ATLANTIC AMERICAN CORPORATION
4370 Peachtree Road, N.E.
Atlanta, Georgia 30319-3000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 6, 1997
Notice is hereby given that the Annual Meeting of Shareholders of Atlantic
American Corporation (the "Company") will be held at the offices of the Company
at 4370 Peachtree Road, N.E., Atlanta, Georgia at 9:00 A.M., Eastern Standard
Time, on May 6, 1997 for the following purposes:
(1) To elect eight (8) directors of the Company for the ensuing year;
(2) To approve the Atlantic American Corporation 1996 Director Stock
Option Plan.
(3) To ratify the appointment of Arthur Andersen LLP as independent public
accountants for the year 1997; and
(4) To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only shareholders of record at the close of business on March 7, 1997, will be
entitled to notice of and to vote at the meeting, or any postponements or
adjournments thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE,
SIGN, DATE AND RETURN THE ENCLOSED PROXY. NO POSTAGE IS REQUIRED WHEN MAILED
IN THE UNITED STATES.
By Order of the Board of Directors
/s/
-------------------------------------
Janie L. Ryan
Corporate Secretary
April 15, 1997
Atlanta, Georgia
ATLANTIC AMERICAN CORPORATION
4370 Peachtree Road, N.E.
Atlanta, Georgia 30319-3000
----------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 6, 1997
----------------------------
GENERAL
This proxy statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Atlantic American Corporation (the "Company") for
use at the Annual Meeting of Shareholders (the "Meeting") to be held at the time
and place and for the purposes specified in the accompanying Notice of Annual
Meeting of Shareholders and at any postponements or adjournments thereof. When
the enclosed proxy is properly executed and returned, the shares which it
represents will be voted at the Meeting in accordance with the instructions
thereon. In the absence of any such instructions, the shares represented thereby
will be voted in favor of the nominees for directors listed under the caption
"Election of Directors", the approval of the 1996 Director Stock Option Plan
(the "Director Plan"), and the ratification of the appointment of Arthur
Andersen LLP as independent public accountants for 1997. Management does not
know of any other business to be brought before the Meeting not described
herein, but it is intended that as to such other business, a vote may be cast
pursuant to the proxy in accordance with the judgment of the person or persons
acting thereunder. This proxy statement and the accompanying form of proxy are
first being mailed to the shareholders of the Company on or about April 15,
1997.
Any shareholder who executes and delivers a proxy may revoke it at any time
prior to its use by (i) giving written notice of such revocation to the
Secretary of the Company at 4370 Peachtree Road, N.E., Atlanta, Georgia
30319-3000; (ii) executing and delivering a proxy bearing a later date to the
Secretary of the Company at 4370 Peachtree Road, N.E., Atlanta, Georgia
30319-3000; or (iii) attending the Meeting and voting in person.
Only holders of record of issued and outstanding shares of $1.00 par value
common stock of the Company ("Common Stock") as of March 7, 1997 (the "Record
Date") will be entitled to notice of and to vote at the Meeting. On the Record
Date, there were 18,691,026 shares of Common Stock outstanding. Each share of
Common Stock is entitled to one vote.
ANNUAL REPORT
The Annual Report of the Company for the year ended December 31, 1996, including
financial statements, is enclosed with this Proxy Statement. The Form 10-K
Annual Report to the Securities and Exchange Commission provides certain
additional information. Shareholders may obtain a copy of the Form 10-K without
charge upon written request addressed to: Corporate Secretary, Atlantic American
Corporation, 4370 Peachtree Road, N.E., Atlanta, Georgia 30319-3000. If the
person requesting a copy of the Form 10-K is not a shareholder of record, the
request must include a representation that the person is a beneficial owner of
the Company's Common Stock.
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. Officers, directors
and employees of the Company may solicit proxies by telephone, telegram or
personal interview. No contract or arrangement exists for engaging specially
paid employees or solicitors in connection with the solicitation of proxies for
the Meeting. Arrangements may be made with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy materials to
their principals, and the Company will reimburse them for their expenses in so
doing.
VOTE REQUIRED
A majority of the outstanding shares of Common Stock must be present in person
or by proxy at the Meeting in order to have the quorum necessary for the
transaction of business. Abstentions and broker "non-votes" will be counted as
present in determining whether the quorum requirement is satisfied. Directors
are elected by the affirmative vote of a plurality of the shares of Common Stock
present in person or by proxy and actually voting at a meeting at which a quorum
is present. In order for shareholders to approve all other matters to be
presented at the Meeting, the votes cast favoring the proposal must exceed the
votes cast opposing the proposal. Abstentions and non-votes will have no effect
on the voting with respect to any proposal as to which there is an abstention or
non-vote. A "non-vote" occurs when a nominee holding shares for a beneficial
owner votes on one proposal pursuant to discretionary authority or instructions
from the beneficial owner, but does not vote on another proposal because the
nominee has not received instruction from the beneficial owner and does not have
discretionary power.
1. ELECTION OF DIRECTORS
One of the purposes of the Meeting is to elect eight directors to serve until
the next annual meeting of the shareholders and until their successors have been
elected and qualified or until their earlier resignation or removal. In the
event any of the nominees should be unavailable to serve as a director, which
contingency is not presently anticipated, proxies will be voted for the election
of such other persons as may be designated by the present Board of Directors.
Nominees for election to the Board of Directors are considered and recommended
by the Executive Committee of the Board of Directors to the shareholders. The
Company has no procedure whereby nominees are solicited or accepted from
shareholders.
All of the nominees for election to the Board of Directors are currently
directors of the Company.
The following information is set forth with respect to the eight nominees for
director to be elected at the Meeting:
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Name Age Position with the Company
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J. Mack Robinson 73 Chairman of the Board
Hilton H. Howell, Jr. 35 Director, President and Chief
Executive Officer
Samuel E. Hudgins 68 Director
D. Raymond Riddle 63 Director
Harriett J. Robinson 66 Director
Scott G. Thompson 52 Director
William H. Whaley,M.D. 57 Director
Dom H. Wyant 70 Director
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Mr. Robinson has served as Director and Chairman of the Board since 1974 and
served as President and Chief Executive Officer of the Company from September
1988 to May 1995. In addition, Mr. Robinson is also a Director of Bull Run
Corporation and Gray Communications Systems, Inc.
Mr. Howell has been President and Chief Executive Officer of the Company since
May 1995, and prior thereto served as Executive Vice President of the Company
from October 1992 to May 1995. He has been a Director of the Company since
October 1992. In addition, Mr. Howell has been Executive Vice President of Delta
Life Insurance Company and Delta Fire & Casualty Company since March 1994. Prior
thereto, he was Vice President and General Counsel of Delta Life Insurance
Company since November 1991. Mr. Howell is the son-in-law of Mr. and Mrs.
Robinson. He is also Vice President, Secretary and a Director of Bull Run
Corporation and a Director of Gray Communications Systems, Inc.
Mr. Hudgins has been a Principal in Percival, Hudgins & Company, LLC, investment
bankers, and has been its President since April 1992 and an independent
consultant since September 1988. He has been a Director of the Company since
1986 and also serves as a Director of The Biltmore Funds and The Biltmore
Municipal Funds of Wachovia Corp.
Mr. Riddle is the retired Chairman and Chief Executive Officer of National
Service Industries, Inc., a diversified holding company, a position he held from
September 1994 to February 1996, and prior thereto served as the President and
Chief Executive Officer of National Service Industries, Inc. since January 1993.
Prior thereto, he was President of Wachovia Bank of Georgia, N.A., the President
of Wachovia Corporation of Georgia and Executive Vice President of Wachovia
Corporation. He has been a Director of the Company since 1976, and also serves
as a Director of AMC, Inc., Atlanta Gas Light Company, Equifax Inc., and Fuqua
Enterprises, Inc.
Mrs. Robinson, the wife of J. Mack Robinson, has been a Director of the Company
since 1989.
Mr. Thompson has been the President and Chief Financial Officer of American
Southern Insurance Company since 1984. He has been a Director of the Company
since February 1996.
Dr. Whaley has been a physician in private practice for more than five years. He
has been a Director of the Company since July 1992.
Mr. Wyant is Of Counsel to the law firm of Jones, Day, Reavis & Pogue, which
serves as counsel to the Company. Prior to January 1995, he was a partner in
Jones, Day, Reavis & Pogue for more than five years. He has been a Director of
the Company since 1985, and also serves as a Director of Thomaston Mills, Inc.
2
Committees Of The Board Of Directors
The Board of Directors of the Company has three (3) standing committees: The
Executive Committee, the Stock Option and Compensation Committee and the Audit
Committee. The Company has no Nominating Committee. The Executive Committee is
composed of Messrs. Robinson, Howell, Hudgins and Wyant, and its function is to
act in the place and stead of the Board to the extent permitted by law on
matters which require Board action between meetings of the Board of Directors.
The Executive Committee of the Company met or acted by written consent two times
during 1996.
The Stock Option and Compensation Committee is composed of Messrs. Riddle,
Whaley and West. The Stock Option and Compensation Committee's function is to
establish the number of stock options to be granted to officers and key
employees and the annual salaries and bonus amounts payable to officers. The
Stock Option and Compensation Committee held one meeting in 1996.
The Audit Committee is composed of Messrs. West and Riddle, Dr. Whaley and Mrs.
Robinson. The Audit Committee's functions include reviewing with the Company's
independent public accountants, their reports and audits, and reporting their
findings to the full Board. The Audit Committee held one meeting in 1996.
The Board of Directors met or acted by written consent eight times in 1996. Each
of the directors named above attended at least 75% percent of the meetings of
the Board and its committees of which he or she was a member during 1996.
Compensation Of Directors
The Company's policy is to pay all Directors an annual retainer fee of $4,000,
to pay fees to Directors at the rate of $600 for each Board meeting attended and
$200 for each committee meeting attended, and to reimburse Directors for actual
expenses incurred in connection with attending meetings of the Board of
Directors and Committees of the Board. In addition, pursuant to the Company's
1996 Director Stock Option Plan (the "Director Plan"), all Directors who are not
employees or officers of the Company or any of its subsidiaries are entitled to
receive an initial grant of options to purchase 5,000 shares of Common Stock and
annual grants of options to purchase 1,000 shares of Common Stock.
3
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth Common Stock ownership information as of March 7,
1997 by: (i) each person who is known to the Company to own beneficially more
than 5% of the outstanding shares of Common Stock of the Company, (ii) each
director, (iii) each executive officer named in the Summary Compensation Table,
and (iv) all of the Company's directors and executive officers as a group.
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Amount and Nature
Name of Individual of Beneficial Percent
or Identity of Group Ownership(1) of Class
- --------------------------------------------------------------------------------
J. Mack Robinson.............................. 13,748,014 (2) 70.20%
4370 Peachtree Road, N.E.
Atlanta, Georgia 30319
Harriett J. Robinson ......................... 8,049,691 (3) 41.92%
3500 Tuxedo Road, N.W.
Atlanta, Georgia 30305
Hilton H. Howell, Jr.......................... 126,842 (4) *
Samuel E. Hudgins............................. 5,000 (5) -
D. Raymond Riddle............................. 6,540 (5) *
Scott G. Thompson............................. 49,750 (6) *
Charles B. West............................... 219,671 (7) 1.0%
William H. Whaley, M.D........................ 15,871 (8) *
Dom H. Wyant.................................. 5,000 (5) -
John W. Hancock............................... 56,418 (9) *
All Directors and Executive Officers as a
Group (10 persons)............................ 14,233,106 (10) 71.81%
- --------------------------------------------------------------------------------
*Represents less than 1% of class.
(1) All such shares are owned of record and beneficially unless otherwise
stated.
(2) Includes 3,381,202 shares owned by Gulf Capital Services, Ltd., 4370
Peachtree Road, N.E., Atlanta, Georgia 30319; 936,702 shares owned by Delta
Life Insurance Company; and 294,000 shares owned by Delta Fire & Casualty
Company; all of which are companies controlled by Mr. Robinson; 35,000
shares subject to presently exercisable options held by Mr. Robinson;
90,310 shares issuable pursuant to convertible notes and 250,750 shares
issuable pursuant to convertible preferred stock which is owned
beneficially by Mr. Robinson; and 3,115 shares held pursuant to the
Company's 401(k) plan. Also includes all shares held by Mr. Robinson's wife
(see note 3 below).
(3) Harriett J. Robinson is the wife of J. Mack Robinson. Includes 7,325,488
shares of common stock and 501,500 shares issuable pursuant to convertible
preferred stock held by Mrs. Robinson as trustee for her children, as to
which she disclaims beneficial ownership. Also includes 6,398 shares
issuable pursuant to convertible notes, 5,000 shares issuable upon exercise
of options granted under the Director Plan exercisable within 60 days, and
6,720 shares held jointly with grandson. Does not include shares held by
Mr. Robinson (see Note 2 above).
(4) Includes 110,000 shares subject to presently exercisable stock options held
by Mr. Howell; 6,917 shares held pursuant to the Company's 401(k) plan; and
1,025 shares owned by Mr. Howell's wife, as to which he disclaims any
beneficial ownership.
(5) Includes 5,000 shares issuable upon exercise of options granted under the
Director Plan, exercisable within 60 days.
(6) Includes 48,750 shares subject to presently exercisable options.
(7) Includes 96,662 shares owned of record by Mr. West; 5,000 shares issuable
upon exercise of options granted under the Director Plan, exercisable
within 60 days; 75,199 shares held in trusts with respect to which Mr. West
has voting power and 42,810 shares owned by his wife, as to which Mr. West
disclaims any beneficial ownership. Mr. West will retire as a Director at
the meeting.
(8) Includes 1,371 shares issuable pursuant to convertible notes and 5,000
shares issuable upon exercise of options granted under the Director Plan
exercisable within 60 days.
(9) Includes 38,750 shares subject to presently exercisable options and 7,668
shares held pursuant to the Company's 401(k) plan.
(10) Includes 226,250 shares subject to presently exercisable options held by
all directors and executive officers as a group. Also includes shares
issuable upon conversion of convertible securities and shares held pursuant
to the Company's 401(k) plan described in notes 2, 3, 4, 8 and 9 above.
4
Under the securities laws of the United States, the Company's directors,
executive officers, and any persons holding more than ten percent of a
registered class of the Company's equity securities are required to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes of ownership of Common Stock and other equity securities of the
Company, and to furnish the Company with copies of such reports. To the
Company's knowledge, all of these filing requirements were satisfied during the
year ended December 31, 1996, except that with respect to one transaction by
each Mr. Howell and Mr. West, such reports were inadvertently not filed. Such
transactions were reported on a Form 4, promptly after the failure to report
such transaction was discovered. In making this disclosure, the Company has
relied on written representations of its directors and officers and copies of
the reports they have filed with the Securities and Exchange Commission.
EXECUTIVE COMPENSATION
There is shown below information concerning the annual and long-term
compensation for services in all capacities to the Corporation for the fiscal
years ended December 31, 1996, 1995 and 1994, of those persons who were, at
December 31, 1996 (i) chief executive officer and (ii) the only other executive
officers of the Corporation whose salary and bonus exceeds $100,000 ("the Named
Officers"):
Summary Compensation Table
Long-Term
Compensation
Annual ---------------
Compensation Awards
Name and ------------------ --------------- All Other
Principal Position Year Salary(s) Bonus(s) Options/SARs(#) Compensation(s)
- --------------------------------------------------------------------------------
Hilton H. Howell, Jr. 1996 180,000 67,500 -0- 13,100 (1)
President and CEO 1995 154,167 45,000 100,000 12,500
1994 125,000 34,375 20,000 11,410
J. Mack Robinson 1996 138,902 34,726 -0- 13,100 (2)
Chairman of the 1995 138,902 34,726 20,000 11,820
Board 1994 132,288 34,725 -0- 11,610
John W. Hancock 1996 114,541 31,499 25,000 4,201 (3)
Senior Vice 1995 107,048 22,908 -0- 2,828
President and 1994 100,989 21,409 10,000 2,554
Treasurer
(1) Consists of (i) contributions to Mr. Howell's account under the Company's
401(k) Plan of $4,500 in 1996; and (ii) fees paid for serving as a director
of the Company and certain of its subsidiaries of $8,600 in 1996.
(2) Consists of (i) contributions to Mr. Robinson's account under the Company's
401(k) Plan of $4,500 in 1996; and (ii) fees paid for serving as a director
of the Company and certain of its subsidiaries of $8,600 in 1996.
(3) Consists of contributions to Mr. Hancock's account under the Company's
401(k) Plan.
5
Option/SAR Grants In Last Fiscal Year
The following table provides information related to options granted to the
named executive officers during fiscal 1996.
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term (1)
--------------------------------------------------------- ----------------------------
Number of
Securities % of Total
Underlying Options/
Options/ SARs
SARs Granted to Exercise or
Granted Employees in Base Price
Name (#) (2) Fiscal Year ($/Sh) Expiration Date 5% ($) 10% ($)
- -------------------------------------------------------------------------------------------------------------------
Hilton H. Howell, Jr. -0- -0- -0- N/A -0- -0-
J. Mack Robinson -0- -0- -0- N/A -0- -0-
John W. Hancock 25,000 10.2 2.375 02/20/2001 $16,425 $36,250
- -----------------------------
(1) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately prior
to the expiration of their term, assuming the specified compounded rates of
appreciation on the Company's Common Stock over the term of the options. The
assumed annual rates of stock price appreciation are specified by the rules
of the Securities and Exchange Commission for illustrative purposes only and
are not intended as projections of the future performance of the Company's
Common Stock.
(2) Options became exercisable with respect to 50% of the shares covered thereby
on February 20, 1996, the date of grant; options for an additional 25% of
the shares became exercisable on February 20, 1997; and options for the
remaining 25% become exercisable on February 20, 1998. The exercise price
was equal to the average of the bid and asked prices of the stock at the
close of business of the date of grant.
Aggregated Option/SAR Exercises In Last Fiscal Year
and FY-End Option/SAR Values
The following table provides information related to the number and value of
options held by the named executive officers at fiscal year-end.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Shares Options/SARs at Year-end(#) at Year-End ($) (2)
Acquired on --------------------------- ---------------------------
Name Exercise (#) Value Realized ($) (1) Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------------
Hilton H. Howell, Jr. --- --- 110,000/25,000 $96,876/$14,063
J. Mack Robinson 20,000 $42,500 35,000/5,000 $49,688/$2,813
John W. Hancock 10,000 $21,250 38,750/6,250 $45,391/$4,297
(1) Value is calculated on the difference between the option exercise price and
the closing price for the Company's Common Stock as reported by the NASDAQ
Stock Market on August 21, 1996, which was $3.125, multiplied by the number
of shares of Common Stock underlying the stock options.
(2) Value is calculated on the difference between the option exercise price and
the closing price for the Company's Common Stock as reported by the NASDAQ
Stock Market on December 31, 1996, which was $3.0625, multiplied by the
number of shares of Common Stock underlying the option.
6
Employment Agreements With Management
The Company, or the applicable insurance subsidiary where appropriate, has
entered into employment agreements with certain key members of management,
including Mr. Hancock. All of such agreements are standard in form, and provide
for certain payments by the Company, or the applicable insurance subsidiary, if
the manager's employment is terminated for any reason following "a Change of
Control Event or Sale," which shall be deemed to have occurred if any person or
entity other than Mr. Robinson, his heirs or his affiliates becomes a beneficial
owner, directly or indirectly, of securities representing 30% or more of the
voting power of the Company's then outstanding voting securities.
Pursuant to the respective agreements, a terminated manager would be entitled to
receive payments at the rate of his current compensation, payable monthly,
following termination for any portion remaining of one year after a change of
control. A reduction in salary also would entitle the terminated manager to such
compensation if he or she so chooses. The amounts payable under the agreements
would vary depending upon the length of time during which such payments are
made, and could exceed $100,000 for certain individuals.
PERFORMANCE GRAPH
Comparison of Five-Year Cumulative Total Return*
Atlantic American Corporation, Russell 2000 Index And Peer Group
(Performance Results Through 12/31/96)
Atlantic American Russell 2000 Peer Group
Corporation Index
----------------- ------------ ----------
1991 $100.00 $100.00 $100.00
1992 216.67 118.41 135.64
1993 233.33 140.80 133.13
1994 300.00 138.01 131.73
1995 308.33 177.26 176.05
1996 408.40 206.48 195.35
Assumes $100 invested at the close of trading 12/91 in Atlantic American
Corporation common stock, Russell 2000 Index, and Peer Group.
*Cumulative total return assumes reinvestment of dividends.
Source: Value Line, Inc. Factual material is obtained from sources believed to
be reliable, but the publisher is not responsible for any errors or omissions
contained herein.
Peer Group: NASDAQ Insurance Companies
7
EXECUTIVE COMPENSATION
Report of the Stock Option and Compensation Committee on Executive Compensation
Compensation Philosophy
The Committee believes that compensation of executives should be designed to
motivate such persons to perform at their potential over both the short and the
long term. The Committee believes that equity-based incentives should benefit
the Company by increasing the retention of executives while aligning the
long-term interests of such persons with those of the Company's shareholders.
Compensation determinations are primarily based on the performance of the
Company and the individual executive officer. The Committee also believes that
compensation packages for executives must be structured to take into account the
nature and the growth of the Company's lines of business in appropriate
circumstances.
Cash Compensation. The compensation packages for the executive officers consists
- ------------------
of three components: base salaries, cash bonuses and equity incentives.
The Chairman annually reviews executive officer compensation and recommends to
the Committee proposed salaries and bonuses for himself and for each of the
other executive officers. Factors considered by the Chairman and the Committee
are based upon the growth of the Company with regard to net income, total
assets, premiums and shareholders' equity. All of these factors were considered
in establishing salary levels for each of the executive officers, as were their
individual duties and the growth and effectiveness of each in performing those
duties. For 1996, the Chairman recommended and the Committee approved a 7%
increase in the base salary of Mr. Hancock, the Senior Vice President and
Treasurer. The Chairman elected not to recommend an increase in his own base
salary, and the Committee did not implement an increase. As in the past several
years, upon the Chairman's recommendation, the Committee awarded cash bonuses of
25% of base salary for each of Mr. Hancock and Mr. Robinson. The base salary
increase and the bonuses reflect the evaluation of the performance the officers
as well as the performance of the Company as a whole; although it was the
Chairman's own desire that his base salary not be increased.
Equity-Based Compensation. The Committee uses equity-based compensation in the
- ---------------------------
form of stock options to motivate executives to perform to improve the Company's
short- and long-term prospects and to align the interests of the Company's
executives with those of the shareholders. In 1996, the Committee granted stock
options to purchase 25,000 shares to Mr. Hancock, at prevailing market prices.
The factors in determining the size of the individual grant were the same as
those considered with respect to cash bonuses. The grant vested with respect to
one-half of the shares purchasable thereunder on the date of grant with the
remainder vesting in equal increments on each of the first and second
anniversaries of the date of grant. The vesting schedule is designed to
encourage both short-term and long-term performance.
Chief Executive Officer. Mr. Howell's compensation is generally evaluated on the
- ------------------------
same basis as the Company's other executive officers. The Committee approved an
increase of 17% in Mr. Howell's base salary, as well as a cash bonus of $67,500,
which represented an increase of 50% over his bonus for 1995.
D. Raymond Riddle
Charles B. West
William H. Whaley
8
2. RATIFICATION OF
THE ATLANTIC AMERICAN CORPORATION 1996 DIRECTOR STOCK OPTION PLAN
On October 29, 1996, the Board of Directors of the Company adopted the
1996 Director Stock Option Plan (the "Plan"), subject to ratification and
approval by the shareholders. The Plan provides for the automatic granting of
options to non-employee Directors of the Company. As of the date hereof, five of
the eight Directors standing for election at the Meeting are eligible to
participate under the Plan. The Board of Directors believes that providing
Directors with the ability to acquire a proprietary interest in the Company
helps to instill loyalty and encourage the generation of long-term value for the
Company's shareholders by aligning Directors' interests with those of the
shareholders, and has, therefore, concluded that adoption of the Plan is in the
best interests of the Company and its shareholders.
The provisions of the Plan are summarized below. Such summary does not
purport to be complete and is qualified in its entirety by reference to the full
text of the Plan, which is included as Annex A.
Purpose
The purpose of the Plan is to attract and retain Directors of the Company
and to provide such persons with incentives and rewards for superior
performance. The only Directors eligible to receive grants of options to
purchase Common Stock under the Plan are those Directors who are not employees
of the Company or its subsidiaries ("Eligible Directors").
Administration
The Plan is administered by a committee comprised of not less than two
Directors, each of whom must be a "Non-Employee Director" as that term is
defined under Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the
"Committee"). Notwithstanding the foregoing, grants of options under the Plan
will be automatic as described below, and the Committee will have no authority,
discretion or power to determine the terms of the options to be granted, the
number of shares of Common Stock to be issued thereunder or the time at which
such options are to be granted, or to establish the duration and nature of
options, except in the sense of administering the Plan subject to the provisions
of the Plan. The Committee will have the power to interpret the Plan, to
determine all questions thereunder and to adopt and amend such rules and
regulations for the administration of the Plan as it may deem desirable. Any
interpretation, determination, or other action made or taken by the Committee
will be final, binding and conclusive.
Shares Subject to the Plan
Subject to certain adjustments as provided in the Plan, the total number
of shares of Common Stock authorized for issuance pursuant to options granted
under the Plan may not exceed 200,000 shares. Shares to be issued may be of
original issuance, or shares held in treasury, or a combination thereof. If any
outstanding option expires or terminates prior to exercise for any reason, then
the Common Stock allocable to the unexercised portion of such option may again
become the subject of an option granted under the Plan.
Terms, Conditions and Form of Options
Each option granted under the Plan must be evidenced by a written
agreement in such form as the Committee will from time to time approve, which
agreement must comply with and be subject to the following terms and conditions:
Option Grants. Each Eligible Director in office on October 29, 1996, the
--------------
date of adoption of the Plan by the Board, was granted an option to
purchase 5,000 shares of Common Stock. Each person who is first elected to
the Board after October 29, 1996, and who is an Eligible Director, will be
automatically granted, on the date such person first takes office as a
Director and without further action by the Board, an option to purchase
5,000 shares of Common Stock. In addition, on the date of the first
regular meeting of the Board following the annual meeting of the Company's
shareholders in each year (commencing with the Meeting), each Eligible
Director on such date will automatically be granted an option to purchase
1,000 shares of Common Stock, without further action by the Board.
Exercise Period. Each option, unless terminated, will become exercisable
----------------
to the extent of 100% of the Common Stock subject thereto commencing six
months after the date of grant; provided, that the holder of the option
--------
has continuously served as a Director through such date. Options will
terminate five years from the date of grant; provided, however, that in
-------- -------
the event any Eligible Director ceases to be a Director for any reason
other than death or disability, all options granted to such Eligible
9
Director under the Plan will terminate 90 days following the date such
Eligible Director ceases to be a Director. To the extent exercisable, an
option may be exercised in full or in part.
Exercise Price. The price per share of Common Stock at which an option may
--------------
be exercised will be equal to the greater of the stated par value of the
Common Stock or the arithmetic mean of the highest and lowest sale prices
of the Common Stock as reported on The NASDAQ Stock Market on the date of
grant.
Exercise Procedure. Options may be exercised (in full or in part) from
-------------------
time to time by written notice to the Company at its principal office
specifying the number of shares of Common Stock with respect to which the
option is being exercised and accompanied by payment of the exercise price
for the shares with respect to which the option is being exercised.
Payment may be made in whole or in part by tendering shares of Common
Stock having a value equal to the exercise price.
Options Non-Transferable. No option granted under the Plan may be
-------------------------
transferable other than by will or the laws of descent and distribution
without the prior approval of the Committee. Except as provided by the
Committee in the case of a transferable option, during the lifetime of the
option holder, options will be exercisable only by the holder's who
received them or, in the event of the incapacity, including incapacity on
account of disability, by the option holder's guardian or legal
representative acting in a fiduciary capacity.
Compliance with Other Laws and Regulations
The Plan, the grant and exercise of options under the Plan, and the
obligation of the Company to transfer shares under such options will be subject
to all applicable federal and state laws, rules and regulations, including those
related to disclosure of financial and other information to Optionees, and to
any approvals by any government or regulatory agency as may be required.
Amendment and Discontinuance
The Board of Directors may from time to time amend, suspend or discontinue
the Plan. No amendment or termination of the Plan shall adversely affect any
outstanding option without the consent of the holder thereof.
Adjustments in Event of Change in Common Stock
The Committee will make or provide for such adjustments in the number of
shares of Common Stock covered by outstanding options, the exercise price of any
such options, and the kind of shares (including shares of another issuer)
covered thereby, as the Committee in good faith determines to be equitably
required in order to prevent dilution or expansion of the rights of option
holders that otherwise would result from (a) any stock dividend, stock split,
combination of shares, recapitalization or other change in the capital structure
of the Company, or (b) any merger, consolidation, spin-off, spin-out, split-off,
split-up, reorganization, partial or complete liquidation or other distribution
of assets, issuance of warrants or other rights to purchase securities or any
other corporate transaction or event having an effect similar to any of the
foregoing. The Committee may also make or provide for such adjustments in the
maximum number of shares of Common Stock reserved hereunder or the number of
shares specified for each grant as the Committee may in good faith determine to
be appropriate in order to reflect any transaction or event requiring such
adjustment.
ERISA
The Plan is not an employee benefit plan that is subject to the provisions
of the Employee Retirement Income Security Act of 1974, as amended, and the
provisions of Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), are not applicable to the Plan.
Non-Statutory Common Stock Options
All options granted under the Plan will be non-statutory options not
entitled to special tax treatment under Section 422 of the Code.
Effective Date of the Plan
The Plan took effect upon its adoption by the Board on October 29, 1996.
Any grants, however, will be void in the event that shareholder approval of the
Plan is not obtained by October 29, 1997.
10
Plan Benefits
The table below illustrates options that have been granted to all
non-employee directors (who are the only persons eligible to receive grants
under the Plan) as of the date hereof:
Plan Benefits Previously Granted
--------------------------------
Dollar Value ($) Number of Shares
---------------- ----------------
All Non-Employee
Directors (6 persons) (1) 30,000
- -------------------
(1) Stock options are granted under the Plan at exercise prices equal to
the fair market value of the Common Stock on the date of grant. The actual
value, if any, a person may realize will depend on the excess of the fair market
value over the exercise price on the date the option is exercised. All currently
outstanding options under the Plan were granted at an exercise price of $3.25.
On March 31, 1997, the last reported sale price for the common stock on The
NASDAQ Stock Market was $3.25.
Vote Required to Approve the Plan
The affirmative vote of holders of a majority of the Common Stock is
required to approve the Plan.
The Board of Directors recommends a vote FOR the approval of the Plan.
3. RATIFICATION OF INDEPENDENT ACCOUNTANTS
One of the purposes of the Meeting is to ratify the selection by the Board of
Directors of Arthur Andersen LLP, independent public accountants, to audit the
books, records, and accounts of the Company and its subsidiaries for the year
ending December 31, 1997. This firm has audited the financial statements of the
Company since 1974.
A representative from Arthur Andersen LLP is expected to be present at the
Meeting and will have the opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases space for its principal offices, as well as the principal
offices of certain of its subsidiaries, in an office building located at 4370
Peachtree Road, N.E., Atlanta, Georgia, from Delta Life Insurance Company, a
corporation owned by Mr. Robinson and members of his immediate family, under
leases expiring May 31, 2002 and July 2005. Under the terms of the lease, the
Company occupies approximately 54,637 square feet of office space as well as
covered parking garage facilities at an annual rental of approximately $513,686,
plus a pro rata share of all real estate taxes, general maintenance, and service
expenses and insurance costs with respect to the office building and other
facilities, which are made available to the Company at no additional rent. The
terms of the lease are believed by management of the Company to be comparable to
terms which could be obtained by the Company from unrelated parties for
comparable rental property.
Effective December 31, 1995, an aggregate of $13.4 million in principal amount
of the 8% and 9 1/2% demand notes were canceled in exchange for the issuance by
the Company of an aggregate of 134,000 shares of a new series of preferred stock
(the "Series B Preferred Stock"), which has a stated value of $100 per share and
accrues interest at 9% per year. At December 31, 1996, the Company had accrued
but unpaid dividends on the Series B Preferred Stock totaling $1,206,000.
In addition, Mr. Robinson and members of his immediate family hold an aggregate
of 30,000 shares of another series of convertible preferred stock, with a stated
value of $100 per share, on which dividends are paid at the rate of 10-1/2% per
year (see beneficial ownership table).
On April 8, 1996, the Company sold the approximately 82% interest it held
directly in Leath Furniture, LLC (f/k/a Leath Furniture, Inc.) ("Leath"), to
Gulf Capital Services, Ltd. ("Gulf Capital"). The aggregate purchase price was
approximately $5.3 million. The Company used the cash proceeds from the
11
transaction to repay the remaining $5.3 million in indebtedness owed by the
Company to certain affiliates of Mr. Robinson. Gulf Capital is a partnership in
which Mr. Robinson is the general partner and certain of his affiliates are the
limited partners. In connection with the transaction, The Robinson-Humphrey
Company, Inc. delivered an opinion to the Board of Directors that the
consideration received by the Company was fair to the Company, from a financial
point of view.
Certain of the Company's subsidiaries have made loans, in an aggregate principal
amount of approximately $6.4 million, to Leath, which are secured by mortgages
on certain properties owned by Leath. The loans bear interest at 9 1/4% per
annum, are payable in monthly installments, and mature on December 1, 2016.
During 1996, Leath made principal and interest payments on such notes to the
Company's subsidiaries in the aggregate amount of $687,958.
Mr. Hudgins, a director of the Company, has entered into a consulting agreement
with the Company which provides for payment of an hourly fee. During 1996, Mr.
Hudgins received no fees pursuant to this agreement.
Mr. Wyant, a director of the Company, is Of Counsel to the law firm of Jones,
Day, Reavis & Pogue, which firm serves as counsel to the Company.
The Company has entered into a consulting agreement with Dr. Whaley, effective
January 1, 1997, pursuant to which Dr. Whaley will provide certain medical
consulting and advisory services to the Company's subsidiaries. Pursuant to the
agreement, which expires December 31, 1999, Dr. Whaley will receive $10,000 per
year for such services.
OTHER BUSINESS
Management of the Company knows of no other matters than those stated above
which are to be brought before the meeting. However, if any such other matters
should be presented for consideration and voting, it is the intention of the
persons named in the proxies to vote thereon in accordance with their best
judgment.
SHAREHOLDER PROPOSALS
Shareholder proposals to be presented at the next annual meeting must be
received by the Company no later than December 17, 1997, in order to be
considered for inclusion in the proxy statement and proxy for the 1997 annual
meeting. Any such proposal should be addressed to the Company's president and
mailed to 4370 Peachtree Road, N.E., Atlanta, Georgia 30319-3000.
12
ANNEX A
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ATLANTIC AMERICAN CORPORATION
1996 Director Stock Option Plan
1. Purpose. The purpose of this Plan is to attract and retain directors for
Atlantic American Corporation, a Georgia corporation (the "Corporation"), and to
provide such persons with incentives and rewards for superior performance.
2. Definitions. As used in this Plan:
"Board" means the Board of Directors of the Corporation.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the committee of the Board described in Section 3 of the
Plan.
"Director" means a member of the Board.
"Disability" means the condition of an Optionee which renders such
Optionee unable to engage in any substantial gainful activities by reason of any
medically determinable physical or mental impairment that can be expected to
result in death or that has lasted or can be expected to last for a continuous
period of not less than twelve (12) months. An Optionee will not be considered
to be subject to a Disability until he furnishes a certification from a
practicing physician in good standing to the effect that such Director meets the
criteria described in this definition.
"Eligible Directors" mean all Directors except for those who are employees
of the Corporation or any Subsidiary of the Corporation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Fair Market Value" means the greater of (i) the stated par value of the
Stock or (ii) the arithmetic mean of the highest and lowest sale prices of the
shares of the Corporation's Stock as reported on The NASDAQ Stock Market's
National Market System on (a) the relevant date for valuation or (b) if there
are no such sales on such date, the nearest preceding date upon which such sales
took place.
"Option" means an option to purchase shares of Stock, granted pursuant to
the Plan and subject to the terms and conditions described in the Plan.
"Optionee" means a Director who has been granted an Option pursuant to the
Plan.
"Plan" means the Atlantic American Corporation 1996 Director Stock Option
Plan, as amended from time to time pursuant to Section 7.
"Stock" means the Corporation's common stock, par value $.01 per share.
"Subsidiary" means any corporation in which the Corporation owns or
controls directly or indirectly more than 50 percent of the total combined
voting power represented by all classes of stock issued by such corporation at
the time of such grant.
3. Administration. The Plan will be administered by a committee comprised of
not less than two Directors, each of whom is a Non-Employee Director as that
term is defined under Rule 16b-3 of the Securities Exchange Act of 1934, as
amended (the "Committee"). Notwithstanding the foregoing, grants of Options will
be automatic as described in Section 5, and the Committee will have no
authority, discretion or power to determine the terms of the Options to be
granted, the number of shares of Stock to be issued thereunder or the time at
which such Options are to be granted, or to establish the duration and nature
of Options, except in the sense of administering the Plan subject to the
provisions of the Plan. The Committee will have the power to interpret the Plan,
to determine all questions thereunder and to adopt and amend such rules and
regulations for the administration of the Plan as they may deem desirable. Any
interpretation, determination, or other action made or taken by the Committee
will be final, binding and conclusive. None of the members of the Committee may
be personally liable for any interpretation, determination or other action made
in good faith with respect to the Plan or the Options.
13
4. Shares Subject to the Plan.
Class. The shares that are to be made the subject of Options granted under
-----
the Plan will be the Corporation's Stock, which may be authorized but unissued
shares or treasury shares. In connection with the issuance of Stock under the
Plan, the Corporation may repurchase Stock in the open market or otherwise.
Aggregate Amount. Subject to Section 8(a), the total number of shares of
-----------------
Stock authorized for issuance pursuant to Options granted under the Plan will
not exceed 200,000 shares. If any outstanding Option expires or terminates prior
to exercise for any reason, then the Stock allocable to the unexercised portion
of such Option will not be charged against the limitation of this Section 4(b)
and may again become the subject of an Option granted under the Plan.
5. Terms, Conditions and Form of Options. Each Option granted under the Plan
must be evidenced by a written agreement (the "Agreement") in such form as the
Committee will from time to time approve, which Agreement must comply with and
be subject to the following terms and conditions:
Option Grants. Each Eligible Director will be granted an Option to purchase
-------------
5,000 shares of Stock on the date of adoption of this Plan by the Board. Each
person who is first elected to the Board after the date of adoption of this Plan
by the Board, and who is an Eligible Director, will be automatically granted, on
the date such person first takes office as a Director and without further action
by the Board, an Option to purchase 5,000 shares of Stock. In addition, on the
date of the first regular meeting of the Board following the annual meeting of
the Corporation's stockholders in each year (commencing in the year after which
the Plan becomes effective pursuant to Section 8(e)), each Eligible Director on
such date will automatically be granted an Option to purchase 1,000 shares of
Stock, without further action by the Board.
Exercise Period. Each Option, unless terminated, will become exercisable
----------------
to the extent of 100% of the Stock subject thereto commencing six months after
the date of grant; provided, that the Optionee has continuously served as a
Director through such date; provided further, however, that any Option granted
pursuant to the Plan will become exercisable in full upon the Optionee's death
or Disability. Options will terminate five years from the date of grant;
provided, however, that in the event any Eligible Director ceases to be a
Director for any reason other than death or Disability, all Options granted to
such Eligible Director under this Plan will terminate 90 days following the date
such Eligible Director ceases to be a Director. To the extent exercisable, an
Option may be exercised in full or in part.
Exercise Price. The price per share of Stock at which an Option may be
--------------
exercised will be equal to the Fair Market Value on the date the Option is
granted pursuant to Section 5(a).
Exercise Procedure. Options may be exercised (in full or in part) from
-------------------
time to time by written notice to the Corporation at its principal office
specifying the number of shares of Stock with respect to which the Option is
being exercised and accompanied by payment of the exercise price for the shares
with respect to which the Option is being exercised (a) in cash, or by check
acceptable to the Corporation, (b) by transfer to the Corporation of shares of
Stock that have been owned by the Optionee for more than six months prior to the
date of exercise and that have a Fair Market Value on the date of exercise equal
to such exercise price, or (c) by a combination of such methods of payment. The
requirement of payment in cash will be deemed satisfied if the Optionee has made
arrangements satisfactory to the Corporation with a broker who is a member of
the National Association of Securities Dealers, Inc. to sell on the exercise
date a sufficient number of the shares of Stock being purchased so that the net
proceeds of the sale transaction will at least equal the exercise price of the
shares of Stock being purchased, and pursuant to which the broker undertakes to
deliver the full exercise price to the Corporation not later than the date on
which the sale transaction will settle in the ordinary course of business.
Options Non-Transferable. No option granted under the Plan may be
------------------------
transferable other than by will or the laws of descent and distribution without
the prior approval of the Committee. No interest of any Optionee under the Plan
may be subject to attachment, execution, garnishment, sequestration, the laws of
bankruptcy or any other legal or equitable process. Except as provided by the
Committee in the case of a transferable option, during the lifetime of the
Optionee, Options will be exercisable only by the Optionee who received them or,
in the event of the Optionee's incapacity, including incapacity on account of
Disability, by the Optionee's guardian or legal representative acting in a
fiduciary capacity.
14
Death of Optionee. Except as provided by the Committee in the case of a
-----------------
transferable option, in the case of death, Options may be exercised by the
person or persons to whom the Optionee's rights under the Option pass by will or
applicable law or, if no person has such rights, by the Optionee's executors or
administrators.
No Rights as Shareholder. No Optionee will have any rights as a shareholder
------------------------
with respect to any shares subject to Options prior to the date of issuance to
such person of a certificate or certificates for such shares.
6. Compliance with Other Laws and Regulations. The Plan, the grant and
exercise of Options under the Plan, and the obligation of the Corporation to
transfer shares under such Options will be subject to all applicable federal and
state laws, rules and regulations, including those related to disclosure of
financial and other information to Optionees, and to any approvals by any
government or regulatory agency as may be required. The Corporation will not be
required to issue or deliver any certificates for shares of Stock prior to (a)
the listing of such shares on any stock exchange or The NASDAQ Stock Market's
National Market System on which the Stock may then be listed, where such listing
is required under the rules or regulations of such exchange or system, and (b)
the compliance with applicable federal and state securities laws and regulations
relating to the issuance and delivery of such certificates; provided, however,
-------- -------
that the Corporation will make all reasonable efforts to so list such shares and
to comply with such laws and regulations.
7. Amendment and Discontinuance. The Board may from time to time amend,
suspend or discontinue the Plan. No amendment or termination of the Plan shall
adversely affect any outstanding Option without the consent of the Optionee.
8. General Provisions.
Adjustments in Event of Change in Stock. The Committee will make or provide
---------------------------------------
for such adjustments in the number of shares of Stock covered by outstanding
Options, the exercise price of any such Options, and the kind of shares
(including shares of another issuer) covered thereby, as the Committee in good
faith determines to be equitably required in order to prevent dilution or
expansion of the rights of Optionees that otherwise would result from (a) any
stock dividend, stock split, combination of shares, recapitalization or other
change in the capital structure of the Corporation, or (b) any merger,
consolidation, spin-off, spin-out, split-off, split-up, reorganization, partial
or complete liquidation or other distribution of assets, issuance of warrants or
other rights to purchase securities or any other corporate transaction or event
having an effect similar to any of the foregoing. The Committee will also make
or provide for such adjustments in the maximum number of shares of Stock
specified in Section 4(b) of the Plan and the number of shares of Stock
specified in Section 5(a) of the Plan as the Committee may in good faith
determine to be appropriate in order to reflect any transaction or event
described in this Section 8(a).
No Right to Continue as a Director. Neither the Plan, the granting of an
----------------------------------
of an Option nor any other action taken pursuant to the Plan may constitute or
be evidence of any agreement or understanding, express or implied, that the
Corporation will retain a Director for any period of time or at any particular
rate of compensation.
ERISA. The Plan is not an employee benefit plan that is subject to the
-----
provisions of ERISA and the provisions of Section 401(a) of the Code are not
applicable to the Plan.
Non-Statutory Stock Options. All Options granted under the Plan will be
---------------------------
non-statutory options not entitled to special tax treatment under Section 422 of
the Code.
Effective Date of the Plan. The Plan will take effect upon its adoption
---------------------------
by the Board. Any grants, however, will be null and void in the event that
stockholder approval of the Plan is not obtained within twelve (12) months of
such effective date.
Governing Law. The Plan and all interpretations and determinations made and
-------------
actions taken pursuant hereto will be governed by the laws of the State of
Georgia without regard to the choice of law provisions thereof.
Variation of Pronouns. All pronouns and any variations thereof contained
---------------------
herein will be deemed to refer to masculine, feminine, neuter, singular or
plural, as the identity of the person or persons may require.
15
