-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LKgOAHQ++I7dQLR7vIb/UBW79osldIv0JvklN6Ff43JB1pbkNZr0C8AePPNPbfst mKy9ePpqOFnQpqr/MzwKQA== 0000950137-98-003180.txt : 19980814 0000950137-98-003180.hdr.sgml : 19980814 ACCESSION NUMBER: 0000950137-98-003180 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TENERE GROUP INC CENTRAL INDEX KEY: 0000922887 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 431675969 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26062 FILM NUMBER: 98685974 BUSINESS ADDRESS: STREET 1: 1903 E BATTLEFIELD CITY: SPRINGFIELD STATE: MO ZIP: 65804 BUSINESS PHONE: 4178620650 MAIL ADDRESS: STREET 1: 1903 E BATTLEFIELD CITY: SPRINGFIELD STATE: MO ZIP: 65804 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 Commission file number 0-24800 THE TENERE GROUP, INC. (Exact name of Registrant as specified in its charter) Missouri 43-1675969 (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 1903 E. Battlefield, Springfield, MO 65804 (Address of principal executive offices) (Zip code) 417-889-1010 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant 1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ------ ------ As of June 30, 1998 there were 1,999,774 shares of Common Stock, $.01 par value, issued and outstanding. 2 THE TENERE GROUP, INC. PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements (unaudited) Consolidated Balance Sheets - June 30, 1998 and December 31, 1997 3 Consolidated Statements of Operations - Three Months ended June 30, 1998 and 1997 4 Consolidated Statements of Operations - Six Months ended June 30, 1998 and 1997 5 Consolidated Statements of Stockholders' Equity and Comprehensive Income - Periods Ended December 31, 1997 and 1996 and June 30, 1998 6 Consolidated Statements of Cash Flows Six Months ended June 30, 1998 and 1997 7 Condensed Notes to Consolidated Financial Statements 8 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 PART II. OTHER INFORMATION ITEM 5. Other Information 18 ITEM 6. Exhibits and Reports on Form 8-K 18 SIGNATURES 19 EXHIBIT INDEX 20 2 3 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS THE TENERE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, 1998 and December 31, 1997
UNAUDITED Assets 1998 1997 ------ ---- ---- Investments: Bonds held available for sale, at fair value (amortized cost - $39,420,763 in 1998; $39,863,330 in 1997) $ 40,674,750 40,930,956 Common stock, at fair value 14,319 7,057 Short-term investments, at cost which approximates fair value 6,222,485 2,788,476 ------------ ----------- Total investments 46,911,554 43,726,489 Cash 1,078,597 3,761,457 Premiums receivable 3,598,709 3,124,660 Reinsurance recoverable 8,952,420 10,413,593 Ceded unearned premiums 315,617 369,727 Accrued investment income 657,433 674,843 Deferred policy acquisition costs 198,839 183,253 Deferred income taxes 2,475,846 2,304,087 Income taxes recoverable 300,000 300,000 Other 793,293 867,543 ------------ ----------- Total assets $ 65,282,308 65,725,652 ============ =========== Liabilities and Stockholders' Equity ------------------------------------- Liabilities: Reserves for losses and loss adjustment expenses $ 30,551,985 31,030,412 Unearned premium reserve 8,247,662 7,717,308 Reinsurance premiums payable 4,343,839 4,435,317 Other 1,463,283 1,563,056 ------------ ----------- Total liabilities 44,606,769 44,746,093 ============ =========== Stockholders' equity: Common stock, $.01 par value; 7,000,000 shares authorized; 1,999,774 shares issued and outstanding 19,998 19,998 Contributed capital 21,940,828 21,940,828 Accumulated deficit (2,122,183) ( 1,690,370) Accumulated other comprehensive income, net of tax 836,896 709,103 ------------ ----------- Total stockholders' equity 20,675,539 20,979,559 ------------ ----------- Total liabilities and stockholders' equity $ 65,282,308 65,725,652 ============ ===========
See notes to consolidated financial statements 3 4 THE TENERE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended June 30, 1998 and 1997 UNAUDITED
1998 1997 ---------- ---------- Revenues: Direct premiums written $3,038,720 2,511,455 Premiums ceded to reinsurers (701,045) (459,420) ---------- ---------- Net premiums written 2,337,675 2,052,035 Increase in unearned premium reserve (419,798) (668,152) ---------- ---------- Net premiums earned 1,917,877 1,383,883 Net investment income 708,424 644,440 ---------- ---------- Total revenues 2,626,301 2,028,323 Losses and expenses: Losses and loss adjustment expenses 2,351,047 950,558 General and administrative expenses 782,224 827,130 ---------- ---------- Total losses and expenses 3,133,271 1,777,688 ---------- ---------- (Loss) income before income taxes (506,970) 250,635 Income tax benefit (expense) 176,383 (77,378) ---------- ---------- Net (loss) income $ (330,587) 173,257 ========== ========== Basic net (loss) income per share $ (0.17) 0.09 ========== ========== Diluted net (loss) income per share $ (0.17) 0.08 ========== ==========
See notes to consolidated financial statements 4 5 THE TENERE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Six Months Ended June 30, 1998 and 1997 UNAUDITED
1998 1997 ---- ---- Revenues: Direct premiums written $ 5,674,199 4,708,923 Premiums ceded to reinsurers (1,386,231) (1,106,244) ------------ ----------- Net premiums written 4,287,968 3,602,679 Increase in unearned premium reserve (584,464) (811,509) ------------ ----------- Net premiums earned 3,703,504 2,791,170 Net investment income 1,416,558 1,285,696 Net realized investment losses (2,204) - ------------ ----------- Total revenues 5,117,858 4,076,866 Losses and expenses: Losses and loss adjustment expenses 4,236,139 2,546,519 General and administrative expenses 1,551,123 1,778,511 ------------ ----------- Total losses and expenses 5,787,262 4,325,030 ------------ ----------- Loss before income taxes (669,404) (248,164) Income tax benefit 237,591 96,059 ------------ ----------- Net loss $ (431,813) (152,105) ============ =========== Basic and diluted net loss per share $ (0.22) (0.08) ============ ===========
See notes to consolidated financial statements. 5 6 THE TENERE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME June 30, 1998 and December 31, 1997 and 1996 UNAUDITED
Retained Accumulated earnings/ other Common Contributed (accumulated comprehensive Comprehensive stock capital deficit) income Total income --------- ----------- ------------ ------------- ----------- ------------- Balance at December 31, 1995 19,998 21,940,828 2,196,890 379,562 24,537,278 Comprehensive income Net loss (2,934,486) (2,934,486) (2,934,486) Other comprehensive income, net of tax Net unrealized investment loss (213,089) (213,089) (213,089) ---------- Total comprehensive income (3,147,575) ========== -------- ---------- ------------ ----------- ---------- Balance at December 31, 1996 19,998 21,940,828 (737,596) 166,473 21,389,703 Comprehensive income Net loss (952,774) (952,774) (952,774) Other comprehensive income, net of tax Net unrealized investment gain 542,630 542,630 542,630 ---------- Total comprehensive income (410,144) ========== -------- ---------- ------------ ----------- ---------- Balance at December 31, 1997 19,998 21,940,828 (1,690,370) 709,103 20,979,559 Comprehensive income Net loss (431,813) (431,813) (431,813) Other comprehensive income, net of tax Net unrealized investment gain 127,793 127,793 127,793 ---------- Total comprehensive income (304,020) ========== -------- ---------- ------------ ----------- ---------- Balance at June 30, 1998 $19,998 21,940,828 (2,122,183) 836,896 20,675,539 ======== ========== ============ =========== ==========
See notes to consolidated financial statements 6 7 THE TENERE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30, 1998 and 1997 UNAUDITED
1998 1997 -------------- --------------- Cash flows from operating activities Premiums received from policyholders $ 5,200,028 4,149,886 Premiums paid to reinsurers (1,446,341) (1,841,411) Recoveries received from reinsurers 2,094,112 396 Losses and loss adjustment expenses paid (5,347,285) (3,666,005) Commissions paid (211,663) (101,719) Cash paid to suppliers and employees (1,472,710) (1,454,320) Interest received 1,525,912 1,403,659 Income taxes received - 335,089 -------------- --------------- Net cash provided by (used in) operating activities 342,053 (1,174,425) Cash flows from investing activities: Maturity of bonds available for sale 4,250,000 1,450,000 Sale of bonds available for sale 2,671,094 - Redemption on stock rights - 56 Purchase of bonds available for sale (6,476,850) - Purchase of furniture and equipment (35,148) (42,388) -------------- --------------- Net cash from investing activities 409,096 1,407,668 Net increase in cash and short-term investments 751,149 233,243 Cash and short-term investments at beginning of period 6,549,933 16,935,122 -------------- --------------- Cash and short-term investments at end of period $ 7,301,082 17,168,365 ============== =============== Reconciliation of net loss to net cash provided by (used in) operating activities Net loss $ (431,813) (152,105) Adjustments to reconcile net loss to net cash from operating activities: Net realized investment losses 2,204 - Depreciation and amortization expense 64,828 130,959 Net change in deferred acquisition costs (15,586) (26,383) Deferred income tax benefit (237,591) (96,059) Net amortization of discount on bonds (3,881) 27,451 Change in operating assets and liabilities Premiums receivable (474,049) (392,144) Reinsurance balances 1,423,805 (994,483) Accrued investment income 17,410 4,816 Income taxes recoverable - 335,089 Other assets 44,571 (10,662) Reserve for losses and loss adjustment expenses (478,427) (843,310) Unearned premium reserve 530,354 770,075 Other liabilities (99,772) 72,331 -------------- --------------- Net cash provided by (used in) operating activities $ 342,053 (1,174,425) ============== ===============
See notes to consolidated financial statements 7 8 THE TENERE GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements are prepared in accordance with the rules and regulations of the Securities and Exchange Commission with regard to interim financial statements. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been made. Such adjustments consisted of only normal recurring items. The results of operations for the six months ended June 30, 1998 are not necessarily indicative of the results which may occur for the full year. The accompanying unaudited financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the 1997 Annual Report. Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (Statement 130). Statement 130 requires a company to classify items of other comprehensive income by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in-capital in the equity section of the statement of financial position. The change in unrealized investment gains and losses is the only component of other comprehensive income for the Company. (2) INVESTMENTS The amortized cost and estimated fair values of investments in bonds and common stock as of June 30, 1998 and December 31, 1997 are presented below. The estimated fair values presented in this footnote were determined using quoted market prices, where available, or independent pricing services.
Gross Gross Estimated Amortized unrealized unrealized fair Type of Investment cost basis gains losses value - ------------------ ------------ ------------ ----------- ----------- June 30, 1998 Bonds: United States government, government agencies and $ 37,567,058 1,205,256 (5,268) 38,767,046 authorities State municipalities and political subdivisions 1,853,705 53,999 - 1,907,704 ------------ ----------- --------- ----------- Total bonds 39,420,763 1,259,255 (5,268) 40,674,750 Common stock 284 14,035 - 14,319 Short-term investments 6,222,485 - - 6,222,485 ------------ ----------- --------- ----------- Total investments $ 45,643,532 1,273,290 (5,268) 46,911,554 ============ =========== ========= ===========
8 9
Gross Gross Estimated Amortized unrealized unrealized fair Type of Investment cost basis gains losses value - ------------------ ------------ ----------- --------- ----------- December 31, 1997 Bonds: United States government, government agencies and $38,003,757 1,012,229 (7,020) 39,008,966 authorities State municipalities and political subdivisions 1,859,573 62,417 - 1,921,990 ----------- ----------- ------- ----------- Total bonds 39,863,330 1,074,646 (7,020) 40,930,956 Common stock 284 6,773 - 7,057 Short-term investments 2,788,476 - - 2,788,476 ----------- ----------- ------- ----------- Total investments $42,652,090 1,081,419 (7,020) 43,726,489 =========== =========== ======= ===========
the amortized cost and estimated fair value of investments in bonds at June 30, 1998 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Estimated Amortized fair cost basis value ---------- ----- Due after one year through five years $ 15,231,099 15,607,957 Due after five years through ten years 24,189,664 25,066,793 ------------- ------------ $ 39,420,763 40,674,750 ============= ============
Proceeds from sales of available for sale securities for the six months ended June 30, 1998 were $2,671,094. Gross losses on those sales were $2,204 in 1998. Net investment income for the six months ended June 30, 1998 and 1997 is comprised of the following:
June 30, June 30, 1998 1997 --------------- ---------- Investment income: Interest on short-term investments $ 226,457 425,295 Interest on bonds 1,285,924 946,097 --------------- ---------- Gross investment income 1,512,381 1,371,392 Investment expenses (95,823) (85,696) --------------- ---------- Net investment income $ 1,416,558 1,285,696 =============== ==========
9 10 Bonds with an estimated fair value of $1,876,502 at June 30, 1998 and $1,878,081 at December 31, 1997 were on deposit with the Missouri Department of Insurance. The net changes in unrealized investment gains (losses) are as follows:
June 30, June 30, 1998 1997 --------- --------- Net unrealized investment gains (losses) $193,624 (160,390) Federal income tax (expense) benefit at 34% (65,831) 54,532 --------- --------- Net unrealized investment gains (losses) $127,793 (105,858) ========= =========
(3) RESERVE FOR LOSSES AND LOSS ADJUSTMENT EXPENSES AND REINSURANCE A summary of the reserves for losses and loss adjustment expenses follows:
June 30, December 31, 1998 1997 ---- ---- Undiscounted reserves for losses and loss adjustment expenses $31,266,540 31,990,412 Less discount (714,555) (960,000) ----------- ---------- Discounted reserves for losses and loss adjustment expenses $30,551,985 31,030,412 =========== ==========
Following is the activity in the reserves for losses and loss adjustment expenses:
June 30, June 30, 1998 1997 ---- ---- Balance at January 1 $ 31,030,412 32,887,407 Less reinsurance recoverable on reserves for losses and loss adjustment expenses (9,950,512) (7,099,463) ------------ ------------- 21,079,900 25,787,944 ------------ ------------- Incurred related to: Current year 3,920,931 2,373,847 Prior Year 315,208 172,672 ------------ ------------- Total incurred 4,236,139 2,546,519 ------------ ------------- Paid related to: Current year 117,909 375,041 Prior Year 2,999,641 3,389,402 ------------ ------------- Total paid 3,117,550 3,764,443 ------------ ------------- Net balance at June 30 22,198,489 24,570,020 Plus reinsurance recoverable on reserves for losses and loss adjustment expenses 8,353,496 7,474,077 ------------ ------------- Balance at June 30 $ 30,551,985 32,044,097 ============ =============
10 11 The reserves for losses and loss adjustment expenses are estimated based on development information available at each reporting date. As a result of the nature of the risks underwritten, claims development may occur over an extended period of time. The changes in the incurred amounts disclosed above related to prior years are the result of utilizing improved claim development information as that information becomes available. Reserves were discounted by 2% in the financial statements for the period ended December 31, 1997. The discount will be 1% in the period ending December 31, 1998 and this change is reflected ratably over the four quarters of the year. As directed by the Missouri Department of Insurance, the discount will be completely eliminated after December 31, 1998. Premiums and losses related to reinsurance amounts for the six months ended June 30, 1998 and 1997 are summarized as follows:
June 30, June 30, 1998 1997 ------------ ----------- Ceded premiums written $ 1,386,231 1,106,244 ============ =========== Ceded premiums earned $ 1,440,341 1,111,678 ============ =========== Ceded losses and loss adjustment expenses $ 632,938 374,614 ============ ===========
(4) FEDERAL INCOME TAXES The Company files a consolidated federal income tax return. Income tax expense (benefit) varies from the amount which would be provided by applying the federal income tax rates to income (loss) before income taxes. The following reconciles the expected provision for income tax expense (benefit) using the federal statutory tax rate of 34% to the provision for income tax expense (benefit) reported herein for the six months ended June 30, 1998 and 1997:
June 30, June 30, 1998 1997 ------------ ---------- Expected tax benefit using statutory rates $(227,597) (84,375) Other, net (9,994) (11,684) ------------ ---------- Income tax benefit $(237,591) (96,059) ============ ========== Income taxes consist of the following at June 30: June 30, June 30, 1998 1997 ------------ ---------- Current expense $ - - Deferred benefit (237,591) (96,059) --------- ------- Income tax benefit $(237,591) (96,059) ========= =======
11 12 Deferred income taxes arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. The sources of these differences and the tax effect of each are as follows:
June 30, June 30, 1998 1997 ---------- --------- Losses and loss adjustment expenses incurred for financial reporting purposes but not deductible for tax purposes $ (245,175) 24,924 Unearned premiums not deductible for tax purposes (40,222) (55,028) Deferred compensation - (102,642) Deferred retirement benefit (11,667) - Net operating loss carryforward 52,905 31,623 Other, net 6,568 5,064 ---------- ------- Deferred tax benefit $ (237,591) (96,059) ========== =======
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at June 30, 1998 and December 31, 1997 are presented below:
June 30, December 31, 1998 1997 ------------ ------------ Deferred tax assets: Discounted unpaid loss reserves $1,325,224 1,080,048 Discounted unearned premium reserves 539,379 499,158 Deferred compensation 191,042 191,042 Deferred retirement benefit 212,913 201,246 Deferred commissions payable 46,198 47,465 Net operating loss carryforward 1,062,516 1,115,423 ------------ ------------ Total gross deferred tax assets 3,377,272 3,134,382 Less valuation allowance (390,400) (390,400) ------------ ------------ Net deferred tax assets 2,986,872 2,743,982 Deferred tax liabilities: Investments adjusted to market value (431,127) (365,295) Deferred acquistion costs (67,605) (62,306) Other (12,294) (12,294) ------------ ------------ Total gross deferred tax liabilities (511,026) (439,895) ------------ ------------ Net deferred tax asset $2,475,846 2,304,087 ============ ============
The valuation allowance for deferred tax assets at June 30, 1998 was $390,400. Based on the Company's historical earnings, future expectations of adjusted taxable income, its ability to change its investment strategy, as well as reversing gross deferred tax liabilities, management believes it is more likely than not that the Company will fully realize the gross deferred tax assets less the valuation allowance. However, there can be no assurances that the Company will generate the necessary adjusted taxable income in any future period. 12 13 (5) STATUTORY ACCOUNTING Intermed and its subsidiary Interlex are domiciled in Missouri and prepare their statutory-basis financial statements in accordance with accounting practices prescribed or permitted by the Missouri Department of Insurance. "Prescribed" statutory accounting practices include state laws, regulations and general administrative rules, as well as a variety of publications of the NAIC. "Permitted" statutory accounting practices encompass all accounting practices that are not prescribed; such practices may differ from state to state, may differ from company to company within a state, and may change in the future. Intermed and its subsidiary Interlex have no significant permitted accounting practices that vary from prescribed accounting practices, except for discounting of loss reserves. Reconciliations of statutory net (loss) income, as determined using statutory accounting principles, to the amounts included in the accompanying consolidated financial statements for the six months ended June 30, 1998 and 1997 are as follows:
June 30, June 30, 1998 1997 --------- -------- Net (loss) income of insurance subsidiaries $(601,638) 76,382 Increase (decrease): Deferred policy acquisition costs 15,586 26,383 Deferred income taxes 237,591 96,059 Deferred compensation - (301,887) Deferred retirement benefit (34,313) - Other adjustments, net (49,039) (49,042) --------- -------- Net loss as reported herein $(431,813) (152,105) ========= ========
Reconciliations of statutory capital and surplus, as determined using statutory accounting principles, to stockholders' equity included in the accompanying consolidated financial statements at June 30, 1998 and December 31, 1997 are as follows:
June 30, December 31, 1998 1997 ----------- ----------- Statutory capital and surplus of insurance companies $23,107,346 23,691,554 Stockholder's equity of noninsurance subsidiaries 500 500 ----------- ---------- Combined capital and surplus 23,107,846 23,692,054 Increase (decrease) Deferred policy acquisition costs 198,839 183,253 Deferred income taxes 2,475,846 2,304,087 Net unrealized gain (loss) on investments 1,253,987 1,067,627 booked at market Deferred compensation (561,887) (561,887) Accrued retirement (626,214) (591,901) Non-admitted assets and other adjustments, net 697,128 747,976 Consolidating eliminations and adjustments (5,870,006) (5,861,650) ----------- ---------- Stockholders' equity as reported herein $20,675,539 20,979,559 =========== ==========
13 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis addresses the Company's financial condition at June 30, 1998 and results of operations for the three and six months ended June 30, 1998 and 1997. RESULTS OF OPERATIONS-THREE MONTHS ENDED JUNE 30, 1998 AND 1997 Direct premiums written in the three months ended June 30, 1998 were $3.0 million, an increase of $527,300 or 21% over the prior year period. Results by line of business were: THREE MONTHS ENDED JUNE 30 --------------------------
1998 1997 CHANGE ---------- --------- ------ Medical $2,746,200 2,280,000 +20.4% Legal 292,500 231,500 +26.3% ---------- --------- ------ Total $3,038,700 2,511,500 +21.0%
Salaried marketing representatives produced approximately 56% of medical malpractice premiums written and approximately 91% of legal malpractice premiums written in the 1998 period. The remainder was written by brokers. Medical malpractice premiums written in the State of Texas through affiliated purchasing groups during the three months ended June 30, 1998 totaled $1,016,800 compared to $582,500 in the same period of 1997. Such premiums represented 37% of all medical premiums written in the 1998 period compared to 26% in the prior year period. Premiums ceded to reinsurers in the three months ended June 30, 1998 were $701,000 compared to $459,000 in the prior year period. The increase was primarily due to an increase in losses ceded under the Company's primary excess of loss treaty for medical malpractice insurance which resulted in a corresponding increase in the cost of reinsurance. Net premiums written in the three months ended June 30, 1998 were $2.3 million, an increase of $285,600 or approximately 14% over the prior year period. There was an increase of $419,800 in the unearned premium reserve (UPR) during the current period compared to $668,200 in the three months ended June 30, 1997. The change was primarily due to an increase of $358,400 in the death, disability and retirement component (DD&R) of the UPR in the three months ended June 30, 1997 compared to an increase of $45,540 in the same period of 1998. Net premiums earned in the 1998 period were $1.9 million, an increase of $534,000 or 38.6% over the prior year primarily due to (a) the increase in premiums written and (b) the smaller increase in the UPR. 14 15 Net investment income in the three month period ended June 30, 1998 was $708,400 compared to $644,400 in the prior year period. The increase was attributable to the Company's portfolio being more fully-invested in higher-yielding long-term bonds during the 1998 period. Losses and loss adjustment expenses totaled $2.4 million in the three months ended June 30, 1998, an increase of $1.4 million or approximately 147.3% over the prior year period. The calendar year loss ratio for the 1998 period was 123% compared to approximately 69% in the prior year period. An increase in the severity of losses experienced in the 1998 period was the primary reason for the unfavorable results. Expected direct loss ratios of 90% for medical and 82.5% for legal were utilized for the 1998 accident year. General and administrative expenses were $782,200 in the three months ended June 30, 1998, a decrease of $44,900 or 5.4% over the prior year period. The expense ratio in the 1998 period was 25.7% compared to approximately 33% in the three months ended June 30, 1997. The improvement was primarily due to the 21% increase in premiums written in the 1998 period. There was a loss before income taxes of $507,000 in the three months ended June 30, 1998 compared to income before income taxes of $250,600 in the prior year period. Unfavorable loss experience in the 1998 period was the primary reason for the change. As a result of the foregoing, the Company reported a net loss of $330,600 in the 1998 period compared to net income of $173,300 in the comparable period of 1997. There was an income tax benefit of $176,400 in the 1998 period compared to an income tax expense of $77,400 in the prior year period. RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1998 AND 1997 Premiums written in the six months ended June 30, 1998 were $5.7 million, an increase of $965,300 or 20.5% over the prior year period. Results by line of business were: SIX MONTHS ENDED JUNE 30 ------------------------
1998 1997 CHANGE ---- ---- ------ Medical $5,005,800 4,154,500 +20.5% Legal 668,400 554,400 +20.6% ---------- --------- ------ Total $5,674,200 4,708,900 +20.5%
Salaried marketing representatives produced approximately 55% of medical malpractice and 90% of legal malpractice premiums written in the 1998 period. The remainder was written by brokers. The State of Texas represents an important new market for Intermed Insurance Co., the Company's medical malpractice subsidiary. Premiums written in Texas through affiliated purchasing groups, were 32% of medical premiums written in the six months ended June 30, 1998 compared 15 16 to 26% in the prior year period. Approximately 92% of legal premiums are written in the State of Missouri and 8% in Kansas. Premiums ceded to reinsurers totaled $1.4 million in the six months ended June 30, 1998, an increase of $280,000 or approximately 25.3%. The increase was due to an increase in losses ceded under the Company's primary excess of loss treaty covering medical malpractice insurance which resulted in a corresponding increase in the cost of reinsurance. Net premiums written in the 1998 period were $4.3 million, an increase of $685,300 or 19% over the six months ended June 30, 1997. There was an increase of $584,500 in the UPR in the six months ended June 30, 1998 compared to an increase of $811,500 in the comparable period of 1997. This change was primarily due to an increase of $358,400 in the DD&R component of the UPR in the six months ended June 30, 1997 compared to an increase of $185,600 in the comparable period of 1998. Net premiums earned in the six months of 1998 were $3.7 million, an increase of $912,300 or 32.7% over the prior year period. Net investment income of $1.4 million in the first half of 1998 was $130,900 or approximately 10% higher than in the 1997 period. The improvement was attributable to the fact that the Company's portfolio was more fully-invested long-term in the 1998 period. Losses and loss adjustment expenses totaled approximately $4.2 million in the six months ended June 30, 1998, an increase of approximately $1.7 million over the same period in 1997. The calendar year loss ratio in the 1998 period was 114% compared to 91% in the six months ended June 30, 1997. An increase in the severity of lossess experienced was the primary reason for the unfavorable experience in 1998. Expected loss ratios of 90% for medical and 82.5% for legal were utilized for the 1998 accident year. General and administrative expenses were $1.6 million in the six months ended June 30, 1998 compared to $1.8 million in the comparable period in 1997. The expense ratio in the 1998 period was 27.3% compared to 37.8% in the six months ended June 30, 1997. The improvement was primarily due to the significant increase in premiums written in the 1998 period. As a result of the foregoing, the Company reported a loss before income taxes of $669,400 in the first half of 1998 compared to a loss before income taxes of $248,200 in the prior year period. The net loss in the six months ended June 30, 1998 was $431,800 compared to a net loss of $152,100 in the six months ended June 30, 1997. There were income tax benefits of $237,600 in the 1998 period and $96,100 in the prior year period. 16 17 FINANCIAL CONDITION ASSETS: Total assets declined from $65.7 million at December 31, 1997 to $65.3 million at June 30, 1998, a decrease of $443,300 or less than 1%. Invested assets increased from $43.7 million to $46.9 million in the same period. Two agency bonds with par values of $2.5 million and $3.0 million were purchased in May with yields-to-maturity of 6.48% and 6.32%. There was an unrealized gain of $1.3 million in the portfolio at June 30, 1998 compared to $1.1 million at the prior year end. Yield-to-maturity of the investment portfolio at June 30, 1998 was 6.71%. Cash balances decreased from $3.8 million at December 31, 1997 to $1.1 million at June 30, 1998 primarily due to the purchase of long-term bonds with a combined par value of $5.5 million. Cash balances are invested overnight at current yields ranging from 4.48% to 5.24%. The reinsurance recoverable account decreased from $10.4 million at December 31, 1997 to $8.9 million at June 30, 1998 due to recoveries from reinsurers of $2.1 million in the six month period. LIABILITIES: Total liabilities were $44.7 million at the end of 1997 and $44.6 million at the end of the current reporting period. Reserves for losses and loss adjustment expenses decreased from $31.0 million at December 31, 1997 to $30.6 million at June 30, 1998. Changes in reserves are discussed more fully under RESULTS OF OPERATIONS. The unearned premium reserve increased from $7.7 million at December 31, 1997 to $8.2 million at June 30, 1998. Reasons for the increase are discussed more fully under RESULTS OF OPERATIONS. EQUITY: There were no changes in the capital structure of the Company in the six months ended June 30, 1998. The accumulated deficit increased from $1.7 million at December 31, 1997 to $2.1 million at the end of the current reporting period due to the net loss of $431,800 during the six months ended June 30, 1998. Accumulated other comprehensive income increased from $709,100 at the prior year end to $836,900 at June 30, 1998 due to an increase in the market value of investments in the current period. Stockholders' equity at June 30, 1998 was $20.7 million, a decrease of $304,000 during the six month period. Equity per share was $10.34 ($9.48 fully diluted). 17 18 LIQUIDITY AND CAPITAL RESOURCES Cash provided by operating activities was $342,100 in the six months ended June 30, 1998 compared to cash of $1.2 million used in operations in the same period of 1997. The $1.5 million improvement in cash flow was attributable to the following factors: $1,050,100 increase in premiums received 395,100 reduction in payments to reinsurer 2,093,700 increase in recoveries from reinsurers 122,300 increase in interest received (128,400) increase in general and administrative expenses paid (1,681,300) increase in loss and loss adjustment expenses paid (335,100) no FIT recovery in 1998 period ----------- $1,516,400 improvement in cash flow from operations
As a result of cash position of $1.1 million at June 30, 1998 and short-term investments of $6.2 million, the Company anticipates that no bonds will have to be liquidated in the final six months of the year in order to meet unexpected cash calls. PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: See Exhibit Index (b) Reports on Form 8-K: None 18 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE TENERE GROUP, INC. (Registrant) August 12, 1998 /s/ J D Williams - --------------- ------------------------------- Date Joseph D. Williams, CPA Vice President - Finance Chief Financial Officer and Principal Accounting Officer 19 20 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ------- -------------------- 3.1 Articles of Incorporation of the Registrant, filed as Exhibit 3.1 to the Registrant's Registration Statement on Forms S-1 (Reg. No. 33-78702) is incorporated herein by this reference. 3.2 Bylaws of the Registrant, filed as Exhibit 3.2 to the Registrant's Registration Statement on Form S-1 (Reg. No. 33-78702) is incorporated herein by this reference. 4.1 Form of common stock certificate, filed as Exhibit 4.1 to the Registrant's Registration Statement on Form S-1 (Reg. No. 33-78702) is incorporated herein by this reference. 10.1 Management Contract, dated July 8, 1994, by and between RCA Mutual Insurance Company, Interlex Insurance Co. and Insurance Services, Inc., filed as Exhibit 10.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995, is incorporated herein by reference. 10.2 Lease Agreement, dated December 7, 1994, by and between Georgetown Square II, Ltd. and Insurance Services, Inc., filed as Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1995, is incorporated herein by reference. 10.3 Medical Practitioners' Liability Primary Excess of Loss Reinsurance Contract, dated October 1, 1993, by and between RCA Mutual Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1995, is incorporated herein by reference. 10.4 Addendum No. 1 to Medical Practitioners' Liability Primary Excess of Loss Reinsurance Contract, dated February 1, 1995, by and between RCA Mutual Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1995, is incorporated herein by reference. 10.5 Addendum No. 2 to Medical Practitioners' Liability Primary Excess of Loss Reinsurance Contract, effective April 27, 1995, by and between RCA Mutual Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1995, is incorporated herein by reference. 10.6 Reinsurance Cover Note: 95/1146/RM to Medical Practitioners' Liability Primary Excess of Loss Reinsurance Contract, dated October 16, 1995, by and between RCA Mutual Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.6 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1995, is incorporated herein by reference. 10.7 Reinsurance Cover Note: 95/1212/RM(A) to Catastrophe "Awards Made" Excess of Loss Reinsurance Contract, dated October 16, 1995, by and between RCA Mutual Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.7 to the Registrant's Quarterly Report on Form 10-Q 20 21 for the nine months ended September 30, 1995, is incorporated herein by reference. 10.8 Catastrophe "Awards Made" Excess of Loss Reinsurance Contract, commencing February 1, 1995, by and between RCA Mutual Insurance Company and Certain Reinsurers of Lloyd's of London including Amendment No. 1, effective April 27, 1995, filed as Exhibit 10.8 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1995, is incorporated herein by reference. 10.9 Reinsurance Cover Note: 95/1249/IP to Lawyers' Professional Liability Primary Excess of Loss Reinsurance Treaty, dated October 16, 1995, by and between Interlex Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.9 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1995, is incorporated herein by reference. 10.10 Lawyers' Professional Liability Primary Excess of Loss Reinsurance Contract, commencing July 1, 1995, by and between Interlex Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.10 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1995, is incorporated herein by reference. 10.11 Reinsurance Cover Note: 95/1250/IP to Prior Agreement Excess of Loss Reinsurance Contract, dated October 16, 1996, by and between Interlex Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.11 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1995, is incorporated herein by reference. Registrant's Quarterly Report on Form 10-Q for the three months March 31, 1996, is incorporated herein by reference. 10.12 Prior Agreement Excess of Loss Reinsurance Contract, commencing July 1, 1996, by and between Interlex Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.12 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1995, is incorporated herein by reference. 10.13 Draft Reinsurance Slip by and between Intermed Insurance Company and American Re-Insurance Company filed as Exhibit 10.13 to the Registrant's Quarterly Report on Form 10-Q for the three months March 31, 1996, is incorporated herein by reference. 10.14 Employment Agreement dated May 6, 1996 between The Tenere Group, Inc. and Raymond A. Christy, M.D., President and Chief Executive Officer, filed as Exhibit 10.14 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1996, is incorporated herein by reference. 10.15 Employment Agreement dated May 6, 1996 between The Tenere Group, Inc. and Andrew K. Bennett, Vice President-Claims and General Counsel, filed as Exhibit 10.15 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1996, is incorporated herein by reference. 10.16 Employment Agreement dated May 6, 1996 between The Tenere Group, Inc. and Andrew C. Fischer, Vice President-Underwriting and Policy Services, filed as Exhibit 10.16 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1996, is incorporated herein by reference. 21 22 10.17 Employment Agreement dated May 6, 1996 between The Tenere Group, Inc. and Clifton R. Stepp, Vice President-Marketing, filed as Exhibit 10.17 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1996, is incorporated herein by reference. 10.18 Employment Agreement dated May 6, 1996 between The Tenere Group, Inc. and Joseph D. Williams, Vice President-Finance, Chief Financial Officer and Assistant Treasurer filed, as Exhibit 10.18 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1996, is incorporated herein by reference. 10.19 The Tenere Group, Inc. Retirement Plan for Directors effective May 17, 1996, filed as Exhibit 10.19 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1996, is incorporated herein by reference. 10.20 The Tenere Group, Inc. 1996 Long Term Incentive Plan effective April 17, 1996, filed as Annex A to the Registrant's definitive proxy statements for the 1996 Annual Meeting of Shareholders, is incorporated herein by reference. 10.21 Amendment No. 1 to Employment Agreement, dated February 28, 1997, between The Tenere Group, Inc. and Raymond A. Christy, M.D., President and Chief Executive Officer, filed as Exhibit 10.21 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1996, is incorporated herein by reference. 10.22 Amendment No. 1 to Employment Agreement, dated February 28, 1997, between The Tenere Group, Inc. and Andrew K. Bennett, Vice President-Claims and General Counsel, filed as Exhibit 10.22 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1996, is incorporated herein by reference. 10.23 Amendment No. 1 to Employment Agreement, dated February 28, 1997, between The Tenere Group, Inc. and Andrew C. Fischer, Vice President - Underwriting and Policy Services, filed as Exhibit 10.23 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1996, is incorporated herein by reference. 10.24 Amendment No. 1 to Employment Agreement dated February 28, 1997, between The Tenere Group, Inc. and Clifton R. Stepp, Vice President-Marketing, filed as Exhibit 10.24 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1996, is incorporated herein by reference. 10.25 Amendment No. 1 to Employment Agreement dated February 28, 1997, between The Tenere Group, Inc. and Joseph D. Williams, Vice President-Finance, Chief Financial Officer and Assistant Treasurer, filed as Exhibit 10.25 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1996, is incorporated herein by reference. 10.26 Reinsurance Cover Note: 96/1212/RM to Catastrophe "Awards Made" Excess of Loss Reinsurance Contract, effective October 1, 1996, by and between Intermed Insurance Company and/or Interlex Insurance Company and certain Reinsurers of Lloyd's of London, filed as Exhibit 10.26 to the Registrant's 22 23 Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.27 Addendum No. 2 to Catastrophe "Awards Made" Excess of Loss Reinsurance Contract, effective October 1, 1996, by and between Intermed Insurance Company and/or Interlex Insurance Company and certain Reinsurers of Lloyd's of London, filed as Exhibit 10.27 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.28 Reinsurance Cover Note: 97/1212/RM to Catastrophe "Awards Made" Excess of Loss Reinsurance Contract, effective October 1, 1997, by and between Intermed Insurance Company and/or Interlex Insurance Company and certain Reinsurers of Lloyd's of London, filed as Exhibit 10.28 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.29 Addendum No. 3 to Catastrophe "Awards Made" Excess of Loss Reinsurance Contract, effective October 1, 1997, by and between Intermed Insurance Company and/or Interlex Insurance Company and certain Reinsurers of Lloyd's of London, filed as Exhibit 10.29 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.30 Reinsurance Cover Note: 94/1146/RM to Medical Practitioners' Liability Primary Excess of Loss Reinsurance Contract, effective October 1, 1994, by and between Intermed Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.30 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.31 Medical Practitioners' Liability Primary Excess of Loss Reinsurance Contract, effective October 1, 1996, by and between Intermed Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.31 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.32 Addendum No. 1 to Medical Practitioners' Liability Combined Reinsurance Contract (formerly the Primary Excess of Loss Reinsurance Contract), effective October 1, 1996, by and between Intermed Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.32 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.33 Addendum No. 2 to Medical Practitioners' Liability Combined Reinsurance Contract (formerly the Primary Excess of Loss Reinsurance Contract), effective October 1, 1997, by and between Intermed Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.33 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.34 Reinsurance Cover Note: 97/1146/RM to Medical Practitioners' Liability Combined Reinsurance Contract (formerly the Primary Excess of Loss Reinsurance Contract), effective October 1, 1997, by and between Intermed Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.34 to the Registrant's Annual Report on Form 10-K for the year ended De- 23 24 cember 31, 1997, is incorporated herein by reference. 10.35 Lawyers' Professional Liability Primary Excess of Loss Reinsurance Contract, effective October 1, 1996, by and between Interlex Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.35 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.36 Lawyers' Professional Liability Primary Excess of Loss Reinsurance Contract, effective October 1, 1997, by and between Interlex Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.36 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.37 Lawyers' Professional Liability Prior Agreement Excess Reinsurance Contract, effective October 1, 1996, by and between Interlex Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.37 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.38 Lawyers' Professional Liability Prior Agreement Excess Reinsurance Contract, effective October 1, 1997, by and between Interlex Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.38 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.39 Employment Agreement dated May 7, 1998 between The Tenere Group, Inc. and Raymond A. Christy, M.D., President and Chief Executive Officer. 10.40 Employment Agreement dated May 7, 1998 between The Tenere Group, Inc. and Andrew K. Bennett, Vice President-Claims and General Counsel. 10.41 Employment Agreement dated May 7, 1998 between The Tenere Group, Inc. and Andrew C. Fischer, Vice President-Underwriting and Policy Services. 10.42 Employment Agreement dated May 7, 1998 between The Tenere Group, Inc. and Clifton R. Stepp, Vice President-Marketing. 10.43 Employment Agreement dated May 7, 1998 between The Tenere Group, Inc. and Joseph D. Williams, Vice President-Finance, Chief Financial Officer and Assistant Treasurer. 27 Financial Data Schedules 24 EX-10.39 2 AMENDMENT #2 TO EMPLOYMENT AGREEMENT 1 EXHIBIT 10.39 THE TENERE GROUP, INC. AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT This Amendment No. 2 to Employment Agreement ("Amendment") has been entered into as of this 7th day of May, 1998, by and between The Tenere Group, Inc., a Missouri corporation ("Company"), and Raymond A. Christy, M.D., an individual ("Executive"). RECITALS WHEREAS, the Company and the Executive are parties to that certain Employment Agreement, dated as of May 6, 1996 (the "Agreement"); and WHEREAS, the Company and the Executive wish to amend the terms of the Agreement, and any Amendments thereto, to extend the initial Employment Period under the Agreement from May 6, 2000 to May 6, 2001: NOW, THEREFORE, in consideration of the premises, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. AMENDMENT OF SECTION 1.1(g). Section 1.1(g) of the Agreement is hereby deleted in its entirety and replaced with the following: 1.1(g) "EMPLOYMENT PERIOD" means the period beginning on the Effective Date and ending on the later of (i) May 6, 2001, or (ii) May 6 of any succeeding fiscal year during which notice is given by either party (as described in Section 1.1(j)) of such party's intent not to renew this Agreement. 2. AMENDMENT OF SECTION 1.1 (j). Section 1.1(j) of the Agreement is hereby deleted in its entirety and replaced with the following: 1.1(j) "TERM" means the period that begins on the Effective Date and ends on the earlier of: (i) the Date of Termination as defined in Section 3.6, or (ii) the close of business on the later of May 6, 2001 or May 6 of any renewed term as set forth in Section 2.1 of this Agreement. 3. EFFECTIVENESS; LIMITED EFFECT. The amendments contained in Sections 1 and 2 hereof shall be effective as of the date of the execution of this Amendment by the Company and the Executive. Except as amended hereby, terms and conditions of the 2 Agreement shall continue in full force and effect and shall be interpreted in light of the amendments contained herein. IN WITNESS WHEREOF, the Executive and the Company, pursuant to the authorization from its Board of Directors, have caused this Amendment to be executed in its name and on its behalf, all as of the day and year first above written. EXECUTIVE /s/ Raymond A. Christy --------------------------- Raymond A. Christy, M.D. THE TENERE GROUP, INC. By: /s/ Andrew K. Bennett ----------------------- Name: Andrew K. Bennett ---------------------- Title: General Counsel --------------------- ATTEST: /s/ Michael D. Hoeman, M.D. --------------------------- Michael D. Hoeman, M.D. Secretary EX-10.40 3 AMENDMENT #2 TO EMPLOYMENT AGREEMENT 1 EXHIBIT 10.40 THE TENERE GROUP, INC. AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT This Amendment No. 2 to Employment Agreement ("Amendment") has been entered into as of this 7th day of May, 1998, by and between The Tenere Group, Inc., a Missouri corporation ("Company"), and Andrew K. Bennett, an individual ("Executive"). RECITALS WHEREAS, the Company and the Executive are parties to that certain Employment Agreement, dated as of May 6, 1996 (the "Agreement"); and WHEREAS, the Company and the Executive wish to amend the terms of the Agreement, and any Amendments thereto, to extend the initial Employment Period under the Agreement from May 6, 2000 to May 6, 2001: NOW, THEREFORE, in consideration of the premises, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. AMENDMENT OF SECTION 1.1(g). Section 1.1(g) of the Agreement is hereby deleted in its entirety and replaced with the following: 1.1(g) "EMPLOYMENT PERIOD" means the period beginning on the Effective Date and ending on the later of (i) May 6, 2001, or (ii) May 6 of any succeeding fiscal year during which notice is given by either party (as described in Section 1.1(j)) of such party's intent not to renew this Agreement. 2. AMENDMENT OF SECTION 1.1 (j). Section 1.1(j) of the Agreement is hereby deleted in its entirety and replaced with the following: 1.1(j) "TERM" means the period that begins on the Effective Date and ends on the earlier of: (i) the Date of Termination as defined in Section 3.6, or (ii) the close of business on the later of May 6, 2001 or May 6 of any renewed term as set forth in Section 2.1 of this Agreement. 3. EFFECTIVENESS; LIMITED EFFECT. The amendments contained in Sections 1 and 2 hereof shall be effective as of the date of the execution of this Amendment by the Company and the Executive. Except as amended hereby, terms and conditions of the 2 Agreement shall continue in full force and effect and shall be interpreted in light of the amendments contained herein. IN WITNESS WHEREOF, the Executive and the Company, pursuant to the authorization from its Board of Directors, have caused this Amendment to be executed in its name and on its behalf, all as of the day and year first above written. EXECUTIVE /s/ Andrew K. Bennett ----------------------------- Andrew K. Bennett THE TENERE GROUP, INC. By: /s/ Raymond A. Christy ------------------------- Name: Raymond A. Christy ----------------------- Title: President/CEO ---------------------- ATTEST: /s/ Michael D. Hoeman, M.D. --------------------------- Michael D. Hoeman, M.D. Secretary EX-10.41 4 AMENDMENT #2 TO EMPLOYMENT AGREEMENT 1 EXHIBIT 10.41 THE TENERE GROUP, INC. AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT This Amendment No. 2 to Employment Agreement ("Amendment") has been entered into as of this 7th day of May, 1998, by and between The Tenere Group, Inc., a Missouri corporation ("Company"), and Andrew C. Fischer, an individual ("Executive"). RECITALS WHEREAS, the Company and the Executive are parties to that certain Employment Agreement, dated as of May 6, 1996 (the "Agreement"); and WHEREAS, the Company and the Executive wish to amend the terms of the Agreement, and any Amendments thereto, to extend the initial Employment Period under the Agreement from May 6, 2000 to May 6, 2001: NOW, THEREFORE, in consideration of the premises, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. AMENDMENT OF SECTION 1.1(g). Section 1.1(g) of the Agreement is hereby deleted in its entirety and replaced with the following: 1.1(g) "EMPLOYMENT PERIOD" means the period beginning on the Effective Date and ending on the later of (i) May 6, 2001, or (ii) May 6 of any succeeding fiscal year during which notice is given by either party (as described in Section 1.1(j)) of such party's intent not to renew this Agreement. 2. AMENDMENT OF SECTION 1.1 (j). Section 1.1(j) of the Agreement is hereby deleted in its entirety and replaced with the following: 1.1(j) "TERM" means the period that begins on the Effective Date and ends on the earlier of: (i) the Date of Termination as defined in Section 3.6, or (ii) the close of business on the later of May 6, 2001 or May 6 of any renewed term as set forth in Section 2.1 of this Agreement. 3. EFFECTIVENESS; LIMITED EFFECT. The amendments contained in Sections 1 and 2 hereof shall be effective as of the date of the execution of this Amendment by the Company and the Executive. Except as amended hereby, terms and conditions of the 2 Agreement shall continue in full force and effect and shall be interpreted in light of the amendments contained herein. IN WITNESS WHEREOF, the Executive and the Company, pursuant to the authorization from its Board of Directors, have caused this Amendment to be executed in its name and on its behalf, all as of the day and year first above written. EXECUTIVE /s/ Andrew C. Fischer ------------------------- Andrew C. Fischer THE TENERE GROUP, INC. By: /s/ Raymond A. Christy ------------------------- Name: Raymond A. Christy ----------------------- Title: President/CEO ---------------------- ATTEST: /s/ Michael D. Hoeman, M.D. --------------------------- Michael D. Hoeman, M.D. Secretary EX-10.42 5 AMENDMENT #2 TO EMPLOYMENT AGREEMENT 1 EXHIBIT 10.42 THE TENERE GROUP, INC. AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT This Amendment No. 2 to Employment Agreement ("Amendment") has been entered into as of this 7th day of May, 1998, by and between The Tenere Group, Inc., a Missouri corporation ("Company"), and Clifton R. Stepp, an individual ("Executive"). RECITALS WHEREAS, the Company and the Executive are parties to that certain Employment Agreement, dated as of May 6, 1996 (the "Agreement"); and WHEREAS, the Company and the Executive wish to amend the terms of the Agreement, and any Amendments thereto, to extend the initial Employment Period under the Agreement from May 6, 2000 to May 6, 2001: NOW, THEREFORE, in consideration of the premises, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. AMENDMENT OF SECTION 1.1(g). Section 1.1(g) of the Agreement is hereby deleted in its entirety and replaced with the following: 1.1(g) "EMPLOYMENT PERIOD" means the period beginning on the Effective Date and ending on the later of (i) May 6, 2001, or (ii) May 6 of any succeeding fiscal year during which notice is given by either party (as described in Section 1.1(j)) of such party's intent not to renew this Agreement. 2. AMENDMENT OF SECTION 1.1 (j). Section 1.1(j) of the Agreement is hereby deleted in its entirety and replaced with the following: 1.1(j) "TERM" means the period that begins on the Effective Date and ends on the earlier of: (i) the Date of Termination as defined in Section 3.6, or (ii) the close of business on the later of May 6, 2001 or May 6 of any renewed term as set forth in Section 2.1 of this Agreement. 3. EFFECTIVENESS; LIMITED EFFECT. The amendments contained in Sections 1 and 2 hereof shall be effective as of the date of the execution of this Amendment by the Company and the Executive. Except as amended hereby, terms and conditions of the 2 Agreement shall continue in full force and effect and shall be interpreted in light of the amendments contained herein. IN WITNESS WHEREOF, the Executive and the Company, pursuant to the authorization from its Board of Directors, have caused this Amendment to be executed in its name and on its behalf, all as of the day and year first above written. EXECUTIVE /s/ Clifton R. Stepp ------------------------- Clifton R. Stepp THE TENERE GROUP, INC. By: /s/ Raymond A. Christy ------------------------- Name: Raymond A. Christy ----------------------- Title: President/CEO ---------------------- ATTEST: /s/ Michael D. Hoeman, M.D. --------------------------- Michael D. Hoeman, M.D. Secretary EX-10.43 6 AMENDMENT #2 TO EMPLOYMENT AGREEMENT 1 EXHIBIT 10.43 THE TENERE GROUP, INC. AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT This Amendment No. 2 to Employment Agreement ("Amendment") has been entered into as of this 7th day of May, 1998, by and between The Tenere Group, Inc., a Missouri corporation ("Company"), and Joseph D. Williams, an individual ("Executive"). RECITALS WHEREAS, the Company and the Executive are parties to that certain Employment Agreement, dated as of May 6, 1996 (the "Agreement"); and WHEREAS, the Company and the Executive wish to amend the terms of the Agreement, and any Amendments thereto, to extend the initial Employment Period under the Agreement from May 6, 2000 to May 6, 2001: NOW, THEREFORE, in consideration of the premises, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. AMENDMENT OF SECTION 1.1(g). Section 1.1(g) of the Agreement is hereby deleted in its entirety and replaced with the following: 1.1(g) "EMPLOYMENT PERIOD" means the period beginning on the Effective Date and ending on the later of (i) May 6, 2001, or (ii) May 6 of any succeeding fiscal year during which notice is given by either party (as described in Section 1.1(j)) of such party's intent not to renew this Agreement. 2. AMENDMENT OF SECTION 1.1 (j). Section 1.1(j) of the Agreement is hereby deleted in its entirety and replaced with the following: 1.1(j) "TERM" means the period that begins on the Effective Date and ends on the earlier of: (i) the Date of Termination as defined in Section 3.6, or (ii) the close of business on the later of May 6, 2001 or May 6 of any renewed term as set forth in Section 2.1 of this Agreement. 3. EFFECTIVENESS; LIMITED EFFECT. The amendments contained in Sections 1 and 2 hereof shall be effective as of the date of the execution of this Amendment by the Company and the Executive. Except as amended hereby, terms and conditions of the 2 Agreement shall continue in full force and effect and shall be interpreted in light of the amendments contained herein. IN WITNESS WHEREOF, the Executive and the Company, pursuant to the authorization from its Board of Directors, have caused this Amendment to be executed in its name and on its behalf, all as of the day and year first above written. EXECUTIVE /s/ Joseph D. Williams ----------------------------- Joseph D. Williams THE TENERE GROUP, INC. By: /s/ Raymond A. Christy ------------------------- Name: Raymond A. Christy ----------------------- Title: President/CEO ---------------------- ATTEST: /s/ Michael D. Hoeman, M.D. --------------------------- Michael D. Hoeman, M.D. Secretary EX-27 7 FDS
7 3-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 40,674,750 0 0 14,319 0 0 6,222,485 1,078,597 598,924 198,839 65,282,308 30,551,985 8,247,662 0 0 0 0 0 19,998 20,655,541 65,282,308 3,703,504 1,416,558 (2,204) 0 4,236,139 0 1,551,123 (669,404) (237,591) (431,813) 0 0 0 (431,813) (.22) (.22) 0 0 0 0 0 0 0
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