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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Fiscal Year Ended December 31, 1995 Commission file number 0-15981
HILB, ROGAL AND HAMILTON COMPANY
(Exact name of registrant as specified in its charter)
Virginia 54-1194795
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4235 Innslake Drive
Glen Allen, Virginia 23060
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(804) 747-6500
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, no par value
(Title of class)
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (229.405 of this
chapter) is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K [ ].
State the aggregate market value of the voting stock held by
non-affiliates of the registrant.
$177,064,401 as of March 5, 1996
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest
practicable date.
Class Outstanding at March 5, 1996
Common Stock, no par value 13,742,367
Documents Incorporated by Reference
Portions of the registrant's 1995 Annual Report to Shareholders
are incorporated by reference into Parts I and II of this
report.
Portions of the registrant's Proxy Statement for the 1996
Annual Meeting of Shareholders are incorporated by reference
into Part III of this report.
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PART I
ITEM 1. BUSINESS
The Company
Hilb, Rogal and Hamilton Company (the Company), through its network
of wholly-owned subsidiary insurance agencies (the Agencies), places
various types of insurance, including property, casualty, marine, aviation
and employee benefits insurance, with insurance underwriters on behalf of
its clients. The Agencies operate 56 offices in 16 states and five
Canadian provinces. The Company's client base ranges from personal to
large national accounts and is primarily comprised of medium-size
commercial and industrial accounts. Insurance commissions accounted
for approximately 93% of the Company's total revenues in 1995. The
Company also advises clients on risk management and employee benefits and
provides claims administration and loss control consulting services to
clients, which contributed approximately 2% of revenues in 1995.
The Company has grown principally through acquisitions of independent
agencies with significant local market shares in small to medium-size
metropolitan areas. Since 1984, the Company has acquired 148 independent
agencies. The Company's growth strategy emphasizes acquisitions of
established independent agencies staffed by local professionals and
centralization of certain administrative functions to allow agents to
focus on business production. The Company believes that a key to its
success has been a strong emphasis on local client service by
experienced personnel with established community relationships. The
Company generally pursues growth in markets where it believes it can
achieve a significant market position. The Company expects to continue
seeking opportunities to add qualified agencies in both existing and new
markets.
The Agencies act as independent agents representing a large number of
insurance companies, which gives the Company access to specialized
products and capacity needed by its clients. Agencies are staffed to
handle the broad variety of insurance needs of their clients.
Additionally, certain Agencies have developed special expertise in
areas such as aviation, construction and marine insurance services, and
this expertise is made available to clients throughout the Company.
The Company has established direct access to certain foreign insurance
markets without the need to share commissions with excess and surplus
lines brokers. This direct access allows the Company to enhance its
revenues from insurance products written by foreign insurers and allows
it to provide a broader array of insurance products to its clients.
While the Agencies have historically been largely decentralized with
respect to client solicitation, account maintenance, underwriting
decisions, selection of insurance carriers and areas of insurance
specialization, the Company maintains centralized administrative
functions, including cash management and investment, human resources and
legal functions, through its corporate headquarters. Accounting records
and systems are maintained at each Agency, but the Company requires each
Agency to comply with standardized financial reporting and control
requirements. Through its internal auditing department, Company
personnel periodically visit each Agency and monitor compliance with
internal accounting controls and procedures.
In the latter part of 1995, the Company created regional operating
units to coordinate the efforts of several local offices in a
geographic area to focus on markets, account retention, client service
and new business production. The five U.S. regions are the Mid-Altantic
(Pennsylvania, New Jersey, Maryland and Virginia); Georgia/Alabama;
Florida; Texas and California. The Canadian operation with its six
locations form a sixth region. Regional management of a sizeable mass
of coordinated and complementary resources will enable each Agency to
address a broader spectrum of client needs and respond more quickly
and expertly than each could do on a stand-alone basis. Additionally,
operations were streamlined by merging multiple locations in the same city
into a single profit center and converting smaller locations into sales
offices of a larger profit center in the same region.
The Company derives income primarily from commissions on the sale of
insurance products to clients paid by the insurance underwriters with
whom the Agencies place their clients' insurance. The Company acts as
an agent in soliciting, negotiating and effecting contracts of insurance
through insurance companies and occasionally as a broker in procuring
contracts of insurance on behalf of insureds. The Company derived in
excess of 98% of its commission and fee revenue in 1995 from the sale of
insurance products, principally property and casualty insurance.
Accordingly, no breakdown by industry segments has been made. The
balance is primarily derived from employee benefits and third party
claims administration. Within its range of services, the Company also
places surplus lines coverages (coverages not available from insurance
companies licensed by the states in which the risks are located) with
surplus lines insurers for various specialized risks.
Insurance agents' commissions are generally a percentage of the
premium paid by the client. Commission rates vary substantially within
the insurance industry. Commissions depend upon a number of factors,
including the type of insurance, the amount of the premium, the
particular insurer, the capacity in which the Company acts and the scope
of the services it renders to the client. In some cases, the Company or
an Agency is compensated by a fee paid by the client directly. The
Company may also receive contingent commissions which are based on the
profit an insurance company makes on the overall volume of business
placed with it by the Company. Contingent commissions are generally
received in the first quarter of each year and, accordingly, may cause
first quarter revenues and earnings to vary from other quarterly results.
The Company provides a variety of professional services to assist
clients in analyzing risks and in determining whether protection against
risks is best obtained through the purchase of insurance or through
retention of all or a portion of those risks and the adoption of risk
management policies and cost-effective loss control and prevention
programs.
No material part of the Company's business is dependent on a single
client or on a few clients, and the Company does not depend on a single
industry or type of client for a substantial amount of its business. In
1995, the largest single client accounted for less than .9% of the
Company's total revenues.
Operating History and Acquisition Program
The Company was formed in 1982 to acquire and continue an existing
insurance agency network. At that time, the Company undertook a program
of consolidating agencies, closing or selling unprofitable locations and
acquiring new agencies. Since 1984, a total of 148 agencies have been
acquired. Ninety-eight of those agencies were acquired using the
purchase method of accounting at a total purchase price of approximately
$93.6 million. In a purchase acquisition, the purchase price of an
agency is typically paid in cash and deferred cash payments. In some
cases, a portion of the purchase price may also be paid in Common
Stock. Since November 1, 1988, 50 agencies have been acquired under the
pooling-of-interests method of accounting in exchange for a total of
approximately 8.1 million shares of Common Stock of the Company. The
Company believes that the public market for its Common Stock, existing
since 1987, has and will continue to enhance its ability to acquire
agencies.
The Company has substantial experience in acquiring insurance
agencies. Each acquisition candidate is subjected to a due diligence
process in which the Company evaluates the quality and reputation of the
business and its management, revenues and earnings, administrative and
accounting records, growth potential and location. For candidates that
pass this screening process, the Company uses a pricing method that
emphasizes pro forma revenues, profits and tangible net worth. As a
condition to completing an acquisition, the Company requires that the
principals execute Company-prepared covenants not to compete
and other restrictive covenants and that agents execute non-piracy
agreements. Once the acquisition is consummated, the Company takes steps
to introduce its procedures and protocols and to integrate the agency's
systems and employees into the Company.
Recent Developments
During 1995, the Company acquired 14 insurance agencies. See "Note
J--Acquisitions" of the Notes to Consolidated Financial Statements in the
Company's 1995 Annual Report to Shareholders which is incorporated herein
by reference for a description of these acquisitions.
Subsequent to December 31, 1995, the Company acquired certain assets
and liabilities of three insurance agencies for $1,811,000 ($1,276,000 in
cash and 40,000 shares of Common Stock). These transactions will be
accounted for as purchase transactions. See "Note M--Subsequent Events"
of the Notes to Consolidated Financial Statements in the Company's 1995
Annual Report to Shareholders which is incorporated herein by reference.
Competition
The Company participates in a very competitive industry. It is a
leading independent insurance agency company serving a wide variety of
clients through its network of wholly-owned subsidiaries which operate 56
independent insurance agencies located in 16 states and five Canadian
provinces. Many of the Company's competitors are larger and have greater
resources than the Company and operate on an international scale.
In some of the Agencies' cities, because no major national insurance
broker has established a presence, the Company competes with local agents,
some of whom may be larger than the Company's local Agency.
The Company's larger competitors also have extensive facilities to
manage captive insurance companies or self-insurance programs for larger
clients, while the Company has only a limited ability to administer
self-insurance and does not currently manage any captive insurance
companies.
The Company is also in competition with certain insurance companies
which write insurance directly for their customers, as well as self-
insurance and other employer sponsored programs.
Employees
As of December 31, 1995, the Company had approximately 1,700
employees. No employees are currently represented by a union. The
Company believes its relations with its employees are good.
Regulation
In every state in which the Company does business, the applicable
Agency or an employee is required to be licensed or to have received
regulatory approval by the state insurance department in order for the
Company to conduct business. In addition to licensing requirements
applicable to the Company, most jurisdictions require individuals who
engage in brokerage and certain insurance service activities to be
licensed personally.
The Company's operations depend on the validity of and its continued
good standing under the licenses and approvals pursuant to which it
operates. Licensing laws and regulations vary from jurisdiction to
jurisdiction. In all jurisdictions, the applicable licensing laws and
regulations are subject to amendment or interpretation by regulatory
authorities, and generally such authorities are vested with general
discretion as to the grant, renewal and revocation of licenses and
approvals.
ITEM 2. PROPERTIES
Except as mentioned below, the Company leases its Agencies' offices.
For information with respect to the Company's lease commitments see "Note
H--Leases" of the Notes to Consolidated Financial Statements in the
Company's 1995 Annual Report to Shareholders which is incorporated herein
by reference.
At December 31, 1995, the Company owned seven buildings in Richmond
and Charlottesville, Virginia; Oklahoma City, Oklahoma; Daytona Beach and
Fort Myers, Florida; Mobile, Alabama and Victoria, Texas (the Richmond,
Virginia building being subject to a mortgage), in which the Agencies in
those cities are located. See "Note D--Long-Term Debt and Override
Commission Agreements" of the Notes to Consolidated Financial Statements
in the Company's 1995 Annual Report to Shareholders which is incorporated
herein by reference for information regarding mortgage notes payable and
related collateral property.
ITEM 3. LEGAL PROCEEDINGS
The Company and its Agencies have no material pending legal
proceedings other than ordinary, routine litigation incidental to the
business, to which it or a subsidiary is a party. With respect to the
routine litigation, upon the advice of counsel, management believes that
none of these proceedings, either individually or in the aggregate, if
determined adversely to the Company, would have a material effect on the
financial position or results of operations of the Company or its ability
to carry on its business as currently conducted.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the registrant are as follows:
Robert H. Hilb, 69, has been Chairman and Chief Executive Officer of
the Company since 1991 and has been a director of the Company since
1982. He was President of the Company from 1982 to 1995.
Andrew L. Rogal, 47, has been President and Chief Operating Officer of
the Company since 1995 and has been a director of the Company since
1989. He was Executive Vice President of the Company from 1991 to
1995 and Senior Vice President of the Company from 1990 to 1991. He
was Chief Executive Officer of Hilb, Rogal and Hamilton Company of
Pittsburgh, Inc., a subsidiary of the Company, from 1990 to
1995 and was President of this subsidiary from 1987 to 1993.
John C. Adams, Jr., 59, has been Executive Vice President of the
Company since 1991 and was a director of the Company from 1987 to 1995.
He was Senior Vice President of the Company from 1989 to 1991. He has
been Chairman of Hilb, Rogal and Hamilton Company of Daytona Beach, Inc.,
a subsidiary of the Company, since 1990 and was Chief Executive Officer
of this subsidiary from 1990 to 1992. Prior thereto, he was President of
this subsidiary.
Timothy J. Korman, 43, has been Executive Vice President, Chief
Financial Officer and Treasurer of the Company since November 1995, and
was Senior Vice President and Treasurer of the Company from 1989 to
November 1995. He was Vice President and Treasurer of the Company from
1982 to 1989. He is a first cousin of Robert S. Ukrop, a director of the
Company.
Dianne F. Fox, 47, has been Senior Vice President-Administration and
Secretary of the Company since 1989 and was Vice President and Secretary
of the Company from 1984 to 1989.
Ronald J. Schexnaydre, 59, has been Senior Vice President of the
Company since 1993 and was Vice President of the Company from 1991 to
1993. He has been Chairman of Hilb, Rogal and Hamilton Company of
Louisiana, a subsidiary of the Company since 1995 and was President
of this subsidiary from 1986 to 1995.
Ann B. Davis, 41, has been Vice President-Human Resources of the
Company since 1993 and was Assistant Vice President-Human Resources of the
Company from 1986 to 1993.
Vincent P. Howley, 47, has been Vice President-Audit of the Company
since 1993 and was Assistant Vice President-Audit of the Company from
1986 to 1993.
Carolyn Jones, 40, has been Vice President and Controller of the
Company since 1991 and was Assistant Vice President and Controller from
1989 to 1991.
Walter L. Smith, 38, has been Vice President and General Counsel of
the Company since 1991 and was Assistant Vice President and General
Counsel from 1988 to 1991. He has been Assistant Secretary of the
Company since 1989.
Robert W. Blanton, Jr., 31, has been Assistant Vice President of the
Company since 1993. He joined the Company in 1990 as Accounting Senior.
Valerie C. Elwood, 34, has been Assistant Vice President of the
Company since 1993. She joined the Company in 1987 and has held various
positions in the accounting department.
Janice G. Pouzar, 49, joined the Company as Assistant Vice President-
Retirement Plans in 1993. Prior thereto, she was employed by William M.
Mercer in Richmond, Virginia from 1972 to 1993.
All officers serve at the discretion of the Board of Directors. Each
holds office until the next annual election of officers, which is held at
the meeting of the Board of Directors after the Annual Meeting of
Shareholders, called to be held on May 7, 1996, or until their successors
are elected. There are no family relationships nor any arrangements or
understandings between any officer and any other person pursuant to which
any such officer was selected, except as noted above.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Information as to market price and dividends per share of Common Stock
and related stockholder matters is incorporated herein by reference to the
material under the heading "Market Price of Common Stock" in the
Company's 1995 Annual Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
Information as to selected financial data is incorporated herein by
reference to the material under the heading "Selected Financial Data" in
the Company's 1995 Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Information as to management's analysis of financial condition and
results of operations is incorporated herein by reference to the material
under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's 1995 Annual Report
to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of independent auditors included on page 12 of Form 10-K
and consolidated financial statements included on pages 8 through 19 of
the Company's 1995 Annual Report to Shareholders are incorporated herein
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information as to the directors of the registrant is incorporated
herein by reference to the material under the heading "Proposal One
Election of Directors" in the Company's definitive Proxy Statement for
the 1996 Annual Meeting of Shareholders. Information as to the executive
officers of the registrant is set forth following Item 4 of Part I of
this report.
ITEM 11. EXECUTIVE COMPENSATION
Information as to executive compensation is incorporated herein by
reference to the material included on pages 7 through 14 in the Company's
definitive Proxy Statement for the 1996 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Information as to security ownership of certain beneficial owners and
management is incorporated herein by reference to the material under the
headings "Security Ownership of Management" and "Security Ownership of
Certain Beneficial Owners" in the Company's definitive Proxy Statement
for the 1996 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information as to certain relationships and related transactions is
incorporated herein by reference to the material under the heading
"Certain Transactions" in the Company's definitive Proxy Statement for
the 1996 Annual Meeting of Shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a) (1) and (2) Financial Statements and Financial Statement Schedules
The following consolidated financial statements of Hilb, Rogal and
Hamilton Company and subsidiaries, included in the Company's 1995 Annual
Report to Shareholders are incorporated herein by reference in Item 8 of
this report:
Consolidated Balance Sheet -- December 31, 1995 and 1994
Statement of Consolidated Income -- Years Ended December 31, 1995, 1994
and 1993
Statement of Consolidated Shareholders' Equity -- Years Ended December 31,
1995, 1994 and 1993
Statement of Consolidated Cash Flows -- Years Ended December 31, 1995,
1994 and 1993
Notes to Consolidated Financial Statements -- December 31, 1995
The following consolidated financial statement schedule of Hilb,
Rogal and Hamilton Company and subsidiaries is included in Item 14(d):
Schedule
Number Description Page Number
II Valuation and Qualifying Accounts 13
All other schedules for which provision is made in the
applicable accounting regulation of the Securities and
Exchange Commission are not required under the
related instructions or are inapplicable, and therefore
have been omitted.
(3) Exhibits - Index
Exhibit No. Document
3.1 Articles of Incorporation
(incorporated by reference
to Exhibit 4.1 to the
Company's Registration State-
ment on Form S-3, File No.
33-56488, effective March 1,
1994, hereinafter, the Form
S-3)
3.2 Amended and Restated Bylaws
10.1 $20,000,000 Credit Agreement
dated February 12, 1996 Among
Hilb, Rogal and Hamilton Company,
Certain Banks and Crestar Bank,
as Agent of the Banks
10.2 Incentive Stock Option Plan, as
amended (incorporated by reference
to Exhibit 28.27 of the Form S-3)
10.3 Amendment Number Twelve to
Employment Agreement of Robert H. Hilb
(the Employment Agreement is incorp-
orated by reference to Exhibit 10.7 to
the Company's Form 10-K for the year
ended December 31, 1994, File
No. 0-15981)
10.4 Employment Agreement of Andrew L. Rogal
10.5 Hilb, Rogal and Hamilton Company
1989 Stock Plan, as amended
(incorporated by reference to Exhibit
28.28 of the Form S-3)
10.6 Amendment to Hilb, Rogal and Hamilton
Company Supplemental Executive
Retirement Plan (Supplemental Executive
Retirement Plan is incorporated by reference
to Exhibit 10.9 to the Company's Form 10-K
for the year ended December 31, 1994, File
No. 0-15981)
10.7 Hilb, Rogal and Hamilton Company
Outside Directors Deferral Plan (incorp-
orated by reference to Exhibit 10.10
to the Company's Form 10-K for the
year ended December 31, 1994, File
No. 0-15981)
10.8 Promissory Note dated September 25,
1995, payable by Andrew L. Rogal to
Hilb, Rogal and Hamilton Company
10.9 Stock Pledge Agreement, dated September
25, 1995, between Andrew L. Rogal
and Hilb, Rogal and Hamilton Company
11 Statement Regarding Computation
of Per Share Earnings
13 1995 Annual Report to Shareholders
22 Subsidiaries of Hilb, Rogal and
Hamilton Company
23 Consent of Ernst & Young LLP
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of 1995.
(c) Exhibits
The response to this portion of Item 14 as listed in Item 14(a)(3)
above is submitted as a separate section of this report.
(d) Financial Statement Schedules
The reports of independent auditors and financial statement schedule
(as indexed in Item 14(a)(2)) of this report are as follows:
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
-------------------------------------------------
Shareholders and Board of Directors
Hilb, Rogal and Hamilton Company
We have audited the consolidated balance sheet of Hilb, Rogal and Hamilton
Company and subsidiaries as of December 31, 1995 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, 1995
(incorporated by reference herein). Our audits also included the
financial statement schedule listed in the index at Item 14(a). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Hilb, Rogal and Hamilton Company and subsidiaries at December
31, 1995 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, 1995, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set
forth therein.
Ernst & Young LLP
Richmond, Virginia
February 14, 1996
<PAGE>
HILB, ROGAL AND HAMILTON COMPANY
AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
Additions
Charged
Balance at Charged to Other Balance
Beginning to Costs Accounts Deductions at End
Description of Period and Expenses (Describe)* (Describe)** of Period
<S> <C> <C> <C> <C> <C>
Year ended
December 31, 1995:
Allowance for doubt-
ful accounts....... $2,348,000 $1,500,000 $121,000 $2,197,000 $1,772,000
Year ended
December 31, 1994:
Allowance for doubt-
ful accounts....... 2,390,000 1,239,000 70,000 1,351,000 2,348,000
Year ended
December 31, 1993:
Allowance for doubt-
ful accounts....... 2,065,000 1,335,000 96,000 1,106,000 2,390,000
</TABLE>
______________________
* Recoveries
** Bad debts written off
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant, Hilb, Rogal and Hamilton Company, has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
HILB, ROGAL AND HAMILTON COMPANY
By /s/ Robert H. Hilb
Robert H. Hilb, Chairman
Date March 25, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Robert H. Hilb Chairman (principal executive March 25, 1996
Robert H. Hilb officer) and Director
/s/ Timothy J. Korman Executive Vice President and March 25, 1996
Timothy J. Korman Treasurer (principal financial
officer)
/s/ Carolyn Jones Vice President and Controller March 25, 1996
Carolyn Jones (principal accounting officer)
/s/ Andrew L. Rogal Director March 25, 1996
Andrew L. Rogal
Director
Philip J. Faccenda
/s/ Robert S. Ukrop Director March 25, 1996
Robert S. Ukrop
Director
Thomas H. O'Brien
Director
J.S.M. French
/s/ Norwood H. Davis, Jr. Director March 25, 1996
Norwood H. Davis, Jr.
/s/ Theodore L. Chandler, Jr. Director March 25, 1996
Theodore L. Chandler, Jr.
</TABLE>
AMENDED AND RESTATED
BYLAWS
OF
HILB, ROGAL AND HAMILTON COMPANY
* * * * * * * *
ARTICLE I
Shareholders
The shareholders of the Corporation shall be those who appear
on the books of the Corporation as holders of one or more shares of the
capital stock, and the original stock transfer books shall be prima facie
evidence as to the identity of the shareholders entitled to vote at any
meeting of shareholders.
ARTICLE II
Meetings of the Shareholders
Section 1. The annual meeting of the shareholders of the
Corporation shall be held on the first Tuesday in May of each year during
normal business hours, at the ofFices of the Corporation, or at such
other place within or without the Commonwealth of Virginia as may from
time to time be fixed by the Board of Directors, or in the absence of
action by the Directors, as may be fixed by the Chairman.
Section 2. Special meetings of the shareholders of the
Corporation may be held at any time, at such place within or without the
Commonwealth of Virginia as shall be designated in the notice of any such
meeting, upon the call of the Chairman, the President, or by order of the
Board of Directors, whenever they deem it necessary.
Section 3. Written notice of any annual or special meeting of
the shareholders shall be mailed to the address of or be delivered to each
shareholder of record entitled to vote at such meeting not less than ten
(10) nor more than fifty (50) days prior to the date of such meeting;
provided, however, that written notice of any meeting to act on an
amendment of the Articles of Incorporation or on a reduction of stated
capital or on a plan of merger, consolidation or exchange shall be given
not less than twenty-five (25) nor more than fifty (50) days prior to the
date of such meeting. In the case of a special meeting, the notice shall
include a statement of the purpose or purposes for which the meeting is
called.
Section 4. To constitute a quorum, shareholders holding a
majority of all the outstanding shares of stock of the Corporation
entitled to vote must be present, either in person or by proxy, each
share of such stock being entitled to one vote, which may be given
personally or by duly authorized proxy. Less than a quorum may adjourn
the meeting to a fixed time and place, no further notice of any adjourned
meeting being required.
Section 5. The Board of Directors may fix in advance a date
as the record date for the purposes of determining shareholders entitled
to notice of or to vote at any meeting of the shareholders or any
adjournment thereof, or entitled to receive payment of any dividend, or
in order to make a determination of shareholders for any other proper
purpose, such date not to be more than seventy (70) days preceding the
date on which the particular action requiring such determination of the
shareholders is to be taken.
Section 6. The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make, at least ten
(10) days before each meeting of shareholders, a complete list of the
shareholders entitled to vote at such meeting or any adjournment thereof,
with the address of and the number of shares held by each. Such list,
for a period of ten (10) days prior to such meeting, shall be kept on
file at the registered office of the Corporation or at its principal
place of business or at the office of its transfer agent or registrar and
shall be subject to inspection by any shareholder at any time during
usual business hours. Such list shall also be produced and kept
open at the time and place of the meeting and shall be subject to the
inspection of any shareholder during the whole time of the meeting for
the purposes thereof. The original stock transfer books shall be prima
facie evidence as to who are the shareholders entitled to examine such
list or transfer books or to vote at any meeting of shareholders.
Section 7. The Chairman shall preside over all meetings of the
shareholders of the Corporation at which he is present. If the
Chairman is not present, the President shall preside. If neither of such
officers is present, a chairman of the meeting shall be elected at the
meeting by those authorized to vote at the meeting. The Secretary of the
Corporation shall record the minutes of all the meetings if he is present
at the meeting. If he is not present, the Chairman shall appoint a
secretary of the meeting. The chairman of the meeting may appoint one
or more inspectors of the election to determine the qualification of
voters, the validity of proxies, and the results of ballots.
ARTICLE III
Board of Directors
Section 1. The affairs and business of the Corporation shall be
under the management and control of the Board of Directors, which shall be
composed of not less than three (3) nor more than fourteen (14) members,
as may be fixed from time to time by the shareholders. Directors need
not be residents of Virginia or shareholders of the Corporation. No
person other than Robert H. Hilb, a founder of the Corporation, may stand
for election as a Director if before the end of the term for which the
election is to be held that person will have attained the age of seventy
(70) years. The Board of Directors may elect, employ or appoint such
other officers and agents as it deems necessary.
Section 2. The Directors shall be elected at each annual meeting
of the shareholders of the Corporation held at the time and place
hereinbefore designated. No individual shall be named or elected as a
director without his prior consent. Vacancies in the Board, whether
caused by death, resignation, or otherwise, may be filled by the Board of
Directors, and the persons so elected shall hold office until the next
annual meeting of the shareholders, or until their successors are elected;
provided, however, that nothing herein shall prevent the shareholders
from filling any such vacancies existing at the time of any meeting of
the shareholders, annual or special, or created at the time of such
meeting by resignations accepted, or otherwise, or additional places
created by an increase in the Board authorized at such meetings. The
shareholders may increase the Board of Directors from time to time and may
provide that the additional places shall be filled by the Board of
Directors at such time as they may deem proper. Should the number of
Directors at any time be increased, the resulting additional places on
the Board shall be considered vacancies to be filled, as above provided,
by the Board of Directors or shareholders. Until any such additional
places shall have been filled by the election of Directors, the total
number of Directors of the Corporation, for the purposes of determining a
quorum, shall be the number of Directors actually elected and serving
at the time of any given meeting.
Section 3. The Board of Directors shall hold its meetings at
such time and place as shall be designated, or in the absence of
designation by the Board of Directors, at such place as shall be
designated in the notice. A meeting may be called at any time by the
Chairman or by any two Directors. Due notice of the time and place of
each meeting of the Directors shall be given by the Secretary
personally, or by mail or telegraph, to all Directors. A majority of
the Directors shall constitute a quorum. The Chairman shall
preside over all meetings of the Board of Directors at which he is
present. If the Chairman is not present, the President shall preside.
If neither of such officers is present, a chairman of the meeting shall
be elected at the meeting by the Directors present at the meeting.
Section 4. The Board of Directors may, by resolution adopted
by a majority of the Directors, designate three or more of their number,
of whom the Chairman shall be one ex officio, to constitute an Executive
Committee, which shall have and exercise all the powers of the Board that
may be lawfully delegated, including the power to authorize the seal of
the Corporation to be affixed to such documents as may require it, but
shall not be empowered to declare dividends. The acts and records of
said Executive Committee shall at all times be subject to the supervision
and control of the Board of Directors when in meeting assembled. The
Secretary shall attend and keep a record of the meetings of the said
Executive Committee.
Section 5. The vote of a majority of disinterested Directors and
the vote of a majority of independent Directors shall be required to
approve any contract, lease, loan or transaction of any kind between the
Corporation and any executive officer, Director or affiliated person of
the Corporation.
ARTICLE IV
Officers
The executive officers of the Corporation shall be a Chairman,
a President, a Secretary, a Treasurer, and such Executive Vice Presidents,
Senior Vice Presidents, Vice Presidents, Assistant Secretaries, Assistant
Treasurers, Assistant Vice Presidents, or other officers as may be deemed
necessary from time to time by the Board of Directors. Assistant Officers
shall have the same authority and power as the primary officeholder. Any
two or more offices may be held by the same person, except the offices of
Chairman, President and Secretary. All of the officers shall be elected
by the Board of Directors each year as soon after the annual meeting of
the shareholders as convenient.
ARTICLE V
Chairman, President and Vice President
Section 1. The Chairman shall be the Chief Executive Officer
of the Corporation. He shall attend and preside at all meetings of the
shareholders and all meetings of the Board of Directors at which he is
present, exercise general supervision over the property, business and
affairs of the Corporation and do everything and discharge all duties
generally pertaining to his office as the executive head of a Corporation
of this character, subject to the control of the Board of Directors. He
may at each annual meeting of the shareholders render a general report
of the Corporation's condition and business.
Section 2. The President shall be the Chief Operating Officer
of the Corporation. He shall supervise the day-to-day operations and
affairs of the Corporation and do everything and discharge all duties
generally pertaining to his office as the operating head of a corporation
of this character and such additional duties as may be delegated to him
from time to time by the Chairman, subject to the control of the
Chairman and the Board of Directors.
Section 3. In the instance of the inability of the Chairman to act
on account of absence, illness, or for any other reason, his duties shall
be performed during the period of such inability by the President. In
the instance of the inability of the President to act on account of
absence, illness, or for any other reason, his duties shall be performed
during the period of such inability by the most senior vice president
available. The vice presidents in the order of their seniority ranking
shall be Executive Vice President, Senior Vice President and Vice
President. The acts of the vice president, duly authorized
and performed under such conditions, shall be the acts of, and binding
upon the Corporation. If a vice president who has temporarily assumed
the duties of the President, is unable for any reason to continue to
perform such duties, the same shall be performed by the Vice President
next in seniority ranking who is available for the purpose. The
President if he should act as Chairman under this bylaw shall report
fully to the Chairman upon the Chairman's return to duty with respect
to all actions taken and transactions accomplished by the
President during the absence or disability of the Chairman. A vice
president who acts as President under this bylaw shall report fully to
the President upon his return to duty with respect to all actions taken
and transactions accomplished by him during the absence or disability of
the President.
Section 4. In the absence of the Chairman, the President and
any Vice President, the Board of Directors may designate some other
individual to discharge such executive duties as may be required for the
elapsed period.
ARTICLE VI
Treasurer
Section 1. The Treasurer shall have charge and custody of the
funds, securities of whatsoever nature, and other like property of the
Corporation; he shall endorse checks, notes, and bills for deposit only
as may be required for the business of the Corporation; he shall have
authority to collect the funds of the Corporation, and shall deposit same
in such bank or banks as the Board may designate, and the same shall not
be drawn therefrom except by checks to be signed in the manner designated
herein.
ARTICLE VII
Secretary
The Secretary shall sign, with the Chairman or the President, all
certificates of stock. The Secretary shall keep a book containing the
names of all persons who are now, or may hereafter, become shareholders
of the Corporation, showing their place of residence, the number of
shares held by them respectively, and the time when they respectively
become the owners of such shares. He shall keep a record of the
proceedings of the meetings of the shareholders and Directors of the
Corporation and of the Executive Committee. He shall have charge of the
seal of the Corporation and shall perform such other duties as pertain
to said office or as the Chairman or Board of Directors may from time to
time require.
ARTICLE VIII
Certificates of Stock
Section 1. Each shareholder shall be entitled to a certificate or
certificates of stock in such form as may be approved by the Board of
Directors, signed by the Chairman, or the President, and by the Secretary
and with the corporate seal impressed thereon.
Section 2. All transfers of stock of the Corporation shall be
made upon its books by surrender of the certificate for the shares
transferred accompanied by an assignment in writing by the holder and may
be accomplished either by the holder in person or by a duly authorized
attorney in fact.
Section 3. In case of the loss, mutilation, or destruction of a
certificate of stock, a duplicate certificate may be issued upon such
terms not in conflict with law as the Board of Directors may prescribe.
Section 4. The Board of Directors may also appoint one or
more Transfer Agents and Registrars for its stock and may, at its option,
require stock certificates to be both countersigned by a Transfer Agent
and registered by a Registrar. If certificates of capital stock of the
Corporation are signed both by a Transfer Agent and Registrar, the
signatures thereon of the officers of the Corporation and the seal of the
Corporation thereon may be facsimiles, engraved or printed. In case
any officer or officers who shall have signed, or whose facsimile
signature or signatures shall have been used on, any such certificate or
certificates shall cease to be such officer or officers of
the Corporation, whether because of death, resignation or otherwise,
before such certificate or certificates shall have been delivered by the
Corporation, such certificate or certificates may nevertheless be issued
and delivered as though the person or persons who signed such certificate
or certificates or whose facsimile signature or signatures shall have
been used thereon had not ceased to be such officer or officers of the
Corporation.
ARTICLE IX
Voting of Stock Held
Unless otherwise provided by a vote of the Board of Directors,
the Chairman may either appoint attorney(s)-in-fact to vote any stock of
any other Corporation owned by this Corporation or may attend any meeting
of the holders of stock of such other Corporation and vote such shares in
person.
ARTICLE X
Checks
All checks, notes, drafts, and bonds given by the Corporation
in the course of its business shall be signed in the name of the
Corporation in such manner as may be designated by the Directors from
time to time.
ARTICLE XI
Fiscal Year
The fiscal year of the Corporation shall end on December 31st
of each calendar year.
ARTICLE XII
Corporate Seal
The corporate seal of this Corporation shall consist of two
concentric circles around the inner edge of which shall be engraved the
words "HILB, ROGAL AND HAMILTON COMPANY" and "VIRGINIA" and
across the center thereof the word "SEAL."
ARTICLE XII
Amendments
These Bylaws may be altered, amended or repealed by a vote
of the majority of the number of Directors present at any meeting of the
Board of Directors, or by the shareholders at any special meeting, when
notice of such proposed amendment has been given in the notice calling
said board meeting or said special meeting of the shareholders, unless
the same shall be waived in the manner prescribed by law, or by the
shareholders at any annual meeting.
ARTICLE XIII
Gender
Wherever the context requires or is appropriate, references in these
Bylaws to the masculine gender of wordsshall include the feminine and vice
versa.
Certified to be the original of the Amended and Restated Bylaws of Hilb,
Rogal & Hamilton Company duly adopted by the Board of Directors of the
Corporation on February 8, 1995.
/s/Dianne F. Fox
Secretary
AMENDMENT OF AMENDED AND RESTATED
BYLAWS ESTABLISHING NOTICE PROCEDURES
FOR SHAREHOLDER BUSINESS AND NOMINATIONS
Article II of the Amended and Restated Bylaws of the
Corporation is hereby amended to insert the following
Section 8 to Article II:
Section 8. Notice of Shareholder Business and Nominations.
A. Annual Meetings of Shareholders.
(1) Nominations of persons for election to the Board
of Directors of the Corporation and the proposal of business to be
considered by the shareholders may be made at an annual meeting of
shareholders (a) pursuant to the Corporation's notice of meeting
("Corporate Initiative"), (b) by or at the direction of the Board of
Directors ("Board Initiative") or (c) by any shareholder of the
Corporation who was a shareholder of record at the time of giving of
notice provided for in this Bylaw, who is entitled to vote at the meeting
and who complies with the notice procedures set forth in this Bylaw
("Shareholder Initiative").
(2) For nominations or other business to be properly
brought before an annual meeting by Shareholder Initiative, the
shareholder must have given timely notice thereof in writing to the
Secretary of the Corporation and such other business must otherwise be
a proper matter for shareholder action. If the annual meeting date of
the Corporation is no more than 30 days before nor 60 days after the
anniversary date of the preceding annual meeting of the Corporation
("Anniversary Date"), then notice of the Shareholder Initiative must be
delivered to the Secretary at the Corporation's principal executive
offices, during normal business hours, no more than 90 nor less than 60
days prior to the Anniversary Date. If the annual meeting date of the
Corporation is more than 30 days before or more than 60 days
after the Anniversary Date, then the notice of Shareholder Initiative
must be delivered to the Secretary of the Corporation's principal
executive offices, during normal business hours, no more than
90 days prior to such annual meeting and no later than the later to
occur of (i) 60 days prior to the annual meeting or (ii) the tenth day
following the day on which public announcement of the date of the
annual meeting was made by the Corporation. If an annual meeting is
adjourned, the public announcement thereof shall not commence a new time
period for delivery of the notice of Shareholder Initiative.
Notice of a Shareholder Initiative shall set forth (a) as to each
person whom the shareholder proposes to nominate for election or
reelection as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each
case pursuant to Regulation 14 A under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and Rule 14a-11 thereunder
(including such person's written consent to being named in the proxy
statement as a nominee and t o serving as a director if elected); (b)
as to any other business that the shareholder proposes to bring before
the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such shareholder
and the beneficial owner, if any , on whose behalf the proposal is made;
and (c) as to the shareholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made (i) the name
and address of such shareholder, as they appear on the Corporation's
books, and of such beneficial owner and (ii) the class or series and
number of shares of the Corporation which are owned beneficially and of
record by such shareholder and such beneficial owner.
(3) Notwithstanding anything in paragraph A(2) of
this Bylaw to the contrary, if the number of directors to be elected to
the Board of Directors of the Corporation is increased and there is no
public announcement by the Corporation naming all of the nominees for
director or specifying the size of the increased Board of Directors at
least 70 days prior to the Anniversary Date, notice of a Shareholder
Initiative shall also be considered timely, but only with respect to
nominees for any new positions created by s uch increase, if it shall be
delivered to the Secretary at the principal executive offices of
the Corporation not later than the close of business on the 10th day
following the day on which such public announcement is first made by the
Corporation.
B. Special Meetings of Shareholders. Only such business shall
be conducted at a special meeting of shareholders as shall have been
brought before the meeting pursuant to the Corporation's notice of
meeting. Nominations of persons for election to the Board of Directors
may be made at a special meeting of shareholders at which directors are
to be elected pursuant to the Corporation's notice of meeting (1) by or at
the direction of the Board of Directors or (2) provided that the Board of
Directors has determined that directors shall be elected at such
meeting, by any shareholder of the Corporation who is a shareholder of
record at the time of giving of notice provided for in this Bylaw, who
shall be entitled to vote at the meeting and who complies with
the notice procedures set forth in this Bylaw. If the Corporation
calls a special meeting of shareholders for the purpose of electing one
or more directors to the Board of Directors, any such shareholder may
nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if
the shareholder's notice required by paragraph A(2) of this Bylaw shall
be delivered to the Secretary at the principal executive offices of the
Corporation not ea rlier than the close of business on the 90th
day prior to such special meeting and not later than the close of
business on the later of the 60th day prior to such special meeting or
the 10th day following the day on which public announcement is first
made of the date of the special meeting and of the no minees proposed by
the Board of Directors to be elected at such meeting. In no event shall
the public announcement of an adjournment of a special meeting commence
a new time period for the giving of a shareholder's notice as described
above.
C. General.
(1) Only such persons who are nominated in accordance with the
procedures set forth in this Bylaw shall be eligible to serve as
directors and only such business shall be conducted at a meeting of
shareholders as shall have been brought before the meeting in accordance
with the procedures set forth in this Bylaw. Except as otherwise
provided by law, the Articles of Incorporation or these Bylaws, the
Chairman of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before the
meeting was made or proposed, as the case may be, in accordance with the
procedures set forth in this Bylaw and, if any proposed nomination or
business is not in compliance with this Bylaw, to declare that such
defective proposal or nomination shall be disregarded.
(2) For purposes of this Bylaw, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a
document publicly filed by the Corporation with the Securities and
Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange
Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a
shareholder shall also comply with all applicable requirements of the
Exchange Act and the rules and re gulations thereunder with respect to
the matters set forth in this Bylaw. Nothing in this Bylaw shall be
deemed to affect any rights (a) of shareholders to request inclusion of
proposals in the Corporation' s proxy statement pursuant to Rule 14a-8
under the Exchange Act or (b) of the holders of any class or series
of Preferred Stock to elect directors under specified circumstances.
$20,000,000
CREDIT AGREEMENT
Dated as of February 12, 1996
Among
HILB, ROGAL, AND HAMILTON COMPANY
The Banks Listed Herein
and
CRESTAR BANK,
as Agent for the Banks
===============================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
LOANS . . . . . . . . . . . .. . . . 1
SECTION 1.01. Commitment.. . . . . . . . . . . . . . . . .. . . . 1
SECTION 1.02. Funding Loans. . . . . . . . . . . . . . . .. . . . 1
SECTION 1.03. Notes; Principal Payments. . . . . . . . . .. . . . 2
SECTION 1.04. Interest.. . . . . . . . . . . . . . . . . .. . . . 2
SECTION 1.05. Commitment Fee; Termination and Reduction of
Commitments. . . . . . . . . . . . . . . . . . . . . .. . . . 3
SECTION 1.06. Additional Interest; Alternate Rate of
Interest; Maximum Interest Rate. . . . . . . . . . . .. . . . 4
SECTION 1.07. Continuation and Conversion of Loans.. . . .. . . . 4
SECTION 1.08. Optional Prepayment of Loans.. . . . . . . .. . . . 6
SECTION 1.09. Manner of Payment. . . . . . . . . . . . . .. . . . 6
SECTION 1.10. Change in Circumstances. . . . . . . . . . .. . . . 7
SECTION 1.11. Change in Legality.. . . . . . . . . . . . .. . . . 7
SECTION 1.12. Indemnity for Eurodollar Loans.. . . . . . .. . . . 8
SECTION 1.13. Capital Adequacy.. . . . . . . . . . . . . .. . . . 8
SECTION 1.14. Reasonableness of Increased Costs. . . . . .. . . . 9
SECTION 1.15. Pro Rata Treatment.. . . . . . . . . . . . .. . . . 9
SECTION 1.16. Certain Notices. . . . . . . . . . . . . . .. . . . 9
ARTICLE II
COLLATERAL AND GUARANTIES . . . . . . .. . . . 10
SECTION 2.01. Unsecured Obligations. . . . . . . . . . . .. . . . 10
SECTION 2.02. Guaranty . . . . . . . . . . . . . . . . . .. . . . 10
SECTION 2.03. Loan Documents . . . . . . . . . . . . . . .. . . . 10
ARTICLE III
CONDITIONS OF LENDING . . . . . . . .. . . . 10
SECTION 3.01. Initial Loans. . . . . . . . . . . . . . . .. . . . 10
SECTION 3.02. All Loans. . . . . . . . . . . . . . . . . .. . . . 11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES . . . . . .. . . . 11
SECTION 4.01. Organization; Powers; Qualification. . . . .. . . . 11
SECTION 4.02. Authorization; Enforceability. . . . . . . .. . . . 12
SECTION 4.03. Consents and Approvals.. . . . . . . . . . .. . . . 12
SECTION 4.04. Financial Statements.. . . . . . . . . . . .. . . . 12
SECTION 4.05. No Material Adverse Change.. . . . . . . . .. . . . 13
SECTION 4.06. Subsidiaries . . . . . . . . . . . . . . . .. . . . 13
SECTION 4.07. Litigation.. . . . . . . . . . . . . . . . .. . . . 13
SECTION 4.08. Tax Returns. . . . . . . . . . . . . . . . .. . . . 13
SECTION 4.09. Properties.. . . . . . . . . . . . . . . . .. . . . 14
SECTION 4.10. Employee Benefit Plans.. . . . . . . . . . .. . . . 14
SECTION 4.11. Government Regulation. . . . . . . . . . . .. . . . 14
SECTION 4.12. Margin Stock.. . . . . . . . . . . . . . . .. . . . 15
SECTION 4.13. No Material Misstatements. . . . . . . . . .. . . . 15
SECTION 4.14. Patents, Trademarks, etc.. . . . . . . . . .. . . . 15
SECTION 4.15. Hazardous Wastes.. . . . . . . . . . . . . .. . . . 16
SECTION 4.16. No Brokers or Finders. . . . . . . . . . . .. . . . 16
SECTION 4.17. No Default of Indebtedness; Solvency.. . . .. . . . 16
SECTION 4.18. Agreements.. . . . . . . . . . . . . . . . .. . . . 16
SECTION 4.19. Compliance with Law. . . . . . . . . . . . .. . . . 17
SECTION 4.20. Labor Controversies. . . . . . . . . . . . .. . . . 17
SECTION 4.21. Non-Material Subsidiaries. . . . . . . . . .. . . . 17
RTICLE V
AFFIRMATIVE COVENANTS . . . . . . . .. . . . 17
SECTION 5.01. Corporate Existence and Maintenance of
Properties.. . . . . . . . . . . . . . . . . . . . . .. . . . 17
SECTION 5.02. Compliance with Laws.. . . . . . . . . . . .. . . . 18
SECTION 5.03. Insurance. . . . . . . . . . . . . . . . . .. . . . 19
SECTION 5.04. Obligations and Taxes. . . . . . . . . . . .. . . . 19
SECTION 5.05. Accounting Methods and Financial Records.. .. . . . 19
SECTION 5.06. Financial Statements, Certificates and
Reports. . . . . . . . . . . . . . . . . . . . . . . .. . . . 19
SECTION 5.07. Access to Premises and Records.. . . . . . .. . . . 21
SECTION 5.08. Notice of Default. . . . . . . . . . . . . .. . . . 21
SECTION 5.09. Notice of Litigation.. . . . . . . . . . . .. . . . 21
SECTION 5.10. Notice of Strikes, Labor Controversies, etc.. . . . 21
SECTION 5.11 Update of Subsidiaries. . . . . . . . . . 22
ARTICLE VI
NEGATIVE COVENANTS . . . . . . . . .. . . . 21
SECTION 6.01. Liens. . . . . . . . . . . . . . . . . . . .. . . . 22
SECTION 6.02. Indebtedness.. . . . . . . . . . . . . . . .. . . . 23
SECTION 6.03. Liquidation, Sale of Assets and Merger.. . .. . . . 23
SECTION 6.04. Investments. . . . . . . . . . . . . . . . .. . . . 24
SECTION 6.05. Guarantees.. . . . . . . . . . . . . . . . .. . . . 25
SECTION 6.06. Breach or Violation. . . . . . . . . . . . .. . . . 25
SECTION 6.07. No Amendments. . . . . . . . . . . . . . . .. . . . 25
SECTION 6.08. Use of Proceeds. . . . . . . . . . . . . . .. . . . 26
SECTION 6.09. Transactions with Affiliates.. . . . . . . .. . . . 26
SECTION 6.10. Restrictive Covenants. . . . . . . . . . . .. . . . 26
SECTION 6.11. Increase in Benefits; New Plans. . . . . . .. . . . 26
ARTICLE VII
FINANCIAL COVENANTS. . . . . . . . .. . . . 27
SECTION 7.01. Adjusted Funded Debt to Adjusted Cash Flow
Ratio. . . . . . . . . . . . . . . . . . . . . . . . .. . . . 27
SECTION 7.02. Consolidated Net Worth.. . . . . . . . . . .. . . . 27
SECTION 7.03. Debt Service Coverage. . . . . . . . . . . .. . . . 27
ARTICLE VIII
EVENTS OF DEFAULT . . . . . . . . .. . . . 27
SECTION 8.01. Events of Default. . . . . . . . . . . . . .. . . . 27
SECTION 8.02. Exercise of Remedies.. . . . . . . . . . . .. . . . 30
ARTICLE IX
THE AGENT . . . . . . . . . . .. . . . 31
SECTION 9.01. Appointment and Authorization. . . . . . . .. . . . 31
SECTION 9.02. Noteholders. . . . . . . . . . . . . . . . .. . . . 31
SECTION 9.03. Consultation with Counsel. . . . . . . . . .. . . . 31
SECTION 9.04. Documents. . . . . . . . . . . . . . . . . .. . . . 31
SECTION 9.05. Resignation or Removal of the Agent. . . . .. . . . 32
SECTION 9.06. Responsibility of the Agent. . . . . . . . .. . . . 32
SECTION 9.07. Notices of Event of Default. . . . . . . . .. . . . 33
SECTION 9.08. Bank Credit Decision.. . . . . . . . . . . .. . . . 33
SECTION 9.09. Indemnification. . . . . . . . . . . . . . .. . . . 33
SECTION 9.10. Benefit of Article IX. . . . . . . . . . . .. . . . 34
ARTICLE X
MISCELLANEOUS . . . . . . . . . .. . . . 34
SECTION 10.01. Modification. . . . . . . . . . . . . . . .. . . . 34
SECTION 10.02. Waiver. . . . . . . . . . . . . . . . . . .. . . . 34
SECTION 10.03. Payment of Expenses.. . . . . . . . . . . .. . . . 35
SECTION 10.04. Notices.. . . . . . . . . . . . . . . . . .. . . . 36
SECTION 10.05. Governing Law.. . . . . . . . . . . . . . .. . . . 37
SECTION 10.06. Invalid Provisions. . . . . . . . . . . . .. . . . 37
SECTION 10.07. Nonliability of Banks.. . . . . . . . . . .. . . . 38
SECTION 10.08. Binding Effect and Assignability. . . . . .. . . . 38
SECTION 10.09. Entirety; Conflicts.. . . . . . . . . . . .. . . . 38
SECTION 10.10. Headings, etc.. . . . . . . . . . . . . . .. . . . 38
SECTION 10.11. Survival. . . . . . . . . . . . . . . . . .. . . . 38
SECTION 10.12. Sale and Transfers etc. . . . . . . . . . .. . . . 38
SECTION 10.13. No Third Party Beneficiary. . . . . . . . .. . . . 39
SECTION 10.14. Waiver of Jury Trial. . . . . . . . . . . .. . . . 40
SECTION 10.15. Consent to Jurisdiction.. . . . . . . . . .. . . . 40
SECTION 10.16. Multiple Counterparts.. . . . . . . . . . .. . . . 41
SECTION 10.17. Disclosures.. . . . . . . . . . . . . . . .. . . . 42
SECTION 10.18. Sharing of Setoffs. . . . . . . . . . . . .. . . . 42
SECTION 10.19. Repayments in Bankruptcy. . . . . . . . . .. . . . 43
ARTICLE XI
DEFINITIONS. . . . . . . . . . .. . . . 43
SECTION 11.01. Definitions.. . . . . . . . . . . . . . . .. . . . 43
SECTION 11.02. Other Definitional Provisions.. . . . . . .. . . . 43
SECTION 11.03. Accounting Matters. . . . . . . . . . . . .. . . . 43
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of February 12, 1996, among
HILB, ROGAL, AND HAMILTON COMPANY, a Virginia corporation (the
"Borrower"), the Banks set forth on the signature page hereto
(the "Banks"), and CRESTAR BANK, a Virginia banking corporation,
as agent for the Banks under this Agreement (in such capacity,
the "Agent")(unless otherwise indicated, capitalized terms herein
have the meanings set forth in Exhibit A hereto), recites and
provides as follows:
RECITALS
WHEREAS, the Borrower has requested that the Banks extend
credit to the Borrower in an aggregate principal amount of up to
$20,000,000 to finance the repurchase of the Borrower's Capital
Securities, to finance acquisitions and to provide funds for
other general corporate purposes; and
WHEREAS, the Banks are willing to extend such credit on the
terms and subject to the conditions set forth herein;
NOW THEREFORE, in consideration of the mutual promises set
forth herein and for other valuable consideration, the parties
agree as follows:
ARTICLE I
LOANS
SECTION 1.01. Commitment. Subject to the terms and
conditions and relying upon the representations and warranties
herein, each Bank, severally and not jointly, agrees to make
Loans to the Borrower, from time to time on or after the date
hereof and until the Commitment Termination Date, in an aggregate
principal amount at any time outstanding not exceeding the amount
of its Commitment. The Borrower may borrow, repay and reborrow
hereunder on or after the date hereof and prior to the Commitment
Termination Date, subject to the terms and conditions herein.
SECTION 1.02. Funding Loans. (a) Each Loan shall be
either a Eurodollar Loan or a Base Rate Loan as the Borrower may
request subject to and in accordance with this Section. The
Eurodollar Loans made by the Banks in any one borrowing shall be
in a minimum aggregate principal amount of $2,000,000 and in
integral multiples of $1,000,000 in excess thereof. The Base
Rate Loans made by the Banks in any one borrowing shall be in a
minimum aggregate principal amount of $1,000,000 and in integral
multiples of $1,000,000 in excess thereof. Loans shall be made
ratably by the Banks in accordance with their respective
Percentages; provided, however, that the failure of any Bank to
make its Loan shall not in itself relieve any other Bank of its
obligation to lend hereunder. Each Bank may, at its option,
fulfill its commitment with respect to any Eurodollar Loan by
causing a foreign branch or Affiliate of such Bank to make such
Loan, provided that any exercise of such option shall not affect
the obligation of the Borrower to repay such Loan in accordance
with the terms of the applicable Note. Subject to the other
provisions of this Section and the provisions of Section 1.07,
Loans of more than one type may be outstanding at the same time.
(b) The Borrower shall give the Agent written notice (as
provided in Section 1.16) of each borrowing under Section 1.01.
Upon receipt by the Agent of notice from the Borrower pursuant to
this paragraph, the Agent shall promptly notify the Banks
thereof. On the borrowing date requested in such notice, each
Bank shall make its ratable share (determined by its Percentage)
of the borrowing available to the Borrower at its account
maintained at the offices of the Agent no later than 2:00 p.m.
Richmond time, in federal or other immediately available funds.
(c) Notwithstanding any provision in this Agreement to the
contrary, the Borrower shall not in any notice of borrowing under
this Section 1.02 request any Eurodollar Loan that would not be
permitted if characterized as a continuation or conversion
pursuant to Section 1.07.
SECTION 1.03. Notes; Principal Payments. (a) The Loans
made by each Bank and the Borrower's obligation to repay the
Loans with interest in accordance with the terms of this
Agreement shall be evidenced by this Agreement, the records of
such Bank and a Note duly executed on behalf of the Borrower,
dated the Closing Date, in substantially the form attached hereto
as Exhibit B, payable to the order of such Bank in a principal
amount equal to its Commitment. Each Note shall bear interest
from its date on the outstanding principal balance thereof as set
forth in Section 1.04. The outstanding aggregate unpaid amount
of the Loans of each Bank at any time shall be the principal
amount owing on the Note of such Bank at such time. The records
of each Bank shall be prima facie evidence of the Loans of such
Bank and accrued interest thereon and of all payments made in
respect thereof.
(b) If not sooner paid, the entire unpaid principal balance
of each Note shall be due and payable on the Commitment
Termination Date.
SECTION 1.04. Interest. (a) Subject to the provisions of
Section 1.06, each Base Rate Loan and each other amount (other
than principal on the Loans) becoming due hereunder shall bear
interest at a rate per annum (computed on the basis of the actual
number of days elapsed over a year of 360 days) equal to the Base
Rate.
(b) Subject to the provisions of Section 1.06, each
Eurodollar Loan shall bear interest at a rate per annum (computed
on the basis of the actual number of days elapsed over a year of
360 days) equal to the Adjusted Eurodollar Rate plus the
Applicable Margin. The Agent shall determine the applicable
Adjusted Eurodollar Rate for each such Loan as at 11:00 a.m.,
London time, or as soon as practicable thereafter, on the date
when such determination is to be made in respect of such Interest
Period and shall notify the Borrower and the Banks of the
Adjusted Eurodollar Rate so determined.
(c) Interest on each Loan shall be payable on each
applicable Interest Payment Date, commencing with the first of
such dates after the date of such Loan, and on each Conversion
Date and the Commitment Termination Date.
SECTION 1.05. Commitment Fee; Termination and Reduction of
Commitments.
(a) In consideration of the Commitments hereunder, the
Borrower shall pay in immediately available funds to the Agent,
for the pro rata account of each Bank, on the last day of each
calendar quarter, commencing with the first such date after the
Closing Date, and on the date of any reduction or termination of
the Commitments of the Banks hereunder, a commitment fee (the
"Commitment Fee") in an amount equal to the Commitment Rate
(computed on the basis of the actual number of days elapsed in a
year of 360 days) multiplied by the average daily unused amount
of the Commitment of such Bank during the period or quarter then
ending. The Commitment Fee shall commence to accrue as of the
Closing Date, and shall cease to accrue on the Commitment
Termination Date.
(b) The Borrower may, by written notice to the Agent (as
provided in Section 1.16) terminate in full, or from time to time
permanently reduce in part, the aggregate Commitments. Each such
voluntary partial reduction of the aggregate Commitments shall be
in an aggregate principal amount of $2,000,000 and in integral
multiples of $1,000,000 in excess thereof.
(c) The Borrower shall repay the Loans upon reduction of
the Commitments pursuant to this Section 1.05 in an amount
sufficient to reduce the outstanding principal balance of the
Loans to an amount not greater than the aggregate reduced
Commitments. All repayments under this Section shall be
accompanied by accrued interest on the principal amount being
repaid to the date of repayment.
(d) Each reduction in the aggregate Commitments shall be
made ratably among the Banks in accordance with each Bank's
Percentage. Once reduced, the Commitments cannot be reinstated
without the unanimous consent of the Banks.
SECTION 1.06. Additional Interest; Alternate Rate of
Interest; Maximum Interest Rate. (a) Upon the occurrence and
during the continuation of an Event of Default, the outstanding
principal balance of the Loans and all other amounts becoming due
hereunder shall accrue interest at a rate per annum equal to the
Base Rate plus 2%.
(b) If the Agent, in its reasonable judgment, determines at
any time that dollar deposits in the amount of the principal
amount of any requested Eurodollar Loan are not generally
available in the relevant interbank market, or that the rate at
which such dollar deposits are being offered will not adequately
and fairly reflect the cost to the Banks of making or maintaining
the principal amount of such requested Eurodollar Loan during
such Interest Period, or that reasonable means do not exist for
ascertaining the Adjusted Eurodollar Rate, the Agent shall, as
soon as practicable thereafter, give prompt written or telephonic
notice of such determination to the Borrower and the Banks.
After such notice has been given and until the circumstances
giving rise to such notice no longer exist, each request for a
Eurodollar Loan or for conversion to or maintenance of a
Eurodollar Loan shall be deemed to be a request for a Base Rate
Loan. Each determination by the Agent hereunder shall be
conclusive absent manifest error.
(c) Nothing contained in this Agreement or any Note shall
require the Borrower at any time to pay interest at a rate
exceeding the Maximum Permitted Rate. If interest payable to any
Bank on any date would exceed the maximum amount permitted by the
Maximum Permitted Rate, such interest payment shall automatically
be reduced to such maximum permitted amounts, and interest for
any subsequent period, to the extent less than the maximum amount
permitted for such period by the Maximum Permitted Rate, shall be
increased by the unpaid amount of such reduction. Any interest
actually received for any period in excess of such maximum
allowable amount for such period shall be deemed to have been
applied as a prepayment of the then outstanding Loans in
accordance with Section 1.08.
SECTION 1.07. Continuation and Conversion of Loans.
Subject to Sections 1.10 and 1.11, the Borrower may, by written
notice to the Agent (as provided in Section 1.16) at any time,
continue any Eurodollar Loan or portion thereof, into a
subsequent Interest Period and convert any Loan or portion
thereof into a Loan of a different type, subject in each case to
the following:
(a) no Default (except in the case of conversion to Base
Rate Loans) shall have occurred and be continuing at the time of
such notice or such continuation or conversion;
(b) On and as of the date of such continuation or
conversion, each representation and warranty set forth in Article
IV shall be true and correct, as determined by the Agent, it
being understood that the representations and warranties set
forth in Sections 4.04 and 4.05 shall be deemed to apply to the
most recent financial statements furnished by the Borrower to the
Banks prior to such Loan;
(c) the notice given to the Agent by the Borrower shall
specify the Loans (identified by reference to the aggregate
amount of such Loans by all of the Banks) to be continued or
converted and provide the information required pursuant to
Section 1.16 with respect to the continuation or conversion;
(d) such continuation or conversion shall be made pro rata
among the Banks in accordance with their respective Percentages;
(e) in the case of a continuation or conversion of less
than all Loans, the aggregate principal amount of Loans continued
or converted shall not be less than the minimum borrowing amounts
set forth in Section 1.02(a);
(f) no Loan may be continued or converted to a Eurodollar
Loan having an Interest Period that would extend beyond the
scheduled Commitment Termination Date;
(g) the Conversion Date must be a Business Day with respect
to the new Loan;
(h) no Loan (or portion thereof) may be converted to a
Eurodollar Loan if, after such conversion, and after giving
effect to any prepayment of Loans, an aggregate of more than five
separate Eurodollar Loans of any Bank would be outstanding
hereunder, it being understood that for such purposes Loans
having different Interest Periods, regardless of whether they
commence or end on the same date, shall be considered separate
Loans;
(i) each request for continuation of or conversion into a
Eurodollar Loan that fails to state an applicable Interest Period
shall be deemed to be a request for an Interest Period of one-
month;
(j) in the event that the Borrower fails to give notice to
continue any Eurodollar Loan into a subsequent Interest Period or
convert any such Loan into a Loan of another type, such Loan
(unless repaid in full) shall automatically become a Base Rate
Loan at the expiration of the then current Interest Period; and
(k) each continuation or conversion shall be effected by
each Bank as if the proceeds of the new Loan were applied to
payment of the Loan (or portion thereof) being continued or
converted, and accrued interest on the Loan (or portion thereof)
being continued or converted shall be paid by the Borrower on and
as of the Conversion Date.
SECTION 1.08. Optional Prepayment of Loans. (a) The
Borrower shall have the right at any time and from time to time
to prepay any Base Rate Loan in whole or in part, without premium
or penalty, upon prior written notice to the Agent; provided,
however, that each such partial prepayment shall be in the
principal amount of at least $1,000,000 and in increments of
$1,000,000 in excess thereof.
(b) The Borrower shall have the right to prepay any
Eurodollar Loan, in whole or in part, upon prior written notice
to the Agent (as provided in Section 1.16); provided, however,
that each such partial prepayment shall be in the principal
amount of at least $2,000,000 and in increments of $1,000,000 in
excess thereof. If the Borrower prepays any Eurodollar Loan
except on the last day of the Interest Period in effect for such
Loan, then the Borrower shall make the payments required by
Section 1.12.
(c) Each notice of prepayment shall specify which Loan(s)
is to be prepaid, the prepayment date and the principal amount of
each Loan to be prepaid. All prepayments under this Section
shall be accompanied by accrued interest on the principal amount
being prepaid to the date of prepayment. Amounts prepaid
pursuant to this Section prior to the Commitment Termination Date
shall be available to be reborrowed from the Banks hereunder in
accordance with the terms hereof to the extent such reborrowings
do not cause the outstanding Loans to exceed the then outstanding
Commitments of the Banks.
SECTION 1.09. Manner of Payment. (a) All payments by the
Borrower hereunder and under the Notes shall be made to the
Agent, at its primary office in Richmond, Virginia, for the
account of each Bank in Dollars in federal or other immediately
available funds by 11:00 a.m., Richmond time, on the date on
which such payment is due, in all cases without any deduction or
withholdings whatsoever, including any deduction or withholding
for any setoff, recoupment, counterclaim or Tax. Whenever any
payment required to be made hereunder or under the Notes is
stated to be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day, and interest
shall continue to accrue thereon until such payment is made.
Interest in respect of any Loan hereunder shall accrue from and
including the date of such Loan to but excluding the date on
which such Loan is paid in full. If such payments are not
received by the Agent within five (5) Business Days after the due
date thereof, such payments may be deducted by the Banks in
accordance with Section 10.18.
(b) All payments received by the Agent shall be remitted to
the Banks on the Business Day on which such payments are received
or deemed to be received by the Agent.
SECTION 1.10. Change in Circumstances. In the event of any
Regulatory Change or any change after the date hereof in
conditions with respect to cost of funding or otherwise affecting
the transactions contemplated by this Agreement or the Notes
that:
(a) subjects any Bank to any tax of any kind or changes the
basis of taxation with respect to any Eurodollar Loan (other than
any tax on the overall net income of such Bank or of the lending
office or Affiliate of such Bank making any Eurodollar Loan
hereunder) imposed by the United States of America or by the
jurisdiction in which such Bank has its principal office (or in
which such lending office or Affiliate is located) or any
political subdivision or taxing authority therein; or
(b) imposes, modifies or deems applicable any reserve
(other than, in the case of Eurodollar Loans, any reserve taken
into account in the computation of Eurodollar Statutory
Reserves), deposit or similar requirement against any assets held
by, deposits with or for the account of or loans or commitments
by an office of such Bank; or
(c) imposes upon such Bank or the relevant interbank market
any other condition with respect to Eurodollar Loans or upon the
Bank any other condition with respect to this Agreement;
and the result of any of the foregoing shall be to increase the
cost to such Bank of making or maintaining any Eurodollar Loan
hereunder or to reduce the amount of any payment (whether of
principal, interest or otherwise) received or receivable by such
Bank, or to require such Bank to make any payment in connection
with any Eurodollar Loan, then and in each such case the Borrower
shall pay to such Bank such amounts as shall be necessary to
compensate such Bank for such cost, reduction or payment. The
protection of this Section shall be available to each Bank
regardless of any possible contention of the invalidity or
inapplicability of any law, regulation or other condition that
gives rise to any right of such Bank for compensation hereunder.
SECTION 1.11. Change in Legality. Notwithstanding any
provision in this Agreement to the contrary, if any Regulatory
Change shall make it unlawful for a Bank to make or maintain a
Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to a Eurodollar Loan, then, by
written notice to the Borrower, such Bank may:
(a) declare that Eurodollar Loans will not thereafter be
made by such Bank hereunder, whereupon the Borrower shall be
prohibited from requesting Eurodollar Loans from such Bank
hereunder unless such declaration is subsequently withdrawn; and
(b) to the extent that maintenance of any Eurodollar Loan
has been made unlawful, require that all outstanding Eurodollar
Loans made by it be converted to Base Rate Loans, whereupon all
of such Eurodollar Loans shall be automatically converted to Base
Rate Loans upon receipt by the Borrower of such notice, and the
Borrower shall make the payments, if any, required by Section
1.12.
SECTION 1.12. Indemnity for Eurodollar Loans. The Borrower
shall reimburse each Bank for any loss incurred or to be incurred
by it in the reemployment of the funds released by any prepayment
or conversion of any Eurodollar Loan required or permitted by any
other provision of this Agreement if such Loan is prepaid or
converted other than on the last day of the Interest Period for
such Loan. Such loss shall be the difference as determined by
such Bank between (a) the amount that would have been realized by
such Bank for the remainder of such Interest Period for such Loan
and (b) any lesser amount that would be realized by such Bank in
reemploying such funds by purchasing on the date of prepayment or
conversion a U.S. Treasury security in the principal amount
prepaid or converted that matures on the last day of the Interest
Period of the Loan being prepaid or converted. Without
duplication of the foregoing indemnity payments, the Borrower
shall indemnify each Bank against any actual loss or expense that
such Bank may sustain or incur as a consequence of any default in
payment or prepayment of the principal amount of any Loan or any
part thereof or interest accrued thereon, as and when due and
payable (at the due date thereof, by notice of prepayment or
otherwise), or the occurrence of any Event of Default, including
but not limited to any loss or expense sustained or incurred in
liquidating or employing deposits from third parties acquired to
effect or maintain such Loan or any part thereof.
SECTION 1.13. Capital Adequacy. If, after the date hereof,
any Bank shall have determined that any Regulatory Change
regarding capital adequacy or compliance by such Bank with any
request or directive regarding capital adequacy (whether or not
having the force of law) of any Governmental Authority, has or
would have the effect of reducing the rate of return on such
Bank's (or its holding company's) capital as a consequence of
this Agreement or the Loans to a level below that which such Bank
(or its holding company) could have achieved but for such
Regulatory Change or compliance (taking into consideration such
Bank's policies with respect to capital adequacy), then from time
to time, the Borrower shall pay to such Bank such additional
amount or amounts as will compensate such Bank for such
reduction. In determining any such amount, the Bank may use any
reasonable averaging and attribution methods.
SECTION 1.14. Reasonableness of Increased Costs.
Notwithstanding anything to the contrary in Sections 1.10, 1.11,
1.12 and 1.13, the amounts payable by the Borrower thereunder
shall not exceed the amounts necessary to indemnify the affected
Bank against such increased cost actually incurred or the
reduction in amount actually received. A certificate in
reasonable detail as to the amount of such increased cost or
reduction in amount received and the method of calculation shall
be submitted to the Borrower by such Bank and shall be conclusive
absent manifest error. The Borrower shall pay to each Bank the
amounts shown as due on any such certificate within ten (10) days
after its receipt of the same. No failure on the part of any
Bank to demand compensation under such Sections above on any one
occasion shall constitute a waiver of its right to demand such
compensation on any other occasion.
SECTION 1.15. Pro Rata Treatment. Except as otherwise
provided in Sections 1.10, 1.11, 1.12 and 1.13, all payments and
prepayments of principal and interest in respect of the Loans,
all payments of Commitment Fees and all borrowings hereunder
shall be made pro rata among the Banks in accordance with their
respective Percentages.
SECTION 1.16. Certain Notices. Notices by the Borrower to
the Agent of any terminations or reductions of the Commitments,
of borrowings and prepayments of Loans, of continuation and
conversion of Loans, of type of Loans and of the duration of
Interest Periods shall be irrevocable and shall be effective only
if received by the Agent not later than 11:00 a.m. Richmond time
on the number of Business Days prior to the date of the relevant
termination, reduction, borrowing, continuation, conversion, or
prepayment or the first day of such Interest Period specified
below (it being understood that notices received by the Agent
after 11:00 a.m. Richmond time shall be considered timely
received on the next Business Day):
Number of
Business
Notice Days Prior
Termination or reduction of
Commitment
10
Borrowing, continuation
or prepayment of or conversion
into Base Rate Loans same day
Borrowing, continuation
or prepayment of, conversion
into, or notification of duration
of Interest Period for,
Eurodollar Loans
3
Each such notice of termination or reduction shall specify the
amount of the Commitment to be terminated or reduced. Each such
notice of borrowing, continuation, conversion or prepayment shall
specify the Loans to be borrowed, continued, converted or prepaid
and the amount and type of the Loans to be borrowed, continued,
converted or prepaid and the date of borrowing, continuation,
conversion or prepayment (which shall be a Business Day). Each
such notice of the duration of an Interest Period shall specify
the Loans to which such Interest Period is to relate. In the
event that the Borrower fails to select within the time period
and otherwise as provided in this Section 1.16 the type of Loan
or the duration of the Interest Period for any Eurodollar Loan,
such Loan shall be automatically converted into a Base Rate Loan
on the last day of the then current Interest Period for such Loan
or will remain as, or will be made as, a Base Rate Loan.
ARTICLE II
COLLATERAL AND GUARANTIES
SECTION 2.01. Unsecured Obligations. The parties
acknowledge that the Loans are unsecured obligations of the
Borrower.
SECTION 2.02. Guaranty. Payment of the Obligations is not
guaranteed by any third party.
SECTION 2.03. Loan Documents. The Borrower agrees to
execute and deliver all Loan Documents and other instruments
contemplated by this Agreement, in form and substance reasonably
satisfactory to the Agent and its counsel.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Initial Loans. In addition to the conditions
precedent in Section 3.02, the obligations of the Banks to make
initial Loans hereunder are subject to the following conditions
precedent:
(a) Satisfaction of each of the conditions set forth on
Exhibit C hereto, the satisfaction of which shall be determined
by the Banks and the Agent in their sole discretion.
(b) All legal matters incident to this Agreement and the
Loans shall be satisfactory to Hunton & Williams, special counsel
for the Agent.
SECTION 3.02. All Loans. As conditions to each Loan to be
made hereunder:
(a) The Agent shall have received a notice of such Loan as
required by Section 1.02.
(b) On and as of the date of such Loan, both before and
after giving effect to such Loan and applying the proceeds
thereof:
(i) each representation and warranty set forth in
Article IV shall be true and correct, as determined by the Agent
in its sole and absolute discretion, it being understood that the
representations and warranties set forth in Sections 4.04 and
4.05 shall be deemed to apply to the most recent financial
statements furnished by the Borrower to the Banks prior to such
Loan, and
(ii) the Borrower shall be in compliance with all
the terms and provisions of this Agreement on its part to be
observed or performed, no Default shall have occurred and be
continuing, and the Agent and the Banks shall have received a
certificate to such effect.
(c) Such Loan will not contravene any Legal Requirement
applicable to the Agent or any Bank.
The Borrower shall be deemed to make representations and
warranties on the date of each Loan as to the matters specified
in paragraphs (b) and (c) of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Banks to enter into this Agreement and to make
Loans hereunder, the Borrower represents and warrants to the
Agent and to each of the Banks that:
SECTION 4.01. Organization; Powers; Qualification. The
Borrower is (a) a corporation duly organized, validly existing
and in good standing under the laws of Virginia, (b) has the
power and authority to own its properties and to carry on its
businesses as now conducted, (c) is qualified to do business in
the jurisdictions indicated on Schedule 4.01, (d) is not required
to be qualified in any other jurisdiction where the failure to be
so qualified would have a Material Adverse Effect, and (e) has
the power to execute, deliver and perform its obligations under
this Agreement, to borrow hereunder and to execute and deliver
the Notes and the other Loan Documents and to perform its
obligations thereunder.
SECTION 4.02. Authorization; Enforceability. The
execution, delivery and performance of this Agreement, the
borrowings hereunder, the execution, delivery and performance of
the Notes and the other Loan Documents and the transactions
contemplated hereby and thereby (a) have been duly authorized by
all requisite action on the part of the Borrower, (b) will not
(i) violate (A) any provision of law, the Organizational
Documents of the Borrower or any Material Subsidiary or (B) any
applicable order of any Governmental Authority, (ii) violate,
conflict with, breach or constitute (with due notice or lapse of
time or both) a default under any indenture, agreement for
borrowed money, bond, note, instrument or other agreement to
which the Borrower or any Material Subsidiary is a party or by
which the Borrower or any Material Subsidiary or any of their
respective property is bound or (iii) result in the creation or
imposition of any Lien of any nature whatsoever upon any property
or assets of the Borrower or any Material Subsidiary. This
Agreement has been duly executed and delivered by the Borrower
and constitutes, and the Notes and the other Loan Documents party
when executed and delivered will constitute, legal, valid and
binding obligations of the Borrower enforceable against the
Borrower in accordance with their respective terms.
SECTION 4.03. Consents and Approvals. No action, consent
or approval of, or registration or filing with, or any other
action by any Governmental Authority or of shareholders is
required in connection with the execution, delivery and
performance by the Borrower of this Agreement, the borrowings
hereunder or the execution, delivery and performance of the Notes
or any other Loan Document.
SECTION 4.04. Financial Statements. The Borrower has
heretofore furnished the following financial statements to each
of the Banks: (i) the consolidated balance sheet of the Borrower
and the Consolidated Subsidiaries as of December 31, 1994 and the
consolidated statements of income, retained earnings and cash
flows of the Borrower and the Consolidated Subsidiaries for the
fiscal year then ended, reported on by Ernst & Young, independent
public accountants, and (ii) the unaudited consolidated balance
sheet of the Borrower and the Consolidated Subsidiaries as of
June 30, 1995, and the related statements of income, retained
earnings and cash flows of the Borrower and the Consolidated
Subsidiaries for the period then ended, duly certified by a
financial officer of the Borrower. Such financial statements
fairly present the consolidated financial condition of the
Borrower and the Consolidated Subsidiaries as of the dates
thereof and the consolidated results of the operations of the
Borrower and the Consolidated Subsidiaries for the periods
covered thereby and are complete and correct. All such financial
statements were prepared in accordance with Generally Accepted
Accounting Principles applied on a consistent basis (subject, in
the case of such interim statements, to the omission of footnotes
and year-end audit adjustments).
SECTION 4.05. No Material Adverse Change. There has been
no material adverse change in the business, assets, liabilities,
condition (financial or otherwise), results of operations or
business prospects, on a consolidated basis, of the Borrower and
the Consolidated Subsidiaries since June 30, 1995.
SECTION 4.06. Subsidiaries. (a) Set forth on Schedule
4.06(a) is a complete and accurate list of all Material
Subsidiaries of the Borrower on the date hereof, showing as to
each such Material Subsidiary the jurisdiction of its
organization, its type of entity and its principal place of
business. All of the outstanding Capital Securities of each of
the Material Subsidiaries are wholly owned, directly or
indirectly, by the Borrower. Such Capital Securities are owned
free and clear of all Liens except Permitted Liens, and the owner
of such Capital Securities has the unrestricted right to vote,
and (subject to limitations imposed by applicable law) to receive
dividends and distributions on, such Capital Securities.
(b) Each of the Material Subsidiaries is (i) duly
organized, validly existing and in good standing under the laws
of the jurisdiction of its organization and is the type of entity
described in Schedule 4.06(a), (ii) has the power and authority
to own its properties and to carry on its businesses as now
conducted, and (iii) is qualified to do business in every
jurisdiction where such qualification is necessary or failure to
qualify would have a Material Adverse Effect.
(c) Set forth on Schedule 4.06(c) is a complete and
accurate list of all foreign Subsidiaries of the Borrower on the
date hereof that have annual revenues (either historically or on
a pro forma basis) exceeding 2.25% of total consolidated revenues
of the Borrower and the Consolidated Subsidiaries, showing as to
each such Subsidiary the jurisdiction of its organization, its
type of entity and its principal place of business. All of the
outstanding Capital Securities of each of the foreign
Subsidiaries are wholly owned, directly or indirectly, by the
Borrower. Such Capital Securities are owned free and clear of
all Liens except Permitted Liens, and the owner of such Capital
Securities has the unrestricted right to vote, and (subject to
limitations imposed by applicable law) to receive dividends and
distributions on, such Capital Securities.
SECTION 4.07. Litigation. Borrower has filed with the SEC
all reports it is required to file with the SEC regarding any
action, suit or proceeding at law or in equity or by or before
any court or Governmental Authority now pending or threatened
against or affecting the Borrower or any of the Material
Subsidiaries or any property or rights of the Borrower or any of
the Material Subsidiaries.
SECTION 4.08. Tax Returns. Except as set forth in Schedule
4.08, the Borrower and the Material Subsidiaries have filed or
caused to be filed all federal, state and local tax returns that
are required to be filed and have paid or caused to be paid all
taxes as shown on such returns or on any assessment received by
any of them to the extent that such taxes have become due, except
taxes the validity of which is being contested in good faith by
appropriate proceedings and with respect to which the Borrower or
such Material Subsidiary, as the case may be, has set aside on
its books adequate reserves, if any, required in accordance with
Generally Accepted Accounting Principles.
SECTION 4.09. Properties. The Borrower and the Material
Subsidiaries have good and marketable title (subject to minor
title defects) to all their respective properties and assets
reflected on the consolidated balance sheet of the Borrower and
the Consolidated Subsidiaries dated June 30, 1995, referred to in
Section 4.04, except for such properties and assets as have been
disposed of since such date as no longer necessary in the conduct
of their respective businesses or as have been disposed of in the
ordinary course of business. The Borrower and the Material
Subsidiaries have good and marketable title to all their
respective properties and assets and own all such properties and
assets free and clear of any Liens except Permitted Liens.
SECTION 4.10. Employee Benefit Plans. Schedule 4.10 sets
forth a true and complete list of all Plans that the Borrower or
any Material Subsidiary maintains, or expects to maintain, or to
which the Borrower or any Material Subsidiary is, or is expected
to be, required to make any contribution. The Borrower, the
Material Subsidiaries and each Plan are in compliance in all
material respects with the applicable provisions of law,
including the applicable provisions of ERISA and the regulations
and published interpretations thereunder. No Plan is (i) a
multiemployer plan (as defined in Section 3(37) of ERISA), (ii)
subject to the provisions of Title IV of ERISA or (iii) subject
to the minimum funding provisions of ERISA or the Internal
Revenue Code. Neither the Borrower nor any ERISA Affiliate has
maintained, contributed to, or had an obligation to contribute
to, any plan described in items (i), (ii) or (iii) of the
preceding sentence. Except for the continued coverage
requirements of the Consolidated Omnibus Budget Reconciliation
Act of 1985 and subsequent legislation and as disclosed in
Schedule 4.10, the Borrower and the Material Subsidiaries are not
obligated to provide medical benefits, hospitalization benefits
or benefits under any other employee welfare benefit plan (within
the meaning of Section 3(1) of ERISA) to any former employee or
the spouse or dependent of any former employee.
SECTION 4.11. Government Regulation. Neither the Borrower
nor any Subsidiary is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the
Investment Company Act of 1940, the Interstate Commerce Act (as
any of such acts may be amended) or any other law (other than
Regulation X) that regulates the incurring by the Borrower or any
Subsidiary of indebtedness.
SECTION 4.12. Margin Stock. No proceeds of any Loan will
be used for the purpose of purchasing or carrying any Margin
Stock or for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase or carry a Margin Stock
or for any other purpose which might constitute this transaction
a "purpose credit" within the meaning of Regulation U or G.
Neither the Borrower nor any Subsidiary is engaged in the
business of extending credit for the purpose of purchasing or
carrying Margin Stocks. Neither the Borrower nor any Person
acting on behalf of the Borrower has taken or will take any
action which might cause the Notes or any of the other Loan
Documents, including this Agreement, to violate Regulation U or G
or any other regulations of the Federal Reserve Board or to
violate Section 7 of the Securities Exchange Act of 1934 or any
rule or regulation thereunder, in each case as now in effect or
as the same may hereinafter be in effect. Neither the Borrower
nor any Subsidiary owns any Margin Stock except as set forth in
Schedule 4.12 and, as of the date hereof, the aggregate value of
all Margin Stock owned by the Borrower does not exceed 25% of all
of the value of all of the Borrower's assets.
SECTION 4.13. No Material Misstatements. All information,
financial statements and documents furnished to the Agent and the
Banks in connection herewith are complete and accurate in all
material respects. No information, report, financial statement,
exhibit or schedule furnished by or on behalf of the Borrower to
the Agent or any Bank in connection with the negotiation,
execution, delivery or performance of this Agreement, any Note or
any other Loan Document hereunder, or any schedule hereto or
thereto contains any material misstatement of fact or omitted or
omits to state any material fact necessary to make the statements
herein or therein not misleading. There is no event or fact that
the Borrower has not disclosed to the Banks in writing that
causes a Material Adverse Effect or, so far as the Borrower can
now foresee, is likely to cause a Material Adverse Effect.
SECTION 4.14. Patents, Trademarks, etc. Each of the
Borrower and the Material Subsidiaries possesses adequate assets,
licenses, patents, patent applications, copyrights, trademarks,
service marks, trademark applications, trade names, technology,
processes and permits and other governmental approvals and
authorizations to conduct its business. Except as set forth in
Schedule 4.14, there are no existing or, to the knowledge of the
Borrower, threatened claims of any Person based on the use of
such permits, patents, trademarks, trade names, copyrights,
technology and processes by the Borrower or any of the Material
Subsidiaries and to the knowledge of the Borrower, no such use
infringes on the rights of any Person.
SECTION 4.15. Hazardous Wastes. To the best of Borrower's
knowledge, all land owned, leased or otherwise used by the
Borrower and the Material Subsidiaries is free from reportable
quantities of Hazardous Wastes, and no portion of such land would
subject the Borrower or any Material Subsidiary to liability
under federal, state or local law or regulation because of the
presence of stored, leaked or spilled Toxic Substances or
Hazardous Wastes, underground storage tanks, "asbestos" (as
defined in 40 C.F.R. 61.141) or the past or present
accumulation, spillage or leakage of any such substance, nor has
the Borrower or any Material Subsidiary arranged for disposal or
treatment (or arranged with a transporter for transport for
disposal or treatment) of any such substance to any other
location except in compliance with Environmental Laws. Neither
the Borrower nor any Material Subsidiary has received any notice
from the Environmental Protection Agency or any other
Governmental Authority alleging that it is a "responsible party"
with respect to any of the foregoing.
SECTION 4.16. No Brokers or Finders. No broker or finder
brought about or contributed to the obtaining, making or closing
of the Loans made pursuant to this Agreement, and the Borrower
has no obligation to any person in respect of any finder's or
brokerage fees in connection with the Loans contemplated by this
Agreement.
SECTION 4.17. No Default of Indebtedness; Solvency.
(a) Neither the Borrower nor any of the Material
Subsidiaries is in default of any Indebtedness, and no holder of
any such Indebtedness has given notice of an asserted default
thereunder. No liquidation, dissolution or other winding up of
the Borrower or any of the Material Subsidiaries and no
bankruptcy or similar proceedings relative to them or their
property are pending or, to the knowledge of the Borrower,
threatened against them.
(b) On the date hereof, each of the Borrower and the
Material Subsidiaries is, and after consummation of this
Agreement and after giving effect to all Indebtedness incurred
(assuming the entire Commitment is fully advanced on the Closing
Date) and Liens, if any, created by the Borrower and the Material
Subsidiaries in connection herewith will be, Solvent.
SECTION 4.18. Agreements. Neither the Borrower nor any
Material Subsidiary is a party to any agreement or instrument or
subject to any provision in its Organizational Documents that
could have a Material Adverse Effect or conflict with or
constitute a Default under this Agreement or any other Loan
Document. Neither the Borrower nor any Material Subsidiary is in
default in the performance, observance or fulfillment of any of
the obligations, covenants or conditions contained in any
agreement or instrument to which it is a party in any manner that
could have a Material Adverse Effect. The Banks understand that
the Borrower and its Subsidiaries are parties to agency and
brokerage contracts that are material to their respective
businesses and that such contracts are subject to negotiation and
may be amended, extended or terminated from time to time in the
ordinary course of business.
SECTION 4.19. Compliance with Law. Each of the Borrower
and the Material Subsidiaries has complied in all material
respects with all applicable statutes, rules, regulations, orders
and restrictions of any Governmental Authority.
SECTION 4.20. Labor Controversies. Neither the Borrower
nor any Material Subsidiary is a party to any collective
bargaining agreement. To the best knowledge of the Borrower, it
and the Material Subsidiaries are in compliance with all
applicable laws respecting employment and employment practices
where such failure to comply could reasonably be expected to have
a Material Adverse Effect.
SECTION 4.21. Non-Material Subsidiaries. To the best of
the Borrower's knowledge, each of the representations and
warranties set forth in this Article IV (except for Section
4.06(a)) with respect to the Material Subsidiaries is true and
correct with respect to all Subsidiaries that are not Material
Subsidiaries except for such matters as would not have a Material
Adverse Effect.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees with the Agent and the
Banks that until the Repayment Date, unless the Majority Banks
otherwise consent in writing, as follows:
SECTION 5.01. Corporate Existence and Maintenance of
Properties. The Borrower shall, and shall cause each of the
Material Subsidiaries to, do or cause to be done all things
necessary to preserve, maintain, renew and keep in full force and
effect its corporate existence and all of its material rights,
licenses, permits and franchises; conduct its business in
substantially the same manner as heretofore conducted; at all
times maintain and preserve all property used or useful in the
conduct of its business and keep the same in good repair, working
order and condition (ordinary wear and tear excepted), and from
time to time make, or cause to be made, all necessary and proper
repairs, renewals and replacements thereto, so that the business
carried on in connection therewith may be properly conducted at
all times.
SECTION 5.02. Compliance with Laws. The Borrower shall,
and shall cause each of the Material Subsidiaries to, do or cause
to be done all things necessary to comply with all laws and
regulations applicable to it, including without limitation the
following:
(a) SEC Filings. The Borrower shall make, and shall cause
each of the Subsidiaries to make, on a timely basis, all filings,
if any, it is required to make with the SEC.
(b) ERISA. The Borrower shall comply, and shall cause each
of its ERISA Affiliates to comply, in all material respects with
the applicable provisions of ERISA and as soon as possible, and
in any event within 10 days after the Borrower knows or has
reason to know of a violation of ERISA with respect to any Plan,
shall deliver to the Agent and each Bank a statement signed by a
senior financial officer of the Borrower setting forth details
respecting such event or condition and the action, if any, that
the Borrower or its ERISA Affiliate proposes to take with respect
thereto.
(c) Environmental Laws. (i) The Borrower shall be and
remain, and shall cause each Material Subsidiary to be and
remain, in compliance in all material respects with the
provisions of all federal, state and local environmental, health
and safety laws, codes and ordinances, and all rules and
regulations issued thereunder. The Borrower shall notify the
Banks immediately of any notice of a hazardous discharge or
environmental complaint received from any Governmental Authority
or any other Person; notify the Banks immediately of any
hazardous discharge from or affecting the Premises, which is also
required to be reported to any Governmental Authority;
immediately contain and remove the same, in compliance with all
applicable Legal Requirements; permit the Banks to inspect the
Premises, to conduct tests thereon, and to inspect all books,
correspondence and records pertaining thereto; and at a Bank's
request, and at the Borrower's expense, provide a report of a
qualified environmental engineer satisfactory in scope, form, and
contents to the Banks, and such other and further assurances
reasonably satisfactory to the Banks that the condition has been
corrected.
(ii) The Borrower acknowledges that the Agent and
the Banks have entered into this Agreement and made the Loans in
reliance upon the Borrower's representations and warranties in
Section 4.15 and its covenants in this Section 5.02(c).
Accordingly, the Borrower hereby agrees that the Borrower shall
be liable for all costs and expenses incurred by or asserted
against the Agent or any Bank arising under violations of the
terms of this Section 5.02(c) or a breach of any representation
or warranty contained in Section 4.15 of this Agreement. All of
the representations and warranties contained in Section 4.15 and
the Borrower's covenants under this Section 5.02(c) shall survive
the Repayment Date.
SECTION 5.03. Insurance. The Borrower shall maintain, and
shall cause each of the Material Subsidiaries to maintain,
insurance with financially sound and reputable insurance
companies or associations, in such amounts and covering such
risks (but including, in any event, public liability) as is
usually carried by companies engaged in the same or similar
businesses and owning similar properties in the same general
areas in which the Borrower and each of the Material Subsidiaries
operates and furnish to the Agent, upon reasonable request, full
information (including certificates and originals or certified
copies of the policies) as to the insurance carried.
SECTION 5.04. Obligations and Taxes. The Borrower shall
pay, and shall cause each of the Material Subsidiaries to pay,
all of its Indebtedness and obligations promptly and in
accordance with the terms thereof and pay and discharge promptly
all taxes, assessments and governmental charges or levies imposed
upon it or upon its income or profits or in respect of its
property, before the same shall become in default or delinquent,
as the case may be, as well as all lawful claims for labor,
materials and supplies or otherwise that, if unpaid, might become
a Lien upon such properties or any part thereof; provided,
however, that neither the Borrower nor any of the Subsidiaries
shall be required to pay and discharge or to cause to be paid and
discharged any such tax, assessment, charge, levy or claim so
long as the validity or amount thereof is contested in good faith
by appropriate proceedings and the Borrower or such Subsidiary,
as the case may be, sets aside on its books adequate reserves
therefor, if any, required in accordance with Generally Accepted
Accounting Principles.
SECTION 5.05. Accounting Methods and Financial Records.
The Borrower shall maintain, and shall cause each Subsidiary to
maintain, a system of accounting and financial records in
accordance with Generally Accepted Accounting Principles, and
keep such books, records and accounts (which shall be true and
complete), as may be required or necessary to permit (a) the
preparation of financial statements required to be delivered
pursuant to Section 5.06 and (b) the determination of the
Borrower's compliance with the terms of this Agreement.
SECTION 5.06. Financial Statements, Certificates and
Reports. The Borrower shall furnish to the Agent and the Banks:
(a) Quarterly Financial Statements. As soon as available,
and in any event within forty-five (45) days after the end of
each of the first three fiscal quarters of the Borrower, copies
of the Quarterly Report of the Borrower on Form 10-Q as filed
with the SEC, containing a balance sheet of the Borrower and the
Consolidated Subsidiaries as of the end of such quarter, and
consolidated statements of income and cash flows of the Borrower
and the Consolidated Subsidiaries for such quarter and for the
portion of the fiscal year ending with such quarter, in each case
setting forth in comparative form the figures for the
corresponding period of the preceding fiscal year;
(b) Annual Statements. As soon as available and in any
event within ninety (90) days after the close of each fiscal year
of the Borrower, copies of the Annual Report of the Borrower on
Form 10-K as filed with the SEC, containing a consolidated
balance sheet of the Borrower and the Consolidated Subsidiaries
as of the close of such fiscal year and consolidated statements
of income and cash flows of the Borrower and the Consolidated
Subsidiaries for such fiscal year, in each case setting forth in
comparative form the figures for the preceding fiscal year;
(c) Other SEC Filings. The Borrower shall deliver to the
Agent and the Banks promptly upon its becoming available, one
copy of each financial statement, report, notice or proxy
statement sent by the Borrower or any Material Subsidiary to
holders of its Capital Securities and of each regular or periodic
report, registration statement or prospectus, if any, filed by
the Borrower or any Material Subsidiary with any securities
exchange or the SEC or any successor agency, including without
limitations Forms 10-K, 8-K and 10-Q.
(d) Audit Reports. Promptly upon receipt thereof, one copy
of each written report submitted to the Borrower by independent
accountants in any annual, quarterly or special audit made;
(e) Compliance Certificate. As soon as available, and in
any event within forty-five (45) days after the end of each of
the first three fiscal quarters of each fiscal year and within
ninety (90) days after the end of the fourth quarter of each
fiscal year of the Borrower hereafter, a Compliance Certificate.
(f) Notices of Discrepancies. Immediately after Borrower's
discovery thereof, written notice of any inaccuracy or incorrect
statement contained in any of the foregoing that is material or
that changes any of the financial calculations under this
Agreement, including a statement containing the correct
information required; and
(g) Other Information. Such other information concerning
the business, properties or financial condition of the Borrower
and the Material Subsidiaries as the Majority Banks shall
request, including without limitation pro forma financial
information, which shall be prepared in such form and such detail
as shall be satisfactory to the Agent and the Banks, shall be
prepared on the same basis as those prepared by the Borrower in
prior years and shall be the same financial reports as those
furnished to the Borrower's officers and directors.
SECTION 5.07. Access to Premises and Records. Upon
reasonable notice, the Borrower shall permit, and shall cause
each Material Subsidiary to permit, representatives of the Agent
and each Bank to have access to the financial records and the
premises of the Borrower and each Material Subsidiary at
reasonable times and to make copies of such records.
SECTION 5.08. Notice of Default. The Borrower shall give
to the Agent and each Bank, promptly after learning of the
occurrence of any Default that has not previously been disclosed
in writing to the Agent and the Banks, (a) notice of such event,
(b) the Borrower's assessment of the effect such event is likely
to have on the financial condition of the Borrower and the
Material Subsidiaries during the following ninety days, (c) the
Borrower's plan for minimizing the adverse effects of such event
and (d) a description of any material development in any such
event.
SECTION 5.09. Notice of Litigation. The Borrower shall,
upon request, deliver or cause to be delivered to the Agent and
each Bank, a description of any material development in any of
the matters described in Section 4.07 that has been disclosed in
filings with the SEC.
SECTION 5.10. Notice of Strikes, Labor Controversies, etc.
The Borrower shall deliver or cause to be delivered to the Agent
and each Bank, promptly after learning of the occurrence of any
event described in Section 4.20 that has not previously been
disclosed in writing to the Agent and the Banks, (a) notice of
such event, (b) the Borrower's assessment of the effect such
event is likely to have on the financial condition of the
Borrower and the Material Subsidiaries during the following
ninety days, (c) the Borrower's plan for minimizing the adverse
effects of such event and (d) a description of any material
development in any such event.
SECTION 5.11. Update of Subsidiaries. The Borrower
shall, upon request, deliver or cause to be delivered to the
Agent and each Bank an update of the Material Subsidiaries listed
on Schedule 4.06(a) and the foreign Subsidiaries listed on
Schedule 4.06(c).
ARTICLE VI
NEGATIVE COVENANTS
The Borrower covenants and agrees with the Agent and the
Banks that, until the Repayment Date, unless the Majority Banks
otherwise consent in writing, as follows:
SECTION 6.01. Liens. The Borrower shall not, and shall not
cause, permit or suffer any of the Material Subsidiaries,
directly or indirectly, to create, incur, assume or suffer to
exist any Lien upon or with respect to any of its assets or
properties, now owned or hereafter acquired, or assign or
otherwise convey any right to receive income; provided that the
foregoing restrictions shall not apply to Liens:
(a) for taxes, assessments or governmental charges or
levies on its property if they (i) are not delinquent at the time
or thereafter can be paid without penalty and (ii) are being
contested in good faith and by appropriate proceedings and with
respect to which it has set aside on its books adequate reserves,
if any, required in accordance with Generally Accepted Accounting
Principles;
(b) imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens, that arise in the
ordinary course of business with respect to obligations not yet
due or being contested in good faith and by appropriate
proceedings and with respect to which it has set aside on its
books adequate reserves, if any, required in accordance with
Generally Accepted Accounting Principles;
(c) arising in the ordinary course of business out of
pledges or deposits under workmen's compensation laws,
unemployment insurance, pensions, or other social security or
retirement benefits, or similar legislation;
(d) incidental to the conduct of its business or the
ownership of its property and assets (such as easements, zoning
restrictions and restrictive covenants) not incurred in
connection with the borrowing of money or the obtaining of
advances or credit, and which do not in the aggregate materially
detract from the value of its property or assets or materially
impair the use thereof in the operation of its business;
(e) arising in the ordinary course of business out of
pledges or deposits to secure performance in connection with
bids, tenders, contracts (other than contracts for the payment of
money), bonds (other than bonds of or for the benefit of the
Borrower or any Subsidiary) or leases to which the Borrower or
any Subsidiary is a party;
(f) securing Indebtedness owing by any Subsidiary to the
Borrower or any Material Subsidiary;
(g) in respect of property acquired or constructed by it
after the date hereof for use in the business of the Borrower and
the Material Subsidiaries (such as real property and equipment),
which Liens (including Capitalized Lease Obligations) exist or
are created at the time of acquisition or completion of
construction of such property or within 60 days thereafter, to
secure Indebtedness assumed or incurred to finance all or any
part of the purchase price or cost of construction of such
property, but any such Lien shall cover only the property so
acquired or constructed and the aggregate amount secured by such
Liens shall not exceed $2,500,000 at any time outstanding;
(h) in respect of automobiles and office equipment acquired
by it prior to the date hereof for use in the business of the
Borrower and the Material Subsidiaries, which Liens (including
Capitalized Lease Obligations) existed or were created at the
time of acquisition of such property, or within 60 days
thereafter, to secure Indebtedness assumed or incurred to finance
all or any part of the purchase price of such property, but any
such Lien shall cover only the property so acquired and the
amount secured by each such Lien shall not exceed $50,000;
(i) on assets of any Person existing at the time such
Person becomes, by acquisition, consolidation or merger, a
Material Subsidiary, provided that such Lien covers only the
assets of the Person so acquired and was not created in
connection with or in contemplation of such acquisition; and
(j) set forth in Schedule 6.01.
SECTION 6.02. Indebtedness. The Borrower shall not, and
shall not cause, permit or suffer any of the Material
Subsidiaries, directly or indirectly, to create, incur, assume or
suffer to exist any Indebtedness, except:
(a) Indebtedness hereunder and under the Loan Documents in
respect of the Notes;
(b) Indebtedness to the Agent pursuant to the Balancing
Line;
(c) Indebtedness of the Material Subsidiaries to the
Borrower or another Material Subsidiary;
(d) Indebtedness of the Material Subsidiaries (other than
as permitted in clause (c) above) that is not guaranteed by the
Borrower in an aggregate principal amount not to exceed
$2,000,000;
(e) Indebtedness assumed or incurred to finance all or any
part of the purchase price or cost of acquisition or construction
of property and secured by Liens permitted pursuant to Section
6.01(g);
(f) Indebtedness assumed in connection with any acquisition
permitted pursuant to Section 6.03 provided that such
Indebtedness was not created in connection with or in
contemplation of such acquisition; and
(g) Indebtedness payable to the applicable seller as all or
any part of the purchase price of any acquisition permitted
pursuant to Section 6.03.
SECTION 6.03. Liquidation, Sale of Assets and Merger.
(a) Except as otherwise provided herein, the Borrower shall
not, and shall not cause, permit or suffer any of the Material
Subsidiaries to, (i) sell, lease, transfer or otherwise dispose
of any portion of its properties and assets to any Person (other
than in the ordinary course of business, including sales for fair
value to former employees of their "book of business" so long as
such business does not account for more than (x) $750,000 in
annual revenue per employee for any fiscal year, or (y)
$3,000,000 in annual revenue for all employees for any fiscal
year) or (ii) liquidate or discontinue its business; provided,
however, that a Material Subsidiary may sell, lease or transfer
all or substantially all of its assets to the Borrower or another
Material Subsidiary and the Borrower may acquire (for an amount
not exceeding the fair value thereof) all or substantially all of
the properties and assets of the Material Subsidiary so to be
sold, leased or transferred to it, if immediately before and
after giving effect to such sale, lease or transfer, no Default
shall have occurred and be continuing.
(b) The Borrower shall not, and shall not cause,
permit or suffer any of the Material Subsidiaries to, merge or
consolidate with or into any other Person or acquire all or
substantially all the Capital Securities, properties or assets of
any other Person except that (i) a Material Subsidiary may be
merged into, or consolidated with, the Borrower or another
Material Subsidiary and (ii) the Borrower or any Material
Subsidiary may acquire all or substantially all of the properties
or assets of any other Person or a Controlling Interest in any
other Person, provided that (A) if the acquisition of such
Controlling Interest is by way of a merger with the Borrower, the
Borrower will be the surviving entity, (B) if a Controlling
Interest is acquired other than through a merger with the
Borrower, such Controlling Interest shall constitute such Person
a Material Subsidiary, (C) immediately prior to such acquisition,
no Default shall have occurred and be continuing, and (D)
immediately after giving effect to such acquisition, no Default
shall have occurred or be continuing.
SECTION 6.04. Investments. The Borrower shall not, and
shall not cause, permit or suffer any of the Material
Subsidiaries to, make or commit to make any advance, loan,
extension of credit or capital contribution to, or purchase of
any stock, bonds, notes, debentures or other securities of, or
make any other investment (by way of guarantee or otherwise) in
any Person other than (i) investments in obligations of, and
obligations of third parties that are fully guaranteed as to
principal and interest by, the United States of America; or (ii)
investments in commercial paper issued by any Person having at
least an A2 credit rating from the publication services of
Standard & Poor's Credit Corp. ("S&P"), or P2 by Moody's Investor
Services, Inc. ("Moody's"), or similar ratings provided by
successor rating agencies; or (iii) demand deposits maintained in
the ordinary course of the Borrower's business or that of any of
the Material Subsidiaries; or (iv) repurchase agreements
collateralized by the investments referred to in (i) or (ii)
above; or (v) certificates of deposit, master notes, bankers'
acceptances, or Eurodollar time deposits issued by commercial
banks or trust companies having capital and surplus in excess of
$100,000,000; or (vi) obligations of states, municipalities,
counties, political subdivisions, agencies of the foregoing and
other similar entities, rated at least A, MIG-1, or MIG-2 by
Moody's or at least A by S&P, or similar ratings by successor
rating agencies; or (vii) unrated obligations of states, munici-
palities, counties, political subdivisions, agencies of the
foregoing and other similar entities, supported by irrevocable
letters of credit issued by commercial banks having capital and
surplus in excess of $100,000,000 and long-term debt that is
rated at least A by Moody's or S&P (or similar ratings by
successor rating agencies) or commercial paper that is rated at
least A2 by Moody's or P2 by S&P (or similar ratings by successor
rating agencies); or (viii) unrated general obligations of
states, municipalities, counties, political subdivisions,
agencies of the foregoing and other similar entities, provided
that the issuer has other outstanding general obligations rated
at least A, MIG-1 or MIG-2 by Moody's or A by S&P (or similar
ratings by successor rating agencies; (ix) repurchases of Capital
Securities of the Borrower pursuant to Borrowers Stock Repurchase
Plan; (x) investments permitted pursuant to Section 6.03(b); and
(xi) other investments not to exceed in the aggregate $2,000,000
acquired in the ordinary course of business. Nothing in this
Section 6.04 shall be construed to restrict the ability of the
Borrower and the Subsidiaries to invest in insurance agencies.
SECTION 6.05. Guarantees. The Borrower shall not, and
shall not cause, permit or suffer any of the Material
Subsidiaries to, issue any Guaranty except that (i) the Borrower
and the Material Subsidiaries may endorse checks for deposit in
the ordinary course of business and (ii) the Borrower may
guarantee the obligations of the Material Subsidiaries to the
extent such obligations are permitted hereunder (provided,
however, that the Borrower shall not guarantee, directly or
indirectly, the obligations of any partnership or joint venture
which is a Subsidiary or in which the Borrower or any Subsidiary
has invested), and (iii) the Borrower and the Material
Subsidiaries may enter into Guaranties of obligations (other than
Premium Payment Obligations and lease payments) in the ordinary
course of business not exceeding $2,500,000 in the aggregate and
Guaranties of Premium Payment Obligations in the ordinary course
of business.
SECTION 6.06. Breach or Violation. The Borrower shall not,
and shall not cause, permit or suffer any of the Material
Subsidiaries to, enter into any agreement containing any
provision that would be violated or breached by the performance
of the Borrower's or any Material Subsidiary's obligations under
this Agreement, the Notes or any of the other Loan Documents.
SECTION 6.07. No Amendments. The Borrower shall not, and
shall not cause, permit or suffer any amendment or modification
of its Organizational Documents without the written consent of
the Banks, which shall not be unreasonably withheld.
SECTION 6.08. Use of Proceeds. The Borrower shall not, and
shall not cause, permit or suffer any of the Subsidiaries to, use
any of the proceeds of any of the Loans for any purpose other
than the purposes set forth in the Recitals herein. Without
limiting the generality of the foregoing, no part of the proceeds
of the Loans hereunder will be used (a) to purchase or carry any
Margin Stock or to extend credit to others for the purpose of
purchasing or carrying any Margin Stock if such action would
violate, or be inconsistent with, any rules or regulations of the
Federal Reserve Board, including without limitation any
provisions of Regulation G, U or X, or (b) to acquire any
security in any transaction that is subject to Section 13 or 14
of the Securities Exchange Act of 1934, including particularly
(but without limitation) Sections 13(d) and 14(d) thereof. If
requested by the Agent or any Bank, the Borrower will furnish to
the Banks a statement in conformity with the requirements of
Federal Reserve Form U-1 referred to in Regulation U.
SECTION 6.09. Transactions with Affiliates. The Borrower
shall not, and shall not cause, permit or suffer any of the
Material Subsidiaries to, effect any transaction with any
Affiliate on a basis less favorable than would at the time be
obtainable for a comparable transaction in arms-length dealing
with an unrelated third party.
SECTION 6.10. Restrictive Covenants. The Borrower shall
not, and shall not cause, permit or suffer any of the Material
Subsidiaries to, enter into any Contract, or otherwise create or
cause or permit to exist or become effective any consensual
restriction, limiting the ability (whether by covenant, event of
default or otherwise) of any Material Subsidiary to (a) pay
dividends or make any other distributions on its Capital
Securities held by the Borrower or any other Material Subsidiary,
(b) pay any obligation owed to the Borrower or any other Material
Subsidiary, (c) make any loans or advances to or investments in
the Borrower or in any other Material Subsidiary, (d) transfer
any of its property or assets to the Borrower or any other
Material Subsidiary, or (e) create any Lien (other than Permitted
Liens) upon its property or assets whether now owned or hereafter
acquired or upon any income or profits therefrom.
SECTION 6.11. Increase in Benefits; New Plans. The
Borrower shall not, and shall not cause, permit or suffer any
ERISA Affiliate to, (a) increase benefits under any Plan or adopt
or establish any new employee benefit plans (within the meaning
of Section 3(3) of ERISA), fringe benefit plans or arrangements,
or executive or incentive plans, if such action would require it
to make substantial additional contributions thereto or to incur
a substantial obligation thereto, except for changes in the
ordinary course of business consistent with past practices of the
Borrower (such as annual cost of living increases) and changes to
existing benefits or new benefits deemed necessary by the
Borrower to remain competitive with the benefits generally
offered by other companies in the same business as the Borrower;
or (b) adopt, establish, or become a party to any Plan that is
subject to the provisions of Title IV of ERISA or any
multiemployer plan (within the meaning of Section 3(37) of
ERISA).
ARTICLE VII
FINANCIAL COVENANTS
The Borrower covenants and agrees with the Agent and the
Banks that, until the Repayment Date, unless the Majority Banks
otherwise consent in writing, it shall comply with the following
financial covenants:
SECTION 7.01. Adjusted Funded Debt to Adjusted Cash Flow
Ratio. The ratio of Adjusted Funded Debt to Adjusted Cash Flow
as of the last day of each calendar quarter shall not exceed 3.00
to 1.00.
SECTION 7.02. Consolidated Net Worth. On the last day of
each quarter, commencing March 31, 1996, Consolidated Net Worth
shall not be less than the sum of (a) $42,500,000, plus (b)
twenty five percent (25%) of positive Consolidated Net Income, if
any, for each fiscal quarter beginning after December 31, 1995,
and ending on or before the date of such determination, plus (c)
fifty percent (50%) of the net proceeds received by the Borrower
or any Subsidiary after December 31, 1995, from the sale of
Capital Securities.
SECTION 7.03. Debt Service Coverage. The ratio of Adjusted
Cash Flow to Debt Service as of the last day of each calendar
quarter shall not be less than 2.50 to 1.00.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default. Each of the following
shall constitute an "Event of Default", whatever the reason for
such event and whether it shall be voluntary or involuntary, or
within or beyond the control of the Borrower or any Subsidiary,
or be effected by operation of law or pursuant to any judgment or
order of any court or any order, rule or regulation of any
governmental or nongovernmental body:
(a) any payment of the principal of or interest on any Note
or of the Commitment Fee or any other amount due under this
Agreement or the Notes shall not be made, within five Business
Days after the same shall become due and payable, whether at the
due date thereof or at a date fixed for prepayment thereof or by
acceleration thereof or otherwise;
(b) any representation or warranty made herein or in any
other Loan Document or any statement or representation made in
any report, certificate, financial statement or other instrument
furnished by the Borrower to the Agent or the Banks pursuant to
this Agreement shall prove to have been false or misleading in
any material respect (whether or not known to the Borrower) when
made or delivered or when deemed made in accordance with the
terms hereof;
(c) the Borrower gives notice to the Agent or the Banks or
the Banks otherwise become aware that an event has occurred or a
circumstance exists or has become known after the Closing Date,
including without limitation notices pursuant to Sections 5.02.
5.06, 5.08, 5.09 and 5.10, that, after notice to the Borrower and
an opportunity (within five Business Days) to discuss Borrower's
plans with respect thereto, the Agent and the Banks determine
could reasonably be expected to have a Material Adverse Effect;
(d) the Borrower or any Subsidiary shall fail to observe or
perform any covenant, warranty or agreement contained in or
referred to in Sections 5.02 and 5.07 and Article VII;
(e) the Borrower or any Subsidiary shall fail to observe or
perform any covenant, warranty or agreement contained in or
referred to in Article VI, provided that any such inadvertent
failure made in good faith shall not constitute an Event of
Default if it is curable and is cured promptly after notice from
Agent (not to exceed, in any event, 15 days);
(f) the Borrower or any Subsidiary shall fail to observe or
perform any other covenant, condition or agreement to be observed
or performed pursuant to the terms hereof and such default shall
continue unremedied for thirty (30) days after written notice
thereof to the Borrower by the Agent or the Majority Banks;
(g) the Borrower or any Material Subsidiary shall fail to
pay any Indebtedness under the Balancing Line or any other
Indebtedness other than the Loans hereunder greater than
$1,000,000 owing by the Borrower or such Material Subsidiary, or
any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable
grace period, if any, specified in the agreement or instrument
relating to such Indebtedness; or the Borrower or any Material
Subsidiary shall fail to perform any term, covenant or agreement
on its part to be performed under any agreement or instrument
evidencing or securing or relating to the Balancing Line or such
Indebtedness; provided that in the case of Indebtedness payable
to sellers in connection with acquisitions by the Borrower and
its Subsidiaries, such failure shall not constitute an Event of
Default if there is a valid dispute regarding the payment or a
valid counterclaim exists against such seller and, in either
case, the payment of such Indebtedness is contested in good
faith;
(h) the Borrower or any Material Subsidiary shall
(i) voluntarily commence any proceeding or file any petition
seeking relief under Title 11 of the United States Code or any
other federal, state or foreign bankruptcy, insolvency or similar
law, (ii) consent to the institution of, or fail to controvert in
a timely and appropriate manner, any such proceeding or the
filing of any such petition, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator or
similar official for the Borrower or such Material Subsidiary or
for a substantial part of its property, (iv) file an answer
admitting the material allegations of a petition filed against it
in any such proceeding, (v) make a general assignment for the
benefit of creditors, (vi) admit in writing its inability or fail
generally to pay its debts as they become due, or (vii) take
corporate action for the purpose of effecting any of the
foregoing;
(i) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of the Borrower or any
Material Subsidiary, or of a substantial part of its property,
under Title 11 of the United States Code or any other federal,
state or foreign bankruptcy, insolvency or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator or
similar official for the Borrower or such Material Subsidiary or
for a substantial part of its property or (iii) the winding-up or
liquidation of the Borrower or such Material Subsidiary; and such
proceeding or petition shall continue undismissed for 60 days or
an order or decree approving or ordering any of the foregoing
shall continue unstayed and in effect for 30 days;
(j) a default or event of default shall have occurred and
be continuing pursuant to any other Loan Document after the
expiration of any applicable notice and cure period provided
therein;
(k) a judgment or order for the payment of money shall be
entered against the Borrower or any Material Subsidiary by any
court, and either (i) such judgment or order shall continue
undischarged and unstayed for a period of 10 days in which the
aggregate amount of all such judgments and orders exceeds
$500,000 or (ii) enforcement proceedings shall have been
commenced upon such judgment or order;
(l) any Person or group of related Persons owns of record
or beneficially, or files with the SEC notice of intent to
acquire, 20% or more of the voting Capital Securities of the
Borrower (excluding amounts owned by such Persons as of the date
hereof), it being understood that for purposes hereof employees
of the Borrower and the Subsidiaries shall not be deemed to be
"related Persons" solely as a result of their common employment;
(m) (i) any Person shall engage in any transaction
involving any Plan that is prohibited under Internal Revenue Code
Section 4975 or ERISA Section 406 and not exempt under Internal
Revenue Code Section 4975 or ERISA Section 408, (ii) the Borrower
or any ERISA Affiliate shall fail to pay when due an amount that
is payable by it to a Plan or (iii) any other event or condition
shall occur or exist with respect to a Plan, except that no event
or condition referred to in clauses (i) through (iii) shall
constitute an Event of Default if it, together with all other
such events or conditions at the time existing, has not
subjected, or in the reasonable determination of the Majority
Banks would not subject, the Borrower or any ERISA Affiliate to
any Indebtedness or liability that, alone or in the aggregate
with all such Indebtedness and liabilities, would have a Material
Adverse Effect; or
(n) the Borrower shall fail to deliver any notice
required to be delivered to the Agent and the Banks pursuant to
any of Sections 5.02. 5.06, 5.08, 5.09 and 5.10 within ten (10)
days after the event giving rise to the obligation to give notice
thereunder.
SECTION 8.02. Exercise of Remedies. Upon the
occurrence of an Event of Default and in every such event and at
any time thereafter during the continuance of such event, the
Agent, upon written request from the Majority Banks, shall by
written notice to the Borrower, take either or both of the
following actions, at the same or different times:
(a) terminate the Commitments and
(b) declare the Notes to be forthwith due and payable,
whereupon the Notes shall become forthwith due and payable, both
as to principal and interest (which, after such declaration,
shall bear interest as provided in Section 1.06(a)), without
presentment, demand, protest or any other notice of any kind, all
of which are hereby expressly waived by the Borrower, anything
contained herein or in the Notes to the contrary notwithstanding.
Notwithstanding the foregoing, if an Event of Default specified
in paragraph (h) or (i) of Section 8.01 occurs with respect to
the Borrower or any Material Subsidiary, the Commitments shall
automatically terminate and the Notes shall become immediately
due and payable, both as to principal and interest, without any
action by any Bank or the Agent and without presentment, demand,
protest or any other notice of any kind, all of which are hereby
expressly waived by the Borrower, anything contained herein or in
the Notes to the contrary notwithstanding. The Agent shall
further be entitled to exercise, for the benefit of the Banks,
all of the rights and remedies available under the Loan Documents
and applicable law.
ARTICLE IX
THE AGENT
SECTION 9.01. Appointment and Authorization. Each Bank
hereby irrevocably appoints and authorizes the Agent to take such
action on its behalf and to exercise such powers hereunder and
under the other Loan Documents as are delegated to the Agent by
the terms hereof and thereof together with such powers as are
incidental thereto. With respect to the Loans made by it and the
Notes issued to it, the Agent shall have the same rights and
powers under this Agreement and the other Loan Documents as any
other Bank and may exercise the same as though it were not the
Agent; and the term "Bank" or "Banks" shall, unless otherwise
expressly indicated, include the Agent in its capacity as a Bank.
The Agent and its Affiliates may accept deposits from, lend money
to, act as trustee under indentures of and generally engage in
any kind of business with, the Borrower, and any Person that may
do business with the Borrower, all as if the Agent were not the
Agent hereunder and without any duty to account therefor to the
Banks.
SECTION 9.02. Noteholders. The Agent may treat the payee
of any Note as the holder thereof.
SECTION 9.03. Consultation with Counsel. The Banks agree
that the Agent may consult with legal counsel selected by it and
shall not be liable for any action taken or suffered in good
faith by it in accordance with the advice of such counsel.
SECTION 9.04. Documents. The Agent shall not be under a
duty to examine or pass upon the validity, effectiveness,
enforceability, genuineness or value of any of the Loan Documents
or any other instrument or document furnished pursuant thereto or
in connection therewith, and the Agent shall be entitled to
assume that the same are valid, effective, enforceable and
genuine and what they purport to be.
SECTION 9.05. Resignation or Removal of the Agent. Subject
to the appointment and acceptance of a successor Agent as
provided below, the Agent may resign at any time by giving
written notice thereof to the Banks and the Borrower and the
Agent may be removed at any time with or without cause by the
Majority Banks. Upon any such resignation or removal, the
Majority Banks shall have the right to appoint a successor Agent.
If no successor Agent shall have been so appointed by the
Majority Banks and shall have accepted such appointment within
thirty (30) days after the retiring Agent's giving of notice of
resignation or the Majority Banks' removal of the retiring Agent,
then the retiring Agent may, on behalf of the Banks, appoint a
successor Agent. Upon the acceptance of any appointment as the
Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation or
removal hereunder as the Agent, the provisions of this Article IX
shall continue in effect for its benefit in respect to any
actions taken or omitted to be taken by it while it was acting as
the Agent.
SECTION 9.06. Responsibility of the Agent. (a) It is
expressly understood and agreed that the obligations of the Agent
under the Loan Documents are only those expressly set forth in
the Loan Documents and that the Agent shall be entitled to assume
that no Default has occurred and is continuing, unless the Agent
has actual knowledge of such fact or has received written notice
from the Borrower or from a Bank that such Bank considers that a
Default has occurred and is continuing and specifying the nature
thereof. The Banks recognize and agree that the Agent shall not
be required to determine independently whether the conditions
described in Articles I and III have been satisfied and, in
disbursing funds to the Borrower, may rely fully upon statements
contained in the relevant notice. Neither the Agent nor any of
its directors, officers or employees shall be liable for any
action taken or omitted to be taken by it under or in connection
with the Loan Documents, except for its own gross negligence or
willful misconduct. The Agent shall incur no liability under or
in respect of any of the Loan Documents by acting upon any
notice, consent, certificate, warranty or other paper or
instrument believed by it to be genuine or authentic or to be
signed by the proper party or parties, or with respect to
anything that it may do or refrain from doing in the reasonable
exercise of its judgment, or that may seem to it to be necessary
or desirable in the circumstances.
(b) The Agent shall not be responsible to the Banks for any
recitals, statements, representations or warranties contained in
this Agreement, or in any certificate or other document referred
to or provided for in, or received by any Bank under, this
Agreement, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or
any document referred to or provided for herein or for any
failure by the Borrower to perform any of its obligations
hereunder. The Agent may employ agents and attorneys-in-fact and
shall not be answerable, except as to money or securities
received by it or its authorized agents, for the negligence or
misconduct of any such agents or attorneys-in-fact.
(c) The relationship between the Agent and each of the Banks
is only that of agent and principal and has no fiduciary aspects,
and the Agent's duties hereunder are acknowledged to be only
administrative and ministerial and not involving the exercise of
discretion on its part. Nothing in this Agreement or elsewhere
contained shall be construed to impose on the Agent any duties or
responsibilities other than those for which express provision is
herein made. In performing its duties and functions hereunder,
the Agent does not assume and shall not be deemed to have
assumed, and hereby expressly disclaims, any obligation or
responsibility toward or any relationship of agency or trust with
or for the Borrower. As to any matters not expressly provided
for by this Agreement (including, without limitation, enforcement
or collection of the Notes), the Agent shall not be required to
exercise any discretion or take any action, but shall be required
to act or to refrain from acting (and shall be fully protected in
so acting or refraining from acting) upon the instructions of the
Majority Banks and such instructions shall be binding upon all
the Banks and all holders of Notes; provided, however, that the
Agent shall not be required to take any action that exposes the
Agent to personal liability or that is contrary to this Agreement
or applicable law.
SECTION 9.07. Notices of Event of Default. In the event
that the Agent shall have acquired actual knowledge of any
Default or Event of Default, the Agent shall promptly give notice
thereof to the other Banks.
SECTION 9.08. Bank Credit Decision. Each Bank acknowledges
that it has, independently and without reliance upon the Agent or
any other Bank and based on the financial information referred to
in Section 4.04 and such other documents and information as it
has deemed appropriate, made its own independent credit analysis
and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance
upon the Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action
under this Agreement.
SECTION 9.09. Indemnification. (a) The Banks jointly and
severally agree to indemnify the Agent (to the extent not
reimbursed by the Borrower), from and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, or disbursements of any kind
or nature whatsoever that may be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out
of the Loan Documents or any action taken or omitted by the Agent
(other than in its capacity as a Bank hereunder) under the Loan
Documents, provided that (i) payment of each Bank's
indemnification shall be made ratably according to its Percentage
unless one or more Banks is not able or permitted to make such
indemnification, in which case each other Bank ratably shall make
payments on behalf of the Bank(s) not so permitted or able and
(ii) no Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the
Agent's gross negligence or willful misconduct.
(b) The Banks hereby agree that any amounts owed to the
Agent by any of the Banks may be deducted by the Agent, and
applied to such amounts, from amounts made available, in
accordance with any of the Loan Documents to the Agent for the
account of the Banks, with the Banks remaining liable for any
deficiency.
SECTION 9.10. Benefit of Article IX. The agreements
contained in this Article IX are solely for the benefit of the
Agent and the Banks, and are not for the benefit of or to be
relied upon by, the Borrower or any third party.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Modification. All modifications, consents,
amendments or waivers of any provision of any Loan Document, or
consent to any departure by the Borrower therefrom, shall be
effective only if the same shall be in writing and concurred in
by the Majority Banks and then shall be effective only in the
specific instance and for the purpose for which given; provided,
however, that no change in the provisions of Articles I, III and
VII, this Section 10.01 or in the definition of the Majority
Banks, shall be effective absent the written concurrence of all
of the Banks, and no change in the provisions of Article IX shall
be effective absent the written concurrence of the Agent.
SECTION 10.02. Waiver. No failure to exercise, and no
delay in exercising, on the part of any Bank, any right hereunder
shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof
or the exercise of any other right. The rights of the Banks
hereunder and under the Loan Documents shall be in addition to
all other rights provided by law. No modification or waiver of
any provision of this Agreement, the Notes or any Loan Documents,
nor consent to departure therefrom, shall be effective unless in
writing and no such consent or waiver shall extend beyond the
particular case and purpose involved. No notice or demand given
in any case shall constitute a waiver of the right to take other
action in the same, similar or other instances without such
notice or demand.
SECTION 10.03. Payment of Expenses. Whether or not any
Loans are made hereunder, the Borrower shall, on demand, pay or
reimburse (a) the Agent and the Banks for all transfer,
documentary, stamp and similar taxes, and all recording and
filing fees, payable in connection with, arising out of or in any
way related to the execution, delivery and performance of this
Agreement, the Notes or the making of the Loans, (b) the Agent
for all of its costs and expenses (including reasonable fees and
disbursements of legal counsel and other experts employed or
retained by the Agent) incurred, and all payments made, and
indemnify and hold the Agent harmless from and against all losses
suffered, by the Agent and the Banks in connection with, arising
out of, or in any way related to (i) the negotiation,
preparation, execution and delivery of (A) this Agreement and the
other Loan Documents and (B) (whether or not executed) any
waiver, amendment or consent hereunder or thereunder and (ii) the
administration of any operations under this Agreement, and (c)
the Agent and the Banks for all of their reasonable costs and
expenses (including reasonable fees and disbursements of legal
counsel and other experts employed or retained by the Agent and
the Banks) incurred, and all payments made, and indemnify and
hold the Agent and the Banks harmless from and against all losses
suffered, by the Agent and the Banks in connection with, arising
out of, or in any way related to (i) consulting with respect to
any matter in any way arising out of, relating to, or connected
with, this Agreement or any other Loan Document, including but
not limited to the enforcement by the Agent and the Banks of any
of their rights hereunder or thereunder or the performance by the
Agent and the Banks of any of their obligations hereunder or
thereunder, (ii) protecting, preserving, exercising or enforcing
any of the rights of the Agent and the Banks hereunder and under
the other Loan Documents, (iii) any claim (whether asserted by
the Agent, the Banks or the Borrower or any other Person and
whether asserted before or after the payment, performance and
observance in full of the Borrower's obligations hereunder and
under the other Loan Documents) and the prosecution or defense
thereof, in any way arising under, related to, or connected with,
this Agreement, the other Loan Documents or the relationship
established hereunder or thereunder and (iv) any governmental
investigation arising out of, relating to, or in any way
connected with this Agreement or any other Loan Document, except
that the foregoing indemnity shall not be applicable to any loss
suffered by the Agent and the Banks to the extent such loss is
determined by a judgment of a court that is binding on the Agent
and the Banks, final and not subject to review on appeal, to be
the result of acts or omissions on the Agent's or the Banks'
part, as the case may be, constituting (x) willful misconduct,
(y) knowing violations of law or, in the case only of claims by
the Borrower against the Agent or the Banks, the Agent's or the
Banks' failure, as the case may be, to comply with its
contractual obligations under this Agreement or any other Loan
Document or, but only to the extent not waivable thereunder,
applicable law. Upon request of the Borrower, the Banks shall
request an itemization (with reasonable detail) of all costs and
expenses from all third parties for which it seeks reimbursement
hereunder and shall provide a copy thereof to the Borrower upon
receipt. Further, the Agent and the Banks shall not be entitled
to reimbursement for costs and expenses of third party
consultants (other than their regular inside and outside legal
counsel) unless an Event of Default has occurred and is
continuing or a bona fide dispute exists hereunder.
SECTION 10.04. Notices. All notices and other
communications provided for herein (including, without
limitation, any modifications of, or waivers or consents under,
this Agreement) shall (unless otherwise indicated) be given or
made by telecopy or in writing and telecopied, mailed or
delivered to the intended recipient at the address of such party
as follows:
(a) The Borrower:
4235 Innslake Drive
P.O. Box 1220
Glen Allen, Virginia 23060-1220
Attention: Timothy J. Korman, Senior Vice President
and Treasurer
Telecopier Number: (804)747-6046
And with a copy of such notice to:
Walter L. Smith, Esquire
Vice President and General Counsel
Hilb, Rogal, and Hamilton Company
4235 Innslake Drive
P.O. Box 1220
Glen Allen, Virginia 23060-1220
Telecopier Number: (804)747-6046
(b) The Agent or any Bank at its address shown below its
name on the signature pages hereof.
With a copy of such notice to:
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
Attention: Douglas S. Granger, Esq.
Telecopier Number: (804) 788-8218
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when
transmitted by telecopier, personally delivered or, in the case
of a mailed notice, upon receipt, in each case given or addressed
as aforesaid. Any such notice or communication that is delivered
by mail shall be presumed to have been received three Business
Days after the day it is mailed. Unless otherwise indicated,
notices received after 5:00 p.m. Richmond time on any day shall
be deemed to have been given by the sender on the next succeeding
Business Day. Any party may change its address for purposes of
this Agreement by giving notice of such change to the other
parties pursuant to this Section 10.04.
SECTION 10.05. Governing Law. This Agreement has been
prepared, is being executed and delivered, and is intended to be
performed in the Commonwealth of Virginia, and the substantive
laws of such state (without regard to choice of law provisions
thereof) shall govern the validity, construction, enforcement and
interpretation of this Agreement and all of the other Loan
Documents.
SECTION 10.06. Invalid Provisions. If any provision of any
Loan Document is held to be illegal, invalid or unenforceable
under present or future laws during the term of this Agreement,
such provision shall be fully severable; such Loan Document shall
be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of such Loan
Document; and the remaining provisions of such Loan Document
shall remain in full force and effect and shall not be affected
by the illegal, invalid or unenforceable provision or by its
severance from such Loan Document. Furthermore, in lieu of each
such illegal, invalid or unenforceable provision shall be added
as part of such Loan Document a provision mutually agreeable to
the Borrower, the Agent and the Majority Banks as similar in
terms to such illegal, invalid or unenforceable provision as may
be possible and be legal, valid and enforceable. In the event
the Borrower, the Agent, and the Majority Banks are unable to
agree, after good faith negotiations, upon a provision to be
added to the Loan Document within a period of ten (10) Business
Days after a provision of the Loan Document is held to be
illegal, invalid or unenforceable, then a provision acceptable to
the Agent and the Majority Banks as similar in terms to the
illegal, invalid or unenforceable provision as is possible and be
legal, valid and enforceable shall be added automatically to such
Loan Document. In either case, the effective date of the added
provision shall be the date upon which the prior provision was
held to be illegal, invalid or unenforceable.
SECTION 10.07. Nonliability of Banks. The relationship
between the Borrower and the Banks is, and shall at all times
remain, solely that of borrower and lenders, and the Banks and
the Agent neither undertake nor assume any responsibility or duty
to the Borrower to review, inspect, supervise, pass judgment
upon, or inform the Borrower of any matter in connection with any
phase of the Borrower's business, operations, or condition,
financial or otherwise. The Borrower shall rely entirely upon
its own judgment with respect to such matters, and any review,
inspection, supervision, exercise of judgment, or information
supplied to the Borrower by any Bank or the Agent in connection
with any such matter is for the protection of the Banks and the
Agent, and neither the Borrower nor any third party is entitled
to rely thereon.
SECTION 10.08. Binding Effect and Assignability. The Loan
Documents shall be binding upon and inure to the benefit of the
Borrower, the Agent and the Banks and their respective
successors, assigns and legal representatives; provided, however,
that the Borrower may not, without the prior written consent of
the Agent and the Banks, assign any rights, powers, duties or
obligations thereunder.
SECTION 10.09. Entirety; Conflicts. The Loan Documents
embody the entire agreement between the parties and supersede all
prior agreements and understandings, if any, relating to the
subject matter hereof and thereof. In the event of any conflict
in the provisions of this Agreement with the provisions of any
other Loan Document, the provisions of this Agreement shall
govern.
SECTION 10.10. Headings, etc. Article and Section headings
and captions and the table of contents hereto are for convenience
of reference only and shall in no way affect the interpretation
of this Agreement.
SECTION 10.11. Survival. All representations and
warranties made by the Borrower herein shall survive delivery of
the Notes and the making of the Loans.
SECTION 10.12. Sale and Transfers etc. of Commitments and
Notes; Participations in Commitments and Notes.
(a) Each Bank shall have the right at any time to sell,
assign, transfer or negotiate all or part (but not less than
$5,000,000 in principal amount) of its Commitments, Loans, Notes,
and other rights and obligations under this Agreement and each
other Loan Document, upon payment to the Agent of an assignment
fee of $2,500 for each such transaction.
(b) Each Bank may grant participations in all or any part
of its Commitment, Loans and its Notes; provided, however, no
holder of any such participation, other than an Affiliate of such
Bank, shall be entitled to require such Bank to take or omit to
take any action hereunder and no Bank shall, as among the
Borrower and such Bank, be relieved of any of its obligations
hereunder as a result of any such granting of a participation,
but the participating Bank shall be entitled to rely on, and
possess all rights under, any opinions, certificates, or other
instruments delivered under or in connection with this Agreement
or any other Loan Document.
(c) The Borrower authorizes each Bank to disclose to any
participant, assignee or Purchasing Bank (each, a "Transferee")
and any prospective Transferee any and all financial and other
information in such Bank's possession concerning the Borrower and
the Subsidiaries, if any, that has been delivered to such Bank by
the Borrower pursuant to this Agreement or that has been
delivered to such Bank by the Borrower.
(d) If, pursuant to this Section 10.12, any interest in
this Agreement or any Commitment, Loan or Note is transferred to
any Transferee that is organized under the laws of any
jurisdiction other than the United States or any state thereof,
the transferor Bank shall cause such Transferee (other than any
participant), and shall cause any participant, concurrently with
the effectiveness of such transfer, (i) to represent to the
transferor Bank (for the benefit of the transferor Bank, the
Agent, and the Borrower) that under applicable law and treaties
no taxes will be required to be withheld by the Agent, and the
Borrower or the transferor Bank with respect to any payments to
be made to such Transferee in respect of the Loans, (ii) to
furnish to the transferor Bank, the Agent and the Borrower either
U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue
Service Form 1001 (wherein such Transferee claims entitlement to
complete exemption from U.S. federal withholding tax on all
interest payments hereunder) and (iii) to agree (for the benefit
of the transferor Bank, the Agent and the Borrower) to provide
the transferor Bank, the Agent and the Borrower a new Form 4224
or Form 1001 upon the obsolescence of any previously delivered
form and comparable statements in accordance with applicable U.S.
laws and regulations and amendments duly executed and completed
by such Transferee, and to comply from time to time with all
applicable U.S. laws and regulations with regard to such
withholding tax exemption.
SECTION 10.13. No Third Party Beneficiary. Without
limiting the effect of Sections 10.08, 10.12 and 10.18, the
parties do not intend the benefits of this Agreement to inure to
any third party, nor shall this Agreement be construed to make or
render the Agent or the Banks liable to any materialman,
supplier, contractor, subcontractor, purchaser or lessee of any
property owned by the Borrower, or for debts or claims accruing
to any such persons against the Borrower. Notwithstanding
anything contained herein or in the Notes, or in any other Loan
Document, or any conduct or course of conduct by any or all of
the parties hereto, before or after signing this Agreement nor
any other Loan Document shall be construed as creating any right,
claim or cause of action against the Agent or the Banks, or any
of their officers, directors, agents or employees, in favor of
any materialman, supplier, contractor, subcontractor, purchaser
or lessee of any property owned by the Borrower, nor to any other
person or entity other than the Borrower.
SECTION 10.14. Waiver of Jury Trial. TO THE FULLEST EXTENT
PERMITTED BY LAW, THE AGENT, THE BANKS AND THE BORROWER HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT, THE NOTES OR ANY LOAN DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (VERBAL OR WRITTEN), OR
ACTIONS OF THE AGENT, THE BANKS, OR THE BORROWER. THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE BANKS ENTERING
INTO THIS AGREEMENT.
SECTION 10.15. Consent to Jurisdiction. (a) The Borrower,
in respect of itself and its properties, represents that it is
subject to (and hereby irrevocably submits to) the nonexclusive
jurisdiction of any United States federal or Virginia state court
sitting in Richmond, Virginia in respect of any suit, action or
proceeding arising out of or relating to this Agreement or the
Notes, and irrevocably agrees that all claims in respect of any
such suit, action or proceeding may be heard and determined in
any such court. The Borrower irrevocably waives, to the fullest
extent it may effectively do so under applicable law, any
objection to the laying of the venue of any such suit, action or
proceeding brought in any such court and any claim that any such
suit, action or proceeding brought in any such court has been
brought in an inconvenient forum.
(b) The Borrower hereby irrevocably appoints Walter L.
Smith, Esq. with an office on the date hereof at 4235 Innslake
Drive, Richmond, Virginia 23060, as its agent to receive and
acknowledge on behalf of itself and its properties and assets
service of any and all process that may be served in any suit,
action or proceeding of the nature referred to in the preceding
paragraph in any United States federal or Virginia state court
sitting in Richmond, Virginia. Said designation and appointment
shall, to the fullest extent permitted by law, be irrevocable
until the Repayment Date. If (i) such agent (or any agent
appointed pursuant to this sentence) shall cease so to act or
(ii) the appointment of such agent (or any agent appointed
pursuant to this sentence) shall prove to be ineffective for any
reason, then the Borrower shall without delay appoint another
such agent satisfactory to the Majority Banks and shall promptly
deliver to the Agent evidence in writing of such other agent's
acceptance of such appointment.
(c) If service cannot promptly and conveniently be made
upon the Borrower's statutory agent for service of process, the
Borrower irrevocably consents to process being served in any
suit, action or proceeding of the nature referred to in clause
(a) of this Section:
(i) by serving a copy of thereof upon the agent for service
of process referred to herein (whether or not the
appointment of such agent shall for any reason prove to be
ineffective or such agent shall accept or acknowledge such
service) or, in the absence of said agent from its office
referred to, or specified in the most recent notice provided
for in, clause (b) of this Section, by delivering a copy of
the same to such office; provided that, to the extent lawful
and possible, written notice of said service shall be mailed
by registered or certified mail, postage prepaid, return
receipt requested, to the Borrower at its address specified
in or designated pursuant to Section 10.04; or
(ii) if service pursuant to clause (i) of this clause (c)
shall prove in the good faith judgment of the Agent or any
Bank to be illegal or impracticable, by mailing a copy
thereof by registered or certified air mail, postage
prepaid, return receipt requested, to the address of the
Borrower specified in or designated pursuant to Section
10.04.
To the fullest extent it may effectively do so under applicable
law, the Borrower irrevocably waives all claim of error by reason
of any such service and agrees that said service (A) shall be
deemed in every respect effective service of process upon the
Borrower in any such suit, action or proceeding and (B) shall be
taken and held to be valid personal service upon and personal
delivery to such Borrower.
(d) The foregoing provisions shall not limit the right of
any Bank, the Agent or any other party hereto to serve process in
any other manner permitted by law or limit the right of any Bank
or the Agent or other party hereto to bring any suit, action or
proceeding or to obtain execution on any judgment rendered in any
suit, action or proceeding in any other appropriate jurisdiction
or in any other manner.
SECTION 10.16. Multiple Counterparts. This Agreement may
be executed in any number of counterparts, all of which taken
together shall constitute one and the same agreement, and any of
the parties hereto may execute this Agreement by signing any such
counterpart.
SECTION 10.17. Disclosures. The Agent and each Bank may
disclose to, and exchange and discuss with, any other Person (the
Agent, each Bank and each such other Person being hereby
irrevocably authorized to do so) any information concerning the
Borrower or any Subsidiary (whether received by the Agent, the
Bank or such Person in connection with or pursuant to this
Agreement or otherwise) solely as may be determined by the
disclosing party to be required by applicable law or necessary or
desirable for the purpose of protecting, preserving, exercising
or enforcing any rights hereunder or under the Notes, or
consulting with respect to any such rights or any rights of the
Borrower.
SECTION 10.18. Sharing of Setoffs. Upon the occurrence and
during the continuance of an Event of Default, the holder of any
Note shall have the right, in addition to and not in limitation
of any right that any such holder may have under applicable law
or otherwise, to setoff against the unpaid balance of any Note or
Notes or participations therein held by it any debt owing to the
Borrower by such holder, including, without limitation, any funds
in any deposit account maintained by the Borrower with such
holder, and nothing in this Agreement shall be deemed any waiver
or prohibition of any Bank's right of banker's lien or setoff.
Each holder of a Note agrees that if it shall, through the
exercise of a right of banker's lien, setoff, counterclaim or
otherwise, obtain payment of a proportion of any Notes held by it
in excess of the proportion of the Notes of the other holders of
the Notes being paid simultaneously or required hereby to be paid
proportionately, it shall be deemed to have simultaneously
purchased from such other holders a participation in the Notes
held by such other holders so that the aggregate unpaid principal
amount of all Notes then outstanding as the principal amount of
such note held by it prior to such exercise of banker's lien,
setoff or counterclaim or receipt of other payment was to the
principal amount of all Notes outstanding prior to such exercise
of banker's lien, setoff or counterclaim or receipt of other
payment, and it shall promptly remit to each such holder the
amount of the participation thus deemed to have been purchased.
The Borrower expressly consents to the foregoing arrangement and
agrees that any holder of a participation in a Note so acquired
may exercise any and all rights of banker's lien, setoff,
counterclaim or otherwise with respect to any and all moneys
owing by such holder to the Borrower as fully as if such holder
were a holder of a Note in the amount of such participation. If
all or any portion of any such excess payment is thereafter
recovered from the holder that received the same, the purchase
provided for herein shall be deemed to have been rescinded to the
extent of such recovery, without interest. Each holder of a Note
agrees to give prompt written notice to the Borrower of any
setoff made pursuant to this Section 10.18.
SECTION 10.19. Repayments in Bankruptcy. In the event any
amount of the Indebtedness of the Borrower to the Banks hereunder
is paid by the Borrower and because of bankruptcy or other laws
relating to creditors' rights the Banks repay any such amounts to
the Borrower or to any trustee, receiver or otherwise, then the
amounts so repaid shall again become part of the Loans payable by
the Borrower.
ARTICLE XI
DEFINITIONS
SECTION 11.01. Definitions. For purposes of this
Agreement, unless the context otherwise requires, capitalized
terms shall have the respective meanings assigned to them in
Exhibit A hereto.
SECTION 11.02. Other Definitional Provisions. (a) Except
as otherwise specified herein, all references herein (i) to any
Person shall be deemed to include such person's, successors,
transferees and assignees, but only, in the case of transferees
and assignees of the Borrower, the Agent and the Banks, to the
extent the applicable transfer or assignment complies with the
provisions of this Agreement, (ii) to any applicable law defined
or referred to herein shall be deemed references to such
applicable law as the same may have been or may be amended or
supplemented from time to time and (iii) to any Contract defined
or referred to herein shall be deemed references to such Contract
(and, in the case of any instrument, any other instrument issued
in substitution therefor) as the terms thereof may have been or
may be amended, supplemented, waived or otherwise modified from
time to time.
(b) When used in this Agreement, the words "herein",
"hereof", and "hereunder" and words of similar import shall refer
to this Agreement as a whole and not to any provision of this
Agreement, and the words "section", "schedule" and "exhibit"
shall refer to Sections of and Schedules and Exhibits to this
Agreement unless otherwise specified.
(c) Whenever the context so requires, the neuter gender
includes the masculine or feminine, and the singular number
includes the plural, and vice versa.
(d) All terms defined in this Agreement shall have the
defined meanings when used in the Notes, and except as otherwise
expressly stated therein, any certificate, opinion or other Loan
Document delivered pursuant hereto or referred to herein.
SECTION 11.03. Accounting Matters. Unless otherwise
specified herein, all accounting determinations hereunder and all
computations utilized by the Borrower in complying with the
covenants contained herein shall be made, all accounting terms
used herein shall be interpreted, and all financial statements
required to be delivered hereunder shall be prepared, in
accordance with Generally Accepted Accounting Principles, except,
in the case of such financial statements, for departures from
Generally Accepted Accounting Principles that may from time to
time be approved in writing by the independent certified
accountants who are at the time in accordance with Section 5.05
reporting on the Borrower's financial statements.
{REMAINDER OF PAGE INTENTIONALLY LEFT BLANK}
{SIGNATURES BEGIN ON THE FOLLOWING PAGE}
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their duly authorized
officers as of the day and year first above written.
HILB, ROGAL, AND HAMILTON COMPANY
By__________________________
Title:_______________________
CRESTAR BANK, as Agent
By__________________________
Christopher B. Werner
Vice President
Address: 919 East Main Street
Richmond, Virginia 23219
Fax: (804) 782-5413
Amount of Percentage
Commitment Interest
CRESTAR BANK
$10,000,000 50% By_________________________
Christopher B. Werner
Vice President
Address: 919 East Main Street
Richmond, Virginia 23219
Fax: (804) 782-5413
FIRST UNION NATIONAL BANK OF
VIRGINIA
$10,000,000 50% By_________________________
Title:______________________
Address: 901 East Cary Street
One James Center
Richmond, Virginia 23219
Fax: (804) ____________
<PAGE>
EXHIBIT A
DEFINITIONS
This is Exhibit A to that certain Credit Agreement dated as
of February 12, 1996, among Hilb, Rogal, and Hamilton Company,
Crestar Bank, and the Banks listed therein (the "Agreement").
When used in this Exhibit, the words "herein", "hereof", and
"hereunder" and words of similar import shall refer to the
Agreement, and the words "section", "schedule" and "exhibit"
shall refer to Sections of and Schedules and Exhibits to the
Agreement, unless otherwise specified.
"Adjusted Cash Flow" means, for any period, the sum for the
Borrower and its Consolidated Subsidiaries, of (a) Consolidated
Net Income for such period plus (b) to the extent deducted in
determining Consolidated Net Income for such period, (i)
depreciation and amortization, (ii) taxes, (iii) Interest
Expense, (iv) Operating Lease Rentals, (v) extraordinary and
unusual items and (vi) loss attributable to equity in Affiliates.
"Adjusted Eurodollar Rate" means, with respect to any
Eurodollar Loan for any Interest Period, an interest rate per
annum determined by the Agent (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to the product of (a) the Fixed
Eurodollar Rate in effect for the Interest Period applicable to
such Loan and (b) Eurodollar Statutory Reserves, adjusted to
reflect all additional actual costs, including brokers' fees and
other acquisition costs, and Taxes as determined by the Agent,
which are incurred by the Agent in connection with making such
Eurodollar Loan. For purposes hereof, the term "Fixed Eurodollar
Rate" shall mean the arithmetic average of the interest rates at
which deposits of Dollars approximately equal in principal amount
to the Eurodollar Loan and for a maturity comparable to the
applicable Interest Period are offered in immediately available
funds to the Agent by leading banks in the interbank market
selected by the Agent for such deposits at approximately 11:00
a.m. (London time), or as soon thereafter as is practicable, two
Business Days prior to the commencement of the Interest Period.
"Eurodollar Statutory Reserves" shall mean, on any date, a
fraction, the numerator of which is one and the denominator of
which is one minus the maximum reserve percentages (including
without limitation, basic, supplemental, marginal and emergency
reserves) expressed by the Federal Reserve Board and any other
banking authority to which the Agent is subject with respect to
"Eurocurrency liabilities" as currently defined in Regulation D,
or under any similar or successor regulation with respect to
Eurocurrency liabilities or Eurocurrency funding. The Adjusted
Eurodollar Rate shall be adjusted automatically on and as of the
effective date of each change in Eurodollar Statutory Reserves.
Each determination by the Agent of any Adjusted Eurodollar Rate
and of Eurodollar Statutory Reserves and Taxes shall be
conclusive and binding on the Borrower and the Banks absent
manifest error. The Banks and the Borrower acknowledge that the
Agent may from time to time determine the Fixed Eurodollar Rate
from quotations of the Agent's money desk or by reference to
Reuter Screen or similar quotations, in the discretion of the
Agent, on and as of the date of determination.
"Adjusted Funded Debt" means, as of any date of
determination, the sum of (a) all Indebtedness (including the
current portion thereof) of the Borrower and its Consolidated
Subsidiaries on such date and (b) an amount equal to eight times
the total Operating Lease Rentals of the Borrower and its
Consolidated Subsidiaries paid during the twelve months
immediately preceding such date.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common
control with, such first Person. For the purposes of this
definition, "control" (including the terms "controlled by" and
"under common control with"), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies
of such Person, whether through the ownership of Capital
Securities having voting rights or by contract or otherwise.
Unless otherwise specified, "Affiliate" means an Affiliate of the
Borrower.
"Agent" shall have the meaning assigned to such term in the
preamble hereof, and any successor thereto pursuant to Article IX
hereof.
"Agreement" means the Credit Agreement among the Borrower,
the Banks and the Agent, dated as of February 12, 1996, as the
same may be amended, modified, supplemented or restated from time
to time.
"Applicable Margin" means the annual rate of interest to be
added to the Adjusted Eurodollar Rate in calculating interest
payable on Eurodollar Loans Notes and shall be determined based
on the ratio of Adjusted Funded Debt to Adjusted Cash Flow as of
the last day of the fiscal quarter ending one quarter prior to
the first day of the quarter for which such determination is
being made as follows:
Ratio Applicable Margin
2.50 to 1.00 or greater 0.700%
greater than or equal to
2.00 to 1.00 but less
than 2.50 to 1.00 0.575%
greater than or equal to
1.75 to 1.00 but less
than 2.00 to 1.00 0.450%
Less than 1.75 to 1.00 0.375%
The ratio upon which a determination of "Applicable Margin" is
based shall be computed on the basis of the financial statements
delivered by Borrower pursuant to Section 5.06(a). Changes in
the Applicable Margin shall be effective as of the first day of
each fiscal quarter for which such determination is being made.
In the event that any financial information provided by Borrower
is subsequently determined to be inaccurate and accurate
information would have resulted in a higher Applicable Margin,
such higher Applicable Margin shall be given effect retroactively
and Borrower shall promptly pay to the Agent for the benefit of
the Banks such amount as is necessary to give effect to such
change.
"Balancing Line" means the uncommitted line of credit from
Crestar Bank to the Borrower pursuant to a letter agreement dated
February 12, 1996, in a maximum principal amount not to exceed
$5,000,000.
"Banks" means the institutions indicated as Banks on the
signature pages hereof, and shall include, at such times as they
shall become parties hereto, Purchasing Banks, if any.
"Base Rate" means the greater of (a) the Federal Funds Rate
plus 1/4 of 1% and (b) the rate of interest announced from time
to time by the Agent as its prime rate of interest (which rate of
interest may not be the lowest rate charged by the Agent or any
Bank on similar loans). Each change in the Base Rate shall
become effective without prior notice to the Borrower
automatically as of the date of such change in the Base Rate.
"Base Rate Loan" shall mean a Loan on which interest accrues
based on the Base Rate in accordance with Article I.
"Borrower" shall have the meaning assigned to such term in
the preamble hereof.
"Business Day" means any day other than Saturday, Sunday or
a day on which banks are required or authorized to be closed for
business in Richmond, Virginia, and, with respect to any
Eurodollar Loan, means any such Business Day on which
transactions are effected in deposits of U.S. Dollars in the
relevant interbank foreign currency deposits market and on which
commercial banks are open for domestic and international business
(including dealings in Dollar deposits) in the jurisdiction in
which such interbank market is located.
"Capital Lease" means, as of any date, any lease of
property, real or personal, that would be capitalized on a
balance sheet of the lessee prepared as of such date in
accordance with Generally Accepted Accounting Principles,
together with any other lease by such lessee that is in substance
a financing lease, including without limitation, any lease under
which (a) such lessee has or will have an option to purchase the
property subject thereto at a nominal amount or an amount less
than a reasonable estimate of the fair market value of such
property as of the date such lease is entered into, or (b) the
term of the lease approximates or exceeds the expected useful
life of the property leased thereunder.
"Capitalized Lease Obligations" means all obligations of the
Borrower and the Subsidiaries under Capital Leases.
"Capital Securities" means with respect to any Person that
is (a) a corporation, any shares of capital stock of such
corporation, (b) a general or limited partnership, any general or
limited partnership interest of such partnership, (c) a limited
liability company, any stock or other membership or ownership
interests in such limited liability company, and also means any
security convertible into, or any option, warrant or other right
to acquire, any of the items described in clause (a), (b) or (c)
above of such Person.
"Closing Date" means February 12, 1996, or such other date
as the Borrower and the Banks may agree.
"Commitment" means, with respect to each Bank, the amount of
the Commitment of such Bank as set forth opposite such Bank's
name on the signature pages hereof, as the same may be reduced
from time to time pursuant to this Agreement.
"Commitment Fee" shall have the meaning assigned to such
term in Section 1.05 hereof.
"Commitment Rate" shall mean the per annum rate to be used
to calculate the payment of Commitment Fees and shall mean the
percentage rate, determined based on the ratio of Adjusted Funded
Debt to Adjusted Cash Flow as of the last day of the fiscal
quarter ending one quarter prior to the first day of the quarter
for which such determination is being made as follows:
Ratio Commitment Rate
2.50 to 1.00 or greater 0.30%
greater than or equal to
2.00 to 1.00 but less
than 2.50 to 1.00 0.25%
greater than or equal to
1.75 to 1.00 but less
than 2.00 to 1.00 0.20%
Less than 1.75 to 1.00 0.175%
The ratio upon which a determination of "Commitment Rate" is
based shall be computed on the basis of the financial statements
delivered by Borrower pursuant to Section 5.06(a). Changes in
the Commitment Rate shall be effective as of the first day of
each fiscal quarter for which such determination is being made.
In the event that any financial information provided by Borrower
is subsequently determined to be inaccurate and accurate
information would have resulted in a higher Commitment Rate, such
higher Commitment Rate shall be given effect retroactively and
Borrower shall promptly pay to the Agent for the benefit of the
Banks such amount as is necessary to give effect to such change.
"Commitment Termination Date" means January 31, 2001, or
such earlier date and time on which the Commitments are
terminated pursuant to Article VIII.
"Commitment Transfer Supplement" means an agreement among
the Agent, a Bank, the Borrower and a Purchasing Bank providing
for the transfer of a portion of the Loans and the Commitment of
such Bank (or any prior Purchasing Bank) to a Purchasing Bank,
which shall be in form and substance satisfactory to the
Borrower, the Agent and such Bank and shall set forth the
reallocations of the Commitment and the outstanding principal
amounts of the Loans by each Bank.
"Compliance Certificate" shall mean a certificate of the
chief financial officer of the Borrower in the form of Exhibit D
hereto setting forth computations in reasonable detail as of the
date thereof of compliance with Article VII.
"Consolidated Net Income" means, for any period, the
consolidated net income of the Borrower and the Consolidated
Subsidiaries for such period (taken as a cumulative whole)
provided that there shall be excluded: (a) any net income of a
Consolidated Subsidiary to the extent that the declaration or
payment of dividends or similar distributions by that
Consolidated Subsidiary is not at the time permitted by operation
of the terms of any contract or applicable law; (b) any net
income (or net loss) of any Person (other than a Consolidated
Subsidiary) in which the Borrower or any Consolidated Subsidiary
has an ownership interest, except to the extent that any such
income has actually been received by the Borrower or such
Subsidiary in the form of cash dividends or similar
distributions; (c) any net gains or losses on the sale or other
disposition, not in the ordinary course of business, of
investments and other capital assets in excess of an aggregate
amount for such period of $7,500,000, provided that there shall
also be excluded any related charges for taxes thereon; (d) any
net gain arising from the collection of the proceeds of any
insurance policy; (e) any write-up of any asset; (f) any net
gains resulting from the defeasance of any Indebtedness; and (g)
any extraordinary gains or losses.
"Consolidated Subsidiaries" means, as of any date, all
Affiliates of the Borrower included as of such date in the
consolidated financial statements of the Borrower.
"Consolidated Net Worth" means, at any date, all amounts
which would be included under shareholder's equity on the
consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries at such time.
"Contract" means an indenture, agreement (other than this
Agreement), other contractual restriction, lease, instrument
(other than the Notes), certificate or Organizational Document.
"Controlled Group" means (a) the controlled group of
corporations as defined in Section 1563 of the Internal Revenue
Code or (b) the group of trades or businesses under common
control as defined in Section 414(c) of the Internal Revenue Code
of which the Borrower is a part or may become a part.
"Controlling Interests" means ownership of a sufficient
interest in a Person to approve mergers, sales of assets,
dissolutions, amendments to Organizational Documents and other
acts requiring a "supermajority" vote under applicable law and
such Person's Organizational Documents.
"Conversion Date" means the date on which any Loan is
converted from a Base Rate Loan or a Eurodollar Loan to a Loan of
a different type pursuant to Section 1.07 hereof.
"Debt Service" means, for any twelve month period, the sum
(determined on a consolidated basis) for the Borrower and its
Consolidated Subsidiaries of (a) Operating Lease Rentals accrued
or paid during such period plus (b) Interest Expense for such
period.
"Default" means an Event of Default or any condition or
event that with the giving of notice or the lapse of time or both
would become an Event of Default.
"Dollars" and the sign "$" shall refer to lawful currency of
the United States of America.
"Environmental Laws" means all laws relating to Hazardous
Waste disposal, Toxic Substances, or environmental conservation.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, together with all regulations and official
rulings and interpretations issued pursuant thereto.
"ERISA Affiliate" means any corporation or trade or
business, whether or not incorporated, which together with the
Borrower would be treated as a single employer under ERISA or the
Internal Revenue Code.
"Eurodollar Loan" means a Loan on which interest accrues
based on the Adjusted Eurodollar Rate in accordance with Article
I.
"Event of Default" shall have the meaning assigned to such
term in Article VIII.
"Federal Funds Rate" means for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/16th of 1%)
equal to the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System
arranged by federal funds brokers on such day, as published by
the Federal Reserve Bank of New York, on the Business Day next
succeeding such day, provided that (a) if the day for which such
rate is to be determined is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next
succeeding Business Day, and (b) if such rate is not so published
for any day, the Federal Funds Rate for such day shall be the
average rate charged to the Agent on such day on such
transactions as determined by the Agent.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System and any successor agency.
"Generally Accepted Accounting Principles" means those
generally accepted accounting principles and practices that are
recognized as such by the American Institute of Certified Public
Accountants acting through its Accounting Principles Board or by
the Financial Accounting Standards Board or through other
appropriate boards or committees thereof and that are
consistently applied for all periods after the date of the most
recent balance sheet of the Borrower referred to in Section 5.06
so as to properly reflect the financial condition, and the
results of operations and cash flows, of the Borrower and its
Consolidated Subsidiaries, except that any accounting principle
or practice required to be changed by the Accounting Principles
Board or Financial Accounting Standards Board (or other
appropriate board or committee of such Boards) in order to
continue as a generally accepted accounting principle or practice
may so be changed. In the event of a change in Generally
Accepted Accounting Principles, the Banks and the Borrower will
thereafter negotiate in good faith to revise any covenants of
this Agreement affected by such change in order to make such
covenants consistent with Generally Accepted Accounting
Principles then in effect.
"Governmental Authority" means (a) with respect to the
Borrower and the Subsidiaries, any government (or any political
unit thereof), court, bureau, agency or other governmental
authority having or claiming jurisdiction over the Borrower or a
Subsidiary or any of their respective businesses, operations or
properties and (b) with respect to the Agent, the Banks and their
Affiliates, the Federal Reserve Board, the Comptroller of the
Currency, any state banking regulator or any other government (or
any political unit thereof), court, bureau, agency or other
governmental authority having or claiming jurisdiction or
regulatory authority over the Agent, such Bank or their
Affiliates or any of their respective businesses, operations or
properties.
"Guaranty" of any Person means any contract, agreement or
understanding of such Person pursuant to which such Person
provides for the payment of any Indebtedness of any other Person
(the "Primary Obligor") or otherwise protecting, or having the
practical effect of protecting, the holder of such Indebtedness
against loss, in any manner, whether directly or indirectly,
contingent or otherwise, including without limitation agreements:
(a) to purchase such Indebtedness or any property constituting
security therefor, (b) to advance or supply funds (i) for the
purchase or payment of such Indebtedness, or (ii) to maintain net
worth or working capital or other balance sheet conditions, or
otherwise to advance or make available funds for the purchase or
payment of such Indebtedness, (c) to purchase property,
securities or service primarily for the purpose of assuring the
holder of such Indebtedness of the ability of the Primary Obligor
to make payment of the Indebtedness, or (d) otherwise to assure
the holder of the Indebtedness of the Primary Obligor against
loss in respect thereof.
"Hazardous Wastes" means all waste materials subject to
regulation or defined as such under the Comprehensive
Environmental Response, Compensation, and Liability Act as
modified by the Superfund Amendments and Reauthorization Act of
1986, the Resource Conservation and Recovery Act, the Clean Air
Act, the Federal Water Pollution Control Act, the Toxic Substance
Control Act, or any applicable state law and any other applicable
federal, state or local laws and their regulations now in force
or hereafter enacted relating to hazardous waste disposal or
environmental conservation.
"Indebtedness" means, with respect to any Person and without
duplication: (a) all obligations of such Person for borrowed
money or the deferred purchase price of goods or services (except
trade payables in the ordinary course of business); (b) all
obligations of such Person in respect of any Guaranty (other than
endorsements of checks for deposit in the ordinary course of
business), (c) all obligations of such Person in respect of any
Capital Lease, (d) all obligations, indebtedness and liabilities,
including any refinancings thereof, secured by any lien or any
security interest on any property or assets of such Person, and
(e) all Mandatorily Redeemable Securities of such Person valued
in accordance with Generally Accepted Accounting Principles.
"Interest Expense" means, for any period, all interest in
respect of Indebtedness accrued or capitalized during such period
(whether or not actually paid during such period).
"Interest Payment Date" means (a) with respect to each
Eurodollar Loan, the last day of each Interest Period for such
Loan and (b) with respect to each Base Rate Loan, the last day of
each calendar month and the Commitment Termination Date.
"Interest Period" means, as to any Eurodollar Loan, the
period commencing on the date of such Eurodollar Loan or
continuation thereof and ending on the numerically corresponding
day (or, if there is no numerically corresponding day, on the
last day) in the calendar month that is 1, 2 or 3 months
thereafter, as the Borrower may elect; provided, however, that
(y) if any Interest Period would end on a day that is not a
Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless such next succeeding Business Day
would fall in the next calendar month, in which case such
Interest Period shall end on the next preceding Business Day and
(z) no Interest Period with respect to any Loan shall end later
than the Commitment Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, and all regulations and official rulings and
interpretations thereunder or thereof.
"Legal Requirement" means any requirement imposed upon the
Agent or any Bank by any law of the United States of America or
any other jurisdiction exercising or claiming authority over the
Agent or such Bank, including without limitation, any regulation,
order, interpretation, ruling or official directive (whether or
not having the force of law) of any Governmental Authority.
"Lien" means any lien, mortgage, security interest, tax
lien, attachment, levy, charge, pledge, encumbrance, conditional
sale or title retention arrangement, or any other interest in
property or assets (or the income or profits therefrom) designed
to secure the repayment of Indebtedness, whether consensual or
nonconsensual and whether arising by agreement or under any
statute or law, or otherwise.
"Loan" means an amount advanced pursuant to Section 1.01 and
a Loan of a "type" means a Loan that bears, or is to bear, as the
context may require, interest based on the Base Rate or Adjusted
Eurodollar Rate.
"Loan Documents" means this Agreement, the Notes and any
other document now or hereafter executed or delivered in
connection with this Agreement or the Obligations, including,
without limitation, any life insurance assignment, pledge
agreement, security agreement, financing statement, deed of
trust, mortgage, promissory note, or subordination agreement
(including any renewals, extensions and refundings thereof and
any modifications, supplements and amendments thereto and
substitutes therefor), each of which shall be in form and
substance satisfactory to the Banks.
"Majority Banks" means, as of any date, Banks holding Notes
representing at least sixty-six percent (66%) of the aggregate
unpaid principal amount of the Loans outstanding on such date,
and in the event no Loans are outstanding on such date, Banks
holding at least sixty-six percent (66%) of the aggregate
Commitments of all Banks ; provided, however, that solely for
purposes of Section 8.02 hereof Majority Banks means Banks
holding Notes representing at least forty percent (40%) of the
aggregate unpaid principal amount of the Loans outstanding on
such date.
"Mandatorily Redeemable Securities" means, as applied to a
Person, any of such Person's Capital Securities or debt to the
extent that it is redeemable, payable or required to be purchased
or otherwise retired or extinguished (a) at a fixed or
determinable date, whether by operation of a sinking fund or
otherwise, (b) at the option of any Person other than such Person
or (c) upon the occurrence of a condition not solely within the
control of such Person, such as a redemption required to be made
out of future earnings.
"Margin Stock" means "margin stock" as defined in Regulation
U or G.
"Material Adverse Effect" means any material adverse effect
upon (a) the validity, performance or enforceability of any Loan
Document, (b) the financial condition or business operations of
the Borrower and the Material Subsidiaries, or (c) the ability of
the Borrower to fulfill its obligations under the Loan Documents.
"Material Subsidiary" means any of the Subsidiaries listed
on Schedule 4.06(a) and any other domestic Subsidiary now or in
the future that has annual revenues (either historically or on a
pro forma basis) exceeding 2.25% of total consolidated revenues
of the Borrower and the Consolidated Subsidiaries, provided that
the sum of all revenues of all Material Subsidiaries shall not be
less than 75% of total consolidated revenues of the Borrower and
the Consolidated Subsidiaries, and if less, additional
Subsidiaries (in descending order of total revenues) shall become
Material Subsidiaries until the sum of all revenues exceeds 75%.
"Maximum Permitted Rate" means, with respect to interest
payable on any amount, the rate of interest on such amount that,
if exceeded could, under applicable law, result in (a) civil or
criminal penalties being imposed on any Bank or (b) any Bank's
being unable to enforce payment of (or if collected, to retain)
all or part of such amount or the interest payable thereon.
"Notes" means the promissory notes executed by the Borrower
and delivered to the Banks pursuant to Section 1.03 of this
Agreement, together with any renewals, extensions, replacements
or modifications thereof.
"Obligations" means all indebtedness, liabilities and
obligations, whether now existing or hereafter arising, direct or
indirect, fixed or contingent, secured or unsecured, matured or
unmatured, joint, several or joint and several, arising out of or
in connection with this Agreement, the Notes, the Loans or any
other Loan Document or other document executed or delivered in
connection with this Agreement or the Loans.
"Operating Lease Rentals" of any Person means, as of any
date, the aggregate amount of the obligations and liabilities
(including future obligations and liabilities not yet due and
payable) of such Person to make payments under all leases,
subleases and similar arrangements for the use of real, personal
or mixed property, other than leases that are Capital Leases.
"Organizational Documents" means the fundamental
organizational and governing documents of a Person and includes,
without limitation, (a) in the case of a corporation, its
articles of incorporation and other charter documents, bylaws and
agreements among shareholders, (b) in the case of a partnership,
its certificate of partnership, partnership agreement and other
agreements among partners and (c) in the case of a limited
liability company, its articles of organization, operating
agreement and other agreements among members.
"Percentage" means, with respect to each Bank, the
percentage set forth opposite the name of such Bank on the
signature pages hereof.
"Permitted Liens" shall mean the Liens permitted pursuant to
the provisions of Section 6.01.
"Person" shall include an individual, a sole proprietorship,
a corporation, a joint venture, a general or limited partnership,
a trust, an unincorporated organization, a mutual company, a
joint stock company, an estate, a union, an employee organization
or a Governmental Authority.
"Plan" means an employee benefit plan as defined in Section
3(3) of ERISA maintained by the Borrower or any Subsidiary for
employees of the Borrower and/or the Subsidiaries, and every
other employee benefit arrangement not subject to ERISA,
including but not limited to, those arrangements providing
profit-sharing, stock bonus, stock option, executive
compensation, deferred compensation, severance, hospitalization,
medical, dental, disability or life insurance benefits.
"Premises" means any and all of the real property owned,
leased or otherwise used by the Borrower and its Material
Subsidiaries.
"Premium Payment Obligations" means the obligation of the
Borrower or any Subsidiary to insurance companies or brokers for
insurance coverages or risk management services purchased for
clients for whom the Borrower or any Subsidiary acted as an agent
or broker in the purchase of such insurance coverages or risk
management services.
"Purchasing Bank" shall have the meaning assigned to such
term in Section 10.12 hereof.
"Regulations D, G, U and X" means Regulations D, G, U and X
of the Federal Reserve Board, as the same is from time to time in
effect, and all official rulings thereunder or thereof.
"Regulatory Change" means (a) any new, or any change in any
existing, law, regulation, interpretation, directive or request
(whether or not having the force of law) or (b) any change in the
administration or enforcement of any such applicable law,
regulation, interpretation, directive or request that becomes
effective after the date of this Agreement, whether as a result
of an enactment or determination of a Governmental Authority or
otherwise.
"Repayment Date" means the later of (a) the Commitment
Termination Date or the reduction to zero of the Commitments,
whichever first occurs and (b) the date on which the Loans and
all other amounts payable hereunder are paid in full.
"SEC" means the Securities and Exchange Commission of the
United States and any successor agency thereto.
"Solvent" means, with respect to any Person on a particular
date, that on such date (a) the fair value of the property of
such Person is greater than the total amount of liabilities,
including, without limitation, contingent liabilities, of such
Person, (b) the amount that will be required to pay the probable
liabilities of such Person on its debts as they become absolute
and matured will not be greater than the fair salable value of
the assets of such Person at such time, (c) such Person is able
to realize upon its assets and pay its debts and other
liabilities, contingent obligations and other commitments as they
mature in the normal course of business, (d) such Person does not
intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and
liabilities mature, and (e) such Person is not engaged in
business or a transaction, and is not about to engage in business
or a transaction, for which such Person's property would
constitute unreasonably small capital after giving due
consideration to prevailing practices in the industry in which
such Person is engaged. In computing the amount of any
contingent liability at any time, it is intended that such
liability will be computed at the amount which, in light of all
the facts and circumstances existing at such time, represents the
amount that might reasonably be expected to become an actual or
matured liability.
"State Official" means, with respect to any Person, the
Secretary of State or other appropriate official of the
jurisdiction in which such Person was incorporated or organized
who is authorized to certify official records of such Person on
file in such jurisdiction.
"Subsidiary" means, with respect to any Person, any other
Person fifty percent (50%) or more of the outstanding Capital
Securities of each class of which is owned or controlled,
directly or indirectly, by such first Person and its Affiliates.
"Tax" means, in relation to any Eurodollar Loan and the
applicable Eurodollar, any federal, state, local or foreign tax,
levy, impost, duty, deduction, withholding or other charge of
whatever nature required by any Legal Requirement (a) to be paid
by the Banks or (b) to be withheld or deducted from any payment
otherwise required hereby to be made by the Borrower to the
Banks; provided, however, that the term "Tax" shall not include
any taxes imposed upon the net income of the Banks by the United
States, any political subdivision thereof or any other taxing
authority.
"Toxic Substances" means and includes any materials present
on the Premises which have been shown to have significant adverse
effects on human health or which are subject to regulation under
the Toxic Substances Control Act, applicable state law, or any
other applicable federal, state or local laws now in force or
hereafter enacted relating to toxic substances. "Toxic
Substances" includes, but is not limited to, asbestos,
polychlorinated biphenyls ("PCBs"), petroleum products, and lead-
based paints.
"Wholly Owned Subsidiary" means a Subsidiary all of the
Capital Securities of which are, directly or indirectly, owned or
controlled by the Borrower or one or more Wholly Owned
Subsidiaries or by the Borrower and one or more of such
Subsidiaries.
<PAGE>
EXHIBIT B
[Form of Revolving Note]
$________
Richmond, Virginia
February 12, 1996
FOR VALUE RECEIVED, HILB, ROGAL, AND HAMILTON COMPANY, a
Virginia corporation (the "Borrower"), hereby promises to pay to
the order of __________________ (the "Bank"), at the office of
Crestar Bank, as Agent (the "Agent"), at 919 East Main Street,
Richmond, Virginia 23219, on the dates provided in the Credit
Agreement (the "Credit Agreement") dated as of February 12, 1996
among the Borrower, the Agent and the Banks described in the
Credit Agreement, but in no event later than the Commitment
Termination Date as defined in the Credit Agreement, in lawful
money of the United States of America, in immediately available
funds, the principal amount of ___________________________
Dollars ($___________ ) or, if less than such principal amount,
the aggregate unpaid principal amount of the Loans (as defined in
the Credit Agreement) made by the Bank to the Borrower pursuant
to the Credit Agreement, and to pay interest from the date hereof
on the unpaid principal amount hereof, in like money, at said
office, on the dates and at the rates selected in accordance with
Article I of the Credit Agreement.
The Borrower promises to pay interest, payable on demand, on
any overdue principal and, to the extent permitted by law,
overdue interest from their due dates at a rate or rates
determined as set forth in the Credit Agreement.
The Borrower hereby waives diligence, presentment, demand,
protest and notice of any kind whatsoever. The nonexercise by
the holder of any of its rights hereunder in any particular
instance shall not constitute a waiver thereof in that or any
subsequent instance.
All borrowings evidenced by this Note and all payments and
prepayments of the principal hereof and interest hereon and the
respective dates thereof shall be evidenced by the books and
records of the Agent and the Bank.
This Note is one of the Notes referred to in the Credit
Agreement which, among other things, contains provisions for the
acceleration of the maturity hereof upon the happening of certain
events, for optional prepayment of the principal hereof prior to
the maturity thereof and for the amendment or waiver of certain
provisions of the Credit Agreement, all upon the terms and
conditions therein specified. This Note shall be construed in
accordance with and governed by the laws of the Commonwealth of
Virginia.
HILB, ROGAL, AND HAMILTON COMPANY
By__________________________
Title:
<PAGE>
EXHIBIT C
CONDITIONS TO INITIAL LOANS
This is Exhibit C to that certain Credit Agreement dated as
of February 12, 1996, among Hilb, Rogal, and Hamilton Company,
Crestar Bank, and the Banks listed therein (the "Agreement").
All capitalized terms used but not defined herein or in the
appendices hereto shall have the meanings given to them in the
Agreement.
1. The Borrower shall have delivered, or caused to be
delivered, to each Bank:
(a) a duplicate original of the Agreement executed on the
Borrower's behalf by its duly authorized officer.
(b) a duly executed Note payable to its order and otherwise
complying with the provisions of Section 1.03 of the Agreement.
(c) the written opinion of Williams, Mullen, Christian &
Dobbins, counsel to the Borrower, substantially in the form
attached as Appendix 1 to this Exhibit, and addressing such other
legal matters as the Banks and their counsel may require.
2. The Borrower shall have delivered, or caused to be
delivered, to the Agent:
(a) A copy of the Borrower's Articles of Incorporation, as
amended, certified as of a recent date by a State Official.
(b) A certificate of a State Official, dated as of a
recent date, as to the good standing and charter documents of the
Borrower on file in the office of such State Official.
(c) A certificate of the Secretary or an Assistant
Secretary of the Borrower dated as of the Closing Date
substantially in the form attached as Appendix 2 to this Exhibit.
(d) A certificate of the Chief Financial Officer of the
Borrower, substantially in the form attached as Appendix 3 to
this Exhibit, certifying that (i) the Borrower is in compliance
with all the terms and provisions of the Agreement and at the
time of and immediately after such borrowing no Default has
occurred or is continuing and (ii) the representations and
warranties contained in Article IV of the Agreement are true and
correct.
(e) Certified copies of all consents and required
governmental approvals, if any, necessary for the execution,
delivery and performance of the Agreement, the Note, and the
other Loan Documents and the transactions contemplated thereby.
(f) Payment in full of all fees required to be paid on the
Closing Date (including the fees, if any, payable pursuant to
Section 1.05 of the Agreement) and all of the Banks' out-of-
pocket costs and expenses (including counsel fees and
disbursements) payable in accordance with Section 10.03 for which
invoices have been submitted on or prior to such date.
(g) A notice of such Loan as required by Section 1.02 of
the Agreement.
(h) Such other documents as the Agent, the Banks and their
counsel may request.
<PAGE>
APPENDIX 1
FORM OF OPINION
[Letterhead of Counsel to Borrower]
[Date of First Borrowing]
[Addressed to the Agent and the Banks]
Dear Sirs:
We have acted as counsel to Hilb, Rogal, and Hamilton
Company, a Virginia corporation (the "Borrower"), and its
subsidiaries in connection with the preparation, execution and
delivery of the Credit Agreement dated as of February 12, 1996
(the "Credit Agreement"), among the Borrower and Crestar Bank, as
agent for itself and the banks named therein (the "Banks").
Terms capitalized but not defined herein shall have the
meanings given to them in the Credit Agreement.
In so acting, we have reviewed executed copies of the Credit
Agreement and the Notes. We have relied upon originals or copies
certified or otherwise identified to our satisfaction, of such
records, documents, certificates, and other instruments, and have
made such other investigations, as in our judgment are necessary
or appropriate to enable us to render the opinions expressed
below. Except with respect to the Borrower and the Material
Subsidiaries, we have assumed the genuineness of all signatures
and the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents
submitted to us as certified copies or photocopies and the
authenticity of the originals of such latter documents.
Based upon and subject to the foregoing and the
qualifications and assumptions set forth below, we are of the
opinion that:
1. The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Virginia, and each Material Subsidiary is duly organized, validly
existing and in good standing in each case under the laws of the
jurisdiction of its organization. The Borrower and each of its
Material Subsidiaries has the corporate power and authority to
own its respective properties and to carry on its respective
businesses as now conducted and is duly qualified to do business,
and is in good standing as a foreign entity in all jurisdictions
wherein such qualification is required by reason of the nature of
its business and activities or the location of its property. The
Borrower has the corporate power to execute, deliver and perform
the Credit Agreement, to borrow thereunder and to execute and
deliver the Note.
2. The execution and delivery by the Borrower of, and
performance by the Borrower of the obligations provided for in,
the Loan Documents have been duly authorized by all proper and
necessary corporate action. Each of the Loan Documents to which
the Borrower is a party has been duly executed and delivered by
the Borrower.
3. The Loan Documents constitute the legal, valid and
binding obligations of the Borrower, enforceable against the
Borrower in accordance with their terms, except as may be limited
by (a) bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the rights of creditors generally
and (b) general principles of equity (whether considered in a
proceeding in at law or in equity).
4. No action, suit, proceeding, inquiry or investigation
before or by any arbitrator or any court, public body, board,
administrative agency or other Governmental Authority is pending
or, to best of our knowledge, threatened against or affecting the
Borrower or any Material Subsidiary.
5. To the best of our knowledge, neither the Borrower nor
any Material Subsidiary is in default with respect to any
judgment, writ, injunction, decree, rule or regulation of any
governmental instrumentality or other agency where such default
could have a material and adverse affect on the financial
condition of the Borrower or of the Borrower and the Material
Subsidiaries taken as a whole.
6. No approval of, consent from or filing with any
Governmental Authority or any other Person, which approval,
consent or filing has not heretofore been obtained, given or
made, is required in connection with the execution and delivery
by the Borrower of any of the Loan Documents.
7. The execution and delivery of the Loan Documents, the
consummation of the transactions therein contemplated, the
performance of and compliance with the provisions thereof and the
application of the proceeds of the Loans as therein contemplated
do not and will not (A) violate, conflict with, result in the
breach of, or constitute a default under (i) any provision of
law, (ii) the Organizational Documents of the Borrower or any
Material Subsidiary, (iii) any instrument, agreement or contract
to which the Borrower or any Material Subsidiary is a party, or
by or to which the Borrower or any Material Subsidiary or any
properties of the Borrower or any Material Subsidiary may be
affected, bound or subject, or (iv) any order, writ, injunction
or decree of any court, arbitrator or Governmental Authority, or
(B) result in the creation or imposition of any lien, charge or
encumbrance upon any assets of the Borrower or any Material
Subsidiary except in favor of the Agent for the benefit of the
Banks.
8. The execution, delivery and performance of the Credit
Agreement and the use of the proceeds of the Loans thereunder do
not and will not constitute a violation of Regulations G, X or U
of the Board of Governors of the Federal Reserve System.
9. The Agent and the Banks will not be (i) deemed to be
doing business for purposes of any requirement for qualification
as a foreign corporation in _________ [list jurisdictions of the
Borrower] solely by reason of making the Loans or enforcing any
of the Loan Documents, or (ii) denied access to the court system
of such jurisdictions by reason of not having so qualified in
such jurisdiction on the sole basis of having made the Loans or
enforcing the Loan Documents. We express no opinion in this
paragraph with respect to any other loans or activities of the
Agent and the Banks, and the Agent and the Banks shall not, nor
shall they have any right to, rely on such opinion in connection
with any loans or activities except those expressly referred to
in the first sentence of this paragraph.
10. The payment by the Borrower and receipt by the Banks,
as applicable, of interest and other payments required to be paid
pursuant to the terms of Credit Agreement and the Notes will not
constitute unlawful interest or otherwise violate the usury laws
of the Commonwealth of Virginia.
This opinion is being delivered to you at the request of our
clients pursuant to Section [1(c)] of Exhibit C to the Credit
Agreement. This opinion is solely for your benefit and may not
be relied upon by any other person without our prior written
consent.
We are members of the Bar of the Commonwealth of Virginia
and express no opinion with respect to the law of any
jurisdiction other than the laws of the Commonwealth of Virginia
and the federal laws of the United States, in each case as in
effect on the date hereof.
Very truly yours,
<PAGE>
APPENDIX 2
FORM OF SECRETARY'S CERTIFICATE
Hilb, Rogal, and Hamilton Company
(the "Company")
Secretary's Certificate Regarding
Incumbency, Resolutions,
Articles of Incorporation and By-Laws
The undersigned, being the duly appointed, qualified and
acting Secretary of the Company, hereby certifies that the
persons named below are, on the date hereof, the duly elected,
qualified and acting officers of the Company and occupy the
offices set opposite their respective names, and the signatures
opposite their names below are their true and correct signatures:
Name Office Signature
__________________
_________________
_
__________________
and hereby further certifies that:
(a) The Board of Directors of the Company adopted, on
______________, at a duly called meeting at which a quorum was
present and voting throughout, the resolutions set forth in
Exhibit "A" attached hereto, none of which has been amended or
repealed in any respect since such date, and all of which remain
in full force and effect as of the date hereof.
(b) Attached hereto as Exhibit "B" is a true, correct and
complete copy of the Articles of Incorporation of the Company,
certified by the appropriate State Official, and no action has
been taken by the Board of Directors of the Company or its
Shareholders to amend or in contemplation of amending the
Articles of Incorporation since such certification date.
(c) Attached hereto as Exhibit "C" is a true, correct and
complete copy of the By-Laws of the Company in effect on the date
hereof.
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand and the
corporate seal of the Company as of this ___ day of ______, 19__.
__________________________
______________, Secretary
[SEAL]
I, ___________________, _____________________ of the Company
do hereby certify that __________________ is the duly elected,
qualified and acting Secretary of the Company, and that his
signature set forth above is his true signature.
IN WITNESS WHEREOF, I have hereunto set my hand as of this
__ day of ______________, 19__.
__________________________
<PAGE>
APPENDIX 3
FORM OF OFFICER'S CERTIFICATE
[Company letterhead]
Hilb, Rogal and Hamilton Company
(the "Company")
The undersigned, who is Chief Financial Officer of the
Company, in connection with a certain Credit Agreement dated as
of February ___, 1996 (the "Credit Agreement"), among the
Company, the banks listed therein (the "Banks") and Crestar Bank,
as the agent (the "Agent") for the Banks, hereby certifies to the
Agent and each of the Banks that, as of the date of this
certificate:
(a) The Company is in compliance with all the terms and
provisions of the Credit Agreement and no Default has occurred or
is continuing; and
(b) Each of the representations and warranties contained in
Article IV of the Credit Agreement are true and correct.
Terms used herein but not defined shall have the meanings
ascribed to them in the Credit Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the
corporate seal of the Company as of this ___ day of ______, 19__.
HILB, ROGAL AND HAMILTON COMPANY
By: _____________________________
Chief Financial
Officer
<PAGE>
EXHIBIT D
FORM OF COMPLIANCE CERTIFICATE
[company letterhead]
[To the Agent and the Banks]
Hilb, Rogal and Hamilton Company
Ladies and Gentlemen:
This certificate is delivered to you pursuant to Section
5.06(e) of the Credit Agreement, dated as of February 9, 1996
(the "Credit Agreement"), among Hilb, Rogal and Hamilton Company
(the "Borrower"), the banks listed therein as, or that may from
time to time become, parties thereto (collectively, the "Banks"),
and Crestar Bank, as the agent (the "Agent") for the Banks.
Unless otherwise defined, terms used herein (including the
Attachment hereto) have the meanings ascribed to them in the
Credit Agreement.
The undersigned hereby certifies that he is the Chief
Financial Officer of the Borrower and further certifies that as
of ________, 19___ (the "Computation Date"):
(a) the Borrower's (i) Adjusted Funded Debt was $________,
(ii) Adjusted Cash Flow was $______ and (iii) ratio of Adjusted
Funded Debt to Adjusted Cash Flow was _________, as shown in
detail on the Attachment hereto, which [complies][does not
comply] with the requirements of Section 7.01 of the Credit
Agreement, and which results in an Applicable Margin of _______;
(b) the Borrower's Consolidated Net Worth was $__________,
as shown in detail on the Attachment hereto, which
[complies][does not comply] with the requirements of Section 7.02
of the Credit Agreement;
(c) the Borrower's (i) Adjusted Cash Flow was $_________,
(ii) Debt Service was $_____, and (iii) Debt Service Coverage
ratio was ________, as shown in detail on the Attachment hereto,
which [complies][does not comply] with the requirements of
Section 7.03 of the Credit Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the
corporate seal of the Borrower as of this ___ day of ______,
19__.
HILB, ROGAL AND HAMILTON COMPANY
By: _____________________________
Chief Financial
Officer
[SEAL]
<PAGE>
ATTACHMENT
to
___\ ___\ ___
Compliance Certificate
1. Adjusted Funded Debt:
(a) All Indebtedness (including
the current portion thereof)
of the Borrower and its
Consolidated Subsidiaries, plus _____________
(b) Total Operating Lease Rentals
of the Borrower and its
Consolidated Subsidiaries paid
during the twelve months
immediately preceding the
date hereof, multiplied
by eight (8), equals ______________
ADJUSTED FUNDED DEBT $
2. Adjusted Cash Flow:
(a) Consolidated Net Income of
the Borrower and its
Consolidated Subsidiaries, plus ______________
(b) Depreciation and amortization
(to the extent deducted in
determining Consolidated
Net Income), plus ______________
(c) Taxes (to the extent deducted in
determining Consolidated
Net Income), plus ______________
(d) Interest Expense (to the extent
deducted in determining
Consolidated Net Income), plus ______________
(e) Operating Lease Rentals
(to the extent deducted in
determining Consolidated
Net Income), plus ______________
(f) Extraordinary and unusual
items (to the extent deducted in
determining Consolidated
Net Income), plus ______________
(g) Loss attributable to
equity in Affiliates (to
the extent deducted in
determining Consolidated
Net Income), equals ______________
ADJUSTED CASH FLOW $
3. Consolidated Net Worth:
(a) Base amount, plus $42,500,000
(b) Twenty-five percent (25%)
of positive Consolidated
Net Income for each fiscal
quarter beginning after
December 31, 1995, and ending
on or before the date
hereof, plus _____________
(c) Fifty percent (50%) of the
net proceeds received by
the Borrower or any
Subsidiary after
December 31, 1995, from
the sale of Capital
Securities, equals ______________
CONSOLIDATED NET WORTH $
4. Debt Service:
(a) Operating Lease Rentals
accrued or paid by the
Borrower and its
Consolidated Subsidiaries (on
a consolidated basis) for
the immediately preceding
twelve month period, plus ______________
(b) Interest Expense of the
Borrower and its
Consolidated Subsidiaries (on
a consolidated basis) for
the immediately preceding
twelve month period, equals ______________
DEBT SERVICE $
AMENDMENT NUMBER TWELVE
THIS AMENDMENT NUMBER TWELVE, dated as of December 15, 1995,
by and between Hilb, Rogal and Hamilton Company, a Virginia
corporation (hereinafter called "HRH"), and Robert H. Hilb of
Glen Ellyn, Illinois (hereinafter called "Hilb"):
W I T N E S S E T H:
WHEREAS, HRH and Hilb have heretofore entered into a certain
Employment Agreement ("Employment Agreement"; terms defined
therein being used herein as therein defined) dated as of June 1,
1982; and
WHEREAS, HRH and Hilb desire to make amendments to the
Employment Agreement as set forth below, pursuant to Section 12
of the Employment Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
promises hereinafter set forth, the parties hereto hereby agree
as follows:
1. Section 1 of the Employment Agreement is hereby amended
by deleting the present Section 1 and substituting in lieu
thereof of the following revised Section 1:
"1. HRH hereby employs Hilb and Hilb agrees to serve HRH
for a term of fourteen years and seven months
(hereinafter called the "initial term") commencing on
the 1st day of June, 1982, and upon expiration of the
said term, Hilb shall continue in the employ of HRH,
upon all the same terms and conditions as provided
herein, until either HRH or Hilb gives the other party
one hundred eighty (180) days advance written notice of
its or his intention to discontinue such relationship
as of a specific future date."
2. For all purposes therein, Section 4 of the Employment
Agreement is hereby amended by deleting the amount of $380,000
and substituting in lieu thereof the amount of $310,000.
3. All other provisions or terms of the Employment
Agreement are hereby ratified and confirmed, including, but not
limited to, the provisions and terms of Section 7 thereof.
4. The effective date of this Amendment Number Twelve is
January 1, 1996.
IN WITNESS WHEREOF, HRH has caused this Agreement to be
executed by its officers thereunto duly authorized and Hilb has
hereunto set his hand and seal, all as of the day and year first
above written.
HILB, ROGAL AND HAMILTON COMPANY
By:/s/ Dianne F. Fox
----------------------------------------
Its:Senior Vice President & Secretary
________________________________________
ATTEST:
/s/ Walter L. Smith
________________________________________
/s/ Robert H. Hilb
___________________________________[SEAL]
Robert H. Hilb
WITNESS BY:
/s/ Carolyn Jones
________________________________________
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated November 10, 1995, is made
between HILB, ROGAL AND HAMILTON COMPANY, a Virginia
corporation ("Employer"), and ANDREW L. ROGAL ("Employee"),
formerly a resident of Pittsburgh, Pennsylvania, and now a resident of
Richmond, Virginia.
RECITALS
WHEREAS, Employer is a publicly traded holding company for
a network of insurance agencies in the United States and Canada;
WHEREAS, Employee has since 1982 been an employee of
Employer's Pittsburgh office;
WHEREAS, Employee was named President of Employer on
February 8, 1995, and has recently moved to Richmond;
WHEREAS, Employee, as President of Employer, will have
access to sensitive knowledge about all aspects of Employers'
operations, including, without limitations, information about the
customer base and financial capabilities of each of Employer's other
offices;
WHEREAS, Employer desires to protect its operations and to
limit disclosure or use of the knowledge of each such office;
WHEREAS, Employee desires to accept employment as
President for the term specified herein, subject to the terms,
covenants and conditions specified herein; and
WHEREAS, Employer avers and Employee acknowledges that
Employer will incur substantial costs in developing, increasing,
improving, and protecting its business;
NOW, THEREFORE, in consideration of the premises stated
above and the sum of $1.00, receipt of which is acknowledged by
Employee, Employer's employment or continued employment of
Employee, and the mutual promises contained in this Agreement, the
parties agree as follows:
1. EMPLOYMENT: TERM, COMPENSATION; RENEWAL.
Employer agrees to employ Employee as its President for an initial
term of three (3) years ("Initial Term"), effective as of
January 1, 1996 ("Effective Date"), and to compensate Employee as
described on Exhibit A attached hereto and incorporated herein by
this reference.
Upon the expiration of the Initial Term, this Agreement shall
renew for one (1) year terms; provided that this Agreement shall not
renew if either party gives written notice to the other not less than
ninety (90) days prior to the end of the Initial Term (or any renewals
thereof) of its intent not to renew the Agreement, and provided further
that either party may terminate this Agreement at any time after the
Initial Term, with or without cause, upon the giving of ninety (90) days
written
notice to the other of its intent to do so. If this Agreement is
terminated by either party on notice, Employee shall continue to
render services faithfully during such period and his employment
hereunder shall terminate at the end of the notice period. At its sole
option, Employer may elect to pay Employee, as severance pay, the
base salary due Employee for the unexpired portion of the notice
period, thereby immediately terminating Employee's employment in
lieu of permitting Employee to continue performing his duties during
the notice period. Employee's compensation shall be reviewed by
the Compensation Committee of the Board of Directors of Employer
not less frequently than annually during the term of this Agreement
and any extensions or renewals thereof, may be adjusted upward or
downward in Employer's sole exercise of its reasonable business
discretion and shall be full compensation for all services performed by
Employee under this Agreement.
2. FULL EFFORTS OF EMPLOYEE. Employee represents to
Employer that he has no employment or other relationship with any
competitor of Employer which would restrict him in performing the
duties contemplated herein. Employee agrees to indemnify and hold
Employer harmless from all claims and damages (including
reasonable attorneys' fees and costs) suffered by Employer and
arising out of a breach of the foregoing representation. Employee
agrees (i) to devote his full business time and energies to the
business and affairs of Employer, (ii) to use his best efforts, skills and
abilities to promote the interests of the Employer and the related
business interests of employer and its other subsidiaries and (iii) to
perform faithfully and to the best of his ability all assignments of work
given to him by Employer. During the course of his employment
hereunder, Employee shall not, directly or indirectly, enter into or
engage in any other activity or other gainful employment without the
prior written consent of employer.
3. FULL COMPENSATION FOR SERVICES. All business,
including insurance, bond, risk management, self-insurance and other
services (collectively, the "HRH Business"), transacted through the
efforts of Employee or any other employee of Employer or any of its
subsidiary corporations (Employer and its subsidiary corporations are
herein referred to as the "HRH Companies.") shall be the sole
property of the Employer and the HRH Companies, and Employee
acknowledges that he shall have no right to any commission or fee
resulting from the conduct of such business other than in the form of
the compensation referred to in paragraph 1. Premiums,
commissions or fees on the HRH Business transacted through the
efforts of Employee shall be invoiced to the insured or purchaser by
Employer or one of the other HRH Companies. All checks or bank
drafts received by Employee from any insured or purchaser shall be
made payable to such company and all amounts collected by
Employee shall be promptly turned over to Employer.
4. CONFIDENTIAL INFORMATION. For purposes of this
paragraph 4, the following words shall have the following respective
meanings:
"Confidential Information" shall mean any and all
information of a proprietary or confidential nature and
trade secrets of Employer and the HRH Companies.
Such confidential information shall include, but not be
limited to, information about the HRH Customers such
as customer identities and lists, revenues from
customers' accounts, customer risk characteristics and
requirements, key contact personnel, financial data and
performance, payroll, policy expiration dates, policy
terms, conditions and rates, information about
prospective customers; information about the HRH
Companies such as methods of soliciting business,
documents, financial data, marketing programs and
specialized insurance markets; and nonpublic
information about Employer such as financial results and
operations and pending or threatened litigation.
Confidential information may be acquired from any
source during Employee's term of employment, whether
or not such information was expressly disclosed to
Employee during the term of his employment.
"Employer" shall mean Hilb, Rogal and Hamilton
Company, any of its predecessors and any person or
entity from which it has, now or at the time of
termination, acquired insurance accounts;
"HRH Companies" means Employer and any subsidiary
of Employer; and
"HRH Customers" means the customers of the HRH
Companies, specifically including, without limitation,
"Customers" and "Prospective Customers" (each as
defined in paragraph 5).
Employee acknowledges that, in the course of his employment
hereunder, he will become acquainted and entrusted with Confidential
Information which is the exclusive property of Employer. Employee
further acknowledges that (i) Employer and the HRH Companies
derive actual and potential economic value from the Confidential
Information not being generally known to the public or to other
persons who can obtain economic value from its disclosure or use,
and (ii) Employer and the HRH Companies have expended and
currently expend substantial effort to acquire Confidential Information,
and expend substantial effort, and expect their employees to expend
substantial effort, to maintain the secrecy of the Confidential
Information. Employee agrees and covenants that he will safeguard
such Confidential Information from exposure to, or appropriation by,
unauthorized persons, either within or outside the employment of
Employer or the HRH Companies, and that he will not, directly or
indirectly, without the prior written consent of Employer and HRH
during the term of this Agreement and any time in the three year
period following termination of this Agreement, divulge or make any
use of any Confidential Information except as may be required in the
course of his employment hereunder. Upon termination of his
employment, Employee covenants to deliver to Employer all
information and materials, including personal notes and
reproductions, relating to any Confidential Information, the HRH
Companies, and the HRH Customers, which are in his possession or
control.
5. NONPIRACY COVENANTS. For the purpose of this
paragraph 5, the following terms shall have the following meanings:
"Customers" shall be limited to those customers of
Employer for whom there is an insurance policy or bond
in force or to or for whom Employer is rendering
services as of the date of termination of Employee's
employment;
"Employer" shall mean Hilb, Rogal and Hamilton
Company, its predecessors and successors, and each of
the subsidiary corporations of Hilb, Rogal and Hamilton
Company engaged in business as an insurance agency
as of the date of termination of Employee's employment;
"Prohibited Services" shall mean (i) services in the fields
of insurance or bonds or (ii) services performed by
Employer, its agents or employees in any other business
engaged in by Employer on the date of termination of
Employee's employment. "Field of insurance" does not
include title insurance, but does include all other lines of
insurance sold by Employer, including, without limitation,
property and casualty, life, group, accident, health,
disability, and annuities;
"Prospective Customers" shall be limited to those parties
known by Employee to have been solicited for business
within any Prohibited Service within the twelve (12)
month period preceding the date of termination of
Employee's employment, and with or from whom, within
the twelve (12) month period preceding the date of
termination of Employee's employment, someone acting
on behalf of Employer either had met for the purpose of
offering any Prohibited Service or had received a written
response to an earlier solicitation to provide a Prohibited
Service;
"Restricted Period" shall mean the period of three (3)
years immediately following the date of termination of
Employee's employment.
Employee recognizes that over a period of many years the
Employer has developed, at considerable expense, relationships with,
and knowledge about, Customers and Prospective Customers which
constitute a major part of the value of the Employer. During the
course of his employment by Hilb, Rogal and Hamilton Company,
Employee will either have substantial contact with, or obtain
substantial knowledge about, these Customers and Prospective
Customers. In order to protect the value of the Employer's business,
Employee covenants and agrees that, in the event of the termination
of his employment, whether voluntary or involuntary, whether with or
without cause, he shall not, directly or indirectly, for his own account
or for the account of any other person or entity, as an owner,
stockholder, director, employee, partner, agent, broker, consultant or
other participant during the Restricted Period:
(a) solicit a Customer for the purpose of providing Prohibited
Services to such Customer;
(b) accept an invitation from a Customer for the purpose of
providing Prohibited Services to such Customer;
(c) solicit a Prospective Customer for the purpose of providing
Prohibited Services to such Prospective Customer; and
(d) accept an invitation from a Prospective Customer for the
purpose of providing Prohibited Services to such Prospective
Customer.
Subparagraphs (a), (b), (c) and (d) are separate and divisible
covenants; if for any reason any one covenant is held to be illegal,
invalid or unenforceable, in whole or in part, the remaining covenants
shall remain valid and enforceable and shall not be affected thereby.
Further, the periods and scope of the restrictions set forth in any such
subparagraph shall be reduced by the minimum amount necessary to
reform such subparagraph to the maximum level of enforcement
permitted to Employer by the law governing this Agreement.
Additionally, Employee agrees that no separate geographic limitation
is needed for the foregoing nonpiracy covenants as such are not a
prohibition on Employee's employment in the insurance agency
business and are already limited to only those entities which are
included within the definition of "Customer" or "Prospective Customer."
6. NONRAIDING OF EMPLOYEES. Employee covenants that
during his employment hereunder (including renewals) and for twenty-
four (24) months after termination of his employment, whether
voluntary or involuntary, with or without cause, he will not solicit,
induce or encourage for the purposes of employing or offering
employment to any individuals who, as of the date of termination of
Employee's employment, were employees of Employer or had been
employees of Employer within the twelve (12) month period preceding
Employee's termination, nor will he directly or indirectly solicit, induce
or encourage any of the Employer's employees to seek employment
with any other business, whether or not Employee is then affiliated
with such business.
7. NOTIFICATION OF FORMER AND NEW EMPLOYMENT.
During the term of this Agreement and the Restricted Period specified
in paragraph 5 hereof, Employee covenants to notify any prospective
employer or joint venturer, which is a competitor of Employer of this
Agreement with Employer; and if Employee accepts employment or
establishes a relationship with such competitor, Employee covenants
to notify Employer immediately of such relationship. If Employer
reasonably believes that Employee is affiliated or employed by or with
a competitor of Employer during the Restricted Period, then
Employee grants Employer the right to forward a copy of this
Agreement to such competitor.
8. REMEDIES UPON EMPLOYEE BREACH OF AGREEMENT.
If Employee breaches any provision of this Agreement, each of
Employer and the HRH Companies reserves the right to avail itself of
any remedy available to it at law or in equity. Further, Employer may,
at its sole option, employ disciplinary procedures against Employee
for any breach, up to and including discharge. Additionally, where
allowed by law, Employer reserves the right to offset against any
sums due Employer from Employee, whether for a violation of this
Agreement (such as paragraph 8 or 12 hereof) or any other obligation
or debt, any amounts which may otherwise be due from Employer to
Employee. Employee acknowledges and agrees that Employer and
the HRH Companies shall be entitled to injunctive relief against
Employee for any violation by Employee of paragraph 4, 5, 6 or 7 of
this Agreement. Employee agrees that the foregoing remedies shall
be cumulative and not exclusive, shall not be waived by any partial
exercise or nonexercise thereof and shall be in addition to any other
remedies available to Employer and the HRH Companies at law or in
equity.
Notwithstanding the foregoing, if Employee breaches
paragraph 4 or 5 of this Agreement, Employer may, at its sole option,
seek liquidated damages with respect to each Customer or
Prospective Customer procured by or through Employee, directly or
indirectly, in violation of paragraph 4 or 5 of this Agreement (with
such Customers being hereafter referred to as "Lost Customers" and
with such Prospective Customers being hereafter referred to as "Lost
Prospects"). Employee acknowledges that it would be difficult to
calculate damages incurred by Employer in the event of such a
breach and that the following liquidated damages clause, when so
elected by Employer, is necessary and reasonable for the protection
of Employer. Employer agrees that, if it elects to exercise the
liquidated damages provision with respect to a Lost Customer or Lost
Prospect, it shall not seek an injunction with respect thereto if
Employee pays such liquidated damages. Employee also
acknowledges that Employer may or may not choose to exercise this
liquidated damages provision and that Employer may, at its sole
option, seek injunctive relief with respect to some Lost Customers and
Lost Prospects and liquidated damages with respect to other Lost
Customers and Lost Prospects. Finally, Employee acknowledges that
he has no right whatsoever to force Employer to exercise this
liquidated damages provision, and that such choice remains entirely
Employer's.
Liquidated damages shall be calculated as follows:
A Lost Customer shall be valued at 150% of the gross
revenue to Employer in the most recent twelve (12)
month period preceding the date of loss of such
account. If such Lost Customer had not been a
Customer of Employer for an entire twelve (12) month
period, such liquidated damages shall be 150% of the
gross revenue which would have been, in the absence
of a breach by Employee, realized by Employer in the
initial twelve (12) month period of such customer being
served by Employer. A Lost Prospect shall be valued at
150% of the gross revenue realized in the initial twelve
(12) month period of such Lost Prospect being served
by any one or more persons or entities receiving such
revenue as a result of Employee's breach.
Employee acknowledges that the foregoing damage amounts
are fair and reasonable, that an industry rule of thumb for the
valuation of an agency is 150% of revenue and that, on the margin,
selected accounts may be worth much more than 150% of their
annual revenue to an agency.
Employee shall pay such liquidated damages to Employer
within five (5) business days after written demand therefor.
Thereafter, such liquidated damages shall bear interest at the
maximum lawful rate. Employee acknowledges that a broker of
record letter granted during the Restricted Period by a Customer or
Prospective Customer in favor of Employee or any person or entity
with whom or which Employee is directly or indirectly affiliated shall
be prima facie evidence of a violation of paragraph 5 of this
Agreement and establishes a rebuttable presumption in favor of
Employer that paragraph 5 of this Agreement has been violated by
Employee. Further, Employee acknowledges that he has an
affirmative duty to inform such Customer or Prospective Customer
that he cannot accept its business until after the Restricted Period and
that he must minimize all contact with such Customer or Prospective
Customer.
9. TOLLING OF RESTRICTIVE COVENANTS DURING
VIOLATION. If a violation by Employee of any of the restrictive
covenants of this Agreement occurs, Employee agrees that the
restrictive period of each such covenant so violated shall be extended
by a period of time equal to the period of such violation by Employee.
It is the intent of this paragraph that the running of the restricted
period of a restrictive covenant shall be tolled during any period of
violation of such covenant so that the Employer shall get the full and
reasonable protection for which it contracted and so that Employee
may not profit by his breach.
10. STANDARDS OF PERFORMANCE; CAUSE. In addition to
the full efforts required of Employee in paragraph 2 hereof and
notwithstanding anything herein to the contrary, Employee's
employment may be terminated or altered, immediately upon notice
to the Employee, in the discretion of Employer, prior to the expiration
(including renewals) of this Agreement, for "Cause." For purposes
hereof and without limitation Cause shall be solely determined in
good faith by Employer and shall include any dishonest, criminal or
immoral conduct or any one or more acts having a material adverse
effect on Employer.
11. ESSENCE OF AGREEMENT. The restrictive covenants
from Employee for the benefit of the Employer set forth herein are the
essence of this Agreement with respect to Employer agreeing to
employ Employee and each such covenant shall be construed as
independent of any other provision in this Agreement. The existence
of any claim or cause of action of the Employee against the
Employer, whether predicated on this Agreement or not, shall not
constitute a defense to the enforcement by the Employer of any of the
restrictive covenants contained herein. Employer shall at all times
maintain the right to seek enforcement of these provisions whether or
not Employer has previously refrained from seeking enforcement of
any such provision as to Employee or any other individual who has
signed an agreement with similar provisions. Further, Employee
grants to Employer the continuous and unilateral right, upon written
notice to Employee, to lessen the restrictions of any of the covenants
set forth in paragraphs 4, 5, 6 and 7 hereof by so much as Employer
deems necessary either to make this Agreement in accordance with
public policy of the Commonwealth of Virginia or to fit the
circumstances peculiar to Employee. Additionally, Employee
covenants that, during the Restricted Period, if he has any questions
about the scope or meaning of any restrictive covenants of this
Agreement, then he shall put such questions in writing to General
Counsel of Employer, who shall then endeavor to answer such
requests as soon as practicable.
12. SEVERABILITY AND INDEPENDENCE. If any provision of
this Agreement or any part of any provision of this Agreement is
determined to be unenforceable for any reason whatsoever, it shall be
severable from the rest of this Agreement and shall not invalidate or
affect the other portions or parts of the Agreement, which shall remain
in full force and effect and be enforceable according to their terms.
Furthermore, no covenant herein shall be dependent upon any other
covenant or provision herein, each of which covenants shall stand
independently and be enforceable without regard to the other or to
any other provision of this Agreement.
13. INTERPRETATION. There shall be no presumption that
this Agreement is to be construed against the Employer or the HRH
Companies, since Employee acknowledges that he understands all
provisions of this Agreement, that the restrictive covenants contained
herein are ancillary to an enforceable agreement and are fair,
necessary for the protection of Employer and the HRH Companies
and relatively standard to the insurance agency industry and that he
was offered the opportunity to negotiate, alter, and amend any and all
provisions of this Agreement before executing this Agreement and
legally binding himself hereto.
14. GOVERNING LAW. This Agreement shall be construed
under and governed by the laws of the Commonwealth of Virginia.
15. MISCELLANEOUS.
A. Case and Gender. Wherever required by the context
of this Agreement, the singular and plural cases and the masculine,
feminine and neuter genders shall be interchangeable.
B. Nonwaiver. The waiver by Employer of a breach of
any provision of this Agreement shall not operate or be construed as
a waiver of any subsequent breach or as a waiver of any other
provisions of this Agreement.
C. Captions. The captions provided in this Agreement
are intended for descriptive and reference purposes only and are not
intended to limit the applicability of the terms of any paragraph to that
caption.
D. Succession and Assignment. This Agreement shall
be binding upon the parties hereto and is not assignable by
Employee. This Agreement shall inure, however, to the benefit of
Employer's successors and assigns, including, without limitation,
successor corporations by way of merger or consolidation or any
entity which purchases substantially all of the assets of Employer.
E. Entire Agreement. This Agreement supersedes any
prior written or unwritten agreement, representation or understanding
between the Employer and Employee and represents the entire
agreement, representations and understanding between Employer
and Employee concerning the subject matter hereof.
F. WAIVER OF JURY TRIAL; PRAYER FOR
REFORMATION. EACH OF EMPLOYER AND EMPLOYEE
KNOWINGLY AND VOLUNTARILY (I) WAIVES THE RIGHT TO A
JURY TRIAL IN RESPECT OF ANY LEGAL PROCEEDINGS IN
STATE OR FEDERAL COURT ARISING IN CONNECTION
HEREWITH; AND (II) REQUESTS THAT ANY COURT OR ARBITER
BEFORE WHOM THIS EMPLOYMENT AGREEMENT IS IN
CONTROVERSY REFORM THE RESTRICTIVE COVENANTS
HEREIN, IF SUCH REFORMATION IS NECESSARY TO MAKE ANY
OF THEM ENFORCEABLE, TO THE MAXIMUM LEVEL OF
ENFORCEMENT PERMISSIBLE TO EMPLOYER AND EQUITABLE
UNDER THE CIRCUMSTANCES. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR EMPLOYER TO ENTER INTO THIS
AGREEMENT.
/s/ Robert H. Hilb /s/ Andrew L. Rogal
_______________________________ ________________________________
EMPLOYER EMPLOYEE
WITNESS the following signatures.
EMPLOYER:
HILB, ROGAL ANDHAMILTON COMPANY
/s/ Rober H. Hilb
By___________________________________
Chairman and CEO
Its___________________________________
EMPLOYEE:
/s/Andrew L. Rogal
______________________________________
Andrew L. Rogal
<PAGE>
EXHIBIT A
At the beginning of the Initial Term, Employee shall be paid an
annual salary of $305,000, payable semi-monthly, as earned. Future
changes in compensation need not be reflected by amendment
hereto as the Compensation Committee of the Board of Directors of
Employer may cause such change to be effected through signature of
a payroll authorization form.
HILB, ROGAL AND HAMILTON COMPANY
AMENDMENT TO SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, the Company adopted the Hilb, Rogal and Hamilton
Company Supplemental Executive Retirement Plan (the "Plan"),
effective December 16, 1994; and
WHEREAS, the Company reserves the right to amend the Plan
by resolution of the Board of Directors, communicated to
Participants not later than sixty (60) days following the
effective date of such amendment, and
WHEREAS, the Company desires to amend the Plan effective
February 5, 1996; now therefore be it
RESOLVED, that the following amendments to the Plan are
hereby approved and adopted, effective February 5, 1996:
1. Section 2.1 shall be amended by amending and
restating the definition of "Final Average Compensation" as
follows:
"Final Average Compensation" means a Participant's
average annual Compensation for the sixty (60)
consecutive whole months immediately prior to
Separation from Service but shall not include
Compensation earned after age 65 (or age 68, for a
Grandfathered Participant).
2. The first sentence of Section 4.1 shall be amended to
read as follows:
4.1 Entitlement to Benefits. Each Participant shall
be entitled to the Supplemental Benefit provided in
Section 4.2 of the Plan upon reaching his Benefit
Commencement Date; provided, however, that a
Participant whose Benefit Commencement Date does not
coincide with his attaining age 65 (for a
Grandfathered Participant, age 68) shall receive the
Actuarial equivalent of his Supplemental Benefit
determined as of age 65 (or 68). . . .
3. The following sentence shall be added at the end of
Section 4.2:
Notwithstanding anything in this Section 4.2 to
the contrary, the Supplemental Benefit for a
Grandfathered Participant shall be fixed at $185,000.
PROMISSORY NOTE
$200,000 Date: September 25, 1995
Place: Glen
Allen, VA
FOR VALUE RECEIVED, the undersigned ("Maker") promises to
pay to the order of HILB, ROGAL AND HAMILTON COMPANY, a Virginia
corporation ("Holder"), at 4235 Innslake Drive, Glen Allen,
Virginia 23060, or at such other place as the Holder may in
writing designate, in lawful money of the United States of
America, the sum of TWO HUNDRED THOUSAND DOLLARS ($200,000), with
interest accruing from the date hereof on the unpaid principal
hereof from time to time outstanding at an annual rate of FIVE
and 73/100 PERCENT (5.73%), compounded monthly, which rate is the
"applicable federal rate" for August, 1995, for short term
obligations.
This Note, including all interest so accrued, shall be
payable upon the earlier to occur of: (i) September 25, 1997; or
(ii) the sale of Maker's former residence at 528 Briarcliff Road,
Pittsburgh, Pennsylvania 15221 ("Sale").
The Maker agrees to pay a late charge equal to two percent
(2%) of the amount not timely paid to the Holder if the payment
called for herein is not paid within ten (10) days after its due
date. Maker covenants to notify Holder as soon as the Sale is
expected to occur if such date is prior to September 25, 1997.
Maker hereby reserves the right of anticipation for all or
any portion of the indebtedness evidenced hereby at any time
without penalty on any amounts so prepaid.
Maker waives presentment, demand, notice of dishonor,
protest, homestead and all other exemptions provided by law.
Maker shall pay all costs, fees and expenses (including court
costs and reasonable attorneys' fees) incurred by the Holder in
collecting or attempting to collect any amount that becomes due
hereunder.
All notices, requests, demands and other communications with
respect hereto shall be in writing and shall be delivered by
hand, sent prepaid by Federal Express (or a comparable overnight
delivery service) or sent by the United States mail, certified,
postage prepaid, return receipt requested, at the address
designated herein. Any notice, request, demand or other
communication delivered or sent in the manner aforesaid shall be
given or made (as the case may be) when actually received by the
intended recipient. The parties hereto may change their
respective addresses by notifying the other party of the new
address in any manner permitted by this paragraph.
Notwithstanding anything in the foregoing to the contrary
and by way of illustration and not by way of limitation, this
Note is subject to all those rights contained in that certain
Stock Pledge Agreement by and among Maker and Holder dated
September 25, 1995, and by this reference incorporated herein.
MAKER:
/s/ Andrew L. Rogal
_________________________________________
Andrew L. Rogal
ADDRESS OF MAKER:
9023 Norwick Road
Richmond, Virginia 23229
STOCK PLEDGE AGREEMENT
Agreement made September 25, 1995, between ANDREW L. ROGAL,
("Pledgor") and HILB, ROGAL AND HAMILTON COMPANY, a Virginia
corporation, located at 4235 INNSLAKE DRIVE, P. O. BOX 1220, GLEN
ALLEN, VIRGINIA 23060-1220 ("Pledgee").
Recitals
At the time of the execution of this agreement the Pledgor
owed Pledgee the sum of $200,000 ("Indebtedness"), pursuant to
the terms of a promissory note, such funds having been advanced
to Pledgor for the purpose of a "bridge loan" to enable Pledgor
to purchase a house in Virginia prior to the sale of his
Pennsylvania house.
To induce the Pledgee to advance the Indebtedness, the
Pledgor has agreed to pledge with the Pledgee a certain amount of
the Pledgor's stock in Pledgee as security for the repayment of
the Indebtedness.
It is therefore agreed:
1. Pledge. As collateral for the Indebtedness, the
Pledgor hereby grants a security interest to the Pledgee in the
instrument of the following description:
37,325 common shares of Pledgee, represented by certificate
H 7587.
The Pledgor appoints the Pledgee his attorney to arrange for
the transfer of the pledged shares on the books of the company to
the name of the Pledgee. The Pledgee shall hold the pledged
shares as security for the repayment of the Indebtedness, and
shall not encumber or dispose of the shares except in accordance
with the provisions of paragraph 8 of this agreement. Pledgor
may order the sale of such pledged shares, provided he makes
arrangements satisfactory to Pledgee, in its sole exercise of its
reasonable business discretion, either to pay the note in full or
to substitute collateral.
2. Dividends. During the term of this pledge and so long
as Pledgor is not in default, all dividends and other amounts
shall be received by Pledgor.
3. Voting rights. During the term of this pledge, and so
long as the Pledgor is not in default in the performance of any
of the terms of this agreement or in the payment of the
Indebtedness, the Pledgor shall have the right to vote the
pledged shares on all corporate questions, and, where necessary
and requested, the Pledgee shall execute due and timely proxies
in favor of the Pledgor to this end.
4. Representations. The Pledgor warrants and represents
that there are no restrictions upon the transfer of any of the
pledged shares, other than any applicable securities laws, and
that the Pledgor has the right to transfer such shares free of
any encumbrances and without obtaining the consents of the other
shareholders.
5. Adjustments. In the event that, during the term of
this pledge, any share dividend, reclassification, readjustment,
or other change is declared or made in the capital structure of
the Pledgee, all new, substituted, and additional shares, or
other securities, issued by reason of any such change shall be
held by the Pledgee under the terms of this agreement in the same
manner as the shares originally pledged hereunder.
6. Warrants and rights. In the event that during the term
of this pledge, subscription warrants or any other rights or
options shall be issued in connection with the pledged shares,
such warrants, rights and options shall be immediately assigned
by the Pledgee to the Pledgor, and if exercised by the Pledgor
all new shares or other securities so acquired by the Pledgor
shall be immediately assigned to the Pledgee to be held under the
terms of this agreement in the same manner as the shares
originally pledged hereunder.
7. Payment of Indebtedness. Upon payment at maturity of
the Indebtedness, less amounts theretofore received and applied
by the Pledgee in reduction thereof, the Pledgee shall transfer
to the Pledgor all the pledged shares and all rights received by
the Pledgee as a result of this Agreement.
8. Default. In the event that the Pledgor defaults in the
performance of any of the terms of this agreement, or in the
payment of the Indebtedness, the Pledgee shall have the rights
and remedies provided in the Uniform Commercial Code in force in
the Commonwealth of Virginia at the date of this agreement and in
this connection, the Pledgee may, upon five days' notice to the
Pledgor, sent by registered mail, and without liability for any
diminution in price which may have occurred, sell all the pledged
shares in such manner and for such price as the Pledgee may
determine. At any bona fide public sale the Pledgee shall be
free to purchase all or any part of the pledged shares. Out of
the proceeds of any sale the Pledgee may retain an amount equal
to the Indebtedness, plus the amount of the expenses of the sale,
and shall pay any balance of such proceeds to the Pledgor. In
the event that the proceeds of any sale are insufficient to cover
the Indebtedness plus expenses of the sale, the Pledgor shall
remain liable to the Pledgee for any deficiency.
In witness whereof the parties have executed this agreement.
PLEDGOR: PLEDGEE:
HILB, ROGAL AND HAMILTON COMPANY
/s/ Andrew L. Rogal /s/Dianne F. Fox
_______________________________ By:_______________________________
Andrew L. Rogal Secretary
Its:_______________________________
<PAGE>
FOR VALUE RECEIVED I, Andrew L. Rogal, hereby sell, assign and
transfer unto HILB, ROGAL AND HAMILTON COMPANY THIRTY-SEVEN
THOUSAND THREE HUNDRED TWENTY-FIVE (37,325) Shares of its Common
Stock standing in my name on the books of said Corporation
represented by Certificate No. H 7587 herewith and do hereby
irrevocably constitute and appoint WALTER L. SMITH or his
designee or successor or any other officer of said Corporation,
attorney to transfer the said stock on the books of the within
named Corporation with full power of substitution in the
premises.
Dated September 25, 1995
/s/ Andrew L. Rogal
____________________________________
Andrew L. Rogal
Exhibit 11
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Year Ended December 31
__________________________________
1995 1994 1993
<S> <C> <C> <C>
PRIMARY:
Average shares outstanding 14,470,407 14,778,304 14,456,055
Net effect of dilutive stock options-- based
on the treasury stock method using average
fair value 9,989 7,082 33,575
Net effect of guaranteed future shares to be
issued in connection with an agency
acquisition 3,009
---------- ---------- ----------
Average number of shares as adjusted 14,480,396 14,785,386 14,492,639
========== ========== ==========
Net income $11,828,910 $11,392,283 $ 8,293,393
=========== =========== ===========
Per share amount $.82 $.77 $.57
==== ==== ====
FULLY DILUTED:
Average shares outstanding 14,470,407 14,778,304 14,456,055
Net effect of dilutive stock options-- based
on the treasury stock method using the end
of period fair value, if higher than average
fair value 27,458 7,344 33,575
Net effect of guaranteed future shares to be
issued in connection with an agency
acquisition 3,009
Net effect of future shares to be issued in
connection with an agency acquisition contingent
upon performance 45,135
---------- ---------- ----------
Average number of shares as adjusted 14,497,865 14,785,648 14,537,774
=========== =========== ===========
Net income $11,828,910 $11,392,283 $ 8,293,393
=========== =========== ===========
Per share amount $.82 $.77 $.57
==== ==== ====
</TABLE>
Note: The per share amounts for each period presented above do not
necessarily support amounts in the statement of consolidated income
because common stock equivalents are less than 3% dilutive.
(front cover)
HILB, ROGAL
AND HAMILTON COMPANY
(HRH INSURANCE logo)
1995 ANNUAL REPORT
<PAGE>
Financial HIghlights
HILB, ROGAL AND HAMILTON COMPANY & SUBSIDIARIES
(in thousands of dollars, except per share amounts)
(Bar graphs relecting the following financial information follow)
1995 1994 1993 1992 1991
Total Revenues $148,147 $140,809 $141,656 $140,461 $142,270
Net Income 11,829 11,392 8,293 8,591 4,736
Net Income Per
Common Share .82 .77 .57 .65 .36
Dividends Per
Common Share .57 .50 .45 .41 .37
OUR BUSINESS
Hilb, Rogal and Hamilton Company serves as an intermediary
between its clients, who are traditionally the mid-size Main Street
businesses of the nation, and insurance companies which underwrite
clients' risks. In this way, Hilb, Rogal and Hamilton Company agencies in
56 locations in North America assist clients in transferring their risks
in areas such as property and casualty, employee benefits and other areas
of specialized risk exposure. The Company's agency system, which extends
to 16 states and five Canadian provinces, is among the leaders nationally
and worldwide in its industry. Revenues are derived primarily from
commissions received from insurance companies with whom client risk is
placed. Support services related to risk transfer transactions are an
additional revenue source. The Company expands its business by developing
new clients, providing additional services to current clients and through
acquisitions.
<PAGE>
TO OUR SHAREHOLDERS
(This section includes two photographs of Robert H. Hilb, Chairman and Chief
Executive Officer, and Andrew L. Rogal, President and Chief Operating Officer
and a map showing the agency locations.)
<PAGE>
Management is pleased to report that 1995 Company performance improved
over the last year. We also want to bring you up to date on developments
in the evolution of the Company designed to continue steady progress in
building Company strength and value for its shareholders.
Anyone watching our industry knows that any measure of progress
has been hard earned during the first half of the 1990s. Softness and
uncertainty in pricing, with the intense competition that rages in such a
market, is continuing into a tenth year - this in an industry that
historically experienced regular price adjustments every four to five
years.
Overlaid on these insurance industry dynamics is the larger condition
affecting American business so far this decade - merging, consolidating,
downsizing. This amounts to a broad shrinkage of many businesses,
whether from being melded into another or trimmed to the bone in order to
compete.
Many of these affected businesses lie within our principal client
profile of mid-size, Main Street enterprises. In the best of times,
keeping business you have against strong competitors, making it
profitable, while doing the development work to expand services and to
perfect service delivery, is a fair test of talent and commitment. In
our business today, these challenges have never been more formidable.
Yet HRH grows.
Your Company has basic strength for steady growth, residing in the
people and their commitment to enduring value, to the goal of being a
great Company. In 1995, management took the next steps to support HRH
people with increasingly efficient operating systems and management
structure, with new corporate resources to accelerate bringing to market
an expanding range of services and, through 14 acquisitions, more
business in areas of high growth potential.
We consider it a solid achievement that the people of Hilb, Rogal and
Hamilton Company in 1995 reached new levels of revenues and earnings.
They produced, they controlled costs and they adapted to evolutionary
refinements with solid effort and performance.
FINANCIAL ACCOMPLISHMENTS
These are highlights of what was achieved: total 1995 revenues of
$148.1 million were up 5.2 percent over the prior year; earnings per
share, at $.82, were 6.5 percent above 1994; and Company directors, as
is their policy, once again raised the shareholder dividend - it stood
at an annual level of $.60 per share for the first quarter of 1996.
Total dividends paid in 1995 were $.57. The dividend growth pattern is
an indicator of shareholder value increasing year-to-year.
We have kept you informed through the year of our program of
purchasing Company stock. More than 1.6 million shares have been
repurchased since our initial authorization in November 1990 and the
program is continuing. We are currently authorized to buy back up to 2.9
million total HRH shares, less those shares previously purchased, as
long as we believe we are being undervalued. We regard our Company as an
excellent investment. More than once, we have heard HRH characterized as
rock-solid financially, the result of careful, conservative financial
management and performance improvements year-to-year. We urge you to
examine details of our balance sheet, cash flow and other indicators to
see why we invest in our own Company.
We also advised you early in the year that we had completed the
divestiture, according to plan, of agencies which were not meeting
performance goals. Following this, we quickened the pace of our
acquisition
efforts over that of the previous two years. Fourteen acquisitions were
successfully completed in 1995, all but two merged into existing offices
where the opportunity seemed excellent.
HRH ENTERS CANADA
One notable exception to the pattern of expanding existing growth
agencies through acquisitions was our purchase of Hayhurst Elias Dudek,
Inc., effective July 1, 1995. It was a favorable acquisition for a
number of reasons. First, the agency principal, Art Elias, continues to
run the business. Under his direction, the agency has had success in
developing specialized approaches to serving selected types of clients.
In addition, although based in Winnipeg, the agency operates across
Canada, with other offices in Vancouver, Calgary, Edmonton, Toronto and
Montreal. And, unlike our U.S. market, the Canadian market is not
suffering the same degree of softness and uncertainty in pricing which
drives our domestic competition. We believe that our new Canadian team
will make important contributions to the Company.
Our expanded North American agency network of 56 offices took its
next step in the maturing process in 1995, with the beginning of our
regionalization of operations. Creation of regional operating units to
coordinate the efforts of several local offices in a geographic area will
further improve cost control. Support to agencies from corporate
resources and other agency offices in the network also will now be more
rapid and efficient.
Regional management of a sizeable mass of coordinated and
complementary resources - from offices within the region, from corporate
and from other regions - will enable each office to address a broader
spectrum of client needs and respond more quickly and expertly than each
could do on a stand-alone basis.
REGIONS FORMALIZED IN '95
Five U.S. regions were formalized in the latter months of 1995. The
acquired Canadian agency offices currently form a sixth region, with its
six locations operating virtually coast to coast north of the border.
The five U.S. regions are: Mid-Atlantic, stretching from New Jersey
south through Virginia and across Pennsylvania; Georgia/Alabama; Florida;
Texas and California. Several HRH offices remain unaligned within a
region. Some will likely become part of a regional unit as this year
proceeds. Measured by its revenues at year-end 1995, the Mid-Atlantic
region is larger than the Company was when it became a public company.
All of the current regions have good markets and strong positions,
but the nature of the business and insurance placement opportunities can
be quite different from one region to another. For this reason, and
because the insurance carriers themselves operate differently depending
on exposure characteristics in different parts of the country, HRH
regional management will have flexibility in the types of business they
pursue with their offices. Each region is expected to achieve steady
growth and increasing profitability from current and new classes of
service offered through its local offices during the remaining years of
this decade.
HRH network operations management at both the regional and
local office levels now have an added value available as the result of the
creation in 1995 of a new corporate-based Resource Group. Working hand
in hand with agencies, the Resource Group is focused on leveraging current
services offered through local offices by opening markets to HRH offices
across the entire network. In addition, this group will develop new
services that will provide additional revenue sources to help fuel
internal growth in the years ahead.
The Resource Group already is working with HRH producers in
several U.S. regions and has national service programs, including a
coordinated flood insurance program, employment practices protection and a
new program for bicycle dealers which grew out of a product originating
in a single office. Experience in the early months of support to offices
from the Resource Group shows clear evidence of enhanced revenue from the
coordinated support and development effort.
There was a senior management change late in 1995, when Timothy
J. Korman, who has been with the Company and its predecessor since
1978, was named executive vice president and chief financial officer of
Hilb, Rogal and Hamilton Company. Tim continues in his role as Company
treasurer. He was vice president and treasurer from our formative
stages in 1982 through 1989, when he was named a senior vice president of
the Company. In addition to his financial role, Tim also directs Company
automation programs.
Increased activity in acquisitions strengthened and broadened the
business base for several of our locations already well positioned in
growth markets. Two acquired agencies were merged into our northern
California operations. In the Texas region, agency operations in Houston
and Amarillo were enlarged through acquisitions and their own internal
growth. Additional capability and business accrued to the growing
Baltimore agency from two acquisitions at mid-year. Acquired agencies
were merged into HRH offices also in Denver, Virginia Beach, Phoenix,
Tampa and Birmingham. Since January 1 of this year, we have merged
agency acquisitions into our offices in Birmingham, New Haven and
Pittsburgh.
ACQUISITIONS PICK UP THEIR PACE
These merged agencies, plus the entry into Canada form another
solid year in our ongoing merger and acquisition program. Over the years,
the Company has integrated with a high rate of success 147 acquisitions or
mergers in its steady, orderly growth from a newborn in 1982 to a
prominent position today as the 10th largest agency network in North
America and 15th in size in our business worldwide.
We are now embarked on the next stage in the evolution of our
Company. Today, the drive to progressively improve the efficiency,
response time and performance of our operational structure through more
sophisticated methods and regional management direction shares the
strategic platform with our tradition of merger and acquisition
initiatives.
Company management, a careful balance of experience, practical
vision and energy, expects to continue moving HRH up in our industry in
size, accomplishment and value. The goal is realistic, cycles or no
cycles...consistent improvements in operating performance year-after-year,
top line and bottom line through the latter 1990s and into the next
century.
We have been referred to within our industry as the consolidator in
our business, the unique organization capable of drawing together separate
agency strengths and business into a system that serves clients well and
brings significant opportunities to carriers of a size and type that they
find appealing. This role of the consolidator is essential during this
soft industry period especially, and it is one we are increasingly
well-suited to fill. We are making careful, measured responses to what
is happening within our industry as our insurance carriers undergo
significant change and as our client organizations seek better ways to
manage and reduce their risk. The evolving HRH agency servicing system
is tailored to fit our clients today, and is developing new solutions to
meet growing client requirements to assure the fit in future years.
IMPROVING CLIENT SERVICES
Regionalization will aid in managing the dynamic process of
delivering services, transporting more and more proven products and
services quickly across our network to clients. Our Resource Group is an
ally in developing a wider range of services, and new services, to help
clients do more than simply transfer risk - services that improve loss
control and claims administration.
Over the first half of the 1990s, the Company solidified its
reputation for its expertise in consolidating top caliber agencies into a
national insurance agency system. In the remaining years of this decade,
the Company expects to be as highly regarded for its operational
excellence and expanding service programs. We expect to be among the top
performing insurance agency systems. We will do it as we have done in
the past, with care, steered by practical vision and sound management.
Hilb, Rogal and Hamilton Company is taking measured steps as we
pursue the goal of being a great company. This means having great
expectations and making them come to pass through orderly gains in a
disciplined organization with the tools to succeed. With your continued
support we made significant progress in 1995 and expect more of the same
this year and in years to come.
/s/Robert H. Hilb
Robert H. Hilb
Chairman and Chief Executive Officer
/s/Andrew L. Rogal
Andrew L. Rogal
President and Chief Operating Officer
<PAGE>
(Page 7 of the annual report is a pictorial reflection of the regions of the
Company, including the Golden Gate Bridge (California region), cowboys roping
a horse (Texas region), the Lincoln Memorial (Midatlantic region), a arial
view of Miami Beach (Florida region), magnolia blossoms (Georgia/Alabama region)
and Niagara Falls (Canadian region).
<PAGE>
CONSOLIDATED BALANCE SHEET
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
December 31
1995 1994
ASSETS
CURRENT ASSETS
Cash and cash equivalents, including
$10,104,000 and $9,594,000, respectively,
of restricted funds $ 17,020,706 $ 12,615,132
Investments 11,154,673 23,131,550
Receivables:
Premiums, less allowance for doubtful
accounts of $1,772,000 and $2,348,000,
respectively 41,707,706 39,261,731
Other 4,794,396 6,635,856
------------ ------------
46,502,102 45,897,587
Prepaid expenses and other current assets 3,937,964 3,262,743
------------ ------------
TOTAL CURRENT ASSETS 78,615,445 84,907,012
INVESTMENTS 4,300,000 9,470,000
PROPERTY AND EQUIPMENT, NET 13,700,260 12,426,949
INTANGIBLE ASSETS
Expiration rights 68,345,441 57,742,996
Goodwill 24,432,875 16,480,408
Noncompetition agreements 9,888,798 9,603,414
------------ -------------
102,667,114 83,826,818
Less accumulated amortization 41,812,787 35,097,409
------------ ------------
60,854,327 48,729,409
OTHER ASSETS 5,778,932 3,361,425
------------ ------------
$163,248,964 $158,894,795
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Premiums payable to insurance companies $ 69,481,803 $ 65,361,846
Accounts payable and accrued expenses 8,040,022 8,438,709
Premium deposits and credits due customers 8,062,626 8,847,097
Current portion of long-term debt 1,755,238 4,499,378
------------ ------------
TOTAL CURRENT LIABILITIES 87,339,689 87,147,030
LONG-TERM DEBT 11,749,848 3,173,405
OTHER LONG-TERM LIABILITIES 7,513,537 2,144,204
SHAREHOLDERS' EQUITY
Common Stock, no par value;
authorized 50,000,000 shares;
outstanding 13,706,764 and
14,679,464 shares, respectively 29,903,900 43,426,295
Retained earnings 26,741,990 23,003,861
------------ ------------
56,645,890 66,430,156
------------ ------------
$163,248,964 $158,894,795
============ ============
See notes to consolidated financial statements.
<PAGE>
STATEMENT OF CONSOLIDATED INCOME
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
Revenues
Commissions and fees $141,555,188 $132,914,113 $137,662,048
Investment income 2,077,462 1,899,803 1,558,982
Other 4,514,388 5,995,698 2,435,150
------------ ------------ ------------
148,147,038 140,809,614 141,656,180
Operating expenses
Compensation and employee
benefits 82,760,664 78,310,999 82,469,714
Other operating expenses 38,264,085 35,975,715 37,773,552
Amortization of intangibles 6,965,947 6,436,119 6,581,550
Interest expense 559,654 812,216 1,270,268
Pooling-of-interests expense - 487,986 503,207
------------ ------------ ------------
128,550,350 122,023,035 128,598,291
------------ ------------ ------------
INCOME BEFORE INCOME TAXES 19,596,688 18,786,579 13,057,889
Income Taxes 7,767,778 7,394,296 4,764,496
------------ ------------ ------------
NET INCOME $ 11,828,910 $ 11,392,283 $ 8,293,393
============ ============ ============
NET INCOME PER COMMON SHARE $0.82 $0.77 $0.57
===== ===== =====
Weighted Average Number of Shares
of Common Stock Outstanding 14,470,407 14,778,304 14,456,055
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
Unearned
Common Retained Compensation
Stock Earnings ESOP
<S> <C> <C> <C>
Balance at January 1, 1993 $22,358,063 $16,876,641 $(1,082,700)
Issuance of 1,642,494 shares of Common
Stock................................. 24,006,654
Purchase of 61,300 shares of Common
Stock................................. (822,266)
Payment of dividends ($.45 per share)... (6,310,225)
Repayment of notes receivable on stock
purchases of a pooled entity, secured
by underlying Common Stock............ 69,322
Transactions related to pooled companies (234,953) (79,636)
Net income.............................. 8,293,393
Repayment of liability by ESOP.......... 1,082,700
----------- ----------- ----------
Balance at December 31, 1993 45,376,820 18,780,173 -
Issuance of 15,450 shares of Common
Stock................................. 169,050
Purchase of 172,360 shares of Common
Stock................................. (2,076,406)
Payment of dividends ($.50 per share)... (7,224,935)
Transactions related to pooled companies (43,169) 56,340
Net income.............................. 11,392,283
----------- ----------- -----------
Balance at December 31, 1994 43,426,295 23,003,861 -
Issuance of 318,326 shares of Common
Stock................................. 3,817,746
Purchase of 1,336,820 shares of Common
Stock................................. (17,389,044)
Payment of dividends ($.57 per share)... (8,209,877)
Other 48,903 119,096
Net income.............................. 11,828,910
----------- ----------- -----------
Balance at December 31, 1995 $29,903,900 $26,741,990 $ -
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
STATEMENT OF CONSOLIDATED CASH FLOWS
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 11,828,910 $ 11,392,283 $ 8,293,393
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,790,772 2,849,831 3,107,872
Amortization of intangible assets 6,965,947 6,436,119 6,581,550
Provision for losses on receivables 1,500,231 1,238,500 1,335,085
Provision for deferred income taxes 44,119 (148,756) (505,731)
Gain on sale of assets (3,337,219) (5,047,488) (1,768,901)
------------ ------------ ------------
19,792,760 16,720,489 17,043,268
Changes in operating assets and liabilities
net of effects from insurance agency
acquisitions and dispositions:
Decrease in accounts receivable 513,907 976,828 2,103,592
(Increase) decrease in prepaid expenses (768,431) 546,613 326,951
Decrease in premiums payable to
insurance companies (1,156,960) (506,723) (6,930,184)
Increase (decrease) in premium deposits
and credits due customers (784,471) 743,579 (2,082,030)
Increase (decrease) in accounts payable
and accrued expenses (1,639,586) 551,458 (83,615)
Other operating activities 230,569 624,242 559,323
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 16,187,788 19,656,486 10,937,305
INVESTING ACTIVITIES
Purchase of held-to-maturity investments (7,399,402) (25,488,282) (39,093,059)
Proceeds from maturities of held-to-maturity
investments 24,546,279 21,238,187 24,315,989
Purchase of property and equipment (4,007,468) (2,179,808) (3,093,744)
Purchase of insurance agencies, net of
cash acquired (6,540,948) (9,740,808) (5,396,028)
Proceeds from sale of assets 3,515,102 7,943,937 1,173,036
Other investing activities 216,173 114,153 749,118
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN)INVESTING ACTIVITIES 10,329,736 (8,112,621) (21,344,688)
FINANCING ACTIVITIES
Proceeds from long-term debt 32,522,950 16,000,000 4,279,024
Principal payments on long-term debt (29,194,326) (20,205,709) (12,840,356)
Proceeds from issuance of Common Stock 7,650 19,050 22,391,654
Repurchase of Common Stock (17,389,044) (1,950,661) (822,266)
Dividends (8,209,877) (7,224,935) (6,310,225)
Other financing activities 150,697 13,171 (255,267)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (22,111,950) (13,349,084) 6,442,564
------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,405,574 (1,805,219) (3,964,819)
Cash and cash equivalents at beginning of year 12,615,132 14,420,351 18,385,170
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 17,020,706 $ 12,615,132 $ 14,420,351
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
Hilb, Rogal and Hamilton Company (the Company), a Virginia
corporation, operates as a network of insurance agencies with offices
located in 16 states and five Canadian provinces. Its principal activity
is the performance of retail insurance services which involves placing
property and casualty and life and health insurance with insurers on
behalf of commercial clients in a variety of industries and individual
clients.
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The accompanying financial statements
include the accounts of the Company and its subsidiaries. Significant
intercompany accounts and transactions have been eliminated in
consolidation.
Use of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Revenues: Commission income as well as the related premiums
receivable from customers and premiums payable to insurance companies are
recorded as of the effective date of insurance coverage or the billing
date, whichever is later. Premium adjustments, including policy
cancellations, are recorded as they occur. Contingent commissions and
commissions on premiums billed and collected directly by insurance
companies are recorded as revenue when received. Fees for services
rendered and override commissions are recorded as earned. These
policies are in accordance with predominant industry practice.
Cash Equivalents: The Company considers all highly liquid
investments with a maturity of three months or less at the date of
acquisition to be cash equivalents. The carrying amounts reported on the
balance sheet approximate the fair values.
Investments: In May 1993, the Financial Accounting Standards Board
(the FASB) issued Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." The
Company adopted the provisions of the new standard for investments held as
of or acquired after January 1, 1994. The adoption of this statement
did not have a material impact on the Company's financial position or
results of operations.
Management determines the appropriate classification of debt
securities at the time of purchase and reevaluates such designation at
each balance sheet date. Debt securities are classified as held-to-
maturity when the Company has the positive intent and ability to hold the
securities to maturity. Held to maturity securities are stated at
amortized cost, which is adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization is included
in investment income. Interest and dividends are included in investment
income. Realized gains and losses, and declines in value judged to be
other than temporary are included in investment income.
Marketable debt securities not classified as held-to-maturity are
classified as available-for-sale. Available-for-sale securities are
carried at fair value. Amortized cost of debt securities in this
category is adjusted for amortization of premiums and accretion of
discounts to maturity. Such amortization 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.
Property and Equipment: Property and equipment are stated on the
basis of cost. Depreciation is computed by the straight-line method over
estimated useful lives (30 to 33 years for buildings, 3 to 7 years for
equipment). Leasehold improvements are generally amortized using a
straight-line method over the term of the related lease.
Intangible Assets: Intangible assets arising from acquisitions
accounted for as purchases principally represent expiration rights, the
excess of costs over the fair value of net assets acquired and
noncompetition agreements. The cost of such assets is being amortized
principally on a straight-line basis over periods ranging up to 15 years
for expiration rights, 15 to 40 years for the excess of cost over the
fair value of net assets acquired and the terms of the related
contracts for noncompetition agreements, generally 3 to 20 years.
In March 1995, the FASB issued Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of," effective for fiscal years
beginning after December 15, 1995. Adoption of this statement is not
expected to have a material impact on the Company's financial position
or results of operations.
Income Taxes: The Company (except for pooled entities prior to
acquisition and its Canadian subsidiary) files a consolidated federal
income tax return. Deferred taxes result from temporary differences
between the reporting for income tax and financial statement purposes
primarily related to bad debt expense, depreciation expense, basis
differences in intangible assets, deferred compensation arrangements
and the recognition of net operating loss carryforwards from pooled
entities.
Net Income Per Common Share: Net income per Common Share is based
on the weighted average number of shares of Common Stock outstanding
during each year.
NOTE B--INVESTMENTS
The following is a summary of held-to-maturity and available-for-sale
investments included in current and long-term assets on the consolidated
balance sheet:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Held-to-Maturity Investments
December 31, 1995
Obligations of U.S.
government agencies $ 107,000 $ 1,000 $ 108,000
Obligations of states and
political subdivisions 10,570,000 97,000 $2,000 10,665,000
Certificates of deposit 864,000 864,000
----------- -------- ------ -----------
$11,541,000 $ 98,000 $2,000 $11,637,000
=========== ======== ====== ===========
Available-for-Sale Investments
December 31, 1995
Obligations of states and
political subdivisions $ 3,914,000 $ - $ - $ 3,914,000
=========== ======== ====== ===========
Held-to-Maturity Investments
December 31, 1994
Obligations of U.S.
government agencies $ 500,000 $ 41,000 $ 459,000
Obligations of states and
political subdivisions 31,149,000 $187,000 218,000 31,118,000
Certificates of deposit 953,000 953,000
----------- -------- -------- -----------
$32,602,000 $187,000 $259,000 $32,530,000
=========== ======== ======== ===========
</TABLE>
During December 1995, the Company reclassified certain investments
aggregating $3,914,000 from held-to-maturity to available-for-sale,
pursuant to the FASB's one time "holiday" allowing such reclassification
without calling into question the Company's intent to hold other debt
securities to maturity in the future.
The amortized cost and fair value of held-to-maturity and available-
for-sale investments at December 31, 1995, by contractual maturity, are
shown below. Actual maturities may differ from contractual maturities
because the issuers of the securities may have the right to prepay
obligations without prepayment penalties.
Cost Fair Value
Held-to-Maturity Investments
Due in one year $ 7,241,000 $ 7,263,000
Due after one year through five years 2,950,000 2,981,000
Due after five years through ten years 1,350,000 1,393,000
----------- -----------
$11,541,000 $11,637,000
=========== ===========
Available-for-Sale Investments
Due in one year $ 3,914,000 $ 3,914,000
=========== ===========
NOTE C--PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
1995 1994
Furniture and equipment $24,454,000 $22,462,000
Buildings and land 7,565,000 7,421,000
Leasehold improvements 1,641,000 1,449,000
----------- -----------
33,660,000 31,332,000
Less accumulated depreciation
and amortization 19,960,000 18,905,000
----------- -----------
$13,700,000 $12,427,000
=========== ===========
NOTE D--LONG-TERM DEBT AND OVERRIDE COMMISSION AGREEMENTS
1995 1994
Notes payable to banks, interest currently
at 6.14% $ 8,500,000
Notes payable to insurance companies including
interest at 10% per annum, to February 1995 $ 2,288,000
Installment notes payable incurred in
acquisitions of insurance agencies,
3.6% to 12%, due in various
installments, to 1999 2,637,000 2,227,000
Mortgage notes payable, currently 9.4%, due
in installments, to 2000 2,180,000 2,867,000
Installment notes payable, 8% to 9.75%, due in
various installments, to 1999 188,000 290,000
----------- -----------
13,505,000 7,672,000
Less current portion 1,755,000 4,499,000
----------- ----------
$11,750,000 $ 3,173,000
=========== ===========
Maturities of long-term debt for the four years ending after
December 31, 1996 are $1,045,000 in 1997; $96,000 in 1998; $44,000 in
1999; and $ 2,065,000 in 2000.
Interest paid was $733,000, $1,014,000 and $1,524,000 in 1995, 1994
and 1993, respectively.
At December 31, 1995, land and buildings having a depreciated cost of
$2,452,000 were pledged as collateral for the mortgage notes payable.
The Company entered into a credit agreement with two banks that
allows for borrowings of up to $20,000,000 under loans due through 2001,
which bear interest at variable rates. At December 31, 1995, $8,500,000
was borrowed under this agreement. This credit agreement contains, among
other provisions, requirements for maintaining a minimum level of
shareholders' equity ($42,500,000 at December 31, 1995) and certain
financial ratios.
The Company had entered into Override Commission Agreements with its
insurance company lenders which provided additional commission income
through 1994, up to a maximum of $2,517,000 if specified levels of
premiums were placed with the respective lenders or their affiliated
insurance companies. Additional commission income earned under these
agreements amounted to $1,225,000 in 1994 and $1,033,000 in 1993.
NOTE E--RETIREMENT PLANS
The Hilb, Rogal and Hamilton Company Profit Sharing Savings Plan
(the Profit Sharing Plan) covers substantially all employees of the
Company and its subsidiaries. The Profit Sharing Plan, which may be
amended or terminated by the Company at any time, provides that the
Company shall contribute to a trust fund such amounts as the Board of
Directors shall determine subject to certain earnings restrictions as
defined in the Profit Sharing Plan.
Prior to merger with the Company, certain of the merged companies
had a separate profit sharing, ESOP or benefit plan. These plans were
terminated or frozen at the time of merger with the Company.
The total expense under these plans for 1995, 1994 and 1993 was
approximately $2,075,000, $2,812,000 and $2,208,000, respectively.
Effective December 16, 1994, the Company adopted the Supplemental
Executive Retirement Plan (the SERP), which is a defined benefit plan
under which the Company will pay supplemental pension benefits to key
executives in addition to amounts received under the Profit Sharing Plan.
Such benefits will be paid from Company assets. The following table sets
forth the SERP's funded status and amounts recognized in the Company's
consolidated balance sheet:
1995 1994
Actuarial present value of:
Vested benefits $(2,054,000) $(1,527,000)
Nonvested benefits (210,000) (192,000)
----------- -----------
Accumulated benefit obligation (2,264,000) (1,719,000)
Effect of anticipated future compensation
levels (710,000) (470,000)
----------- -----------
Projected benefit obligation (2,974,000) (2,189,000)
Plan assets at fair value - -
----------- -----------
Excess of projected benefit obligation
over assets (2,974,000) (2,189,000)
Unrecognized prior service costs 2,047,000 2,172,000
Unrecognized net loss 450,000 -
----------- -----------
Accrued SERP expense (477,000) (17,000)
Adjustment to recognize minimum liability (1,786,000) (1,702,000)
----------- -----------
Pension liability recognized in consolidated
balance sheet $(2,263,000) $(1,719,000)
=========== ===========
The expense for the SERP includes the following components:
1995 1994
Service cost $159,000 $ 6,000
Interest cost 175,000 7,000
Amortization of prior service cost 126,000 4,000
-------- -------
Net periodic postretirement benefit cost $460,000 $17,000
======== =======
Significant assumptions used in determining obligations and the
related expense for the SERP include a weighted-average discount rate of
7.5% and 8.0% at December 31, 1995 and 1994, respectively, and an assumed
rate of increase in future compensation of 4% at both dates.
NOTE F--OTHER POSTRETIREMENT BENEFIT PLANS
The Company sponsors postretirement benefit plans that provide
medical and life insurance benefits to retirees. Employees who retire
after age 55 with 10 years of service are eligible to participate. The
plans are contributory for substantially all participants, with retiree
contributions adjusted annually and the health care plan contains other
cost sharing features such as deductibles and coinsurance. The
accounting for the health care plan anticipates future cost sharing
changes to the written plan that are consistent with the Company's
expressed intent to increase retiree contributions annually in
accordance with increases in health care costs. The Company's policy is
to fund the cost of these benefits when actual claims are incurred.
The following table sets forth the plans' combined funded status
reconciled with the amount shown in the Company's consolidated balance
sheet:
1995 1994
Accumulated postretirement benefit obligation:
Retirees $(1,419,000) $(1,391,000)
Active plan participants -- --
----------- -----------
Total (1,419,000) (1,391,000)
Plan assets at fair value -- --
----------- -----------
Accumulated postretirement benefit obligation in
excess of plan assets (1,419,000) (1,391,000)
Unrecognized net (gain) loss (512,000) (424,000)
Unrecognized transition benefit cost 1,264,000 1,379,000
----------- -----------
Accrued postretirement benefit liability $ (667,000) $ (436,000)
=========== ===========
Net periodic postretirement benefit cost includes the following
components:
1995 1994 1993
Interest cost $104,000 $103,000 $125,000
Amortization of transition
obligation over 14 years 115,000 115,000 115,000
Amortization of prior gains (29,000) (6,000)
-------- -------- --------
Net periodic postretirement
benefit cost $190,000 $212,000 $240,000
======== ======== ========
For measurement purposes, a 9.1% and a 10.2% annual rate of
increase in the per capita cost of covered health care benefits was
assumed for 1996 and 1995, respectively; the rate was assumed to decrease
gradually to 6.15% in 2021 and remain at that level thereafter. The
health care cost trend rate assumption has an effect on the amounts.
For example, increasing the assumed health care cost trend rates by one
percentage point in each year would increase the accumulated
postretirement benefit obligation for the medical plan as of December 31,
1995 and 1994 by $130,000 and the net periodic postretirement benefit
cost for 1995 by $10,000.
The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 7.5% and 8.0% at
December 31, 1995 and 1994, respectively.
NOTE G--INCOME TAXES
The components of income taxes shown in the statement of consolidated
income are as follows:
1995 1994 1993
Current
Federal $6,232,000 $6,176,000 $4,348,000
State 1,268,000 1,367,000 922,000
Foreign 224,000 -- --
---------- ---------- ----------
7,724,000 7,543,000 5,270,000
Deferred
Federal 76,000 (125,000) (428,000)
State 14,000 (24,000) (78,000)
Foreign (46,000) -- --
--------- ---------- ----------
44,000 (149,000) (506,000)
--------- ---------- ----------
$7,768,000 $7,394,000 $4,764,000
========== ========== ==========
Included in prepaid expenses and other current assets and other
long-term liabilities on the consolidated balance sheet are deferred
income taxes of $1,180,000 and $3,535,000, respectively, at December 31,
1995 and $1,529,000 and $623,000, respectively, at December 31, 1994.
The effective income tax rate varied from the statutory federal
income tax rate as follows:
1995 1994 1993
Statutory federal income tax rate 35.0% 35.0% 35.0%
Tax exempt investment income (2.1) (2.4) (2.2)
State income taxes, net of federal
tax benefit 4.2 4.8 4.4
Other 2.5 2.0 (0.7)
----- ----- -----
Effective income tax rate 39.6% 39.4% 36.5%
===== ===== =====
Income taxes paid were $8,428,000, $7,074,000 and $5,478,000 in
1995, 1994 and 1993, respectively.
The Internal Revenue Service has examined the Company's federal
income tax return for the years ended December 31, 1988 through 1992, and
adjustments are being contested. In the opinion of management, the
outcome of such action is not expected to materially affect the
financial position or results of operations of the Company.
NOTE H--LEASES
The Company and its subsidiaries have noncancellable lease contracts
for office space, equipment and automobiles which expire at various dates
through the year 2002 and generally include escalation clauses for
increases in lessors' operating expenses and increased real estate taxes.
Future minimum rental payments required under such operating leases
are summarized as follows:
1996 $ 5,663,000
1997 5,126,000
1998 3,740,000
1999 2,381,000
2000 1,642,000
Thereafter 1,190,000
-----------
$19,742,000
===========
Rental expense for all operating leases amounted to $6,712,000 in
1995, $6,549,000 in 1994 and $7,270,000 in 1993. Included in rental
expense for 1995, 1994 and 1993 is approximately $435,000, $798,000 and
$1,351,000, respectively, which was paid to employees or related parties.
NOTE I--SHAREHOLDERS' EQUITY
The Company has adopted and the shareholders have approved the 1986
Incentive Stock Option Plan and the Hilb, Rogal and Hamilton Company 1989
Stock Plan, which provide for the granting of options to purchase up to an
aggregate of approximately 1,895,000 and 2,026,000 shares of Common Stock
as of December 31, 1995 and 1994, respectively. The number of shares
available for grant may increase or decrease with the respective changes
in the number of shares of Common Stock outstanding. Stock option
activity under the plans was as follows:
Shares Option Price
Outstanding at January 1,1993 339,875 $ 6.00 - $18.20
Granted 593,000 12.13 - 15.75
Exercised 14,875 6.00 - 12.75
Expired 31,600 10.73 - 14.75
-------
Outstanding at December 31, 1993 886,400 6.00 - 18.20
Granted 38,000 11.88 - 12.13
Exercised 2,950 6.00 - 12.75
Expired 51,875 10.73 - 18.20
-------
Outstanding at December 31, 1994 869,575 6.00 - 18.20
Granted 25,000 11.75 - 12.50
Exercised 600 12.75
Expired 87,250 10.00 - 14.00
-------
Outstanding at December 31, 1995 806,725 $ 6.00 - $18.20
=======
These options expire at various dates through August 2005 (411,875
shares exercisable at December 31, 1995).
NOTE J--ACQUISITIONS
During 1995, the Company acquired certain assets and liabilities of
14 insurance agencies for $13,097,000 ($7,303,000 in cash, $1,974,000 in
guaranteed future payments and 317,726 shares of Common Stock) in
purchase accounting transactions. Assets acquired include expiration
rights of $9,616,000, noncompetition agreements of $385,000 and goodwill
of $7,278,000. The combined purchase price may be increased by
approximately $2,354,000 in 1996, $2,354,000 in 1997, $690,000 in 1998
and $358,000 in 1999 based upon commissions or net profits realized.
During 1994, the Company acquired all of the outstanding shares of
three insurance agencies in exchange for 543,930 shares of Common Stock
of the Company. The transactions were accounted for as pooling-of-
interests mergers.
During 1994, the Company acquired certain assets and liabilities of
four insurance agencies for $8,766,000 ($8,340,000 in cash, $276,000 in
guaranteed future payments and 12,500 shares of Common Stock) in purchase
accounting transactions. Assets acquired include expiration rights of
$7,350,000 and noncompetition agreements of $966,000. The combined
purchase price was increased by approximately $1,203,000 in 1995 and may
be increased by approximately $1,289,000 in 1996 and $75,000 in 1997 based
upon commissions or net profits realized.
During 1993, the Company acquired all of the outstanding shares of
two insurance agencies in exchange for 784,000 shares of Common Stock of
the Company. The transactions were accounted for as pooling-of-interests
mergers.
During 1993, the Company acquired certain assets and liabilities of
six insurance agencies for $6,407,000 ($3,568,000 in cash, $1,224,000 in
guaranteed future payments and 120,793 shares of Common Stock) in
purchase accounting transactions. Assets acquired include expiration
rights of $4,773,000 and noncompetition agreements of $1,210,000. The
combined purchase price was increased by approximately $665,000 in 1995
and $1,008,000 in 1994 and may be increased by $1,185,000 in 1996 based
upon commissions or net profits realized.
The above purchase acquisitions have been included in the Company's
consolidated financial statements from their respective acquisition dates.
The pro forma unaudited results of operations for the years ended
December 31, 1995 and 1994, assuming the above 1995 and 1994 purchase
acquisitions had occurred as of January 1, 1994, are as follows:
1995 1994
Revenues $155,376,000 $163,322,000
Net Income 11,612,000 11,114,000
Net Income Per Common Share $0.80 $0.74
NOTE K--SALE OF ASSETS
During 1995, 1994 and 1993, the Company sold certain insurance
accounts and other assets resulting in gains of approximately $3,337,000,
$5,044,000 and $1,735,000, respectively. These amounts are included in
other revenues in the statement of consolidated income. Revenues,
expenses and assets of these operations were not material to the
consolidated financial statements.
NOTE L--COMMITMENTS AND CONTINGENCIES
Included in cash and cash equivalents and premium deposits and
credits due customers are approximately $1,396,000 and $927,000 of funds
held in escrow at December 31, 1995 and 1994, respectively. In addition,
premiums collected from insureds but not yet remitted to insurance
carriers are restricted as to use by laws in certain states in which the
Company operates. The amount of cash and cash equivalents so restricted
was approximately $8,708,000 and $8,667,000 at December 31, 1995 and
1994, respectively.
There are in the normal course of business various outstanding
commitments and contingent liabilities. Management does not anticipate
material losses as a result of such matters.
The Company is generally involved in routine insurance policy
related litigation. Several suits have been brought against the Company
involving settlement of various insurance matters where customers are
seeking both punitive and compensatory damages. Management, upon the
advice of counsel, is of the opinion that such suits are substantially
without merit, that valid defenses exist, and that such litigation will
not have a material effect on the consolidated financial statements.
NOTE M--SUBSEQUENT EVENTS
Subsequent to December 31, 1995, the Company acquired certain assets
and liabilities of three insurance agencies in exchange for $1,811,000
($1,276,000 in cash and 40,000 shares of Common Stock). The transactions,
which are not material to the consolidated financial statements, will be
accounted for as purchase transactions.
NOTE N--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations
for the years ended December 31, 1995 and 1994:
Three Months Ended(1)
March 31 June 30 Sept. 30 Dec. 31
(in thousands, except per share amounts)
1995
Total Revenues $39,455 $36,573 $36,395 $35,724
Net Income 4,928 3,310(2) 2389 1,202
Net Income Per Common Share(3) 0.33 0.23 0.17 0.09
1994
Total Revenues $39,332 $35,186 $34,130 $32,162
Net Income 4,731(2) 2,918(2) 2,474(2) 1,269(4)
Net Income Per Common Share(3) 0.32 0.20 0.17 0.09
(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 from quarter to quarter.
(2) Second quarter 1995 and first, second and third quarter 1994 net
income increased approximately $1,477,000, $677,000, $892,000 and
$1,343,000, respectively, from the sale of certain insurance accounts
and other assets.
(3) Income per share calculations for each of the quarters is based on
the weighted average number of shares outstanding for each period
and the sum of the quarters may not necessarily be equal to the full
year net income per share amount.
(4) Fourth quarter 1994 net income increased approximately $550,000 due
to reductions made to amounts expensed during the first nine months
of the year under the discretionary compensation programs.
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
Shareholders and Board of Directors
Hilb, Rogal and Hamilton Company
We have audited the accompanying consolidated balance sheet of Hilb,
Rogal and Hamilton Company and subsidiaries as of December 31, 1995
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, 1995. 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 that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Hilb, Rogal and Hamilton Company and subsidiaries at December 31, 1995
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, 1995,
in conformity with generally accepted accounting principles.
Ernst & Young LLP
Richmond, Virginia
February 14, 1996
<PAGE>
Selected Financial Data
HILB, ROGAL AND HAMILTON COMPANY & SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993 1992 1991
(in thousands, except per share amounts)
(Unaudited)
<S> <C> <C> <C> <C> <C>
Statement of Consolidated Income Data:(1)
Commissions and fees $141,555 $132,914 $137,662 $137,296 $136,927
Investment income and other(2) 6,592 7,895 3,994 3,165 5,343
-------- -------- -------- -------- --------
Total revenues 148,147 140,809 141,656 140,461 142,270
Compensation and employee benefits 82,761 78,311 82,470 81,940 86,510
Other operating expenses 38,264 35,976 37,774 36,209 37,453
Amortization of intangibles 6,966 6,436 6,581 6,558 6,573
Interest expense 559 812 1,270 1,821 2,576
Pooling-of-interests expense - 488 503 533 1,082
-------- -------- -------- -------- --------
Total expenses 128,550 122,023 128,598 127,061 134,194
-------- -------- -------- -------- --------
Income before income taxes 19,597 18,786 13,058 13,400 8,076
Income taxes 7,768 7,394 4,765 4,809 3,340
-------- -------- -------- -------- --------
Net Income $ 11,829 $ 11,392 $ 8,293 $ 8,591 $ 4,736
======== ======== ======== ======== ========
Net income per Common Share $ .82 $ .77 $ .57 $ .65 $ .36
======== ======== ======== ======== ========
Weighted average number of shares outstanding 14,470 14,778 14,456 13,241 13,313
Dividends paid per Common Share $ .57 $ .50 $ .45 $ .41 $ .37
Consolidated Balance Sheet Data:
Intangible assets, net $ 60,854 $ 48,729 $ 49,454 $ 47,682 $ 46,196
Total assets 163,249 158,895 160,922 151,992 153,566
Long-term debt, less current portion 11,750 3,173 7,249 15,110 19,218
Other long-term liabilities 7,514 2,144 2,889 3,120 2,796
Total shareholders' equity 56,646 66,430 64,157 38,152 34,163
</TABLE>
(1) See Note J of Notes to Consolidated Financial Statements for information
regarding business purchase transactions which impact the comparability of
this information. In addition, during the years ended December 31, 1992 and
1991, the Company consummated 9 and 16 purchase acquisitions, respectively.
(2) During 1995, 1994, 1993, 1992 and 1991, the Company sold certain insurance
accounts and other assets resulting in gains of approximately $3,337,000,
$5,044,000, $1,735,000, $1,138,000 and $1,759,000, respectively.
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The income of an insurance agency business such as the Company is
principally derived from commissions earned, which are generally
percentages of premiums placed with insurance underwriters. Premium
pricing within the insurance underwriting industry has been cyclical and
has displayed a high degree of volatility based on prevailing economic
and competitive conditions. Decreases in premium rates result directly
in revenue decreases to the Company. Since 1987, 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. 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. Management cannot predict the timing or extent
of premium pricing changes due to market conditions or their effects
on the Company's operations in the future, but believes that the
"soft market" conditions will continue into 1996.
RESULTS OF OPERATIONS
Total revenues for 1995 were $148.1 million, an increase of $7.3
million or 5.2% over 1994. For 1994, total revenues were $140.8 million,
a decrease of $0.8 million or 0.6% from 1993. Commissions and fees for
1995 were $141.6 million, or 6.5% higher than 1994. Approximately $14.9
million of commissions and fees were derived from purchase acquisitions
of new insurance agencies. These increases were offset by decreases of
$6.4 million from the sale of certain offices and accounts in 1995 and
1994 and reductions in override commissions of $1.2 million.
Commissions and fees for 1994 were $132.9 million, or 3.4% lower
than 1993. Approximately $6.3 million of commissions and fees were
derived from purchase acquisitions of new insurance agencies. These
increases were offset by decreases of $8.4 million from the sale
of certain offices and insurance accounts in 1994 and 1993 and the
impact of the soft market conditions, which have resulted in
decreasing premium rates and increased competition.
Investment income increased by $0.2 million in 1995 and $0.3 million
in 1994 due to increases in interest rates, offset in 1995 by a decrease
in average invested assets due primarily to the use of available
funds for the Company's acquisition program and repurchase of shares of
Common Stock of the Company.
Other revenues decreased by $1.5 million in 1995 and increased by
$3.6 million in 1994. These amounts include gains of $3.3 million, $5.0
million and $1.7 million in 1995, 1994 and 1993, respectively,
from the sale of certain offices, insurance accounts and other
assets.
Total operating expenses for 1995 were $128.6 million, an increase
of $6.5 million or 5.3% from 1994. For 1994, total operating expenses
were $122.0 million, a decrease of $6.6 million or 5.1% from 1993.
Compensation and employee benefits costs for 1995 were $82.8 million,
an increase of $4.4 million or 5.7% over 1994. Increases include
approximately $8.4 million related to purchase acquisitions offset
by decreases of $3.9 million related to offices sold in 1995 and
1994. Compensation and employee benefits costs for 1994 were $78.3
million, a decrease of $4.2 million or 5.0% from 1993. Decreases
include approximately $5.4 million related to offices sold in 1994
and 1993 offset by the impact of purchase acquisitions.
Other operating expenses for 1995 were $38.3 million, or 6.4% higher
than 1994. Increases relate primarily to purchase acquisitions
offset in part by the sales of certain offices in 1995 and 1994.
Other operating expenses for 1994 were $36.0 million, or 4.8% less
than 1993. Decreases include approximately $2.4 million related
to offices sold in 1994 and 1993 offset by the impact of purchase
acquisitions.
Amortization expense primarily reflects the amortization of
expiration rights, an intangible asset acquired in the purchase of
insurance agencies. Amortization expense increased by $530,000 or 8.2% in
1995 and decreased by $145,000 or 2.2% in 1994 which is
attributable to purchase acquisitions consummated during 1995,
1994 and 1993 offset by decreases from amounts which became fully
amortized or were sold in those years.
The Company consummated three business combinations during 1994 and
two during 1993, which were accounted for under the pooling-of-interests
method of accounting. One-time costs incurred with each transaction,
principally legal, accounting and consulting fees, along with insurance
for errors and omissions coverage, are expensed when incurred. These
costs approximated $0.5 million in each of 1994 and 1993.
The effective tax rates for the Company were 39.6% in 1995, 39.4% in
1994 and 36.5% in 1993. An analysis of the effective income tax
rates is presented in "Note G-Income Taxes" of Notes to
Consolidated Financial Statements.
Over the last three years, inflationary pressure has been
relatively modest and did not have a significant effect on the Company's
operations.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations totalled $16.2 million, $19.7
million and $10.9 million for the years ended December 31, 1995, 1994 and
1993, respectively, and is primarily dependent upon the timing of
the collection of insurance premiums from clients and payment of
those premiums to the appropriate insurance underwriters.
The Company has historically generated sufficient funds internally
to finance capital expenditures for personal property and equipment. Real
properties acquired for offices of the Company are generally financed by
long-term mortgages. Cash expenditures for the acquisition of property
and equipment were $4.0 million, $2.2 million and $3.1 million in the
years ended December 31, 1995, 1994 and 1993, respectively. The timing
and extent of the purchase of investments is dependent upon cash needs
and yields on alternate investments and cash equivalents. In addition,
during 1995, total investments decreased by $17.1 million as the Company
utilized these funds for the repurchase of Common Stock of the
Company. Cash expenditures for the purchase of insurance agencies
accounted for under the purchase method of accounting amounted to
$6.5 million, $9.7 million and $5.4 million in the years ended
December 31, 1995, 1994 and 1993, respectively. Cash expenditures
for such insurance agency acquisitions have been funded primarily
through operations and from the proceeds of the sale of 1,504,000
shares of Common Stock offered through a Form S-3 Registration
Statement effective in March 1993. In addition, a portion of the
purchase price in such acquisitions may be paid through Common
Stock and deferred cash payments. Cash proceeds from the sale of
certain offices, insurance accounts and other assets totalled $3.5
million, $7.9 million and $1.2 million in the years ended December
31, 1995, 1994 and 1993, respectively. The Company did not have
any material capital expenditure commitments as of December 31,
1995.
Financing activities utilized cash of $22.1 million and $13.3
million for the years ended December 31, 1995 and 1994, respectively, and
provided cash of $6.4 million for the year ended December 31, 1993
as the Company generated $22.2 million from the aforementioned
stock offering in 1993, repaid its debt, including debt of pooled
entities and annually increased its dividend rate. In addition,
during 1995, 1994 and 1993, the Company repurchased 1,336,820,
172,360 and 61,300, respectively, shares of its Common Stock under
a stock repurchase program. The Company is currently authorized
to purchase an additional 1,225,000 shares and anticipates that
it will continue to repurchase shares in 1996. The Company
anticipates the continuance of its dividend policy. The Company
has a bank credit agreement for borrowings of up to $20.0 million
under loans due through 2001. At December 31, 1995, there were
loans of $8.5 million outstanding under the agreement.
The Company had a current ratio (current assets to current
liabilities) of 0.90 to 1.00 as of December 31, 1995. Shareholders'
equity of $56.6 million at December 31, 1995 is decreased from $66.4
million at December 31, 1994 and the debt to equity ratio of 0.21 to 1.00
at December 31, 1995, is increased from the last year-end ratio
of 0.05 to 1.00 due to the aforementioned purchase of Common Stock
of the Company and borrowings of $8.5 million under the bank
agreement used for insurance agency acquisitions and the
repurchase of Common Stock.
The Company believes that cash generated from operations, together
with the proceeds from borrowings, will provide sufficient funds to meet
the Company's short and long-term funding needs.
<PAGE>
Market Price of Common Stock
The Company's Common Stock has been publicly traded since July 15,
1987. Prior to June 19, 1992, the Common Stock was traded on the
NASDAQ National Market System under the symbol "HRHC." Since that
date, it has been traded on the New York Stock Exchange under the
symbol "HRH." As of December 31, 1995, there were 763 holders of
record of the Company's Common Stock. The transfer agent and
registrar for the Common Stock is Chemical Mellon Shareholder
Services, L.L.C., Ridgefield Park, New Jersey. High and low stock
prices and dividends per share for the indicated quarters were:
Cash
Sales Price Dividends
Quarter Ended High Low Declared
March 31, 1994 $12.88 $11.13 $.12
June 30, 1994 13.38 11.25 .12
September 30, 1994 12.63 11.50 .12
December 31, 1994 12.63 11.00 .14
March 31, 1995 12.13 10.75 .14
June 30, 1995 13.13 10.50 .14
September 30, 1995 13.50 12.00 .14
December 31, 1995 14.38 13.25 .15
<PAGE>
Board of Directors
Robert H. Hilb (1) (4)
Chairman and Chief Executive Officer
Hilb, Rogal and Hamilton Company
Glen Allen, Virginia
Andrew L. Rogal (1)
President and Chief Operating Officer
Hilb, Rogal and Hamilton Company
Glen Allen, Virginia
Theodore L. Chandler, Jr. (1) (2) (3)
Attorney
Williams, Mullen, Christian & Dobbins
Richmond, Virginia
J.S.M. French (2) (3) (4)
President
Dunn Investment Company
Birmingham, Alabama
Thomas H. O'Brien (2) (3) (4)
Chairman and Chief Executive Officer
PNC Bank Corp.
Pittsburgh, Pennsylvania
Robert S. Ukrop (1) (4)
President and Chief Operating Officer
Ukrop's Super Markets, Inc.
Richmond, Virginia
Philip J. Faccenda (2)
Vice President and General Counsel, Emeritus
University of Notre Dame
Notre Dame, Indiana
Norwood H. Davis, Jr. (3)
Chairman of the Board and
Chief Executive Officer
Trigon Blue Cross Blue Shield
Richmond, Virginia
(1) Executive Committee Member
(2) Compensation Committee Member
(3) Audit Committee Member
(4) Nominating Committee Member
Officers
Robert H. Hilb
Chairman and
Chief Executive Officer
Andrew L. Rogal
President and
Chief Operating Officer
Timothy J. Korman
Executive Vice President, Chief
Financial Officer and Treasurer
John C. Adams, Jr.
Executive Vice President
Dianne F. Fox
Senior Vice President -
Administration and Secretary
Ronald J. Schexnaydre
Senior Vice President
Carolyn Jones
Vice President and Controller
Walter L. Smith
Vice President, General
Counsel and Assistant Secretary
Vincent P. Howley
Vice President - Audit
Ann B. Davis
Vice President - Human
Resources
Janice G. Pouzar
Assistant Vice President -
Retirement Plans
Robert W. Blanton, Jr.
Assistant Vice President
Valerie C. Elwood
Assistant Vice President
<PAGE>
Agency Locations
UNITED STATES
- -----------------------------------------------------------------------------
Alabama
- -------
Birmingham
Mobile
Arizona
- -------
Flagstaff
Mesa
Phoenix
Tucson
California
- ----------
Bakersfield
Dinuba
Fresno
Orange County
Palm Desert
Sacramento
San Rafael
Santa Rosa
Truckee
Vallejo
Colorado
- --------
Denver
Connecticut
- -----------
New Haven
Florida
- -------
Daytona Beach
Fort Lauderdale
Fort Myers
Gainesville
Orlando
Tampa
Georgia
- -------
Atlanta
Gainesville
St. Simons Island
Savannah
Louisiana
- ---------
New Orleans
Maryland
- --------
Baltimore
Rockville
Michigan
- --------
Grand Rapids
Port Huron
New Jersey
- ----------
Voorhees
Nevada
- ------
Incline Village
Oklahoma
- --------
Oklahoma City
Pennsylvania
- ------------
Pittsburgh
Texas
- -----
Abilene
Amarillo
Corpus Christi
Dallas (2 locations)
Houston
McAllen
Victoria (2 locations)
Virginia
- --------
Charlottesville
Fredericksburg
Richmond
Virginia Beach
Canada
- -----------------------------------------------------------------------------
Alberta
- -------
Calgary
Edmonton
British Columbia
- ----------------
Vancouver
Manitoba
- --------
Winnipeg
Quebec
- ------
Montreal
Ontario
- -------
Toronto
<PAGE>
10-K Available
Shareholders are entitled to receive, without charge and upon written
request, a copy of the Company's Form 10-K Annual Report for the year
ended December 31, 1995, which has been filed with the Securities and
Exchange Commission.
Address requests to Dianne F. Fox, Senior Vice President and
Secretary, Corporate Headquarters.
Annual Meeting
The Company's Annual Meeting of Shareholders will be held on May 7,
1996 at 10 A.M. at Crestar Bank, 919 East Main Street, Richmond,
Virginia.
Transfer Agent and Registrar
Chemical Mellon Shareholder Services, L.L.C.
Overpeck Centre
85 Challenger Road
Ridgefield Park, New Jersey 07660
Corporate Headquarters
4235 Innslake Drive
P.O. Box 1220
Glen Allen, Virginia 23060-1220
Tel: (804) 747-6500
Fax: (804) 747-6046
Exhibit 22
Subsidiaries of Hilb, Rogal and Hamilton Company
Name of Subsidiary State/Province of Incorporation
------------------ -------------------------------
The Burton Company Connecticut
Hilb, Rogal and Hamilton Company of Canada, Ltd. Manitoba, Canada
(six locations)
Hilb, Rogal and Hamilton Company of Alabama, Inc.
(two locations) Alabama
Hilb, Rogal and Hamilton Company of Arizona (four locations) Arizona
Hilb, Rogal and Hamilton Company of Atlanta, Inc. Georgia
Hilb, Rogal and Hamilton Company of Baltimore Maryland
Hilb, Rogal and Hamilton Insurance Services of
Central California, Inc. (three locations) California
HRH Insurance Services of the Coachella Valley, Inc. California
Hilb, Rogal and Hamilton Company of Daytona Beach, Inc. Florida
Hilb, Rogal and Hamilton Company of Denver Colorado
Hilb, Rogal and Hamilton Company of the District
of Columbia Delaware
Hilb, Rogal and Hamilton Company of Fort Lauderdale Florida
Hilb, Rogal and Hamilton Company of Fort Myers Florida
Hilb, Rogal and Hamilton Company of Gainesville,
Florida, Inc. Florida
Hilb, Rogal and Hamilton Company of Gainesville, Georgia Georgia
Hilb, Rogal and Hamilton Company of Grand Rapids Michigan
Hilb, Rogal and Hamilton International, LTD. Virginia
Hilb, Rogal and Hamilton Company of Louisiana Louisiana
Hilb, Rogal and Hamilton Company of New Jersey New Jersey
HRH of Northern California Insurance Services, Inc.
(six locations) California
Hilb, Rogal and Hamilton Company of Oklahoma Oklahoma
Hilb, Rogal and Hamilton Insurance Services of
Orange County, Inc. California
Hilb, Rogal and Hamilton Company of Orlando Florida
Hilb, Rogal and Hamilton Company of Pittsburgh, Inc. Pennsylvania
Hilb, Rogal and Hamilton Company of Port Huron Michigan
Hilb, Rogal and Hamilton Realty Company Delaware
Hilb, Rogal and Hamilton Company of Savannah, Inc. Georgia
Hilb, Rogal and Hamilton Company of St. Simons Island Georgia
Hilb, Rogal and Hamilton Resource Group, Ltd. Virginia
Hilb, Rogal and Hamilton Company of Tampa Bay, Inc. Florida
Hilb, Rogal and Hamilton Company of Texas (nine locations) Texas
Hilb, Rogal and Hamilton Company of Virginia
(four locations) Virginia
Each of the above subsidiaries is 100% owned by the registrant.
Consent of Ernst & Young LLP, Independent Auditors
--------------------------------------------------
We consent to the incorporation by reference in the Registration
Statements (Form S-4 No. 33-44271 and Form S-8 No. 33-59866) of Hilb,
Rogal and Hamilton Company and in the related prospectuses of our report
dated February 14, 1996, with respect to the consolidated financial
statements and schedule of Hilb, Rogal and Hamilton Company included in
this Annual Report (Form 10-K) for the year ended December 31, 1995.
Ernst & Young LLP
Richmond, Virginia
March 21, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF HILB, ROGAL AND HAMILTON COMPANY AS OF AND FOR THE YEAR
ENDED DECEMBER 31, 1995, INCORPORATED BY REFERENCE INTO THE 1995 FORM 10K,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 17,020,706
<SECURITIES> 11,154,673
<RECEIVABLES> 48,274,102
<ALLOWANCES> 1,772,000
<INVENTORY> 0
<CURRENT-ASSETS> 78,615,445
<PP&E> 33,660,106
<DEPRECIATION> 19,959,846
<TOTAL-ASSETS> 163,248,964
<CURRENT-LIABILITIES> 87,339,689
<BONDS> 11,749,848
<COMMON> 29,903,900
0
0
<OTHER-SE> 26,741,990
<TOTAL-LIABILITY-AND-EQUITY> 163,248,964
<SALES> 0
<TOTAL-REVENUES> 148,147,038
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 127,990,696
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 559,654
<INCOME-PRETAX> 19,596,688
<INCOME-TAX> 7,767,778
<INCOME-CONTINUING> 11,828,910
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,828,910
<EPS-PRIMARY> .82
<EPS-DILUTED> .82
</TABLE>
