<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
COMMISSION FILE NUMBER: 0-22344
--------------------------------
PROFESSIONAL BENEFITS INSURANCE COMPANY
---------------------------------------
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
<TABLE>
<S> <C>
TEXAS 74-2072535
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
10835 Rockley Road
Houston, Texas 77099
(Address of principal executive offices)
Issuer's telephone number (281) 721-1800
Securities registered under Section 12(b) of the Exchange Act:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON
WHICH REGISTERED
<S> <C>
None None
</TABLE>
Securities registered under Section 12(g) of the Exchange Act:
Class A Common Stock
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $9,602,613
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days (See definition of affiliate in Rule 12b-2 of the Exchange
Act). No actual market exists for the registrant's shares. Based solely on the
most recent sale, Registrant believes that the Class A Common Stock has a value
of approximately $2.00 per share.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. As of December 31, 1996:
587,129 Class A Common Stock and 73,524 Class B Common Stock.
<PAGE> 2
PART 1
ITEM 1. DESCRIPTION OF BUSINESS.
Professional Benefits Insurance Company ("Company") is a Texas
domestic stock life insurance company which has been doing business under the
Texas Board of Insurance for seventeen years. Originally incorporated on July
31, 1979 as TDA Life and Health Insurance Company, the corporation changed its
name in 1988 to Professional Benefits Insurance Company.
The Company provides life and health insurance primarily serving
dental professionals in Texas, but including some professionals in adjoining
and nearby states. Revenues from premiums and other considerations for 1996
totaled $9,602,613 with a net loss (after taxes) of $(457,785) and with total
assets of $5,610,994 as reflected in the 1996 audited Financial Statements.
The Company is a licensed indemnity life insurance company. Product
lines include term life and comprehensive major medical (accident and health)
insurance.
The Company's reinsurance providers and respective A.M. Best Ratings
are as follows:
<TABLE>
<CAPTION>
Company Rating Coverage
<S> <C> <C>
American United Life Insurance Company A+ (Superior) Individual Life Business
Life Reassurance Corp. of America A+ (Superior) Individual & Group Life Business
Washington National Insurance Company A- (Excellent) Disability
Lone Star Life B (Adequate) Income Assurance
Manufacturers Life Co. of America A++ (Superior) Major Medical
BCS Life Insurance Co. A- (Excellent) Medical
IOA Reassurance Pool Company Non-rated Pooling Syn. Medical
Transamerica Occidental Life Insurance Co. A+ (Superior) Individual Life Business
Connecticut General Life Insurance Co. A+ (Superior) Accidental Death
</TABLE>
The maximum retention on one risk is as follows:
<TABLE>
<S> <C>
Accident and Health (major medical) $125,000/year
Life $ 25,000/life
Disability & Income Assurance $ 300/month
</TABLE>
INSURANCE IN FORCE
Total insurance in force is as follows:
<TABLE>
<CAPTION>
INDIVIDUAL LIFE INSURANCE GROUP LIFE INSURANCE
------------------------- --------------------
# OF $ AMOUNT OF # OF $ AMOUNT OF
YEAR POLICIES INSURANCE CERTIFICATES INSURANCE
---- -------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
1996 520 25,110,500 2,860 32,527,500
</TABLE>
<TABLE>
<CAPTION>
INDIVIDUAL ACCIDENT GROUP ACCIDENT
AND HEALTH INSURANCE AND HEALTH INSURANCE
$ AMT OF ANNUAL $ AMT OF ANNUAL
YEAR PREMIUMS PREMIUMS
---- -------------------- --------------------
<S> <C> <C>
1996 $4,494,171 $4,874,676
</TABLE>
2
<PAGE> 3
ITEM 1. DESCRIPTION OF BUSINESS. (CONTINUED)
DESCRIPTION OF STOCK
The Company is authorized to issue 1,022,668 shares of Class A Common
Stock and 73,524 shares of Class B Common Stock, each with a par value of $1.22
per share. As of December 31, 1996, 587,129 shares of Class A Common Stock and
73,524 shares of Class B Common Stock were issued and outstanding.
Class A Common Stock carries the right of one vote per share. Each
share of Class A Common Stock will share in dividends and on dissolution
equally with every other share of Class A Common and Class B Common Stock.
Class B Common Stock is non-voting shares (but shares equal in value and
earnings with every other share of Class A Common or Class B Common Stock).
The Articles of Incorporation deny the preemptive right of a holder of stock to
acquire unissued or treasury shares of stock. The right of cumulative voting
is further prohibited by the Articles of Incorporation.
EMPLOYEES
The Company has 26 full time employees and 1 part-time employee.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company's executive offices are located at 10835 Rockley Road,
Houston, Texas. The Company owns and occupies all of its home office building,
which has approximately 12,840 square feet of usable space. This space is
adequate for the Company's current and planned needs.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, through the solicitation
of proxies or otherwise.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's stock is not actively being traded on any market.
As of December 31, 1996 there were 699 persons or entities holding
587,129 shares of Class A Common Stock, and one entity holding 73,524 shares
of Class B Common Stock.
Dividends have not been paid in any of the last two fiscal years.
3
<PAGE> 4
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Changes in Company revenues for 1996 and 1995 are shown below:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Total Revenues $9,602,613 $8,539,247
Change in Revenues
Compared to Preceding Year $1,063,366 ($85,037)
12.5% (1.0%)
</TABLE>
The primary components of the Company's revenue are premium and net investment
income.
Changes in net premium revenue for 1996 and 1995 are shown below:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Total Premiums $9,126,520 $8,184,169
Change in Premiums
Compared to Preceding Year $942,351 ($197,705)
11.5% (2.4%)
</TABLE>
The increase in premium is due to increased marketing by the Company. The
Company continues to successfully pursue its niche marketing strategy of
targeting associations and the group dental market. Dental premium, on a cash
basis, increased by 206% over the prior year, with group life increasing by
32%.
Components of the changes in net investment income for 1996 and 1995
are shown below:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Total Net Investment Income $349,998 $219,553
Change in Net Investment
Income $130,445 $ 64,894
59% 42%
</TABLE>
4
<PAGE> 5
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
(Continued)
The Company maintains a mix in its investment portfolio in the following
percentages: investment grade bonds 39.5%, bond mutual funds (government
obligation bonds) 34.2%, and money market funds 26.3%. Investment income
increased in 1996 due to significant gains which were realized from the
liquidation of the Company's equity mutual funds. The Company's investment
philosophy is one of preservation of capital while providing current income.
General and administrative expenses for 1996 and 1995 are shown below:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
General and Administrative
Expenses $2,100,777 $2,217,003
Change in General and
Administrative Expenses
Compared to Preceding Year $ (116,226) $ 193,396
(5.2%) 9.6%
</TABLE>
General and administrative expenses have decreased from the prior year due to a
decrease in accounting and actuarial fees. These fees have in aggregate
decreased by $146,000 from the prior year. There were abnormally high
accounting and actuarial fees in 1995 due to regulatory changes in 1995. This
decrease is due to the return to a normal operating and regulatory environment
in 1996.
Total Commissions expense for 1996 and 1995 are shown below:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Total Commissions Expense $676,828 $376,867
Change in Commissions Expense
Compared to Preceding Year $299,961 $ 45,548
79.6% 13.7%
</TABLE>
Commissions expense increased over 1995 due to increased sales of dental and
major medical insurance. First year commissions on major medical insurance are
higher than those paid in latter years. Therefore commissions on major medical
insurance written in 1996 should moderate in 1997. The commissions associated
with the Company's dental product are significantly higher than commissions for
major medical.
5
<PAGE> 6
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
(Continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company requires cash for the payment of policy benefits, operating
expenses, commissions and funds for the purchase of assets for investment.
These needs have been met by the Company with funds generated by its
operations, from its reserves and liquid assets. Policy benefits as a
percentage of earned premium was above historical averages in 1996 and 1995.
The Company believes this is primarily due to the cyclical nature of policy
benefits and will correct itself in the normal course of business. As an
additional measure, the Company has imposed premium rate increases on some of
its policyholders and is evaluating the need to impose further increases on
other policyholders to help cover the portion of the increased cost of policy
benefits which may not be temporary or cyclical in nature.
In addition to the Company's cash needs, the Company must maintain capital and
surplus levels, determined on a statutory accounting basis, in order to conduct
insurance business in the jurisdictions in which it is licensed. The Company
is in compliance with all such requirements.
The Company had total assets of $5,610,994 and $5,683,464 for the years ended
December 31, 1996 and 1995, respectively. The Company experienced cash flows
from operations of $(63,301) and $(152,744) in the years ended December 31,
1996 and 1995 respectively.
6
<PAGE> 7
ITEM 7. FINANCIAL STATEMENTS.
PROFESSIONAL BENEFITS INSURANCE COMPANY
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
INDEPENDENT ACCOUNTANTS' REPORT......................................................................... 8
FINANCIAL STATEMENTS
Balance Sheets.................................................................................... 9
Statements of Operations.......................................................................... 11
Statements of Changes in Stockholders' Equity..................................................... 12
Statements of Cash Flows.......................................................................... 13
Notes to Financial Statements..................................................................... 14-24
</TABLE>
7
<PAGE> 8
CAUSON & WESTHOFF
================================================================================
CERTIFIED PUBLIC ACCOUNTANTS
1707 S. Canton Avenue
Tulsa, Oklahoma 74112
(918) 747-4870
fax (918) 747-4870
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
Professional Benefits Insurance Company
Houston, Texas
We have audited the accompanying balance sheet of PROFESSIONAL BENEFITS
INSURANCE COMPANY as of December 31, 1996, and the related statements of
operations, stockholders' equity, and cash flows for year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of PROFESSIONAL BENEFITS INSURANCE COMPANY
as of December 31, 1995 were audited by other accountants whose report dated
March 8, 1996, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require 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 our audit provides a reasonable basis for
our opinion.
In our opinion, the 1996 financial statements referred to above present
fairly, in all material respects, the financial position of PROFESSIONAL
BENEFITS INSURANCE COMPANY as of December 31, 1996, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ CAUSON & WESTHOFF
Tulsa, Oklahoma
March 7, 1997
8
<PAGE> 9
PROFESSIONAL BENEFITS INSURANCE COMPANY
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS
1996 1995
----------- -----------
<S> <C> <C>
INVESTMENTS
Fixed maturities, at market (amortized $ 1,927,526 $ 1,220,642
cost - $1,935,408 - 1996 and
$1,230,621 - 1995)
Common stock mutual funds, at market 856,389
Short-term investments (cost approximating
market) 830,898 1,420,523
----------- -----------
2,758,424 3,497,554
CASH 729,252 37,252
REINSURANCE RECOVERABLE
Current recoverable 52,084 16,590
Future recoverable 839,100 990,166
ACCRUED INVESTMENT INCOME 10,763 47,643
PREMIUMS DUE AND UNCOLLECTED 179,836 28,551
ACCOUNTS AND NOTE RECEIVABLE 58,051 36,584
LAND AND BUILDING, AT COST
(net of accumulated depreciation -
$454,906 - 1996 and $376,794 - 1995) 497,882 575,994
FURNITURE AND EQUIPMENT, AT COST
(net of accumulated depreciation -
$328,861 - 1996 and $529,326 - 1995) 226,940 217,139
GUARANTY FUND ASSESSMENTS 3,654 10,361
DEFERRED TAX BENEFIT 28,000
FEDERAL INCOME TAX RECEIVABLE 207,000 188,000
OTHER ASSETS, AT COST 20,008 37,630
----------- -----------
$ 5,610,994 $ 5,683,464
=========== ===========
</TABLE>
See Notes to Financial Statements
-9-
<PAGE> 10
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
1996 1995
----------- -----------
<S> <C> <C>
LIABILITIES
Future policy benefits $ 1,048,334 $ 1,052,509
Policy claims 1,905,000 1,623,000
Premiums received in advance 185,706 100,488
Unearned premiums 56,324
----------- -----------
3,195,364 2,775,997
Reinsurance payable 57,463 31,820
Deferred tax liability 5,000
Other liabilities 311,397 300,951
----------- -----------
3,564,224 3,113,768
----------- -----------
STOCKHOLDERS' EQUITY
Common stock
Class A voting, $1.22 par value; 1,022,668
authorized shares; 587,129 issued and
outstanding in 1996 and 1995 716,297 716,297
Class B nonvoting, $1.22 par value; 136,720
authorized shares; 73,524 issued and
outstanding in 1996 and 1995 89,699 89,699
Additional paid-in capital 536,214 536,214
Unrealized gain (loss) on investments
(net of deferred income tax benefits
(liabilities) of $2,600 - 1996;
$(21,200) - 1995) (5,182) 41,959
Retained earnings 709,742 1,185,527
----------- -----------
2,046,770 2,569,696
----------- -----------
$ 5,610,994 $ 5,683,464
=========== ===========
</TABLE>
See Notes to Financial Statements
-10-
<PAGE> 11
PROFESSIONAL BENEFITS INSURANCE COMPANY
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
REVENUES
Premiums earned $ 9,617,689 $ 8,725,826
Reinsurance ceded (491,169) (541,657)
------------ ------------
Net premiums earned 9,126,520 8,184,169
Net investment income 349,998 219,553
Other income 126,095 135,525
------------ ------------
9,602,613 8,539,247
------------ ------------
BENEFITS, CLAIMS, AND EXPENSES
Benefits and claims 7,782,007 6,895,595
Reinsurance recoverable (278,214) (382,488)
------------ ------------
Net benefits and claims 7,503,793 6,513,107
Commissions 676,828 376,867
Underwriting, acquisition, insurance, and
administrative expenses 2,100,777 2,217,003
------------ ------------
10,281,398 9,106,977
------------ ------------
INCOME BEFORE INCOME TAXES (678,785) (567,730)
INCOME TAX PROVISION (CREDIT) (203,000) (185,000)
------------ ------------
NET INCOME $ (457,785) $ (382,730)
============ ============
NET INCOME PER SHARE $ (.72) $ (.58)
============ ============
</TABLE>
See Notes to Financial Statements
-11-
<PAGE> 12
PROFESSIONAL BENEFITS INSURANCE COMPANY
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK
----------------------------------------------
TOTAL CLASS A CLASS B
STOCKHOLDERS' -------------------- -------------------
EQUITY SHARES AMOUNT SHARES AMOUNT
------------- ------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 $2,802,794 587,329 $ 716,594 73,524 $ 89,699
NET INCOME (382,730)
TRANSFERS 0 (200) (297)
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) ON AVAILABLE-FOR-SALE
SECURITIES, NET OF INCOME TAXES OF $77,000 149,632
---------- ------- ---------- ------ ----------
BALANCE, DECEMBER 31, 1995 2,569,696 587,129 716,297 73,524 89,699
NET INCOME (475,785)
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) ON AVAILABLE-FOR-SALE
SECURITIES, NET OF INCOME TAXES OF $24,000 (47,141)
---------- ------- ---------- ------ ----------
BALANCE, DECEMBER 31, 1996 $2,046,770 587,129 $ 716,297 73,524 $ 89,699
========== ======= ========== ====== ==========
<CAPTION>
UNREALIZED
PAID-IN DEPRECIATION ON RETAINED
CAPITAL INVESTMENTS EARNINGS
---------- ---------- ----------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 $ 536,464 $ (107,673) $1,567,710
NET INCOME (382,730)
TRANSFERS (250) 547
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) ON AVAILABLE-FOR-SALE
SECURITIES, NET OF INCOME TAXES OF $77,000 149,632
---------- ---------- ----------
BALANCE, DECEMBER 31, 1995 536,464 41,959 1,185,527
NET INCOME (475,785)
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) ON AVAILABLE-FOR-SALE
SECURITIES, NET OF INCOME TAXES OF $24,000 (47,141)
---------- ---------- ----------
BALANCE, DECEMBER 31, 1996 $ 536,214 $ (5,182) $ 709,742
========== ========== ==========
</TABLE>
See Notes to Financial Statements
-12-
<PAGE> 13
PROFESSIONAL BENEFITS INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Gross premiums $ 9,607,947 $ 8,637,588
Reinsurance ceded (465,526) (549,699)
Net investment income 230,372 193,106
Other income 90,831 130,002
Gross benefits and claims (7,504,182) (6,703,021)
Reinsurance recoveries 393,786 335,097
Commissions (726,699) (374,904)
Underwriting, acquisition, insurance, and
administrative expenses (1,873,455) (1,802,913)
Income taxes 188,000 (18,000)
----------- -----------
Deposits (4,375)
----------- -----------
Net cash provided by (used in)
operating activities (63,301) (152,744)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the maturing of investments (1,389,720) 978,787
Proceeds from the sale of furniture and
equipment 757
Purchase of investments 2,215,013 (940,000)
Purchase of furniture and equipment (69,992) (106,492)
----------- -----------
Net cash provided by (used in)
investing activities 755,301 (66,948)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
INCREASE (DECREASE) IN CASH 692,000 (219,692)
CASH, BEGINNING OF YEAR 37,252 256,944
----------- -----------
CASH, END OF YEAR $ 729,252 $ 37,252
=========== ===========
</TABLE>
See Notes to Financial Statements
-13-
<PAGE> 14
PROFESSIONAL BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
NATURE OF OPERATIONS
Professional Benefits Insurance Company is a stock life, accident, and
health insurance company organized under the laws of the state of Texas. The
Company's principal lines of business consist primarily of marketing,
underwriting, and servicing of group accident and health insurance policies.
The Company also markets, underwrites, and services dental, disability,
professional overhead, and group life insurance policies. This insurance is
primarily sold to members of various professional organizations throughout the
southwest United States.
The Company also prepares financial statements on the basis of statutory
accounting principles for the purpose of filing with state insurance
departments.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions which 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.
INVESTMENTS
Fixed maturity investments, all of which are considered to be
available-for-sale, are reported at fair value, with net unrealized gains and
losses included in equity, net of applicable income taxes. Unrealized losses
which are other than temporary are recognized in earnings. Premiums and
discounts are amortized and accreted, respectively, to interest income using
the level-yield method over the period to maturity. In prior years, such
investments were reported at cost, adjusted for amortization of premium or
discount and for other than temporary decreases in market value. Realized gains
and losses are included in net investment income.
-14-
<PAGE> 15
PROFESSIONAL BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
INVESTMENTS (Continued)
Common stock mutual funds were entirely disposed during 1996. The realized
gain on the disposal thereof is included in net investment income. In 1995,
common stock mutual funds were recorded at current market value. Net unrealized
gains and losses were included in equity, net of applicable income taxes.
Short-term investments represent investments in short-term money market
funds and certificates of deposit which mature at specific future dates of less
than one year. Interest on certificates of deposit and other short-term
investments is recorded as revenue when it is earned.
Realized gains and losses are recognized on the specific identification
basis.
RECOGNITION OF PREMIUM REVENUES, RELATED EXPENSES, AND FUTURE POLICY BENEFITS
Premiums on life insurance policies are reported as earned when due. The
liabilities for future policy benefits and expenses are computed using the
Commissioner's reserve valuation method including assumptions as to investment
yields and mortality. Policies issued prior to 1985 are based upon the 1958
Commissioner's standard ordinary mortality table, assuming interest rates from
3% to 4.5%. Policies issued during 1985 and thereafter are based upon the 1980
Commissioner's standard ordinary mortality table, assuming interest rates from
4.5% to 5.5%. There is no material difference between future life insurance
policy benefit liabilities for financial reporting and statutory purposes
inasmuch as such policies consist only of term coverages with no cash values
accruing.
Premiums for accident and health policies are recognized ratably over the
period of insurance coverage. The liabilities for insurance claims are
determined using statistical analyses and represent estimates of the ultimate
net cost of all reported and unreported claims which are unpaid at year end,
including provisions for extended benefits. Although it is not possible to
measure the degree of variability inherent in such estimates, management
believes the liabilities for insurance claims are adequate. The estimates are
reviewed periodically by management, and, as adjustments to these liabilities
become necessary, such adjustments are reflected in current operations.
-15-
<PAGE> 16
PROFESSIONAL BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
REINSURANCE
In the normal course of business, the Company seeks to limit its exposure
to loss on any single insured and to recover a portion of benefits paid by
ceding reinsurance to other insurance enterprises or reinsurers under excess
coverage and coinsurance contracts. The Company retains a maximum of $125,000
of coverage per individual on major medical policies and $25,000 of coverage
per individual life policies. The Company maintains a separate major medical
reinsurance treaty with a $0 deductible (zero retention) to cover organ
transplants.
REAL ESTATE
Real estate is recorded at cost and represents the Company's home office,
land and building. Depreciation has been provided on the straight-line method
over the useful life of the building. Maintenance and repairs which do not
materially extend the useful life are charged to expense as incurred.
Depreciation expense recognized during 1996 and 1995 was $78,112 and $35,031,
respectively.
FURNITURE AND EQUIPMENT
Furniture and equipment are recorded at cost. Depreciation is provided on
the straight-line method over estimated useful lives of three to seven years.
Depreciation expense recognized during 1996 and 1995 was $56,438 and $44,676,
respectively.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the tax effect of
temporary differences between the financial reporting and tax bases of assets
and liabilities. A valuation allowance is established to reduce deferred tax
assets if it is more likely than not that a deferred tax asset will not be
realized. Such temporary differences are principally related to the deferral of
accrued premiums and losses as defined under the Internal Revenue Code, and
depreciation, as well as unrealized gains and losses, on investments.
-16-
<PAGE> 17
PROFESSIONAL BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
NET INCOME PER SHARE OF COMMON STOCK
Net income per share of common stock is based on the weighted average
number of shares of common stock and common stock equivalents outstanding
during each year. Stock options are common stock equivalents but have no
material impact on the total weighted number of shares outstanding.
NOTE 2: INVESTMENTS IN DEBT AND EQUITY SECURITIES
The amortized cost and approximate fair value of fixed-maturity securities
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,1996
-------------------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Fixed-maturity securities
U. S. Treasury bond funds $ 899,382 $ 1,573 $ $ 900,955
U. S. Treasury and other U.S.
government corporations and
agencies 747,065 (9,124) 736,941
Mortgage-backed securities (FHLMC) 289,961 (331) 289,630
----------- ----------- ----------- -----------
1,935,408 1,573 (9,455) 1,927,526
Short-term investments 830,898 830,898
----------- ----------- ----------- -----------
$ 2,766,306 $ 1,573 $ (9,455) $ 2.758,424
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,1995
-------------------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Fixed-maturity securities
U. S. Treasury and other U.S.
government corporations and
agencies $ 873,633 $ 9,586 $ $ 883,219
Mortgage-backed securities (FHLMC) 356,988 (19,565) 337,423
----------- ----------- -----------
1,230,621 9,586 (19,565) 1,220,642
Common stock mutual funds 783,251 73,138 856,389
----------- ----------- ----------- -----------
2,013,872 82,724 (19,565) 2,077,031
Short-term investments 1,420,523 1,420,523
----------- ----------- ----------- -----------
$ 3,434,395 $ 82,724 $ (19,565) $ 3,497,554
=========== =========== =========== ===========
</TABLE>
-17-
<PAGE> 18
PROFESSIONAL BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 2: INVESTMENTS IN DEBT AND EQUITY SECURITIES (Continued)
Maturities of fixed-maturity securities at December 31, 1996:
<TABLE>
<CAPTION>
AMORTIZED APPROXIMATE
COST FAIR VALUE
---------- -----------
<S> <C> <C>
One year or less $ 899,382 $ 900,955
After one through five years 746,065 736,941
After five through ten years
Mortgage-backed securities not due
on a single maturity date 289,961 289,630
---------- ----------
$1,935,408 $1,927,526
========== ==========
</TABLE>
Major categories of investment income are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Fixed maturities $ 57,423 $ 76,574
Common stock mutual funds 206,083 66,430
Short-term investments 86,492 76,549
-------- --------
$349,998 $219,553
======== ========
</TABLE>
The Company has certificates of deposits totaling $700,000 and $600,00 on
deposit with regulatory authorities to meet statutory requirements as of
December 31, 1996 and 1995, respectively.
NOTE 3: SIGNIFICANT ESTIMATES AND CONCENTRATIONS
Generally accepted accounting principles require disclosure of certain
significant estimates and current vulnerabilities due to certain
concentrations. Those matters include the following:
INSURANCE CLAIM LIABILITIES
The Company has recorded future policy benefits of $1,048,334 and
$1,052,509 and policy claims of $1,905,000 and $1,623,000 at December 31, 1996
and 1995, respectfully. Management currently believes the accruals for
liabilities associated with the insurance claims are adequate. However, the
ultimate claim expense will depend on actual claims paid. Consequently, it is
possible the estimated liability accrued for claims during the policy period
covered by the financial statements may materially change.
-18-
<PAGE> 19
PROFESSIONAL BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 3: SIGNIFICANT ESTIMATES AND CONCENTRATIONS (Continued)
REVENUES FROM TRADE ASSOCIATIONS
The Company sells group accident and health insurance to trade
associations. Approximately 31%, 14%, and 24% of the Company's premium revenues
for the year ended December 31, 1996, and approximately 33%, 30%, and 19% of
the Company's premium revenues for the year ended December 31, 1995, were from
three unrelated individual associations.
REVENUES FROM GROUP ACCIDENT AND HEALTH INSURANCE
The Company derived approximately 75% and 90% of its revenues in 1996 and
1995, respectfully, from sales of group accident and health insurance,
principally to trade associations located in the southwest United States.
NOTE 4: PRINCIPLES OF CONSOLIDATIONS
The 1995 financial statements presented herein were consolidated to include
the accounts of the Company and its 100% owned subsidiary, Direct Reimbursement
Services, Inc. The accounts of Direct Reimbursement Services, Inc. reflected no
retained earnings at December 31, 1995. Therefore, the consolidated statements
were identical to the Company's financial statements before consolidation.
During 1996, Direct Reimbursement Services, Inc. was officially dissolved.
Therefore, the December 31, 1996 data reflected in these financial statements
are Company balances, are not consolidated, and are comparable to the December
31, 1995 data presented herein.
NOTE 5: REINSURANCE
Reinsurance contracts do not relieve the Company from its obligations to
policyholders. Failure of reinsurers to honor their obligations could result in
losses to the Company; consequently, allowances are established for amounts, if
any, deemed uncollectible. The Company evaluates the financial condition of its
reinsurers and monitors concentrations of credit risk arising from similar
geographic regions, activities, or economic characteristics of the reinsurers
to minimize its exposure to significant losses from reinsurer insolvencies.
-19-
<PAGE> 20
PROFESSIONAL BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 6: LEASES
The Company entered into a capital lease for computer equipment effective
January 1, 1995.
Future minimum lease payments as of December 31, 1996, were:
<TABLE>
<S> <C> <C>
1997 $ 19,463
1998 19,463
1999 19,463
--------
Future minimum lease payments 58,389
Less amount representing interest 12,814
--------
$ 45,575
========
</TABLE>
NOTE 7: STOCKHOLDERS' EQUITY AND RESTRICTIONS
Generally, dividends to stockholders are limited to amounts which exceed
minimum capital and surplus requirements determined in accordance with
statutory accounting principles. Under the Texas Insurance Code, the Company
must maintain minimum capital of the greater of $100,000 or par value of the
outstanding common stock and minimum surplus of $100,000.
The Company must additionally comply with minimum statutory capital and
surplus requirements in the various states in which it is currently licensed.
These minimum combined statutory capital and surplus requirements range between
$500,000 and $1,200,000.
Net income and stockholders' equity, as determined in accordance with
statutory accounting practices based upon audited reports, are as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Net Income (Loss) $ (394,960) $ (365,165)
=========== ===========
Stockholders' Equity $ 1,740,531 $ 2,165,665
=========== ===========
</TABLE>
-20-
<PAGE> 21
PROFESSIONAL BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 8: INCOME TAXES
The tax effects of temporary differences related to deferred taxes shown
on the balance sheets were:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred tax assets:
Discounted future claims $ 23,000 $ 18,500
Policy acquisition costs 2,000 1,700
Unrealized loss on investments 2,600
Accumulated depreciation 1,400
Other 500
-------- --------
29,000 20,700
-------- --------
Deferred tax liabilities:
Unrealized gain on investments (21,200)
Accumulated depreciation (4,500)
Other (1,000)
-------- --------
(1,000) (25,700)
-------- --------
Net deferred tax asset (liability) $ 28,000 $ (5,000)
======== ========
</TABLE>
The provision for income taxes includes these components:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Tax currently receivable $(207,000) $(188,000)
Deferred income tax liability 4,000 3,000
--------- ---------
$(203,000) $(185,000)
========= =========
</TABLE>
A reconciliation of the income tax expense (refund) at the statutory rate
to income tax expense at the Company's effective tax rate is shown below:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Computed at the statutory rate of 34% $(204,666) $(193,028)
Increase (decrease) in tax resulting from:
Nondeductible expenses 1,666 3,000
Other 5,028
--------- ---------
$(203,000) $(185,000)
========= =========
</TABLE>
Deferred income taxes related to the change in unrealized appreciation
(depreciation) on available-for-sale securities, shown in stockholders' equity,
were $2,600 and $(21,200) for 1996 and 1995, respectively.
-21-
<PAGE> 22
PROFESSIONAL BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 9: DEFINED CONTRIBUTION EMPLOYEE BENEFIT PLAN
The Company has a noncontributory 401(k) plan which provides for employer
contributions to be made only from current or accumulated net profits not to
exceed the maximum amount deductible for federal income tax purposes. To be
eligible for participation, an employee must be at least 21 years of age and
have accumulated 1,000 hours of service as of the anniversary date of the plan
nearest the date eligibility requirements are met. Participant interests in
employer contributions are vested over a period from two to six years. No
contributions were made by the Company in 1996. Contributions of $7,366 were
made by the Company in 1995.
NOTE 10: STOCK OPTIONS
On July 14, 1990, the Board of Directors of Professional Benefits Insurance
Company authorized the granting of stock options to Board members and certain
key employees. The stock options were immediately exercisable upon grant and
enable the grantees to purchase Class A common stock at a price of $2 per
share. The July 14, 1990 stock options expired during 1996. On December 30,
1996, the Board of Directors authorized the granting of 5,000 new stock options
to each of the Directors. The new options are exercisable at the same price and
terms as the expired options. The new options are currently scheduled to expire
December 30, 2001.
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Options outstanding, beginning of year 60,000 85,000
Granted 30,000
Expired 60,000 25,000
Exercised ------ ------
Options outstanding, end of year 30,000 60,000
====== ======
</TABLE>
-22-
<PAGE> 23
PROFESSIONAL BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 11: ADDITIONAL CASH FLOW INFORMATION
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
Net income (loss) $ (475,785) $ (382,730)
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation and amortization 138,303 79,372
Amortization from investments 726 (731)
Realized gain from investments (157,232)
Provision for deferred income taxes (9,800) 3,000
Decrease (increase) in receivables (21,466) (5,523)
Decrease (increase) in premiums due (151,284) 4,768
Decrease (increase) in accrued investment income 36,880 (25,716)
Decrease (increase) in amounts recoverable and 139,899 134,765
due from reinsurers and other assets
Increase (decrease) in future policy benefits (4,175) 3,574
Increase (decrease) in other policy claims and
benefits payable 282,000 189,000
Increase (decrease) in unearned premiums and advance
premiums 141,542 (88,238)
Increase (decrease) current income taxes payable or
receivable (19,000) (206,000)
Decrease in accounts payable, accrued expenses,
and amounts due reinsurers 36,091 141,715
---------- -----------
Net cash provided by (used in) operations $ (63,301) $ (152,744)
========== ===========
</TABLE>
NOTE 12: CONTINGENCIES
The Company is a defendant in, and is threatened with, various legal
proceedings with respect to claims arising from insurance coverages. Such
litigation is taken into account in establishing claim reserves. Management,
after consultation with legal counsel, is of the opinion that the ultimate
liability, to the extent not provided for, is not likely to have a material
effect on the financial position or results of operations of the Company.
-23-
<PAGE> 24
PROFESSIONAL BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 13: COMMISSIONS
Commissions expense is calculated as a percentage of written premium.
Commission rates vary based on the type of insurance policy written and for
first year policies versus subsequent renewals. As discussed in Note 3, the
Company's mix between accident and health insurance and other insurance changed
during 1996 to reflect a larger percentage of other types of insurance. A large
component of the other insurance during the 1996 is dental insurance. Dental
insurance has a higher commission structure than other policy lines which the
Company markets. The mix of first year premium as a percentage of total premium
was 40% and 21% in 1996 and 1995, respectively. Commission expense was $676,828
and $376,867 in 1996 and 1995, respectively.
-24-
<PAGE> 25
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Notification of the change in accountants of the Company was made in Form 8-K
filed on February 19, 1997
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
<TABLE>
<CAPTION>
Name Age Since Position
---- --- ----- --------
<S> <C> <C> <C> <C>
A. Directors
James Ople Henry, Jr., DDS 64 1981
William Lloyd Glenn, Jr., DDS 73 1979
Robert Warren Little, DDS 76 1981
Hobert Phillip Lundblade, DDS 67 1979
Barham Dale Rhodes, DDS 71 1979
Jerry Odis Ray 51 1995
B. Executive Officers
James Ople Henry, Jr., DDS 64 1995 Chairman
Jerry Odis Ray 51 1995 President
William Lloyd Glenn, Jr., DDS 73 1979 Secretary
Robert Warren Little, DDS 76 1995 Treasurer
C. Other Key Employees
Jerry Campbell 44 1993 Vice-President
Tammy Skains 33 1993 Assistant Vice-
President
Steven Taylor 37 1995 Controller
</TABLE>
-25-
<PAGE> 26
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
(CONTINUED).
D. Business Experience:
WILLIAM L. GLENN, JR., DDS, has been Secretary and a Director of the
Company since its organization in 1979. He has practiced dentistry
for over 50 years. He served from 1964 to 1969 as Vice-President for
the Texas Dental Association. He also served six years as Chairman of
the TDA Council on Constitution Bylaws. He was a founder and Chairman
of the Board of Galveston Savings and Loan Association (a Texas stock
company) from 1975-1983 which was sold while in a strong financial
position. He was also past President of the Rotary Club of Galveston
and of the Southwest Restorative Academy. Dr. Glenn serves on the
Company's Executive Committee.
JAMES O. HENRY, JR., DDS, has been a Director of the Company since
1981 and served as Treasurer from March 1990 through October 1995. He
has served as Chairman of the Board since October 1995. Dr. Henry
practiced dentistry for 15 years and is currently on the Faculty of
Baylor College of Dentistry where he has served as Assistant Dean for
20 years. He was a Director of the First Republic Bank Dallas East in
Dallas, Texas and served as the Secretary-Treasurer of the Texas
Dental Association for 6 years. Dr. Henry serves on the Company's
Executive Committee.
ROBERT W. LITTLE, DDS, has been a Director of the Company since 1981.
Dr. Little has served as Treasurer of the Company since 1995. He has
practiced dentistry for over 39 years. Dr. Little serves on the
Company's Investment Committee and serves on the Company's Executive
Committee.
HOBERT P. LUNDBLADE, DDS, is a founding Director of the Company and
has served on the Board since its organization in 1979. He has
practiced dentistry for over 39 years. He served as Mayor of Castle
Hills, Texas for over 23 years, and was a former Director of Castle
Hills National Bank in San Antonio, Texas. Dr. Lundblade serves on,
and is Chairman of, the Company's Audit Committee and serves on the
Company's Investment Committee.
JERRY O. RAY, FLMI has been a Director of the Company since October,
1995. He has worked in the insurance industry for over 21 years,
serving as Vice-President for Philadelphia American Life Insurance
Company and American General Life Insurance Company. He is a Fellow
of the Life Management Institute. He served as Chief Operating
Officer from 1990 through October, 1995. Mr. Ray currently serves as
President and Chief Executive Officer of the Company and serves on the
Company's Executive Committee.
BARHAM D. RHODES, DDS, has been a Director since its organization in
1979. He practiced dentistry for over 40 years. He is a Director of
Community State Bank in Lufkin, Texas. Dr. Rhodes serves on, and is
Chairman of, the Company's Investment Committee and serves on the
Company's Audit Committee.
JERRY CAMPBELL was hired in May, 1989. He was promoted to his current
position of Vice-President in November, 1996. Mr. Campbell has a
total of 17 years industry experience specializing in underwriting,
reinsurance and compliance.
TAMMY SKAINS was employed by PBIC in May of 1993 as Assistant Director
of Administration. She was promoted to her current position of
Assistant Vice-President in June, 1996. Ms. Skains was employed as
the Administrative/Accounting Supervisor of a local group dental
practice for five years prior to her association with the Company.
STEVEN TAYLOR joined the Company as Controller in May, 1995. He has
held various financially related positions in the industry during the
last 11 years. Mr. Taylor's experience includes financial reporting,
strategic planning, and expense management.
E. Compliance With Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more
than ten percent of the outstanding Common Stock to file with the
Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than
ten-percent stockholders are required by regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, the Section 16(a) filing
requirements applicable to James O. Henry, Jr., William L. Glenn, Jr.,
Robert W. Little, Hobert P. Lundblade, Barham D. Rhode and Jerry O.
Ray relating to each of their shareholdings in the Company and the
stock options granted to them on December 30, 1996 have not been
complied with as no reports have been filed.
26
<PAGE> 27
ITEM 10. EXECUTIVE COMPENSATION.
A. Summary Compensation Table:
<TABLE>
<CAPTION>
Other Annual
& Long-Term
Names & Position Year Salary Bonuses Compensation
---------------- ---- ------ ------- ------------
<S> <C> <C> <C> <C>
Jerry O. Ray 1996 $66,778 $ 0 None
President 1995 $64,091 $ 150 None
1994 $63,016 $3,148 None
William L. Glenn, Jr. 1996 $15,000 $ 0 None
Director and Secretary 1995 $14,000 $ 0 None
1994 $10,800 $ 0 None
James O. Henry, Jr. 1996 $12,000 $ 0 None
Director and Chairman 1995 $ 0 $ 0 None
1994 $ 0 $ 0 None
</TABLE>
B. Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
% of Total
Number of Options Granted Exercise
Securities To Employeees In or Base Expiration
Name Underlying Options Fiscal Years Price ($/SH) Date
---- ------------------ ---------------- ------------ -----------
<S> <C> <C> <C> <C>
Jerry O. Ray 5,000 16.67% $2.00 12/30/2001
William L. Glenn, Jr. 5,000 16.67% $2.00 12/30/2001
James O. Henry, Jr. 5,000 16.67% $2.00 12/30/2001
</TABLE>
C. Compensation of Directors
The Company currently pays directors a fee of $1,250 quarterly
or $5,000 annually for their services as a Director, except Jerry O. Ray who
has elected to waive his directors fee. In addition, each such Director
currently holds a stock option for 5,000 shares of Class A Common Stock,
exercisable at $2.00 per share granted on December 30, 1996 and lasting until
December 30, 2001.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
A. Beneficial Owners
<TABLE>
<CAPTION>
(1) Title (2) Name and Address of (3) Amount of (4) Percent of
of Class Beneficial Owner Shares Owned Class
-------- ---------------- ------------ ----------
<S> <C>
Class A None owning more than 5% of outstanding shares of Class A Common Stock.
Class B Texas Dental Assoc. 73,524 100%
P.O. Box 3358
Austin, TX 78764-3358
</TABLE>
27
<PAGE> 28
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT. (CONTINUED).
B. Management (Directors and Officers)
<TABLE>
<CAPTION>
(1) Title (2) Name and Address of (3) Amount of (4) Percent of
of Class Beneficial Owner Shares Owned Class
-------- ---------------- ------------ -----
<S> <C> <C> <C>
Class A Barham D. Rhodes 12,251 2.08%
William L. Glenn 4,032 0.68%
Hobert P. Lundblade 4,124 0.70%
James O. Henry 1,276 0.22%
Robert W. Little 3,572 0.61%
Jerry O. Ray 60 0.01%
</TABLE>
NOTE: In total, the directors and officers own 25,315
shares, constituting 4.3% of the outstanding shares of
Class A Common Stock.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
Exhibit
Number Description of Exhibit Page
- ------- ---------------------- ----
3.1 Articles of Incorporation of the Company
3.2 Bylaws of the Company
10.1 License Agreement dated May 2, 1994 between the
Company and Texas Restaurant Association
10.2 Endorsement Agreement dated January 15, 1996
between Don M. Canada and the Company
10.3 Points of TDA/ODA Agreement between ODA and
TDA Life and Health
16 Letter from Baird, Kurtz & Dobson dated
February 19, 1997 - incorporated by reference from
Exhibit 16 of the Company's report on Form 8-K
dated February 19, 1997
27 Financial Data Schedule
REPORTS ON FORM 8-K
A Form 8-K relating to the change in the accountants of the Company
was filed on February 19, 1997.
28
<PAGE> 29
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this registration
statement to be signed on its behalf of the undersigned, thereunto duly
authorized.
PROFESSIONAL BENEFITS INSURANCE COMPANY
Date 3/21/97 By: /s/ JERRY O. RAY
----------------- ---------------------------------------
Jerry O. Ray
President
Date 3/21/97 By: /s/ STEVEN TAYLOR
----------------- ---------------------------------------
Steven Taylor
Controller
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and dates indicated.
Date 3/21/97 By: /s/ BARHAM D. RHODES
----------------- ---------------------------------------
Barham D. Rhodes, DDS, Director
Date 3/21/97 By: /s/ WILLIAM L. GLENN
----------------- ---------------------------------------
William L. Glenn, DDS, Director
Date 3/21/97 By: /s/ JAMES O. HENRY
----------------- ---------------------------------------
James O. Henry, Jr., DDS, Director
Date 3/21/97 By: /s/ ROBERT W. LITTLE
----------------- ---------------------------------------
Robert W. Little, DDS, Director
Date 3/21/97 By: /s/ HOBERT P. LUNDBLADE
----------------- ---------------------------------------
Hobert P. Lundblade, DDS, Director
Date 3/21/97 By: /s/ JERRY O. RAY
----------------- ---------------------------------------
Jerry O. Ray, Director
29
<PAGE> 30
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit Page
- ------- ---------------------- ----
<S> <C> <C>
3.1 Articles of Incorporation of the Company
3.2 Bylaws of the Company
10.1 License Agreement dated May 2, 1994 between the
Company and Texas Restaurant Association
10.2 Endorsement Agreement dated January 15, 1996
bewteen Don M. Canada and the Company
10.3 Points of TDA/ODA Agreement between ODA and
TDA Life and Health
16 Letter from Baird, Kurtz & Dobson dated
February 19, 1997 - incorporated by reference from
Exhibit 16 of the Company's report on Form 8-K
dated February 19, 1997
27 Financial Data Schedule
</TABLE>
<PAGE> 1
ARTICLES OF INCORPORATION
OF
PROFESSIONAL BENEFITS INSURANCE COMPANY
ARTICLE I
NAME
The name of the corporation is Professional Benefits Insurance Company.
ARTICLE II
INCORPORATORS
The name and place of residence of each incorporator is as follows:
J.B. Veale, Jr., DDS. 1304 North Coffee
Pampa, Texas 79065
William L. Glenn, Jr., DDS. 2601 Broadway
Galveston, Texas 77550
Burton J. Kunik, DDS. 7000 Fannin, No. 1430
Houston, Texas 77030
ARTICLE III
HOME OFFICE
The location of the home office of said corporation is:
Houston, Harris County, Texas
ARTICLE IV
KINDS OF INSURANCE
The purpose for which this corporation is organized is to engage in the
business of life insurance, accident and health insurance, and the writing of
annuities, as all of said terms are defined in Article 3.01 of the Texas
Insurance Code.
<PAGE> 2
ARTICLE V
CAPITAL STOCK
The aggregate number of shares of the corporation shall have authority to issue
is one million twenty-two thousand, six hundred sixty-eight (1,022,668) shares
of Class "A" common stock of a par value of One & 22/100 Dollars ($1.22) each
and seventy-three thousand, five hundred twenty-four (73,524) shares of Class
"B" common stock of a par value of One & 22/100 Dollars ($1.22) each. Each
share of stock shall be equal in all respects in preferences, rights,
limitations, privileges and restrictions; except, however, the holders of Class
"A" common shares shall be entitled to one vote for each share held, but the
holders of Class "B" common stock shall have no voting rights except as
otherwise provided by law. Said capital stock shall consist
ARTICLE VI
CAPITAL AND SURPLUS
As of the date of adoption of these Articles of Amendment, at least fifty
percent (50%) of the total authorized common stock, or Five Hundred Forty-Eight
Thousand, Ninety-Six and no/100 Dollars ($548,096.00) of capital has been
subscribed and paid in and is possessed by the corporation in lawful money of
the United States of America, and such capital, together with a surplus of at
least One Million and No/100 Dollars ($1,000,000.00) in lawful money of the
United States of America, is in the possession of and is the bona fide property
of the corporation.
ARTICLE VII
DURATION
The corporation shall exist for a duration of five hundred (500) years.
ARTICLE VIII
PRE-EMPTIVE RIGHTS
Pre-emptive rights are expressly denied.
-2-
<PAGE> 3
ARTICLE IX
NO CUMULATIVE VOTING
Stockholders of the corporation shall not have the right of cumulative voting.
ARTICLE X
BY-LAWS
The Board of Directors, at any annual, regular, or special meeting, by a vote
of three-fourths (3/4) of the current number of Directors, shall have the power
to alter, amend, make, and repeal the Bylaws of the corporation.
ARTICLE XI
INITIAL DIRECTORS
The initial directors shall be:
J. B. Veale, Jr., DDS. 1304 North Coffee
Pampa, Texas 79005
William L. Glenn, Jr., DDS. 2601 Broadway
Galveston, Texas 77550
Burton J. Kunik, DDS. 7000 Fannin, No. 1430
Houston, Texas 77030
ARTICLE XII
DIRECTORS, CLASSIFICATION
The business and property of the corporation shall be managed by the board of
directors composed of no less than five (5) nor more than thirteen (13)
members. The number of directors shall be set by a resolution of the board
meeting held in January of each year. When the board consists of eight or less
members, all directors shall be elected for one year terms. When the board
consists of nine or more members, the directors shall be divided into three
classes, each class to be as nearly equal in number as possible, the terms of
office of the directors of the first class to expire at the first annual
meeting of the shareholders, that of the second class to expire at the second
annual meeting after
-3-
<PAGE> 4
their election, and that of the third class to expire at the third annual
meeting after their election. Directors shall be elected by popularity vote at
the annual meeting of the shareholders. A vacancy or vacancies on the board of
directors may be filled by the remaining directors. Directors elected to fill
such a vacancy or vacancies shall hold office for an unexpired term or until
his or their successors shall be duly elected and qualified. Ownership of
shares shall be prerequisite to eligibility to serve on the board of directors.
ARTICLE XIII
OFFICERS AND DIRECTORS - INDEMNIFICATION
Each director, officer and former director or officer of the corporation, and
any person who may have served or who may hereafter serve at its request as a
director or officer of another corporation in which it owns shares of capital
stock or of which it is a creditor, is hereby indemnified by the corporation
against expenses actually and necessarily incurred by him in connection with
the defense of any action, suit or proceeding in which he is made a party by
reason of being or having been a director of officer, except in relation to
matters as to which he shall be adjudged in such action, suit or proceeding to
be liable for negligence or misconduct in the performance of duty. Such
indemnification shall not be deemed exclusive of any other right to which such
director, officer or person may be entitled under any by-laws, amendment, vote
of stockholders or otherwise.
ARTICLE XIV
LIMITATION OF LIABILITY
To the fullest extent provided by law, no director of the corporation shall be
liable to the corporation or to its shareholders for monetary damages for an
act or omission in the director's capacity as a director, except liability for
(1) a breach of a director's duty of loyalty to the corporation or its
shareholders or members; (2) an act or omission not in good faith or that
involves intentional misconduct or a knowing violation of the law; (3) a
transaction from which a director received an improper benefit, whether or not
the benefit resulted from an action taken within the scope of the director's
office; (4) an act or omission for which the liability of a director is
expressly provided for by statute; or (5) an act related to an unlawful stock
repurchase or payment of a dividend. If the Texas statutory law hereafter is
amended to further eliminate or limit the lability of a director, then a
director of the corporation, in addition to the circumstances in which a
director is not personally liable as set forth in the preceding paragraph,
shall not be liable to the fullest extent permitted by the amended Texas
statutory law. Any repeal or modification of the preceding provisions in this
article by the shareholders of the corporation shall not adversely affect any
right or protection of a director
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<PAGE> 5
of the corporation existing at the time of such repeal or modification for any
prior acts during a time when this amendment was operative.
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<PAGE> 1
BYLAWS
OF
PROFESSIONAL BENEFITS INSURANCE COMPANY
ARTICLE I. NAME, LOCATION AND RULES OF ORDER
NOTE: USE OF THE MASCULINE GENDER THROUGHOUT THESE BYLAWS SHALL
MEAN ANY PERSON, WHETHER MALE OR FEMALE
Section 1. Name. The name of the Corporation shall be Professional
Benefits Insurance Company.
Section 2. Location. The Principal Office of the Corporation shall be
in the city of Houston, State of Texas. Other offices of the Corporation shall
be located at such places as the Board of Directors may designate.
Section 3. Rules of Order. The current edition of Sturgis Code of
Parliamentary Procedure shall govern deliberations of Professional Benefits
Insurance Company when not in conflict with its Bylaws.
ARTICLE II. STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the Stockholders of
the Corporation shall be held at the principal office of the Corporation or at
such other place as may be designated in the notice of the meeting on either
the last, or the next to the last Friday in April as designated in the notice
of the meeting, each and every year, for the purpose of electing Directors and
for the transaction of such other business as may come before the meeting. The
date set for the annual meeting shall not be set to fall on a legal holiday in
the State of Texas. The date of the Annual Stockholders Meeting shall be set by
a Resolution of the Board of Directors during the January Quarterly Board
Meeting.
Section 2. Special Meetings. Special meetings of the Stockholders may
be called by the President or by the Board of Directors. A special meeting of
the Stockholders shall be called by the President upon the demand of Class A
common Stockholders owning over ten percent [10%] of the Class A stock issued
and outstanding. The purpose of the call shall be specifically stated by the
Stockholders making the demand. Only the specific subjects listed in the
official "Notice of the Special Called Meeting" may be acted upon. The Company
shall have 10 business days following
<PAGE> 2
the receipt of the Request of a Special Called Stockholders Meeting to verify
that the list of the required 10% of the stockholders requesting the call
contains a valid list of 10% of the required stockholders.
The Board of Directors or the Executive Committee shall set the date of the
Special Called Meeting at the end of the 10 business days following the request
as set forth in "Article II, Section 3. Notice of Meetings" of these Bylaws.
Notwithstanding the requirements of Article II, Section 3, the Special Called
Meeting date may be set at a date later than the "...60 days...," but not
exceeding 150 days if the Annual stockholders Meeting will be held within 150
days of the "Notice."
Section 3. Notice of Meetings. Notice of the time and place for all
annual and special meetings shall be mailed by the Secretary to each
Stockholder not less than ten [10] days nor more than [60] days before the date
of the meeting. The place, date and time of Stockholders meetings shall be set
by a resolution of the Board of Directors or by a resolutions of the Executive
Committee.
Section 4. Quorum. At any meeting of the Stockholders, the holder or
holders of a majority of the shares of the Class A stock issued and
outstanding, present in person or by proxy, shall constitute a quorum of the
Stockholders for all purposes. If a quorum shall not be present at any meeting,
such meeting may adjourn from time to time without notice other than by
announcement by the Chairman at the meeting until holders of the amount of
stock necessary to constitute a quorum shall attend.
Section 5. Voting. At all meetings, a Stockholder shall be entitled to
cast one vote for each share of Class A Common stock held in his name, which
vote may be cast by the Stockholder in person or by proxy. Every proxy must be
executed in writing by the shareholder or by his duly authorized attorney in
fact.
When a quorum is present at any meeting, the vote of the holders of a
majority of the shares present or represented by proxy at such meeting and
entitled to vote shall decide any question properly brought before such meeting
and shall be the act of the shareholder's meeting, unless the vote of a greater
number is required by these bylaws, the Articles of Incorporation, the Texas
Business Corporation Act, the Texas Insurance Code, the Security Exchange
Commission Regulations or other law.
Section 6. Closing of Transfer Books or Fixing of Record Date. For the
purposes of determining the stockholders entitled to notice of, or to vote at
any meeting of the stockholders, or any adjournment thereof, only persons who
are stockholders on the date of the mailing of the notice of the specific
meeting which is being called may vote.
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<PAGE> 3
Section 7. Conduct of Meetings. All meetings of the Stockholders shall
be presided over by the Chairman of the Board of the Corporation, or in his
absence by the President.
ARTICLE III. BOARD OF DIRECTORS
Section 1. Number. The business and property of the Corporation shall
be managed by the Board of Directors composed of no less than five [5], nor
more than thirteen [13] members who shall be owners of Class A stock. The
number of Directors to serve from the next Annual Stockholders meeting until
the subsequent Stockholders Meeting shall be set by a Resolution of the Board
at the October Board Meeting. At this October meeting, the Board shall also, by
Resolution, appoint one or more members of the Board to the Nominating
Committee and select the Chairman. The committee shall bring a slate of
nominees to the January Board meeting for approval of the Board. If the number
of Directors is eight [8] or less, all Directors shall be elected for a one [1]
year term. If the number of Directors is nine [9] or more, the Directors shall
be elected for three [3] year terms. The resolution shall then prescribe the
number to be elected each year so that as near an equal number as possible
shall be elected each year as set forth in the Articles of Incorporation. The
Directors shall be elected by the Class A common Stockholders by a plurality
vote at the Annual meeting of the Stockholders. A vacancy or vacancies on the
Board of Directors may be filled by the remaining Directors or Director though
less than a quorum and the Director or Directors elected to fill such a vacancy
or vacancies shall hold office for the unexpired term or until his or their
successors shall be duly elected and qualified.
Between Annual Stockholder Meetings, the Board may, by a vote of [2/3] of the
current Directors, increase or decrease the number of Directors as may be
deemed necessary. Any increase in the Number shall be filled by the election by
the Board of a person or persons to serve until the next Annual Election of
Directors by the Stockholders. Any decrease in the number of directors may only
be made if there is a vacancy, or vacancies so that a reduction in the number
of directors shall not effect the removal of a current Director.
Section 2. Advisory Directors. The Board of Directors may appoint one
or more Advisory Directors, but not to exceed a number equal to one half the
number of Directors. Terms of Advisory Directors shall run from the date of
their appointment until the next Annual Meeting of the Board of Directors.
Advisory Directors may be re-appointed at the will of the Board. The duty of
Advisory Directors shall be to lend their experience and expertise to the
deliberations and activities of the Board of Directors. They may serve on
committees and do all such things as any Director except as specifically noted
in these Bylaws. Advisory Directors may enter into discussions and make and or
second motions, but shall not have the right to vote. Advisory Directors shall
not serve as Officers of the Company. Compensation for Advisory Directors shall
be the same as set for Directors.
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<PAGE> 4
Section 3. Removal of a Director. A Director shall automatically be
removed from the Board of Directors when they are no longer a Shareholder of
any Class A Stock of the Company. An employee who is also elected as a Director
by virtue of having been elected an Officer shall automatically be removed from
the Board of Directors upon their resignation as an officer, retirement from
the Company, or upon the termination of their employment with the Company.
Directors may only be removed by action of the Board of Directors as provided
in these Bylaws. Any Director may be removed from the Board of Directors with
or without cause by a two thirds [2/3] affirmative vote of the Directors
present at any regular or called meeting of the Board of Directors, including a
telephone conference call meeting, provided further that the quorum necessary
for such an action shall be two thirds [2/3] vote of the current number of
Directors and not the simple majority quorum required for Board Meetings.
Section 4. Regular Meetings. The regular Annual meeting of the Board
of Directors shall be held immediately after the adjournment of each Annual
meeting of the Stockholders. The Board of Directors shall also hold additional
regular meetings in October, January and July. Notice of the time and place for
the annual meeting and all regular meetings of the Board of Directors shall be
mailed or sent by facsimile transmission by the Secretary to each Director not
less than ten [10] days before the date of the meeting.
Section 5. Special Meetings. The Chairman or the President, shall have
the authority to call and hold Special Meetings of the Board of Directors.
Special meetings of the Board of Directors shall be held at such time and at
such place as shall be determined by the Chairman of the Board or the President
when they issue the call for the Special Meeting. The Chairman shall call a
special meeting of the Board of Directors upon the request of a majority of the
Directors.
Section 6. Telephone Conference Call Meetings. The Chairman or
President, shall have the authority to call and hold meetings by means of
telephone conference calls. Such meetings shall be considered special meetings
of the Board of Directors.
Section 7. Notice. Notice of all Annual, Regular or Special Meetings
of the Board of Directors, shall be given by the Secretary. Notices for
Quarterly and Special meetings of the Board of Directors may be either written,
[the word oral has been deleted] or by Facsimile Transmission. Notice of Annual
and Quarterly Board Meetings shall be sent no less than twenty [20] and no more
than sixty [60] days before the date of such meeting. Notice of Special Board
Meetings shall be sent before such meeting is held, not less than two [2] days
nor more than ten [10] days before the date for such Special Board meeting. By
unanimous consent this provision may be waived only for Special Meetings.
Section 8. Action by Unanimous Consent. The Board of Directors is
authorized to take action by unanimous consent in lieu of holding Directors
Meetings.
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<PAGE> 5
Section 9. Quorum. A majority of the number of Directors shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors and a majority vote of the members present shall be needed to take
any action, except in those instances where a two thirds [2/3] Quorum, and a
two thirds [2/3] affirmative vote is specified in another Section of these
Bylaws.
Section 10. Election of Officers. The Directors shall elect the
Officers of the Corporation at the regular Annual meeting of the Directors
following each Annual meeting of the Stockholders.
Section 11. Executive Committee. The Executive Committee shall be a
Standing Committee of the Board of Directors and shall be composed of the
Chairman of the Board of Directors, the President, the Secretary and the
Treasurer, or the Secretary-Treasurer. The Chairman of the Board shall be the
Chairman of the Executive Committee. It shall be the duty of the Executive
Committee to assist the President in making decisions between the regular
meetings of the Board of Directors. Either the Chairman of the Board, or the
President may call a meeting of the Executive Committee. The Chairman shall
call a meeting of the committee at the request of any two members of the
committee. A quorum shall be two thirds of the number of the members and a
majority vote of the members present shall be needed to take any action. The
Secretary shall keep minutes of all meetings, and a copy of the minutes of each
Executive Committee meeting shall be filed with the records of the Company, and
a copy of these minutes shall be distributed to all Directors.
Section 12. Committees. The Board of Directors may by resolution
designate among its members one or more Committees consisting of one or more
Directors and or Advisory Directors, to exercise such authority as granted by
the Board of Directors. These Committees may be created as Standing Committees,
or as Temporary Committees. The Committees shall keep minutes of all meetings,
and a copy of all minutes shall be sent to the President and the Secretary to
be filed with the records of the Company.
Section 13. Compensation. Directors of the Corporation shall receive
as compensation for their services as Directors such compensation as may be
fixed and determined by the Board of Directors. Advisory Directors shall
receive as compensation for their services as Advisory Directors the same
compensation that has been fixed for Directors.
ARTICLE IV. OFFICERS
Section 1. Number and Designation. The Officers of the Corporation
shall be a Chairman of the Board, a President, a Secretary, a Treasurer or
Secretary-Treasurer and a VicePresident. An Executive Vice President, a Senior
Vice President, and other Vice Presidents and such assistant officers as may be
needed may be designated by the Board of Directors. The Chairman or the
President may not hold the office of Secretary or Treasurer, but may hold any
other office concurrently. Only members of the Board of Directors are eligible
for election to the office of
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<PAGE> 6
Chairman of the Board, President, Secretary and Treasurer or
Secretary-Treasurer. The Executive Vice President, the Senior Vice-President
and any other Vice-Presidents may be elected from the board or from the
employees of the company.
Section 2. Election and Term of Office. The Officers of the
Corporation shall be elected at the Annual Board of Directors Meeting by the
Board of Directors for a term of one year and shall hold office until their
successors are duly elected and qualified, or until they are removed in
accordance with the provisions of these Bylaws.
Section 3. Removal of an Officer. Only the Board of Directors shall
have the right and power to remove from office the Chairman of the Board, the
Secretary, the Treasurer or the Secretary-Treasurer and to terminate the
employment of the President by a two thirds [2/3] affirmative vote at any
regular or called meeting of the Board of Directors including a telephone
conference call meeting; provided further that the quorum necessary for such an
action shall be two thirds [2/3] of the current number of Directors and not the
simple majority quorum required for Board meetings. The President shall have
the right and power to terminate the employment of any employee officer of the
Company subject to the provisions of the Company Employee Policy Manual. Any
employee officer of the Company who retires, or who resigns from the Company,
or whose employment is terminated, or is deceased shall automatically cease to
be an officer of the Company. An employee officer who is also a Director shall
automatically be removed as a Director under the provisions of Article III,
Section 2., of these Bylaws.
Section 4. Vacancy. A vacancy in any office may be filled by the Board
of Directors by appointment for the unexpired portion of the term.
Section 5. Chairman of the Board. The Chairman shall preside at all
meetings of the Stockholders, the Board of Directors and the Executive
Committee.
Section 6. President. The President shall be the Chief Executive
Officer of the Corporation and shall in general supervise and control all of
the business and property of the Corporation. The President shall in the
absence of the Chairman of the Board preside at meetings of the Stockholders,
the Board of Directors and the Executive Committee. The President shall, at the
direction of the Board of Directors, have authority to make and enter into
contracts, to borrow money, and make purchases and sales, and to sign, execute
and deliver all contracts, conveyances, deeds, deeds of trust, leases,
assignments, mortgages, chattel mortgages, pledges, releases, checks, drafts,
orders for the payment of money, notes or other obligations of the Corporation
and all other written instruments of any character appropriate to any of the
powers or duties of the President in the name of and binding upon the
Corporation. The President shall perform such other duties as from time to time
may be designated by the Board of Directors.
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<PAGE> 7
Section 7. Executive Vice-President. In the absence of the President
or in the event of his death or inability or refusal to act, the Executive
Vice-President shall perform the duties of the President and when so acting
shall have all of the powers of, and be subject to all restrictions upon the
President. The Executive Vice-President shall perform such other duties as from
time to time may be designated by the President or the Board of Directors.
Section 8. Senior Vice-President. In the absence of the President and
the Executive Vice-President, the Senior Vice President shall perform the
duties of the President and when so acting shall have all of the powers of, and
be subject to all restrictions upon the President. The Senior Vice-President
shall perform such other duties as from time to time may be designated by the
President or the Board of Directors.
Section 9. Vice-President. In the absence of the President and the
Executive VicePresident and the Senior Vice-President, or in the event of their
death or inability or refusal to act, the Vice President shall perform the
duties of the President and when so acting shall have all of 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 designated by the
President or the Board of Directors. In the event that there are two or more
Vice-President, the Vice-President that shall perform the duties of the
President under the above circumstances shall be designated by Resolution of
the Board of Directors and recorded in the Minutes.
Section 10. Secretary. The Secretary shall attend and keep the minutes
of the meetings of the Stockholders, the meetings of the Board of Directors and
the meetings of the Executive Committee. The Secretary shall issue notice of
all meetings of Stockholders, the Board of Directors and the Executive
Committee in accordance with these Bylaws. The Secretary shall be the custodian
of the records and of the seal of the Corporation and see that the seal of the
Corporation is duly affixed to all documents and shall attest with his or her
signature all stock certificates and contracts of the Corporation. The
Secretary shall perform all other such duties as are incident to the office and
shall perform all other duties delegated to the Secretary by the President or
the Board of Directors.
Section 11. Treasurer. The Treasurer shall keep record of books of
accounts and shall submit them, together with all his vouchers, receipts,
records and other papers to the Board of Directors for their examination and
approval as often as they may require. The Treasurer shall perform all other
such duties delegated to the Treasurer by the President or the Board of
Directors.
Section 12. Secretary-Treasurer. In the event the Board of Directors
chooses to designate a Secretary-Treasurer, the Secretary-Treasurer shall have
all the duties of the Secretary, as set forth in ARTICLE IV., Section 10., and
all of the duties of the Treasurer, as set forth in ARTICLE IV, Section 11.
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<PAGE> 8
Section 13. Salaries. The salaries of all Officers of the Corporation
shall be fixed by the Board of Directors. However, the Board of Directors may
by resolution authorize the President to fix the salaries of all other
Officers. Only the Board shall fix the salary of the President.
ARTICLE V. STOCK CERTIFICATES
Section 1. Form. Certificates representing stock in the Corporation
shall be in such form as approved by the Board of Directors. The certificates
shall be signed by the President or Senior Vice-President and the Secretary or
Assistant Secretary, and the signatures of such officers may be facsimiles.
They shall be consecutively numbered and shall bear the seal of the
Corporation. The name and address of the person to whom the shares are issued
with the number of shares and date of issue shall be entered on the stock
transfer books of the Corporation.
Section 2. Registered Shareholders. The Corporation shall be entitled
to recognize the holder of record of any share or shares of stock as the holder
in fact thereof and, accordingly, shall not be bound to recognize any equitable
or other claim to, or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
When shares are registered on the books of the corporation in the names of two
or more persons as joint owners with the right of survivorship, and after the
death of a joint owner and before the time that the corporation receives actual
written notice that parties other than the surviving joint owner or owners
claim an interest in the shares or any distribution thereon, the transfer of
those shares to any person, firm, or corporation [including that surviving
joint owner, individually] and pay any distributions made in respect of those
shares, in each case as if the surviving joint owner was the absolute owner of
the Shares.
Section 3. Transfer. Transfers of stock shall be made only on the
books of the Corporation. The old certificate, properly endorsed, shall be
surrendered and canceled before a new certificate shall be issued.
Section 4. Lost, Stolen, Destroyed or Mutilated Certificates. A
Duplicate certificate of stock may be issued for such as may have been lost or
destroyed, upon the applicant's furnishing affidavit that they are the owner of
said certificate and that same has been lost or destroyed, together with bond
of indemnity, with satisfactory security to the Company conditioned upon loss
in consequence of issue of said duplicate certificate.
Section 5. Uncertified Shares. The Board of Directors is authorized to
provide that some or all of any or all classes and series of shares of the
Corporation Stock is designated as uncertified shares.
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<PAGE> 9
ARTICLE VI. DIVIDENDS
The Board of Directors may declare and pay dividends from the earned surplus of
the Corporation or from the net profits arising from the business of the
Corporation. The Board of Directors may fix in advance a record date for the
purpose of determining which shares shall receive dividends.
ARTICLE VII. CORPORATE SEAL
The Corporate seal of the Corporation shall be a circular disc within which
shall be inscribed the name of the Corporation. While the corporate seal may be
placed on any document at the desire of the Officers or the Directors of the
Corporation, it shall never be necessary to place the corporate seal on any
document as a prerequisite to the validity of such document except only where
the Texas Corporation Business Act specifically requires such seal.
ARTICLE VIII. FISCAL YEAR
The fiscal year of the Corporation shall begin January 1 and end December 31 of
every year.
ARTICLE IX. WAIVER
Whenever any notice is required to be given any Stockholder or Director of the
Corporation, a waiver thereof in writing signed by the person entitled to such
notice, whether before or after the time stated therein, shall be the
equivalent to the giving of such notice.
ARTICLE X. AMENDMENTS
The Board of Directors at any Annual, Regular or special meeting by a vote of
three fourths [3/4] of the current number of Directors, shall have the power to
alter, amend, make and repeal the Bylaws of the Corporation.
ARTICLE XI. CONTRACTS
Contracts between the Company and its Officers and or Directors are permissible
so long as one [1], the material facts of the contract and the relationship of
the Officer or Director are disclosed to the Board of Directors which
authorizes such contract, or two [2], the material facts of the contract and
the relationship of the Officer or Director are disclosed to the Shareholders
who authorize such contract, or three [3], the contract is fair to the Company
at the time it is authorized, approved or ratified by the Board of Directors or
Shareholders of the Company.
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<PAGE> 1
LICENSE AGREEMENT
THE STATE OF TEXAS ) (
) ( KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF TRAVIS ) (
This agreement is made and entered into by and between TEXAS
RESTAURANT ASSOCIATION, Licensor, and PROFESSIONAL BENEFITS INSURANCE COMPANY,
Licensee.
WITNESSETH:
WHEREAS, the Texas Restaurant Association is the sole owner of, and
has a valuable licensable property right in the name "Texas Restaurant
Association" and the associated logo, a copy of which is attached hereto as
Exhibit A (collectively, the "marks"); and
WHEREAS, the members of the Texas Restaurant Association constitute a
substantial market for medical insurance; and
WHEREAS, Licensee is aware of the fact that the marks are well
recognized and respected among members of the Texas Restaurant Association; and
WHEREAS, Licensee is desirous of securing a non-exclusive license to
use the marks in the marketing of medical insurance coverage;
NOW THEREFORE, for and in consideration of the premises and mutual
covenants set forth herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged and confessed, the
parties hereto agree as follows:
1. Texas Restaurant Association and its successors and assigns retain
the sole right to register, to use and to license others to use the marks and
any modifications and derivations thereof.
2. Licensee will not register or attempt to register in its own name
or in the name of any other person, corporation or other entity any name of
logo or mark of any other designation of any kind utilizing the marks, any
modification of derivations thereof, or any logo hereafter used by the Texas
Restaurant Association.
3. Licensee will not contest, directly or indirectly, Texas Restaurant
Association's ownership, title, right or interest in the sole right to
register, use and to license others to use the marks or any other names or
marks which incorporate that name and logo or any modifications or derivations
thereof.
<PAGE> 2
4. In consideration of the payment of a royalty, Texas Restaurant
Association grants to Licensee a non-exclusive license to use the marks in the
marketing of medical insurance to the members of the Association.
5. The royalty to be paid to the Texas Restaurant Association by
Licensee which constitutes the consideration for this agreement, shall be
computed and paid quarterly to the Texas Restaurant Association in Austin,
Travis County, Texas, in compliance with the following formula:
(a) for each use of the marks in an advertisement published in a
periodical with a circulation of 4,000 or more, the sum of $3,200.00.
(b) for each use of the marks in an advertisement published in a
periodical with a circulation of fewer than 4,000, the sum of
$2,500.00.
(c) for each use of the marks in form letters or other materials
prepared for distribution by mail the sum of $80.00 per 100 copies.
(d) for each reference to the Texas Restaurant Association in
a personal interview conducted in an effort to sell insurance, the sum
of $2.05.
6. This agreement shall be in effect for a term of one (1) year unless
continued by agreement of the parties or sooner terminated under other
provisions hereof. Either party may cancel this contract, with or without
cause, by giving 30 days written notice to the other party.
7. As long as this agreement is in effect, Licensee agrees to submit
to the Texas Restaurant Association a monthly report showing any or all
additions to or drops from the list of Texas Restaurant Association members
shown to have been enrolled as participants in the medical insurance program.
8. During the existence of this agreement, Texas Restaurant
Association shall have the right, at reasonable times and on advance notice to
Licensee, to have the enrollment records of the company verified by the Texas
Restaurant Association's certified public accountants. Licensee shall make
available its books and records as may be reasonably necessary for such
verification.
9. Licensee will use its best efforts to promote and protect the
goodwill and reputation associated with Texas Restaurant Association and the
marks and will hold Texas Restaurant Association harmless from any claims,
damages, liabilities, and causes of action which might arise in connection with
Licensee's negligent use of the marks.
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<PAGE> 3
10. This agreement is limited to the license herein granted to
Licensee to use the marks in the marketing of medical insurance to Texas
Restaurant Association members; any other business dealings between the parties
will be conducted as separate transactions under whatever agreements or
contracts are applicable thereto.
11. Licensee agrees to hold in confidence all information which it may
receive from the Texas Restaurant Association, including the names of its
members, and to return any writings revealing the same at the termination of
this agreement, unless otherwise required by law.
12. This agreement shall be binding upon any successors or assigns of
the Licensee. Licensee may not assign any of it's rights or delegate any of
it's obligations hereunder without the prior written consent of the Texas
Restaurant Association.
13. In the event of any violation of the terms and conditions of this
agreement, Texas Restaurant Association shall be entitled to injunctive relief
and damages, which remedies shall be cumulative and in addition to any other
rights or remedies to which Texas Restaurant Association might be entitled.
14. If legal action is required to enforce this contract the
prevailing party is entitled to recover reasonable attorney fees,
administrative costs, costs of court, and any other expenses incurred in
enforcing the contract.
15. THIS AGREEMENT SHALL BE CONTROLLED BY THE LAWS OF THE
STATE OF TEXAS AND IS PERFORMABLE IN TRAVIS COUNTY, TEXAS. ANY
LITIGATION WITH REGARD THERETO MUST BE BROUGHT IN TRAVIS COUNTY,
TEXAS.
WITNESS OUR HANDS this the 2nd day of May 1994.
TEXAS RESTAURANT ASSOCIATION PROFESSIONAL BENEFITS INSURANCE CO.
By: /s/ [illegible] By: /s/ JERRY RAY
------------------------ ------------------------
Executive Vice President Executive Vice President
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<PAGE> 1
ENDORSEMENT AGREEMENT
This Endorsement Agreement is hereby entered into on this the 15th day
of January, 1996, by and between DON M. CANADA, an individual authorized
pursuant to the provisions of Article 21.07-1 of the Texas Insurance Code to
act as a Group I Life Insurance Agent with principal offices at 918 Congress
Avenue, Suite 200, Austin, Texas 78701 (hereinafter "AGENT") as agent of record
for and authorized representative of the Texas Association for Optometrists,
the Texas Podiatric Medical Association and the Texas Society of Professional
Surveyors, and PROFESSIONAL BENEFITS INSURANCE COMPANY, a corporation organized
and existing under the laws of the State of Texas and authorized pursuant to
the provisions of Chapter 3 of the Texas Insurance Code to act as a life,
accident and health insurer with principal offices at 10835 Rockley, Houston,
Texas 77099 (hereinafter "PBIC").
R E C I T A L S:
WHEREAS, AGENT is the insurance agent of record for and the authorized
representative of the Texas Association of Optometrists, the Texas Podiatric
Medical Association, and the Texas Society of Professional Surveyors
(hereinafter "THE ASSOCIATIONS");
WHEREAS, as agent of record, AGENT represents the above-mentioned
associations in seeking various insurance coverages to endorse to the members
of the associations, including life, accident and health insurance coverages;
WHEREAS, PBIC is a licensed life, accident and health insurer in the
state of Texas;
<PAGE> 2
WHEREAS, PBIC desires to secure the endorsement of the Associations
for the offer to the membership of the Associations of life, accident and
health insurance products;
WHEREAS, Agent is seeking an alternative carrier to take over the
life, accident and health insurance book of business previously written by
Fidelity American Insurance Company on behalf of members of the Associations;
WHEREAS, PBIC is willing to assume the Fidelity American Insurance
book of business on terms and conditions as set out in this agreement;
WHEREAS, the parties hereto have agreed to the terms and conditions
set out in this agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein the parties hereto agree as follows:
I.
TAKEOVER OF BUSINESS
1.01 PBIC does hereby agree to take over the insurance book of
business previously insured through Fidelity American Insurance Company as
respects the members of the Texas Association of Optometrists, the Texas
Podiatric Medical Association, and the Texas Society of Professional Surveyors
as of February 1, 1996. The takeover of the above-mentioned book of business
will be evidenced by the issuance of policies of insurance by PBIC on forms
approved for use in the State of Texas for PBIC by the Texas Department of
Insurance. The forms approved for use in Texas for PBIC by the Texas Department
of Insurance shall provide the same schedule of
-2-
<PAGE> 3
benefits as that provided by Fidelity American Insurance Company to the members
of the Associations as of January 31, 1996. The schedule of benefits may
include certain enhancements including a $3,000,000.00 life time maximum and
such other enhancements as may be mutually agreed between PBIC and Agent as
Agent of Record for the Associations.
1.02 PBIC policies will be issued to the members of the Associations
as of February 1, 1996 on a "full takeover basis." It is the intent of the
parties that the PBIC coverage effective February 1, 1996, shall be on a
"no-loss/no-gain" basis whereby the members of the Associations covered through
Fidelity American Insurance Company as of January 31, 1996, shall receive
credit for any deductible amounts satisfied between January 1, 1996, and
January 31, 1996. Any policies of Fidelity American Insurance Company in force
for a period of less than twelve (12) months as of January 31, 1996, will
continue the twelve (12) month pre-existing condition limitation. Any policies
of Fidelity American Insurance Company in force as of January 31, 1996, having
current life time maximums exhausted will transfer to new coverage under PBIC;
however, no further benefits will be payable under the PBIC policy. It is
specially agreed and understood between the parties that no part of the premium
payable to PBIC may be paid by the employer of any covered person.
II.
ENDORSEMENT OF PBIC
2.01 AGENT on behalf of the Texas Association of Optometrists, the
Texas Podiatric Medical Association and the Texas Society of Professional
Surveyors does hereby endorse PBIC
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<PAGE> 4
to the members of the Associations as the insurer of preference for the
Associations as respects life, accident and health insurance coverages. By the
execution of the agreement by Agent, the Associations evidence their
endorsement of PBIC to their members for life, accident and health insurance
coverages. The above endorsement may be advertised and made known in a manner
consistent with the Texas Insurance Code and the Rules and Regulations of the
Texas Department of Insurance.
2.02 For purposes of this Agreement "new business" means applications
for insurance coverages on members of the Associations not covered through an
Fidelity American Insurance Company policy as of January 31, 1996. Any new
business submitted to PBIC as respects members of the Associations will be
subject to underwriting by PBIC utilizing the current underwriting procedures
of PBIC. The underwriting procedures of PBIC will be specifically outlined to
AGENT in order that AGENT may follow such underwriting procedures in soliciting
applications for coverage on behalf of PBIC through any agency agreement
specifically entered into by and between PBIC and Agent.
2.03 The coverage made available by PBIC to the members of the
Associations will be a franchise policy approved for use in Texas by the Texas
Department of Insurance. PBIC will issue the franchise policies to those
members of the Associations meeting the current underwriting criteria of PBIC
and accepted for coverage by PBIC. Those members of the Associations accepted
for coverage by PBIC will be issued identification cards in addition to the
PBIC policy.
-4-
<PAGE> 5
2.04 New business submitted to PBIC will be subject to the current
premium rates in effect. Business written by PBIC pursuant to this Agreement
will be subject to rate increases predicted upon PBIC's normal method of
calculating premium rate increases. PBIC will consider recommendations and
advice from Agent with respect to premium rate actions; provided, however,
premium rate actions remain within the sole discretion of PBIC.
2.05 AGENT agrees that as Agent of Record for the Associations AGENT
will permit PBIC the right of first refusal as respects any and all
applications for life, accident and health insurance coverages on behalf of
members of the above-mentioned associations. The endorsement provided in this
agreement is exclusive to the extent that PBIC does have the right of first
refusal as respects any and all applications for life, accident, and health
insurance coverages solicited by Agent from members of the Associations.
2.05 In the event PBIC is aware of "follow-up" business as respects
Association members known to PBIC, Agent shall be given the right of first
refusal to solicit the "follow-up" business with respect to leads generated on
business related to any of the Associations.
III.
TERM
3.01 AGENT hereby enters into this Endorsement Agreement on behalf of
the Texas Association of Optometrists, the Texas Podiatric Medical Association,
and the Texas Society of Professional Surveyors and does hereby appoint PBIC as
the insurer on behalf of the above-mentioned associations and PBIC hereby
accepts the endorsement of the Associations as respects
-5-
<PAGE> 6
the life, accident and health insurance products of PBIC for a period of five
(5) years from and after the date of execution of this agreement; subject,
however, to prior termination of this agreement as hereinafter provided.
IV.
DUTIES OF PBIC
4.01 As the insurer for the life, accident and health insurance
coverages contemplated by this agreement, PBIC will be responsible for all
administrative functions as respects the policies issued by PBIC to members of
the Associations. The administrative functions include underwriting as respects
new business, claims review and claims payment, new policy issue, policyholder
service, and related administrative functions. It is specifically agreed and
understood between the parties that Agent shall be responsible for the billing
and collection of premium on behalf of PBIC.
4.02 PBIC shall be responsible for the proper payment of commissions.
PBIC will pay commissions to the appropriate agent within five (5) business
days from the first day of the month following receipt of collected premium.
4.03 PBIC and AGENT will implement a quarterly strategic marketing
meeting to review and determine targets of opportunity as respects the
Associations or other non-profit associations brought to the attention of PBIC
by AGENT.
4.04 PBIC will implement a claims appeal process similar to that
utilized by PBIC as respects the Texas Restaurant Association for claims
arising under policies issued to members of the Texas Society of Professional
Surveyors.
-6-
<PAGE> 7
V.
DUTIES OF AGENT
5.01 AGENT shall be responsible for the billing and collection of
premium as respects policies of insurance issued by PBIC to members of the
Texas Association of Optometrists, the Texas Podiatric Medical Association, and
the Texas Society of Professional Surveyors. AGENT shall submit to PBIC premium
as respects the Associations on the twenty-fifth (25th) day of each month as
collected by AGENT. The premium will be submitted by AGENT to PBIC on a list
billing which reflects the name of each individual policyholder and the premium
paid by such policyholder for each type of coverage. The list billing will be
submitted in a format which is acceptable to PBIC. The list billing submitted
by AGENT shall serve as the basis for PBIC's determination of eligibility for
coverage for members of the Associations.
5.02 It is specifically agreed and understood between the parties that
any monies received or collected by AGENT constituting premiums due and payable
to PBIC constitute trust funds belonging to PBIC. AGENT has no right, title, or
interest in and to premiums collected by AGENT on behalf of PBIC. AGENT is only
entitled to commissions earned and payable by PBIC to AGENT. AGENT specifically
agrees that a trust is imposed upon any and all premiums collected by AGENT on
behalf of PBIC and that the monies so collected will be treated as fiduciary
funds belonging to PBIC.
-7-
<PAGE> 8
VI.
TERMINATION OF APPOINTMENT
6.01 This agreement shall terminate on the occurrence of any of the
following events:
a. Anything contained herein to the contrary not withstanding, in the
event PBIC shall discontinue operating its business, this agreement
shall cease and terminate on the first day of the month in which PBIC
ceases operations with the same force and effect as if said first day
of the month were originally set forth as a termination date hereof;
b. Anything contained herein to the contrary notwithstanding, in the
event any of the Associations named in this agreement shall
discontinue operating its business, this agreement shall cease and
terminate on the first day of the month in which such Association
ceases operations with the same force and effect as if said first day
of the month were originally set forth as the termination date hereof;
c. The willful breach of duty, the habitual neglect or continued
incapacity on the part of PBIC to perform PBIC's duties unless waived
by AGENT on behalf of the Associations;
d. The willful breach of duty, the habitual neglect or continued
incapacity on the part of AGENT to perform AGENT's duties unless
waived by PBIC; or
e. By delivery through the U.S. Mail or by hand, a written notice of
termination giving at least one hundred eighty (180) days notice of
termination of this agreement by either party.
VII.
GENERAL PROVISIONS
7.01 This agreement supersedes any and all other agreements, either or
oral or written, between the parties hereto with respect to the matters subject
of this agreement and contains all of the covenants between the parties with
respect to the endorsement of PBIC by the Associations and the takeover of the
Fidelity American book of business by PBIC.
-8-
<PAGE> 9
7.02 This agreement shall be governed by and construed in accordance
with the laws of the State of Texas. This agreement shall be performed in
Harris County, Texas.
7.03 In the event of a breach of this agreement by either PBIC or
AGENT or any of the Associations for whom AGENT is AGENT of Record resulting in
damages to the other party, the aggrieved party shall recover from the party
breaching this agreement any and all damages that may be sustained.
7.04 If any act at law or in equity is necessary to enforce or
interpret the terms of this agreement, the prevailing party shall be entitled
to reasonable costs, attorney's fees, and necessary disbursements in addition
to any and all other relief to which such party may be entitled.
7.05 Any notices to be given hereunder by one party to the other may
be effected either by personal delivery in writing or by mail, registered or
certified, postage prepaid with return receipt requested. Mailed notices shall
be addressed to the parties at the addresses appearing in the introductory
paragraph of this agreement. Notices delivered personally shall be deemed
communicated as of actual receipt; mailed notices shall be deemed communicated
as five (5) days after mailing.
7.06 Nothing contained herein is intended to nor does it create the
relationship of joint venturer or partner between the parties.
7.07 This agreement is severable. Should any term, condition,
paragraph, or portion of this agreement be void or invalid for any reason, the
remainder of this agreement shall be of full force
-9-
<PAGE> 10
and effect as if the void and invalid term, condition, paragraph, or portion
were not a part of this agreement.
7.08 This agreement may only be assigned with the mutual consent of
the parties which such consent shall be evidenced by a written document
attached to and made a part of this Agreement by either party.
Executed on the day and year first above written by:
PROFESSIONAL BENEFITS DON M. CANADA, AS AGENT
INSURANCE COMPANY OF RECORD FOR THE TEXAS
ASSOCIATION OF OPTOMETRISTS,
THE TEXAS PODIATRIC MEDICAL
ASSOCIATION AND THE TEXAS
SOCIETY OF PROFESSIONAL SURVEYORS
/s/ JERRY RAY /s/ DON M. CANADA
- ---------------------------- --------------------------------
BY: Jerry Ray DON M. CANADA
TITLE: President
-10-
<PAGE> 1
POINTS OF TDA/ODA AGREEMENT
1. Mutual Agreement between ODA and TDA Life and Health to provide
various insurance programs for members of the Oklahoma Dental
Association.
2. ODA will lend its logo and implied name to TDA Life and Health to
promote ODA approved programs.
3. No insurance programs or any other products may be promoted among ODA
members that has not first been approved by the Board of Trustees of
the ODA, and under normal circumstances after study and recommendation
by the Sub Council on Insurance.
4. All changes in any approved program will come only after review of the
Sub Council on Insurance and approval of the Board of Trustees.
5. No TDA Life and Health program will be marketed or sold to any dentist
in Oklahoma who is not a member in good standing of the Oklahoma
Dental Association.
6. TDA Life and Health agrees to inform delinquent members that their
insurance will not be renewed if their membership in the ODA is not
kept current. This should be done each year at such time as the ODA
will provide TDA Life and Health a list of delinquent members.
7. ODA agrees to promote the ODA approved insurance program among its
members and their employees.
8. TDA Life and Health agrees to exhibit at ODA Annual Meeting (at least
on exhibit space).
9. TDA Life and Health agrees to buy one full page ad in each quarterly
Journal.
10. TDA Life and Health agrees to buy one-third page ad in each Talkback
or ODA Newsletter.
11. ODA agrees to provide mailing address, act as a mailing house for TDA
Life and Health for dentists to mail in claims and premiums at a
reasonable cost to TDA Life and health. ODA will receive daily mail,
log it so there is a record of mail received, package it and mail it
to TDA Life and Health at its Houston address no later than the next
work day and the same day when possible. A log of each mailing from
ODA to TDA Life and Health will be kept in the event there is question
about receipt of claim or premium or any other correspondence from the
member dentists to ODA Administered Insurance programs or TDA Life and
Health.
<PAGE> 2
When a dentist calls the 1-800 number in Houston at no time will TDA
Life and Health employees blame or accuse ODA employees for delay in
mailing unless they can prove that correspondence has not been
forwarded within the prescribed time above.
12. The total program is to be operated with the concept that ODA
Administered Insurance programs is an ODA program, the Sub Council on
Insurance stands between the member dentists and any insurance
companies and carry out the understanding that the ODA Administered
Insurance program is "Our" program. The ODA shall have the final
decision of payment of denied claims with the understanding that cost
for said payment will reflect back on the claims paid against the
program.
13. TDA Life and Health will provide to ODA from time to time requested
information to prove the financial stability of TDA Life and Health.
14. TDA Life and Health will provide to ODA no less than quarterly a
report indicating:
A. Number of insureds per program.
B. Premium income for each program.
C. Claims paid for each program.
D. Claims made but not reported for each program.
E. Reserves for unpaid claims.
F. Administrative costs for each program.
15. TDA Life and Health will place a member of the ODA on the Board of
Trustees of TDA Life and Health as an advisory member. TDA Life and
Health will open an office in Oklahoma to administer the ODA
Administered Insurance programs. ODA will purchase a reasonable amount
of stock of TDA Life and Health.
-2-
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEETS AND STATEMENTS OF OPERATIONS FROM THE COMPANY'S REPORT ON FORM
10-KSB FOR THE PERIOD ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<DEBT-HELD-FOR-SALE> 1,927,526
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 497,882
<TOTAL-INVEST> 2,758,424
<CASH> 1,560,150
<RECOVER-REINSURE> 52,084
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 5,610,994
<POLICY-LOSSES> 1,048,334
<UNEARNED-PREMIUMS> 56,324
<POLICY-OTHER> 1,905,000
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 805,996
<OTHER-SE> 1,240,774
<TOTAL-LIABILITY-AND-EQUITY> 5,610,994
9,126,520
<INVESTMENT-INCOME> 349,998
<INVESTMENT-GAINS> 196,835
<OTHER-INCOME> 126,095
<BENEFITS> 7,503,793
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 2,100,777
<INCOME-PRETAX> (678,785)
<INCOME-TAX> (203,000)
<INCOME-CONTINUING> (457,785)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (457,785)
<EPS-PRIMARY> (.72)
<EPS-DILUTED> (.66)
<RESERVE-OPEN> 2,675,509
<PROVISION-CURRENT> 370,988
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 2,401,031
<PAYMENTS-PRIOR> 4,731,774
<RESERVE-CLOSE> 2,953,334
<CUMULATIVE-DEFICIENCY> 93,163
</TABLE>
