SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
[ ] Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(C) or ss. 240.14a-12
American Physicians Service Group, Inc.
(Name of Registrant as Specified In Its Charter)
American Physicians Service Group, Inc.
(Name of Persons(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(I)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(I)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
4) Proposed maximum aggregate value of transaction:
5) Total Fee Paid
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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[Logo]
American Physicians Service Group, Inc.
1301 Capital of Texas Highway
Austin, Texas 78746
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 13, 2000
Notice is hereby given that the Annual Meeting of Shareholders of
American Physicians Service Group, Inc., a Texas corporation (the "Company"),
will be held at the Lakeway Inn located at 101 Lakeway Drive, Austin, Texas
78734, on Tuesday, June 13, 2000 at 8:30 a.m., Austin, Texas time, for the
following purposes:
(a) To elect four directors to serve on the Board of Directors; and
(b) To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.
The accompanying Proxy Statement contains information regarding, and a
more complete description of, the items of business to be considered at the
meeting.
Only shareholders of record at the close of business on April 27, 2000,
are entitled to notice of, and to vote at, the Annual Meeting of Shareholders or
any adjournment(s) thereof.
You are cordially invited and urged to attend the meeting, but if you
are unable to attend the meeting, you are requested to sign and date the
accompanying proxy and return it promptly in the enclosed self-addressed
envelope. If you attend the meeting, you may vote in person, if you wish,
whether or not you have returned your proxy. In any event, a proxy may be
revoked at any time before it is exercised.
By Order of the Board of Directors
W. H. HAYES, Sr. VP and Secretary
Austin, Texas
May 10, 2000
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
1301 Capital of Texas Highway
Austin, Texas 78746
PROXY STATEMENT
for
ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 13, 2000
This Proxy Statement is sent to shareholders of American Physicians
Service Group, Inc., a Texas corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Shareholders of the Company to be held at the Lakeway Inn
located at 101 Lakeway Drive, Austin, Texas 78734, on Tuesday, June 13, 2000 at
8:30 a.m., Austin, Texas time, and any adjournment(s) thereof, for the purposes
set forth in the accompanying Notice of Annual Meeting of Shareholders.
Solicitation of proxies may be made in person or by mail, telephone, or telecopy
by directors, officers, and regular employees of the Company. The Company may
also engage the service of others to solicit proxies in person or by telephone
or telecopy. In addition, the Company may also request banking institutions,
brokerage firms, custodians, nominees, and fiduciaries to forward solicitation
material to the beneficial owners of common stock of the Company held of record
by such persons, and the Company will reimburse the forwarding expenses. The
cost of solicitation of proxies will be paid by the Company. This Proxy
Statement and the enclosed form of proxy were first mailed to shareholders on or
about May 10, 2000.
Unless the context indicates otherwise, the "Company" includes the
Company and all of the other direct and indirect subsidiaries of the Company on
a consolidated basis.
ANNUAL REPORT
Enclosed is an Annual Report to Shareholders for the year ended
December 31, 1999, including audited financial statements. Such Annual Report to
Shareholders does not form any part of the material for the solicitation of
proxies.
REVOCATION OF PROXY
Any shareholder returning the accompanying proxy may revoke such proxy
at any time prior to its exercise (a) by giving written notice to the Secretary
of the Company of such revocation, (b) by voting in person at the meeting, or
(c) by executing and delivering to the Secretary of the Company a later dated
proxy.
OUTSTANDING COMMON STOCK; CERTAIN SHAREHOLDERS
The voting securities of the Company are shares of its common stock,
$.10 par value (the "Common Stock"), each share of which entitles the holder
thereof to one vote on each matter properly brought before the meeting. Only
shareholders of record at the
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close of business on April 27, 2000 are entitled to notice of, and to vote at,
the Annual Meeting of Shareholders and any adjournment(s) thereof. At April 27,
2000, the Company had outstanding and entitled to vote 2,745,233 shares of
Common Stock.
The following table sets forth certain information as of April 27, 2000
regarding the amount and nature of the beneficial ownership of Common Stock by
(a) each person who is known by the Company to be the beneficial owner of more
than five percent of the outstanding shares of Common Stock, (b) each director
and nominee for director of the Company, (c) each executive officer of the
Company named in the Summary Compensation Table below, and (d) all officers and
directors of the Company as a group:
Amount and Nature Percent
Name and Address of of Beneficial of
Beneficial Owner Ownership(1)(2) Class
Kenneth S. Shifrin............................552,825 19.0
1301 Capital of Texas Highway
Austin, Texas 78746
Dimensional Fund Advisors, Inc. (4)...........259,600 9.5
1299 Ocean Ave., 11th Floor
Santa Monica, California 90401
Heartland Advisors, Inc. .....................375,200 13.7
790 North Milwaukee St.
Milwaukee, Wisconsin 53202
Duane K. Boyd.................................131,800 4.7
George S. Conwill..............................31,834 1.2
W. H. Hayes...................................139,000 4.9
Brad A. Hummel..................................7,000 .3
Robert L. Myer.................................95,000 3.4
William A. Searles.............................86,000 3.0
All officers and directors as
a group (10 persons)(2)(3).................1,111,959 33.6
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(1) Except as otherwise indicated, and subject to community property laws
where applicable, each individual has sole voting and investment power
with respect to all shares owned by such individual.
(2) The number of shares beneficially owned by officers and directors
includes the following number of shares subject to options that are
presently exercisable or exercisable within 60 days after April 27,
2000: Mr. Shifrin, 170,000; Mr. Boyd, 45,000; Mr. Conwill, 31,834; Mr.
Hayes, 83,000; Mr. Hummel, 7,000; Mr. Myer, 70,000; Mr. Searles,
86,000. The number of shares beneficially owned by all directors and
officers as a group, including the above-named directors, includes
560,334 shares subject to options that are presently exercisable or
exercisable within 60 days after April 27, 2000.
(3) Includes the president and chairman of the board, if any, of each of
the Company's consolidated subsidiaries.
(4) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of 259,600
shares of Common Stock as of December 31, 1999, all of which shares are
held in portfolios of DFA Investment Dimensions Group Inc., a
registered open-end investment company, or in series of the DFA
Investment Trust Company, a Delaware business trust, or the DFA Group
Trust and DFA Participation Group Trust, investment vehicles for
qualified employee benefit plans, all of which Dimensional Fund
Advisors Inc. serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares.
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EXECUTIVE COMPENSATION
Summary Compensation Table
Set forth below is information concerning aggregate cash compensation
earned during each of the Company's last three fiscal years by the Company's
Chief Executive Officer and each of the Company's other most highly compensated
executive officers who received in excess of $100,000 in salary and bonuses
during any of the last three years.
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation Awards
------------ -------------------
Other Annual Securities All Other
Name and Principal Fiscal Salary ($) Bonus Compensation Underlying Compensation
Position Year ($) ($) Options (#) ($) (1)
- --------------------------- ----------- ----------- --------- ---------------- ------------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth S. Shifrin, 1999 225,000 50,000 -- 35,000 2,390
Chairman & CEO
1998 173,438 40,050 -- 185,000 2,066
1997 112,500 50,800 -- 35,000 2,492
Duane K. Boyd, Jr., Sr. VP 1999 130,000 20,000 -- 15,000 2,390
1998 135,000 35,000 -- 45,000 2,074
1997 140,000 136,000 -- 20,000 2,497
William H. Hayes, Sr. VP 1999 99,996 20,000 -- 20,000 2,390
1998 88,466 17,700 -- 65,000 2,074
1997 86,160 21,400 -- 20,000 2,497
George S. Conwill, VP 1999 117,196 211,323 -- 10,000 2,294
1998 118,519 125,000 -- 25,000 1,595
1997 119,174 -- -- -- 1,880
(1) Consists of Company contributions to the Company's 401(k) plan.
</TABLE>
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Options Granted During Last Fiscal Year
The following table provides information related to options granted to
the named executive officers during 1999. The Company does not have any
outstanding stock appreciation rights.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Individual Grants
Number of Potential realizable value
securities Percent of at assumed annual rates of
underlying total options stock price appreciation for
Options granted to Exercise Expiration option term:
Name granted (#) employees in Price ($/Sh) Date
(1) fiscal year
- -------------------------- --------------- --------------- -------------- -----------
5% ($) (2) 10% ($) (2)
- -------------------------- --------------- --------------- -------------- ----------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth S. Shifrin 35,000 23% $4.125 08/12/04 39,888 88,142
Duane K. Boyd, Jr. 15,000 10% $4.125 08/12/04 17,095 37,775
William H. Hayes 20,000 13% $4.125 08/12/04 22,793 50,367
George S. Conwill 10,000 6% $4.125 08/12/04 11,397 25,184
All employees as a group 155,000 100% (3) (3) 173,436 383,248
-------------------------------
</TABLE>
5% ($) 10% ($)
------ -------
Total potential stock price appreciation from
dates of stock option grants for all shareholders
at assumed rates of stock price appreciation (4) 3,071,752 6,787,768
Potential realizable value of options granted to
all employees, as a percentage of total potential
stock price appreciation from dates of stock
option grants for all shareholders at assumed
rates of stock price appreciation from the exercise
price. 5.6% 5.6%
(1)These options were granted at fair market value at the time of grant and
vest in three annual installments beginning one year after grant.
(2)The potential realizable value of the options granted in 1999 was calculated
by multiplying those options by the excess of (a) the assumed market value,
of the underlying Common Stock five years from grant date of the options if
the market value of Common Stock were to increase 5% or 10% in each year of
the option's 5-year term over (b) the exercise price shown. This calculation
does not take into account any taxes or other expenses which might be owed.
The 5% and 10% appreciation rates are set forth in the Securities and
Exchange Commission rules and no representation is made that the Common Stock
will appreciate at these assumed rates or at all.
(3)Options were granted under the Company's stock option program throughout
1999 with various expiration dates through the year 2004. The average
exercise price of all options granted to employees in 1999 is $4.05.
(4) Based on an average price of $4.05 on the grant dates, and a total of
2,745,233 shares of Common Stock outstanding.
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Option Exercises During 1999 and Option Values at December 31, 1999
The following table provides information related to options exercised
by the named executive officers during 1999 and the number and value of options
held at December 31, 1999. The Company does not have any outstanding stock
appreciation rights.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options at
at Fiscal Fiscal
Year-End Year-End (2)
-------------------------------- -------------------------------
Shares Acquired
Name on Exercise (#) Value Realized Exercisable Unexercisable Exercisable Unexercisable
($)(1) (#) (#) ($) ($)
- ---------------------- ------------------- ------------------ ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Kenneth S. Shifrin -- -- 174,000 156,000 10,938 --
Duane K. Boyd -- -- 57,000 48,000 -- --
William H. Hayes 25,000 29,688 89,000 66,000 10,938 --
George S. Conwill -- -- 23,834 27,000 2,552 --
</TABLE>
(1) The Value Realized was calculated by subtracting the per share exercise
price of the option from the closing price for the Company's Common
Stock on the date of exercise and multiplying the difference by the
number of shares of Common Stock underlying the option.
(2) The Value of Unexercised In-the-Money Options is before any income
taxes and was calculated by subtracting the per share exercise price of
the option from the closing price for the Company's Common Stock on
December 31, 1999 ($3.6875) and multiplying the difference by the
number of shares of Common Stock underlying the option.
COMPENSATION OF DIRECTORS
Outside directors receive a fee of $1,000 for each meeting of the
Board of Directors that they attend. Mr. Myer has requested that the Company
make a $1,000 charitable contribution for each meeting in lieu of a fee to
him. Mr. Shifrin does not receive separate compensation for his services as a
director.
INDEMNITY AGREEMENTS
The Company has entered into indemnity agreements with its officers and
directors. The agreements generally provide that, to the extent permitted by
law, the Company must indemnify each person for judgements, expenses, fines,
penalties and amounts paid in settlement of claims that result from the fact
that such person was an officer, director or employee of the Company. In
addition, the Company's and certain of its subsidiaries' articles of
incorporation provide for certain indemnifications and limitations on director
liability.
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REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Company is engaged in several highly competitive industries. In
order to succeed, the Company believes that it must be able to attract and
retain qualified executives. To achieve this objective, the Company has
structured an executive compensation system tied to operating performance that
the Company believes has enabled it to attract and retain key executives.
During 1999, the Compensation Committee was comprised of Robert L.
Myer, an outside director, and William A. Searles.
During 1999, the Compensation Committee had primary responsibility for
determining executive compensation levels. The Board as a whole maintains a
philosophy that compensation of executive officers, specifically including that
of the Chief Executive Officer, should generally be linked to both operating and
stock price performance. A portion of the management compensation has been
comprised of bonuses, based on operating and stock price performance, with a
particular emphasis on the attainment of planned objectives. Accordingly, in
years in which performance goals are achieved or exceeded, executive
compensation tends to be higher than in years in which performance is below
expectations. Stock options are granted from time to time to members of
management, based primarily on such person's potential contribution to the
Company's growth and profitability. The Committee feels that options are an
effective incentive for managers to create value for shareholders since the
value of an option bears a direct relationship to the Company's stock price.
For 1999, the Company's executive compensation program consisted of
base salary and a bonus based upon the achievement of specific performance
measurements. Executives of subsidiaries of the Company were paid a bonus based
upon achieving, among other things, a targeted pretax income. The Chief
Executive Officer was paid a bonus for 1999 based upon implementing new growth
initiatives, as well as improving book value and earnings per share.
The Company's objective is financial performance that achieves several
long-term goals, including earnings-per-share growth, revenue growth, stock
price growth and a proper diversification of business risks. The Committee
believes that its compensation policy promotes those objectives and that
compensation levels during 1999 adequately reflect the Company's compensation
goals and policies.
Compensation Committee: Robert L. Myer and
William A. Searles
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 1, 1998 the Company invested in the preferred stock of
Uncommon Care, Inc., ("Uncommon Care") a developer and operator of specialized
care facilities for those with Alzheimer's disease. At April 27, 2000, the
preferred shares owned by the Company were convertible into approximately a 34%
interest in the equity of Uncommon Care. The Company has also extended a $2.4
million secured line of credit to Uncommon Care. Certain officers, directors and
employees of the Company also invested in the common stock of Uncommon Care,
paying the same price per share for their investment as the Company. These same
officers, directors and employees also funded their pro rata portion of the line
of credit that was extended to Uncommon Care. The investments were as follows:
Initial
Name Title Ownership %
---- ----- -----------
Duane K. Boyd, Jr. Senior Vice President .95
William H. Hayes Senior Vice President .38
Robert L. Myer Director .86
William A. Searles Director .49
Kenneth S. Shifrin Chairman and CEO .57
All others .29
The Company has also extended two unsecured lines of credit to Uncommon
Care totaling $2.45 million. Mr. Boyd, Mr. Searles and Mr. Shifrin are members
of Uncommon Care's Board of Directors.
In May 1998, the Company formed APS Asset Management, Inc., ("Asset
Management") with an initial ownership of 95%. Asset Management was organized to
manage fixed income and equity assets for institutional and individual clients
on a fee basis. Certain officers, directors and employees of the Company also
invested in Asset Management, paying the same price per share as the Company.
Their investments are as follows:
Initial
Name Title Ownership %
---- ----- -----------
George S. Conwill Vice President 1
William A. Searles Director 1
All other officers,
directors & employees 2
Other owners 1
The Company's affiliate Prime Medical Services, Inc. ("Prime") occupies
approximately 8,100 square feet of office space owned by the Company and also
shares certain personnel with the Company. Prime pays the Company rent,
personnel and other expense reimbursements of approximately $16,700 per month.
As of April 27, 2000, the Company owned 2,343,803 shares of the common stock of
Prime.
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On October 1, 1997, the Company formed Syntera Healthcare Corporation
("Syntera") with an initial ownership of 85%. Syntera specialized in the
management of OB/GYN and related medical practices. On June 30, 1999 the Company
merged Syntera with another unaffiliated practice management company,
FemPartners, Inc., ("FemPartners") resulting in the Company owning approximately
12% of the total equity of FemPartners, the surviving company. Certain officers,
directors and employees of the Company also invested in Syntera, paying the same
price per share for their investment as the Company. These officers' and
directors' interests have now been converted to ownership in FemPartners. At
February 29, 2000 such ownership was as follows:
Name Title Ownership %
---- ----- -----------
Duane K. Boyd, Jr. Senior Vice President .08
William H. Hayes Senior Vice President .02
Robert L. Myer Director .26
Kenneth S. Shifrin Chairman and CEO .20
All others .07
During 1999, Mr. Searles, a director, provided consulting services to
the Company's financial services segment. As part of his consulting duties he
served as Chairman of the Board of APS Investment Services, Inc. Mr. Searles'
fee consisted of a monthly base amount of $5,000 plus an incentive amount based
upon Investment Services achieving certain levels of return on capital. Such fee
was $113,000 in 1999.
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PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return with the total stockholder returns of all NASDAQ stocks (the "NASDAQ
Total") and of all stocks (the "Peer Index") contained in the following three
NASDAQ indexes (with each index being given equal weight): Financial, Health
Services and Insurance.
The following is a table representation of the performance graph depicted
on page 10 of the print version of the proxy.
NASDAQ INDEX CONVERSION (12/31/94 = 100)
PEER
FYE NASDAQ INDEX APSG
------- -------- --------- ---------
12/31/94 100.00 100.00 100.00
12/31/95 141.34 135.80 405.26
12/31/96 173.89 152.10 273.68
12/31/97 213.07 199.30 300.00
12/31/98 300.25 181.40 189.47
12/31/99 542.43 160.20 155.26
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SECTION 16 FILING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and officers, and persons who own more than 10%
of a registered class of the Company's equity securities, to file initial
reports of ownership and reports of changes in ownership with the Securities and
Exchange Commission (the "SEC") and the NASDAQ Stock Exchange. Such persons are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on review of the copies of such forms received by the
Company with respect to 1999, or written representations from certain reporting
persons, the Company believes that all filing requirements applicable to its
directors and officers and persons who own more than 10% of a registered class
of the Company's equity securities have been complied with, except for a late
filing of Form 3 by Mr. Hummel.
QUORUM; VOTING
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote is necessary to
constitute a quorum at the meeting. If a quorum is not present or represented at
the meeting, the shareholders entitled to vote thereat, present in person or
represented by proxy, have the power to adjourn the meeting from time to time,
without notice other than an announcement at the meeting, until a quorum is
present or represented. At any such adjourned meeting at which a quorum is
present or represented, any business may be transacted that might have been
transacted at the meeting as originally notified.
Cumulative voting is not permitted in the election of directors of the
Company. On all matters (including election of directors) submitted to a vote of
the shareholders at the meeting or any adjournment(s) thereof, each holder of
Common Stock will be entitled to one vote for each share of Common Stock owned
of record by such shareholder at the close of business on April 27, 2000.
SHAREHOLDER PROPOSALS
Any shareholder of the Company meeting certain minimum stock ownership
and holding period requirements may present a proposal for action at the annual
meeting of shareholders to be held in 2001. Such shareholder must deliver the
proposal to the executive offices of the Company no later than January 15, 2001,
unless the Company notifies the shareholders otherwise. Only those proposals
that are proper for shareholder action and otherwise proper may be included in
the Company's proxy statement. The Board of Directors will consider nominations
for directors of the Company to be elected at the Annual Meeting of Shareholders
to be held in 2001 that are submitted in writing by any shareholder of the
Company prior to January 15, 2001. Notwithstanding the foregoing, all
shareholder proposals must be made in compliance with the applicable provisions
of the Bylaws of the Company.
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ACTION TO BE TAKEN UNDER THE PROXY
Proxies in the accompanying form which are properly executed and
returned will be voted at the meeting and any adjournment(s) thereof and will be
voted in accordance with the instructions thereon. Any proxy upon which no
instructions have been indicated with respect to a specified matter will be
voted as follows with respect to such matters: (a) "FOR" the four persons named
in this Proxy Statement as the Board of Directors' nominees for election to the
Board of Directors, and (b) in the transaction of such other business as may
properly come before the meeting or any adjournment(s) thereof. The Board of
Directors knows of no matters, other than those stated above, to be presented
for consideration at the meeting. If, however, other matters properly come
before the meeting or any adjournment(s) thereof, it is the intention of the
persons named in the accompanying proxy to vote such proxy in accordance with
their judgment on any such matters. The persons named in the accompanying proxy
may also, if it is deemed to be advisable, vote such proxy to adjourn the
meeting from time to time.
ELECTION OF DIRECTORS
Pursuant to the Company's Bylaws, the Board of Directors has, by
resolution, fixed the number of directors at four, and four directors will be
elected. All nominees will be elected to hold office until the next annual
meeting of shareholders of the Company and until his successor is elected and
qualified. Each nominee is presently a director of the Company and has served
continuously since first becoming a director. The Board of Directors held five
meetings during the year ended December 31, 1999, and each director attended at
least 75% of the aggregate of (a) the total number of meetings of the Board of
Directors held during the period for which he served as a director and (b) the
total number of meetings held by all committees of the board on which he served.
Director of
Name Age Company Since
------- ----- --------------
Brad A. Hummel 43 1999
Robert L. Myer 51 1996
William A. Searles 57 1989
Kenneth S. Shifrin 51 1987
Mr. Shifrin has been Chairman of the Board since March 1990. He has
been President and Chief Executive Officer since March 1989 and was President
and Chief Operating Officer from June 1987 to February 1989. He has been a
Director of the Company since February 1987. From February 1985 until June 1987,
Mr. Shifrin served as Senior Vice President - Finance and Treasurer. He has been
Chairman of the Board of Prime since October 1989 and a director of Uncommon
Care since February 1998. Mr. Shifrin is a member of the World Presidents'
Organization.
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Mr. Hummel has been a director since June 1999. He is currently Chief
Operating Officer of Prime. He was employed by Diagnostic Health Services, Inc.,
("DHS") a provider of management services and radiology and cardiac diagnostic
services and equipment to hospitals and other healthcare facilities, from 1984
to 1999, most recently as President and Chief Executive Officer. Subsequent to
Mr. Hummel's employment by Prime DHS filed for Chapter 11 reorganization.
Mr. Myer has been a director since June 1996. He is currently a
consultant to Americo Life, Inc., a life insurance company, ("Americo"). Prior
to the sale of certain of his insurance related businesses to Americo in October
1998, he had been President and Chief Executive Officer of College Insurance
Group, Inc., an insurance holding company which owned 100% of Annuity Service
Corp. and Financial Assurance Life Insurance Company. Annuity Service Corp.
managed and administered tax qualified plan annuity and life insurance business
for several insurance companies. Financial Assurance Life Insurance Company is a
provider of annuity and life insurance products. Mr. Myer founded and serves as
President and Chief Executive Officer of the NAP Group of Companies. The NAP
Group of Companies markets and administers tax-deferred annuity and life
insurance programs.
Mr. Searles has been a director since July 1989. He has been an
independent business consultant since 1989. Prior to that he spent 25 years with
various Wall Street firms, the last ten of which were with Bear Stearns (an
investment banking firm) as an Associate Director/Limited Partner. He has served
as a Director of Prime since October 1989, as Chairman of the Board of APS
Investment Services since May 1998, as a director of Uncommon Care since
September 1998 and as an Advisory Director of Probex Corp, a re-refiner which
converts waste oil into premium quality base oil, since December 1999.
Should any nominee named herein for the office of director become
unwilling or unable to accept nomination or election, it is intended that the
persons acting under the proxy will vote for the election, in his stead, of such
other persons as the Board of Directors of the Company may recommend or the
Board of Directors of the Company may reduce the number of directors to be
elected. The Board of Directors has no reason to believe that any nominee named
above will be unwilling or unable to serve.
The Board recommends a vote FOR each nominee for director.
CERTAIN INFORMATION CONCERNING THE BOARD OF DIRECTORS
No family relationships exist among the officers or directors of the
Company. Except as indicated above with respect to Prime, no director of the
Company is a director of any company with a class of securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange
Act or any company registered as an investment company under the Investment
Company Act of 1940.
The Board of Directors has a standing audit committee which, during
1999, consisted of two directors, Mr. Hummel and Mr. Myer. The audit committee
held one
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meeting during the year ended December 31, 1999, at which both members
were present. The audit committee meets with the Company's independent auditors,
reviews the financial statements of the Company, and recommends to the Board of
Directors of the Company the selection of the Company's independent auditors for
each fiscal year. The Board has a standing compensation committee which, in
1999, consisted of two directors, Mr. Myer and Mr. Searles. The compensation
committee held one meeting during the year ended December 31, 1999.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company selected KPMG LLP ("KPMG") as independent
auditors for the year ended December 31, 1999. KPMG advised the Company that, in
accordance with professional standards, it would not perform any non-audit
service which would impair its independence for purposes of expressing an
opinion on the Company's financial statements. A representative of KPMG will
attend the meeting with the opportunity to make a statement if such
representative desires to do so and will be available to respond to appropriate
questions. The Audit Committee has not yet made a recommendation of independent
auditors for 2000.
OTHER MATTERS
The Board of Directors of the Company does not intend to bring any other matters
before the meeting and does not know of any matters which will be brought before
the meeting by others. However, if any other matters properly come before the
meeting, it is the intention of the persons named in the accompanying proxy to
vote such proxy in accordance with their judgment on such matters.
By Order of the Board of Directors
W. H. HAYES
Sr. Vice President and Secretary
Austin, Texas
May 10, 2000
