SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
American Public Holdings, Inc.
----------------------------------
(Exact name of registrant as specified in its charter)
Mississippi 64-0874171
- -------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
2305 Lakeland Drive, Jackson, Mississippi 39208
- --------------------------------------- --------------------------
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (601) 936-6600
--------------------
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
------------------------------------------
(Title of each class)
<PAGE>
Item 1. Business.
American Public Holdings, Inc. (the "Company") is a Mississippi
business corporation organized on December 21, 1995 by American Public Life
Insurance Company ("American Public Life"), also a Mississippi corporation. The
Company was formed to serve as a holding company for American Public Life.
On February 20, 1996 the Mississippi Commissioner of Insurance approved
an Agreement and Plan of Exchange (the "Plan of Exchange") pursuant to which
American Public Life would become a wholly-owned subsidiary of American Public
Holdings, Inc., and each share of outstanding American Public Life Common Stock
would be converted into one share of Company Common Stock. The Plan of Exchange
was approved by the stockholders of American Public Life at a Special Meeting
held on October 29, 1996 and became effective on November 30, 1996.
American Public Life is a Mississippi life and health insurance
company, which began operations in 1945. It is licensed to do business in
twenty-one (21) states. American Public Life specializes in supplemental health
insurance products, including cancer, accident, intensive care, heart
attack/stroke and dental insurance policies. American Public Life also offers
whole life and term life insurance contracts.
The following table sets forth earned premiums by product line for the
last three years ended December 31.
<TABLE>
Year ended December 31,
----------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Premium revenue:
Cancer $18,154,674 $18,300,716 $17,360,977
Life insurance 552,908 578,342 614,700
Accident 1,149,841 1,202,815 1,241,577
DentaCare (Dental) 4,906,975 4,296,655 3,889,010
Group Accident & Health 993,026 693,629 778,103
Other Accident & Health 312,424 313,814 288,523
---------- ---------- ---------
$26,069,848 $333,385,971 $24,172,890
=========== ============ ===========
1
<PAGE>
Underwriting income:
Life insurance $ (346,527) $ (269,699) $ (324,671)
Accident & Health (1,719,138) (2,901,606) (1,473,144)
Investment income 2,387,010 2,300,624 2,214,311
Other income 26,067 28,129 38,594
Realized investment gains (80,291) (82,117) (5,235)
--------- ----------- ---------
Income (loss) before income tax provision $ 267,121 $ (924,669) $ 449,855
============ ============= ===========
</TABLE>
The following is a discussion of the characteristics of the categories of
insurance currently marketed or in force. Products are described in general
terms as there are many variations resulting principally from differing state
laws and regulations.
Life Insurance
American Public Life conducts its life insurance business on a
non-participating basis. A simple issue term life policy is also written on a
payroll deduction basis. American Public Life is licensed to write insurance in
21 states. The following table indicates those states which accounted for 5% or
more of the total direct premiums collected by American Public Life during 1996.
<TABLE>
<S> <C> <C>
Alabama $32,188 5.30%
Arkansas 47,697 7.85%
Louisiana 106,105 17.46%
Mississippi 242,276 39.86%
Oklahoma 40,810 6.71%
Texas 63,929 10.52%
Others 74,871 12.30%
-------- ------
Total 607,876 100.00%
======= ======
</TABLE>
Term life insurance policies provide death benefits if the insured's death
occurs during the specific premium paying term of the policy and generally do
not include a savings or investment element in the policy premium. Whole life
insurance policies provide death benefits which are payable under effective
policies regardless of the time of the insured's death and have a savings and
investment element which may result in the accumulation of a cash surrender
value.
2
<PAGE>
The following table sets forth certain information concerning the
development of American Public Life's life insurance business.
<TABLE>
Year Ended December 31,
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Life insurance in force at the end of period:
Ordinary - whole life $35,285 $33,144 $33,804
-term 15,390 18,476 22,624
Industrial 0 0 0
Other 0 0 0
----------- ----------- -----------
Total $50,675 $51,620 $56,428
======= ======= =======
New life insurance issued:
Ordinary - whole life 3,191 2,474 2,649
- term 678 2,692 3,038
Industrial 0 0 0
Other 0 0 0
------------ ------------ ------------
Total $ 3,869 $ 5,166 $ 5,687
========== ========== ==========
Premium Income $ 553 $ 578 $ 615
======== ======== ========
</TABLE>
Accident and Health Insurance
American Public Life is licensed to write accident and health insurance
in 21 states. The following table indicates those states which accounted for 5%
or more of the total direct premiums collected by American Public Life during
1996.
<TABLE>
<S> <C> <C>
Alabama $1,267,179 4.96%
Louisiana 8,374,791 32.77%
Mississippi 5,973,363 23.38%
Oklahoma 2,699,177 10.56%
Texas 4,154,750 16.26%
Others 3,083,401 12.07%
--------- ------
Total $25,552,661 100.00%
========== ======
</TABLE>
American Public Life's accident and health product lines include:
individual cancer indemnity, accident indemnity, heart attack/stroke and dental
coverage. Additionally, American Public Life offers group products such as group
hospital, group disability and group dental.
3
<PAGE>
American Public Life's marketing structure currently consists of 53
general agents and 725 soliciting agents. The majority of its sales are derived
from the payroll deduction market. Its primary product lines consist of
supplemental health insurance, dental insurance and disability income products.
Investments
American Public Life is regulated as to the types of investments which it
can make and the amount of funds which it may maintain in any one type of
investment. American Public Life's investment policy emphasizes investment grade
corporate bonds, political subdivision bonds, mortgage backed securities issued
by government agencies and United States Treasury securities. Investment real
estate and mortgage loans are gradually being liquidated as markets present
themselves.
The following table sets forth certain information concerning American
Public Life's investments at the dates shown.
<TABLE>
Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Securities:
Available for sale $32,720,388 --- ---
Held to maturity --- $31,084,657 $28,200,395
Mortgage loans on real estate 1,075,268 1,257,771 1,397,586
Investment real estate 781,542 710,326 741,430
Policy loans 1,600,398 1,641,192 1,782,211
Short-term investments --- 15,000 890,000
----------------- -------------- -------------
Total investments $36,177,596 $34,708,946 $33,011,622
=========== =========== ===========
The results with respect to the foregoing investments are as follows:
Net investment income $2,387,010 $2,300,624 $2,214,311
Net realized losses on investments
(before income taxes) (80,291) (82,117) (5,235)
Average yield on investments 6.73% 6.79% 6.91%
Economic yield on investments
(includes realized and unrealized capital gains) 6.51% 6.55% 6.89%
</TABLE>
As of December 31, 1996 the maturity schedule for all bonds and notes
held by American Public Life at amortized cost was as follows:
4
<PAGE>
<TABLE>
<CAPTION>
Maturity Schedule
Amortized
Maturity Cost Percentage of Total
<S> <C> <C>
Due in one year or less $ 500,000 1.54%
Due in one to five years 399,979 1.24%
Due in five to ten years 4,057,443 12.52%
Due after ten years 5,243,585 16.18%
----------- ---------
10,201,007 31.48%
Mortgage-backed securities 22,205,121 68.52%
----------- ---------
$32,406,128 100.00%
=========== =========
</TABLE>
Actual maturities may differ from contractual maturities because of the
borrowers' right to call or prepay obligations.
Marketing and Distribution
American Public Life's insurance products are marketed through an
independent field force of 53 general agents and 725 producing agents. The
American Public Life marketing department provides training support to its field
force on a periodic basis throughout the year. Agents are compensated through
the payment of commissions which are calculated as a percentage of collected
premium revenue.
The following agencies have accounted for more than 10% of the new
coverage issued in the past few years.
<TABLE>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Clinton %, Ruston, LA 11% 12% 9%
Benoit %, Kenner, LA 31% 23% 13%
MGM %, Plano, TX 23% 29% 27%
</TABLE>
These percentages generally reflect the percentage of distribution of premium
income.
Reserve Liabilities
American Public Life maintains reserves for future policy benefits to
meet future obligations under outstanding policies. These reserves are
calculated by an independent actuarial firm, Wakely and Associates, and are
certified to be sufficient to meet policy and contract obligations as they
mature. Liabilities for future policy benefits are calculated using assumptions
for interest, mortality, morbidity, expense and withdrawals determined at the
5
<PAGE>
time the policies were issued. As of December 31, 1996, the total reserves of
American Public Life were $34,653,694. American Public Life believes that such
reserves for future policy benefits were calculated in accordance with generally
accepted actuarial methods and that such reserves are adequate to provide for
future policy benefits with respect to American Public Life.
Underwriting Activities
American Public Life maintains an underwriting department which seeks
to evaluate the risks associated with the issuance of an insurance policy.
American Public Life's underwriting and policy issue department is staffed by 7
employees. The department is responsible for data entry, underwriting and policy
issue. Underwriters determine whether an application is accepted or declined.
The underwriting process consists of a review of the information contained in
the application in conjunction with information obtained through the medical
information bureau (MIB), and through its review of medical histories furnished
upon request.
American Public Life conducts some telephone interviews to verify the
information on the application and to obtain such additional information as to
enable American Public Life to make an assessment of the applicant's functional
and cognitive capacities. American Public Life does not require physical
examinations as part of the underwriting process, as this is not generally
required for the type of coverages offered.
Claims Administration
Claims under American Public Life's policies are administered by a
claims department comprised of 15 employees. The claim adjudication process
principally includes verification of coverage, analysis of medical records,
interpretation of policy language and computation and payment of benefits.
American Public Life utilizes a physician who provides advice and direction with
regard to medical matters as they relate to American Public Life's claim
adjudication process.
Regulation
American Public Life is subject to regulation by the insurance
departments of those states in which it is licensed to conduct business.
Although the extent of regulation varies from state to state, the insurance laws
of the various states generally establish supervisory departments having broad
administrative powers with respect to, among other matters, the granting and
revocation of licenses to transact business, the licensing of agents, the
establishment of standards of financial solvency, including reserves to be
maintained, the nature of investments and, in most cases, premium rates, the
approval of forms and policies and the form and content of financial statements.
These regulations have as their primary purpose the protection of policyholders
and do not necessarily confer a benefit upon stockholders.
6
<PAGE>
Most states in which American Public Life operates have laws which
require that insurers become members of guaranty associations. These
associations guarantee that benefits due policyholders of insurance companies
will continue to be provided even if the insurance company which wrote the
business is financially unable to fulfill its obligations. To provide these
benefits, the associations assess the insurance companies licensed in a state to
write that type of insurance for which coverage is guaranteed. The amount of an
insurer's assessment is generally based on the relationship between that
company's premium volume in the state and the premium volume of all of the
companies writing the particular type of insurance in the state.
American Public Life is subject to periodic financial and market
conduct examinations. The last completed financial examination of American
Public Life was conducted by the Mississippi Insurance Department for the period
ended December 31, 1992. American Public Life is currently under examination for
the three-year period ended December 31, 1995. In addition, American Public Life
is subject to state imposed mandatory annual audits by independent certified
public accountants. These are conducted by the Company's independent public
accounting firm in conjunction with its audit of the Company's financial
statements.
The maximum amount of dividends which can be paid by Mississippi
insurance companies to stockholders without prior approval of the Insurance
Commissioner is subject to restrictions relating to statutory surplus. The
maximum dividend payout which may be made without prior approval is the lesser
of 10% of the prior years' capital and surplus or the prior year's net income.
Premiums
Premium rates for all of American Public Life's products are generally
subject to state regulation. Premium regulations vary greatly among
jurisdictions and product lines. Rates are established by American Public Life's
consulting actuary and are reviewed by the regulatory authorities in most
states. Rate changes must generally be filed and approved by these authorities.
Competition
American Public Life is engaged in highly competitive businesses and
competes with many insurance companies of substantially greater financial
resources, including stock and mutual insurance companies. Mutual insurance
companies return profits, if any, to policyholders rather than stockholders;
therefore, mutual insurance companies may be able to charge lower net premiums
than those charged by stock insurers. Accordingly, stock insurers such as
American Public Life must attempt to achieve competitive premium rates through
greater volume, efficiency of operation and control of expenses. A large number
of insurance companies are licensed to sell accident and health insurance,
cancer insurance, and dental insurance. These include substantially all of the
major carriers in the United States. A number of these companies specialize in
supplemental health insurance and may have
7
<PAGE>
considerably greater financial resources and larger networks of agents than
American Public Life.
American Public Life competes with insurers which offer similar
policies in attracting new agents and attempts to attract and maintain agents
through a combination of competitive products, competitive agent commission
rates and quality underwriting and claims service. Management believes that
flexibility and sensitivity to changes in the marketplace are a major
consideration in competing for business.
Number of Employees
The Company employs a total of 91 persons as follows:
Accounting 15
Financial & Data Processing 7
Marketing 12
Legal & Compliance 9
Claims 15
Policy Service 25
All Other 9
----
91
Business Acquisitions
The Company's growth strategy includes the investigation and evaluation
of acquisition opportunities with respect to existing blocks of insurance
business underwritten by other companies. It is anticipated that these
acquisitions will allow the Company to increase business in force without
incurring high first year commission and administrative expenses associated with
business produced directly by agents. No such acquisitions have been completed
recently. Management intends to continue to evaluate acquisition opportunities
as they arise. However, there can be no assurance that any acquisition
opportunities will arise or that the Company will be successful in completing
any such acquisitions.
8
<PAGE>
Item 2. Financial Information.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
For the year ended December 31,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Revenues:
<S> <C> <C> <C> <C> <C>
Premiums $26,069,848 $25,385,971 $24,172,890 $19,713,300 $21,300,631
Net investment income 2,387,010 2,300,624 2,214,311 2,338,180 2,351,929
Realized investment gains (losses) (80,291) (82,117) (5,235) 869 339,381
Other income 26,067 28,129 38,594 31,249 35,071
Benefits and expenses:
Benefits, claims, losses and
settlement expenses 17,650,892 18,025,211 16,957,140 12,238,126 12,756,312
Expenses 10,484,621 10,532,065 9,013,565 8,522,253 8,863,845
Income (loss) before income tax
provision (benefit) 267,121 (924,669) 449,855 1,323,219 2,406,855
Income tax provision (benefit) 17,328 (337,013) (105,545) 432,430 763,050
Net income (loss) 249,793 (587,656) 555,400 899,789 1,643,805
Net income (loss) per share 4.65 (10.67) 10.03 16.26 29.69
Other selected financial data:
Stockholders' equity 16,229,497 16,597,309 17,663,109 16,048,507 17,407,462
Book value per share 307.13 303.51 319.07 289.92 314.46
Dividends per share 4.70 4.70 5.59 0.00 5.32
Total assets 52,277,519 51,724,155 51,281,469 47,444,179 50,015,268
</TABLE>
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth the Company's condensed statement of
operations for the years ended December 31, 1992 through 1996, expressed as a
percentage of total revenues.
<TABLE>
Year ended December 31,
1996 1995 1994 1993 1992
------ ------ ------ ------ -----
Revenues:
<S> <C> <C> <C> <C> <C>
Premiums 91.8% 91.9% 91.5% 88.7% 89.3%
Net investment income 8.4% 8.3% 8.4% 9.8% 10.6%
Other (.2)% (.2)% .1% 1.5% .1%
-------- -------- -------- -------- -------
Total revenues 100.0% 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------ ------
Benefits and expenses:
Benefits, claims, losses and
settlement expenses 62.1% 65.2% 64.2% 53.1% 55.4%
Commission expense 8.3% 8.3% 9.1% 9.8% 9.5%
Salaries and benefits 9.1% 8.2% 8.0% 8.1% 8.6%
Amortization of deferred policy
acquisition costs 11.0% 13.1% 9.2% 12.0% 13.6%
Other operating expenses 8.6% 8.5% 7.8% 7.0% 6.9%
------- ------- ------- -------- --------
Total benefits and
expenses 99.1% 103.3% 98.3% 90.0% 94.0%
------- ------ ------- ------- -------
Income before income taxes .9% (3.3)% 1.7% 10.0% 6.0%
Provision for federal income taxes .1% (1.2)% (.4)% 3.2% 1.9%
------- ------ ----- ------- -------
Net income .8% (2.1)% 2.1% 6.8% 4.1%
======= ====== ==== ======= =======
</TABLE>
Premium income has shown an increase in each year illustrated. Prior to
1994, cancer insurance was the only significant product sold in volume by the
agents of the Company. In the fourth quarter of 1993, the Company acquired an
existing block of dental business, and this acquisition contributed to premium
growth in the years 1994, 1995, and 1996. Rate increases on cancer insurance
have also contributed to the increase in premium income. The components of
annualized premiums in force are summarized below:
10
<PAGE>
<TABLE>
<CAPTION>
Annualized Premiums In Force
(In thousands)
Year ended December 31, Percentage change
1996 1995 1994 1993 1996 vs. 1995 1995 vs. 1994 1994 vs. 1993
------ ------ ------ ------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cancer $19,694 $19,271 $19,159 17,600 2.20% .58% 8.86%
Denta Care 5,466 4,132 4,075 4,000 32.28 1.40 1.88
Accident 1,130 1,195 1,256 1,389 (5.44) (4.86) (9.58)
Life insurance 415 442 479 563 (6.11) (7.72) (14.92)
Other 284 281 157 190 1.07 78.98 (17.37)
Group 1,513 1,109 764 884 36.43 45.16 (13.57)
------ ------ ------- ---- ----- ------- --------
Total annualized
premium
in force $28,502 $26,430 $25,890 24,626 7.84% 2.09% 5.13%
======= ======= ======= ====== ===== ===== =====
</TABLE>
As the above table illustrates, annualized cancer premium has continued to rise,
but this is primarily attributed to rate increases assessed on policyholders. In
1995 the Company discontinued sales of unlimited chemotherapy cancer products
due to higher claim costs. As a result, the sales of cancer products plummeted.
The void created by lower cancer sales has been replaced with sales of dental
insurance and supplemental group health insurance, such as group dental and
group disability.
Total new business premiums are summarized by line of business below:
<TABLE>
<CAPTION>
New Business Summary
(In thousands)
Year ended December 31, Percentage change
----------------------------------------------- ----------------------------
1996 1995 1994 1993 1996 vs. 1995 1995 vs. 1994
------ ------ ------ ------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Cancer $ 708 $1,785 $2,990 $2,791 (60.34)% (40.30)%
Denta Care 2,095 1,590 1,268 83 31.76 25.39
Accident 364 520 432 694 (30.00) 20.37
Life insurance 45 46 57 62 (2.17) (19.30)
Other 163 245 248 270 (33.47) (8.15)
Group 1,372 372 283 602 268.82 (53.00)
------- ------- ------- ------- ----------- ----------
Total annualized $4,747 $4,558 $5,278 $4,502 4.15% (13.64)%
====== ====== ====== ====== ========== ========
premium solicited
</TABLE>
Net investment income has increased each year, with the exception of
1994. The Company's purchase of a new home office in the first quarter of 1994
caused a significant reduction in availability of funds for short term
investment. The increases in investment income are attributable to investment
yields on additional cash flow made available each year from operations.
The Company's investment policy is to invest in state and federal
obligations as well as corporate obligations with a Standard & Poors rating of
"BBB" or greater. In 1996 the
11
<PAGE>
Company discontinued the purchase of government agency, mortgage-backed
securities and disposed of a significant amount of government agency,
mortgage-backed securities, and shifted these funds into bonds with short to
medium maturities. Such government agency, mortgage-backed securities continue
to be the largest component of the portfolio. Because of prepayments, such
securities present a greater interest rate risk than traditional fixed income
securities. The intent of the effort to change the mix of the portfolio is to
reduce the risk, volatility and active management required of the portfolio
since a change in market interest rates results in a related change in such
securities' prepayment risk.
The Company experienced realized investment losses in the years 1996,
1995, and 1994. The investment losses are the result of partial liquidations of
non-performing real estate holdings. The realized gains from 1993 are the result
of a one-time exchange of government backed mortgage securities.
Benefits, claims, losses and settlement expenses which is the sum of
claims paid and changes in reserves for claims and future policy benefits, has
shown increases each year, with the exception of 1996. The components of
benefits, claims, losses and settlement expenses are as follows:
<TABLE>
<CAPTION>
Benefits To Policyholders
(In thousands)
Year ended December 31, Percentage change
-----------------------------------------------------------------------------------
1996 1995 1994 1993 1996 vs. 1995 1995 vs. 1994
---- ------ ------ ------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paid claims $16,672 $16,185 $15,620 $12,417 3.0% 3.6%
Reserve increase 979 1,840 1,337 339 (46.8)% 37.6%
--------- -------- -------- ---------
Total benefits $17,651 $18,025 $16,957 $12,756 (2.1)% 6.3%
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Benefits to Policyholders
As a % of Total Premium
1996 1995 1994 1993
------ ----- ------ -----
<S> <C> <C> <C> <C>
Paid claims 63.95% 63.75% 64.62% 58.29%
Reserve increase 3.76% 7.25% 5.53% 1.59%
---------- ---------- ---------- ----------
Total benefits 67.71% 71.00% 70.15% 59.88%
========= =========== =========== ===========
</TABLE>
Claims have increased due to increased costs in cancer treatments such
as chemotherapy. Also, the Company's expansion into other products such as
dental insurance has exposed it to products with high claim utilization costs.
The Company's de-emphasis of cancer insurance over the last several years has
resulted in a drop in policies in force and policy reserves in 1996.
12
<PAGE>
Commission expense has increased in proportion to the increase in
premium income. However, the percentage of commission expense to premium income
has decreased because the Company does not pay commission on cancer premium rate
increases and also the Company has shifted its focus to product lines which pay
lower commissions.
Salaries and benefits have increased due to the staffing requirements
needed to service the block of dental coverages acquired in 1993. Additionally,
the Company is attempting to increase the level of employee compensation to be
more competitive in its recruitment of qualified personnel. The Company's salary
costs is somewhat high due to its shrinking volume of policies in force and the
labor intensive methods utilized in administrative procedures.
Amortization of deferred policy acquisition costs has been affected in
recent years by decreases in the Company's in force policy count. The
amortization of deferred policy acquisition cots are accelerated when the number
of policies terminated exceed policies issued each year. A continual decrease in
policies in force each year has been a trend over the past several years.
Other operating expenses decreased $76,650 in 1996 and increased
$294,325 in 1995. In 1996 the Company closed its off-site dental administration
office. In 1995 the Company incurred significant expenses related to a limited
benefit offer made to policyholders as opposed to a rate increase. These costs
are somewhat high due to the shrinking volume of policies in force.
Liquidity and Capital Resources
The Company's primary sources of cash are premiums and investment
income. Its primary uses of cash are benefit payments, policy acquisition costs
and operating expenses. At December 31, 1996 and 1995, 100% of the Company's
investments were in fixed maturity securities, mortgage loans, investment real
estate, policy loans and short-term certificates of deposit. Total investments,
combined with cash and cash equivalents, increased to $36,780,066 at December
31, 1996, compared to $35,010,048 at December 31, 1995, due to increases in
operational cash flow.
Prior to the acquisition of American Public Life by the Company,
American Public Life paid annual cash dividends to stockholders of $4.70 per
share in 1996 and 1995. In March, 1997, the Board of Directors of the Company
declared an annual cash dividend for 1997 of $4.70 per share which will be paid
in May, 1997. In 1996 and 1995, the Company repurchased shares of its common
stock for an aggregate cost of $1,629,445. The Company also issued shares of
common stock in 1996 and 1995 for aggregate consideration of $787,250.
The Company's ability to pay dividends is limited by the amount of
dividends it receives from American Public Life. Payment of dividends by
American Public Life is
13
<PAGE>
restricted by law to available net surplus computed on a statutory basis. In
addition, without the prior approval of the Mississippi Commissioner of
Insurance, the size of any dividend by American Public Life during any one year
is limited to the lesser of (i) 10% of surplus; or (ii) net gain from operations
for the past three years, less dividends paid in the past two years.
Pursuant to the laws and regulations of the State of Mississippi,
American Public Life is required to maintain minimum statutory capital of
$400,000 and additional minimum statutory surplus of $600,000. Other states have
similar restrictions for licensing purposes, the largest being a minimum capital
requirement of $2,000,000 in the State of Georgia.
The National Association of Insurance Commissioners ("NAIC") measures
the adequacy of a company's capital by its risk-based capital ratio (the ratio
of its total capital, as defined, to its risk-based capital). These requirements
provide a measurement of minimum capital appropriate for an insurance company to
support its overall business operations based upon its size and risk profile
which considers (i) asset risk, (ii) insurance risk, (iii) interest rate risk,
and (iv) business risk. An insurance company's risk-based capital is calculated
by applying a defined factor to various statutory based assets, premiums and
reserve items, wherein the factor is higher for items with greater underlying
risk.
The NAIC has provided levels of progressively increasing regulatory
action for remedies when an insurance company's risk-based capital ratio falls
below a ratio of 1:1. As of December 31, 1996, American Public Life was in
compliance with these minimum capital requirements as follows:
Total adjusted capital $9,805,000
Authorized control level risk-based capital $1,588,000
Ratio of adjusted capital to risk-based capital 6.17:1
Item 3. Properties.
American Public Life owns its principal executive offices located at
2305 Lakeland Drive, Jackson, Mississippi. The building consists of
approximately 30,000 square feet, and was constructed in 1985. The Company also
owns a building on 480 E. Woodrow Wilson Drive, Jackson, Mississippi, the old
home office, which has recently been leased. The building consists of
approximately 15,000 square feet. There are no encumbrances on these properties.
Management believes the buildings are in good condition and adequate for the
Company's foreseeable needs.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information as of April 15, 1997, as to
the number of shares of Company Common Stock beneficially owned by each of the
Company's directors, including the Company's CEO, and by the Company's directors
and executive officers as a
14
<PAGE>
group. The following table also includes those persons who beneficially owned,
as of April 15, 1997, five percent (5%) or more of the Company Common Stock.
<TABLE>
Name and Address Number of Shares Percentage of
Beneficially Class Beneficially
Owned Owned
<S> <C> <C>
Warren I. Hammett 1,379 2.6%
2000 Old Leland Road
Greenville, MS 38701
Garry V. Hughes 1,000 1.9%
Post Office Box 30
Louisville, MS 39339
F. Harrell Josey, D.V.M. 1,163 2.2%
Post Office Box 231
Starkville, MS 39759
Frank K. Junkin, Jr. 1,422 2.7%
262 Quitman Road
Natchez, MS 39120
David A. New, Sr. 29,475(1) 55.8%
Chairman of the Board
Post Office Box 1487
Natchez, MS 39121
David A. New, Jr. 1,717(1) 3.3%
David New Drilling Co.,
Inc.
Post Office Box 1487
Natchez, MS 39121
Paul H. Watson, Jr. 3,282 6.2%
Vice Chairman of the Board
Post Office Box 5487
Greenville, MS 38701
Johnny H. Williamson 572 1.1%
President & CEO of APL
104 Pine Court
Brandon, MS 39042
15
<PAGE>
All Directors and Executive 40,014 75.7%
Officers as a Group (16
Persons)
</TABLE>
(1) Mr. New, Sr. and Mr. New, Jr. share voting and investment power with
respect to 1,400 shares held by David New Operating Company and 14,256 shares
held by David New Drilling Company. These shares are reflected only in Mr.
New, Sr.'s beneficial ownership in the table above.
Item 5. Directors and Executive Officers.
Directors
The Board currently consists of eight (8) directors who serve one-year
terms. The following persons are currently serving as directors of the Company.
Except as otherwise noted, each director has held the position indicated for at
least five (5) years.
Warren I. Hammett. Age 70. Mr. Hammett is Director and President of
H. K. Hammett & Sons, Inc., W. W. Farms, Inc. and Oakland Company. He has
served as a director of American Public Life since 1979, and of the Company
since its organization in December, 1995.
Garry V. Hughes. Age 62. Mr. Hughes is President and Chairman of the
Board of Hughes Construction Co., Inc. and has numerous other
business interests. He was elected to the Board of American Public Life in
1996, and he has served as a director of the Company since its organization
in December, 1995.
F. Harrell Josey, D.V.M. Age 72. Dr. Josey is a veterinarian and the
director of Josey Animal Medical Center, Inc. He has served as a director of
American Public Life since 1974 and of the Company since its organization in
December, 1995.
Frank K. Junkin, Jr. Age 46. Mr. Junkin is Senior Vice President,
Marketing of American Public Life. He has served as a director of American
Public Life since 1987 and of the Company since its organization in December,
1995.
David A. New, Sr. Age 69. Mr. New is Chairman and Director of David
New Operating Co., Inc., David New Oil Co., Inc. and David New Drilling Co.,
Inc. He also is Chairman of the Board of American Public Life and the
Company. He has served as a director of American Public Life since 1979
and of the Company since its organization in December, 1995.
16
<PAGE>
David A. New, Jr. Age 40. Mr. New is Director and President of David
New Operating Co., Inc., David New Oil Co., Inc. and David New Drilling Co.,
Inc. David A. New, Jr. is the son of David A. New, Sr. He has served as a
director of American Public Life since 1983 and of the Company since its
organization in December, 1995.
Paul H. Watson, Jr. Age 58. Mr. Watson is President of Farmers
Tractor Company, Inc., a farm equipment dealer. Mr. Watson serves as Director
of Trustmark Corp, Jackson, Mississippi. He has served as a director of
American Public Life since 1979 and of the Company since its organization in
December, 1995.
Johnny H. Williamson. Age 63. Mr. Williamson was President of
American Public Life until his retirement in August, 1995. Mr. Williamson
then served as a consultant to American Public Life until July, 1996, when he
was reappointed President of American Public Life. He has served as a director
of American Public Life since 1974, and of the Company since its organization
in December, 1995.
Executive Officers
In addition to Mr. New, Sr., Mr. Williamson and Mr. Junkin, who are
discussed above under the subheading "Directors," the following persons serve
as executive officers of the Company. Except as otherwise indicated, each
officer has been employed by American Public Life for at least five (5) years.
Dianne D. Aycock. Age 36. Ms Aycock is Vice President-Claims of
American Public Life, a position she has held since March, 1997. Prior to that
time she was employed by American Public Life in various positions.
E. Ray Hampton. Age 44. Mr. Hampton is Vice President-Data
Processing of American Public Life, a position he has held since 1995.
Prior to that time he worked as a systems analyst with American Public
Life and as director of information services for a hospital.
Joseph C. Hartley, Jr. Age 55. Mr. Hartley is Senior Vice President,
Counsel and Secretary/Treasurer of American Public Life, and Secretary of the
Company. He has been employed in a senior position with American Public Life
since December, 1993. Prior to December, 1993, Mr. Hartley was employed as an
attorney with David New Oil Company.
Alison James, Jr. Age 51. Mr. James is a Vice President and Agency
Director of American Public Life.
17
<PAGE>
Richard K. Mills. Age 54. Mr. Mills is Vice President-Manpower
Development of American Public Life, a position he has held since January,
1997. He was employed by American Public Life in January, 1994, and prior
to that time was self-employed in the insurance business.
Sharon D. Starnes. Age 33. Ms Starnes is Vice President-Customer
Service of American Public Life, a position she has held since January, 1997.
Prior to that time she was employed by American Public Life in various
positions.
Jerry C. Stovall. Age 60. Mr. Stovall is Executive Vice President of
American Public Life, a position he has held since October, 1996. Until May,
1995, when he retired, Mr. Stoval was President of Lamar Life Insurance
Company.
William F. Weems. Age 40. Mr. Weems is a Vice President - Financial
of American Public Life and Treasurer of the Company. Mr. Weems has been
employed by American Public Life in a senior position since November, 1993.
Prior to November, 1993, he was employed as an accountant with The Andrew
Jackson Life Insurance Company.
Item 6. Executive Compensation.
The following table sets forth the total compensation paid by the
Company or American Public Life for the last fiscal year to each person who
served as CEO of the Company or American Public Life.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------------------------------------------
Annual Base Compensation
Name and Principal Position Year
Salary ($)
<S> <C> <C>
Johnny H. Williamson 1996 92,690(1)
President & Chief Executive
Officer of American Public Life
(February, 1981 to August, 1995;
July, 1996 to December, 1996)
Consultant (September, 1995 to
July, 1996)
Ralph B. Plummer 1996 73,614
President & Chief Executive
Officer of American Public Life
(September, 1995 to July, 1996)
<FN>
(1) Includes consulting fees paid prior to reappointment as President and CEO.
</FN>
</TABLE>
Director Compensation
18
<PAGE>
In 1996 directors received $1,500 for each monthly meeting attended. In
1997 directors will receive $750 for each monthly meeting attended.
Item 7. Certain Relationships and Related Transactions.
On August 30, 1995, American Public Life entered into several
agreements with Johnny H. Williamson in connection with his resignation from the
position of President of the Company. Pursuant to a Severance Agreement between
Mr. Williamson and American Public Life, Mr. Williamson resigned from the
position of President effective August 31, 1995 and American Public Life paid
him a $43,620 severance payment. Mr. Williamson also entered into a Consulting
Agreement with American Public Life pursuant to which he was to provide
consulting services to American Public Life until he reached age 65. As
compensation under the Consulting Agreement, Mr. Williamson was to be paid $100
per hour with a minimum payment of $1,000 per month. This consulting arrangement
was suspended when Mr. Williamson was reappointed to serve as President and CEO
in July, 1996. American Public Life also entered into a Stock Purchase Agreement
with Mr. Williamson in August, 1995, pursuant to which American Public Life
purchased 858 shares of American Public Life Common Stock from Mr. Williamson
for an aggregate purchase price of $287,430. The Company has agreed to purchase
an additional 572 shares of Company Common Stock at a purchase price of $335 per
share, when he ceases to be a director of the Company. Mr. Williamson entered
into an agreement with Company stockholders holding a controlling interest in
the Company providing that such stockholders will vote for his election to the
Board of Directors until he reaches age 65.
In November, 1996 American Public Life purchased 2,361 shares of
American Public Life Common Stock from Paul Watson, a director of the Company
and American Public Life, for $790,935 or $335 per share.
Item 8. Legal Proceedings.
American Public Life is involved in litigation arising in the normal
course of business. Management of the Company, based on the advice of counsel,
is of the opinion that American Public Life's ultimate liability, if any, which
may result from the litigation, will not have a material adverse effect on the
financial condition of the Company and American Public Life.
Item 9. Market Price of and Dividends on the Registrant's Common
Equity and Related Stockholder Matters.
Market Information
There is no established public trading market for the Company's shares.
Management of the Company is not aware of any trades occurring since the Plan of
Exchange became effective. Prior to consummation of the Plan of Exchange,
American Public Life's Common Stock was traded on a limited and sporadic basis
in the over-the-counter market. The
19
<PAGE>
following table sets forth the range of high and low bid prices of American
Public Life's Common Stock for 1995 and 1996 and is based on information
provided by the National Quotation Bureau. The prices reported by the National
Quotation Bureau reflect inter-dealer prices and do not include retail mark-ups,
mark-downs or commissions and may not have represented actual transactions.
<TABLE>
<CAPTION>
Bid Prices
Low High
1995
<S> <C> <C>
First Quarter 98.00 106.00
Second Quarter 103.00 113.00
Third Quarter 123.50 123.50
Fourth Quarter 137.00 144.00
1996
First Quarter 143.00 150.50
Second Quarter 151.00 160.00
Third Quarter 161.50 161.50
Fourth Quarter 162.25 162.25
</TABLE>
Prior to the consummation of the Plan of Exchange, American Public Life
purchased and sold shares of American Public Life Common Stock for a purchase
price of $335 per share. See "Item 7. Certain Relationships and Related
Transactions." and "Item 10. Recent Sales of Unregistered Securities."
Holders
As of March 31, 1997, there were 1,576 holders of record of Common
Stock of the Company.
Dividends
In 1996 and 1995, prior to its acquisition by the Company, American
Public Life paid annual cash dividends to its stockholders of $4.70 per share.
In March, 1997, the Board of Directors of the Company declared an annual cash
dividend for 1997 of $4.70 per share which will be paid in May, 1997.
20
<PAGE>
The Company's ability to pay dividends is limited by the amount of
dividends its receives from American Public Life. Payment of dividends by
American Public Life is restricted by law to available net surplus computed on a
statutory basis, which, as of December 31, 1996, was $6,941,370. In addition,
without the prior approval of the Mississippi Commissioner of Insurance, the
size of any dividend by American Public Life during any one year is limited to
the lesser of (i) 10% of surplus; or (ii) net gain from operations for the past
three years, less dividends paid in the past two years. Under this test,
American Public Life has $694,137 available for the payment of dividends to the
Company in 1997.
Item 10. Recent Sales of Unregistered Securities.
The Company issued one share of Common Stock to American Public Life on
December 21, 1996, pursuant to the private offering exemption under Section 4(2)
of the Securities Act of 1933. This share was canceled upon consummation of the
Plan of Exchange.
The issuance of Company Common Stock pursuant to the Plan of Exchange
was exempt from registration under Section 3(a)(10) of the Securities Act of
1933. The Mississippi Commissioner of Insurance approved the fairness of the
terms and conditions of the proposed issuance of stock under the Plan of
Exchange after a public hearing required by Mississippi statute. Notice of the
public hearing was given to all stockholders of the Company at least ten days
prior to the hearing.
In November, 1996 American Public Life sold 1,500 shares of Common
Stock to six purchasers at a purchase price of $335 per share pursuant to the
private placement exemption provided by Section 4(2) of the Securities Act of
1933. The proceeds from these sales were $502,500.
On September 1, 1995 American Public Life sold 1,000 shares of Company
Common Stock to Garry V. Hughes, who is currently a director of the Company,
pursuant to the private placement exemption provided by Section 4(2) of the
Securities Act of 1933. The proceeds of this sale were $335,000.
Item 11. Description of Registrant's Securities to be Registered.
The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock, no par value ("Company Common Stock"), and 25,000,000 shares of
Preferred Stock, par value of $1.00 per share ("Company Preferred Stock").
Presently, 52,844 shares of Company Common Stock are issued and outstanding and
no shares of Company Preferred Stock are issued and outstanding. Although the
Company is authorized to issue Company Preferred Stock, the Board of Directors
does not presently have plans to issue any shares of Preferred Stock. It is not
possible to state the actual effect of any issuance of Preferred Stock upon the
rights of holders of Company Common Stock since the issuance price and rights of
any future holders of Preferred Stock are not yet determined, but such effects
might include (i)
21
<PAGE>
restrictions on Company Common Stock dividends if preferred cumulative stock
dividends have not been paid; (ii) dilution of voting power and equity interest
of holders of Company Common Stock; (iii) preferences of holders of Company
Preferred Stock upon liquidation; or (iv) required approval of holders of
Company Preferred Stock on matters such as mergers or amendments to the Articles
of Incorporation.
Holders of Company Common Stock do not have preemptive rights and
Company Common Stock does not have any redemption provisions applicable
thereto. Company Common Stock is fully paid and nonassessable.
In the event of liquidation, holders of Company Common Stock will be
entitled to receive pro rata any assets distributable to stockholders with
respect to the shares held by them, after payment of indebtedness and such
preferential amounts as may be required to be paid to the holders of any
Preferred Stock issued hereafter by the Company.
Holders of Company Common Stock have one vote per share on any matter
presented for a vote of stockholders. Under the Company Articles of
Incorporation, holders of Company Common Stock do not have cumulative voting
rights.
The Company may pay dividends unless after giving effect to the payment
(i) the Company would not be able to pay its debts as they come due in the
ordinary course of business; or (ii) the Company's total liabilities would
exceed its total assets. For the foreseeable future, however, the Company's
ability to pay dividends will be limited by the amount of dividends its receives
from American Public Life. Thus, the more restrictive provisions applicable to
American Public Life will indirectly limit the Company's ability to pay
dividends. Payment of dividends by American Public Life is restricted by law to
available net surplus computed on a statutory basis. In addition, without the
prior approval of the Mississippi Commissioner of Insurance, the size of any
dividend during any one year is limited to the lesser of: (i) 10% of surplus; or
(ii) net gain from operations for the past three years, less dividends paid in
the past two years.
Item 12. Indemnification of Directors and Officers.
The Company is incorporated under the laws of Mississippi. Subarticle E
of Article 8 of the Mississippi Business Corporation Act prescribes the
conditions under which indemnification may be obtained by a present or former
director or officer of the Company who incurs expenses or liabilities as a
consequence of matters arising out of his activities as a director or officer.
The Company Articles of Incorporation provide that the board of directors of the
Company shall have power to make any indemnity, including advance of expenses,
to, and to enter into contracts of indemnity with, any director, officer, or
employee, except an indemnity against his gross negligence or willful
misconduct. The Company bylaws provide for mandatory indemnification of an
officer or director if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interest of the Company,
22
<PAGE>
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful.
The Company Articles of Incorporation provide that a director of the
Company will not be liable to the Company or to its stockholders for monetary
damages for any action taken, or any failure to take action, as a director,
except liability for: (i) the amount of a financial benefit received by a
director to which he is not entitled; (ii) an intentional infliction of harm on
the Company or the stockholders; (iii) approving an unlawful distribution by the
Company as provided under the Mississippi Business Corporation Act; or (iv) an
intentional violation of criminal law. The Company Articles of Incorporation
also provide that if the Mississippi Business Corporation Act is amended to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Company shall be
eliminated or limited to the fullest extent permitted by the Mississippi
Business Corporation Act, as so amended.
Item 13. Financial Statements and Supplementary Data.
For information concerning the financial statements filed as part of
this Registration Statement, see "Item 15. Financial Statements and Exhibits."
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
Item 15. Financial Statements and Exhibits.
(a) Financial Statements
American Public Holdings, Inc. and Consolidated Subsidiaries
Independent Auditors' Report
Consolidated Balance Sheets - December 31, 1996 and 1995
Consolidated Statements of Operations - Years Ended December
31, 1996, 1995 and 1994 Consolidated Statements of Changes in
Stockholders' Equity--Years Ended December 31, 1996, 1995, and
1994 Consolidated Statements of Cash Flows--Years Ended
December 31, 1996, 1995, and 1994 Notes to Consolidated
Financial Statements--Years Ended December 31, 1996, 1995, and
1994
23
<PAGE>
Financial Statement Schedules
II - Consolidated Financial Information of Registrant
V - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the
required information is shown in the Financial Statements or Notes thereto.
(b) Exhibits Required by Item 601 of Regulation S-K
2 Agreement and Plan of Exchange
3(a) Articles of Incorporation of American Public Holdings,
Inc.
3(b) Bylaws of American Public Holdings, Inc.
10 Consulting Agreement between American Public Life
Insurance Company and Johnny Williamson.
21 Subsidiaries of Registrant
27 Financial Data Schedule
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
American Public Holdings, Inc.
(Registrant)
Date: By:
------------------------- -------------------------------------
Johnny H. Williamson, President
--------------------------
25
<PAGE>
AMERICAN PUBLIC
HOLDINGS, INC.
Consolidated Balance Sheets as of December 31, 1996 and 1995, and Related
Consolidated Statements of Operations, Changes in Stockholders' Equity and Cash
Flows for Each of the Three Years in the Period Ended December 31, 1996, and
Independent Auditors' Report
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of American Public Holdings, Inc.:
We have audited the consolidated balance sheets of American Public Holdings,
Inc. and subsidiary as of December 31, 1996 and 1995, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. Our
audits also included the financial statement schedules listed in the Index at
Item 15 (a). These financial statements and financial statement schedules are
the responsibility of the Company's management. Our responsibility is to express
an opinion on the financial statements and financial statement schedules based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of American Public
Holdings, Inc. and subsidiary as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
/s/ DELOITTE & TOUCHE LLP
March 5, 1997
<PAGE>
<TABLE>
<CAPTION>
AMERICAN PUBLIC HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
- ----------------------------------------------------------------------------------------------- -------------------
1996 1995
Assets
<S> <C> <C>
Investments:
Securities:
Available for sale $ 32,720,388 $ 31,084,657
Held to maturity
Mortgage loans 1,075,268 1,257,771
Investment real estate - net 781,542 710,326
Policy loans 1,600,398 1,641,192
Short-term investments 15,000
Total investments 36,177,596 34,708,946
Cash and cash equivalents 602,470 301,102
Accrued investment income 424,805 319,769
Accounts and notes receivable, net of allowance for
uncollectible accounts of $46,000 (1996) and $102,000 512,906 789,759
(1995)
Deferred policy acquisition costs 11,317,490 12,397,790
Property and equipment - net 2,205,019 2,357,866
Real estate acquired in satisfaction of debt 583,393 695,143
Deferred income tax asset 357,272 145,356
Other 96,568 8,424
TOTAL ASSETS $ 52,277,519 $ 51,724,155
================ ===========
See notes to consolidated financial statements.
</TABLE>
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
<S> <C> <C> <C>
LIABILITIES:
Future policy benefits $ 32,918,172 $ 32,034,811
Unpaid claims 856,085 906,837
Unearned premiums 879,437 796,915
Policyholders' dividend accumulations 396,952 383,569
Accounts payable and other liabilities 997,376 1,004,714
--------------- ------------
Total liabilities 36,048,022 35,126,846
COMMITMENTS AND CONTINGENCIES
(Notes 5, 8 and 11)
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value, authorized 25,000,000
shares
Common stock, $1 stated value, authorized
50,000,000 shares, issued 57,250 shares 57,250 57,250
Additional paid-in capital 2,232,750 2,232,750
Unrealized gain on available for sale securities, net of
deferred taxes of $63,000 251,408
Retained earnings 14,702,498 14,705,318
--------------- ----------
17,243,906 16,995,318
Less cost of treasury stock - 4,407 (1996) and 2,566 (1,014,409) (398,009)
--------------- ----------
(1995) shares
Total stockholders' equity 16,229,497 16,597,309
---------------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' $ 52,277,519 $ 51,724,155
============== =============
EQUITY
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN PUBLIC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- ---------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
REVENUE:
Premiums $ 26,069,848 $ 25,385,971 $ 24,172,890
Net investment income 2,387,010 2,300,624 2,214,311
Realized investment losses (80,291) (82,117) (5,235)
Other income 26,067 28,129 38,594
----------------- ------------- -------------
28,402,634 27,632,607 26,420,560
BENEFITS AND EXPENSES:
Benefits, claims, losses and settlement 17,650,892 18,025,211 16,957,140
expenses
Commission expense 2,346,428 2,301,863 2,405,062
Salaries and benefits 2,584,925 2,265,737 2,125,891
Amortization of deferred policy 3,129,605 3,627,023 2,430,081
acquisition costs
Insurance taxes, licenses and fees 1,019,295 856,424 865,838
Other operating expenses 1,404,368 1,481,018 1,186,693
----------------- ------------ -----------
28,135,513 28,557,276 25,970,705
----------------- ----------- -----------
INCOME (LOSS) BEFORE INCOME
TAX PROVISION (BENEFIT) 267,121 (924,669) 449,855
INCOME TAX PROVISION (BENEFIT) 17,328 (337,013) (105,545)
----------------- ----------- -----------
NET INCOME (LOSS) $ 249,793 $ (587,656) $ 555,400
=================== =============== ==============
NET INCOME (LOSS) PER SHARE $ 4.65 $ (10.67) $ 10.03
==================== =============== ===============
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
AMERICAN PUBLIC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------------------------------------------------
Unrealized
Gain on
Available
Common Stock Additional for
-------------------------
Paid-in Sale Retained
Shares Amount Capital Securities Earnings
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 57,250 $ 57,250 $2,232,750 $15,289,776
Treasury stock reissued
Dividends paid to stockholders
($5.59 per share) (299,853)
Net income ________ _________ ___________ 555,400
----------
BALANCE, DECEMBER 31, 1994 57,250 57,250 2,232,750 15,545,323
Treasury stock acquired
Treasury stock reissued
Dividends paid to stockholders
($4.70 per share) (252,349)
Net loss (587,656)
BALANCE, DECEMBER 31, 1995 57,250 57,250 2,232,750 14,705,318
Change in net unrealized gain $251,408
Treasury stock acquired
Treasury stock reissued
Dividends paid to stockholders
(4.70 per share) (252,613)
Net income 249,793
BALANCE, DECEMBER 31, 1996 57,250 $57,250 $2,232,750 $251,408 $14,702,498
========== ========== ========== ========== ===========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
- ---------------------------------------------------------------------------
<TABLE>
Total
Treasury Stockholders'
Stock Equity
<S> <C> <C>
BALANCE, JANUARY 1, 1994 $ (172,314) $ 17,407,462
Treasury stock reissued 100 100
Dividends paid to stockholders (299,853)
($5.59 per share)
Net income 555,400
------------------- -----------------
BALANCE, DECEMBER 31, 1994 (172,214) 17,663,109
Treasury stock acquired (560,795) (560,795)
Treasury stock reissued 335,000 335,000
Dividends paid to stockholders (252,349)
($4.70 per share)
Net loss (587,656)
------------------ -----------------
BALANCE, DECEMBER 31, 1995 (398,009) 16,597,309
Change in net unrealized gain 251,408
Treasury stock acquired (1,068,650) (1,068,650)
Treasury stock reissued 452,250 452,250
Dividends paid to stockholders (252,613)
($4.70 per share)
Net income 249,793
--------------------- -------------
BALANCE, DECEMBER 31, 1996 $ (1,014,409) $ 16,229,497
============== =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN PUBLIC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- ---------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $249,793 $(587,656) $555,400
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Realized investment losses 80,291 82,117 5,235
Amortization of deferred policy acquisition 3,129,605 3,627,023 2,430,081
Depreciation and other amortization 410,970 319,082 286,296
Deferred income tax benefit (274,768) (492,970) (375,306)
Decrease (increase) in receivables 171,817 (80,162) 71,000
Decrease (increase) in other assets (88,144) 41,485 419,414
Policy acquisition costs deferred (2,049,305) (2,872,745) (2,772,789)
Increase in liability for future policy benefits 883,361 1,880,558 (1,305,194)
Increase (decrease) in unpaid claims, accounts (58,090) 15,154 160,988
payable and other liabilities
Increase (decrease) in unearned premiums and
policyholders' dividend accumulations 95,905 (39,615) 31,703
---------- ----------- ----------
Net cash provided by operating activities 2,551,435 1,892,271 2,117,216
INVESTING ACTIVITIES:
Proceeds from sale of real estate 59,326 160,948 88,520
Purchase of securities and short-term
investments (22,339,700) (19,910,815) (15,301,653)
Mortgage and policy loan repayments 223,297 280,834 255,642
Proceeds from sales of securities 1,128,156
Proceeds from maturities and calls of
securities and short-term investments 19,890,844 17,919,027 14,934,367
Property and equipment purchased (567,977) (394,387) (1,713,452)
Refund of deposit 225,000
Improvements to real estate acquired in
satisfaction of debt (81,402) (34,875)
---------------- ----------- ------------
Net cash used in investing activities (1,381,054) (2,025,895) (1,771,451)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN PUBLIC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- ------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Dividends paid to shareholders $ (252,613) $ (252,349) $ (299,853)
Proceeds from treasury stock reissued 452,250 335,000 100
Payments to acquire treasury stock (1,068,650) (560,795)
------------------ ---------------- ---------------
Net cash used in financing activities (869,013) (478,144) (299,753)
------------------- ---------------- ----------------
NET INCREASE (DECREASE) IN CASH 301,368 (611,768) 46,012
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 301,102 912,870 866,858
-------------------- ------------------ -------------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 602,470 $ 301,102 $ 912,870
=================== =================== ===================
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING
ACTIVITY-
Unrealized gain on available for sale
securities $ 251,000
=================
SUPPLEMENTAL CASH FLOW
INFORMATION-
Income taxes paid (refunded) $ 270,000 $ 113,000 $ (113,000)
=================== =================== ==================
See notes to consolidated financial statements. (Concluded)
</TABLE>
- 7 -
<PAGE>
AMERICAN PUBLIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. ACCOUNTING POLICIES
a. Nature of Operations and Basis of Presentation - American
Public Holdings, Inc. (the Company) is a Mississippi
corporation organized on December 21, 1995 by American Public
Life Insurance Company (APL). The Company was formed to
serve as a holding company for APL, and, in effect, is a
successor to APL. APL is a stock life insurance company that
insures against risk of loss under various types of
coverages, with the majority of revenue being derived from
cancer policy premiums. The Company is licensed to operate
in twenty-one states but operates primarily in Mississippi
(where it is domiciled), Louisiana and Texas.
In 1996, the Mississippi Commissioner of Insurance and APL
stockholders approved an Agreement and Plan of Exchange (the
"Plan of Exchange") pursuant to which APL became a
wholly-owned subsidiary of the Company, and each share of
outstanding common stock of APL was converted into one share
of common stock of the Company. The exchange was accounted for
like a "pooling of interests" and historical costs are
continued. All prior years have been restated as though the
exchange had occurred at the beginning of the earliest year
presented.
The consolidated financial statements include those of the
Company and its wholly-owned subsidiary, APL, and APL's
wholly-owned subsidiary, DentaCare Marketing and
Administration, Inc. All significant intercompany balances and
transactions have been eliminated.
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles which
vary in some respects from accounting practices prescribed or
permitted by the Insurance Department of the State of
Mississippi. Prescribed statutory accounting practices include
a variety of publications of the National Association of
Insurance Commissioners (NAIC), as well as state laws,
regulations, and general administrative rules. Permitted
statutory accounting practices encompass all accounting
practices not so prescribed (see Note 9).
- 8 -
<PAGE>
b. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
c. Investment Securities - The Company's investment security
portfolio is comprised of fixed maturity securities and is
classified as available for sale. The portfolio is therefore
carried at market value with net unrealized holding gains
carried as a separate component of shareholders' equity. The
portfolio classification was changed in 1996 from held to
maturity (carried at amortized cost) to available for sale to
better reflect management intent and to provide greater
flexibility for liquidating securities within the portfolio.
The specific identification method is used to compute gains
or losses on the sale of these assets. Interest earned on
these assets is included in interest income. Securities that
reflect a market decline below cost or
amortized cost that is deemed other than temporary are
written down to net realizable value by a charge to earnings.
Investment premiums and discounts are amortized by a method
which approximates the interest method.
d. Mortgage Loans and Real Estate Acquired in Satisfaction of
Debt - The Company makes investments in mortgage loans
collateralized by real estate. The return on and ultimate
recovery of these loans is generally dependent on the
successful operation, sale or refinancing of the real estate.
The Company monitors the effects of current and expected
market conditions and other factors on the collectibility of
real estate loans. When, in management's judgment, these
assets are impaired, appropriate losses will be recorded.
Such estimates necessarily include assumptions, which may
include anticipated improvements in market conditions for
real estate, which may or may not occur.
Real estate acquired in satisfaction of debt is recorded at
the lower of loan balance, including accrued interest, if any,
or fair value at acquisition. Additional valuation adjustments
are made when the carrying value exceeds fair market value.
e. Cash and Cash Equivalents - For purposes of the consolidated
statements of cash flows, the Company considers checking
accounts and cash on hand to be cash and cash equivalents.
Short-term investments are included in the investments
category in order to conform to insurance company reporting
requirements.
- 9 -
<PAGE>
f. Property and Equipment - Property and equipment is stated at
cost and depreciated and amortized by the straight-line method
over the estimated useful lives of the assets, which for
building and improvements is thirty-nine years and for
furniture and equipment ranges from five to ten years.
g. Deferred Policy Acquisition Costs - Commissions and other
costs that vary with and are primarily related to the
production of new and renewed insurance business are deferred
and amortized over the anticipated premium paying period of
the related policies on a pro-rata basis.
h. Policy Reserves - The unearned premium reserve recognizes
premiums as earned pro rata over the policy term. The
aggregate reserve for future policy benefits has been
actuarially determined using the following assumptions:
<TABLE>
Life Accident and Health
<S> <C> <C>
Mortality for policies issued 100% of 1965-70 100% of 1965-70
prior to 1982 S&U male mortality Ultimate male
table mortality table
Mortality for policies issued 100% of 1975-80 100% of 1975-80
after 1982 S&U male mortality Ultimate male
table mortality table
Interest rates 5-7% 5-7%
Withdrawals (Lapse Rates) 30% first year graded 30% first year graded
to 5% in year 21 and to 5% in year 21 and
later later
</TABLE>
i. Unpaid Claims - Unpaid claims represent the estimated
liabilities on claims reported to the Company plus provision
for claims incurred but not yet reported. The liabilities for
unpaid claims are determined using both evaluations of each
claim and statistical analyses and represent the estimated
ultimate net cost of all claims incurred through the end of
the reporting period.
j. Income Taxes - Deferred tax liabilities and assets are
determined based on the differences between the financial
statement and tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the
differences are expected to reverse. The Company files a
consolidated income tax return with its wholly-owned
subsidiary. Income taxes are allocated based on each company's
separate taxable income.
- 10 -
<PAGE>
k. Revenue Recognition - Premiums are recognized as revenue when
due from policyholders. Policy benefits and expenses are
deferred or accrued to result in a matching of costs with the
earned premiums over the life of the insurance contracts. This
matching is accomplished by accrual of the liability for
future policy benefits on insurance in force and the
amortization of deferred policy acquisition costs.
l. Profit Sharing Plan - Employees are eligible to participate in
a profit sharing plan covering substantially all employees
with more than one year of service. Contributions to the plan
are made at the discretion of the Board of Directors.
Contributions made to the plan were approximately $ - 0 - in
1996, $31,000 in 1995, and $21,000 in 1994.
m. Income (Loss) Per Share - The income (loss) per share is based
on the weighted average number of common shares outstanding
during each year. The weighted average number of shares
outstanding was 53,764 in 1996, 55,099 in 1995 and 55,358 in
1994.
2. INVESTMENTS
The amortized cost and related approximate fair value of fixed maturity
securities were as follows:
<TABLE>
Amortized Unrealized Unrealized Fair
1996 Cost Gains Losses Value
<S> <C> <C> <C> <C>
U. S. Treasury and government
corporations and agencies $ 2,801,365 $ 47,351 $ 38,949 $ 2,809,767
States and political subdivisions 3,322,717 318,517 13,214 3,628,020
Public utility bonds 846,744 8,999 5,088 850,655
Industrial and miscellaneous 3,230,181 16,810 31,051 3,215,940
Mortgage-backed securities 22,205,121 370,787 359,902 22,216,006
---------------- ----------- ------------
$32,406,128 $ 762,464 $ 448,204 $ 32,720,388
=============== ========== ===========
1995
U. S. Treasury bonds $ 1,450,547 $ 114,453 $ 1,565,000
States and political subdivisions 1,406,505 $ 6,505 1,400,000
Public utility bonds 699,701 8,369 70 708,000
Industrial and miscellaneous 1,452,056 8,000 18,056 1,442,000
Mortgage-backed securities 26,075,848 816,535 94,383 26,798,000
-------------- --------- ------------
$ 31,084,657 $ 947,357 $ 119,014 $ 31,913,000
================= ========== ============
</TABLE>
- 11 -
<PAGE>
<TABLE>
<CAPTION>
Net realized gains (losses) are summarized as follows:
1996 1995 1994
<S> <C> <C> <C>
Calls, maturities and principal receipts of held
to maturity securities $ 5,423
Investment security sales $ (25,392)
Real estate acquired in satisfaction of debt (54,899) $ (82,117) (10,656)
-------------- --------- ----------
$ (80,291) $ (82,117) $ (5,235)
============= ========== =========
</TABLE>
Bonds with an approximate carrying value of $2,689,000 in 1996 and
$2,418,000 in 1995 and certificates of deposit with a carrying value
of $15,000 in 1995 were pledged to the respective states in which the
Company transacts business for the security and benefit of
policyholders. At December 31, 1996, assets on deposit met minimum
statutory requirements.
The following is an analysis of the amortized cost and fair value of
investments in fixed maturities at December 31, 1996 by contractual
maturity:
<TABLE>
Amortized Fair
Cost Value
<S> <C> <C>
Due in one year or less $ 500,000 $ 512,970
Due in one to five years 399,979 403,400
Due in five to ten years 4,057,443 4,033,064
Due after ten years 5,243,585 5,554,948
------------------- ------------
10,201,007 10,504,382
Mortgage-backed securities 22,205,121 22,216,006
------------------ -----------
$ 32,406,128 $32,720,388
================= ===========
</TABLE>
Actual maturities may differ from contractual maturities because of
the borrowers' right to call or prepay obligations.
- 12 -
<PAGE>
<TABLE>
<CAPTION>
The components of net investment income were as follows:
1996 1995 1994
<S> <C> <C> <C>
Fixed maturities $ 2,405,619 $ 2,271,250 $ 1,980,475
Mortgage loans 106,630 118,286 128,850
Investment real estate 78,770
Policy loans 83,878 87,850 89,765
Short-term investments 20,701 63,222 240,163
Real estate acquired in satisfaction of debt 18,299 18,341 19,255
----------------- ------------- -----------
Total investment income 2,713,897 2,558,949 2,458,508
Investment expenses 326,887 258,325 244,197
------------------ ------------- -----------
Net investment income $ 2,387,010 $ 2,300,624 $ 2,214,311
================ ============ ===========
</TABLE>
3. INVESTMENT REAL ESTATE AND PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Investment real estate and property and equipment were as follows:
Investment Real Estate Property and Equipment
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Land $ 170,000 $ 170,000 $ 322,447 $ 322,447
Buildings and improvements 1,057,399 943,710 1,312,752 1,301,799
Furniture and equipment 1,967,848 1,774,337
----------------- ----------------- ------------- -----------
1,227,399 1,113,710 3,603,047 3,398,583
Less accumulated depreciation (445,857) (403,384) (1,398,028) (1,040,717)
------------ ------------ --------- ------------
Property and equipment, net $ 781,542 $ 710,326 $ 2,205,019 $ 2,357,866
============== ============== ============== ==============
</TABLE>
4. PARTICIPATING POLICIES
APL had in force approximately $2,717,000 in 1996 and $2,779,000 in
1995 in face amount of annual dividend participating policies.
Dividends on such policies are based on mortality, interest and
expense experience, and are payable only upon declaration by the
Board of Directors. All amounts allocable to policyholders have been
accrued and none of APL's retained earnings was allocable to
participating policies.
- 13 -
<PAGE>
5. REINSURANCE
The maximum amount of risk that APL retains on any one life is
$50,000 ($40,000 before 1995) of life insurance and waiver of premium
benefits (all accidental death benefits are reinsured), depending on
age and classification of risk.
The reserves for life and accident and health policies were stated
after deduction for reinsurance with other companies. A contingent
liability exists with respect to such reinsurance, which could become
a liability of APL in the event that such reinsurance companies are
unable to meet their obligation under the existing reinsurance
agreements. The reinsured portion of life reserves deducted in
developing the net liability was approximately $32,000 in 1996 and
$37,000 in 1995 relating to insurance in force of $4,302,000 in 1996
and $4,782,000 in 1995. The reinsurance portion of accident and
health reserves deducted in developing the net liability was
approximately $24,000 in 1996 and $25,000 in 1995.
6. POLICY CLAIMS
<TABLE>
<CAPTION>
Activity in the liability for unpaid policy claims is summarized as follows:
1996 1995
<S> <C> <C> <C>
Balance at January 1 $ 906,837 $ 889,926
Less reinsurance recoverables 470 30,143
------------- --------------
Net balance at January 1 906,367 859,783
----------- -------------
Incurred related to:
Current year 13,698,234 13,088,542
Prior years 2,727,849 2,678,782
------------- -----------
Total incurred 16,426,083 15,767,324
------------- ------------
Paid related to:
Current year 13,057,102 12,158,555
Prior years 3,420,623 3,562,188
------------ ---------
Total paid 16,477,725 15,720,740
------------ -----------
Net balance at December 31 854,725 906,367
Plus reinsurance recoverables 1,360 470
------------- -----------
Balance at December 31 856,085 $ 906,837
=============== ============
</TABLE>
The liability for unpaid policy claims is composed of claims incurred
but not reported and claims reported and in course of settlement. The
accident and health policy
- 14 -
<PAGE>
reserve includes a claim reserve of $3,682,000 in 1996 and
$4,121,000 in 1995 which represents the present value of future
claims.
7. INCOME TAXES
<TABLE>
<CAPTION>
The components of the provision for income taxes were as follows:
1996 1995 1994
<S> <C> <C> <C>
Current provision $ 292,096 $ 155,957 $ 269,761
Deferred benefit (274,768) (492,970) (375,306)
-------------- ------------ -------------
Income tax provision (benefit) $ 17,328 $ (337,013) $ (105,545)
============== ============= ============
</TABLE>
<TABLE>
<CAPTION>
The significant components of the deferred income tax benefit are as
follows:
1996 1995 1994
<S> <C> <C> <C>
Deferred policy acquisition costs $ (432,418) $ (414,287) $ (105,731)
Future policy benefit liabilities (19,961) (155,384) (257,735)
Capital losses deducted (carried forward) (42,955) (82,085) (8,184)
Alternative minimum tax (74,862) (36,737) (51,422)
Valuation allowance applicable to
deferred tax assets 267,199 138,486 51,422
Other 28,229 57,037 (3,656)
-------------- ------------- --------------
Deferred income tax benefit $ (274,768) $ (492,970) $ (375,306)
============= ============= =============
</TABLE>
- 15 -
<PAGE>
<TABLE>
<CAPTION>
The tax effects of significant items comprising the net deferred tax asset
are as follows:
1996 1995
<S> <C> <C>
Deferred tax liabilities:
Unrealized gain on available for sale securities $ (106,848)
Deferred policy acquisition costs (2,286,550) $ (2,718,968)
Total deferred tax liabilities (2,393,398) (2,718,968)
Deferred tax assets:
Unrealized loss on real estate acquired in satisfaction of debt 81,106 96,763
Future policy benefit liabilities 2,721,345 2,701,384
Capital loss carryforward 133,224 90,268
Alternative minimum tax credits 293,916 219,054
Other 65,085 77,658
---------------- -----------
Total deferred tax assets 3,294,676 3,185,127
Valuation allowance (544,006) (320,803)
--------------- -----------
Net deferred tax asset $ 357,272 $ 145,356
============== ============
</TABLE>
The valuation allowance increased by approximately $223,000 in 1996 and
$138,000 in 1995.
At December 31, 1996, the Company had accumulated untaxed policyholders'
surplus of approximately $1,923,000. The Company is not required to pay
tax on the balance in the surplus account unless distributions to
stockholders exceed accumulated taxed earnings.
- 16 -
<PAGE>
<TABLE>
<CAPTION>
The effective income tax rate on earnings (loss) before federal income
taxes differed from the statutory federal income tax rate for the
following reasons:
1996 1995 1994
<S> <C> <C> <C>
Statutory federal income tax rate 35.0 % (35.0)% 35.0 %
Add (deduct): Small life insurance company deduction (112.6) (18.4) (71.1)
Valuation allowance on deferred tax assets 100.0 15.0 11.4
Other (15.9) 02.0 01.2
-------- -------- --------
Effective income tax rate 6.5 % ( 36.4)% ( 23.5)%
========= ========= ========
</TABLE>
The alternative minimum tax credit carryover approximated $ 294,000 at
December 31, 1996.
8. STOCKHOLDERS' EQUITY
The Company's ability to pay dividends is limited by the amount of
dividends its receives from APL. Payment of dividends by APL is
restricted by law to available net surplus computed on a statutory
basis. In addition, without the prior approval of the Mississippi
Commissioner of Insurance, the size of any dividend by APL during any
one year is limited to the lesser of (i) 10% of surplus; or (ii) net
gain from operations for the past three years, less dividends paid in
the past two years.
Pursuant to the laws and regulations of the State of Mississippi, APL
is required to maintain minimum statutory capital of $400,000 and
additional minimum statutory surplus of $600,000. Other states have
similar restrictions for licensing purposes, the largest being a
minimum capital requirement of $2,000,000 in the State of Georgia.
APL entered into a Stock Purchase Agreement with the President and
CEO of APL in August 1995, pursuant to which APL purchased 858 shares
of APL Common Stock from the President and CEO of APL for an
aggregate purchase price of $287,430. The Company has agreed to
purchase an additional 572 shares of Company Common Stock, at a
purchase price of $335 per share, when he ceases to be a director of
the Company.
In November, 1996 APL purchased 2,361 shares of APL Common Stock from
a director of the Company and APL, for $790,935 or $335 per share.
- 17 -
<PAGE>
The National Association of Insurance Commissioners measures the
adequacy of a company's capital by its risk-based capital ratio (the
ratio of its total capital, as defined, to its risk-based capital).
These requirements provide a measurement of minimum capital
appropriate for an insurance company to support its overall business
operations based upon its size and risk profile which considers (i)
asset risk, (ii) insurance risk, (iii) interest rate risk, and (iv)
business risk. An insurance company's risk-based capital is
calculated by applying a defined factor to various statutory based
assets, premiums and reserve items, wherein the factor is higher for
items with greater underlying risk.
The NAIC has provided levels of progressively increasing regulatory
action for remedies when an insurance company's risk-based capital
ratio falls below a ratio of 1:1. As of December 31, 1996, APL was in
compliance with these minimum capital requirements as follows:
Total adjusted capital $ 9,805,000
Authorized control level risk-based capital $ 1,588,000
Ratio of adjusted capital to risk-based capital 6.17:1
- 18 -
<PAGE>
9. STATUTORY FINANCIAL INFORMATION
Generally accepted accounting principles differ in certain respects
from the accounting practices prescribed or permitted by insurance
regulatory authorities (statutory basis). A reconciliation between
consolidated net income and stockholders' equity as reported under
generally accepted accounting principles (GAAP basis) and statutory
net income and stockholders' equity of APL follows:
<TABLE>
1996 1995 1994
---------------- ------------------- -------------------------------------------------------
Net Stockholders' Net Income Stockholders' Net
Income Equity (Loss) Equity Income
<S> <C> <C> <C> <C> <C>
GAAP basis $ 249,793 $ 16,229,497 $ (587,656) $ 16,597,309 $ 555,400
Adjustments to:
Policy reserves (476,697) 6,380,953 557,013 6,857,650 919,814
Non-admitted assets (1,392,981) (1,479,035)
Deferred acquisition costs 1,080,300 (11,317,490) 754,277 (12,397,790) (342,708)
Deferred income taxes (274,768) (357,272) (492,970) (145,356) (375,306)
Unrealized gain on
invested securities (314,260)
Other 38,167 153,196 (109,130) 181,845 (48,840)
-------------
Statutory basis $ 616,795 $ 9,381,643 $ 121,534 $ 9,614,623 $ 708,360
============= ============= ============== ============= =============
</TABLE>
10. FAIR VALUES OF FINANCIAL INSTRUMENTS
In accordance with FAS Statement No. 107, "Disclosures about Fair
Value of Financial Instruments", information is provided about the
fair value of certain financial instruments for which it is
practicable to estimate that value. The fair value amounts disclosed
represent management's best estimates of fair value. In accordance
with FAS No. 107, this disclosure excludes certain insurance
policy-related financial instruments and all nonfinancial
instruments. The aggregate fair value amounts presented are not
intended to represent the underlying aggregate fair value of the
Company.
The estimated fair values are significantly affected by assumptions
used, principally the timing of future cash flows, the discount rate,
judgments regarding current economic conditions, risk characteristics
of various financial instruments and other factors. Because
assumptions are inherently subjective in nature, the estimated fair
values cannot be substantiated by comparison to independent quotes
and, in many cases, the estimated fair values could not necessarily
be realized in an immediate sale
- 19 -
<PAGE>
or settlement of the instrument. Potential tax ramifications related
to the realization of unrealized gains and losses that would be
incurred in an actual sale and/or settlement have not been taken into
consideration.
The methods and assumptions used to estimate fair value are as
follows:
o Fair value for securities is determined from quoted market
prices, where available. For securities not actively traded,
fair value is estimated using quoted market prices for similar
securities.
o Fair value for mortgage loans is estimated by discounting cash
flows and using current interest rates on similar real estate
loans considering credit ratings and the remaining terms to
maturity.
o Fair value for short-term investments and accrued investment
income approximates the carrying amount. Fair value for
guaranteed interest and supplementary contract liabilities also
approximates the carrying amount since those contracts are
carried at redemption values and there are no applicable
surrender or mortality charges.
o Policy loans have no stated maturity dates and are an integral
part of the related insurance contract. Accordingly, it is not
practicable to estimate a fair value.
The estimated fair value of the Company's financial instruments for
which it is practicable to estimate that value, is as follows:
<TABLE>
1996 1995
------------------- ------------------ --------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Securities $ 32,720,388 $ 32,720,388 $ 31,084,657 $ 31,913,000
Mortgage loans 1,075,268 1,107,000 1,257,771 1,314,000
</TABLE>
11. COMMITMENTS AND CONTINGENCIES
The Company is required to participate in certain guaranty funds and
involuntary pools of insurance and is therefore exposed to undeterminable
future assessments resulting from the insolvency of other insurers.
- 20 -
<PAGE>
The Company leases various land, buildings and operating equipment under
monthly lease arrangements. Expenses incurred under all operating leases
approximated $163,000 (1996), $91,000 (1995) and $112,000 (1994). Future
minimum lease commitments for non-cancelable operating leases are as
follows:
1997 $ 135,000
1998 131,000
1999 124,000
2000 112,000
-------------
$ 502,000
The Company is involved in litigation incurred in the normal course of business.
Management of the Company, based upon the advice of legal counsel, is of the
opinion that the Company's ultimate liability, if any, which may result from the
litigation will not have a material adverse effect on the financial condition or
results of operations of the Company.
* * * * * *
- 21 -
ARTICLE 7, SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF
REGISTRANT
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
1996 1995
ASSETS:
<S> <C> <C>
Investment in American Public Life Insurance $16,293,957 $16,547,309
Company
Organizational costs and other deferred costs 92,909
-------------
Total assets $16,386,866 $16,597,309
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY -
Due to American Public Life Insurance Company $ 157,369
STOCKHOLDER'S EQUITY 16,229,497 $16,597,309
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY $16,386,866 $16,597,309
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
<S> <C> <C> <C>
EQUITY IN EARNINGS (LOSS) OF
SUBSIDIARY $314,253 $(587,656) $555,400
COSTS AND EXPENSES:
Professional fees 41,233
Amortization 23,227
64,460
NET INCOME (LOSS) $249,793 $(587,656) $555,400
======== ========== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOW
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $249,793 $(587,656) $555,400
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Equity in (earnings) loss of subsidiary (314,253) 587,656 (555,400)
Increase in organizational costs and
other deferred costs (92,909)
Increase due to stockholder 157,369
NET CASH USED IN OPERATING
ACTIVITIES $ 0 $ 0 $ 0
=========== ============== =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 7, SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS
Col. A Col. B Col. C Col. D Col. E
Description Balance at Additions Deductions -- Balance at
----------------------------------
Beginning (1) (2) End of
of Period Charged Charged Describe Period
to Costs to Other
and Accounts --
Expenses Describe
<S> <C> <C> <C>
1996
Allowance for real
estate acquired in
satisfaction of debt $284,596 $ 46,050 $238,546
(sales)
Allowance for
uncollectible agent
balances 101,939 55,564 46,375
(write-offs/
collections)
Valuation allowance for
deferred tax assets 320,803 $223,203 544,006
--------- -------- ------------- ---------
$707,338 $223,203 $101,614 $828,927
======== ======== ======== ========
1995
Allowance for real
estate acquired in
satisfaction of debt $443,904 $159,308 $284,596
(sales)
Allowance for
uncollectible agent
balances 62,296 $39,643 101,939
Valuation allowance for
deferred tax assets 182,317 138,486 320,803
--------- --------- ------------- ---------
$688,517 $178,129 $159,308 $707,338
======== ======== ======== ========
</TABLE>
AGREEMENT AND PLAN OF EXCHANGE
This Agreement and Plan of Exchange (the "Agreement"), dated as of
October 29, 1996, between American Public Life Insurance Company, a Mississippi
insurance corporation (the "Company"), and American Public Holdings, Inc., a
Mississippi corporation (the "Holding Company"), which was formed by the Company
for the purpose of consummating the transfers contemplated by this Agreement
(the "Exchange").
Recitals
The Company, a publicly held corporation engaged in the business of
insurance, is authorized to issue 500,000 shares of Common Stock. As of the date
of this Agreement, 53,869 shares of Company Common Stock are issued and
outstanding.
The Holding Company is a Mississippi corporation that was recently
formed for the purpose of effecting the transactions contemplated by this
Agreement. The Holding Company is authorized to issue 50,000,000 shares of
Common Stock and 25,000,000 shares of Preferred Stock. As of the date of this
Agreement, all of the issued and outstanding shares of Common Stock of the
Holding Company are owned by the Company.
The respective Boards of Directors of the Company and the Holding
Company have determined that it is desirable and in the best interests of each
of the corporations and their stockholders to effect the transactions
contemplated by this Agreement. Pursuant to this Agreement, each outstanding
share of Common Stock of the Company, other than those shares held in the
treasury of the Company and those shares as to which rights of dissent have been
exercised, shall be converted and exchanged for one (1) share of Common Stock of
the Holding Company, and all of the outstanding shares of Common Stock of the
Company will be held by the Holding Company (the "Exchange"). As used herein,
the Effective Time shall mean the date and time that the Exchange becomes
effective in accordance with ss.83-19-119 of the Mississippi Code of 1972, as
amended, as described more specifically in Article II F. hereof.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the Company and the Holding Company
agree as follows:
ARTICLE I
REPRESENTATIONS
A. Holding Company. The Holding Company hereby represents that
a) it is a corporation duly organized under the laws of Mississippi; (b) it has
its registered office and principal office at 2305 Lakeland Drive, Jackson,
Mississippi; (c) its authorized capital stock
199180.1/07964.98735
1
<PAGE>
consists of 50,000,000 shares of Common Stock, no par value ("Holding Company
Common Stock"), and 25,000,000 shares of Preferred Stock, par value of $1.00 per
share ("Holding Company Preferred Stock"); (d) there is as of the date of this
Agreement one (1) share of Holding Company Common Stock issued and outstanding
and no shares of Holding Company Preferred Stock issued and outstanding; and (e)
no additional shares of Holding Company Common Stock or Holding Company
Preferred Stock will be issued and outstanding prior to the Effective Time.
The Company. The Company hereby represents that (a) it is a Mississippi
insurance company duly organized under the laws of Mississippi and authorized to
conduct the business of life and health insurance; (b) it has its principal
office and registered office at 2305 Lakeland Drive, Jackson, Mississippi; (c)
the authorized capital stock of the Company consists of 500,000 shares of Common
Stock, par value of $20.00 per share (the "Company Common Stock"); (d) there are
as of the date of this Agreement 53,869 shares of Company Common Stock issued
and outstanding, and no shares of Company Common Stock shall be issued or
redeemed prior to the Effective Time of the Exchange; (e) the Company presently
owns one (1) share of the Holding Company Common Stock; and (f) at all times
prior to the Effective Time, the Company will own such Holding Company Common
Stock.
ARTICLE II
EXCHANGE
A. Undertakings. As soon as is practicable, the parties,
through their respective officers and directors, shall submit this Agreement
to the Mississippi Commissioner of Insurance (the "Commissioner") for his
approval. Each of the parties shall take every reasonable and necessary action
to secure the approval of this Agreement by the Commissioner.
The parties, through their respective officers and directors, shall
execute and file with the appropriate state officials of any other state all the
documents and papers necessary and required by any such state and shall take
every reasonable and necessary step and action to comply with and to secure any
required approval of this Agreement and the transactions contemplated herein as
may be required by the statutes, rules and regulations of any such state.
The Company shall prepare and deliver to its stockholders a Proxy
Statement/Prospectus meeting the requirements of applicable law.
B. Exchange and Conversion. At the Effective Time, upon the terms and
conditions set forth in the provisions of this Agreement, each outstanding share
of Company Common Stock (other than shares held in the treasury of the Company
and shares as to which rights of dissent have been exercised) shall be converted
into one (1) share of Holding Company Common Stock.
2
<PAGE>
C. Effect of the Exchange on the Company. From and after the
Effective Time:
(1) All issued and outstanding Company Common Stock, subject
to the exercise of right of dissent by a stockholder of the Company, shall
immediately, by operation of law and without any conveyance, transfer, or
further action, become the property of the Holding Company;
(2) The Articles of Incorporation and Bylaws of the
Company shall continue in full force and effect following the Exchange until
amended or repealed;
(3) The business presently conducted by the Company shall,
subject to the actions of the Board of Directors and officers of the Company,
continue to be conducted by the Company as a wholly-owned subsidiary of the
Holding Company; and
(4) The directors and officers of the Company and the Holding
Company, respectively, immediately prior to the Effective Time shall continue in
their respective positions with the Company and the Holding Company,
respectively. A list of directors of the Company and the Holding Company, their
addresses, and terms of office is attached to this Agreement as Exhibit 1.
D. Stock. At the Effective Time:
(1) Each issued and outstanding share of Company Common Stock
other than shares held in the treasury of the Company and shares as to which
rights of dissent shall have been exercised, shall, without any action on the
part of the holder thereof, become and be converted into one (1) share of
Holding Company Common Stock, and all outstanding certificates representing
shares of Company Common Stock thereafter shall represent the right to receive
certificates representing shares of Holding Company Common Stock at the rate of
one (1) share of Holding Company Common Stock for each share of Company Common
Stock.
(2) The issued and outstanding shares of Holding Company
Common Stock presently held by the Company shall be canceled and retired.
(3) Each issued and outstanding share of Company Common Stock,
the holder of which has perfected his right to dissent and receive the "fair
value" of such share in accordance with ss.83-19-121 and ss.ss. 79-4-13.01
through 79-4-13.31 of the Mississippi Code of 1972, as amended, copies of which
are attached as Exhibit 2 hereto (the "Statutory Dissent Provisions") and has
not effectively withdrawn or lost such right as of the Effective Time, shall be
entitled to the rights granted by the Statutory Dissent Provisions.
E. Issuance of Stock Certificates.
(1) As soon as practicable after the Effective Time, the
Holding Company shall furnish each person who was a holder of Company Common
Stock immediately prior to
3
<PAGE>
the Effective Time with a form letter of transmittal to be used to exchange the
certificate previously representing their Company Common Stock for certificates
representing their ownership of Holding Company Common Stock.
(2) Upon the surrender by former stockholders of the Company
of certificates previously representing their Company Common Stock accompanied
by properly completed and executed letters of transmittal in a form designated
by the Holding Company, the Holding Company shall deliver to such stockholders
certificates representing the number of shares of the Holding Company Common
Stock to which they are entitled pursuant to this Agreement.
(3) Until a physical exchange of certificates has occurred,
the Holding Company shall be entitled to withhold all distributions, including
dividends, to persons holding certificates of stock which before the Exchange
represented Company Common Stock.
F. Effective Time. The Effective Time of the Exchange will be
the close of businesson the last day of the month during which the Agreement is
recorded by the Commissioner in accordance with ss.83-19-119 of the Mississippi
Code of 1972, as amended.
G. Accounting Treatment. The Exchange will be treated as though
a "pooling of interests" for financial reporting purposes.
ARTICLE III
CONDITIONS
Consummation of the Exchange is conditioned upon:
A. Board Approval. At or prior to the Effective Time, the
Company and the Holding Company shall each have duly authorized, approved and
ratified this Agreement by a majority vote of their entire Boards of Directors
and delivered this Agreement to each other, and such authorization shall not
have been revoked or modified at the Effective Time.
B. Stockholder Approval. The holders of Company Common Stock
shall have approved this Agreement by the affirmative vote of at least two-
thirds of the outstanding shares of outstanding capital stock at a meeting of
the stockholders of the Company; and the holder of the outstanding shares of
the Holding Company shall have approved this Agreement; and such approvals
shall not have been revoked or modified at the Effective Time; provided,
however, that this Agreement shall not be submitted to the stockholders for
their approval, unless it has first been approved by the Commissioner.
C. Registration. The shares of the Holding Company Common Stock
to be issued to the holders of the Company Common Stock pursuant to the
Exchange either (i) shall have been the subject of a "no-action" position
issued by the staff of the Securities and Exchange Commission, or an opinion
of counsel to the Holding Company, indicating that the issuance of
such Holding Company Common Stock is exempt from registration to Section
3(a)(10) of the
4
<PAGE>
Securities Act of 1933 or (ii) shall have been registered with the Securities
and Exchange Commission under the Securities Act of 1933.
D. Resales. The shares of Holding Company Common Stock to be
issued pursuant to the Exchange either (i) shall have been the subject of a
"no-action" position issued by the staff of the Securities and Exchange
Commission, or an opinion of counsel to the Holding Company, to the effect that
the shares are not subject to the holding period for restricted securities
under SEC Rule 144(d) adopted pursuant to the Securities Act of 1933, or (ii)
shall have been registered with the Securities and Exchange Commission under
the Securities Act of 1933.
E. Approvals and Consents. All approvals and consents required
for the lawful consummation of the Exchange shall have been received from the
Commissioner, and any other federal or state official.
F. Tax Status. The Company shall have received an opinion from
Deloitte & Touche LLP to the effect that, for federal income tax purposes, the
Exchange will be treated as a nontaxable transaction under the Internal Revenue
Code of 1986 (the "Code"), and related regulations, that the Exchange will not
give rise to gain or loss to the stockholders of the Company (except to the
extent of any cash received), that the basis of the shares of the Holding
Company Common Stock to be received in the Exchange will, in each instance,
include the basis of the respective shares of Company Common Stock exchanged
therefor, that the holding period of the shares of the Holding Company Common
Stock to be received in the Exchange will, in each instance, include the
holding period of the respective shares of Company Common Stock exchanged
therefor, and the consummation of the transactions in connection with the
Exchange will not constitute a distribution from the policyholders or
stockholders surplus of the Company within the meaning of Section 815 of the
Code and such opinion will not have been withdrawn prior to the Effective
Time.
G. Dissents. The holders of fewer than 10% of the shares of
Company Common Stock shall have properly exercised dissenters' rights under the
Statutory Dissent Provisions.
H. Performance. Each of the parties shall have performed and
complied with all the obligations imposed upon it hereunder which are to be
complied with or performed on or before the Effective Time.
I. State Securities Laws. The Holding Company shall have
complied with all applicable state securities or "blue sky" laws relating to the
issuance and distribution of Holding Company Common Stock.
J. Accounting Treatment. The Company shall have received an
opinion from Deloitte & Touche LLP to the effect that the Exchange will be
treated as though a "pooling of interests" for financial reporting purposes.
5
<PAGE>
K. Opinion of Counsel. The Company and the Holding Company shall have
received an opinion of counsel to the effect that: (i) the Company and the
Holding Company are duly organized, validly existing and in good standing under
the laws of the State of Mississippi; (ii) the Agreement has been duly
authorized and validly executed and delivered by the Company and the Holding
Company, and constitutes a valid, legal and enforceable obligation of both
parties in accordance with its terms, except as such may be limited by any
future proceedings under bankruptcy, insolvency, reorganization or other laws of
general application relating to or affecting the enforcement of creditors'
rights generally; (iii) all shares of Holding Company stock to be issued in the
Exchange, when issued in accordance with this Agreement shall be legally and
validly issued, fully paid and nonassessable shares; and (iv) to the best
knowledge of such counsel, execution and delivery of this Agreement and
performance hereunder, shall not conflict with, or constitute a default under,
the Articles of Incorporation of the Company, the Articles of Incorporation of
the Holding Company, the Bylaws of the Company or the Holding Company, or any
material agreement to which either the Company or the Holding Company is a
party.
ARTICLE IV
TERMINATION
A. This Agreement may be terminated at any time prior to the
Effective Time (whether before or after any approval by the stockholders of the
Company);
(1) at the option of either the Company or the Holding Company
if any one (1) or more of the conditions to the obligations of any of them under
this Agreement shall not have been satisfied and shall not be waived at or prior
to the Effective Time;
(2) by the mutual consent of the parties;
(3) by the Company or by the Holding Company if any suit,
action, or other proceeding shall be pending or threatened by the federal
government or by a state government before any court or governmental agency in
which it is sought to restrain, or prohibit, or otherwise affect the
consummation of this Exchange, or any legal proceeding pending or threatened
before any court or other governmental body seeking to enjoin or prohibit the
reorganization and Exchange contemplated herein, or which might restrict the
operation of the business of the Company or the Holding Company or the ownership
of Company stock or the exercise of any rights with respect thereto by the
Holding Company, or to subject any of the parties, their directors or officers
to any liability, fine or forfeiture arising out of the transactions
contemplated hereby, or asserting that the parties hereto or their directors or
officers, have breached or will breach any applicable law or regulation, or have
otherwise acted improperly in connection with the transactions contemplated
hereby.
6
<PAGE>
B. An election by a party hereto to terminate this Agreement and
abandon the Exchange and reorganization as provided in this article shall be
exercised on behalf of such corporation by its Board of Directors.
C. In the event of the termination and abandonment of this Agreement
pursuant to the provisions of this article the Agreement shall become void and
have no effect and create no liability on the part of any of the parties hereto
or their respective directors, officers or stockholders.
ARTICLE V
MISCELLANEOUS
A. Costs and Expenses. Each party shall pay all costs and
expenses incurred by it in connection with this Agreement and the transactions
contemplated by this Agreement.
(1) No director, officer, agent or employee of either the
Company or the Holding Company shall receive any fee, commission, or other
compensation or valuable consideration whatever for aiding, promoting or
assisting in the promotion of the Exchange.
(2) Employees of the Company and the Holding Company,
accountants, attorneys and others who render customary professional services in
the preparation and consummation of the Exchange shall be entitled to
compensation but such compensation shall not extend to activities that promote
the Exchange.
B. Waiver and Amendment. Any of the terms or conditions of this
Agreement, which legally may be waived, may be waived at any time by the party
that is entitled to the benefit of such terms or conditions. Any of such terms
or conditions may be amended in whole or in part at any time, to the extent
authorized by applicable law, rules and regulations, by an agreement in writing,
executed in the same manner as this Agreement.
C. Counterparts. This Agreement may be executed by the parties
in any number of separate counterparts, each of which shall be an original, but
such counterparts together shall constitute one (1) and the same instrument.
D. Headings. The article and section headings contained in this
Agreement are for reference purposes only and should not be deemed to be part
of this Agreement or to affect the meaning or interpretation of this Agreement.
E. Controlling Law. The laws of the State of Mississippi,
without reference to its choice of law principles, shall be controlling on the
construction and operation of this Agreement.
F. Further Efforts. The parties agree that if it becomes
necessary or desirable to execute further instruments or to make such other
assurances are deemed necessary, the party
7
<PAGE>
requested to do so shall provide such executed instruments or do all things
necessary to properly carry out the purposes of this Agreement.
G. Merger Clause. This Agreement embodies the entire Agreement
among the parties and there have been and are no agreements, representations or
warranties among the parties other than those contained herein.
IN WITNESS WHEREOF, the Company and the Holding Company have entered
into this Agreement on November 7, 1996.
AMERICAN PUBLIC LIFE INSURANCE COMPANY
By:
Johnny H. Williamson, Its President
ATTEST:
Joseph C. Hartley, Jr., Its Secretary
AMERICAN PUBLIC HOLDINGS, INC.
By:
Johnny H. Williamson, Its President
ATTEST:
Joseph C. Hartley, Jr., Its Secretary
8
<PAGE>
EXHIBIT INDEX
NO. ITEM
1. Directors of the Company and Holding Company
2. Statutory Dissent Provisions
<PAGE>
Exhibit 1
Directors of the Company and Holding Company
Set forth below is a complete list of the members of the Board of
Directors of American Public Holdings, Inc., as of the date of the Agreement and
Plan of Exchange of which this Exhibit is a part.
Warren I. Hammett Garry V. Hughes F. Harrell Josey, D.V.M.
3000 Old Leland Road P.O. Box 30 P.O. Box 231
Greenville, MS 38701 Louisville, MS 39339 Starkville, MS 39759
Frank K. Junkin, Jr. David A. New, Jr. David A. New, Sr.
262 Quitman Road P.O. Box 1487 P.O. Box 1487
Natchez, MS 39120 Natchez, MS 39121 Natchez, MS 39121
Paul H. Watson, Jr. Johnny H. Williamson
P.O. Box 5487 104 Pine Court
Greenville, MS 38701 Brandon, MS 39042
Set forth below is a complete list of the members of the Board of
Directors of American Public Life Insurance Company, as of the date of the
Agreement and Plan of Exchange of which this Exhibit is a part.
Warren I. Hammett Garry V. Hughes F. Harrell Josey, D.V.M.
3000 Old Leland Road P.O. Box 30 P.O. Box 231
Greenville, MS 38701 Louisville, MS 39339 Starkville, MS 39759
Frank K. Junkin, Jr. David A. New, Jr. David A. New, Sr.
262 Quitman Road P.O. Box 1487 P.O. Box 1487
Natchez, MS 39120 Natchez, MS 39121 Natchez, MS 39121
Paul H. Watson, Jr. Johnny H. Williamson
P.O. Box 5487 104 Pine Court
Greenville, MS 38701 Brandon, MS 39042
Each director will serve until the 1997 Annual Meeting or until his
successor is chosen and shall qualify.
<PAGE>
Exhibit 2
Statutory Dissent Provisions
1. Miss. Code Ann. ss.83-19-121
2. Miss. Code Ann. ss.ss. 79-4-13.01 through 79-4-13.31
<PAGE>
83-19-121. Rights of dissenters.
Any shareholder of any domestic stock insurance company which is a
party to a merger, consolidation or exchange of securities as described in
sections 83-19-99 to 83-19- 123 shall have the right to dissent and receive fair
value for his shares by complying with the procedure set forth in section
79-3-161, Mississippi Code of 1972.
ARTICLE 13 OF TITLE 79, CHAPTER 4
DISSENTERS' RIGHTS
Subarticle A. Right to Dissent and Obtain Payment for Shares
79-4-13.01 DEFINITIONS--ln this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 79-4-13.02 and who exercises that right when and
in the manner required by Sections 79-4-13.20 through 79-4-13.28.
( 3) "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
79-4-13.02 RIGHT TO DISSENT.--(a) A shareholder is entitled to dissent
from, and obtain payment of the fair value of his shares in the event of any of
the following corporate actions:
<PAGE>
(1) Consummation of a plan of merger to which the corporation is a
party (i) if shareholder approval is required for the merger by Section
79-4-11.03 or the articles of incorporation and the shareholder is entitled to
vote on the merger, or (ii) if the corporation is a subsidiary that is merged
with its parent under Section 79-4-11.04;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the shareholder
is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) Alters or abolishes a preferential right of the shares;
(ii) Creates, alters or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(iii) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(iv) Excludes or limits the right of the shares to vote on any matter,
or to cumulate votes, other than a limitation by dilution through issuance of
shares or other securities with similar voting rights; or
(v) Reduces the number of shares owned by the shareholder to a fraction
of a share if the fraction share so created is to be acquired for cash under
Section 79-4-6.04; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.
(b) Nothing in subsection (a)(4) shall entitle a shareholder of a
corporation to dissent and obtain payment for his shares as a result of an
amendment of the articles of incorporation exclusively for the purpose of either
(i) making such corporation subject to application of the Mississippi Control
Share Act, or (ii) making such act inapplicable to a control share acquisition
of such corporation.
<PAGE>
(c) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
79-4-13.03 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.--(a) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.
Subarticle B. Procedure for Exercise of Dissenters' Rights
79-4-13.20 NOTICE OF DISSENTERS' RIGHTS. --(a) If proposed corporate
action creating dissenters' rights under Section 79-4-13.02 is submitted to a
vote at a shareholders' meeting, the meeting notice must state that shareholders
are or may be entitled to assert dissenters' rights under this article and be
accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Section
79-4-13.02 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Section
79-4-13.22.
79-4-13.21 NOTICE OF INTENT TO DEMAND PAYMENT.-- (a) If proposed
corporate action creating dissenters' rights under Section 79-4-13.02 is
submitted to a vote at a shareholders' meeting, a shareholder who wishes to
assert dissenters' rights (1) must deliver to the corporation before the vote is
taken written notice of his intent to demand payment for his shares if the
proposed action is effectuated, and (2) must not vote his shares in favor of the
proposed action.
(b) A shareholder who does not satisfy the requirement of subsection
(a) is not entitled to payment for his shares under this article.
<PAGE>
79-4-13.22 DISSENTERS' NOTICE.--(a) If proposed corporate action
creating dissenters' rights under Section 79-4-13.02 is authorized at a
shareholders' meeting, the corporation shall deliver a written dissenters'
notice to all shareholders who satisfied the requirements of Section 79-4-13.21.
(b) The dissenters' notice must be sent no later than ten (10) days
after the corporate action was taken, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether or not he acquired beneficial ownership of the shares before
that date;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty (30) nor more that sixty (60)
days after the date the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this article.
79-4-13.23 DUTY TO DEMAND PAYMENT.--(a) A shareholder sent a
dissenters' notice described in Section 79-4-13.22 must demand payment, certify
whether he acquired beneficial ownership of the shares before the date required
to be set forth in the dissenter's notice pursuant to Section 79-13.22(b)(3),
and deposit his certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his shares under
subsection (a) retains all other rights of a shareholder until these rights are
canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required. each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
79-4-13.24 SHARE RESTRICTIONS.--(a) The corporation may restrict the
transfer of uncertified shares from the date the demand for their payment is
received until the proposed corporate action is taken or the restrictions
released under Section 79-4-13.26.
<PAGE>
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
79-4-13.25 PAYMENT.--(a) Except as provided in Section 79-4-13.27, as
soon as the proposed corporate action is taken, or upon receipt of a payment
demand, the corporation shall pay each dissenter who complied with Section
79-4-13.23 the amount the corporation estimates to be the fair value of his
shares, plus accrued interest.
(b) The payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for that
year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares; (3) An explanation of how the interest was calculated; (4) A
statement of the dissenters' right to demand payment under Section
79-4-13.28; and (5) A copy of this article.
79-4-13.26 FAILURE TO TAKE ACTION.--(a) If the corporation does not
take the proposed action within sixty (60) days after the date set for demanding
payment and depositing share certificates, the corporation shall return the
deposited certificates and release the transfer restrictions imposed on
uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Section 79- 4-13.22 and repeat the payment demand
procedure.
79-4-13.27 AFTER-ACQUIRED SHARES.--(a) A corporation may elect to
withhold payment required by Section 79-4-13.25 from a dissenter unless he was
the beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders of
the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall estimate
the fair value of the shares, plus accrued interest, and shall pay this amount
to each dissenter who agrees to accept it in full satisfaction of his demand.
The corporation shall send with its offer a statement of its estimate of the
fair value of the shares, an explanation of how the interest was calculated and
a statement of the dissenter's right to demand payment under Section 79-4-13.28.
79-4-13.28 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR
OFFER.--(a) A dissenter may notify the corporation in writing of his own
estimate of the fair value of his shares and amount of interest due, and demand
payment of his estimate (less any
<PAGE>
payment under Section 79-4-13.25), or reject the corporation's offer under
Section 79-4-13.27 and demand payment of the fair value of his shares and
interest due, if:
(1) The dissenter believes that the amount paid under Section
79-4-13.25 or offered under Section 79-4-13.27 is less than the fair value of
his shares or that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under Section 79-4-13.25
within sixty (60) days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty (60) days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (a)
within thirty (30) days after the corporation made or offered payment for his
shares.
Subarticle C. Judicial Appraisal of Shares
79-4-13.30 COURT ACTION.--(a) If a demand for payment under Section
79-4-13.28 remains unsettled, the corporation shall commence a proceeding within
sixty (60) days after receiving the payment demand and petition the court to
determine the fair value of the shares and accrued interest. If the corporation
does not commence the proceeding within the 60-day period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the chancery court
of the county where a corporation's principal office (or, if none in this state,
its registered office) is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
(c) The corporation shall make all dissenters (whether or not residents
of this state) whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. The appraisers have the powers described in the order appointing
them, or in any amendment to it. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
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(e) Each dissenter made a party to the proceeding is entitled to
judgment (1) for the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the corporation, or (2)
for the fair value, plus accrued interest, of his after-acquired shares for
which the corporation elected to withhold payment under Section 79-4-13.27.
79-4-13.31 COURT COSTS AND COUNSEL FEES.--(a) The court in an appraisal
proceeding commenced under Section 79-4-13.30 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously or not in good faith in demanding
payment under Section 79-4-13.28.
(b) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Sections 79-4-13.20 through 79-4-13.28; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously or not in good faith with
respect to the rights provided by this article.
(c) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefitted.
ARTICLES OF INCORPORATION
OF
AMERICAN PUBLIC HOLDINGS, INC.
I, the undersigned incorporator of a corporation under the Mississippi
Business Corporation Act, adopt the following Articles of Incorporation for such
corporation:
FIRST: The name of the corporation is American Public Holdings, Inc.
SECOND: The number of shares which the corporation is authorized to
issue is 75,000,000, divided into two classes. The designation of each class,
the number of shares of each class and the par value, if any, of the shares of
each class, or a statement that the shares of any class are without par value,
is as follows:
Number of Par
Shares Class Value per Share
50,000,000 Common No par value.
25,000,000 Preferred $1.00
The Board of Directors is authorized, subject to limitations prescribed
by law, to provide for the issuance of the shares of Preferred Stock in series,
and by filing articles of amendment pursuant to the laws of the State of
Mississippi, to establish from time to time the number of shares to be included
in each such series, and to fix the designation, powers, preferences and right
of the shares of each such series and the qualifications, limitations or
restrictions thereof.
The authority of the board with respect to each series shall include,
but not be limited to, determination of the following:
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(a) The number of shares constituting that series and the
distinctive designation of that series;
(b) The dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable, and,
if so, the terms and conditions of such redemption, including the date upon or
after which they shall be redeemable, and the amount per share payable in case
of redemption, which amount may vary under different conditions and at different
redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(g) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the corporation, and
the relative rights of priority, if any, of payment of shares of that series;
(h) Any other relative rights, preferences and limitations of that
series.
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Dividends on outstanding shares of Preferred Stock shall be paid or
declared and set apart for payment before any dividends shall be paid or
declared and set apart for payment on the common shares with respect to the same
dividend period.
If upon any voluntary or involuntary liquidation, dissolution or
winding up of the corporation, the assets available for distribution to holders
of shares of Preferred Stock of all series shall be insufficient to pay such
holders the full preferential amount to which they are entitled, then such
assets shall be distributed ratably among the shares of all series of Preferred
Stock in accordance with the respective preferential amounts (including unpaid
cumulative dividends, if any) payable with respect thereto.
Shareholders shall not have the right to cumulate their votes for
directors nor shall the shareholders be entitled to multiply the number of votes
they are entitled to cast by the number of directors for whom they are entitled
to vote and cast the product for a single candidate or distribute the product
among two (2) or more candidates.
THIRD: The street address of the corporation's initial registered
office is 2305 Lakeland Drive, Jackson, Mississippi, and the name of its initial
registered agent at that office is Ralph B.
Plummer.
FOURTH: The name and address of the incorporator is:
NAME ADDRESS
David L. Martin 633 N. State Street
Jackson, MS 39202
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FIFTH: A director of the corporation will not be liable to the
corporation or to its shareholders for monetary damages for any action taken, or
any failure to take action, as a director, except liability for: (i) the amount
of a financial benefit received by a director to which he is not entitled; (ii)
an intentional infliction of harm on the corporation or the shareholders; (iii)
a violation of Section 79-4-8.33 of the Mississippi Code of 1972, as amended; or
(iv) an intentional violation of criminal law. If the Mississippi Business
Corporation Act is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the corporation shall be eliminated or limited to the fullest extent
permitted by the Mississippi Business Corporation Act, as so amended. Any repeal
or modification of this Article by the shareholders of the corporation shall not
adversely affect any right or protection of a director of the corporation
existing at the time of such repeal or modification.
SIXTH: The board of directors of the corporation shall have power to
make any indemnity, including advance of expenses, to, and to enter into
contracts of indemnity with, any director, officer, or employee, except an
indemnity against his gross negligence or willful misconduct. Any determination
as to any indemnity shall be made in accordance with applicable sections of the
bylaws.
Dated December 21, 1995
.
David L. Martin, Incorporator
4
BYLAWS
OF
AMERICAN PUBLIC HOLDINGS, INC.
ARTICLE I. PRINCIPAL OFFICE
The principal office of the corporation in the State of Mississippi
shall be located in the City of Jackson, County of Rankin. The corporation may
have such other offices, either within or without the State of Mississippi, as
the board of directors may designate or as the business of the corporation may
require from time to time.
ARTICLE II. SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the shareholders shall
be held on the fourth Thursday in the month of April, in each year at the hour
of 11:00 o'clock, A.M., or such other time and date as may be determined by the
directors, for the purpose of electing directors and for the transaction of such
other business as may properly come before the meeting. If the day fixed for the
annual meeting shall be a legal holiday in the State of Mississippi, such
meeting shall be held on the next succeeding business day.
If the election of directors shall not be held on the day designated
herein for any annual meeting of the shareholders, or at any adjournment
thereof, the board of directors shall cause the election to be held at a special
meeting of the shareholders as soon thereafter as conveniently may be.
SECTION 2. Special Meetings. The corporation shall hold a special
meeting of shareholders (1) on call of the chairman of the board or the
president; or (2) unless the articles of incorporation provide otherwise, if the
holders of at least ten percent (10%) of all the votes entitled to be cast on
any issue proposed to be considered at the proposed special meeting sign, date
and deliver to the corporation's secretary one or more written demands for the
meeting describing the purpose or purposes for which it is to be held. If not
otherwise fixed under applicable law, the record date for determining
shareholders entitled to demand a special meeting shall be the date the first
shareholder signs the demand.
SECTION 3. Place of Meeting. The board of directors may designate any
place, either within or without the State of Mississippi, for any annual meeting
or for any special meeting of shareholders. A valid waiver of notice signed by
all shareholders entitled to notice may designate any place, either within or
without the State of Mississippi, as the place for any annual meeting
<PAGE>
or for any special meeting of shareholders. Unless the notice of the meeting
states otherwise, shareholders' meetings shall be held at the corporation's
principal office.
SECTION 4. Notice of Meeting. The corporation shall notify shareholders
of the date, time and place of each annual and special shareholders' meeting no
fewer than ten (10) nor more than sixty (60) days before the meeting date.
Unless applicable law or the articles of incorporation require otherwise, the
corporation shall give notice only to shareholders entitled to vote at the
meeting.
Unless applicable law or the articles of incorporation require
otherwise, notice of an annual meeting need not include a description of the
purpose or purposes for which the meeting is called. Notice of a special meeting
must include a description of the purpose or purposes for which the meeting
shall be called. Only business within the purpose or purposes described in the
meeting notice may be conducted at a special shareholders' meeting.
Unless these bylaws require otherwise, if an annual or special
shareholders' meeting is adjourned to a different date, time or place, notice
need not be given of the new date, time or place if the new date, time or place
is announced at the meeting before adjournment. If a new record date for the
adjourned meeting is or must be fixed under applicable law or Article II,
Section 5 of these bylaws, however, notice of the adjourned meeting must be
given under this section to persons who are shareholders as of the new record
date.
SECTION 5. Closing of Transfer Books or Fixing of Record Date. The
board of directors of the corporation may fix the record date for one or more
voting groups in order to determine shareholders entitled to notice of a
shareholders' meeting, to demand a special meeting, to vote or to take any other
action. A record date may not be more than seventy (70) days before the meeting
or action requiring a determination of shareholders. If not otherwise fixed by
law, the record date for determining shareholders entitled to notice of and to
vote at an annual or special shareholders' meeting shall be the day before the
first notice is delivered to shareholders. If the board of directors does not
fix the record date for determining shareholders entitled to a distribution
(other than one involving a purchase, redemption or other acquisition of the
corporation's shares), it shall be the date the board of directors authorizes
the distribution. A determination of shareholders entitled to notice of or to
vote at a shareholders' meeting shall be effective for any adjournment of the
meeting unless the board of directors fixes a new record date, which it must do
if the meeting is adjourned to a date more than one hundred twenty (120) days
after the date fixed for the original meeting.
SECTION 6. Voting Lists. After fixing a record date for a meeting, the
corporation shall prepare an alphabetical list of the names of all its
shareholders who are entitled to notice of a shareholders' meeting. The list
must be arranged by voting group (and within each voting group by class or
series of shares) and show the address of and number of shares held by each
shareholder.
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The shareholders' list must be available for inspection by any
shareholder beginning two (2) business days after notice of the meeting is given
for which the list was prepared and continuing through the meeting, at the
corporation's principal office or at a place identified in the meeting notice in
the city where the meeting will be held. A shareholder, his agent or attorney
shall be entitled on written demand to inspect and, subject to the requirements
of applicable law, to copy the list during regular business hours and at his
expense, during the period it shall be available for inspection. The corporation
shall make the shareholders' list available at the meeting, and any shareholder,
his agent or attorney shall be entitled to inspect the list at any time during
the meeting or any adjournment.
SECTION 7. Quorum. Shares entitled to vote as a separate voting group
may take action on a matter at a meeting only if a quorum of those shares exists
with respect to that matter. Unless the articles of incorporation or applicable
law impose other quorum requirements, a majority of the votes entitled to be
cast on the matter by a voting group, represented in person or by proxy, shall
constitute a quorum of that voting group for action on that matter. If less than
a majority of the outstanding shares are represented at a meeting, a majority of
the shares so represented may adjourn the meeting from time to time without
further notice except as may be required by Article II, Section 4 of these
bylaws or by applicable law. At such adjourned meeting at which a quorum shall
be present or represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. Once a share is represented for
any purpose at a meeting, it shall be deemed present for quorum purposes for the
remainder of the meeting and for any adjournment of that meeting unless a new
record date is or must be set for that adjourned meeting.
SECTION 8. Proxies. A shareholder may appoint a proxy to vote or
otherwise act for him by signing an appointment form, either personally or by
his attorney-in-fact. An appointment of a proxy shall be effective when received
by the secretary or other officer or agent authorized to tabulate votes of the
corporation. An appointment shall be valid for eleven (11) months unless a
longer period is expressly provided in the appointment form. An appointment of a
proxy shall be revocable by the shareholder unless the appointment form
conspicuously states that it is irrevocable and the appointment shall be coupled
with an interest. Appointments coupled with an interest include the appointment
of (1) a pledgee; (2) a person who purchased or agreed to purchase the shares;
(3) a creditor of the corporation who extended it credit under terms requiring
the appointment; (4) an employee of the corporation whose employment contract
requires the appointment; or (5) a party to a voting agreement created under
applicable law.
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity shall be received by the secretary or other
officer or agent authorized to tabulate votes before the proxy exercises his
authority under the appointment. An appointment made irrevocable because it is
coupled with an interest shall be revoked when the interest with which it is
coupled is extinguished. A transferee for value of shares subject to an
irrevocable appointment may revoke the appointment if he did not know of its
existence when he acquired the shares and the existence
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<PAGE>
of the irrevocable appointment was not noted conspicuously on the certificate
representing the shares or on the information statement for shares without
certificates.
Subject to applicable law and to any express limitation on the proxy's
authority appearing on the face of the appointment form, the corporation shall
be entitled to accept the proxy's vote or other action as that of the
shareholder making the appointment.
SECTION 9. Voting of Shares. Except as provided below or unless the
articles of incorporation provide otherwise, and subject to the provisions of
Section 12 of this Article II, each outstanding share, regardless of class,
shall be entitled to one (1) vote on each matter voted on at a shareholders'
meeting. If a quorum exists, action on a matter (other than the election of
directors) by a voting group shall be approved if the votes cast within the
voting group favoring the action exceed the votes cast opposing the action,
unless the articles of incorporation or applicable law require a greater number
of affirmative votes. Unless otherwise provided in the articles of
incorporation, directors shall be elected by a plurality of the votes cast by
the shares entitled to vote in the election at a meeting at which a quorum is
present.
SECTION 10. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine.
Absent special circumstances, shares of this corporation shall not be
entitled to vote if they are owned, directly or indirectly, by a second
corporation, domestic or foreign, and this corporation owns, directly or
indirectly, a majority of the shares of the second corporation entitled to vote
for the directors of the second corporation. This does not limit the power of
this corporation to vote any shares, including its own shares, held by it in a
fiduciary capacity.
Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name. Shares standing in
the name of a receiver may be voted by such receiver, and shares held by or
under the control of a receiver may be voted by such receiver without the
transfer thereof into his name if authority so to do be contained in an
appropriate order of the court by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
SECTION 11. Informal Action by Shareholders. Action required or
permitted by applicable law to be taken at a shareholders' meeting may be taken
without a meeting if the action is taken by all the shareholders entitled to
vote on the action. The action must be evidenced by
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<PAGE>
one or more written consents describing the action taken, signed by all the
shareholders entitled to vote on the action, and delivered to the corporation
for inclusion in the minutes or filing with the corporate records. If not
otherwise determined under applicable law, the record date for determining
shareholders entitled to take action without a meeting shall be the date the
first shareholder signs such consent. A consent signed under this section has
the effect of a meeting vote and may be described as such in any document.
If applicable law requires that notice of proposed action be given to
nonvoting shareholders and the action is to be taken by unanimous consent of the
voting shareholders, the corporation must give its nonvoting shareholders
written notice of the proposed action at least ten (10) days before the action
is taken. The notice must contain or be accompanied by the same material that,
under applicable law, would have been required to be sent to nonvoting
shareholders in a notice of meeting at which the proposed action would have been
submitted to the shareholders for action.
SECTION 12. Cumulative Voting. Shareholders shall not have the right to
cumulate their votes for directors, and the shareholders shall not be entitled
to multiply the number of votes they are entitled to cast by the number of
directors for whom they are entitled to vote and cast the product for a single
candidate or distribute the product among two (2) or more candidates.
SECTION 13. Shares Held by Nominees. The corporation may establish a
procedure by which the beneficial owner of shares that are registered in the
name of a nominee shall be recognized by the corporation as the shareholder. The
extent of this recognition may be determined in the procedure. The procedure may
set forth: (1) the types of nominees to which it applies; (2) the rights or
privileges that the corporation recognizes in a beneficial owner; (3) the manner
in which the procedure shall be selected by the nominee; (4) the information
that must be provided when the procedure is selected; (5) the period for which
selection of the procedure shall be effective; and (6) other aspects of the
rights and duties created.
SECTION 14. Corporation's Acceptance of Votes. If the name signed on a
vote, consent, waiver or proxy appointment corresponds to the name of the
shareholder, the corporation, if acting in good faith, shall be entitled to
accept the vote, consent, waiver or proxy appointment and give it effect as the
act of the shareholder.
If the name signed on a vote, consent, waiver or proxy appointment does
not correspond to the name of its shareholder, the corporation, if acting in
good faith, shall nevertheless be entitled to accept the vote, consent, waiver
or proxy appointment and give it effect as the act of the shareholder if: (1)
the shareholder is an entity and the name signed purports to be that of an
officer or agent of the entity; (2) the name signed purports to be that of an
administrator, executor, guardian or conservator representing the shareholder
and, if the corporation requests, evidence of fiduciary status acceptable to the
corporation has been presented with respect to the vote, consent, waiver or
proxy appointment; (3) the name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the corporation requests,
evidence of this status acceptable to the corporation has been presented with
respect to the vote, consent, waiver or proxy appointment; (4) the name signed
purports to be that of a pledgee, beneficial owner or
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<PAGE>
attorney-in-fact of the shareholder and, if the corporation requests, evidence
acceptable to the corporation of the signatory's authority to sign for the
shareholder has been presented with respect to the vote, consent, waiver or
proxy appointment; (5) two (2) or more persons are the shareholders as cotenants
or fiduciaries and the name signed purports to be the name of at least one (1)
of the co-owners and the person signing appears to be acting on behalf of all
the co-owners.
The corporation shall be entitled to reject a vote, consent, waiver or
proxy appointment if the secretary or other officer or agent authorized to
tabulate votes, acting in good faith, has reasonable basis for doubt about the
validity of the signature on it or about the signatory's authority to sign for
the shareholder.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. General Powers. All corporate powers shall be exercised by
or under the authority of, and the business and affairs of the corporation
managed under the direction of, its board of directors, subject to any
limitation set forth in the articles of incorporation.
SECTION 2. Number, Election, Tenure and Qualifications. The number of
directors of the corporation shall be no less than three (3) and no more than
twenty-one (21). Directors are elected at the first annual shareholders' meeting
and at each annual meeting thereafter. The terms of the initial directors of the
corporation expire at the first shareholders' meeting at which directors shall
be elected. The terms of all other directors expire at the next annual
shareholders' meeting following their election. A decrease in the number of
directors does not shorten an incumbent director's term. The term of a director
elected to fill a vacancy expires at the next shareholders' meeting at which
directors shall be elected. Despite the expiration of a director's term, he
continues to serve until his successor shall be elected and qualifies or until
there shall be a decrease in the number of directors. A director need not be a
resident of this state or a shareholder of the corporation.
SECTION 3. Resignation of Directors; Removal of Directors by
Shareholders. (a) A director may resign at any time by delivering written notice
to the board of directors, to its chairman or to the corporation. A resignation
shall be effective when the notice is delivered unless the notice specifies a
later effective date.
(b) The shareholders may remove one or more directors with or without
cause unless the articles of incorporation provide that directors may be removed
only for cause. If a director is elected by a voting group of shareholders, only
the shareholders of that voting group may participate in the vote to remove him.
A director may be removed only if the number of votes cast to remove him exceeds
the number of votes cast not to remove him. A director may be removed by the
shareholders only at a meeting called for the purpose of removing him and the
meeting notice must state that the purpose, or one (1) of the purposes, of the
meeting shall be removal of the director.
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SECTION 4. Regular Meetings. Unless the articles of incorporation or
these bylaws provide otherwise, a regular meeting of the board of directors
shall be held without other notice than this bylaw immediately after, and at the
same place as, the annual meeting of shareholders.
SECTION 5. Special Meetings. Special meetings of the board of directors
may be called by or at the request of the chairman of the board or the president
or the holders of ten percent (10%) of the outstanding shares of stock. Unless
the articles of incorporation or these bylaws provide for a longer or shorter
period, special meetings of the board of directors must be preceded by at least
two (2) days' notice of the date, time and place of the meeting. If no place for
the meeting has been designated in the notice, the meeting shall be held at the
principal office of the corporation. The notice need not describe the purpose of
the special meeting unless required by the articles of incorporation or these
bylaws.
SECTION 6. Place of Meetings. The board of directors may hold
regular or special meetings in or out of this state.
SECTION 7. Quorum. Unless the articles of incorporation or these bylaws
require a greater number, a quorum of the board of directors consists of a
majority of the number of directors in office immediately before the meeting
begins. If less than such number necessary for a quorum shall be present at a
meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice.
SECTION 8. Manner of Acting. If a quorum is present when a vote is
taken, the affirmative vote of a majority of directors present is the act of the
board of directors unless the articles of incorporation or bylaws require the
vote of a greater number of directors.
SECTION 9. Action Without A Meeting. Unless the articles of
incorporation or bylaws provide otherwise, action required or permitted to be
taken at a board of directors' meeting may be taken without a meeting if the
action is taken by all members of the board. The action must be evidenced by one
or more written consents describing the action taken, signed by each director,
and included in the minutes or filed with the corporate records reflecting the
action taken. Action taken under this section shall be effective when the last
director signs the consent, unless the consent specifies a different effective
date. Such a consent has the effect of a meeting vote and may be described as
such in any document.
SECTION 10. Vacancies. Unless the articles of incorporation provide
otherwise, if a vacancy occurs on the board of directors, including a vacancy
resulting from an increase in the number of directors, (i) the shareholders may
fill the vacancy, (ii) the board of directors may fill the vacancy, or (iii) if
the directors remaining in office constitute fewer than a quorum of the board,
they may fill the vacancy by the affirmative vote of a majority of all the
directors remaining in office. If the vacant office was held by a director
elected by a voting group of shareholders, only the holders of shares of that
voting group shall be entitled to fill the vacancy if it is filled by the
shareholders. A vacancy that will occur at a specific later date (by reason of
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a resignation effective at a later date or otherwise) may be filled before the
vacancy occurs, but the new director may not take office until the vacancy
occurs.
SECTION 11. Compensation. Unless the articles of incorporation or these
bylaws provide otherwise, the board of directors may fix the compensation of
directors. By resolution of the board of directors, each director may be paid
his expenses, if any, of attendance at each meeting of the board of directors,
and may be paid a stated salary as a director or a fixed sum for attendance at
each meeting of the board of directors or both. No such payment shall preclude
any director from serving the corporation in any other capacity and receiving
compensation therefor.
SECTION 12. Executive and Other Committees. Unless the articles of
incorporation or bylaws provide otherwise, the board of directors may create an
executive committee and one or more other committees and appoint members of the
board of directors to serve on them. Each committee must have two (2) or more
members, who serve at the pleasure of the board of directors. The creation of a
committee and appointment of members to it must be approved by the greater of
(1) a majority of all the directors in office when the action is taken or (2)
the number of directors required by the articles of incorporation or bylaws to
take action. To the extent specified by the board of directors or in the
articles of incorporation or bylaws, each committee may exercise the authority
of the board of directors. A committee may not, however, authorize
distributions; approve or propose to shareholders action required by applicable
law to be approved by shareholders; fill vacancies on the board of directors or
on any of its committees; amend articles of incorporation pursuant to applicable
law authorizing amendment by the board of directors; adopt, amend, or repeal
bylaws; approve a plan of merger not requiring shareholder approval; authorize
or approve the reacquisition of shares, except according to a formula or method
prescribed by the board of directors; or authorize or approve the issuance or
sale or contract for sale of shares, or determine the designation and relative
rights, preferences and limitations of a class or series of shares, except that
the board of directors may authorize a committee (or a senior executive officer
of the corporation) to do so within limits specifically prescribed by the board
of directors. Provisions of these bylaws governing meetings, action without
meetings, notice and waiver of notice, and quorum and voting requirements of the
board of directors, apply to committees and their members as well.
SECTION 13. Participation by Telephonic or Other Means. Unless the
articles of incorporation or these bylaws provide otherwise, the board of
directors may permit any or all directors to participate in a regular or special
meeting by, or conduct the meeting through the use of, any means of
communication by which all directors participating may simultaneously hear each
other during the meeting. A director participating in a meeting by this means
shall be deemed to be present in person at the meeting.
ARTICLE IV. OFFICERS
SECTION 1. Number. The officers of the corporation shall be a
chairman of the board, a president, a secretary and a treasurer, each of whom
shall be elected by the board of directors.
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Such other officers, assistant officers and agents as may be deemed necessary
may be elected or appointed by the board of directors. Any two or more offices
may be held by the same person.
SECTION 2. Election and Term of Officers. The officers of the
corporation to be elected by the board of directors shall be elected annually by
the board of directors at the regular meeting of the board of directors
immediately following the annual meeting of the shareholders. If the election of
officers shall not be held at such meeting, such election shall be held as soon
thereafter as conveniently may be. Each officer shall continue to serve until
his successor is elected and qualifies or until his death or until he shall
resign or shall have been removed in the manner hereinafter provided.
SECTION 3. Resignation or Removal of Officers and Agents. (a) An
officer or agent may resign at any time by delivering written notice to the
board of directors, to its chairman or to the corporation. A resignation shall
be effective when the notice is delivered unless the notice specifies a later
effective date.
(b) Any officer or agent may be removed by the board of directors
whenever in its judgment, the best interests of the corporation will be served
thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person so removed. Election or appointment of an officer or agent
shall not of itself create contract rights.
SECTION 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term.
SECTION 5. Chairman of the Board. The chairman of the board must be a
member of the board of directors at the time of election to such office. When
present he shall preside at all meetings of the shareholders and of the board of
directors. He may sign, with the president and secretary or any other proper
officer of the corporation thereunto authorized by the board of directors, any
deeds, mortgages, bonds, contracts or other instruments which the board of
directors has authorized to be executed, except in cases where the signing and
execution thereof shall be expressly delegated by the board of directors or by
these bylaws to some other officer or agent of the corporation, or shall be
required by law to be otherwise signed or executed; and in general shall perform
all duties incident to the office of chairman of the board and such other duties
as may be prescribed by the board of directors from time to time.
SECTION 6. President. The president shall be the principal executive
officer of the corporation and, subject to the control of the board of
directors, shall have general supervision and control of the business and
affairs of the corporation. In the absence of the chairman of the board of
directors, he shall, when present, preside at all meetings of the shareholders
and of the board of directors. He may sign, with the secretary or any other
proper officer of the corporation thereunto authorized by the board of
directors, certificates for shares of the corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the board of directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be
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expressly delegated by the board of directors or by these bylaws to some other
officer or agent of the corporation, or shall be required by law to be otherwise
signed or executed; and in general shall perform all duties incident to the
office of president and such other duties as may be prescribed by the board of
directors from time to time.
SECTION 7. Vice President. In the absence of the president or in the
event of his death, inability or refusal to act, the vice president shall
perform the duties of the president, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the president. The vice
president shall perform such other duties as from time to time may be assigned
to him by the president or by the board of directors.
SECTION 8. Secretary. The secretary shall (a) prepare and keep the
minutes of the directors' and shareholders' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these bylaws or as required by law; (c) be custodian of
the corporate records and of the seal of the corporation and see that the seal
of the corporation is affixed to all documents the execution of which on behalf
of the corporation under its seal is duly authorized; (d) authenticate records
of the corporation; (e) keep a register of the post office address of each
shareholder which shall be furnished to the secretary by such shareholder; (f)
sign with the president, certificates for shares of the corporation, the
issuance of which shall have been authorized by resolutions of the board of
directors; (g) have general charge of the stock transfer books of the
corporation; (h) in general perform all duties incident to the office of
secretary and such other duties as from time to time may be assigned to him by
the president or by the board of directors.
SECTION 9. Treasurer. The treasurer shall: (a) have charge and custody
of and be responsible for all funds and securities of the corporation; (b)
receive and give receipts for monies due and payable to the corporation from any
source whatsoever, and deposit all such monies in the name of the corporation in
such banks, trust companies or other depositories as shall be selected in
accordance with these bylaws; and (c) in general perform all of the duties
incident to the office of treasurer and such other duties as from time to time
may be assigned to him by the president or by the board of directors. If
required by the board of directors, the treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the board of directors shall determine.
SECTION 10. Compensation. The board of directors may fix the
compensation of the officers. No such payment shall preclude any officer from
serving the corporation in any other capacity and receiving compensation
therefor.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. The board of directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of
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and on behalf of the corporation, and such authority may be general or confined
to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the board of directors. Such authority may be
general or confined to specific instances.
SECTION 3. Checks, Drafts, Etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by resolution of the board of directors.
SECTION 4. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, companies or other depositories as the board of directors may
select.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares. Shares shall be represented by
certificates. Certificates representing shares of the corporation shall be in
such form as shall be determined by the board of directors. At a minimum, each
share certificate must state on its face (1) the name of the corporation and
that the corporation is organized under the law of the State of Mississippi; (2)
the name of the person to whom issued; and (3) the number and class of shares
and the designation of the series, if any, the certificate represents. If the
corporation is authorized to issue different classes of shares or different
series within a class, the designations, relative rights, preferences and
limitations applicable to each class and the variations in rights, preferences
and limitations determined for each series (and the authority of the board of
directors to determine variations for future series) must be summarized on the
front or back of each certificate or the corporation must furnish the
shareholder this information on request in writing and without charge.
Each share certificate must be signed (either manually or in facsimile)
by the president or a vice president and by the secretary or an assistant
secretary or by such other officers designated in the bylaws or by the board of
directors so to do, and may be sealed with the corporate seal. If the person who
signed (either manually or in facsimile) a share certificate no longer holds
office when the certificate is issued, the certificate is nevertheless valid.
All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the corporation. All
certificates surrendered to the corporation for transfer shall be canceled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and canceled, except that in the
case of a lost, destroyed, or mutilated certificate
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a new one may be issued therefor upon such terms and indemnity to the
corporation as the board of directors may prescribe.
SECTION 2. Transfer of Shares. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the secretary of the corporation,
and on surrender for cancellation of the certificate for such shares.
ARTICLE VII. INDEMNIFICATION
SECTION 1. Mandatory Indemnification. Subject to Section 3 of this
Article VII, the corporation shall indemnify any person who was or is a party or
is threatened to be made party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, or employee of the corporation, or
is or was serving at the request of the corporation as a director, officer, or
employee of another corporation partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. This indemnification
provision shall not extend to those suits instituted by any such director,
officer, or employee unless and to the extent such indemnification is authorized
by the Board of Directors.
SECTION 2. Derivative Actions. Subject to Section 3 of this Article
VII, the corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, or employee of the
corporation, or is or was serving at the request of the corporation as a
Director, officer, or employee of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of
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all the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses which such court shall deem proper.
SECTION 3. Procedure for Determining Right to Indemnification. Any
indemnification under this Article VII (unless ordered by a court) shall be made
by the corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, or employee is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 1 or Section 2 of this Article VII, as the case may be. Such
determination shall be made (i) by the Board of Directors by a majority vote of
a quorum of the entire Board of Directors, which majority and quorum must
consist of directors who were not parties to or otherwise interested in such
action, suit or proceeding, or (ii) if such a quorum is not obtainable, by
independent legal counsel in a written opinion, or (iii) by the stockholder.
Directors "parties to or otherwise interested in" an action, suit or proceeding
shall include, for purposes of the preceding sentence, (i) any director
instituting such action, suit or proceeding, whether in his capacity as director
or stockholder (an "Instituting Director") and (ii) any other director nominated
(x) by an Instituting Director (and not by the Board of Directors), (y) as part
of the same slate of nominees as an Instituting Director (if not nominated by
the Board of Directors), or (z) by the same stockholder or any of the same
stockholders who nominated an Instituting Director. To the extent, however, that
a director, officer, or employee of the corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding described
above, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith, without the necessity of authorization
in the specific case. Notwithstanding any of the provisions of this Article VII,
in no event shall any person be indemnified against expenses (including
attorneys' fees), judgments, fines and amounts due or paid in connection with
any action, suit or proceeding instituted by any such director, officer, or
employee unless and to the extent such indemnification is authorized by the
Board of Directors, or against expenses, penalties, or other payments incurred
in an administrative proceeding or action instituted by an appropriate bank
regulatory agency which proceeding or action results in a final order assessing
civil money penalties or requiring affirmative action by an individual or
individuals in the form of payments to the corporation.
SECTION 4. Standard of Conduct. For purposes of a determination under
Section 3 of this Article VII, a person shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, or with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the corporation or
another enterprise, or on information supplied to him by the officers of the
corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the corporation or another enterprise or on
information or records given or reports made to the corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section 4 shall mean
any other corporation or any partnership, joint venture, trust or other
enterprise of which such person is or was serving at the request of the
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corporation as a director, officer, or employee. The provisions of this Section
4 shall not be deemed to be exclusive or to limit in any way the circumstances
in which a person may be deemed to have met the applicable standard of conduct
set forth in Sections 1 or 2 of this Article VII, as the case may be.
SECTION 5. Determination by Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VII, and
notwithstanding the absence of any determination thereunder, any director,
office, or employee may apply to any court of competent jurisdiction in the
State of Mississippi for indemnification to the extent otherwise permissible
under Sections 1 and 2 of this Article VII. The basis of such indemnification by
a court shall be a determination by such court that indemnification of the
director, officer, or employee is proper in the circumstances because he has met
the applicable standards of conduct set forth in Sections 1 and 2 of this
Article VII, as the case may be. Notice of any application for indemnification
pursuant to this Section 5 shall be given to the corporation promptly upon the
filing of such application.
SECTION 6. Advancing Expenses. Expenses incurred in defending or
investigating a threatened or pending action, suit or proceeding may be paid by
the corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors in the specific case upon
receipt of an undertaking by or on behalf of the director, officer, or employee
to repay such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the corporation as authorized in this Article VII.
SECTION 7. Indemnification Under This Article Not Exclusive. The
indemnification provided by this Article VII shall not be deemed exclusive of
any other rights to which those seeking indemnification may be entitled under
any Bylaw, agreement, contract, vote of stockholders or disinterested directors
or pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, it being the policy of the
corporation that indemnification of the persons specified in Sections 1 and 2 of
this Article VII shall be made to the fullest extent permitted by law. The
provisions of this Article VII shall not be deemed to preclude the
indemnification of any person who is not specified in Sections 1 or 2 of this
Article VII, but whom the corporation has the power or obligation to indemnify
under the provisions of applicable federal or state law, or otherwise. The
indemnification provided by this Article VII shall continue as to a person who
has ceased to be a director, officer, or employee and shall inure to the benefit
of heirs, executors and administrators of such person.
SECTION 8. Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, or employee
of the corporation, or is or was serving at the request of the Corporation as a
director, officer, or employee of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him,
and incurred by him, in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power or the obligation to
indemnify him against such liability under the provisions of this Article VII,
provided that the corporation shall not
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purchase or maintain insurance coverage for a formal order by a bank regulatory
agency assessing civil money penalties against a director or employee of the
corporation.
SECTION 9. Persons Covered. For purposes of this Article VII,
references to "the corporation shall include, in addition to the resulting
company, any constituent company (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its directors,
officers and employees, so that any person who is or was a director, officer, or
employee of such constituent company as a director, officer, or employee of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article VII with
respect to the resulting or surviving company as he would have with respect to
such constituent company if its separate existence had continued.
ARTICLE VIII. NOTICE
Notice shall be in writing unless oral notice is reasonable under the
circumstances. Notice may be communicated in person; by telephone, telegraph,
teletype or other form of wire or wireless communication; or by mail or private
carrier. If these forms of personal notice shall be impracticable, notice may be
communicated by a newspaper of general circulation in the area where published;
or by radio, television or other form of public broadcast communication.
Written notice to shareholders, if in a comprehensible form, shall be
effective when mailed, if mailed postpaid and correctly addressed to the
shareholder's address shown in the corporation's current record of shareholders.
Except as provided above with respect to notice to shareholders,
written notice, if in a comprehensible form, shall be effective at the earliest
of the following:
(1) When received;
(2) Five (5) days after its deposit in the United States mail,
as evidenced by the postmark, if mailed postpaid and correctly addressed;
(3) On the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested, and the receipt is signed by or on
behalf of the addressee.
Oral notice shall be effective when communicated if communicated in a
comprehensible manner.
If applicable law prescribes notice requirements for particular
circumstances, those requirements govern. If the articles of incorporation or
these bylaws prescribe notice requirements, not inconsistent with this section
or other provisions of applicable law, those requirements govern.
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ARTICLE IX. WAIVER OF NOTICE; ASSENT TO ACTIONS
Unless otherwise provided by law, a shareholder or director of the
corporation may waive any notice required by applicable law, the articles of
incorporation or these bylaws, before or after the date and time stated in the
notice. Except as provided below, the waiver must be in writing, be signed by
the shareholder or director entitled to the notice, and delivered to the
corporation for inclusion in the minutes or filing with the corporate records.
A director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless the director at the beginning of
the meeting (or promptly upon his arrival) objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting. A shareholder's attendance at a meeting (i)
waives objection to lack of notice or defective notice of the meeting unless the
shareholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting, and (ii) waives objection to consideration
of a particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder objects to considering
the matter when it is presented.
A director who is present at a meeting of the board of directors or a
committee of the board of directors when corporate action is taken shall be
deemed to have assented to the action taken unless: (1) he objects at the
beginning of the meeting (or promptly upon his arrival) to holding it or
transacting business at the meeting; (2) his dissent or abstention from the
action taken shall be entered in the minutes of the meeting; or (3) he delivers
written notice of his dissent or abstention to the presiding officer of the
meeting before its adjournment or to the corporation immediately after
adjournment of the meeting. The right of dissent or abstention shall not be
available to a director who votes in favor of the action taken.
ARTICLE X. FISCAL YEAR
The fiscal year of the corporation shall begin on January 1 and end on
December 31 in each year.
ARTICLE XI. DISTRIBUTIONS
The board of directors may authorize and the corporation may make
distributions to its shareholders, subject to restriction by the articles of
incorporation and applicable law.
199235.1/ 16
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ARTICLE XII. CORPORATE SEAL
The board of directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words "Corporate Seal".
ARTICLE XIII. AMENDMENTS
Unless the articles of incorporation, applicable law or a resolution of
the shareholders reserves this power exclusively to the shareholders in whole or
part, the corporation's board of directors may amend or repeal these bylaws and
adopt new bylaws at any regular or special meeting of the board of directors.
17
CONSULTING AGREEMENT
THIS AGREEMENT made and entered into this 30th day of
August, 1995, between JOHNNY H. WILLIAMSON (hereinafter "Consultant")
and AMERICAN PUBLIC LIFE INSURANCE COMPANY (hereinafter "Company"), upon the
following terms and condition, to-wit:
WITNESSETH:
WHEREAS, Consultant has been active in the management and operations of
insurance companies for numerous years, during which time he has been the
President of American Public Life Insurance Company and as such, has been
responsible for the administration, operation and management of the Company; and
WHEREAS, Consultant has gained experience in the administration and
management of the Company which enables the Consultant to provide to Company
valuable and desirable services in connection with its business;
NOW, THEREFORE, in consideration of the covenants contained herein, the
parties hereto agree as follows:
i. Agreement. The Company agrees to retain Consultant as an independent
contractor, and Consultant agrees to provide his unique experience, ability and
services as a consultant to the Company. The areas in which Consultant will
provide services shall include such duties as may be necessary in the best
interest of the Company, and such duties as may be assigned to him from time to
time by the President, Board of Directors or its Chairman. The Consultant agrees
to hold confidential all proprietary or trade secret information heretofore
obtained by
199537.1/
<PAGE>
him as an employee or officer of the Company and all such information relative
to the services being performed under this Agreement.
2. Compensation. As compensation for services rendered by the
Consultant, the Company shall pay the Consultant $100.00 per hour for his
services with a minimum payment of $1,000.00 per month. The Consultant will
submit time records to Company at the end of each month to the president of the
Company, or to David A. New, Sr., or their designee if any time is expended by
Consultant. Company will pay Consultant based upon these records, approved by
the president of the Company or David A. New, Sr., or their designee at the
above rate and minimum fee within ten (10) days after approval of the records.
If no time is expended, the Company shall nevertheless pay Consultant each month
the minimum fee of $1,000. If Consultant is not requested to perform at least
ten (10) hours of services in a given month, the unused hours shall not be
carried over to a subsequent month or accumulated.
3. Expenses. The Company shall reimburse Consultant for all reasonable
and necessary expenses incurred in performing these services, including, but
not limited to, travel, lodging, meals, telephone and postage. Consultant shall
be reimbursed for automobile mileage at a rate of $.27 per mile. All expenses
must be documented.
4. Relationship of the Parties. The parties intend that the
relationship between them created under this Agreement is that of an independent
contractor only. Consultant is not to be considered an agent or employee of
Company for any purpose, and Company is interested only in the results obtained
under this Agreement. The manner and means of performing the services are
subject to Consultant's sole control. Consultant shall be
<PAGE>
responsible for all state, federal and local taxes, including estimated taxes,
and employment reporting for Consultant or any employees or agents of
Consultant.
5. Term. The term of this Agreement shall begin on September 1, 1995,
and shall terminate on the Consultant's sixty-fifth (65th) birthday, which is
January 22, 1999.
6. Assignment. The Consultant acknowledges that the services to be
rendered by him are unique and personal. Accordingly, the Consultant may not
assign any of his rights nor delegate any of his duties or obligations under
this Agreement. The Company, with written consent of Consultant, may assign its
rights or obligations under this Agreement at any time, subject to written
acknowledgment and acceptance of such assignment by the assignee thereof. The
rights and obligations of the Company shall be binding upon the heirs,
executors, administrators, successors and assigns of the Company.
7. Sale of Company. In the event David A. New, Sr., the Company's major
shareholder sells all or substantially all of his stock in the Company to the
effect that control of the Company changes, or if control of the Company changes
for any other reason, all remaining unpaid amounts payable monthly to
Williamson's age sixty-five (65) under this Agreement shall become due and
payable immediately.
8. Applicable Law. This Agreement shall be construed in accordance with
the laws of the State of Mississippi.
9. Notices and Communications. Any and all notices or other
communications required or permitted under this Agreement shall be in writing
and shall be deemed sufficient when
<PAGE>
delivered in person or when mailed by United States Postal Service certified
mail, return receipt requested, postage prepaid and addressed:
TO CONSULTANT: Johnny H. Williamson
104 Pine Court
Brandon, Mississippi 39042
TO COMPANY: American Public Life Insurance Company
c/o Its President
Post Office Box 925
Jackson, Mississippi 39205
Any party may change the address to which notice and other communications are
sent by delivering written notice of the change to the other party to this
Agreement.
10. Titles and Captions. All section titles or captions contained in
this Agreement are for convenience only and shall not be deemed part of the
context nor affect the interpretation of this Agreement.
11. Amendment. This Agreement may be amended only by a written
agreement signed by the parties hereto.
12. Presumption. This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
13. Further Action. The parties hereto shall execute and deliver all
documents, provide all information, and take or forbear from all such action
as may be necessary or appropriate to achieve the purposes of the Agreement.
14. Parties in Interest. Nothing herein shall be construed to be to
the benefit of any third party, nor is it intended that any provision shall
be for the benefit of any third party.
<PAGE>
15. Partial Invalidity. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such
invalid or unenforceable provisions were omitted.
16. Entire Agreement. This Agreement contains the entire agreement
between the parties concerning the retention of the Consultant, and there are
no oral or written inducements, promises or agreements except as contained
herein.
IN WITNESS WHEREOF, the Consultant has executed this Agreement and the
Company has caused this Agreement to be executed by its duly authorized officer.
[SIGNATURES]
EXHIBIT 21- SUBSIDIARIES OF REGISTRANT
The following is a list of all subsidiaries of the Company and the
jurisdiction in which they were organized. Each subsidiary does business under
its own name.
NAME JURISDICTION WHERE ORGANIZED
American Public Life Insurance Company. Mississippi
DentaCare Marketing & Administration. Louisiana
<TABLE> <S> <C>
<ARTICLE> 7
<CIK> 0001037559
<NAME> American Public Holdings, Inc.
<S> <C> <C>
<PERIOD-TYPE> year year
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> Jan-01-1996 Jan-01-1995
<PERIOD-END> Dec-31-1996 Dec-31-1995
<DEBT-HELD-FOR-SALE> 32720388 0
<DEBT-CARRYING-VALUE> 0 31084657
<DEBT-MARKET-VALUE> 0 31913000
<EQUITIES> 0 0
<MORTGAGE> 1075268 1257771
<REAL-ESTATE> 784542 710326
<TOTAL-INVEST> 36177596 34708946
<CASH> 602470 301102
<RECOVER-REINSURE> 0 0
<DEFERRED-ACQUISITION> 11317490 12397790
<TOTAL-ASSETS> 52277519 51724155
<POLICY-LOSSES> 32918172 32034811
<UNEARNED-PREMIUMS> 879437 796915
<POLICY-OTHER> 856085 906837
<POLICY-HOLDER-FUNDS> 396952 383569
<NOTES-PAYABLE> 0 0
0 0
0 0
<COMMON> 57250 57250
<OTHER-SE> 16172247 16540059
<TOTAL-LIABILITY-AND-EQUITY> 52277519 51724155
26069848 25385971
<INVESTMENT-INCOME> 2387010 2300624
<INVESTMENT-GAINS> (80291) (82117)
<OTHER-INCOME> 26067 28216
<BENEFITS> 17650892 18025211
<UNDERWRITING-AMORTIZATION> 3129605 3627023
<UNDERWRITING-OTHER> 7355016 6905042
<INCOME-PRETAX> 267121 (924669)
<INCOME-TAX> 17328 (337013)
<INCOME-CONTINUING> 249793 (587656)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 249793 (587656)
<EPS-PRIMARY> 4.65 (10.67)
<EPS-DILUTED> 4.65 (10.67)
<RESERVE-OPEN> 0 0
<PROVISION-CURRENT> 0 0
<PROVISION-PRIOR> 0 0
<PAYMENTS-CURRENT> 0 0
<PAYMENTS-PRIOR> 0 0
<RESERVE-CLOSE> 0 0
<CUMULATIVE-DEFICIENCY> 0 0
</TABLE>
