SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-5562
HOME BENEFICIAL CORPORATION
(Exact name of registrant as specified in its charter)
VIRGINIA 54-0884714
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification No.)
3901 West Broad Street, Richmond, Virginia 23230
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 804-358-843l
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None
Securities registered pursuant to Section 12(g) of the Act:
CLASS B COMMON STOCK
(Title of Class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [ ]
The Registrant's Class A Voting Common Stock is closely held and is not
publicly traded. The aggregate market value of Class B Non-Voting Common Stock
held by nonaffiliates of the Registrant was $334,094,012 as of December 31,
1996.
Number of shares outstanding of each of the Registrant's classes of common
stock as of December 31, 1996:
Class Shares
----- ------
Class A Common Stock
$.3125 Par Value 8,060,660
Class B Common Stock
$.3125 Par Value 8,992,910
Documents Incorporated by Reference
NONE
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TABLE OF CONTENTS
-----------------
PAGE
----
PART I
ITEM 1. Business..............................................................3
ITEM 2. Properties............................................................6
ITEM 3. Legal Proceedings.....................................................6
ITEM 4. Submission of Matters to a Vote of Security Holders...................6
PART II
ITEM 5. Market for the Registrants' Common Equity and Related Stockholder
Matters.....................................................................7
ITEM 6. Selected Consolidated Financial Data .................................7
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................................9
ITEM 8. Financial Statements and Supplementary Data......................... 11
ITEM 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosures......................................................11
PART III
ITEM 10. Directors and Executive Officers of the Registrant ..................12
ITEM 11. Executive Compensation ..............................................14
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.......17
ITEM 13. Certain Relationships and Related Transactions ......................20
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ....21
SIGNATURES....................................................................42
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PART I
ITEM 1. Business
HOME BENEFICIAL CORPORATION
Home Beneficial Corporation ("the Corporation") was incorporated in
Virginia on March 5, 1970, for the purpose of becoming a holding company
for Home Beneficial Life Insurance Company ("the Life Company"), which
originated in 1899. On December 31, 1970, pursuant to a Plan of
Reorganization proposed by the Board of Directors and approved by the
stockholders of the Life Company, the Corporation acquired all of the
issued and outstanding capital stock of the Life Company by merger of the
Life Company into a wholly-owned subsidiary of the Corporation, the name
of which was immediately changed to Home Beneficial Life Insurance
Company. At the present time, the Life Company, which is engaged in the
life and accident and health insurance business, is the major subsidiary
of the Corporation.
There was no material change in the nature of business done by the
Corporation during 1996.
On December 22, 1996, the Corporation entered into an Agreement and Plan
of Merger, as amended as of January 22, 1997, (the "Merger Agreement")
with American General Corporation ("American General") and AGC Life
Insurance Company, a wholly owned subsidiary of American General
("Sub"). The Merger Agreement provides for the merger (the "Merger") of
the Corporation with and into Sub, subject to the terms and conditions set
forth therein. Pursuant to the terms of the Merger Agreement, each
stockholder of the Corporation will have the right to elect to receive,
in exchange for each share of common stock of the Corporation, shares
of common stock of American General, cash consideration of
$39.00 per share of common stock of the Corporation, or any combination
thereof (subject to certain proration limitations as further described
in the Merger Agreement). Total cash elections by the Corporation's
shareholders will be limited to 50 percent of the aggregate consideration,
while stock elections will be limited to 75 percent. The Merger is
intended to be a tax-free transaction for all stockholders of the
Corporation who elect stock. The exchange ratio for American General
common stock will be determined by dividing $39.00 by an average trading
price of American General common stock prior to closing and is subject to
a maximum of 1.1143 shares of American General for each Home Beneficial
Corporation common share. The consideration per share may be reduced by up
to $0.55 per share if, and to the extent that, the Life Company pays a
dividend of less than $250 million to the Corporation prior to the closing
of the Merger.
Consummation of the Merger is subject to the approval of the Corporation's
stockholders and certain regulatory authorities, and the satisfaction or
waiver of various other conditions as more fully described in the Merger
Agreement. There can be no assurance that the Merger will be consummated.
BUSINESS OF THE LIFE COMPANY
The Life Company sells group life insurance and substantially all of the
forms of ordinary insurance, including universal life, whole life, term,
and annuities, together with accidental death and disability riders. The
Life Company's business is concentrated in six Mid-Atlantic states and the
District of Columbia, and its products are marketed through its own sales
force of approximately 1,150 full-time personnel assigned to some 48
district offices located in principal cities and towns. In addition to the
agency force, there were some 220 supervisory, administrative, clerical
and other personnel employed in the home office.
The following table sets forth the geographic distribution of direct
business premiums received during 1996:
Premiums
Jurisdiction (In millions)
Delaware $ 2.5
District of Columbia 2.8
Maryland 15.2
North Carolina 10.5
Tennessee 22.2
Virginia 40.5
West Virginia 1.2
The maximum amount of ordinary individual insurance presently retained by
the Life Company without reinsurance is $200,000 plus an additional
$75,000 coverage for accidental death. The total amount of life insurance
in force at December 31, 1996 reinsured by the Life Company with other
companies aggregated $70 million representing less than
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1% of the Life Company's life insurance in force on that date. A
contingent liability exists on insurance ceded to the reinsurer since the
Life Company would be liable in the event that the reinsurer is unable to
meet obligations assumed by it under the reinsurance agreement. The Life
Company participates in several group life insurance programs as a
reinsurer and also assumes reinsurance on a facultative (individual risk)
basis from two other life insurance companies. Life insurance assumed
relates principally to group life. Claims incurred under these group life
insurance programs approximate the related premium income, and no
significant assets or liabilities are required in the balance sheet.
Accident and health insurance premiums accounted for less than 4% of premium
income for 1996. The Life Company offers no health insurance coverage other
than to its own employees. The Life Company writes individual accident
policies with death and dismemberment benefits. These policies accounted for
approximately 71% of total accident and health premiums for 1996.
The Life Company, as a legal reserve company, is required by the various laws
of the states in which it is licensed to transact business to carry as
liabilities aggregate policy reserves which are considered adequate to meet
its obligations on insurance policies in force. Such required reserves are
considered statutory reserves because the methods and assumptions used in
their calculation are explicitly prescribed by the laws of the various
states. The liabilities shown herein for all policies issued since 1948 are
based on guidelines prescribed by the American Institute of Certified Public
Accountants and have been calculated in accordance with generally accepted
accounting principles. Such liabilities are calculated by the use of
assumptions as to mortality rates, interest rates, withdrawal rates and
expense rates in effect at the time the gross premiums were calculated.
Liabilities on paid-up policies include a liability for future maintenance
expenses which the Life Company expects to incur. See Revenues, Benefits,
Claims and Expenses, Note 1 of the Notes to Consolidated Financial
Statements, on pages 30 and 31.
The investment of the Life Company's funds and assets is determined by an
Investment Committee. Generally, investments made must meet requirements
established by the applicable investment statutes of the Commonwealth of
Virginia governing the nature and quality of investments which may be made by
life insurance companies.
The following table shows investments of the Life Company at December 31,
1996. Fixed maturities (bonds, notes and redeemable preferred stocks) and
equity securities (nonredeemable preferred and common stocks) are stated at
fair value; mortgage loans on real estate are stated at cost adjusted where
appropriate for amortization of premium or discount; short-term investments
are stated at cost; and policy loans are stated at unpaid balances.
Asset Value
-----------
Percent
Amount of Total
------ --------
(In millions)
Fixed Maturities:
Bonds and notes:
United States government and government
agencies and authorities $ 32.6 2.6%
States, municipalities and political
subdivisions 392.7 30.9
Foreign government 22.5 1.8
Public utilities 257.3 20.2
All other corporate 74.3 5.8
--------- -----
Total fixed maturities 779.4 61.3
Equity securities 25.8 2.0
Mortgage loans on real estate 375.0 29.5
Policy loans 55.0 4.3
Short-term investments 29.7 2.3
Other 7.4 .6
--------- -----
Total investments $ 1,272.3 100.0%
========= =====
There were no principal and interest payments past due on fixed maturities at
December 31, 1996.
The Life Company's mortgage portfolio consists of approximately 2,400
conventional first mortgages on a wide range of residential and commercial
properties located primarily in those Mid-Atlantic states in which the Life
Company conducts its insurance business. At December 31, 1996, the aggregate
carrying value of mortgage loans was $375 million, with residential and
commercial loans accounting for 52% and 48% of the carrying value,
respectively.
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Commercial loans include loans on apartments, shopping centers, office
buildings and warehouses. Generally, commercial loans range from $250,000 to
$4,500,000 in principal amount. The Life Company also makes some mortgage
loans to churches. Every property is inspected by a staff underwriter prior
to the issuance of a loan commitment. On commercial loans of more than
$250,000, the property is inspected every two years after the loan is closed
as long as the balance exceeds $250,000.
The Life Company's mortgage lending business is heavily concentrated in the
states of Virginia and North Carolina. At December 31, 1996, approximately
78% of the Life Company's mortgages, constituting approximately 73% of the
total book value of the Life Company's mortgage portfolio, were on
residential or commercial properties located in the State of Virginia.
Additionally, at the same date approximately 13% of the Life Company's
mortgages, constituting approximately 12% of the total book value of the Life
Company's mortgage portfolio, were on properties in North Carolina. The
relatively high percentage of mortgage loans made in these two states
reflects the geographical concentration of the Life Company's insurance
business activities in the same two states. Although the Life Company's
mortgage loan portfolio is heavily concentrated in Virginia and North
Carolina, the economies of those states are diversified, and the Life Company
does not believe its mortgage loan portfolio reflects undue risk from the
large percentage of its loans originated in those two states.
The Life Company presently holds one real estate parcel acquired through
foreclosure with a carrying value in the financial statements of $0.6
million. Mortgage loans whose terms have been restructured over the past five
years are immaterial, and no mortgage loans were in foreclosure proceedings
at December 31, 1996. Except as indicated below, there were no mortgage loans
otherwise not performing in accordance with the contractual terms.
At December 31, 1996, the aging schedule for delinquent mortgage loans in
terms of past due days was as follows:
Past due days
-------------
(In millions)
30-60 60-90 Over 90 Total
----- ----- ------- -----
Principal $ 3.1 (1) $ .2 $ -- $ 3.3
Percent of total
mortgage loans .82% .05% -- .87%
(1) 30-60 days past due includes a substantial amount of loan
payments that have been received by the Life Company's brokers
after their December, 1996 cut-off reporting date to the Life
Company. These amounts will be included in their next remittance
report.
The Life Company believes the quality of its loan portfolio is attributable
to its relatively stringent underwriting standards which have been in force
for many years. At the present time, and for a number of years, the Life
Company's lending policies have restricted mortgage loans to a maximum loan
to value ratio of 75%, based on the lower of cost or appraisal, except for
purchase money mortgages and insured or guaranteed mortgages. The Life
Company's policy is to place mortgage loans on non-accrual status where any
mortgage payment is 90 days or more past due.
During the period 1986-1996, the Life Company experienced only seven
foreclosures on real estate loans, one in each of the years 1986, 1989, 1990,
1995 and 1996, two in 1992, and none in 1993 and 1994. The total of the
unpaid principal balances of loans in these seven foreclosures was
approximately $1.8 million. The Life Company disposed of six properties
acquired in pre-1994 and 1996 foreclosure proceedings without a net loss. The
Corporation does not provide a provision for loan losses in its financial
statements. Based upon the de minimis loss experience of the mortgage loan
portfolio over many years and the continuing satisfactory performance of its
portfolio, the Corporation's management does not feel that a provision is
required.
See Investment Operations, Note 2 of Notes to Consolidated Financial
Statements, on pages 31, 32, and 33, and Schedule I included in Part IV, page
37, for additional information concerning the Corporation's consolidated
investment portfolio.
The Life Company, in common with other insurance companies, is subject to
regulation and supervision in each of the states in which it does business.
Such regulation is primarily for the benefit of the policyholders of the Life
Company rather than the stockholders. Although the extent of such regulation
varies from state to state, in general, the insurance laws of the respective
states delegate broad administrative powers to supervisory agencies. These
powers relate to the granting and revocation of licenses to transact
business, the licensing of agents, the approval of the forms of policies
used, reserve requirements, and the type and concentration of investments
permitted. In addition, the supervisory agencies have power over the form and
content of required financial statements and reports, including requirements
regarding accounting practices to be employed in the presentation of such
statements and reports. Certain of the required accounting practices vary
from generally accepted accounting principles. See Notes 1 and 7 of the Notes
to Consolidated Financial Statements on pages 30, 31 and 36.
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Several jurisdictions in which the Life Company does business including its
domiciliary state of Virginia, have enacted legislation providing for
specific regulation of the relationship between licensed insurers and their
holding companies and among affiliated members of a holding company group.
These statutes vary in substance from state to state, but generally speaking,
vest administrative control in the insurance regulatory authority. Among the
provisions found in these statutes are provisions for the filing of
registration statements by insurers which are members of a holding company
group, provisions that the holding company will be subject to reporting
requirements and to visitation by the insurance regulatory authorities,
standards as to transactions between insurers and their holding companies or
between members of a holding company group, and control over the payment of
extraordinary dividends. See Stockholders' Equity and Restrictions, Note 7 of
the Notes to Consolidated Financial Statements, on page 36 for additional
information concerning transactions between the Life Company and its
affiliates.
The life insurance business is intensely competitive and the Life Company
competes with many other companies in the states in which it is licensed.
The American Council of Life Insurance in its "1996 Fact Book", estimates
that there were approximately 1,700 life insurance companies doing
business in the United States at the end of 1995.
According to figures reported in the October 1996 issue of Best's Review,
Life/Health Edition, calculated on a statutory accounting basis, the Life
Company ranks in the top 20% of all life insurance companies in the United
States based on total admitted assets as of December 31, 1995.
No material portion of the business of the Life Company is dependent upon a
single customer or a very few customers. The group life insurance sold by the
Life Company consists largely of reinsurance participations described on page
4.
The Corporation's only industry segment is the business of the Life Company,
and its operations have contributed over 98% of the total consolidated
revenues and income before income taxes for each of the past three years.
Neither the Corporation nor any of its subsidiaries engage in material
operations outside of the United States, or derives material business from
customers outside the United States.
ITEM 2. Properties
The principal office of the Corporation is located at 3901 West Broad Street,
Richmond, Virginia 23230, which also serves as the home office premises of
the Life Company. The home office building, which contains approximately
110,000 square feet of office space, was originally completed in 1950 with a
30,000 square foot addition completed in 1990. The building is used solely
for company purposes.
The Life Company presently leases space for 63 district and detached offices
in Delaware, Maryland, the District of Columbia, West Virginia, Virginia,
Tennessee and North Carolina. The termination dates on these leases range
from 1997 to 2005; all of the longer term leases being for district office
purposes. The maximum annual rent paid under any lease is $29,000. The
annualized rent under all leases in effect on December 31, 1996 was
approximately $770,000.
ITEM 3. Legal Proceedings
As of the date of this report, neither the Corporation nor any of its
subsidiaries was a party to any material pending legal proceedings.
ITEM 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Corporation's security holders
during the fourth quarter of its fiscal year ended December 31, 1996.
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PART II
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The Corporation's Class B Non-Voting Common Stock trades on the NASDAQ Stock
Market under the symbol HBENB. The Corporation's Class A Voting Stock is not
publicly traded, but is entitled to the same cash dividend as Class B
NonVoting Common Stock. The approximate number of record holders of the
Corporation's common stock at December 31, 1996 was 2,000.
The following table gives the high and low prices of the Corporation's Class
B Non-Voting Common Stock and the cash dividends paid per share for each
quarter in the past two years:
High Low Dividend
---- --- --------
1996
First Quarter $26 1/4 $23 1/2 $ .21
Second Quarter 26 1/2 24 3/4 .22
Third Quarter 27 3/4 24 1/2 .22
Fourth Quarter 38 1/2 24 3/4 .22
1995
First Quarter $20 3/4 $19 $ .20
Second Quarter 21 3/4 19 .21
Third Quarter 24 20 1/4 .21
Fourth Quarter 25 1/2 22 3/4 .21
ITEM 6. Selected Consolidated Financial Data
RECORD OF GROWTH OF INSURANCE
Five Years Ended December 31
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
(In millions)
<S> <C>
Insurance in force at end of period
Direct sales
Permanent........................... $ 3,633.1 $ 3,588.8 $ 3,487.7 $3,475.9 $3,493.5
Term................................ 1,169.5 1,107.6 1,061.7 1,046.1 1,048.1
------------ ---------- ----------- --------- ---------
Total............................. 4,802.6 4,696.4 4,549.4 4,522.0 4,541.6
Group................................. 6,946.5 6,029.5 5,674.4 5,466.6 5,249.9
------------ ---------- ----------- --------- ---------
Total............................. $11,749.1 $10,725.9 $10,223.8 $9,988.6 $9,791.5
New insurance written
Direct sales
Permanent........................... $ 712.1 $ 707.8 $ 598.3 $ 600.2 $ 642.6
Term................................ 281.0 230.4 192.2 196.2 359.4
----------- ----------- ----------- ----------- -----------
Total............................. 993.1 938.2 790.5 796.4 1,002.0
Group................................. 967.1 372.2 225.6 258.2 3,215.2
----------- ----------- ----------- ----------- ----------
Total............................. $ 1,960.2 $ 1,310.4 $ 1,016.1 $1,054.6 $4,217.2
Life and annuity premium income $ 113.9 $ 105.4 $ 107.0 $ 107.1 $ 107.7
</TABLE>
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SELECTED FINANCIAL INFORMATION
Five Years Ended December 31
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
(In millions except for per share data)
<S> <C>
Premium income....................................... $ 117.6 $ 114.0 $ 116.1 $ 116.4 $ 117.9
Net investment income................................ 89.4 88.1 84.8 86.0 90.7
Realized investment gains............................ 6.9 -- -- 10.8 2.9
Net income before accounting change.................. 42.4 37.9 36.2 42.6 46.4
Accounting change(1)................................. -- -- -- -- (29.4)
Net income ........................................ 42.4 37.9 36.2 42.6 17.0
Net income per share(1)
Before accounting change.......................... 2.46 2.16 2.04 2.35 2.50
Accounting change................................. -- -- -- -- (1.58)
------ ------- ------- ------- ------
Net............................................ 2.46 2.16 2.04 2.35 .92
Dividends paid per share............................. .87 .83 .795 .775 .76
Investments(2)....................................... 1,285.3 1,266.8 1,146.7 1,143.9 1,116.4
Total assets (2)..................................... 1,423.5 1,403.4 1,288.8 1,280.2 1,248.4
Total liabilities.................................... 874.9 861.3 822.0 806.9 788.0
Stockholders' equity (2)............................. 548.6 542.1 466.8 473.3 460.4
Book value per share (2)............................. 32.17 31.08 26.58 26.38 24.85
</TABLE>
(1)The Corporation adopted Statement of Financial Accounting Standards No. 106,
"EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS" in 1992.
Adoption of this Standard was recognized as an accounting change. See Note 4 of
Notes to Consolidated Financial Statements on pages 33 and 34..
(2)The Corporation adopted Statement of Financial Standards (SFAS) No. 115
"ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES" as of
January 1, 1994. Adoption of SFAS No. 115 resulted in a $26.3 million
decrease in the carrying value of fixed maturities at December 31, 1994 and
increased the carrying value $28.4 million and $51.7 million at December 31,
1996 and December 31, 1995, respectively. In accordance with SFAS No. 115,
prior period financial statement balances were not restated. See Note 1 of
Notes to Consolidated Financial Statements on pages 30 and 31.
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ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FINANCIAL CONDITION
The Corporation is primarily engaged in the life insurance business which
historically has provided a positive cash flow. By statute, the Life Company is
required to invest in quality securities which provide ample protection for its
policyholders. Policy liabilities of the Life Company are predominately
long-term in nature and are supported primarily by long-term fixed maturity
investments and mortgage loans on real estate.
In May 1993 the Financial Accounting Standards Boards (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," effective for fiscal years beginning
after December 15, 1993. Under the new rules, debt securities that the
Corporation has both the positive intent and ability to hold-to-maturity are
carried at amortized cost. Debt securities that the Corporation does not have
the positive intent or ability to hold-to-maturity and all marketable equity
securities are classified as available-for-sale or trading and carried at fair
value. Unrealized holding gains and losses on securities classified as
available-for-sale are carried as a separate component of stockholders' equity.
Unrealized holding gains and losses on securities classified as trading are
reported in earnings. The Corporation adopted the provisions of SFAS No. 115 as
of January 1, 1994 and placed its entire fixed maturity and equity securities
portfolio in the available-for-sale classification. The Corporation believes it
has the ability to hold all fixed income investments until maturity; however,
securities may be sold to take advantage of investment opportunities generated
by changing interest rates, prepayments or income tax considerations, as a part
of the Corporation's asset/liability strategy, or for similar factors. Due to
increasing interest rates during 1996, a $15.1 million net unrealized loss (net
of deferred income tax benefit) on fixed maturities was charged against
stockholders' equity at December 31, 1996. Declining interest rates during 1995
produced a $50.7 million net unrealized gain (net of deferred income taxes)
which was credited to stockholders' equity at December 31, 1995.
Assets totaled $1.4 billion at December 31, 1996 with investment assets totaling
$1.3 billion or 90% of total assets. Growth in investment assets for 1996 was
affected by reduced market value adjustments to fixed maturities as a result of
increasing interest rates during 1996 and the use of internal funds to
repurchase $9.3 million of the Corporation's common stock. At December 31, 1996
there were no principal and interest payments past due on fixed maturities and
over 99% of the mortgage loans on real estate were current for both principal
and interest. The Corporation is not aware of any potential problem loans, and
there are no mortgage loans whose terms were restructured during 1996.
Cash and investment assets for 1996 exceeded total liabilities by 47%. The Life
Company continually matches the investment portfolio to the cash flow demands of
the types of insurance being written and maintains adequate cash and short-term
investments to meet cash requirements for policy loans and voluntary policy
terminations, as well as investment commitments. Policy loans increased $0.5
million for 1996 and accounted for less than 5% of total cash and investment
assets.
As disclosed in the Notes to Consolidated Financial Statements at December 31,
1996, $157 million of consolidated stockholders' equity represents net assets of
the Life Company that cannot be transferred in the form of dividends, loans or
advances to the Corporation. However, this poses no liquidity concerns to the
Corporation as it has sufficient cash flow to meet its operational requirements.
In May 1993, the FASB issued SFAS No. 114, "Accounting for Creditors for
Impairment of a Loan". SFAS No. 114 requires that impaired loans be valued at
the present value of expected future cash flows discounted at the loan's
effective interest rate or, as a practical expedient, at the loan's observable
market price, or the fair market value of the collateral if the loan is
collateral dependent. The Corporation adopted the provisions of SFAS No. 114 as
of January 1, 1995. Adoption of this Standard does not have any effect on the
financial condition or results of operations of the Corporation.
Effective December 31, 1993 the National Association of Insurance Commissioners
adopted Risk-Based Capital (RBC) requirements for life/health insurance
companies to evaluate the adequacy of statutory capital and surplus in relation
to investment and insurance risks such as asset quality, mortality and
morbidity, asset and liability
9
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matching, and other business factors. The RBC formula will be used by states as
an early warning tool to identify companies that potentially are inadequately
capitalized for the purpose of initiating regulatory action. The Life Company's
statutory adjusted capital exceeds the authorized control level of the RBC
requirement.
On December 22, 1996 the Corporation's Board of Directors approved the merger of
the Corporation with and into a wholly owned subsidiary of American General
Corporation. Subject to shareholder approval and regulatory consents, the
transaction is expected to close during the first quarter of 1997.
RESULTS OF OPERATIONS
Individual life insurance sales for 1996 increased 6% over 1995 results, which
were up 18%. Premiums increased 3% compared to decreases of approximately 2% and
1% for 1995 and 1994, respectively. The growth in premiums for 1996 resulted
principally from increased individual premiums. Premium growth for 1995 was
affected by a decline in premiums recognized from participation in a large group
reinsurance contract. Premium growth for 1994 was affected by reduced individual
life insurance sales. Net investment income, excluding realized investment gains
and losses, increased 1.5% compared to an increase of 3.6% for 1995 and a
decrease of 1.4% for 1994. The improvement for both 1996 and 1995 resulted from
growth in invested assets. Net investment income for 1994 was affected by the
downward trend experienced in portfolio interest rates during 1993. In addition,
the Corporation used $34 million of internally generated funds between April
1991 and July 1994 to repurchase 1.5 million shares of its common stock. During
1996 the Corporation used $9.3 million of internally generated funds to
repurchase 0.4 million shares of its common stock. Realized investment gains and
losses for 1995 and 1994 were insignificant. Realized investment gains amounted
to $6.9 million for 1996. Benefits and claims increased 2% for both 1996 and
1995 compared to a decrease of 4% for 1994. Mortality costs contributed to the
changes in each of the years. Amortization of deferred policy acquisition costs
for 1996 increased as a result of increased individual policy terminations.
General expenses increased 9% for 1996 compared to a 9% decrease for 1995. The
decline for 1995 was attributable to increased policy acquisition cost deferral
related to increased individual sales and an improvement in employee health plan
cost provisions. The increase for 1996 resulted primarily from increases in
employee health plan cost provisions.
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ITEM 8. Financial Statements and Supplementary Data
The information for this item is submitted in a separate section of
this report. See page 22.
ITEM 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosures
None.
11
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PART III
ITEM 10. Directors and Executive Officers of the Registrant
(a) and (b) The following table gives the name and age of each of the
directors (all of whom, except L. W. Richardson and D. N. Hoppes are
executive officers of the Corporation and the Life Company) and their
positions and offices with the Corporation and the Life Company and the
dates first elected to those positions with the Corporation.
Position and Offices with the
Corporation and the Life Company and
Date Elected to Corporation Officer
Name Age Position
H. D. Garnett 54 Vice President (since 1979), Controller
(since 1974) and a director of the
Corporation and the Life Company
W. G. Hancock 46 Counsel (since 1984) and a director of
the Corporation and the Life Company
D. N. Hoppes 51 Director of the Corporation and the Life
Company
G. T. Richardson 44 Vice President (since 1983) and a
director of the Corporation and the Life
Company
L. W. Richardson 77 Retired Vice President and a director of
the Corporation and the Life Company
J. M. Wiltshire, Jr. 71 Secretary (since 1994) and a director of
the Corporation and the Life Company
R. W. Wiltshire 75 Chairman of the Board (since 1983) and a
director of the Corporation and the Life
Company
R. W. Wiltshire, Jr. 51 President (since 1988) and Chief
Executive Officer (since 1992) and a
director of the Corporation and the
Life Company
W. B. Wiltshire 48 Vice President (since 1983) and a
director of the Corporation and the Life
Company
Mrs. Hoppes was first elected to the Board of Directors of the
Corporation on February 15, 1994, Messrs. Garnett, Hancock, G. T.
Richardson, and W. B. Wiltshire were first elected to the Board in
1983, and Messrs. R. W. Wiltshire, Jr. and J. M. Wiltshire, Jr.
were first elected to the Board in 1976 and 1971, respectively,
all to fill then existing vacancies on the Board. Messrs. R. W.
Wiltshire and L. W. Richardson have served as directors of the
Corporation since its organization in 1970.
All of the above persons serve one year terms as both executive
officers and directors, or in the case of L. W. Richardson and
Mrs. Hoppes, as directors only, which expire when their successors
are duly elected. There are no executive officers of the
Corporation who are not directors.
(c) Not applicable.
(d) L. W. Richardson is the father of G. T. Richardson and the first
cousin of R. W. Wiltshire. R. W. Wiltshire is the father of R.
W. Wiltshire, Jr. and W. B. Wiltshire and the first cousin of J.
M. Wiltshire, Jr.
(e)(1) Except as set forth below, each of the persons named in (a) and
(b) above has been principally employed by the Corporation and the
Life Company in the present position for more than the past five
years. D. N. Hoppes has been a Trustee of the 1984 Voting Trust
described in Item 12 below since January 4, 1994 and a volunteer
in the Richmond, Virginia community for more than the past five
years. W. G. Hancock has been a partner of the law firm of Mays &
Valentine since 1981 specializing in real estate and mortgage
lending, insurance company
12
<PAGE>
regulation and general business matters. He was designated as
Counsel to the Corporation and the Life Company effective June
13, 1984. L. W. Richardson retired on December 31, 1987, having
served in the office shown for more than five years immediately
prior to his retirement. J. M. Wiltshire, Jr. retired as an
employee and salaried officer of the Corporation and the Life
Company on December 31, 1995, having served as Vice President and
Counsel for more than five years immediately prior to his
retirement. He was elected Secretary of the Corporation and Life
Company effective January 18, 1994 and continues to serve in that
capacity. Effective April 7, 1992, R. W. Wiltshire, Jr. was
elected Chief Executive Officer of the Corporation and the Life
Company to succeed R. W. Wiltshire who had served in that office
for more than five years immediately prior thereto. Prior to his
election as Chief Executive Officer, R. W. Wiltshire, Jr. was
responsible for the general management of the operations of the
Corporation and the Life Company. R. W. Wiltshire retired as an
employee and salaried officer of the Corporation and the Life
Company effective September 6, 1993.
(e)(2) Not applicable.
(f) Not applicable.
(g) Not applicable.
Section 16(a) Beneficial Ownership Reporting Compliance
The Corporation's directors and executive officers are required to
file reports with the Securities and Exchange Commission (the
"Commission") concerning their initial ownership of shares of the
Corporation's Class A and Class B Common Stock and any subsequent
changes in that ownership, and the Corporation traditionally has
assisted its directors and executive officers in the filing of
these reports. In making these reports, the Corporation has relied
on written representations of its directors and executive officers
and copies of the reports that they have filed with the
Commission. The Corporation believes that these filing
requirements were satisfied in 1996 and prior years with the
following exception, as well as certain other exceptions
previously reported by the Corporation. In 1996 G. T. Richardson
reported his exchange of certain shares of Class A Common Stock
for an equal number of shares of Class B Common Stock owned by a
related family member. The exchange occurred in 1994 and Mr.
Richardson's failure to file a report of the transaction on a
timely basis was inadvertent.
13
<PAGE>
ITEM 11. Executive Compensation
(a) and (b) Summary Compensation Table
The following Summary Compensation Table sets forth certain information
concerning cash compensation paid to or contributed for the benefit of
the four individuals named below for services rendered to the Corporation
and its subsidiaries as executive officers during each of the three years
in the period ended December 31, 1996. During 1996, the Corporation had
no additional salaried executive officers not listed in the table.
SUMMARY COMPENSATION TABLE
--------------------------
<TABLE>
<CAPTION>
All Other
Name and Principal Position (1) Year Compensation-Salary (2) Compensation(3)
------------------------------- ---- ----------------------- ---------------
<S> <C>
R. W. Wiltshire, Jr. 1996 $ 180,912 $5,427
President and Chief 1995 160,112 4,803
Executive Officer 1994 139,312 4,179
W. B. Wiltshire 1996 143,295 4,299
Vice President 1995 130,284 3,909
1994 117,294 3,519
G. T. Richardson 1996 138,735 4,162
Vice President 1995 128,597 3,858
1994 117,074 3,512
H. D. Garnett 1996 134,722 4,042
Vice President and 1995 126,922 3,808
Controller 1994 119,122 3,574
</TABLE>
(1) Offices shown are of both the Corporation and the Life Company.
(2) The amounts shown include employee contributions to the Thrift
Plan.
(3) All of the amounts shown reflect matching contributions by the
Corporation and the Life Company to the Thrift Plan. The Thrift Plan is
a defined contribution plan available to substantially all salaried
employees. Participants may make thrift contributions to the plan in
any whole percentage of 2-14% of their compensation (not over the
compensation limit, as adjusted from time to time under the Internal
Revenue Code of 1986, as amended, which was $150,000 in 1996), and the
Corporation and the Life Company will make a matching contribution to
the plan in an amount equal to three-fourths of the first 4% of each
eligible employee's compensation so contributed for the year. All
matching amounts shown for each executive officer are fully vested.
Benefits under the Thrift Plan are payable at death, retirement or
other termination of employment (or at January of the calendar year of
age 70 1/2, if earlier). The amount shown for R. W. Wiltshire, Jr.
includes the amount allocated under the excess benefit program of the
Home Beneficial Supplemental Retirement Plan, which is in part an
unfunded non-qualified plan designed to provide matching company
contributions which are not made to the Thrift Plan on account of the
compensation limit.
(c) Not applicable
(d) Not applicable
(e) Not applicable
(f) Pension, Supplemental Executive Retirement, and Postretirement
Medical Benefits Plans
Pension Plan The Corporation's Retirement Plan, a defined benefit
pension plan, covers substantially all employees of the
Corporation and the Life Company with two months of service. The
Plan provides a retirement annuity, payable by the Life Company
as the insurer under the Plan, to each employee who is credited
with five years of service, who attains his normal retirement age
(which is age 65 or, if the employee becomes a participant at
or after age 60, his fifth anniversary of becoming a
participant) while employed by the Corporation or the Life
Company, or who is totally and permanently disabled while an
employee. The retirement annuity is earned in the form
14
<PAGE>
of a single life annuity for the life of the employee, commencing
at the employee's normal retirement age, and is equal to the sum
of retirement annuity credits earned by the employee for each
calendar year he is credited with a year of service. Retirement
annuity benefits under the plan can be paid as early as age 55 if
the employee retires with at least ten years of service (or at
disability retirement, if earlier) and must be paid starting in
January of the calendar year the employee reaches age 70 1/2, even
though he has not then retired. The annuity is payable monthly and
is subject to actuarial reduction in the event the employee
commences to receive his retirement annuity prior to his normal
retirement age (other than as a result of disability retirement)
or receives his retirement annuity in a joint and survivor rather
than a single life annuity form of payment. A survivor annuity
benefit is provided to the employee's spouse in certain cases if
the employee dies before his retirement annuity payments begin.
The annual annuity credit for years after 1988 is equal to 2% of
the first $10,000 of the employee's compensation for the year,
plus 2.5% of the employee's compensation for the year in excess of
$10,000. Once an employee is credited with 35 years of service,
whether before or after 1989, the annual annuity credit after 1988
becomes 2.5% of the employee's compensation for the year. Prior to
1989, several different benefit formulas were applied, and
employees who were participants before 1989 will retain their
annuity credits as determined through December 31, 1988 based on
those earlier formulas. Covered compensation for purposes of the
Plan is aggregate cash compensation up to $150,000 per year, as
adjusted from time to time under the Internal Revenue Code of
1986, as amended, which in the case of each executive officer is
identical to the amount shown as salary in the Summary
Compensation Table appearing in Item 11(a) and (b).
The estimated annual benefits payable under the Plan for each of
the individuals listed in the Summary Compensation Table are as
follows: R. W. Wiltshire, Jr. - $93,965, W. B. Wiltshire -
$99,329, G. T. Richardson - $108,102, and H. D. Garnett -
$79,330. The benefits as shown are estimated on the basis that
the persons named will continue to receive, until the end of the
calendar year in which they reach age 65, salaries at the same
rates in effect during 1996 and will then retire and elect a
single life rather than a joint and survivor annuity form of
payment.
Amounts payable under the Plan are not subject to deduction for
social security benefits under the Federal Social Security Act.
Supplemental Executive Retirement Plan
In 1996, the Corporation adopted a Supplemental Executive
Retirement Plan which became effective November 1, 1996. The Plan
is an unfunded, nonqualified defined benefit plan maintained
primarily for the purpose of providing deferred compensation to
certain senior management employees of the Corporation and Life
Company. The Plan provides supplemental retirement income to
participants in excess of their employer- provided benefits under
certain other plans and arrangements up to the maximum benefit
specified in the Plan. The Plan also provides supplemental
survivor's income to a participant's spouse, a death benefit to a
participant's beneficiaries and certain limited medical benefits.
A participant's accrued benefit under the Plan is an annual amount
payable monthly, equal to a stated percentage (from 55% to 70%
depending on the participant) of the participant's highest weekly
compensation as determined pursuant to the Plan reduced by (i) ten
percent for each year of future service (beginning November 1,
1996) less than ten; (ii) benefits paid under the Corporation's
pension plan, (iii) except in the event of disability, five
percent for each year payment begins before age 65; and (iv) in
the event of disability, any benefits paid under the Corporation's
welfare benefit plan providing long-term disability benefits
The retirement benefit under the Plan is payable beginning at age
65, and is payable monthly in the form of a 100% joint and spouse
survivor annuity for R. W. Wiltshire, Jr., W. B. Wiltshire and G.
T. Richardson, if married at their benefit starting dates, and a
life annuity for all other participants. The other participants,
who include H. D. Garnett, may elect to receive payment in the
form of an actuarially reduced 100% joint and spouse survivor
annuity.
A participant will become fully vested in his accrued retirement
benefit under the Plan upon the earliest to occur of the following
events, while he is an active employee: (i) death; (ii)
termination of employment due to disability; or (iii) completion
of five years of service. A participant will forfeit any benefits
in the event of termination from employment prior to satisfying
the vesting requirements.
Notwithstanding the forgoing, additional benefits are payable on
account of a change in control (as defined in the Plan). Upon a
change in control, participants in the Plan are deemed to have ten
years of future service and become 100% vested in their accrued
benefit, and their accrued benefit is payable immediately without
15
<PAGE>
reduction for payment before age 65. In addition, the Plan
provides participants with certain retiree life insurance benefits
after termination of employment comparable to the retiree benefits
they would have received if they were considered retirees under
the Corporation's welfare benefit plan providing retiree life
insurance benefits. The participants who are eligible to receive
an unreduced 100% joint and spouse survivor annuity are also
provided medical insurance benefits until age 65 for themselves
and their dependents comparable to the benefits under the
Corporation's welfare benefit plan providing medical expense
benefits. While it is believed that payments or benefits are not
subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended, the Plan provides that
participants will be reimbursed for any excise tax on such
payments and benefits and for any income, employment and excise
taxes payable on the reimbursement.
The estimated gross annual retirement benefits under the Plan
before reduction for benefits payable under the Corporation's
pension plan (that is, the sum of the benefit under the Plan and
the benefit payable under the Corporation's pension plan) for each
of the individuals listed in the Summary Compensation Table are as
follows: R. W. Wiltshire, Jr. - $126,638, W. B. Wiltshire -
$100,306, G. T. Richardson - $97,114, and H. D. Garnett - $80,833.
The benefits as shown are estimated on the basis that the persons
named will continue to receive, until they reach age 65, or until
there is a change in control, if earlier, salaries at the same
rates in effect during 1996 and will then be paid, in
the cases of R. W. Wiltshire, Jr., W. B. Wiltshire and G. T.
Richardson, in the form of a 100% joint and spouse survivor
annuity, and in the case of H. D. Garnett, in the form of a single
life rather than a 100% joint and spouse survivor annuity.
Postretirement Medical Benefits Plan
In addition to the Corporation's defined benefit pension plan, the
Corporation has a Postretirement Medical Benefits Plan consisting
of defined benefit medical coverage for pre-1993 retirees and
defined contribution medical coverage for post-1992 retirees who
were active employees on December 31, 1992. The pre-1993 retiree
program covers all employees who had retired under the
Corporation's pension plan as of December 31, 1992. The post-1992
retiree program covers all full time active employees as of
December 31, 1992 who retire under the Corporation's pension plan
thereafter. Employees who joined the Corporation after December
31, 1992 are not eligible for participation in either program
under the postretirement medical benefits plan.
The pre-1993 retiree program reimburses its participants for
actual covered costs subject to specified deductibles and
coinsurance. The pre-1993 retiree program is contributory and
participant contribution requirements may be increased from time
to time and benefits may be modified or terminated by the
Corporation. The post-1992 retiree program is noncontributory and
reimburses its participants for the cost of health insurance and
other health care coverage premiums up to a maximum benefit amount
(stated in terms of health care spending credits) determined in
accordance with the plan based on years of service as of December
31, 1992. The unused maximum benefit amount, initially determined
as of December 31, 1992, is increased thereafter only for interest
from January 1, 1993 until it is fully expended.
Use of the healthcare spending account may be limited by the
Corporation prior to a change in control (defined in the same
manner as in the Supplemental Executive Retirement Plan). Upon the
occurrence of a change in control, the amounts in the healthcare
spending accounts become vested for all active employees and
retirees.
All current salaried executive officers of the Corporation, upon
their retirement, will be covered under the post- 1992 retiree
program. The spending account credit balances determined as of
December 31, 1996 (without interest to be credited thereafter) for
each of them are as follows: R. W. Wiltshire, Jr. - $31,607, W.
B. Wiltshire - $32,377, G. T. Richardson - $29,294, and H. D.
Garnett - $29,294.
The Corporation is self insured with respect to benefits under the
postretirement medical benefits plan.
(g) Compensation of Directors
All directors of the Corporation (other than Messrs. L. W.
Richardson, R. W. Wiltshire, J. M. Wiltshire, Jr., and Hancock and
Mrs. Hoppes) are salaried executive officers. Messrs. L. W.
Richardson, R. W. Wiltshire and J. M. Wiltshire, Jr. have retired
as salaried executive officers of the Corporation and the Life
Company on December 31, 1987, September 6, 1993, and December 31,
1995, respectively. In consideration of their past services to
the Corporation and the Life Company, the Corporation agreed to
pay L. W. Richardson (more than 42 years of continuous service)
$30,000 per year, R. W. Wiltshire (more than 47 years of
continuous service) $90,000 per year and J. M. Wiltshire, Jr.
(more than 27 years of continuous service) $25,000 per year, in
addition to their respective annual benefits of $34,109, $55,002
and $33,936 under the Corporation's pension plan. The
Corporation's agreements with each of them provide that they will
not compete with the Corporation or its subsidiaries, directly or
indirectly, on a full time or a part time or on a consulting or
advisory basis. L.
16
<PAGE>
W. Richardson also is a participant in the pre-1993 retiree
program under the Corporation's postretirement medical benefits
plan. R. W. Wiltshire and J. M. Wiltshire, Jr. are each
participants in the post-1992 retiree program under the plan and
have spending account credit balances as of December 31, 1996,
after payment of premiums subsequent to their retirement, of
$39,020 and $32,687, respectively. (See "Pension, Supplemental
Executive Retirement, and Postretirement Medical Benefits Plans"
in Item 11(f)). Effective January 1, 1996, J. M. Wiltshire, Jr.
entered into a two-year consulting arrangement with the
Corporation to provide consulting services as a non-employee at
$50 per hour for 20 hours per week. The Corporation may
discontinue this arrangement at any time. Mr. Hancock is a
partner in the law firm of Mays & Valentine. The amount of legal
fees paid to that firm by the Corporation and its subsidiaries and
affiliates in 1996, including amounts for legal services provided
by Mr. Hancock, did not exceed 5% of the firm's gross revenues for
its last fiscal year. No director of the Corporation receives any
additional compensation in the form of directors' fees or
otherwise for attendance at meetings of the Board or committees
thereof, or other services performed solely in his or her capacity
as a director.
(h) Employment Contracts and Termination of Employment and
Change-in-Control Arrangements
(1) Not applicable
(2) The Corporation's Supplemental Executive Retirement Plan and
Postretirement Medical Benefits Plan contain provisions for
payments to the Corporation's executive officers upon a
"change of control" as defined in the Plans. See the
description of these plans under "Pension, Supplemental
Executive Retirement and Postretirement Medical Benefits
Plans in Item 11(f).
(i) Not applicable
(j) Board of Director Interlocks and Insider Participation
The Corporation has no formal compensation committee, and all
final decisions as to executive officer compensation are made by
the entire Board of Directors. All members of the Board of
Directors, except Mrs. Hoppes, are present or retired officers of
the Corporation. Messrs. R. W. Wiltshire, Jr., W. B. Wiltshire,
G. T. Richardson and Garnett are salaried executive officers of
the Corporation. Messrs. R. W. Wiltshire and J. M. Wiltshire, Jr.
have retired as employees of the Corporation and now serve as
unsalaried executive officers in the capacities of Chairman of the
Board and Secretary, respectively. L. W. Richardson is a retired
executive officer of the Corporation. Mr. Hancock is an
unsalaried executive officer of the Corporation and a partner in
the law firm of Mays & Valentine which is general counsel to the
Corporation.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
(a) and (b) As of December 31,1996, 5,181,165 shares of Class A Common
Stock of the Corporation, constituting 64.3% of the 8,060,660
shares then outstanding, were held by trustees under a voting
trust agreement dated as of May 1, 1984, which, by virtue of a
voting trust extension agreement dated as of May 1, 1987,
continues in force until May 11, 1997 (1984 Voting Trust), unless
earlier terminated pursuant to its terms. The Voting Trustees,
each of whom is a director of the Corporation and the Life Company
are R. W. Wiltshire, L. W. Richardson, R. W. Wiltshire, Jr., G. T.
Richardson, and D. N. Hoppes (together, the Trustees). Their
mailing address is 3901 West Broad Street, Richmond, Virginia
23230. The Trustees are given exclusive voting power of the Class
A Common Stock subject to the 1984 Voting Trust, but must vote or
execute consents in accordance with the instructions of the
holders of voting trust certificates with respect to any action
submitted to a vote of the holders of Class A Common Stock as to
which a majority of the Trustees then in office favor an
affirmative vote, where such action, if approved by the holders of
Class A Common Stock in accordance with and to the extent required
by law and the Corporation's Articles of Incorporation, would
result in: (a) the increase or decrease of the authorized number
of shares of Class A Common Stock; (b) an exchange,
reclassification, or cancellation of all or part of the shares of
Class A Common Stock; (c) an exchange, or right of exchange, of
all or any part of the shares of another class into the shares of
Class A Common Stock; (d) any change that may be adverse to the
designations, preferences, limitations, voting rights or relative
to other rights of any nature of the shares of Class A Common
Stock; (e) any change of the shares of Class A Common Stock into a
different number of shares of the same class or into the same or a
different number of shares, either with or without par value, of
other classes of stock; (f) the creation of a new class of stock,
or change of a class with subordinate and inferior rights into a
class having rights and preferences prior and superior to shares
of Class A Common Stock, or any increase of the rights and
preferences of any class having rights and preferences prior or
superior to shares of Class A Common Stock; (g) any limitation or
denial of preemptive rights of shares of Class A Common Stock; (h)
the sale, lease, exchange, mortgage, pledge or other disposition
of all, or substantially all, the property and assets of the
Corporation; (i) the merger or consolidation of the Corporation
17
<PAGE>
with or into any other corporation, or of any other corporation
with or into the Corporation; or (j) the dissolution of the
Corporation. If a majority of the Trustees shall oppose any such
matter, the Trustees need not solicit, obtain or follow directions
from the holders of the voting trust certificates, and such
majority of Trustees opposing any such proposal are authorized and
empowered to vote all the shares of Class A Common Stock held by
the Trustees under the 1984 Voting Trust against such proposal. A
majority vote of the Trustees controls actions to be taken by
them; they may vote in person or by proxy to another Trustee with
or without direction how to vote. They may vote for themselves as
directors and officers of the Corporation and fix their
compensation provided it be commensurate with the duties and
responsibilities of the office or position held. They may name
successor trustees in event of death, resignation, removal from
the Commonwealth of Virginia or incapacity of any Trustee. They
receive no compensation for their services as Trustees. In the
event that by virtue of a stock dividend, stock split,
reclassification of stock or subscription, the Trustees receive
further Class A Common Stock, it is to be held by them subject to
all of the provisions of the 1984 Voting Trust. In the event that
as a result of any merger, consolidation, sale of assets or
property, exchange or other cause, the shares of Class A Common
Stock of the held by the Trustees should be converted into and
become shares of another corporation, the 1984 Voting Trust shall
be terminated automatically unless the amount of voting stock in
such other corporation received as a result of the conversion
would thereafter represent more than one-third of the issued and
outstanding voting stock of such other corporation if it has no
class of stock registered under the Securities Exchange Act of
1934, or more than one-twentieth of the issued and outstanding
voting stock of such other corporation if it has a class of stock
so registered, in either of which cases the 1984 Voting Trust
shall continue in force according to its terms.
Class B Common Stock, which has no vote on most matters, is
publicly traded in the over-the-counter market and is not subject
to the 1984 Voting Trust.
Due to the substantial number of shares of Class A Common Stock
held subject to the 1984 Voting Trust, the Trustees individually
and collectively may be deemed to be "control persons" of the
Corporation under rules and regulations of the Securities and
Exchange Commission.
As of December 31, 1996, the Trustees under the 1984 Voting Trust
beneficially owned, directly or indirectly, voting trust
certificates evidencing an aggregate of 1,199,760 shares of Class
A Common Stock subject thereto, as well as another 280,437 shares
of Class A Common Stock that are not subject to the 1984 Voting
Trust.
The following table shows as of December 31, 1996, the beneficial
ownership of all Class A and Class B Common Stock by each director
of the Corporation, and the beneficial ownership of the
Corporation's Class A Common Stock by any other person or entity
known to the Corporation to own more than 5% of the outstanding
shares of such class. The Corporation has no executive officers
who are not directors. The amounts shown for Class A Common Stock
include beneficial ownership evidenced by voting trust
certificates of the 1984 Voting Trust, but exclude Class A shares
held by the Trustees thereunder.
DIRECTORS
---------
TITLE OF AMOUNT PERCENT OF
NAME OF DIRECTOR CLASS BENEFICIALLY OWNED(1) CLASS(2)
---------------- ----- --------------------- ----------
H. D. Garnett Class A -- --
Class B 2,600 (3) *
W. G. Hancock Class A 89,560 (4)(5)(6) 1.11
Class B 4 *
D. N. Hoppes Class A 13,536 (7)(8)(9) *
Class B 7,264 (8) *
G. T. Richardson Class A 291,475 (7)(9)(10) 3.62
Class B 11,774 *
L. W. Richardson Class A 349,324 (4)(7)(9)(10)(11) 4.33
Class B 89,179 (4)(11) *
J. M. Wiltshire, Jr. Class A - --
Class B 6,000 *
R. W. Wiltshire Class A 788,752 (4)(7)(9)(12) 9.79
Class B 660 (12) *
R. W. Wiltshire, Jr. Class A 37,110 (7)(9)(12) *
Class B 32,679 (4)(12) *
W. B. Wiltshire Class A 36,950 (9)(12) *
Class B 21,786 (4)(12) *
All directors as a group Class A 1,606,707 19.93
Class B 171,946 1.91
18
<PAGE>
5% CLASS A STOCKHOLDERS
(OTHER THAN DIRECTORS AND TRUSTEES)
AMOUNT
NAME AND ADDRESS OF BENEFICIALLY PERCENT OF
5% CLASS A STOCKHOLDER OWNED (1) CLASS
---------------------- --------- --------
Dixie Company (13) 2,373,552 (8)(9) 29.45
PO Box 12312
Richmond, Virginia 23241-0312
Estate of Mary Morton Parsons(14) 1,174,427 (9) 14.57
PO Box 85678
Richmond, Virginia 23285-5678
(1) Beneficial ownership has been determined in accordance with
Rule 13d-3 under the Securities Exchange Act of 1934.
(2) Where an asterisk is shown, the percentage is less than 1%.
(3) All of the Class B shares shown for Mr. Garnett are owned
jointly with his wife.
(4) Includes an aggregate of 26,240 shares of Class A (of which
22,696 shares are evidenced by voting trust certificates of
the 1984 Voting Trust) and 12,710 shares of Class B Common
Stock held by directors as trustees or custodians for the
benefit of children (that are not described in other
footnotes to this table), or by their wives, and with
respect to which beneficial ownership is or will be
disclaimed by individual directors in ownership reports
filed with the Securities and Exchange Commission.
(5) The ownership shown for Mr. Hancock excludes 188,800 shares
of Class A Common Stock held in trust for the benefit of his
mother, with remainder to her issue, in which Mr. Hancock
has a vested one-third beneficial interest subject to
partial divestment upon any further children of his mother.
(6) Includes 2,400 shares of Class A Common Stock held by Mr.
Hancock and his brother and sister as trustees under inter
vivos trusts created by their mother for the benefit of her
six grandchildren, three of whom are children of Mr.
Hancock.
(7) 5,181,165 shares of Class A Common Stock constituting 64.3%
of the 8,060,660 shares outstanding are held by R. W.
Wiltshire, L. W. Richardson, R. W. Wiltshire, Jr., G. T.
Richardson and D. N. Hoppes, as Trustees under the 1984
Voting Trust.
(8) All of the voting trust certificates for Class A shares and
the Class B shares are held of record by Dixie Company and
may be acquired by Mrs. Hoppes pursuant to her power to
revoke an inter vivos trust. Such voting trust certificates
are also included in the table for Dixie Company.
(9) Some portion or all of the Class A shares shown for each of
the indicated directors or stockholders are subject to the
1984 Voting Trust, and their beneficial ownership as to
those shares is evidenced by voting trust certificates that
have been issued to them thereunder. The number of Class A
shares deposited in the 1984 Voting Trust by each of them is
as follows: D. N. Hoppes - 13,536; G. T. Richardson -
258,448; L. W. Richardson - 330,860; R. W. Wiltshire -
586,276; R. W. Wiltshire, Jr. - 10,640; W. B. Wiltshire
-10,492; Dixie Company - 2,313,656; and Estate of Mary
Morton Parsons - 1,174,427.
(10) Includes voting trust certificates for 235,138 shares of
Class A Common Stock held by a trust of which G. T.
Richardson is one of two trustees sharing voting and
investment power. L. W. Richardson has a contingent
one-half remainder interest in the assets of the trust. The
ownership shown includes all such shares for G. T.
Richardson and excludes all such shares for L. W.
Richardson.
(11) Includes 4,253 shares of Class A Common Stock, voting trust
certificates for 25,538 shares of Class A Common Stock
subject to the 1984 Voting Trust and 37,712 shares of Class
B Common Stock held by Mr. Richardson, as trustee with sole
voting and shared investment power, for the benefit of a
member of his immediate family.
(12) 141,804 shares of Class A Common Stock, voting trust
certificates for 94,976 shares of Class A Common Stock
subject to the 1984 Voting Trust and 660 shares of Class B
Common Stock are held by the Estate of Essie Lee Wiltshire
for the life of R. W. Wiltshire with a vested remainder
interest in the children of R. W. Wiltshire. R. W.
Wiltshire is the sole executor of the Estate of Essie Lee
Wiltshire. During the life of R. W. Wiltshire the income
from the foregoing shares is paid to his children. In
addition, R. W. Wiltshire has a life estate in voting trust
certificates evidencing 450,524 shares of Class A Common
Stock subject to the 1984 Voting Trust, with remainder to
his children. R. W. Wiltshire, Jr. and W. B. Wiltshire have
vested one-fourth beneficial interests in all of the
foregoing shares, subject to partial divestment upon any
further children of R. W. Wiltshire. The ownership shown
includes such shares for R. W. Wiltshire and excludes all
such shares for R. W. Wiltshire, Jr. and W. B. Wiltshire.
19
<PAGE>
Both R. W. Wiltshire, Jr. and W. B. Wiltshire also have the
same vested one-fourth remainder interests subject to
partial divestment in voting trust certificates for 17,528
Class A shares and 123,308 shares of Class B Common Stock in
which various children and grandchildren of R. W. Wiltshire
residing in other households have an interest for his life.
The ownership shown for R. W. Wiltshire, R. W. Wiltshire,
Jr. and W. B. Wiltshire does not reflect any of such shares,
except in the case of R. W. Wiltshire, Jr. for voting trust
certificates evidencing 8,764 Class A shares held by him for
his own benefit and 26,445 Class B shares held by him as
custodian for his minor children and, in the case of W. B.
Wiltshire, for voting trust certificates evidencing 8,764
Class A shares held by him for his own benefit and 17,630
Class B shares held by him as custodian for his minor
children.
(13) Dixie Company is the nominee of Jefferson National Bank,
Richmond, Virginia, which holds 59,896 Class A shares and
voting trust certificates for another 2,313,656 Class A
shares in a number of fiduciary accounts that it administers
(including voting trust certificates for 13,536 Class A
shares previously reported in the table for Mrs. Hoppes).
(14) Clinton Webb and NationsBank, N.A., Richmond, Virginia are
the co-executors of the Estate of Mary Morton Parsons.
(c) Other than the Merger Agreement, the Corporation has no knowledge
of any contractual arrangement which may at a subsequent date
result in a change of control of the Corporation, except that the
1984 Voting Trust will expire on the earlier of (i) consummation
of the Merger or (ii) May 11, 1997.
ITEM 13. Certain Relationships and Related Transactions
(a) On September 4, 1996, the Corporation repurchased 150,000 shares
of its Class A Common Stock at a price of $3,526,500, or $23.51
per share, from an inter vivos trust created by George L.
Richardson prior to his death. At the time of the repurchase, the
Estate of George L. Richardson was the beneficial owner of more
than 5% of the Corporation's outstanding Class A Common Stock. G.
T. Richardson, a director and executive officer of the
Corporation, is a co-executor of the estate and co-trustee of the
trust. L. W. Richardson, a director of the Company, and G. T.
Richardson are beneficiaries of the estate. On September 27, 1996,
the Corporation repurchased voting trust certificates for 86,110
shares of its Class A Common Stock at a price of $2,098,931 or
$24.375 per share from Lee R. Jones who is the sister of L. W.
Richardson. Lee R. Jones received such voting trust certificates
as a distribution from the Estate of George L. Richardson. In the
case of each of the above purchases, the price paid by the
Corporation was below the then applicable bid price for the
Corporation's Class B Common Stock in the over-the-counter market,
and the Board of Directors determined that reacquisition of the
shares was in the best interest of the Corporation and its
stockholders when compared with alternative investments available
to the Corporation. Immediately upon their reacquisition, all of
the shares became authorized but unissued shares under Virginia
law.
(b) W. G. Hancock is a partner in the law firm of Mays & Valentine
which provided legal services as general counsel to the
Corporation and its subsidiaries and affiliates during 1996, and
is expected to serve in the same capacity in 1997. The amount of
legal fees paid to that firm by the Corporation and its
subsidiaries and affiliates for 1996 did not exceed 5% of the
firm's gross revenues for its last full fiscal year.
(c) Not applicable.
(d) Not applicable.
20
<PAGE>
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. and 2. - Financial Statements and Financial Statement
Schedules
The financial statements and financial statement schedules listed
in the accompanying Index to Financial Statements and Financial
Statement Schedules on page 23 are filed as part of this annual
report.
3. Exhibits
The exhibits listed in the accompanying Index to Exhibits are
filed as part of this annual report.
(b) Reports on Form 8-K
The Corporation filed a Report on Form 8-K dated December 27, 1996
with the Securities and Exchange Commission reporting on Item 1,
Changes in Control of Registrant to reflect the Agreement and Plan
of Merger with American General Corporation and AGC Life Insurance
Company and Home Beneficial Corporation.
21
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8 AND ITEMS 14(a)(1) and (2)
INDEX OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1996
HOME BENEFICIAL CORPORATION
RICHMOND, VIRGINIA
22
<PAGE>
HOME BENEFICIAL CORPORATION
Index to Financial Statements
and Financial Statement Schedules
(Item 8 and Items 14(a)(1) and (2))
Page
The following consolidated financial statements of Home Beneficial
Corporation are in response to the requirements of Item 8:
Report of Ernst & Young LLP, Independent Auditors 24
Consolidated Balance Sheet
-- December 31, 1996 and 1995 25-26
Consolidated Statement of Income
-- Years ended December 31, 1996, 1995, and 1994 27
Consolidated Statement of Retained Earnings
-- Years ended December 31, 1996, 1995, and 1994 28
Consolidated Statement of Cash Flows
-- Years ended December 31, 1996, 1995, and 1994 29
Notes to Consolidated Financial Statements
-- December 31, 1996 30-36
The following financial statement schedules of Home Beneficial Corporation
are in response to the requirements of Item 14 (a)(1) and (2):
Schedule I - Summary of Investments - Other Than Investments
in Related Parties 37
Schedule II - Condensed Financial Information of Registrant 38-40
Schedule IV - Reinsurance 41
All other schedules for which provision is made in the applicable accounting
regulation of the Securities Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.
23
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders Home Beneficial Corporation
We have audited the accompanying consolidated balance sheets of Home Beneficial
Corporation as of December 31, 1996 and 1995, and the related consolidated
statements of income, retained earnings, and cash flows for each of the three
years in the period ended December 31, 1996. Our audits also included the
financial statement schedules listed in the Index at Item 14(a). These financial
statements and schedules are the responsibility of the Corporation's management.
Our responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Home Beneficial
Corporation at December 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedules, when considered
in relation to the basic financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
/S/ ERNST & YOUNG LLP
Richmond, Virginia
February 7, 1997
24
<PAGE>
HOME BENEFICIAL CORPORATION
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996 AND 1995
1996 1995
(In millions)
ASSETS
INVESTMENTS - Note 2
Securities available-for-sale at fair value
Fixed maturities (amortized cost: 1996, $751.0;
1995, $744.0)........................................ $ 779.4 $ 795.7
Equities (cost: 1996, $8.5; 1995, $8.7) 34.7 29.5
Mortgage loans on real estate.......................... 375.0 339.8
Policy loans........................................... 55.0 54.5
Short-term investments................................. 31.4 41.1
Other.................................................. 9.8 6.2
--------- ---------
Total investments.................................. 1,285.3 1,266.8
CASH ................................................... 1.0 3.1
RECEIVABLES .............................................. 26.3 23.0
DEFERRED POLICY ACQUISITION COSTS......................... 102.4 99.3
PROPERTY AND EQUIPMENT AT COST
(less accumulated depreciation: 1996, $8.2; 1995, $7.4) 6.1 6.9
DEFERRED CHARGES AND OTHER ASSETS......................... 2.4 4.3
--------- ---------
$ 1,423.5 $ 1,403.4
========= =========
See accompanying notes.
25
<PAGE>
HOME BENEFICIAL CORPORATION
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
(In millions)
<S> <C>
LIABILITIES
Policy liabilities and accruals - Note 1
Future policy benefits................................. $ 682.3 $ 672.3
Unearned premiums...................................... 26.6 26.3
Policy claims and benefits payable..................... 12.7 10.8
-------- --------
Total policy liabilities and accruals................ 721.6 709.4
Other policyholder funds.................................. 74.8 71.5
Income taxes - Notes 2 and 5.............................. 17.0 21.0
Other liabilities......................................... 61.5 59.4
-------- --------
Total liabilities.................................... 874.9 861.3
COMMITMENTS AND CONTINGENT LIABILITIES - Note 3
STOCKHOLDERS' EQUITY - Notes 2, 6 and 7
Capital stock
Class A Common Stock, Voting, $.3125 par value, 12,800,000
shares authorized; 8,060,660 issued at December 31, 1996
and 8,446,200 issued at December 31, 1995 2.5 2.6
Class B Common Stock, Non-Voting, $.3125 par value,
19,200,000 shares authorized; 8,992,910 issued at December 31,
1996 and at December 31, 1995.......................... 2.8 2.8
-------- --------
Total capital stock.................................. 5.3 5.4
Unrealized gains on securities available-for-sale less
deferred income taxes.................................. 36.6 48.2
Retained earnings...................................... 506.7 488.5
-------- --------
Total stockholders' equity........................... 548.6 542.1
-------- --------
$1,423.5 $1,403.4
======== ========
</TABLE>
See accompanying notes.
26
<PAGE>
HOME BENEFICIAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
(In millions except per share data)
<S> <C>
REVENUES
Premiums............................................... $ 117.6 $114.0 $116.1
Net investment income - Note 2......................... 96.3 88.1 84.8
------- ------ ------
Total revenues..................................... 213.9 202.1 200.9
BENEFITS, CLAIMS AND EXPENSES
Benefits and claims.................................... 94.7 92.8 91.1
Underwriting, acquisition and insurance expenses:
Amortization of deferred policy acquisition costs 17.1 12.3 13.2
Commission and related sales expenses................ 8.3 11.7 11.3
General, administrative and other.................... 29.6 27.2 29.7
------- ------ ------
Total benefits, claims and expenses................ 149.7 144.0 145.3
------- ------ ------
INCOME BEFORE INCOME TAXES................................ 64.2 58.1 55.6
INCOME TAXES - Note 5
Current................................................ 21.5 19.9 18.5
Deferred............................................... .3 .3 .9
------- ------ ------
Total income taxes................................. 21.8 20.2 19.4
------- ------ ------
NET INCOME................................................ $ 42.4 $ 37.9 $ 36.2
======= ====== ======
NET INCOME PER SHARE OF COMMON STOCK
(Average shares outstanding: 1996, 17,244,257; 1995,
17,528,836; and 1994, 17,757,315) - Note 6 $ 2.46 $ 2.16 $ 2.04
======= ====== ======
</TABLE>
See accompanying notes.
27
<PAGE>
HOME BENEFICIAL CORPORATION
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
(In millions except per share data)
<S> <C>
Balance at beginning of year.............................. $488.5 $467.9 $453.4
Additions (deductions)
Net income............................................. 42.4 37.9 36.2
Dividends paid to stockholders (per share: 1996, $.87;
1995, $.83; 1994, $.795)............................. (15.0) (14.5) (14.1)
Purchase and retirement of Class A and Class B
Common Stock - Note 6................................ (9.2) (2.8) (7.6)
------ ------ ------
Balance at end of year.................................... $506.7 $488.5 $467.9
====== ====== ======
</TABLE>
See accompanying notes.
28
<PAGE>
HOME BENEFICIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
(In millions)
<S> <C>
Increase (Decrease) in Cash
Operating Activities
Net income ............................................ $ 42.4 $ 37.9 $ 36.2
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization........................ 1.4 1.4 1.4
Amortization of discount and premiums on
investments, net................................... (1.4) (1.4) (.9)
Increase in policy liabilities and accruals 12.2 12.6 10.7
Increase (decrease) in income tax liability 2.4 .9 (.9)
Policy acquisition costs deferred.................... (20.2) (15.3) (13.1)
Amortization of deferred policy acquisition costs 17.1 12.3 13.2
Realized investment (gains) ......................... (6.9) -- --
Other................................................ (1.3) ( .9) 1.6
------ ------- -------
Net cash provided by operating activities 45.7 47.5 48.2
Investing Activities
Proceeds from sales, calls or maturities of investments
Securities available-for-sale........................ 160.0 125.8 259.2
Mortgage loans on real estate........................ 39.7 35.4 44.4
Policy loans......................................... 12.7 11.2 10.6
Short term investments, net.......................... 9.7 -- 3.0
Real estate.......................................... 5.8 -- --
Other................................................ .4 .7 --
------ ------- -------
Total proceeds..................................... 228.3 173.1 317.2
------ ------- -------
Costs of investments acquired
Securities available-for-sale........................ (160.2) (149.0) (273.1)
Mortgage loans on real estate........................ (74.8) (37.1) (66.4)
Short term investments, net.......................... -- (8.6) --
Policy loans......................................... (13.2) (12.2) (11.3)
Other................................................ (6.9) (.5) (1.7)
------ ------- -------
Total costs........................................ (255.1) (207.4) (352.5)
------ ------- -------
Net cash used in investing activities (26.8) (34.3) (35.3)
Financing Activities
Dividends paid......................................... (15.0) (14.5) (14.1)
Purchase of Class A and Class B Common Stock (9.3) (2.8) (7.7)
Other.................................................. 3.3 5.5 4.6
------ ------- -------
Net cash used in financing activities................ (21.0) (11.8) (17.2)
------ ------- -------
Net (decrease) increase in cash........................... (2.1) 1.4 (4.3)
Cash at beginning of year................................. 3.1 1.7 6.0
------ ------- -------
Cash at end of year....................................... $ 1.0 $ 3.1 $ 1.7
====== ======= =======
Supplemental disclosure of cash flow information
Income tax payments.................................... $ 19.2 $ 20.4 $ 20.3
====== ======= =======
</TABLE>
See accompanying notes.
29
<PAGE>
HOME BENEFICIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation -- The consolidated financial statements include the accounts of
the Corporation, its principal subsidiary, Home Beneficial Life Insurance
Company (the Life Company), and its other subsidiaries. All significant
inter-company accounts and transactions are eliminated. The Corporation is
engaged predominantly in the life and accident and health insurance business.
Basis of Presentation -- The accompanying consolidated financial statements have
been prepared on the basis of generally accepted accounting principles (GAAP),
which reflect certain major adjustments to the Life Company's financial
statements as filed with insurance regulatory authorities (statutory basis). The
preparation of financial statements requires management to make estimates and
assumptions that affect amounts reported herein. Such estimates and assumptions
could change in the future as more information becomes known. See Note 7.
Investments --The Corporation's entire fixed maturity (bonds and redeemable
preferred stocks) and equity (non-redeemable preferred and common stocks)
securities are classified as available-for-sale. Accordingly, these securities
are reported at estimated fair value with related unrealized gains and losses
(net of deferred taxes) reported as a separate component of stockholders'
equity. Mortgage loans on real estate are reported at cost, adjusted where
appropriate for amortization of premium or discount. Short-term investments are
reported at cost and policy loans are reported at unpaid balances. Realized
investment gains and losses are included as a component of net investment
income. The cost of investments sold is generally determined under the specific
identification method.
Fair Value Disclosures -- The following methods and assumptions were used by the
Corporation in estimating its fair value disclosures for financial investments:
The carrying amounts of cash and short-term investments reported in the balance
sheet approximate their fair values. Fair values for fixed maturity securities
(including redeemable preferred stocks) are based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair values are
estimated using values obtained from independent pricing services or, in the
case of private placements, are estimated by discounting expected future cash
flows using a current market rate applicable to the yield, credit quality, and
maturity of the investments. The fair values for equity securities are based on
quoted market prices and are recognized in the balance sheet. The fair values
for mortgage loans and policy loans are estimated using discounted cash flow
analyses, using interest rates currently being offered for similar loans to
borrowers with similar credit ratings. Loans with similar characteristics are
aggregated for purposes of the calculations. Fair values for the Corporation's
liabilities under investment-type insurance contracts (included with policy
liabilities and accruals in the balance sheet) approximate recorded values. See
Note 2.
Revenues, Benefits, Claims, and Expenses
Traditional Life Insurance Products -- Traditional life insurance products
include those products with fixed and guaranteed premiums and benefits and
consist principally of whole life and limited-payment life insurance policies.
Premiums are recognized as revenues when due. Liabilities for policy benefits
and expenses for traditional life insurance policies are computed using a net
level premium method including assumptions as to investment yields, mortality,
withdrawals, and other assumptions which were appropriate at the time the
policies were issued based on the Life Company's experience modified as
necessary to reflect anticipated trends and to include provisions for possible
unfavorable deviations. Investment yield assumptions are graded and range from
9% to 3% and the weighted average assumed investment yield was approximately 4
1/2% for 1996. Unearned premiums include certain deferred profits on
limited-payment policies which are being recognized in income over the estimated
lives of the policies.
Interest-Sensitive Insurance Products -- Premiums for interest-sensitive
policies are recorded in a policyholder account as a liability. Premium revenue
is recognized as amounts are assessed against the policyholder account for
mortality coverage and policy administration. Surrender benefits reduce the
account value. Policy benefits and claims that are charged to expense include
interest credited to policyholder accounts and benefit claims incurred in excess
of the account balances. Interest credit rates for interest-sensitive insurance
products range from 6% to 5.4%. A liability equal to the current value of the
policyholder accounts is included in other policyholder funds in the balance
sheet.
Deferred Policy Acquisition Costs -- The costs of acquiring new business,
principally commissions and certain policy underwriting and issue costs, which
generally vary with and are primarily related to the production of new business,
have been deferred to the extent such costs are deemed recoverable from future
premiums. Costs deferred related to traditional life insurance are being
amortized over the premium paying period of the related policies using
assumptions consistent with those
30
<PAGE>
used in computing future policy benefits. Costs deferred related to
interest-sensitive policies are being amortized over the lives of the policies,
in relation to the present value of estimated gross profits from mortality,
investment and expense margins.
Income Taxes -- Income taxes have been provided using the liability method in
accordance with SFAS No. 109, "Accounting for Income Taxes". Under that method,
deferred tax assets and liabilities are determined based on the difference
between their financial reporting and their tax bases and are measured using the
enacted tax rates.
2. INVESTMENT OPERATIONS
The following is a summary of available-for-sale securities at December 31,
1996:
<TABLE>
<CAPTION>
Cost or Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(In millions)
<S> <C>
US Treasury securities and obligations of US
government corporations and agencies $ 29.9 $ 2.7 $ -- $ 32.6
Obligations of states and political subdivisions 381.4 12.2 .9 392.7
Debt securities issued by foreign governments 21.5 1.0 -- 22.5
Corporate securities 318.2 13.9 .5 331.6
-------- ------- -------- -------
Total fixed maturities 751.0 29.8 1.4 779.4
Equity securities 8.5 26.5 .3 34.7
-------- ------- -------- -------
Total $ 759.5 $ 56.3 $ 1.7 $ 814.1
======== ======= ======== =======
</TABLE>
The following is a summary of available-for-sale securities at December 31,
1995:
<TABLE>
<CAPTION>
Cost or Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(In millions)
<S> <C>
US Treasury securities and obligations of US
government corporations and agencies $ 31.2 $ 4.9 $ -- $ 36.1
Obligations of states and political subdivisions 350.2 20.0 .7 369.5
Debt securities issued by foreign governments 22.2 1.8 -- 24.0
Corporate securities 340.4 26.6 .9 366.1
------- ----- ----- ------
Total fixed maturities 744.0 53.3 1.6 795.7
Equity securities 8.7 20.8 -- 29.5
------- ----- ----- ------
Total $ 752.7 $74.1 $ 1.6 $825.2
======= ===== ===== ======
The amortized cost and estimated fair value of fixed maturities, by contractual
maturity, and equities available-for-sale at December 31, 1996, are shown below.
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
Cost or Estimated
Amortized Fair
Cost Value
(In millions)
Due in one year or less $ 23.1 $ 23.5
Due after one year through five years 223.2 231.0
Due after five years through ten years 449.3 465.8
Due after ten years 47.2 49.3
------- -------
742.8 769.6
US government mortgage backed securities 8.2 9.8
Equities 8.5 34.7
------- -------
Total $ 759.5 $ 814.1
======= =======
31
<PAGE>
The carrying amounts and fair values of the Corporation's investments in
mortgage loans on real estate and policy loans were as follows at December 31,
1996 and 1995:
1996 1995
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
(In millions)
Commercial mortgages $ 179.6 $ 183.4 $172.0 $186.6
Residential mortgages 195.4 189.8 167.8 176.7
------- ------- ------ ------
$ 375.0 $ 373.2 $339.8 $363.3
======= ======= ====== ======
Policy loans $ 55.0 $ 54.0 $ 54.5 $ 55.0
======= ======= ====== ======
Details of net investment income for the three years ended December 31, 1996 are
as follows:
1996 1995 1994
(In millions)
Fixed maturities $ 56.9 $ 55.4 $ 54.0
Equity securities .8 .9 1.0
Mortgage loans on real estate 30.4 28.6 28.3
Short-term investments 1.9 3.2 1.7
Realized investment gains 6.9 -- --
Other 4.3 4.4 4.1
------- ------ ------
Total investment income 101.2 92.5 89.1
Investment expenses (4.9) (4.4) (4.3)
------- ------ ------
Net investment income $ 96.3 $ 88.1 $ 84.8
======= ====== ======
Realized investment gains (losses) and unrealized investment gains (losses)
representing the change in difference between fair value and cost (principally
amortized cost for fixed maturities) on fixed maturities, equity securities and
other investments for the three years ended December 31, 1996 are summarized
below:
</TABLE>
<TABLE>
<CAPTION>
Investment Gains (Losses)
---------------------------------------------
Realized Change in Unrealized Net
(In millions)
<S> <C>
1996
Fixed maturities available-for-sale $ (2.5) $ (15.1) (1) $ (17.6)
Equity securities available-for-sale 7.8 3.5 (2) 11.3
Other 1.6 -- 1.6
------- -------- -------
$ 6.9 $ (11.6) $ (4.7)
======= ======== =======
(1)Net of $8.2 deferred income tax benefit.
(2)Net of $1.9 deferred income taxes.
1995
Fixed maturities available-for-sale $ (1.6) $ 50.7 (1) $ 49.1
Equity securities available-for-sale 1.6 4.1 (2) 5.7
Other -- -- --
------- -------- -------
$ -- $ 54.8 $ 54.8
======= ======== =======
(1)Net of $27.4 million deferred income taxes.
(2)Net of $2.2 million deferred income taxes.
1994
Fixed maturities available-for-sale $(5.9) $ (49.4) (1) $ (55.3)
Equity securities available-for-sale 5.9 (3.8) (2) 2.1
Other -- -- --
-------- -------- -------
$ -- $ (53.2) $ (53.2)
======== ======== =======
</TABLE>
(1)Net of $9.2 million deferred income tax benefit.
(2)Net of $2.1 million deferred income tax benefit.
32
<PAGE>
Proceeds from the sales of available-for-sale securities during 1996 were $93.1
million. Gross investment losses of $2.3 million were realized on those sales,
and there were no gross investment gains realized. 1995 proceeds from the sales
of available-for-sale securities were $80.7 million and gross investment gains
and gross investment losses of $0.1 million and $1.9 million were realized on
those sales, respectively.
As of December 31, 1996, approximately 52% of the mortgage loans on real estate
were on single family homes and 48% were on commercial properties such as
apartments, shopping centers, office buildings and warehouses. Approximately 73%
and 12%, respectively, of the mortgage loans are on properties geographically
dispersed throughout Virginia and North Carolina. The Corporation manages the
credit risk on its mortgage loan portfolio by, among other items, generally
restricting loan to collateral value ratios to a maximum of 75% at the time the
loan is made, limiting the total amount of loans outstanding by individual
borrower and monitoring the type of loans and extent of geographic concentration
within the region in which the Life Company operates.
No investment in any person or affiliates of the Corporation exceeded ten
percent of stockholders' equity at December 31, 1996.
3. REINSURANCE
Future policy benefits and claims are stated after deducting benefits applicable
to life insurance reinsured by other companies. The contingent liability for
such deducted benefits was less than 1% of future policy benefits at December
31, 1996. Premiums related to such reinsurance are insignificant.
The Life Company participates in two group life insurance programs as a
reinsurer and also assumes reinsurance on a facultative (individual risk) basis
from two other life insurance companies. Life insurance assumed relates
principally to group life and represented approximately 20% of premium income
for 1996 and 17% for 1995 and 1994. Claims incurred under these group life
insurance programs approximate the related premium income, and no significant
assets or liabilities are required in the balance sheet.
4. PENSION PLAN AND HEALTH AND LIFE INSURANCE BENEFITS
A noncontributory defined benefit pension plan covers substantially all
employees. The benefits are based on years of service and the employee's
compensation. As of December 31, 1996 and 1995, annuity contracts issued by the
Life Company covered benefit obligations of $59.2 million and $60.0 million,
respectively, for employees for service prior to 1989 and for all retirees. The
following table sets forth the plan's status for employees for service
subsequent to 1988 as of the indicated actuarial valuation dates:
December 31
1996 1995
(In millions)
Actuarial present value of benefit obligations:
Vested $17.3 $15.8
Non-vested 1.1 1.2
----- -----
Total accumulated benefit obligations $18.4 $17.0
===== =====
Pension assets at fair value (held in a Deposit Administration
Contract issued by the Life company to the pension plan) $18.9 $15.5
===== =====
Projected benefit obligation $25.4 $24.3
===== =====
Unrecognized net transition asset $ 1.1 $ 1.3
===== =====
The pension liabilities and reserves are included in future policy benefits
which are held by the Life Company and are supported by the general investments
of the Life Company.
The weighted-average discount rate used in determining the actuarial present
value of the above projected benefit obligations was 7.3% for 1996 and 7% for
1995. The rate of increase used for future compensation was 4 1/2% for both 1996
and 1995.
33
<PAGE>
The components of net pension expense for years ended December 31, 1996, 1995
and 1994 are as follows:
1996 1995 1994
(In millions)
Service cost -- benefits earned $ 1.7 $1.9 $2.1
Interest cost on projected benefit obligation 1.7 1.4 1.3
Net amortization and deferral (.2) (.2) (.2)
----- ---- ----
Net pension expense $ 3.2 $3.1 $3.2
===== ==== ====
Supplemental retirement benefits are provided to certain highly compensated
participants under non-qualified plans. Such individuals were designated by the
Board of Directors to receive supplemental retirement payments in addition to
their retirement benefits from the qualified retirement plans described above.
In addition, one of these plans provides for benefits which would have been
available from the qualified plans except for Internal Revenue Code limits on
compensation which can be counted in the benefit calculations.
In addition to the above plans, the Corporation has two postretirement plans --
a medical plan (consisting of defined benefit medical coverage for pre-1993
retirees and defined contribution medical coverage for post-1992 retirees who
were active employees on December 31, 1992) and a life insurance plan. The
pre-1993 retiree medical benefits program covers all employees who had retired
under the Corporation's pension plan as of December 31, 1992. The post-1992
retiree medical benefits program covers all employees who were full time active
at December 31, 1992 and who retire under the Corporation's pension plan after
December 31, 1992. Employees who joined the Corporation after December 31, 1992
are not eligible for participation in either program under the postretirement
medical benefits plan. The postretirement life insurance benefits plan covers
all employees who retire under the Corporation's pension plan.
The pre-1993 retiree medical benefits program reimburses its participants for
actual covered costs subject to specified deductibles and coinsurance. The
pre-1993 retiree program is contributory and participant contribution
requirements may be increased from time to time and benefits may be modified or
terminated by the Corporation. The post-1992 retiree medical benefits program is
noncontributory and reimburses its participants for the cost of health insurance
and other health care coverage premiums up to a maximum benefit amount
determined in accordance with the plan based on years of service as of December
31, 1992. A participant's unused maximum benefit amount for post-1992 retirees
determined as of December 31, 1992, is increased for interest only from January
1, 1993 until it is fully expended. The Corporation is self insured with respect
to benefits under both the medical and life insurance benefit plans.
The following is an analysis of the Corporation's accrued postretirement benefit
obligation for postretirement medical and life insurance benefit plans which is
included in other liabilities in the consolidated balance sheet at December 31,
1996 and 1995:
1996 1995
(In millions)
Retirees $26.1 $36.2
Fully eligible active plan participants 11.4 11.6
Other active plan participants 7.7 6.5
----- -----
Accumulated postretirement benefit obligation 45.2 54.3
Unrecognized net gain 10.7 1.6
----- -----
Accrued postretirement benefit obligation $55.9 $55.9
===== =====
The assumed rate of increase in the per capita cost of covered benefits (the
health care cost trend rate) at December 31, 1996 is 5% for 1997 and subsequent
years. At December 31, 1995, the assumed rate of increase was 10.4% to 15% for
1996 decreasing to 5 1/2% over approximately 14 years. The change in the health
care cost trend rate assumption resulted in a reduction in the accrued
post-retirement benefit obligation at December 31, 1996 of approximately $10.2
million. The health care cost trend rate assumption has a significant effect on
the amounts reported. For example, increasing the assumed health care cost trend
rate by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1996 by $2.3 million, and
the net periodic postretirement benefit cost for 1996 by $200,000.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.3% for 1996 and 7% for 1995.
Postretirement benefits expense was $2.9 million, $1.6 million and $3.5 million
for the years ended December 31, 1996, 1995 and 1994, respectively. This expense
primarily represents interest expense on the accumulated postretirement benefit
obligation and claims cost.
34
<PAGE>
5. FEDERAL INCOME TAXES
Under the tax law in effect prior to 1984, $78 million has been accumulated in a
"Policyholders' Surplus Account" which has not been subject to taxation.
Amounts, if any, distributed to stockholders from the account or exceeding
prescribed balance limitations will become taxable at the then current federal
income tax rates. Under the present circumstances, the Corporation does not
anticipate such account becoming taxable and no provision has been made for the
related deferred income taxes of $27.3 million.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Corporation's deferred tax liabilities and assets as of December 31, 1996
and 1995 are as follows:
1996 1995
(In millions)
Deferred tax assets:
Postretirement benefit obligation $ 17.3 $ 16.9
Policy liabilities 14.6 16.6
Other -- net 3.1 2.3
------- -------
35.0 35.8
Deferred tax (liabilities):
Deferred policy acquisition expenses (28.1) (27.2)
Discount on fixed maturities (2.6) (2.9)
Unrealized investment gain on available-for-sale securities (19.0) (25.4)
Other -- net ( .1) (1.1)
------- -------
(49.8) (56.6)
Net deferred tax (liability) $ (14.8) $ (20.8)
======= =======
The Corporation is required to establish a valuation allowance for any portion
of the deferred tax asset that management believes will not be realized. In the
opinion of management, it is more likely than not that the Corporation will
realize the benefit of the deferred tax assets, and therefore, no such valuation
allowance has been established.
The provision for income taxes differs from amounts computed by applying the
statutory tax rate to income before income taxes, and these differences arise
from the following:
<TABLE>
<CAPTION>
1996 1995 1994
Percent of Percent of Percent of
Pre-Tax Pre-Tax Pre-Tax
Amount Income Amount Income Amount Income
(In millions)
<S> <C>
Tax computed at the
prevailing statutory rate $22.5 35.0% $20.3 35.0% $19.4 35.0%
Deduct tax effect of:
Investment income not taxable (.5) (.8) (.5) (.8) (.5) (.9)
Other (.2) (.2) .3 .5 .5 .8
----- ----- ----- ---- ----- ----
(.7) (1.0) (.2) (.3) -- (.1)
----- ----- ----- ---- ----- ----
Provision for income taxes $21.8 34.0% $20.1 34.7% $19.4 34.9%
===== ===== ===== ==== ===== ====
</TABLE>
6. CAPITAL STOCK
The Corporation purchased 385,540 shares of its Class A Common Stock in 1996 at
a cost of $9.3 million. The cost was allocated to reduce Class A Common Stock
par value by $.1 million and retained earnings by $9.2 million.
In 1995 the Corporation purchased 30,376 shares of its Class A and 94,624 shares
of its Class B Common Stock at a cost of $2.8 million. The cost was allocated to
reduce Class A and Class B Common Stock par value by $9 thousand and $30
thousand respectively, and retained earnings by $2.8 million.
In 1994 the Corporation purchased 374,948 shares of its Class B Common Stock at
a cost of $7.7 million. The cost was allocated to reduce Class B Common Stock
par value and retained earnings by $ 0.1 million and $7.6 million, respectively.
35
<PAGE>
7. STOCKHOLDERS' EQUITY AND RESTRICTIONS
Consolidated stockholders' equity at December 31, 1996 includes $157 million
representing GAAP adjustments and minimum statutory capital and surplus
requirements of the Life Company that cannot be transferred in the form of
dividends, loans or advances to the Corporation.
In addition, the Corporation and the Life Company are subject to the provisions
of the Insurance Holding Company Act of the State of Virginia, which governs
transactions between the Corporation and the Life Company. The Act, among other
things, (1) requires that transactions among affiliates be fair and reasonable,
and (2) assures maintenance of reasonable statutory capital and surplus in
relation to the insurer's outstanding liabilities and its other financial needs.
Also the Act requires the prior approval of the State Corporation Commission for
transactions among affiliates that exceed three percent of the insurer's
admitted assets or twenty-five percent of the insurer's statutory capital and
surplus, whichever is the lesser, and, at December 31, 1996 the maximum amount
available under this provision without prior approval approximated $39 million.
The payment of dividends in any one year by the Life Company without approval by
the State Corporation Commission is limited to the lesser of (1) ten percent of
the insurer's prior year end statutory capital and surplus, or (2) prior year
statutory net gain from operations before realized capital gains or losses.
On a statutory basis, the net gain from operations before realized capital gains
or losses of the Life Company was $29.6 million, $29.4 million and $27.0 million
for the years ended December 31, 1996, 1995 and 1994, respectively; and
stockholder's equity (capital and surplus) as of December 31, 1996, 1995 and
1994 was $349.3 million, $343.2 million and $328.3 million, respectively.
8. ACQUISITION
On December 22, 1996, the Corporation's Board of Directors approved the merger
of the Corporation with and into AGC Life Insurance Company, a wholly-owned
subsidiary of American General Corporation. Subject to shareholder approval and
regulatory consents, the transaction is expected to close during the first
quarter of 1997.
9. UNAUDITED QUARTERLY FINANCIAL INFORMATION
First Second Third Fourth
Quarter Quarter Quarter Quarter
(In millions except for per share data)
1996
Premium income $ 29.3 $ 29.2 $ 29.1 $ 30.0
Net investment income 22.2 22.3 22.7 22.2
Realized investment gains -- -- -- 6.9
Income before income taxes 13.7 14.1 15.4 21.0
Net income 9.5 9.1 9.4 14.4
Net income per share .54 .53 .55 .84
1995
Premium income $ 28.8 $ 28.5 $ 28.4 $ 28.3
Net investment income 21.9 22.0 22.1 22.1
Income before income taxes 13.7 14.7 13.8 15.9
Net income 9.5 9.0 9.4 10.0
Net income per share .54 .51 .54 .57
36
<PAGE>
Schedule I
HOME BENEFICIAL CORPORATION
(CONSOLIDATED)
SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES
At December 31, 1996
Column A Column B Column C Column D
-------- -------- -------- --------
Amount at
which shown in
Type of Investment Cost Value balance sheet
------------------ ---- ----- -------------
(In millions)
Fixed maturity securities
available-for-sale:
Bonds and notes:
United States Government
and government agencies
and authorities $ 29.9 $ 32.6 $ 32.6
States, municipalities
& political subdivisions 381.4 392.7 392.7
Foreign governments 21.5 22.5 22.5
Public utilities 246.0 256.5 256.5
All other corporate 71.4 74.3 74.3
Redeemable preferred stock .8 .8 .8
-------- ------- --------
Total fixed maturities 751.0 $ 779.4 779.4
-------- ======= --------
Equity securities available-for-sale:
Common stocks:
Public utilities .6 $ 1.7 1.7
Banks, trust and insurance companies 2.4 8.2 8.2
Industrial, miscellaneous and other 5.0 24.2 24.2
Nonredeemable preferred stocks .5 .6 .6
-------- ------- --------
Total equity securities 8.5 $ 34.7 34.7
-------- ======= --------
Mortgage loans on real estate 375.0 375.0
Policy loans 55.0 55.0
Other long-term investments 9.8 9.8
Short-term investments 31.4 31.4
-------- --------
Total investments $1,230.7 $1,285.3
======== ========
37
<PAGE>
Schedule II
HOME BENEFICIAL CORPORATION
(PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEET
December 31, 1996 and 1995
1996 1995
---- ----
(In millions)
ASSETS
Cash and cash equivalents $ 1.7 $ 1.5
Investment in subsidiaries, at equity 542.1 535.6
Other assets 5.2 5.2
------- -------
$ 549.0 $ 542.3
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities $ .4 $ .2
Stockholders' equity (*)
Capital stock:
Class A Common Stock, Voting, $.3125 par
value 12,800,000 shares authorized;
8,060,660 issued at December 31, 1996
and 8,446,200 issued at December 31, 1995 2.5 2.6
Class B Common Stock, Non-Voting,
$.3125 par value, 19,200,000 shares
authorized; 8,992,910 issued at
December 31, 1996 and December 31, 1995 2.8 2.8
------- -------
Total capital stock 5.3 5.4
Unrealized gains on available-for-sale
securities of subsidiaries
less deferred income taxes 36.6 48.2
Retained earnings 506.7 488.5
------- -------
Total stockholders' equity 548.6 542.1
------- -------
$ 549.0 $ 542.3
======= =======
(*) See Notes 6 and 7 to Consolidated Financial Statements
38
<PAGE>
Schedule II
HOME BENEFICIAL CORPORATION
(PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF INCOME
Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
(In millions)
Revenues:
Dividends from subsidiaries $ 24.4 $ 17.4 $ 22.3
Other investment income 1.2 1.1 1.0
------ ------ ------
Total Revenues 25.6 18.5 23.3
Expenses:
Operating and administrative 1.4 .7 .8
------ ------ ------
Income before income taxes and
equity in undistributed income
of subsidiaries 24.2 17.8 22.5
Income taxes - current .1 .1 .1
------ ------ ------
Income before equity in
undistributed income of
subsidiaries 24.1 17.7 22.4
Equity in undistributed income
of subsidiaries 18.3 20.2 13.8
------ ------ ------
Net income $ 42.4 $ 37.9 $ 36.2
====== ====== ======
39
<PAGE>
Schedule II
HOME BENEFICIAL CORPORATION
(PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ----- ----
(In millions)
<S> <C>
Increase (Decrease) in Cash and Cash Equivalents (*)
Operating activities:
Net income $ 42.4 $ 37.9 $ 36.2
Adjustments to reconcile net income to
net cash provided from operating activities:
Undistributed net income of subsidiaries (18.3) (20.2) (13.8)
Other .4 .1 .3
------ ------ ------
Net cash provided by operating activities 24.5 17.8 22.7
Investing activities:
Additional investment in subsidiary -- -- (1.5)
------ ------ ------
Net cash used in investing activities -- -- (1.5)
Financing activities:
Purchase of common stock (9.3) (2.8) (7.7)
Cash dividends to stockholders (15.0) (14.5) (14.1)
------ ------ ------
Net cash used in financing activities (24.3) (17.3) (21.8)
------ ------ ------
Increase (Decrease) in cash and cash equivalents .2 .5 (.6)
Cash and cash equivalents, beginning of year 1.5 1.0 1.6
------ ------ ------
Cash and cash equivalents, end of year $ 1.7 $ 1.5 $ 1.0
====== ====== ======
</TABLE>
(*) Short-term investments, which consist of investments with maturities of 30
days or less, are considered cash equivalents
40
<PAGE>
Schedule IV
HOME BENEFICIAL CORPORATION
(CONSOLIDATED)
REINSURANCE
Years Ended December 31, 1996, 1995 and 1994
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
% of
Ceded Assumed amount
Gross to other from other Net assumed
amount companies companies amount to net
(In millions)
1996:
Life insurance
in force $4,865.0 $70.0 $6,954.1 $11,749.1 59.2%
======== ===== ======== ========= ====
Premiums:
Life insurance $ 91.4 $ .4 $ 22.9 $ 113.9 20.1%
Accident and
health insurance 2.6 -- 1.1 3.7 29.7
-------- ----- -------- --------- ----
Total premiums $ 94.0 $ .4 $ 24.0 $ 117.6 20.4%
======== ===== ======== ========= ====
1995:
Life insurance
in force $4,774.0 $84.9 $6,036.8 $10,725.9 56.3%
======== ===== ======== ========= ====
Premiums:
Life insurance $ 87.7 $ .4 $ 18.1 $ 105.4 17.2%
Accident and
health insurance 7.8 -- .8 8.6 9.3
-------- ----- -------- --------- ----
Total premiums $ 95.5 $ .4 $ 18.9 $ 114.0 16.6%
======== ===== ======== ========= ====
1994:
Life insurance
in force $4,641.8 $96.6 $5,678.6 $10,223.8 55.5%
======== ----- ======== ========= ====
Premiums:
Life insurance $ 88.3 $ .5 $ 19.2 $ 107.0 17.9%
Accident and
health insurance 8.4 -- .7 9.1 7.7
-------- ----- -------- --------- ----
Total premiums $ 96.7 $ .5 $ 19.9 $ 116.1 17.1%
======== ===== ======== ========= ====
41
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 or 15(d) of the Securities Exchange
Act of 1934 the Registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
HOME BENEFICIAL CORPORATION
- ---------------------------
Registrant
By: H. D. Garnett
-----------------------------------
Vice President and Controller, 2/18/97
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
R. W. Wiltshire
- -------------------------------------------
Chairman of the Board and Director, 2/18/97
L. W. Richardson
- --------------------------------------------
Retired Vice President and Director, 2/18/97
R. W. Wiltshire, Jr.
- --------------------------------------------------------
President, Chief Executive Officer and Director, 2/18/97
J. M. Wiltshire, Jr.
- -------------------------------
Secretary and Director, 2/18/97
W. B. Wiltshire
- ------------------------------------
Vice President and Director, 2/18/97
H. D. Garnett
- ------------------------------------------------
Vice President, Controller and Director, 2/18/97
G. T. Richardson
- ------------------------------------
Vice President and Director, 2/18/97
W. G. Hancock
- -----------------------------
Counsel and Director, 2/18/97
D. N. Hoppes
- -----------------
Director, 2/18/97
42
<PAGE>
HOME BENEFICIAL CORPORATION
Index to Exhibits
(Items 14(c))
<TABLE>
<CAPTION>
Sequential
Page Number
<S> <C>
EXHIBITS
2(i) - Agreement and Plan of Merger, dated as of December 22, 1996, (the
"Merger Agreement") with American General Corporation and AGC Life
Insurance Company and the Corporation incorporated herein by
reference from December 27, 1996 Form 8-K
(ii) - Amendment No. 1, dated as of January 22, 1997, to the Merger
Agreement 44
3(i) - Restated Articles of Incorporation incorporated herein by reference
from December 31, 1993 Form 10-K
(ii) - Bylaws incorporated herein by reference from December 31, 1992 Form
10-K
4 - Instruments defining the rights of security holders, including
indentures - See Article III of the Restated Articles of
Incorporation incorporated herein by reference from December 31, 1993
Form 10-K
9 - Voting Trust Agreement dated May 1, 1984, effective May 31, 1984, and
Voting Trust Extension Agreement dated May 1, 1987, effective May 11,
1987 incorporated herein by reference from December 31, 1992 Form
10-K
10 - Material Contracts -
(i) Consulting and compensation agreement with L. W. Richardson, a
Director of the Corporation, incorporated herein by reference
from December 31, 1992 Form 10-K.
(ii) Supplemental Compensation Agreement with R. W. Wiltshire,
Chairman of the Board of Directors of the Corporation,
incorporated herein by reference from September 30, 1993 Form
10-Q.
(iii) Supplemental Compensation Agreement with J. M. Wiltshire, Jr.,
a Director and Secretary of the Corporation, incorporated
herein by reference from September 30, 1995 Form 10-Q.
(iv) Supplemental Retirement Plan 45-64
(v) Supplemental Executive Retirement Plan 65-89
(vi) Consulting agreement with J. M. Wiltshire, Jr. 90
11 - Statement reference computation of per share earnings
- Not applicable
12 - Statement reference computation of ratios - Not applicable
13 - Annual Report to Security Holders - Not applicable
16 - Letter reference change in certifying accountant - Not applicable
18 - Letter reference change in accounting principles - Not applicable
21 - Subsidiaries of the Registrant incorporated herein by reference
from December 31, 1995 Form 10-K
22 - Published report regarding matters submitted to vote of security
holders - Not applicable
23 - Consents of experts and counsel
24 - Power of Attorney - Not applicable
27 - Financial Data Schedule 91
99 - Additional exhibits - Not applicable
43
<PAGE>
</TABLE>
Exhibit 2(ii)
AMENDMENT NO. 1 TO THE
AGREEMENT AND PLAN OF MERGER
AMENDMENT NO. 1, dated as of January 22, 1997 (this "Amendment"), by and
among American General Corporation, a Texas corporation ("Purchaser"), AGC Life
Insurance Company, a Missouri corporation and a wholly-owned subsidiary of
Purchaser ("Sub") and Home Beneficial Corporation, a Virginia corporation (the
"Company"), to the Agreement and Plan of Merger, dated as of December 22, 1996,
by and among Purchaser, Sub and the Company (the "Merger Agreement").
WHEREAS, Purchaser, Sub and the Company desire to amend and modify the
Merger Agreement as set forth herein;
NOW, THEREFORE, Purchaser, Sub and the Company hereby agree that the
Merger Agreement shall be, and hereby is, amended and modified as follows:
1. The last sentence in clause (i) of Section 3.1(a) of the Merger
Agreement is hereby amended and replaced in its entirety to read as follows:
"As used herein, the "Average Purchaser Price" shall mean the average of
the high and low sales prices, regular way, of Purchaser Common Stock as
reported in The Wall Street Journal during the ten consecutive New York
Stock Exchange trading days (each, a "Trading Day") ending on (and
including) the fifth Trading Day prior to the Effective Time (the "Trading
Average"); provided, however, that if the Trading Average is less than
$35.00, then the Average Purchaser Price shall be $35.00; and/or"
2. Clause (iii) of Section 3.3(e) of the Merger Agreement is hereby
amended and replaced in its entirety to read as follows:
"(iii) Each Share covered by a Cash Election and not fully converted
into the right to receive the Cash Consideration as set forth in clause (ii)
above shall be converted in the Merger into the right to receive a number of
shares of Purchaser Common Stock equal to the Exchange Ratio; and"
3. Except as amended and modified by this Amendment, all other terms of
the Merger Agreement shall remain unchanged.
4. This Amendment may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same instrument.
IN WITNESS WHEREOF, each of Purchaser, Sub and the Company has caused
this Amendment to be executed as of the date first above written.
AMERICAN GENERAL CORPORATION
By: Peter V. Tuters
Senior Vice President & Chief Investment Officer
AGC LIFE INSURANCE COMPANY
By: Peter V. Tuters
Vice President & Chief Investment Officer
HOME BENEFICIAL CORPORATION
By: R.W. Wiltshire, Jr.
President and Chief
Executive Officer
44
<PAGE>
EXHIBIT 10 (IV)
HOME BENEFICIAL SUPPLEMENTAL RETIREMENT PLAN
(AS ADOPTED EFFECTIVE JULY 1, 1996)
45
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITION OF TERMS
1.1 ACT 1
1.2 ADMINISTRATOR 1
1.3 AFFILIATE 1
1.4 BENEFICIARY 1
1.5 BOARD 1
1.6 CODE 2
1.7 EFFECTIVE DATE 2
1.8 ELIGIBLE EMPLOYEE 2
1.9 EMPLOYEE 2
1.10 EMPLOYER 2
1.11 EXCESS RETIREMENT BENEFIT 2
1.12 EXCESS RETIREMENT DEATH BENEFIT 2
1.13 EXCESS THRIFT BENEFIT 2
1.14 EXCESS THRIFT DEATH BENEFIT 2
1.15 PARTICIPANT 2
1.16 PLAN 2
1.17 PLAN SPONSOR 2
1.18 PLAN YEAR 3
1.19 THRIFT PLAN 3
1.20 RABBI TRUST 3
1.21 RETIREMENT PLAN 3
1.22 SUPPLEMENTAL RETIREMENT DEATH BENEFIT 3
1.23 SUPPLEMENTAL RETIREMENT BENEFIT 3
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.1 ELIGIBILITY AND DATE OF PARTICIPATION 3
2.2 LENGTH OF PARTICIPATION 3
ARTICLE III
EXCESS AND SUPPLEMENTAL BENEFITS
3.1 EXCESS RETIREMENT BENEFIT 3
3.2 EXCESS THRIFT BENEFIT 4
3.3 SUPPLEMENTAL RETIREMENT BENEFIT 5
ARTICLE IV
EXCESS AND SUPPLEMENTAL DEATH BENEFITS
4.1 DEATH AFTER BENEFIT COMMENCEMENT 5
4.2 DEATH BEFORE BENEFIT COMMENCEMENT 5
4.3 EXCESS RETIREMENT DEATH BENEFIT 5
4.4 EXCESS THRIFT DEATH BENEFIT 6
4.5 SUPPLEMENTAL RETIREMENT DEATH BENEFIT 6
- I - 46
<PAGE>
ARTICLE V
VESTING
5.1 VESTING GENERALLY 6
5.2 FORFEITURE OF BENEFITS 6
5.3 NO RESTORATION OF FORFEITED BENEFITS 6
5.4 DETERMINATION OF BENEFITS AFTER FORFEITURE FOLLOWED BY
RE-EMPLOYMENT 7
ARTICLE VI
PAYMENT OF BENEFITS
6.1 TIME AND MANNER FOR PAYMENT OF BENEFITS 7
6.2 DISCRETIONARY CASH-OUT BY LUMP SUM PAYMENT 7
6.3 BENEFIT DETERMINATION AND PAYMENT PROCEDURE 8
6.4 PAYMENTS TO MINORS AND INCOMPETENTS 8
6.5 DISTRIBUTION OF BENEFIT WHEN DISTRIBUTEE CANNOT BE LOCATED 8
6.6 CLAIMS PROCEDURE 8
ARTICLE VII
FUNDING
7.1 FUNDING 9
7.2 USE OF RABBI TRUST PERMITTED 10
ARTICLE VIII
FIDUCIARIES
8.1 FIDUCIARIES AND DUTIES AND RESPONSIBILITIES 10
8.2 LIMITATION OF DUTIES AND RESPONSIBILITIES OF FIDUCIARIES 10
8.3 SERVICE BY FIDUCIARIES IN MORE THAN ONE CAPACITY 10
8.4 ALLOCATION OR DELEGATION OF DUTIES AND RESPONSIBILITIES BY
FIDUCIARIES 10
8.5 ASSISTANCE AND CONSULTATION 10
8.6 COMPENSATION AND EXPENSES 10
8.7 INDEMNIFICATION 11
ARTICLE IX
PLAN ADMINISTRATOR
9.1 APPOINTMENT OF PLAN ADMINISTRATOR 11
9.2 PLAN SPONSOR AS PLAN ADMINISTRATOR 11
9.3 PROCEDURE IF A COMMITTEE 11
9.4 ACTION BY MAJORITY VOTE IF A COMMITTEE 11
9.5 APPOINTMENT OF SUCCESSORS 11
9.6 DUTIES AND RESPONSIBILITIES OF PLAN ADMINISTRATOR 11
9.7 POWER AND AUTHORITY 12
9.8 AVAILABILITY OF RECORDS 12
9.9 NO ACTION WITH RESPECT TO OWN BENEFIT 12
ARTICLE X
AMENDMENT OR TERMINATION OF THE PLAN
10.1 AMENDMENT OR TERMINATION OF THE PLAN 12
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ARTICLE XI
PARTICIPATION BY EMPLOYERS OTHER THAN THE PLAN SPONSOR
11.1 ADOPTION BY ADDITIONAL EMPLOYERS 12
11.2 TERMINATION EVENTS WITH RESPECT TO EMPLOYERS OTHER THAN THE
PLAN SPONSOR 13
11.3 EFFECT OF EMPLOYER MERGER, CONSOLIDATION OR LIQUIDATION 13
ARTICLE XII
MISCELLANEOUS
12.1 NON-ASSIGNABILITY 13
12.2 RIGHT TO REQUIRE INFORMATION AND RELIANCE THEREON 14
12.3 NOTICES AND ELECTIONS 14
12.4 DELEGATION OF AUTHORITY 14
12.5 SERVICE OF PROCESS 14
12.6 GOVERNING LAW 14
12.7 BINDING EFFECT 14
12.8 SEVERABILITY 14
12.9 NO EFFECT ON EMPLOYMENT AGREEMENT 14
12.10 GENDER AND NUMBER 14
12.11 TITLES AND CAPTIONS 14
12.12 CONSTRUCTION 14
12.13 INCOME AND EMPLOYMENT TAXES 15
APPENDIX A - LIST OF PARTICIPATING EMPLOYERS
APPENDIX B - LIST OF EXCESS BENEFIT PARTICIPANTS
APPENDIX C - LISTING AND DESCRIPTION OF SUPPLEMENTAL RETIREMENT AND DEATH
BENEFITS AND SUPPLEMENTAL BENEFIT PARTICIPANTS
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THIS SUPPLEMENTAL RETIREMENT PLAN (HEREINAFTER THE "PLAN") IS ADOPTED AS OF
THE 1ST DAY OF JULY, 1996 BY HOME BENEFICIAL CORPORATION, A VIRGINIA CORPORATION
(SOMETIMES REFERRED TO AS THE "PLAN SPONSOR"), AND HOME BENEFICIAL LIFE
INSURANCE COMPANY, A VIRGINIA CORPORATION (HEREINAFTER COLLECTIVELY CALLED THE
"EMPLOYER");
WITNESSETH:
WHEREAS, EACH EMPLOYER DESIRES TO RETAIN THE SERVICES OF CERTAIN TOP
MANAGEMENT EMPLOYEES AND DEEMS IT APPROPRIATE TO PROVIDE FOR ADDITIONAL
RETIREMENT INCOME FOR SUCH EMPLOYEES PURSUANT TO THE TERMS OF THE PLAN IN
CONSIDERATION OF THEIR SERVICES AND AS AN INCENTIVE TO REMAIN IN THE EMPLOY OF
THE EMPLOYER;
NOW, THEREFORE, WITNESSETH:
ARTICLE I
DEFINITION OF TERMS
THE FOLLOWING WORDS AND TERMS AS USED IN THIS PLAN SHALL HAVE THE MEANING
SET FORTH BELOW, UNLESS A DIFFERENT MEANING IS CLEARLY REQUIRED BY THE CONTEXT:
1.1 "ACT": THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS THE SAME
MAY BE AMENDED FROM TIME TO TIME, OR THE CORRESPONDING SECTIONS OF ANY
SUBSEQUENT LEGISLATION WHICH REPLACES IT, AND, TO THE EXTENT NOT INCONSISTENT
THEREWITH, THE REGULATIONS ISSUED THEREUNDER.
1.2 "ADMINISTRATOR": THE PLAN ADMINISTRATOR PROVIDED FOR IN ARTICLE IX
HEREOF.
1.3 "AFFILIATE": THE PLAN SPONSOR AND EACH OF THE FOLLOWING BUSINESS
ENTITIES OR OTHER ORGANIZATIONS (WHETHER OR NOT INCORPORATED) WHICH DURING THE
RELEVANT PERIOD IS TREATED (BUT ONLY FOR THE PORTION OF THE PERIOD SO TREATED
AND FOR THE PURPOSE AND TO THE EXTENT REQUIRED TO BE SO TREATED) TOGETHER WITH
THE EMPLOYER AS A SINGLE EMPLOYER PURSUANT TO THE FOLLOWING SECTIONS OF THE CODE
(AS MODIFIED WHERE APPLICABLE BY SECTION 415(H) OF THE CODE):
(I) ANY CORPORATION WHICH IS A MEMBER OF A CONTROLLED GROUP OF
CORPORATIONS (AS DEFINED IN SECTION 414(B) OF THE CODE) WHICH INCLUDES THE
EMPLOYER, AND
(II) ANY TRADE OR BUSINESS (WHETHER OR NOT INCORPORATED) WHICH IS
UNDER COMMON CONTROL (AS DEFINED IN SECTION 414(C) OF THE CODE) WITH THE
EMPLOYER.
1.4 "BENEFICIARY": FOR PURPOSES OF:
(I) THE EXCESS RETIREMENT DEATH BENEFIT AND THE EXCESS THRIFT
DEATH BENEFIT, THE PERSON OR PERSONS ENTITLED UNDER THE RETIREMENT PLAN AND
THRIFT PLAN, RESPECTIVELY, TO RECEIVE ANY BENEFITS PAYABLE THEREUNDER AFTER
THE PARTICIPANT'S DEATH.
(II) THE SUPPLEMENTAL DEATH BENEFIT, THE PERSON OR PERSONS
ENTITLED PURSUANT TO APPENDIX C TO THE PLAN TO RECEIVE ANY BENEFITS PAYABLE
THEREUNDER AFTER THE PARTICIPANT'S DEATH.
1.5 "BOARD": THE PRESENT AND ANY SUCCEEDING BOARD OF DIRECTORS OF THE PLAN
SPONSOR, UNLESS SUCH TERM IS USED WITH RESPECT TO A PARTICULAR EMPLOYER AND ITS
EMPLOYEES, IN WHICH EVENT IT SHALL MEAN THE PRESENT AND ANY SUCCEEDING BOARD OF
DIRECTORS OF THAT EMPLOYER.
1.6 "CODE": THE INTERNAL REVENUE CODE OF 1986, AS THE SAME MAY BE AMENDED
FROM TIME TO TIME, OR THE CORRESPONDING SECTION OF ANY SUBSEQUENT INTERNAL
REVENUE CODE, AND, TO THE EXTENT NOT INCONSISTENT THEREWITH, REGULATIONS ISSUED
THEREUNDER.
1.7 "EFFECTIVE DATE": JULY 1, 1996.
1.8 "ELIGIBLE EMPLOYEE": AN EMPLOYEE (OR FORMER EMPLOYEE) WHO IS (OR WAS) A
PARTICIPANT IN EITHER THE RETIREMENT PLAN OR THE THRIFT PLAN, OR BOTH, AND WHO
IS DESIGNATED BY EITHER THE CHIEF EXECUTIVE OFFICER OR THE BOARD OF THE PLAN
SPONSOR AS A PARTICIPANT IN THE CASE OF EXCESS BENEFIT PARTICIPANTS OR WHO IS
DESIGNATED BY THE BOARD OF THE PLAN SPONSOR AS A PARTICIPANT IN THE CASE
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OF SUPPLEMENTAL BENEFIT PARTICIPANTS.
1.9 "EMPLOYEE": AN INDIVIDUAL WHO IS EMPLOYED IN THE SERVICE OF THE
EMPLOYER AS A COMMON LAW EMPLOYEE.
1.10 "EMPLOYER":
1.10(A) HOME BENEFICIAL CORPORATION, A VIRGINIA CORPORATION (OR ANY
SUCCESSOR THERETO); HOME BENEFICIAL LIFE INSURANCE COMPANY, A VIRGINIA
CORPORATION; AND ANY ADDITIONAL AFFILIATE EXECUTING OR ADOPTING THIS PLAN AS A
PARTICIPATING EMPLOYER. A LISTING OF THE EMPLOYERS PARTICIPATING IN THE PLAN IS
ATTACHED HERETO AS APPENDIX A AND SHALL BE UPDATED BY THE ADMINISTRATOR AT EACH
COMMENCEMENT OR TERMINATION OF PARTICIPATION BY AN EMPLOYER.
1.10(B) EMPLOYMENT WITH AN AFFILIATE SHALL BE CONSIDERED EMPLOYMENT WITH THE
EMPLOYER FOR ALL PURPOSES OF THE PLAN OTHER THAN DETERMINING ELIGIBLE EMPLOYEES.
1.11 "EXCESS RETIREMENT BENEFIT": THE EXCESS RETIREMENT BENEFIT DUE A
PARTICIPANT UNDER THE PLAN, AS DETERMINED PURSUANT TO ARTICLE III HEREOF.
1.12 "EXCESS RETIREMENT DEATH BENEFIT": THE EXCESS RETIREMENT DEATH BENEFIT
DUE THE BENEFICIARY OF A PARTICIPANT UNDER THE PLAN, AS DETERMINED PURSUANT TO
ARTICLE IV HEREOF.
1.13 "EXCESS THRIFT BENEFIT": THE EXCESS THRIFT BENEFIT DUE A PARTICIPANT
UNDER THE PLAN, AS DETERMINED PURSUANT TO ARTICLE III HEREOF.
1.14 "EXCESS THRIFT DEATH BENEFIT": THE EXCESS THRIFT DEATH BENEFIT DUE THE
BENEFICIARY OF A PARTICIPANT UNDER THE PLAN, AS DETERMINED PURSUANT TO ARTICLE
IV HEREOF.
1.15 "PARTICIPANT": AN ELIGIBLE EMPLOYEE QUALIFIED TO PARTICIPATE IN THE
PLAN, FOR SO LONG AS HE IS CONSIDERED A PARTICIPANT, AS PROVIDED IN ARTICLE II
HEREOF. A PARTICIPANT MAY BE DESIGNATED AS AN "EXCESS BENEFIT PARTICIPANT"
(INCLUDING AN "EXCESS RETIREMENT BENEFIT PARTICIPANT" AND/OR AN "EXCESS THRIFT
BENEFIT PARTICIPANT") AND/OR A "SUPPLEMENTAL BENEFIT PARTICIPANT". FOR PURPOSES
HEREOF:
(I) AN "EXCESS RETIREMENT BENEFIT PARTICIPANT" IS A PARTICIPANT
WHO IS DESIGNATED AS SUCH AND WHO IS OR MAY BECOME ENTITLED TO AN EXCESS
RETIREMENT BENEFIT.
(II) AN "EXCESS THRIFT BENEFIT PARTICIPANT" IS A PARTICIPANT WHO
IS DESIGNATED AS SUCH AND WHO IS OR MAY BECOME ENTITLED TO AN EXCESS THRIFT
BENEFIT.
(III) A "SUPPLEMENTAL BENEFIT PARTICIPANT" IS A PARTICIPANT WHO IS
DESIGNATED AS SUCH AND WHO IS OR MAY BECOME ENTITLED TO A SUPPLEMENTAL
RETIREMENT BENEFIT.
1.16 "PLAN": THIS DOCUMENT AS CONTAINED HEREIN OR DULY AMENDED. THE PLAN
MAINTAINED PURSUANT HERETO SHALL BE KNOWN AS THE "HOME BENEFICIAL SUPPLEMENTAL
RETIREMENT PLAN".
1.17 "PLAN SPONSOR": HOME BENEFICIAL CORPORATION, A VIRGINIA CORPORATION
(OR ANY SUCCESSOR THERETO).
1.18 "PLAN YEAR": THE CALENDAR YEAR.
1.19 "THRIFT PLAN": THE HOME BENEFICIAL THRIFT PLAN, AS AMENDED FROM TIME TO
TIME, WHICH PLAN IS A DEFINED CONTRIBUTION PLAN MAINTAINED BY THE PLAN SPONSOR
AND QUALIFIED UNDER SECTION 401 OF THE CODE.
1.20 "RABBI TRUST": A TRUST FUND DESCRIBED IN PARAGRAPH 7.2 IF ESTABLISHED
AND MAINTAINED FOR THE PLAN.
1.21 "RETIREMENT PLAN": THE HOME BENEFICIAL RETIREMENT PLAN, AS AMENDED FROM
TIME TO TIME, WHICH PLAN IS A DEFINED BENEFIT PENSION PLAN MAINTAINED BY THE
PLAN SPONSOR AND QUALIFIED UNDER SECTION 401 OF THE CODE.
1.22 "SUPPLEMENTAL DEATH BENEFIT": THE SUPPLEMENTAL RETIREMENT DEATH
BENEFIT DUE THE BENEFICIARY OF A PARTICIPANT UNDER THE PLAN, AS DETERMINED
PURSUANT TO ARTICLE IV HEREOF.
1.23 "SUPPLEMENTAL RETIREMENT BENEFIT": THE SUPPLEMENTAL RETIREMENT BENEFIT
DUE A PARTICIPANT UNDER THE PLAN, AS DETERMINED PURSUANT TO ARTICLE III HEREOF.
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ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.1 ELIGIBILITY AND DATE OF PARTICIPATION.
2.1(A) EACH ELIGIBLE EMPLOYEE SHALL BE A PARTICIPANT IN THE PLAN COMMENCING
WITH THE LATER OF THE EFFECTIVE DATE OF THE PLAN OR THE DATE HE FIRST BECOMES,
OR AGAIN BECOMES, AN ELIGIBLE EMPLOYEE.
2.1(B) A LISTING OF THE EMPLOYEES WHO ARE EXCESS BENEFIT PARTICIPANTS IN THE
PLAN, AND STATUS AS EXCESS RETIREMENT BENEFIT PARTICIPANTS AND/OR EXCESS THRIFT
BENEFIT PARTICIPANTS, IS ATTACHED HERETO AS APPENDIX B AND SHALL BE UPDATED BY
THE ADMINISTRATOR AT EACH COMMENCEMENT OR TERMINATION OF STATUS AS AN EXCESS
BENEFIT PARTICIPANT. A LISTING OR IDENTIFICATION OF THE EMPLOYEES WHO ARE
SUPPLEMENTAL BENEFIT PARTICIPANTS IN THE PLAN IS ATTACHED HERETO AS APPENDIX C
AND SHALL BE UPDATED BY THE ADMINISTRATOR AT EACH COMMENCEMENT OR TERMINATION OF
STATUS AS A SUPPLEMENTAL BENEFIT PARTICIPANT.
2.2 LENGTH OF PARTICIPATION. EACH ELIGIBLE EMPLOYEE WHO BECOMES A
PARTICIPANT SHALL BE OR REMAIN A PARTICIPANT FOR SO LONG AS HE IS AN ELIGIBLE
EMPLOYEE OR HE IS ENTITLED TO FUTURE BENEFITS UNDER THE TERMS OF THE PLAN.
ARTICLE III
EXCESS AND SUPPLEMENTAL BENEFITS
3.1 EXCESS RETIREMENT BENEFIT.
3.1(A) SUBJECT TO THE TERMS AND CONDITIONS SET FORTH HEREIN, A PARTICIPANT
WHO IS AN EXCESS RETIREMENT BENEFIT PARTICIPANT SHALL BE ENTITLED TO AN EXCESS
RETIREMENT BENEFIT, GENERALLY EXPRESSED AS A BENEFIT PAYABLE MONTHLY FOR THE
LIFE OF THE PARTICIPANT AND COMMENCING AT THE APPLICABLE TIME PROVIDED IN THE
RETIREMENT PLAN, EQUAL TO THE EXCESS, IF ANY, OF:
(I) THE AMOUNT OF THE PARTICIPANT'S ACCRUED BENEFIT UNDER THE
RETIREMENT PLAN (REFERRED TO IN THE RETIREMENT PLAN AS HIS "ACCRUED
BENEFIT"), CALCULATED AS PROVIDED IN THE RETIREMENT PLAN BUT WITHOUT REGARD
TO THE FOLLOWING:
(A) THE LIMITATIONS ON CONTRIBUTIONS AND
BENEFITS IMPOSED BY SECTION 415 OF THE CODE, AND
(B) THE LIMITATION ON COMPENSATION IMPOSED BY SECTION
401(A)(17) OF THE CODE (REFERRED TO IN THE RETIREMENT PLAN AS
THE "COMPENSATION LIMIT"), PROVIDED, HOWEVER, THAT UNLESS
OTHERWISE EXPRESSLY PROVIDED WITH RESPECT TO A PARTICIPANT
ACCRUALS HEREUNDER FOR COMPENSATION IN EXCESS OF THE
COMPENSATION LIMIT SHALL ONLY BE APPLICABLE FOR EACH PLAN YEAR
AN ELIGIBLE EMPLOYEE IS AN EXCESS RETIREMENT BENEFIT PARTICIPANT
AND SHALL ALSO BE APPLICABLE RETROACTIVELY TO JANUARY 1, 1995
FOR EACH ELIGIBLE EMPLOYEE WHO BECOMES AN EXCESS RETIREMENT
BENEFIT PARTICIPANT IN 1996, OVER
(II) THE ACTUAL AMOUNT OF THE PARTICIPANT'S ACCRUED BENEFIT UNDER
THE RETIREMENT PLAN.
TO THE EXTENT THAT THE PARTICIPANT'S ACCRUED BENEFIT PAYABLE UNDER THE
RETIREMENT PLAN IS INCREASED AT ANY TIME DUE TO INCREASES IN LIMITATIONS ON
CONTRIBUTIONS AND BENEFITS IMPOSED BY SECTION 415 OF THE CODE OR TO INCREASES IN
THE LIMITATION ON COMPENSATION IMPOSED BY SECTION 401(A)(17) OF THE CODE,
WHETHER BY STATUTE, REGULATIONS, ACTION OF THE SECRETARY OF THE TREASURY OR HIS
DELEGATE OR OTHERWISE, THE PARTICIPANT'S EXCESS RETIREMENT BENEFIT SHALL BE
REDUCED CORRESPONDINGLY.
3.1(B) IF A PARTICIPANT CEASES TO BE AN ELIGIBLE EMPLOYEE, HIS EXCESS
RETIREMENT BENEFIT AND EXCESS RETIREMENT DEATH BENEFIT SHALL NOT BE INCREASED
THEREAFTER EXCEPT UPON HIS AGAIN BECOMING AN ELIGIBLE EMPLOYEE.
3.2 EXCESS THRIFT BENEFIT.
3.2(A) SUBJECT TO THE TERMS AND CONDITIONS SET FORTH HEREIN, A PARTICIPANT
WHO IS AN EXCESS THRIFT BENEFIT PARTICIPANT SHALL BE ENTITLED TO AN EXCESS
THRIFT BENEFIT EQUAL TO THE BALANCE IN HIS EXCESS THRIFT ACCOUNT. THE BALANCE IN
HIS EXCESS THRIFT ACCOUNT SHALL CONSIST OF HIS ANNUAL EXCESS THRIFT ALLOCATIONS
DETERMINED PURSUANT TO SUBPARAGRAPH 3.2(B), SUBTRACTIONS DETERMINED PURSUANT TO
SUBPARAGRAPH 3.2(D) AND DEEMED EARNINGS OR LOSS THEREON DETERMINED PURSUANT TO
SUBPARAGRAPH 3.2(E).
3.2(B) FOR EACH PLAN YEAR AN ELIGIBLE EMPLOYEE IS AN EXCESS THRIFT BENEFIT
PARTICIPANT AND RETROACTIVELY TO JANUARY 1, 1995 FOR EACH ELIGIBLE EMPLOYEE WHO
BECOMES AN EXCESS THRIFT BENEFIT PARTICIPANT IN 1996, THERE SHALL BE CREDITED TO
HIS EXCESS THRIFT ACCOUNT AN AMOUNT (REFERRED TO AS THE "EXCESS THRIFT
ALLOCATION") EQUAL TO THE MATCHING CONTRIBUTIONS (REFERRED TO IN THE THRIFT PLAN
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AS "COMPANY THRIFT CONTRIBUTIONS"), BASED ON HIS ACTUAL EMPLOYEE AFTER-TAX
CONTRIBUTIONS UNDER THE THRIFT PLAN (REFERRED TO IN THE THRIFT PLAN AS "EMPLOYEE
THRIFT CONTRIBUTIONS"), WHICH WOULD HAVE BEEN ALLOCATED TO, OR WOULD HAVE
REMAINED ALLOCATED TO, HIS ACCOUNT UNDER THE THRIFT PLAN FOR SUCH PLAN YEAR BUT
FOR THE LIMITATION ON CONTRIBUTIONS AND BENEFITS IMPOSED BY SECTION 415 OF THE
CODE AND THE LIMITATION ON COMPENSATION IMPOSED BY SECTION 401(A)(17) OF THE
CODE (REFERRED TO IN THE THRIFT PLAN AS THE "COMPENSATION LIMIT"). SUCH AMOUNTS
SHALL BE CREDITED AS OF THE END OF THE PLAN YEAR.
3.2(C) IF A PARTICIPANT CEASES TO BE AN ELIGIBLE EMPLOYEE, HIS EXCESS THRIFT
DEATH BENEFIT AND EXCESS THRIFT BENEFIT SHALL NOT BE INCREASED THEREAFTER,
EXCEPT FOR INTEREST (OR OTHER DEEMED EARNINGS) CREDITED TO HIS EXCESS THRIFT
BENEFIT OR EXCEPT UPON HIS AGAIN BECOMING AN ELIGIBLE EMPLOYEE.
3.2(D) THE FOLLOWING AMOUNTS SHALL BE SUBTRACTED FROM A PARTICIPANT'S EXCESS
THRIFT ACCOUNT:
(I) ALL FORFEITURES FROM THE ACCOUNT, WHICH SHALL BE
SUBTRACTED WHEN THEY OCCUR.
(II) ALL DISTRIBUTIONS FROM THE ACCOUNT, WHICH SHALL BE SUBTRACTED
WHEN MADE.
3.2(E) AT THE END OF EACH CALENDAR QUARTER OF A PLAN YEAR, THERE SHALL BE
CREDITED TO EACH PARTICIPANT'S EXCESS THRIFT ACCOUNT AN AMOUNT REPRESENTING
DEEMED EARNINGS OR LOSS ON THE BALANCE OF SUCH ACCOUNT AS OF THE BEGINNING OF
SUCH CALENDAR QUARTER REDUCED BY DISTRIBUTIONS OR FORFEITURES FROM SUCH ACCOUNT
DURING SUCH CALENDAR QUARTER. SUCH EARNINGS OR LOSS SHALL BE DETERMINED AND
CREDITED ON THE SAME BASIS THAT EARNINGS OR LOSS ARE CREDITED FOR THE SAME
PERIOD UNDER THE THRIFT PLAN.
3.2(F) WHEN AN ERROR OR OMISSION IS DISCOVERED IN THE ACCOUNT OF A
PARTICIPANT, THE ADMINISTRATOR SHALL BE AUTHORIZED TO MAKE SUCH EQUITABLE
ADJUSTMENT AS IT DEEMS APPROPRIATE.
3.2(G) NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, A PARTICIPANT'S
EXCESS THRIFT ACCOUNT IS INTENDED ONLY TO BE A BOOK ACCOUNT MAINTAINED BY THE
EMPLOYER FOR ADMINISTRATIVE PURPOSES HEREUNDER.
3.2(H) WITHIN A REASONABLE TIME AFTER THE END OF EACH PLAN YEAR AND AT THE
DATE A PARTICIPANT'S EXCESS THRIFT BENEFIT OR EXCESS THRIFT DEATH BENEFIT
BECOMES PAYABLE UNDER THE PLAN, THE ADMINISTRATOR SHALL PROVIDE TO EACH
PARTICIPANT (OR, IF DECEASED, TO HIS BENEFICIARY) A STATEMENT OF THE BALANCE AS
OF SUCH DATE IN HIS EXCESS THRIFT ACCOUNT.
3.3 SUPPLEMENTAL RETIREMENT BENEFIT. THE SUPPLEMENTAL RETIREMENT BENEFIT
UNDER THE PLAN OF A PARTICIPANT WHO IS A SUPPLEMENTAL BENEFIT PARTICIPANT
CONSISTS OF THAT DEATH BENEFIT, IF ANY, PROVIDED FOR THE PARTICIPANT IN APPENDIX
C TO THE PLAN.
ARTICLE IV
EXCESS AND SUPPLEMENTAL DEATH BENEFITS
4.1 DEATH AFTER BENEFIT COMMENCEMENT. IF A PARTICIPANT DIES AFTER HIS EXCESS
RETIREMENT BENEFIT, HIS EXCESS THRIFT BENEFIT OR HIS SUPPLEMENTAL RETIREMENT
BENEFIT COMMENCES TO BE PAID, THE ONLY BENEFITS PAYABLE UNDER THE PLAN TO HIS
BENEFICIARY AFTER HIS DEATH SHALL BE THOSE, IF ANY, PROVIDED UNDER THE FORM OF
PAYMENT OF SUCH BENEFIT BEING MADE TO HIM AT HIS DEATH. THE PROVISIONS OF THIS
PARAGRAPH SHALL APPLY SEPARATELY TO EACH SUCH BENEFIT.
4.2 DEATH BEFORE BENEFIT COMMENCEMENT. IF A PARTICIPANT DIES BEFORE HIS
EXCESS RETIREMENT BENEFIT, HIS EXCESS THRIFT BENEFIT OR HIS SUPPLEMENTAL
RETIREMENT BENEFIT COMMENCES TO BE PAID, THE ONLY BENEFIT PAYABLE UNDER THE PLAN
WITH RESPECT TO HIM SHALL BE THE EXCESS RETIREMENT DEATH BENEFIT, EXCESS THRIFT
DEATH BENEFIT OR SUPPLEMENTAL DEATH BENEFIT, IF ANY, PROVIDED IN THIS ARTICLE
IV. THE PROVISIONS OF THIS PARAGRAPH SHALL APPLY SEPARATELY TO EACH SUCH
BENEFIT.
4.3 EXCESS RETIREMENT DEATH BENEFIT. SUBJECT TO THE TERMS AND CONDITIONS SET
FORTH HEREIN, IF AN EXCESS RETIREMENT BENEFIT PARTICIPANT DIES BEFORE HIS EXCESS
RETIREMENT BENEFIT COMMENCES TO BE PAID AND IF HIS BENEFICIARY IS ENTITLED TO
RECEIVE A PRE- RETIREMENT SPOUSE'S DEATH BENEFIT UNDER THE RETIREMENT PLAN
(REFERRED TO IN THE RETIREMENT PLAN AS THE "PRE-RETIREMENT SPOUSE'S DEATH
BENEFIT"), SUCH BENEFICIARY SHALL BE ENTITLED TO RECEIVE AS AN EXCESS RETIREMENT
DEATH BENEFIT UNDER THE PLAN AN AMOUNT EQUAL TO THE EXCESS OF:
(I) THE AMOUNT OF SUCH PRE-RETIREMENT SPOUSE'S DEATH BENEFIT
UNDER THE RETIREMENT PLAN, CALCULATED AS PROVIDED IN THE RETIREMENT PLAN BUT
WITHOUT REGARD TO THE FOLLOWING:
(A) THE LIMITATIONS ON CONTRIBUTIONS AND BENEFITS IMPOSED
BY SECTION 415 OF THE CODE, AND
(B) THE LIMITATION ON COMPENSATION IMPOSED BY SECTION
401(A)(17) OF THE CODE (REFERRED TO IN THE RETIREMENT PLAN AS
THE "COMPENSATION LIMIT"), OVER
(II) THE ACTUAL AMOUNT OF SUCH PRE-RETIREMENT SPOUSE'S
DEATH BENEFIT UNDER THE RETIREMENT PLAN.
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TO THE EXTENT THAT THE PARTICIPANT'S ACCRUED BENEFIT OR HIS PRE-RETIREMENT
SPOUSE'S DEATH BENEFIT PAYABLE UNDER THE RETIREMENT PLAN IS INCREASED AT ANY
TIME DUE TO INCREASES IN THE LIMITATIONS ON CONTRIBUTIONS AND BENEFITS IMPOSED
BY SECTION 415 OF THE CODE OR TO INCREASES IN THE LIMITATION ON COMPENSATION
IMPOSED BY SECTION 401(A)(17) OF THE CODE, WHETHER BY STATUTE, REGULATIONS,
ACTION BY THE SECRETARY OF TREASURY OR HIS DELEGATE OR OTHERWISE, THE
PARTICIPANT'S EXCESS RETIREMENT DEATH BENEFIT SHALL BE REDUCED CORRESPONDINGLY.
4.4 EXCESS THRIFT DEATH BENEFIT. SUBJECT TO THE TERMS AND CONDITIONS SET
FORTH HEREIN, IF AN EXCESS THRIFT BENEFIT PARTICIPANT DIES BEFORE HIS EXCESS
THRIFT BENEFIT COMMENCES TO BE PAID, HIS BENEFICIARY SHALL BE ENTITLED TO
RECEIVE AN EXCESS THRIFT DEATH BENEFIT EQUAL TO THE VESTED BALANCE IN HIS EXCESS
THRIFT ACCOUNT.
4.5 SUPPLEMENTAL DEATH BENEFIT. THE SUPPLEMENTAL DEATH BENEFIT UNDER THE
PLAN WITH RESPECT TO A SUPPLEMENTAL BENEFIT PARTICIPANT CONSISTS OF THAT DEATH
BENEFIT, IF ANY, PROVIDED FOR THE PARTICIPANT IN APPENDIX C TO THE PLAN.
ARTICLE V
VESTING
5.1 VESTING GENERALLY.
5.1(A) A PARTICIPANT'S EXCESS RETIREMENT BENEFIT OR EXCESS RETIREMENT DEATH
BENEFIT, AS THE CASE MAY BE, SHALL BE VESTED TO THE EXTENT AND DETERMINED IN THE
MANNER THAT HE HAS A VESTED AND NON-FORFEITABLE RIGHT TO HIS EMPLOYER-DERIVED
ACCRUED BENEFIT UNDER THE RETIREMENT PLAN.
5.1(B) A PARTICIPANT'S EXCESS THRIFT BENEFIT OR EXCESS THRIFT DEATH BENEFIT,
AS THE CASE MAY BE, AT ANY TIME SHALL BE VESTED TO THE EXTENT AND DETERMINED IN
THE MANNER THAT HE HAS A VESTED AND NON-FORFEITABLE RIGHT TO HIS
EMPLOYER-DERIVED COMPANY THRIFT ACCOUNT UNDER THE THRIFT PLAN (REFERRED TO IN
THE THRIFT PLAN AS THE COMPANY THRIFT ACCOUNT") AT SUCH TIME.
5.1(C) A PARTICIPANT'S SUPPLEMENTAL RETIREMENT BENEFIT OR SUPPLEMENTAL DEATH
BENEFIT, AS THE CASE MAY BE, SHALL BE VESTED TO THE EXTENT AND DETERMINED IN THE
MANNER PROVIDED IN APPENDIX C TO THE PLAN.
5.2 FORFEITURE OF BENEFITS.
5.2(A) NOTWITHSTANDING ANY CONTRARY PROVISION HEREOF, THE NON-VESTED PORTION
OF THE EXCESS RETIREMENT BENEFIT OF A PARTICIPANT AND THE EXCESS RETIREMENT
DEATH BENEFIT WITH RESPECT TO A PARTICIPANT SHALL BE FORFEITED UPON:
(I) THE PARTICIPANT'S VOLUNTARY OR INVOLUNTARY TERMINATION OF
EMPLOYMENT WITH THE EMPLOYER FOR REASONS OTHER THAN DEATH UNDER
CIRCUMSTANCES WHICH DO NOT CONSTITUTE RETIREMENT FOR PURPOSES OF THE
RETIREMENT PLAN; OR
(II) AT THE PARTICIPANT'S DEATH, BUT HIS VESTING SHALL INCLUDE ANY
ADDITIONAL VESTING PROVIDED UNDER THE RETIREMENT PLAN BY REASON OF HIS
DEATH.
5.2(B) NOTWITHSTANDING ANY CONTRARY PROVISION HEREOF, THE NON-VESTED PORTION
OF A PARTICIPANT'S EXCESS THRIFT BENEFIT AND THE EXCESS THRIFT DEATH BENEFIT
WITH RESPECT TO A PARTICIPANT SHALL BE FORFEITED UPON:
(I) THE PARTICIPANT'S VOLUNTARY OR INVOLUNTARY TERMINATION OF
EMPLOYMENT WITH THE EMPLOYER FOR REASONS OTHER THAN DEATH UNDER
CIRCUMSTANCES WHICH DO NOT CONSTITUTE RETIREMENT FOR PURPOSES OF THE THRIFT
PLAN; OR
(II) THE PARTICIPANT'S DEATH, BUT HIS VESTING SHALL INCLUDE ANY
ADDITIONAL VESTING PROVIDED UNDER THE THRIFT PLAN BY REASON OF HIS DEATH.
5.3(C) A PARTICIPANT'S SUPPLEMENTAL RETIREMENT BENEFIT OR SUPPLEMENTAL DEATH
BENEFIT, AS THE CASE MAY BE, SHALL BE FORFEITED AT THE TIME AND IN THE MANNER
PROVIDED IN APPENDIX C TO THE PLAN.
5.3 NO RESTORATION OF FORFEITED BENEFITS. THERE SHALL BE NO RESTORATION OF
FORFEITED BENEFITS.
5.4 DETERMINATION OF BENEFITS AFTER FORFEITURE FOLLOWED BY RE-EMPLOYMENT.
5.4(A) IF A PARTICIPANT INCURS A FORFEITURE AND SUBSEQUENTLY IS AN ELIGIBLE
EMPLOYEE AND A PARTICIPANT:
(I) HIS EXCESS RETIREMENT BENEFIT AND EXCESS RETIREMENT DEATH
BENEFIT SHALL BE DETERMINED AS THOUGH THE
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RETIREMENT PLAN PROVIDED FOR ACCRUAL OF BENEFITS WITHOUT REGARD TO HIS
SERVICE CREDITED AND COMPENSATION EARNED PRIOR TO SUCH FORFEITURE, AND ANY
ADDITIONAL EXCESS RETIREMENT BENEFIT AND EXCESS RETIREMENT DEATH BENEFIT
EARNED AFTER HIS RE-EMPLOYMENT SHALL BE REDUCED BY THE ACTUARIAL VALUE,
DETERMINED ON THE BASIS OF THE APPLICABLE ACTUARIAL EQUIVALENT OR VALUE
FACTORS UNDER THE RETIREMENT PLAN, OF HIS VESTED EXCESS RETIREMENT BENEFIT
AND EXCESS RETIREMENT DEATH BENEFIT, RESPECTIVELY, EARNED PRIOR TO SUCH
RE-EMPLOYMENT.
(II) A NEW EXCESS THRIFT ACCOUNT SHALL BE ESTABLISHED FOR SUCH
PARTICIPANT TO REFLECT HIS SUBSEQUENT PARTICIPATION IN THE PLAN, AND THE
PARTICIPANT'S VESTED EXCESS THRIFT ACCOUNT AT ANY TIME SHALL EQUAL THE SUM
OF HIS PRIOR VESTED EXCESS THRIFT ACCOUNT AND HIS NEW VESTED EXCESS THRIFT
ACCOUNT AT SUCH TIME.
5.4(B) IF A PARTICIPANT INCURS A FORFEITURE AND SUBSEQUENTLY IS AN ELIGIBLE
EMPLOYEE AND A SUPPLEMENTAL BENEFIT PARTICIPANT, UNLESS OTHERWISE PROVIDED IN
APPENDIX C TO THE PLAN, HIS SUPPLEMENTAL RETIREMENT BENEFIT AND SUPPLEMENTAL
DEATH BENEFIT SHALL BE DETERMINED WITHOUT REGARD TO HIS SERVICE CREDITED AND
COMPENSATION EARNED PRIOR TO SUCH FORFEITURE.
ARTICLE VI
PAYMENT OF BENEFITS
6.1 TIME AND MANNER FOR PAYMENT OF BENEFITS.
6.1(A) A PARTICIPANT'S VESTED EXCESS RETIREMENT BENEFIT, OR THE VESTED
EXCESS RETIREMENT DEATH BENEFIT WITH RESPECT TO A PARTICIPANT, SHALL BE PAYABLE
COMMENCING AT THE TIME THAT THE PARTICIPANT'S ACCRUED BENEFIT OR PRE-RETIREMENT
SPOUSE'S DEATH BENEFIT, RESPECTIVELY, COMMENCES TO BE PAID UNDER THE RETIREMENT
PLAN, AS APPLICABLE WITH RESPECT TO THE BENEFIT PAYMENT HEREUNDER. SUCH BENEFIT
SHALL BE PAYABLE TO THE PARTICIPANT OR, WHERE APPLICABLE, THE PARTICIPANT'S
BENEFICIARY IN THE SAME MANNER, AT THE SAME TIME, FOR THE SAME DURATION AND
SUBJECT TO ALL THE SAME OTHER OPTIONS, CONDITIONS, PRIVILEGES, ACTUARIAL
EQUIVALENT OR VALUE FACTORS, RESTRICTIONS, BENEFIT SUSPENSIONS AND OTHER PAYMENT
PROVISIONS AS ARE APPLICABLE TO THE BENEFIT PAYABLE TO THE PARTICIPANT OR HIS
BENEFICIARY UNDER THE RETIREMENT PLAN, AS APPLICABLE WITH RESPECT TO THE BENEFIT
PAYMENT HEREUNDER.
6.1(B) A PARTICIPANT'S VESTED EXCESS THRIFT BENEFIT, OR THE VESTED EXCESS
THRIFT DEATH BENEFIT WITH RESPECT TO A PARTICIPANT, AS THE CASE MAY BE, SHALL BE
PAYABLE COMMENCING AT THE TIME THAT THE PARTICIPANT'S ACCRUED BENEFIT COMMENCES
TO BE PAID UNDER THE THRIFT PLAN, AS APPLICABLE WITH RESPECT TO THE BENEFIT
PAYMENT HEREUNDER. SUCH BENEFIT SHALL BE PAYABLE TO THE PARTICIPANT OR, WHERE
APPLICABLE, THE PARTICIPANT'S BENEFICIARY IN THE SAME MANNER, AT THE SAME TIME,
FOR THE SAME DURATION AND SUBJECT TO ALL THE SAME OTHER OPTIONS, CONDITIONS,
PRIVILEGES, ACTUARIAL EQUIVALENT OR VALUE FACTORS, RESTRICTIONS, BENEFIT
SUSPENSIONS AND OTHER PAYMENT PROVISIONS AS ARE APPLICABLE TO THE BENEFIT
PAYABLE TO THE PARTICIPANT OR HIS BENEFICIARY UNDER THE THRIFT PLAN, AS
APPLICABLE WITH RESPECT TO THE BENEFIT PAYMENT HEREUNDER.
6.1(C) A PARTICIPANT'S VESTED SUPPLEMENTAL RETIREMENT BENEFIT, OR THE VESTED
SUPPLEMENTAL DEATH BENEFIT WITH RESPECT TO A PARTICIPANT, AS THE CASE MAY BE,
SHALL BE PAID AT THE TIME AND IN THE MANNER PROVIDED IN APPENDIX C TO THE PLAN.
6.2 DISCRETIONARY CASH-OUT BY LUMP SUM PAYMENT.
6.2(A) NOTWITHSTANDING THE FORM OF BENEFIT PAYMENT PROVISIONS OF PARAGRAPH
6.1, IN THE SOLE DISCRETION OF THE ADMINISTRATOR, A PARTICIPANT'S VESTED EXCESS
RETIREMENT BENEFIT, OR VESTED EXCESS RETIREMENT DEATH BENEFIT WITH RESPECT TO A
PARTICIPANT, MAY BE CASHED-OUT IN A LUMP SUM PAYMENT, DETERMINED ON THE BASIS OF
THE APPLICABLE ACTUARIAL EQUIVALENT AND VALUE FACTORS UNDER THE RETIREMENT PLAN,
IF EITHER (I) THE ENTIRE ACTUARIAL VALUE OF SUCH BENEFIT IS NOT OVER $10,000 OR
(II) THE MONTHLY PAYMENT AMOUNT IS NOT OVER $500.
6.2(B) NOTWITHSTANDING THE FORM OF BENEFIT PAYMENT PROVISIONS OF PARAGRAPH
6.1, IN THE SOLE DISCRETION OF THE ADMINISTRATOR, A PARTICIPANT'S VESTED EXCESS
THRIFT BENEFIT, OR THE VESTED EXCESS THRIFT DEATH BENEFIT WITH RESPECT TO A
PARTICIPANT, MAY BE CASHED-OUT IN A LUMP SUM PAYMENT IN AN AMOUNT EQUAL TO THE
VESTED BALANCE IN THE PARTICIPANT'S EXCESS THRIFT ACCOUNT AT SUCH TIME IF, AT
ANY TIME PRIOR TO THE COMMENCEMENT OF PAYMENT, THE ENTIRE VESTED EXCESS THRIFT
ACCOUNT BALANCE IS NOT OVER $10,000 OR IF, AT ANY TIME AFTER THE COMMENCEMENT OF
PAYMENT, EITHER (I) THE ENTIRE ACTUARIAL VALUE OF SUCH BENEFIT IS NOT OVER
$10,000 OR (II) THE MONTHLY PAYMENT AMOUNT IS NOT OVER $500 (WITH THE LUMP SUM
AND ACTUARIAL VALUATION BASED ON THE APPLICABLE ANNUITY PURCHASE RATE UNDER THE
THRIFT PLAN FOR THE FORM OF PAYMENT IN QUESTION.
6.3 BENEFIT DETERMINATION AND PAYMENT PROCEDURE. THE ADMINISTRATOR SHALL
MAKE ALL DETERMINATIONS CONCERNING ELIGIBILITY FOR BENEFITS UNDER THE PLAN, THE
TIME OR TERMS OF PAYMENT, AND THE FORMS OR MANNER OF PAYMENT TO THE PARTICIPANT
OR THE PARTICIPANT'S BENEFICIARY, IN THE EVENT OF THE DEATH OF THE PARTICIPANT.
THE ADMINISTRATOR SHALL PROMPTLY NOTIFY THE EMPLOYER AND, WHERE PAYMENTS ARE TO
BE MADE FROM THE RABBI TRUST (IF ESTABLISHED AND MAINTAINED FOR THE PLAN), THE
TRUSTEE THEREOF OF EACH SUCH DETERMINATION THAT BENEFIT PAYMENTS ARE DUE AND
PROVIDE TO THE EMPLOYER AND, WHERE APPLICABLE, SUCH TRUSTEE ALL OTHER
INFORMATION NECESSARY TO ALLOW THE EMPLOYER OR SUCH TRUSTEE, AS THE CASE MAY BE,
TO CARRY OUT SAID DETERMINATION, WHEREUPON THE EMPLOYER OR SUCH TRUSTEE, AS THE
CASE MAY BE, SHALL PAY SUCH BENEFITS IN ACCORDANCE WITH THE ADMINISTRATOR'S
DETERMINATION.
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6.4 PAYMENTS TO MINORS AND INCOMPETENTS. IF A PARTICIPANT OR BENEFICIARY
ENTITLED TO RECEIVE ANY BENEFITS HEREUNDER IS A MINOR OR IS ADJUDGED TO BE
LEGALLY INCAPABLE OF GIVING VALID RECEIPT AND DISCHARGE FOR SUCH BENEFITS, OR IS
DEEMED SO BY THE ADMINISTRATOR, BENEFITS WILL BE PAID TO SUCH PERSON AS THE
ADMINISTRATOR MAY DESIGNATE FOR THE BENEFIT OF SUCH PARTICIPANT OR BENEFICIARY.
SUCH PAYMENTS SHALL BE CONSIDERED A PAYMENT TO SUCH PARTICIPANT OR BENEFICIARY
AND SHALL, TO THE EXTENT MADE, BE DEEMED A COMPLETE DISCHARGE OF ANY LIABILITY
FOR SUCH PAYMENTS UNDER THE PLAN.
6.5 DISTRIBUTION OF BENEFIT WHEN DISTRIBUTEE CANNOT BE LOCATED. THE
ADMINISTRATOR SHALL MAKE ALL REASONABLE ATTEMPTS TO DETERMINE THE IDENTITY
AND/OR WHEREABOUTS OF A PARTICIPANT OR HIS BENEFICIARY ENTITLED TO BENEFITS
UNDER THE PLAN, INCLUDING THE MAILING BY CERTIFIED MAIL OF A NOTICE TO THE LAST
KNOWN ADDRESS SHOWN ON THE EMPLOYER'S OR THE ADMINISTRATOR'S RECORDS. IF THE
ADMINISTRATOR IS UNABLE TO LOCATE SUCH A PERSON ENTITLED TO BENEFITS HEREUNDER,
OR IF THERE HAS BEEN NO CLAIM MADE FOR SUCH BENEFITS, THE EMPLOYER SHALL
CONTINUE TO HOLD THE BENEFIT DUE SUCH PERSON, SUBJECT TO ANY APPLICABLE STATUTE
OF ESCHEATS.
6.6 CLAIMS PROCEDURE.
6.6(A) A PARTICIPANT OR BENEFICIARY (THE "CLAIMANT") SHALL HAVE THE RIGHT TO
REQUEST ANY BENEFIT UNDER THE PLAN BY FILING A WRITTEN CLAIM FOR ANY SUCH
BENEFIT WITH THE ADMINISTRATOR ON A FORM PROVIDED BY THE ADMINISTRATOR FOR SUCH
PURPOSE. THE ADMINISTRATOR SHALL GIVE SUCH CLAIM DUE CONSIDERATION AND SHALL
EITHER APPROVE OR DENY IT IN WHOLE OR IN PART. WITHIN NINETY (90) DAYS FOLLOWING
RECEIPT OF SUCH CLAIM BY THE ADMINISTRATOR, NOTICE OF ANY DENIAL THEREOF, IN
WHOLE OR IN PART, SHALL BE DELIVERED TO, AND A RECEIPT THEREFOR SHALL BE
OBTAINED FROM, THE CLAIMANT OR HIS DULY AUTHORIZED REPRESENTATIVE OR SUCH NOTICE
OF DENIAL SHALL BE SENT BY REGISTERED MAIL TO THE CLAIMANT, OR HIS DULY
AUTHORIZED REPRESENTATIVE, AT THE ADDRESS SHOWN ON THE CLAIM FORM OR SUCH
INDIVIDUAL'S LAST KNOWN ADDRESS. THE AFORESAID NINETY (90) DAY RESPONSE PERIOD
MAY BE EXTENDED TO ONE HUNDRED EIGHTY (180) DAYS AFTER RECEIPT OF THE CLAIMANT'S
CLAIM IF SPECIAL CIRCUMSTANCES EXIST AND IF WRITTEN NOTICE OF THE EXTENSION TO
ONE HUNDRED EIGHTY (180) DAYS INDICATING THE SPECIAL CIRCUMSTANCES INVOLVED AND
THE DATE BY WHICH A DECISION IS EXPECTED TO BE MADE IS FURNISHED TO THE CLAIMANT
WITHIN NINETY (90) DAYS AFTER RECEIPT OF THE CLAIMANT'S CLAIM. SUCH NOTICE OF
DENIAL SHALL BE WRITTEN IN A MANNER CALCULATED TO BE UNDERSTOOD BY THE CLAIMANT
AND SHALL:
(I) SET FORTH A SPECIFIC REASON OR REASONS FOR THE DENIAL,
(II) MAKE SPECIFIC REFERENCE TO THE PERTINENT PROVISIONS OF THE
PLAN ON WHICH ANY DENIAL OF BENEFITS IS BASED,
(III) DESCRIBE ANY ADDITIONAL MATERIAL OR INFORMATION NECESSARY FOR
THE CLAIMANT TO PERFECT THE CLAIM AND EXPLAIN WHY SUCH MATERIAL OR
INFORMATION IS NECESSARY, AND
(IV) EXPLAIN THE CLAIM REVIEW PROCEDURE OF SUBPARAGRAPH 6.6(B).
IF SUCH NOTICE OF DENIAL IS NOT PROVIDED TO THE CLAIMANT WITHIN THE
APPLICABLE NINETY (90) DAY OR ONE HUNDRED EIGHTY (180) DAY PERIOD, THE
CLAIMANT'S CLAIM SHALL BE CONSIDERED DENIED FOR PURPOSES OF THE CLAIM REVIEW
PROCEDURE OF SUBPARAGRAPH 6.6(B).
6.6(B) A PARTICIPANT OR BENEFICIARY WHOSE CLAIM FILED PURSUANT TO
SUBPARAGRAPH 6.6(A) HAS BEEN DENIED, IN WHOLE OR IN PART, MAY, WITHIN SIXTY (60)
DAYS FOLLOWING RECEIPT OF NOTICE OF SUCH DENIAL, OR FOLLOWING THE EXPIRATION OF
THE APPLICABLE PERIOD PROVIDED FOR IN SUBPARAGRAPH 6.6(A) FOR NOTIFYING THE
CLAIMANT OF THE DECISION ON THE CLAIM IF NO NOTICE OF DENIAL IS PROVIDED, MAKE
WRITTEN APPLICATION TO THE ADMINISTRATOR FOR A REVIEW OF SUCH CLAIM, WHICH
APPLICATION SHALL BE FILED WITH THE ADMINISTRATOR.
FOR PURPOSES OF SUCH REVIEW, THE CLAIMANT OR HIS DULY AUTHORIZED REPRESENTATIVE
MAY REVIEW PLAN DOCUMENTS PERTINENT TO SUCH CLAIM AND MAY SUBMIT TO THE
ADMINISTRATOR WRITTEN ISSUES AND COMMENTS RESPECTING SUCH CLAIM. THE
ADMINISTRATOR MAY SCHEDULE AND HOLD A HEARING. THE ADMINISTRATOR SHALL MAKE A
FULL AND FAIR REVIEW OF ANY DENIAL OF A CLAIM FOR BENEFITS AND ISSUE ITS
DECISION THEREON PROMPTLY, BUT NO LATER THAN SIXTY (60) DAYS AFTER RECEIPT BY
THE ADMINISTRATOR OF THE CLAIMANT'S REQUEST FOR REVIEW, OR ONE HUNDRED TWENTY
(120) DAYS AFTER SUCH RECEIPT IF A HEARING IS TO BE HELD OR IF OTHER SPECIAL
CIRCUMSTANCES EXIST AND IF WRITTEN NOTICE OF THE EXTENSION TO ONE HUNDRED TWENTY
(120) DAYS IS FURNISHED TO THE CLAIMANT WITHIN SIXTY (60) DAYS AFTER THE RECEIPT
OF THE CLAIMANT'S REQUEST FOR A REVIEW. SUCH DECISION SHALL BE IN WRITING,
SHALL BE DELIVERED BY THE ADMINISTRATOR TO THE CLAIMANT AND SHALL:
(I) INCLUDE SPECIFIC REASONS FOR THE DECISION,
(II) BE WRITTEN IN A MANNER CALCULATED TO BE UNDERSTOOD BY THE
CLAIMANT, AND
(III) CONTAIN SPECIFIC REFERENCES TO THE PERTINENT PLAN PROVISIONS
ON WHICH THE DECISION IS BASED.
THE ADMINISTRATOR'S DECISION MADE IN GOOD FAITH SHALL BE FINAL.
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ARTICLE VII
FUNDING
7.1 FUNDING.
7.1(A) THE UNDERTAKING TO PAY THE BENEFITS HEREUNDER SHALL BE AN UNFUNDED
OBLIGATION PAYABLE SOLELY FROM THE GENERAL ASSETS OF THE EMPLOYER AND SUBJECT TO
THE CLAIMS OF THE EMPLOYER'S CREDITORS.
7.1(B) EXCEPT AS MAY BE PROVIDED IN ANY RABBI TRUST, NOTHING CONTAINED IN
THE PLAN AND NO ACTION TAKEN PURSUANT TO THE PROVISIONS OF THE PLAN SHALL CREATE
OR BE CONSTRUED TO CREATE A TRUST OF ANY KIND OR A FIDUCIARY RELATIONSHIP
BETWEEN THE EMPLOYER AND THE PARTICIPANT OR HIS BENEFICIARY OR ANY OTHER PERSON
OR TO GIVE ANY PARTICIPANT OR BENEFICIARY ANY RIGHT, TITLE OR INTEREST IN ANY
SPECIFIC ASSET OR ASSETS OF THE EMPLOYER. TO THE EXTENT THAT ANY PERSON ACQUIRES
A RIGHT TO RECEIVE PAYMENTS FROM THE EMPLOYER UNDER THE PLAN, SUCH RIGHTS SHALL
BE NO GREATER THAN THE RIGHT OF ANY UNSECURED GENERAL CREDITOR OF THE EMPLOYER.
7.1(C) EACH EMPLOYER SHALL BE JOINTLY AND SEVERALLY LIABLE FOR THE PAYMENTS
OF BENEFITS UNDER THE PLAN ACCRUED WHILE A PARTICIPATING EMPLOYER. AS BETWEEN
EMPLOYERS, PRIMARY RESPONSIBILITY FOR THE EXCESS RETIREMENT BENEFIT, EXCESS
THRIFT BENEFIT, EXCESS RETIREMENT DEATH BENEFIT, EXCESS THRIFT DEATH BENEFIT
OBLIGATIONS TO A PARTICIPANT HEREUNDER SHALL BE BASED ON THE COMPENSATION PAID
BY EACH SUCH EMPLOYER TO THE PARTICIPANT ON WHICH SUCH BENEFITS UNDER THE PLAN
ARE ACCRUED, AND PRIMARY RESPONSIBILITY FOR THE SUPPLEMENTAL RETIREMENT BENEFIT
AND SUPPLEMENTAL RETIREMENT DEATH BENEFIT OBLIGATIONS HEREUNDER TO A PARTICIPANT
SHALL BE BASED ON THE COMPENSATION PAID BY EACH SUCH EMPLOYER TO THE PARTICIPANT
DURING THE PARTICIPANT'S LAST CONTINUOUS PERIOD OF EMPLOYMENT WITH THE EMPLOYERS
DURING WHICH SUCH BENEFIT(S) ARE AWARDED.
7.1(D) EXCEPT TO THE EXTENT PAID FROM ANY RABBI TRUST, HOME BENEFICIAL LIFE
INSURANCE COMPANY AS A PARTICIPATING EMPLOYER AGREES TO, AND SHALL, PAY BENEFITS
DUE UNDER THE PLAN ON BEHALF OF ALL EMPLOYERS. HOME BENEFICIAL LIFE INSURANCE
COMPANY MAY REQUIRE CONTRIBUTIONS BY PARTICIPATING EMPLOYERS AT SUCH TIMES
(WHETHER BEFORE, AT OR AFTER THE TIME OF PAYMENT), IN SUCH AMOUNTS AND ON SUCH
BASIS AS IT OR THE PLAN SPONSOR MAY FROM TIME TO TIME DETERMINE IN ORDER TO
DEFRAY THE COSTS OF BENEFITS UNDER AND ADMINISTRATION OF THE PLAN.
7.2 USE OF RABBI TRUST PERMITTED. NOTWITHSTANDING ANY PROVISION HEREIN TO
THE CONTRARY, THE PLAN SPONSOR MAY IN ITS SOLE DISCRETION ELECT TO ESTABLISH AND
FUND THE RABBI TRUST FOR THE PURPOSE OF PROVIDING BENEFITS UNDER THE PLAN.
ARTICLE VIII
FIDUCIARIES
8.1 FIDUCIARIES AND DUTIES AND RESPONSIBILITIES. AUTHORITY TO CONTROL AND
MANAGE THE OPERATION AND ADMINISTRATION OF THE PLAN SHALL BE VESTED IN THE
FOLLOWING, WHO, TOGETHER WITH THEIR MEMBERSHIP, IF ANY, SHALL BE THE FIDUCIARIES
UNDER THE PLAN WITH THOSE POWERS, DUTIES, AND RESPONSIBILITIES SPECIFICALLY
ALLOCATED TO THEM BY THE PLAN:
8.1(A) PLAN ADMINISTRATOR - THE PLAN ADMINISTRATOR NAMED AND SERVING AS
PROVIDED IN ARTICLE IX HEREOF.
8.1(B) TRUSTEE - THE TRUSTEE, IF ANY, OF ANY RABBI TRUST.
8.2 LIMITATION OF DUTIES AND RESPONSIBILITIES OF FIDUCIARIES. THE DUTIES AND
RESPONSIBILITIES, AND ANY LIABILITY THEREFOR, OF THE FIDUCIARIES PROVIDED FOR IN
PARAGRAPH 8.1 SHALL BE SEVERALLY LIMITED TO THE DUTIES AND RESPONSIBILITIES
SPECIFICALLY ALLOCATED TO EACH SUCH FIDUCIARY IN ACCORDANCE WITH THE TERMS OF
THE PLAN, AND THERE SHALL BE NO JOINT DUTY, RESPONSIBILITY, OR LIABILITY AMONG
ANY SUCH GROUPS OF FIDUCIARIES IN THE CONTROL AND MANAGEMENT OF THE OPERATION
AND ADMINISTRATION OF THE PLAN.
8.3 SERVICE BY FIDUCIARIES IN MORE THAN ONE CAPACITY. ANY PERSON OR GROUP
OF PERSONS MAY SERVE IN MORE THAN ONE FIDUCIARY CAPACITY WITH RESPECT TO THE
PLAN.
8.4 ALLOCATION OR DELEGATION OF DUTIES AND RESPONSIBILITIES BY FIDUCIARIES.
BY WRITTEN AGREEMENT FILED WITH THE ADMINISTRATOR AND THE PLAN SPONSOR, ANY
DUTIES AND RESPONSIBILITIES OF ANY FIDUCIARY MAY BE ALLOCATED AMONG FIDUCIARIES
OR MAY BE DELEGATED TO PERSONS OTHER THAN FIDUCIARIES. ANY WRITTEN AGREEMENT
SHALL SPECIFICALLY SET FORTH THE DUTIES AND RESPONSIBILITIES SO ALLOCATED OR
DELEGATED, SHALL CONTAIN REASON ABLE PROVISIONS FOR TERMINATION, AND SHALL BE
EXECUTED BY THE PARTIES THERETO.
8.5 ASSISTANCE AND CONSULTATION. A FIDUCIARY, AND ANY DELEGATE NAMED
PURSUANT TO PARAGRAPH 8.4, MAY ENGAGE AGENTS TO ASSIST IN ITS DUTIES AND MAY
CONSULT WITH COUNSEL, WHO MAY BE COUNSEL FOR THE EMPLOYER, WITH RESPECT TO ANY
MATTER AFFECTING THE PLAN OR ITS OBLIGATIONS AND RESPONSIBILITIES HEREUNDER, OR
WITH RESPECT TO ANY ACTION OR PROCEEDING AFFECTING THE PLAN.
8.6 COMPENSATION AND EXPENSES. ALL COMPENSATION AND EXPENSES OF THE
FIDUCIARIES AND THEIR AGENTS AND COUNSEL SHALL BE PAID OR REIMBURSED BY THE
EMPLOYER ON SUCH BASIS AS THE PLAN SPONSOR SHALL DETERMINE; PROVIDED, HOWEVER,
THAT EACH PERSON OR COMMITTEEMAN SERVING AS A FIDUCIARY SHALL SERVE WITHOUT
COMPENSATION FOR SUCH SERVICE UNLESS OTHERWISE DETERMINED BY THE PLAN
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SPONSOR OR, IN THE CASE OF THE TRUSTEE UNDER ANY RABBI TRUST, UNLESS OTHERWISE
PROVIDED IN THE RABBI TRUST.
8.7 INDEMNIFICATION. THE EMPLOYER, ON SUCH BASIS AS THE PLAN SPONSOR SHALL
DETERMINE, SHALL INDEMNIFY AND HOLD HARMLESS ANY INDIVIDUAL WHO IS AN EMPLOYEE
OF THE EMPLOYER OR AN AFFILIATE AND WHO IS A FIDUCIARY OR A MEMBER OF A
FIDUCIARY UNDER THE PLAN AND ANY OTHER INDIVIDUAL WHO IS AN EMPLOYEE OF THE
EMPLOYER OR AN AFFILIATE AND TO WHOM DUTIES OF A FIDUCIARY ARE DELEGATED
PURSUANT TO PARAGRAPH 8.4, TO THE EXTENT PERMITTED BY LAW, FROM AND AGAINST ANY
LIABILITY, LOSS, COST OR EXPENSE ARISING FROM THEIR GOOD FAITH ACTION OR
INACTION IN CONNECTION WITH THEIR RESPONSIBILITIES UNDER THE PLAN.
ARTICLE IX
PLAN ADMINISTRATOR
9.1 APPOINTMENT OF PLAN ADMINISTRATOR. THE PLAN SPONSOR MAY APPOINT ONE OR
MORE PERSONS TO SERVE AS THE PLAN ADMINISTRATOR (THE "ADMINISTRATOR") FOR THE
PURPOSE OF CARRYING OUT THE DUTIES SPECIFICALLY IMPOSED ON THE ADMINISTRATOR BY
THE PLAN AND THE CODE. IN THE EVENT MORE THAN ONE PERSON IS APPOINTED, THE
PERSONS SHALL FORM A COMMITTEE FOR THE PURPOSE OF FUNCTIONING AS THE
ADMINISTRATOR OF THE PLAN. THE PERSON OR COMMITTEEMEN SERVING AS ADMINISTRATOR
SHALL SERVE FOR INDEFINITE TERMS AT THE PLEASURE OF THE PLAN SPONSOR, AND MAY,
BY THIRTY (30) DAYS PRIOR WRITTEN NOTICE TO THE PLAN SPONSOR, TERMINATE SUCH
APPOINTMENT. THE PLAN SPONSOR SHALL INFORM THE TRUSTEE OF ANY RABBI TRUST OF ANY
SUCH APPOINTMENT OR TERMINATION, AND ANY SUCH TRUSTEE MAY ASSUME THAT ANY PERSON
APPOINTED CONTINUES IN OFFICE UNTIL NOTIFIED OF ANY CHANGE.
9.2 PLAN SPONSOR AS PLAN ADMINISTRATOR. IN THE EVENT THAT NO ADMINISTRATOR
IS APPOINTED OR IN OFFICE PURSUANT TO PARAGRAPH 9.1, THE PLAN SPONSOR SHALL BE
THE ADMINISTRATOR.
9.3 PROCEDURE IF A COMMITTEE. IF THE ADMINISTRATOR IS A COMMITTEE, IT SHALL
APPOINT FROM ITS MEMBERS A CHAIRMAN AND A SECRETARY. THE SECRETARY SHALL KEEP
RECORDS AS MAY BE NECESSARY OF THE ACTS AND RESOLUTIONS OF SUCH COMMITTEE AND BE
PREPARED TO FURNISH REPORTS THEREOF TO THE PLAN SPONSOR AND THE TRUSTEE OF ANY
RABBI TRUST. EXCEPT AS OTHERWISE PROVIDED, ALL INSTRUMENTS EXECUTED ON BEHALF OF
SUCH COMMITTEE MAY BE EXECUTED BY ITS CHAIRMAN OR SECRETARY, AND THE TRUSTEE OF
ANY RABBI TRUST MAY ASSUME THAT SUCH COMMITTEE, ITS CHAIRMAN OR SECRETARY ARE
THE PERSONS WHO WERE LAST DESIGNATED AS SUCH TO THEM IN WRITING BY THE PLAN
SPONSOR OR ITS CHAIRMAN OR SECRETARY.
9.4 ACTION BY MAJORITY VOTE IF A COMMITTEE. IF THE ADMINISTRATOR IS A
COMMITTEE, ITS ACTION IN ALL MATTERS, QUESTIONS AND DECISIONS SHALL BE
DETERMINED BY A MAJORITY VOTE OF ITS MEMBERS QUALIFIED TO ACT THEREON. THEY MAY
MEET INFORMALLY OR TAKE ANY ACTION WITHOUT THE NECESSITY OF MEETING AS A GROUP.
9.5 APPOINTMENT OF SUCCESSORS. UPON THE DEATH, RESIGNATION OR REMOVAL OF A
PERSON SERVING AS, OR ON A COMMITTEE WHICH IS, THE ADMINISTRATOR, THE PLAN
SPONSOR MAY, BUT NEED NOT, APPOINT A SUCCESSOR.
9.6 DUTIES AND RESPONSIBILITIES OF PLAN ADMINISTRATOR. THE ADMINISTRATOR
SHALL HAVE THE FOLLOWING DUTIES AND RESPONSIBILITIES UNDER THE PLAN:
9.6(A) THE ADMINISTRATOR SHALL BE RESPONSIBLE FOR THE FULFILLMENT OF ALL
RELEVANT REPORTING AND DISCLOSURE REQUIREMENTS SET FORTH IN THE PLAN AND THE
CODE AND, IF APPLICABLE, THE ACT, THE DISTRIBUTION THEREOF TO PARTICIPANTS AND
THEIR BENEFICIARIES AND THE FILING THEREOF WITH THE APPROPRIATE GOVERNMENTAL
OFFICIALS AND AGENCIES.
9.6(B) THE ADMINISTRATOR SHALL MAINTAIN AND RETAIN NECESSARY RECORDS
RESPECTING ITS ADMINISTRATION OF THE PLAN AND MATTERS UPON WHICH DISCLOSURE IS
REQUIRED UNDER THE PLAN AND THE CODE AND, IF APPLICABLE, THE ACT.
9.6(C) THE ADMINISTRATOR SHALL MAKE ANY ELECTIONS FOR THE PLAN REQUIRED TO
BE MADE BY IT UNDER THE PLAN AND THE CODE AND, IF APPLICABLE, THE ACT.
9.6(D) THE ADMINISTRATOR IS EMPOWERED TO SETTLE CLAIMS AGAINST THE PLAN AND
TO MAKE SUCH EQUITABLE ADJUSTMENTS IN A PARTICIPANT'S OR BENEFICIARY'S RIGHTS OR
ENTITLEMENTS UNDER THE PLAN AS IT DEEMS APPROPRIATE IN THE EVENT AN ERROR OR
OMISSION IS DISCOVERED OR CLAIMED IN THE OPERATION OR ADMINISTRATION OF THE
PLAN.
9.6(E) THE ADMINISTRATOR MAY CONSTRUE THE PLAN, CORRECT DEFECTS, SUPPLY
OMISSIONS OR RECONCILE INCONSISTENCIES TO THE EXTENT NECESSARY TO EFFECTUATE THE
PLAN AND SUCH ACTION SHALL BE CONCLUSIVE.
9.7 POWER AND AUTHORITY. THE ADMINISTRATOR IS HEREBY VESTED WITH ALL THE
POWER AND AUTHORITY NECESSARY IN ORDER TO CARRY OUT ITS DUTIES AND
RESPONSIBILITIES IN CONNECTION WITH THE ADMINISTRATION OF THE PLAN IMPOSED
HEREUNDER. FOR SUCH PURPOSE, THE
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ADMINISTRATOR SHALL HAVE THE POWER TO ADOPT RULES AND REGULATIONS CONSISTENT
WITH THE TERMS OF THE PLAN.
9.8 AVAILABILITY OF RECORDS. THE EMPLOYER AND THE TRUSTEE OF ANY RABBI TRUST
SHALL, AT THE REQUEST OF THE ADMINISTRATOR, MAKE AVAILABLE NECESSARY RECORDS OR
OTHER INFORMATION THEY POSSESS WHICH MAY BE REQUIRED BY THE ADMINISTRATOR IN
ORDER TO CARRY OUT ITS DUTIES HEREUNDER.
9.9 NO ACTION WITH RESPECT TO OWN BENEFIT. NO ADMINISTRATOR WHO IS A
PARTICIPANT SHALL TAKE ANY PART AS THE ADMINISTRATOR IN ANY DISCRETIONARY ACTION
IN CONNECTION WITH HIS PARTICIPATION AS AN INDIVIDUAL. SUCH ACTION SHALL BE
TAKEN BY THE REMAINING ADMINISTRATOR, IF ANY, OR OTHERWISE BY THE PLAN SPONSOR.
ARTICLE X
AMENDMENT AND TERMINATION OF THE PLAN
10.1 AMENDMENT OR TERMINATION OF THE PLAN.
10.1(A) THE PLAN MAY BE TERMINATED AT ANY TIME BY THE BOARD. THE PLAN MAY BE
AMENDED IN WHOLE OR IN PART FROM TIME TO TIME BY THE BOARD EFFECTIVE AS OF ANY
DATE SPECIFIED. NO AMENDMENT OR TERMINATION SHALL OPERATE TO DECREASE OR
OTHERWISE ADVERSELY AFFECT THE AMOUNT OF A PARTICIPANT'S THEN CURRENTLY ACCRUED
EXCESS RETIREMENT BENEFIT, EXCESS THRIFT BENEFIT OR SUPPLEMENTAL RETIREMENT
BENEFIT OR THE EXCESS RETIREMENT DEATH BENEFIT, EXCESS THRIFT DEATH BENEFIT
ORSUPPLEMENTAL DEATH BENEFIT WITH RESPECT THERETO, OR THE THEN CURRENT OR FUTURE
VESTING THEREOF, DETERMINED AS OF THE EARLIER OF THE DATE ON WHICH THE AMENDMENT
OR TERMINATION IS APPROVED BY THE BOARD OR THE DATE ON WHICH AN INSTRUMENT OF
AMENDMENT OR TERMINATION IS SIGNED ON BEHALF OF THE PLAN SPONSOR UNLESS THE
BENEFIT IS REPLACED BY A COMPARABLE BENEFIT UNDER ANOTHER PLAN OF THE PLAN
SPONSOR OR AN AFFILIATE OR THE AFFECTED PARTICIPANT AGREES IN WRITING.
10.1(B) THE BOARD HEREBY DELEGATES TO THE CHIEF EXECUTIVE OFFICER OF THE
PLAN SPONSOR THE RIGHT TO MODIFY, ALTER, OR AMEND THE PLAN IN WHOLE OR IN PART
TO MAKE ANY TECHNICAL MODIFICATION, ALTERATION OR AMENDMENT WHICH IN THE OPINION
OF COUNSEL FOR THE PLAN SPONSOR IS REQUIRED BY LAW AND IS DEEMED ADVISABLE BY
THE ADMINISTRATOR AND TO MAKE ANY OTHER MODIFICATION, ALTERATION OR AMENDMENT
WHICH DOES NOT, IN THE ADMINISTRATOR'S VIEW, SUBSTANTIALLY INCREASE COSTS,
CONTRIBUTIONS OR BENEFITS AND DOES NOT MATERIALLY AFFECT THE ELIGIBILITY,
VESTING OR BENEFIT ACCRUAL OR ALLOCATION PROVISIONS OF THE PLAN.
10.1(C) ON TERMINATION OF THE PLAN, ALL THEN CURRENTLY ACCRUED EXCESS
RETIREMENT BENEFITS, EXCESS THRIFT BENEFITS AND SUPPLEMENTAL RETIREMENT BENEFITS
AND THE EXCESS RETIREMENT DEATH BENEFITS, EXCESS THRIFT DEATH BENEFITS AND
SUPPLEMENTAL DEATH BENEFITS, IF ANY, WITH RESPECT THERETO SHALL BE FULLY VESTED
AND NON-FORFEITABLE EXCEPT TO THE EXTENT A PAYMENT MAY BE EXPRESSLY FORFEITABLE
FOR COMPETITION OR SOME OTHER OCCURRENCE OTHER THAN THE PARTICIPANT'S
TERMINATION OF EMPLOYMENT. IF ONLY A PART OF THE PLAN IS TERMINATED, THIS
PROVISION SHALL APPLY TO THE PART THAT IS TERMINATED.
ARTICLE XI
PARTICIPATION BY EMPLOYERS OTHER THAN THE PLAN SPONSOR
11.1 ADOPTION BY ADDITIONAL EMPLOYERS.
11.1(A) ANY AFFILIATE MAY ADOPT THE PLAN WITH THE CONSENT OF THE BOARD AND
ITS BOARD.
11.1(B) IN ADDITION, AND AS ALTERNATIVE TO THE CONSENT, AUTHORIZATION AND
APPROVAL BY THE BOARD REQUIRED UNDER SUBPARAGRAPH 11.1(A) WITH RESPECT TO THE
ADOPTION OF THE PLAN BY AN AFFILIATE, THE CHIEF EXECUTIVE OFFICER OF THE PLAN
SPONSOR SHALL BE AND IS HEREBY AUTHORIZED TO CONSENT TO, AUTHORIZE AND APPROVE
ANY SUCH ADOPTION OF THE PLAN.
11.2 TERMINATION EVENTS WITH RESPECT TO EMPLOYERS OTHER THAN THE PLAN
SPONSOR.
11.2(A) THE PLAN SHALL TERMINATE WITH RESPECT TO ANY EMPLOYER OTHER THAN THE
PLAN SPONSOR, AND SUCH EMPLOYER SHALL AUTOMATICALLY CEASE TO BE A PARTICIPATING
EMPLOYER IN THE PLAN, UPON THE HAPPENING OF ANY OF THE FOLLOWING EVENTS:
(I) ACTION BY THE EMPLOYER'S BOARD TERMINATING ITS PARTICIPATION
IN THE PLAN AND SPECIFYING THE DATE OF SUCH TERMINATION. NOTICE OF SUCH
TERMINATION SHALL BE DELIVERED TO THE ADMINISTRATOR AND THE PLAN SPONSOR.
(II) THE EMPLOYER'S CEASING TO BE AN AFFILIATE.
(III) ACTION BY THE BOARD OR CHIEF EXECUTIVE OFFICER OF THE PLAN
SPONSOR TERMINATING AN EMPLOYER'S PARTICIPATION IN THE PLAN AND SPECIFYING
THE DATE OF SUCH TERMINATION. NOTICE OF SUCH TERMINATION SHALL BE DELIVERED
TO THE ADMINISTRATOR AND THE FORMER PARTICIPATING EMPLOYER.
11.2(B) TERMINATION OF THE PLAN WITH RESPECT TO ANY EMPLOYER SHALL MEAN
TERMINATION OF FURTHER BENEFIT ACCRUAL BY AND
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ACTIVE PARTICIPATION OF THE PARTICIPANTS EMPLOYED BY SUCH EMPLOYER WITH RESPECT
TO SUCH EMPLOYMENT.
11.2(C) NOTWITHSTANDING THE FOREGOING, NO TERMINATION WITH RESPECT TO ANY
EMPLOYER SHALL OPERATE TO DECREASE OR OTHERWISE ADVERSELY AFFECT A PARTICIPANT'S
THEN CURRENTLY ACCRUED EXCESS RETIREMENT BENEFIT, EXCESS THRIFT BENEFIT OR
SUPPLEMENTAL RETIREMENT BENEFIT OR THE EXCESS RETIREMENT DEATH BENEFIT, EXCESS
THRIFT DEATH BENEFIT OR SUPPLEMENTAL DEATH BENEFIT WITH RESPECT THERETO, OR THE
THEN CURRENT OR FUTURE VESTING THEREOF, DETERMINED AS OF THE EARLIER OF THE DATE
ON WHICH THE TERMINATION IS APPROVED OR THE DATE ON WHICH AN INSTRUMENT OF
TERMINATION IS SIGNED UNLESS THE BENEFIT IS REPLACED BY A COMPARABLE BENEFIT
UNDER ANOTHER PLAN OF THE PLAN SPONSOR, THE EMPLOYER IN QUESTION OR THE
AFFILIATE OR A SUCCESSOR THERETO OR THE AFFECTED PARTICIPANT AGREES IN WRITING.
11.2(D) ON TERMINATION OF THE PLAN WITH RESPECT TO AN AFFILIATE, ALL THEN
CURRENTLY ACCRUED EXCESS RETIREMENT BENEFITS, EXCESS THRIFT BENEFITS AND
SUPPLEMENTAL RETIREMENT BENEFITS OF EMPLOYEES OF THAT AFFILIATE WHO CEASE TO BE
ACTIVE PARTICIPANTS IN THE PLAN BY REASON OF THEIR CEASING TO BE COVERED
EMPLOYEES AND THE EXCESS RETIREMENT DEATH BENEFITS, EXCESS THRIFT DEATH BENEFITS
AND SUPPLEMENTAL DEATH BENEFITS, IF ANY, WITH RESPECT THERETO SHALL BE FULLY
VESTED AND NON-FORFEITABLE EXCEPT TO THE EXTENT A PAYMENT MAY BE EXPRESSLY
FORFEITABLE FOR COMPETITION OR SOME OTHER OCCURRENCE OTHER THAN THE
PARTICIPANT'S TERMINATION OF EMPLOYMENT.
11.3 EFFECT OF EMPLOYER MERGER, CONSOLIDATION OR LIQUIDATION.
NOTWITHSTANDING THE FOREGOING PROVISIONS OF THIS ARTICLE XI, THE MERGER OR
LIQUIDATION OF ANY EMPLOYER INTO ANY OTHER EMPLOYER OR THE CONSOLIDATION OF TWO
(2) OR MORE OF THE EMPLOYERS SHALL NOT CAUSE THE PLAN TO TERMINATE WITH RESPECT
TO THE MERGING, LIQUIDATING OR CONSOLIDATING EMPLOYERS, PROVIDED THAT THE PLAN
HAS BEEN ADOPTED OR IS CONTINUED BY AND HAS NOT TERMINATED WITH RESPECT TO THE
SURVIVING OR CONTINUING EMPLOYER.
ARTICLE XII
MISCELLANEOUS
12.1 NON-ASSIGNABILITY. THE INTERESTS OF EACH PARTICIPANT UNDER THE PLAN ARE
NOT SUBJECT TO CLAIMS OF THE PARTICIPANT'S CREDITORS; AND NEITHER THE
PARTICIPANT, NOR HIS BENEFICIARY, SHALL HAVE ANY RIGHT TO SELL, ASSIGN, TRANSFER
OR OTHERWISE CONVEY THE RIGHT TO RECEIVE ANY PAYMENTS HEREUNDER OR ANY INTEREST
UNDER THE PLAN, WHICH PAYMENTS AND INTEREST ARE EXPRESSLY DECLARED TO BE
NON-ASSIGNABLE AND NONTRANSFERABLE.
12.2 RIGHT TO REQUIRE INFORMATION AND RELIANCE THEREON. THE PLAN SPONSOR,
THE EMPLOYER AND THE ADMINISTRATOR SHALL HAVE THE RIGHT TO REQUIRE ANY
PARTICIPANT, BENEFICIARY OR OTHER PERSON RECEIVING BENEFIT PAYMENTS TO PROVIDE
IT WITH SUCH INFORMATION, IN WRITING, AND IN SUCH FORM AS IT MAY DEEM NECESSARY
TO THE ADMINISTRATION OF THE PLAN AND MAY RELY THEREON IN CARRYING OUT ITS
DUTIES HEREUNDER. ANY PAYMENT TO OR ON BEHALF OF A PARTICIPANT OR BENEFICIARY IN
ACCORDANCE WITH THE PROVISIONS OF THE PLAN IN GOOD FAITH RELIANCE UPON ANY SUCH
WRITTEN INFORMATION PROVIDED BY A PARTICIPANT OR ANY OTHER PERSON TO WHOM SUCH
PAYMENT IS MADE SHALL BE IN FULL SATISFACTION OF ALL CLAIMS BY SUCH PARTICIPANT
AND HIS BENEFICIARY; AND ANY PAYMENT TO OR ON BEHALF OF A BENEFICIARY IN
ACCORDANCE WITH THE PROVISION SO THE PLAN IN GOOD FAITH RELIANCE UPON ANY SUCH
WRITTEN INFORMATION PROVIDED BY SUCH BENEFICIARY OR ANY OTHER PERSON TO WHOM
SUCH PAYMENT IS MADE SHALL BE IN FULL SATISFACTION OF ALL CLAIMS BY SUCH
BENEFICIARY.
12.3 NOTICES AND ELECTIONS. ALL NOTICES REQUIRED TO BE GIVEN IN WRITING AND
ALL ELECTIONS REQUIRED TO BE MADE IN WRITING, UNDER ANY PROVISION OF THE PLAN,
SHALL BE INVALID UNLESS MADE ON SUCH FORMS AS MAY BE PROVIDED OR APPROVED BY THE
ADMINISTRATOR AND, IN THE CASE OF A NOTICE OR ELECTION BY A PARTICIPANT OR
BENEFICIARY, UNLESS EXECUTED BY THE PARTICIPANT OR BENEFICIARY GIVING SUCH
NOTICE OR MAKING SUCH ELECTION.
12.4 DELEGATION OF AUTHORITY. WHENEVER THE PLAN SPONSOR OR ANY EMPLOYER IS
PERMITTED OR REQUIRED TO PERFORM ANY ACT, SUCH ACT MAY BE PERFORMED BY ITS
PRESIDENT OR CHIEF EXECUTIVE OFFICER OR OTHER PERSON DULY AUTHORIZED BY ITS
PRESIDENT OR CHIEF EXECUTIVE OFFICER OR ITS BOARD.
12.5 SERVICE OF PROCESS. THE ADMINISTRATOR SHALL BE THE AGENT FOR SERVICE
OF PROCESS ON THE PLAN.
12.6 GOVERNING LAW. THE PLAN SHALL BE CONSTRUED, ENFORCED AND ADMINISTERED
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA, AND ANY FEDERAL LAW
WHICH PREEMPTS THE SAME.
12.7 BINDING EFFECT. THE PLAN SHALL BE BINDING UPON AND INURE TO THE
BENEFIT OF THE EMPLOYER, ITS SUCCESSORS AND ASSIGNS, AND THE PARTICIPANT AND HIS
HEIRS, EXECUTORS, ADMINISTRATORS AND LEGAL REPRESENTATIVES.
12.8 SEVERABILITY. IF ANY PROVISION OF THE PLAN SHOULD FOR ANY REASON BE
DECLARED INVALID OR UNENFORCEABLE BY A COURT OF COMPETENT JURISDICTION, THE
REMAINING PROVISIONS SHALL NEVERTHELESS REMAIN IN FULL FORCE AND EFFECT.
12.9 NO EFFECT ON EMPLOYMENT AGREEMENT. THE PLAN SHALL NOT BE CONSIDERED
OR CONSTRUED TO MODIFY, AMEND OR
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SUPERSEDE ANY EMPLOYMENT AGREEMENT BETWEEN THE EMPLOYER AND THE PARTICIPANT
HERETOFORE OR HEREAFTER ENTERED INTO UNLESS SO SPECIFICALLY PROVIDED.
12.10 GENDER AND NUMBER. IN THE CONSTRUCTION OF THE PLAN, THE MASCULINE
SHALL INCLUDE THE FEMININE OR NEUTER AND THE SINGULAR SHALL INCLUDE THE PLURAL
AND VICE-VERSA IN ALL CASES WHERE SUCH MEANINGS WOULD BE APPROPRIATE.
12.11 TITLES AND CAPTIONS. TITLES AND CAPTIONS AND HEADINGS HEREIN HAVE BEEN
INSERTED FOR CONVENIENCE OF REFERENCE ONLY AND ARE TO BE IGNORED IN ANY
CONSTRUCTION OF THE PROVISIONS HEREOF.
12.12 CONSTRUCTION. THE PLAN AND THE FUND (IF ESTABLISHED) ARE CREATED FOR
THE BENEFIT OF ELIGIBLE EMPLOYEES OF THE EMPLOYER AND THEIR BENEFICIARIES AND
SHALL BE INTERPRETED AND ADMINISTERED IN A MANNER CONSISTENT WITH THEIR BEING AN
UNFUNDED DEFERRED COMPENSATION PLAN MAINTAINED FOR A SELECT GROUP OF MANAGEMENT
OR HIGHLY COMPENSATED EMPLOYEES (SOMETIMES REFERRED TO AS A "TOP-HAT" PLAN)
DESCRIBED IN SECTIONS 201(2), 301(A)(3) AND 401(A)(1) OF THE ACT. THE FUND (IF
ESTABLISHED) IS INTENDED TO BE A GRANTOR TRUST, OF WHICH THE EMPLOYER IS THE
GRANTOR, WITHIN THE MEANING OF SUBPART E, PART I, SUBCHAPTER J, CHAPTER 1,
SUBTITLE A OF THE CODE, AND SHALL BE CONSTRUED ACCORDINGLY. CERTAIN BENEFITS
UNDER THE PLAN ARE INTENDED TO BE EXCESS BENEFITS WITHIN THE MEANING OF SECTIONS
3(36) AND 4(B)(5) OF THE ACT AND SHALL BE INTERPRETED AND ADMINISTERED AS SUCH.
12.13 INCOME AND EMPLOYMENT TAXES. BENEFITS UNDER THE PLAN GENERALLY ARE
ANTICIPATED TO BE SUBJECT TO INCOME AND EMPLOYMENT TAX WITHHOLDING FROM TIME TO
TIME. NOTWITHSTANDING ANY CONTRARY PROVISION OF THE PLAN, IF A PARTICIPANT DOES
NOT HAVE OTHER COMPENSATION FROM WHICH ANY TAXES REQUIRED TO BE WITHHELD WITH
RESPECT TO HIS PLAN BENEFITS CAN BE WITHHELD OR THE PARTICIPANT DOES NOT MAKE
OTHER ARRANGEMENTS SATISFACTORY TO THE ADMINISTRATOR FOR PAYMENT OF THE SAME,
THE AMOUNT OF THE PARTICIPANT'S BENEFITS UNDER THE PLAN MAY AT THE DIRECTION OF
THE ADMINISTRATOR BE REDUCED BY ANY TAXES REQUIRED TO BE WITHHELD THEREFROM AND
NOT OTHERWISE PROVIDED FOR.
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IN WITNESS WHEREOF, EACH EMPLOYER HAS CAUSED THE PLAN TO BE SIGNED ON
ITS BEHALF BY ITS DULY AUTHORIZED OFFICER OR MEMBER OF ITS BOARD OF DIRECTORS ON
THE DAY, MONTH AND YEAR AFORESAID.
HOME BENEFICIAL CORPORATION,
PLAN SPONSOR
BY:
-----------------------------------
ITS PRESIDENT AND CHIEF EXECUTIVE OFFICER
HOME BENEFICIAL LIFE INSURANCE COMPANY,
PARTICIPATING EMPLOYER
BY:
-----------------------------------------
ITS PRESIDENT AND CHIEF EXECUTIVE OFFICER
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HOME BENEFICIAL SUPPLEMENTAL RETIREMENT PLAN
APPENDIX A
(AS OF JULY 1, 1996)
LIST OF PARTICIPATING EMPLOYERS
EFFECTIVE DATE
EFFECTIVE DATE
PLACE OF OF COMMENCEMENT
OF TERMINATION
NAME INCORPORATION OF PARTICIPATION
OF PARTICIPATION
HOME BENEFICIAL CORPORATION VIRGINIA JULY 1, 1996
----
HOME BENEFICIAL LIFE
INSURANCE COMPANY VIRGINIA JULY 1, 1996
----
- A-1 - 62
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HOME BENEFICIAL SUPPLEMENTAL RETIREMENT PLAN
APPENDIX B
(AS OF JULY 1, 1996)
LIST OF EXCESS BENEFIT PARTICIPANTS
STATUS AND DATE - STATUS AND DATE -
EXCESS RETIREMENT EXCESS THRIFT
NAME BENEFIT PARTICIPANT BENEFIT PARTICIPANT
---- ------------------- -------------------
RICHARD W. WILTSHIRE, JR. NO YES - 07/01/96
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HOME BENEFICIAL SUPPLEMENTAL RETIREMENT PLAN
APPENDIX C
(AS OF JULY 1, 1996)
LISTING AND DESCRIPTION OF
SUPPLEMENTAL RETIREMENT AND DEATH BENEFITS
AND SUPPLEMENTAL BENEFIT PARTICIPANTS
I. H. STANLEY BOURNE.
A. DESIGNATION AS A SUPPLEMENTAL BENEFIT PARTICIPANT. H. STANLEY
BOURNE IS HEREBY DESIGNATED AS A SUPPLEMENTAL BENEFIT PARTICIPANT COMMENCING AT
HIS RETIREMENT FROM THE EMPLOYMENT OF THE EMPLOYER AT OR AFTER HIS NORMAL
RETIREMENT AGE UNDER THE RETIREMENT PLAN.
B. SUPPLEMENTAL RETIREMENT BENEFIT. THE PARTICIPANT'S
SUPPLEMENTAL RETIREMENT BENEFIT IS $20,000 PER YEAR, PAYABLE MONTHLY ON THE
FIRST OF EACH MONTH DURING THE LIFE OF THE PARTICIPANT.
C. VESTING IN AND FORFEITURE OF SUPPLEMENTAL RETIREMENT BENEFIT.
THE PARTICIPANT'S SUPPLEMENTAL RETIREMENT BENEFIT SHALL BE FORFEITED UPON HIS
TERMINATION OF EMPLOYMENT WITH THE EMPLOYER FOR REASONS OTHER THAN RETIREMENT AT
OR AFTER HIS NORMAL RETIREMENT AGE UNDER THE RETIREMENT PLAN AND SHALL BE VESTED
AS OF THE DATE OF HIS RETIREMENT FROM THE EMPLOYMENT OF THE EMPLOYER UNDER THE
RETIREMENT PLAN AT OR AFTER HIS NORMAL RETIREMENT AGE UNDER THE RETIREMENT PLAN,
BUT SHALL REMAIN SUBJECT TO DIVESTMENT AND FORFEITURE IN THE EVENT OF THE
PARTICIPANT'S COMPETITION WITH THE EMPLOYER. NO VESTING IS PROVIDED PRIOR TO
SUCH RETIREMENT. FOR PURPOSES HEREOF, "COMPETITION" MEANS ENGAGING, DIRECTLY OR
INDIRECTLY, ON A FULL-TIME OR PART-TIME BASIS OR ON A CONSULTING OR ADVISORY
BASIS OR OTHERWISE FOR ANY OTHER BUSINESS ORGANIZATION IN ANY MATTER OR IN ANY
MANNER WHICH MIGHT BE DEEMED TO BE IN COMPETITIVE WITH OR AGAINST THE BEST
INTERESTS OF THE PLAN SPONSOR OR ANY OF ITS AFFILIATES.
D. SUPPLEMENTAL RETIREMENT DEATH BENEFIT. NO SUPPLEMENTAL
RETIREMENT DEATH BENEFIT IS PROVIDED WITH RESPECT TO THE PARTICIPANT.
E. TIME AND FORM OF PAYMENT OF SUPPLEMENTAL RETIREMENT BENEFIT.
THE PARTICIPANT'S SUPPLEMENTAL RETIREMENT BENEFIT SHALL BE PAYABLE MONTHLY FOR
THE LIFE OF THE PARTICIPANT, COMMENCING AT THE TIME THE PARTICIPANT'S RETIREMENT
BENEFIT UNDER THE RETIREMENT PLAN COMMENCES TO BE PAID. ALL PAYMENTS WILL END
UPON THE PARTICIPANT'S DEATH.
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Exhibit 10 (v)
HOME BENEFICIAL CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
TABLE OF CONTENTS
Page
Section 1. Establishment and Purpose of the Plan........................1
1.1. Establishment................................................1
1.2. Purpose......................................................1
Section 2. Participation by Eligible Executives.........................2
2.1. Eligible Executives on Effective Date........................2
2.2. Eligible Executives after Effective Date.....................2
2.3. Written Proof of Participation Required......................2
Section 3. Accrued Benefit .............................................3
3.1. Accrued Benefit Definition...................................3
3.2. Other Benefit Definitions....................................3
3.3 Cessation of Benefit Accrual after a Change in Control.......3
3.4 Required Reductions..........................................3
Section 4. Benefits.....................................................5
4.1. Normal Retirement Benefit....................................5
4.2. Late Retirement Benefit......................................5
4.3. Early Retirement Benefit.....................................5
4.4. Vested Retirement Benefit....................................5
4.5. Disability Retirement Benefit................................6
4.6. Joint & Spouse Survivor Annuity Option.......................6
4.7. Additional Benefits..........................................6
Section 5. Preretirement Death Benefits................................10
5.1. Preretirement Death Benefit.................................10
5.2. Payment to Beneficiaries....................................10
Section 6. Nature of Participant's Interest in Plan ...................11
6.1. No Right to Assets..........................................11
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6.2. No Right to Transfer Interest...............................11
6.3. No Employment Rights .......................................11
6.4. Withholding and Tax Liabilities.............................11
Section 7. Administration, Interpretation, and Modification of Plan....12
7.1. Plan Administrator..........................................12
7.2. Powers of Committee.........................................12
7.3. Finality of Committee Determinations........................12
7.4. Incapacity..................................................12
7.5. Amendment, Suspension, and Termination......................12
7.6. Power to Delegate Board Authority...........................12
7.7. Headings....................................................12
7.8. Severability................................................12
7.9. Governing Law...............................................12
7.10. Complete Statement of Plan..................................12
7.11. Administration Matters Arising Upon a Change in Control.....13
7.12. Participation by Company Affiliates.........................13
Section 8 Terms Used in the Plan......................................14
8.1. Gender and Number...........................................14
8.2. Definitions.................................................14
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HOME BENEFICIAL CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
EFFECTIVE NOVEMBER 1, 1996
SECTION 1. ESTABLISHMENT AND PURPOSE OF THE PLAN.
1.1. ESTABLISHMENT. Effective November 1, 1996, the Company
established the Plan for the benefit of the Participants.
1.2. PURPOSE. The Plan is an unfunded plan maintained primarily for the
purpose of providing deferred compensation to a select group of management or
highly compensated employees. The Plan provides supplemental retirement income
to Participants in excess of their employer-provided benefits under certain
other plans and arrangements up to the maximum benefit specified in the Plan.
The Plan also provides supplemental survivor's income to Participants'
Beneficiaries, a death benefit, and certain limited medical benefits.
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SECTION 2. PARTICIPATION BY ELIGIBLE EXECUTIVES.
2.1. ELIGIBLE EXECUTIVES ON EFFECTIVE DATE. An employee who is an
Eligible Executive on the Effective Date will become a Participant in the Plan
beginning on the Effective Date.
2.2. ELIGIBLE EXECUTIVES AFTER EFFECTIVE DATE. An employee who first
becomes an Eligible Executive after the Effective Date will become a Participant
in the Plan as of the date he is designated as an Eligible Executive by the
Compensation Committee in its sole discretion.
2.3. WRITTEN PROOF OF PARTICIPATION REQUIRED. No employee will become a
Participant in the Plan unless he and the Company execute a written
participation agreement in the form attached hereto recognizing his
participation in the Plan. The executed copy of the written participation
agreement will constitute an agreement between the Company and the employee that
binds both of them to the terms of the Plan. The written participation agreement
will be binding on their heirs, executors, administrators, successors, and
assigns, both present and future. The executed copy of the written participation
agreement must be signed on the Company's behalf by an authorized officer (other
than the employee) and by the employee on his own behalf.
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SECTION 3. ACCRUED BENEFIT.
3.1. ACCRUED BENEFIT DEFINITION. A Participant's Accrued Benefit under
the Plan is a monthly benefit equal to one twelfth of the Applicable Percentage
of his Final Compensation multiplied by a fraction (not to exceed one) whose
numerator is his Period of Service as an Eligible Executive and a Participant
from November 1, 1996 until his Determination Date and whose denominator is ten,
payable in the applicable Normal Payment Form beginning on his Normal Retirement
Date, and reduced in accordance with Section 3.4. In the event of a Change in
Control, each Participant who is an Eligible Executive as of the date of the
Change in Control will be deemed to have a Period of Service as an Eligible
Executive and a Participant of ten years, thereby causing the fraction described
above to be equal to one.
3.2. OTHER BENEFIT DEFINITIONS.
(a) A Participant's Applicable Percentage is the percentage
that is specified by the Compensation Committee with respect to the
Participant for purposes of the Plan and that is reflected in the
written participation agreement between the Company and the Participant
executed in accordance with Section 2.3.
(b) The Determination Date with respect to a Participant is
the date he ceases to be an Eligible Executive for any reason
(including without limitation, his death) or, if earlier, the date a
Change in Control occurs.
(c) A Participant's Final Compensation is 52 times his Final
Week Compensation. The Final Week Compensation of a Participant is the
gross amount of base salary paid to him for the highest week of the 260
weeks of service closest to the Determination Date, plus the highest
annual bonus for that period divided by 52.
(d) The Normal Payment Form for a Tier One Participant will be
a Joint & Spouse Survivor Annuity at his Benefit Starting Date or, if
earlier, at his death. If the Tier One Participant is not married at
his Benefit Starting Date or, if earlier, at his death, his Normal
Payment Form will be a Single Life Annuity. The Normal Payment Form for
Participant who is not a Tier One Participant will be a Single Life
Annuity.
3.3. CESSATION OF BENEFIT ACCRUAL AFTER A CHANGE IN CONTROL. In the
event a Change in Control occurs, all further benefit accrual under the Plan
shall cease as of the day after the date the Change in Control occurs.
3.4. REQUIRED REDUCTIONS. The monthly installments otherwise included
in a Participant's Accrued Benefit will be reduced as follows:
(a) First, each monthly installment will be reduced by an
amount that is the monthly Actuarial Equivalent (converted to the form
of benefit payable to the Participant under this Plan) payable at the
Plan's Normal Retirement Date of all
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employer-provided benefits accrued through the Participant's
Determination Date which the Participant or, where applicable, his
Beneficiary is receiving under any defined benefit plan (other than
this Plan) maintained by the Company or any Company Affiliate.
Employer-provided benefits provided to an alternate payee under a
qualified domestic relations order will be treated as if they were
provided to the Participant. The reduction required under this Section
3.4(a) shall be applied only based on and only as and when actual
benefit payments under such other defined benefit plans are made.
(b) Second, if the Participant elects to begin receiving
benefits before his Normal Retirement Date, the monthly installment
resulting after the preceding reductions have been made will be further
reduced by 5/12 of one percent for each month during which benefits are
scheduled to be paid before his Normal Retirement Date.
Notwithstanding the foregoing, no such reduction
shall be effected if the Participant becomes Disabled while an Eligible
Executive and is receiving a Disability Retirement Benefit.
(c) Third, after the preceding reductions have been made, the
resulting monthly installment will be further reduced by multiplying it
by the Participant's Vested Percentage. The Vested Percentage is 100
percent in the case of a Participant whose Period of Service is five or
more years, and the Vested Percentage of each Participant whose Period
of Service is less than five years is zero.
Notwithstanding the foregoing, a Participant's Vested
Percentage will be 100 percent if, at or before his Determination Date,
either he dies while an Eligible Executive, he becomes Disabled while
an Eligible Executive or he is an Eligible Executive at the date of a
Change in Control.
A Participant whose Vested Percentage is 100 percent
is sometimes referred to as a Vested Participant.
(d) Fourth, after the preceding reductions have been made,
each monthly installment made during a month for which the Participant
receives benefits under a long- term disability welfare plan maintained
by the Company will be further reduced by the amount of the
employer-provided long-term disability benefit he receives for that
month.
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SECTION 4. BENEFITS
4.1. NORMAL RETIREMENT BENEFIT. A Participant who retires from service
with the Company on his Normal Retirement Date is entitled to a Normal
Retirement Benefit. Unless he elects otherwise, he will receive his Normal
Retirement Benefit in the applicable Normal Payment Form beginning on his Normal
Retirement Date. The monthly installments made under his Normal Retirement
Benefit will be the same as the monthly installments under his Accrued Benefit.
4.2. LATE RETIREMENT BENEFIT. A Participant who retires from service
with the Company after his Normal Retirement Date is entitled to a Late
Retirement Benefit. Unless he elects otherwise, he will receive his Late
Retirement Benefit in the applicable Normal Payment Form beginning on the first
day of the month after he retires from service with the Company. The monthly
installments made under his Late Retirement Benefit will be the same as the
monthly installments under his Accrued Benefit, beginning with the monthly
installment for the month that includes his Late Retirement Date. For purposes
of calculating the Final Week Compensation and Period of Service of a
Participant entitled to a Late Retirement Benefit, compensation paid and service
after the Participant's Normal Retirement Date will be taken into account.
4.3. EARLY RETIREMENT BENEFIT. A Participant who retires from service
with the Company on or after age 55 but before his Normal Retirement Date is
entitled to an Early Retirement Benefit. Unless he elects otherwise, he will
receive his Early Retirement Benefit in the applicable Normal Payment Form
beginning on his Normal Retirement Date. The monthly installments made under his
Early Retirement Benefit will be the same as the monthly installments under his
Accrued Benefit. However, he may elect to begin receiving his Early Retirement
Benefit on the first day of any month before his Normal Retirement Date (his
Early Retirement Date) and on or after the date he retires from service with the
Company, in accordance with Section 3.4(b).
4.4. VESTED RETIREMENT BENEFIT.
(a) A Participant who is an Eligible Executive at the date a
Change in Control occurs is entitled to a Vested Retirement Benefit.
Unless he elects otherwise, he will receive his Vested Retirement in
the applicable Normal Payment Form beginning on the first day of the
month following the date the Change in Control occurs. The monthly
installments made under his Vested Retirement Benefit will be the same
as the monthly installments under his Accrued Benefit. The
Participant's Vested Retirement Benefit will not be reduced in
accordance with Section 3.4(b).
(b) A Participant who does not retire under the Plan and who
is not otherwise entitled to a Vested Retirement Benefit under Section
4.4(a) but who has a Vested Percentage of 100 percent and whose
employment with the Company terminates for any reason other than
retirement or death is entitled to a Vested Retirement Benefit. Unless
he elects otherwise, he will receive his Vested Retirement
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in the applicable Normal Payment Form beginning on his Normal
Retirement Date. The monthly installments made under his Vested
Retirement Benefit will be the same as the monthly installments under
his Accrued Benefit. However he may elect to begin receiving his Vested
Retirement Benefit on the first day of any month before his Normal
Retirement Date and on or after age 55, in accordance with Section
3.4(b).
4.5. DISABILITY RETIREMENT BENEFIT. A Participant who becomes Disabled
while an Eligible Executive and before he satisfies the requirements for another
Retirement Benefit under this Section 4 is entitled to a Disability Retirement
Benefit while he remains Disabled. Unless he elects otherwise, he will receive
his Disability Retirement Benefit in the applicable Normal Payment Form
beginning on his Disability Retirement Date. The monthly installments made under
his Disability Retirement Benefit will be the same as the monthly installments
under his Accrued Benefit, and will not be reduced in accordance with Section
3.4(b).
4.6. JOINT & SPOUSE SURVIVOR ANNUITY OPTION. A Participant who is not a
Tier One Participant may elect to receive his Retirement Benefit in the form of
a Joint & Spouse Survivor Annuity rather than a Single Life Annuity. The Joint &
Spouse Survivor Annuity may begin on the first day of any month on which the
Participant is entitled to begin receiving his Retirement Benefit and will be
the Actuarial Equivalent of the Retirement Benefit that would have been payable
to him in the form of a Single Life Annuity beginning on that day. Any election
under this Section 4.6 must be made before the Participant's Benefit Starting
Date and may not be changed or revoked after that date, provided however that
such an election will be automatically revoked if the Participant is not married
at his Benefit Starting Date. A Participant shall have an election period of at
least 60 days to make his election under this Section 4.6.
4.7. ADDITIONAL BENEFITS. In addition to the various forms of
retirement benefits described above, in the event of a Change in Control, the
following additional benefits will be provided to Participants who are Eligible
Executives at the date the Change in Control occurs:
(a) LIFE INSURANCE - In the event of a Participant's cessation
of employment for any reason other than death on or after the date a
Change in Control occurs, the Participant's Beneficiary will be
entitled to a life insurance benefit which will pay upon the
Participant's death the excess of (i) the following applicable amount
over (ii) the actual amount of the life insurance death benefit paid
(whether or not to that Beneficiary) with respect to the Participant
under the Home Beneficial Death and Disability Plan (or any successor
to such plan):
o 100% of his total normal compensation (based on the
four most recently completed calendar quarters prior
to cessation of employment and defined in the same
manner as provided in the Home Beneficial Death and
Disability Plan for retiree death benefit purposes at
the date of the Change in Control) for the first full
year following cessation of employment,
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o 75% of his total normal compensation for the second
full year following cessation of employment, and
o 50% of his total normal compensation for each year
thereafter.
(b) MEDICAL BENEFIT - In the event of a Change in Control,
each Tier One Participant who is an Eligible Executive at the date the
Change in Control occurs and his spouse to whom he is married at the
date of the Change in Control shall be entitled to receive until age 65
health care coverage for himself and his family which is comparable to
that provided, and for which the cost to the Participant does not
exceed the cost to an active employee, at the date of the Change in
Control occurs under the Home Beneficial Medical Expense Plan.
(c) GROSS-UP BENEFIT - In the event of a Change in Control,
anything in the Plan to the contrary notwithstanding, in the event it
shall be determined that any benefit, payment or distribution by the
Company to or for the benefit of a Participant who is an Eligible
Executive at the date the Change in Control occurs or his Beneficiary
(determined without regard to any additional payments required under
this Section 4.7(c) (a "Payment") is or would be subject to the excise
tax imposed by Section 4999 of the Code or any interest or penalties
are incurred by the Participant or his Beneficiary with respect to such
excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise
Tax"), then the Participant or his Beneficiary shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such
that after payment by the Participant or his Beneficiary of all taxes
(including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Participant or his Beneficiary
retains an amount of the Gross- Up Payment equal to the Excise Tax
imposed upon the Payments.
The following shall apply for purposes of this
Section 4.7(c):
(i) Subject to the provisions of clause (ii) of this
Section 4.7(c), all determinations required to be made under
this Section 4.7(c), including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such
determination, shall be made by or such other certified public
accounting firm as may be designated by the Participant or his
Beneficiary (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the
Participant or his Beneficiary within 15 business days of the
receipt of notice from the Participant or his Beneficiary that
there has been a Payment, or such earlier time as is requested
by the Company. In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or
group effecting the Change in Control, the Participant or his
Beneficiary shall appoint another nationally recognized
accounting firm to make the determinations required hereunder
(which accounting firm shall then
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be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this
Section 4.7(c), shall be paid by the Company to the
Participant or his Beneficiary within five days of the receipt
of the Accounting Firm's determination. Any determination by
the Accounting Firm shall be binding upon the Company and the
Participant or his Beneficiary. As a result of the uncertainty
in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it
is possible that Gross-Up Payments which will not have been
made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies
pursuant to this Section 4.7(c) and the Participant or his
Beneficiary thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Company to or for the benefit of
the Participant or his Beneficiary.
(ii) The Participant or his Beneficiary shall notify
the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten business
days after the Participant or his Beneficiary is informed in
writing of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is
requested to be paid in writing. The Participant or his
Beneficiary shall not pay such claim prior to the expiration
of the 30-day period following the date on which it gives such
notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is
due). If the Company notifies the Participant or his
Beneficiary in writing prior to the expiration of such period
that it desires to contest such claim, the Participant or his
Beneficiary shall:
(A) give the Company any information reasonably
requested by the Company relating to such claim,
(B) take such action in connection with contesting
such claim as the Company shall reasonably request in writing
from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney
reasonably selected by the Company,
(C) cooperate with the Company in good faith in
order effectively to contest such claim, and
(D) permit the Company to participate in any
proceedings relating to such claim.
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Notwithstanding the foregoing, the Company shall bear and pay
directly all costs and expenses (including additional interest
and penalties) incurred in connection with such contest and
shall indemnify and hold the Participant or his Beneficiary
harmless, on an after-tax basis, for any Excise Tax or income
tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing
provisions of this Section 4.7(c), the Company shall control
all proceedings taken in connection with such contest and, at
its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at
its sole option, either direct the Participant or his
Beneficiary to pay the tax claimed and sue for a refund or to
contest the claim in any permissible manner, and the
Participant or his Beneficiary agrees to prosecute such
contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine. If the
Company directs the Participant or his Beneficiary to pay such
claim and sue for a refund, the Company shall advance the
amount of such payment to the Participant or his Beneficiary,
on an interest-free basis and shall indemnify and hold the
Participant or his Beneficiary harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest
or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of
taxes for the taxable year of the Participant or his
Beneficiary with respect to which such contested amount is
claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Participant or his
Beneficiary shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(iii) If, after the receipt by the Participant or his
Beneficiary of an amount advanced by the Company pursuant to
this Section 4.7(c), the Participant or his Beneficiary
becomes entitled to receive any refund with respect to such
claim, the Participant or his Beneficiary shall (subject to
the Company's complying with the requirements of this Section
4.7(c)) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the
Participant or his Beneficiary of an amount advanced by the
Company pursuant to this Section 4.7(c), a determination is
made that the Participant or his Beneficiary shall not be
entitled to any refund with respect to such claim and the
Company does not notify the Participant or his Beneficiary in
writing of its intent to contest such denial of refund prior
to the expiration of 30 days after such determination, then
such advance shall be forgiven and shall not be
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required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
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SECTION 5. PRERETIREMENT DEATH BENEFITS.
5.1. PRERETIREMENT DEATH BENEFIT. If a Vested Participant (as defined
in Section 3.4(c)) dies before his Benefit Starting Date, his surviving spouse,
if any, is entitled to a Preretirement Death Benefit. The Preretirement Death
Benefit with respect to a Participant is that portion of the Participant's
Accrued Benefit that would have been paid to the surviving spouse after the
Participant's death if (i) the Participant's Retirement Benefit had begun on the
earliest date after his death on which he could have begun receiving benefits
under Section 4 ("his assumed Benefit Starting Date"), (ii) the Participant's
Retirement Benefit was paid in the form of a Joint & Spouse Survivor Annuity,
and (iii) the Participant died on the day after his assumed Benefit Starting
Date.
If a Preretirement Death Benefit is payable to the
Participant's surviving spouse, that spouse shall automatically be considered
the Participant's Beneficiary with respect to such benefit under the Plan.
5.2. PAYMENT TO BENEFICIARIES. The Preretirement Death Benefit with
respect to a Participant will be paid to the Participant's surviving spouse, if
any, in the form of a Single Life Annuity for the Beneficiary's life commencing
on the earliest date after the Participant's death on which he could have begun
receiving benefits under Section 4.
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SECTION 6. NATURE OF PARTICIPANT'S INTEREST IN PLAN.
6.1. NO RIGHT TO ASSETS. Participation in the Plan does not create, in
favor of any Participant or Beneficiary, any right or lien in or against any
asset of the Company. Nothing contained in the Plan, and no action taken under
its provisions, will create or be construed to create a trust of any kind, or a
fiduciary relationship, between the Company and a Participant or any other
person. The Company's promise to pay benefits under the Plan will at all times
remain unfunded as to each Participant and Beneficiary, whose rights under the
Plan are limited to those of a general and unsecured creditor of the Company.
6.2. NO RIGHT TO TRANSFER INTEREST. Rights to benefits payable under
the Plan are not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, or encumbrance. However, the Administrative
Committee may permit a Participant or Beneficiary to enter into a revocable
arrangement to pay all or part of his benefits under the Plan to a revocable
grantor trust (a so-called "living trust"). In addition, the Administrative
Committee may recognize the right of an alternate payee named in a domestic
relations order to receive all or part of a Participant's benefits under the
Plan, but only if (a) the domestic relations order would be a "qualified
domestic relations order" within the meaning of section 414(p) of the Code (if
section 414(p) applied to the Plan), (b) the domestic relations order does not
attempt to give the alternate payee any right to any asset of the Company, (c)
the domestic relations order does not attempt to give the alternate payee any
right to receive payments under the Plan at a time or in an amount that the
Participant could not receive under the Plan, and (d) the amount of the
Participant's benefits under the Plan are reduced to reflect any payments made
or due the alternate payee.
6.3. NO EMPLOYMENT RIGHTS. No provisions of the Plan and no action
taken by the Company, the Board of Directors, the Compensation Committee, or the
Administrative Committee will give any person any right to be retained in the
employment of the Company, and the Company specifically reserves the right and
power to dismiss or discharge any participant with or without cause, maintaining
the "at-will employment status of all employees".
6.4. WITHHOLDING AND TAX LIABILITIES. The amount of any withholdings
required to be made by any government or government agency will be deducted from
benefits paid under the Plan to the extent deemed necessary by the
Administrative Committee. In addition, the Participant or Beneficiary (as the
case may be) will bear the cost of any taxes not withheld on benefits provided
under the Plan, regardless of whether withholding is required.
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SECTION 7. ADMINISTRATION, INTERPRETATION, AND MODIFICATION OF PLAN.
7.1. PLAN ADMINISTRATOR. The Administrative Committee will administer
the Plan and is the plan administrator of the Plan.
7.2. POWERS OF COMMITTEE. The Administrative Committee's powers
include, but are not limited to, the power to adopt rules consistent with the
Plan; the power to decide all questions relating to the interpretation of the
terms and provisions of the Plan; and the power to resolve all other questions
arising under the Plan (including, without limitation, the power to remedy
possible ambiguities, inconsistencies, or omissions by a general rule or
particular decision). The Administrative Committee has discretionary authority
to exercise each of the foregoing powers.
7.3. FINALITY OF COMMITTEE DETERMINATIONS. Determinations by the
Administrative Committee and any interpretation, rule, or decision adopted by
the Administrative Committee under the Plan or in carrying out or administering
the Plan will be final and binding for all purposes and upon all interested
persons, their heirs, and their personal representatives.
7.4. INCAPACITY. If the Administrative Committee, in its sole
discretion, determines that any person entitled to benefits under the Plan is
unable to care for his affairs because of illness or accident, any payment due
(unless a duly qualified guardian or other legal representative has been
appointed) may be paid for the benefit of such person to his spouse, parent,
brother, sister, or other party deemed by the Administrative Committee to have
incurred expenses for such person.
7.5. AMENDMENT, SUSPENSION, AND TERMINATION. The Board of Directors
has the right by written resolution to amend, suspend, or terminate the Plan at
any time. However, no amendment, suspension, or termination will apply to an
employee who already is a Participant in the Plan without the Participant's
express written consent.
7.6. POWER TO DELEGATE BOARD AUTHORITY. The Board of Directors may, in
its sole discretion, delegate to any person or persons all or part of its
authority and responsibility under the Plan, including, without limitation, the
authority to amend the Plan.
7.7. HEADINGS. The headings used in this document are for convenience
of reference only and may not be given any weight in interpreting any provision
of the Plan.
7.8. SEVERABILITY. If any provision of the Plan is held illegal or
invalid for any reason, the illegality or invalidity of that provision will not
affect the remaining provisions of the Plan, and the Plan will be construed and
enforced as if the illegal or invalid provision had never been included in the
Plan.
7.9. GOVERNING LAW. The Plan will be construed, administered, bind
regulated in accordance with the laws of the Commonwealth of Virginia, except to
the extent that those
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laws are preempted by federal law.
7.10. COMPLETE STATEMENT OF PLAN. This Plan contains a complete
statement of its terms. The Plan may be amended, suspended or terminated only in
writing and then only as provided in Section 7.5. A Participant's right to any
benefit of a type provided under the Plan will be determined solely in
accordance with the terms of the Plan. No other evidence, whether written or
oral, will be taken into account in interpreting the provisions of the Plan.
Notwithstanding the preceding provisions of this Section 7.10, for purposes of
determining benefits with respect to a Participant, this Plan will be deemed to
include (a) the provisions of the written participation agreement executed in
accordance with Section 2.3, and (b) the provisions of any other written
agreement between the Company and the Participant to the extent such other
agreement explicitly provides for the incorporation of some or all of its terms
into this Plan.
7.11. ADMINISTRATIVE MATTERS ARISING FROM A CHANGE IN CONTROL. In the
event of a Change in Control as defined in Section 8.2, the Company will, within
90 days, place the amount necessary to pay future benefits into a grantor trust
(the Trust) to be used for benefit payments, but subject to the general
creditors of the Company as provided therein.
The trustee of the Trust is expressly authorized, though not
required, to purchase annuities for payment of the benefits within 60 days
following the establishment of the Trust, such Trust to begin payment of
benefits as soon as possible, commensurate with this agreement.
Nothing in this Section 7.11 shall be construed to authorize
or delay benefit payments due under the Plan.
7.12. PARTICIPATION BY COMPANY AFFILIATES. Any Company Affiliate may
adopt this Plan for the benefit of one or more of its employees who are Eligible
Executives with the consent of its Board of Directors and the Company's Board of
Directors. Such adoption shall be reflected in an adoption agreement or in the
Plan. Each Company Affiliate adopting the Plan shall be jointly and severally
liable with the Company and other adopting Company Affiliates for benefits
accrued under the Plan participating in the Plan. As of the Effective Date, the
only Company Affiliate adopting the Plan is Home Beneficial Life Insurance
Company.
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SECTION 8. TERMS USED IN THE PLAN.
8.1. GENDER AND NUMBER. Words used in the masculine gender in the Plan
are intended to include the feminine and neuter genders, where appropriate.
Words used in the singular form in the Plan are intended to include the plural
form, where appropriate, and vice versa.
8.2. DEFINITIONS. When used in capitalized form in the Plan, the
following words and phrases have the following meanings, unless the context
clearly indicates that a different meaning is intended:
"ACCRUED BENEFIT" means the benefit described in Section 3.
"ACTUARIAL EQUIVALENT" means the following: an amount or
benefit is the "Actuarial Equivalent" of, or is "Actuarially
Equivalent" to, another amount or benefit as of a specified date, if
the Actuarial Present Value as of the specified date of the first
amount or benefit equals the Actuarial Present Value as of the
specified date of the second amount or benefit, when calculated using
the same actuarial assumptions.
Actuarial Equivalence under Section 3.4 will be determined as
of the Participant's Benefit Starting Date, and the resulting benefit
will be expressed in the applicable Normal Payment Form beginning on
the Participant's Normal Retirement Date.
Actuarial Equivalence under Section 4.6 will be determined as
of the Participant's Benefit Starting Date, and the resulting benefit
will be expressed in the form of a Joint & Spouse Survivor Annuity
beginning on the Participant's Benefit Starting Date.
Actuarial Equivalence under the definition of "Single Life
Annuity" in this Section 8.2 will be determined as of the Beneficiary's
Benefit Starting Date, and the resulting benefit will be expressed in
the form of a Single Life Annuity beginning on the Beneficiary's
Benefit Starting Date.
To determine the actuarial equivalent of a benefit in the form
of a Joint & Spouse Survivor Annuity, the factors in Table II-C of the
Home Beneficial Retirement Plan for benefits earned after December 3l,
1988 shall be used. For this purpose, the "Normal Retirement Age
Payment Date" in such Table shall be applied based on the Retirement
Plan's definition and not based on this Plan's definition of Normal
Retirement Date and shall also be determined without the 5/12 of one
percent early payment reduction built into the Table.
"ACTUARIAL PRESENT VALUE" means the value as of a specified
date of an amount or a series of amounts due before or thereafter,
where each amount is multiplied by the probability that the condition
or conditions on which payment of the
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amount is contingent will be satisfied, and where each amount so
multiplied is then increased (if due before) or discounted (if due
thereafter) according to assumed rate of interest to reflect the time
value of money. Unless the Plan specifies otherwise, the mortality
table and interest rate used to calculate the Actuarial Present Value
of an amount or series of amounts will be the mortality table and
interest rate in effect under section 417(e)(3)(A)(ii) of the Code in
effect in the month before the beginning of the plan year, during which
such computation is being made.
"ADMINISTRATIVE COMMITTEE" means the Board of Directors or any
other person or committee appointed by the Board of Directors. However,
following a Change in Control, "Administrative Committee" means the
trustee under the Trust maintained by the Company in connection with
the Plan unless the Board of Directors as such Board is constituted
prior to such Change in Control provides otherwise.
"APPLICABLE PERCENTAGE" has the meaning assigned to that term
in Section 3.2(a).
"ASSOCIATE" has the meaning assigned to that term for purposes
of Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act.
"BENEFICIAL OWNER" means the following: a Person is deemed to
be the "Beneficial Owner" of, to "Beneficially Own," and to have
"Beneficial Ownership" of, any securities:
(1) which such Person or any of such Person's Securities Law
Affiliates or Associates beneficially owns, directly or indirectly;
(2) which such Person or any of such Person's Securities Law
Affiliates or Associates has (A) the right or obligation to acquire
(whether such right or obligation is exercisable or effective
immediately or only after the passage of time) pursuant to any
agreement, arrangement, or understanding (whether or not in writing) or
upon the exercise of conversion rights, exchange rights, rights,
warrants or options, or otherwise; provided that a Person shall not be
deemed the "Beneficial Owner" of; or to "Beneficially Own," or to have
"Beneficial Ownership" of, securities tendered pursuant to a tender or
exchange offer made by such Person or any of such Person's Securities
Law Affiliates or Associates until such tendered securities are
accepted for purchase or exchange; or (B) the right to vote pursuant to
any agreement, arrangement, or understanding (whether or not in
writing); provided that a Person shall not be deemed the "Beneficial
Owner" of; or to "Beneficially Own," or to have "Beneficial Ownership"
of; any security under this clause (B) if the agreement, arrangement,
or understanding to vote such security (i) arises solely form
irrevocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
rules and regulations of the Securities Exchange Act, and (ii) is not
also then reported by such Person on Schedule 13D under the Securities
Exchange Act (or any comparable or successor report); or
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(3) which are beneficially owned, directly or in directly, by
any other Person (or any Securities Law Affiliate or Associate thereof)
with which such Person or any of such Person's Securities Law
Affiliates or Associates has any agreement, arrangement, or
understanding (whether or not in writing) or with which such Person or
any of such Person's Securities Law Affiliates have otherwise formed a
group for the purpose of acquiring, holding, voting (except pursuant to
a revocable proxy as described in clause (B)(i) of paragraph (2),
above), or disposing of any securities of the Company.
"BENEFICIARY" means, except as otherwise expressly provided in
Section 5 for purposes of the Preretirement Death Benefit, the person
designated in writing by a Participant to receive benefits under the
Plan after the Participant's death. If a Participant dies and he has
failed to designate a Beneficiary or his designated Beneficiary fails
to survive him, his Beneficiary will be the person to whom he is
married at the time of his death, or if he is not married at that time,
his Beneficiary will be the executor of his will or the administrator
of his estate. A Participant may revoke in writing a prior designation
of a Beneficiary at any time prior to receipt of benefits.
"BENEFIT STARTING DATE" means the date on which a Participant
or Beneficiary is scheduled to begin receiving benefits under the Plan.
"BOARD OF DIRECTORS" means the Board of Directors of the
Company.
"CHANGE IN CONTROL" means the first to occur of the following
events (however if the 1984 Voting Trust, due to continue until May 11,
1997 is not renewed, such nonrenewal will not be considered a Change in
Control):
(1) an acquisition (other than directly from the Company) of
securities of the Company by any Person, immediately after which such
Person, together with all Securities Law Affiliates and Associates of
such Person, becomes the Beneficial Owner of securities of the Company
representing 50 percent or more of the Voting Power, provided that, in
determining whether a Change in Control has occurred, the acquisition
of securities of the Company in a Non-Control Acquisition will not
constitute an acquisition that would cause a Change in Control; or
(2) four or more directors, whose election or nomination for
election is not approved by a majority of the members of the Incumbent
Board then serving as members of the Board of Directors, are elected
within any single 12-month period to serve on the Board of Directors;
provided that an individual whose election or nomination for election
is approved as a result of either an actual or threatened Election
Contest or Proxy Contest, including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest, will be
deemed not to have been approved by a majority of the Incumbent Board
for purposes of this definition; or
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(3) members of the Incumbent Board cease for any reason to
constitute at least a majority of the Board of Directors; or
(4) consummation of:
(A) a merger, consolidation, or reorganization involving the
Company, unless
(i) the shareholders of the Company, immediately
before the merger, consolidation, or reorganization, own,
directly or indirectly immediately following such merger,
consolidation, or reorganization, at least 75 percent of the
combined voting power of the outstanding voting securities of
the corporation resulting from such merger, consolidation, or
reorganization in substantially the same proportion as their
ownership of the voting securities immediately before such
merger, consolidation, or reorganization;
(ii) individuals who were members of the Incumbent
Board immediately prior to the execution of the agreement
providing for such merger, consolidation, or reorganization
constitute at least a majority of the board of directors of
the Surviving Corporation; and
(iii) no Person (other than (1) the Company or any
Subsidiary thereof, (2) any employee benefit plan (or any
trust forming a part thereof) maintained by the Company, any
Subsidiary thereof, or the Surviving Corporation, or (3) any
Person who, immediately prior to such merger, consolidation,
or reorganization, had Beneficial Ownership of securities
representing 25 percent or more of the Voting Power) has
Beneficial Ownership of securities representing 25 percent or
more of the combined voting power of the Surviving
Corporation's then outstanding voting securities;
(B) a complete liquidation or dissolution of the Company; or
(C) the sale or other disposition of all or substantially all
of the assets of the Company to any Person (other than a transfer to a
Subsidiary of the Company).
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
"COMPANY" means Home Beneficial Corporation, any successor to
Home Beneficial Corporation. Employment with the Company includes
employment with any Company Affiliate.
"COMPANY AFFILIATE" means any corporation, partnership, or
other organization, partnership, or other organization required to be
aggregated with the Company under section 414(b) and (c) of the Code.
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"COMPENSATION COMMITTEE" means the Compensation Committee of
the Board of Directors or if there is no such committee, the Board of
Directors.
"DETERMINATION DATE" with respect to a Participant means the
applicable date as of which his benefit is determined as described in
Section 3.2(b).
"DISABILITY RETIREMENT BENEFIT" means the benefit described in
Section 4.5.
"DISABLED" means entitled to receive disability benefits under
a long-term disability plan or disability retirement benefits under a
defined benefit plan (other than this Plan) maintained by the Company.
"EARLY RETIREMENT BENEFIT" means the benefit described in
Section 4.3.
"EARLY RETIREMENT DATE" shall be that last day of the calendar
month coinciding with or next following the date of early retirement
from the Company. A Participant who has attained the age of fifty-five
years or more and has completed a Period of Service of at least five
years as determined for vesting purposes under Section 3.4(c).
"EFFECTIVE DATE" means November 1, 1996.
"ELECTION CONTEST" means an election contest described in Rule
14a-II promulgated under the Securities Exchange Act.
"ELIGIBLE EXECUTIVE" means a common law employee who is an
officer of the Company or a Company Affiliate or who holds another key
position with the Company or a Company Affiliate and, in either case,
who is designated as an "Eligible Executive" for purposes of this Plan
by the Compensation Committee in its sole discretion. Unless otherwise
expressly provided in a Participant's written participation agreement
referred to in Section 2.3, any such designation may be terminated for
prospective periods, but not retroactively, by the Compensation
Committee in its sole discretion, and any such designation shall
automatically terminate when the person ceases to be a common law
employee of the Company and all Company Affiliates, in which case the
employee will cease to be an "Eligible Employee" prospectively from the
effective date of such termination. Notwithstanding the foregoing, no
termination of such a designation may be made by the Compensation
Committee (whether by termination of the employee's employment or his
actual designation as an Eligible Executive or otherwise) in
anticipation of a Change in Control.
"FINAL WEEK COMPENSATION" has the meaning assigned to that
term in Section 3.2(c).
85
<PAGE>
"INCUMBENT BOARD" means individuals who, as of the close of
business on the Effective Date, are members of the Board of Directors;
provided that, if the election, or nomination for election by the
Company's shareholders, of any new director was approved by a vote of
at least 75 percent of the Incumbent Board, such new director shall,
for purposes of the Plan, be considered as a member of the Incumbent
Board; provided further that no individual shall be considered a member
of the Incumbent Board if such individual initially assumed office as a
result of either an actual or threatened Election Contest or other
actual or threatened Proxy Contest, including by reason of any
agreement intended to avoid or settle any election Contest or Proxy
contest.
JOINT & SPOUSE SURVIVOR ANNUITY" means an annuity payable in
equal monthly installments to the Participant, beginning with the
calendar month in which his Benefit Starting Date occurs and ending
with the calendar month in which he dies, and thereafter in equal
monthly installments of the same amount to his surviving spouse (if
any), beginning with the calendar month following the calendar month in
which he dies and ending with the calendar month in which his surviving
spouse dies.
"LATE RETIREMENT BENEFIT" means the benefit described in
Section 4.2.
"LATE RETIREMENT DATE" means the first day of the month
following the month in which a Participant retires from service with
the Company, if he retires from service with the Company after his
Normal Retirement Date.
"NON-CONTROL ACQUISITION" means an acquisition by (1) an
employee benefit plan (or a trust forming a part thereof) maintained by
(a) the Company or (b) any of its Subsidiaries, (2) the Company or any
of its Subsidiaries, or (3) any Person in connection with a Non-Control
Transaction.
"NON-CONTROL TRANSACTION" means any transaction described in
clauses (4)(A)(i) through (iii) of the definition of "Change in
Control."
"NORMAL PAYMENT FORM" with respect to a Participant means the
applicable form of payment described for the Participant in Section
3.2(d).
"NORMAL RETIREMENT BENEFIT" means the benefit described in
Section 4.1.
"NORMAL RETIREMENT DATE" means the first day of the month
following the month in which a Participant reaches age 65, unless a
Change in Control occurs, in which case Normal Retirement Date means
the first day of the month following the month in which the Change in
Control occurs for each Participant who is an Eligible Executive at the
date the Change in Control occurs. In the case of a Participant who
dies before reaching his Normal Retirement Date, Normal Retirement Date
means the day on which the Participant would have reached his Normal
Retirement Date had he
86
<PAGE>
not died.
"PARTICIPANT" means a member of a select group of management
or highly compensated employees of the Company or a Company Affiliate
who has become a participant in the Plan under Section 2.
Certain Participants are designated as Tier One Participants
in their written participation agreements referred to in Section 2.3.
All Participants who are not so designated as Tier One Participants
shall be considered Tier Two Participants.
Once an Eligible Executive becomes a Participant, he shall be
a Participant for so long as he is an Eligible Executive or he is
entitled to future benefits under the terms of the Plan.
"PERIOD OF SERVICE" with respect to an employee means the
period he is a common law employee of the company or any company
Affiliate, based on whole months of employment and expressed in years
and months (expressed as 1/12th of a year each), whether or not such
employment is continuous. Separate periods of employment shall be
aggregated, with 30 days being considered a month in the case of
aggregated separate partial months of employment.
"PERSON" means any individual, firm, corporation, partnership,
joint venture, association, trust, or other entity.
"PLAN" means the Home Beneficial Corporation Supplemental
Executive Retirement Plan as set forth in this document.
"PRERETIREMENT DEATH BENEFIT" means the benefit described in
Section 5.1.
"PROXY CONTEST" means a solicitation of proxies or consents by
or on behalf of a Person other than the Board of Directors.
"RETIREMENT BENEFIT" means a Normal Retirement Benefit, a Late
Retirement Benefit, an Early Retirement Benefit, a Vested Retirement
Benefit, or a Disability Retirement Benefit.
"SECTION" means a section of this Plan. For example, a
reference to Section 2 includes a reference to Sections 2.1 through
2.3, while a reference to Section 2.1 is intended as a reference to
Section 2.1 only.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934, amended and in effect from time to time.
"SECURITIES EXCHANGE AFFILIATE" means an "affiliate" as
defined for purposes
87
<PAGE>
of Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act.
"SINGLE LIFE ANNUITY" generally means an annuity payable in
equal monthly installments to the Participant, beginning with the
calendar month in which the Participant's Benefit Starting Date occurs
and ending with the calendar month in which the Participant dies.
The Single Life Annuity payable to a Beneficiary means an
annuity payable in equal monthly installments to the Beneficiary,
beginning with the calendar month in which the Beneficiary's Benefit
Starting Date occurs and ending with the calendar month in which the
Beneficiary dies.
"SUBSIDIARY" of any Person means any corporation or other
entity of which at least 80 percent (or such lesser percentage as the
Administrative Committee may determine) of the voting power of the
voting equity securities or voting interest therein is owned, directly
or indirectly, by such Person.
"SURVIVING CORPORATION" means a corporation resulting from a
merger, consolidation, or reorganization described in paragraph
(4)(A)(i) of the definition of "Change in Control."
"TRUST" means the grantor trust referred to in Section 7.11,
which trust is maintained under that certain document known as the Home
Beneficial Corporation Supplemental Executive Retirement Trust
Agreement.
"VESTED PARTICIPANT" means a Participant described as such in
Section 3.4(c).
"VESTED RETIREMENT BENEFIT" means the benefit described in
Section 4.4.
"VOTING POWER" means the voting power of all securities of the
Company then outstanding generally entitled to vote for the election of
directors of the Company.
WITNESS, THE FOLLOWING SIGNATURES THIS DAY OF DECEMBER, 1996:
HOME BENEFICIAL CORPORATION
ATTEST: BY:
---------------------------------- ---------------------------
JAMES M. WILTSHIRE, JR. R. W. WILTSHIRE
88
<PAGE>
TITLE: SECRETARY TITLE: CHAIRMAN
HOME BENEFICIAL
LIFE INSURANCE COMPANY
ATTEST: BY:
---------------------------------- ---------------------------
JAMES M. WILTSHIRE, JR. R. W. WILTSHIRE
TITLE: SECRETARY TITLE: CHAIRMAN
89
<PAGE>
Exhibit 10 (vi)
HOME BENEFICIAL CORPORATION
PO Box 27572
Richmond, VA 23261
September 19, 1995
Mr. J. M. Wiltshire, Jr.
3901 West Broad Street
Richmond, VA 23230
Dear Mr. Wiltshire:
Since you will be retiring from active service with the Corporation and its
subsidiaries as of December 31, 1995, your service as an employee will cease at
that time.
Based on our mutual agreement, on January 1, 1996, you will begin serving as
consulting Counsel to the Corporation and its subsidiaries on a schedule of 20
hours per week and will be compensated at a rate of $50.00 per hour for such
service. You will provide consulting service on such matters as the Chief
Executive Officer, or his delegate, of the Corporation may from time to time
determine. You will continue to have your present office available for your use.
Your service will be considered as that of an independent contractor and not
that of a common law employee.
You have agreed to serve as a consultant for a period of two years unless unable
to do so by reason of illness, disability or some other situation beyond your
control. The Corporation has the right to discontinue this agreement, as well as
the right to reduce the number of hours per week mentioned above, at any time
without further liability.
Will you please acknowledge your agreement to the above by signing the enclosed
copy of this letter.
Sincerely,
R. W. Wiltshire, Jr.
Chief Executive Officer
Home Beneficial Corporation and
Home Beneficial Life Insurance Company
Seen and Agreed to:
J.M. Wiltshire, Jr.
Date: 9-19-95
90
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This filing contains summary financial information extracted from the
current year' Form 10-K and is qualified in its entirety by reference
to such Form 10-K
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<DEBT-HELD-FOR-SALE> 779
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 35
<MORTGAGE> 375
<REAL-ESTATE> 0
<TOTAL-INVEST> 1285
<CASH> 1
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 102
<TOTAL-ASSETS> 1424
<POLICY-LOSSES> 682
<UNEARNED-PREMIUMS> 27
<POLICY-OTHER> 13
<POLICY-HOLDER-FUNDS> 75
<NOTES-PAYABLE> 0
0
0
<COMMON> 5
<OTHER-SE> 543
<TOTAL-LIABILITY-AND-EQUITY> 1424
118
<INVESTMENT-INCOME> 89
<INVESTMENT-GAINS> 7
<OTHER-INCOME> 0
<BENEFITS> 95
<UNDERWRITING-AMORTIZATION> 17
<UNDERWRITING-OTHER> 38
<INCOME-PRETAX> 64
<INCOME-TAX> 22
<INCOME-CONTINUING> 42
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42
<EPS-PRIMARY> 2.46
<EPS-DILUTED> 2.46
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
