 1999.
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 22, 1999, the record date, are
entitled to vote at the Annual Meeting. As of the record date, there were
7,242 shares of Common Stock outstanding (excluding shares held by the
Company's subsidiary, which are not voted) and approximately 696 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 22, 1999), 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 (84): 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 (67): 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. (70): 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 1998 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 1998 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 1998.
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 22, 1999.
Name and Address of Shares Beneficially Percent
Beneficial Owner Owned (1) of Class
---------------- --------- -------
InsCap Corporation 3,317 45.81%
10555 Richmond Avenue, 2nd Floor
Houston, Texas 77042
William F. Guest 3,570 (2) 49.31%
10555 Richmond Avenue, 2nd Floor
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 Bylaws 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 22, 1999), the offices held
and the business experience during the past five years of each executive
officer appear below.
William F. Guest (67): Chairman of the Board and President. For the
biography of Mr. Guest see "Election of Directors."
John D. Cornett (40): 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 (42): 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 22, 1999.
Amount and
Name of Nature of Percent
Beneficial Beneficial (2) of
Owner (1) Ownership Class (3)
--------- ------------- ---------
The Company
Common Stock
William F. Guest 3,570 (4) 49.31%
John D. Cornett 198 2.73%
C. Stratton Hill, Jr. 6 (6) *
All Officers and Directors 3,774 52.13%
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, 2nd Floor, 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, 1998 by the persons and
entities filing same, the Company believes that during its fiscal year ended
December 31, 1998 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 $100,000, (the "Named
Executive Officers") was as follows:
Shares
Name and Underlying All
Principal Postition Year Salary($) Bonus($) Options(#) Other($)
William F. Guest, CEO 1998 230,000 -- -- 14,936*
1997 230,000 -- 100 --
1996 180,000 -- -- --
John D. Cornett, Treasurer 1998 120,000 -- -- 17,612**
1997 120,000 -- 100 17,628**
1996 100,000 -- -- 17,643**
* A split dollar agreement was signed between Mr. Guest and American Capitol
Insurance Company ("American Capitol") on August 28, 1998 with an effective
date of December 8, 1997. The agreement allows Mr. Guest one-third of a
keyman policy on his life owned by American Capitol in exchange for
$328,000, one-third of the cash value of the policy on December 8, 1997.
Mr. Guest is required to pay to American Capitol each year on or before
August 28th an amount equal to the one year term cost of the insurance
protection until the $328,000 is paid for. As of December 31, 1998, the
remaining balance owed by Mr. Guest was $320,070.
** The Company advanced Mr. Cornett $17,612, $17,628,and $17,643 during 1998,
1997 and 1996, 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 not less than $120,000.
In the event Mr. Cornett's employment is terminated during the term of the
agreement other than for cause, the salary payable thereunder, under specified
conditions and subject to certain limitations, will continue for up to 18
months, less any amounts earned by Mr. Cornett from other employment during
such period. In addition, in April 1997, American Capitol renewed a stock
purchase agreement with Mr. Cornett which provides that in the event of a
change of control of American Capitol, Mr. Cornett shall have the right to
sell certain shares of Company Common Stock owned by him to American Capitol
at a price per share determined by reference to the consideration involved in
the change of control.
The following table reflects certain information with respect to the Named
Executive Officers regarding stock options exercised during fiscal year 1998
and the number of unexercised options and the value of unexercised options
outstanding at December 31, 1998. None of the unexercised options were
exercisable at December 31, 1998.
Number of Value of
Securities Unexercised
Underlying In-the-Money
Shares Value Unexercised Options
Acquired on Realized Options at at
Name Exercise (#) ($) 12/31/98(#) 12/31/98($)
William F. Guest -- -- 100 21,600
John D. Cornett -- -- 100 24,000
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, 1998 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 1998. KPMG has
served as the independent auditors for the Company for the fiscal year ended
December 31, 1998. The Company anticipates that KPMG will be selected to
serve in such capacity for the fiscal year ending December 31, 1999,
subject to formal approval of such engagement by the Company's Audit Committee.
Representatives of KPMG 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 Bylaws 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 2000
Annual Meeting of Stockholders must be received in writing at the Company's
principal executive offices by December 7, 1999 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
H. Kathleen Musselwhite
Secretary
April 5, 1999
