<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 4, 1995
REGISTRATION NO. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
POE & BROWN, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
FLORIDA 59-0864469
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
220 SOUTH RIDGEWOOD AVENUE
DAYTONA BEACH, FLORIDA 32114
(904) 252-9601
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
LAUREL J. LENFESTEY, ESQ.
VICE PRESIDENT, SECRETARY, AND GENERAL COUNSEL
POE & BROWN, INC.
401 EAST JACKSON STREET, SUITE 1700
TAMPA, FLORIDA 33602
(813) 222-4100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
<TABLE>
<S> <C>
MICHAEL L. JAMIESON, ESQ. RANDOLPH C. COLEY, ESQ.
HOLLAND & KNIGHT KING & SPALDING
400 NORTH ASHLEY DRIVE 191 PEACHTREE STREET
SUITE 2050 ATLANTA, GEORGIA 30303-1764
TAMPA, FLORIDA 33602 (404) 572-4732
(813) 227-8500
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c)under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier registration statement for the
same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===========================================================================================================
<S> <C> <C> <C> <C>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------
Common stock, $.10 par value per
share......................... 1,638,750 shares $24.00 $39,330,000 $13,562
===========================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee based
upon the average between the high and low price of the Common Stock on The
Nasdaq Stock Market on August 2, 1995, pursuant to Rule 457(c).
THE COMPANY HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE COMPANY SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 4, 1995
PROSPECTUS
1,425,000 SHARES
[LOGO]
POE & BROWN, INC.
COMMON STOCK
------------------
All of the 1,425,000 shares offered hereby are being sold by certain
shareholders of Poe & Brown, Inc. (the "Company"). See "Principal and Selling
Shareholders." The Company will not receive any proceeds from the offering.
The Company's Common Stock is traded on The Nasdaq Stock Market under the
symbol "POBR." The last reported sale price of the Common Stock on The Nasdaq
Stock Market on August 2, 1995 was $23.75 per share. See "Price Range of Common
Stock."
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER
THE CAPTION "RISK FACTORS," BEGINNING ON PAGE 6.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===============================================================================================
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) SHAREHOLDERS(2)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $ $ $
- -----------------------------------------------------------------------------------------------
Total(3) $ $ $
===============================================================================================
</TABLE>
(1) For information regarding indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting expenses estimated at $325,000, of which 50% are payable
by the Company and 50% are payable by the Selling Shareholders.
(3) Certain Selling Shareholders have granted the Underwriters a 30-day option
to purchase up to 213,750 additional shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised in
full, the total Price to the Public, Underwriting Discounts and
Commissions, and Proceeds to Selling Shareholders will be $ ,
$ , and $ , respectively.
------------------
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock offered hereby will be available for delivery on or about
, 1995.
------------------
SMITH BARNEY INC. THE ROBINSON-HUMPHREY COMPANY, INC.
, 1995
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). The Registration Statement described below, as
well as such reports, proxy statements, and other information filed by the
Company, can be inspected and copied at the public reference facilities of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, as well as the following Regional Offices: 7 World Trade Center,
Suite 1300, New York, New York 10048; and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies can be obtained by mail at prescribed rates.
Requests should be directed to the Commission's Public Reference Section,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The Common
Stock is listed on The Nasdaq Stock Market.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of Common Stock offered by this Prospectus. For the
purposes hereof, the term "Registration Statement" means the original
Registration Statement and any and all amendments thereto, including the
schedules and exhibits to such Registration Statement or any such amendment.
This Prospectus, which forms a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
portions of which have been omitted pursuant to rules and regulations of the
Commission. Reference is hereby made to the Registration Statement for further
information with respect to the Company and the Common Stock. Each statement
made in this Prospectus concerning a contract, agreement or other document filed
as an exhibit to the Registration Statement is qualified in its entirety by
reference to such exhibit for a complete statement of its contents.
------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ STOCK MARKET IN ACCORDANCE
WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
------------------
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus. Unless the context indicates
otherwise, all references in this Prospectus to the "Company" include the
Company and its wholly owned and majority owned subsidiaries.
THE COMPANY
Poe & Brown, Inc. (the "Company") is the largest insurance agency
headquartered in the southeastern United States and the twelfth largest
insurance agency in the country, based on total revenues. The Company is a
diversified insurance brokerage and agency that markets and sells primarily
property and casualty insurance products and services to its clients. Because
the Company does not engage in underwriting activities, it does not assume
underwriting risks. Instead, it acts in an agency capacity to provide its
customers with targeted, customized risk management products and is compensated
for its services by commissions paid by insurance companies and fees for
administration and benefit consulting services.
The Company's business is divided into four divisions:
- the Retail Division, which provides a wide range of insurance products to
commercial, professional, and individual clients;
- the Program Division, which markets proprietary professional liability,
property, casualty, and life and health insurance programs to members of
various professional and trade groups through non-affiliated independent
agents;
- the Service Division, which provides insurance-related services such as
third-party administration and consultation for workers' compensation and
employee benefit self-insurance markets; and
- the Brokerage Division, which markets and sells excess and surplus
commercial insurance primarily through non-affiliated independent agents.
For the year ended December 31, 1994, the Retail Division accounted for
approximately 58% of the Company's total commissions and fees, the Program
Division accounted for approximately 28%, the Service Division accounted for
approximately 11%, and the Brokerage Division accounted for approximately 3%.
The Retail Division targets middle-market companies (annual premiums
between $50,000 and $500,000), which have historically provided the Company with
higher profit margins as compared to large-market companies. The Company
believes it derives a competitive advantage from its decentralized management
structure. This allows management at the Retail Division's 23 offices to explore
new initiatives, respond rapidly to new opportunities and attract and retain
high-quality people. The Retail Division's operations are concentrated in
Florida; 70.5% of the division's commissions and fees for the year ended
December 31, 1994 was attributable to its Florida offices.
The Company believes its Program Division is an industry leader in
marketing specially designed proprietary professional liability, property,
casualty, and life and health insurance programs to members of various
professional and trade groups. The professional groups targeted by the Company's
Program Division include dentists, attorneys, physicians, optometrists and
opticians. Targeted trade groups include wholesalers, used auto dealers, and
towing operators. The Program Division typically tailors an insurance product to
the needs of a particular professional or trade group, negotiates policy forms,
coverages and premium rates with an insurance company and, in certain instances,
secures the formal or informal endorsement of the product by a professional or
trade association. Policies are sold primarily through a national network of
approximately 270 non-affiliated independent agencies, representing
approximately 2,000 independent agents.
The Company's business objective is to achieve consistent annual revenue
growth while maintaining profitability. The strategy of the Retail Division is
to expand by continuing to capitalize on its strong position in the Florida
market and to develop its offices outside of Florida through internal growth and
selective acquisitions of insurance agencies to complement the Company's
existing base of retail business. The Company's strategy with respect to its
Program Division is to expand through increased market penetration of
3
<PAGE> 5
existing products, as well as the development of new specialty programs. In
recent years, traditional risk-bearing insurance companies have sought greater
operating efficiencies by reducing their agent sales forces. The Company expects
that large underwriters will continue to outsource the production of premium
revenue to non-affiliated insurance agents and the Company intends to continue
to capitalize on this trend.
The Company was organized in 1959 and since 1971 operated under the name
Poe & Associates, Inc. ("P&A"). On April 28, 1993, a subsidiary of P&A merged
(the "Merger") with Brown & Brown, Inc. ("B&B"), and the name of the Company was
changed to Poe & Brown, Inc. The primary objectives of the Merger were to
combine P&A's historically strong program operations with B&B's comparatively
high-margin retail operations and to obtain certain synergies as a result of the
combination. William F. Poe resigned as the Chief Executive Officer of the
Company following the Merger, and J. Hyatt Brown, the President of B&B, became
the President and Chief Executive Officer of the Company and its largest
shareholder. In August 1994, William F. Poe resigned as Chairman of the Board of
Directors and was succeeded by J. Hyatt Brown. William F. Poe and certain family
members and affiliates, all of whom are selling shareholders (the "Selling
Shareholders") in this offering, will reduce their aggregate record ownership of
the outstanding shares of Common Stock from 19.8% to less than 1% as a result of
this offering (assuming exercise of the Underwriters' over-allotment option).
See "Principal and Selling Shareholders". William F. Poe and his brother,
Charles W. Poe, serve as directors of the Company, but are not involved in
management. William F. Poe, Jr. is employed as an insurance agent with the
Company and serves as a director, but is not involved in management of the
Company.
The Company's activities are conducted in 17 locations throughout Florida,
and in 10 additional locations in Arizona, California, Colorado, Connecticut,
Georgia, New Jersey, North Carolina, Pennsylvania, and Texas. The Company's
principal executive offices are located at 220 South Ridgewood Avenue, Daytona
Beach, Florida 32114 (telephone number (904) 252-9601) and 401 East Jackson
Street, Suite 1700, Tampa, Florida 33602 (telephone number (813) 222-4100).
THE OFFERING
All of the shares being offered hereby (the "Shares") are being offered on
behalf of the Selling Shareholders in the manner described under "Underwriting."
The following table sets forth certain information concerning this offering (the
"Offering") that should be read in conjunction with information appearing
elsewhere in this Prospectus or in the documents incorporated herein by
reference.
<TABLE>
<S> <C>
Common Stock being offered by the Selling Shareholders....... 1,425,000 shares
Common Stock outstanding before and after the Offering(1).... 8,662,686 shares
Use of Proceeds.............................................. The Shares offered hereby are
being sold by the Selling
Shareholders. The Company will
not receive any of the
proceeds from the Offering.
The Nasdaq Stock Market Symbol............................... POBR
</TABLE>
- ---------------
(1) Based upon shares outstanding on June 30, 1995. Does not include 33,667
shares of Common Stock reserved for issuance upon the exercise of stock
options at a weighted average price per share of $7.60.
4
<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------- -------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(1):
Commissions and fees(2)..................... $ 80,202 $ 81,879 $ 88,276 $ 94,420 $ 95,852 $ 48,137 $ 50,803
Total revenues(3)........................... 82,612 85,252 91,508 97,821 101,580 51,863 52,989
Total expenses(2)(4)........................ 72,916 74,445 83,190 84,774 80,994 41,088 42,161
Income before income taxes and loss from
discontinued operations................... 9,696 10,807 8,318 13,047 20,586 10,775 10,828
Income from continuing
operations(3)(4)(5)....................... 6,029 6,685 4,138 8,118 13,519 6,643 7,111
Net income(3)(4)(5)......................... $ 5,839 $ 5,880 $ 2,558 $ 8,118 $ 13,519 $ 6,643 $ 7,111
Weighted average number of shares
outstanding............................... 8,431 8,389 8,569 8,571 8,670 8,615 8,696
PER SHARE DATA(1):
Income per share from continuing
operations(3)(4)(5)....................... $ .71 $ .80 $ .48 $ .95 $ 1.56 $ .77 $ .82
Net income per share(3)(4)(5)............... $ .69 $ .70 $ .30 $ .95 $ 1.56 $ .77 $ .82
Dividends paid per share.................... $ .32 $ .32 $ .40 $ .40 $ .42 $ .20 $ .24
OPERATING DATA(1):
Ratio of employee compensation and benefits
to total revenues(6)...................... 54.0% 53.8% 56.2% 53.9% 52.9% 53.0% 52.9%
Ratio of other operating expenses to total
revenues(6)............................... 27.0% 25.6% 27.5% 26.5% 23.0% 24.0% 22.1%
Ratio of income before income taxes to total
revenues(6)............................... 11.7% 12.7% 9.1% 13.3% 20.7% 21.7% 20.4%
Revenue per employee(6)(7).................. $ 75,102 $ 79,452 $ 82,365 $ 97,626 $ 99,895 $ 48,372 $ 53,363
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------------------------------------- -------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA(1):
Total assets................................ $122,393 $117,156 $129,143 $134,924 $140,980 $135,780 $141,560
Long-term debt.............................. 15,276 19,254 18,870 17,637 7,430 12,933 8,199
Shareholders' equity(8)..................... 17,561 22,039 21,232 27,246 44,106 37,721 49,278
</TABLE>
- ---------------
(1) Effective March 1, 1995, the Company acquired Insurance West, a Phoenix,
Arizona general insurance agency, by merger. The merger has been accounted
for as a pooling-of-interests and, accordingly, the Company's financial
statements have been restated for all periods prior to the merger. See Note
2 of the Notes to Consolidated Financial Statements.
(2) See Note 3 of the Notes to Consolidated Financial Statements for information
regarding business purchase transactions that affect the comparability of
this information.
(3) During the first quarter of 1994 the Company sold 150,000 shares of its
investment in the common stock of Rock-Tenn Company, resulting in a gain of
$2,185,000 and an after-tax gain of $1,342,000, or $.16 per share.
(4) Results of operations for 1992 and 1993 were negatively affected by expenses
related to the Merger. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(5) During the third quarter of 1994 the Company reduced its general tax
reserves by $700,000, or $.08 per share, as a result of a settlement
agreement with the Internal Revenue Service on certain outstanding
examination issues. During the six months ended June 30, 1995, the Company
reduced its general tax reserves by $450,000, or $.05 per share, as a result
of settling the remaining examination issues. See Note 9 of the Notes to
Consolidated Financial Statements.
(6) During 1994, the Company sold 150,000 shares of its investment in the common
stock of Rock-Tenn Company for $2,314,000, resulting in a gain of
$2,185,000. This gain has been excluded from the 1994 computations.
(7) Revenue per employee is based upon the number of full-time equivalent
employees at the end of the period.
(8) Shareholders' equity as of June 30, 1994, December 31, 1994, and June 30,
1995 increased $4,910,000, $5,341,000, and $5,304,000, respectively, as a
result of the Company's adoption of SFAS 115, "Accounting for Certain
Investments in Debt and Equity Securities," effective January 1, 1994. See
Note 1 of the Notes to Consolidated Financial Statements.
5
<PAGE> 7
RISK FACTORS
The following factors, as well as other information in this Prospectus,
should be carefully considered by prospective investors.
INDUSTRY RISKS
The Company is primarily engaged in insurance agency and brokerage
activities, and derives revenues from commissions paid by insurance companies
and fees for administration and benefit consulting services. Insurance premiums
are not determined by the Company. Historically, property and casualty premiums
have been cyclical in nature and have varied widely based on market conditions.
Since the mid-1980s, general premium levels have been depressed as a result of
the expanded underwriting capacity of insurance companies and increased
competition. In addition, as traditional risk-bearing insurance companies
continue to outsource the production of premium revenue to non-affiliated agents
such as the Company, such insurance companies may seek to further reduce their
expenses by reducing the commission rates payable to such insurance agents. The
Company cannot predict the timing or extent of future changes in commission
rates or premiums and therefore cannot predict the effect, if any, that such
changes would have on its operations. See "Business -- Industry Overview."
RELIANCE ON SIGNIFICANT UNDERWRITER
The programs offered by the Company's Program Division are primarily
underwritten by the CNA Insurance Companies ("CNA"). For the year ended December
31, 1994, approximately $20.9 million, or 78.8%, of the Program Division's
commissions and fees were generated from policies underwritten by CNA. During
the same period, the Program Division represented 27.7% of the Company's total
commission and fee revenues. In addition, for the same period, approximately
$1.5 million, or 2.7%, of the Retail Division's total commissions and fees were
generated from policies underwritten by CNA. Accordingly, revenues attributable
to CNA represent approximately 23.4% of the Company's total commissions and
fees. The Company has an agreement with CNA relating to each program
underwritten by CNA and each provides for either six months' or one year's
advance notice of termination. In addition, the Company has an existing credit
agreement with CNA under which $6,000,000 is currently outstanding. Upon the
occurrence of an an event of default by the Company under this credit agreement,
including the termination by the Company of any insurance program agreement with
CNA, CNA may, at its option, declare any unpaid balance due and payable on
demand. For additional information concerning the Company's contractual
relationships with CNA, see "Business -- Lines of Business -- Program Division"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
The Company believes its relationship with CNA is excellent and that CNA is
committed to the programs administered by the Company. However, there can be no
assurance that future events will not produce changes in the relationship. If
the relationship were terminated, the Company believes that other insurance
companies would be available to underwrite the business, although some
additional expense and loss of market share would at least initially result.
FLORIDA BUSINESS CONCENTRATION
For the year ended December 31, 1994, the Company's Retail Division derived
70.5% of its commissions and fees from its Florida offices, constituting 41.2%
of the Company's total commissions and fees. See "Business -- Lines of
Business -- Retail Division." The Company believes that these revenues are
attributable predominately to customers in Florida. The Company believes the
regulatory environment for insurance agencies in Florida is no more restrictive
than in other states. The insurance business is a state-regulated industry,
however, and there can be no assurance that the current regulatory environment
will remain unchanged. In addition, the occurrence of adverse economic
conditions, natural disasters, or other circumstances specific to Florida could
have a material adverse effect on the Company's business. Although Hurricane
Andrew, in 1992, slightly constricted the property insurance business in
Florida, the Company does not believe it significantly affected the insurance
agency and brokerage business.
6
<PAGE> 8
RELIANCE ON MANAGEMENT
Although the Company is operated with decentralized management systems, the
loss of the services of J. Hyatt Brown, the Company's Chairman, President and
Chief Executive Officer, who beneficially owns approximately 23% of the
Company's outstanding Common Stock, could materially adversely affect the
Company. The Company maintains a $5 million key man life insurance policy with
respect to Mr. Brown. The Company also maintains a $20 million insurance policy
on the lives of Mr. Brown and his wife. Under the terms of an agreement with Mr.
and Mrs. Brown, at the request of the Brown estate, the Company will purchase,
upon the death of the later to die of Mr. Brown and his wife, up to a maximum
number of shares of Common Stock of the Company owned by Mr. and Mrs. Brown that
will exhaust the proceeds of the policy. If the estate were to make such an
election, none of the proceeds of this $20 million policy would be available to
the Company for use in its ongoing operations.
ACQUISITION RISKS
The Company plans to pursue the acquisition of insurance agencies. See
"Business -- Lines of Business -- Retail Division." There can be no assurance
that the Company will be able successfully to identify suitable acquisition
candidates, complete acquisitions, integrate acquired businesses into its
operations, or expand into new markets. Once integrated, acquired entities may
not achieve levels of revenue, profitability, or productivity comparable to the
Company's existing locations, or otherwise perform as expected. The Company is
unable to predict whether or when any prospective acquisition candidates will
become available or the likelihood that any acquisition will be completed should
any negotiations commence. The Company competes for acquisition and expansion
opportunities with entities that have substantially greater resources. In
addition, acquisitions involve a number of special risks, such as diversion of
management's attention, difficulties in the integration of acquired operations
and retention of personnel, entry into unfamiliar markets, unanticipated
problems or legal liabilities, and tax and accounting issues, some or all of
which could have a material adverse effect on the Company's results of
operations and financial condition.
COMPETITION
The insurance agency business is highly competitive and numerous firms
actively compete with the Company for customers and insurance carriers. Although
the Company is the largest insurance agency headquartered in Florida, a number
of firms with much greater resources and market presence than the Company
compete with the Company in Florida and elsewhere. This situation is
particularly pronounced outside Florida. Competition in the insurance business
is largely based on innovation, quality of service, and price. A number of
insurance companies are engaged in the direct sale of insurance, primarily to
individuals, and do not pay commissions to agents and brokers. To date, such
direct writing has had relatively little effect on the Company's operations,
primarily because the Company's Retail Division is commercially oriented.
EFFECT OF POSSIBLE TORT REFORM
Legislation concerning tort reform is currently being considered in the
United States Congress and in several states. Among the provisions being
considered for inclusion in such legislation are limitations on damage awards,
including punitive damages, and various restrictions applicable to class action
lawsuits, including lawsuits asserting professional liability of the kind for
which insurance is offered under policies sold by the Company's Program
Division. Enactment of these or similar provisions by Congress or by states in
which the Company sells insurance, could result in a reduction in the demand for
liability insurance policies or a decrease in policy limits of such policies
sold, thereby reducing the Company's commission revenues. The Company cannot
predict whether any such legislation will be enacted or, if enacted, the form
such legislation will take, or the effect, if any, such legislation could have
on its operations.
7
<PAGE> 9
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares.
PRICE RANGE OF COMMON STOCK
The Common Stock is traded on The Nasdaq Stock Market under the symbol
"POBR." The following table sets forth, for the periods indicated, the high and
low last sale price per share for the Common Stock, as reported on The Nasdaq
Stock Market.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1993
First Quarter............................................................ $19.00 $16.00
Second Quarter........................................................... 21.25 17.25
Third Quarter............................................................ 20.00 18.25
Fourth Quarter........................................................... 20.25 16.88
1994
First Quarter............................................................ $19.50 $17.00
Second Quarter........................................................... 20.75 18.00
Third Quarter............................................................ 22.75 19.50
Fourth Quarter........................................................... 21.75 19.50
1995
First Quarter............................................................ $22.50 $20.25
Second Quarter........................................................... 24.50 21.50
Third Quarter (through August 2, 1995)................................... 24.25 23.25
</TABLE>
On August 2, 1995, the last sale price of the Common Stock as reported on
The Nasdaq Stock Market was $23.75 per share. As of August 2, 1995, there were
approximately 923 holders of record of the Common Stock.
DIVIDEND POLICY
Cash dividends of $.10 per share were paid to shareholders on February 19,
1994, May 20, 1994 and August 19, 1994, and cash dividends of $.12 per share
were paid to shareholders on November 18, 1994, February 17, 1995 and May 19,
1995. The Company intends to continue paying quarterly dividends, subject to
declaration by the Board of Directors. The Board of Directors has declared a
dividend of $.12 per share, payable on August 18, 1995, and has established
August 3, 1995 as the record date for determining shareholders of the Company
entitled to receive the dividend.
Purchasers of Common Stock in this offering will not receive the quarterly
dividend payable on August 18, 1995.
8
<PAGE> 10
CAPITALIZATION
The table below sets forth the unaudited capitalization of the Company as
of June 30, 1995. This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's Consolidated Financial Statements and the Notes thereto which
appear elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1995
--------------
(IN THOUSANDS)
<S> <C>
Long-term debt, including current portion of $1,420,000(1)..................... $ 9,619
---------
Shareholders' equity:
Common stock................................................................. 867
Additional paid-in capital................................................... 2,403
Retained earnings............................................................ 40,704
Net unrealized appreciation of available for-sale securities................. 5,304
---------
Total shareholders' equity........................................... 49,278
---------
Total capitalization........................................................... $ 58,897
=========
</TABLE>
- ---------------
(1) Of the $1,420,000 current portion, $1,000,000 was paid on August 1, 1995.
9
<PAGE> 11
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
The selected consolidated financial data presented below as of and for the
years ended December 31, 1990 through 1994, have been derived from the
Consolidated Financial Statements of the Company audited by Ernst & Young LLP.
The selected consolidated financial data presented below as of and for the six
months ended June 30, 1994 and 1995, are derived from the unaudited consolidated
financial statements of the Company. The operating results for the six months
ended June 30, 1995 are not necessarily indicative of the results that may be
expected for the full year. In the opinion of the Company, the unaudited
consolidated financial statements include all adjustments (consisting of normal
recurring accruals and the adjustment described in Note 3 below) necessary for a
fair presentation of the information set forth herein. The data set forth below
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto appearing elsewhere in this Prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Effective March 1, 1995, the Company acquired Insurance West by merger. The
merger has been accounted for as a pooling-of-interests and, accordingly, the
Company's financial statements have been restated for all periods prior to the
merger. See Note 2 of the Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------- -------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Commissions and fees(1)......................... $ 80,202 $ 81,879 $ 88,276 $ 94,420 $ 95,852 $ 48,137 $ 50,803
Investment income(2)............................ 2,049 2,954 2,439 2,061 5,126 3,488 1,856
Other income.................................... 361 419 793 1,340 602 238 330
-------- -------- -------- -------- -------- -------- --------
Total revenues(1)(2)............................ 82,612 85,252 91,508 97,821 101,580 51,863 52,989
-------- -------- -------- -------- -------- -------- --------
Employee compensation and benefits(1)........... 44,633 45,872 51,456 52,699 52,554 26,315 28,051
Other operating expenses(1)(4).................. 22,287 21,812 25,159 25,930 22,848 11,919 11,692
Interest and amortization....................... 5,996 6,761 6,575 6,145 5,592 2,854 2,418
-------- -------- -------- -------- -------- -------- --------
Total expenses(1)(4)............................ 72,916 74,445 83,190 84,774 80,994 41,088 42,161
-------- -------- -------- -------- -------- -------- --------
Income before income taxes and loss from
discontinued operations....................... 9,696 10,807 8,318 13,047 20,586 10,775 10,828
Income taxes(3)................................. 3,667 4,122 4,180 4,929 7,067 4,132 3,717
-------- -------- -------- -------- -------- -------- --------
Income from continuing operations(2)(3)(4)...... 6,029 6,685 4,138 8,118 13,519 6,643 7,111
Loss from discontinued operations(5)............ 190 805 1,580 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income(2)(3)(4)............................. $ 5,839 $ 5,880 $ 2,558 $ 8,118 $ 13,519 $ 6,643 $ 7,111
======== ======== ======== ======== ======== ======== ========
PER SHARE DATA:
Income per share from continuing
operations(2)(3)(4)........................... $ .71 $ .80 $ .48 $ .95 $ 1.56 $ .77 $ .82
Loss per share from discontinued
operations(5)................................. .02 .10 .18 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income per share(2)(3)(4)................... $ .69 $ .70 $ .30 $ .95 $ 1.56 $ .77 $ .82
======== ======== ======== ======== ======== ======== ========
Cash dividends per common share................. $ .32 $ .32 $ .40 $ .40 $ .42 $ .20 $ .24
Weighted average number of shares outstanding... 8,431 8,389 8,569 8,571 8,670 8,615 8,696
OPERATING DATA:
Ratio of employee compensation and benefits to
total revenues(6)............................. 54.0% 53.8% 56.2% 53.9% 52.9% 53.0% 52.9%
Ratio of other operating expenses to total
revenues(6)................................... 27.0% 25.6% 27.5% 26.5% 23.0% 24.0% 22.1%
Ratio of income before income taxes to total
revenues(6)................................... 11.7% 12.7% 9.1% 13.3% 20.7% 21.7% 20.4%
Revenue per employee(6)(7)...................... $ 75,102 $ 79,452 $ 82,365 $ 97,626 $ 99,895 $ 48,372 $ 53,363
</TABLE>
10
<PAGE> 12
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------------------------------------- ---------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................... $ 20,485 $ 18,740 $ 18,806 $ 27,132 $ 23,185 $ 29,876 $ 33,208
Premiums and commissions receivable, net.... 50,365 47,686 59,478 54,308 56,784 49,642 46,760
Total assets................................ 122,393 117,156 129,143 134,924 140,980 135,780 141,560
Premiums payable to insurance companies..... 64,822 52,030 62,421 67,078 63,195 62,537 59,280
Long-term debt.............................. 15,276 19,254 18,870 17,637 7,430 12,933 8,199
Shareholders' equity(8)..................... 17,561 22,039 21,232 27,246 44,106 37,721 49,278
</TABLE>
- ---------------
(1) See Note 3 of the Notes to Consolidated Financial Statements for information
regarding business purchase transactions that affect the comparability of
this information.
(2) During the first quarter of 1994 the Company sold 150,000 shares of its
investment in the common stock of Rock-Tenn Company, resulting in a gain of
$2,185,000 and an after-tax gain of $1,342,000, or $.16 per share.
(3) During the third quarter of 1994 the Company reduced its general tax
reserves by $700,000, or $.08 per share, as a result of a settlement
agreement with the Internal Revenue Service on certain outstanding
examination issues. During the six months ended June 30, 1995, the Company
reduced its general tax reserves by $450,000, or $.05 per share, as a
result of settling the remaining Internal Revenue Service examination
issues. See Note 9 of the Notes to Consolidated Financial Statements.
(4) Results of operations for 1992 and 1993 were negatively affected by expenses
related to the Merger. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(5) Losses from discontinued operations were associated with the Company's
risk-bearing operation which was discontinued in 1988. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
(6) During 1994, the Company sold 150,000 shares of its investment in the common
stock of Rock-Tenn Company for $2,314,000, resulting in a gain of
$2,185,000. This gain has been excluded from the 1994 computations.
(7) Revenue per employee is based upon the number of full-time equivalent
employees at the end of the period.
(8) Shareholders' equity as of June 30, 1994, December 31, 1994, and June 30,
1995 increased $4,910,000, $5,341,000, and $5,304,000, respectively, as a
result of the Company's adoption of SFAS 115, "Accounting for Certain
Investments in Debt and Equity Securities," effective January 1, 1994. See
Note 1 of the Notes to Consolidated Financial Statements.
11
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's revenues are comprised of commissions paid by insurance
companies, fees paid directly by clients, and investment income. Commission
revenues generally represent a percentage of the premium paid by the insured and
are materially affected by both fluctuations in premium rate levels charged by
insurance underwriters and the amount of premiums written by such underwriters.
Revenues are also affected by acquisitions, development of new and existing
proprietary programs, fluctuations in insured values and in the volume of
business from new and existing clients, and general economic and competitive
conditions. Contingent commissions may be paid to the Company by insurance
carriers based upon the volume and profitability of the business placed with
such carriers by the Company, and are generally received in the first quarter of
each fiscal year. In each of the last three years, contingent commissions have
totalled less than 3.5% of total revenues.
Fee revenues are substantially generated by the Service Division of the
Company, which offers administration and benefit consulting services primarily
in the workers' compensation and employee benefit self-insurance markets.
Florida's legislative reform of workers' compensation insurance, as well as
certain market factors, have resulted in increased competition in this service
sector. In response to the increased competition, the Company has offered
value-added services that enabled it to maintain 1994 fee revenues at a level
consistent with that recognized in 1993. For the past several years, service fee
revenues have ranged from 10.0% to 11.1% of total commissions and fees.
Investment income consists principally of gains and losses from sales of
investments of primarily fixed-income securities (other than the Company's
investment in Rock-Tenn Company ["Rock-Tenn"]), as well as interest earnings on
premiums and advance premiums collected and not immediately remitted to
insurance carriers. The Company's policy is to invest its funds in high-quality,
fixed-income investment securities.
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." Under these new rules, debt securities that the Company has
both the positive intent and ability to hold to maturity would be classified as
"held-to-maturity" securities and would be reported at amortized cost.
Marketable equity securities and debt securities not classified as
held-to-maturity are classified as "available-for-sale." Available-for-sale
securities are reported at fair value, with unrealized gains and losses, net of
tax, reported as a separate component of shareholders' equity. Application of
these new rules resulted in a net increase of $5,341,000 and $5,304,000 in
shareholders' equity as of December 31, 1994 and June 30, 1995, respectively,
relating principally to the 509,064 shares of Rock-Tenn owned by the Company.
Insurance premiums are established by insurance companies based upon many
factors, none of which is controlled by the Company. Beginning in 1986 and
continuing into 1995, revenues have been adversely influenced by a consistent
decline in premium rates resulting from intense competition among property and
casualty insurers for market share.
The Company's revenues have continued to grow through initiatives to
generate new business and through development of new products, markets and
services. Coupled with this revenue growth, expenses were curtailed in 1994,
primarily as a result of operational efficiencies realized from the Merger, as
well as significant repayments of debt, which have reduced interest expense.
Effective March 1, 1995, the Company acquired Insurance West by merger.
This merger has been accounted for as a pooling-of-interests and, accordingly,
the Company's financial statements have been restated for all periods prior to
the merger.
The following discussion and analysis regarding results of operations and
liquidity and capital resources should be considered in conjunction with the
accompanying consolidated financial statements and related notes.
12
<PAGE> 14
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Commissions and Fees. Commissions and fees for the six months ended June
30, 1995 were $50,803,000 compared to $48,137,000 for the same period in 1994, a
6% increase. The increase is attributable to an increase in contingent
commissions of $919,000, revenues from acquired agencies of $914,000, and the
remainder primarily to new business production.
Investment Income. Investment income for the six months ended June 30,
1995 declined $1,632,000 from the same period in 1994. This decline is related
primarily to the $2,185,000 gain realized from the sale of approximately 23% of
the Company's investment in the common stock of Rock-Tenn that occurred in March
1994. Excluding this gain, investment income during the first six months of 1995
increased by $553,000, or 42%, over the same period in 1994. The increase in
investment income after excluding the gain from the Rock-Tenn stock sale is due
to increased available funds, the implementation of a consolidated cash
management program that has resulted in improved earnings on cash and cash
equivalents, and increased interest rates. The Company continues to own 509,064
shares of common stock of Rock-Tenn and has no current plans to sell these
shares.
Other Income. Other income consists primarily of gains and losses from the
sale and disposition of assets. Other income increased approximately $92,000 for
the six months ended June 30, 1995 over the same period in 1994.
Employee Compensation and Benefits. Compensation and employee benefits
increased 6.6% during the six months ended June 30, 1995 over the same period in
1994. This increase is due primarily to additional commission expense as a
result of the increased commission and fee revenues and the addition of $542,000
of expenses resulting from the accelerated vesting of benefits under certain
terminated deferred compensation arrangements. Compensation and employee
benefits as a percentage of commissions were generally consistent between the
1995 and 1994 periods. As of June 30, 1995, the Company had 993 full-time
equivalent employees compared to 1,027 at June 30, 1994.
Other Operating Expenses. Other operating expenses for the six months
ended June 30, 1995 declined $227,000 from the same period in 1994 and declined
as a percentage of commissions and fees from 24.8% to 23.0%. This decline is due
primarily to continued improvements in operational efficiencies.
Interest and Amortization. Interest and amortization expense declined
$436,000 during the six months ended June 30, 1995 from the same period in 1994.
This decline is primarily as attributable to lower average borrowings.
Income Taxes. The Company's effective tax rate for the six-month period
ended June 30 declined from 38.3% in 1994 to 34.3% in 1995. The decline in the
effective tax rate is primarily the result of a $450,000 reduction in the
Company's income tax reserves during the first quarter of 1995 due to the
favorable tax settlement in March 1995 of the remaining outstanding Internal
Revenue Service ("IRS") examination assessments protested by the Company, as
described below. The Company's effective tax rate excluding this $450,000 tax
reduction is 38.5%.
Net Income Summary. Net income for the six months ended June 30, 1995 was
$7,111,000, or $.82 per share, as compared to net income of $6,643,000, or $.77
per share, for the same period in 1994. The 1995 earnings per share includes a
favorable tax reserve adjustment of $.05 per share resulting from the reduction
in general tax reserves stemming from the March 1995 settlement of the Company's
remaining IRS examination issues. The 1994 earnings per share includes a $.16
per share gain from the sale of approximately 23% of the Company's investment in
common stock of Rock-Tenn. Excluding these items, earnings per share increased
from $.61 in 1994 to $.77 in 1995, a 26% increase.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Commissions and Fees. Commissions and fees increased 2% in 1994, 7% in
1993 and 8% in 1992. Excluding the effects of acquisitions, commissions and fees
would have increased 4% in 1993 compared to a decrease of 2% in 1992.
Acquisition activity in 1994 did not have a material impact on commissions and
fees.
13
<PAGE> 15
Although in general, property and casualty insurance premium prices during 1994
remained competitive, there were some increases in premium rates for coastal
properties as a result of recent Florida storms, such as Hurricane Andrew, and
some increases in insurable exposure units that occurred toward the end of 1994.
Investment Income. Investment income increased $3,065,000 in 1994 to
$5,126,000 compared to a decrease of $378,000 in 1993 to $2,061,000. The 1994
results included a $2,185,000 gain from the sale of approximately 23% of the
Company's investment in the common stock of Rock-Tenn. This sale was in
conjunction with an initial public offering by Rock-Tenn of its common stock.
Other Income. During 1994, gains on the sale of customer accounts
aggregated $411,000. During 1993, certain customer accounts were sold for an
aggregate net gain of $864,000, of which $818,000 related to the sale of two of
the Company's retail operations in Tallahassee, Florida and Westlake Village,
California. In 1992, customer accounts were sold for $715,000.
Employee Compensation and Benefits. Employee compensation and benefits
remained constant in 1994 compared to an increase of less than 3% in 1993.
Without acquisitions, employee compensation and benefits expense remained
constant in 1994 and would have decreased less than 1% in 1993. As of December
31, 1994, the Company had 993 full-time equivalent employees compared to 1,002
at the beginning of the year. The impact of the reduction in personnel during
1994 was offset by increases in compensation due to merit raises and
production-related increases. The Merger also resulted in a reduction of
personnel throughout 1993. This reduction was offset primarily by increases in
vacation benefits, operational bonuses, and certain deferred compensation
arrangements.
Other Operating Expenses. Other operating expenses declined 12% in 1994
compared to an increase of approximately 3% in 1993. Without acquisitions,
operating expenses would have still declined 12% in 1994 and would have
increased less than 1% in 1993. The 1994 decline is primarily attributable to
approximately $2,500,000 of costs incurred in 1993 related to the Merger and
subsequent improvements in operational efficiencies that resulted in decreases
to most other operating expenses. Excluding the $2,500,000 of Merger-related
costs, most of the 1993 other operating expenses declined from their 1992
levels. Other operating expenses for 1992 included a $1,538,000 charge for
certain costs and uncollectible receivables, of which approximately $800,000
originated from previous acquisitions. In addition, 1992 also included $481,000
of costs incurred in conjunction with the Merger.
Interest and Amortization. Interest and amortization declined $553,000 and
$430,000 or 9% and 7% in 1994 and 1993, respectively, due primarily to a
reduction in outstanding debt in 1994 and 1993 and the refinancing of certain
debt in 1993 at lower interest rates.
Income Taxes. The effective rate on income from operations was 34.3% in
1994, 37.8% in 1993 and 50.3% in 1992. The lower effective tax rate in 1994 is
primarily due to the effect of recording a $700,000 reduction to the general tax
reserves as a result of a settlement agreement with the IRS on certain
outstanding examination issues, as described below. The higher effective rate in
1992 was primarily due to non-deductible amortization of certain intangible
assets, establishment of additional general tax reserves related to the IRS
examinations, and a taxable gain differential on a building sale relating to an
acquisition in 1990.
In 1992, the IRS completed examinations of the Company's federal income tax
returns for tax years 1988, 1989 and 1990. As a result of these examinations,
the IRS issued Reports of Proposed Adjustments asserting income tax deficiencies
which, by including interest and state income taxes for the periods examined and
the Company's estimates of similar adjustments for subsequent periods through
December 31, 1993, would total $6,100,000. The disputed items related primarily
to the deductibility of amortization of purchased customer accounts of
approximately $5,107,000 and non-compete agreements of approximately $993,000.
In addition, the IRS's report included a dispute regarding the time at which the
Company's payments made pursuant to certain indemnity agreements would be
deductible for tax reporting purposes. During 1994, the Company reached a
settlement agreement with the IRS with respect to certain of the disputed
amortization items and the indemnity agreement payment issue. This settlement
reduced the total remaining asserted
14
<PAGE> 16
income tax deficiencies to approximately $2,800,000 as of December 31, 1994. In
March 1995, the Company reached an agreement with the IRS on the remaining
unsettled items.
Discontinued Operations. In 1992, the Company recorded a significant
charge of $1,580,000, or $0.18 per share, relating to discontinued operations.
This charge was associated with the Company's risk-bearing operation, Whiting
National Insurance Company ("Whiting"), which was discontinued in 1988. The
charge resulted primarily from a re-evaluation of the Company's expected
recoveries associated with its indemnity of a reinsurance agreement and, to a
lesser extent, from a strengthening of reserves for that indemnity.
The Company had historically estimated that certain recoveries related to
the indemnity were available to it from the insolvency of Whiting, placed in
liquidation in 1988. While none of the underlying facts had changed, the
activity associated with the liquidation of Whiting had proceeded more slowly
than anticipated, making realization of those recoveries uncertain. The
elimination of those recoveries accounts for approximately three-fourths of the
discontinued operations charge. In addition, the Company bolstered reserves
associated with the underlying indemnity obligations, further increasing the
charge. These reserves are expected to be settled over many years and do not
require any immediate significant cash outlays.
Management currently expects that the existing reserves will be sufficient
to provide for its responsibility under the indemnity agreement. Accordingly,
management believes that the Company's future operating results and financial
position will not be materially affected by this indemnity.
Net Income Summary. The Company's net income was $13,519,000 in 1994,
$8,118,000 in 1993, and $2,558,000 in 1992. The Company's net income per share
was $1.56, $0.95, and $0.30 in 1994, 1993 and 1992, respectively. Net income per
share was affected by discontinued operation charges of $0.18 in 1992. The 1994
net income includes a net after-tax gain of approximately $1,342,000, or $.16
per share, from the Company's sale of part of its investment in Rock-Tenn. The
1994 net income was also positively impacted by $.08 per share as a result of a
favorable settlement of part of the Company's IRS examination and the related
reduction in general tax reserves (see "Income Taxes"). Excluding these items,
net income in 1994 increased $.38 per share, primarily as a result of an
increase in commissions and fees of approximately 2% and a decrease in expenses
of approximately 4%.
LIQUIDITY AND CAPITAL RESOURCES
The Company utilizes cash provided by operating activities to finance
acquisitions, purchase fixed assets, repay indebtedness, and pay dividends.
During the year ended December 31, 1994, and the six months ended June 30,
1995, the Company's operating activities provided $10,396,000 and $14,802,000 of
cash, respectively. During those same periods, the Company used $339,000 and
$2,498,000, respectively, in investing activities primarily for purchases of
fixed assets and businesses. During fiscal 1994 and the six months ended June
30, 1995, the Company used $14,004,000 and $2,281,000, respectively, of cash for
financing activities, representing principally the repayment of long-term debt
and notes payable and the payment of cash dividends.
The Company uses its cash and cash equivalents and credit facilities to
fund its day-to-day cash requirements. The Company's cash and cash equivalents
were $23,185,000 and $33,208,000 at December 31, 1994 and June 30, 1995,
respectively.
The Company has a credit agreement with CNA under which $7,000,000 (the
maximum amount available for borrowings) was borrowed at June 30, 1995 at an
interest rate equal to the prime lending rate plus one percent. The amount
available under this facility will decrease by $1,000,000 each August through
the year 2001, when it will expire. On August 1, 1995, the Company made a
mandatory $1,000,000 payment, reducing the outstanding balance to $6,000,000.
See "Risk Factors -- Reliance on Significant Underwriter."
In November 1994, the Company entered into a revolving credit facility with
a national banking association that provides for borrowings of up to
$10,000,000. On borrowings under this facility of less than $1,000,000, the
interest rate is the higher of the prime rate or the federal funds rate plus
.50%. On borrowings under this facility equal to or in excess of $1,000,000, the
interest rate is LIBOR plus .50% to 1.25%,
15
<PAGE> 17
depending on certain financial ratios. A commitment fee is assessed in the
amount of .25% per annum on the unused balance. The facility expires in November
1997. No borrowings were outstanding against this line of credit as of June 30,
1995. Borrowings would be secured by substantially all of the assets of the
Company, subject to existing or permitted liens.
The Company believes that its existing cash, cash equivalents, short-term
investments, funds generated from operations, and available credit facility
borrowings are sufficient to satisfy its normal financial needs for the near
term. The Company's current ratio was 1.10 to 1.0, 1.03 to 1.0 and .97 to 1.0,
as of December 31, 1994, 1993, and 1992, respectively. The increase in the ratio
at December 31, 1994 was primarily the result of lower premiums payable to
insurance companies, lower accounts payable and accrued expenses and less
outstanding current portion of long-term debt at year end. The increase in the
ratio at December 31, 1993 as compared to December 31, 1992 was primarily the
result of higher net cash flows from operations. Premiums payable to insurance
companies generally exceed the amount of premiums receivable from customers
because of the Company's billing and collection practices and its agreed payment
period terms with insurance companies.
16
<PAGE> 18
THE COMPANY
The Company is the largest insurance agency headquartered in the
southeastern United States and the twelfth largest insurance agency in the
country, based on total revenues, as reported in Business Insurance, an industry
trade publication. The Company is a diversified insurance brokerage and agency
that markets and sells primarily property and casualty insurance products and
services to its clients. Because the Company does not engage in underwriting
activities, it does not assume underwriting risks. Instead, it acts in an agency
capacity to provide its customers with targeted, customized risk management
products.
The Company is compensated for its services by commissions paid by
insurance companies and fees for administration and benefit consulting services.
The commission is usually a percentage of the premium paid by an insured.
Commission rates generally depend upon the type of insurance, the particular
insurance company, and the nature of the services provided by the Company. In
some cases, a commission is shared with other agents or brokers who have acted
jointly with the Company in a transaction. The Company may also receive from an
insurance company a contingent commission that is generally based on the
profitability and volume of business placed with it by the Company over a given
period of time. Fees are principally generated by the Service Division, which
offers administration and benefit consulting services primarily in the workers'
compensation and employee benefit self-insurance markets.
The Retail Division targets middle-market companies (annual premiums
between $50,000 and $500,000), which have historically provided the Company with
higher profit margins as compared to large-market companies. The Company
believes it derives a competitive advantage from its decentralized management
structure. This allows management at the Retail Division's 23 offices to explore
new initiatives, respond rapidly to new opportunities, and attract and retain
high-quality people. The Retail Division's operations are concentrated in
Florida; 70.5% of the division's commissions and fees for the year ended
December 31, 1994 was attributable to its Florida offices.
The Company believes its Program Division is an industry leader in
marketing specially designed proprietary professional liability, property,
casualty, and life and health insurance programs to members of various
professional and trade groups. The professional groups targeted by the Company's
Program Division include dentists, attorneys, physicians, optometrists and
opticians. Targeted trade groups include wholesalers, used auto dealers, and
towing operators. The Program Division typically tailors an insurance product to
the needs of a particular professional or trade group, negotiates policy forms,
coverages and premium rates with an insurance company and, in certain instances,
secures the formal or informal endorsement of the product by a professional or
trade association. Policies are sold primarily through a national network of
approximately 270 non-affiliated independent agencies, representing
approximately 2,000 independent agents.
The Company was organized in 1959 and prior to the Merger operated as P&A.
On April 28, 1993, a subsidiary of P&A merged with B&B, and the name of the
Company was changed to Poe & Brown, Inc. The primary objectives of the Merger
were to combine P&A's historically strong program operations with B&B's
comparatively high-margin retail operations and to obtain certain synergies as a
result of the combination. William F. Poe resigned as the Chief Executive
Officer of the Company following the Merger, and J. Hyatt Brown, the President
of B&B, became the President and Chief Executive Officer of the Company and its
largest shareholder. In August 1994, William F. Poe resigned as Chairman of the
Board of Directors and was succeeded by J. Hyatt Brown. William F. Poe and
certain family members and affiliates, all of whom are Selling Shareholders in
this Offering, will reduce their aggregate record ownership of the outstanding
shares Common Stock from 19.8% to less than 1%, as a result of this Offering
(assuming exercise of the Underwriters' over-allotment option). See "Principal
and Selling Shareholders." William F. Poe and his brother, Charles W. Poe, serve
as directors of the Company, but are not involved in management. William F. Poe,
Jr. is employed as an insurance agent with the Company and serves as a director,
but is not involved in management of the Company.
17
<PAGE> 19
BUSINESS
INDUSTRY OVERVIEW
Premium pricing within the property and casualty insurance underwriting
industry has been cyclical and has displayed a high degree of volatility based
on prevailing economic and competitive conditions. Since the mid-1980s, the
property and casualty insurance industry has been in a "soft market" during
which the underwriting capacity of insurance companies expanded, stimulating an
increase in competition and a decrease in premium rates and related commissions
and fees. Significant reductions in premium rates occurred during the years 1987
through 1989 and continue, although to a lesser degree, through the present. The
effect of the softness in rates on the Company's revenues has been somewhat
offset by the Company's acquisitions and new business programs. The Company
cannot predict the timing or extent of premium pricing changes due to market
conditions or their effect on the Company's operations in the future, but
believes that the "soft market" conditions will continue into 1996.
In recent years, risk-bearing insurance companies have sought greater
operating efficiencies by reducing their agent sales forces. The Company expects
that large underwriters will continue to outsource the production of premium
revenue to non-affiliated insurance agents, and the Company intends to continue
to capitalize on this trend. See "Risk Factors -- Industry Risks."
BUSINESS OVERVIEW
The Company's activities are conducted in 17 locations throughout Florida,
and in 10 additional locations in Arizona, California, Colorado, Connecticut,
Georgia, New Jersey, North Carolina, Pennsylvania, and Texas.
The Company's business is divided into four divisions: (i) the Retail
Division; (ii) the Program Division; (iii) the Service Division; and (iv) the
Brokerage Division. The Retail Division is composed of Company employees in 23
offices that market and sell a broad range of insurance products to insureds.
The Program Division works with underwriters to develop proprietary insurance
programs for specific niche markets. These programs are marketed and sold
primarily through approximately 270 non-affiliated independent agencies,
representing approximately 2,000 independent agents throughout the United
States. The Company receives an override on the commissions generated by these
independent agencies. The Service Division provides insurance-related services
such as third-party administration and consultation for workers' compensation
and employee benefit self-insurance markets. The Brokerage Division markets and
sells excess and surplus commercial insurance primarily through non-affiliated
independent agents.
The following table sets forth a summary of (i) the commission and fee
revenues realized from each of the Company's operating divisions for each of the
three years in the period ended December 31, 1994 and for the six months ended
June 30, 1994 and 1995 (in thousands of dollars), and (ii) the percentage of the
Company's total commission and fee revenues represented by each division for
each of such periods:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- ----------------------------------
1992 % 1993 % 1994 % 1994 % 1995 %
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Retail Division(1)........ $55,910 63.3% $58,959 62.4% $56,018 58.4% $29,210 60.7% $30,085 59.2%
Program Division.......... 21,988 24.9% 23,633 25.0% 26,519 27.7% 12,255 25.5% 13,342 26.3%
Service Division.......... 8,816 10.0% 10,166 10.8% 10,643 11.1% 5,173 10.7% 5,303 10.4%
Brokerage Division........ 1,562 1.8% 1,662 1.8% 2,672 2.8% 1,499 3.1% 2,073 4.1%
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Total................. $88,276 100% $94,420 100% $95,852 100% $48,137 100% $50,803 100%
======= ==== ======= ==== ======= ==== ======= ==== ======= ====
</TABLE>
- ---------------
(1) In 1993 and 1994, the Company sold retail offices in Tallahassee, Florida
and Westlake Village, California and various other customer accounts. Over
half of the decline in Retail Division revenues from 1993 to 1994 is
attributable to those dispositions.
18
<PAGE> 20
BUSINESS STRATEGY
The Company's objective is to maximize long-term shareholder value by
achieving consistent annual revenue growth while maintaining profitability. The
Company's strategy to achieve revenue growth is to expand internally in its
existing businesses, to create new proprietary products within the Program
Division, and to acquire selected independent agencies on an opportunistic
basis. The Company expects to continue to capitalize on its strong position in
the Florida market and to emphasize its expertise in serving middle-market
companies, where the Company has historically achieved higher profit margins.
The Company's strategy to achieve targeted margin enhancements is based
upon consistently superior resource productivity. Elements facilitating such
productivity include:
- Quality Personnel. The Company believes its most important competitive
factor is its ability to recruit, train, and retain quality
entrepreneurial people who respond to challenges. The Company provides
incentives and educational opportunities for its employees at virtually
every level of the organization.
- Decentralized Profit Centers. The Company's four divisions are divided
into profit centers based upon office location or specific line of
business or service. Each profit center has a manager who maintains
responsibility for that profit center's financial results. Each profit
center's results therefore depend upon the leadership and creativity of
the manager. With the exception of the Program Division, the profit
centers are not restricted in their sales efforts by territory or product.
- Incentive Compensation. To align the interests of profit center managers
with those of shareholders, the Company maintains an incentive
compensation plan that pays profit center managers annual performance
bonuses that are tied directly to each profit center's operating profit
margin. These bonuses typically are a significant portion of a profit
center manager's total compensation.
LINES OF BUSINESS
RETAIL DIVISION
The Retail Division operates through 23 locations in eight states. These
locations employ approximately 550 persons, and offer principally property and
casualty insurance products. The Company also sells and services a wide range of
group and individual life, accident, health, hospitalization, medical and dental
insurance products.
19
<PAGE> 21
The following table sets forth (i) the total commissions and fees derived
by the Retail Division on a state of origination basis for each of the three
years in the period ended December 31, 1994, and for each of the six-month
periods ended June 30, 1994 and 1995, and (ii) the number of Retail Division
offices and agents in each such state as of July 1, 1995:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
NUMBER NUMBER --------------------------- -----------------
STATE(1) AGENTS OFFICES 1992 1993 1994 1994 1995
-------------------------- ------ ------ ------- ------- ------- ------- -------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
Florida................... 88 15 $39,346 $40,706 $39,491 $20,420 $22,564
Arizona................... 12 1 4,574 4,534 4,555 2,258 2,298
Texas..................... 8 1 3,811 3,829 3,363 1,787 1,511
New Jersey................ 5 2 3,325 4,047 3,478 2,046 1,496
California................ 5 1 1,799 2,976 2,889 1,568 1,153
Georgia................... 12 1 2,284 1,862 1,372 688 704
North Carolina............ 4 1 771 1,005 870 443 359
Pennsylvania(2)........... 5 1 0 0 0 0 0
------ -- ------- ------- ------- ------- -------
TOTAL........... 139 23 $55,910 $58,959 $56,018 $29,210 $30,085
====== ====== ======= ======= ======= ======= =======
</TABLE>
- ---------------
(1) Revenues are classified by state of origination, rather than customer
location. Consequently, reported revenues include sales to customers
located in other states.
(2) Effective July 1, 1995 the Company acquired Robert Scott Gordon, Inc., based
in a suburb of Philadelphia.
No material part of the Company's retail business depends upon a single
customer or a few customers. During 1994, the Company's Retail Division received
approximately $365,000 of fees and commissions from Rock-Tenn, the Company's
largest single Retail Division customer. Such amount represented less than 1% of
the Retail Division's total commission and fee revenues for 1994.
In connection with the selling and marketing of insurance coverages, the
Company provides a broad range of related services to its customers, such as
risk management surveys and analysis, consultation in connection with placing
insurance coverages and claims processing. The Company believes these services
are important factors in securing and retaining customers.
The Company expects to entertain strategic acquisitions that complement the
Company's existing base of retail business. Company profit center managers
occasionally alert Company management to acquisition opportunities which they
believe to be favorable. All acquisition candidates are evaluated by the
acquisition committee of the Company, which reports to the Board of Directors.
As opportunities are identified, the Company may engage in discussions with
interested parties concerning possible transactions. The Company has evaluated
and is evaluating such opportunities and prospects and will continue to do so
throughout 1995. The Company cannot predict if any transactions will be
consummated, nor the terms or form of consideration that may be required. The
Company has historically paid for its acquisitions with cash, although at times
it has utilized shares of its Common Stock as consideration, particularly to
provide incentives for management of the seller to remain in leadership
positions with the Company. See "Risk Factors -- Acquisition Risks."
PROGRAM DIVISION
The Program Division tailors an insurance product to the needs of a
particular professional or trade group, negotiates policy forms, coverages, and
commission rates with an insurance company, and, in certain cases, secures the
formal or informal endorsement of the product by an association. The Program
Division's programs are marketed and sold primarily through a national network
of approximately 270 non-affiliated independent agencies, representing
approximately 2,000 independent agents, who solicit customers through
advertisements in association publications, direct mailings and personal
contact. The Company also markets these products directly in Florida through the
Program Division's Professional Services Program. Under agency agreements with
the insurance companies that underwrite these programs, the Company usually has
20
<PAGE> 22
authority to bind coverages, subject to established guidelines, to bill and
collect premiums and, in some cases, to process claims.
The Company is committed to ongoing market research and development of new
proprietary programs. The Company employs a variety of methods to assess the
coverage needs of various professional groups and trade associations to which
the Company does not presently offer insurance products. Among other techniques,
these methods include interviews with members of prospective professional and
trade groups. If the initial market research is positive, the Company studies
the existing and potential competition and locates potential carriers for the
program. A proposal is then submitted to and negotiated with a selected carrier
and, in most instances, a professional or trade association concerning
endorsement of the program. New programs are introduced through written
communications, personal visits with agents, placements of advertising in trade
publications and, where appropriate, participation in trade shows and
conventions. Several new programs are currently being reviewed by the Company.
There can be no assurance, however, as to whether the Company will be successful
in developing any such new programs or what the market reception will be.
Bruce G. Geer, Executive Vice President of the Company in charge of the
Program Division and a member of the Company's Board of Directors, has notified
the Company that he will resign as an officer of the Company effective September
1, 1995. Mr. Geer will remain a member of the Company's Board of Directors and
will continue to be employed on a part-time basis as a consultant through 1995.
Since July 1, 1995, two senior profit center managers in the Program Division
have overseen its operations.
Professional Groups. The professional groups targeted by the Program
Division include dentists, attorneys, physicians, and optometrists and
opticians. Set forth below is a brief description of the programs offered to
these four major professional groups.
- Dentists: The largest program marketed by the Program Division is a
package insurance policy known as the Professional Protector Plan(R), which
provides comprehensive coverages for dentists, including practice protection and
professional liability. This program was initiated in 1969, is endorsed by more
than 25 state dental societies, and is offered in 49 states, the District of
Columbia, the Virgin Islands, and Puerto Rico. This program presently insures
approximately 37,300 dentists, which the Company believes represents
approximately 27% of the eligible practicing dentists within the Company's
marketing territories.
- Lawyers: The Company began marketing lawyers' professional liability
insurance in 1973, and the national Lawyer's Protector Plan(R) was introduced in
1983. The program presently insures approximately 38,500 attorneys and is
offered in 45 states.
- Physicians: The Company markets professional liability insurance for
physicians, surgeons, and other health care providers through a program known as
the Physicians Protector Plan(R). The program was initiated in 1980, is offered
in seven states, and insures approximately 4,000 physicians.
- Optometrists and Opticians: The Optometric Protector Plan(R) was created
in 1973 to provide optometrists and opticians with a package of practice and
professional liability coverage. This program insures approximately 6,900
optometrists and opticians in all states and Puerto Rico.
The professional group programs described above are underwritten
predominantly through CNA. The Company and CNA are parties to Program Agency
Agreements with respect to each of the programs described above. Among other
things, these agreements grant the Company the exclusive right to solicit and
receive applications for program policies directly and from other licensed
agents and to bind and issue such policies and endorsements thereto. In
fulfilling its obligations under the agreements, the Company must comply with
the administrative and underwriting guidelines established by CNA. The Company
must use its best efforts to promote the programs and to solicit and sell
program policies. The Company is compensated through commissions on premiums,
which vary with respect to insurance product (e.g., workers' compensation,
commercial umbrella, package coverage, monoline professional and general
liability) and the Company's role in the transaction. The commission to which
the Company is entitled may change upon 90 days written notice from CNA. The
Program Agency Agreements are generally cancelable by either party on six
months'
21
<PAGE> 23
or one year's advance written notice for any reason. An agreement may also be
terminated upon breach, by the non-breaching party, subject to certain
opportunities to cure the breach.
The Company believes its relationship with CNA is excellent and that CNA is
committed to the programs administered by the Company. However, should CNA
become unable or unwilling to continue underwriting such programs, the Company
does not believe it would encounter difficulty replacing CNA as the underwriter
of the business, although some additional expense and loss of market share would
at least initially result. See "Risk Factors -- Reliance On Significant
Underwriter."
Commercial. The Program Division's Towing Operators Protector Plan(R) was
introduced in 1993 and currently provides specialized insurance products to
tow-truck operators in 19 states. The Automobile Dealers Protector Plan(R)
insures used car dealers, not affiliated with manufacturers, in Florida through
a program endorsed by the Florida Independent Auto Dealers Association. In 1994,
this Plan expanded into six additional states, and currently insures
approximately 2,200 dealers in seven states. This program is underwritten by TIG
Insurance Company.
Health Care Insurers, Inc. ("HCI"), a wholly owned subsidiary of the
Company located in Colorado Springs, Colorado, was created in 1989 to market and
sell professional liability and property coverages to hospitals, laboratories,
nursing homes, medical groups, and clinics. HCI currently represents 160 clients
in ten states.
The Insurance Administration Center ("IAC") became a wholly owned
subsidiary of the Company in 1989. IAC was founded in 1962 to serve as insurance
consultant to the National Association of Wholesaler-Distributors ("NAW") and,
through NAW, NAW's industry associations, which have a total of approximately
40,000 members. IAC currently serves NAW members as a third-party administration
facility for life and health coverages, and markets and sells various employee
benefits, property, and casualty insurance products to NAW members.
IAC's third-party administration services include billing, premium
accounting, eligibility, enrollment, claims payments, and financial reporting,
and IAC currently processes claims for approximately 350 employers associated
with NAW in a program for which New York Life Insurance Company is the lead
underwriter. Since April 1995, IAC's property and casualty offerings have been
principally underwritten by General Accident Insurance Company. Prior to that
time, they were principally underwritten by CIGNA.
Revenue Breakdown Among Programs. The table below contains a breakdown of
the total commission and fee revenues attributable to each of the Program
Division's programs for each of the three years in the period ended December 31,
1994, and for each of the six-month periods ended June 30, 1994 and 1995:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
----------------------------- ------------------
PROGRAM 1992 1993 1994 1994 1995
------------------------------------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Lawyers Protector Plan............... $ 5,019 $ 6,529 $ 7,839 $ 3,701 $ 4,418
Professional Protector Plan.......... 7,964 8,133 8,337 3,664 3,757
Automobile Dealers Protector Plan.... 1,032 1,225 1,420 720 1,393
IAC-Employee Benefits................ 2,358 2,018 2,193 1,055 1,113
Physicians Protector Plan............ 2,859 2,936 2,913 1,231 1,043
Professional Services Program........ 0 372 932 465 445
Health Care Insurers, Inc............ 834 712 755 291 430
Optometric Protector Plan............ 747 687 886 488 417
Towing Operators Protector Plan...... 0 86 154 56 212
National Association of Wholesaler
Distributors -- Property &
Casualty........................... 1,175 935 1,090 584 114
------- ------- ------- ------- -------
TOTAL...................... $21,988 $23,633 $26,519 $12,255 $13,342
======= ======= ======= ======= =======
</TABLE>
22
<PAGE> 24
SERVICE DIVISION
The Service Division consists of two separate components: (i) insurance and
related services as a third-party administrator ("TPA") for employee health and
welfare benefit plans, and (ii) insurance and related services providing
comprehensive risk management and third-party administration to self-funded
workers' compensation plans.
In connection with its employee benefit plan administrative services, the
Service Division provides TPA services, including benefit consulting, benefit
plan design and costing, arrangement for the placement of stop-loss insurance
and other employee benefit coverages, and settlement of claims. The Service
Division provides utilization management services such as pre-admission review,
concurrent/retrospective review, pre-treatment review of certain non-hospital
treatment plans, and medical and psychiatric case management. In addition to the
administration of self-funded health care plans, the Service Division offers
administration of flexible benefit plans, including plan design, employee
communication, enrollment and reporting. The Service Division's workers'
compensation TPA services include risk management services such as loss control,
claim administration, access to major reinsurance markets, cost containment
consulting, and services for secondary disability and subrogation recoveries.
The Service Division provides workers' compensation TPA services for
approximately 2,000 employers representing more than $1.7 billion of employee
payroll. The Service Division's largest workers' compensation contract
represents approximately 71% of the Company's workers' compensation TPA
revenues, or 5% of the Company's total commission and fee revenues. This
contract expires December 31, 1995; negotiations to renew it are in process.
The total revenues derived by the Service Division for the three years
ended December 31, 1992, 1993 and 1994 were $8,816,000, $10,166,000 and
$10,643,000, respectively, and for the six-month periods ended June 30, 1994 and
1995 were $5,173,000 and $5,303,000, respectively. The Service Division has five
agents located in two offices in Florida.
BROKERAGE DIVISION
The Brokerage Division markets excess and surplus lines and specialty
insurance products to the Company's Retail Division, as well as other retail
agencies throughout Florida and the Southeast. The Brokerage Division represents
various U.S. and U.K. surplus lines companies and is also a Lloyd's of London
correspondent. In addition to surplus lines carriers, the Brokerage Division
represents admitted carriers for smaller agencies that do not have access to
large insurance carrier representation. Excess and surplus products include
commercial automobile, garage, restaurant, builder's risk and inland marine
lines. Difficult-to-insure general liability and products liability coverages
are a specialty, as is excess workers' compensation. Retail agency business is
solicited through mailings and direct contact with retail agency
representatives. The total revenues derived by the Brokerage Division's two
offices (both in Florida) for the three years ended December 31, 1992, 1993 and
1994 were $1,562,000, $1,662,000 and $2,672,000, respectively, and for the six-
month periods ended June 30, 1994 and 1995 were $1,499,000 and $2,073,000,
respectively. Effective July 1, 1995, the Company acquired Roehrig Flood &
Associates, Inc., an excess and surplus lines broker located in St. Petersburg,
Florida.
EMPLOYEES
As of June 30, 1995, the Company had 993 full-time equivalent employees.
The Company has contracts with its sales employees that include provisions
restricting their right to solicit the Company's customers after termination of
employment with the Company. The enforceability of such contracts varies from
state to state depending upon state statutes, judicial decisions, and factual
circumstances. The majority of these contracts are terminable by either party;
however, the agreements not to solicit the Company's customers continue
generally for a period of at least three years after employment termination.
None of the Company's employees is represented by a labor union, and the
Company considers its relations with its employees to be satisfactory.
23
<PAGE> 25
COMPETITION
The insurance agency business is highly competitive, and numerous firms
actively compete with the Company for customers and insurance carriers. Although
the Company is the largest insurance agency headquartered in Florida, a number
of firms with much greater resources and market presence than the Company
compete with the Company in Florida and elsewhere. This situation is
particularly pronounced outside Florida. Competition in the insurance business
is largely based on innovation, quality of service, and price. A number of
insurance companies are engaged in the direct sale of insurance, primarily to
individuals, and do not pay commissions to agents and brokers. To date, such
direct writing has had relatively little effect on the Company's operations,
primarily because the Company's Retail Division is commercially oriented.
REGULATION, LICENSING, AND AGENCY CONTRACTS
The Company or its designated employees must be licensed to act as agents
by state regulatory authorities in the states in which the Company conducts
business. Regulations and licensing laws vary in individual states and are often
complex.
The applicable licensing laws and regulations in all states are subject to
amendment or reinterpretation by state regulatory authorities, and such
authorities are vested in most cases with relatively broad discretion as to the
granting, revocation, suspension and renewal of licenses. The possibility exists
that the Company could be excluded or temporarily suspended from carrying on
some or all of its activities in, or otherwise subjected to penalties by, a
particular state.
24
<PAGE> 26
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information, as of July 31, 1995, concerning the
Company's directors and executive officers.
<TABLE>
<CAPTION>
YEAR FIRST
BECAME
NAME POSITIONS AGE A DIRECTOR
- -------------------------- ------------------------------------------------- --- ----------
<S> <C> <C> <C>
J. Hyatt Brown............ Chairman, President, and Chief Executive Officer 58 1993
Kenneth E. Hill........... Executive Vice President and Director 57 1993
Jim W. Henderson.......... Executive Vice President and Director 49 1993
Bruce G. Geer(1).......... Executive Vice President and Director 48 1991
William F. Poe(2)......... Director 64 1979(3)
Samuel P. Bell, III....... Director 56 1993
Theodore J. Hoepner....... Director 54 1994
Charles W. Poe(2)......... Director 66 1958
William F. Poe, Jr.(2).... Director 39 1994(4)
V. C. Jordan, Jr.......... Vice Chairman 65 --
Vice President, Treasurer, and Chief Financial
Timothy L. Young.......... Officer 32 --
Laurel J. Lenfestey....... Vice President, Secretary, and General Counsel 36 --
</TABLE>
- ---------------
(1) Mr. Geer has resigned as Executive Vice President, effective September 1,
1995. He is expected to continue to serve as a director following his
resignation and to be employed on a part-time basis as a consultant through
1995.
(2) William F. Poe and Charles W. Poe are brothers, and William F. Poe, Jr. is
the son of William F. Poe.
(3) In 1974, Mr. Poe resigned when he was elected Mayor of the City of Tampa. At
the expiration of his term as Mayor in 1979, Mr. Poe was reappointed to the
Board.
(4) Mr. Poe, Jr. was a director of the Company from April 1991 through April
1993, when he resigned as part of the Merger. Mr. Poe, Jr. was re-elected
to the Board in January.
J. HYATT BROWN. Mr. Brown has been the President and Chief Executive
Officer of the Company since April 1993, and the Chairman of the Board of
Directors since August 1994. Mr. Brown has been President and Chief Executive
Officer of B&B, now a subsidiary of the Company, since 1961. He was a member of
the Florida House of Representatives from 1972 to 1980, and Speaker of the House
from 1978 to 1980. Mr. Brown serves as Vice Chairman of the Florida Residential
Property and Casualty Joint Underwriting Association, as a director of SunTrust
Banks, Inc., Sun Bank of Volusia County, Inc., International Speedway
Corporation, The FPL Group, Inc., BellSouth Corporation, and Rock-Tenn and as a
Trustee of Stetson University.
KENNETH E. HILL. Mr. Hill has been an Executive Vice President of the
Company since April 1993. He has served as Executive Vice President of B&B since
1981.
JIM W. HENDERSON. Mr. Henderson served as Senior Vice President of the
Company since April 1993, and was elected an Executive Vice President in January
of 1995. He has served as Senior Vice President of B&B since 1989. He also
served as Chief Financial Officer of B&B from 1985 through 1989.
BRUCE G. GEER. Mr. Geer has been an Executive Vice President of the
Company since December 1984. He also served as Chief Financial Officer from 1982
to 1988. Mr. Geer has resigned as Executive Vice President, effective September
1, 1995, but will continue to be employed on a part-time basis as a consultant
through 1995.
WILLIAM F. POE. Mr. Poe has been a director of the Company since prior to
1979. He is currently the President of Poe Investments, Inc., a private
investment company. From November 1979 until August 1994, he was the Chairman of
the Board of Directors of the Company, and from November 1979 until April 1993,
he was the Company's Chief Executive Officer. Mr. Poe is a director of Fort
Brooke Corporation of Florida, a holding company that owns the Fort Brooke Bank
of Florida.
25
<PAGE> 27
SAMUEL P. BELL, III. Mr. Bell has been a director of the Company since
1993. He is a shareholder and the managing partner of the law firm of Cobb Cole
& Bell. He has served as counsel to B&B since 1964. Mr. Bell was a member of the
Florida House of Representatives from 1974 to 1988.
THEODORE J. HOEPNER. Mr. Hoepner has been a director of the Company since
April 1994. He has been the Chairman of the Board, President, and Chief
Executive Officer of SunBank, N.A. since 1990. From 1983 through 1990, he was
the Chairman of the Board and Chief Executive Officer of SunBank/Miami, N.A. Mr.
Hoepner has been elected Chairman of the Board, President, and Chief Executive
Officer of SunBanks, Inc. effective September 1, 1995.
CHARLES W. POE. Mr. Poe has been a director of the Company since 1958. He
has been the President of Poe Industries, Inc., a private investment company,
since December 1990. Mr. Poe was the President and principal owner of City Ready
Mix Co. from January 1972 through December 1990. Mr. Poe is also a director of
Fort Brooke Corporation of Florida, a holding company that owns the Fort Brooke
Bank of Florida.
WILLIAM F. POE, JR. Mr. Poe has been a director of the Company since
January 1994, and also served as a director from 1991-1993. He has been
Assistant Vice President of the Company since 1988, serving principally as an
insurance agent.
V. C. JORDAN, JR. Mr. Jordan has been Vice Chairman of the Company since
April 1993, serving on the advisory board to the Board of Directors. He was
President of the Company from November 1983 to April 1993.
TIMOTHY L. YOUNG. Mr. Young has been Vice President and Chief Financial
Officer of the Company since April 1994, and Treasurer since March 1994. He was
Vice President of Finance for Concord Resorts from October 1992 through December
1993. From August 1990 through October 1992, he was Chief Financial Officer of
Quest Entertainment, Inc., and from January 1990 through August 1990, he was
Director of Accounting for George E. Warren, Inc. For more than three years
prior thereto, Mr. Young was an accountant with Coopers & Lybrand.
LAUREL J. LENFESTEY. Ms. Lenfestey has been Vice President, Secretary, and
General Counsel of the Company since January 1994. She was a partner of the law
firm of Holland & Knight from January 1991 through December 1993, and for more
than three years prior thereto, she was an associate with Holland & Knight.
26
<PAGE> 28
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's outstanding Common Stock as of July 26, 1995 and
after the consummation of the Offering by: (i) each of the Company's directors
and executive officers (including certain Selling Shareholders); (ii) all
executive officers and directors of the Company as a group; (iii) each person
known by the Company to own beneficially more than 5% of the Company's Common
Stock; and (iv) each of the other Selling Shareholders (assuming exercise of the
Underwriters' over-allotment option). As of July 26, 1995, the Company had
outstanding 8,662,686 shares of Common Stock, entitled to one vote per share.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THE OWNED AFTER THE
OFFERING(2)(3) SHARES OFFERING
------------------- OFFERED FOR -------------------
NAME AND ADDRESS(1) NUMBER PERCENT SALE(4) NUMBER PERCENT
- ----------------------------------------------- --------- ------- ----------- --------- -------
<S> <C> <C> <C> <C> <C>
DIRECTORS AND OFFICERS
J. Hyatt Brown(5).............................. 1,991,210 23.0% -- 1,991,210 23.0%
Samuel P. Bell, III............................ 1,000 * -- 1,000 *
Cobb Cole & Bell
131 N. Gadsden Street
Tallahassee, FL 32301
Bruce G. Geer.................................. 95,317 1.1% -- 95,317 1.1%
Jim W. Henderson(6)............................ 70,407 * -- 70,407 *
Kenneth E. Hill................................ 4,032 * -- 4,032 *
Theodore J. Hoepner............................ 1,000 * -- 1,000 *
SunBank, N.A.
200 S. Orange Avenue
Orlando, FL 32801
V. C. Jordan, Jr.(7)........................... 124,612 1.4% -- 124,612 1.4%
Timothy L. Young............................... 2,769 * -- 2,769 *
Laurel J. Lenfestey............................ 420 * -- 420 *
DIRECTORS WHO ARE SELLING SHAREHOLDERS
Charles W. Poe(8).............................. 1,056,211 12.2% -- 7,500 *
William F. Poe(9).............................. 1,002,881 11.6% 80,760 33,160 *
William F. Poe, Jr.(10)........................ 273,092 3.2% 5,623 15,020 *
All directors and executive officers as a group
(12 persons)................................. 4,622,951 53.3% 86,383 2,346,447 27.0%
OTHER SELLING SHAREHOLDERS(7)
William F. Poe Sr. Grantor Retained Annuity
Trust........................................ 600,000 6.9% 600,000 -- *
Charles E. Poe (11)............................ 290,186 3.3% 22,717 15,000 *
Charles W. Poe Grantor Retained Annuity
Trust........................................ 289,662 3.3% 289,662 -- *
Keren Poe Foster(11)........................... 284,920 3.3% 13,889 18,562 *
Marilyn Poe Lunskis(11)........................ 282,459 3.3% 14,990 15,000 *
Janice Poe Mitchell(11)........................ 276,011 3.2% 8,542 15,000 *
W. F. Poe Syndicate, Inc.(12).................. 267,469 3.1% 252,469 15,000 *
Charles W. Poe & Co.(12)....................... 158,111 1.8% 150,611 7,500 *
Doris P. Anderson.............................. 125,791 1.5% 101,590 24,201 *
William F. Poe Foundation...................... 50,000 * 50,000 -- *
Elizabeth A. Poe............................... 13,775 * 13,775 -- *
Lynn Poe(13)................................... 10,000 * 5,438 4,562 *
Charles W. Poe Revocable Living Trust.......... 8,438 * 8,438 -- *
Jennifer Poe Wolf(14).......................... 7,188 * 5,438 1,750 *
Reynolds Children Trust........................ 4,562 * 4,562 -- *
</TABLE>
27
<PAGE> 29
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THE OWNED AFTER THE
OFFERING(2)(3) SHARES OFFERING
------------------- OFFERED FOR -------------------
NAME AND ADDRESS(1) NUMBER PERCENT SALE(4) NUMBER PERCENT
- ----------------------------------------------- --------- ------- ----------- --------- -------
<S> <C> <C> <C> <C> <C>
J. Wayne Anderson.............................. 4,496 4,496 -- *
Ronald and Joan Anderson....................... 4,000 4,000 -- *
Wolf Children's Trust.......................... 1,750 * 1,750 -- *
</TABLE>
- ---------------
* Less than 1%.
(1) The business address for Messrs. Brown, Henderson, Hill, and Young is 220
South Ridgewood Avenue, Daytona Beach, Florida 32114. The business address
for Messrs. Geer, Jordan and Poe, Jr. and Ms. Lenfestey is 401 East Jackson
Street, Suite 1700, Tampa, Florida 33602.
(2) Beneficial ownership of shares, as determined in accordance with applicable
Commission rules, includes shares as to which a person has or shares voting
power or investment power or has the right to acquire within 60 days. The
Company has been informed that all shares shown are held of record with
sole voting and investment power, except as otherwise indicated.
(3) The number and percentage of shares owned by the following persons include
the indicated number of shares that are owned by the spouse of such person,
and each person disclaims beneficial ownership of such shares: Mr.
Hill -- 4,032; Mr. Geer -- 26,260; Mr. Poe, Sr. -- 13,775; all directors
and executive officers as a group -- 44,067. The number and percentage of
shares owned by the following persons include the indicated number of
shares owned through the Company's 401(k) plan as of July 26, 1995: Mr.
Henderson -- 32,563; Mr. Poe, Jr. -- 697; Mr. Young -- 41; Ms.
Lenfestey -- 420. Shares beneficially owned by Mr. Geer and Mr. Jordan
include 175 and 17,698 shares issuable upon exercise of outstanding
options, respectively.
(4) The amounts shown under the column Shares Beneficially Owned Prior to the
Offering were determined in accordance with Commission rules requiring
inclusion of shares over which a person has voting or investment power. The
amounts in the column Shares Offered for Sale do not correspond to those
numbers and instead are the number of shares owned of record by the Selling
Shareholder and being sold in the Offering.
(5) Mr. Brown's ownership includes 167,739 shares owned by his children, as to
which beneficial ownership is disclaimed. Mr. Brown owns 1,823,471 shares
in joint tenancy with his wife, and these shares are subject to shared
voting and investment power.
(6) Mr. Henderson's ownership includes 1,000 shares owned by his daughter, as
to which beneficial ownership is disclaimed.
(7) All shares are held of record by the V. C. Jordan, Jr. Revocable Trust, of
which V. C. Jordan, Jr. is trustee.
(8) The number and percentage of shares shown in the table as owned by Charles
W. Poe consist of (a) 8,438 shares owned by the Charles W. Poe Revocable
Living Trust, (b) 289,662 shares owned by the Charles W. Poe Grantor
Retained Annuity Trust, as to which beneficial ownership is disclaimed, (c)
158,111 shares owned by Charles W. Poe & Co. (of which 150,611 shares are
being sold [80,611 shares if the over-allotment option is not exercised]),
a partnership in which Mr. Poe is a partner, and (d) 600,000 shares held as
trustee for the William F. Poe, Sr. Grantor Retained Annuity Trust, as to
which beneficial ownership is disclaimed. Mr. Poe's business address is
4601 San Miguel, Tampa, Florida 33629.
(9) The number and percentage of shares shown in the table as owned by William
F. Poe include the following shares, as to which beneficial ownership is
disclaimed: (a) 13,775 shares owned by Elizabeth A. Poe, Mr. Poe's spouse;
(b) 267,469 shares owned by W. F. Poe Syndicate, Inc. (of which 252,469
shares are being sold [108,719 shares if the over-allotment option is not
exercised]), a corporation of which Mr. Poe is President and in which he
has a 5% ownership interest; (c) 22,717 shares owned by Charles E. Poe, his
adult son who shares his household; and (d) 600,000 shares owned of record
by the William F. Poe, Sr. Grantor Retained Annuity Trust. Mr. Poe's
business address is 1000 North Ashley Drive, Tampa, Florida 33602.
28
<PAGE> 30
(10) William F. Poe, Jr.'s ownership includes 267,469 shares owned by W. F. Poe
Syndicate, Inc. (of which 252,469 shares are being sold [108,719 shares if
the over-allotment option is exercised]), a corporation of which he is a
director and in which he has a 19% ownership interest and as to which
beneficial ownership is disclaimed.
(11) Charles E. Poe's, Marilyn Poe Lunskis', Keren Poe Foster's, and Janice Poe
Mitchell's ownership includes 267,469 shares owned by W. F. Poe Syndicate,
Inc., a corporation in which each of the above is a director and in which
he or she has a 19% ownership interest (of which 252,469 shares are being
sold [108,719 shares if the over-allotment option is not exercised]).
(12) If the Underwriters' over-allotment option is not exercised, the Shares
Offered for Sale by Charles W. Poe & Co. and by W. F. Poe Syndicate, Inc.
will be 80,611 and $108,719, respectively; the shares Beneficially Owned
after the Offering will be 77,500 and 158,750, respectively.
(13) The number and percentage of shares shown in the table include 4,562 shares
beneficially owned by Lynn Poe as Trustee of the Reynolds Children Trust.
(14) The number and percentage of shares shown in the table include 1,750 shares
beneficially owned by Jennifer Wolf as Trustee of the Wolf Children Trust.
29
<PAGE> 31
UNDERWRITING
Subject to the terms and conditions contained in the Underwriting
Agreement, each of the Underwriters named below (the "Underwriters") has
severally agreed to purchase, and the Selling Shareholders have agreed to sell
to such Underwriters, the number of shares of Common Stock set forth below
opposite the name of such Underwriter:
<TABLE>
<CAPTION>
NUMBER
NAME OF UNDERWRITER OF SHARES
------------------------------------------------------------------------- ----------
<S> <C>
Smith Barney Inc.........................................................
The Robinson-Humphrey Company, Inc.......................................
----------
Total.......................................................... 1,425,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Shares are subject to
approval of certain legal matters by counsel and certain other conditions. The
Selling Shareholders are obligated to sell, and the Underwriters are obligated
to purchase, all the shares of Common Stock offered hereby if any are purchased.
The Underwriters, for whom Smith Barney Inc. and The Robinson-Humphrey
Company, Inc. are acting as representatives (the "Representatives"), have
advised the Company and the Selling Shareholders that they initially propose to
offer part of the shares of the Common Stock directly to the public at the
public offering price set forth on the cover page of this Prospectus and part of
the shares to certain dealers at a price that represents a concession not in
excess of $ per share under the public offering price. The Underwriters
may allow, and such dealers may reallow, a concession not in excess of $
per share to certain other dealers. After the initial public offering, the
offering price and the concessions may be changed by the Representatives.
Certain Selling Shareholders have granted the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase, in the
aggregate, up to 213,750 additional shares of Common Stock at the initial public
offering price, less underwriting discounts and commissions, as set forth on the
cover page of this Prospectus. The Underwriters may exercise such option solely
for the purpose of covering over-allotments, if any, incurred in the sale of the
shares of Common Stock offered hereby. To the extent such option is exercised,
each Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional shares as the
number set forth next to such Underwriter's name in the preceding table bears to
the total shown.
The Company, the Selling Shareholders and the Underwriters have agreed to
indemnify each other or contribute to losses arising out of certain liabilities,
including liabilities under the Securities Act.
The Company, its officers and directors, and the Selling Shareholders have
agreed not to, directly or indirectly, offer, sell, contract to sell, grant any
option to purchase or otherwise sell or dispose (or announce
30
<PAGE> 32
any offer, sale, offer of sale, contract of sale, grant of any option to
purchase or other sale or disposition) of any shares of Common Stock or other
capital stock or any securities convertible into, or exercisable or exchangeable
for any share of Common Stock or other capital stock, for a period of 180 days,
in the case of the Selling Shareholders and J. Hyatt Brown, and 90 days, in the
case of the other officers and directors, after the date of this Prospectus
without the prior written consent of the Representatives, on behalf of the
Underwriters.
In connection with this offering, certain Underwriters and selling group
members (if any) or their respective affiliates who are qualified registered
market makers on The Nasdaq Stock Market may engage in passive market making
transactions in the Common Stock on The Nasdaq Stock Market in accordance with
Rule 10b-6A under the Exchange Act, during the two business day period before
commencement of offers and sales of the Common Stock. These passive market
making transactions must comply with applicable volume and price limits and be
identified as such. In general, a passive market maker may display its bid at a
price not in excess of the highest independent bid for the security; however, if
all independent bids are lowered below the passive market maker's bid, such bid
must then be lowered when certain purchase limits are exceeded.
LEGAL MATTERS
Certain legal matters in connection with the Offering will be passed upon
for the Company by Holland & Knight, Tampa, Florida, for the Selling
Shareholders by Shackleford, Farrior, Stallings & Evans, Tampa, Florida, and for
the Underwriters by King & Spalding, Atlanta, Georgia.
EXPERTS
The consolidated financial statements of the Company at December 31, 1994
and 1993, and for each of the three years in the period ended December 31, 1994,
appearing in this Prospectus, have been audited by Ernst & Young LLP,
independent certified public accountants, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
pursuant to either the Securities Act or the Exchange Act, are incorporated
herein by reference, except as superseded or modified:
1. The Company's annual report on Form 10-K for the year ended
December 31, 1994;
2. The Company's quarterly report on Form 10-Q for the quarter ended
March 31, 1995;
3. The Company's quarterly report on Form 10-Q for the quarter ended
June 30, 1995;
4. The Company's Proxy Statement, dated March 22, 1995, for the
Company's 1995 Annual Meeting of Shareholders; and
5. The description of the Company's Common Stock contained in its
registration statement on Form S-4, File Number 33-58090, filed with the
Commission on February 10, 1993, as amended.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14,
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of this Offering shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the date of filing of such
documents.
The information relating to the Company contained in this Prospectus does
not purport to be comprehensive and must be read together with the information
contained in the documents listed above, which have been incorporated by
reference. Any information contained in a document incorporated by reference or
deemed to be incorporated by reference herein shall be modified or superseded,
for purposes of this Prospectus, to the extent that a statement contained herein
or in any subsequently filed document which is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any document incorporated by reference in this Prospectus,
31
<PAGE> 33
other than exhibits to any such document not specifically described above.
Requests for such documents should be directed to Poe & Brown, Inc., 401 East
Jackson Street, Suite 1700, Tampa, Florida 33602, Attention: Laurel J. Lenfestey
(telephone number (813) 222-4100).
GLOSSARY OF SELECTED INSURANCE TERMS
Casualty insurance: Insurance which is primarily concerned with the losses
caused by injuries to third persons (i.e., persons other than the policyholder)
and the legal liability imposed on the insured resulting therefrom, including
workers' compensation, commercial and private passenger automobile coverage and
fidelity and surety insurance.
Contingent commissions: Commissions paid by insurance carriers based upon
the volume and profitability of the business placed with such carriers,
generally for the preceding year.
Excess and surplus lines: Specialized property and casualty coverage that
is generally not available from licensed insurers because a risk requires limits
above that readily available from other insurers, has above average loss
experience or frequency, or involves a higher degree of hazard or loss severity
potential than risks customarily assumed by other insurers. An insurance company
that specialized in excess and surplus lines is usually unlicensed in the states
in which it provides such lines but approved as an excess and surplus lines
carrier in such states.
Insurable exposure units: Specific items to be covered under an insurance
policy. These include both tangible (e.g., buildings, equipment, automobiles)
and intangible (e.g., sales, earnings, employee payroll levels, etc.) assets.
Override commission: That portion of the commission retained by the
wholesale brokerage that markets and distributes the insurance product.
Property insurance: Insurance against physical damage to property and
resultant interruption of business or extra expense caused by fire, windstorm or
other perils.
Retail agency: Business organization whose employees represent and act as
agent for businesses and individuals in their purchase of insurance. The retail
agent negotiates on behalf of the insured and is generally compensated on a
commission basis.
Third party administrator ("TPA"): Business organization that provides
specified consulting and administrative services, typically in the area of
employee benefits and risk management, in exchange for a fee. Services generally
provided under a TPA agreement include employee benefit design and costing,
arrangement of employee benefit coverage, claims management and administration,
and utilization management.
Wholesale brokerage: Business organization that acts as intermediary
between insurer and retail agency. The wholesale broker generally markets and
distributes insurance products to independent retail agencies whose premium
volume is not large enough to maintain a direct relationship with an insurance
carrier.
32
<PAGE> 34
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants..................................... F-2
Consolidated Balance Sheets as of December 31, 1993 and 1994 and June 30, 1995
(unaudited).......................................................................... F-3
Consolidated Statements of Income for the Years Ended December 31, 1992, 1993 and 1994,
and for the Six Months Ended June 30, 1994 and 1995 (unaudited)...................... F-4
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1992,
1993 and 1994, and for the Six Months Ended June 30, 1995 (unaudited)................ F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1992, 1993 and
1994 and for the Six Months Ended June 30, 1994 and 1995 (unaudited)................. F-6
Notes to Consolidated Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE> 35
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Poe & Brown, Inc.
Daytona Beach, Florida
We have audited the accompanying consolidated balance sheets of Poe &
Brown, Inc. and subsidiaries as of December 31, 1993 and 1994, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 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 Poe & Brown,
Inc. and subsidiaries at December 31, 1993 and 1994, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1994
the Company changed its method of accounting for certain investments in debt and
equity securities.
ERNST & YOUNG LLP
Tampa, Florida
January 28, 1995, except for
the last paragraph of Note 2,
as to which the date is
March 1, 1995
F-2
<PAGE> 36
POE & BROWN, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1993 1994 1995
-------- -------- ----------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS AND
SHARES, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents...................................... $ 27,132 $ 23,185 $ 33,208
Short-term investments......................................... 667 787 672
Premiums and commissions receivable, less allowance for
doubtful accounts of $435 at 1993, $69 at 1994, and $124 at
1995......................................................... 54,308 56,784 46,760
Other current assets........................................... 4,791 6,779 5,249
-------- -------- ----------
Total current assets................................. 86,898 87,535 85,889
Fixed assets, net.............................................. 8,063 8,330 9,206
Intangibles, net............................................... 35,914 32,973 33,072
Investments.................................................... 695 9,274 9,264
Other assets................................................... 3,354 2,868 4,129
-------- -------- ----------
Total assets......................................... $134,924 $140,980 $141,560
======== ======== ========
LIABILITIES
Premiums payable to insurance companies........................ $ 67,078 $ 63,195 $ 59,280
Premium deposits and credits due customers..................... 5,051 6,970 5,600
Accounts payable and accrued expenses.......................... 8,984 8,302 7,879
Current portion of long-term debt.............................. 3,232 1,434 1,420
-------- -------- ----------
Total current liabilities............................ 84,345 79,901 74,179
Long-term debt................................................. 17,637 7,430 8,199
Deferred income taxes.......................................... 1,323 3,778 3,320
Other liabilities.............................................. 4,373 5,765 6,584
-------- -------- ----------
Total liabilities.................................... 107,678 96,874 92,282
-------- -------- ----------
SHAREHOLDERS' EQUITY
Common stock, par value $.10; authorized 18,000 shares; issued
8,550 shares at 1993; 8,635 shares at 1994; and 8,663 shares
at 1995...................................................... 855 864 867
Additional paid-in capital..................................... 1,314 2,241 2,403
Retained earnings.............................................. 25,883 35,660 40,704
Net unrealized appreciation of available-for-sale securities,
net of tax effect of $3,344 at 1994 and $3,320 at 1995....... -- 5,341 5,304
Treasury stock, at cost; 45 shares at 1993; 0 shares at 1994
and 1995..................................................... (806) -- --
-------- -------- ----------
Total shareholders' equity........................... 27,246 44,106 49,278
-------- -------- ----------
Total liabilities and shareholders' equity........... $134,924 $140,980 $141,560
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 37
POE & BROWN, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------- -----------------
1992 1993 1994 1994 1995
------- ------- -------- ------- -------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS AND SHARES, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C> <C> <C>
REVENUES
Commissions and fees.......................... $88,276 $94,420 $ 95,852 $48,137 $50,803
Investment income............................. 2,439 2,061 5,126 3,488 1,856
Other income.................................. 793 1,340 602 238 330
------- ------- -------- ------- -------
Total revenues........................ 91,508 97,821 101,580 51,863 52,989
------- ------- -------- ------- -------
EXPENSES
Employee compensation and benefits............ 51,456 52,699 52,554 26,315 28,051
Other operating expenses...................... 25,159 25,930 22,848 11,919 11,692
Interest and amortization..................... 6,575 6,145 5,592 2,854 2,418
------- ------- -------- ------- -------
Total expenses........................ 83,190 84,774 80,994 41,088 42,161
------- ------- -------- ------- -------
Income before income taxes and loss from
discontinued operations....................... 8,318 13,047 20,586 10,775 10,828
Income taxes.................................... 4,180 4,929 7,067 4,132 3,717
------- ------- -------- ------- -------
Income from continuing operations............... 4,138 8,118 13,519 6,643 7,111
Loss from discontinued operations, net of tax
benefit of $976............................... 1,580 -- -- -- --
------- ------- -------- ------- -------
Net income............................ $ 2,558 $ 8,118 $ 13,519 $ 6,643 $ 7,111
======= ======= ======== ======= =======
INCOME (LOSS) PER SHARE
Continuing operations......................... $ .48 $ .95 $ 1.56 $ .77 $ .82
Discontinued operations....................... (.18) -- -- -- --
------- ------- -------- ------- -------
Net income............................ $ .30 $ .95 $ 1.56 $ .77 $ .82
======= ======= ======== ======= =======
Weighted average number of shares outstanding... 8,569 8,571 8,670 8,615 8,696
======= ======= ======== ======= =======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 38
POE & BROWN, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL NET TREASURY STOCK
--------------- PAID-IN RETAINED UNREALIZED ----------------
SHARES AMOUNT CAPITAL EARNINGS APPRECIATION SHARES AMOUNT TOTAL
------ ------ ---------- -------- ------------ ------ ------- -------
(IN THOUSANDS OF DOLLARS AND SHARES, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1992............. 8,657 $866 $1,137 $ 22,307 $ -- 242 $(2,104) $22,206
Net income........................... 2,558 2,558
Issued for stock option plans and
employee stock purchase plans...... (12) (81) 621 609
Purchase and retirement of Brown
stock.............................. (118) (12) (1,177) (1,189)
Adjustment to conform fiscal year
ends of Brown and
Arch-Holmes (See Note 2)........... (924) (924)
Cash dividends paid ($.40 per
share)............................. (2,028) (2,028)
------ ------ ---------- -------- ------------ ------ ------- -------
BALANCE, DECEMBER 31, 1992........... 8,539 854 1,125 20,736 -- 161 (1,483) 21,232
Net income........................... 8,118 8,118
Issued for stock option plans and
employee stock purchase plans...... 11 1 13 (116) 677 691
Tax benefit from sale of option
shares by employees................ 176 176
Cash dividends paid ($.40 per
share)............................. (2,971) (2,971)
------ ------ ---------- -------- ------------ ------ ------- -------
BALANCE, DECEMBER 31, 1993........... 8,550 855 1,314 25,883 -- 45 (806) 27,246
Net income........................... 13,519 13,519
Issued for stock option plans and
employee stock purchase plans...... 85 9 872 (45) 806 1,687
Tax benefit from sale of option
shares by employees................ 55 55
Cumulative effect of change in
accounting principle (see Note
1)................................. 23 23
Net increase in unrealized
appreciation of available-for-sale
securities......................... 5,318 5,318
Partnership distributions for
Insurance West..................... (200) (200)
Cash dividends paid ($.42 per
share)............................. (3,542) (3,542)
------ ------ ---------- -------- ------------ ------ ------- -------
BALANCE, DECEMBER 31, 1994........... 8,635 864 2,241 35,660 5,341 -- -- 44,106
Net income (unaudited)............... 7,111 7,111
Issued for stock option plans
(unaudited)........................ 28 3 162 165
Net decrease in unrealized
appreciation
of available-for-sale securities
(unaudited)........................ (37) (37)
Cash dividends paid ($.24 per share)
(unaudited)........................ (2,067) (2,067)
------ ------ ---------- -------- ------------ ------ ------- -------
BALANCE, JUNE 30, 1995 (UNAUDITED)... 8,663 $867 $2,403 $ 40,704 $5,304 -- $ -- $49,278
===== ====== ======== ======== ========== ===== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 39
POE & BROWN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------- -----------------
1992 1993 1994 1994 1995
-------- ------- -------- ------- -------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income..................................... $ 2,558 $ 8,118 $ 13,519 $ 6,643 $ 7,111
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................ 7,085 7,030 6,398 3,361 3,266
Provision for doubtful accounts.............. 749 562 19 47 55
Deferred income taxes........................ 516 499 (1,173) -- (1,638)
Net gains on sales of investments, fixed
assets and customer accounts.............. (809) (864) (2,231) (2,389) (311)
Loss from discontinued operations............ 1,580 -- -- -- --
Adjustment due to change in pooled entities'
year end.................................. (1,694) -- -- -- --
Premiums and commissions receivable (increase)
decrease..................................... (12,524) 1,982 (2,374) 6,516 9,969
Other assets decrease (increase)............... 201 805 (2,439) 925 1,239
Premiums payable to insurance companies
increase (decrease).......................... 10,389 4,657 (3,951) (4,585) (3,915)
Premium deposits and credits due customers
increase (decrease).......................... 985 (471) 1,919 (644) (1,370)
Accounts payable and accrued expenses
decrease..................................... (708) (2,821) (683) (2,276) (423)
Other liabilities increase..................... 320 1,212 1,392 872 819
-------- ------- -------- ------- -------
Net cash provided by operating activities...... 8,648 20,709 10,396 8,470 14,802
-------- ------- -------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to fixed assets...................... (2,194) (1,815) (2,400) (1,453) (2,100)
Payments for businesses acquired, net of cash
acquired..................................... (5,858) (2,120) (1,382) -- (825)
Proceeds from sales of fixed assets and
customer accounts............................ 1,187 427 1,337 184 362
Purchases of investments....................... (731) (93) (187) -- (261)
Proceeds from sales of investments............. 4,103 709 2,346 2,404 326
Other investing activities, net................ 316 (130) (53) 18 --
-------- ------- -------- ------- -------
Net cash (used in) provided by investing
activities................................... (3,177) (3,022) (339) 1,153 (2,498)
-------- ------- -------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt and notes payable... (5,441) (11,090) (12,004) (9,051) (639)
Proceeds from long-term debt and notes
payable...................................... 1,550 3,833 -- 3,234 260
Exercise of stock options, issuances of stock
and treasury stock sales..................... 609 691 1,687 742 165
Tax benefit from sale of option shares by
employees.................................... -- 176 55 -- --
Purchase and retirement of treasury stock...... (95) -- -- -- --
Partnership distributions...................... -- -- (200) (129) --
Cash dividends paid............................ (2,028) (2,971) (3,542) (1,674) (2,067)
-------- ------- -------- ------- -------
Net cash used in financing activities.......... (5,405) (9,361) (14,004) (6,878) (2,281)
-------- ------- -------- ------- -------
Net increase (decrease) in cash and
cash equivalents............................. 66 8,326 (3,947) 2,745 10,023
Cash and cash equivalents at beginning of
period....................................... 18,740 18,806 27,132 27,132 23,185
-------- ------- -------- ------- -------
Cash and cash equivalents at end of period..... $ 18,806 $27,132 $ 23,185 $29,877 $33,208
======== ======= ======== ======= =======
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 40
POE & BROWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED WITH RESPECT TO THE SIX-MONTH PERIODS ENDED JUNE 30, 1994 AND 1995)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Poe & Brown,
Inc. and its subsidiaries (the "Company"). All significant intercompany account
balances and transactions have been eliminated in consolidation.
BASIS OF INTERIM FINANCIAL STATEMENT PRESENTATION
The unaudited condensed consolidated financial statements as of June 30,
1995 and for the six month periods ended June 30, 1994 and 1995, have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals and the income tax adjustment described in Note 9)
considered necessary for a fair presentation have been included. The operating
results for the six months ended June 30, 1995 are not necessarily indicative of
the results that may be expected for the entire year.
REVENUE RECOGNITION
Commissions relating to the brokerage and agency activity whereby the
Company has primary responsibility for the collection of premiums from insureds
are generally recognized as of the later of the effective date of the policy or
the date billed. Commissions to be received directly from insurance companies
are generally recognized when ascertained. Subsequent commission adjustments
such as policy cancellations, are recognized upon notification from the
insurance companies. Commission revenues are reported net of sub-broker
commissions. Contingent commissions from insurance companies are recognized when
received. Fee income is recognized when services are rendered.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents principally consist of demand deposits with
financial institutions, money market accounts, and certificates of deposit
having maturities of less than three months when purchased.
PREMIUMS AND COMMISSIONS RECEIVABLE
In its capacity as an insurance broker or agent, the Company typically
collects premiums from insureds and, after deducting its authorized commissions,
remits the premiums to the appropriate insurance companies. In other
circumstances, the insurance companies collect the premiums directly from the
insureds and remit the applicable commissions to the Company. Accordingly, as
reported in the consolidated balance sheets, "premiums" are receivable from
insureds and "commissions" are receivable from insurance companies.
INVESTMENTS
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." Under these new rules, debt securities that the Company
has both the positive intent and ability to hold to maturity would be classified
as "held-to-maturity" securities and would be reported at amortized cost,
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization, as well as interest earnings on these securities, would be
included in investment income.
F-7
<PAGE> 41
POE & BROWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Marketable equity securities and debt securities not classified as
held-to-maturity are classified as "available-for-sale." Available-for-sale
securities are reported at estimated fair value, with the unrealized gains and
losses, net of tax, reported as a separate component of shareholders' equity.
The amortized cost of debt securities in this category is adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization and accretion is included in investment income. Realized gains and
losses and declines in value judged to be other-than-temporary on
available-for-sale securities are included in investment income. The cost of
securities sold is based on the specific identification method. Interest and
dividends on securities classified as available-for-sale are included in
investment income.
Nonmarketable equity securities and certificates of deposit having
maturities of more than three months when purchased are reported at cost,
adjusted for other-than-temporary market value declines.
The adoption of SFAS No. 115 resulted in an increase of $23,000 (net of
$15,000 in deferred taxes) to shareholders' equity as of January 1, 1994.
Application of this new Statement resulted in an increase of $5,341,000 and
$5,304,000 in shareholders' equity, net of $3,344,000 and $3,320,000 in deferred
income taxes, as of December 31, 1994 and June 30, 1995, respectively.
As of January 1, 1994, the Company owned 659,064 shares of common stock of
Rock-Tenn Company with an aggregate cost of $565,000. As of that date, the
common stock of Rock-Tenn Company was not publicly traded and, therefore, had no
readily determinable market value. However, on March 3, 1994, the common stock
of Rock-Tenn Company was registered with the Securities and Exchange Commission
and began trading on The Nasdaq Stock Market at the initial public offering
price of $16.50 per share. As part of the initial public offering of the
Rock-Tenn Company's common stock, the Company sold 150,000 shares of its
investment in this stock and reported a net after-tax gain of $1,342,000 in the
first quarter of 1994. The remaining 509,064 shares of Rock-Tenn Company common
stock held by the Company have been classified as non-current available-for-sale
securities as of December 31, 1994 and June 30, 1995. The Company has no current
plans to sell these shares.
FIXED ASSETS
Fixed assets are stated at cost. Expenditures for improvements are
capitalized and expenditures for maintenance and repairs are charged to
operations as incurred. Upon sale or retirement, the cost and related
accumulated depreciation and amortization are removed from the accounts and the
resulting gain or loss, if any, is reflected in income. Depreciation has been
provided using principally the straight-line method over the estimated useful
lives of the related assets which range from three to ten years. Leasehold
improvements are amortized on the straight-line method over the term of the
related leases.
INTANGIBLES
Intangible assets are stated at cost less accumulated amortization and
principally represent purchased customer accounts, non-compete agreements,
purchased contract agreements, and the excess of costs over the fair market
value of identifiable net assets acquired (goodwill). Purchased customer
accounts, non-compete agreements, and purchased contract agreements are being
amortized on a straight-line basis over the related estimated lives and contract
periods, which range from three to 15 years. The excess of costs over the fair
value of identifiable net assets acquired is being amortized on a straight-line
basis over 40 years. Purchased customer accounts are records and files obtained
from acquired businesses that contain information on insurance policies and the
related insured parties that is essential to policy renewals.
The carrying value of intangibles, corresponding with each agency division
and subsidiary comprising the Company, is periodically reviewed by management to
determine if the facts and circumstances suggest that they may be impaired. In
the insurance brokerage and agency industry, it is common for agencies or books
of business (customer accounts) to be acquired at a price determined as a
multiple of the corresponding
F-8
<PAGE> 42
POE & BROWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
revenues. Accordingly, the Company assesses the carrying value of its
intangibles by comparison to a reasonable multiple applied to corresponding
revenues, as well as considering the operating cash flow generated by the
corresponding agency division or subsidiary. Any impairment identified through
this assessment may require that the carrying value of related intangibles be
adjusted.
INCOME TAXES
The Company files a consolidated federal income tax return. Deferred income
taxes are provided for in the consolidated financial statements and relate
principally to expenses charged to income for financial reporting purposes in
one period and deducted for income tax purposes in other periods, unrealized
appreciation of available-for-sale securities, and basis differences of
intangible assets.
NET INCOME PER SHARE
Net income per share is based on the weighted average number of shares
outstanding, adjusted for the dilutive effect of stock options, which is the
same on both a primary and fully-diluted basis.
RECLASSIFICATIONS
Certain amounts in the 1993 and 1992 consolidated financial statements have
been reclassified to conform with the 1994 consolidated financial statements.
NOTE 2 -- MERGERS
On April 28, 1993, Poe & Associates, Inc. ("Poe") issued 3,013,975 shares
of its common stock in exchange for all of the outstanding common stock of Brown
& Brown, Inc. ("Brown") a closely-held general insurance agency headquartered in
Daytona Beach, Florida. Subsequent to that transaction, Poe's name was changed
to Poe & Brown, Inc.
On November 1, 1993, the Company issued 124,736 shares of its common stock
in exchange for all of the outstanding common stock of Arch-Holmes Insurance,
Inc. ("Arch-Holmes"), a closely-held general insurance agency headquartered in
Hollywood, Florida.
Both transactions were accounted for as pooling-of-interests and
accordingly, the Company's consolidated financial statements have been restated
for all periods prior to the mergers to include the results of operations,
financial positions, and cash flows of Brown and Arch-Holmes. To conform to
Poe's year end, the fiscal year ends of Brown and Arch-Holmes were changed to
December 31 effective on each of the respective merger dates. Accordingly, the
three-month period ended March 31, 1992 for Brown and Arch-Holmes, which
consisted of aggregate revenues of $10,580,000 and aggregate net income of
$924,000, has been included in both the Company's 1992 and 1991 operating
results. Accordingly, an adjustment has been made in 1992 to retained earnings
for the duplication of this net income.
F-9
<PAGE> 43
POE & BROWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following reflects the 1992 individual company operating results of
Poe, Brown, and Arch-Holmes. Amounts pertaining to Brown and Arch-Holmes for
1993 reflect their respective operating results up to their dates of merger.
<TABLE>
<CAPTION>
POE BROWN ARCH-HOLMES COMBINED
------- ------- ----------- --------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
1993
Revenues............................................... $80,817 $13,488 $ 1,265 $95,570
Net income (loss)...................................... 6,897 1,145 (39) 8,003
1992
Revenues............................................... $52,393 $35,452 $ 1,465 $89,310
Income from continuing operations...................... 2,865 1,208 68 4,141
Loss from discontinued operations...................... (1,580) -- -- (1,580)
Net income............................................. 1,285 1,208 68 2,561
1992
Net Income Per Share
As previously reported............................... $ 0.25
Combined............................................. $ 0.30
</TABLE>
Effective March 1, 1995, the Company issued 146,300 shares of its common
stock in exchange for all of the partnership interest in Insurance West, a
Phoenix, Arizona general insurance agency. The merger has been accounted for as
a pooling-of-interests and, accordingly, the Company's consolidated financial
statements have been restated for all periods prior to the merger to include the
results of operations, financial positions and cash flows of Insurance West. The
individual company operating results of Insurance West prior to the date of the
merger are not material to the Company's consolidated operating results.
NOTE 3 -- ACQUISITIONS
During 1994 the Company acquired the assets of three insurance agencies for
an aggregate cost of $656,000. The Company had no acquisitions during 1993
accounted for as purchases. In 1992 the Company acquired outstanding shares of
one insurance agency and the assets of five other insurance agencies at an
aggregate cost of $11,784,000. The 1994 and 1992 acquisitions were accounted for
as purchases, and substantially the entire cost was assigned to purchased
customer accounts, non-compete agreements, and goodwill.
Additional or return consideration resulting from acquisition contingency
provisions are recorded as adjustments to intangibles when they occur. Certain
contingency payments relating to these acquisitions were finalized in 1993 and
1992, resulting in a net increase (decrease) to the original combined purchase
price of $5,893,000 and ($315,000), respectively. The results of operations of
the acquired companies have been included in the consolidated financial
statements from their respective acquisition dates. Pro forma results of
operations of the Company for the years ended December 31, 1994, 1993 and 1992,
including 1994 acquisitions as though they occurred on January 1, 1994 and the
1992 acquisitions as though they occurred on January 1, 1992, were not
materially different from the results of operations as reported.
During the six-month period ended June 30, 1995, the Company acquired
substantially all of the assets of King Insurance Agency, Inc. of Naples,
Florida and S. Lloyd Underwriters, Inc. of Ft. Lauderdale, Florida. In addition,
during that same period, the Company purchased four small books of business
(customer accounts). In connection with these acquisitions, the Company acquired
assets valued at $1,960,000 in exchange for cash of $825,000 and debt of
$1,135,000. These acquisitions have been accounted for using the purchase method
of accounting. Their results of operations have been combined with those of the
Company since their respective acquisition dates. Pro forma results of
operations of the Company for the six months ended June 30, 1994 and
F-10
<PAGE> 44
POE & BROWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1995 and the year ended December 31, 1994, including these acquisitions as if
they occurred on January 1, 1994, were not materially different from the results
of operations as reported.
NOTE 4 -- INVESTMENTS
Investments at December 31, 1994 consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-------------------------
CARRYING VALUE
-------------------------
CURRENT NON-CURRENT
------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Available-for-sale marketable equity securities............... $ 317 $ 9,163
Nonmarketable equity securities and certificates of deposit... 470 111
------- -----------
Total Investments................................... $ 787 $ 9,274
====== =========
</TABLE>
The following summarizes available-for-sale securities at December 31,
1994:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
COST UNREALIZED GAINS UNREALIZED LOSSES FAIR VALUE
---- ---------------- ----------------- ----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Marketable equity securities............ $795 $8,739 $54 $ 9,480
</TABLE>
Investments at December 31, 1993 consisted of marketable equity securities
reported at aggregate cost which approximates market value, other investments
reported at cost, and certificates of deposit having maturities of more than
three months when purchased.
In 1994, the Company's proceeds from sales of available-for-sale securities
totaled $2,314,000, from which $2,185,000 of gross gains were realized. During
1993, the Company had no sales of marketable equity securities. In 1992, the
Company realized net gains on sales of marketable equity securities in the
amount of $329,000.
NOTE 5 -- FIXED ASSETS
Fixed assets are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1993 1994
------- -------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Furniture, fixtures, and equipment............................. $21,461 $17,180
Land, buildings, and improvements.............................. 1,453 1,349
Leasehold improvements......................................... 1,629 1,564
------- -------
24,543 20,093
Less accumulated depreciation and amortization................. 16,480 11,763
------- -------
$ 8,063 $ 8,330
======= =======
</TABLE>
The gross cost and accumulated depreciation balances at December 31, 1994
have declined from December 31, 1993 due to the Company's elimination of all
fully depreciated assets no longer utilized in operations.
Depreciation and amortization expense amounted to $2,574,000, $2,650,000,
and $2,132,000 for the years ended December 31, 1992, 1993, and 1994,
respectively.
F-11
<PAGE> 45
POE & BROWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- INTANGIBLES
Intangibles are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
----------------- -----------
1993 1994 1995
------- ------- -----------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Purchased customer accounts............................. $27,118 $26,999 $28,691
Non-compete agreements.................................. 9,739 9,706 9,706
Goodwill................................................ 19,190 19,431 19,738
Purchased contract agreements........................... 789 789 981
------- ------- -----------
56,836 56,925 59,116
Less accumulated amortization........................... 20,922 23,952 26,044
------- ------- -----------
$35,914 $32,973 $33,072
======= ======= =========
</TABLE>
Amortization expense amounted to $4,511,000, $4,380,000, and $4,266,000,
for the years ended December 31, 1992, 1993 and 1994, respectively. Amortization
expense for the six-month periods ended June 30, 1994 and 1995 was $2,181,000
and $2,091,000, respectively.
NOTE 7 -- LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1994
------- ------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Long-term credit agreement...................................... $ 8,000 $7,000
Bank term loans................................................. 7,821 189
Notes payable:
Variable rate acquisition note payable........................ 1,692 --
Notes from treasury stock purchases........................... 1,883 1,662
Other acquisition notes payable............................... 1,452 --
Other notes payable........................................... 21 13
------- ------
20,869 8,864
Less current portion............................................ 3,232 1,434
------- ------
Long-term debt.................................................. $17,637 $7,430
======= ======
</TABLE>
In 1991, the Company entered into a long-term credit agreement with a major
insurance company that provided $10 million at an interest rate equal to the
prime lending rate plus 1% (9.5% at December 31, 1994). The amount of available
credit decreases by $1 million each August through the year 2001 when it will
expire.
In 1993, the Company entered into a long-term credit facility with a
national banking institution that consisted of two secured term loans
aggregating $7,500,000 and a $2,000,000 unsecured short-term line of credit.
Interest on the term loans was payable on a monthly basis at the LIBOR rate plus
2%. These term loans were repaid in November 1994. There were no borrowings
against the unsecured line of credit during 1994 and during 1994 this line of
credit agreement was terminated by the Company.
In November 1994, the Company entered into a revolving credit facility with
a national banking institution which provides for available borrowing of up to
$10 million. Amounts outstanding are secured by all assets of the Company,
subject to existing or permitted liens. Interest on this facility is based upon
the LIBOR or the federal funds rate. A commitment fee is assessed in the amount
of .25% per annum on the unused
F-12
<PAGE> 46
POE & BROWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
balance. During 1994 and as of December 31, 1994 and June 30, 1995, there were
no borrowings against this line of credit.
The variable rate acquisition note payable was repaid in May 1994 including
interest through that period.
Treasury stock notes payable are due to various individuals for the
redemption of Brown & Brown, Inc. stock. These notes bear no interest and have
maturities ranging from fiscal years ending 1997 to 2001. These notes have been
discounted at effective yields ranging from 8.5% to 9.2% for consolidated
financial statement presentation purposes.
Other acquisition notes payable, including interest ranging from 8% to 9%,
were repaid in 1994. Additional obligations were incurred in the six-month
period ended June 30, 1995 in connection with acquisitions during that period.
Maturities of long-term debt as of December 31, 1994 for succeeding years
are $1,434,000 in 1995, $1,266,000 in 1996, $1,284,000 in 1997, $1,233,000 in
1998, $1,252,000 in 1999, and $2,395,000 thereafter.
Interest expense included in the consolidated statements of income was
$2,064,000, $1,765,000 and $1,326,000 for the years ended December 31, 1992,
1993 and 1994, respectively.
NOTE 8 -- COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries lease office facilities and certain items
of office equipment under noncancelable operating lease arrangements expiring on
various dates through 2005. These occupancy leases generally contain renewal
options and escalation clauses based on increases in the lessors' operating
expenses and other charges. The Company anticipates that most of these leases
will be renewed or replaced upon expiration. At December 31, 1994, the aggregate
future minimum lease payments under all noncancelable lease agreements are as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS
YEAR ENDING DECEMBER 31, OF DOLLARS)
------------------------------------------------------------------------ -------------
<S> <C>
1995.................................................................... $ 3,317
1996.................................................................... 2,675
1997.................................................................... 2,659
1998.................................................................... 2,474
1999.................................................................... 2,542
Thereafter.............................................................. 10,334
-------------
Total future minimum lease payments........................... $24,001
==========
</TABLE>
Rental expense in 1992, 1993, and 1994 for operating leases totaled
$4,879,000, $4,594,000 and $4,269,000, respectively. The 1993 rental expense
amount includes $676,000 of direct costs related to the termination of a certain
lease.
The Company is not a party to any legal proceedings other than various
claims and lawsuits arising in the normal course of business. Management of the
Company does not believe that any such claims or lawsuits will have a material
effect on the Company's financial condition or results of operations.
NOTE 9 -- INCOME TAXES
Effective January 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by
Financial Accounting Standards Board Statement No. 109, "Accounting for Income
Taxes." As permitted under these new rules, the prior years' consolidated
financial statements have not been restated for the effects of this Statement.
The cumulative effect of adopting Statement No. 109 as of January 1, 1993 was to
increase net income by $119,000.
F-13
<PAGE> 47
POE & BROWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1994, the Company had net operating loss carryforwards of
$850,000 for income tax reporting purposes that expire in the years 1996 through
2002. These carryforwards were derived from agency acquisitions by the Company
beginning in 1985. For financial reporting purposes, a valuation allowance of
$38,000 has been recognized to offset the deferred tax assets related to these
carryforwards.
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 corresponding amounts used for income tax reporting purposes.
Significant components of the Company's deferred tax liabilities and assets as
of December 31 are as follows:
<TABLE>
<CAPTION>
1993 1994
------ ------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Deferred tax liabilities:
Fixed assets................................................... $ 512 $ 444
Net unrealized appreciation of available-for-sale securities... -- 3,344
Installment sales.............................................. 405 296
Prepaid insurance and pension.................................. 350 666
Intangible assets.............................................. 281 628
General tax reserves........................................... 1,900 800
Other.......................................................... 312 239
------ ------
Total deferred tax liabilities......................... 3,760 6,417
------ ------
Deferred tax assets:
Deferred compensation.......................................... 889 1,062
Accruals and reserves.......................................... 1,221 1,250
Net operating loss carryforwards............................... 316 327
Other.......................................................... 49 38
------ ------
Total deferred tax assets.............................. 2,475 2,677
Valuation allowance for deferred tax assets.................... 38 38
------ ------
Net deferred tax assets................................ 2,437 2,639
------ ------
Net deferred tax liabilities........................... $1,323 $3,778
====== ======
</TABLE>
Significant components of the provision for income taxes attributable to
continuing operations are as follows:
<TABLE>
<CAPTION>
1992 1993 1994
--------------- ------ -------
DEFERRED METHOD LIABILITY METHOD
--------------- ----------------
<S> <C> <C> <C>
Current:
Federal............................................. $ 3,087 $3,728 $ 7,237
State............................................... 577 702 1,003
------- ------ -------
Total current provision..................... 3,664 4,430 8,240
------- ------ -------
Deferred:
Federal............................................. 454 419 (1,076)
State............................................... 62 80 (97)
------- ------ -------
Total deferred provision (benefit).......... 516 499 (1,173)
------- ------ -------
Total tax provision......................... $ 4,180 $4,929 $ 7,067
============ ====== =======
</TABLE>
F-14
<PAGE> 48
POE & BROWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the provision for deferred income taxes for the year
ended December 31, 1992 as determined under the deferred method are as follows
(in thousands of dollars):
<TABLE>
<S> <C>
Amortization................................................................. $ 225
Accrued commissions.......................................................... (342)
Other items, net............................................................. 633
-----
$ 516
=====
</TABLE>
A reconciliation of the differences between the effective tax rate and the
federal statutory tax rate on income from continuing operations is as follows:
<TABLE>
<CAPTION>
1993 1994
1992 ---- ----
--------------- LIABILITY
DEFERRED METHOD METHOD
--------------- --------------
<S> <C> <C> <C>
Federal statutory tax rate............................ 34.0% 34.2% 35.0%
State income taxes, net of federal income tax
benefit............................................. 4.3 3.6 2.8
Interest exempt from taxation and dividend
exclusion........................................... (0.8) 0.3) (0.3)
Non-deductible goodwill amortization.................. 1.8 1.2 .7
Internal Revenue Service examination.................. 10.9 -- (3.4)
Other, net............................................ .1 (0.9) (.5)
----- ---- ----
Effective tax rate.......................... 50.3% 37.8% 34.3%
====== ==== ====
</TABLE>
Income taxes payable as of December 31, 1993 were $652,000 and were
reported as a component of accounts payable and accrued expenses. Income taxes
receivable as of December 31, 1994 were $894,000 and are reported as a component
of other current assets.
In 1992, the Internal Revenue Service (the "IRS") completed examinations of
the Company's federal income tax returns for the tax years 1988, 1989, and 1990.
As a result of their examinations, the IRS issued Reports of Proposed
Adjustments asserting income tax deficiencies which, by including interest and
state income taxes for the periods examined and the Company's estimates of
similar adjustments for subsequent periods through December 31, 1993, would
total $6,100,000. The disputed items related primarily to the deductibility of
amortization of purchased customer accounts of approximately $5,107,000 and
non-compete agreements of approximately $993,000. In addition, the IRS's report
included a dispute regarding the time at which the Company's payments made
pursuant to certain indemnity agreements would be deductible for tax reporting
purposes. During 1994, the Company was able to reach a settlement agreement with
the IRS with respect to certain of the disputed amortization items and the
indemnity agreement payment issue. This settlement reduced the total remaining
asserted income tax deficiencies to approximately $2,800,000 as of December 31,
1994. Based on this settlement, after taking into consideration a $400,000
reduction of the Company's tax reserve resulting from payments under the partial
settlement agreement, during 1994 the Company recorded a $700,000 adjustment to
decrease the originally established reserves of $1,900,000. This decrease has
been recorded as a reduction to the current income tax provision for the year
ended December 31, 1994.
In March 1995, the Company reached a settlement agreement with the IRS with
respect to the remaining disputed items. Based upon this settlement and after
taking into consideration a $250,000 reduction in the Company's general tax
reserves resulting from current and expected payments under the settlement
agreement, the Company recorded a $450,000 adjustment to decrease tax reserves
in the six-month period ended June 30, 1995 with a corresponding reduction in
the income tax provision.
F-15
<PAGE> 49
POE & BROWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10 -- EMPLOYEE BENEFITS PLANS
The Company maintains a defined benefit pension plan covering substantially
all previous Poe & Associates, Inc. employees with one or more years of service.
The benefits are based on years of service and compensation during the period of
employment. Annual contributions are made in conformance with minimum funding
requirements and maximum deductible limitations.
The plan's funded status and amounts recognized in the Company's
consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1993 1994
------- -------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations, including vested benefits of
$3,559 in 1993 and $3,642 in 1994............................ $(3,773) $(3,793)
======= =======
Projected benefit obligations for service rendered to date..... $(3,943) $(3,808)
Plan assets at fair value, principally consisting of a group
annuity contract............................................. 3,757 3,787
------- -------
Excess of projected benefit obligations over plan assets....... (186) (21)
Unrecognized net excess of plan assets under previously accrued
but unfunded pension costs, to be amortized.................. 425 583
------- -------
Net prepaid pension costs............................ $ 239 $ 562
======= =======
</TABLE>
The following assumptions were used in determining the actuarial present
value of the benefit obligations and pension costs:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1992 1993 1994
---- ---- ----
<S> <C> <C> <C>
Discount rate.................................................. 8.75% 7.5% 7.5%
Long-term rate for compensation increase....................... 5.0% 3.5% 3.5%
Long-term rate of return on plan assets........................ 8.5% 8.0% 8.0%
</TABLE>
Pension costs included in the Company's consolidated statements of income
are comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1992 1993 1994
----- ----- -----
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service cost............................................... $ 204 $ 221 $ 91
Interest cost.............................................. 191 232 304
Actual return on assets.................................... (230) (284) 113
Net amortization and deferral.............................. (89) (39) (407)
----- ----- -----
Net pension cost................................. $ 76 $ 130 $ 101
===== ===== =====
</TABLE>
During 1994, the defined benefit pension plan was converted to a cash
balance plan. The impact of this change on the plan costs and plan liabilities
was not material.
The Company has an Employee Stock Purchase program under which all eligible
employees may subscribe to its common shares at 85% of the lesser of the market
value of such shares at the beginning or the end of the subscription period.
Payment is made through payroll deductions, not to exceed 10% of base pay,
F-16
<PAGE> 50
POE & BROWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
over a 12-month period and shares are issued at the end of the purchase period.
At December 31, 1994, a total of 2,502 shares of common stock were authorized
and reserved for future issuance relating to this program.
The Company has a Deferred Savings and Profit Sharing Plan (401(k))
covering substantially all employees with one year of service. Under this plan,
the Company makes matching contributions equal to the participants'
contributions, subject to a maximum of 2.5% of the participant's salary, and
also provides for a discretionary profit sharing contribution for all eligible
employees. The Company's contributions to the plan totaled $857,000 in 1992,
$1,085,000 in 1993 and $1,208,000 in 1994.
NOTE 11 -- STOCK OPTION PLANS
The Company has adopted stock option plans which provide for the granting
to key employees options to purchase shares of its common stock. The following
schedule summarizes the transactions from 1992 through 1994 pertaining to these
plans:
<TABLE>
<CAPTION>
NUMBER PER SHARE
OF SHARES OPTION PRICE
--------- -------------------
<S> <C> <C>
Outstanding, January 1, 1992.............................. 392,554 $ 3.40 -- $ 9.67
Granted................................................. 10,000 14.75
Exercised............................................... (71,874) 3.40 -- 9.40
Canceled................................................ (31,040) 6.00 -- 7.60
---------
Outstanding, December 31, 1992............................ 299,640 6.00 -- 14.75
Granted................................................. --
Exercised............................................... (129,462) 6.00 -- 9.45
Canceled................................................ (9,936) 7.60
---------
Outstanding, December 31, 1993............................ 160,242 6.00 -- 14.75
Granted................................................. --
Exercised............................................... (65,173) 6.00 -- 14.75
Canceled................................................ (8,689) 7.60 -- 14.75
---------
Outstanding, December 31, 1994............................ 86,380 $ 7.60
========
</TABLE>
All options outstanding as of December 31, 1994 are exercisable. At
December 31, 1994, a total of 285,745 shares of common stock were reserved for
future issuance relating to these plans.
NOTE 12 -- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The Company's significant non-cash investing and financing activities and
cash payments for interest and income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1992 1993 1994
------ ------ ------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C> <C>
Unrealized appreciation of available-for-sale securities net
of tax effect of $3,344.................................... $ -- $ -- $5,341
Notes payable issued for purchased customer accounts......... 3,206 3,862 --
Notes received on the sale of fixed assets and customer
accounts................................................... 649 1,532 266
Notes payable issued on purchases and retirement of stock.... 1,094 -- --
Cash paid during the year for:
Interest................................................... 1,912 1,944 1,462
Income taxes............................................... 4,298 3,978 9,597
</TABLE>
F-17
<PAGE> 51
POE & BROWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13 -- BUSINESS CONCENTRATIONS
Substantially all of the Company's premiums receivable from customers and
premiums payable to insurance companies arise from policies sold on behalf of
insurance companies. The Company, as agent, typically collects premiums, retains
its commission and remits the balance to the insurance companies. A significant
portion of business written by the Company is for customers located in Florida.
Accordingly, the occurrence of adverse economic conditions or an adverse
regulatory climate in Florida could have a material adverse effect on the
Company's business, although no such conditions have been encountered in the
past.
For the years ended December 31, 1993 and 1994, approximately 21% and 22%,
respectively, of the Company's total revenues are from insurance policies
underwritten by one insurance company. Should this carrier seek to terminate its
arrangement with the Company, the Company believes alternative insurance
companies are available to underwrite the business, although some additional
expenses and loss of market share would at least initially result. No other
insurance company accounts for as much as five percent of the Company's
revenues.
NOTE 14 -- REINSURANCE INDEMNITY
Whiting National Insurance Company ("Whiting"), the Company's risk-bearing
subsidiary, ceased underwriting operations in early 1985 and in 1988 entered
into liquidation by the New York State Insurance Department (the "Department").
Since then, the handling of Whiting's affairs has been the responsibility of the
Department.
In 1979, the Company agreed to indemnify a ceding insurer should Whiting
fail to perform under a reinsurance contract. As a result, the Company is
directly responsible for the management and adjudication of claims outstanding
under that indemnification contract. The Company had historically estimated that
certain recoveries related to the indemnity were available to it from the
Whiting liquidation. While none of the underlying facts or operations of law as
to the Company's rights or creditor priority had changed, the liquidation
activities proceeded more slowly than anticipated, making realization of those
recoveries uncertain. As a result, in 1992 those estimated recoveries were
written off and reserves associated with the underlying indemnity obligation
were bolstered because of adverse loss developments. These adjustments have been
reported as discontinued operations in the 1992 consolidated statement of
income.
F-18
<PAGE> 52
POE & BROWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15 -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The Company's 1992, 1993 and 1994 quarterly operating results have not been
reviewed by the Company's independent certified public accountants.
<TABLE>
<CAPTION>
NET INCOME (LOSS) CASH STOCK PRICE RANGE
------------------- DIVIDENDS --------------------
REVENUE AMOUNT PER SHARE PER SHARE HIGH LOW
-------- ------- --------- --------- ------ -------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
1992(1)
First quarter......................... $ 23,889 $ 2,107 $ 0.25 $0.10 $15.75 -- $ 11.50
Second quarter........................ 20,503 694 0.09 0.10 16.00 -- 13.50
Third quarter......................... 22,942 1,293 0.15 0.10 14.00 -- 11.25
Fourth quarter(2)..................... 24,174 (1,536) (0.19) 0.10 17.00 -- 12.75
-------- ------- --------- ---------
$ 91,508 $ 2,558 $ 0.30 $0.40
======== ======= ======= =======
1993(1)
First quarter......................... $ 24,706 $ 2,208 $ 0.26 $0.10 $19.00 -- $ 16.00
Second quarter(3)..................... 23,323 662 0.08 0.10 21.25 -- 17.25
Third quarter......................... 25,320 2,503 0.30 0.10 20.00 -- 18.25
Fourth quarter........................ 24,472 2,745 0.31 0.10 20.25 -- 16.87
-------- ------- --------- ---------
$ 97,821 $ 8,118 $ 0.95 $0.40
======== ======= ======= =======
1994(1)
First quarter(4)...................... $ 28,529 $ 4,625 $ 0.54 $0.10 $19.50 -- $ 17.63
Second quarter........................ 23,334 2,018 0.23 0.10 20.50 -- 18.25
Third quarter(5)...................... 25,039 3,577 0.41 0.10 22.75 -- 19.75
Fourth quarter........................ 24,678 3,299 0.38 0.12 21.75 -- 19.50
-------- ------- --------- ---------
$101,580 $13,519 $ 1.56 $0.42
======== ======= ======= =======
</TABLE>
- ---------------
(1) Quarterly financial information is affected by seasonal variations. The
timing of contingent commissions, policy renewals and acquisitions may
cause revenues, expenses and net income to vary significantly between
quarters.
(2) Fourth quarter 1992 includes loss from discontinued operations of $1,580,000
or $0.30 per share. Fourth quarter net income (loss) also includes expenses
of $2,147,000, or $0.26 per share, from charges associated with certain
costs and uncollectible receivables arising from purchase acquisitions,
costs related to the merger involving Brown, and additions to income tax
reserves.
(3) Second quarter 1993 net income increased $818,000 from the sale of certain
insurance accounts and other assets, and decreased $1,151,000 due to
merger-related combination costs.
(4) First quarter 1994 net income increased $1,342,000, or $0.16 per share, from
the sale of a portion of the Company's investment in Rock-Tenn Company (see
Note 1).
(5) Third quarter 1994 net income increased $700,000, or $0.08 per share, due to
the reduction in general tax reserves (See note 9).
F-19
<PAGE> 53
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES
OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT
RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER
IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Prospectus Summary.................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 8
Price Range of Common Stock........... 8
Dividend Policy....................... 8
Capitalization........................ 9
Selected Consolidated Financial
Data................................ 10
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 12
The Company........................... 17
Business.............................. 18
Management............................ 25
Principal and Selling Shareholders.... 27
Underwriting.......................... 30
Legal Matters......................... 31
Experts............................... 31
Incorporation of Documents by
Reference........................... 31
Glossary of Selected Insurance
Terms............................... 32
Index to Financial Statements......... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
1,425,000 SHARES
POE & BROWN, INC.
COMMON STOCK
LOGO
------------
PROSPECTUS
, 1995
------------
SMITH BARNEY INC.
THE ROBINSON-HUMPHREY
COMPANY, INC.
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 54
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.(1)
<TABLE>
<S> <C>
Registration fees -- Securities and Exchange Commission........................... $ 13,562
NASD filing fee................................................................... 4,413
Legal fees and expenses........................................................... 100,000*
Accounting fees and expenses...................................................... 100,000*
Printing and engraving expenses................................................... 45,000*
Blue Sky fees and expenses........................................................ 12,000*
Transfer Agent's fees and expenses................................................ 1,500*
Miscellaneous..................................................................... 48,525*
--------
Total................................................................... $325,000*
========
</TABLE>
- ---------------
* Estimated
(1) Half of these fees and expenses will be paid by the Company and half, pro
rata, by the Selling Shareholders.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a Florida corporation. Reference is made to Section 607.0850
of the Florida Business Corporation Act, which permits, and in some cases
requires, indemnification of directors, officers, employees, and agents of the
Company under certain circumstances and subject to certain limitations.
Under Article VII of the Company's Bylaws, the Company is required to
indemnify its officers and directors, and officers and directors of certain
other corporations serving as such at the request of the Company, against all
costs and liabilities incurred by such persons by reason of their having been an
officer or director of the Company or such other corporation, provided that such
indemnification shall not apply with respect to any matter as to which such
officer or director shall be finally adjudged to have been individually guilty
of gross negligence or willful malfeasance in the performance of his or her duty
as a director or officer, and provided further that the indemnification shall,
with respect to any settlement of any suit, proceeding, or claim, include
reimbursement of any amounts paid and expenses reasonably incurred in settling
any such suit, proceeding, or claim when, in the judgment of the Board of
Directors, such settlement and reimbursement appeared to be for the best
interests of the Company.
The Company has entered into an indemnification agreement with certain
members of its Board of Directors. The agreements create certain indemnification
obligations of the Company in favor of such persons in connection with their
service as directors and, as permitted by applicable law, clarify and expand the
circumstances under which such persons will be indemnified.
The underwriters also will agree to indemnify the directors and officers of
the Company against certain liabilities as set forth in Section 8 of the
Underwriting Agreement (see Exhibit 1).
The Company has purchased insurance with respect to, among other things,
any liabilities that may arise under the statutory provisions referred to above.
II-1
<PAGE> 55
ITEM 16. EXHIBITS.
The exhibits constituting part of this Registration Statement are as
follows:
<TABLE>
<S> <C>
1 -- Form of Underwriting Agreement
5 -- Opinion of Holland & Knight
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Holland & Knight (contained in Exhibit 5)
24.1 -- Powers of Attorney pursuant to which this Registration Statement has been signed on
behalf of certain directors and officers
24.2 -- Resolutions of the Board of Directors, certified by the Secretary of the Company
</TABLE>
ITEM 17. UNDERTAKINGS.
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of any employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in said Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in said Act and will be governed by the final adjudication
of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE> 56
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Tampa, State of Florida on August 4, 1995.
POE & BROWN, INC.
By: /s/ J. HYATT BROWN*
------------------------------------
J. Hyatt Brown,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ J. HYATT BROWN* Chairman of the Board, President August 4, 1995
- --------------------------------------------- and Chief Executive Officer
J. Hyatt Brown (principal executive officer)
/s/ TIMOTHY L. YOUNG Vice President, Chief Financial August 4, 1995
- --------------------------------------------- Officer, and Treasurer
Timothy L. Young (principal financial and
accounting officer)
/s/ SAMUEL P. BELL, III* Director August 4, 1995
- ---------------------------------------------
Samuel P. Bell, III
/s/ BRUCE G. GEER* Director August 4, 1995
- ---------------------------------------------
Bruce G. Geer
/s/ JIM W. HENDERSON* Director August 4, 1995
- ---------------------------------------------
Jim W. Henderson
/s/ KENNETH E. HILL* Director August 4, 1995
- ---------------------------------------------
Kenneth E. Hill
/s/ THEODORE J. HOEPNER* Director August 4, 1995
- ---------------------------------------------
Theodore J. Hoepner
/s/ CHARLES W. POE* Director August 4, 1995
- ---------------------------------------------
Charles W. Poe
/s/ WILLIAM F. POE, SR.* Director August 4, 1995
- ---------------------------------------------
William F. Poe, Sr.
/s/ WILLIAM F. POE, JR.* Director August 4, 1995
- ---------------------------------------------
William F. Poe, Jr.
*By: /s/ LAUREL J. LENFESTEY August 4, 1995
-----------------------------------------
Laurel J. Lenfestey,
Attorney-in-fact
</TABLE>
II-3
<PAGE> 57
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. ITEM PAGE
- ---- ----------------------------------------------------------------------------- ----
<S> <C> <C>
1 -- Form of Underwriting Agreement...............................................
5 -- Opinion of Holland & Knight..................................................
23.1 -- Consent of Ernst & Young LLP.................................................
24.1 -- Powers of Attorney pursuant to which this Registration Statement has been
signed on behalf of certain directors and officers...........................
24.2 -- Resolutions of the Board of Directors, certified by the Secretary of the
Company......................................................................
</TABLE>
<PAGE> 1
EXHIBIT 1
POE & BROWN, INC.
COMMON STOCK
------------------------
UNDERWRITING AGREEMENT
------------------------
August , 1995
THE ROBINSON-HUMPHREY COMPANY, INC.
SMITH BARNEY INC.
As representatives of the several
Underwriters named in Schedule II hereto,
c/o The Robinson-Humphrey Company, Inc.
3333 Peachtree Road, N.E.
Atlanta, Georgia 30326
Ladies and Gentlemen:
The shareholders of Poe & Brown, Inc., a Florida corporation (the "Company"),
listed on Schedule I hereto (the "Selling Shareholders") propose, subject to the
terms and conditions stated herein, to issue and sell to the Underwriters named
in Schedule II hereto (the "Underwriters") an aggregate of 1,425,000 shares of
common stock, $.10 par value per share ("Common Stock"), of the Company (the
"Firm Shares"), and, at the election of the Underwriters, subject to the terms
and conditions stated herein, to sell to the Underwriters up to 213,750
additional shares of Common Stock (the "Optional Shares") (the Firm Shares and
the Optional Shares that the Underwriters elect to purchase pursuant to Section
2 hereof are collectively called the "Shares").
1. REPRESENTATIONS AND WARRANTIES. (a) The Company represents and
warrants to, and agrees with, each of the Underwriters that:
(1) A registration statement on Form S-3 (File No. 33- ) with
respect to the Shares, including a prospectus subject to completion, has
been filed by the Company with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), and
one or more amendments to such registration statement may have been so
filed. After the execution of this Agreement, the Company will file with
the Commission either (i) if such registration statement, as it may have
been amended, has become effective under the Act and information has been
omitted therefrom in accordance with Rule 430A under the Act, either (A) if
the Company relies on Rule 434 under the Act, a term sheet relating to the
shares that shall identify the preliminary prospectus that it supplements
containing such information as is required or permitted by Rules 434, 430A
and 424(b) under the Act or (B) if the Company does not rely on Rule 434
under the Act, a prospectus in the form most recently included in an
amendment to such registration statement (or, if no such amendment shall
have been filed, in such registration statement) with such changes or
insertions as are required by Rule 430A or permitted by Rule 424(b) under
the Act and as have been provided to and approved by you, or (ii) if such
registration statement, as it may have been amended, has not become
effective under the Act, an amendment to such registration statement,
including a form of prospectus, a copy of which amendment has been provided
to and approved by you prior to the execution of this Agreement. The
Company may also file a related registration statement with the Commission
pursuant to Rule 462(b) under the Act for the purpose of registering
certain additional shares of Common Stock, which registration statement
will be effective upon filing with the Commission. As used in this
Agreement, the term "Registration Statement" means such registration
statement, as amended at the time when it was or is declared effective,
including all financial statement schedules and exhibits thereto, documents
incorporated by reference in the prospectus included in the registration at
the time such
<PAGE> 2
registration statement became effective and any information omitted
therefrom pursuant to Rule 430A under the Act and included in the
Prospectus (as hereinafter defined); the term "Preliminary Prospectus"
means each prospectus subject to completion included in such registration
statement or any amendment or post-effective amendment thereto (including
the prospectus subject to completion, if any, included in the Registration
Statement at the time it was or is declared effective) and all documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
Act, as of the date of each such Preliminary Prospectus; the term
"Prospectus" means (A) if the Company relies on Rule 434 of the Act, the
Term Sheet (as hereinafter defined) relating to the Shares that is first
filed pursuant to Rule 424(b)(7) of the Act, together with the Preliminary
Prospectus identified therein that such Term Sheet supplements, (B) if the
Company does not rely on Rule 434 of the Act, the prospectus first filed
with the Commission pursuant to Rule 424(b) under the Act or (C) if no
prospectus is required to be so filed, such term means the prospectus
included in the Registration Statement; in each case including all
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the Act, as of the date of the Prospectus; the term "462(b)
Registration Statement" means any registration statement filed with the
Commission pursuant to Rule 462(b) under the Act (including the
Registration Statement and any Preliminary Prospectus or Prospectus
incorporated therein at the time such registration statement becomes
effective); and the term "Term Sheet" means any term sheet that satisfies
the requirements of Rule 434 of the Act. Any reference to the "date" of a
Prospectus that includes a Term Sheet shall mean the date of such Term
Sheet. For purposes of the following representations and warranties, to the
extent reference is made to the Prospectus and at the relevant time the
Prospectus is not yet in existence, such reference shall be deemed to be to
the most recent Preliminary Prospectus.
(2) No order preventing or suspending the use of any Preliminary
Prospectus has been issued and no proceeding for that purpose has been
instituted or threatened by the Commission or the securities authority of
any state or other jurisdiction. If the Registration Statement or any
462(b) Registration Statement, respectively, has become effective under the
Act, no stop order suspending the effectiveness of the Registration
Statement or any 462(b) Registration Statement, respectively, or any part
thereof has been issued and no proceeding for that purpose has been
instituted or threatened or, to the best knowledge of the Company,
contemplated by the Commission or the securities authority of any state or
other jurisdiction.
(3) When any Preliminary Prospectus was filed with the Commission it
(i) contained all statements required to be stated therein in accordance
with, and complied in all material respects with the requirements of, the
Act and the rules and regulations of the Commission thereunder and (ii) did
not include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. When
the Registration Statement or any 462(b) Registration Statement,
respectively, or any amendment thereto was or is declared effective, and at
each Time of Delivery (as hereinafter defined), it (i) contained or will
contain all statements required to be stated therein in accordance with,
and complied or will comply in all material respects with the requirements
of, the Act and the rules and regulations of the Commission thereunder and
(ii) did not or will not include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein
not misleading. When (A) the Prospectus or any amendment or supplement
thereto is filed with the Commission pursuant to Rule 424(b) (or, if the
Prospectus or such amendment or supplement is not required to be so filed,
when the Registration Statement or the amendment thereto containing such
amendment or supplement to the Prospectus was or is declared effective) or
(B) any Term Sheet that is a part of the Prospectus is filed with the
Commission pursuant to Rule 434, and at each Time of Delivery, the
Prospectus, as amended or supplemented at any such time, (i) contained or
will contain all statements required to be stated therein in accordance
with, and complied or will comply in all material respects with the
requirements of, the Act and the rules and regulations of the Commission
thereunder and (ii) did not or will not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. The foregoing provisions of this paragraph (3)
do not apply to statements or omissions made in any Preliminary Prospectus,
the Registration Statement or any amendment thereto, the Prospectus or any
2
<PAGE> 3
amendment or supplement thereto, any Term Sheet or any 462(b) Registration
Statement in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through you specifically for
use therein.
(4) The documents incorporated by reference in the Prospectus when
they were filed with the Commission conformed in all material respects to
the requirements of the Securities Exchange Act of 1934 (the "Exchange
Act") and the rules and regulations of the Commission thereunder, and none
of such documents contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; and any further document so
filed and incorporated by reference in the Prospectus, as amended or
supplemented, when such documents are filed with the Commission, will
conform in all material respects to the requirements of the Exchange Act,
the rules and regulations of the Commission thereunder and will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through you expressly for use therein.
(5) The descriptions in the Registration Statement and the Prospectus
of statutes, legal and governmental proceedings or contracts and other
documents are accurate and fairly present the information required to be
shown; and there are no statutes or legal or governmental proceedings
required to be described in the Registration Statement or the Prospectus
that are not described as required and no contracts or documents of a
character that are required to be described in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration Statement
that are not described and filed as required.
(6) Each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation and has full power and
authority (corporate and other) to own or lease its properties and conduct
its business as described in the Prospectus. The Company has full power and
authority (corporate and other) to enter into this Agreement and to perform
its obligations hereunder. Each of the Company and its subsidiaries is duly
qualified to transact business as a foreign corporation and is in good
standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification, except where the failure to so qualify would not have a
material adverse effect on the financial position, results of operations or
business of the Company and its subsidiaries.
(7) The Company's authorized, issued and outstanding capital stock is
as disclosed in the Prospectus. All of the issued shares of capital stock
of the Company have been duly authorized and validly issued, are fully paid
and nonassessable and conform to the description of the Common Stock
incorporated by reference in the Prospectus. None of the issued shares of
capital stock of the Company or any of its subsidiaries has been issued or
is owned or held in violation of any preemptive rights of shareholders, and
no person or entity (including any holder of outstanding shares of capital
stock of the Company or its subsidiaries) has any preemptive or other
rights to subscribe for any of the Shares.
(8) All of the issued shares of capital stock of each of the Company's
subsidiaries have been duly authorized and validly issued, are fully paid
and nonassessable and all of the issued shares of capital stock of the
Company's subsidiaries are owned beneficially by the Company free and clear
of all liens, security interests, pledges, charges, encumbrances, defects,
shareholders' agreements, voting trusts, equities or claims of any nature
whatsoever, except as disclosed in or incorporated by reference in the
Prospectus. Other than wholly owned subsidiaries or as disclosed in the
Prospectus, the Company does not own, directly or indirectly, any material
capital stock or other equity securities of any other corporation or any
ownership interest in any partnership, joint venture or other association.
(9) Except as disclosed in the Prospectus, there are no outstanding
(i) securities or obligations of the Company or any of its subsidiaries
convertible into or exchangeable for any capital stock of the Company or
any such subsidiary, (ii) warrants, rights or options to subscribe for or
purchase from the Company or any such subsidiary any such capital stock or
any such convertible or exchangeable securities
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<PAGE> 4
or obligations, or (iii) obligations of the Company or any such subsidiary
to issue any shares of capital stock, any such convertible or exchangeable
securities or obligations, or any such warrants, rights or options.
(10) Since the date of the most recent audited financial statements
included in the Prospectus, neither the Company nor any of its subsidiaries
has sustained any material loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as disclosed in or contemplated by the
Prospectus.
(11) Except as disclosed in the Prospectus, since the respective dates
as of which information is given in the Registration Statement, any 462(b)
Registration Statement and the Prospectus, (i) neither the Company nor any
of its subsidiaries has incurred any liabilities or obligations, direct or
contingent, or entered into any transactions, not in the ordinary course of
business, that are material to the Company and its subsidiaries, (ii) the
Company has not purchased any of its outstanding capital stock or declared,
paid or otherwise made any dividend or distribution of any kind on its
capital stock (except a purchase of 36,000 shares of Common Stock), (iii)
there has not been any change in the capital stock, long-term debt or
short-term debt of the Company or any of its subsidiaries, (iv) there has
not been any material decrease in commission and fee revenues earned as
compared to the comparable period in the immediately preceding quarter, and
(v) there has not been any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
financial position, results of operations or business of the Company and
its subsidiaries, in each case other than as disclosed in or contemplated
by the Prospectus.
(12) The certificates evidencing the Shares comply with all applicable
requirements of Florida law.
(13) There are no contracts, agreements or understandings between the
Company and any person (except the Selling Shareholders), granting such
person the right to require the Company to file a registration statement
under the Act with respect to any securities of the Company owned or to be
owned by such person or to require the Company to include such securities
in the securities registered pursuant to the Registration Statement (or any
such right has been effectively waived) or any securities being registered
pursuant to any other registration statement filed by the Company under the
Act.
(14) All offers and sales of the Company's capital stock prior to the
date hereof were at all relevant times duly registered under the Act or
exempt from the registration requirements of the Act by reason of Sections
3(b), 4(2) or 4(6) thereof and were duly registered or the subject of an
available exemption from the registration requirements of the applicable
state securities or blue sky laws.
(15) Neither the Company nor any of its subsidiaries is, or with the
giving of notice or passage of time or both would be, in violation of its
Articles of Incorporation or Bylaws or in default under any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party or to
which any of their respective properties or assets are subject.
(16) The issue and sale of the Shares and the performance of this
Agreement and the consummation of the transactions herein contemplated will
not conflict with, or (with or without the giving of notice or the passage
of time or both) result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement, lease or other agreement or instrument to which
the Company or any of its subsidiaries is a party or to which any of their
respective properties or assets is subject, nor will such action conflict
with or violate any provision of the Articles of Incorporation or Bylaws of
the Company or any of its subsidiaries or any statute, rule or regulation
or any order, judgment or decree of any court or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries or any
of their respective properties or assets.
(17) The Company and its subsidiaries have good and marketable title
in fee simple to all real property, if any, and good title to all personal
property owned by them, in each case free and clear of all liens, security
interests, pledges, charges, encumbrances, mortgages and defects, except as
described in
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<PAGE> 5
the Prospectus, and except such as do not materially and adversely affect
the value of such property and do not interfere with the use made or
proposed to be made of such property by the Company and its subsidiaries;
and any real property and buildings held under lease by the Company or any
of its subsidiaries are held under valid, subsisting and enforceable
leases, with such exceptions as are not material and do not interfere with
the use made or proposed to be made of such property and buildings by the
Company or such subsidiary.
(18) No consent, approval, authorization, order or declaration of or
from, or registration, qualification or filing with, any court or
governmental agency or body is required for the issue and sale of the
Shares or the consummation of the transactions contemplated by this
Agreement, except (i) the registration of the Shares under the Act (which,
if the Registration Statement is not effective as of the time of execution
hereof, shall be obtained as provided in this Agreement) and (ii) such as
may be required under state securities or blue sky laws in connection with
the offer, sale and distribution of the Shares by the Underwriters.
(19) Other than as disclosed in the Prospectus, there is no
litigation, arbitration, claim, proceeding (formal or informal) or
investigation pending or threatened (or any basis therefor) in which the
Company or any of its subsidiaries is a party or of which any of their
respective properties or assets are the subject which, if determined
adversely to the Company or any such subsidiary, would individually or in
the aggregate have a material adverse effect on the financial position,
results of operations or business of the Company and its subsidiaries.
Neither the Company nor any of its subsidiaries is in violation of, or in
default with respect to, any statute, rule, regulation, order, judgment or
decree, except as described in the Prospectus or such as do not and will
not individually or in the aggregate have a material adverse effect on the
financial position, results of operations or business of the Company and
its subsidiaries, and neither the Company nor any of its subsidiaries is
required to take any action in order to avoid any such violation or
default.
(20) Ernst & Young LLP, who has certified certain financial statements
of the Company and its consolidated subsidiaries, is, and were during the
periods covered by its reports included in the Registration Statement, any
462(b) Registration Statement and the Prospectus, independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder.
(21) The consolidated financial statements and schedules (including
the related notes) of the Company and its consolidated subsidiaries
included in the Registration Statement, any 462(b) Registration Statement,
the Prospectus or any Preliminary Prospectus were prepared in accordance
with generally accepted accounting principles consistently applied
throughout the periods involved and fairly present the financial position
and results of operations of the Company and its subsidiaries, on a
consolidated basis, at the dates and for the periods presented. The
selected financial data set forth under the caption "Selected Financial
Data" in the Prospectus fairly present, on the basis stated in the
Prospectus, the information included therein.
(22) This Agreement has been duly authorized, executed and delivered
by the Company and constitutes the valid and binding agreement of the
Company enforceable against the Company in accordance with its terms,
subject, as to enforcement, to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws relating to or affecting
the enforcement of creditors' rights generally and to general equitable
principles and except as the enforceability of rights to indemnity and
contribution under this Agreement may be limited under applicable
securities laws or the public policy underlying such laws.
(23) Neither the Company nor any of its officers, directors or
affiliates has (i) taken, directly or indirectly, any action designed to
cause or result in, or that has constituted or might reasonably be expected
to constitute, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares or
(ii) since the filing of the Registration Statement (A) sold, bid for,
purchased or paid anyone any compensation for soliciting purchases of, the
Shares or (B) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company.
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<PAGE> 6
(24) The Company has obtained for the benefit of the Company and the
Underwriters from each of its directors and officers and each Selling
Shareholder a written agreement that for a period of 180 days (or 90 days,
in the case of directors and officers of the Company other than J. Hyatt
Brown and Selling Shareholders) from the date of the Prospectus such
director, officer or Selling Shareholder will not, without your prior
written consent, offer, pledge, sell, contract to sell, grant any option
for the sale of, or otherwise dispose of (or announce any offer, pledge,
sale, grant of an option to purchase or other disposition), directly or
indirectly, any shares of Common Stock or securities convertible into, or
exercisable or exchangeable for, shares of Common Stock.
(25) Neither the Company, any of its subsidiaries, nor any director,
officer, agent, employee or other person associated with or acting on
behalf of the Company or any such subsidiary has, directly or indirectly:
used any corporate funds for unlawful contributions, gifts, entertainment
or other unlawful expenses relating to political activity; made any
unlawful payment to foreign or domestic government officials or employees
or to foreign or domestic political parties or campaigns from corporate
funds; violated any provision of the Foreign Corrupt Practices Act of 1977,
as amended; or made any bribe, rebate, payoff, influence payment, kickback
or other unlawful payment.
(26) The operations of the Company and its subsidiaries with respect
to any real property currently leased or owned or by any means controlled
by the Company or any subsidiary (the "Real Property") are in compliance
with all federal, state, and local laws, ordinances, rules, and regulations
relating to occupational health and safety and the environment
(collectively, "Laws"), and the Company and its subsidiaries have all
licenses, permits and authorizations necessary to operate under all Laws
and are in compliance with all terms and conditions of such licenses,
permits and authorizations; neither the Company nor any subsidiary has
authorized, conducted or has knowledge of the generation, transportation,
storage, use, treatment, disposal or release of any hazardous substance,
hazardous waste, hazardous material, hazardous constituent, toxic
substance, pollutant, contaminant, petroleum product, natural gas,
liquefied gas or synthetic gas defined or regulated under any environmental
law on, in or under any Real Property; and there is no pending or
threatened claim, litigation or any administrative agency proceeding, nor
has the Company or any subsidiary received any written or oral notice from
any governmental entity or third party, that: (i) alleges a violation of
any Laws by the Company or any subsidiary; (ii) alleges the Company or any
subsidiary is a liable party under the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq.
or any state superfund law; (iii) alleges possible contamination of the
environment by the Company or any subsidiary; or (iv) alleges possible
contamination of the Real Property.
(27) The Company and each of its subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in
such amounts as are prudent and customary in the businesses in which they
are engaged; and neither the Company nor any such subsidiary has any reason
to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue its business at a
comparable cost, except as disclosed in the Prospectus.
(28) The Company, its offices and insurance agents are duly licensed
to conduct business, including the business of an insurance agent, under
the laws of each jurisdiction in which the conduct of their business
requires such licensing, and there is no pending or threatened action,
suit, proceeding or investigation that may lead to the revocation,
termination or suspension of any such license, which would have,
individually or in the aggregate, a material adverse effect on the
financial position, results of operations or business of the Company and
its subsidiaries.
(29) Each of the Company and its subsidiaries makes and keeps accurate
books and records reflecting its assets and maintains internal accounting
controls which provide reasonable assurance that (i) transactions are
executed in accordance with management's authorization, (ii) transactions
are recorded as necessary to permit preparation of the Company's
consolidated financial statements in accordance with generally accepted
accounting principles and to maintain accountability for the assets of the
Company, (iii) access to the assets of the Company and each of its
subsidiaries is permitted only in
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<PAGE> 7
accordance with management's authorization, and (iv) the recorded
accountability for assets of the Company and each of its subsidiaries is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(30) The Company and its subsidiaries have filed all foreign, federal,
state and local tax returns that are required to be filed by them and have
paid all taxes shown as due on such returns as well as all other taxes,
assessments and governmental charges that are due and payable; and no
deficiency with respect to any such return has been assessed or proposed.
(31) The Company is not, will not become as a result of the
transactions contemplated hereby, and does not intend to conduct its
business in a manner that would cause it to become, an "investment company"
or a company "controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940.
(32) The Company has complied with all provisions of Florida Statutes,
Section 517.075, relating to issuers doing business with Cuba.
(b) Each of the Selling Shareholders represents and warrants to, and agrees
with, each of the Underwriters and the Company that:
(1) All consents, approvals, authorizations and orders necessary for
the execution and delivery by such Selling Shareholder of this Agreement
and the Custody Agreement and Durable Power of Attorney (the "Custody
Agreement") hereinafter referred to, and for the sale and delivery of the
Shares to be sold by such Selling Shareholder hereunder, have been
obtained, and such Selling Shareholder has full right, power and authority
to enter into this Agreement and the Custody Agreement and to sell, assign,
transfer and deliver the Shares to be sold by such Selling Shareholder
hereunder.
(2) The sale of the Shares to be sold by such Selling Shareholder
hereunder and the performance of this Agreement and the Custody Agreement
and the consummation of the transactions herein and therein contemplated
will not result in a breach or violation of any of the terms of provisions
of, or constitute a default under, any statute, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which
such Selling Shareholder is a party to or by which such Selling Shareholder
is bound, the declaration of trust of such Selling Shareholder if such
Selling Shareholder is a trust, or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over such Selling
Shareholder or the property of such Selling Shareholder.
(3) Such Selling Shareholder has, and immediately prior to each Time
of Delivery (as defined in Section 4 hereof) such Selling Shareholder will
have, good and valid title to the Shares to be sold by such Selling
Shareholder hereunder, free and clear of all liens, encumbrances, equities
or claims; and, upon delivery of such Shares and payment therefor pursuant
thereto, good and valid title to such Shares, free and clear of all liens,
encumbrances, equities or claims, will pass to the several Underwriters.
(4) No offering, sale or other disposition of any Common Stock will be
made within 180 days after the date of the Prospectus, directly or
indirectly, by such Selling Shareholder, otherwise than hereunder or with
your written consent.
(5) Such Selling Shareholder has not taken and will not take, directly
or indirectly, any action which is designed to or which has constituted or
which might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Shares.
(6) To the extent that any statements or omissions made in the
Registration Statement, any 462(b) Registration Statement, any Preliminary
Prospectus or the Prospectus are made in reliance upon and in conformity
with written information furnished to the Company by such Selling
Shareholder expressly for use therein, such Preliminary Prospectus did, and
the Registration Statement, any 462(b) Registration Statement and the
Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder and will not contain any untrue statement of a
7
<PAGE> 8
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
In order to document the Underwriters' compliance with the reporting and
withholding provisions of the Tax Equity and Fiscal Responsibility Act of 1982
with respect to the transactions herein contemplated, each of Selling
Shareholders agrees to deliver to you prior to or at the First Time of Delivery
(as defined in Section 4 hereof) a properly completed and executed United States
Treasury Department Form W-9 (or other applicable form or statement specified by
Treasury Department regulations in lieu thereof).
Each of the Selling Shareholders represents and warrants that certificates
in negotiable form representing all of the Shares to be sold by such Selling
Shareholder hereunder have been placed in custody under the Custody Agreement
duly executed and delivered by such Selling Shareholder to Laurel J. Lenfestey
and Timothy L. Young, as custodians (the "Custodians"), and appointing William
F. Poe and Charles W. Poe as such Selling Shareholder's attorneys-in-fact (the
"Attorneys-in-Fact") with authority to execute and deliver this Agreement on
behalf of such Selling Shareholder, to determine the purchase price to be paid
by the Underwriters to the Selling Shareholder hereunder and otherwise to act on
behalf of such Selling Shareholder in connection with the transactions
contemplated by this Agreement.
Each of the Selling Shareholders specifically agrees that the Shares
represented by the certificates held in custody for such Selling Shareholder
under the Custody Agreement are subject to the interests of the Underwriters
hereunder, and that the arrangements made by such Selling Shareholder for such
custody and the appointment by such Selling Shareholder of the Attorneys-in-Fact
are to that extent irrevocable. Each of the Selling Shareholders specifically
agrees that the obligations of the Selling Shareholders hereunder shall not be
terminated by operation of law, whether by the death or incapacity of any
individual Selling Shareholder or, in the case of an estate or trust, by the
occurrence of any other event. If any individual Selling Shareholder or any such
executor or trustee should die or become incapacitated, or if any such other
event should occur before the delivery of the Shares hereunder, certificates
representing the Shares shall be delivered by or on behalf of the Selling
Shareholders in accordance with the terms and conditions of this Agreement, and
actions taken by the Attorneys-in-Fact pursuant to the Powers of Attorney shall
be as valid as if such death, incapacity or other event had not occurred,
regardless of whether or not the Custodians, the Attorneys-in-Fact, or any of
them, shall have received notice of such death, incapacity or other event.
2. PURCHASE AND SALE OF SHARES. Subject to the terms and conditions
herein set forth, (a) each Selling Shareholder agrees to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from each Selling Shareholder, at a purchase price of $ per
share, the number of Firm Shares set forth opposite the name of such Underwriter
in Schedule II hereto, and (b) in the event and to the extent that the
Underwriters shall exercise the election to purchase Optional Shares as provided
below, each Selling Shareholder agrees to sell to each of the Underwriters, and
each of the Underwriters agrees, severally and not jointly, to purchase from
each Selling Shareholder, at the purchase price per share set forth in clause
(a) of this Section 2, that portion of the number of Optional Shares as to which
such election shall have been exercised (to be adjusted by you so as to
eliminate fractional shares) determined by multiplying such number of Optional
Shares by a fraction, the numerator of which is the maximum number of Optional
Shares that such Underwriter is entitled to purchase as set forth opposite the
name of such Underwriter in Schedule II hereto and the denominator of which is
the maximum number of the Optional Shares that all of the Underwriters are
entitled to purchase hereunder.
The Selling Shareholders, as and to the extent indicated in Schedule I
hereto, hereby grant to the Underwriters the right to purchase at your election
in whole or in part from time to time up to 213,750 Optional Shares, at the
purchase price per share set forth in clause (a) in the paragraph above, for the
sole purpose of covering over-allotments in the sale of Firm Shares. Any such
election to purchase Optional Shares may be exercised by written notice from you
to the Company and the Attorneys-in-Fact, given from time to time within a
period of 30 calendar days after the date of this Agreement and setting forth
the aggregate number of Optional Shares to be purchased and the date on which
such Optional Shares are to be delivered, as determined by you but in no event
earlier than the First Time of Delivery (as hereinafter defined) or, unless you,
the Company and the Attorneys-in-Fact otherwise agree in writing, earlier than
two or later than ten
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<PAGE> 9
business days after the date of such notice. In the event you elect to purchase
all or a portion of the Optional Shares, the Company and the Selling
Shareholders agree to furnish or cause to be furnished to you the certificates,
letters and opinions, and to satisfy all conditions, set forth in Section 7
hereof at each Subsequent Time of Delivery (as hereinafter defined).
3. OFFERING BY THE UNDERWRITERS. Upon the authorization by you of the
release of the Shares, the several Underwriters propose to offer the Shares for
sale upon the terms and conditions disclosed in the Prospectus.
4. DELIVERY OF SHARES; CLOSING. Certificates in definitive form for the
Shares to be purchased by each Underwriter hereunder, and in such denominations
and registered in such names as The Robinson-Humphrey Company, Inc. may request
upon at least 48 hours' prior notice to the Company and the Attorneys-in-Fact
shall be delivered by or on behalf of the Selling Shareholders to you for the
account of such Underwriter, against payment by such Underwriter or on its
behalf of the purchase price therefor by official bank check or checks (payable
in next day funds) drawn on an Atlanta, Georgia bank, payable to the order of
the Custodians in next day available funds. The closing of the sale and purchase
of the Shares shall be held at the offices of King & Spalding, 191 Peachtree
Street, Atlanta, Georgia 30303, except that physical delivery of such
certificates shall be made at the office of The Depository Trust Company, 55
Water Street, New York, New York 10041. The time and date of such delivery and
payment shall be, with respect to the Firm Shares, at 10:00 a.m., Atlanta time,
on not later than the fourth full business day after the execution of this
Agreement or at such other time and date as you and the Company and the
Attorneys-in-Fact may agree upon in writing, and, with respect to the Optional
Shares, at 10:00 a.m., Atlanta time, on the date specified by you in the written
notice given by you of the Underwriters' election to purchase all or part of
such Optional Shares, or at such other time and date as you, the Company and the
Attorneys-in-Fact may agree upon in writing. Such time and date for delivery of
the Firm Shares is herein called the "First Time of Delivery," such time and
date for delivery of the Optional Shares, if not the First Time of Delivery, is
herein called a "Subsequent Time of Delivery," and each such time and date for
delivery is herein called a "Time of Delivery." Such certificates will be made
available for checking and packaging at least 24 hours prior to each Time of
Delivery at the office of the office of The Depository Trust Company, 55 Water
Street, New York, New York 10041 or at such other location in New York, New York
specified by you in writing at least 48 hours prior to such Time of Delivery.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with each
of the Underwriters:
(a) If the Registration Statement has been declared effective prior to
the execution and delivery of this Agreement, the Company will file either
(A) the Prospectus with the Commission pursuant to and in accordance with
subparagraph (1) (or, if applicable and if consented to by you,
subparagraph (4)) of Rule 424(b) or (B) a Term Sheet with the Commission
pursuant to and in accordance with Rule 434 not later than the earlier of
(i) the second business day following the execution and delivery of this
Agreement or (ii) the fifteenth business day after the date on which the
Registration Statement is declared effective. The Company will advise you
promptly of any such filing pursuant to Rule 424(b) or Rule 434.
(b) The Company will not file with the Commission the Prospectus or
the amendment referred to in the second sentence of Section 1(a)(1) hereof,
any amendment or supplement to the Prospectus, any Term Sheet, any
amendment to the Registration Statement or any 462(b) Registration
Statement unless you have received a reasonable period of time to review
any such proposed amendment or supplement and consented to the filing
thereof and will use its best efforts to cause any such amendment to the
Registration Statement to be declared effective as promptly as possible.
Upon your request or counsel for the Underwriters, the Company will
promptly prepare and file with the Commission, in accordance with the rules
and regulations of the Commission, any amendments to the Registration
Statement or amendments or supplements to the Prospectus, any Term Sheet or
any 462(b) Registration Statement that may be necessary or advisable in
connection with the distribution of the Shares by the several Underwriters
and will use its best efforts to cause any such amendment to the
Registration Statement to be declared effective as promptly as possible. If
required, the Company will file any amendment or
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<PAGE> 10
supplement to the Prospectus or any Term Sheet with the Commission in the
manner and within the time period required by Rule 424(b) and Rule 434, as
applicable, under the Act. The Company will advise you, promptly after
receiving notice thereof, of the time when the Registration Statement or
any amendment thereto or any 462(b) Registration Statement has been filed
or declared effective or the Prospectus or any amendment or supplement
thereto has been filed and will provide evidence to you of each such filing
or effectiveness.
(c) The Company will advise you promptly after receiving notice or
obtaining knowledge of (i) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or any 462(b)
Registration Statement or any part thereof or any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, (ii) the suspension of the qualification
of the Shares for offer or sale in any jurisdiction or of the initiation or
threatening of any proceeding for any such purpose, or (iii) any request
made by the Commission or any securities authority of any other
jurisdiction for amending the Registration Statement or any 462(b)
Registration Statement, for amending or supplementing the Prospectus or for
additional information. The Company will use its best efforts to prevent
the issuance of any such stop order and, if any such stop order is issued,
to obtain the withdrawal thereof as promptly as possible.
(d) If the delivery of a prospectus relating to the Shares is required
under the Act at any time prior to the expiration of 90 days after the date
of the Prospectus and if at such time any events have occurred as a result
of which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if for any
reason it is necessary during such same period to amend or supplement the
Prospectus to comply with the Act or the rules and regulations thereunder,
the Company will promptly notify you and upon your request (but at the
Company's expense) prepare and file with the Commission an amendment or
supplement to the Prospectus that corrects such statement or omission or
effects such compliance and will furnish without charge to each Underwriter
and to any dealer in securities as many copies of such amended or
supplemented Prospectus as you may from time to time reasonably request. If
the delivery of a prospectus relating to the Shares is required under the
Act at any time 90 days or more after the date of the Prospectus, upon your
request but at the expense of such Underwriter, the Company will prepare
and deliver to such Underwriter as many copies as you may request of an
amended or supplemented Prospectus complying with Section 10(a)(3) of the
Act. Neither your consent to, nor the Underwriters' delivery of, any such
amendment or supplement shall constitute a waiver of any of the conditions
set forth in Section 7.
(e) The Company promptly from time to time will take such action as
you may reasonably request to qualify the Shares for offering and sale
under the securities or blue sky laws of such jurisdictions as you may
request and will continue such qualifications in effect for as long as may
be necessary to complete the distribution of the Shares, provided that in
connection therewith the Company shall not be required to qualify as a
foreign corporation or to file a general consent to service of process in
any jurisdiction.
(f) The Company will promptly provide you, upon your reasonable
request, without charge, (i) three manually executed copies of the
Registration Statement and any 462(b) Registration Statement as originally
filed with the Commission and of each amendment thereto, (ii) for each
other Underwriter a conformed copy of the Registration Statement and any
462(b) Registration Statement as originally filed and of each amendment
thereto, without exhibits, and (iii) so long as a prospectus relating to
the Shares is required to be delivered under the Act, as many copies of
each Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto as you may reasonably request.
(g) As soon as practicable, but in any event not later than the last
day of the thirteenth month after the effective date of the Registration
Statement, the Company will make generally available to its security
holders an earnings statement of the Company and its subsidiaries, if any,
covering a period of at least 12 months beginning after the effective date
of the Registration Statement (which need not be audited) complying with
Section 11(a) of the Act and the rules and regulations thereunder.
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(h) During the period beginning from the date hereof and continuing to
and including the date 180 days after the date of the Prospectus, the
Company will not, without your prior written consent, offer, pledge, issue,
sell, contract to sell, grant any option for the sale of, or otherwise
dispose of (or announce any offer, pledge, sale, grant of an option to
purchase or other disposition), directly or indirectly, any shares of
Common Stock or securities convertible into, exercisable or exchangeable
for, shares of Common Stock, except as provided in Section 2 and except for
the issuance of Common Stock issuable upon the exercise of stock options
(including options granted under the Company's Employee Stock Purchase
Plan) or warrants outstanding on the date of this Agreement to the extent
that such stock options or warrants are properly disclosed in the
Prospectus.
(i) During a period of five years from the effective date of the
Registration Statement, the Company will furnish to you and, upon request,
to each of the other Underwriters, without charge, (i) copies of all
reports or other communications (financial or other) furnished to
shareholders, (ii) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange, and (iii) such additional information
concerning the business and financial condition of the Company and its
subsidiaries, if any, as you may reasonably request.
(j) Neither the Company nor any of its officers, directors or
affiliates will (i) take, directly or indirectly, prior to the termination
of the underwriting syndicate contemplated by this Agreement, any action
designed to cause or to result in, or that might reasonably be expected to
constitute, the stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of any of the Shares, (ii)
sell, bid for, purchase or pay anyone any compensation for soliciting
purchases of, the Shares or (iii) pay or agree to pay to any person any
compensation for soliciting another to purchase any other securities of the
Company.
(k) If at any time during the period beginning on the date the
Registration Statement becomes effective and ending on the later of (i) the
date 30 days after such effective date and (ii) the date that is the
earlier of (A) the date on which the Company first files with the
Commission a Quarterly Report on Form 10-Q after such effective date and
(B) the date on which the Company first issues a quarterly financial report
to shareholders after such effective date, any publication or event
relating to or affecting the Company shall occur as a result of which in
your reasonable opinion the market price of the Common Stock has been or is
likely to be materially affected (regardless of whether such publication or
event necessitates an amendment of or supplement to the Prospectus), the
Company will, after written notice from you advising the Company to the
effect set forth above, forthwith prepare, consult with you concerning the
substance of, and disseminate a press release or other public statement,
reasonably satisfactory to you, responding to or commenting on such
publication or event.
6. EXPENSES. The Company and the Selling Shareholders covenant and agree
with one another and the Underwriters, whether or not the transactions
contemplated hereby are consummated or this Agreement is terminated pursuant to
Section 10 hereof, that (a) the Company and the Selling Shareholders will pay
the following: (i) the fees, disbursements and expenses of the counsel for the
Company and accountants in connection with the registration of the Shares under
the Act and all other expenses in connection with the preparation, printing and,
if applicable, filing of the Registration Statement (including all amendments
thereto), any 462(b) Registration Statement, any Preliminary Prospectus, the
Prospectus and any amendments and supplements thereto, this Agreement, any blue
sky memoranda and any state insurance law memoranda; (ii) the delivery of copies
of the foregoing documents to the Underwriters; (iii) the preparation, issuance
and delivery to the Underwriters of any certificates evidencing the Shares,
including transfer agent's and registrar's fees; (iv) the qualification of the
Shares for offering and sale under state securities and blue sky laws, including
filing fees and fees and disbursements of counsel for the Underwriters or
counsel for the Company, as the case may be, relating thereto; (v) the filing
fees of the Commission and the National Association of Securities Dealers, Inc.
relating to the Shares; and (vi) any expenses for travel, lodging and meals
incurred by the Selling Shareholders and the Company and any of its officers,
directors and employees in connection with any meetings with prospective
investors in the Shares; and (b) the Selling Shareholders will pay all costs and
expenses incident to the performance of the Selling Shareholders' obligations
hereunder which are not otherwise specifically provided for in this Section 6,
including (i) any fees
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and expenses of counsel for the Selling Shareholders; (ii) the fees and expenses
of the Attorneys-in-Fact and the Custodians; and (iii) all expenses and taxes
incident to the sale and delivery of the Shares to be sold by the Selling
Shareholders to the Underwriters hereunder. It is understood, however, that,
except as provided in this Section, Section 8 and Section 10 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, stock transfer taxes on resale of any of the Shares by them, and
any advertising expenses relating to the offer and sale of the Shares.
7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters hereunder to purchase and pay for the Shares to be delivered at
each Time of Delivery shall be subject, in their discretion, to the accuracy of
the representations and warranties of the Company and the Selling Shareholders
contained herein as of the date hereof and as of such Time of Delivery, to the
accuracy of the statements of Company officers and the Selling Shareholders made
pursuant to the provisions hereof, to the performance by the Company of its
covenants and agreements hereunder, and to the following additional conditions
precedent:
(a) If the registration statement as amended to date has not become
effective prior to the execution of this Agreement, such registration
statement shall have been declared effective not later than 11:00 a.m.,
Atlanta time, on the date of this Agreement or such later date and/or time
as shall have been consented to by you in writing. The Prospectus and any
amendment or supplement thereto or a Term Sheet shall have been filed with
the Commission pursuant to Rule 424(b) or Rule 434, as applicable, within
the applicable time period prescribed for such filing and in accordance
with Section 5(a) of this Agreement; any 462(b) Registration Statement
shall have been filed with the Commission and have become effective, and no
stop order suspending the effectiveness of the Registration Statement or
any 462(b) Registration Statement, respectively, or any part thereof shall
have been issued and no proceedings for that purpose shall have been
instituted, threatened or, to the knowledge of the Company or you,
contemplated by the Commission; and all requests for additional information
on the part of the Commission shall have been complied with to your
reasonable satisfaction.
(b) King & Spalding, counsel for the Underwriters, shall have
furnished to you such opinion or opinions, dated such Time of Delivery,
with respect to the incorporation of the Company, the validity of the
Shares being delivered at such Time of Delivery, the Registration Statement
and any 462(b) Registration Statement, the Prospectus, and other related
matters as you may reasonably request, and the Company shall have furnished
to such counsel such documents as they request for the purpose of enabling
them to pass upon such matters. In rendering such opinion, such counsel may
rely as to all matters of Florida law upon the opinion of Holland & Knight
referred to in paragraph (c) below.
(c) You shall have received an opinion, dated such Time of Delivery, of
Laurel J. Lenfestey, Esq. or Holland & Knight, counsel for the Company, in form
and substance satisfactory to you and your counsel, to the effect that:
(i) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation and has the corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement and the Prospectus and to enter into this Agreement and perform
its obligations hereunder. The Company is duly qualified to transact
business as a foreign corporation and is in good standing under the laws of
each other jurisdiction in which it owns or leases property, or conducts
any business, so as to require such qualification, except where the failure
to so qualify would not have a material adverse effect on the financial
position, results of operations or business of the Company and its
subsidiaries.
(ii) Each of the subsidiaries of the Company has been duly
incorporated, is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation and has the corporate power
and authority to own or lease its properties and conduct its business as
described in the Registration Statement and the Prospectus. Each such
subsidiary is duly qualified to transact business as a foreign corporation
and is in good standing under the laws of each other jurisdiction in which
it owns or leases property, or conducts any business, so as to require such
qualification, except where the failure to
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so qualify would not have a material adverse effect on the financial
position, results of operations or business of the Company and its
subsidiaries.
(iii) The Company's authorized, issued and outstanding capital stock
is as disclosed in the Prospectus. All of the issued shares of capital
stock of the Company have been duly authorized and validly issued, are
fully paid and nonassessable and conform to the description of the Common
Stock contained in the Prospectus. None of the issued shares of capital
stock of the Company or any of its subsidiaries has been issued or is owned
or held in violation of any preemptive rights of shareholders, and no
person or entity (including any holder of outstanding shares of capital
stock of the Company or its subsidiaries) has any preemptive or other
rights to subscribe for any of the Shares.
(iv) All of the issued shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable, and all of the shares of capital stock of the
Company's subsidiaries are owned beneficially by the Company free and clear
of all liens, security interests, pledges, charges, encumbrances,
shareholders' agreements, voting trusts, defects, equities or claims of any
nature whatsoever, except as disclosed in the Prospectus. To such counsel's
knowledge, other than wholly owned subsidiaries, the Company does not own,
directly or indirectly, any capital stock or other equity securities of any
other corporation or any ownership interest in any partnership, joint
venture or other association, except as disclosed in the Prospectus.
(v) Except as disclosed in the Prospectus, there are no outstanding
(A) securities or obligations of the Company or any of its subsidiaries
convertible into or exchangeable for any capital stock of the Company or
any such subsidiary, (B) warrants, rights or options to subscribe for or
purchase from the Company or any such subsidiary any such capital stock or
any such convertible or exchangeable securities or obligations, or (C)
obligations of the Company or any such subsidiary to issue any shares of
capital stock, any such convertible or exchangeable securities or
obligations, or any such warrants, rights or options.
(vi) The certificates evidencing the Shares comply with all applicable
requirements of Florida law.
(vii) There are no contracts, agreements or understandings between the
Company and any person granting such person (other than the Selling
Shareholders) the right to require the Company to file a registration
statement under the Act with respect to any securities of the Company owned
or to be owned by such person or to require the Company to include such
securities in the securities registered pursuant to the Registration
Statement (or any such right has been effectively waived) or in any
securities being registered pursuant to any other registration statement
filed by the Company under the Act.
(viii) All offers and sales of the Company's capital stock subsequent
to one year prior to the date hereof were at all relevant times duly
registered under the Act or exempt from the registration requirements of
the Act by reason of Sections 3(b), 4(2) or 4(6) thereof and were duly
registered or the subject of an available exemption from the registration
requirements of the applicable state securities or blue sky laws.
(ix) Neither the Company nor any of its subsidiaries is, or with the
giving of notice or passage of time or both, would be, in violation of its
Articles of Incorporation or Bylaws or in default under any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or
instrument to which the Company or any such subsidiary is a party or to
which any of their respective properties or assets is subject.
(x) The issue and sale of the Shares being issued at such Time of
Delivery and the performance of this Agreement and the consummation of the
transactions herein contemplated will not conflict with, or (with or
without the giving of notice or the passage of time or both) result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument to which the Company or any such
subsidiary is a party or to which any of their respective properties or
assets is subject, nor will such action conflict with or violate any
provision of the Articles of Incorporation or Bylaws of the Company or any
of its subsidiaries or any statute, rule or regulation or any order,
judgment or decree of any court or governmental agency or
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<PAGE> 14
body having jurisdiction over the Company or any of its subsidiaries or any
of their respective properties or assets.
(xi) Any real property and buildings held under lease by the Company
or any of its subsidiaries are held by the Company or such subsidiary under
valid, subsisting and enforceable leases with such exceptions as are
disclosed in the Prospectus or are not material and do not interfere with
the use made and proposed to be made of such property and buildings by the
Company or such subsidiary.
(xii) No consent, approval, authorization, order or declaration of or
from, or registration, qualification or filing with, any court or
governmental agency or body is required for the issue and sale of the
Shares or the consummation of the transactions contemplated by this
Agreement, except (i) the registration of the Shares under the Act and (ii)
such as may be required under state securities or blue sky laws in
connection with the offer, sale and distribution of the Shares by the
Underwriters.
(xiii) To such counsel's knowledge and other than as disclosed in or
contemplated by the Prospectus, there is no litigation, arbitration, claim,
proceeding (formal or informal) or investigation pending or threatened (or
any basis therefor) in which the Company or any of its subsidiaries is a
party or of which any of their respective properties or assets is the
subject which, if determined adversely to the Company or any such
subsidiary, would individually or in the aggregate have a material adverse
effect on the financial position, results of operations or business of the
Company and its subsidiaries; and, to such counsel's knowledge, neither the
Company nor any of its subsidiaries is in violation of, or in default with
respect to, any statute, rule, regulation, order, judgment or decree,
except as described in the Prospectus, nor is the Company or any subsidiary
required to take any action in order to avoid any such violation or
default.
(xiv) This Agreement has been duly authorized, executed and delivered
by the Company.
(xv) The Registration Statement, any 462(b) Registration Statement and
the Prospectus and each amendment or supplement thereto (other than the
financial statements and related schedules therein, as to which such
counsel need express no opinion), as of their respective effective or issue
dates, complied as to form in all material respects with the requirements
of the Act and the rules and regulations thereunder. The descriptions in
the Registration Statement and the Prospectus of statutes, legal and
governmental proceedings or contracts and other documents are accurate and
fairly present the information required to be shown; and such counsel do
not know of any statutes or legal or governmental proceedings required to
be described in the Registration Statement, any 462(b) Registration
Statement or Prospectus that are not described as required or of any
contracts or documents of a character required to be described in the
Registration Statement or Prospectus or to be filed as exhibits to the
Registration Statement which are not described and filed as required.
(xvi) Each of the Registration Statement and any 462(b) Registration
Statement is effective under the Act; any required filing of the Prospectus
or any Term Sheet pursuant to Rule 424(b) or Rule 434, as applicable, has
been made in the manner and within the time period required by Rule 424(b)
or Rule 434, as applicable; and no stop order suspending the effectiveness
of the Registration Statement or any 462(b) Registration Statement,
respectively, or any part thereof has been issued and, to such counsel's
knowledge, no proceedings for that purpose have been instituted or
threatened or are contemplated by the Commission.
(xvii) The Company is not, and will not be as a result of the
consummation of the transactions contemplated by this Agreement, an
"investment company," or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940.
Such counsel shall also state that although such counsel has not
independently verified the accuracy or completeness of the information in the
Registration Statement and Prospectus, they have participated in conferences
with representatives of the Company and its counsel and independent accountants,
at which the contents of the Registration Statement and Prospectus were
discussed at length, and although there is no assurance that all possible
material information concerning the Company was disclosed at such conferences,
or that such counsel's familiarity with the Company and its industry is such
that they have necessarily recognized
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<PAGE> 15
the materiality of the information that was disclosed, or that they would not
have discovered different or additional information if they had conducted
third-party inquiries, they have no reason to believe that the Registration
Statement, or any 462(b) Registration Statement, respectively, or any further
amendment thereto made prior to such Time of Delivery, on its effective date and
as of such time of Delivery, contained or contains any untrue statement of a
material fact or omitted or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus, or any amendment or supplement thereto made prior to such
Time of Delivery, as of its issue date and as of such Time of Delivery,
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading (provided that such counsel need express no belief regarding the
financial statements and related schedules and other financial data contained in
the Registration Statement, or any 462(b) Registration Statement, respectively,
any amendment thereto, or the Prospectus, or any amendment or supplement
thereto).
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deem proper, on certificates of responsible
officers of the Company and public officials and an opinion or opinions, each
dated the Time of Delivery, of other counsel retained by them or the Company as
to the laws of any jurisdiction other than the United States or the State of
Florida, provided that (1) each such local counsel is reasonably acceptable to
you, (2) such reliance is expressly authorized by each opinion so relied upon
and a copy of each such opinion is delivered to the Representatives and is in
form and substance satisfactory to them and their counsel, and (3) counsel shall
state in their opinion that they believe that they and the Underwriters are
justified in relying thereon.
(d) Shackleford Farrior Stallings & Evans, P.A., counsel for each of
the Selling Shareholders, shall have furnished to you their written opinion
with respect to each of the Selling shareholders, dated such Time of
Delivery, in form and substance satisfactory to you, to the effect that:
(i) A Custody Agreement has been duly executed and delivered by
such Selling Shareholder and constitutes the valid and binding agreement
of such Selling Shareholder in accordance with its terms.
(ii) This Agreement has been duly executed and delivered by or on
behalf of such Selling Shareholder and constitutes a valid and binding
agreement of such Selling Shareholder in accordance with its terms; and
the sale of the Shares to be sold by such Selling Shareholder hereunder
and the performance of this Agreement and the Custody Agreement and the
consummation of the transactions herein and therein contemplated will
not result in a breach or violation of any terms or provisions of, or
constitute a default under, any statute, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument known to such
counsel to which such Selling Shareholder is a party or by which such
Selling Shareholder is bound, the declaration of trust of such Selling
Shareholder if such Selling Shareholder is a trust, or any order, rule
or regulation known to such counsel of any court or governmental agency
or body having jurisdiction over such Selling Shareholder or the
property of such Selling Shareholder.
(iii) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions contemplated by this Agreement in connection with the
Shares to be sold by such Selling Shareholder hereunder, except such as
have been obtained under the Act and such as may be required under state
securities or Blue Sky or insurance laws in connection with the purchase
and distribution of such shares by the Underwriters.
(iv) Immediately prior to such Time of Delivery such Selling
Shareholders had good and valid title to the Shares to be sold by such
Selling Shareholder under this Agreement, free and clear of all liens,
encumbrances, equities or claims, and full right, power and authority to
sell, assign, transfer and deliver the Shares to be sold by such Selling
Shareholder hereunder.
(v) Good and valid title to such Shares, free and clear of all
liens, encumbrances, equities or claims, has been transferred to each of
the several Underwriters who have purchased such Shares in
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good faith and without notice of any such lien, encumbrance, equity or
claim or any other adverse claim within the meaning of the Uniform
Commercial Code.
In rendering the opinion of clause (iv) such counsel may rely upon a
certificate of such Selling Shareholder as to matters of fact as to ownership of
and liens, encumbrances, equities or claims on the Shares sold by such Selling
Shareholder, provided that such counsel shall state that they have no reason not
to believe that both you and they are justified in relying upon such
certificate.
(e) You shall have received from Ernst & Young LLP letters dated,
respectively, the date hereof (or, if the Registration Statement has been
declared effective prior to the execution and delivery of this Agreement,
dated such effective date and the date of this Agreement) and each Time of
Delivery, in form and substance satisfactory to you, to the effect set
forth in Annex I hereto. In the event that the letters referred to in this
Section 7(e) set forth any changes, decreases or increases in the items
specified in paragraph (C) of Annex I, it shall be a further condition to
the obligations of the Underwriters that (i) such letters shall be
accompanied by a written explanation by the Company as to the significance
thereof, unless the Representatives deem such explanation unnecessary, and
(ii) such changes, decreases or increases do not, in your sole judgment,
make it impracticable or inadvisable to proceed with the purchase, sale and
delivery of the Shares being delivered at such Time of Delivery as
contemplated by the Registration Statement, as amended as of the date of
such letter.
(f) Since the date of the latest audited financial statements included
in the Prospectus, neither the Company nor any of its subsidiaries shall
have sustained (i) any loss or interference with their respective
businesses from fire, explosion, flood, hurricane or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as disclosed in or
contemplated by the Prospectus, or (ii) any change, or any development
involving a prospective change (including without limitation a change in
management or control of the Company), in or affecting the position
(financial or otherwise), results of operations, net worth or business
prospects of the Company and its subsidiaries, otherwise than as disclosed
in or contemplated by the Prospectus, the effect of which, in either such
case, is in your judgment so material and adverse as to make it
impracticable or inadvisable to proceed with the purchase, sale and
delivery of the Shares being delivered at such Time of Delivery as
contemplated by the Registration Statement, as amended as of the date
hereof.
(g) Subsequent to the date hereof there shall not have occurred any of
the following: (i) any suspension or limitation in trading in securities
generally on the New York Stock Exchange, or any setting of minimum prices
for trading on such exchange, or in the Common Stock by the Commission or
The Nasdaq Stock Market; (ii) a moratorium on commercial banking activities
in New York declared by either federal or state authorities; or (iii) any
outbreak or escalation of hostilities involving the United States,
declaration by the United States of a national emergency or war or any
other national or international calamity or emergency if the effect of any
such event specified in this clause (iii) in your judgment makes it
impracticable or inadvisable to proceed with the purchase, sale and
delivery of the Shares being delivered at such Time of Delivery as
contemplated by the Registration Statement, as amended as of the date
hereof.
(h) The Company and Selling Shareholders shall have furnished to you
at such Time of Delivery certificates of officers of the Company and
Selling Shareholders, satisfactory to you as to the accuracy of the
representations and warranties of the Company and Selling Shareholders
herein at and as of such Time of Delivery, as to the performance by the
Company of all of its obligations hereunder to be performed at or prior to
such Time of Delivery, and as to such other matters as you may reasonably
request, and the Company shall have furnished or caused to be furnished
certificates as to the matters set forth in subsections (a) and (f) of this
Section 7, and as to such other matters as you may reasonably request.
8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to indemnify
and hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to the extent provided in Section 8(g), to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon:
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(i) any untrue statement or alleged untrue statement made by the Company in
Section 1 of this Agreement; (ii) any untrue statement or alleged untrue
statement of any material fact contained in (A) the Registration Statement or
any amendment thereto, any 462(b) Registration Statement, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or (B) any
application or other document, or any amendment or supplement thereto, executed
by the Company or based upon written information furnished by or on behalf of
the Company filed in any jurisdiction in order to qualify the Shares under the
securities or blue sky laws thereof or filed with the Commission or any
securities association or securities exchange (each an "Application"); or (iii)
the omission or alleged omission to state in the Registration Statement, any
462(b) Registration Statement or any amendment thereto, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or any
Application a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating, defending against or appearing as a third-party
witness in connection with any such loss, claim, damage, liability or action;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement or any 462(b) Registration
Statement or any amendment thereto, any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto or any Application in reliance upon and
in conformity with written information furnished to the Company by any Selling
Shareholder or by any Underwriter through you expressly for use therein
provided, further, however, that the Company shall not be liable to any
Underwriter in respect of any Preliminary Prospectus to the extent that (i) the
Prospectus did not contain the untrue statement or alleged untrue statement or
omission or alleged omission giving rise to such loss, claim, damage, liability
or action, (ii) the Prospectus was not sent or given to the purchaser of the
Shares in question at or prior to the time at which the written confirmation of
the sale of such Shares was sent or given to such person, and (iii) the failure
to deliver such Prospectus was not the result of the Company's noncompliance
with its obligations under Sections 5(b) and 5(f) hereof. The Company will not,
without the prior written consent of each Underwriter, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim, action,
suit or proceeding (or related cause of action or portion thereof) in respect of
which indemnification may be sought hereunder (whether or not such Underwriter
is a party to such claim, action, suit or proceeding), unless such settlement,
compromise or consent includes an unconditional release of such Underwriter from
all liability arising out of such claim, action, suit or proceeding (or related
cause of action or portion thereof).
(b) The Selling Shareholders, jointly and severally, to the extent provided
in Section 8(g), agrees to indemnify and hold harmless each Underwriter against
any losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon: (i) any untrue statement or alleged untrue statement made
by a Selling Shareholder in Section 1 of this agreement; (ii) any untrue
statement or alleged untrue statement of any material fact contained in (A) the
Registration Statement or any amendment thereto, any 462(b) Registration
Statement, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or (B) any application or other document, or any amendment
or supplement thereto, executed by the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
qualify the Shares under the securities or blue sky laws thereof or filed with
the Commission or any securities association or securities exchange (each an
"Application"); or (iii) the omission or alleged omission to state in the
Registration Statement, any 462(b) Registration Statement or any amendment
thereto, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or any Application a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating, defending against or
appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; provided, however, that no Selling Shareholder
shall be liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in the
Registration Statement or any 462(b) Registration Statement or any amendment
thereto, any Preliminary Prospectus, the Prospectus or any amendment or
17
<PAGE> 18
supplement thereto or any Application in reliance upon and in conformity with
written information furnished to the Company by any Underwriter through you
expressly for use therein provided, further, however, that no Selling
Shareholder shall be liable to any Underwriter in respect of any Preliminary
Prospectus to the extent that (i) the Prospectus did not contain the untrue
statement or alleged untrue statement or omission or alleged omission giving
rise to such loss, claim, damage, liability or action, (ii) the Prospectus was
not sent or given to the purchaser of the Shares in question at or prior to the
time at which the written confirmation of the sale of such Shares was sent or
given to such person, and (iii) the failure to deliver such Prospectus was not
the result of the Company's noncompliance with its obligations under Sections
5(b) and 5(f) hereof. No Selling Shareholder will, without the prior written
consent of each Underwriter, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding (or
related cause of action or portion thereof) in respect of which indemnification
may be sought hereunder (whether or not such Underwriter is a party to such
claim, action, suit or proceeding), unless such settlement, compromise or
consent includes an unconditional release of such Underwriter from all liability
arising out of such claim, action, suit or proceeding (or related cause of
action or portion thereof).
(c) Each Underwriter, severally but not jointly, agrees to indemnify and
hold harmless the Company and each Selling Shareholder against any losses,
claims, damages or liabilities to which the Company or any Selling Shareholder
may become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement or any 462(b) Registration Statement or
any amendment thereto, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto or any Application or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Underwriter through you expressly for use therein provided, or to the extent
that (i) the Preliminary Prospectus contained an untrue statement or alleged
untrue statement or omission or alleged omission giving rise to a loss, claim,
damage, liability or action, (ii) the Prospectus did not contain such statement
or omission and was not sent or given to the purchaser of the Shares in question
at or prior to the time at which the written confirmation of the sale of such
Shares was sent or given to such person, and (iii) the failure to deliver such
Prospectus was not the result of the Company's noncompliance with its
obligations under Sections 5(b) and 5(f) hereof; and the Underwriters, severally
but not jointly, will reimburse the Company and the Selling Shareholders for any
legal or other expenses reasonably incurred by the Company and the Selling
Shareholders in connection with investigating or defending any such loss, claim,
damage, liability or action.
(d) Promptly after receipt by an indemnified party under subsection (a) and
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party);
provided, however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses available
to it or other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnifying party shall not have
the right to assume the defense of such action on behalf of such indemnified
party and such indemnified party shall have the right to select separate counsel
to defend such action on behalf of such indemnified party. After such notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof and approval by such indemnified party of counsel
appointed to defend such action, the indemnifying party will not be liable to
such indemnified party under this Section 8 for any legal or other expenses,
other than reasonable costs of
18
<PAGE> 19
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
or (ii) the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. Nothing in this
Section 8(d) shall preclude an indemnified party from participating at its own
expense in the defense of any such action so assumed by the indemnifying party.
(e) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a), (b)
or (c) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Selling Shareholders, respectively, on the one
hand and the Underwriters on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give the
notice required under subsection (d) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company and the Selling Shareholders, respectively, on
the one hand and the Underwriters on the other in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Shareholders, respectively, on the one hand and the Underwriters on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Selling Shareholders bear
to the total underwriting discounts and commissions received by the
Underwriters. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company and the Selling Shareholders on the one hand
or the Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, the Selling Shareholders and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this subsection
(e) were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this subsection (e). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this subsection (e) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (e), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (e) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(f) The obligations of the Company and the Selling Shareholders under this
Section 8 shall be in addition to any liability which the Company and the
Selling Shareholders may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section 8
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company and the Selling Shareholders and to each
person, if any, who controls the Company and the Selling Shareholders within the
meaning of the Act.
(g) Notwithstanding the foregoing, the liability of each Selling
Shareholder pursuant to this Section 8 or a breach of a representation or
warranty contained in Section 1 shall be limited to an amount equal to the
aggregate net proceeds received by it pursuant to this agreement, and the
liability of the Company pursuant to
19
<PAGE> 20
this Section 8 or a breach of a representation or warranty contained in Section
1 shall be limited to an amount equal to the excess, if any, of the loss, cost,
expense, or liability to which the Underwriters may become subject over the
aggregate of any amounts received by the Underwriters from the Selling
Shareholders pursuant to this Section 8 if the Underwriters have first exercised
reasonable efforts (including available legal proceedings) to recover from the
Selling Shareholders the amount to which they are entitled pursuant thereto.
9. DEFAULT OF UNDERWRITERS. (a) If any Underwriter defaults in its
obligation to purchase Shares at a Time of Delivery, you may in your discretion
arrange for you or another party or other parties to purchase such Shares on the
terms contained herein. If within thirty-six (36) hours after such default by
any Underwriter you do not arrange for the purchase of such Shares, the Company
and the Selling Shareholders shall be entitled to a further period of thirty-six
(36) hours within which to procure another party or other parties satisfactory
to you to purchase such Shares on such terms. In the event that, within the
respective prescribed periods, you notify the Company and the Attorneys-in-Fact
that you have so arranged for the purchase of such Shares, or the Company or
Attorneys-in-Fact notify you that they have so arranged for the purchase of such
Shares, you or the Company or Attorneys-in-Fact shall have the right to postpone
a Time of Delivery for a period of not more than seven days in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other documents or arrangements, and the Company
agrees to file promptly any amendments to the Registration Statement or the
Prospectus that in your opinion may thereby be made necessary. The cost of
preparing, printing and filing any such amendments shall be paid for by the
Underwriters. The term "Underwriter" as used in this Agreement shall include any
person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Shareholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of Shares to be purchased at such Time of Delivery, then
the Company shall have the right to require each non-defaulting Underwriter and
the Selling Shareholders to purchase the number of Shares which such Underwriter
agreed to purchase hereunder at such Time of Delivery and, in addition, to
require each non-defaulting Underwriter to purchase its pro rata share (based on
the number of Shares which such Underwriter agreed to purchase hereunder) of the
Shares of such defaulting Underwriter or Underwriters for which such
arrangements have not been made, but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
10. TERMINATION. (a) This Agreement may be terminated with respect to the
Firm Shares or any Optional Shares in your sole discretion by notice to the
Company and the Attorneys-in-Fact given prior to the First Time of Delivery or
any Subsequent Time of Delivery, respectively, in the event that (i) any
condition to the obligations of the Underwriters set forth in Section 7 hereof
has not been satisfied, or (ii) the Selling Shareholders shall have failed,
refused or been unable to deliver the Shares or the Company or Selling
Shareholders have failed to perform all obligations and satisfy all conditions
on their part to be performed or satisfied hereunder at or prior to such Time of
Delivery, in either case other than by reason of a default by any of the
Underwriters. If this Agreement is terminated pursuant to this Section 10(a)(i),
the Company and Selling Shareholders and if this Agreement is terminated
pursuant to Section 10(a)(ii), the Selling Shareholders will reimburse the
Underwriters severally upon demand for all out-of-pocket expenses (including
counsel fees and disbursements) that shall have been incurred by them in
connection with the proposed purchase and sale of the Shares. The Company and
Selling Shareholders shall not in any event be liable to any of the Underwriters
for the loss of anticipated profits from the transactions covered by this
Agreement.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you, the Company and
Selling Shareholders as provided in Section 9(a), the aggregate number of such
Shares which remains unpurchased exceeds one-eleventh of the aggregate number of
Shares to be purchased at such Time of Delivery, or if the Company and Selling
Shareholders shall not exercise the right described in Section 9(b) to require
non-defaulting Underwriters to purchase Shares of a defaulting Underwriter or
Underwriters, then this Agreement (or, with respect to a Subsequent Time of
Delivery, the obligations of the Underwriters to purchase and of the Selling
Shareholders to sell the Optional Shares) shall
20
<PAGE> 21
thereupon terminate, without liability on the part of any non-defaulting
Underwriter or the Company and Selling Shareholders, except for the expenses to
be borne by the Company and the Underwriters as provided in Section 6 hereof and
the indemnity and contribution agreements in Section 8 hereof; but nothing
herein shall relieve a defaulting Underwriter from liability for its default.
11. SURVIVAL. The respective indemnities, agreements, representations,
warranties and other statements of the Company and the Selling Shareholders, the
Company's officers and the several Underwriters, as set forth in this Agreement
or made by or on behalf of them, respectively, pursuant to this Agreement, shall
remain in full force and effect, regardless of any investigation (or any
statement as to the results thereof) made by or on behalf of any Underwriter or
any controlling person referred to in Section 8(f) or the Company and the
Insurance Subsidiaries, or any officer or director or controlling person of the
Company or the Insurance Subsidiaries referred to in Section 8(f), and shall
survive delivery of and payment for the Shares. The respective agreements,
covenants, indemnities and other statements set forth in Sections 6 and 8 hereof
shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement.
12. NOTICES. All communications hereunder shall be in writing and, if
sent to any of the Underwriters, shall be mailed, delivered or telegraphed and
confirmed in writing to you in care of The Robinson-Humphrey Company, Inc., 3333
Peachtree Road, N.E., Atlanta, Georgia 30326, Attention: Corporate Finance
Department (with a copy to King & Spalding, 191 Peachtree Street, Atlanta,
Georgia 30303, Attention: Randolph C. Coley; if sent to the Company, shall be
mailed, delivered or telegraphed and confirmed in writing to the Company at 401
East Jackson Street, Suite 1700, Tampa, Florida 33602, Attention: Laurel J.
Lenfestey (with a copy to Holland & Knight, 400 North Ashley Drive, Suite 2050,
Tampa, Florida 33602, Attention: Michael L. Jamieson) and if sent to the Selling
Shareholders Poe Investments, Inc., P.O. Box 1348, Tampa, Florida 33601,
Attention: William F. Poe (with a copy to Shackleford Farrior Stallings & Evans,
P.A., 501 East Kennedy Boulevard, Tampa, Florida 33602, Attention: John I. Van
Voris).
13. REPRESENTATIVES. You will act for the several Underwriters in
connection with the transactions contemplated by this Agreement, and any action
under this Agreement taken by you jointly or by The Robinson-Humphrey Company,
Inc. will be binding upon all the Underwriters.
14. BINDING EFFECT. This Agreement shall be binding upon, and inure
solely to the benefit of, the Underwriters and the Company and to the extent
provided in Sections 8 and 10 hereof, the officers and directors and controlling
persons referred to therein and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia without giving effect to any
provisions regarding conflicts of laws.
16. COUNTERPARTS. This Agreement may be executed by any one or more of
the parties hereto in any number of counterparts, each of which shall be deemed
to be an original, but all such counterparts shall together constitute one and
the same instrument.
21
<PAGE> 22
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us one of the counterparts hereof, and upon the
acceptance hereof by The Robinson-Humphrey Company, Inc., on behalf of each of
the Underwriters, this letter will constitute a binding agreement among the
Underwriters and the Company. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is pursuant to the authority set
forth in the Master Agreement among Underwriters, a copy of which shall be
submitted to the Company for examination, upon request, but without warranty on
your part as to the authority of the signers thereof.
Very truly yours,
POE & BROWN, INC.
By:
------------------------------------
Name:
Title:
[Selling Shareholder Signatures]
22
<PAGE> 23
The foregoing Agreement is hereby
confirmed and accepted as of the date
first written above at Atlanta,
Georgia.
THE ROBINSON-HUMPHREY COMPANY, INC.
SMITH BARNEY INC.
By: The Robinson-Humphrey Company,
Inc.
By:
----------------------------------
(Authorized Representative)
On behalf of each of the Underwriters
23
<PAGE> 24
SCHEDULE I
LIST OF SELLING SHAREHOLDERS
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
NUMBER OF FIRM SOLD IF
SHARES TO BE MAXIMUM OPTION
SELLING SHAREHOLDERS SOLD EXERCISED
- ------------------------------------------------------------ -------------- ------------------
<S> <C> <C>
William F. Poe, Sr. ........................................ 80,760 --
Elizabeth Poe............................................... 13,775 --
William F. Poe, Sr.
Grantor Retained Annuity Trust............................ 600,000 --
William F. Poe Foundation................................... 50,000 --
W. F. Poe Syndicate, Inc. .................................. 108,719 143,750
William F. Poe, Jr. ........................................ 5,623 --
Karen Poe Foster............................................ 13,889 --
Marilyn Poe Lunskis......................................... 14,990 --
Janice Poe Mitchell......................................... 8,542 --
Charles E. Poe.............................................. 22,717 --
Charles W. Poe & Co. ....................................... 80,611 70,000
Charles W. Poe Grantor
Retained Annuity Trust.................................... 289,662 --
Charles W. Poe Revocable
Living Trust.............................................. 8,438 --
Lynn Poe.................................................... 5,438 --
Reynolds Children's Trust................................... 4,562 --
Jennifer Poe Wolf........................................... 5,438 --
Wolf Children's Trust....................................... 1,750 --
Doris P. Anderson........................................... 101,590 --
J. Wayne Anderson........................................... 4,496 --
Ronald and Joan Anderson.................................... 4,000 --
----------- -----------
Total....................................................... 1,425,000 213,750
=========== ===========
</TABLE>
<PAGE> 25
SCHEDULE II
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
NUMBER OF FIRM PURCHASED IF
SHARES TO BE MAXIMUM OPTION
UNDERWRITER PURCHASED EXERCISED
- ------------------------------------------------------------ -------------- ------------------
<S> <C> <C>
The Robinson-Humphrey Company, Inc. ........................
Smith Barney Inc. ..........................................
--------- ---------
Total.............................................
========= =========
</TABLE>
<PAGE> 26
ANNEX I
Pursuant to Section 7(e) of the Underwriting Agreement, Ernst & Young LLP
shall furnish letters to the Underwriters to the effect that:
(i) they are independent public accountants with respect to the
Company and its consolidated subsidiaries within the meaning the Act and
the applicable published rules and regulations thereunder;
(ii) in their opinion, the consolidated financial statements and
schedules audited by them and included in the Prospectus and the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the related published
rules and regulations thereunder;
(iii) the financial statements of the Company as of and for the
six-month period ended June 30, 1995 were reviewed by them in accordance
with the standards established by the American Institute of Certified
Public Accountants and based upon their review they are not aware of any
material modifications that should be made to such financial statements for
them to be in conformity with generally accepted accounting principles, and
such financial statements comply as to form in all material respects with
the applicable accounting requirements of the Act and the applicable rules
and regulations thereunder;
(iv) On the basis of limited procedures not constituting an audit in
accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information
referred to below, a reading of the latest available interim financial
statements of the Company and its subsidiaries, inspection of the minute
books of the Company and its subsidiaries since the date of the latest
audited financial statements included in the Prospectus, inquiries of
officials of the Company and its subsidiaries responsible for financial
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused them
to believe that:
(A) the unaudited consolidated condensed financial statements of
the Company and its consolidated subsidiaries included in the
Registration Statement and the Prospectus do not comply in form in all
material respects with the applicable accounting requirements of the Act
and the related published rules and regulations thereunder or are not in
conformity with generally accepted principles applied on a basis
substantially consistent with that of the audited consolidated financial
statements included in the Registration Statement and the Prospectus;
(B) as of a specified date not more than 5 days prior to the date
of such letter, there were any changes in the capital stock (other than
the issuance of capital stock upon exercise of employee stock options
that were outstanding on the date of the latest balance sheet included
in the Prospectus) or any increase in the long-term debt or short-term
debt of the Company and its subsidiaries, or any decreases in net
current assets or net assets or other items specified by the
Underwriters, or any increases in any other items specified by the
Underwriters, in each case as compared with amounts shown in the latest
balance sheet included in the Prospectus, except in each case for
changes, increases or decreases which the Prospectus discloses have
occurred or may occur, or which are described in such letter; and
(C) for the period from the date of the latest financial statements
included in the Prospectus to the specified date referred to in clause
(B) there were any decreases in revenues or operating income or the
total or per share amounts of net income or other items specified by the
Underwriters, or any increases in any items specified by the
Underwriters, in each case as compared with the comparable period of the
preceding year and with any other period of corresponding length
specified by the Representatives, except in each case for increases or
decreases which the Prospectus discloses have occurred or may occur, or
which are described in such letter; and
(v) In addition to the audit referred to in their report(s) included
in the Prospectus and the limited procedures, inspection of minute books,
inquiries and other procedures referred to in paragraph (iv) above, they
have carried out certain specified procedures, not constituting an audit in
accordance with
<PAGE> 27
generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Underwriters that
are included in the Registration Statement and the Prospectus, or which
appear in Part II of, or in exhibits or schedules to, the Registration
Statement and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and its
subsidiaries and have found them to be in agreement.
References to the Registration Statement and the Prospectus in this Annex I
shall include any amendment or supplement thereto at the date of such letter.
<PAGE> 1
HOLLAND & KNIGHT
400 NORTH ASHLEY DR.
TAMPA, FLORIDA 33602
EXHIBIT 5
August 4, 1995
Poe & Brown, Inc.
220 South Ridgewood Avenue
Daytona Beach, Florida 32114
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We refer to the Registration Statement on Form S-3 (the "Registration
Statement"), to be filed by Poe & Brown, Inc. (the "Company") with the
Securities and Exchange Commission, for the purpose of registering under the
Securities Act of 1933 an aggregate of 1,638,750 shares of the Company's common
stock, par value $.10 per share (the "Common Stock"), to be offered to the
public pursuant to a proposed underwriting agreement (the "Underwriting
Agreement") between the Company, certain shareholders of the Company, and Smith
Barney Inc. and The Robinson-Humphrey Company, Inc., as representatives of a
group of underwriters.
In connection with the foregoing registration, we have acted as counsel for
the Company, and have examined originals, or copies certified to our
satisfaction, of all such corporate records of the Company, certificates of
public officials, and representatives of the Company, and other documents as we
deemed necessary to require as a basis for the opinion hereafter expressed.
Based upon the foregoing, and having regard for legal considerations that
we deem relevant, it is our opinion that the Common Stock will be, when and if
sold in accordance with the Underwriting Agreement, legally issued, fully paid
and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement, and to the reference to this firm under the caption
"Legal Matters," contained in the prospectus filed as a part thereof.
Very truly yours,
HOLLAND & KNIGHT
By: /s/ MICHAEL L. JAMIESON
------------------------------------
Michael L. Jamieson
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our report dated
January 28, 1995, except for the last paragraph of Note 2, as to which the date
is March 1, 1995, in the Registration Statement (Form S-3) and related
Prospectus of Poe & Brown, Inc. for the registration of 1,638,750 shares of its
common stock.
We also consent to the incorporation by reference therein of our report
with respect to the financial statement schedule of Poe & Brown, Inc. for the
years ended December 31, 1994, 1993 and 1992 included in the Annual Report (Form
10-K) for 1994 filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Tampa, Florida
July 31, 1995
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel J. Lenfestey, James A.
Orchard, and Timothy L. Young, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign the Poe & Brown, Inc. Registration Statement on Form S-3
and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, and each or any of them or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: August 1, 1995
/s/ J. Hyatt Brown
-------------------------------------
J. Hyatt Brown
<PAGE> 2
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel J. Lenfestey, James A.
Orchard, and Timothy L. Young, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign the Poe & Brown, Inc. Registration Statement on Form S-3
and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, and each or any of them or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: August 1, 1995
/s/ Bruce G. Geer
-------------------------------------
Bruce G. Geer
<PAGE> 3
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel J. Lenfestey, James A.
Orchard, and Timothy L. Young, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign the Poe & Brown, Inc. Registration Statement on Form S-3
and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, and each or any of them or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: July 31, 1995
/s/ Kenneth E. Hill
-------------------------------------
Kenneth E. Hill
<PAGE> 4
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel J. Lenfestey, James A.
Orchard, and Timothy L. Young, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign the Poe & Brown, Inc. Registration Statement on Form S-3
and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, and each or any of them or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: July 31, 1995
/s/ Jim W. Henderson
-------------------------------------
Jim W. Henderson
<PAGE> 5
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel J. Lenfestey, James A.
Orchard, and Timothy L. Young, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign the Poe & Brown, Inc. Registration Statement on Form S-3
and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, and each or any of them or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: July 28, 1995
/s/ William F. Poe, Sr.
-------------------------------------
William F. Poe, Sr.
<PAGE> 6
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel J. Lenfestey, James A.
Orchard, and Timothy L. Young, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign the Poe & Brown, Inc. Registration Statement on Form S-3
and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, and each or any of them or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: July 28, 1995
/s/ Samuel P. Bell, III
-------------------------------------
Samuel P. Bell, III
<PAGE> 7
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel J. Lenfestey, James A.
Orchard, and Timothy L. Young, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign the Poe & Brown, Inc. Registration Statement on Form S-3
and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, and each or any of them or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: July 31, 1995
/s/ Theodore J. Hoepner
-------------------------------------
Theodore J. Hoepner
<PAGE> 8
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel J. Lenfestey, James A.
Orchard, and Timothy L. Young, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign the Poe & Brown, Inc. Registration Statement on Form S-3
and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, and each or any of them or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: August 1, 1995
/s/ Charles W. Poe
-------------------------------------
Charles W. Poe
<PAGE> 9
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel J. Lenfestey, James A.
Orchard, and Timothy L. Young, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign the Poe & Brown, Inc. Registration Statement on Form S-3
and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, and each or any of them or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: July 28, 1995
/s/ William F. Poe, Jr.
-------------------------------------
William F. Poe, Jr.
<PAGE> 1
EXHIBIT 24.2
POE & BROWN, INC.
CERTIFICATE OF SECRETARY
I, Laurel J. Lenfestey, hereby certify that I am the duly elected,
qualified and acting Secretary of Poe & Brown, Inc. (the "Company"), a Florida
corporation, and that, attached hereto as Attachment A is a true and correct
copy of resolutions duly adopted by the Board of Directors of the Company on
August 2, 1995, and such resolutions are in full force and effect on and as of
the date hereof, not having been amended, altered, or repealed.
IN WITNESS WHEREOF, I have executed this Certificate on August 4, 1995.
POE & BROWN, INC.
By: /s/ Laurel J. Lenfestey
---------------------------------
Name: Laurel J. Lenfestey
Title: Secretary
<PAGE> 2
ATTACHMENT A
RESOLUTIONS ADOPTED BY THE
BOARD OF DIRECTORS
OF POE & BROWN, INC.
PUBLIC OFFERING
---------------
RESOLVED, that the Board of Directors hereby approves in principle the
plan submitted for the sale to the public of shares of Common Stock, $.10 par
value, of the Company through a negotiated sale to an underwriting group;
FURTHER RESOLVED, that the filing with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended
(the "Act"), of a Registration Statement on Form S-3 (the "Registration
Statement"), relating to the sale of shares of Common Stock, $.10 par value
(the "Shares"), to be offered by certain selling shareholders (the "Selling
Shareholders"), including William F. Poe, Sr., William F. Poe, Jr., Charles E.
Poe, and certain of their family members and affiliates, in substantially the
form of the July 28, 1995, draft Registration Statement previously delivered to
the directors, with such changes therein as any executive officer of the
Company shall approve (the execution of the Registration Statement by such
officer, either personally or through a power of attorney, shall conclusively
evidence approval of any such changes reflected therein), is hereby authorized
and approved;
FURTHER RESOLVED, that the execution of the Registration Statement by the
appropriate officers and directors of the Company, including J. Hyatt Brown,
President and Chief Executive Officer, and Timothy L. Young, Vice President,
Treasurer and Chief Financial Officer, either personally or through a power of
attorney, is hereby authorized and approved;
<PAGE> 3
FURTHER RESOLVED, that the filing with the Commission of amendments to
the Registration Statement as may be required by the rules promulgated by the
Commission (the "Rules"), requested or ordered by the Commission, or otherwise
deemed appropriate, advisable, or convenient by any executive officer of the
Company is hereby authorized and approved, and that the execution and filing of
such amendments on behalf of the Company by any executive officer in such form,
and with such content, as such officer may determine, is hereby authorized and
approved, such execution and filing to be conclusive evidence of the approval
of such amendments and the filing thereof; and that the execution thereof,
either personally or through a power of attorney, by certain officers and at
least a majority of the Board of Directors of the Company, according to the
Rules, is hereby authorized and approved;
FURTHER RESOLVED, that Laurel J. Lenfestey, Vice President, Secretary
and General Counsel of the Company, is hereby designated as Agent for Service
with respect to the Registration Statement with all attendant powers provided
by the Rules;
FURTHER RESOLVED, that Laurel J. Lenfestey, Vice President, Secretary
and General Counsel of the Company, is hereby authorized to execute on behalf
of the Company a Registration Agreement with the Selling Shareholders in the
offering, addressing certain issues related to the offering, and containing
provisions whereby the Selling Shareholders will pay all underwriting discounts
and commissions relating to the sale of their shares and all fees and expenses
of counsel for the selling shareholders, as well as one-half of the other
expenses of the offering;
FURTHER RESOLVED, that the Registration Agreement may contain such
other terms and conditions, including customary indemnification provisions,
that the President of the Company shall approve (Ms. Lenfestey's execution
thereof shall conclusively evidence such approval of any such provisions);
FURTHER RESOLVED, that Ms. Lenfestey is hereby authorized to execute
on behalf of the Company an Underwriting Agreement with The Robinson-Humphrey
Company, Inc. and Smith Barney Inc., as representatives of the several
underwriters with respect to the proposed offering, and such Underwriting
Agreement may contain provisions that are customary with respect to such
agreements and such other terms
<PAGE> 4
and conditions as the President of the Company shall approve (Ms. Lenfestey's
execution of the Underwriting Agreement shall conclusively evidence such
approval of any such provisions);
FURTHER RESOLVED, that the law firm of Holland & Knight is hereby
authorized to act as counsel for the Company in connection with matters
relating to the offering and sale of the Shares.
