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, 1998
COMMISSION FILE NO. 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 23060
Glen Allen, Virginia (Zip Code)
(Address of principal executive offices)
(804) 747-6500
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of Exchange on Which Registered
Common Stock, no par value New York Stock Exchange
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 (ss. 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 [X].
State the aggregate market value of the voting stock held by
non-affiliates of the registrant.
$230,487,480 as of December 31, 1998
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 1, 1999
Common Stock, no par value 12,157,575
Documents Incorporated by Reference
Portions of the registrant's Proxy Statement for the 1999 Annual Meeting of
Shareholders (to be filed) are incorporated by reference into Part III hereof.
<PAGE>
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, with insurance underwriters on behalf of its clients. The Agencies
operate 59 offices in 16 states. The Company's client base ranges from personal
to large national accounts and is primarily comprised of middle market
commercial and industrial accounts. Insurance commissions accounted for
approximately 90% of the Company's total revenues in 1998. 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 7% of revenues in 1998.
The Company has historically 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 173
independent agencies. The Company's prior growth strategy emphasized
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. Beginning in 1997, the Company began to
pursue a more focused merger and acquisition strategy which is expected to
continue in the future. This program is largely focused on acquisitions which
fit into the strategic and regional plans and targets entities which provide a
specialty or product expertise which can be exported throughout the Company.
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 and regions are staffed to handle the
broad variety of insurance needs of their clients. Additionally, certain
Agencies and regions have developed special expertise in areas such as aviation,
construction and marine insurance services and this expertise is made available
to clients throughout the regions and 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-Atlantic (Connecticut, Pennsylvania, Maryland
and Virginia); Alabama/Georgia; Florida; Oklahoma/Texas and Western (Arizona,
California, Colorado and
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Michigan). Regional management of a sizable mass of coordinated and
complementary resources has enabled 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 93% of its commission and
fee revenue in 1998 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 service fee income related to
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 directly by
the client. 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 1998, the largest
single client accounted for approximately 1.3% 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. From 1984 to March 1, 1999, a total of 173 agencies have been
acquired. One hundred twenty-three of those agencies were acquired using the
purchase method of accounting at a total purchase price of approximately $147.0
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. From November 1, 1988 to May 1,
1995, 50 agencies were 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 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, specialized products and expertise, administrative and
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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 be subject to restrictive
covenants, either in a Company prepared form or as an amendment of the existing
contracts. 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 1998, the Company acquired six insurance agencies. See "Note
K--Acquisitions" of the Notes to Consolidated Financial Statements beginning on
page F-6 for a description of these acquisitions.
Subsequent to December 31, 1998, the Company acquired certain assets
and liabilities of one insurance agency for $2,244,000 ($1,450,000 in cash and
$794,000 in guaranteed future payments) in a purchase accounting transaction.
Pro forma revenues and net income are not material to the consolidated financial
statements.
On March 30, 1999, the Company announced the execution of a Stock
Purchase Agreement with PM Holdings, Inc., Phoenix Home Life Mutual Insurance
Company and Martin L. Vaughan, III to acquire all of the issued and outstanding
shares of American Phoenix Corporation, a subsidiary of Phoenix Home Life Mutual
Insurance Company, for approximately $49 million in cash, $32 million in 5.25%
Convertible Subordinated Debentures due 2014, with a conversion price of $22.75
per share, callable in 2009, and 1,000,000 shares of Common Stock of the
Company. The acquisition is subject to regulatory approval and satisfaction of
certain conditions to closing. The Company expects to fund the cash portion of
the purchase price with a credit facility to be obtained in connection with the
acquisition. The acquisition is expected to be completed during the second
quarter of 1999 and will be accounted for using purchase accounting.
American Phoenix Corporation reported total assets of $106.6 million
as of December 31, 1998 and revenues of $72.9 million for the year then ended.
Competition
The Company participates in a very competitive industry. It is a
leading independent insurance agency system serving a wide variety of clients
through its network of wholly-owned subsidiaries which operate 59 insurance
agencies located in 16 states. 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 and
private, regional firms, some of who may be larger than the Company's local
Agency.
The Company is also in competition with certain insurance companies
which write insurance directly for their customers, and the banking industry, as
well as self-insurance and other employer sponsored programs.
Employees
As of December 31, 1998, the Company had approximately 1,610 employees.
No employees are currently represented by a union. The Company believes its
relations with its employees are good.
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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
G--Leases" of the Notes to Consolidated Financial Statements beginning on page
F-6.
At December 31, 1998, the Company owned buildings in Oklahoma City,
Oklahoma; Fort Myers, Florida; and Victoria, Texas from which the Agencies in
those cities operate. In addition, the Company owned a building in
Charlottesville, Virginia.
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, 72, has been Chairman of the Company since 1991 and has
been a director of the Company since 1982. He was Chief Executive Officer of the
Company from 1991 to 1997 and was President of the Company from 1982 to 1995.
Andrew L. Rogal, 50, has been Chief Executive Officer of the Company
since 1997, and President of the Company since 1995 and has been a director of
the Company since 1989. He was Chief Operating
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Officer of the Company from 1995 to 1997. 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.
Timothy J. Korman, 46, has been Executive Vice President, Finance and
Administration since 1997. He was Executive Vice President, Chief Financial
Officer and Treasurer of the Company from 1995 to 1997, and was Senior Vice
President and Treasurer of the Company from 1989 to 1995. He is a first cousin
of Robert S. Ukrop, a director of the Company.
Carolyn Jones, 43, has been Senior Vice President, Chief Financial
Officer and Treasurer since 1997 and was Vice President and Controller of the
Company from 1991 to 1997.
Walter L. Smith, 41, has been Vice President and General Counsel of the
Company since 1991 and Secretary of the Company since May 1998. He was Assistant
Secretary of the Company from 1989 to 1998.
Vincent P. Howley, 50, has been Vice President, Agency Financial
Operations since 1997. He was Vice President-Audit of the Company from 1993 to
1997, and was Assistant Vice President-Audit of the Company from 1986 to 1993.
John P. McGrath, 41, has been Vice President of the Company since May
1998. He has been Director of the Mid-Atlantic region since 1995 and Vice
President of Hilb, Rogal and Hamilton Company of Pittsburgh, Inc. and President
HRH Financial Institutions Group, Inc., subsidiaries of the Company since 1998.
He was President and Chief Executive Officer of Hilb, Rogal and Hamilton Company
of Pittsburgh, Inc. from 1993 to 1998, Senior Vice President and Chief Executive
Officer of this subsidiary from 1991 to 1992 and Vice President of this
subsidiary from 1990 to 1991.
Richard E. Simmons, III, 45, has been Vice President of the Company
since May 1998. He has been Director of the Alabama/Georgia region since 1995
and Chief Executive Officer of Hilb, Rogal and Hamilton Company of Alabama, Inc.
a subsidiary of the Company, since 1997. He was President and Chief Executive
Officer of this subsidiary from 1990 to 1996.
William L. Chaufty, 46, has been Vice President of the Company since
May 1998. He has been Director of the Texas/Oklahoma region since 1997 and
President of Hilb, Rogal and Hamilton Company of Oklahoma, a subsidiary of the
Company, since 1989.
Michael A. Janes, 39, has been Vice President of the Company since May
1998. He has been Director of the Western region since 1997 and Chairman of
Hilb, Rogal and Hamilton Company of Arizona, a subsidiary of the Company, since
June 1998. He was President of this subsidiary from 1993 to 1998.
Steven C. Deal, 45, has been Vice President of the Company since May
1998. He has been National Director of Select Commercial Operations since 1997,
National Director of Personal Lines since 1998 and Chairman of Hilb, Rogal and
Hamilton Company of Virginia, a subsidiary of the Company, since October 1997.
He was President of this subsidiary from 1990 to 1997, Executive Vice President
from 1989 to 1990 and Vice President from 1987 to 1988.
Richard F. Galardini, 49, has been Vice President of the Company since
May 1998. He has been National Director of Employee Benefits since 1997. He was
Executive Vice President and Chief Operating Officer of Hilb, Rogal and Hamilton
Company of Pittsburgh, Inc., a subsidiary of the Company, from 1996 to 1997 and
was Vice President of this subsidiary from 1992 to 1996.
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Henry C. Kramer, 54, joined the Company as Vice President, Human
Resources in 1997. Prior thereto, he held various human resource positions with
Alexander & Alexander, Inc. in Baltimore, Maryland from 1973 to 1997.
Robert J. Hilb, 35, has been Vice President of the Company since 1997.
He was President of HRH Resource Group, Ltd., a subsidiary of the Company from
1994 to 1997. Prior thereto, he held various insurance related positions within
the Company. He is the son of Robert H. Hilb, Chairman and a director of the
Company.
Robert W. Blanton, Jr., 34, has been Vice President and Controller of
the Company since May 1998. He was Assistant Vice President and Controller from
1997 to May 1998 and was Assistant Vice President of the Company from 1993 to
1997. He joined the Company in 1990 as Accounting Senior.
Valerie C. Elwood, 37, 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.
William C. Widhelm, 30, has been Assistant Vice President, Internal
Audit since February 1999. He joined the Company in 1994 and has held various
positions in the auditing department.
All officers serve at the discretion of the Board of Directors. Each
holds office until the next annual election of officers by the Board of
Directors, which will occur after the Annual Meeting of Shareholders, scheduled
to be held on June 8, 1999, 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
The Company's Common Stock has been publicly traded since July 15,
1987. It is traded on the New York Stock Exchange under the symbol "HRH". As of
December 31, 1998, there were 610 holders of record of the Company's Common
Stock.
The following table sets forth the reported high and low sales prices
per share of the Common Stock on the NYSE Composite Tape, based on published
financial sources, and the dividends per share declared on Common Stock for the
quarter indicated.
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Cash
Dividends
Quarter Ended Sales Price Declared
------------------------------------------------------------------------------
High Low
---- ---
1997
March 31 13.88 $12.50 $.155
June 30 17.25 13.50 .155
September 30 18.69 15.75 .155
December 31 19.63 17.56 .155
1998
March 31 19.19 16.25 .155
June 30 18.44 15.50 .160
September 30 19.13 16.13 .160
December 31 19.88 15.94 .160
The Company's current dividend policy anticipates the payment of
quarterly dividends in the future. The declaration and payment of dividends to
holders of Common Stock will be at the discretion of the Board of Directors and
will be dependent upon the future earnings and financial condition of the
Company.
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ITEM 6. SELECTED FINANCIAL DATA
The information set forth in the following table should be read in
conjunction with "Management's discussion and Analysis of Financial Conditions
and Results of Operations" and the Consolidated Financial Statements and Notes
thereto.
<TABLE>
<CAPTION>
Year Ended December 31
1998 1997 1996 1995 1994
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Statement of Consolidated
Income
Data 1:
Commissions and fees $175,887 $168,558 $153,968 $141,555 $132,914
Investment income 1,579 1,740 1,533 2,077 1,900
Other income 2 3,582 3,411 2,742 4,515 5,995
----------- ----------- ---------- ---------- ----------
Total revenues 181,048 173,709 158,243 148,147 140,809
Compensation and
Employee
benefits 98,478 96,240 88,406 82,761 78,311
Other operating expenses 46,970 45,477 41,951 38,264 35,976
Amortization of
Intangibles 7,919 8,110 7,596 6,966 6,436
Interest expense 2,317 2,037 1,245 559 812
Pooling-of-interests expense - - - - 488
----------- ----------- ---------- ---------- ----------
Total expenses 155,684 151,864 139,198 128,550 122,023
----------- ----------- ---------- ---------- ----------
Income before income taxes 25,364 21,845 19,045 19,597 18,786
Income taxes 10,419 9,055 7,639 7,768 7,394
----------- ----------- ---------- ---------- ----------
Net income $ 14,945 $ 12,790 $ 11,406 $ 11,829 $ 11,392
=========== =========== ========== ========== ==========
Net income per Common
Share:
Basic $ 1.20 $ 0.98 $ 0.84 $ 0.82 $ 0.77
=========== =========== ========== ========== ==========
Diluted $ 1.18 $ 0.97 $ 0.84 $ 0.82 $ 0.77
=========== =========== ========== ========== ==========
Weighted average number of shares
Outstanding
Basic 12,497 13,099 13,500 14,470 14,778
Diluted 12,709 13,215 13,526 14,480 14,785
Dividends paid per Common Share $ 0.635 $ 0.62 $ 0.605 $ 0.57 $ 0.50
Consolidated Balance Sheet Data
Intangible assets, net $ 87,471 $ 82,170 $ 80,006 $ 60,854 $ 48,729
Total assets 188,066 181,607 181,475 163,249 158,895
Long-term debt, less current portion 43,658 32,458 27,196 11,750 3,173
Other long-term
liabilities 10,192 9,537 9,870 7,514 2,144
Total shareholders' equity 45,710 51,339 55,298 56,646 66,430
</TABLE>
___________________________
1 See Note J of Notes to Consolidated Financial Statements beginning on page
F-6 for information regarding business purchase transactions which impact
the comparability of this information. In addition, during the years ended
December 31, 1995 and 1994, the Company consummated 14 and four purchase
acquisitions, respectively.
2 During 1998, 1997, 1996, 1995 and 1994, the Company sold certain insurance
accounts and other assets resulting in gains of approximately $2,638,000,
$2,475,000, $1,856,000, $3,337,000 and $5,044,000, respectively.
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ITEM 7. 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 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 1999.
Results of Operations
Total revenues for 1998 were $181.0 million, an increase of $7.3
million or 4.2% over 1997. For 1997, total revenues were $173.7 million, an
increase of $15.5 million or 9.8% from 1996.
Commissions and fees for 1998 were $175.9 million, or 4.3% higher than
1997. Approximately $6.5 million of commissions and fees were derived from
purchase acquisitions of new insurance agencies. These increases were offset by
decreases of $7.4 million from the sale of certain offices and accounts in 1998
and 1997. Excluding the effects of acquisitions and dispositions, commissions
and fees increased 5.0%.
Commissions and fees for 1997 were $168.6 million, or 9.5% higher than
1996. Approximately $18.3 million of commissions and fees were derived from
purchase acquisitions of new insurance agencies. These increases were offset by
decreases of $7.1 million from the sale of certain offices and accounts in 1997
and 1996. Excluding the effects of acquisitions and dispositions, commissions
and fees increased 3.1%.
Investment and other income remained level in 1998 and increased by
$0.9 million in 1997. These amounts include gains of $2.6 million, $2.5 million
and $1.9 million in 1998, 1997 and 1996, respectively, from the sale of certain
offices, insurance accounts and other assets.
Total operating expenses for 1998 were $155.7 million, an increase of
$3.8 million or 2.5% from 1997. For 1997, total operating expenses were $151.9
million, an increase of $12.7 million or 9.1% from 1996.
Compensation and employee benefits costs for 1998 were $98.5 million,
an increase of $2.2 million or 2.3% from 1997. Increases include approximately
$3.2 million related to purchase acquisitions, amounts related to revenue growth
and $1.7 million in incentive compensation related to improved operating results
offset by decreases of $4.5 million related to offices sold in 1998 and 1997.
Compensation and employee benefits costs for 1997 were $96.2 million, an
increase of $7.8 million or 8.9% from 1996. Increases include approximately $9.3
million related to purchase acquisitions and $1.7 million in incentive
compensation related to improved operating results offset by decreases of $3.0
million related to offices sold in 1997 and 1996.
Other operating expenses for 1998 were $47.0 million, or 3.3% higher
than 1997. Increases relate primarily to purchase acquisitions and costs
associated with revenue growth offset in part by the sale of
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certain offices in 1998 and 1997 and consulting fees totaling $1.0 million in
1997 related to the Company's strategic plan.
Other operating expenses for 1997 were $45.5 million, or 8.4% higher
than 1996. Increases relate primarily to purchase acquisitions and to the
aforementioned consulting fees in 1997 offset in part by the sale of certain
offices in 1997 and 1996.
Amortization expense primarily reflects the amortization of expiration
rights, an intangible asset acquired in the purchase of insurance agencies.
Amortization expense decreased by $0.2 million or by 2.4% in 1998 and increased
by $0.5 million or 6.8% in 1997 which is attributable to purchase acquisitions
consummated during 1998, 1997 and 1996 offset by decreases from amounts which
became fully amortized or were sold in those years.
The effective tax rates for the Company were 41.1% in 1998, 41.5% in
1997 and 40.1% in 1996. An analysis of the effective income tax rates is
presented in "Note F--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 totaled $19.6 million, $21.0 million
and $16.6 million for the years ended December 31, 1998, 1997 and 1996,
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. Cash expenditures for the acquisition of property
and equipment were $5.0 million, $2.1 million and $5.1 million for the years
ended December 31, 1998, 1997 and 1996, 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 1998 and 1997, total
proceeds from maturities of investments exceeded purchases of investments by
$0.4 million and $2.4 million, respectively, as the Company utilized these funds
for the repurchase of Common Stock of the Company and the acquisition of
insurance agencies. Cash expenditures for the purchase of insurance agencies
accounted for under the purchase method of accounting amounted to $10.4 million,
$9.3 million and $9.7 million in the years ended December 31, 1998, 1997 and
1996, respectively. Cash expenditures for such insurance agency acquisitions
have been funded primarily through operations and from long-term borrowings. 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 sales of
certain offices, insurance accounts and other assets totaled $8.9 million, $6.5
million and $2.5 million in the years ended December 31, 1998, 1997 and 1996,
respectively. The Company did not have any material capital expenditure
commitments as of December 31, 1998.
Financing activities utilized cash of $16.4 million, $16.0 million and
$6.0 million for the years ended December 31, 1998, 1997 and 1996, respectively,
as the Company made scheduled debt payments and annually increased its dividend
rate. In addition, during 1998, 1997 and 1996, the Company repurchased
1,045,280, 700,000 and 801,700, respectively, shares of its Common Stock under a
stock repurchase program. The Company is currently authorized to purchase an
additional 777,500 shares and anticipates that it will continue to repurchase
shares in 1999 at a decreased level. The Company has a bank credit agreement
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for $40.0 million under loans due in 2003. At December 31, 1998, there were
loans of $40.0 million outstanding under the agreement.
The Company had a current ratio (current assets to current liabilities)
of 0.88 to 1.00 as of December 31, 1998. Shareholders' equity of $45.7 million
at December 31, 1998, decreased from $51.3 million at December 31, 1997, and the
debt to equity ratio of 0.96 to 1.00 at December 31, 1998 increased from the
last year-end ratio of 0.63 to 1.00 due to the aforementioned purchase of Common
Stock of the Company and an increase in borrowings to $40.0 million under the
bank agreement used for insurance agency acquisitions and the repurchase of
Common Stock.
On March 29, 1999, the Company entered into a Stock Purchase Agreement
with PM Holdings, Inc., Phoenix Home Life Mutual Insurance Company and Martin L.
Vaughan, III to acquire all of the issued and outstanding shares of capital
stock of American Phoenix Corporation. The acquisition is subject to regulatory
approval and satisfaction of certain conditions to closing. Upon consummation of
the acquisition, the Company expects to incur debt of approximately $49 million
under a credit facility to be obtained in connection with the acquisition and to
issue $32 million principal amount of 5.25% Convertible Subordinated Debentures
due 2014. The Company expects repayment and servicing of the debt to be funded
largely from cash flows of the combined operations. Additionally, management
believes that these cash requirements will be partially offset by federal income
tax benefits related to the interest expense and a portion of the goodwill
amortization. Based upon the historic ability of the Company and American
Phoenix Corporation to generate consistent, positive cash flows, the Company
believes that the combined company will have sufficient liquidity and adequate
capital resources to meet both its short- and long-term capital needs.
Market Risk
The Company has certain investments and utilizes derivative financial
instruments which are subject to market risk; however, the Company believes that
exposure to market risk associated with these instruments is not material.
Impact of Year 2000
Many existing computer programs use only two digits to identify a year
in the date field. These programs were designed and developed without
considering the impact of the upcoming change in the century. If not corrected,
this could result in a system failure or miscalculations causing disruption of
operations, and could conceivably have a material adverse effect on the Company.
The Company's technological operations rely primarily on personal
computers ("PC's") and off-the-shelf software applications. As such, management
is monitoring a program to evaluate external software relationships and ready
its computer systems for the year 2000. As part of this process, the Company has
assessed its year 2000 readiness by (1) performing an inventory of its PC's and
applications software; (2) seeking compliance statements from its agency
management system and other third party software vendors; and (3) testing PC
hardware. As a result of this assessment, the Company is upgrading or replacing
portions of its existing software and hardware that were not year 2000
compliant. Generally, these modifications and replacements were contemplated
with normal system enhancements and improvements. The Company has substantially
completed the required software replacements during 1998 and expects hardware
replacements to be completed during 1999. The Company is also assessing any
systems that may contain embedded chips or microcontrollers, such as elevators,
office equipment, telephones or security systems. This assessment should be
completed by mid 1999 with replacements or upgrades and limited testing to occur
during the remainder of 1999.
12
<PAGE>
The Company is also evaluating insurance carriers, financial
institutions and other third party vendors. This process is expected to be
complete by mid 1999. Determining the year 2000 readiness of external parties
requires the collection of compliance statements made by those parties, together
with factual research. Although the Company has taken, and will continue to
take, reasonable efforts to gather information to determine the readiness of
external parties, often such information is not provided voluntarily, is not
available or is not reliable.
In assessing the material risks to the Company's business arising from
the year 2000 problem, the Company considers the year 2000 readiness of agency
management system vendors, insurance carriers, financial institutions and other
third parties (including public utilities and telecommunication service
companies) to be the primary risk to its business. The loss of services from any
one of these entities could disrupt operations and have a material adverse
effect on the Company. The year 2000 readiness of third parties is substantially
beyond the Company's knowledge and control, and there can be no assurances that
the Company will not be adversely affected by the failure of a third party to
adequately address the year 2000 problem.
The Company is scheduled to begin a comprehensive contingency planning
effort in March 1999 to ensure that all critical business functions will
continue on January 1, 2000. The plan will outline the procedures to follow for
the most likely areas of risk. The Company expects its contingency plan to
create a business continuity project work group, define triggers for activating
contingency plans, assess business resumption strategies and establish
alternative processes for core business functions, where commercially
reasonable. The Company's contingency planning efforts will be ongoing
throughout 1999.
The Company currently estimates that the total costs for addressing the
year 2000 issue, including the necessary enhancements, will be approximately
$3.5 million. Software and hardware replacements are being capitalized; whereas,
the costs associated with preparing for the year 2000 are expensed as incurred
and are being funded with cash from operations. As of December 31, 1998, the
Company had spent approximately $1.8 million. The Company does not expect the
total cost of addressing the year 2000 issue with respect to its internal
computer systems and hardware to be material to its consolidated financial
condition or results of operations.
Forward-Looking Statements
When used in this annual report, in Form 10-K or other filings by the
Company with the Securities and Exchange Commission, in the Company's press
releases or other public or shareholder communications, or in oral statements
made with the approval of an authorized Company executive officer, the words or
phrases "would be," "will allow," "expects to," "will continue," "is
anticipated," "estimate," "project" or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995.
While forward-looking statements are provided to assist in the
understanding of the Company's anticipated future financial performance, the
Company cautions readers not to place undue reliance on any forward-looking
statements, which speak only as of the date made. Forward-looking statements are
subject to significant risks and uncertainties, many of which are beyond the
Company's control. Although the Company believes that the assumptions underlying
its forward-looking statements are reasonable, any of the assumptions could
prove to be inaccurate. Actual results may differ materially from those
contained in or implied by such forward-looking statements for a variety of
reasons. Risk factors and uncertainties that might cause such a difference
include, but are not limited to the following: the Company's commission revenues
are highly dependent on premium rates charged by insurers, which are subject to
fluctuation; the continuation of the "soft market" during which the underwriting
capacity of insurance companies has
13
<PAGE>
expanded causing increased competition and decreased premium rates and related
commissions and fees; continued low interest rates will reduce income earned on
invested funds; the insurance intermediary business is extremely competitive
with a number of competitors being substantially larger than the Company; the
alternative insurance market continues to grow; the Company's revenues vary
significantly from quarter to quarter as a result of the timing of policy
renewals and the net effect of new and lost business production; the general
level of economic activity can have a substantial impact on the Company's
renewal business; uncertainties associated with the Company's year 2000
remediation program and contingency plans; and the year 2000 readiness of third
parties. The Company's continued growth has also been enhanced through
acquisitions, which may or may not be available on acceptable terms in the
future and which, if consummated, may or may not be advantageous to the Company.
The Company does not undertake, and specifically disclaims any
obligation, to update any forward-looking statements to reflect occurrences or
unanticipated events or circumstances after the date of such statements.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT
MARKET RISK
The Company believes that its exposure to market risk associated with
transactions using derivative financial instruments is not material.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted in a separate section of this
report.
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
Except as to certain information regarding executive officers included
in Part I, the Proxy Statement for the 1999 Annual Meeting of the Shareholders
to be filed within 120 days after the end of the last fiscal year is
incorporated herein by reference for the information required by this item.
ITEM 11. EXECUTIVE COMPENSATION
The Proxy Statement for the 1999 Annual Meeting of the Shareholders to
be filed within 120 days after the end of the last fiscal year is incorporated
herein by reference for the information required by this item.
14
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Proxy Statement for the 1999 Annual Meeting of the Shareholders to
be filed within 120 days after the end of the last fiscal year is incorporated
herein by reference for the information required by this item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Proxy Statement for the 1999 Annual Meeting of the Shareholders to
be filed within 120 days after the end of the last fiscal year is incorporated
herein by reference for the information required by this item.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2). The response to this portion of Item 14 is submitted
as a separate section of this report.
(3) Exhibits - Index
Exhibit No. Document
----------- --------
2 Stock Purchase Agreement dated March 29, 1999
by and among Hilb, Rogal and Hamilton Company,
a Virginia corporation, PM Holdings, Inc., a
Connecticut corporation, Phoenix Home Life
Mutual Insurance Company, a New York life
insurance company and Martin L. Vaughan, III*
3.1 Articles of Incorporation (incorporated by
reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-3, File No.
33-56488, effective March 1, 1993,
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 (incorporated by reference
to Exhibit 10.1 to the Company's Form 10-K for
the year ended December 31, 1995, File No.
0-15981)
15
<PAGE>
Exhibit No. Document
----------- --------
10.2 Amendment dated February 24, 1997 to Credit
Agreement dated February 12, 1996 among Hilb,
Rogal and Hamilton Company, Certain Banks and
Crestar Bank as Agent of the Banks
(incorporated by reference to Exhibit 10.2 to
the Company's Form 10-K for the year ended
December 31, 1996, File No. 0-15981)
10.3 Amendment dated December 15, 1998 to Credit
Agreement dated February 12, 1996 among Hilb,
Rogal and Hamilton Company, Certain Banks and
Crestar Bank as Agent of the Banks*
10.4 Incentive Stock Option Plan, as amended
(incorporated by reference to Exhibit 28.27 of
the Form S-3)
10.5 Consulting Agreement with Robert H. Hilb
(incorporated by reference to Exhibit 10.1 to
the Company's Form 10-Q for the quarter ended
June 30, 1997, File No. 0-15981)
10.6 Employment Agreement of Andrew L. Rogal
(incorporated by reference to Exhibit 10.2 to
the Company's Form 10-Q for the quarter ended
June 30, 1997, File No. 0-15981)
10.7 Hilb, Rogal and Hamilton Company 1989 Stock
Plan, as amended and restated*
10.8 Supplemental Executive Retirement Plan, as
amended and restated*
10.9 Hilb, Rogal and Hamilton Company Outside
Directors Deferral Plan, as amended and
restated*
10.10 Hilb, Rogal and Hamilton Company Non-employee
Directors Stock Incentive Plan, as amended and
restated*
10.11 Sale and Quitclaim Agreement between Hilb,
Rogal and Hamilton Company of Pittsburgh, Inc.
and Harold J. Bigler, Chandler G. Ketchum and
Richard F. Galardini*
16
<PAGE>
Exhibit No. Document
----------- --------
10.12 Form of Change of Control Employment Agreement
for the following executive officers: Andrew
L. Rogal, Timothy J. Korman, Carolyn Jones,
Walter L. Smith, Vincent P. Howley, Henry C.
Kramer, Robert J. Hilb and Robert W. Blanton,
Jr.*
10.13 Form of Change of Control Employment Agreement
for the following executive officers: John P.
McGrath, Richard E. Simmons, III, William C.
Chaufty, Steven C. Deal, Michael A. Janes and
Richard F. Galardini*
10.14 Employment Agreement of John P. McGrath*
10.15 Employment Agreement of Richard F. Galardini*
10.16 Employment Agreement of Michael A. Janes*
21 Subsidiaries of Hilb, Rogal and Hamilton
Company*
23 Consent of Ernst & Young LLP*
27 Financial Data Schedule* (electronic copy
only)
* Filed Herewith
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of
1998.
(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 response to this portion of Item 14 is submitted as a separate
section of this report.
17
<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/ Andrew L. Rogal
-----------------------------------
Andrew L. Rogal, President
and Chief Executive Officer
Date: March 30, 1999
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/ Andrew L. Rogal President and Chief Executive March 30, 1999
- ------------------------------------ Officer
Andrew L. Rogal (Principal)
/s/ Carolyn Jones Senior Vice President, Chief March 30, 1999
- ------------------------------------ Financial Officer and Treasurer
Carolyn Jones (Principal Financial Officer)
/s/ Robert W. Blanton, Jr. Vice President and Controller March 30, 1999
- ------------------------------------ (Principal Accounting Officer)
Robert W. Blanton, Jr.
/s/ Robert H. Hilb Chairman and Director March 30, 1999
- ------------------------------------
Robert H. Hilb
/s/ Philip J. Faccenda Director March 30, 1999
- ------------------------------------
Philip J. Faccenda
/s/ Robert S. Ukrop Director March 30, 1999
- ------------------------------------
Robert S. Ukrop
/s/ Thomas H. O'Brien Director March 30, 1999
- ------------------------------------
Thomas H. O'Brien
18
<PAGE>
/s/ J.S.M. French Director March 30, 1999
- ------------------------------------
J.S.M. French
/s/ Norwood H. Davis, Jr. Director March 30, 1999
- ------------------------------------
Norwood H. Davis, Jr.
/s/ Theodore L. Chandler, Jr. Director March 30, 1999
- ------------------------------------
Theodore L. Chandler, Jr.
/s/ Anthony F. Markel Director March 30, 1999
- ------------------------------------
Anthony F. Markel
</TABLE>
19
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEMS 14 (a)(1) AND (2) AND (d)
INDEX OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
YEAR ENDED DECEMBER 31, 1998
HILB, ROGAL AND HAMILTON COMPANY
GLEN ALLEN, VIRGINIA
20
<PAGE>
FORM 10-K ITEM 14 (a)(1) AND (2)
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of Hilb, Rogal and
Hamilton Company and subsidiaries are included in Item 8:
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Auditors ...................................................................... F-1
Consolidated Balance Sheets, December 31, 1998 and 1997 ............................................. F-2
Statement of Consolidated Income,
Years Ended December 31, 1998, 1997 and 1996 ...................................................... F-3
Statement of Consolidated Shareholders' Equity,
Years Ended December 31, 1998, 1997 and 1996 ...................................................... F-4
Statement of Consolidated Cash Flows,
Years Ended December 31, 1998, 1997 and 1996 ...................................................... F-5
Notes to Consolidated Financial Statements........................................................... F-6
The following consolidated financial statement schedule of Hilb, Rogal and
Hamilton Company and subsidiaries is included in Item 14(d):
Schedule II Valuation and Qualifying Accounts......................................... F-19
</TABLE>
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.
21
<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, 1998 and 1997, and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1998. Our audits
also included the financial statement schedule listed in the Index at Item
14(a). 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, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, 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 10, 1999,
except for Note M, as to which the date is
March 30, 1999
F-1
<PAGE>
CONSOLIDATED BALANCE SHEET
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents, including $10,951,000 $ 19,394,958 $ 22,314,860
and $7,645,000, respectively, of restricted funds
Investments 3,383,742 3,892,533
Receivables:
Premiums, less allowance for doubtful accounts
of $1,505,000 and $2,299,000, respectively 45,313,620 41,292,489
Other 6,257,370 5,720,513
------------ ------------
51,570,990 47,013,002
Prepaid expenses and other current assets 3,852,095 3,612,523
------------ ------------
TOTAL CURRENT ASSETS 78,201,785 76,832,918
INVESTMENTS 3,068,140 5,030,000
PROPERTY AND EQUIPMENT, NET 12,387,194 11,762,080
INTANGIBLE ASSETS
Expiration rights 81,074,920 75,193,075
Goodwill 35,985,542 33,411,145
Noncompetition agreements 14,740,145 11,636,847
------------ ------------
131,800,607 120,241,067
Less accumulated amortization 44,329,974 38,071,304
------------ ------------
87,470,633 82,169,763
OTHER ASSETS 6,938,074 5,811,797
------------ ------------
$188,065,826 $181,606,558
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Premiums payable to insurance companies $ 65,436,784 $ 67,520,370
Accounts payable and accrued expenses 13,025,426 10,925,646
Premium deposits and credits due customers 7,765,575 7,752,502
Current portion of long-term debt 2,277,479 2,074,788
------------ ------------
TOTAL CURRENT LIABILITIES 88,505,264 88,273,306
LONG-TERM DEBT 43,658,306 32,457,882
OTHER LONG-TERM LIABILITIES 10,191,881 9,536,771
SHAREHOLDERS' EQUITY
Common Stock, no par value;
authorized 50,000,000 shares;
outstanding 12,117,412 and
12,813,023 shares, respectively 3,831,208 16,540,461
Retained earnings 41,879,167 34,798,138
------------ ------------
45,710,375 51,338,599
------------ ------------
$188,065,826 $181,606,558
============ ============
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
STATEMENT OF CONSOLIDATED INCOME
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Revenues
Commissions and fees $ 175,886,766 $ 168,558,411 $ 153,967,914
Investment income 1,578,782 1,739,578 1,533,066
Other 3,582,345 3,410,891 2,742,120
--------------- --------------- ---------------
181,047,893 173,708,880 158,243,100
Operating expenses
Compensation and employee benefits 98,478,098 96,239,782 88,406,342
Other operating expenses 46,969,711 45,476,904 41,950,933
Amortization of intangibles 7,919,355 8,110,010 7,596,274
Interest expense 2,317,195 2,037,338 1,244,729
--------------- --------------- ---------------
155,684,359 151,864,034 139,198,278
--------------- --------------- ---------------
INCOME BEFORE INCOME TAXES 25,363,534 21,844,846 19,044,822
Income Taxes 10,418,469 9,054,995 7,638,431
--------------- --------------- ---------------
NET INCOME $ 14,945,065 $ 12,789,851 $ 11,406,391
=============== =============== ===============
NET INCOME PER COMMON SHARE:
BASIC $ 1.20 $ 0.98 $ 0.84
=============== =============== ===============
DILUTED $ 1.18 $ 0.97 $ 0.84
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
Common Retained
Stock Earnings
-------------- --------------
<S> <C> <C>
Balance at January 1, 1996 $ 29,903,900 $ 26,741,990
Issuance of 462,170 shares of Common Stock 6,251,661
Purchase of 801,700 shares of Common Stock (10,845,095)
Payment of dividends ($.605 per share) (8,116,389)
Other (44,187)
Net income 11,406,391
-------------- --------------
Balance at December 31, 1996 25,266,279 30,031,992
Issuance of 192,446 shares of Common Stock 2,895,697
Purchase of 700,000 shares of Common Stock (11,338,557)
Payment of dividends ($.62 per share) (8,023,705)
Other (282,958)
Net income 12,789,851
-------------- --------------
Balance at December 31, 1997 16,540,461 34,798,138
Issuance of 349,669 shares of Common Stock 5,684,404
Purchase of 1,045,280 shares of Common Stock (18,672,302)
Payment of dividends ($.635 per share) (7,864,036)
Other 278,645
Net income 14,945,065
-------------- --------------
Balance at December 31, 1998 $ 3,831,208 $ 41,879,167
============== ==============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
STATEMENT OF CONSOLIDATED CASH FLOWS
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31
1998 1997 1996
------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 14,945,065 $ 12,789,851 $ 11,406,391
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of intangible assets 7,919,355 8,110,010 7,596,274
Depreciation and amortization 3,589,957 3,557,298 3,259,452
------------ ------------ ------------
Net income plus amortization and depreciation 26,454,377 24,457,159 22,262,117
Provision for losses on receivables 560,262 383,670 1,276,258
Provision for deferred income taxes (503,796) (397,674) (816,246)
Gain on sale of assets (2,637,829) (2,474,894) (1,856,443)
Changes in operating assets and liabilities
net of effects from insurance agency
acquisitions and dispositions:
(Increase) decrease in accounts receivable (5,991,755) 3,784,756 (1,405,660)
(Increase) decrease in prepaid expenses (460,178) 197,802 (1,649,239)
Increase (decrease) in premiums payable to
insurance companies 2,562,095 (2,115,712) (4,241,464)
Increase (decrease) in premium deposits and
credits due customers 13,073 (1,197,195) 774,857
Increase (decrease) in accounts payable and
accrued expenses 405,635 (1,178,335) 224,046
Other operating activities (752,315) (475,547) 2,077,498
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES
19,649,569 20,984,030 16,645,724
INVESTING ACTIVITIES
Purchase of held-to-maturity investments (444,281) (3,549,631) (7,339,705)
Purchase of available-for-sale investments -- -- (260,000)
Proceeds from maturities and calls of
held-to-maturity investments 833,593 5,640,804 7,866,672
Proceeds from sale of available-for-sale
investments -- 260,000 3,914,000
Purchase of property and equipment (4,978,966) (2,135,837) (5,051,253)
Purchase of insurance agencies, net of cash
acquired (10,446,138) (9,309,760) (9,722,979)
Proceeds from sale of assets 8,912,516 6,546,661 2,461,177
Other investing activities 2,403 115,892 222,231
------------ ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (6,120,873) (2,431,871) (7,909,857)
FINANCING ACTIVITIES
Proceeds from long-term debt 18,975,000 7,750,668 30,861,966
Principal payments on long-term debt (11,071,664) (5,329,866) (18,024,341)
Repurchase of Common Stock (18,672,302) (11,338,557) (10,845,095)
Dividends (7,864,036) (8,023,705) (8,116,389)
Other financing activities 2,184,404 929,787 141,660
------------ ------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (16,448,598) (16,011,673) (5,982,199)
------------ ------------ -------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(2,919,902) 2,540,486 2,753,668
Cash and cash equivalents at beginning of year 22,314,860 19,774,374 17,020,706
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR
$ 19,394,958 $ 22,314,860 $ 19,774,374
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
December 31, 1998
Hilb, Rogal and Hamilton Company (the Company), a Virginia corporation, operates
as an agency system with offices located in 16 states. 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: 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.
F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES -- Continued
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 20 years for expiration rights, 15 to 40 years for the excess of
costs over the fair value of net assets acquired and 3 to 20 years for
noncompetition agreements. The carrying value of the Company's intangible assets
is periodically reviewed to ensure that there are no conditions which exist
indicating that the recorded amount of intangible assets is not recoverable from
future undiscounted cash flows.
Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." Adoption of this statement did not have a
material impact on the Company's financial position or results of operations.
Accounting for Stock-Based Compensation: In October 1995, the Financial
Accounting Standards Board (the FASB) issued Statement No. 123, "Accounting for
Stock-Based Compensation" (Statement No. 123). Statement No. 123 defines a fair
value based method of accounting for employee stock options. Companies may,
however, elect to adopt this new accounting rule through a pro forma disclosure
option, while continuing to use the intrinsic value based method of accounting
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB No. 25).
The Company has elected to continue to follow APB No. 25 and related
interpretations in accounting for its employee stock options. In addition, the
effect of applying Statement No. 123's fair value method to the Company's
employee stock options does not result in net income and net income per share
that are materially different from amounts reported. Accordingly, the pro forma
disclosures required by Statement No. 123 have not been included in the
footnotes to the financial statements.
Fair Value of Financial Instruments: The carrying amounts reported in the
balance sheet for cash and cash equivalents, receivables, premiums payable to
insurance companies, accounts payable and accrued expenses and long-term debt
approximate those assets' and liabilities' fair values. Fair values for
investment securities are based on quoted market prices and are disclosed in
Note B.
Interest Rate Swaps: The Company enters into interest rate swap agreements to
modify the interest characteristics of its outstanding debt. Each interest rate
swap agreement is designated with all or a portion of the principal balance and
term of a specific debt obligation. These agreements involve the exchange of
amounts based on variable interest rates for amounts based on fixed interest
rates over the life of the agreement without an exchange of the notional amount
upon which the payments are based. The differential to be paid or received as
interest rates change is accrued and recognized as an adjustment of interest
expense related to the debt (the accrual accounting method). The related amount
payable to or receivable from counterparties is included in other liabilities or
assets. The fair value of the swap agreements and changes in the fair value as a
result of changes in market interest rates are not recognized in the financial
statements.
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES -- Continued
Gains and losses on terminations of interest rate swap agreements are deferred
as an adjustment to the carrying amount of the outstanding debt and amortized as
an adjustment to interest expense related to the debt over the remaining term of
the original contract life of the terminated swap agreement. In the event of the
early extinguishment of a designated debt obligation, any realized or unrealized
gain or loss from the swap would be recognized in income coincident with the
extinguishment gain or loss.
Income Taxes: The Company (except for its Canadian subsidiary sold in 1998)
files a consolidated federal income tax return with its subsidiaries. Deferred
taxes result from temporary differences between the income tax and financial
statement bases of assets and liabilities and are based on tax laws as currently
enacted.
Accounting Pronouncements: In February 1998, the FASB issued Statement No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits"
(Statement No. 132) which revises employers' disclosures about pension and other
postretirement benefit plans. The Company has adopted Statement No. 132 and
restated its disclosures for earlier periods.
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which is required to be adopted in years
beginning after June 15, 1999. Because of the Company's minimal use of
derivatives, management does not anticipate that the new statement will have a
significant effect on earnings or financial position of the Company.
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
NOTE B -- INVESTMENTS
The following is a summary of held-to-maturity investments included in current
and long-term assets on the consolidated balance sheet:
<TABLE>
<CAPTION>
Held-to-Maturity Investments
-----------------------------------------------------------------------
Gross Gross
Cost Unrealized Gains Unrealized Losses Fair Value
---------- ---------------- ----------------- ----------
<S> <C> <C> <C> <C>
December 31, 1998
Obligations of states and political
subdivisions $4,719,000 $ 64,000 $ -- $4,783,000
Certificates of deposit and other 1,733,000 -- -- 1,733,000
---------- ------------ ------------ ----------
$6,452,000 $ 64,000 $ -- $6,516,000
========== ============ ============ ==========
</TABLE>
<TABLE>
<CAPTION>
Held-to-Maturity Investments
-----------------------------------------------------------------------
Gross Gross
Cost Unrealized Gains Unrealized Losses Fair Value
---------- ---------------- ----------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997
Obligations of U.S. government
agencies $1,000,000 $ -- $ -- $1,000,000
Obligations of states and political
subdivisions 5,840,000 75,000 1,000 5,914,000
Certificates of deposit and other 2,083,000 2,083,000
---------- ------------ ------------ ----------
$8,923,000 $ 75,000 $ 1,000 $8,997,000
========== ============ ============ ==========
</TABLE>
The amortized cost and fair value of held-to-maturity investments at December
31, 1998, by contractual maturity, are as follows. Actual maturities may differ
from contractual maturities because the issuers of the securities may have the
right to prepay obligations without prepayment penalties.
<TABLE>
<CAPTION>
Cost Fair Value
<S> <C> <C>
Held-to-Maturity Investments
Due in one year $ 3,384,000 $ 3,393,000
Due after one year through five years 3,068,000 3,123,000
----------- -----------
$ 6,452,000 $ 6,516,000
=========== ===========
</TABLE>
NOTE C -- PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Furniture and equipment $28,830,000 $27,880,000
Buildings and land 3,350,000 3,835,000
Leasehold improvements 2,376,000 1,887,000
----------- -----------
34,556,000 33,602,000
Less accumulated depreciation
and amortization 22,169,000 21,840,000
----------- -----------
$12,387,000 $11,762,000
=========== ===========
</TABLE>
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
NOTE D -- LONG-TERM DEBT
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Notes payable to banks, interest currently at 6.2% $40,000,000 $30,000,000
Installment notes payable incurred in acquisitions
of insurance agencies, 4.95% to 9.0%, due in
various installments, to 2003 5,651,000 4,123,000
Installment notes payable, 6.0% to 8.0%, due in
various installments, to 2003 284,000 410,000
----------- -----------
45,935,000 34,533,000
Less current portion 2,277,000 2,075,000
----------- -----------
$43,658,000 $32,458,000
=========== ===========
</TABLE>
Maturities of long-term debt for the four years ending after December 31, 1999
are $1,780,000 in 2000; $964,000 in 2001; $601,000 in 2002 and $40,313,000 in
2003.
Interest paid was $2,321,000, $3,437,000 and $1,232,000 in 1998, 1997 and 1996,
respectively.
The Company entered into a credit agreement with two banks that allows for
borrowings of up to $40,000,000 under loans due in 2003, which bear interest at
variable rates. At December 31, 1998, $40,000,000 was borrowed under this
agreement. This credit agreement contains, among other provisions, requirements
for maintaining certain financial ratios.
The Company entered into two interest rate swap agreements effective December
19, 1997 and January 21, 1998 to manage interest rate exposure on its long-term
debt. The swap agreements are contracts to exchange floating rate for fixed rate
interest payments periodically over the life of the agreement without the
exchange of the underlying combined notional amount of $15,000,000. The notional
amounts of interest rate agreements are used to measure interest to be paid or
received and do not represent the amount of exposure to credit loss. The credit
risk to the Company would be the counterparty's inability to pay the
differential in the fixed rate and variable rate in a rising interest rate
environment. The Company is exposed to market risk from changes in interest
rates.
The differential paid or received on the interest rate per the agreements is
recognized as an adjustment to interest expense. Under the Company's interest
rate swap agreements, the Company contracted with the counterparty to exchange
the difference between the Company's fixed pay rates of 6.52% and 6.46% and the
counterparty's variable pay rate of LIBOR plus 0.575%. At December 31, 1998, the
variable rate was approximately 6.14%. The contracts expire December 19, 2002
and January 21, 2003, respectively.
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
NOTE E -- RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS
The Company sponsors the Hilb, Rogal and Hamilton Company Profit Sharing Savings
Plan (the Profit Sharing Plan) which 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 separate
profit sharing, ESOP or benefit plans. These plans were terminated or frozen at
the time of merger with the Company.
The total expense recorded under these plans for 1998, 1997 and 1996 was
approximately $2,378,000, $3,120,000 and $2,680,000, respectively.
In addition, in 1998, the Company amended and restated the Supplemental
Executive Retirement Plan for key executives to convert the plan from a defined
benefit arrangement to a defined contribution arrangement. Contributions to this
defined contribution plan for the year ended December 31, 1998 amounted to
approximately $75,000.
The Company also retained its defined benefit Supplemental Executive Retirement
Plan for grandfathered participants prior to January 1, 1998. This plan pays
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 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.
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
NOTE E -- RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS -- Continued
The following tables set forth a reconciliation of the changes in benefit
obligation and fair value of assets, a statement of funded status, weighted
average discount rates used by the actuary and components of net periodic
benefit cost:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------------------- ----------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Reconciliation of Change in Benefit Obligations:
Benefit obligation at beginning of year $ 3,143,000 $ 2,976,000 $ 896,000 $1,050,000
Service cost 27,000 188,000 -- --
Interest cost 174,000 229,000 64,000 80,000
Plan amendments (746,000) -- -- --
Actuarial (gain)/loss 109,000 (83,000) (34,000) (41,000)
Benefit payments (167,000) (167,000) (31,000) (193,000)
----------- ----------- ----------- -----------
Benefit obligation at end of year $ 2,540,000 $ 3,143,000 $ 895,000 $ 896,000
=========== =========== =========== ===========
Reconciliation of Fair Value of Plan Assets:
Fair value of plan assets at beginning of year $ -- $ -- $ -- $ --
Employer contributions -- -- 31,000 193,000
Benefit payments -- -- (31,000) (193,000)
----------- ----------- ----------- -----------
Fair value of plan assets at end of year $ -- $ -- $ -- $ --
=========== =========== =========== ===========
Funded Status:
Funded status as of December 31 $(2,540,000) $(3,143,000) $ (895,000) $ (896,000)
Unrecognized transition cost -- -- 881,000 991,000
Unrecognized prior service cost 975,000 1,795,000 -- --
Unrecognized (gain)/loss 65,000 (45,000) (668,000) (704,000)
----------- ----------- ----------- -----------
Accrued benefit cost $(1,500,000) $(1,393,000) $ (682,000) $ (609,000)
=========== =========== =========== ===========
Weighted Average Assumptions as of December 31:
Discount rate 7.00% 7.50% 7.00% 7.50%
Salary scale 4.00% 4.00% -- --
</TABLE>
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------- --------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Components of Net Periodic Benefit Cost:
Service cost $ 27,000 $188,000 $182,000 -- -- --
Interest cost 174,000 229,000 223,000 64,000 80,000 82,000
Amortization of transition obligation -- -- -- 110,000 115,000 115,000
Amortization of prior gains -- -- -- (70,000) (79,000) (67,000)
Amortization of prior service cost 73,000 126,000 135,000 -- --
-------- -------- -------- -------- -------- --------
Net periodic benefit cost $274,000 $543,000 $540,000 $104,000 $116,000 $130,000
======== ======== ======== ======== ======== ========
</TABLE>
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
NOTE E -- RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS -- Continued
The following table provides the amounts recognized in the statement of
financial position as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------- --------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Accrued benefit liability $(2,331,000) $(2,228,000) $(682,000) $(609,000)
Intangible asset 831,000 835,000 -- --
----------- ----------- --------- ---------
Net amount recognized $(1,500,000) $(1,393,000) $(682,000) $(609,000)
=========== =========== ========= =========
</TABLE>
For measurement purposes, a 7.25% gross medical trend rate was assumed in 1999.
The rate is assumed to decrease to 6.15% over the period to 2020 and remain
level thereafter.
Assumed health care cost rates have an effect on the amounts reported for the
health care plans. A one percent change in assumed health care costs trend rates
would have the following effects:
<TABLE>
<CAPTION>
1% Increase 1% Decrease
----------- -----------
<S> <C> <C>
Effect on total of service and interest cost
components of net periodic
postretirement health care benefit cost $ 7,000 $ 6,000
Effect on the health care component of
the accumulated postretirement benefit
obligation 53,000 50,000
</TABLE>
NOTE F -- INCOME TAXES
The components of income taxes shown in the statement of consolidated income are
as follows:
1998 1997 1996
---- ---- ----
Current
Federal $ 8,542,000 $7,401,000 $6,481,000
State 2,039,000 1,438,000 1,305,000
Foreign 341,000 614,000 668,000
----------- ---------- ----------
10,922,000 9,453,000 8,454,000
Deferred
Federal (362,000) (247,000) (639,000)
State (68,000) (46,000) (73,000)
Foreign (74,000) (105,000) (104,000)
----------- ---------- ----------
(504,000) (398,000) (816,000)
----------- ---------- ----------
$10,418,000 $9,055,000 $7,638,000
=========== ========== ==========
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
NOTE F -- INCOME TAXES -- Continued
The effective income tax rate varied from the statutory federal income tax rate
as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Tax exempt investment income (0.5) (0.8) (1.4)
State income taxes, net of federal tax
benefit 5.0 4.2 4.5
Other 1.6 3.1 2.0
---- ---- ----
Effective income tax rate 41.1% 41.5% 40.1%
==== ==== ====
</TABLE>
Income taxes paid were $10,678,000, $9,646,000 and $10,128,000 in 1998, 1997 and
1996, respectively.
Income before income taxes from the Company's Canadian operations (sold in 1998)
was $451,000, $900,000 and $1,168,000 in 1998, 1997 and 1996, respectively.
Deferred income taxes reflect the tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the
Company's deferred tax liabilities and assets on the consolidated balance sheet
are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred tax liabilities:
Intangible assets $5,531,000 $6,015,000
Other--net 1,513,000 1,129,000
---------- ----------
Total deferred tax liabilities 7,044,000 7,144,000
Deferred tax assets:
Deferred compensation 1,083,000 917,000
Bad debts 571,000 870,000
Other 1,255,000 833,000
---------- ----------
Total deferred tax assets 2,909,000 2,620,000
---------- ----------
Net deferred tax liabilities $4,135,000 $4,524,000
========== ==========
</TABLE>
In 1997, the Company reached a final agreement with the Internal Revenue Service
(the IRS) which resolved all issues arising from the IRS's audit of the
Company's income tax returns for the seven years ended December 31, 1994. Since
the agreement related to deductions claimed in connection with intangible assets
acquired by the Company, the additional tax that resulted from the agreement,
including payments of $2,626,000 and a $1,500,000 increase in deferred tax
liabilities, was recorded as an increase in goodwill of $4,126,000 on the
December 31, 1996 balance sheet. The settlement will not have a significant
impact on the Company's future earnings.
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
NOTE G -- LEASES
The Company and its subsidiaries have noncancellable lease contracts for office
space, equipment and automobiles which expire at various dates through the year
2008 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:
1999 $ 6,526,000
2000 5,731,000
2001 4,545,000
2002 3,988,000
2003 2,886,000
Thereafter 8,454,000
-----------
$32,130,000
Rental expense for all operating leases amounted to $7,474,000 in 1998,
$7,276,000 in 1997 and $6,845,000 in 1996. Included in rental expense for 1998,
1997 and 1996 is approximately $554,000, $386,000 and $313,000, respectively,
which was paid to employees or related parties.
NOTE H -- SHAREHOLDERS' EQUITY
The Company has adopted and the shareholders have approved the 1986 Incentive
Stock Option Plan, the Hilb, Rogal and Hamilton Company 1989 Stock Plan and the
Non-employee Directors Stock Incentive Plan, which provide for the granting of
options to purchase up to an aggregate of approximately 1,853,000 and 1,765,000
shares of Common Stock as of December 31, 1998 and 1997, 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
options granted have seven to ten year terms and vest and become fully
exercisable at various periods up to five years. Stock option activity under the
plans were as follows:
Weighted Average
Shares Exercise Price
------ --------------
Outstanding at January 1, 1996 806,725 $13.38
Granted 72,900 13.00
Exercised 3,600 10.40
Expired 132,700 13.21
---------
Outstanding at December 31, 1996 743,325 13.39
Granted 528,190 15.97
Exercised 78,052 12.19
Expired 87,000 13.42
---------
Outstanding at December 31, 1997 1,106,463 14.70
Granted 290,747 17.68
Exercised 136,405 13.16
Expired 54,346 15.20
---------
Outstanding at December 31, 1998 1,206,459 15.54
=========
Exercisable at December 31, 1998 613,969 14.62
The options outstanding at December 31, 1998 have exercise prices that range
from $9.34 to $18.69. The weighted average contractual life of these options is
five years.
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
NOTE H -- SHAREHOLDERS' EQUITY -- Continued
There were 309,000 and 466,000 shares available for future grant under these
plans as of December 31, 1998 and 1997, respectively.
No compensation expense is recognized in operations for 1998, 1997 or 1996.
NOTE I -- NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted net income
per share:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Numerator for basic and dilutive net income
per share - net income $14,945,065 $12,789,851 $11,406,391
Denominator
Weighted average shares 12,453,558 13,069,453 13,493,255
Effect of guaranteed future shares to be issued in
connection with agency acquisitions 43,194 29,764 7,075
----------- ----------- -----------
Denominator for basic net income per share 12,496,752 13,099,217 13,500,330
Effect of dilutive securities:
Employee stock options 187,794 101,280 25,451
Contingent stock - acquisitions 24,198 14,222 --
----------- ----------- -----------
Dilutive potential common shares 211,992 115,502 25,451
----------- ----------- -----------
Denominator for diluted net income per
share - adjusted weighted average
shares and assumed conversions 12,708,744 13,214,719 13,525,781
=========== =========== ===========
Net Income Per Common Share:
Basic $ 1.20 $ 0.98 $ 0.84
====== ====== ======
Diluted $ 1.18 $ 0.97 $ 0.84
====== ====== ======
</TABLE>
NOTE J -- ACQUISITIONS
During 1998, the Company acquired certain assets and liabilities of six
insurance agencies for $9,998,000 ($4,498,000 in cash, $3,500,000 in guaranteed
future payments and 113,945 shares of Common Stock) in purchase accounting
transactions. Assets acquired include expiration rights of $7,220,000,
noncompetition agreements of $2,645,000 and goodwill of $1,922,000. The combined
purchase price may be increased by approximately $885,000 in 1999, $1,635,000 in
2000, $1,500,000 in 2001, $1,125,000 in 2002 and $525,000 in 2003 based upon
commissions or net profits realized.
During 1997, the Company acquired certain assets and liabilities of six
insurance agencies for $9,426,000 ($6,333,000 in cash, $2,393,000 in guaranteed
future payments and 53,555 shares of Common Stock) in purchase accounting
transactions. Assets acquired include expiration rights of $7,082,000,
noncompetition agreements of $1,151,000 and goodwill of $1,310,000. The combined
purchase price was increased by $2,564,000 in 1998 and may be increased by
approximately $1,490,000 in 1999 and $1,490,000 in 2000 based upon commissions
or net profits realized.
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
NOTE J -- ACQUISITIONS -- Continued
During 1996, the Company acquired certain assets and liabilities of 15 insurance
agencies for $16,189,000 ($7,343,000 in cash, $2,736,000 in guaranteed future
payments and 451,610 shares of Common Stock) in purchase accounting
transactions. Assets acquired include expiration rights of $13,565,000,
noncompetition agreements of $2,820,000 and goodwill of $2,717,000. The combined
purchase price was increased by approximately $4,957,000 in 1998 and $3,392,000
in 1997 and may be increased by approximately $1,354,000 in 1999, $127,000 in
2000 and $37,000 in 2001 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,
1998 and 1997, assuming the above 1998 and 1997 purchase acquisitions had
occurred as of January 1, 1997, are as follows:
1998 1997
---- ----
Revenues $186,417,000 $183,477,000
Net Income 15,093,000 12,942,000
Net Income Per Common Share:
Basic $1.19 $0.97
Diluted $1.17 $0.96
NOTE K -- SALE OF ASSETS
During 1998, 1997 and 1996, the Company sold certain insurance accounts and
other assets resulting in gains of approximately $2,638,000, $2,475,000 and
$1,856,000, 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 $929,000 and $1,496,000 of funds held in escrow at
December 31, 1998 and 1997, 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 $10,022,000 and $6,149,000 at
December 31, 1998 and 1997, 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.
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
NOTE M -- SUBSEQUENT EVENTS
Subsequent to December 31, 1998, the Company acquired certain assets and
liabilities of one insurance agency for $2,244,000 ($1,450,000 in cash and
$794,000 in guaranteed future payments) in a purchase accounting transaction.
Pro forma revenues and net income are not material to the consolidated financial
statements.
On March 30, 1999, the Company announced the execution of a Stock Purchase
Agreement with PM Holdings, Inc., Phoenix Home Life Mutual Insurance Company and
Martin L. Vaughan, III to acquire all of the issued and outstanding shares of
American Phoenix Corporation, a subsidiary of Phoenix Home Life Mutual Insurance
Company, for approximately $49 million in cash, $32 million in 5.25% Convertible
Subordinated Debentures due 2014, with a conversion price of $22.75 per share,
callable in 2009, and 1,000,000 shares of Common Stock of the Company. The
acquisition is subject to regulatory approval and satisfaction of certain
conditions to closing. The Company expects to fund the cash portion of the
purchase price with a credit facility to be obtained in connection with the
acquisition. The acquisition is expected to be completed during the second
quarter of 1999 and will be accounted for using purchase accounting.
American Phoenix Corporation reported total assets of $106.6 million as of
December 31, 1998 and revenues of $72.9 million for the year then ended.
NOTE N -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations for the years
ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
Three Months Ended 1
-------------------------------------------------------------------------------
March 31 June 30 September 30 December 31
-------------------------------------------------------------------------------
(in thousands, except per share amounts)
1998
- ----
<S> <C> <C> <C> <C>
Total Revenues $48,698 $45,924 $44,000 $42,426
Net Income 5,946 4,446 3,101 1,452
Net Income Per Common Share:
Basic 0.47 0.35 0.25 0.12
Diluted 0.46 0.35 0.25 0.12
1997
- ----
Total Revenues $47,913 $44,323 $41,850 $39,623
Net Income 5,407 3,537 2,566 1,280
Net Income Per Common Share:
Basic 0.41 0.27 0.20 0.10
Diluted 0.40 0.27 0.19 0.10
</TABLE>
________________________
1 Quarterly financial information is affected by seasonal variations. The
timing of contingent commissions, policy renewals and acquisitions may
cause revenues, expenses and net income to vary significantly from quarter
to quarter.
F-18
<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, 1998:
Allowance for doubtful
accounts $2,299,000 $ 560,000 $ 44,000 $1,398,000 $1,505,000
Year ended
December 31, 1997:
Allowance for doubtful
accounts 2,445,000 384,000 66,000 596,000 2,299,000
Year ended
December 31, 1996:
Allowance for doubtful
accounts 1,772,000 1,276,000 100,000 703,000 2,445,000
</TABLE>
- ----------------------
* Recoveries
** Bad debts written off
F-19
Exhibit 2
STOCK PURCHASE AGREEMENT
By and Among
Hilb, Rogal and Hamilton Company
a Virginia corporation
and
PM Holdings, Inc.
a Connecticut corporation
and
Phoenix Home Life Mutual Insurance Company
a New York life insurance company
and
Martin L. Vaughan, III
Dated as of March 29, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
I. DEFINITIONS..............................................................................................1
1.1. Certain Matters of Construction.................................................................1
1.2. Cross Reference Table...........................................................................2
1.3. Certain Definitions.............................................................................3
II. THE ACQUISITION..........................................................................................9
2.1. Acquisition.....................................................................................9
2.2. Consideration and Closing.......................................................................9
III. REPRESENTATIONS AND WARRANTIES OF SELLERS...............................................................12
3.1. Corporate Matters..............................................................................12
3.2. Financial Statements...........................................................................13
3.3. Change in Condition............................................................................14
3.4. Liabilities....................................................................................15
3.5. Assets.........................................................................................16
3.6. Intellectual Property..........................................................................17
3.7. Year 2000 Compliance...........................................................................18
3.8. Accounts.......................................................................................19
3.9. Certain Contractual Obligations................................................................19
3.10. Insurance......................................................................................21
3.11. Transactions with Affiliates...................................................................21
3.12. Compliance with Laws...........................................................................22
3.13. Tax Matters....................................................................................22
3.14. Employee Relations and Employee Benefit Plans..................................................23
3.15. Environmental Matters..........................................................................28
3.16. Accounts Receivable............................................................................29
3.17. Litigation.....................................................................................29
3.18. Agents and Broker Relationships................................................................29
3.19. Brokers........................................................................................29
3.20. Full Disclosure................................................................................29
IIIA. REPRESENTATIONS AND WARRANTIES OF PHL...................................................................29
3A.1. Corporate Matters..............................................................................30
3A.2. Financial Information of Holdings..............................................................31
IIIB. REPRESENTATIONS AND WARRANTIES OF VAUGHAN...............................................................31
3B.1. Matters Relating to Vaughan....................................................................31
IV. REPRESENTATIONS AND WARRANTIES OF BUYER.................................................................31
4.1. Corporate Matters..............................................................................31
4.2. Financial Statements...........................................................................32
<PAGE>
4.3. Change in Condition............................................................................33
4.4. Compliance with Laws...........................................................................33
4.5. Litigation.....................................................................................33
4.6. Financing......................................................................................34
4.7. Buyer SEC Documents............................................................................34
4.8. Brokers........................................................................................34
V. CERTAIN COVENANTS OF THE PARTIES........................................................................34
5.1. Access to Information of Buyer.................................................................34
5.2. Access to Premises and Information of APC......................................................34
5.3. Confidentiality Letter.........................................................................35
5.4. Operation of APC Business Prior to the Closing Date............................................35
5.5. Certain Notices................................................................................37
5.6. Preparation for Closing........................................................................37
5.7. Tax Matters....................................................................................37
5.8. Expenses of Transaction; Accounts..............................................................41
5.9. Books and Records; Personnel...................................................................41
5.10. Use of Certain Names and Marks.................................................................42
5.11. Further Assurances.............................................................................42
5.12. Reimbursement by the Parties...................................................................42
5.13. Financial Statement Deliveries.................................................................43
5.14. Errors and Omissions Insurance.................................................................44
5.15. No Solicitation or Employment; Interference in Relationships...................................44
5.16. No Solicitation of Proposals or Offers.........................................................44
5.17. Noncompetition Covenant........................................................................44
5.18. Payment of Certain Outstanding Debt; Capital Contribution......................................49
5.19. Assumption of Excluded Liabilities by Holdings or
PHL; Purchase of Owned Real Property.......................................................49
5.20. Financing......................................................................................50
5.21. Assumption of Certain Liabilities by Buyer.....................................................50
5.22. Collection of Accounts Receivable..............................................................50
5.23. Audit of Accounts Payable......................................................................51
5.24. Certain Leases.................................................................................51
5.25. Acquisition of Atlanta Subsidiary..............................................................51
5.26. Financial Position of Holdings.................................................................52
5.27. Cooperation....................................................................................52
5.28. Guarantees.....................................................................................52
5.29. Record Retention...............................................................................52
5.30. Minority Interests.............................................................................52
VI. CONDITIONS TO THE OBLIGATION OF BUYER TO CLOSE..........................................................53
6.1. Representations, Warranties and Covenants......................................................53
6.2. Closing Agreements.............................................................................53
6.3. Legality; Governmental Authorization; Litigation...............................................54
6.4. Affiliate Debt.................................................................................54
6.5. Financing......................................................................................54
6.6. Opinions of Counsel............................................................................54
6.7. Vaughan Employment Agreement...................................................................54
6.8. Vaughan Resignation Letter.....................................................................54
ii
<PAGE>
6.9. Update.........................................................................................54
6.10. General........................................................................................54
VII. CONDITIONS TO THE OBLIGATION OF SELLERS TO CLOSE........................................................55
7.1. Representations, Warranties and Covenants......................................................55
7.2. Closing Agreements.............................................................................55
7.3. Legality; Government Authorization; Litigation.................................................55
7.4. Opinion of Counsel.............................................................................56
7.5. General........................................................................................56
7.6. Update.........................................................................................56
7.7. Listing of Shares Issuable Upon Conversion of Subordinated Debentures..........................56
7.8. Board of Directors.............................................................................56
7.9. Payment........................................................................................56
7.10. Registration of the Buyer Common Shares........................................................56
VIII. INDEMNIFICATION.........................................................................................56
8.1. Indemnification by Sellers.....................................................................56
8.2. Indemnification by Buyer.......................................................................57
8.3. Time Limitation on Indemnification.............................................................58
8.4. Monetary Limitations on Indemnification........................................................58
8.5. Reporting......................................................................................59
8.6. Third Party Claims.............................................................................59
8.7. No Circular Recovery...........................................................................59
8.8. Nature of Certain Payments.....................................................................60
8.9. Other Remedies.................................................................................60
IX. CONSENT TO JURISDICTION; GOVERNING LAW..................................................................60
9.1. Consent to Jurisdiction........................................................................60
9.2. Governing Law..................................................................................60
X. TERMINATION.............................................................................................61
10.1. Termination of Agreement.......................................................................61
10.2. Effect of Termination..........................................................................62
XI. MISCELLANEOUS...........................................................................................62
11.1. Entire Agreement; Waivers......................................................................62
11.2. Amendment or Modification......................................................................62
11.3. Survival, etc..................................................................................62
11.4. Independence of Representations and Warranties.................................................62
11.5. Severability...................................................................................63
11.6. Successors and Assigns.........................................................................63
11.7. Notices........................................................................................63
11.8. Public Announcements...........................................................................64
11.9. Headings, etc..................................................................................64
11.10. Third Party Beneficiaries......................................................................64
11.11. Counterparts...................................................................................64
</TABLE>
iii
<PAGE>
EXHIBITS
Exhibit A - Baltimore Lease
Exhibit B - Indenture
Exhibit C - Jamestown Lease
Exhibit D - Miami Lease
Exhibit E - Registration Rights Agreement
Exhibit F - Risk Management Agreement
Exhibit G - Rule 145 Representation Letter
Exhibit H - Vaughan Employment Agreement
Exhibit I - Voting and Standstill Agreement
Exhibit J - Trademark License Agreement
Exhibit K - Form of Legal Opinion of Stroock & Stroock & Lavan LLP
Exhibit L - Form of Legal Opinion of Carole A. Masters
Exhibit M - Form of Legal Opinion of Sorokin, Gross & Hyde, P.C.
Exhibit N - Form of Legal Opinion of Williams, Mullen, Christian & Dobbins, P.C.
SCHEDULES
Schedule 5.7.1 - APC Electing Subsidiaries
iv
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 29th day of March, 1999, by and among HILB, ROGAL AND HAMILTON
COMPANY, a Virginia corporation (the "Buyer"), PM HOLDINGS, INC., a Connecticut
corporation ("Holdings"), PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY, a New York
life insurance company ("PHL"), and MARTIN L. VAUGHAN, III (individually
"Vaughan," and collectively with Holdings, the "Sellers").
RECITALS
1. Holdings owns 5,000 Class A common shares, which is eighty-five
percent (85%) of the issued and outstanding shares, of the capital stock of
American Phoenix Corporation, a Connecticut corporation ("APC"), and Vaughan
owns 882 Class B common shares, which is fifteen percent (15%) of the issued and
outstanding shares, of the capital stock of APC. The issued and outstanding
shares of capital stock of APC are collectively referred to herein as the "APC
Shares."
2. The Sellers desire to sell and transfer the APC Shares to Buyer,
and Buyer desires to purchase and accept transfer of (the "Purchase") the APC
Shares from Sellers, upon the terms and subject to all of the conditions set
forth in this Agreement.
3. PHL is the ultimate corporate parent of Holdings and, in
connection with, and to induce Buyer to consummate, the Purchase, PHL desires to
make certain representations and warranties and perform and satisfy certain
covenants and obligations upon the terms and subject to all of the conditions
set forth in this Agreement.
AGREEMENT
Therefore, in consideration of the foregoing and the mutual agreements
and covenants set forth below, which are acknowledged by each party to be fair
and adequate consideration for its obligations and commitments hereunder, the
parties hereby agree as follows:
ARTICLE I
Definitions
For the purposes of this Agreement:
Section 1.1. Certain Matters of Construction. In addition to the
definitions set forth below in this Article I:
(a) The words "hereof", "herein", "hereunder" and words of
similar import shall refer to this Agreement as a whole and not to any
particular Section or provision of
<PAGE>
this Agreement, and any reference to a particular Section of this Agreement
shall include all subsections thereof.
(b) The word "party" shall refer to Buyer, Holdings, PHL or
Vaughan, as the case may be, and the word "parties" shall refer to Buyer,
Holdings, PHL and Vaughan, collectively.
(c) Definitions shall be equally applicable to both the
singular and plural forms of the terms defined, and references to the masculine,
feminine or neuter gender shall include each other gender.
(d) Accounting terms used herein and not otherwise defined
herein are used herein as defined by GAAP.
Section 1.2. Cross Reference Table. The following terms are defined in
the Preamble, Recitals or Sections set forth opposite the term and shall have
the respective meaning therein set forth:
Term Definition
---- ----------
"Affiliated Group" Section 3.13(b)
"Agreement" Preamble
"AGUB" Section 5.7.6
"Allocations" Section 5.7.6
"APC" Recitals
"APC Annual Balance Sheets" Section 3.2.1
"APC Assets" Section 3.5.1
"APC Benefit Arrangements" Section 3.14.2(a)
"APC Electing Subsidiaries" Section 5.7.1
"APC Financial Statements" Section 3.2.1
"APC Headquarters" Section 1.3.7
"APC Marks" Section 5.10
"APC Plans" Section 3.14.2(a)
"APC Shares" Recitals
"APIA Georgia" Section 5.2.5
"Books and Records" Section 5.9(b)(i)
"Buyer" Preamble
"Buyer Disclosure Letter" Article IV
"Buyer Financial Statements" Section 4.2.1
"Buyer's Deemed Sales Price Notice" Section 5.7.6
"Buyer SEC Documents" Section 4.7
"Cash Consideration" Section 2.2.1
"Closing" Section 2.2.4
"Closing Agreements" Section 6.2
"Closing Date" Section 2.2.4
"Closing Date Accounts Receivable" Section 5.22
2
<PAGE>
"Closing Date Balance Sheet" Section 2.2.2
"Commitment Letter" Section 4.6
"Confidentiality Agreement" Section 5.3
"Contracts" Section 3.9
"Copyright Properties" Section 3.6.1
"Exchange Act" Section 4.7
"Excluded Liabilities" Section 2.2.3
"February 1999 APC Balance Sheet" Section 3.2.1
"February 1999 APC Financial Statements" Section 3.2.1
"General Survival Period" Section 8.3
"Holdings" Preamble
"Holdings Balance Sheet" Section 3A.2
"HSR Act" Section 3.1.3
"IJB" Section 5.4
"Indemnifying Party" Section 8.1, 8.2
"Indemnitee" Section 8.1, 8.2
"Insurance Policies" Section 3.10
"Intellectual Property" Section 3.6.1
"Lead Lender" Section 4.6
"Leases" Section 3.5.2
"Leases-Out" Section 3.5.2
"Net Adjustment to Buyer" Section 2.2.2
"Net Adjustment to Sellers" Section 2.2.2
"1998 APC Balance Sheet" Section 3.2.1
"1998 APC Financial Statements" Section 3.2.1
"Offeror" Section 5.17.3(iv)
"Owned Real Property" Section 3.5.1
"Patent Properties" Section 3.6.1
"Permits" Section 3.12
"PHL" Preamble
"Post-Closing Tax Period" Section 5.7.2
"Pre-Closing Tax Period" Section 5.7.2
"Purchase" Recitals
"Purchase Consideration" Section 2.2.1
"Required Filings" Section 3.1.3
"Reserved Claims" Section 8.3
"Restricted Period" Section 5.17
"Section 338(h)(10) Elections" Section 5.7.1
"Securities Act" Section 4.7
"Sellers" Preamble
"Software Properties" Section 3.6.1
"Tax Loss" Section 5.7.2
"Threshold" Section 8.5
"Trade Secrets" Section 3.6.1
"Trademark License Agreement" Section 5.10
"Trademark Properties" Section 3.6.1
3
<PAGE>
"Transaction Costs" Section 5.7.6
"Vaughan" Preamble
"WARN" Section 3.14.1
"Year 2000 Compliant" Section 3.7
Section 1.3. Certain Definitions. The following terms shall have the
following meanings:
1.3.1. "Action" shall mean any claim, action, cause of action or suit
(in contract or tort or otherwise), arbitration, proceeding or investigation by
or before any Governmental Authority (and whether brought by any Governmental
Authority or any other Person).
1.3.2. "Adjusted Tangible Net Worth" shall mean, with respect to APC
and its Subsidiaries, $(negative) 48,328,012.
1.3.3. "Affiliate" shall mean, as to any specified Person, each other
Person directly or indirectly controlling, controlled by or under direct or
indirect common control with that specified Person. For the purposes of this
definition, "control," when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, or by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. Notwithstanding the foregoing, any investment
company registered under the Investment Company Act of 1940, as amended, shall
not be deemed an Affiliate of any specified Person.
1.3.4. "Affiliate Debt" shall mean all Debt between APC or any
Subsidiary of APC, on the one hand, and PHL, either of the Sellers or any of
their Affiliates (other than APC or its Subsidiaries), on the other hand, and
all intercompany advances of funds between PHL, either of the Sellers or any of
their Affiliates (other than APC or its Subsidiaries), on the one hand, and APC
or any Subsidiary of APC, on the other hand.
1.3.5. "Alternative Accountants" shall mean one of the top five (5)
national accounting firms in the United States other than the accounting firms
that regularly audit the annual financial statements of any of the parties,
which firm is mutually acceptable to the parties or, if the parties do not agree
upon such a firm within three (3) Business Days of the date any dispute under
this Agreement is required to be submitted to such firm, then such a top five
firm as is chosen by lot.
1.3.6. "APC Business" shall mean, taken as a whole, the businesses
conducted by APC and its Subsidiaries as such businesses are currently being
conducted by them.
1.3.7. "APC Headquarters Employees" shall mean any Person employed by
APC prior to the Closing whose place of employment is at the corporate
headquarters of APC in Hartford, Connecticut (the "APC Headquarters") other
than: (a) employees of APC Subsidiaries, (b) Persons listed on the Buyer
Disclosure Letter, or (c) Persons whom the parties, within thirty (30) days
after the date hereof mutually agree in writing shall be retained by APC or its
Affiliates.
4
<PAGE>
1.3.8. "Baltimore Lease" shall mean the Lease Agreement to be entered
into by APC or its Affiliate and Holdings or its Affiliate at the Closing, which
shall be in substantially the form attached hereto as Exhibit A.
1.3.9. "Business Day" shall mean any day on which banking institutions
in New York, New York are customarily open for the purpose of transacting
business.
1.3.10. "Buyer Common Shares" shall mean, in the aggregate, the
1,000,000 shares of the Buyer Common Stock to be issued by Buyer to Sellers at
Closing pursuant and subject to the terms and conditions set forth herein and,
with respect to the Buyer Common Stock to be issued to Holdings, in the Voting
and Standstill Agreement.
1.3.11. "Buyer Common Stock" shall mean the shares of Common Stock, no
par value, issued by the Buyer.
1.3.12. "Bylaws" shall mean all written rules, regulations and bylaws,
and all other documents (other than the Charter), relating to the management,
governance or internal regulation of a Person (other than an individual) or
interpretative of the Charter of such Person, each as from time to time in
effect.
1.3.13. "Charter" shall mean the certificate or articles of
incorporation or organization, statute, constitution, joint venture or
partnership agreement or other charter documents of any Person (other than an
individual), each as from time to time in effect.
1.3.14. "Code" shall mean the Internal Revenue Code of 1986, as
amended, and in effect from time to time.
1.3.15. "Compensation", as applied to any Person, shall mean all
salaries, compensation, remuneration, commissions or bonuses of any character,
and medical, surgical, dental, hospital, disability, unemployment, retirement,
pension, vacation, insurance or fringe benefits of any kind, or other payments
or benefits of any kind whatsoever made or provided directly or indirectly by or
on behalf of APC or its Subsidiaries to such Person or members of the immediate
family of such Person.
1.3.16. "Contractual Obligation" shall mean, with respect to any
Person, any contract, agreement, deed, mortgage, lease, sublease, license,
indenture, Guarantee, commitment, undertaking or arrangement, written or oral,
or other consensual document or instrument, including, without limitation, any
document or instrument evidencing or otherwise relating to any indebtedness, but
excluding the Charter and Bylaws of such Person, to which or by which such
Person is a party or otherwise subject or bound or to which or by which any
property or right of such Person is subject or bound.
1.3.17. "Debt" of any Person shall mean all obligations of such Person
(i) in respect of indebtedness for borrowed money, (ii) evidenced by notes,
bonds, debentures or similar instruments, (iii) for the deferred purchase price
of property, tangible or real, goods or services (other than trade payables or
accruals incurred in the Ordinary Course of Business or, with
5
<PAGE>
respect to a Person other than APC or its Subsidiaries, in the Ordinary Course
of the Business of such Person), (iv) under capital leases and (v) in the nature
of Guarantees of the obligations described in clauses (i) through (iv) above of
any other Person.
1.3.18. "Distribution" shall mean, with respect to the capital stock of
or other Equity Securities issued by any Person, (i) the declaration or payment
of any dividend on or in respect of any shares of any class of such capital
stock or in respect of any such Equity Security; (ii) the purchase, redemption
or other retirement of any shares of any class of such capital stock or of any
such Equity Security, directly, or indirectly through a Subsidiary of such
Person or otherwise; and (iii) any other distribution on or in respect of any
shares of any class of such capital stock or on or in respect of any such Equity
Security.
1.3.19. "Enforceable" shall mean, with respect to any Contractual
Obligation, that such Contractual Obligation is the legal, valid and binding
obligation of the Person in question, enforceable against such Person in
accordance with its terms, subject to bankruptcy, reorganization, insolvency and
other similar laws affecting the enforcement of creditors' rights in general and
to general principles of equity (regardless of whether considered in a
proceeding in equity or an Action at law).
1.3.20. "Environmental Laws" shall mean any Legal Requirement in effect
on or prior to the Closing Date relating to (i) releases or threatened releases
of Hazardous Substances, (ii) the manufacture, handling, transport, use,
treatment, storage or disposal of Hazardous Substances or materials containing
Hazardous Substances or (iii) otherwise relating to pollution of the environment
or the protection of human health or the environment.
1.3.21. "Equity Securities" shall mean, with respect to any Person that
is not a natural Person, all shares of capital stock or other equity or
beneficial interests issued by or created in or by such Person, all stock
appreciation or similar rights or grants of, or any other Contractual Obligation
for, any right to share in the equity, income, revenues or cash flow of such
Person, and all securities or other rights, warrants or other Contractual
Obligations to acquire any of the foregoing, whether by conversion, exchange,
exercise or otherwise.
1.3.22. "ERISA" shall mean the federal Employee Retirement Income
Security Act of 1974 or any successor statute, and the rules and regulations
thereunder, and in the case of any referenced section of any such statute, rule
or regulation, any successor section thereto, collectively and as from time to
time amended and in effect.
1.3.23. "GAAP" shall mean generally accepted United States accounting
principles as in effect on the date hereof, consistently applied in accordance
with past practices.
1.3.24. "Governmental Authority" shall mean any United States federal,
state or local or any foreign government, governmental authority, regulatory or
administrative agency, governmental commission, court or tribunal (or any
department, bureau or division of any of the foregoing).
6
<PAGE>
1.3.25. "Governmental Order" shall mean any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or with any
Governmental Authority.
1.3.26. "Guarantee", with respect to any Person, shall mean (i) any
guarantee of the payment or performance of, or any contingent obligation in
respect of, any Debt or other obligation of any other Person, (ii) any other
arrangement whereby credit is extended to any other Person on the basis of any
promise or undertaking of such Person (a) to pay the Debt of such other Person,
(b) to purchase any obligation owed by such other Person, (c) to purchase or
lease assets under circumstances that would enable such other Person to
discharge one or more of its obligations, or (d) to maintain the capital,
working capital, solvency or general financial condition of such other Person
and (iii) any liability of such Person as a general partner of a partnership or
as a venturer in a joint venture in respect of Debt or other obligations of such
partnership or venture.
1.3.27. "Hazardous Substances" shall mean (i) substances which contain
substances defined in or regulated under the following federal statutes, and
their state counterparts, each as amended, as well as these statutes'
implementing regulations as amended from time to time and as interpreted by
administering Governmental Authorities: the Hazardous Materials Transportation
Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking
Water Act, the Asbestos Hazard Emergency Response Act, the Atomic Energy Act,
the Toxic Substances Control Act, the Federal Insecticide, Fungicide, and
Rodenticide Act, and the Clean Air Act; (ii) petroleum and petroleum products,
including crude oil and any fractions thereof; (iii) natural gas, synthetic gas
and any mixtures thereof; (iv) radon; (v) PCBs; (vi) asbestos; (vii) any
substance with respect to which a Governmental Authority requires environmental
investigation, monitoring, reporting or remediation; and (viii) any other
radioactive or toxic materials or substances.
1.3.28. "Income Tax" means any Tax which is, in whole or in part, based
on or measured by income or gains.
1.3.29. "Indenture" shall mean the Indenture, dated the Closing Date,
which shall be in the form attached hereto as Exhibit B.
1.3.30. "Jamestown Lease" shall mean the Lease Agreement to be entered
into by Holdings or its Affiliate and APC or its Affiliate at the Closing, which
shall be in substantially the form attached hereto as Exhibit C.
1.3.31. "Knowledge" shall mean the actual knowledge of Vaughan or of
the executive officers of PHL, Holdings or Buyer, as the case may be, following
due inquiry of Vaughan or the executive officers of each Subsidiary of PHL,
Holdings or Buyer, as the case may be. For purposes of this definition,
"executive officer" shall mean the two (2) highest ranking officers of the
Person in question but, in the event several individuals have the same rank or
title, then that individual with the longest term of service with his or her
current employer shall be deemed the highest ranking among such similarly titled
or ranked individuals.
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1.3.32. "Legal Requirement" shall mean any United States federal, state
or local or any foreign law, statute, standard, ordinance, code, order, rule,
regulation, resolution or promulgation, or any Governmental Order, or any
license, franchise, consent, approval, permit or similar right granted by any
Governmental Authority under any of the foregoing.
1.3.33. "Liabilities" shall mean any and all liabilities and
obligations, whether accrued, fixed, absolute or contingent, matured or
unmatured or determined or determinable.
1.3.34. "Lien" shall mean any mortgage, pledge, lien, security
interest, charge, attachment, equity or other encumbrance, or restriction on the
creation of any of the foregoing, whether relating to any property or right or
the income or profits therefrom; provided, however, that the term "Lien" shall
not include statutory liens for Taxes to the extent that the payment thereof is
not in arrears or otherwise due.
1.3.35. "Limited Knowledge" shall mean the actual knowledge of the
executive officers of PHL, Holdings, Vaughan or Buyer, as the case may be,
without any obligation to investigate. For purposes of this definition,
"executive officer" shall mean the two (2) highest ranking officers of the
Person in question but, in the event several individuals have the same rank or
title, then that individual with the longest term of service with his or her
current employer shall be deemed the highest ranking among such similarly titled
or ranked individuals.
1.3.36. "Losses" shall mean any and all losses, damages, obligations,
Liabilities, claims, awards (including, without limitation, interest),
assessments, amounts paid in settlement, judgments, orders, decrees, fines and
penalties, plus reasonable costs and expenses reasonably incurred (including,
without limitation, reasonable legal costs and expenses and reasonable costs and
expenses of collection).
1.3.37. "Material Adverse Effect" shall mean any adverse change in or
effect on the business, condition (financial or otherwise), operations,
performance or properties of any Person that is material to such Person and its
Subsidiaries, taken as a whole; provided, however, that when such term is used
in reference to Buyer, such term shall not include any change or effect
attributable to the acquisition of APC or any Subsidiary of APC; provided
further, however, that such term when used in reference to APC and its
Subsidiaries shall not include (i) changes in general economic conditions,
changes in legal or regulatory conditions that affect, in general, businesses in
which APC or any of its Subsidiaries are engaged or the insurance industry in
general and not specifically relating to APC or its Subsidiaries, or (ii) the
loss of accounts which represented less than $3,250,000 of the consolidated
revenues of APC and its Subsidiaries for 1998.
1.3.38. "Miami Lease" shall mean the Lease Agreement to be entered into
by Holdings or its Affiliate and APC or its Affiliate at the Closing, in
substantially the form attached hereto as Exhibit D.
1.3.39. "Ordinary Course of Business" shall mean the ordinary course of
the business of a Person consistent with such Person's regular custom and
practice.
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1.3.40. "Person" shall mean any individual, partnership, corporation,
limited liability company, association, trust, joint venture, unincorporated
organization or other entity, and any Governmental Authority.
1.3.41. "Registration Rights Agreement" shall mean the Registration
Rights Agreement to be entered into by PHL, Holdings and Buyer at the Closing in
the form attached hereto as Exhibit E.
1.3.42. "Risk Management Agreement" shall mean the Risk Management
Agreement to be entered into by PHL and Buyer at the Closing in the form
attached hereto as Exhibit F.
1.3.43. "Rule 145 Representation Letter" shall mean the Rule 145
Representation Letter to be executed by PHL, Holdings and Vaughan in the form
attached hereto as Exhibit G.
1.3.44. "Subordinated Debentures" shall mean Buyer's 5.25% Convertible
Subordinated Debentures (Due 2014), in the aggregate principal amount of
$32,000,000.
1.3.45. "Subsidiary" shall mean, as the case may be, any Person of
which Buyer, PHL, Holdings or APC (or other specified Person) shall own directly
or indirectly at least a majority of the outstanding capital stock (or other
shares of Equity Securities) entitled to vote generally in the election of
directors or in which Buyer, PHL, Holdings or APC (or other Specified Person) is
a general partner or joint venturer without limited liability; provided,
however, all references in Sections 3.6, 3.8, 3.10, 3.14 and 3.15 of this
Agreement to the Subsidiaries of APC shall not include Lees Preston Ferry
(Holdings) Ltd., a company incorporated with limited liability under the laws of
the United Kingdom, or its direct and indirect subsidiaries.
1.3.46. "Tangible Net Worth" shall mean, with respect to APC and its
Subsidiaries on a consolidated basis, the aggregate of (a) the capital stock and
surplus of APC and its Subsidiaries, and (b) APC's and its Subsidiaries'
consolidated retained earnings or deficit, each determined on a basis in
accordance with GAAP after eliminating (i) that portion of the book amount of
all assets which would be treated as intangible under GAAP, including, without
limitation, goodwill, trademarks, tradenames, copyrights, patents, licenses and
rights with respect to the foregoing and unamortized debt, discount and expense,
(ii) deferred Taxes and (iii) property, real and personal, and equipment.
1.3.47. "Taxes" shall mean all United States federal, state or local,
or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax, fee, levy, duty, impost or charge of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not;
and the term "Tax" means one of the foregoing Taxes.
1.3.48. "Tax Return" shall mean any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto,
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and including any amendment thereof, required to be filed with any tax
authority, domestic or foreign.
1.3.49. "Vaughan Employment Agreement" shall mean the Employment
Agreement entered into by Buyer and Vaughan as of the date hereof in the form
attached hereto as Exhibit H.
1.3.50. "Voting and Standstill Agreement" shall mean the Voting and
Standstill Agreement to be entered into by the Buyer, Holdings and PHL at the
Closing in the form attached hereto as Exhibit I.
ARTICLE II
The Acquisition
Section 2.1. Acquisition. Upon the terms, subject to the conditions,
and in reliance on the representations, warranties and covenants set forth
herein, Sellers agree to sell and transfer to Buyer, and Buyer agrees to
purchase and accept from Sellers, on the Closing Date, all of the APC Shares.
Section 2.2. Consideration and Closing.
2.2.1. Purchase Consideration.
2.2.1A. Consideration to PHL. At the Closing, in consideration of the
non-competition covenants and obligations to be complied with by PHL pursuant to
Section 5.17 of this Agreement, Buyer shall issue to PHL the aggregate principal
amount of $10,000,000 of the Subordinated Debentures and $150,000 in cash.
2.2.1B. Consideration to Sellers. At the Closing, in consideration of
the sale and transfer of the APC Shares by Sellers to Buyer and of the
agreements by PHL and Sellers to perform those obligations and covenants to be
fulfilled or complied with by them hereunder, Buyer shall:
(a) pay to Vaughan at the Closing (by wire transfer of
immediately available funds to an account designated in writing by Vaughan to
Buyer) not fewer than three (3) Business Days prior to the Closing Date, the
cash sum of $671,988 (the "Cash Consideration");
(b) issue to Holdings, and deliver certificates
representing, 865,042 shares of Buyer Common Stock at the Closing;
(c) issue to Vaughan, and deliver certificates representing,
134,958 shares of Buyer Common Stock at the Closing; and
(d) issue to Holdings the aggregate principal amount of
$22,000,000 of the Subordinated Debentures.
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The items of consideration provided for in subsections (a) - (d) above
shall collectively be referred to as the "Purchase Consideration."
2.2.2. Tangible Net Worth Adjustment. After the Closing, the Purchase
Consideration shall be decreased dollar-for-dollar by the amount, if any, by
which the Tangible Net Worth of APC and its Subsidiaries, on a consolidated
basis as of the date of the Closing Date Balance Sheet, is less than the
Adjusted Tangible Net Worth (in such case, the "Net Adjustment to Buyer"), and
increased dollar-for-dollar by the amount, if any, by which the Tangible Net
Worth of APC and its Subsidiaries as of the date of the Closing Date Balance
Sheet, is greater than the Adjusted Tangible Net Worth (in such case, the "Net
Adjustment to Sellers"). Such adjustment shall be determined on the basis of a
balance sheet of APC and its Subsidiaries as of the Closing Date if the Closing
occurs on the last calendar day of any month, but if the Closing occurs on any
other day, then as of the last calendar day of the month immediately preceding
the Closing Date, prepared by APC in accordance with GAAP, which balance sheet
may be reviewed or audited, at Buyer's expense and sole election, by Ernst &
Young LLP, or at Holdings' expense and sole election, by PricewaterhouseCoopers
(the "Closing Date Balance Sheet"). For the purpose of the preparation of the
Closing Date Balance Sheet, (a) the value of the minority shareholders' Equity
Securities of the Subsidiaries of APC outstanding as of the Closing Date shall
be determined in accordance with the formula set forth in the respective
buy-sell agreements with respect to the respective APC Subsidiaries, using for
purposes of such formulae the respective Subsidiaries' financial statements as
of the Closing Date if the Closing occurs on the last calendar day of any month,
but if the Closing occurs on any other day, then their respective financial
statements as of the last calendar day of the month immediately preceding, and
no discounts for lack of marketability, minority interest or other discounts
shall be taken into effect, (b) the APC Assets on the Closing Date Balance Sheet
shall not include any commissions earned but not received on insurance policies
which are direct billed by the insurance carriers to the commercial customers of
APC and its Subsidiaries to the extent that such commissions exceed $1,500,000,
(c) the capital contribution of PHL or Holdings, as the case may be (as provided
in Section 5.18(b)), shall be included, (d) the purchase price paid by Holdings
or PHL, as the case may be, for the Owned Real Property shall be included and
(e) accruals as of the date of the Closing Date Balance Sheet for the applicable
pro rata portions of bonuses earned by employees of APC and its Subsidiaries and
any other accruals for expenses incurred but not yet paid shall be included.
Buyer and its accountants, Ernst & Young LLP, and Holdings and its accountants,
PricewaterhouseCoopers, shall be permitted to review the Closing Date Balance
Sheet and the work papers related to the preparation and review of the Closing
Date Balance Sheet, and, in the event of any dispute concerning the correctness
of such Closing Date Balance Sheet, such dispute shall be submitted to the
Alternative Accountants for resolution. If issues in dispute are submitted to
such accounting firm for resolution, (i) each party will furnish to such
accounting firm such work papers and other documents and information relating to
the disputed issues as such accounting firm may request and are available to
that party (or its independent public accountants), and will be afforded an
opportunity to present to such accounting firm any material relating to the
determination and to discuss the determination with such accounting firm, (ii) a
determination by such accounting firm, as set forth in a notice delivered to
both parties by such accounting firm no later than thirty (30) days after the
issues in dispute are submitted to such accounting firm, will be binding and
conclusive on the parties, and (iii) Buyer, on the one hand, and Sellers, on the
other, will each bear fifty percent (50%) of the fees of such accounting firm
for such determination. The Closing
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Date Balance Sheet shall be prepared within thirty (30) days following Closing.
Buyer or Sellers, jointly and severally, whichever is the case, shall pay the
Net Adjustment to Sellers or the Net Adjustment to Buyer, whichever is the case,
to Sellers or Buyer, as the case may be, by wire transfer or delivery of other
immediately available funds within three (3) Business Days after the date on
which the Closing Date Balance Sheet is finally determined. Any Net Adjustment
to Sellers or any Net Adjustment to Buyer, as the case may be, shall bear
interest at a rate of seven percent (7%) per annum from the Closing Date, and
all accrued interest shall be paid at the same time as any Net Adjustment to
Sellers or any Net Adjustment to Buyer. Any Net Adjustment to Sellers payable
to, or any Net Adjustment to Buyer payable by, Sellers, as the case may be,
shall be payable in proportion to Holdings' and Vaughan's respective percentage
ownership in APC as of the Closing Date.
2.2.3. Excluded Liabilities. The parties agree that, except as
otherwise provided herein or in any of the Closing Agreements, Buyer (and after
the Closing, APC and its Subsidiaries) shall not have any responsibility or
incur or assume any Liabilities with respect to the following matters
(collectively, the "Excluded Liabilities") (it being understood, subject to
Section 5.21 of this Agreement, that such assets shall be transferred to, or
such obligations will be assumed by, PHL or Holdings prior to Closing):
(a) any Owned Real Property; and
(b) any APC Headquarters Employees.
Notwithstanding the foregoing to the contrary, with respect to any APC
Headquarters Employees, Buyer (and after the Closing, APC and its Subsidiaries)
shall, except as provided hereinafter, assume Liabilities accrued, arising or
incurred under, or otherwise relating to, any APC Plan or APC Benefit
Arrangement, and such Liabilities shall not be deemed Excluded Liabilities for
purposes of this Agreement. The foregoing notwithstanding, Holdings shall be
responsible for any severance benefits payable as a result of the termination
within eight (8) weeks after the Closing of the employment of any APC
Headquarters' Employee other than any severance benefits or penalties as are
attributable to the wrongful acts or inactions of Buyer or its Affiliates
(including APC or its Subsidiaries after the Closing).
All of the above notwithstanding, the parties have agreed that in the
interests of facilitating a transition following the Closing, APC shall be
entitled to continue, for a period of up to eight (8) weeks following the
Closing, the employment of any of the APC Headquarters Employees, provided APC
shall be liable for such employees' salary and benefits earned or accrued during
such period. Such continuation of employment for such period of time shall not
affect Holdings' obligation hereunder for severance benefits (as more fully
described above). If, however, APC, without Holdings' prior express written
permission, continues, after that date which is eight (8) weeks after the
Closing, the employment of any APC Headquarters Employee, such circumstance,
without more, shall immediately and automatically result in the termination of
all obligations of Holdings under this Agreement for severance benefits of any
kind with respect to such employee.
2.2.4. Time and Place of Closing. The closing of the purchase and sale
of the APC Shares and the other transactions contemplated by this Agreement (the
"Closing") shall take place at the
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offices of Williams, Mullen, Christian & Dobbins in Richmond, Virginia on such
date as is mutually agreed by the parties hereto (the "Closing Date") at 10:00
a.m. (local time); provided that: (i) all conditions to Closing have been
satisfied or waived as provided in Articles VI and VII hereof, and (ii) the
Closing Date shall in no event be later than June 30, 1999.
2.2.5. Delivery. At the Closing, Sellers will convey, transfer and
assign the APC Shares to Buyer free and clear of any Liens (including, without
limitation, restrictions on transfer or voting), and will deliver to Buyer
certificates evidencing all of the APC Shares duly endorsed or accompanied by
separate stock power(s) duly endorsed, with all required stock transfer Tax
stamps affixed and in form proper for transfer, against delivery by Buyer of the
Subordinated Debentures, the Cash Consideration and issuance by Buyer of the
Buyer Common Shares as set forth in Section 2.2.1 above.
ARTICLE III
Representations and Warranties of Sellers
Except as disclosed, or as qualified by information set forth in the
Sellers' disclosure letter dated of even date herewith and delivered to Buyer
concurrently herewith (the "Sellers' Disclosure Letter"), Sellers, jointly and
severally, represent and warrant to Buyer and to Buyer's successors and
permitted assigns as of the date hereof and as of the Closing Date (except to
the extent that Sellers' representations and warranties expressly speak as of a
specified earlier date) as follows:
Section 3.1. Corporate Matters.
3.1.1. Organization and Standing; Power and Authority. APC is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Connecticut. Each of the Subsidiaries of APC is a corporation
duly organized, validly existing and in good standing (to the extent its
jurisdiction of incorporation or organization recognizes such concept) under the
jurisdiction of its incorporation or organization. Each of APC and its
Subsidiaries has all requisite power and authority, corporate and otherwise, to
carry on its respective portion of the APC Business as currently conducted. Each
of APC and its Subsidiaries is duly qualified or licensed to do business as a
foreign corporation or otherwise, and is in good standing as such (to the extent
their respective jurisdictions of incorporation or qualification recognize such
concept), in each jurisdiction where the nature of APC's or such Subsidiary's
activities or its ownership or leasing of property requires such qualification
or license, except to the extent that the failure to be so qualified or licensed
would not have a Material Adverse Effect on APC.
3.1.2. Non-Contravention. No approval, consent, waiver, authorization
or other order of, and no filing, registration, qualification or recording with,
any Governmental Authority or any other Person is required to be obtained or
made by or on behalf of Sellers, APC or any of their Subsidiaries in connection
with the execution, delivery or performance of this Agreement and the
consummation of the transactions contemplated hereby, except for (a)
satisfaction of the requirements of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and (b) the items listed in Section
3.1.2 of the Sellers' Disclosure Letter. Specifically, and not by way of
limitation, all filings with and approvals of State Departments of Insurance and
similar Governmental Authorities, which filings and approvals must be made or
obtained prior to
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the Closing (collectively, the "Required Filings") are set forth in the Sellers'
Disclosure Letter. Neither the execution, delivery and performance of this
Agreement nor the consummation of any of the transactions contemplated hereby
(including, without limitation, the execution, delivery and performance of the
Closing Agreements) does or will constitute, result in or give rise to (i) a
breach or violation or default under any Legal Requirement applicable to
Sellers, APC, or any of their Subsidiaries (assuming the accuracy of the
representations and warranties of Buyer in Article IV hereof), (ii) a breach of
or a default under any Charter or Bylaws provision of Holdings, APC or any of
their Subsidiaries, (iii) the acceleration of the time for performance of any
obligation under any Contractual Obligation of Holdings, APC or any of their
Subsidiaries, (iv) the imposition of any Lien upon or the forfeiture of any APC
Asset, (v) a breach of or a default under any Contractual Obligation of
Holdings, APC or any of their Subsidiaries, or (vi) the right to any severance
payments other than by operation of law (including, without limitation, if such
payments become due only if employment is terminated following the Closing),
termination, right of termination, modification of terms or change in benefits
or burdens under any Contractual Obligation, other than in the case of clauses
(i), (iii), (iv), (v) and (vi) such as, individually or in the aggregate, have
and could reasonably be expected to have neither a Material Adverse Effect on
APC nor on the ability of Holdings to consummate the transactions contemplated
hereby.
3.1.3. Title to APC Shares.
(a) Holdings is the beneficial and record holder of, and has
good and valid title to, 5,000 Class A shares of the APC Shares, which is
eighty-five percent (85%) of the issued and outstanding shares of the capital
stock of APC.
(b) Sellers, collectively, own all of the APC Shares.
(c) Except for this Agreement, there is no Contractual
Obligation pursuant to which Sellers or its Affiliates have, directly or
indirectly, granted any Equity Security in APC or any of its Subsidiaries to any
Person or any right to acquire any of, or any interest in, any APC Asset. Upon
delivery of certificates representing the APC Shares, and delivery of the
Purchase Consideration, Buyer will receive good and valid title to all of the
APC Shares, free and clear of any Liens (including, without limitation,
restrictions on transfer or voting) and subject to no rescission rights or
similar rights or equities of any kind, other than such Liens or rights as arise
out of actions or inactions of Buyer.
3.1.4. Capitalization. The only issued and outstanding shares of
capital stock of APC are the APC Shares, all of which are duly authorized,
validly issued, fully paid and non-assessable. There is no Contractual
Obligation or Charter or Bylaw provision that obligates APC or any of its
Subsidiaries to issue, purchase or redeem, or make any payment in respect of,
any Equity Security.
3.1.5. Subsidiaries. APC's only Subsidiaries are listed in the Sellers'
Disclosure Letter, which sets forth the name and jurisdiction of incorporation
or organization, the date of incorporation or organization, the issued and
outstanding shares of capital stock and number of shares owned of record and
beneficially by each minority shareholder of such Subsidiaries and the federal
or foreign taxpayer identification number of each such Subsidiary. APC is the
direct
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record and beneficial owner of all of the issued and outstanding shares of
capital stock of each of its respective Subsidiaries, such shares of capital
stock have been duly authorized and validly issued and are fully paid and
nonassessable, and APC has good and valid title to such shares free and clear of
any Liens (including, without limitation, restrictions on transfer or voting).
There is no outstanding Equity Security of any Subsidiary of APC other than its
issued and outstanding shares of capital stock. APC has no equity investment in
any Person other than its Subsidiaries.
3.1.6. Charter and Bylaws. Sellers have heretofore made available to
Buyer true and complete copies of the Charter and Bylaws of APC and each of its
Subsidiaries, in each case in the form currently in effect and as will be in
effect immediately prior to the Closing.
Section 3.2. Financial Statements.
3.2.1. Financial Information. Sellers have previously provided Buyer
with (i) a true and complete copy of the unaudited consolidated balance sheet of
APC and its Subsidiaries as of February 28, 1999 (the "February 1999 APC Balance
Sheet"), and the related unaudited statements of income, stockholders' equity
and cash flows of such entities for the two (2) months ending February 28, 1999
(collectively, with the February 1999 APC Balance Sheet, the "February 1999 APC
Financial Statements"), and (ii) true and complete copies of the audited
consolidated balance sheets of APC and its Subsidiaries as of December 31, 1998,
1997 and 1996 (collectively, the "APC Annual Balance Sheets") and the related
audited statements of income, stockholders' equity and cash flows of such
entities for such fiscal years ended December 31, 1998, 1997 and 1996
(collectively with the APC Annual Balance Sheets and the February 1999 APC
Financial Statements, the "APC Financial Statements").
3.2.2. Character of Financial Information. The APC Financial
Statements, including (except with respect to the February 1999 APC Financial
Statements) the notes thereto, were prepared in accordance with GAAP throughout
the periods specified therein and present fairly, in all material respects, the
consolidated financial position and results of operations of APC and its
Subsidiaries at the respective dates and for the periods specified therein,
subject in the case of the February 1999 APC Financial Statements to year-end
audit adjustments.
Section 3.3. Change in Condition.
Since February 28, 1999:
(a) The APC Business has been conducted in all material
respects only in the Ordinary Course of Business (except as may be otherwise
required by the terms of this Agreement), and without limiting the generality of
the foregoing, APC and its Subsidiaries have made capital expenditures only in
the Ordinary Course of Business;
(b) Neither APC nor any of its Subsidiaries has:
(i) made any capital expenditure greater than
$50,000 except for expenditures for repairs and maintenance in the Ordinary
Course of Business;
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(ii) incurred or otherwise become liable in respect
of any Debt or become liable in respect of any Guarantee, other than any Debt or
any Guarantee between APC and its respective wholly-owned Subsidiaries;
(iii) mortgaged or pledged an APC Asset or subjected
any APC Asset to any Lien;
(iv) made any change in its authorized or issued
capital stock or granted or issued any option, purchase right, convertible
stock, other sort of security or registration right, or purchased, redeemed or
retired any shares or other securities, or declared or made any Distribution
(other than distributions or contributions in connection with an increase in or
the repayment or cancellation (in whole or in part) of Debt or intercompany
advances between APC and its respective wholly-owned Subsidiaries);
(v) sold, leased to others or otherwise disposed of
any of the APC Assets except in the Ordinary Course of Business and except for
such assets as were not, individually or in the aggregate, material to APC;
(vi) purchased any Equity Security issued by any
Person other than ones issued by a Subsidiary of APC, or any assets material in
amount or constituting a business or line of business, or been party to any
merger, consolidation or other business combination or entered into any
Contractual Obligation relating to any such purchase, merger, consolidation or
business combination;
(vii) made any loan, advance or capital contribution
to or investment in any Person other than loans, advances or capital
contributions to or investments in or to APC or any of APC's wholly-owned
Subsidiaries and other than loans or advances made in the Ordinary Course of
Business which are not material either singly or in the aggregate;
(viii) canceled or compromised any Debt or claim other
than in the Ordinary Course of Business and other than any Debt, intercompany
advances or claim between APC and its respective wholly-owned Subsidiaries;
(ix) sold, transferred, licensed or otherwise
disposed of any Intellectual Property other than in the Ordinary Course of
Business;
(x) made or agreed to make any material change in
its customary methods of accounting or accounting practices;
(xi) engaged in or become obligated in respect of any
transaction with PHL, Holdings or any of their Affiliates;
(xii) waived or released or permitted to lapse any
right of material value except in the Ordinary Course of Business or suffered
any material damage to or material destruction or loss of any material asset or
property, whether or not covered by insurance;
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(xiii) instituted, settled or agreed to settle any
material Action; or
(xiv) consented or agreed to do any of the foregoing.
(c) Neither APC nor any of its Subsidiaries has (i) had any
material change in its relationships with its employees, producers, agents,
independent contractors, insurance carriers, customers, referral sources or
suppliers, or (ii) made any changes in the rate of Compensation payable (or paid
or agreed in writing or orally promised to pay, conditionally or otherwise, any
extra Compensation) to any director, officer, manager, employee, producer,
consultant or agent (other than changes granted in the Ordinary Course of
Business and consistent with past practice, which changes will not have a
Material Adverse Effect);
(d) There has been no amendment of any material provision of
any Equity Security issued by APC or any of its Subsidiaries;
(e) Neither APC nor any of its Subsidiaries has entered into
any Contractual Obligation (and PHL, Sellers and their Affiliates have not
entered into any Contractual Obligation obligating APC or any of its
Subsidiaries) to do any of the things referred to in clauses (a) through (d)
above with respect to APC, any of the Subsidiaries of APC or the APC Business;
and
(f) No Material Adverse Effect has occurred with respect to
APC and its Subsidiaries.
Section 3.4. Liabilities. Except as otherwise provided in this
Agreement, neither APC nor any of its Subsidiaries has any Liabilities, other
than, to the extent the existence thereof is consistent with all other
representations and warranties of PHL and Sellers, as:
(a) set forth on the February 1999 APC Balance Sheet;
(b) incurred since the date of the February 1999 APC Balance
Sheet in the Ordinary Course of Business;
(c) incurred in respect of the Leases and Contracts; or
(d) between APC and its respective wholly-owned Subsidiaries
or between wholly-owned Subsidiaries of APC.
Section 3.5. Assets.
3.5.1. Title to Assets; Owned Real Estate. APC and its Subsidiaries
have good and valid title to, or, in the case of property held under lease or
other Contractual Obligation, a valid and enforceable right to use under an
Enforceable Lease or license, all of their properties, rights and assets,
whether real or personal property or intellectual property and whether tangible
or intangible (collectively, the "APC Assets"), including, without limitation,
all properties, rights and assets reflected in the February 1999 APC Balance
Sheet or acquired after the date of the February 1999 APC Balance Sheet (except
as sold or otherwise disposed of since the date of the February 1999 APC Balance
Sheet in the Ordinary Course of Business or as otherwise permitted or required
by this Agreement to be disposed of since the date of the
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February 1999 APC Balance Sheet). The Sellers' Disclosure Letter contains a
true, correct and complete list of all real property and buildings owned by APC
or any of its Subsidiaries (collectively, the "Owned Real Property") and
identifies the respective owner of each such parcel or building. No APC Asset is
subject to any Lien except as described in the Sellers' Disclosure Letter. The
APC Assets (including, without limitation, the Owned Real Property, the
Intellectual Property, the Leases and the Contracts), constitute all material
properties, rights and assets held for or used in the APC Business as currently
conducted.
3.5.2. Real Property Leases. The Sellers' Disclosure Letter sets forth
a true, correct and complete list of (a) each facility, location or parcel which
is leased or subleased, or which has been agreed to be leased or subleased, as
lessee or sublessee by APC or any of its Subsidiaries (all of the leases,
subleases or other Contractual Obligations pursuant to which such facilities,
locations or parcels are held or are to be held being referred to herein
collectively as the "Leases"), and (b) each lease, sublease or other Contractual
Obligation (collectively, the "Leases-Out") under which APC or any of its
Subsidiaries is a lessor or sublessor of any facility, location or parcel. True,
correct and complete copies of the Leases and the Leases-Out, and all material
amendments, modifications and supplemental agreements thereto, have been
previously made available to the Buyer.
Except as set forth on the Sellers' Disclosure Letter, to
Sellers' Knowledge:
(a) each Lease and each Lease-Out is an Enforceable
agreement of APC or the Subsidiary of APC which is party thereto, and each Lease
or Lease-Out is an Enforceable agreement of the other parties thereto;
(b) APC or the Subsidiary of APC which is a party thereto
has fulfilled all material obligations required pursuant to the Leases and the
Leases-Out to have been performed by APC or the Subsidiary of APC party thereto
on its part;
(c) neither APC nor any Subsidiary of APC is in material
breach of or default under any Lease or Lease-Out, and no event has occurred
which with the passage of time or giving of notice or both would constitute such
a breach or default, result in a loss of rights or result in the creation of any
Lien thereunder or pursuant thereto;
(d) (i) there is no existing material breach or default by
any other party to any Lease or Lease-Out, and (ii) no event has occurred which
with the passage of time or giving of notice or both would constitute a material
default by such other party, result in a loss of rights or result in the
creation of any Lien thereunder or pursuant thereto;
(e) neither APC nor any Subsidiary of APC is obligated to
pay any material leasing or lease brokerage commission as a result of the
transactions contemplated hereby; and
(f) there is no pending or threatened eminent domain taking
affecting any of the properties which are the subject of the Leases or the
Leases-Out.
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Section 3.6. Intellectual Property.
3.6.1. Definition of Intellectual Property. "Intellectual Property"
shall mean, collectively, all (i) United States or foreign patents, patent
applications, patent disclosures, and all renewals, reissues, divisions,
continuations, extensions or continuations-in-part thereof, and all discoveries
which may be patentable (collectively, "Patent Properties"), (ii) trademarks,
service marks, trade dress, trade names and corporate names and registrations
and applications for registration thereof (collectively, "Trademark
Properties"), (iii) copyrights (registered or unregistered), registrations and
applications for registration thereof, including all renewals, derivative works,
enhancements, modifications, updates, new releases or other revisions thereof,
and all works of authorship (collectively, "Copyright Properties"), (iv)
computer software (including source code and object code), data, databases, code
segments, algorithms, objects, routines, templates and documentation
(collectively, "Software Properties"), (v) trade secrets and other confidential
information, including, but not limited to, ideas, processes, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, blue prints,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans, schematics, and customer and supplier lists and
information ("Trade Secrets"), (vi) rights to third party warranties relating to
the foregoing, including, without limitation, rights to millennium compliance
warranties, (vii) copies and tangible embodiments of all of the foregoing (in
whatever form or medium), (viii) the internet domain names used by APC's
Subsidiaries, (ix) the telephone numbers used by APC and its Subsidiaries, (x)
all licenses and rights to royalties, and (xi) all damages and payments under
and the right to sue for infringement with respect to all of the foregoing, and
the goodwill symbolized by all of the foregoing and connected therewith
throughout the world.
3.6.2. Ownership of Intellectual Property. APC and its Subsidiaries own
or are authorized by license to use the "American Phoenix" name and all Software
Properties developed or currently used by each which are material to the conduct
of the APC Business, and each has the right to use the "American Phoenix" name
and such Software Properties, and in each case, such usage without more, will
not infringe upon the Intellectual Property rights of another Person, and such
Software Properties are listed in the Sellers' Disclosure Letter.
3.6.3. Compliance with License Agreements. All license agreements
relating in any manner to the Intellectual Property used by APC and its
Subsidiaries that are material to the conduct of the APC Business are listed in
the Sellers' Disclosure Letter. APC and its Subsidiaries are in full compliance
in all material respects with and are not in default under any such license
agreements, and to the Knowledge of Sellers, all other parties to any of such
license agreements are in full compliance in all material respects with and are
not in default under any of such license agreements.
3.6.4. Registrations. There are no registered (with the U.S. Copyright
Office, U.S. Patent and Trademark Office or the trademark registration offices
of any of the fifty states) Patent Properties, Trademark Properties or Copyright
Properties owned and used by APC and its Subsidiaries (except as used pursuant
to a license agreement listed in the Sellers' Disclosure
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Letter) in the conduct of the APC Business.
3.6.5. Custom Software. There are no Software Properties that APC and
its Subsidiaries have had written or developed by any Person not an employee of
APC or its Subsidiaries.
3.6.6. Noninfringement. APC and its Subsidiaries have not infringed,
misappropriated, or otherwise used in an unauthorized manner the proprietary
rights (including, but not limited to, the patent, trade secret, trademark,
service mark, trade dress, or copyright rights) of any third party.
3.6.7. Rights Granted to Others. APC and its Subsidiaries have not
granted or committed to grant any rights in their Intellectual Property of any
nature whatsoever to any third party.
3.6.8. No Claims. No claim has been asserted in writing by any Person
to Sellers (i) to the effect that any Action by APC or any of its Subsidiaries,
infringes on the Intellectual Property rights of any other Person; or (ii) that
challenges or questions the right of APC or any of its Subsidiaries to use any
of the Intellectual Property being used by it; or (iii) except for license
agreements disclosed in the Sellers' Disclosure Letter, which asserts the right
of any third party to use such Intellectual Property.
3.6.9. Unauthorized Use. To the Knowledge of Sellers, there has been no
unauthorized use, infringement or misappropriation of any of the Intellectual
Property of APC or its Subsidiaries by any third party, including, but not
limited to, any employee, former employee, producer, agent or independent
contractor of APC or its Subsidiaries.
Section 3.7. Year 2000 Compliance. "Year 2000 Compliant" or "Year 2000
Compliance" means, with respect to computer systems (including, but not limited
to, all hardware, software, embedded systems, databases and tools) that the
computer systems (i) accurately process date/time data (including, but not
limited to, calculating, comparing and sequencing) from, into, and between the
twentieth and twenty-first centuries, and the years 1999 and 2000 and leap year
calculations, (ii) will operate prior to, during, and after the calendar year
2000 AD without error relating to date data, specifically including any error
relating to, or the product of, date data which represents or references
different centuries or more than one century, (iii) will respond to two-digit
date input in a manner which resolves any ambiguity as to century in a
disclosed, defined and predetermined manner and (iv) will store and provide
output of date information in manners that are unambiguous as to century.
APC and its Subsidiaries are implementing a program to identify on a
timely basis the Year 2000 Compliance of mission critical: (i) products and
services supplied by third parties and used in the APC Business, and (ii)
computer systems or components therein used in the APC Business, whether owned
or leased by APC or any of its Subsidiaries, and to remediate (or replace or
abandon as appropriate) any such non-Year 2000 Compliant systems, test any such
renovated or updated products or services, and implement contingency plans in
the event of internal computer system or third party failure that is mission
critical to its business. This program is outlined in the Sellers' Disclosure
Letter, and included therein, is an identification of those tasks and or/tests
that
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have not been completed as of the date of this Agreement, as well as a list of
all vendors where APC and its Subsidiaries have determined the vendor's product
or service are not Year 2000 Compliant. With respect to third party developed
software, Sellers shall be entitled to rely upon vendor certifications received
by either of them or their Affiliates, provided that APC and its Subsidiaries
have adequate contingency plans in place in the event of failure. Sellers
reasonably believe, consistent with industry standards, that APC and its
Subsidiaries will complete all aspects of such program prior to the time when
any damages are likely to result from the failure of such products and services
to be Year 2000 Compliant.
Section 3.8. Accounts. Each bank account or similar account for the
deposit of cash or securities currently maintained by or on behalf of, or
utilized by, APC or any Subsidiary of APC (i) is wholly owned by APC or one of
its Subsidiaries; (ii) periodically reconciled to its bank statements; and (iii)
to the extent such accounts of APC and its Subsidiaries in the aggregate hold
monies in an escrow or trust capacity, contains in the aggregate all escrow and
trust monies of APC and its Subsidiaries required to be so maintained by it.
Section 3.9. Certain Contractual Obligations. Set forth in the Sellers'
Disclosure Letter is a true and complete list of all of the material Contractual
Obligations of APC or any of its Subsidiaries (except for or with respect to the
APC Plans and the APC Benefit Arrangements), including, without limitation, each
of the following:
(a) All collective bargaining agreements and other labor
agreements; all material employment, producer or consulting agreements; and all
other material plans, agreements, arrangements or practices which constitute
Compensation or benefits to any of the directors, officers or employees of APC
or any of its Subsidiaries;
(b) All Contractual Obligations under which APC or any of
its Subsidiaries is or may become obligated to pay any legal, accounting,
brokerage, finder's or similar fees or expenses in connection with, or incur any
severance pay or special Compensation obligations which would become payable by
reason of, this Agreement or the consummation of the transactions contemplated
hereby;
(c) All Contractual Obligations under which APC or any of
its Subsidiaries is or will after the Closing be restricted from carrying on any
business or other activities anywhere in the world;
(d) All Contractual Obligations (including, without
limitation, options) to: (i) sell or otherwise dispose of any APC Assets except
in the Ordinary Course of Business or (ii) purchase or otherwise acquire any
individual property or other assets for a price of $50,000 or more;
(e) All Contractual Obligations which, individually, are in
excess of $50,000 under which APC or any of its Subsidiaries has any liability
for Debt or obligation for Debt or constituting or giving rise to a Guarantee of
any liability or obligation of any Person (other than any Lease, any Debt or
intercompany advances between APC and its wholly-owned Subsidiaries), or under
which any Person has any liability or obligation constituting or giving rise to
a Guarantee
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of any liability or obligation of APC or any of its Subsidiaries (including,
without limitation, partnership and joint venture agreements) other than any
Guarantee by APC of any Lease;
(f) Any lease or other Contractual Obligation under which
any tangible personal property having a cost or capital lease obligation in
excess of $50,000 is held or used by APC or any of its Subsidiaries;
(g) Any Contractual Obligation under which APC or any of its
Subsidiaries would reasonably be expected to become obligated to pay any amount
in excess of $50,000 in respect of indemnification obligations or purchase price
adjustment provisions in connection with any (i) acquisition or disposition of
assets, securities or real property, (ii) other acquisition or disposition of
assets other than in the Ordinary Course of Business, (iii) assumption of
liabilities or warranty, (iv) settlement of claims, (v) merger, consolidation or
other business combination, or (vi) series or group of related transactions or
events of a type specified in subclauses (i) through (v); and if with respect to
any Contractual Obligation there exists any pending or, to the Knowledge of
Sellers, threatened Action that could reasonably be expected to result in APC,
its Subsidiaries or any of them being liable to pay an amount in excess of
$50,000 or there currently exist circumstances that would reasonably be expected
to give rise to such an Action;
(h) All written contracts or commitments relating to
commission arrangements with others (other than those listed under subsection
(i) below), pursuant to which $50,000 or more is expected to be paid by APC or
any of its Subsidiaries in 1999;
(i) All written agreements with agents or independent
contractors, which are the exclusive representative of APC or any of its
Subsidiaries in a specified market, relating to the APC Business;
(j) All written agreements containing covenants limiting
competition by APC or its Subsidiaries in any kind of business or in any
jurisdiction or limiting the ability of APC or its Subsidiaries to retain the
services of any Person or classes of Persons or to sell any product or the
ability of APC or its Subsidiaries to acquire Equity Securities issued by any
Persons; and
(k) Any other Contractual Obligation of a type not
specifically covered in clauses (a) through (j) above entered into other than in
the Ordinary Course of Business, involving payments by or on behalf of, or to,
APC or any of its Subsidiaries in excess of $50,000 during the calendar year
ended December 31, 1998 or $100,000 over the remaining term of such Contractual
Obligation or the termination of which may reasonably be expected to require
payments by APC or any of its Subsidiaries exceeding $50,000 (other than
purchase orders entered into in the Ordinary Course of Business).
Sellers have heretofore made available to Buyer a true and
complete copy (or, in the case of oral contracts or arrangements, a full and
accurate written summary) of each of the Contractual Obligations listed in the
Sellers' Disclosure Letter, each as in effect on the date hereof, including,
without limitation, all amendments (such Contractual Obligations required to be
listed in the Sellers' Disclosure Letter, together with all licenses identified
in Section 3.6.3 of Sellers' Disclosure Letter and the Insurance Policies, but
excluding the APC Plans and APC
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Benefit Arrangements, being referred to herein collectively as the "Contracts").
Each Contract is Enforceable by APC or the Subsidiary of APC which is party
thereto, against each Person (other than APC or such Subsidiary of APC) party
thereto. No material breach or default by APC or any of its Subsidiaries under
any of the Contracts has occurred and is continuing, and no event has occurred
or circumstance exists which with notice or lapse of time would constitute such
a breach or default or permit termination, modification or acceleration by any
other Person under any of the Contracts or would result in a loss of rights or
creation of any Lien thereunder or pursuant thereto except as would arise from
execution, delivery and performance of this Agreement and the Closing
Agreements. To the Knowledge of Sellers, no material breach or default by any
other Person under any of the Contracts has occurred and is continuing, and no
event has occurred or circumstance exists that with notice or lapse of time
would constitute such a breach or default or permit termination, modification or
acceleration by APC or any of its Subsidiaries under any of the Contracts or
would result in a loss of rights or creation of any Lien thereunder or pursuant
thereto except as would arise from the execution, delivery and performance of
this Agreement and the Closing Agreements.
Section 3.10. Insurance. The Sellers' Disclosure Letter sets forth a
list of all (i) fire, theft, casualty, general liability, workers compensation,
fidelity, errors and omissions, business interruption, environmental, product
liability, automobile and other insurance policies maintained by APC or any of
its Subsidiaries, or by Holdings relating to APC or the APC Business, (ii) life
insurance policies maintained by PHL or APC or any Subsidiary of APC on the life
of any of its employees, officers or directors, other than the group term
insurance provided for all employees (collectively, items (i) and (ii) shall be
referred to as the "Insurance Policies"), specifying the type of coverage, the
amount of coverage, the premium, the insurer, the policyholder, each covered
insured, the policy owner, the expiration date of each such policy and a
description of any retroactive premium adjustments or other loss-sharing
arrangements, (iii) any self-insurance arrangements by or affecting APC or its
Subsidiaries, any sharing of risk contracts or arrangements affecting APC and
any obligations of APC or its Subsidiaries to any third party with respect to
insurance, and (iv) excess of loss or catastrophic loss reinsurance arrangements
maintained by APC or any of its Subsidiaries or to which any of them is a party.
True, correct and complete copies of all Insurance Policies have been previously
made available by the Sellers to the Buyer. To the Knowledge of the Sellers, the
Insurance Policies are Enforceable and will continue to be Enforceable
immediately after the Closing in accordance with their terms as in effect
immediately before the Closing. All premiums due and payable on any of the
Insurance Policies or renewals thereof have been paid or will be paid timely
through the Closing Date, and Sellers have no Knowledge that there is any
default (including with respect to the payment of premiums or the giving of
notices) by APC or any its Subsidiaries under the Insurance Policies nor any
default by any other party to the Insurance Policies and Sellers have no
Knowledge that any event has occurred which, with notice or the lapse of time,
would constitute such a breach or default or permit termination, modification or
acceleration, under any Insurance Policy. Neither PHL, Holdings, APC nor any of
their Subsidiaries has received any notice from the issuer of any of the
Insurance Policies denying coverage or reserving rights with respect to a
particular claim currently pending under any Insurance Policy or with respect to
any Insurance Policy in general. Since February 28, 1999, neither APC nor any
Subsidiary of APC has incurred any loss, damage, expense or liability that has
had or would reasonably be expected to have a Material Adverse Effect and that
was or would be covered by any Insurance Policy for which it has not properly
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asserted a claim under any Insurance Policy. Each of APC and its Subsidiaries is
covered by types of insurance customary for the industry in which it is engaged
and in coverage amounts reasonable for a company of its size. There is no
outstanding recommendation or requirement by the issuer of any Insurance Policy
of any material changes in the conduct of the APC Business or of any material
repairs or other work to be done on or with respect to any APC Asset.
Section 3.11. Transactions with Affiliates. None of (i) the officers,
directors or employees of Holdings, PHL or their Affiliates is an officer,
director, employee, consultant, distributor, supplier or vendor of, or is party
to any Contractual Obligation with, and (ii) Sellers, PHL or their Affiliates is
a consultant, distributor, supplier or vendor of, APC or any Subsidiary of APC.
Except with respect to obligations arising or circumstances existing prior to
the Closing (including, without limitation, services provided prior to Closing
and existing guaranties of certain Liabilities of APC and its Subsidiaries),
neither APC nor any Subsidiary of APC will have any Liability or obligation to
or for the benefit of PHL, the Sellers or any of their Subsidiaries (other than
APC or any Subsidiary of APC) as a result of any agreement among such Persons
which is in effect on the date hereof. There are no APC Assets (including,
without limitation, Intellectual Property) that PHL, Sellers or any of their
Affiliates (other than APC or its Subsidiaries) own or are licensed or otherwise
have the right to use which are used in or necessary to the conduct of the APC
Business nor are there any services or staffing being provided to the APC
Business by PHL, Sellers or any of their Affiliates other than pursuant to
written Contractual Obligations.
Section 3.12. Compliance with Laws. Without regard to environmental
matters which are covered in Section 3.15 of this Agreement, (i) the APC
Business as heretofore, and currently being, operated has not been, and is not,
in violation of, nor is APC or any Subsidiary of APC in default under, any Legal
Requirement, except for such violations or defaults as have not had and will not
have individually or in the aggregate a Material Adverse Effect, and (ii) APC
and the Subsidiaries of APC have been duly granted and continue to hold, and at
the Closing will hold, all licenses, permits, consents, approvals, franchises
and other authorizations under any Legal Requirement or trade practice necessary
for them to hold for the conduct of the APC Business as currently conducted
(collectively, the "Permits"), except such as have not had and will not have
individually or in the aggregate a Material Adverse Effect. All of the Permits
are now and after giving effect to the Closing will be in full force and effect,
except for those whose failure to be in full force and effect would not have a
Material Adverse Effect. Within twenty-one (21) days following the execution of
this Agreement, Sellers will provide Buyer with an update to the Sellers'
Disclosure Letter which will set forth all Permits and applications therefor
that are material to the APC Business. Neither PHL, Sellers, APC nor any
Subsidiary of APC has received any notice from any Governmental Authority or
other licensing authority or association that such entity will revoke, cancel,
rescind, materially modify or refuse to renew in the ordinary course any of the
Permits, which actions individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect.
Section 3.13. Tax Matters. Except as set forth in the APC Financial
Statements:
(a) The following is correct with respect to APC and its
Subsidiaries for so long as each Subsidiary has been owned by APC (i) all Tax
Returns required to be filed on or before the Closing Date by, or with respect
to APC or any of its Subsidiaries have been or will be
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timely filed (taking into account permitted extensions) with the appropriate
taxing authorities; (ii) all Tax Returns required to be filed on or before the
Closing Date by, or with respect to APC or any of its Subsidiaries have
accurately reflected and will accurately reflect all material liability for
Taxes of APC and its Subsidiaries for the periods covered thereby; (iii) APC and
its Subsidiaries have timely paid, withheld or made provision in the APC
Financial Statements for all Taxes shown as due and payable on any Tax Return
and have timely paid, withheld, or made provision in the APC Financial
Statements for all material Taxes, whether or not shown on any Tax Return; (iv)
no Liens for Taxes upon the APC Assets exist; (v) neither APC nor any of its
Subsidiaries currently is the beneficiary of any extension of time within which
to file any Tax Return; and (vi) no claim has ever been made by an authority in
a jurisdiction where any of APC or its Subsidiaries does not file Tax Returns
that any of them is or may be subject to taxation by that jurisdiction. The
amounts recorded as liabilities for Taxes on the February 1999 APC Financial
Statements are sufficient for the payment of all material unpaid Taxes for which
APC or its Subsidiaries are or shall become liable as of February 28, 1999 with
respect to all periods through February 28, 1999.
(b) APC and each of its Subsidiaries is a member of the
affiliated group of which PHL is the common parent, within the meaning of
Section 1504(a) of the Code (the "Affiliated Group"), and such Affiliated Group
files a consolidated federal Income Tax Return. Neither APC nor any of its
Subsidiaries has at any time been a member of an affiliated group filing a
consolidated federal Income Tax Return other than the Affiliated Group. All
Income Taxes shown on any consolidated federal income Tax Return of the
Affiliated Group have been paid for each taxable period during which APC and its
Subsidiaries were a member of the Affiliated Group.
(c) Each of APC and its Subsidiaries has withheld and paid
all material Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, producer, independent contractor,
creditor, stockholder, foreign Person, or other third party.
(d) There is no dispute or claim concerning any material Tax
Liability of any of APC and its Subsidiaries as to which Sellers have Limited
Knowledge. The Sellers' Disclosure Letter lists all Income Tax Returns filed
with respect to APC or any of its Subsidiaries (with respect to each Subsidiary
only since its acquisition or creation by APC or an APC Subsidiary) for taxable
periods ended on or after December 31, 1994, indicates those Tax Returns that
have been audited, and indicates those Tax Returns that currently are the
subject of audit. Sellers have delivered to Buyer correct and complete copies of
all portions of federal Income Tax Returns and examination reports and
statements of deficiencies assessed against or agreed to by PHL, Sellers, APC or
any of their Subsidiaries since December 31, 1994 which pertain to APC and its
Subsidiaries. Any representation with respect to Subsidiaries under this Section
3.13(d) shall relate to a Subsidiary only for periods following its acquisition
or creation by APC or an APC Subsidiary.
(e) Neither APC nor any of its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
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(f) Neither APC nor any of its Subsidiaries has (i) made any
payments, (ii) is obligated to make any payments, or (iii) is a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Section 280G.
(g) There are no tax sharing, allocation, indemnification or
similar agreements or arrangements in effect between APC or any of its
Subsidiaries, or any predecessor or affiliate thereof, and any other party under
which APC or any of its Subsidiaries could be liable for any Taxes or other
claims of any Person.
(h) Neither APC nor any of its Subsidiaries has applied for,
been granted, or agreed to any accounting method change for which it will be
required to take into account any adjustment under Section 481 of the Code or
any similar provision of the Code or the corresponding tax laws of any nation,
state or locality.
(i) No indebtedness of APC or any of its Subsidiaries
consists of "corporate acquisition indebtedness" within the meaning of Section
279 of the Code.
Section 3.14. Employee Relations and Employee Benefit Plans.
3.14.1. Employee Relations.
(a) To the Knowledge of Sellers, APC and each of its
Subsidiaries are in material compliance with all federal, state or other
applicable laws, domestic or foreign, respecting employment and employment
practices, terms and conditions of employment and wages and hours of employment;
(b) No legal claim in respect of application for employment,
employment or termination of employment of any Person has been asserted or, to
the Knowledge of Sellers, threatened, against APC or any of its Subsidiaries;
(c) To the Knowledge of Sellers, APC and each of its
Subsidiaries have not, and are not, engaged in any unfair labor practice;
(d) No unfair labor practice complaint against APC or any of
its Subsidiaries is pending before the National Labor Relations Board;
(e) No labor strike, dispute, slowdown or stoppage is
actually pending or, to the Knowledge of Sellers, threatened against or
involving APC or any of its Subsidiaries;
(f) Neither APC nor any of its Subsidiaries is a party to
any collective bargaining agreement and no collective bargaining agreement is
currently being negotiated by any of them;
(g) None of the employees of APC or any of its Subsidiaries
is represented by a labor union;
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(h) No petition has been filed or Action instituted by any
employee or group of employees of APC or any of its Subsidiaries with any labor
relations board seeking recognition of a bargaining representative;
(i) To the Knowledge of Sellers, there is no organizational
effort currently being made or threatened by or on behalf of any labor union to
organize any employees of APC or any of its Subsidiaries;
(j) There are no other controversies or disputes pending
between APC or any of its Subsidiaries on the one hand, and any of their
respective employees on the other hand, except for such other controversies and
disputes with individual employees arising in the Ordinary Course of Business
that have not had and may not reasonably be expected to have a Material Adverse
Effect; and
(k) Sellers, PHL, APC and the Subsidiaries of APC have taken
any and all actions necessary to comply with the Worker Adjustment and
Retraining Notification Act ("WARN"), with respect to any event or occurrence
affecting APC or its Subsidiaries since the effective date of WARN, or, if
later, the date of acquisition by APC of such Subsidiaries.
3.14.2. Employee Benefit Plans and Programs.
(a) List of Plans. Set forth in the Sellers' Disclosure
Letter is an accurate and complete list, by name and benefit type, of all plans
and benefit arrangements in which employees of APC or any Subsidiary of APC
participate (the "APC Plans" and "APC Benefit Arrangements"), which list further
specifies which of said plans and arrangements are sponsored by any Affiliate of
Sellers other than APC or a Subsidiary of APC.
(b) Status of Plans.
(i) Each APC Plan and APC Benefit Arrangement has,
at all times, been maintained and operated in compliance, in all material
respects, with its terms and the requirements of all applicable laws, including,
without limitation, ERISA and the Code;
(ii) No complete or partial termination of any APC
Plan or APC Benefit Arrangement has occurred or is expected to occur solely as a
result of this Agreement and the consummation of the transactions contemplated
hereby;
(iii) Neither APC nor any of its Subsidiaries has any
current commitment or understanding to create, modify or terminate any APC Plan
or APC Benefit Arrangement, except solely as required by current applicable law;
(iv) Except as required by applicable law or the
terms of a current collective bargaining agreement, no condition or circumstance
exists that would prevent the subsequent unrestricted amendment or termination
of any APC Plan or APC Benefit Arrangement; and
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(v) Apart from the transactions contemplated by this
Agreement or change in applicable law, no event has occurred and no condition or
circumstance has existed that will, or could, result in a material increase in
the benefits under, or the expense of maintaining, any APC Plan or APC Benefit
Arrangement from the level of benefits or expense incurred for the most recently
concluded fiscal year thereof.
(c) Liabilities.
(i) Neither Sellers, PHL, APC nor any of its
Subsidiaries maintain or contribute to an APC Plan subject to Section 412 or
418B of the Code, or Section 302 of ERISA or which otherwise is a "multiemployer
plan" (as such term is defined in Section 4001(a)(3) of ERISA);
(ii) Neither APC nor any of its Subsidiaries
maintains any APC Plan or APC Benefit Arrangement which is a "group health plan"
(as such term is defined in Section 5000(b)(1) of the Code) that has not been
administered and operated, in all material respects, in compliance with the
applicable requirements of Sections 601, 701 and 702 of ERISA and Sections
4980B(f), 9801 and 9802 of the Code; and, neither APC nor any of its
Subsidiaries is subject to any liability for fines, penalties or loss of Tax
deduction as a result of such administration and operation;
(iii) Neither APC nor any of its Subsidiaries
maintains any APC Plan or APC Benefit Arrangement (whether qualified or
nonqualified within the meaning of Section 401(a) of the Code) providing for
retiree health and/or life benefits or having unfunded liabilities;
(iv) Neither APC nor any of its Subsidiaries
maintains any APC Plan which is an "employee welfare benefit plan" (as such term
is defined in Section 3(1) of ERISA) that has provided any "disqualified
benefit" (as such term is defined in Section 4976(b) of the Code) with respect
to which any excise tax could be imposed;
(v) No Person is entitled to, with respect to
employment with APC or any of its Subsidiaries, any benefit to be paid after
termination of employment (other than pursuant to an APC Plan that is
tax-qualified under Section 401(a) of the Code or pursuant to the group health
plan continuation coverage requirements under Section 4980B of the Code and Part
6 of Title I of ERISA);
(vi) Neither APC nor any of its Subsidiaries has
incurred any liability for any tax or excise tax arising under Section 4971,
4977, 4978, 4979, 4980, 4980B or 4980D of the Code; and, no event has occurred
and no condition or circumstance has existed that could give rise to any such
liability;
(vii) No Actions are pending, or, to the Knowledge of
Sellers, threatened, anticipated or expected to be asserted against any APC Plan
or APC Benefit Arrangement or the assets of any such APC Plan or APC Benefit
Arrangement (other than routine claims for benefits and appeals of denied
routine claims);
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(viii) No civil or criminal Action brought pursuant to
the provisions of Title I, Subtitle B, Part 5 of ERISA is pending, or, to the
Knowledge of Sellers, threatened, anticipated or expected to be asserted against
APC or any of its Subsidiaries or to the Knowledge of Sellers, any fiduciary of
any APC Plan or APC Benefit Arrangement, with respect to any APC Plan or APC
Benefit Arrangement; and
(ix) On or after January 1, 1993, no APC Plan or APC
Benefit Arrangement or, with respect to any APC Plan or APC Benefit Arrangement,
and to the Knowledge of Sellers, any fiduciary thereof, is or has been the
direct or indirect subject of an audit, investigation or examination by any
governmental or quasi-governmental agency; or, has entered into a settlement
with such agency.
(d) Contributions.
(i) Full payment has been made, or by the Closing
Date will have been made, of all material amounts which APC or any of its
Subsidiaries is required, under applicable law, under any APC Plan or APC
Benefit Arrangement or under any agreement relating to any APC Plan or APC
Benefit Arrangement to which APC or any of its Subsidiaries is a party, to have
paid as contributions thereto as of the last day of the most recent fiscal year
of such APC Plan or APC Benefit Arrangement ended prior to Closing;
(ii) All contributions by APC or any of its
Subsidiaries to an APC Plan or an APC Benefit Arrangement have been deducted, or
can be deducted, in the taxable year for which such contributions are made; and,
no such contribution deduction has been challenged or disallowed;
(iii) APC has made adequate provision for reserves to
make APC Plan or APC Benefit Arrangement contributions that have accrued or will
have accrued through Closing, but that have not been made because they are not
yet due under the terms of any APC Plan or APC Benefit Arrangement or related
agreements; and
(iv) Benefits under all APC Plans or APC Benefit
Arrangements are materially as represented in this Agreement and have not been
increased subsequent to the date as of which plan documents were provided or
made available to Buyer except as may be required by applicable law.
(e) Tax Qualification.
(i) Each APC Plan intended to be qualified under
Section 401(a) of the Code has been determined to be so qualified, as to design,
by the Internal Revenue Service. Each APC Plan intended to be tax-qualified is
qualified under Section 401(a) of the Code (and with respect to the APC's 401(k)
plan, Section 401(k) of the Code);
(ii) Each trust established in connection with any
APC Plan which is intended to be exempt from federal income taxation under
Section 501(a) of the Code continues
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to be exempt; and
(iii) Since the date of each most recent determination
referred to in this paragraph (e), to the Knowledge of Sellers, no event has
occurred and no condition or circumstance has existed that resulted or is likely
to result in the revocation of any such determination or that could adversely
affect the qualified status of any APC Plan or the exempt status of any such
related trust.
(f) Transactions. Neither APC nor any of its Subsidiaries
nor, to the Knowledge of Sellers, any of their respective directors, officers,
employees or other Persons who participate in the operation of any APC Plan or
APC Benefit Arrangement or related trust or funding vehicle, has engaged in any
transaction with respect to any APC Plan or APC Benefit Arrangement or breached
any applicable fiduciary responsibilities or obligations under Title I of ERISA
with respect to any APC Plan or APC Benefit Arrangement that would subject any
of them to a Tax, penalty or liability for prohibited transactions under ERISA
or the Code or would result in any claim being made under, by or on behalf of
any such APC Plan or APC Benefit Arrangement, by any Person with standing to
make such claim for which APC or its Subsidiaries would have a liability.
(g) Triggering Events.
(i) The execution of this Agreement and the
consummation of the transactions contemplated hereby, do not constitute a
triggering event under any APC Plan or APC Benefit Arrangement, policy,
arrangement, statement, commitment or agreement, whether or not legally
enforceable, which (either alone or upon the occurrence of any additional or
subsequent event) will or may result in any payment (whether of severance pay or
otherwise), acceleration, vesting or increase in benefits to any employee or
former employee or director of APC or any of its Subsidiaries; and
(ii) No APC Plan or APC Benefit Arrangement provides
for the payment of severance benefits upon the termination of employment of an
employee of APC or any of its Subsidiaries.
(h) Documents. Sellers have delivered or caused to be
delivered to Buyer or its counsel true and complete copies of all of the
following documents in connection with each APC Plan and APC Benefit
Arrangement, as applicable: (i) all APC Plans and APC Benefit Arrangements as in
effect on the date hereof, together with all amendments thereto, including, in
the case of any APC Plan or APC Benefit Arrangement not set forth in writing, a
written description thereof; (ii) all current summary plan descriptions and
summaries of material modifications; (iii) all current trust agreements,
declarations of trust and other documents establishing other funding
arrangements (and all amendments thereto and the latest financial statements
thereof); (iv) the most recent Internal Revenue Service determination letter
obtained with respect to each APC Plan or APC Benefit Arrangement intended to be
qualified under Section 401(a) of the Code or exempt under Section 501(a) of the
Code; (v) the annual report on Internal Revenue Service Form 5500-series for
each of the last three (3) years for each APC Plan or APC Benefit Arrangement
required to file such form; (vi) the most recently prepared financial
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statements for each APC Plan or APC Benefit Arrangement; and (vii) all
Contractual Obligations relating to each APC Plan or APC Benefit Arrangement,
including, without limitation, service provider agreements, insurance contracts,
annuity contracts, investment management agreements, subscription agreements,
participation agreements and record-keeping agreements.
3.14.3 Compensation of Employees. Set forth in the Sellers' Disclosure
Letter is an accurate and complete list for APC, showing the names of all
Persons employed by APC and its Subsidiaries who received more than $80,000 in
1998 cash compensation (including, without limitation, salary, commission and
bonus) and who are expected to be employed by APC or its Subsidiaries on the
Closing Date. Such list sets forth the present (1999) salary or hourly wage and
the total cash compensation in 1998.
3.14.4 Employment Agreements. Neither APC nor any of its Subsidiaries
is a party to or bound by (i) any written employment agreement, producer
agreement or similar arrangement providing annual cash compensation to an
individual in excess of $80,000, other than written agreements or arrangements
that may be terminated at any time by APC or its Subsidiaries, as the case may
be, upon no more than ninety (90) days' notice without penalty or other payment,
or any extension of any benefit or other coverage, or (ii) any employment
agreement or producer agreement that causes an employee to be other than an "at
will" employee.
Section 3.15. Environmental Matters.
(a) Neither APC nor any of its Subsidiaries is or has in the
past been in violation of Environmental Laws. Neither APC nor the Subsidiaries
of APC has received notice of any Action pending against it or such Subsidiaries
nor, to the Knowledge of Sellers, is there any basis for any Action or is any
Action threatened against APC or its Subsidiaries, in each case in respect of
(i) a violation by APC or any Subsidiary of APC of any Environmental Laws, or
(ii) the presence or release or threatened release into the environment of any
Hazardous Substance whether or not generated by APC or any Subsidiary of APC or
located at or about or emanating from or to a site included in the Owned Real
Property or any other facility, location, building or site currently or
heretofore owned, leased or otherwise used by APC or any Subsidiary of APC or
any predecessor entity of any of them.
(b) Except for matters that would not result in any material
Liability to APC and its Subsidiaries taken as a whole, no event has occurred or
condition exists or operating practice is being engaged in that is currently
contrary to any environmental law and that gives rise to any Liability or Losses
on the part of APC or any of its Subsidiaries (or, after the Closing, Buyer)
either at the present or at any future time (including, without limitation, any
obligation to conduct any remedial or monitoring work) under any Environmental
Laws or otherwise resulting from or relating to the handling, storage, use,
transportation or disposal of any Hazardous Substance by or on behalf of APC or
any Subsidiary of APC or any of their respective predecessors or otherwise.
(c) The Sellers have previously made available to Buyer true
and correct copies of all written reports and all other documents arising out of
environmental inspections, investigations, studies, audits, tests, reviews or
other analyses conducted by Sellers with respect
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to any Owned Real Property listed in the Sellers' Disclosure Letter or any real
property leased or otherwise used by APC or any of its Subsidiaries.
Section 3.16. Accounts Receivable. All accounts receivable of APC and
its Subsidiaries that are reflected on the APC Financial Statements (i) are
accurate and complete in all material respects, and (ii) represent or will
represent valid obligations arising from services actually performed in the
Ordinary Course of Business. None of such accounts receivable are subject to any
counterclaim or set-off except to the extent set forth on the Sellers'
Disclosure Letter.
Section 3.17. Litigation. Without regard to environmental matters which
are covered in Section 3.15 of this Agreement, there is no Action against APC or
any Subsidiary of APC, pending or, to the Knowledge of Sellers, threatened, with
respect to which APC or any of its Subsidiaries are or would reasonably be
expected to be parties. There is no Action pending or, to the Limited Knowledge
of Sellers, threatened, that seeks rescission of, seeks to enjoin the
consummation of, or otherwise relates to, this Agreement or any of the
transactions contemplated hereby. No Governmental Order specifically directed at
APC or any of its Subsidiaries has been issued which has had or could reasonably
be expected to have a Material Adverse Effect.
Section 3.18. Agents and Broker Relationships. Since February 28, 1999,
neither APC nor any of its Subsidiaries has had any agent, broker or insurance
carrier terminate its relationship with it so as to adversely affect its
business, reputation, income, property or financial condition, nor has any such
terminated Person taken or successfully solicited any accounts or customers of
APC or its Subsidiaries, and, to the Knowledge of Sellers, no broker, agent or
insurer with whom APC or any of its Subsidiaries currently does business intends
to terminate its relationship with APC or any Subsidiary of APC as of any date
or upon the happening of any event.
Section 3.19. Brokers. Except for Bear Stearns & Co., no broker,
finder, investment bank or banker or similar agent is entitled to any brokerage,
finder's or other fee, Compensation or reimbursement of expenses in connection
with the transactions contemplated by this Agreement based upon agreements or
arrangements made by or on behalf of (or the conduct of) Sellers, PHL, APC, any
Subsidiary of APC or any of their respective Affiliates. Sellers shall be solely
responsible for the payment of the fees and expenses of Bear Stearns & Co.
Section 3.20. Full Disclosure. No statement contained in any document,
certificate, or other writing furnished or to be furnished by PHL, Sellers, APC
or any of their Subsidiaries to Buyer pursuant to the provisions of this
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary, in the light of the
circumstances under which it was made, in order to avoid statements herein or
therein being misleading.
ARTICLE IIIA
Representations and Warranties of PHL
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PHL represents and warrants to Buyer and to Buyer's successors and
assigns as of the date hereof and as of the Closing Date (except to the extent
that PHL's representations and warranties expressly speak as of a specified
earlier date) as follows:
Section 3A.1. Corporate Matters.
3A.1.1. Organization and Standing; Power and Authority.
(a) PHL is a life insurance company duly organized, validly
existing and in good standing under the laws of the State of New York and has
all requisite power and authority, corporate and otherwise, to enter into this
Agreement and the Closing Agreements to which it is intended to be a party as
reflected on the signature page thereof, to carry out and perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby.
(b) Holdings is a corporation duly organized, validly
existing and in good standing under the laws of the State of Connecticut and has
all requisite power and authority, corporate and otherwise, to enter into this
Agreement and each of the Closing Agreements to which it is intended to be a
party as reflected on the signature page thereof, to carry out and perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby.
3A.1.2. Authorization and Enforceability.
(a) This Agreement has been duly authorized, executed and
delivered by PHL and is Enforceable against PHL. Each of the Closing Agreements
to which PHL or any of its Affiliates is a party as reflected on the signature
page thereof has been duly authorized, and, on or before the Closing Date, will
be duly executed and delivered by PHL or its applicable Affiliate and be
Enforceable against PHL or such Affiliate, as the case may be.
(b) This Agreement has been duly authorized, executed and
delivered by Holdings and is Enforceable against Holdings. Each of the Closing
Agreements to which Holdings or any of its Affiliates, including APC, is a party
as reflected on the signature page thereof has been duly authorized, and, on or
before the Closing Date, will be duly executed and delivered by Holdings or its
applicable Affiliate and be Enforceable against Holdings or such Affiliate, as
the case may be.
3A.1.3. Non-Contravention. No approval, consent, waiver, authorization
or other order of, and no filing, registration, qualification or recording with,
any Governmental Authority or any other Person is required to be obtained or
made by or on behalf of PHL in connection with the execution, delivery or
performance of this Agreement and the consummation of the transactions
contemplated hereby, except for (a) satisfaction of the requirements of the HSR
Act, and (b) the items listed in Section 3A.1.3 of the Sellers' Disclosure
Letter. Specifically, and not by way of limitation, all Required Filings are set
forth in the Sellers' Disclosure Letter. Neither the execution, delivery and
performance of this Agreement nor the consummation of any of the transactions
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contemplated hereby (including, without limitation, the execution, delivery and
performance of the Closing Agreements) does or will constitute, result in or
give rise to (i) a breach or violation or default under any Legal Requirement
applicable to PHL (assuming the accuracy of the representations and warranties
of Buyer in Article IV hereof), or (ii) a breach of or a default under any
Charter or Bylaws provision of PHL.
3A.1.4. Title to APC Shares. All of the APC Shares owned by Holdings
are held free and clear of any Liens (including, without limitation,
restrictions on transfer or voting).
Section 3A.2. Financial Information of Holdings. Holdings has
previously provided Buyer with a true and complete copy of the unaudited
consolidated balance sheet of Holdings and its Subsidiaries as of December 31,
1998 (the "Holdings Balance Sheet"). The Holdings Balance Sheet presents fairly,
in all material respects, the consolidated financial position of Holdings and
its Subsidiaries as of December 31, 1998.
ARTICLE IIIB
Representations and Warranties of Vaughan
Except as disclosed, or as qualified by information set forth in the
Sellers' Disclosure Letter, Vaughan represents and warrants to Buyer as of the
date hereof and as of the Closing Date (except to the extent that Vaughan's
representations and warranties expressly speak as of a specified earlier date)
as follows:
Section 3B.1. Matters Relating to Vaughan.
3B.1.1. Enforceability. This Agreement is, and each of the Closing
Agreements to which Vaughan is a party as reflected on the signature page
thereof, will be when it is executed and delivered by Vaughan, Enforceable
against Vaughan.
3B.1.2. Title to APC Shares. Vaughan is the beneficial and record
holder of, and has good and valid title to, 882 Class B shares of the APC
Shares, which is fifteen percent (15%) of the issued and outstanding shares of
the capital stock of APC, free and clear of any Liens (including, without
limitation, restrictions on transfer, except as provided in the Shareholders'
Agreement with APC dated April 13, 1993, which shall be terminated effective as
of the Closing Date).
ARTICLE IV
Representations and Warranties of Buyer
Except as disclosed, or as qualified by information set forth in the
Buyer's disclosure letter dated of even date herewith and delivered to Sellers
concurrently herewith (the "Buyer Disclosure Letter"), Buyer represents and
warrants to Sellers as of the date hereof and as of the Closing Date
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(except to the extent that Buyer's representations and warranties expressly
speak as of a specified earlier date) as follows:
Section 4.1. Corporate Matters.
4.1.1. Incorporation and Authority of Buyer. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia and has all requisite power and authority, corporate
and otherwise, to enter into this Agreement and each of the Closing Agreements
to which it is intended to be a party as reflected on the signature page
thereof, to carry out and perform its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby.
4.1.2. Organization, Power and Standing. Each of the Subsidiaries of
Buyer is a corporation duly incorporated, validly existing and in good standing
under the jurisdiction of its incorporation or organization (to the extent
recognized in such jurisdiction of incorporation or organization). Each of Buyer
and its Subsidiaries has all requisite power and authority, corporate and
otherwise, to carry on its business as currently conducted, and, in the case of
the Buyer, to consummate the transactions contemplated hereby. Each of Buyer and
its Subsidiaries is duly qualified or licensed to do business as a foreign
corporation or otherwise, and is in good standing as such (to the extent such
concept is recognized in such jurisdiction), in each jurisdiction where the
nature of Buyer's or such Subsidiaries' activities or their ownership or leasing
of property requires such qualification or license, except to the extent that
the failure to be so qualified or licensed would not have a Material Adverse
Effect on Buyer.
4.1.3. Authorization and Enforceability. This Agreement has been duly
authorized, executed and delivered by Buyer, and is Enforceable against Buyer.
Each of the Closing Agreements to which Buyer is a party as reflected on the
signature page thereof has been duly authorized, and, on or before the Closing
Date, will be duly executed and delivered by Buyer and will be Enforceable
against Buyer.
4.1.4. Non-Contravention. No approval, consent, waiver, authorization
or other order of, and no filing, registration, qualification or recording with,
any Governmental Authority or any other Person is required to be obtained or
made by or on behalf of Buyer in connection with the execution, delivery or
performance of this Agreement or any of the Closing Agreements and the
consummation of the transactions contemplated hereby and thereby, except for (i)
satisfaction of the requirements of the HSR Act and (ii) the items listed in the
Buyer Disclosure Letter. Except as set forth in the Buyer Disclosure Letter,
neither the execution, delivery and performance of this Agreement nor the
consummation of any of the transactions contemplated hereby (including, without
limitation, the execution, delivery and performance of the Closing Agreements
and performance by Buyer of Buyer's obligations in respect of the Buyer Common
Stock and Subordinated Debentures in accordance with its terms) does or will
constitute, result in or give rise to (i) a breach or violation or default under
any Legal Requirement applicable to Buyer or any of Buyer's Subsidiaries
(assuming the accuracy of the representations and warranties of PHL and Sellers
in Articles III, IIIA and IIIB hereof), (ii) a breach of or a default under any
Charter or Bylaws provision of Buyer or any of Buyer's Subsidiaries, (iii) the
acceleration of the time for performance of any obligation under any Contractual
Obligation of Buyer or any of Buyer's
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Subsidiaries, (iv) the imposition of any Lien upon or the forfeiture of any
asset of Buyer or any of Buyer's Subsidiaries, or (v) a breach of or a default
under any material Contractual Obligation of Buyer or any of Buyer's
Subsidiaries.
4.1.5. Capitalization. As of March 26, 1999, 12,157,975 shares of Buyer
Common Stock were issued and outstanding. Each outstanding share of the Buyer
Common Stock is duly authorized, validly issued, fully paid and non-assessable.
There is no Contractual Obligation or Charter or Bylaw provision that obligates
Buyer to issue, purchase or redeem, or make any payment in respect of any Equity
Security.
4.1.6. Charter and Bylaws. Buyer has heretofore made available to
Sellers true and complete copies of the Charter and Bylaws of Buyer, in the form
currently in effect and as will be in effect immediately prior to Closing.
Section 4.2. Financial Statements.
4.2.1. Financial Information. Buyer has previously made available to
Sellers true and complete copies of the audited consolidated balance sheets of
Buyer as of December 31, 1998, 1997 and 1996 and the related audited
consolidated statements of income, stockholders' equity and cash flows of Buyer
for such fiscal years ended December 31, 1998, 1997 and 1996 (collectively, the
"Buyer Financial Statements").
4.2.2. Character of Financial Information. The Buyer Financial
Statements, including the notes thereto, were prepared in accordance with GAAP
consistently applied throughout the periods specified therein and present
fairly, in all material respects, the consolidated financial position and
results of operations of the Buyer and its Subsidiaries for the periods
specified therein.
Section 4.3. Change in Condition.
Except for the matters set forth in the Buyer Disclosure Letter, since
December 31, 1998:
(a) The business of the Buyer has been conducted only in the
Ordinary Course of Business (except as may be otherwise required by the terms of
this Agreement);
(b) Neither the Buyer nor any of its Subsidiaries has
(except as required or otherwise contemplated by this Agreement):
(i) made any change in its authorized or issued
capital stock or granted or issued any option, purchase right, convertible
stock, other sort of security or registration right, purchased, redeemed or
retired any shares or other securities, or declared or made any Distribution;
(ii) amended its Charter or Bylaws;
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(iii) made or agreed to make any material change in
its customary methods of accounting practices; or
(iv) instituted, settled or agreed to settle any
material Action.
(c) There has been no amendment of any material provision of
any Equity Security of the Buyer other than as contemplated by this Agreement
and the Closing Agreements; and
(d) No Material Adverse Effect has occurred with respect to
Buyer and its Subsidiaries.
Section 4.4. Compliance with Laws. Except as set forth in the Buyer
Disclosure Letter, the Buyer's business as heretofore, and currently being,
operated has not been, and is not, in violation of, nor is Buyer or any
Subsidiary of Buyer in default under, any Legal Requirement, except for such
violations or defaults as have not had and will not have individually or in the
aggregate a Material Adverse Effect on Buyer.
Section 4.5. Litigation. Except as set forth in the Buyer Disclosure
Letter, there is no Action pending or, to the Knowledge of Buyer, threatened
with respect to Buyer or any of its Subsidiaries, which could reasonably be
expected to have a Material Adverse Effect on Buyer. There is no Action pending
or, to the Knowledge of Buyer, threatened, that seeks rescission of, seeks to
enjoin the consummation of, or otherwise relates to, this Agreement or any of
the transactions contemplated hereby and that could reasonably be expected to
have a Material Adverse Effect on Buyer or a material adverse effect on Buyer's
ability to consummate the transactions contemplated hereby. No Governmental
Order specifically directed at Buyer or any of Buyer's Subsidiaries has been
issued which has had or could reasonably be expected to have a Material Adverse
Effect on Buyer.
Section 4.6. Financing. Buyer has received and delivered to Sellers a
commitment letter with respect to fully underwritten debt financing from First
Union National Bank and First Union Capital Markets Corp. ("Lead Lender") dated
as of March 15, 1999 (the "Commitment Letter"), which is in an amount sufficient
to enable Buyer to pay the Cash Consideration. The terms of such letter have not
been altered or amended by Buyer or Lead Lender in a manner that would have a
Material Adverse Effect upon Buyer's ability to perform its obligations under
this Agreement and such letter remains in full force and effect (unless
superseded by definitive credit documentation that would not have a Material
Adverse Effect upon Buyer's ability to perform its obligations under this
Agreement).
Section 4.7. Buyer SEC Documents. Buyer has filed all required reports,
schedules, forms, statements and other documents with the Securities and
Exchange Commission since January 1, 1998 (collectively, the "Buyer SEC
Documents"). As of their respective dates, the Buyer SEC Documents complied as
to form, in all material respects, with the requirements of the Securities Act
of 1933, as amended (the "Securities Act") and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations promulgated
thereunder applicable to the Buyer SEC Documents, and none of the Buyer SEC
Documents, as of their
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respective filing dates, contained any untrue statements of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
Section 4.8. Brokers. Except for Davenport & Company, LLC, no broker,
finder, investment bank or similar agent is entitled to any brokerage, finder's
or other fee, Compensation or reimbursement of expenses in connection with the
transactions contemplated by this Agreement based upon agreements or
arrangements by or on behalf of (or the conduct of) Buyer or its Affiliates.
Buyer shall be solely responsible for the payment of the fees and expenses of
Davenport & Company, LLC.
ARTICLE V
Certain Covenants of the Parties
Section 5.1. Access to Information of Buyer. Prior to the Closing,
Buyer shall cause its management to be available to Sellers and their
representatives and advisors at such times, and from time to time, as Sellers
may reasonably request in connection with the transactions contemplated hereby.
Buyer will cause to be delivered to Sellers as soon as is practicable such
additional information and copies of documents, books and records relating to
Buyer as may be reasonably requested by Sellers or their respective
representatives and advisors, and all financial statements (audited and
unaudited) of Buyer and its Subsidiaries that are prepared prior to the Closing
Date. All financial statements prepared by or on behalf of Buyer after the date
hereof shall be included within the meaning of the term Buyer Financial
Statements for all purposes of this Agreement from and after their respective
dates.
Section 5.2. Access to Premises and Information of APC. Prior to the
Closing, Sellers will, and will cause APC and its Subsidiaries to, permit Buyer
and its prospective lenders listed in the Buyer Disclosure Letter (which shall
execute appropriate confidentiality agreements reasonably acceptable to PHL),
and their respective representatives and advisors, to have full access to their
premises and documents, books and records and to make copies at their expense
during APC's normal business hours of such financial and operating data and
other information with respect to APC and its Subsidiaries as Buyer, such
lenders, or any of their representatives and advisors shall reasonably request;
provided, however, that Sellers shall not be required to provide access to, or
copies of, the portions of any documents, books and records or other data that
contain information relating solely to entities other than APC and its
Subsidiaries. In addition, Sellers shall cause the management of APC and its
Subsidiaries to be available to Buyer and its prospective lenders at such times
during APC's normal business hours, and from time to time, as Buyer and its
prospective lenders may reasonably request in connection with the transactions
contemplated hereby and their review of the APC Business. Sellers will cause to
be delivered as soon as is practicable such additional information and copies of
documents, books and records relating to APC and its Subsidiaries or the APC
Business as may be reasonably requested by Buyer, such lenders, or any of their
representatives and advisors, and all financial statements, audited and
unaudited, of APC or its Subsidiaries that are prepared prior to the Closing
Date. All financial statements so provided to the Buyer after the date hereof
shall be included
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within the meaning of the term APC Financial Statements for all purposes of this
Agreement from and after their respective dates.
Section 5.3. Confidentiality Letter. The provisions of that certain
letter agreement between Buyer and Holdings dated October 27, 1998 (the
"Confidentiality Agreement") are hereby confirmed and remain in effect and are
acknowledged to be Enforceable with respect to Buyer, PHL, Sellers, APC and each
of their Subsidiaries as fully as if each of them had been an original signatory
and to apply to all documents and materials disclosed hereunder or in the due
diligence review of any party in connection with the transactions contemplated
hereunder; provided, however, that the Confidentiality Agreement is hereby
amended so that (i) it shall terminate with respect to the obligations of Buyer
thereunder upon the consummation of the Closing and (ii) it shall not prohibit
any retention of records or disclosure made in connection with the enforcement
of any right or remedy relating to this Agreement or the transactions
contemplated hereby.
Section 5.4. Operation of APC Business Prior to the Closing Date.
(a) On and prior to the Closing Date, except as otherwise
required by this Agreement, Sellers will cause APC to conduct the APC Business
only in the Ordinary Course of Business, and Sellers will use their reasonable
commercial efforts to maintain the value of the APC Business as a going concern
and the relationships of APC and its Subsidiaries with insurance carriers,
customers, suppliers, vendors, employees, producers, agents, referral sources
and Governmental Authorities. Sellers agree to cause APC and its Subsidiaries to
make capital expenditures only in the Ordinary Course of Business up to the
Closing Date and prior to the Closing Date and to obtain the written consent of
the Buyer prior to any capital expenditure which is individually equal to or
greater than $50,000 or any capital expenditures in the aggregate of more than
$100,000, whether or not in the Ordinary Course of Business. Without in any way
limiting the generality of the foregoing, on and prior to the Closing Date,
Sellers will cause APC and its Subsidiaries to refrain from doing any of the
following without the prior written consent of Buyer:
(i) enter into any transaction with PHL, Sellers or
any of their Affiliates (other than APC or its Subsidiaries) except in the
Ordinary Course of Business or with respect to Affiliate Debt as set forth in
the Sellers' Disclosure Letter;
(ii) pay or accrue any Compensation other than in the
Ordinary Course of Business or increase any Compensation of any officer or
employee other than such increases in Compensation for individual employees as
may be made in the Ordinary Course of Business;
(iii) make any Distribution other than (w) those
required in connection with the dissolution of Poor, Bowen, Bartlett & Kennedy
of PA, Inc., (x) the distributions set forth in the Sellers' Disclosure Letter
pursuant to Section 3.3(b); (y) distributions of cash or of any receivable
constituting Affiliate Debt in connection with the repayment or cancellation of
Affiliate Debt; and (z) distributions or contributions in connection with an
increase in or the repayment or cancellation (in whole or in part) of Debt or
intercompany advances between APC and any of its respective wholly-owned
Subsidiaries;
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(iv) incur any Debt except in the Ordinary Course of
Business or intercompany advances between APC and any of its respective
wholly-owned Subsidiaries, except in the Ordinary Course of Business or, in the
case of Lees Preston Fairy (Holdings), Ltd., such Subsidiary may borrow, or
enter into an agreement to borrow, from APC an amount not to exceed Five Hundred
Thousand Dollars ($500,000) in order to facilitate the execution and
consummation of a Profit-Sharing Agreement with International Jewelers Fine Art
& Insurance Services Inc. ("IJB"), or incur any Lien except in the Ordinary
Course of Business;
(v) amend the Charter or Bylaws of APC or any
Subsidiary of APC other than the Articles of Association of Lees Preston Fairy
(Holdings), Ltd.;
(vi) allow any material permit or license to lapse or
terminate or fail to renew any material permit or license in accordance with
reasonably prudent business practice;
(vii) fail to operate the APC Business and maintain
APC's and its Subsidiaries' books, accounts and records in the Ordinary Course
of Business and maintain in good repair, ordinary wear and tear excepted, APC's
and its Subsidiaries' business premises, fixtures, machinery, furniture and
equipment in a manner consistent with past practice;
(viii) engage any new employee of APC or any of its
Subsidiaries for a salary in excess of $100,000 per annum;
(ix) enter into, amend in any material respect,
extend, terminate or permit any renewal notice period or option to lapse with
respect to any Lease, Lease-Out or any other Contractual Obligation that
contains either consideration to be given or performed by APC or any of its
Subsidiaries of a value exceeding $50,000 per year or a term exceeding one year
(except for the making of capital expenditures consistent with the opening
paragraph of this Section 5.4);
(x) purchase, or otherwise acquire, or enter into a
lease of any real property except for Lease renewals in the Ordinary Course of
Business;
(xi) issue any capital stock or other securities or
enter into any amendment of any material term of any outstanding security of APC
or any of its Subsidiaries, except that Lees Preston Fairy (Holdings), Ltd. may
issue or commit to issue securities if and to the extent required in order to
consummate its current merger discussions and may grant the option contemplated
under the proposed Profit-Sharing Agreement with IJB;
(xii) take any of the actions specified in any of
subsections (a) through (d) of Section 3.3; or
(xiii) consent or agree to do any of the foregoing.
Section 5.5. Certain Notices.
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(a) On and prior to the Closing Date, Sellers will promptly
upon becoming aware thereof give Buyer written notice of any material
development that results in or constitutes a Material Adverse Effect with
respect to the APC Business, and any material breach of or inaccuracy in any
representation or warranty of PHL or Sellers contained in this Agreement.
(b) On and prior to the Closing Date, Buyer will promptly
upon becoming aware thereof give Sellers written notice of any material
development affecting Buyer, or the financial condition of Buyer and any
material breach of or inaccuracy in any representation or warranty of Buyer
contained in this Agreement.
Section 5.6. Preparation for Closing. Each party will use its best
efforts to bring about the timely fulfillment of each of the conditions
precedent to the obligations of the other parties hereto set forth in this
Agreement. Without limiting the generality of the foregoing, the parties shall
take the actions set forth below in this Section 5.6.
5.6.1. HSR Filing. Promptly upon execution and delivery of this
Agreement, each of PHL and Buyer will prepare and file, or cause to be prepared
and filed, with the appropriate Governmental Authorities, a notification with
respect to the transactions contemplated by this Agreement pursuant to the HSR
Act. Each of PHL and Buyer will promptly provide all additional information
requested, and take all other actions necessary or appropriate, to comply with
notification requirements under the HSR Act and to cause the expiration of all
waiting periods under the HSR Act.
5.6.2. Closing Agreements. Each of PHL and Sellers will enter into each
of the Closing Agreements to which it is intended to be a party, and PHL will
cause each of its Subsidiaries and Affiliates which is intended to be a party to
any Closing Agreement to enter into each Closing Agreement to which such Person
is intended to be a party. Buyer will enter into each of the Closing Agreements
to which it is intended to be a party.
Section 5.7. Tax Matters.
5.7.1. Section 338(h)(10) Election. Sellers and Buyer (i) shall join in
making timely, effective and irrevocable elections under Section 338(h)(10) of
the Code and any corresponding elections under state, local, or foreign tax law
that have substantially the same effect as an election under Section 338(h)(10)
of the Code (collectively, the "Section 338(h)(10) Elections") with respect to
APC and each of the Subsidiaries listed on attached Schedule 5.7.1 (the "APC
Electing Subsidiaries"), and (ii) shall file such elections in accordance with
applicable regulations. Sellers and Buyer agree to cooperate in all respects for
the purpose of effectuating timely and effective Section 338(h)(10) Elections,
including, without limitation, the execution and filing of any forms or returns.
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5.7.2. Tax Indemnification.
(i) Sellers, jointly and severally, shall be liable for and
shall pay (and shall indemnify and hold Buyer harmless from and against) (x) all
Taxes with respect to APC and its Subsidiaries for any Pre-Closing Tax Period
(including, without limitation, any Taxes attributable to the Section 338(h)(10)
Election) but only to the extent the amount payable exceeds the amount accrued
therefor in the Closing Date Balance Sheet adjusted as provided in Section
5.7.2(ii) below and (y) any and all federal Income Taxes of the Affiliated Group
of which Holdings is a member imposed on APC or any of its Subsidiaries pursuant
to Section 1.1502-6 of the Treasury Regulations, in each case incurred or
suffered by Buyer, any of its Affiliates or, effective upon the Closing, APC or
any of its Subsidiaries (the sum of (x) and (y) being referred to as a "Tax
Loss"). For purposes of this Section 5.7, (A) the term "Pre-Closing Tax Period"
shall mean all taxable periods ending on or before the close of the Closing Date
and the portion ending at the close of the Closing Date of any taxable period
that includes (but does not end on) the Closing Date, and (B) the term
"Post-Closing Tax Period" shall mean all taxable periods that begin on or after
the day following the Closing Date and the portion beginning after the Closing
Date of any taxable period that includes (but does not end on) the Closing Date.
In the case of a taxable period that includes (but does not end on) the Closing
Date, the Tax attributable to the Pre-Closing Tax Period shall be the
responsibility of Sellers (and not APC and its Subsidiaries) and the Taxes
attributable to the Post-Closing Tax Period shall be the responsibility of Buyer
and APC and its Subsidiaries. Buyer shall be liable (and shall indemnify and
hold Sellers harmless from and against) any Taxes attributable to the
Post-Closing Tax Period.
(ii) For purposes of this Section 5.7.2, in the case of any
Taxes that are imposed on a periodic basis and are payable for a Tax period that
includes (but does not end on) the Closing Date, the portion of such Tax related
to the portion of such Tax period ending on the Closing Date shall (x) in the
case of any Taxes other than Taxes based upon or related to income, sales, gross
receipts, wages, capital expenditures or expenses, be deemed to be the amount of
such Tax for the entire Tax period multiplied by a fraction, the numerator of
which is the number of days in the Tax period ending on the Closing Date and the
denominator of which is the number of days in the entire Tax period, and (y) in
the case of any Tax based upon or related to income, sales, gross receipts,
wages, capital expenditures or expenses, be deemed equal to the amount which
would be payable if the relevant Tax period ended on the Closing Date. In the
case of Income Taxes described in the preceding sentence, if either Buyer or
Sellers are adversely affected (as a consequence of an increase in liability or
a reduction of refund or other Tax attribute) that would have been available to
it if the relevant tax period had ended on the Closing Date, and the other party
is benefited from such circumstance, the party benefited shall reimburse the
party adversely affected to the extent of the benefit realized. In the event the
Closing occurs on a date other than the date of the Closing Date Balance Sheet,
for purposes of this Section 5.7.2 only, the amount accrued for Taxes in the
Closing Date Balance Sheet shall be adjusted to reflect any increase or decrease
in Taxes with respect to APC and its Subsidiaries attributable to the operation
of APC and it Subsidiaries in the Ordinary Course of Business from the date of
the Closing Date Balance Sheet through the Closing Date determined in a manner
consistent with prior practices without any change in an election or accounting
method. Such adjustment shall not include any Taxes attributable to an
"extraordinary transaction" as such term is defined in Section
1.1502(b)(2)(ii)(C) of the Treasury Regulations.
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(iii) Any payment pursuant to this Section 5.7.2 shall be made
(x) if reflected on a Tax Return, contemporaneously with the filing of such Tax
Return and (y) in all other cases, not later than thirty (30) days after receipt
by Sellers or Buyer, as the case may be, of written notice from Buyer or Sellers
stating that any Tax Loss has been paid by Buyer or Sellers, any of its
Affiliates or, effective upon the Closing, APC or any Subsidiary of APC, and the
amount thereof and of the indemnity payment requested; provided, however, no
payment shall be made until the procedures set forth in Section 5.7.2(ii) and
5.7.5(iii) have been complied with.
(iv) If any claim or demand for Taxes in respect of which
indemnity may be sought pursuant to this Section 5.7.2 is asserted in writing
against Buyer, any of its Affiliates or, effective upon the Closing, APC or any
Subsidiary of APC, Buyer shall promptly notify PHL and Sellers of such claim or
demand within sufficient time that would allow Sellers to timely respond to such
claim or demand, and shall give PHL and Sellers such information with respect
thereto as they may reasonably request. PHL and Sellers may discharge, at any
time, their indemnification obligations under this Section 5.7.2 by paying to
Buyer the amount of the applicable Tax Loss, calculated on the date of such
payment. PHL and Sellers may, at their own expense, participate in and, upon
notice to Buyer, assume the defense of any such Action (including any Tax
audit). If PHL or Sellers assume such defense and if the relevant Action relates
to a taxable period that includes (but does not end on) the Closing Date, Buyer
shall have the right (but not the duty) to participate in the defense thereof to
the extent it relates to Taxes for which Buyer is not entitled to
indemnification hereunder and to employ counsel, at its own expense, separate
from the counsel employed by PHL or Sellers. Whether or not PHL or Sellers
choose to defend or prosecute any Action, all of the parties hereto shall
cooperate in the defense or prosecution thereof.
(v) Except with respect to Taxes described in clause (y) of
Section 5.7.2(i), Buyer shall be liable for any Taxes pertaining to any
Post-Closing Tax Period.
5.7.3. Tax Sharing Agreements. Except as provided below in this Section
5.7.3, all Tax sharing agreements or similar agreements with respect to or
involving APC and its Subsidiaries shall be terminated as of the Closing Date
and, after the Closing Date, APC and its Subsidiaries shall not be bound thereby
or have any liability thereunder. Notwithstanding the foregoing, The Tax
Allocation Agreement between PHL and its Subsidiaries, dated November 10, 1994,
and the Connecticut Tax Allocation Agreement between Holdings and its
Subsidiaries, dated August 25, 1993, shall survive with respect to the liability
of APC and its Subsidiaries to Holdings or PHL, or the liability of Holdings or
PHL to APC and its Subsidiaries, as the case may be, in connection with any
consolidated federal income Tax Returns of the PHL Affiliated Group or any
combined Connecticut income Tax Return of the Holdings Affiliated Group for any
Pre-Closing Tax Period.
5.7.4. Transfer Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be borne equally by
Sellers and Buyer.
5.7.5. Return Filings, Refunds and Credits.
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(i) PHL shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns of APC and its Subsidiaries for all Tax
periods ending on or before the Closing Date and shall be responsible for
remitting all Taxes reflected on such Tax Returns. Copies of all such Tax
Returns (or the relevant portion thereof relating to APC and its Subsidiaries)
shall be furnished to Buyer.
(ii) Buyer shall prepare or cause to be prepared and file or
cause to be filed on a timely basis all Tax Returns with respect to APC and its
Subsidiaries for taxable periods including (but not ending on) the Closing Date
(taking into account extensions) and shall be responsible for remitting all
Taxes reflected on such Tax Returns. If requested by PHL or Sellers, Buyer shall
furnish copies of all such Tax Returns prepared by Buyer that are prepared for a
Pre-Closing Tax Period.
(iii) Sellers and Buyer shall reasonably cooperate, and shall
cause their respective Affiliates, agents, auditors, representatives, officers
and employees reasonably to cooperate, in preparing and filing all Tax Returns
(including amended returns and claims for refund), including maintaining and
making available to each other all records reasonably required in connection
with Taxes and in resolving all disputes and audits with respect to all taxable
periods relating to Taxes. Buyer, PHL and Sellers agree to retain or cause to be
retained all books and records pertinent to APC and its Subsidiaries until the
applicable period for assessment under applicable law (giving effect to any and
all extensions or waivers) has expired, and to abide by or cause the abidance
with all record retention agreements entered into with any taxing authority.
Buyer, PHL and Sellers shall cooperate with each other in the conduct of any
audit or other proceedings involving APC or any Subsidiary of APC for any Tax
purposes and each shall execute and deliver such powers of attorney and other
documents as are necessary to carry out the intent of this subsection. Any Tax
Return prepared by PHL pursuant to Section 5.7.5(i) for which PHL intends to
seek reimbursement from Buyer or, effective after Closing, APC or any of its
Subsidiaries, for any portion of the Taxes reflected on such Tax Return or any
Tax Return prepared by, or at the direction of, Buyer pursuant to Section
5.7.5(ii) for which Buyer intends to seek indemnification from Sellers for any
portion of the Taxes reflected on such Tax Return shall be prepared in a manner
consistent with past practice and without a change of any election or any
accounting method and shall be submitted to PHL or Buyer, as the case may be, in
sufficient time to permit a reasonable review prior to the due date (including
extensions) of such Tax Return. Buyer or PHL, as the case may be, shall have the
right to review all work papers and procedures used to prepare any such Tax
Return. If Buyer or PHL, as the case may be, within twenty (20) Business Days
after delivery of any such Tax Return, notifies the other party in writing that
it objects to any items in such Tax Return, the parties shall proceed in good
faith to resolve the disputed items and, if they are unable to do so within ten
(10) Business Days, the disputed items shall be resolved (within a reasonable
time, taking into account the deadline for filing such Tax Return) with respect
to (i) items for which PHL or Buyer is solely liable by reference to such
party's treatment and (ii) all other items by the Alternative Accountants. Upon
resolution of all disputed items, the relevant Tax Return shall be adjusted to
reflect such resolution and shall be binding upon the parties without further
adjustment. The costs, fees and expense of such Alternative Accountants shall be
borne equally by PHL and Buyer.
(iv) With respect to Tax refunds pertaining to APC or its
Subsidiaries for any
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tax period or portion thereof ending on or before the Closing Date: (a) if and
to the extent such refund is less than or equal to the corresponding asset
reflected on the Closing Date Balance Sheet, APC shall be entitled to retain the
entire amount; and (b) if and to the extent such refund exceeds the asset so
reflected, Holdings shall be entitled to such excess amount.
(v) If and to the extent any Liability reflected on the
Closing Date Balance Sheet for Taxes proves to have been overstated, Buyer shall
pay Holdings cash in the amount of such overstatement.
5.7.6. Allocation of Consideration. In connection with the Section
338(h)(10) Elections, Holdings and Buyer shall act together in good faith to
determine and agree upon: (i) the amount of the "adjusted grossed-up basis" (the
"AGUB") of the APC Shares and the shares of each of the Electing Subsidiaries
(within the meaning of Treasury Regulations Section 1.338(b)-1(c)) and (ii) the
proper allocations (the "Allocations") of the AGUB of the APC Shares among the
assets of APC, and the AGUB of the shares of the APC Electing Subsidiaries among
the assets of the APC Electing Subsidiaries, including, without limitation,
intangibles, in accordance with the IRC and the Treasury Regulations promulgated
thereunder. Unless otherwise agreed by the parties, the AGUB of the APC Shares,
allocated to the APC Electing Subsidiaries shall be allocated among the APC
Electing Subsidiaries based on their 1998 operating revenue. For this purpose,
the operating revenues shall be the sum of commissions, fees and contingent
payments less outside brokers' expenses, as reflected on the unaudited
consolidated income statements of APC and its Subsidiaries included in the
Seller Disclosure Letter. Notwithstanding the foregoing, the calculations of the
AGUB and the Allocations which the parties shall agree upon pursuant to this
Section shall not include the respective investment banking, legal, accounting
and other fees or costs incurred by each of Buyer and Sellers as a result of the
transactions contemplated by this Agreement ("Transaction Costs"). Holdings and
each APC Electing Subsidiary will calculate the gain or loss, if any, resulting
from the Section 338(h)(10) Elections in a manner consistent with the
Allocations and the amount of the APC Electing Subsidiary AGUB and will not take
any position inconsistent with the Section 338(h)(10) Elections, the Allocations
or the amount of the AGUB in any Tax Return or otherwise, except as otherwise
required by any final determination of a proposed adjustment by a taxing
authority; provided, however, that Holdings will be entitled to take into
account its Transaction Costs when calculating such gain or loss. Buyer will
allocate the AGUB of the APC Shares among the assets of APC and the AGUB of the
APC Electing Subsidiaries among the assets of the APC Electing Subsidiaries in a
manner consistent with the Allocations and will not take any position
inconsistent with the Section 338(h)(10) Elections, the Allocations or the
amount of the AGUB in any Tax Return or otherwise, except as otherwise required
by any final determination of a proposed adjustment by a taxing authority;
provided, however, that Buyer will be entitled to add its Transaction Costs to
the AGUB of the APC Shares for purposes of allocating such AGUB among the APC
Assets.
Section 5.8. Expenses of Transaction; Accounts.
5.8.1. Transaction Costs of Sellers. Except to the extent specifically
otherwise provided herein, Holdings shall pay all financial advisory, legal,
accounting and other fees and expenses incurred by Holdings, APC or any of their
Subsidiaries in connection with the transactions contemplated by this Agreement
other than normal salaries, benefits and expenses of APC
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personnel, and Vaughan shall pay all such fees and expenses incurred by him in
connection with the transactions contemplated by this Agreement; provided,
however, that with respect to APC and its Subsidiaries, Holdings shall pay only
fees and expenses incurred prior to and on the Closing Date.
5.8.2. Transaction Costs of Buyer. Except to the extent specifically
otherwise provided herein, Buyer shall bear all financial advisory, legal,
accounting and other fees and expenses incurred by Buyer in connection with the
transactions contemplated by this Agreement and all such fees and expenses
incurred by APC or its Subsidiaries from and after the Closing Date.
5.8.3. Accounts. Subject to the provisions of Section 3.8, after the
Closing Date, all monies and bank or other depository accounts arising out of,
relating to or established for the APC Business, APC or any Subsidiary of APC
shall be held by, and accessible only to, Buyer, APC or such Subsidiary of APC.
Section 5.9. Books and Records; Personnel.
(a) Sellers acknowledge and agree that from and after the
Closing Date, APC will be entitled to own and possess, subject to the next
succeeding sentence, all documents, books, records, agreements and financial
data of any sort relating to APC, as the case may be, its Subsidiaries or the
APC Business. Sellers agree to deliver and cause their Affiliates to deliver,
not later than immediately following the Closing, all such books and records in
their possession to APC, as appropriate, or, to the extent such books and
records are not readily separable from the books and records of Holdings or any
of its Affiliates relating to their businesses other than the APC Business, true
and complete copies of such books and records.
(b) From and after the Closing Date:
(i) Buyer shall, and shall cause APC to, allow PHL,
Sellers and their agents reasonable access to all books and records (other than
books and records which are subject to the attorney/client privilege or which
constitute an attorney's work product) of APC or relating to the APC Business
arising from or relating to periods prior to the Closing Date (the "Books and
Records") during normal working hours at Buyer's principal place of business or
at any location where the Books and Records are stored, and PHL and Holdings
shall have the right, at their own expense, to make copies of any Books and
Records; provided, however, that any such access or copying shall be had or done
(A) in such a manner so as not to interfere with the normal conduct of Buyer's
business or the APC Business and (B) for a legitimate business purpose (such as
tax preparation) that does not involve direct or indirect competition with the
APC Business.
(ii) Holdings shall reimburse Buyer, APC and its
Subsidiaries for the reasonable out-of-pocket expenses reasonably incurred by
any of them in performing the covenants contained in this Section 5.9. The
parties agree that the confidentiality provisions of the Confidentiality
Agreement shall apply to the information disclosed pursuant to this Section 5.9.
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Section 5.10. Use of Certain Names and Marks. PHL and Sellers
acknowledge and confirm that: (i) from and after the Closing Date, neither PHL,
Sellers nor their Affiliates has or shall have any rights in the current legal
names and current assumed names of the Subsidiaries of APC (except as otherwise
provided in this Section 5.10) and those trademarks to be listed in the Sellers'
Disclosure Letter, and all confusingly similar variations of the foregoing
(collectively, the "APC Marks"), and (ii) neither PHL, Sellers nor any of their
Affiliates will contest the ownership or validity of any rights of Buyer or APC
and its Subsidiaries in or to any of the APC Marks, or registrations (or
applications for registration) thereof; provided, however, neither Buyer, APC or
its Subsidiaries shall have any rights whatsoever in and to the service mark and
trade name "PHOENIX" and the service mark and trade name "AMERICAN PHOENIX,"
except as otherwise expressly provided in the Trademark License Agreement (the
"Trademark License Agreement") to be entered into at the Closing between PHL and
APC, in substantially the form attached hereto as Exhibit J.
Section 5.11. Further Assurances. Each party, upon the request from
time to time of any other party hereto after the Closing, and without further
consideration, will do each and every act and thing as may be necessary or
reasonably requested to consummate the transactions contemplated hereby in an
orderly fashion.
Section 5.12. Reimbursement by the Parties. To the extent that any
party to this Agreement or its Subsidiaries receives any payment after the
Closing which belongs in whole or in part to another Person or any of its
Subsidiaries, it shall promptly pay over such payment to such other Person. In
the case of errors and omissions claims made prior to Closing, if and to the
extent any payment received (i) was reflected as an asset in determining APC's
Tangible Net Worth at Closing, then to that extent such payment shall be
retained by or paid to APC, (ii) was reflected as a Liability in determining
APC's Tangible Net Worth at Closing, then to that extent such payment shall be
retained by or paid to Holdings or PHL, or (iii) was not reflected as an asset
or a Liability in determining APC's Tangible Net Worth at Closing, then to the
extent any Person has paid or is liable to pay all or any part of the sums
received to another Person, the payment under such errors and omissions coverage
shall be paid to the Person who made, or has an obligation to make, such
payment.
Section 5.13. Financial Statement Deliveries.
5.13.1. Financial Statements of APC. As soon as is reasonably
practicable following the date hereof and in any event not later than three (3)
Business Days after their preparation in final form, and in the case of clause
(a) below, no later than April 23, 1999, Sellers shall cause to be delivered to
Buyer, at the cost and expense of Sellers, each of the following:
(a) The unaudited consolidated balance sheet of APC and its
Subsidiaries as of March 31, 1999 and the related statements of earnings,
stockholders' equity and cash flows for the quarter then ended; and
(b) Such additional unaudited financial statements of APC
and its Subsidiaries as are prepared prior to the Closing Date and, after the
Closing Date, such additional financial statements of APC and its Subsidiaries
for periods prior to the Closing Date as are in Holdings'
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possession. Nothing in this paragraph (b) shall obligate Holdings to prepare any
financial statement that would not have been prepared absent Buyer's request.
Sellers shall cause all financial statements (including the notes
thereto) referred to in this Section 5.13.1 to be prepared in accordance with
GAAP consistently applied throughout the periods specified therein, and to
present fairly in all material respects, the consolidated financial position and
results of operations of APC and its Subsidiaries for the periods specified
therein, subject in the case of financial statements for interim periods to an
absence of footnotes and to normal year-end audit adjustments which will not in
the aggregate be material. Sellers shall use their best efforts to cause
PricewaterhouseCoopers to consent in writing (and to deliver such consent to
Buyer) to the inclusion of its report on the historical audited financial
statements in any filings made by Buyer under the Securities Act or the Exchange
Act.
5.13.2. Financial Statements of Buyer. As soon as is reasonably
practicable following the date hereof and in any event not later than three (3)
Business Days after their preparation in final form and, in the case of clause
(a) below, no later than April 23, 1999, Buyer shall cause to be delivered to
Sellers, at the cost and expense of Buyer, each of the following:
(a) The unaudited consolidated balance sheet of the Buyer as
of March 31, 1999 and the related statements of earnings, stockholders' equity
and cash flows for the quarter then ended; and
(b) Such additional unaudited financial statements of the
Buyer as are prepared prior to the Closing Date.
Buyer shall cause all financial statements (including the notes
thereto) referred to in this Section 5.13.2 to be prepared in accordance with
GAAP consistently applied throughout the periods specified therein, and to
present fairly in all material respects, the consolidated financial position and
results of operations of Buyer for the periods specified therein, subject in the
case of financial statements for interim periods to an absence of footnotes and
to normal year-end audit adjustments which will not in the aggregate be
material.
Section 5.14. Errors and Omissions Insurance. Buyer will use its best
efforts to include APC in its errors and omissions coverage, including full
prior acts coverage, for all periods arising on or after the Closing, provided
such terms are acceptable to Buyer. Alternatively, Buyer may request APC to
continue its existing coverage, including full prior acts coverage, or procure a
limited term tail policy. In either circumstance, Holdings shall pay the
appropriate carrier one (1) year's premiums for that portion of the coverage
attributable to APC. All premiums attributable to such insurance coverage for
periods commencing on or after that date which is one (1) year after the Closing
shall be payable by Buyer. The foregoing assumes that the errors and omissions
coverages for APC will be upon substantially the same terms as APC currently
maintains, including, without limitation, APC's current limits and deductibles.
Section 5.15. No Solicitation or Employment; Interference in
Relationships. Except as provided by law, or as otherwise contemplated by this
Agreement with respect to certain employees of APC, for a period beginning on
the date hereof and ending on the second
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anniversary of the Closing Date, neither PHL, Holdings nor any of their
Affiliates shall solicit to employ or employ any individual who is an employee
(other than secretarial or clerical employee) of APC or any of its Subsidiaries
on the date hereof. PHL, Holdings and their Affiliates, from and after the
Closing Date, will take no action and make no statement to discourage the
continuation of any of the existing business relationships of APC or any of its
Subsidiaries.
Section 5.16. No Solicitation of Proposals or Offers. The parties
hereto shall not, after the date hereof and before the Closing Date, directly or
indirectly, through any officer, director, employee, agent or otherwise,
solicit, initiate or encourage submission of proposals or offers from any Person
relating to any acquisition or purchase of all or (other than in the Ordinary
Course of Business) a substantial portion of the assets of, or any equity
interest in, Buyer, on the one hand, or APC or any of its Subsidiaries, on the
other hand, or any business combination involving any of them or, except to the
extent required by fiduciary obligations under Legal Requirements or case law as
advised by counsel, participate in any negotiations regarding, or furnish to any
other Person any information with respect to, or otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage, any effort or
attempt by any other Person to do or seek any of the foregoing. The parties
shall, to the extent permitted by the terms of each such party's confidentiality
agreements with other Persons existing on the date hereof, promptly advise one
another if any such proposal or offer, or any inquiry or contact with any Person
with respect thereto, is made, shall promptly inform one another of all the
terms and conditions thereof, and shall furnish to one another copies of any
such written proposal or offer and the contents of any communications in
response thereto. Neither party shall waive any provisions of any "standstill"
agreements between such party and any other Person, except to the extent that
such waiver is, as advised by counsel, required by fiduciary obligations under
Legal Requirements.
Section 5.17. Noncompetition Covenant.
5.17.1. Definitions. For purposes of this Section 5.17 only, the
following terms shall have the following meanings:
"Acquire" shall mean and include the act of acquiring the stock or
assets of another Person, or merging or otherwise combining through a business
combination with another Person.
"Controlling" shall mean the power to direct the management and
policies of a Person, directly or indirectly, whether through the ownership of
voting securities, or by contract or otherwise.
"Incidental Business" shall mean an insurance agency or broker that, in
the twelve (12) months preceding its acquisition (i) derived less than fifty
percent (50%) of its revenues from the sale of Property-Casualty Insurance in
the United States, and (ii) had consolidated revenues arising from the sale of
Property-Casualty Insurance in the United States equal to or less than Five
Million Dollars ($5,000,000).
"Person" shall mean a natural person or a corporation, partnership,
limited liability company or any other business entity, domestic or foreign.
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"Property-Casualty Business" shall mean an insurance agency or broker
(but not an insurance or reinsurance company) organized in the United States
that derived during the preceding calendar year fifty percent (50%) or more of
its revenues from the sale of Property-Casualty Insurance in the United States.
"Property-Casualty Insurance" shall mean those forms of insurance
denominated as such under applicable state insurance laws, but shall not include
any type of insurance which may be underwritten by a duly licensed life
insurance company, such as, for example and not in limitation, stop-loss
insurance.
"Restricted Period" shall mean the period from the Closing Date until
the later of: (i) the third anniversary of the Closing Date, or (ii) that date
upon which PHL, Holdings and its Affiliates (other than, as provided in the
Voting and Standstill Agreement, Phoenix Investment Partners, Ltd. and its
Subsidiaries) no longer hold that number of Adjusted Outstanding Shares (as
defined in the Voting and Standstill Agreement) equal to at least ten percent
(10%) of the issued and outstanding Buyer Common Stock.
5.17.2. Non-Compete Covenant. PHL and Holdings agree that, during the
Restricted Period, without the prior written consent of Buyer, PHL, Holdings and
their Affiliates (except as otherwise provided in the Voting and Standstill
Agreement with respect to Phoenix Investment Partners, Ltd. and its
Subsidiaries) shall not, directly or indirectly, through ownership of an
interest in any Person in any country, state, locality or territory, domestic or
foreign, acquire an ownership interest in a Property-Casualty Business or an
Incidental Business except as otherwise provided hereafter.
5.17.3. Exceptions to Covenant. Section 5.17.2 notwithstanding, during
the Restricted Period, PHL, Holdings and their Affiliates may, without the prior
consent of Buyer:
(i) Acquire an interest of less than five percent (5%) of the
outstanding capital stock of a publicly-traded company that owns or constitutes
a Property-Casualty Business or an Incidental Business;
(ii) Acquire less than a Controlling interest in an Incidental
Business;
(iii) Acquire a Controlling interest in an Incidental Business,
subject to the limitations in clause (i) of Section 5.17.4;
(iv) organize or form a new, start-up Property-Casualty Business,
subject to the limitations in clause (i) of Section 5.17.4 and, provided that,
if such start-up Property-Casualty Business during any calendar year derives
revenues arising from the sale of Property-Casualty Insurance in the United
States that exceed Five Million Dollars ($5,000,000), then, at such time, PHL,
Holdings or their Affiliates, as the case may be, shall provide Buyer with a
right of first refusal with respect to such portion (designated by the selling
party) of such Property-Casualty Business as is necessary in order to reduce
such revenues below an amount equal to Five Million Dollars ($5,000,000). In
such case, PHL, Holdings or their Affiliates, as the case may be (the
"Offeror"), shall send a notice to Buyer which (a) identifies the start-up
Property-Casualty
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Business or portion thereof for which the right of first refusal exists, (b)
provides relevant summary financial information pertaining to the business of
such Property-Casualty Business, and (c) states the offering price and any other
material terms for such business. Buyer shall have sixty (60) days from receipt
of the notice hereunder in which to elect whether to acquire the business
identified in clause (a), which election shall be evidenced by a writing
delivered to the Offeror by the close of business. In the event Buyer does not
timely exercise its rights hereunder, or, having exercised its rights, fails to
close the sale in a timely manner, the Offeror shall be entitled to sell the
business identified in clause (a) upon the terms such business was offered to
Buyer pursuant to this paragraph, but may not materially modify such terms
without reoffering such business to Buyer hereunder upon the proposed new terms.
(v) Acquire less than a Controlling Interest in any
Property-Casualty Business, subject to the limitations in clause (i) of Section
5.17.4; and, provided that, in the twelve (12) calendar months preceding its
acquisition, such Property-Casualty Business did not have revenues arising from
the sale in the United States of Property-Casualty Insurance in an amount
exceeding Five Million Dollars ($5,000,000); and
(vi) Acquire a Controlling Interest in any Property-Casualty
Business, subject to the limitations in clause (i) of Section 5.17.4 and to
Buyer's rights, if any, pursuant to Sections 5.17.5 and 5.17.6 and provided that
such Property-Casualty Business did not, during the twelve (12) calendar months
preceding such acquisition, have revenues from the sale in the United States of
Property-Casualty Insurance in an amount exceeding Five Million Dollars
($5,000,000).
5.17.4. Limitations.
(i) Restrictions on Aggregate Revenues. PHL, Holdings and their
Subsidiaries shall not acquire any Person pursuant to clauses (iii), (iv), (v)
or (vi) of Section 5.17.3 if such acquisition would cause the aggregate
commission and fee revenue obtained by PHL, Holdings and their Affiliates from
all Property-Casualty Businesses and Incidental Businesses Acquired during the
Restricted Period pursuant to clauses (iii) through (vi) of Section 5.17.3, and
from all Property-Casualty Businesses organized by PHL, Holdings and their
Affiliates during the Restricted Period, which revenue is attributable to the
sale of Property-Casualty Insurance in the United States, to exceed Twenty
Million Dollars ($20,000,000) for calendar year 1999 and, for subsequent years,
such number increased by three percent (3%) for each year after 1999 to and
including the calendar year of measurement.
(ii) Restriction on Combinations. During the Restricted Period,
neither PHL, Holdings nor their Affiliates shall merge or otherwise combine the
management and operations of any Property-Casualty Businesses or any Incidental
Businesses with those of any other Property-Casualty Business or any Incidental
Business Acquired during the Restricted Period, unless the resulting Person
qualifies, at the time of such combination, as an Incidental Business.
5.17.5. Option. If during the Restricted Period, PHL, Holdings or any
of their Affiliates wishes to Acquire, directly or indirectly, a Controlling
interest in a Property-Casualty Business pursuant to clause (vi) of Section
5.17.3 above, it may do so provided: (i) it offers an option to Buyer to
acquire, in the optionor's discretion, the whole Property-Casualty Business
being
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acquired or only that portion thereof that causes such business to fail to
qualify as an Incidental Business; and (ii) the limitation contained in clause
(i) of Section 5.17.4 shall continue to be satisfied. The offer pursuant to this
Section 5.17.5 to Buyer shall be in the form of a notice providing (a)
identifying information as to the Property-Casualty Business or portion thereof
that the offeror is proposing to sell to Buyer, (b) relevant summary financial
information pertaining to the business identified in clause (a), and (c) the
purchase price for such business, determined as provided hereinafter. Buyer
shall have sixty (60) days from receipt of the notice hereunder in which to
elect whether to exercise its option, which exercise shall be evidenced by a
writing delivered to the Offeror by the close of business on the sixtieth day
following receipt of the notice of option, but if such date is not a day on
which Buyer is open for business, then by the close of business on its first
business day thereafter. The purchase price under this Section 5.17.5 shall be
the price Offeror would be paying for the Property-Casualty Business or, if only
a portion thereof is subject to the option hereunder, then the purchase price
shall be calculated on a pro rata basis. If Buyer does not accept the offer, or,
having accepted the offer, fails to settle in a timely manner, then the Offeror
may Acquire such business on the terms and conditions of the offer presented to
Buyer; provided that, PHL, Holdings or any of their Affiliates, as the case may
be, shall dispose of the whole Property-Casualty Business being Acquired or only
that portion thereof that causes such business to fail to qualify as an
Incidental Business within twenty-four (24) calendar months following its
acquisition. During any period pending the disposition of such business to a
third party pursuant to the terms of this Section 5.17.5, PHL, Holdings or their
Affiliates, as the case may be, shall pay to Buyer, on a net basis, the revenue
generated by such Property-Casualty Business during the period from the date
that Buyer elects not to purchase such business through the date on which such
Property-Casualty Business or portion thereof is sold by PHL, Holdings or their
Affiliates, as the case may be.
5.17.6. Right of First Refusal. If during the Restricted Period, PHL,
Holdings or any of their Affiliates wishes to acquire, directly or indirectly, a
Controlling interest in a Property-Casualty Business where such acquisition
would cause them to fail to comply with the limitation contained in clause (i)
of Section 5.17.4, they may do so, provided they sell, subject to providing
Buyer with a right of first refusal with respect to, such portion (designated by
the selling party) of the aggregate Property-Casualty Businesses acquired during
the Restricted Period as necessary in order to comply with such limitation once
the sale that is subject to such right is consummated. PHL, Holdings or their
Affiliates, whichever of them wishes to acquire a Property-Casualty Business
subject to a right of first refusal hereunder, shall send a notice to Buyer
which (i) identifies the Property-Casualty Business or portion thereof it wishes
to sell, (ii) provides relevant summary financial information pertaining to the
business identified in clause (i), and (iii) states the offering price and any
other material terms for such business. Buyer shall have sixty (60) days from
receipt of the notice hereunder in which to elect whether to acquire the
business identified in clause (i), which election shall be evidenced by a
writing delivered to the Offeror by the close of business. In the event Buyer
does not timely exercise its rights hereunder, or, having exercised its rights,
fails to close the sale in a timely manner, the Offeror shall be entitled to
sell the business identified in clause (i) upon the terms such business was
offered to Buyer pursuant to this paragraph, but may not materially modify such
terms without re-offering such business to Buyer hereunder upon the proposed new
terms.
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5.17.7. Non-Circumvention. PHL and Holdings hereby agree that they and
their Affiliates will not attempt to circumvent the intent of the foregoing
provisions of this Section 5.17 through any joint venture agreement or other
business arrangement. The foregoing notwithstanding, PHL, Holdings and their
Affiliates shall be permitted to do the following, without being deemed to be in
violation of this paragraph 5.17.7:
(i) Acquire, start-up or continue to own an interest in an insurance
or reinsurance company engaged in underwriting any type of insurance or
reinsurance, including, without limitation, Property-Casualty Insurance, and
except as expressly prohibited by this Section 5.17, without regard to what
method such company utilizes to distribute its products, subject to the
limitations below;
(ii) Acquire a block of insurance or reinsurance of any kind or
underwrite any type of insurance;
(iii) hire or otherwise retain or continue to employ or contract with
any Person who sells Property-Casualty Insurance;
(iv) enter into or continue any kind of arrangement with any Person,
including a Property-Casualty Business, relating to the marketing or sale of any
products or services, subject to any applicable limitations in the case of
Persons organized, Acquired or owned pursuant to clause (i) above, issued or
underwritten by PHL, Holdings or their Affiliates; and
(v) lease or otherwise make available on an Affiliate's premises
space for an insurance agent to sell insurance, including Property-Casualty
Insurance.
In the event PHL, Holdings or their Affiliates Acquire or own any
insurance or reinsurance company engaged in the sale of Property-Casualty
Insurance which distributes such insurance through Property-Casualty Businesses
and Incidental Businesses it owns, the aggregate revenues received on a
consolidated basis by such insurer or reinsurer in any calendar year which are
attributable to the sale by such businesses of Property-Casualty Insurance in
the United States shall not, when aggregated with the revenues counted for
purposes of clause (i) of Section 5.17.4 above, exceed Thirty Million Dollars
($30,000,000) nor shall the aggregate of such revenues received by such insurer
or reinsurer from any single Property-Casualty Business or Incidental Business
they own exceed Ten Million Dollars ($10,000,000).
5.17.8. Remedies.
(i) Liquidated Damages. If PHL, Holdings or their Affiliates breach
the limitations contained in clause (i) of Section 5.17.4, and Buyer, in its
sole discretion, deems such breach to be an isolated and incidental violation,
then in lieu of seeking any other remedies available to Buyer under this
Agreement and applicable law, Buyer may elect to cause PHL, Holdings or their
Affiliates, as the case may be, to pay to Buyer as liquidated damages an amount
equal to the net commission revenue (after taxes and expenses) generated in the
United States for the period from the date of default until the date of payment,
which revenue is attributable to the Incidental Business, Property-Casualty
Business or portion thereof that exceeds such limitations. The
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foregoing sum is agreed by the parties to be in the nature of liquidated damages
for the breach of this Section 5.17 and is acknowledged to be reasonable in
light of the nature of this Agreement and the difficulty in determining the
actual damages which Buyer would suffer in connection with a breach of this
Section 5.17.
(ii) Specific Performance. PHL and Holdings acknowledge that Buyer
and its Affiliates will be irrevocably damaged if all of the provisions of this
Section 5.17 are not specifically enforced and accordingly, PHL and Holdings
each agree that, in addition to any other relief to which Buyer and its
Affiliates may be entitled, Buyer and its Affiliates will be entitled to seek
and obtain injunctive relief from a court of competent jurisdiction for the
purpose of restraining PHL and Holdings from any actual or threatened breach of
this Section 5.17, except as provided in clause (iii) below.
(iii) Other. In the event PHL, Holdings or their Affiliate would be in
violation of this Section 5.17 as a consequence of a merger or other business
combination whose primary purpose is not the acquisition of one or more
Property-Casualty Businesses, then the acquiring party or its relevant Affiliate
shall, at its option, either: (a) within six (6) months after consummation of
such transaction sell such number of Buyer Common Shares as to trigger the
termination of the Restricted Period, as provided in Section 5.17.1 above; or
(b) have twenty-four (24) months after consummation of such transaction in which
to either divest itself of a sufficient amount of Incidental Businesses,
Property-Casualty Businesses or portions thereof or to otherwise reduce the
revenues from the sale of Property-Casualty Insurance in the United States it
derives therefrom in order to come into compliance with the covenants contained
in this Section 5.17. If and to the extent PHL, Holdings and their Affiliates
fail to meet the requirements set forth above in this clause (iii), Buyer shall
be entitled to liquidated damages pursuant to clause (i) of Section 5.17.8, but
shall not be entitled to injunctive relief preventing or reversing the merger or
other business combination.
5.17.9. Validity of Covenant. PHL and Holdings agree that all of the
covenants contained in this Section 5.17 are reasonably necessary to protect the
legitimate interests of Buyer, are reasonable with respect to time and territory
and do not interfere with the interests of the public and that the descriptions
of the covenants contained in this Section 5.17 are sufficiently accurate and
definite to inform each of them of the scope of the covenants. PHL and Holdings
agree that the consideration to be received by Sellers hereunder, upon receipt
of such consideration at the Closing, will be full, fair and adequate to support
the obligations of PHL and Holdings hereunder.
5.17.10. Amendment of Section 5.17. PHL, Holdings and Vaughan
acknowledge the difficulty of agreeing upon a non-competition covenant of the
kind contemplated herein which will have a long duration and yet should remain
relevant in the ever-evolving financial services marketplace. For this reason,
without the intent of detracting in any way from the validity of this Section
5.17, the parties agree that the provisions of this Section 5.17 may be amended
through a writing signed by all of Buyer, PHL and Holdings, without any consent
thereto by Vaughan.
Section 5.18. Payment of Certain Outstanding Debt; Capital
Contribution.
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(a) At the Closing, Buyer shall make a payment to The First
National Bank of Boston, in an amount sufficient to satisfy all existing
indebtedness owed by APC and its Subsidiaries, provided that, such payment shall
not exceed $48,328,012. Following such payment, Holdings shall cooperate with
the Buyer to (a) obtain from The First National Bank of Boston the release of
all collateral securing the indebtedness of APC and its Subsidiaries to such
bank, including assets pledged and mortgaged by APC and its Subsidiaries, and
(b) obtain originals of all credit agreements and related loan documents
necessary to effectuate the preceding items.
(b) At or prior to Closing, PHL or Holdings shall contribute
capital to APC in an amount equal to the greater of (i) $19,805,898 or (ii) an
amount sufficient to satisfy all indebtedness of APC and its Subsidiaries
outstanding as of the Closing Date to The First National Bank of Boston and
Deutsche Bank after effect is given to the payment of Buyer under Section
5.18(a).
Section 5.19. Assumption of Excluded Liabilities by Holdings or PHL;
Purchase of Owned Real Property. Prior to the Closing Date, Holdings or PHL
shall assume all of the Excluded Liabilities. In connection therewith, Holdings
or PHL shall purchase from APC or its Subsidiary, as applicable, each parcel of
Owned Real Property. In addition, to the extent provided in Section 2.2.3, PHL
and Holdings shall indemnify Buyer (and after Closing, APC and its Subsidiaries)
for any Losses incurred by Buyer (and after Closing, APC and its Subsidiaries)
with respect to any severance payment obligations required to be made by Buyer,
APC or their Subsidiaries after the Closing to any employees employed by APC at
the APC Headquarters whose employment is terminated after the Closing.
Section 5.20. Financing. Prior to the Closing, Buyer shall use its best
efforts to satisfy all of the terms and conditions set forth in the Commitment
Letter. If the lenders shall have terminated the Commitment Letter or definitive
loan documentation contemplated thereby for any reason other than the occurence
of an event or change constituting a Material Adverse Effect with respect to
APC, Buyer shall use its best efforts to obtain substitute financing by not
later than June 30, 1999.
Section 5.21. Assumption of Certain Liabilities by Buyer. Buyer and APC
shall indemnify Holdings, PHL and their Subsidiaries for all Losses suffered by
any of Holdings, PHL and their Subsidiaries as a result of the use by APC or its
Subsidiaries after the Closing of any name pursuant to the Trademark License
Agreement and use after the Closing of any forms, booklets and other written
materials used by APC or its Subsidiaries prior to the Closing in the conduct of
the APC Business. From and after the Closing Date, Buyer shall also be liable
for all Losses incurred by Buyer, APC and their Subsidiaries arising out of or
relating to the termination after the Closing of any employee of APC (except as
provided in Section 2.2.3) or of any Subsidiaries of APC and shall indemnify
PHL, Holdings and their Affiliates for any Losses reasonably incurred by them in
connection with or as a result of any such termination, including, without
limitation, any payments in the nature of severance ultimately required to be
paid to any such terminating employees (except as provided in Section 2.2.3).
From and after the Closing Date, Buyer shall take any and all actions necessary
to comply with WARN and shall indemnify PHL, Holdings and their Affiliates
against all Losses they incur as a result of any actual or alleged failure of
Buyer or APC to take such actions.
Section 5.22. Collection of Accounts Receivable. Following the Closing
Date, Buyer
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shall, consistent with its customary business practices and in the Ordinary
Course of Business, use its best efforts to collect the accounts receivable of
APC and its Subsidiaries that are outstanding as of the Closing Date
(collectively, the "Closing Date Accounts Receivable"). On a monthly basis for a
period of one year from the Closing Date, Buyer shall deliver to Holdings a
computer generated accounts receivable aging report with respect to the Closing
Date Accounts Receivable, which shall include the identity of delinquent
accounts by agency office. One year from the Closing Date, Buyer shall notify
Sellers of any uncollected Closing Date Accounts Receivable and shall provide
Sellers with reasonable evidence of such determination. Within fifteen (15) days
from Buyer's notification of the uncollected Closing Date Accounts Receivable,
if any, Sellers, jointly and severally, shall pay to Buyer, on a
dollar-for-dollar basis, the amount by which the uncollected Closing Date
Accounts Receivable exceed the sum of (a) the accounts receivable reserve set
forth on the Closing Date Balance Sheet, plus (b) $125,000. Any dispute
regarding the calculation of uncollected Closing Date Accounts Receivable shall
be submitted to the Alternative Accountants for resolution, in which case, (i)
Sellers and Buyer will furnish to such accounting firm such work papers and
other documents and information relating to the disputed issues as such
accounting firm may request and are available to Sellers and Buyer, and will be
afforded an opportunity to present to such accounting firm any material relating
to the determination and to discuss the determination with such accounting firm,
(ii) a determination by such accounting firm, as set forth in a notice delivered
to both parties by such accounting firm no later than thirty (30) days after the
issues in dispute are submitted to such accounting firm, will be binding and
conclusive on the parties, and (iii) Buyer, on the one hand, and Sellers, on the
other, will each bear fifty percent (50%) of the fees of such accounting firm
for such determination. Upon Buyer's receipt of any reimbursement pursuant to
this Section 5.22, Buyer shall promptly assign to Holdings all of the
uncollected Closing Date Accounts Receivable.
Section 5.23. Audit of Accounts Payable. Buyer shall, as of one hundred
twenty (120) days following the Closing Date, audit the accuracy and
completeness of the accounts payable of APC and its Subsidiaries as reflected on
the Closing Date Balance Sheet and shall notify Sellers of any errors, positive
or negative, in the statement of accounts payable in the Closing Date Balance
Sheet. If the actual accounts payable were less than the amount reflected on the
Closing Date Balance Sheet, then Buyer shall reimburse Holdings in the amount of
such overstatement. If the actual accounts payable exceeded the amount reflected
on the Closing Date Balance Sheet, then Sellers, jointly and severally, shall
reimburse Buyer in the amount of such understatement. Any amount due hereunder,
whether due from Sellers or Buyer, shall be paid within thirty (30) days from
Buyer's notification to Sellers of the results of such audit, unless Sellers, in
good faith, dispute such results. Any dispute regarding the audit of accounts
payable shall be submitted to the Alternative Accountants for resolution, in
which case, (i) Sellers and Buyer will furnish to such accounting firm such work
papers and other documents and information relating to the disputed issues as
such accounting firm may request and are available to Buyer or Sellers, and will
be afforded an opportunity to present to such accounting firm any material
relating to the determination and to discuss the determination with such
accounting firm, (ii) a determination by such accounting firm, as set forth in a
notice delivered to both parties by such accounting firm no later than thirty
(30) days after the issues in dispute are submitted to such accounting firm,
will be binding and conclusive on the parties, and (iii) Buyer, on the one hand,
and Sellers, on the other, will each bear fifty percent (50%) of the fees of
such accounting firm for such determination.
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Section 5.24. Certain Leases. Buyer shall indemnify Holdings and PHL
for and hold them harmless from any Losses incurred by APC, Holdings or PHL
after the Closing as a result of the failure to obtain prior to the Closing any
required consent to assign the following leases: St. Davids Center Indenture of
Lease between Wyeth Laboratories Inc. and American Brokerage Corporation of
Philadelphia, dated November 15, 1990; and Office Lease between Magnolia
Associates, Ltd. and American Phoenix Corporation, dated August 2, 1995.
Section 5.25. Acquisition of Atlanta Subsidiary. In the event that the
Closing has not occurred on or before April 30, 1999, Buyer and Sellers will
enter into a stock purchase agreement effective as of such date, in a form that
is mutually acceptable to Sellers and Buyer, pursuant to which all of the issued
and outstanding capital stock of American Phoenix Insurance Agency of Georgia, a
Georgia corporation ("APIA Georgia") will be acquired by Buyer. Such agreement
shall provide for a purchase price equal to APIA Georgia's revenue from the
period of May 1, 1998 through May 1, 1999. Such purchase price, together with
interest from May 1, 1999 to the date of closing at a rate of seven percent (7%)
per annum shall be payable on the date this Agreement is validly terminated
pursuant to Article X hereof; provided that, the purchase price shall be deemed
paid in full upon the Closing hereunder. The purchase price agreement will
provide that, subject to the terms thereof, the purchase price shall be payable
by Buyer as follows: fifty percent (50%) by wire transfer or certified check at
closing, and fifty percent (50%) payable on May 1, 2000 by wire transfer or
certified check. The purchase agreement shall contain representations,
warranties and indemnities similar in substance and scope to those set forth in
this Agreement, but the parties acknowledge and agree that such provisions shall
be modified where necessary to reflect the smaller size of such transaction. The
purchase agreement shall provide that, from May 1, 1999 and thereafter, Buyer
shall be responsible for all salaries and benefits of, and all severance
obligations with respect to, all APIA Georgia employees.
Section 5.26. Financial Position of Holdings. Holdings shall deliver a
copy of its annual consolidated balance sheet to Buyer for each calendar year
through 2003. PHL and Holdings shall notify Buyer immediately of any event that
has, or reasonably could be expected to have, a Material Adverse Effect on
Holdings, and in the event of such a Material Adverse Effect, PHL shall, upon
the request of Buyer, guarantee the payment and performance of the indemnity
obligations of Sellers hereunder, and shall execute and deliver to Buyer an
instrument in form reasonably satisfactory to Buyer to evidence such guarantee.
Section 5.27. Cooperation. From and after the Closing, the parties will
cooperate and cause their respective Subsidiaries to cooperate to the extent
reasonably required for each party to appropriately defend against any Action
brought or threatened to be brought against another party hereto or its
Subsidiaries. Such cooperation shall include, without limitation, making records
and personnel available during normal business hours. The party seeking such
cooperation shall bear all reasonable costs of travel and lodging reasonably
incurred by the Person whose cooperation is requested.
Section 5.28. Guarantees. The parties acknowledge and agree that
Holdings and PHL are each, individually, the guarantor of certain obligations of
APC and its Subsidiaries to certain non-bank Persons identified in Item 5.28 of
Sellers' Disclosure Letter. In consideration for Holdings and PHL agreeing to
allow such guarantees to remain in full force and effect after the Closing,
Buyer agrees to defend, indemnify and hold Holdings, PHL and their Affiliates
harmless
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from and against all Actions arising after Closing as a result of or in
connection with such guarantees and the underlying obligations of APC and its
Subsidiaries.
Section 5.29. Record Retention. Buyer, PHL and Sellers agree, in
addition to abiding by the covenants contained in Section 5.9 with respect to
books and records, to retain or cause to be retained all books and records
pertaining to Actions currently pending against APC or any APC Subsidiary and
not to destroy such until the later of: (a) the running of the applicable
statutes of limitation; or (b) termination of the Action by verdict, settlement
or otherwise and the completion of all appeals therefrom or the termination of
all periods for appeal. Buyer, PHL and Sellers also agree to retain or cause to
be retained all books and records pertaining to APC or its Subsidiaries until
the later of: (i) passage of the relevant survival period under Section 8.3 of
this Agreement for bringing an Action; or (ii) ten (10) years from the date
hereof. The foregoing notwithstanding, nothing herein shall be deemed to condone
or require: (x) the destruction of books or records in contravention of
applicable Legal Requirements; or (y) the destruction of any records commonly
held for permanent retention such as, without limitation, minute books and stock
ledgers.
Section 5.30. Minority Interests. Within sixty (60) days after the
Closing, Buyer will offer to purchase the outstanding shares of minority
interests in the APC Subsidiaries outstanding as of the Closing Date at a price
calculated in accordance with the applicable formula in the respective buy-sell
agreements entered into by such minority shareholders; provided that, Buyer,
may, in its sole discretion, determine whether to make such an offer to the
minority shareholder(s), if any, of Lees Preston Fairy (Holdings), Ltd. In the
event that any holder of minority interests in the APC Subsidiaries elects not
to sell its minority shares to Buyer, Buyer shall have no further obligation
with respect to such minority shareholders under this Agreement, except as
otherwise provided.
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ARTICLE VI
Conditions to the Obligation of Buyer to Close
The obligations of Buyer at the Closing to purchase the APC Shares, to
issue the Buyer Common Shares and the Subordinated Debentures, to pay the Cash
Consideration and to execute and deliver the Closing Agreements to which it is
party are subject to the satisfaction, at or prior to the Closing, of each of
the following conditions, compliance with which, or the occurrence of which, may
be waived prior to the Closing in writing by Buyer in its sole discretion:
Section 6.1. Representations, Warranties and Covenants.
6.1.1. Continued Accuracy of Representations and Warranties. All
representations and warranties of PHL and Sellers contained in this Agreement or
any Closing Agreement that include qualifications as to materiality or Material
Adverse Effect shall be true and correct as of the Closing Date and all other
representations and warranties of PHL and Sellers contained in this Agreement or
any Closing Agreement shall be true and correct in all material respects as of
the Closing Date, in each case with the same force and effect as if such
representations and warranties were made at and as of the Closing, except to the
extent such representations and warranties expressly speak as of a specified
earlier date.
6.1.2. Performance of Agreements. PHL and Sellers shall have performed
and satisfied in all material respects all covenants and agreements required by
this Agreement or any Closing Agreement to be performed or satisfied by them at
or prior to the Closing, and Sellers shall have delivered the APC Shares and all
required instruments of transfer.
6.1.3. Closing Certificate. At the Closing, Holdings shall furnish to
Buyer an unqualified certificate, signed by the President of Holdings and the
President of APC, dated the Closing Date, to the effect that the conditions
specified in Sections 6.1.1 and 6.1.2 hereof have been satisfied.
Section 6.2. Closing Agreements. At or prior to the Closing, the
parties thereto other than Buyer shall have entered into each of the following
documents or agreements (collectively, the "Closing Agreements," it being
understood by the parties that the Vaughan Employment Agreement shall be deemed
to be one of the Closing Agreements for all purposes other than Sections 6.2 and
7.2), in substantially the form thereof attached hereto without change other
than such changes as may be acceptable to Buyer:
(i) the Voting and Standstill Agreement,
(ii) the Indenture,
(iii) the Registration Rights Agreement,
(iv) the Risk Management Agreement,
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(v) the Baltimore Lease (unless the current holder of a
right of first refusal with respect to the premises
leased under the Baltimore Lease validly exercises its
right to acquire such premises), the Miami Lease and the
Jamestown Lease,
(vi) the Trademark License Agreement, and
(vii) the Rule 145 Representation Letter.
Section 6.3. Legality; Governmental Authorization; Litigation. Buyer's
purchase of and payment for the APC Shares, and the consummation of the other
transactions contemplated hereby, shall not be prohibited by any Legal
Requirement. All Required Filings and HSR Act filings shall have been made and
all requisite approvals obtained and related waiting periods expired or
terminated. No Action shall have been instituted at or prior to the Closing by
any Governmental Authority that seeks to delay, enjoin or otherwise make illegal
the consummation of the transactions contemplated hereby; but if such Action
shall have been instituted by a non-federal Governmental Authority, then there
must be no reasonable likelihood that the result of such Action could be to
delay, enjoin or otherwise make illegal Buyer's purchase of the APC Shares or
the consummation of any other transaction contemplated hereby.
Section 6.4. Affiliate Debt. Except to the extent not finally
determined prior to the availability of the Closing Date Balance Sheet: (a)
there shall not be any outstanding Affiliate Debt, and (b) there shall not be
outstanding any Debt or other advances owed to APC or any Subsidiary of APC by
PHL, Holdings or any of their Affiliates or by any present or former employee,
officer, stockholder or director of PHL, Holdings or their Affiliates other than
APC and its Subsidiaries.
Section 6.5. Financing. Buyer shall have obtained the funds to be
provided pursuant to the Commitment Letter, unless Buyer shall have failed to
have obtained such funds (i) exclusively as a result of Buyer's failure to pay
any fees or expenses required to be paid by Buyer under the Commitment Letter or
(ii) due to the lenders terminating the Commitment Letter or definitive loan
documentation contemplated thereby other than by reason of the occurrence of any
event or change constituting a Material Adverse Effect with respect to APC.
Section 6.6. Opinions of Counsel. Sellers shall have furnished Buyer
with the favorable opinion of (i) Stroock & Stroock & Lavan LLP, dated the
Closing Date, in substantially the form of Exhibit K hereto, (ii) Carole A.
Masters, Esquire, in substantially the form of Exhibit L hereto, and Sorokin,
Gross & Hyde, P.C., in substantially the form of Exhibit M hereto.
Section 6.7. Vaughan Employment Agreement. The Vaughan Employment
Agreement shall be in full force and effect, subject to the Closing.
Section 6.8. Vaughan Resignation Letter. Vaughan shall have executed
and delivered to Buyer a resignation letter with respect to his position on the
Board of Directors of Buyer, in form reasonably satisfactory to Buyer.
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Section 6.9. Update. PHL and Sellers shall have provided the Buyer with
a written update of all of the information provided in, and consistent with the
form of, all parts of the Sellers' Disclosure Letter as of a date which is no
more than five (5) Business Days prior to the Closing Date. The information
provided in such updates shall not constitute a Material Adverse Effect with
respect to APC and its Subsidiaries, taken as a whole. No written update
provided by PHL and Sellers of the Sellers' Disclosure Letter prior to the
Closing Date shall cure any breach of any representation and warranty of PHL and
Sellers.
Section 6.10. General. Sellers shall have furnished Buyer with such
officers' certificates, good standing certificates, incumbency certificates and
other customary closing documents as Buyer may reasonably request in connection
with the transactions contemplated hereby, including, without limitation (i) an
instrument of assumption by PHL or Holdings or, in the case of the Owned Real
Properties, any of their Subsidiaries of the Excluded Liabilities, (ii) either a
"sworn affidavit" or a "qualifying statement" that complies with Section 1445 of
the Code and (iii) resignation letters from such officers and directors of APC
or any of its Subsidiaries as are primarily employed by PHL or Holdings.
ARTICLE VII
Conditions to the Obligation of Sellers to Close
The obligations of Sellers at the Closing to sell and transfer the APC
Shares and to execute and deliver the Closing Agreements to which they are a
party are subject to the satisfaction, at or prior to the Closing, of each of
the following conditions, compliance with which, or the occurrence of which, may
be waived prior to the Closing in writing by Sellers in their sole discretion:
Section 7.1. Representations, Warranties and Covenants.
7.1.1. Continued Accuracy of Representations and Warranties. All
representations and warranties of Buyer contained in this Agreement or any
Closing Agreement that include qualifications as to materiality shall be true
and correct as of the Closing Date and all other representations and warranties
of Buyer contained in this Agreement or any Closing Agreement shall be true and
correct in all material respects as of the Closing Date, in each case with the
same force and effect as if such representations and warranties were made at and
as of the Closing, except to the extent such representations and warranties
expressly speak as of a specified earlier date.
7.1.2. Performance of Agreements. Buyer shall have performed and
satisfied in all material respects all covenants and agreements required by this
Agreement or any Closing Agreement to be performed or satisfied by Buyer at or
prior to the Closing and shall have delivered all payments, Buyer Common Shares,
Subordinated Debentures, documents and instruments of transfer required by
Article II.
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7.1.3. Closing Certificate. At the Closing, Buyer shall furnish to
Sellers an unqualified certificate signed by the President of Buyer dated the
Closing Date, to the effect that the conditions specified in Sections 7.1.1 and
7.1.2 hereof have been satisfied.
Section 7.2. Closing Agreements. At or prior to the Closing, Buyer
shall have entered into each of the Closing Agreements to which it is party,
such agreements being in substantially the form attached hereto without change
other than such changes as may be reasonably satisfactory to Sellers.
Section 7.3. Legality; Government Authorization; Litigation. Sellers'
sale of the APC Shares, and the consummation of the other transactions
contemplated hereby, shall not be prohibited by any Legal Requirement. All
Required Filings and HSR Act filings shall have been made and related waiting
periods shall have expired or been terminated. No Action shall have been
instituted at or prior to the Closing by any Governmental Authority that seeks
to delay, enjoin or otherwise make illegal the consummation of the transactions
contemplated hereby; but if such Action shall have been instituted by a
non-federal Governmental Authority, then there must be no reasonable likelihood
that the result of such Action could be to delay, enjoin or otherwise make
illegal Sellers' sale of the APC Shares or the consummation of any other
transaction contemplated hereby.
Section 7.4. Opinion of Counsel. Buyer shall have furnished Sellers
with the favorable opinion of Williams, Mullen, Christian & Dobbins, P.C. dated
the Closing Date, in substantially the form of Exhibit N hereto.
Section 7.5. General. Sellers shall have received copies of such
officers' certificates, good standing certificates, incumbency certificates and
other customary closing documents as they may reasonably request in connection
with the transactions contemplated hereby.
Section 7.6. Update. The Buyer shall have provided the Sellers with a
written update of all of the information provided in, and consistent with the
form of, all parts of the Buyer Disclosure Letter as of a date which is no more
than five (5) Business Days prior to the Closing Date. The information provided
in such updates shall not constitute a Material Adverse Effect with respect to
Buyer. No written update provided by Buyer of the Buyer Disclosure Letter prior
to the Closing Date shall cure any breach of any representation and warranty of
Buyer.
Section 7.7. Listing of Shares Issuable Upon Conversion of Subordinated
Debentures.On or prior to the Closing Date, the shares of Buyer Common Stock
issuable upon conversion of the Subordinated Debentures shall be listed, on a
when issued basis, on the New York Stock Exchange.
Section 7.8. Board of Directors. On or prior to the Closing Date, the
Board of Directors of Buyer shall have been increased from nine (9) to thirteen
(13) directors and Vaughan, Robert W. Fiondella, and David W. Searfoss shall
have been elected to the Board of Directors of Buyer in accordance with the
provisions of the Voting and Standstill Agreement.
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Section 7.9. Payment. Buyer shall have delivered to Sellers the
payments provided for in Section 2.2 hereof and all other payments required to
be made by Buyer on the Closing Date pursuant to the terms hereof, and shall
have issued to Sellers the Buyer Common Shares and to Holdings and PHL the
Subordinated Debentures.
Section 7.10. Registration of the Buyer Common Shares. The issuance of
the Buyer Common Shares to Sellers shall have been registered under the
Securities Act of 1933, as amended, pursuant to Buyer's effective Registration
Statement on Form S-4. All certificates evidencing Buyer Common Stock delivered
to Sellers at the Closing shall be free of all restrictive legends, and no stop
transfer instructions shall be filed with the stock transfer agent with respect
to such shares. In the event that Vaughan is unable to sell the Buyer Common
Shares acquired by him pursuant to this Agreement during the one year period
following the Closing Date due to the holding period requirements of Rule
144(d), then the Buyer will take such steps as may be necessary to permit
Vaughan to sell such shares free of such holding period requirements.
ARTICLE VIII
Indemnification
Section 8.1. Indemnification by Sellers. In addition to other
obligations of indemnification contained in this Agreement, Sellers, jointly and
severally (collectively, in their capacities as indemnifying parties, the
"Indemnifying Party"), hereby agree, subject to the limitations set forth below,
to indemnify Buyer and its Affiliates and their respective directors, officers
and employees (including, without limitation, APC and each Subsidiary of APC
from and after the Closing) (each in its capacity as indemnified party, an
"Indemnitee"), regardless of any investigation conducted by or knowledge
obtained by any of them, and hold each of Buyer and such Affiliates and their
respective directors, officers and employees harmless, from, against and in
respect of any and all Losses arising from or related to any of the following:
(i) any breach of, untruth of or inaccuracy in (or any
allegation by any third party of facts which, if true as alleged, would
constitute such a breach or inaccuracy in) any representation or warranty made
by or on behalf of PHL or either of the Sellers in this Agreement (including,
without limitation, the Sellers' Disclosure Letter) or in any Closing Agreement
or other document, instrument or certificate delivered pursuant hereto;
(ii) any breach, non-fulfillment or violation of any covenant
or agreement made by PHL or either of the Sellers in this Agreement or in any
Closing Agreement or in any document, instrument or certificate delivered
pursuant hereto;
(iii) any Excluded Liability;
(iv) subject to the limitations and conditions set forth
elsewhere in this Agreement, any severance due and payable under any APC Plan or
APC Benefit Arrangement, Contractual Obligation or Legal Requirement by reason
of the execution and delivery of this Agreement, the Closing Agreements or the
consummation of the transactions contemplated
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hereunder or thereunder, including, without limitation, severance due and
payable with respect to any APC Headquarters Employee pursuant to Section 2.2.3;
(v) any Liability (other than Tax Liability covered by the
provisions of Section 5.7.2 hereof) that arises from or relates to the conduct
of the APC Business during any period prior to the Closing Date unless such
Liability was disclosed in the February 1999 APC Balance Sheet or in the
Sellers' Disclosure Letter or incurred in the Ordinary Course of Business since
the dates thereof;
(vi) any Liability (other than Tax Liability covered by the
provisions of Section 5.7.2 hereof) of APC or any of its Subsidiaries arising as
a result of APC or any of its Subsidiaries being a member of a group of
companies or other entities controlled by PHL or Holdings or any other Person
(other than APC or any of its Subsidiaries) prior to the Closing Date.
Section 8.2. Indemnification by Buyer. In addition to other obligations
of indemnification contained in this Agreement, Buyer (in its capacity as
indemnifying party, the "Indemnifying Party") hereby agrees, subject to the
limitations set forth below, to indemnify PHL, Sellers and their Affiliates
other than APC or any of its Subsidiaries and their respective directors,
officers and employees (each in its capacity as indemnified party, an
"Indemnitee") regardless of any investigation conducted by or knowledge obtained
by any of them, and hold each of PHL, Sellers and their Affiliates and their
respective directors, officers and employees harmless from, against and in
respect to any and all Losses arising from or related to any of the following:
(i) any breach of, untruth of or inaccuracy in (or any
allegation by any third party of facts which, if true as alleged, would
constitute such a breach or inaccuracy in) any representation or warranty made
by or on behalf of Buyer in this Agreement (including, without limitation, in
the Buyer Disclosure Letter) or in any Closing Agreement or other document,
instrument or certificate delivered pursuant hereto;
(ii) any breach, non-fulfillment or violation of any covenant
or agreement made by Buyer in this Agreement, or in any Closing Agreement or in
any document, instrument or certificate delivered pursuant hereto; or
(iii) any Liability incurred by PHL, Sellers or any of their
Affiliates relating to or arising from any time period after the Closing Date
arising out of, with respect to or in connection with the APC Business or any
matter or circumstance involving APC or any of its Subsidiaries, including,
without limitation, the APC Plans and the APC Benefit Arrangements, other than
matters with respect to (a) any Excluded Liabilities (b) any Losses covered by
Section 5.7 or the indemnity in Section 8.1 or (c) any Losses arising out of an
illegal or tortious course of conduct on the part of PHL, Sellers or any of
their Affiliates.
Section 8.3. Time Limitation on Indemnification. Notwithstanding the
foregoing, no claim may be made or suit instituted under any provision of this
Article VIII more than two (2) years following the Closing Date (the "General
Survival Period") except for Reserved Claims. The term "Reserved Claims" shall
mean (a) all Actions as to which any Indemnitee has given any
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Indemnifying Party notice on or prior to the end of the General Survival Period,
(b) all Actions by any Indemnitee based upon an alleged or actual breach of or
inaccuracy in the representations or warranties contained in Sections 3.1.4,
3A.1.4 and 3B.1.2 (Title to APC Shares), 3.1.6 (Subsidiaries), 3.13 (Tax
Matters), 3.14.2 (Employee Benefit Plans and Programs) and 3.15 (Environmental
Matters), (c) all Actions for Tax Losses pursuant to Section 5.7.2 and (d) all
Actions based upon fraud. With respect to clause (b) above, the only claims
concerning Section 3.1.4, 3A.1.4, 3B.1.2 or Section 3.1.6 which shall be
considered Reserved Claims are those which are based upon or arise out of an
allegation that Sellers have breached their representation as to the validity
of, in the case of Section 3.1.4, 3A.1.4 or 3B.1.2, Sellers' title, direct or
indirect, to the APC Shares and, in the case of Section 3.1.6, APC's title,
direct or indirect, to the capital stock of any APC Subsidiary. As to the
Reserved Claims, there shall be no time limitation with respect to any such
claims or any suit instituted with respect thereto, other than for any
applicable statute of limitations.
Section 8.4. Monetary Limitations on Indemnification.
8.4.1. Monetary Limitations on PHL's and Sellers' Indemnification
Obligations. Except with respect to claims referred to in clauses (b), (c) or
(d) of the definition of Reserved Claims and claims for breaches of any covenant
under Article V hereof, Sellers as Indemnifying Party shall not have any
obligation to indemnify Buyer or any of its Affiliates as Indemnitees under
Section 8.1 in respect of any Loss incurred by Buyer and/or any of its
Affiliates as Indemnitees unless the aggregate cumulative total of all Losses
(other than Losses arising out of claims referred to in clauses (b), (c) or (d)
of the definition of Reserved Claims or claims for breaches of any covenant
under Article V hereof) incurred by Buyer and/or any of its Affiliates as
Indemnitees exceeds $1,000,000, whereupon Buyer and each of its Affiliates as
Indemnitees shall be entitled to indemnification for the aggregate cumulative
amount of such Losses without regard to any dollar basket or limitation
(commencing with the first dollar of Losses). With respect to claims referred to
in clauses (b), (c) or (d) of the definition of Reserved Claims) and claims for
breaches of any covenant under Article V hereof, no such minimum dollar
limitation or basket shall apply.
8.4.2. Monetary Limitations on Buyer's Indemnification Obligations.
Except with respect to all claims based on fraud or claims for breaches by Buyer
of any covenant under Article V hereof, Buyer as Indemnifying Party shall not
have any obligation to indemnify PHL, Sellers or any of their Affiliates as
Indemnitees under Section 8.2 in respect of any Loss incurred by PHL, Sellers
and/or any of their Affiliates as Indemnitees unless the aggregate cumulative
total of all Losses (other than Losses arising out of claims based on fraud or
claims for breaches by Buyer of any covenant under Article V hereof) incurred by
PHL, Sellers and/or any of their Affiliates as Indemnitees exceeds $1,000,000,
whereupon PHL, Sellers and each of their Affiliates as Indemnitees shall be
entitled to indemnification for the aggregate cumulative amount of such Losses
without regard to any dollar basket or limitation (commencing with the first
dollar of Losses). With respect to claims based on fraud or claims for breaches
by Buyer of any covenant under Article V hereof, no such minimum dollar
limitation or basket shall apply.
Section 8.5 Reporting. Within forty-five (45) days after that date
which is one year after the Closing Date, each party shall provide the other
with a written report with respect to the
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claims that have arisen during that year which would be subject to
indemnification under this Article VIII had the aggregate amounts in controversy
reached the $1,000,000 level (the "Threshold"). Thereafter, each party shall
respond in a timely fashion to the other party's reasonable requests for
additional information concerning such claims and, if and when the Threshold is
reached, shall cooperate in trying to resolve such claims. In addition, once the
Threshold is reached for an Indemnitee, such Indemnitee shall provide the
Indemnifying Party with a written report within forty-five (45) days after the
end of each calendar quarter, identifying all new claims that arose during such
quarter. Notwithstanding the foregoing, any party's failure to comply in any
respect with this Section 8.5 shall not affect in any way such party's
indemnification rights under the terms of this Agreement.
Section 8.6. Third Party Claims. Promptly after the receipt by any
Indemnitee of notice of the commencement of any Action against such Indemnitee
by a third party (other than any Action relating to Taxes or any Tax Return,
which shall be governed by Section 5.7) such Indemnitee shall, if a claim with
respect thereto is or may be made against any Indemnifying Party pursuant to
this Article VIII, give such Indemnifying Party written notice thereof. The
failure to give such notice shall not relieve any Indemnifying Party from any
obligation hereunder except where, and then solely to the extent that, the
omission results in a failure of actual notice to the Indemnifying Party and the
Indemnifying Party is materially damaged as a result of such failure to give
notice. Such Indemnifying Party shall have the right to defend such Action, at
such Indemnifying Party's expense and with counsel of its choice reasonably
satisfactory to the Indemnitee, provided that the Indemnifying Party so notifies
the Indemnitee that it will defend such Action within fifteen (15) days after
receipt of such notice and then actually commences promptly the defense of such
Action, and otherwise the Indemnitee shall have the right to defend such Action
and the Indemnifying Party will reimburse the Indemnitee promptly and
periodically for the costs of defending such Action, including reasonable
attorneys' fees and expenses reasonably incurred. If the Indemnifying Party is
defending such Action, the Indemnitee may retain separate co-counsel at its sole
cost and expense and may participate in the defense of such Action.
Section 8.7. No Circular Recovery. PHL and Sellers hereby agree that
they will not make any claim for indemnification against Buyer, APC or any of
its Subsidiaries by reason of the fact that PHL, Sellers or any of their
officers, directors, agents or other representatives was a controlling Person,
director, officer, employee, agent or other representative of APC or any of its
Subsidiaries or was serving as such for another Person at the request of APC or
any Subsidiary of APC (whether such claim is for Losses of any kind or otherwise
and whether such claim is pursuant to any statute, Charter, Bylaw, Contractual
Obligation or otherwise) with respect to any Action brought by Buyer or any of
its Affiliates against PHL and/or Sellers (whether such Action is pursuant to
this Agreement, applicable law, or otherwise).
Section 8.8. Nature of Certain Payments. The following payments shall
be deemed for all purposes to be adjustments to the Purchase Consideration: all
payments pursuant to Article VIII or pursuant to Sections 2.2.3, 5.7, 5.14,
5.19, 5.21, 5.22 or 5.23.
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Section 8.9. Other Remedies. The remedies set forth under this Article
VIII are in addition to any other remedies and rights which might otherwise be
available or applicable under any other provisions of this Agreement or
otherwise under applicable law.
ARTICLE IX
Consent to Jurisdiction; Governing Law
Section 9.1. Consent to Jurisdiction. Each party to this Agreement, by
its execution hereof, (i) hereby irrevocably submits, and agrees to cause each
of its Affiliates to submit, to the exclusive jurisdiction of the federal courts
located either in the City of Richmond, Virginia, or in the City of Hartford
Connecticut, and in the event that such federal courts shall not have subject
matter jurisdiction over the relevant proceeding, then of the state courts
located in the City of Richmond, Virginia, or in the City of Hartford,
Connecticut, for the purpose of any Action arising out of or based upon this
Agreement or any Closing Agreement or relating to the subject matter hereof or
thereof or the transactions contemplated hereby or thereby, (ii) hereby waives,
and agrees to cause each of its Subsidiaries and Affiliates to waive, to the
extent not prohibited by applicable law, and agrees not to assert, and agrees
not to allow any of its Subsidiaries and Affiliates to assert, by way of motion,
as a defense or otherwise, in any such Action, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that any such proceeding brought
in one of the above-named courts is improper, or that this Agreement or any
other Closing Agreement, or the subject matter hereof or thereof, may not be
enforced in or by such court and (iii) hereby agrees not to commence or to
permit any of its Subsidiaries or Affiliates to commence any Action arising out
of or based upon this Agreement or any Closing Agreement or relating to the
subject matter hereof or thereof other than before one of the above-named courts
nor to make any motion or take any other Action seeking or intending to cause
the transfer or removal of any such Action to any court other than one of the
above-named courts whether on the grounds of inconvenient forum or otherwise.
Each party hereby consents to service of process in any such proceeding in any
manner permitted by Virginia or Connecticut law, as the case may be, and agrees
that service of process by registered or certified mail, return receipt
requested, at its address specified pursuant to Section 11.7 hereof is
reasonably calculated to give actual notice.
Section 9.2. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic substantive law of the Commonwealth of
Virginia, without giving effect to any choice or conflict of law provision or
rule that would cause the application of the law of any other jurisdiction.
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ARTICLE X
Termination
Section 10.1. Termination of Agreement. This Agreement may be
terminated by the parties only as provided below:
(a) Buyer, Sellers and PHL may terminate this Agreement by
mutual written consent at any time prior to the Closing.
(b) Buyer may terminate this Agreement by giving written
notice to PHL and Sellers at any time prior to the Closing (i) in the event that
any representation or warranty made by or on behalf of PHL and Sellers herein or
pursuant hereto or in any Closing Agreement containing qualifications as to
materiality or Material Adverse Effect shall have been inaccurate when made, or
any other representation or warranty made by or on behalf of PHL and Sellers
herein or in any Closing Agreement shall have been inaccurate in any material
respect when made, or in each case if then made would be so inaccurate, and such
inaccuracy is not capable of cure or if capable of cure is not so cured within a
reasonable period following notice of such inaccuracy, (ii) in the event that
PHL or Sellers materially breach or violate any covenant or agreement contained
herein or in any Closing Agreement to be performed by PHL or Sellers and such
breach or violation is not capable of cure or if capable of cure is not so cured
within a reasonable period following notice of such breach or violation, (iii)
if the Closing shall not have occurred on or before June 30, 1999 by reason of
the failure of any condition set forth in Article VI hereof to be satisfied
(unless the failure results primarily from the failure of any representation or
warranty made by or on behalf of Buyer herein or in any Closing Agreement
containing qualifications as to materiality or Material Adverse Effect to be
true and correct or any other representation or warranty made by or on behalf of
Buyer herein or in any Closing Agreement to be true and correct in all material
respects or from the material breach or violation by Buyer of any covenant or
agreement contained herein or in any Closing Agreement).
(c) Sellers may terminate this Agreement by giving written
notice to Buyer at any time prior to the Closing (i) in the event that any
representation or warranty made by or on behalf of Buyer herein or pursuant
hereto or in any Closing Agreement containing qualifications as to materiality
or Material Adverse Effect shall have been inaccurate when made, or any other
representation or warranty made by or on behalf of Buyer herein or in any
Closing Agreement shall have been inaccurate in any material respect when made,
or in each case if then made would be so inaccurate, and such inaccuracy is not
capable of cure or if capable of cure is not so cured within a reasonable period
following notice of such inaccuracy, (ii) in the event that Buyer materially
breaches or violates any covenant or agreement contained herein or in any
Closing Agreement to be performed by Buyer and such breach or violation is not
capable of cure or if capable of cure is not so cured within a reasonable period
following notice of such breach or violation, or (iii) if the Closing shall not
have occurred on or before June 30, 1999 by reason of the failure of any
condition set forth in Article VII hereof to be satisfied (unless the failure
results primarily from the failure of any representation or warranty made by or
on behalf of PHL and Sellers herein or in any Closing Agreement containing
qualifications as to materiality or Material Adverse Effect to be true and
correct or any other representation or warranty made by or on
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behalf of PHL and Sellers herein or in any Closing Agreement to be true and
correct in all material respects or from the material breach or violation by PHL
or Sellers of any covenant or agreement contained herein or in any Closing
Agreement).
Section 10.2. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 10.1, all obligations of the parties
hereunder (other than the obligations under Sections 5.8 (Expenses of
Transaction; Accounts), 9.1 (Consent to Jurisdiction), 9.2 (Governing Law), 10.1
(Termination of Agreement), 10.2 (Effect of Termination), 11.1 (Entire
Agreement), 11.6 (Successors and Assigns), 11.7 (Notices), 11.8 (Public
Announcements) and 11.10 (Third Party Beneficiaries), each of which shall
survive termination) shall terminate without any liability of any party to any
other party; provided, however, that no termination shall relieve any party from
any liability arising from or relating to breach prior to termination.
ARTICLE XI
Miscellaneous
Section 11.1. Entire Agreement; Waivers. This Agreement, the Closing
Agreements and the Confidentiality Agreement constitute the entire agreement
among the parties hereto pertaining to the subject matter hereof and thereof and
supersede all prior and contemporaneous agreements, understandings, negotiations
and discussions, whether oral or written, of the parties with respect to such
subject matter. No waiver of any provision of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
similar), shall constitute a continuing waiver unless otherwise expressly
provided nor shall be effective unless in writing and executed (i) in the case
of a waiver by Buyer, by Buyer and (ii) in the case of a waiver by Sellers, by
Sellers.
Section 11.2. Amendment or Modification. The parties hereto may not
amend or modify this Agreement except in such manner as may be agreed upon by a
written instrument executed and delivered by Buyer, PHL and Sellers.
Section 11.3. Survival, etc. All representations, warranties, covenants
and agreements made by or on behalf of any party hereto in this Agreement
(including, without limitation, in Sellers' Disclosure Letter and the Buyer
Disclosure Letter), or pursuant to any document, certificate or other instrument
referred to herein or delivered in connection with the transactions contemplated
hereby, shall be deemed to have been relied upon by the parties hereto,
notwithstanding any investigation made by or on behalf of any of the parties
hereto or any opportunity therefor (including without limitation the
availability for review of any document), and, subject to the provisions of
Article VIII, shall survive the execution and delivery of this Agreement and the
Closing. Neither the period of survival nor the liability of any party with
respect to such party's representations, warranties covenants and agreements
shall be reduced by any investigation made at any time by or on behalf of any
party. If notice of a claim has been given prior to the expiration of any time
period set forth herein for any such notice by a party in whose favor such
representations, warranties, covenants or agreements have been made to any party
that made such representations, warranties, covenants or agreements, then the
relevant
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representations, warranties, covenants or agreements shall survive as to such
claim until such claims have been finally resolved.
Section 11.4. Independence of Representations and Warranties. The
parties hereto intend that each representation, warranty, covenant and agreement
contained herein shall have independent significance. If any party has breached
any representation, warranty, covenant or agreement contained herein in any
respect, the fact that there exists any other representation, warranty, covenant
or agreement relating to the same subject matter (regardless of the relative
levels of specificity) that the party has not breached shall not detract from or
mitigate the fact that such party is in breach of the first representation,
warranty, covenant or agreement.
Section 11.5. Severability. In the event that any provision hereof
(including, without limitation, any of the provisions of Section 5.17 hereof)
would, under applicable law, be invalid or unenforceable in any respect, such
provision shall (to the extent permitted under applicable law) be construed by
modifying or limiting it so as to be valid and enforceable to the maximum extent
compatible with, and possible under, applicable law. The provisions hereof
(including, without limitation, each of the provisions of Section 5.17 hereof)
are severable, and in the event any provision hereof should be held invalid or
unenforceable in any respect, it shall not invalidate, render unenforceable or
otherwise affect any other provision hereof.
Section 11.6. Successors and Assigns. All of the terms and provisions
of this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective transferees, successors and permitted
assigns (each of which such transferees, successors and permitted assigns shall
be deemed to be a party hereto for all purposes hereof); provided, however, that
neither PHL, Sellers nor Buyer may assign or transfer (by operation of law or
otherwise) any of their respective rights or obligations hereunder.
Section 11.7. Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given only if in writing (including
telecopy or similar teletransmission), addressed as follows:
If to Holdings Phoenix Home Life Mutual Insurance Company
or PHL, (or, for Holdings) PM Holdings, Inc.
to either, at: One American Row
Hartford, Connecticut 06102-5056
Attention: Carole A. Masters, Esquire
Telecopier: (860) 403-5182
With a copy to: Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY 10038
Attention: David Finkelman, Esquire
Telecopier: (212) 806-6006
If to Vaughan, to
him at: Martin L. Vaughan, III
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1450 Lakeview Drive
Deland, Florida 32720
With a copy to: Sorokin, Gross & Hyde, P.C.
One Corporate Center
Hartford, Connecticut
Attention: Morris W. Banks, Esquire
Telecopier: (860) 522-1781
If to Buyer, to it at: Hilb, Rogal and Hamilton Company
4235 Innslake Drive
P.O. Box 1220
Glen Allen, Virginia 23060-1220
Attention: Walter L. Smith, Esquire
Telecopier: (804) 747-3138
With a copy to: Williams, Mullen, Christian & Dobbins, P.C.
1021 East Cary Street, 16th Floor
Richmond, Virginia 23219
Attention: Theodore L. Chandler, Jr., Esquire
Telecopier: (804) 783-6507
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) in the case of any notice or communication sent other than
by mail, on the date actually delivered to such address (evidenced, in the case
of delivery by overnight courier, by confirmation of delivery from the overnight
courier service making such delivery, and in the case of a telecopy, by receipt
of a transmission confirmation form or the addressee's confirmation of receipt),
or (b) in the case of any notice or communication sent by mail, three (3)
Business Days after being sent, if sent by registered or certified mail, with
first-class postage prepaid. Each of the parties hereto shall be entitled to
specify a different address by giving notice as aforesaid to each of the other
parties hereto.
Section 11.8. Public Announcements. At all times on or before the
Closing Date, no party hereto will issue or make any reports, statements or
releases to the public or generally to any Persons to whom Buyer or APC or their
Subsidiaries provides services or with whom Buyer or APC or their Subsidiaries
otherwise has significant business relationships with respect to this Agreement
or the transactions contemplated hereby without the prior written consent of the
other parties hereto. If any party hereto is unable to obtain, after reasonable
effort, the approval of its public report, statement or release from the other
parties hereto and such report, statement or release is, in the opinion of legal
counsel to such party, required by law in order to discharge such party's
disclosure obligations, then such party may make or issue the legally required
report, statement or release and promptly furnish the other parties with a copy
thereof. Each party hereto will also obtain the prior approval by the other
parties hereto of any press release to be issued immediately following the
Closing announcing the consummation of the transactions contemplated by this
Agreement.
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Section 11.9. Headings, etc. Section and subsection headings are not to
be considered part of this Agreement, are included solely for convenience, are
not intended to be full or accurate descriptions of the content thereof and
shall not affect the construction hereof.
Section 11.10. Third Party Beneficiaries. Except as otherwise provided
in Article VIII, nothing in this Agreement is intended or shall be construed to
entitle any Person other than the parties, APC or their respective transferees,
successors and assigns permitted hereby to any claim, cause of Action, remedy or
right of any kind.
Section 11.11. Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties on separate counterparts
each of which shall be deemed an original, but all of which together shall
constitute but one and the same instrument.
(SIGNATURES ON FOLLOWING PAGE)
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed, or have caused to be executed by their respective
officers thereunto duly authorized, this Stock Purchase Agreement as of the date
first above written.
PHL: PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
By: /s/ David W. Searfoss
----------------------------------
Name: David W. Searfoss
Title: Executive Vice President and
Chief Financial Officer
SELLERS: PM HOLDINGS, INC.
By: /s/ David W. Searfoss
----------------------------------
Name: David W. Searfoss
Title: Vice President/Chief
Financial Officer
/s/ Martin L. Vaughan, III
--------------------------------------
Martin L. Vaughan, III
BUYER: HILB, ROGAL AND HAMILTON
COMPANY
By: /s/ Andrew L. Rogal
----------------------------------
Name: Andrew L. Rogal
Title: President and Chief
Executive Officer
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EXHIBITS
Exhibit A - Baltimore Lease [Omitted]
Exhibit B - Indenture [Omitted]
Exhibit C - Jamestown Lease [Omitted]
Exhibit D - Miami Lease [Omitted]
Exhibit E - Registration Rights Agreement
Exhibit F - Risk Management Agreement [Omitted]
Exhibit G - Rule 145 Representation Letter [Omitted]
Exhibit H - Vaughan Employment Agreement [Omitted]
Exhibit I - Voting and Standstill Agreement
Exhibit J - Trademark License Agreement [Omitted]
Exhibit K - Form of Legal Opinion of Stroock & Stroock & Lavan LLP [Omitted]
Exhibit L - Form of Legal Opinion of Carole A. Masters [Omitted]
Exhibit M - Form of Legal Opinion of Sorokin, Gross & Hyde, P.C. [Omitted]
Exhibit N - Form of Legal Opinion of Williams, Mullen, Christian & Dobbins, P.C.
[Omitted]
SCHEDULES
Schedule 5.7.1 - APC Electing Subsidiaries [Omitted]
The Company will provide the omitted exhibits and schedule to the
Commission upon request.
<PAGE>
Exhibit E to Stock
Purchase Agreement
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
________ __, 1999, is made between Hilb, Rogal and Hamilton Company, a Virginia
corporation (the "Company"), PM Holdings, Inc., a Connecticut corporation
("Holdings"), and Phoenix Home Life Mutual Insurance Company, a New York life
insurance company ("PHL").
W I T N E S S E T H:
WHEREAS, the Company, Holdings, PHL and Martin L. Vaughan, III entered
into a Stock Purchase Agreement dated March 29, 1999 (the "Stock Purchase
Agreement"), under which the Company agreed to acquire from Holdings and Martin
L. Vaughan, III all of the issued and outstanding shares of the capital stock of
American Phoenix Corporation, a Connecticut corporation ("APC"); and
WHEREAS, pursuant to the Stock Purchase Agreement, (i) Holdings
acquired __________ shares of the Company's Common Stock (as hereinafter
defined) and $22,000,000
principal amount of the Company's Subordinated Debentures (as hereinafter
defined), and (ii) PHL acquired $10,000,000 principal amount of the Company's
Subordinated Debentures; and
WHEREAS, the Subordinated Debentures acquired by Holdings and PHL
pursuant to the Stock Purchase Agreement are convertible into shares of Common
Stock pursuant to the terms of the Subordinated Debentures; and
WHEREAS, the Company has agreed to enter into this Agreement to provide
certain registration rights to Holdings in order to facilitate the distribution
of the shares of Common Stock acquired by Holdings pursuant to the Stock
Purchase Agreement and any shares of Common Stock that may be acquired by
Holdings, PHL or their Affiliates upon conversion of the Subordinated
Debentures.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and in the Stock Purchase Agreement, the Company, Holdings and
PHL hereby agree as follows:
ARTICLE I
Definitions
Except as otherwise specified herein, capitalized terms used in this
Agreement shall have the respective meanings assigned to such terms in the Stock
Purchase Agreement. For purposes of this Agreement, the following terms have the
following meanings:
(a) "Affiliate" shall mean, as to any specified Person, each other
Person directly or indirectly controlling, controlled by or under direct or
indirect common control with that specified
<PAGE>
Person. For the purposes of this definition, "control," when used with respect
to any specified Person, means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, or by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. Notwithstanding the
foregoing, the following shall not be deemed to be an Affiliate of Holdings or
PHL for purposes of this Agreement: (i) Phoenix Investment Partners, Ltd., a
Delaware corporation, and its subsidiaries (or any successor thereof), and (ii)
any Person registered as an investment company under the Investment Company Act
of 1940, as amended.
(b) "Blue Sky Filing" shall mean a filing made in connection with the
registration or qualification of the Registrable Shares under a particular
state's securities or blue sky laws.
(c) "Common Shares" shall mean the __________ shares of Common Stock
that Holdings acquired from the Company pursuant to the Stock Purchase Agreement
and such additional shares of Common Stock that the Company may issue with
respect to such shares pursuant to any stock splits, stock dividends,
recapitalizations, restructurings, reclassifications or similar transactions.
(d) "Common Stock" shall mean the Common Stock, without par value, of
the Company.
(e) "Effective Period," with respect to the Registrable Shares, shall
mean the period from the date of effectiveness of the Registration Statement
relating to the Registrable Shares under Section 2.3 below to the date that is
two years from the date of such effectiveness; provided, that, for each Holdback
Period required by the Company under Article III of this Agreement and for each
Discontinuance Period (as defined in Section 2.5(k) below), the Effective Period
shall be extended by the number of days during which the applicable Holdback
Period or Discontinuance Period was in effect.
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(g) "NYSE" shall mean the New York Stock Exchange.
(h) "Person" shall have the meaning set forth in Section 3(a)(9) of the
Exchange Act as in effect on the date of this Agreement, and shall include,
without limitation, corporations, partnerships, limited liability companies and
trusts.
(i) "Prospectus" shall mean the prospectus included in a Registration
Statement (including a prospectus that discloses information previously omitted
from a prospectus filed as part of an effective registration statement in
reliance upon Rule 430A under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Shares covered by such Registration Statement, and
all other amendments and supplements to such prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in any such prospectus.
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(j) "Registrable Shares" shall mean collectively (i) the Common Shares
and (ii) the aggregate number of shares of Common Stock into which the
Subordinated Debentures are convertible pursuant to the terms of the
Subordinated Debentures and such additional shares of Common Stock that the
Company may issue with respect to such shares pursuant to any stock splits,
stock dividends, recapitalizations, restructurings, reclassifications or similar
transactions.
(k) "Registration Statement" shall mean a registration statement of the
Company under the Securities Act that covers the resale of the Registrable
Shares pursuant to the terms of this Agreement, including the related
Prospectus, all amendments and supplements to such registration statement,
including pre- and post-effective amendments, all exhibits thereto and all
material incorporated by reference or deemed to be incorporated by reference in
such registration statement.
(l) "SEC" shall mean the Securities and Exchange Commission.
(m) "Securities Act" shall mean the Securities Act of 1933, as amended.
(n) "Subordinated Debentures" shall mean the Company's 5.25%
Convertible Subordinated Debentures (Due 2014), in the aggregate principal
amount of $32,000,000.
(o) "Voting and Standstill Agreement" shall mean the Voting and
Standstill Agreement, dated ________ __, 1999, executed by the Company, Holdings
and PHL in connection with the Stock Purchase Agreement.
ARTICLE II
Registration of Securities
Section 2.1. Securities Subject to this Agreement. The securities
entitled to the benefits of this Agreement are the Registrable Shares. For the
purposes of this Agreement, one or more of the Registrable Shares will no longer
be subject to this Agreement when and to the extent that (i) a Registration
Statement covering such Registrable Shares has been declared effective under the
Securities Act and such Registrable Shares have been sold pursuant to such
effective Registration Statement, (ii) such Registrable Shares are distributed
to the public pursuant to Rule 144 under the Securities Act, (iii) such
Registrable Shares shall have been otherwise transferred or disposed of, new
certificates therefor not bearing a legend restricting further transfer or
disposition shall have been delivered by the Company and, at such time,
subsequent transfer or disposition of such securities shall not require
registration or qualification of such Registrable Shares under the Securities
Act or any similar state law then in force, or (iv) such Registrable Shares have
ceased to be outstanding.
Section 2.2. Registration Rights. Holdings may exercise the demand and
piggy-back registration rights to which it is entitled under this Agreement only
at a time at which the Holdings Ownership Percentage (as such term is defined in
the Voting and Standstill Agreement) exceeds
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10% or Holdings is otherwise deemed by the Company to be an Affiliate of the
Company. Holdings may not exercise any such rights after ________ __, 2014.
Section 2.3. Demand Registration.
(a) Holdings shall have the right, subject to Section 2.2 above, to
make one written request to the Company for the registration of all of the
Registrable Shares subject to this Agreement that are beneficially owned by
Holdings, PHL and their Affiliates at the time of the request. The Company shall
not be obligated to register any of the Registrable Shares held by an Affiliate
of Holdings or PHL unless and until such Affiliate shall have agreed in writing
to indemnify the Company pursuant to Section 4.2 of this Agreement.
(b) Upon the receipt of the request described in Section 2.3(a) above,
the Company shall (i) within 45 days of such request, file a Registration
Statement with the SEC under the Securities Act to register the resale of the
Registrable Shares as set forth in such request and (ii) use its best efforts to
cause such Registration Statement to become effective as soon as practicable
after the filing thereof with the SEC. On or before the Closing Date, the
Company shall have listed on the NYSE, on a when issued basis, the Registrable
Shares.
(c) The Company shall use its best efforts to maintain the
effectiveness of the Registration Statement relating to the Registrable Shares,
and maintain the listing of such shares, as applicable, on the NYSE or any
exchange or automated interdealer quotation system on which the Common Stock is
then listed or quoted, during the Effective Period.
(d) If the Company is required to effect a Registration Statement
pursuant to this Section 2.3, the Company may, in its discretion, include
securities, other than Registrable Shares, among the securities covered by such
registration.
(e) The Company shall not be required to effect more than one
registration under this Section 2.3.
Section 2.4 Piggy-Back Registration.
(a) In the event that the Company shall propose to file a registration
statement under the Securities Act relating to a public offering by or through
one or more underwriters of shares of Common Stock for the Company's own account
or for the account of any holder of shares of Common Stock other than Holdings,
PHL or any of their Affiliates (a "Selling Shareholder") and on a form and in a
manner that would permit the registration of any of the Registrable Shares for
sale to the public under the Securities Act, the Company shall (i) give written
notice to Holdings of its intention to do so and of the right of Holdings,
subject to Section 2.2 above, to have any or all of the Registrable Shares
subject to this Agreement that are beneficially owned by Holdings, PHL and their
Affiliates at the time of such notice included among the securities to be
covered by such registration statement and (ii) at the written request of
Holdings given to the Company within 20 days after the Company provides such
notice, use its best efforts to include among the securities covered by such
registration statement the number of such Registrable Shares that
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Holdings shall have requested be so included (subject, however, to reduction in
accordance with Section 2.4(b) below). None of Holdings, PHL and their
Affiliates, however, shall be entitled to participate in any offering pursuant
to this Section 2.4(a) unless and until Holdings, PHL, if participating, and any
participating Affiliate have entered into an underwriting or other agreement
with such underwriter or underwriters for such offering in such customary form
as such underwriter or underwriters shall reasonably determine.
(b) Holdings may include Registrable Shares in any registration
statement relating to any offering pursuant to Section 2.4(a) above to the
extent that the inclusion of such shares shall not reduce the number of shares
of Common Stock to be offered and sold by the Company or the Selling
Shareholder, as the case may be. If the lead managing underwriter selected by
the Company for any such offering determines that marketing factors require a
limitation on the number of Registrable Shares to be offered and sold by
Holdings, PHL and their Affiliates in such offering, there shall be included in
such offering only that number of Registrable Shares, if any, that such lead
managing underwriter reasonably and in good faith believes will not jeopardize
the success of the offering of all shares of Common Stock that the Company or
the Selling Shareholder, as the case may be, desires to sell for its own
account. In such event and provided that the lead managing underwriter has so
notified the Company in writing, the shares of Common Stock to be included in
such offering shall consist of (i) the securities that the Company or the
Selling Shareholder, as the case may be, proposes to sell, and (ii) the number,
if any, of Registrable Shares requested to be included in such registration
that, in the opinion of such lead managing underwriter, can be sold without
jeopardizing the success of the offering of the shares of Common Stock that the
Company or the Selling Shareholder, as the case may be, desires to sell for its
own account.
(c) Nothing in this Section 2.4 shall create any liability on the part
of the Company to Holdings, PHL or any of their Affiliates if the Company for
any reason should decide not to file a registration statement proposed to be
filed under Section 2.4(a) above or to withdraw such registration statement
subsequent to its filing, regardless of any action whatsoever that Holdings may
have taken, whether as a result of the issuance by the Company of any notice
hereunder or otherwise.
Section 2.5. Registration Procedures. In order to comply with the
requirements of Sections 2.3 and 2.4 above, the Company will:
(a) prepare and file with the SEC a Registration Statement covering the
Registrable Shares on any form or forms for which the Company then qualifies and
that counsel for the Company shall deem appropriate, and which form shall be
available for the sale of the Registrable Shares
(i) in connection with the registration of the Registrable
Shares pursuant to Section 2.3 above, on a delayed or continuous basis
in accordance with Rule 415 under the Securities Act (or any successor
rule); provided, however, that the methods of distribution permitted by
such Registration Statement shall not include underwritten offerings;
or
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(ii) in connection with a registration that includes any
Registrable Shares pursuant to Section 2.4 above, in accordance with
the intended methods of distribution thereof.
(b) prepare and file with the SEC pre- and post-effective amendments to
the Registration Statement and such amendments and supplements to the Prospectus
used in connection therewith as may be required by the rules, regulations or
instructions applicable to the registration form utilized by the Company, or by
the Securities Act or the rules and regulations thereunder, and cause the
Prospectus as so supplemented to be filed pursuant to Rule 424 under the
Securities Act, and otherwise comply with the provisions of the Securities Act
with respect to the disposition of the Registrable Shares;
(c) furnish to Holdings such number of copies of the Registration
Statement and each pre- and post-effective amendment thereto, any Prospectus or
Prospectus supplement and each amendment thereto and such other documents as
Holdings may reasonably request in order to facilitate the transfer or
disposition of the Registrable Shares by Holdings;
(d) make such Blue Sky Filings, if necessary, to register or qualify
the Registrable Shares under such state securities or blue sky laws of such
jurisdictions as Holdings may reasonably request, and do any and all other acts
that may be reasonably necessary or advisable to enable Holdings to consummate
the transfer or disposition in such jurisdictions of the Registrable Shares,
except that the Company shall not for any such purpose be required (i) to
qualify generally to do business as a foreign corporation in any jurisdiction
where, but for the requirements of this Section 2.5(d), it would not be
obligated to be so qualified, (ii) to subject itself to taxation in any such
jurisdiction, or (iii) to consent to general service of process in any such
jurisdiction;
(e) notify Holdings, at any time when a Prospectus is required to be
delivered under the Securities Act with respect to one or more of the
Registrable Shares, of the Company's becoming aware that a Prospectus included
in the Registration Statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, and prepare and furnish to Holdings a reasonable number of
copies of an amendment to such Prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Shares, such
Prospectus shall not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(f) notify Holdings
(1) when any Prospectus or Prospectus supplement or pre- or
post-effective amendment has been filed, and, with respect to the Registration
Statement or any post-effective amendment, when such Registration Statement or
post-effective amendment has become effective;
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(2) of any request by the SEC or any other applicable
regulatory authority for amendments or supplements to the Registration Statement
or Prospectus or for additional information;
(3) of the issuance by the SEC or any other applicable
regulatory authority of any stop order of which the Company or its counsel is
aware suspending the effectiveness of the Registration Statement or any order
preventing the use of a related Prospectus, or the initiation or any threats of
any proceedings for such purpose; and
(4) of the receipt by the Company of any written notification
of the suspension of the registration or qualification of any of the Registrable
Shares for sale in any jurisdiction, or the initiation or any threats of any
proceeding for such purpose;
(g) make generally available to the Company's shareholders, as soon as
reasonably practicable, an earnings statement that shall satisfy the provisions
of Section 11(a) of the Securities Act, provided that the Company shall be
deemed to have complied with this Section 2.5(g) if it has complied with Rule
158 under the Securities Act;
(h) use its best efforts to provide a transfer agent and registrar for
the Registrable Shares covered by the Registration Statement no later than the
effective date of such Registration Statement;
(i) cooperate with Holdings to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends) representing the
securities to be sold under the Registration Statement, and enable such
securities to be in such denominations and registered in such names as Holdings
may reasonably request;
(j) provide Holdings and any attorney, accountant or other agent
retained by Holdings (collectively, the "Inspectors") with reasonable access
during normal business hours to appropriate officers of the Company and its
subsidiaries to ask questions and to obtain information that any such Inspector
may reasonably request and make available for inspection all financial and other
records, pertinent corporate documents and properties of any of the Company and
its subsidiaries (collectively, the "Records"), as shall be reasonably necessary
to enable them to exercise their due diligence responsibility; provided,
however, that the Records that the Company determines, in good faith, to be
confidential and that it notifies the Inspectors in writing are confidential
shall not be disclosed to any Inspector unless such Inspector signs or is
otherwise bound by a confidentiality agreement reasonably satisfactory to the
Company; and
(k) in the event of the issuance of any stop order of which the Company
or its counsel is aware suspending the effectiveness of the Registration
Statement or any order suspending or preventing the use of any related
Prospectus or suspending the registration or qualification of any Registrable
Shares for sale in any jurisdiction, the Company promptly will use its best
efforts to obtain its withdrawal.
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Holdings shall furnish to the Company in writing such information
regarding Holdings, PHL and their Affiliates as is required to be disclosed
pursuant to the Securities Act. Holdings agrees to notify the Company promptly
of any inaccuracy or change in information previously furnished by Holdings to
the Company or of the happening of any event in either case as a result of which
the Registration Statement, a Prospectus, or any amendment or supplement thereto
contains an untrue statement of a material fact regarding Holdings, PHL or any
of their Affiliates or omits to state a material fact regarding Holdings, PHL or
any of their Affiliates required to be stated therein or necessary to make the
statements therein not misleading and to furnish promptly to the Company any
additional information required to correct and update any previously furnished
information or required so that such Registration Statement, Prospectus, or
amendment or supplement, shall not contain, with respect to Holdings, PHL or any
of their Affiliates, an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.
Holdings agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Sections 2.5(e) or (k)
above, Holdings will forthwith discontinue (and cause any Affiliate, and PHL and
any of its Affiliates, to discontinue) the transfer or disposition of any
Registrable Shares pursuant to the Prospectus relating to the Registration
Statement covering such Registrable Shares until Holdings' receipt of the copies
of the amended or supplemented Prospectus contemplated by Section 2.5(e) or the
withdrawal of any order contemplated by Section 2.5(k), and, if so directed by
the Company, Holdings will deliver to the Company all copies, other than
permanent file copies then in Holdings' possession, of the Prospectus covering
such Registrable Shares at the time of receipt of such notice. The period during
which any discontinuance under this paragraph is in effect is referred to herein
as a "Discontinuance Period."
Section 2.6. Registration Expenses.
(a) In connection with the registration of the Registrable Shares
pursuant to Section 2.3 above, the Company will pay any and all out-of-pocket
expenses incident to the Company's performance of or compliance with this
Agreement, including, without limitation, (i) all registration and filing fees
with the SEC relating to the shares of Common Stock into which the Subordinated
Debentures are convertible pursuant to the terms of the Subordinated Debentures,
(ii) all fees and expenses of complying with state securities or blue sky laws,
(iii) all printing and delivery expenses, (iv) all fees and expenses incurred in
connection with the listing of the Registrable Shares on the NYSE, or any other
exchange or automated interdealer quotation system as then applicable, (v) the
fees and disbursements of the Company's counsel and of its independent public
accountants, and (vi) the fees and expenses of any special experts retained by
the Company in connection with the requested registration, and Holdings shall
pay any and all out-of-pocket expenses incurred by Holdings, including, without
limitation, (x) all registration and filing fees with the SEC relating to the
Common Shares, (y) all fees or disbursements of counsel to Holdings and (z) all
brokerage commissions, fees and expenses and all transfer taxes and documentary
stamp taxes, if any, relating to the sale or disposition of the Registrable
Shares.
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(b) In connection with a registration that includes any Registrable
Shares pursuant to Section 2.4 above, Holdings will pay any and all
out-of-pocket expenses attributable to such Registrable Shares, including,
without limitation, (i) all registration and filing fees with the SEC and the
National Association of Securities Dealers, Inc., (ii) all fees and expenses
associated with qualifying the Registrable Shares with state securities or blue
sky laws, (iii) any fees or disbursements of counsel to Holdings, and (iv) any
brokerage commissions and fees, underwriting discounts and commissions, transfer
taxes and documentary stamp taxes, if any, relating to the sale or disposition
of the Registrable Shares.
ARTICLE III
Holdback Period
If one or more underwritten public offerings of shares of Common Stock
(other than the Registrable Shares) by the Company occur during the Effective
Period, then, in connection with each such public offering, the Company may
require Holdings, PHL and their Affiliates to refrain from, and Holdings, PHL
and their Affiliates will refrain from, selling any of the Registrable Shares
for a period determined by the Company but not to exceed 120 days (or such
lesser period as the Company may require its officers and directors or other
holders of shares of Common Stock to so refrain) (each such period referred to
as a "Holdback Period") so long as the Company delivers written notice to
Holdings of the Company's requirement of a Holdback Period and the length of
such Holdback Period prior to commencement of the Holdback Period.
ARTICLE IV
Indemnification; Contribution
Section 4.1. Indemnification by the Company. The Company will, and
hereby agrees to, indemnify and hold harmless, to the fullest extent permitted
by law, and, subject to Section 4.3 below, defend Holdings, PHL, each of their
Affiliates (i) to whom Holdings or PHL transferred Registrable Shares in a
manner permitted by the Voting and Standstill Agreement and (ii) who is listed
as a selling shareholder in the Prospectus, and their respective officers,
directors, employees, agents, representatives and each other Person, if any, who
controls Holdings within the meaning of the Securities Act (each, a "Company
Indemnitee"), against any and all losses, claims, damages, liabilities and
expenses, joint or several, to which they or any of them may become subject
under the Securities Act or any other statute or common law, including any
amount paid in settlement of any action or proceeding, commenced or threatened,
and to reimburse them for any reasonable legal or other expenses incurred by
them in connection with investigating any claims and defending any actions
(collectively, "Losses"), with respect to sales of Registrable Shares under the
Registration Statement, insofar as any Losses arise out of or are based upon (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any pre- or post-effective amendment thereto or in
any Blue Sky Filing, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (ii) any untrue statement or alleged untrue statement
of a material fact contained in the Prospectus or any amendment or supplement
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thereto, or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the indemnification agreement contained herein shall not (i) apply to
Losses arising out of, or based upon, any such untrue statement or alleged
untrue statement, or any such omission or alleged omission, if such statement or
omission was made in reliance upon and in conformity with information furnished
in writing to the Company by such Company Indemnitee from time to time
specifically for use in the Registration Statement, the Prospectus or any such
amendment or supplement thereto or any Blue Sky Filing or (ii) inure to the
benefit of any Person, to the extent that any such Loss arises out of such
Person's failure to send or give a copy of the Prospectus, as the same may be
then supplemented or amended, to the Person asserting an untrue statement or
alleged untrue statement, or omission or alleged omission, at or prior to the
written confirmation of the sale of the Registrable Shares to such Person if
such statement or omission was corrected in the Prospectus or any amendment or
supplement thereto prior to the written confirmation of the sale. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Company Indemnitee or any other Person and shall survive the
transfer of such securities by such Company Indemnitee.
Section 4.2. Indemnification by Holdings. Holdings and PHL will, and
hereby agree to, indemnify and hold harmless and, subject to Section 4.3 below,
defend (in the same manner and to the same extent as set forth in Section 4.1
above), and cause each of their Affiliates who is listed as a selling
shareholder in the Prospectus to so indemnify, hold harmless and defend, the
Company and the Company's officers, directors, employees, agents,
representatives and each other Person, if any, who controls the Company within
the meaning of the Securities Act, with respect to any such untrue statement or
alleged untrue statement in, or any such omission or alleged omission from, the
Registration Statement, any Prospectus, or any amendment or supplement thereto,
if such statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company by Holdings, PHL or any of their
Affiliates from time to time specifically for use in the Registration Statement,
the Prospectus, and any such amendment or supplement thereto. Such indemnity
shall remain in full force and effect, regardless of any investigation made by
or on behalf of the Company or any such director, officer or any other Person
and shall survive the transfer of such securities by Holdings and PHL. The
liability of an indemnifying party under this Section 4.2 shall be limited to
the amount of the net proceeds received by such indemnifying party upon the
resale of any Registrable Shares pursuant to the Registration Statement creating
such liability.
Section 4.3. Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in Sections 4.1 and 4.2 above, such indemnified
party will give, if a claim in respect thereof is to be made against an
indemnifying party, written notice to the latter of the commencement of such
action, provided that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under this Article IV, except to the extent that the indemnifying party is
actually prejudiced in any material respect by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, to
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assume the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of reasonable investigation. If the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such Person of its election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the indemnified party may, at its option, defend, settle or
otherwise compromise or pay such action or claim in each case at the
indemnifying party's expense. In any event, unless and until the indemnifying
party elects in writing to assume and does so assume the defense of any such
claim, proceeding or action, the indemnified party's reasonable costs and
expenses arising out of the defense, settlement or compromise of any such
action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party that relates to such
action or claim. The indemnifying party shall keep the indemnified party fully
informed at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense, except that the indemnifying party shall be liable for such reasonable
costs and expenses if, in such indemnified party's reasonable judgment, a
conflict of interest between such indemnified and indemnifying parties may exist
as described above. If the indemnifying party does not assume such defense, the
indemnified party shall keep the indemnifying party informed at all times as to
the status of the defense; provided, however, that the failure to keep the
indemnifying party so informed shall not affect the obligations of the
indemnifying party hereunder. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its written
consent; provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the written consent of the indemnified party, consent to entry of any judgment
or enter into any settlement that does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
general written release from all liability with respect to such claim or
litigation.
Section 4.4. Indemnification Payments. The indemnification required by
this Article IV shall be made by periodic payments of the amount thereof during
the course of the investigation or defense as and when bills are received or
Losses are incurred, subject to the receipt of such documentary support therefor
as the indemnifying party may reasonably request.
Section 4.5. Contribution. If the indemnification provided for in this
Article IV is unavailable to or insufficient to hold harmless a party otherwise
entitled to be indemnified thereunder in respect to any Losses referred to
therein, then the parties required to provide indemnification under this Article
IV shall contribute to the amount paid or payable by such party
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as a result of Losses in such proportion as is appropriate to reflect the
relative fault of each such indemnifying party in connection with the statements
or omissions that resulted in such Losses. The relative fault of each
indemnifying party shall be determined by reference to whether the untrue
statement or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
indemnifying party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, Holdings and PHL agree that it would not be just and equitable if
contributions pursuant to this Section 4.5 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to above in this Section 4.5. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation.
Section 4.6. Other Rights and Liabilities. The indemnity and
contribution agreements contained herein shall be in addition to (i) any cause
of action or similar right of the indemnified party against the indemnifying
party or others and (ii) any liabilities the indemnifying party may be subject
to pursuant to the law.
ARTICLE V
Rule 144 Representations
The Company covenants that, for the time that the Holdings Ownership
Percentage (as such term is defined in the Voting and Standstill Agreement)
exceeds 10% or Holdings is otherwise deemed by the Company to be an Affiliate of
the Company, it will use its best efforts to:
(i) file with the SEC all reports and other documents required
to be filed by the Company under the Exchange Act and the rules and
regulations promulgated thereunder;
(ii) if not required to file such reports and documents
referred to in subsection (i) above, keep publicly available certain
information regarding the Company, as contemplated by Rule 144(c)(2)
under the Securities Act; and
(iii) take all other actions reasonably necessary to enable
Holdings, PHL and their Affiliates to sell the Registrable Shares
without registration under the Securities Act within the limitation of
the exemption provided by Rule 144 under the Securities Act.
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ARTICLE VI
Miscellaneous
Section 6.1. Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if in writing (including
telecopy or similar teletransmission), addressed as follows:
If to the Company, Hilb, Rogal and Hamilton Company
to it at: 4235 Innslake Drive
Glen Allen, Virginia 23060
Telecopier: (804) 747-3138
Attention: Andrew L. Rogal
With a copy to: Williams Mullen Christian & Dobbins
1021 East Cary Street, 16th Floor
Richmond, Virginia 23219
Telecopier: (804) 783-6507
Attention: Theodore L. Chandler, Jr., Esquire
If to Holdings PM Holdings, Inc.
or PHL, to them at: One American Row
Hartford, Connecticut 06115
Telecopier: (860) 403-5182
Attention: Carole A. Masters, Esquire
Phoenix Home Life Mutual Insurance Company
One American Row
Hartford, Connecticut 06115
Telecopier: (860) 403-5182
Attention: David W. Searfoss
Executive Vice President and
Chief Financial Officer
With a copy to: Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
Telecopier: (212) 806-6006
Attention: David L. Finkelman, Esquire
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Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) in the case of any notice or communication sent other than
by mail, on the date actually delivered to such address (evidenced, in the case
of delivery by overnight courier, by confirmation of delivery from the overnight
courier service making such delivery, and in the case of a telecopy, by receipt
of a transmission confirmation form or the addressee's confirmation of receipt),
or (b) in the case of any notice or communication sent by mail, three Business
Days after being sent, if sent by registered or certified mail, with first-class
postage prepaid. Each of the parties hereto shall be entitled to specify a
different address by giving notice as aforesaid to each of the other parties
hereto.
Section 6.2. Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated
except by an instrument in writing signed by Holdings and by the Company
following approval thereof by a majority of the Continuing Directors (as such
term is defined in the Voting and Standstill Agreement).
Section 6.3. Successors and Assigns. Except as otherwise provided
herein, this Agreement shall be binding upon and shall inure to the benefit of
and be enforceable by the parties and their respective successors and assigns,
including without limitation in the case of any corporate party hereto any
corporate successor by merger or otherwise; provided that no party may assign
this Agreement without the other party's prior written consent, which consent
will not be required in the event of the transfer of all of the Registrable
Shares beneficially owned by Holdings in accordance with Sections 4.1(g) or
4.1(h) of the Voting and Standstill Agreement.
Section 6.4. Entire Agreement. This Agreement embodies the entire
agreement and understanding among the parties relating to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter. There are no representations, warranties or covenants by the
parties hereto relating to such subject matter other than those expressly set
forth in this Agreement and the Stock Purchase Agreement.
Section 6.5. Specific Performance. The parties acknowledge that money
damages are not an adequate remedy for violations of this Agreement and that any
party may, in its sole discretion, apply to a court of competent jurisdiction
for specific performance or injunctive or such other relief as such court may
deem just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
Section 6.6. Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise or beginning
of the exercise of any thereof by any party shall not preclude the simultaneous
or later exercise of any other such right, power or remedy by such party.
Section 6.7. No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and
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any custom or practice of the parties at variance with the terms hereof, shall
not constitute a waiver by such party of its right to exercise any such or other
right, power or remedy or to demand such compliance.
Section 6.8. No Third Party Beneficiaries. Except as provided in
Article IV above, this Agreement is not intended to be for the benefit of and
shall not be enforceable by any Person who or which is not a party hereto.
Section 6.9. Consent to Jurisdiction. Each party to this Agreement, by
its execution hereof, (i) hereby irrevocably submits, and agrees to cause each
of its Affiliates to submit, to the jurisdiction of the federal courts located
either in the City of Richmond, Virginia, or in the City of Hartford,
Connecticut, and in the event that such federal courts shall not have subject
matter jurisdiction over the relevant proceeding, then of the state courts
located either in the City of Richmond, Virginia, or in the City of Hartford,
Connecticut, for the purpose of any Action (as such term is defined in the Stock
Purchase Agreement) arising out of or based upon this Agreement or relating to
the subject matter hereof or the transactions contemplated hereby, (ii) hereby
waives, and agrees to cause each of its Affiliates to waive, to the extent not
prohibited by applicable law, and agrees not to assert, and agrees not to allow
any of its Affiliates to assert, by way of motion, as a defense or otherwise, in
any such Action, any claim that it is not subject personally to the jurisdiction
of the above-named courts, that its property is exempt or immune from attachment
or execution, that any such proceeding brought in one of the above-named courts
is improper, or that this Agreement or the subject matter hereof may not be
enforced in or by such court and (iii) hereby agrees not to commence or to
permit any of its Affiliates to commence any Action arising out of or based upon
this Agreement or relating to the subject matter hereof other than before one of
the above-named courts nor to make any motion or take any other action seeking
or intending to cause the transfer or removal of any such Action to any court
other than one of the above-named courts whether on the grounds of inconvenient
forum or otherwise. Each party hereby consents to service of process in any such
proceeding in any manner permitted by Virginia or Connecticut law, as the case
may be, and agrees that service of process by registered or certified mail,
return receipt requested, at its address specified pursuant to Section 6.1 above
is reasonably calculated to give actual notice. Notwithstanding anything
contained in this Section 6.9 to the contrary with respect to the parties' forum
selection, if an Action is filed against a party to this Agreement, including
its Affiliates, by a person who or which is not a party to this Agreement, an
Affiliate of a party to this Agreement, or an assignee thereof (a "Third Party
Action"), in a forum other than the federal district court or a state court
located in the City of Richmond, Virginia, or in the City of Hartford,
Connecticut, and such Third Party Action is based upon, arises from, or
implicates rights, obligations or liabilities existing under this Agreement or
acts or omissions pursuant to this Agreement, then the party to this Agreement,
including its Affiliates, joined as a defendant in such Third Party Action shall
have the right to file cross-claims or third-party claims in the Third Party
Action against the other party to this Agreement, including its Affiliates, and
even if not a defendant therein, to intervene in such Third Party Action with or
without also filing cross-claims or third-party claims against the other party
to this Agreement, including its Affiliates.
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Section 6.10. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic substantive law of the Commonwealth of
Virginia, without giving effect to any choice or conflict of law provision or
rule that would cause the application of the law of any other jurisdiction.
Section 6.11. Name, Captions. The name assigned to this Agreement and
the section captions used herein are for convenience of reference only and shall
not affect the interpretation or construction hereof.
Section 6.12. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one instrument. Each counterpart may consist
of a number of copies each signed by less than all, but together signed by all,
the parties hereto.
Section 6.13. Expenses. Each of the parties hereto shall bear their own
expenses incurred in connection with this Agreement and the transactions
contemplated hereby, except that in the event of a dispute concerning the terms
or enforcement of this Agreement, the prevailing party in any such dispute shall
be entitled to reimbursement of reasonable legal fees and disbursements from the
other party or parties to such dispute.
Section 6.14. Severability. In the event that any provision of this
Agreement would, under applicable law, be invalid or unenforceable in any
respect, such provision shall (to the extent permitted under applicable law) be
construed by modifying or limiting it so as to be valid and enforceable to the
maximum extent compatible with, and possible under, applicable law. The
provisions of this Agreement are severable, and in the event that any provision
hereof should be held invalid or unenforceable in any respect, it shall not
invalidate, render unenforceable or otherwise affect any other provision hereof.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Registration Rights Agreement to be executed, as of the
date first above written by their respective officers thereunto duly authorized.
HILB, ROGAL AND HAMILTON COMPANY
By: ______________________________________
Name: Andrew L. Rogal
Title: President and Chief Executive Officer
PM HOLDINGS, INC.
By:
______________________________________
Name:
Title:
PHOENIX HOME LIFE MUTUAL INSURANCE
COMPANY
By:
______________________________________
Name:
Title:
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Exhibit I to Stock
Purchase Agreement
VOTING AND STANDSTILL AGREEMENT
THIS VOTING AND STANDSTILL AGREEMENT (the "Agreement"), dated as of
___________, 1999, is made by and among Hilb, Rogal and Hamilton Company, a
Virginia corporation (the "Company"), PM Holdings, Inc., a Connecticut
corporation ("Holdings"), and Phoenix Home Life Mutual Insurance Company, a New
York life insurance company ("PHL").
W I T N E S S E T H:
WHEREAS, the Company, Holdings, PHL and Martin L. Vaughan, III entered
into a Stock Purchase Agreement dated March 29, 1999 (the "Stock Purchase
Agreement"), under which the Company agreed to acquire from Holdings and Martin
L. Vaughan, III all of the issued and outstanding shares of the capital stock of
American Phoenix Corporation, a Connecticut corporation ("APC"); and
WHEREAS, pursuant to the Stock Purchase Agreement, (i) Holdings
acquired __________ shares of the Company's Common Stock (as hereinafter
defined) and $22,000,000 principal amount of the Company's Subordinated
Debentures (as hereinafter defined), and (ii) PHL acquired $10,000,000 principal
amount of the Company's Subordinated Debentures; and
WHEREAS, the Subordinated Debentures acquired by Holdings and PHL
pursuant to the Stock Purchase Agreement are convertible into shares of Common
Stock pursuant to the terms of the Subordinated Debentures; and
WHEREAS, the parties to this Agreement desire to establish certain
rights and obligations in connection with the relationship of Holdings and PHL
to the Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and in the Stock Purchase Agreement, the Company, Holdings and
PHL hereby agree as follows:
ARTICLE I
Definitions; Representations and Warranties
Section 1.1. Definitions. Except as otherwise specified herein,
capitalized terms used in this Agreement shall have the respective meanings
assigned to such terms in the Stock Purchase Agreement. For purposes of this
Agreement, the following terms have the following meanings:
(a) "Adjusted Outstanding Shares" shall mean, at any time and with
respect to the determination of (i) the Holdings Ownership Percentage as it
relates to Holdings and its Affiliates, (ii) the Standstill Percentage as it
relates to Holdings and its Affiliates, and (iii) any other percentage of the
beneficial ownership of Common Stock as it relates to a Person or Group, the
total number of shares of Common Stock then issued and outstanding together with
the total
<PAGE>
number of shares of Common Stock not then issued and outstanding that would be
outstanding if all then existing Subordinated Debentures had been converted.
(b) "Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as in effect on the date of this Agreement, and shall include, with
respect to a determination of the Affiliates of Holdings, any Affiliate of PHL;
provided, however, that (i) PXP and its subsidiaries and (ii) any Person
registered as an investment company under the Investment Company Act of 1940, as
amended, which might otherwise be deemed to be an "affiliate" of Holdings or PHL
within the meaning of Rule 12b-2 under the Exchange Act (a "Related Investment
Company"), shall not be deemed to be Affiliates of Holdings or PHL for purposes
of this Agreement to the extent their respective businesses consist principally
of investing in securities, investment management and/or advisory services, and
any shares of Common Stock or other equity securities of the Company acquired,
or caused to be acquired, by PXP and its subsidiaries or such Related Investment
Company in the conduct of their respective businesses in the ordinary course for
the account of, or for the benefit of, clients of PXP or its subsidiaries,
policyholders or investors (other than Holdings, PHL or their Affiliates), and
not with the purpose of avoiding the provisions of Section 3.1 below, shall not
be deemed, for purposes of this Agreement, to be beneficially owned by Holdings,
PHL or their Affiliates.
(c) "Beneficial ownership," "beneficial owner" and "beneficially own"
shall have the meanings ascribed to such terms in Rule 13d-3 under the Exchange
Act as in effect on the date of this Agreement; provided that Holdings and each
of its Affiliates and any Person or Group shall be deemed to be the beneficial
owners of any shares of Common Stock that Holdings or such Affiliate, Person
and/or Group, as the case may be, has the right to acquire within sixty (60)
days after the determination date pursuant to any other agreement, arrangement
or understanding or upon the exercise of conversion or exchange rights,
warrants, options or otherwise, including but not limited to any right to
acquire shares of Common Stock through the conversion of the Subordinated
Debentures.
(d) "Board of Directors" shall mean the Board of Directors of the
Company.
(e) "Business Day" shall mean any day on which banking institutions in
New York, New York are customarily open for the purpose of transacting business.
(f) "Common Stock" shall mean the Common Stock, without par value, of
the Company.
(g) "Continuing Directors" shall mean the members of the Board of
Directors of the Company immediately prior to the Closing Date and any future
members of the Board of Directors nominated by the Board of Directors; provided,
however, that no Holdings Director shall constitute a Continuing Director or be
counted in determining the presence of a quorum of Continuing Directors.
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(h) "Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
(i) "Group" shall have the meaning comprehended by Section 13(d)(3) of
the Exchange Act as in effect on the date of this Agreement.
(j) "Holdings Designee" shall mean a member of the Board of Directors
of the Company who was designated by Holdings for nomination pursuant to this
Agreement, but shall not include Robert W. Fiondella or Martin L. Vaughan, III.
(k) "Holdings Directors" shall mean Robert W. Fiondella and the
Holdings Designee.
(l) "Holdings Ownership Percentage" shall mean, at any time, the
percentage of the Adjusted Outstanding Shares that is beneficially owned in the
aggregate by Holdings, PHL and their Affiliates. Immediately following the
consummation of the transactions contemplated by the Stock Purchase Agreement,
the Holdings Ownership Percentage was ____%.
(m) "Holdings Securities" shall mean collectively (i) the _________
shares of Common Stock that Holdings acquired pursuant to the terms of the Stock
Purchase Agreement, (ii) the Subordinated Debentures acquired by Holdings and
PHL pursuant to the terms of the Stock Purchase Agreement, (iii) the shares of
Common Stock into which the Subordinated Debentures are convertible pursuant to
the terms of the Subordinated Debentures and (iv) any other shares of Common
Stock that Holdings, PHL and their Affiliates may acquire from time to time,
including without limitation such additional shares of Common Stock that the
Company may issue with respect to such shares pursuant to any stock splits,
stock dividends, recapitalizations, restructurings, reclassifications or similar
transactions.
(n) "HRH Designee" shall mean a member of the Board of Directors of the
Company who was designated by the Continuing Directors for appointment or
nomination pursuant to this Agreement.
(o) "Indenture" shall mean the Indenture, dated ____________, 1999,
executed by the Company and _______________, as Trustee, in connection with the
issuance of the Subordinated Debentures.
(p) "NYSE Rules" shall mean the rules and regulations of the New York
Stock Exchange as in effect from time to time.
(q) "Person" shall have the meaning set forth in Section 3(a)(9) of the
Exchange Act as in effect on the date of this Agreement, and shall include,
without limitation, corporations, partnerships, limited liability companies and
trusts.
(r) "PXP" shall mean Phoenix Investment Partners, Ltd., a Delaware
corporation, approximately 60% of the common stock of which is currently owned
by Holdings.
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(s) "Registration Rights Agreement" shall mean the Registration Rights
Agreement, dated ___________, 1999, executed by the Company, Holdings and PHL in
connection with the Stock Purchase Agreement.
(t) "Subordinated Debentures" shall mean the Company's 5.25%
Convertible Subordinated Debentures (Due 2014), in the aggregate principal
amount of $32,000,000, acquired by Holdings and PHL pursuant to the Stock
Purchase Agreement.
(u) "Standstill Percentage" shall mean, at any time, 20.0% of the
Adjusted Outstanding Shares.
(v) "Transfer" shall mean sell, transfer, assign, pledge, hypothecate,
give away or in any manner dispose of any Common Stock or Subordinated
Debentures.
Section 1.2. Representations and Warranties of Holdings. Holdings
represents and warrants to the Company as follows:
(a) Holdings is a corporation duly organized, validly existing and in
good standing under the laws of the State of Connecticut.
(b) Except for the Holdings Securities, neither Holdings nor any of its
Affiliates beneficially owns any Common Stock or any options, warrants or rights
of any nature (including conversion and exchange rights) to acquire beneficial
ownership of any Common Stock.
(c) Holdings has full legal right, power and authority to enter into
and perform this Agreement, and the execution and delivery of this Agreement by
Holdings have been duly authorized by all necessary corporate action on behalf
of Holdings. This Agreement is enforceable against Holdings in accordance with
its terms, subject to bankruptcy, reorganization, insolvency and other similar
laws affecting the enforcement of creditors' rights generally and to general
principles of equity (regardless of whether considered in a proceeding in equity
or an action at law).
(d) The execution, delivery and performance of this Agreement by
Holdings does not and will not conflict with or constitute a violation of or
default under the Charter or Bylaws (or comparable documents) of Holdings, or
any statute, law, regulation, order or decree applicable to Holdings, or any
contract, commitment, agreement, arrangement or restriction of any kind to which
Holdings is a party or by which Holdings is bound, other than such violations as
would not prevent or materially delay the performance by Holdings of its
obligations hereunder or otherwise subject the Company to any material claim or
liability.
Section 1.3. Representations and Warranties of PHL. PHL represents and
warrants to the Company as follows:
(a) PHL is a life insurance company duly organized, validly existing
and in good standing under the laws of the State of New York.
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(b) PHL has full legal right, power and authority to enter into and perform this
Agreement, and the execution and delivery of this Agreement by PHL have been
duly authorized by all necessary corporate action on behalf of PHL. This
Agreement is enforceable against PHL in accordance with its terms, subject to
bankruptcy, reorganization, insolvency and other similar laws affecting the
enforcement of creditors' rights generally and to general principles of equity
(regardless of whether considered in a proceeding in equity or an action at
law).
(c) The execution, delivery and performance of this Agreement by PHL
does not and will not conflict with or constitute a violation of or default
under the Charter or Bylaws (or comparable documents) of PHL, or any statute,
law, regulation, order or decree applicable to PHL, or any contract, commitment,
agreement, arrangement or restriction of any kind to which PHL is a party or by
which PHL is bound, other than such violations as would not prevent or
materially delay the performance by PHL of its obligations hereunder or
otherwise subject the Company to any material claim or liability.
Section 1.4. Representations and Warranties of the Company. The Company
hereby represents and warrants to Holdings and PHL as follows:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Virginia.
(b) The Company has full legal right, power and authority to enter into
and perform this Agreement, and the execution and delivery of this Agreement by
the Company have been duly authorized by all necessary corporate action on
behalf of the Company. This Agreement is enforceable against the Company in
accordance with its terms, subject to bankruptcy, reorganization, insolvency and
other similar laws affecting the enforcement of creditors' rights generally and
to general principles of equity (regardless of whether considered in a
proceeding in equity or an action at law).
(c) The execution, delivery and performance of this Agreement by the
Company does not and will not conflict with or constitute a violation of or
default under the Charter or Bylaws of the Company, or any statute, law,
regulation, order or decree applicable to the Company, or any contract,
commitment, agreement, arrangement or restriction of any kind to which the
Company is a party or by which the Company is bound, other than such violations
as would not prevent or materially delay the performance by the Company of its
obligations hereunder or otherwise subject Holdings or PHL to any material claim
or liability.
ARTICLE II
Board Representation
Section 2.1. Initial Board Representation. On the later of the Closing
Date or the date of the Company's 1999 annual meeting of shareholders, the
Company will (a) take such action as may be necessary to increase the size of
the Board of Directors from nine (9) to thirteen (13) directors, (b) upon
receipt of executed letter agreements regarding resignation in the form attached
to this Agreement as Exhibit A, fill two (2) of the vacancies created thereby
with Martin
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L. Vaughan, III and the Holdings Designee in accordance with the applicable
provisions of the Charter and Bylaws of the Company, and (c) fill the remaining
two (2) vacancies created thereby with Robert W. Fiondella and the HRH Designee
in accordance with the applicable provisions of the Company's Charter and
Bylaws. With respect to the four (4) directors appointed to the Board of
Directors pursuant to this Section 2.1, the Company will (i) appoint Robert W.
Fiondella and Martin L. Vaughan, III to the Class whose current term expires in
2000, the Holdings Designee to the Class whose current term expires in 2001 and
the HRH Designee to the Class whose current term expires in 2002, and (ii)
subject to the right of Holdings to designate a new Holdings Designee as a
substitute for the initial Holdings Designee, nominate and recommend each for
election as a director to the respective Class designated above at the next
annual meeting of the Company's shareholders following such appointments;
provided that, if any such director is not elected by the shareholders of the
Company, the Company shall have no further obligations under this Section 2.1
for the applicable year; and provided further that the Company shall be under no
obligation to appoint or recommend for election the Holdings Designee or Martin
L. Vaughan, III to the Board of Directors unless and until it has received from
such director an executed letter agreement regarding resignation in the form
attached to this Agreement as Exhibit A. The HRH Designee shall be an executive
officer of the Company at the time of appointment or nomination by the Company.
Any person designated by Holdings to be the Holdings Designee shall be
reasonably acceptable to the Continuing Directors, and, if found unacceptable by
the Continuing Directors (i) the Company shall not be obligated to appoint or
recommend for election any such person to the Board of Directors and (ii)
Holdings shall be entitled to designate a replacement that is reasonably
acceptable to the Continuing Directors.
Section 2.2. Continuing Board Representation.
(a) Except as otherwise expressly provided by the provisions of this
Article II, the Company agrees that, during the term of this Agreement, it will
not take or recommend to its shareholders any action that would cause the Board
of Directors to consist of any number of directors other than thirteen (13)
directors; provided, however, that the Company may increase the number of
directors on the Board of Directors (i) in connection with the consummation of
business combination transactions wherein the Company has agreed to increase the
size of the Board of Directors or (ii) with the consent of Holdings, which will
not be unreasonably withheld; and provided further, that the Company may reduce
the number of directors on the Board of Directors in the event of the death,
resignation or removal of any director pursuant to the Company's Bylaws or this
Agreement (unless such death, resignation or removal relates to the Holdings
Designee and Holdings has the right under this Article II to designate a
replacement).
(b) Subject to the provisions of Sections 2.2(a), 2.2(c) and 2.5 hereof
regarding reductions in the size of the Board of Directors and any required
resignation of the Holdings Designee, during the term of this Agreement the
Company will nominate and recommend the Holdings Directors for election in the
applicable year in which their respective Class terms expire; provided that, if
any such Holdings Director is not elected by the shareholders of the Company,
the Company shall have no further obligations under this Section 2.2(b) for the
applicable year; and provided further that the Company shall be under no
obligation to nominate or recommend for election the Holdings Designee to the
Board of Directors unless and until it has received from such director an
executed letter agreement regarding resignation in the form attached to this
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Agreement as Exhibit A. Any person designated by Holdings to be a Holdings
Designee shall be reasonably acceptable to the Continuing Directors, and, if
found unacceptable by the Continuing Directors (i) the Company shall not be
obligated to appoint or recommend for election any such person to the Board of
Directors and (ii) Holdings shall be entitled to designate a replacement that is
reasonably acceptable to the Continuing Directors.
(c) The Company shall have no obligation to nominate or recommend a
Holdings Director for election to the Board of Directors after the termination
of this Agreement pursuant to Article VI hereof or upon the occurrence of the
following events:
(i) With respect to the Holdings Designee, upon the earlier of
(x) the date when the Holdings Ownership Percentage is less than ten
percent (10%), or (y) subject to the right of Holdings to designate a
replacement Holdings Designee pursuant to Section 2.7 hereof, his
death, disability or attainment of the age of seventy (70) years; or
(ii) With respect to Robert W. Fiondella, upon the earlier of
his death, disability or attainment of the age of seventy (70) years;
or
(iii) With respect to each of the Holdings Directors, upon a
final determination by a court of competent jurisdiction that this
Agreement has been breached by PHL, Holdings or their Affiliates.
For purposes of this Section 2.2(c) and Section 2.5(b) below, the term
"disability" shall mean the inability to perform the duties of a director as a
result of a physical or mental incapacity (or combination thereof) for a period
longer than three (3) consecutive months or for more than six (6) months in any
consecutive twelve (12) month period, in each case determined by the written
opinion of such director's regular attending physician.
The Company may take such action as may be necessary to reduce the size
of the Board of Directors upon the occurrence of the events set forth in (c)(i)
and (c)(iii) above or in the event of Mr. Fiondella's death or disability. Upon
attaining the age of seventy (70) years, Mr. Fiondella may continue to serve as
a director for the remainder of his then current term on the Board of Directors
and thereafter the Company may take such action as may be necessary to reduce
the size of the Board of Directors by one director.
(d) Until the earlier to occur of (i) the date on which there are no
Holdings Directors serving on the Board of Directors pursuant to this Agreement
or (ii) the expiration of this Agreement, the Company agrees that it will not
take or recommend to its shareholders any action that would result in any
amendment to the Company's Bylaws in effect on the date hereof that would impose
any qualifications on the eligibility of directors of the Company to serve on
any committee of the Board of Directors, except as may be required by the NYSE
Rules, the rules and regulations under the Internal Revenue Code of 1986, as
amended, relating to the qualification of employee stock benefit plans and the
deductibility of compensation paid to executive officers, the rules and
regulations under Section 16(b) of the Exchange Act, including Rule 16b-3
thereunder or any successor rule, and the Company's Bylaws.
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Section 2.3. Committee Representation. Until the earlier to occur of
(i) the date on which there are no Holdings Directors serving on the Board of
Directors pursuant to this Agreement or (ii) the expiration of this Agreement,
to the extent that, and for so long as, but only insofar as required by
applicable law or NYSE Rules, any of the Holdings Directors is qualified under
the then-current NYSE Rules, the rules and regulations under the Internal
Revenue Code of 1986, as amended, relating to the qualification of employee
stock benefit plans and the deductibility of compensation paid to executive
officers, the rules and regulations under Section 16(b) of the Exchange Act,
including Rule 16b-3 thereunder or any successor rule, the Board of Directors
shall designate, as it deems appropriate, each of the Holdings Directors to
serve on at least one committee of the Board of Directors (whether existing on
the date hereof or formed or constituted after the date hereof).
Section 2.4. Resignations at the Request of Holdings; Vacancies.
Holdings shall have the right to request the resignation from the Board of
Directors of the Holdings Designee pursuant to the terms of Exhibit A. In the
event that the Holdings Designee for any reason ceases to serve as a member of
the Board of Directors during his or her term of office and at such time
Holdings would have the right to a designation hereunder if an election for the
resulting vacancy were to be held, Holdings may designate a person to fill such
vacancy (a "Holdings Designee Vacancy"); provided that, the person so designated
shall be reasonably acceptable to the Continuing Directors. Subject to the
foregoing and Section 2.2 hereof, the Company agrees to (i) appoint Holdings'
designee to the Board of Directors to fill the Holdings Designee Vacancy and to
serve until the next annual meeting of the Company's shareholders and (ii)
nominate and recommend the Holdings' designee for election to the Board of
Directors at the next annual meeting of the Company's shareholders to fill the
remaining term of the class of directors to which such designee was appointed;
provided further that the Company shall be under no obligation to appoint,
nominate or recommend for election any such designee to fill an Holdings
Designee Vacancy unless and until it has received from such designee an executed
letter agreement regarding resignation in the form attached to this Agreement as
Exhibit A. Other than with respect to the foregoing provisions relating to a
Holdings Designee Vacancy, the Board of Directors shall have the sole and
exclusive right to designate a replacement director in the event of any vacancy
on the Board of Directors.
Section 2.5. Required Resignations.
(a) On the earlier of (i) the date when the Holdings Ownership
Percentage is less than ten percent (10%), or (ii) the date of any final
determination by a court of competent jurisdiction that this Agreement has been
breached by PHL, Holdings or their Affiliates, Holdings shall, within five (5)
Business Days, use its best efforts to cause the Holdings Designee to resign
from the Board of Directors. In the event of any decrease in the Holdings
Ownership Percentage to below such ten percent (10%) threshold, any subsequent
increase in the Holdings Ownership Percentage to or above such ten percent (10%)
threshold shall not entitle Holdings to reinstate, elect or designate any
Holdings Designee to the Board of Directors. If Holdings does not cause the
resignation of the Holdings Designee within such five (5) Business Day period,
the Company may seek such resignation or, in the alternative, the Continuing
Directors may seek the removal of the Holdings Designee.
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(b) In the event of the disability or termination of employment of
Martin L. Vaughan, III under the Employment Agreement between the Company and
Martin L. Vaughan, III dated ______________, 1999, the Company may request
Martin L. Vaughan, III to resign from the Board of Directors. If such
resignation is not received by the Company within five (5) Business Days from
the date of the Company's request for resignation, the Company may seek his
removal in accordance with the letter agreement attached hereto as Exhibit A.
(c) Upon any shareholder vote relating to the removal of a director for
failure to resign pursuant to this Section 2.5, Holdings and its Affiliates
shall (i) attend any meeting either in person or by proxy and (ii) vote in favor
of such removal. At such time as a director becomes subject to resignation
pursuant to this Section 2.5, the Board of Directors may amend its Bylaws or
take such other action as it deems appropriate to reduce the number of directors
constituting the Board of Directors proportionately or fill the vacancy caused
by such resignation(s) with its own nominee in accordance with the applicable
provisions of the Charter and Bylaws of the Company.
Section 2.6. No Voting Trust. This Agreement does not create or
constitute, and shall not be construed as creating or constituting, a voting
trust agreement under the Virginia Stock Corporation Act or any other applicable
corporation law.
Section 2.7. Notification of Designation. Holdings shall notify the
Company in writing not later than March 1st of the year in which the Holdings
Designee's term on the Board of Directors expires as to the designation of the
person to be nominated for election as the Holdings Designee at the annual
meeting of the Company's shareholders for such year; provided that, if Holdings
should fail to so notify the Company of its Holdings Designee by such date,
Holdings shall be deemed to have designated the then current Holdings Designee
for nomination to the Board of Directors at the next annual meeting of
shareholders. Holdings shall cause the Holdings Designee to provide promptly
information that may be required under the Exchange Act for inclusion in the
Company's proxy statement for such annual meeting and shall cooperate with the
Company in obtaining any such information, including but not limited to the
prompt completion of any director questionnaires applicable to the directors
generally. Holdings shall have the sole and exclusive right to designate the
Holdings Designee under this Article II and the Company shall not be required to
accept a designation from any Person other than Holdings; provided, however,
that to the extent that Holdings Transfers all of the Holdings Securities
beneficially owned by Holdings to (i) an Affiliate of Holdings or PHL in
compliance with Section 4.1(g) hereof or (ii) a Person surviving a merger or
formed by a consolidation pursuant to Section 4.1(h) hereof, such Affiliate or
Person shall have the sole and exclusive right to designate the Holdings
Designee under this Article II from and after the date of such Transfer.
Section 2.8. No Duty to Designate; Reduction of Board Representation.
Nothing contained in this Article II shall be construed as requiring Holdings to
designate any Holdings Designee or as requiring any Holdings Director, once
elected, to continue to serve in office if such Holdings Director elects to
resign. Until the earlier to occur of (i) the date on which there are no
Holdings Directors serving on the Board of Directors pursuant to this Agreement
or (ii) the expiration of this Agreement, in the event of any vacancy created by
the death, resignation or removal of the Holdings Designee or the failure of
Holdings to designate an Holdings Designee,
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other than a vacancy created by the resignation or removal of an Holdings
Designee pursuant to Section 2.5 above, Holdings may notify the Company in
writing that it does not intend to designate a person to fill such vacancy, and
the Company thereafter may take such action as may be necessary either to reduce
the size of the Board of Directors by one director or fill the vacancy with its
own designee.
ARTICLE III
Standstill Restrictions; Voting Matters
Section 3.1. Standstill Restrictions.
(a) During the term of this Agreement, PHL and Holdings covenant and
agree that PHL and Holdings shall not, and shall not permit any of their
Affiliates to, either individually or as part of a Group, directly or
indirectly:
(i) acquire (other than acquisitions resulting from corporate
action taken by the Board of Directors with respect to any pro rata distribution
of shares of Common Stock in connection with any stock split, stock dividend,
recapitalization, reclassification or similar transaction), propose to acquire
(or publicly announce or otherwise disclose an intention to propose to acquire),
offer to acquire, or agree to acquire any Common Stock (or any options,
warrants, rights or other securities exercisable for, or convertible or
exchangeable into, Common Stock, including without limitation the Subordinated
Debentures) if the effect of such acquisition would cause the Holdings Ownership
Percentage to equal or exceed the Standstill Percentage (other than as a result
of any stock purchases or repurchases by the Company); provided that this
Section 3.1(a)(i) shall not apply to (a) any acquisition of Common Stock or of
options, warrants, rights or other securities exercisable for, or convertible or
exchangeable into, Common Stock granted to any Person, including without
limitation Holdings Directors, pursuant to any benefit plan of the Company or
any of its Affiliates or the exercise, conversion or exchange of any such
option, warrant, right or other security or (b) any acquisition of Common Stock
upon the exercise by PHL, Holdings or their Affiliates of rights pursuant to any
Rights Agreement that may be adopted by the Company for the purpose of deterring
coercive takeover activities with respect to the Company, provided that all of
the shares of Common Stock so acquired upon the exercise of the rights shall be
subject to all of the terms of this Agreement;
(ii) propose (or publicly announce or otherwise disclose an
intention to propose), solicit, offer, seek or take any action to effect,
negotiate with or provide any confidential information relating to the Company
or its business to any other Person with respect to, any tender or exchange
offer, merger, consolidation, share exchange, business combination,
restructuring, recapitalization or similar transaction involving the Company
(other than (x) any of the foregoing that has been approved by the Board of
Directors or (y) in connection with any tender or exchange offer in which the
Board of Directors has (a) recommended that its shareholders accept such offer
or (b) after ten (10) business days (as defined in Rule 14d-1 under the Exchange
Act as in effect on the date of this Agreement) from the date of commencement of
such offer, expressed no opinion, remained neutral, was unable to take a
position or otherwise did not oppose or recommend that its shareholders reject
such offer);
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(iii) make, or in any way participate in, any "solicitation"
of "proxies" to vote (as such terms are defined in Rule 14a-1 under the Exchange
Act), solicit any consent or communicate with or seek to advise or influence any
person or entity with respect to the voting of any Common Stock or become a
"participant" in any "election contest" (as such terms are defined or used in
Rule 14a-11 under the Exchange Act) with respect to the Company; provided that
nothing in this Section 3.1(a)(iii) shall apply to any deemed solicitation of
proxies by the Holdings Directors that may result from such Holdings Directors'
position or status as a director of the Company at the time of any general
solicitation of proxies by the management of the Company;
(iv) form, participate in or join any Person or Group with
respect to any Common Stock or Subordinated Debentures, or otherwise act in
concert with any Person for the purpose of (x) acquiring beneficial ownership of
any Common Stock or Subordinated Debentures or (y) holding or disposing of
Common Stock or Subordinated Debentures for any purpose prohibited by this
Section 3.1(a);
(v) except as specifically provided in Section 3.2 below,
deposit any Common Stock or Subordinated Debentures into a voting trust or
subject any Common Stock or Subordinated Debentures to any arrangement or
agreement with respect to the voting thereof;
(vi) initiate, propose or otherwise solicit shareholders for
the approval of any shareholder proposal with respect to the Company as
described in Rule 14a-8 under the Exchange Act, or induce or attempt to induce
any other Person to initiate, propose or otherwise solicit any such shareholder
proposal;
(vii) except as specifically provided in Article II of this
Agreement, seek election to or seek to place a representative on the Board of
Directors, or seek the removal of any member of the Board of Directors (other
than a Holdings Director);
(viii) call or seek to have called any meeting of the
shareholders of the Company for any purpose;
(ix) take any other action to seek to Control the management
or policies of the Company;
(x) demand, request or propose to amend, waive or terminate
the provisions of this Section 3.1(a); or
(xi) agree to do any of the foregoing, or advise, assist,
encourage or persuade any third party to take any action with respect to any of
the foregoing.
(b) PHL and Holdings agree that they will notify the Company promptly
if any inquiries or proposals are received by, any information is exchanged with
respect to, or any negotiations or discussions are initiated or continued by or
with, PHL, Holdings or any of their Affiliates regarding any matter described in
Section 3.1(a) above. PHL and the Company shall
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mutually agree upon an appropriate response to be made to any such proposals
received by PHL, Holdings or any of their Affiliates.
(c) Nothing contained in this Article III shall be deemed to restrict
the manner in which the Holdings Directors may participate in deliberations or
discussions of the Board of Directors or individual consultations with any
member of the Board of Directors, so long as such actions do not otherwise
violate any provision of Section 3.1(a) above.
(d) Each of Holdings and PHL covenants and agrees that, during the term
of this Agreement and so long as Holdings, PHL or their Affiliates Control (i)
PXP and its subsidiaries (or any successor of PXP and its subsidiaries) or (ii)
any Person registered as an investment company under the Investment Company Act
of 1940, as amended, which might otherwise be deemed to be an "affiliate" of
Holdings or PHL within the meaning of Rule 12b-2 under the Exchange Act (a
"Related Investment Company"), it will not, and will not permit any of its
Affiliates to, cause or permit PXP and its subsidiaries (or any such successor
of PXP and its subsidiaries) or such Related Investment Company, directly or
indirectly, to (i) attempt to exercise Control or influence over the business
and affairs of the Company, (ii) act in concert with Holdings, PHL or their
Affiliates to violate the provisions of this Agreement or (iii) act in concert
with any other Person for the purposes of violating the provisions of this
Agreement or otherwise effecting a change of Control of the Company. Each of
Holdings and PHL also covenants and agrees that, during the term of this
Agreement, it will not direct or influence, or attempt to direct or influence,
the voting or disposition of shares of Common Stock owned of record or
beneficially by PXP and its subsidiaries (or any successor of PXP and its
subsidiaries).
Section 3.2. Voting Matters.
(a) During the term of this Agreement, PHL and Holdings will take all
such action as may be required so that the Common Stock beneficially owned and
entitled to be voted by PHL, Holdings and their Affiliates, as a Group, are
voted or caused to be voted (in person or by proxy):
(i) with respect to the Continuing Director's nominees to the
Board of Directors, in accordance with the recommendation of the Board of
Directors, or a nominating or similar committee of the Board of Directors, if
any such committee exists and makes a recommendation; and
(ii) in accordance with the recommendation of the Board of
Directors with respect to any transaction to be effected with the Company or its
Affiliates in connection with an unsolicited tender or exchange offer, any
"election contest" (as such term is defined or used in Rule 14a-11 under the
Exchange Act as in effect on the date of this Agreement) with respect to the
Board of Directors of the Company or any other attempt to acquire Control of the
Company or the Board of Directors.
(b) For a period of five (5) years from the date of this Agreement, PHL
and Holdings will take all such action as may be required so that the Common
Stock beneficially owned and entitled to be voted by PHL, Holdings and their
Affiliates, as a Group, are voted or caused to be voted (in person or by proxy)
in accordance with the recommendation of the Board of Directors
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of the Company with respect to negotiated mergers, acquisitions, divestitures,
consolidations, sale of assets, share exchanges or other similar transactions
for which shareholder approval is sought.
(c) With respect to all matters brought before the Company's
shareholders for a vote not otherwise provided for in Section 2.5(c) or Section
3.2(a) and (b) above, PHL, Holdings and their Affiliates may vote in accordance
with their independent judgment without regard to any request or recommendation
of the Board of Directors.
(d) PHL, Holdings and their Affiliates who beneficially own any of the
Common Stock shall be present, in person or by proxy, at all duly held meetings
of shareholders of the Company so that the Common Stock held by PHL, Holdings
and their Affiliates may be counted for the purposes of determining the presence
of a quorum at such meetings.
ARTICLE IV
Transfers of Holdings Securities
Section 4.1. Transfer Restrictions. During the term of this Agreement,
PHL, Holdings and their Affiliates, shall not, directly or indirectly, Transfer
any of the Holdings Securities beneficially owned by PHL, Holdings and their
Affiliates to any Person or Group without the prior written consent of the
Company (which consent may be withheld in the Company's sole discretion), if (i)
as a result of such Transfer, such Person or Group would have beneficial
ownership of Common Stock representing in the aggregate more than 9.9% of the
issued and outstanding shares of Common Stock, such determination to be based
upon (x) the most recent publicly available information as to the number of
shares of Common Stock beneficially owned by such Person or Group (to the extent
such information is available) or the transferor's actual knowledge, after due
inquiry, as to such beneficial ownership, (y) the number or amount of Holdings
Securities proposed to be Transferred and (z) the number of issued and
outstanding shares of Common Stock on the date of Transfer (as adjusted pursuant
to Rule 13d- 3(d)(1)(i) under the Exchange Act), or (ii) prior to such Transfer,
such Person or Group has beneficial ownership of Common Stock representing in
the aggregate more than 9.9% of the issued and outstanding shares of Common
Stock, such determination to be based upon (x) the most recent publicly
available information as to the number of shares of Common Stock beneficially
owned by such Person or Group (to the extent such information is available) or
the transferor's actual knowledge, after due inquiry, as to such beneficial
ownership and (y) the number of issued and outstanding shares of Common Stock on
the date of Transfer (as adjusted pursuant to Rule 13d-3(d)(1)(i) under the
Exchange Act). Subject to the foregoing limitation (except in the case of
subparagraphs (g) and (h) of this Section 4.1) and, with respect to any Transfer
of the Subordinated Debentures, the provisions of the Indenture, PHL, Holdings
and their Affiliates may Transfer the Holdings Securities beneficially owned by
PHL, Holdings and their Affiliates in the following manner:
(a) to the Company or any Affiliate of the Company;
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(b) pursuant to an effective registration statement under the
Securities Act as provided in the Registration Rights Agreement; provided that
such registration statement shall apply only to sales of the Common Stock of the
Company and not to sales of the Subordinated Debentures;
(c) pursuant to Rule 144, Rule 144A, Regulation S or any other
applicable exemption from registration under the Securities Act;
(d) pursuant to a distribution (including any such distribution
pursuant to any liquidation or dissolution) by PHL or Holdings to its
shareholders; provided that, upon a change in Control of PHL or Holdings
occurring after the date of this Agreement, PHL or Holdings shall not distribute
any of the Holdings Securities to its Affiliates pursuant to this Section 4.1(d)
or otherwise unless PHL or Holdings has received the prior written consent of
the Company (which consent may be withheld in the Company's sole discretion) and
obtained an agreement in writing by the distributee to be bound by the terms and
conditions of this Agreement, such agreement to be substantially in the form of
Exhibit B attached hereto;
(e) pursuant to a merger or consolidation of the Company or pursuant to
a plan of liquidation of the Company, which has been approved by the affirmative
vote of a majority of the members of the Board of Directors then in office;
(f) pursuant to a tender or exchange offer in which more than 67% of
the issued and outstanding shares of Common Stock have been tendered by Persons
who are not Affiliates of Holdings, PHL or its Affiliates or in which the Board
of Directors has (i) recommended that its shareholders accept such offer or (ii)
after ten (10) business days (as defined in Rule 14d-1 under the Exchange Act as
in effect on the date of this Agreement) from the date of commencement of such
offer, expressed no opinion, remained neutral, was unable to take a position or
otherwise did not oppose or recommend that its shareholders reject such offer;
(g) to any Affiliate of Holdings or PHL; provided that such Affiliate
has delivered to the Company an agreement in writing by such Affiliate to be
bound by the terms and conditions of this Agreement, such agreement to be
substantially in the form of Exhibit B attached hereto;
(h) pursuant to a merger or consolidation of Holdings or PHL or any
Affiliate to which the Holdings Securities have theretofore been Transferred;
provided that the Person surviving such merger or formed by such consolidation
shall have delivered to the Company an agreement in writing by such Person to be
bound by the terms and conditions of this Agreement, such agreement to be
substantially in the form of Exhibit B attached hereto.
In connection with any permitted Transfer pursuant to this Section 4.1,
the rights of PHL and Holdings under this Agreement shall not transfer to any
transferee(s) of the Holdings Securities, except to the extent provided in
Section 2.7 hereof or upon express assignment of such rights to the extent
permitted by Section 7.3 hereof.
Section 4.2. Transfers to Affiliates. In the event of any Transfer of
the Holdings Securities to an Affiliate of PHL or Holdings under Section 4.1
above, or such Affiliate otherwise becomes the beneficial owner of any of the
Holdings Securities, PHL shall use its best efforts to
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cause such Affiliate to comply with all of the provisions of this Agreement,
including without limitation this Article IV.
Section 4.3. Confidential Information. In connection with any permitted
Transfer of the Holdings Securities pursuant to this Article IV, neither PHL,
Holdings nor their Affiliates shall disclose any confidential information
relating to the Company or its business to any Person except as required by
applicable law, including without limitation Section 10(b) of the Exchange Act
and Rule 10b-5 thereunder, but only to the extent that any required disclosure
of such confidential information has been preceded by the execution of a
confidentiality agreement by PHL, Holdings or their Affiliates, as the case may
be, and such Person substantially in the form attached hereto as Exhibit C. Such
confidentiality agreement shall be promptly forwarded to the Company for its
execution, which execution by the Company may be subsequent to the permitted
Transfer or disclosure to such Person; provided that the failure of the Company
to so execute such confidentiality agreement shall in no way be construed to be
a failure on the part of PHL, Holdings or their Affiliates, as the case may be,
to fulfill its obligations under this paragraph or to limit or affect the
validity of such confidentiality agreement as between PHL, Holdings or their
Affiliates, as the case may be, and such Person.
ARTICLE V
Further Assurances
Each party shall execute and deliver such additional instruments and
other documents and shall take such further actions as may be necessary or
appropriate to effectuate, carry out and comply with all of its respective
obligations under this Agreement. Holdings shall deliver to the Company,
concurrently with the filing thereof with the Securities and Exchange
Commission, copies of all Forms 3, 4 and 5, Form 144 and Schedules 13D or 13G,
and each amendment thereto, filed by Holdings, PHL or its Affiliates pursuant to
the Exchange Act. Holdings and PHL agree to provide any additional information
requested by the Company regarding Transfers of the Holdings Securities for the
purpose of determining compliance with this Agreement. Holdings shall notify the
Company promptly of any proposed Transfer of the Holdings Securities pursuant to
Sections 4.1(g) and (h) hereof. If reasonably requested by the Company at any
time during the term of this Agreement, Holdings agrees to confirm in writing to
the Company the number of Holdings Securities held, beneficially and of record,
by Holdings and its Affiliates as of the latest practicable date.
ARTICLE VI
Termination
Unless earlier terminated by written agreement of the parties hereto,
this Agreement shall terminate on the expiration of ten (10) years from the date
hereof. Any termination of this Agreement as provided herein shall be without
prejudice to the rights of any party arising out of the breach by any other
party of any provisions of this Agreement that occurred prior to the
termination.
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ARTICLE VII
Miscellaneous
Section 7.1. Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if in writing (including
telecopy or similar teletransmission), addressed as follows:
If to the Company, Hilb, Rogal and Hamilton Company
to it at: 4235 Innslake Drive
Glen Allen, Virginia 23060
Telecopier: (804) 747-3138
Attention: Andrew L. Rogal
With a copy to: Williams Mullen Christian & Dobbins
1021 East Cary Street, 16th Floor
Richmond, Virginia 23219
Telecopier: (804) 783-6507
Attention: Theodore L. Chandler, Jr., Esquire
If to Holdings PM Holdings, Inc.
or PHL, One American Row
to them at: Hartford, Connecticut 06115
Telecopier: (860) 403-5182
Attention: Carole A. Masters, Esquire
Phoenix Home Life Mutual Insurance Company
One American Row
Hartford, Connecticut 06115
Telecopier: (860) 403-5182
Attention: David W. Searfoss
Executive Vice President and
Chief Financial Officer
With a copy to: Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
Telecopier: (212) 806-6006
Attention: David L. Finkelman, Esquire
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) in the case of any notice or communication sent other than
by mail, on the date actually delivered to such address (evidenced, in the case
of delivery by overnight courier, by confirmation of delivery from the overnight
courier service making such delivery, and in the case of a telecopy, by receipt
of a transmission confirmation form or the addressee's confirmation of receipt),
or (b) in the case of any notice or communication sent by mail, three (3)
Business Days after being
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sent, if sent by registered or certified mail, with first-class postage prepaid.
Each of the parties hereto shall be entitled to specify a different address by
giving notice as aforesaid to each of the other parties hereto.
Section 7.2. Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated
except by an instrument in writing signed by Holdings, PHL and the Company
following approval thereof by a majority of the Continuing Directors.
Section 7.3. Successors and Assigns. Except as otherwise provided
herein, this Agreement shall be binding upon and shall inure to the benefit of
and be enforceable by the parties and their respective successors and assigns,
including without limitation in the case of any corporate party hereto any
corporate successor by merger or otherwise; provided that no party may assign
this Agreement without the other party's prior written consent, which consent
will not be required in the event of the Transfer of the Holdings Securities in
accordance with Sections 4.1(g) or 4.1(h) hereof. Notwithstanding the foregoing,
during the term of this Agreement, as long as Holdings, PHL or any of their
Affiliates beneficially own any of the Holdings Securities, no assignment of
this Agreement by Holdings, PHL or any of their Affiliates shall relieve the
assignor from its obligation to fully perform or comply with the terms of this
Agreement and, unless otherwise expressly agreed in writing by the Company, such
assignor shall remain bound by all of the provisions hereof.
Section 7.4. Entire Agreement. This Agreement, the Stock Purchase
Agreement, the Indenture and the Registration Rights Agreement embody the entire
agreement and understanding among the parties relating to the subject matter
hereof and supersede all prior agreements and understandings relating to such
subject matter. There are no covenants by the parties hereto relating to such
subject matter other than those expressly set forth in this Agreement, the Stock
Purchase Agreement, the Indenture and the Registration Rights Agreement.
Section 7.5. Specific Performance. The parties acknowledge that money
damages are not an adequate remedy for violations of this Agreement and that any
party may, in its sole discretion, apply to a court of competent jurisdiction
for specific performance or injunctive or such other relief as such court may
deem just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
Section 7.6. Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise or beginning
of the exercise of any thereof by any party shall not preclude the simultaneous
or later exercise of any other such right, power or remedy by such party.
Section 7.7. No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a
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waiver by such party of its right to exercise any such or other right, power or
remedy or to demand such compliance.
Section 7.8. No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of and shall not be enforceable by any Person who
or which is not a party hereto.
Section 7.9. Consent to Jurisdiction. Each party to this Agreement, by
its execution hereof, hereby (i) irrevocably submits, and agrees to cause each
of its Affiliates to submit, to the jurisdiction of the federal courts located
either in the City of Richmond, Virginia, or in the City of Hartford,
Connecticut, and in the event that such federal courts shall not have subject
matter jurisdiction over the relevant proceeding, then of the state courts
located either in the City of Richmond, Virginia, or in the City of Hartford,
Connecticut, for the purpose of any Action arising out of or based upon this
Agreement or relating to the subject matter hereof or the transactions
contemplated hereby, (ii) waives, and agrees to cause each of its Affiliates to
waive, to the extent not prohibited by applicable law, and agrees not to assert,
and agrees not to allow any of its Affiliates to assert, by way of motion, as a
defense or otherwise, in any such Action, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that any such proceeding brought
in one of the above-named courts is improper, or that this Agreement or the
subject matter hereof may not be enforced in or by such court and (iii) hereby
agrees not to commence or to permit any of its Affiliates to commence any Action
arising out of or based upon this Agreement or relating to the subject matter
hereof other than before one of the above-named courts nor to make any motion or
take any other action seeking or intending to cause the transfer or removal of
any such Action to any court other than one of the above-named courts whether on
the grounds of inconvenient forum or otherwise. Each party hereby consents to
service of process in any such proceeding in any manner permitted by Virginia or
Connecticut law, as the case may be, and agrees that service of process by
registered or certified mail, return receipt requested, at its address specified
pursuant to Section 7.1 above is reasonably calculated to give actual notice.
Notwithstanding anything contained in this Section 7.9 to the contrary with
respect to the parties' forum selection, if an Action is filed against a party
to this Agreement, including its Affiliates, by a Person who or which is not a
party to this Agreement, an Affiliate of a party to this Agreement, or an
assignee thereof (a "Third Party Action"), in a forum other than the federal
district court or a state court located in the City of Richmond, Virginia, or in
the City of Hartford, Connecticut, and such Third Party Action is based upon,
arises from, or implicates rights, obligations or liabilities existing under
this Agreement or acts or omissions pursuant to this Agreement, then the party
to this Agreement, including its Affiliates, joined as a defendant in such Third
Party Action shall have the right to file cross-claims or third-party claims in
the Third Party Action against the other party to this Agreement, including its
Affiliates, and even if not a defendant therein, to intervene in such Third
Party Action with or without also filing cross-claims or third-party claims
against the other party to this Agreement, including its Affiliates.
Section 7.10. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic substantive law of the Commonwealth of
Virginia, without giving effect to any choice or conflict of law provision or
rule that would cause the application of the law of any other jurisdiction.
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Section 7.11. Name, Captions. The name assigned to this Agreement and
the section captions used herein are for convenience of reference only and shall
not affect the interpretation or construction hereof.
Section 7.12. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one instrument. Each counterpart may consist
of a number of copies each signed by fewer than all, but together signed by all,
the parties hereto.
Section 7.13. Expenses. Each of the parties hereto shall bear their own
expenses incurred in connection with this Agreement and the transactions
contemplated hereby, except that in the event of a dispute concerning the terms
or enforcement of this Agreement, the prevailing party in any such dispute shall
be entitled to reimbursement of reasonable legal fees and disbursements
reasonably incurred from the other party or parties to such dispute.
Section 7.14. Severability. In the event that any provision hereof
would, under applicable law, be invalid or unenforceable in any respect, such
provision shall (to the extent permitted under applicable law) be construed by
modifying or limiting it so as to be valid and enforceable to the maximum extent
compatible with, and possible under, applicable law. The provisions hereof are
severable, and in the event any provision hereof should be held invalid or
unenforceable in any respect, it shall not invalidate, render unenforceable or
otherwise affect any other provision hereof.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Voting and Standstill Agreement to be executed, as of
the date first above written by their respective officers thereunto duly
authorized.
HILB, ROGAL AND HAMILTON COMPANY
By: ____________________________________________
Name: Andrew L. Rogal
Title: President and Chief Executive Officer
PM HOLDINGS, INC.
By: ____________________________________________
Name:
Title:
PHOENIX HOME LIFE MUTUAL INSURANCE
COMPANY
By: ____________________________________________
Name:
Title:
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Exhibit A
Form of Resignation Agreement
Hilb, Rogal and Hamilton Company
4235 Innslake Drive
Glen Allen, Virginia 23060
Ladies and Gentlemen:
I hereby acknowledge that my position on the Board of Directors of
Hilb, Rogal and Hamilton Company ("the Company") is subject to the provisions of
a Voting and Standstill Agreement (the "Agreement"), dated _____________, 1999,
between the Company, PM Holdings, Inc., a Connecticut corporation ("Holdings"),
and Phoenix Home Life Mutual Insurance Company, a New York life insurance
company ("PHL"). Accordingly, I hereby agree to resign immediately from such
Board of Directors under the terms of Article II of the Agreement in the event
that the Company or Holdings (with respect to the Holdings Designee) requests
such resignation in accordance with such terms. I understand that, if I do not
resign as requested within five (5) Business Days (as defined in the Agreement),
the Company may seek specific performance of this letter agreement through court
proceedings or otherwise may seek to remove me from office. I agree that any
failure to resign upon request shall be deemed to be "cause" for my removal from
the Board of Directors.
Date: _________________
_________________________________
Name
Agreed to and Accepted:
Hilb, Rogal and Hamilton Company
By:___________________________
Name:
Title:
<PAGE>
Exhibit B
Form of Assumption Agreement
Hilb, Rogal and Hamilton Company
4235 Innslake Drive
Glen Allen, Virginia 23060
Ladies and Gentlemen:
Pursuant to Section 4.1[(d), (g) or (h)] of the Voting and Standstill
Agreement (the "Agreement"), dated _____________, 1999, between Hilb, Rogal and
Hamilton Company ("the Company"), PM Holdings, Inc., a Connecticut corporation
("Holdings"), and Phoenix Home Life Mutual Insurance Company, a New York life
insurance company ("PHL"), the undersigned hereby agrees to be bound by all of
the terms and conditions of the Agreement to the same extent as if it were a
party thereto and assumes all of the obligations of [Holdings, PHL or their
Affiliate] under the Agreement with respect to the Holdings Securities (as
defined in the Agreement).
[HOLDINGS, PHL or AFFILIATE]
Date: _________________ By:_________________________________
Name:
Title:
[TRANSFEREE]
Date: _________________ By:_________________________________
Name:
Title:
Agreed to and Accepted:
Hilb, Rogal and Hamilton Company
By:___________________________
Name:
Title:
<PAGE>
Exhibit C
Form of Confidentiality Agreement
________ __, 19__
CONFIDENTIAL
[Name]
[Address]
Re: Confidentiality Agreement
Ladies and Gentlemen:
In connection with our [soliciting, offering, seeking to effect or
negotiating] with you with respect to the [sale, transfer, assignment, pledge,
etc.] of [shares of Common Stock, without par value, or 5.25% Convertible
Subordinated Debentures], of Hilb, Rogal and Hamilton Company (the "Company"),
we are prepared to make available to you certain confidential information
relating to the Company and its business (the "Confidential Information"). As a
condition to your being furnished the Confidential Information, you agree to
comply with the terms and conditions of this letter agreement (this
"Agreement").
For the purposes of this Agreement, the term "Representatives" shall
mean your employees, agents and advisors and the directors, officers, employees
and agents of any of your advisors. The term "Third Party" shall be broadly
interpreted to include without limitation any corporation, company, group,
partnership, other entity or individual. The term "Confidential Information"
shall not include information that (i) was or becomes generally available to the
public other than as a result of a disclosure by you or your Representatives, or
(ii) was or becomes available to you on a non-confidential basis from a source
other than the Company or its advisors.
You hereby agree to treat the Confidential Information as confidential
and, unless required by applicable law, you shall not, and shall direct your
Representatives not to, use in any way or to disclose, directly or indirectly,
the Confidential Information to any Third Party without the written consent of
the Company.
It is understood and agreed that money damages would not be a
sufficient remedy for any breach of this Agreement by you and that the Company
shall be entitled to specific performance and injunctive or other equitable
relief as a remedy for any such breach, and you further agree to waive any
requirement for the securing or posting of any bond in connection with such
remedy.
<PAGE>
Such remedy shall not be deemed to be the exclusive remedy for your breach of
this Agreement, but shall be in addition to all other remedies available at law
or equity to the Company.
If you are in agreement with the foregoing, please so indicate by
signing and returning one copy of this Agreement, whereupon it will constitute
our agreement with respect to the subject matter hereof.
Very truly yours,
[Name]
Officer of [Holdings or Affiliate]
CONFIRMED AND AGREED as of
the date first written
above:
[NAME]
By:_________________________________
Name:
Title:
Hilb, Rogal and Hamilton Company
By:_________________________________
Name:
Title:
Exhibit 3.2
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 time and 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 Chief Executive Officer.
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 Chief Executive Officer, 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 sixty (60) 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 sixty (60) 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 a 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 Chief Executive Officer shall preside over all meetings
of the shareholders of the Corporation at which he is present. If the Chief
Executive Officer is not 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 of the meeting 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. 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 days 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 14A 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 to 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 such 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 earlier 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 nominees 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 regulations 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 of series of Preferred Stock to elect directors under specified
circumstances.
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 Board of Directors. 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 that
person has 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 person 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 placed
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 Chief Executive Officer 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 and the Chief Executive Officer shall each 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
Section 1. The officers of the Corporation shall be a Chairman, a Chief
Executive Officer, a President, a Secretary, a Treasurer and such Chief
Operating Officers, 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 Chief Executive Officer and Secretary shall be
held by different persons. All of the officers shall be elected by the Board of
Directors each year as soon after the annual meeting of the shareholders as is
convenient.
Section 2. The Chairman shall preside at all meetings of the Board of
Directors at which he is present. In addition, he shall do everything and
discharge all duties generally pertaining to his office as Chairman of the Board
of Directors of a corporation of this character and such additional duties as
may be delegated to him from time to time by the Board of Directors.
Section 3. The Chief Executive Officer of the Corporation shall attend
and preside at all meetings of the shareholders, shall attend all meetings of
the Board of Directors, shall exercise general supervision over the property,
business and affairs of the Corporation and shall 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 4. The President, or the Chief Operating Officer, as the case
may be, 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 Chief Executive Officer,
subject to the control of the Board of Directors.
Section 5. In the instance of the inability of the Chief Executive
Officer 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,
or the Chief Operating Officer, as the case may be. In the instance of the
inability of the President, or the Chief Operating Officer, as the case may be,
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, or the Chief Operating
Officer, as the case may be, 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, or the Chief Operating
Officer, as the case may be, if either should act as Chief Executive Officer
under this Bylaw shall report fully to the Chief Executive Officer upon the
Chief Executive Officer's return to duty with respect to all actions taken and
transactions accomplished by the President, or the Chief Operating Officer, as
the case may be, during the absence or disability of the Chief Executive
Officer. 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 6. In the absence of the Chief Executive Officer, 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.
Section 7. The Treasurer shall have charge and custody of the funds,
securities of whatsoever nature and other like property of the Corporation. The
Treasurer shall endorse checks, notes and bills for deposit only as may be
required for the business of the Corporation, 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.
Section 8. The Secretary shall sign, with the Chief Executive Officer,
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 became the owners of
such shares. The Secretary shall keep a record of the proceedings of the
meetings of the shareholders, of the Board of Directors and of the Executive
Committee. He shall have charge of the seal of the Corporation and shall perform
such other duties as pertain to such office or as the Chief Executive Officer or
the Board of Directors may from time to time require.
ARTICLE V
Certificates of Stock
Section 1. Each shareholder shall be entitled to a certificate of
certificates of stock in such form as may be approved by the Board of Directors,
signed by the Chief Executive Officer, 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 holders 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 VI
Voting of Stock Held
Unless otherwise provided by a vote of the Board of Directors, the
Chief Executive Officer 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 VII 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 VIII
Fiscal Year
The fiscal year of the Corporation shall end on December 31st of each
calendar year.
ARTICLE IX
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 X 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
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 XI
Gender
Wherever the context requires or is appropriate, references in these
Bylaws to the masculine gender of words shall 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 March 29, 1999.
Secretary
Exhibit 10.3
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Agreement") is made and
entered into as of this 15TH day of December, 1998, by and 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 the Credit Agreement (in such
capacity, the "Agent").
RECITALS
A. The Borrower, the Agent and the Banks are parties to that certain Credit
Agreement dated as of February 12, 1996 and that certain Amendment to Credit
Agreement dated as of February 24, 1997 (together, the "Credit Agreement"),
pursuant to which each Bank, severally and not jointly, agreed to make Loans
from time to time until the Commitment Termination Date in an aggregate
principal amount at any time outstanding not exceeding the amount of its
Commitment. Capitalized terms not otherwise defined herein shall have the
meanings given such terms in the Credit Agreement.
B. The Borrower has requested that the Agent and the Banks make certain
amendments to the Credit Agreement and the Agent and the Banks are willing to
make certain amendments to the Credit Agreement on the terms and conditions set
forth herein.
AGREEMENT
In consideration of the Recitals and of the mutual promises and
covenants contained herein, the Borrower, the Agent and the Banks agree as
follows:
1. Amendments to Credit Agreement. The Borrower, the Agent and the
Banks agree to the following amendments to the Credit Agreement:
(a) Section 7.02 of the Credit Agreement is amended by
deleting the existing provision and substituting the following in lieu thereof:
"SECTION 7.02. Indebtedness to Total Capitalization
Ratio. The ratio of Consolidated Indebtedness to the sum
of Consolidated Indebtedness plus Consolidated Net Worth
shall not at any time exceed .55 to 1.00. For purposes
of this covenant, (i) Consolidated Indebtedness shall be
determined as of the date of the last day of each
quarter and the date of any change in Consolidated
Indebtedness, and (ii) Consolidated Net Worth shall be
calculated as of the last day of each quarter."
(b) The definition of "Commitment" as set forth in Exhibit A
of the Credit Agreement is amended by deleting the existing provision and
substituting the following in lieu thereof:
"'Commitment' means, with respect to each Bank,
$20,000,000, as such amount may be reduced from time to
time pursuant to this Agreement."
(c) The definition of "Commitment Termination Date" as set
forth in Exhibit A of the Credit Agreement is amended by deleting the existing
provision and substituting the following in lieu thereof:
"'Commitment Termination Date' means December 31, 2003,
or such earlier date and time on which the Commitments
are terminated pursuant to Article VIII."
(d) Schedule 4.06(a) is amended by deleting the existing
schedule in its entirety and substituting in lieu thereof the Schedule 4.06(a)
attached hereto.
2. Representations and Warranties. The Borrower hereby represents
and warrants to the Agent and the Banks as follows:
(a) Recitals. The Recitals in this Agreement are true and
correct in all respects.
(b) Incorporation of Representations. All representations
and warranties of the Borrower in the Credit Agreement are incorporated herein
in full by this reference and are true and correct as of the date hereof.
(c) No Defaults. No Default or Event of Default has occurred
and is continuing under the Credit Agreement.
(d) Corporate Power; Authorization. The Borrower has the
corporate power, and has been duly authorized by all requisite corporate action,
to execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement has been duly executed and delivered by the Borrower.
(e) Enforceability. This Agreement is the legal, valid and
binding obligation of the Borrower, enforceable against the Borrower in
accordance with its terms.
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<PAGE>
(f) No Violation. The Borrower's execution, delivery and
performance of this Agreement do not and will not (i) violate any law, rule,
regulation or court order to which the Borrower is subject, or (ii) conflict
with or result in a breach of the Borrower's Articles of Incorporation or Bylaws
or any agreement or instrument to which the Borrower is party or by which it or
its properties are bound.
(g) Obligations Absolute. The obligation of the Borrower to
repay the Loans, together with all interest accrued thereon, is absolute and
unconditional, and there exists no known right of set off or recoupment,
counterclaim or defense of any nature whatsoever to payment of the Obligations,
and, to the Borrower's knowledge, it does not currently hold and has not
previously held any claims of any kind against the Banks and their respective
employees, directors, agents, successors or assigns arising out of or in any way
connected with this Agreement, the Credit Agreement or the Replacement Notes.
3. Conditions Precedent to Effectiveness of Agreement. This
Agreement shall not be effective unless and until each of the following
conditions shall have been satisfied in the Agent and the Banks sole discretion
or waived by the Agent and the Banks, for whose sole benefit such conditions
exist:
(a) The Borrower shall have paid all of the Agent's and the
Banks' costs and expenses (including the Agent's and the Banks' reasonable
attorneys fees) incurred in connection with the preparation of this Agreement.
(b) The Borrower shall have delivered, or caused to be
delivered, to each Bank:
(i) a duplicate original of this Agreement executed
on the Borrower's behalf by its duly authorized officer.
(ii) a duly executed promissory note reflecting such
Bank's increased Commitment and new Commitment Termination Date and
substantially in the form of Exhibit B to the Credit Agreement (each, a
"Replacement Note"), payable to its order and otherwise complying with the
provisions of Section 1.03 of the Credit Agreement, whereupon the original notes
will be returned to the Borrower marked "Cancelled by Substitution".
(c) The Borrower shall have delivered, or caused to be
delivered, to the Agent, (i) a certificate of the Secretary or an Assistant
Secretary of the Borrower dated as of the date hereof substantially in the form
attached as Appendix 1 hereto and (ii) a certificate of the Chief Financial
Officer of the Borrower, substantially in the form attached as Appendix 2
hereto.
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<PAGE>
4. Effect and Construction of Agreement. Except as expressly
provided herein, the Credit Agreement shall remain in full force and effect in
accordance with its respective terms, and this Agreement shall not be construed
to:
(i) waive or impair any rights, powers or remedies of the
Agent and the Banks under the Credit Agreement; or
(ii) constitute an agreement by the Agent and the Banks or
require the Agent and the Banks to make further amendments to the
Credit Agreement.
In the event of any inconsistency between the terms of this Agreement and the
Credit Agreement, this Agreement shall govern. The Borrower acknowledges that it
has consulted with counsel and with such other experts and advisors as it has
deemed necessary in connection with the negotiation, execution and delivery of
this Agreement. This Agreement shall be construed without regard to any
presumption or rule requiring that it be construed against the party causing
this Agreement or any part hereof to be drafted.
5. Expenses. The Borrower agrees to pay all costs, fees and
expenses of the Agent and the Banks (including the reasonable fees of the
Agent's and the Banks' counsel) incurred by the Agent and the Banks in
connection with the negotiation, preparation, administration and enforcement of
this Agreement.
6. Miscellaneous.
(a) Further Assurance. The Borrower agrees to execute such
other and further documents and instruments as the Agent may request to
implement the provisions of this Agreement.
(b) Benefit of Agreement. This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the parties hereto, their
respective successors and assigns. No other person or entity shall be entitled
to claim any right or benefit hereunder, including, without limitation, the
status of a third-party beneficiary of this Agreement.
(c) Integration. This Agreement, together with the Credit
Agreement and the Replacement Notes, constitutes the entire agreement and
understanding among the parties relating to the subject matter hereof, and
supersedes all prior proposals, negotiations, agreements and understandings
relating to such subject matter. In entering into this Agreement, the Borrower
acknowledges that it is relying on no statement, representation, warranty,
covenant or agreement of any kind made by the Agent and the Banks or any
employee or agent of the Agent and the Banks, except for the agreements of the
Agent and the Banks set forth herein.
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<PAGE>
(d) Severability. The provisions of this Agreement are
intended to be severable. If any provisions of this Agreement shall be held
invalid or unenforceable in whole or in part in any jurisdiction, such provision
shall, as to such jurisdiction, be ineffective to the extent of such invalidity
or enforceability without in any manner affecting the validity of enforceability
of such provision in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.
(e) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of the Commonwealth
of Virginia, without regard to the choice of law principles of such state.
(f) Counterparts; Telecopied Signatures. This Agreement may
be executed in any number of counterparts and by different parties to this
Agreement on separate counterparts, each of which, when so executed, shall be
deemed an original, but all such counterparts shall constitute one and the same
agreement. Any signature delivered by a party by facsimile transmission shall be
deemed to be an original signature hereto.
(g) Notices. Any notices with respect to this Agreement
shall be given in the manner provided for in Section 10.04 of the Credit
Agreement.
(h) Amendment. No amendment, modification, rescission,
waiver or release of any provision of this Agreement shall be effective unless
the same shall be in writing and signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CRESTAR BANK, as Agent FIRST UNION NATIONAL BANK
(formerly, First Union National Bank
of Virginia)
By: /s/ By: /s/
-------------------------------- --------------------------------
Its: Vice President Its: Vice President
--------------------------- ---------------------------
CRESTAR BANK HILB, ROGAL AND HAMILTON
COMPANY
By: /s/ By: /s/ Carolyn Jones
-------------------------------- --------------------------------
Its: Vice President Its: Sr. VP, CFO & Treasurer
---------------------------- ---------------------------
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Exhibit 10.7
AMENDED AND RESTATED
EFFECTIVE FEBRUARY 2, 1999
HILB, ROGAL AND HAMILTON COMPANY
1989 STOCK PLAN
I. PURPOSE
This 1989 Stock Plan is intended to assist Hilb, Rogal and
Hamilton Company (the "Company") in recruiting, retaining and
motivating capable individuals as key employees and Directors by
enabling those individuals who contribute significantly to the
Company to participate in its future success and to associate
their interests with those of the Company through equity
participation or equity-based rewards. This Plan is also
intended to assist affiliated corporations in recruiting,
retaining and motivating capable individuals as key employees by
enabling such employees who contribute significantly to the
affiliated corporation and, thereby the Company, to participate
in the Company's future success and to associate their interests
with those of the Company through equity participation or equity-
based rewards. The proceeds received by the Company from the
sale of Common Stock pursuant to this Plan shall be used for
general corporate purposes.
II. DEFINITIONS
For purposes of this Plan, the following terms shall have
the following meanings:
(a) Affiliate means any "subsidiary" or "parent"
corporation (within the meaning of Section 424 of the Code) of
the Company.
(b) Agreement means a written agreement (including any
amendment or supplement thereto) between the Company and a
Participant specifying the terms and conditions of an Option, SAR
or Restricted Stock award granted to such Participant.
(c) Board means the Board of Directors of the Company.
(d) Change of Control shall mean
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 25% or more of
either (a) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (b) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (i), the
following acquisitions shall not constitute a Change of Control:
(w) any acquisition directly from the Company, (x) any
acquisition by the Company, (y) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (z) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (a), (b) and (c) of subsection (iii) of
this Section; or
(ii) Individuals who, as of February 2, 1999,
constitute the Board "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to February 2,
1999 whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially
all of the assets of the Company (a "Business Combination"), in
each case, unless, following such Business Combination, (a) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately
prior to such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the
case may be, (b) no Person (excluding any corporation resulting
from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from
such Business Combination) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then
outstanding voting securities of such corporation except to the
extent that such ownership existed prior to the Business
Combination and (c) at least a majority of the members of the
board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(iv) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, for purposes of subsection
(i) of this Section, a Change of Control shall not be deemed to
have taken place if, as a result of an acquisition by the Company
which reduces the Outstanding Company Common Stock or the
Outstanding Company Voting Securities, the beneficial ownership
of a Person increases to 25% or more of the Outstanding Company
Common Stock or the Outstanding Company Voting Securities;
provided, however, that if a Person shall become the beneficial
owner of 25% or more of the Outstanding Company Common Stock or
the Outstanding Company Voting Securities by reason of share
purchases by the Company and, after such share purchases by the
Company, such Person becomes the beneficial owner of any
additional shares of the Outstanding Company Common Stock or the
Outstanding Company Voting Stock through any means except an
acquisition directly from the Company, for purposes of subsection
(a) of this Section, a Change of Control shall be deemed to have
taken place.
(e) Change of Control Date is the date of the occurrence of
an event described in (i), (ii) or (iii) of the definition of
"Change of Control" above.
(f) Code means the Internal Revenue Code of 1986, and any
amendments thereto.
(g) Committee means the Compensation Committee which shall
be appointed from time to time by the Board but shall always
consist of three individuals, all of whom shall be Directors of
the Company who are not employees of the Company.
(h) Common Stock means the common stock of the Company.
(i) Director means a member of the Board.
(j) Exchange Act means the Securities Exchange Act of 1934,
as amended from time to time, and any successor thereto.
(k) Fair Market Value means, for any given date, the
closing price per share of Common Stock as reported on the New
York Stock Exchange composite tape on that day or, if the Common
Stock was not traded on such day, then the next preceding day
that the Common Stock was traded on such exchange, all as
reported by such source as the Committee may select.
(l) Initial Value means with respect to any SAR, the Fair
Market Value on the date of the grant of the SAR as set forth in
the applicable Agreement.
(m) Option means a stock option, not otherwise specifically
qualified for favorable tax treatment under a section of the
Code, that entitles the holder to purchase from the Company a
stated number of shares of Common Stock at the price set forth in
an Agreement under the terms of this Plan.
(n) Participant means an employee of the Company or an
Affiliate or a member of the Board of Directors of the Company,
whether or not an employee of the Company, who satisfies the
requirements of Section IV of the Plan and who either is selected
by the Committee to receive an Option, SAR or award of Restricted
Stock or receives a grant of an Option pursuant to Section VII.
(o) Person shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d)
and 14(d) thereof, including a "group" as defined in Section
13(d).
(p) Plan means the Hilb, Rogal and Hamilton Company 1989
Stock Plan.
(q) 1986 Plan means the Hilb, Rogal and Hamilton Company
1986 Incentive Stock Option Plan.
(r) Restricted Stock means shares of Common Stock awarded
to a Participant under Section X of this Plan. Shares of Common
Stock shall cease to be Restricted Stock when, in accordance with
the terms of the applicable Agreement, they become freely
transferable and free of substantial risk of forfeiture.
(s) SAR means a stock appreciation right entitling the
holder to receive, with respect to each share of Common Stock
encompassed by the exercise of such SAR, the excess of the Fair
Market Value over the Initial Value of the SAR.
(t) Subsidiary means, with respect to any corporation, a
subsidiary of that corporation within the meaning of Code Section
424(f).
III. ADMINISTRATION
This Plan shall be administered by the Committee. Employees
of the Company and its Affiliates and Directors, whether or not
employees of the Company or an Affiliate, shall be eligible to
participate in this Plan; provided, however, that non-employee
Directors shall only receive awards of Options under Section VII
below and no other awards or grants hereunder except for
adjustments pursuant to Section XI. The Committee shall have
authority to grant Options, Restricted Stock awards, or SARs or
any combination thereof to any individual eligible to be a
Participant other than a non-employee Director, upon such terms
(not inconsistent with the provisions of this Plan) as it may
consider appropriate. The terms upon which each Option,
Restricted Stock award or SAR is granted by the Committee may
include conditions (in addition to those contained in this Plan)
established by the Committee upon the exercisability of all or
any part of the Option or SAR (including the terms of exercise,
Option price, time of vesting, transferability and
forfeitability) and the price, transferability or forfeitability
of Restricted Stock. Notwithstanding any such conditions, the
Committee may, in its discretion, accelerate the time at which
any Option or SAR which has been granted by the Committee may be
exercised or at which Restricted Stock becomes freely
transferable and free of risk of forfeiture. The Committee, in
its discretion, may establish guidelines supplementing this Plan
regarding the selection of Participants, other than non-employee
Directors, and the amounts, times and terms for grants by the
Committee of Options, Restricted Stock awards and SARs. In
addition, the Committee shall have complete authority to
interpret all provisions of this Plan, to adopt, amend, and
rescind rules and regulations pertaining to the administration of
this Plan, and to make all other determinations necessary or
advisable for the administration of this Plan. The Committee
shall prescribe the form of Agreements, consistent with the Plan,
to set forth terms and conditions for Options, SARs and
Restricted Stock awards granted to individual Participants. Any
decision made, or action taken, by the Committee in connection
with the administration of this Plan shall be final and
conclusive. No member of the Committee shall be liable for any
act done in good faith with respect to this Plan or any Agreement
or Common Stock or stock right granted under its terms. All
expenses associated with the administration of this Plan shall be
borne by the Company.
IV. ELIGIBILITY
(1) General. Any employee of the Company, or any employee
of an Affiliate, who, in the judgment of the Committee, has
contributed or may be expected to contribute to the profits or
growth of the Company or an Affiliate, as the case may be, may be
granted one or more Options, SARs or awards of Restricted Stock
by the Committee. Non-employee Directors shall receive Options
only under the terms of Sections VII below.
(2) Grants. The Committee will designate employees to whom
Options, SARs or awards of Restricted Stock are to be granted and
will specify the number of shares of Common Stock subject to each
grant. An Option may be granted to an employee with a related
SAR and an SAR may be granted to an employee with a related
Option or each may be granted independently. All Options, SARs
and awards of Restricted Stock granted under this Plan shall be
evidenced by Agreements which shall be subject to applicable
provisions of this Plan and, with respect to grants of Options,
SARs and awards of Restricted Stock to employees, to such other
terms and provisions as the Committee may adopt.
V. MAXIMUM NUMBER OF SHARES SUBJECT TO PLAN
Upon the proper exercise of any Option, independent SAR or
award of Restricted Stock, and payment therefor, the Company may
deliver to the Participant authorized but previously unissued
Common Stock. The maximum aggregate number of shares of Common
Stock that may be issued pursuant to both this Plan and the 1986
Plan is 625,000, inclusive of all shares issued pursuant to the
1986 Plan prior to the adoption of this Plan, (the "Maximum
Issuable Shares"). The Maximum Issuable Shares shall be
increased, or decreased, at the end of each fiscal year by 13.39%
of the increase, or decrease, in the number of shares of Common
Stock issued and outstanding between the first and last days of
the fiscal year (other than increases from the issuance of Common
Stock under this Plan or the 1986 Plan); provided, however, that
the Maximum Issuable Shares shall not be reduced below the number
that is the sum of those already issued and those that are the
subject of outstanding options under the 1986 Plan or this Plan
at the end of the fiscal year. This annual adjustment shall
first be made as of the last day of the Company's fiscal year
that begins on January 1, 1989.
If an Option is terminated, in whole or in part, for any
reason other than its exercise, the number of shares of Common
Stock allocated to the Option or portion thereof may be
reallocated to other Options to be granted under this Plan or
options under the 1986 Plan. Any shares of Restricted Stock that
are forfeited by a Participant may be reallocated to other awards
of Restricted Stock under this Plan. Upon the exercise of an SAR
granted independently of an Option, the Company may deliver to
the Participant authorized but previously unissued Common Stock,
cash, or a combination thereof as provided in Section IX(3). If
such an SAR is terminated, in whole or in part, for any reason
other than its exercise, the number of shares of Common Stock
allocated to that SAR, or portion thereof, respectively, may be
reallocated to other Options under this Plan or options under the
1986 Plan or SARs which may be granted independently of Options
under this Plan.
VI. OPTION PRICE
The price per share for Common Stock which may be purchased
by the exercise of any Option granted by the Committee under this
Plan shall be set by the Committee. Such Option price may differ
between Options and may be less than Fair Market Value at the
time of grant in the discretion of the Committee.
VII. OPTION GRANTS TO NON-EMPLOYEE DIRECTORS
Each Director of the Company who is not an employee of the
Company at the time of the grant shall receive a grant of an
Option for the purchase of 2,000 shares of Common Stock on the
first business day following the 1993, 1994, 1995, 1996 and 1997
Annual Meetings of the Shareholders of the Company. Each such
Option granted to a non-employee Director shall be for a purchase
price equal to the Fair Market Value of the Common Stock at the
time of the grant and shall be evidenced by an Agreement. Such
Agreement shall contain terms and provisions consistent with the
applicable provisions of this Plan.
VIII. EXERCISE OF OPTIONS AND SARS
(1) Maximum Option or SAR Period. Options and SARs granted
to employees may be exercisable immediately or become exercisable
after any term of months or years and may remain exercisable for
any term of months or years as set by the Committee in its
discretion at the time of granting. The date upon which any
Option or SAR granted by the Committee becomes exercisable may be
accelerated by the Committee in its discretion. The term of
exercisability for any Option or SAR granted by the Committee may
be extended by the Committee and may be made contingent upon the
continued employment of the Participant by the Company or
Affiliate. The terms of any Option or SAR granted by the
Committee may provide that the Option or SAR is exercisable in
whole or in part from time to time over such period of time as
the Committee shall consider appropriate.
(2) Nontransferability. Any Option or SAR granted under
this Plan shall be nontransferable except, in the case of the
death of the Participant, by will or by the laws of descent and
distribution. In the event of any such transfer upon the death
of the Participant, the Option and any related SAR must be
transferred to the same person or persons, trust or estate and
may not be separated. During the lifetime of the Participant to
whom an Option or SAR is granted, the Option or SAR may be
exercised only by the Participant. No right or interest of a
Participant in any Option or SAR shall be liable for, or subject
to, any obligation, lien, or liability of such Participant.
(3) Employee Status. In the event that the terms of any
Option or SAR granted to an employee of the Company provide that
the Option or SAR may be exercised only during the employment of
the Participant or within a specified period of time after the
termination of his employment, the Committee may decide in each
case whether and the extent to which leaves of absence for
governmental or military service, illness, temporary disability,
or other reasons shall be deemed interruptions of continuous
employment.
IX. METHODS OF EXERCISE
(1) Exercise. Subject to the provisions of Sections VIII,
XI and XIII, an Option or SAR granted by the Committee may be
exercised in whole at any time or in part from time to time at
such times and in compliance with the applicable Agreement and
such other requirements as the Committee shall determine. An
Option granted under Section VII hereof may be exercised in whole
at any time or in part from time to time at such times and in
compliance with the applicable Agreement. A partial exercise of
an Option or SAR shall not affect the right to exercise the
Option or SAR from time to time in accordance with this Plan with
respect to remaining shares subject to the Option or SAR, except
that the exercise of an Option shall result in the termination of
any related SAR to the extent of the number of shares with
respect to which the Option is exercised.
(2) Payment for Option Exercises. Unless otherwise
provided by the Agreement (or permitted by the Committee for non-
qualified Options granted by the Committee), payment of the
Option price shall be made in cash (in United States dollars) or
a cash equivalent acceptable to the Committee. If the Agreement
so provides (or the Committee so permits), payment of all or a
part of the Option price for a non-qualified Option may be
effected by a "cashless exercise" thereof (i) by the Participant
surrendering shares of Common Stock to the Company, or (ii) by
the Participant delivering to a broker instructions to sell a
sufficient number of the shares of Common Stock being acquired
upon exercise of the Option to cover the Option price and any
additional costs and expenses associated with the cashless
exercise. If Common Stock is surrendered to pay all or part of
the Option price, the shares surrendered must have a Fair Market
Value (determined as of the date of exercise of the Option) that
is not less than such Option price or part thereof.
(3) Settlement of SARs. At the discretion of the
Committee, the amount payable as a result of the exercise of an
SAR may be settled in cash, Common Stock or a combination of cash
and Common Stock. No fractional share shall be delivered upon
the exercise of an SAR but cash shall be paid in lieu thereof.
(4) Shareholder Rights. No Participant shall, as a result
of receipt of any Option or SAR, have any rights as a shareholder
until the date he exercises such Option or SAR.
(5) Tax Withholding With Respect to Options. In the case
of the exercise of an Option, the Participant shall pay to the
Company in cash the full amount of all federal and state income
and employment taxes required to be withheld by the Company in
respect of the taxable income of the Participant from such
exercise. If the Agreement so provides (or the Committee so
permits for non-qualified Options granted by the Committee),
payment of all or a part of such taxes may be made by the
Participant surrendering shares of Common Stock to the Company,
provided the shares surrendered have a Fair Market Value
(determined as of the date of exercise of the Option) that is not
less than the amount of such taxes or part thereof, or by the
sale of shares of Common Stock upon the cashless exercise of an
Option through a broker.
X. RESTRICTED STOCK.
(1) Award. In accordance with the provisions of Section
IV, the Committee will designate employees to whom an award of
Restricted Stock is to be made and will specify the number of
shares of Restricted Stock to be awarded, and the purchase price
per share to be paid by the Participant.
(2) Vesting. The Committee, on the date of the award, may
prescribe that the Participant's rights in the Restricted Stock
shall be forfeitable or otherwise restricted in any manner in the
discretion of the Committee for such period of time as is set
forth in the Agreement. By way of example and not limitation,
the restrictions may postpone transferability of the shares or
may provide that the shares will be forfeited if the employment
of the Participant by the Company or an Affiliate or the service
of the Participant as a Director terminates before the expiration
of a stated term.
(3) Shareholder Rights. Prior to the forfeiture of shares
in accordance with the terms of the Agreement and while the
shares are Restricted Stock, a Participant will have all rights
of a shareholder with respect to Restricted Stock, including the
right to receive dividends and vote the shares; provided,
however, that (i) a Participant may not sell, transfer, pledge,
exchange, hypothecate, or otherwise dispose of Restricted Stock,
(ii) the Company shall retain custody of the certificates
evidencing shares of Restricted Stock, and (iii) the Participant
will deliver to the Company a stock power, endorsed in blank,
with respect to each award of Restricted Stock. The limitations
set forth in the preceding sentence shall not apply after the
shares cease to be Restricted Stock.
(4) Tax Withholding With Respect to Restricted Stock. The
Participant shall pay or provide for the payment to the Company
in cash of the full amount of all federal and state income and
employment taxes required to be withheld by the Company with
respect to the inclusion in the taxable income of the Participant
of any amount pursuant to an award of Restricted Stock, including
an election made pursuant to Section 83(b) of the Code or the
lapse of any restriction with respect thereto.
XI. CHANGES IN CAPITAL STRUCTURE
Subject to any required action by the shareholders of the
Company, the number of shares of Common Stock covered by each
outstanding Option or SAR, and the price per share thereof, and
the number of shares of Restricted Stock awarded, shall be
adjusted proportionately for any increase or decrease in the
number of issued and outstanding shares of Common Stock of the
Company by reason of any stock dividend, stock split,
combination, reclassification, recapitalization, or the general
issuance to holders of Common Stock of rights to purchase Common
Stock at substantially below its then fair market value, or any
change in the number of shares of Common Stock outstanding
effected without receipt of cash, property, labor or services by
the Company, or any spin-off or other type of distribution of
assets to shareholders.
In the event of a change in the Common Stock of the Company
as presently constituted, which is limited to a change of all or
part of its authorized shares without par value into the same
number of shares with a par value, or any subsequent change into
the same number of shares with a different par value, the shares
resulting from any such change shall be deemed to be the Common
Stock within the meaning of the Plan.
Except as expressly provided above in this Section XI or in
Section XIII(3), a Participant shall have no rights by reason of
any subdivision or consolidation of shares of stock of any class
or the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class or by
reason of any dissolution, liquidation, merger, or consolidation
or spin-off of assets or stock of another corporation. Any issue
by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect,
and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Restricted Stock or of
Common Stock subject to any Option or SAR.
The grant of an Option, SAR or Restricted Stock award
pursuant to the Plan shall not affect in any way the right or
power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure
or to merge or to consolidate or to dissolve, liquidate or sell,
or transfer all or any part of its business or assets.
XII. COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
No Option or SAR shall be exercisable, no Common Stock or
Restricted Stock shall be issued, no certificates for shares of
Common Stock or Restricted Stock shall be delivered, and no
payment shall be made under this Plan (i) except in compliance
with all applicable federal and state laws and regulations and
rules of all domestic stock exchanges on which the Company's
shares may be listed and (ii) until the Company has obtained such
consent or approval as the Board or the Committee may deem
advisable from regulatory bodies having jurisdiction over such
matters and from the shareholders. The Company and the Committee
shall have the right to rely on the opinion of counsel for either
of them as to such compliance. Any share certificate issued to
evidence Common Stock for which an Option or SAR is exercised or
to evidence Restricted Stock may bear such legends and statements
as the Board or the Committee may deem advisable to assure
compliance with federal and state laws and regulations.
XIII. GENERAL PROVISIONS
(1) Effect on Employment. Neither the adoption of this
Plan, its operation, nor any documents describing or referring to
this Plan (or any part thereof) shall confer upon any employee
any right to continue in the employ of the Company or an
Affiliate or in any way affect any right and power of the Company
or an Affiliate, as the case may be, to terminate the employment
of any employee at any time with or without assigning a reason
therefor.
(2) Unfunded Plan. This Plan, insofar as it provides for
grants, shall be unfunded, and the Company shall not be required
to segregate any assets that may at any time be represented by
grants under the Plan. Any liability of the Company to any
person with respect to any grant under this Plan shall be based
solely upon any contractual obligations that may be created
pursuant to this Plan. No such obligation of the Company shall
be deemed to be secured by any pledge of, or other encumbrance
on, any property of the Company.
(3) Change of Control. Notwithstanding any other provision
of the Plan to the contrary, in the event of a Change of Control:
(a) Any outstanding Option or SAR which is not
presently exercisable or vested as of a Change of Control Date
shall become fully exercisable and vested to the full extent of
the original grant upon such Change of Control Date.
(b) The restrictions applicable to any outstanding
Restricted Stock shall lapse, and such Restricted Stock shall
become free of all restrictions and become fully vested,
nonforfeitable and transferable to the full extent of the
original grant.
(4) Rules of Construction. Headings are given to the
articles and sections of this Plan solely as a convenience to
facilitate reference. The reference to any statute, regulation,
or other provision of law shall be construed to refer to any
amendment to or successor of such provision of law.
XIV. AMENDMENTS
The Board may amend or terminate this Plan from time to
time; provided, however, that: (i) no amendment may become
effective until the approval of the Company's shareholders is
obtained if the amendment (a) increases the aggregate number of
shares that may be issued hereunder or (b) changes the class of
individuals eligible to become Participants and, (ii) the Board
may amend Section VII hereof but only to provide for the granting
of Options to non-employee Directors in a year or years after
1996 which Option grants must not cause this Plan to fail to
qualify for exemption from Section 16(b) of the Securities
Exchange Act of 1934 under the provisions of Rule 16b-3 or any
successor rule and provided that such amendment to Section VII
hereof must also be approved by a majority of the employee
Directors then serving on the Board. No amendment shall, without
a Participant's consent, adversely affect any rights of such
Participant under any Option or SAR outstanding or Restricted
Stock issued at the time such amendment is made unless required
by law, regulation or rule of stock exchange.
XV. EFFECTIVE DATE OF PLAN
Options and SARs may be granted under this Plan, upon its
adoption by the Board, provided that no Option or SAR will be
effective unless and until this Plan is approved by the holders
of a majority of the shares of the Company's outstanding voting
stock present in person, or represented by proxy, and entitled to
vote at a duly held meeting of the shareholders. No Option or
SAR granted prior to such shareholder approval may be exercised
before the requisite shareholder approval is obtained.
XVI. GOVERNING LAW
The Plan shall be governed by and construed and enforced in
accordance with the laws of the Commonwealth of Virginia, except
to the extent that federal law shall be deemed to apply.
Exhibit 10.8
HILB, ROGAL, AND HAMILTON COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Amended and Restated
Effective February 2, 1999
HILB, ROGAL, AND HAMILTON COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Table of Contents
Page
ARTICLE I
GENERAL
Section 1.1 Effective Date 1
Section 1.2 Purpose 1
ARTICLE II
DEFINITIONS AND USAGE
Section 2.1 Definitions 2
Section 2.2 Usage 6
ARTICLE III
ELIGIBILITY AND PARTICIPATION
Section 3.1 Eligibility and Participation 6
ARTICLE IV
SUPPLEMENTAL BENEFIT
Section 4.1 Entitlement to Benefits 7
Section 4.2 Supplemental Benefit 7
Section 4.3 Normal Form of Payment 8
Section 4.4 Time of Payment 9
Section 4.5 Segregation of Assets 9
Section 4.6 Forfeiture of Supplemental Benefit 9
ARTICLE V
DEATH AND DISABILITY BENEFITS
Section 5.1 Death Benefit 9
Section 5.2 Disability Benefit 10
ARTICLE VI
ADMINISTRATION
Section 6.1 General 10
Section 6.2 Administrative Rules 11
Section 6.3 Duties 11
Section 6.4 Fees 12
ARTICLE VII
CLAIMS PROCEDURE
Section 7.1 General 12
Section 7.2 Denials 12
Section 7.3 Notice 12
Section 7.4 Appeals Procedure 13
Section 7.5 Review 13
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1 Amendment 13
Section 8.2 Termination 14
Section 8.3 No Assignment 14
Section 8.4 Incapacity 15
Section 8.5 Successors and Assigns 15
Section 8.6 Governing Law 15
Section 8.7 No Guarantee of Employment 15
Section 8.8 Unfunded Plan 15
Section 8.9 Severability 16
Section 8.10 Notification of Addresses 16
Section 8.11 Bonding 16
HILB, ROGAL, AND HAMILTON COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE I
GENERAL
1.1 Effective Date. The provisions of the Plan shall be
effective as of December 16, 1994, and, as amended and restated,
effective January 1, 1998. The rights, if any, of any person
whose status as an employee of the Company and its subsidiaries
and affiliates, if any, has terminated shall be determined
pursuant to the Plan as in effect on the date such employee
terminated, unless subsequently adopted provisions of the Plan
are made specifically applicable to such person.
1.2 Purpose. The purpose of the Plan is to provide
supplemental retirement income to a Participant. The Plan is
intended to be (and shall be construed and administered as) an
"employee pension benefit plan" under the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA") which
is unfunded and maintained by the Company solely to provide
retirement income to a select group of management or highly
compensated employees as such group is described under sections
201(2), 301(a)(3), and 401(a)(1) of ERISA as interpreted by the
U.S. Department of Labor. The Plan is not intended to be a plan
described in section 401(a) of the Code or section 3(2)(A) of
ERISA.
ARTICLE II
DEFINITIONS AND USAGE
2.1 Definitions. Wherever used in the Plan, the following
words and phrases shall have the meanings set forth below unless
the context plainly requires a different meaning:
"Benefit Commencement Date" means the January 1
following a Participant's termination of employment
with the Company, or such earlier date in the absolute
discretion of the Committee.
"Board" means the Board of Directors of the
Company.
"Change of Control" means (i) The acquisition by
any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of
25% or more of either (a) the then outstanding shares
of common stock of the Company (the "Outstanding
Company Common Stock") or (b) the combined voting power
of the then outstanding voting securities of the
Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of
this subsection (i), the following acquisitions shall
not constitute a Change of Control: (w) any acquisition
directly from the Company, (x) any acquisition by the
Company, (y) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or
(z) any acquisition by any corporation pursuant to a
transaction which complies with clauses (a), (b) and
(c) of subsection (iii) of this Section; or
(ii) Individuals who, as of February 2, 1999,
constitute the Board "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a
director subsequent to February 2, 1999 whose election,
or nomination for election by the Company's
shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent
Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest with respect to the
election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(iii) Consummation of a reorganization,
merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following
such Business Combination, (a) all or substantially all
of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50%
of, respectively, the then outstanding shares of common
stock and the combined voting power of the then
outstanding voting securities entitled to vote generally
in the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation a corporation which as a
result of such transaction owns the Company or all or
substantially all of the Company's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (b) no Person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related
trust) of the Company or such corporation resulting from
such Business Combination) beneficially owns, directly
or indirectly, 25% or more of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined
voting power of the then outstanding voting securities
of such corporation except to the extent that such
ownership existed prior to the Business Combination and
(c) at least a majority of the members of the board of
directors of the corporation resulting from such
Business Combination were members of the Incumbent Board
at the time of the execution of the initial agreement,
or of the action of the Board, providing for such
Business Combination; or
(iv) Approval by the shareholders of the
Company of a complete liquidation or dissolution of the
Company.
Notwithstanding the foregoing, for purposes
of subsection (i) of this Section, a Change of Control
shall not be deemed to have taken place if, as a result
of an acquisition by the Company which reduces the
Outstanding Company Common Stock or the Outstanding
Company Voting Securities, the beneficial ownership of
a Person increases to 25% or more of the Outstanding
Company Common Stock or the Outstanding Company Voting
Securities; provided, however, that if a Person shall
become the beneficial owner of 25% or more of the
Outstanding Company Common Stock or the Outstanding
Company Voting Securities by reason of share purchases
by the Company and, after such share purchases by the
Company, such Person becomes the beneficial owner of
any additional shares of the Outstanding Company Common
Stock or the Outstanding Company Voting Stock through
any means except an acquisition directly from the
Company, for purposes of subsection (a) of this
Section, a Change of Control shall be deemed to have
taken place.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
"Committee" means the Compensation Committee of
the Board, if any, and otherwise, the Board.
"Company" means Hilb, Rogal, and Hamilton Company
and any successor thereto.
"Compensation" means total base compensation,
excluding bonuses and other forms of compensation, paid
to a Participant for personal services rendered to the
Company without regard to any Compensation Limitation.
"Compensation Limitation" means $150,000 as
adjusted to reflect cost-of-living increases by the
Secretary of the Treasury or his delegate from time to
time under section 401(a)(17) of the Code.
"Eligible Employee" means an employee of the
Company whose Compensation exceeds $150,000 as adjusted
from time to time under section 401(a)(17) of the Code.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time.
"Grandfathered Participant" means a Participant
who is designated by the Committee as a "grandfathered
participant."
"Participant" means an Eligible Employee who is
participating in the Plan in accordance with Section
3.1 hereof and shall include a Grandfathered
Participant, unless otherwise specified.
"Plan" means the Hilb, Rogal, and Hamilton Company
Supplemental Executive Retirement Plan.
"Plan Year" means the calendar year.
"Pre-1998 Accrued Benefit" means the value of the
benefit for each Participant in the Plan who was not in
pay status (receiving benefits) as of December 31, 1997
determined in accordance with the terms of the Plan
determined in accordance with the terms of the Plan
then in effect as though the Participant had terminated
employment as of that date.
"Retirement Plan" means the Hilb, Rogal and
Hamilton Company Profit Sharing Savings Plan.
"Separation from Service" means a Participant's
termination from employment as described in the
Retirement Plan.
"Supplemental Benefit" means the benefit provided
in accordance with Section 4.2 of the Plan.
"Years of Service", for purposes of benefit
accrual and vesting, means a Participant's full years
of employment with the Company. Years of employment
with Insurance Management Corporation shall be credited
as Years of Service for purposes of vesting and benefit
accrual.
2.2 Usage. Except where otherwise indicated by the
context, any masculine terminology used herein shall also include
the feminine and vice versa, and the definition of any term
herein in the singular shall also include the plural and vice
versa.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Eligibility and Participation. The Committee shall
designate from time to time Eligible Employees of the Company who
shall participate in the Plan; provided, however, that such
Eligible Employees shall be members of a select group of
management or highly compensated employees as such group is
described under sections 201(2), 301(a)(3), and 401(a)(1) of
ERISA. The Eligible Employees of the Company so designated by
the Committee shall become Participants in the Plan.
ARTICLE IV
SUPPLEMENTAL BENEFIT
4.1 Entitlement to Benefits. Each Participant shall be
entitled to the vested portion of his Supplemental Benefit
provided in Section 4.2 of the Plan upon reaching his Benefit
Commencement Date. A Participant who terminates employment (for
any reason other than disability or death) shall have a vested
interest in his Supplemental Benefit, based upon the following
vesting schedule:
Years of Service Vesting Percentage
0-4 0%
5 33.33%
6-15 6.66% per year
Notwithstanding the foregoing, a Participant shall be fully
vested upon a Change of Control.
4.2 Supplemental Benefit. A Participant's Supplemental
Benefit shall be equal to his account balance under the Plan.
(a) Deemed Contributions to Account. Annually the
account of a Participant shall be credited (deemed to have been
contributed) with an amount that is calculated by determining the
total employer match and profit sharing contribution (as a
percentage of compensation) that the Participant would have
received under the Retirement Plan but without the Compensation
Limitation that applies to such Retirement Plan, reduced by the
amount of employer match and profit sharing contribution actually
contributed to the Retirement Plan by the Company.
(b) Account Adjustments. A deemed contribution to the
Participant's account shall be treated as having been invested in
one or more deemed investments designated by the Committee from
time to time. The value of a Participant's account shall be
adjusted at least annually to reflect increase or decrease in the
value of such deemed investments. In the absence of any
designation of one or more deemed investments, the Participant's
account shall be credited with interest at an annual rate
specified from time to time by the Committee.
(c) Exception for Grandfathered Participants.
Participants in the Plan as of December 31, 1997 shall be
regarded as Grandfathered Participants. Effective January 1,
1998, their accounts shall be administered as set forth above
except as follows:
(1) A Grandfathered Participant's
Pre-1998 Accrued Benefit shall be determined
and shall be the beginning amount in the
Participant's account as of January 1, 1998.
(2) Annually, the account of a
Grandfathered Participant shall be credited
with the greater of 2% of Compensation or the
amount determined in Paragraph (a) above.
4.3 Normal Form of Payment. The normal form of payment of
the Participant's Supplemental Benefit shall be five annual
installments with interest as determined by the Committee from
time to time.
4.4 Time of Payment.
(a) General Time of Payment. The actual payment of
the Supplemental Benefit shall commence on the Participant's
Benefit Commencement Date.
(b) Accelerated Payment of Benefits: Notwithstanding
anything herein to the contrary, in the sole discretion of the
Committee, payment of benefits under Article IV or V of the Plan
may be accelerated.
4.5 Segregation of Assets. The Company may, but shall not
be obligated, to segregate assets in trust or otherwise for the
purpose of paying obligations under this plan. Further, the
Company has no obligation to match with actual investment any
deemed contribution or deemed investment.
4.6 Forfeiture of Supplemental Benefit. Notwithstanding
anything in Article IV to the contrary, a Participant shall
forfeit the right to or interest in his Supplemental Benefit as
follows:
After a Participant has begun receiving payment of his
Supplemental Benefit, he shall forfeit all right to or interest
in any future payments if he enters into employment with a
competitor of the Company without the consent of the Company.
ARTICLE V
DEATH AND DISABILITY BENEFITS
5.1 Death Benefit. If a Participant dies while employed by
the Company before his Benefit Commencement Date, the surviving
spouse of the Participant shall be entitled to a death benefit
equal to the Participant's Supplemental Benefit determined as of
the Participant's date of death. A deceased Participant shall be
fully vested in his Supplemental Benefit as of his date of death.
If a Participant dies after retirement and after he has begun to
receive his benefits under the Plan, the death benefit shall be
equal to the principal of any of the Participant's remaining
payments.
The death benefit shall be paid to his designated
beneficiary, if any, in a lump sum within sixty (60) days of the
Participant's date of death or as soon thereafter as is
practicable. If no beneficiary is designated, the death benefit
shall be paid to his estate.
5.2 Disability Benefit. If a Participant becomes disabled,
as defined in the Retirement Plan, he shall become fully vestedin
his Supplemental Benefit determined as of the date of his
separation from service as a result of disability.
ARTICLE VI
ADMINISTRATION
6.1 General. The Administrator shall be the Committee, or
such other person or persons as designated by the Committee.
Except as otherwise specifically provided in the Plan, the
Administrator shall be responsible for administration of the
Plan. The Administrator shall be the "named fiduciary" within
the meaning of Section 402(c)(2) of ERISA.
6.2 Administrative Rules. The Administrator may adopt such
rules of procedure as it deems desirable for the conduct of its
affairs, except to the extent that such rules conflict with the
provisions of the Plan.
6.3 Duties. The Administrator shall have the following
rights, powers and duties:
(a) The decision of the Administrator in matters
within its jurisdiction shall be final, binding and conclusive
upon the Company and upon any other person affected by such
decision, subject to the claims procedure hereinafter set forth.
(b) The Administrator shall have the duty and
authority to interpret and construe the provisions of the Plan,
to decide any question that may arise regarding the rights of
employees, Participants and beneficiaries, and the amounts of
their respective interests, to adopt such rules and to exercise
such powers as the Administrator may deem necessary for the
administration of the Plan, and to exercise any other rights,
powers or privileges granted to the Administrator by the terms of
the Plan.
(c) The Administrator shall maintain full and complete
records of its decisions. Its records shall contain all relevant
data pertaining to the Participant and his rights and duties
under the Plan. The Administrator shall have the duty to
maintain account records of all Participants.
(d) The Administrator shall cause the principal
provisions of the Plan to be communicated to the Participants,
and a copy of the Plan and other documents to be available at the
principal office of the Company for inspection by the
Participants at reasonable times determined by the Administrator.
(e) The Administrator shall periodically report to the
Committee with respect to the status of the Plan.
6.4 Fees. No fee or compensation shall be paid to any
person for services as the Administrator.
ARTICLE VII
CLAIMS PROCEDURE
7.1 General. Any claim for benefits under the Plan shall
be filed by the Participant or surviving spouse ("claimant") on
the form prescribed for such purpose with the Administrator.
7.2 Denials. If a claim for benefits under the Plan is
wholly or partially denied, notice of the decision shall be
furnished to the claimant by the Administrator within a
reasonable period of time after receipt of the claim by the
Administrator.
7.3 Notice. Any claimant who is denied a claim for
benefits shall be furnished written notice setting forth:
(a) the specific reason or reasons for the denial;
(b) specific reference to the pertinent provision of
the Plan upon which the denial is based;
(c) a description of any additional material or
information necessary for the claimant to perfect the claim; and
(d) an explanation of the claim review procedure under
the Plan.
7.4 Appeals Procedure. In order that a claimant may appeal
a denial of a claim, the claimant or the claimant's duly
authorized representative may:
(a) request a review by written application to the
Administrator, or its designate, no later than sixty (60) days
after receipt by the claimant of written notification of denial
of a claim;
(b) review pertinent documents; and
(c) submit issues and comments in writing.
7.5 Review. A decision on review of a denied claim shall
be made not later than sixty (60) days after receipt of a request
for review, unless special circumstances require an extension of
time for processing, in which case a decision shall be rendered
within a reasonable period of time, but not later than one
hundred and twenty (120) days after receipt of a request for
review. The decision on review shall be in writing and shall
include the specific reason(s) for the decision and the specific
reference(s) to the pertinent provisions of the Plan on which the
decision is based.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 Amendment. The Company reserves the right to amend the
Plan in any manner that it deems advisable by a resolution of the
Board, which shall be communicated to Participants not later than
sixty (60) days following the effective date of such amendment.
No amendment shall, without the Participant's consent, affect the
amount of the Participant's Supplemental Benefit at the time the
amendment becomes effective or the right of the Participant to
receive a Retirement Benefit after the Participant has met the
entitlement requirements provided in Section 4.1 of the Plan.
8.2 Termination. The Company reserves the right to
terminate the Plan at any time by resolution of the Board, which
shall be communicated to Participant not later than sixty (60)
days following the effective date of such amendment. No
termination shall, without the consent of the Participant, affect
the amount of the Participant's Supplemental Benefit prior to the
termination of the right of the Participant to receive a
Supplemental Benefit after the Participant has met the
entitlement requirements provided in Section 4.1 of the Plan.
8.3 No Assignment. The Participant shall not have the
power to pledge, transfer, assign, anticipate, mortgage or
otherwise encumber or dispose of in advance any interest in
amounts payable hereunder or any of the payments provided for
herein, no shall any interest in amounts payable hereunder or in
any payments be subject to seizure for payment of any debts,
judgments, alimony or separate maintenance, or be reached or
transferred by operation of law in the event of bankruptcy,
insolvency or otherwise.
8.4 Incapacity. If the Administrator determines that any
person to whom such benefit is payable is incompetent by reason
of physical or mental disability, the Administrator may cause the
payments becoming due to such person to be made to another for
his benefit. Payments made pursuant to this Section shall, as to
such payment, operate as a complete discharge of the Plan, each
Company, the Committee and the Administrator.
8.5 Successors and Assigns. The provisions of the Plan are
binding upon and inure to the benefit of each Company, its
respective successors and assigns, and the Participant and his
beneficiaries, heirs, legal representatives, and assigns.
8.6 Governing Law. The Plan shall be subject to and
construed in accordance with the laws of the Commonwealth of
Virginia to the extent not preempted by the provisions of ERISA.
8.7 No Guarantee of Employment. Nothing contained in the
Plan shall be construed as a contract of employment or deemed to
give any Participant the right to be retained in the employ of
the Company or to give any Participant any equity or other
interest in the assets, business, or affairs of the Company. No
Participant hereunder shall have a security interest in assets of
any Company used to make contributions or pay benefits.
8.8 Unfunded Plan. The obligation of the Company to make
payments under this Plan constitutes nothing more than an
unsecured promise of the Company to make such payments, and any
property of the Company that may be set aside in a trust or
otherwise for the payment of benefits under this Plan shall, in
the event of the Company's bankruptcy or insolvency, remain
subject to the claims of the Company's general creditors until
such benefits are distributed in accordance with Article IV
hereof.
8.9 Severability. If any provision of the Plan shall be
held illegal or invalid for any reason, such illegality or
invalidity shall not affect the remaining provisions of the Plan,
but the Plan shall be construed and enforced as if such illegal
or invalid provision had never been included herein.
8.10 Notification of Addresses. Each Participant shall file
with the Administrator, from time to time, in writing, the post
office address of the Participant, the post office address of
each Beneficiary, and each change of post office address. Any
communication, statement or notice addressed to the last post
office address filed with the Administrator (or if no such
address was filed with the Administrator, then to the last post
office address of the Participant or beneficiary as shown on the
Company's records) shall be binding on the Participant and each
beneficiary for all purposes of the Plan and neither the
Administrator nor any Company shall be obliged to search for or
ascertain the whereabouts of any Participant or beneficiary.
8.11 Bonding. The Administrator and all agents and advisors
employed by it shall not be required to be bonded, except as
otherwise required by ERISA.
IN WITNESS WHEREOF, the Company has caused this Plan to be
executed by its duly authorized officer.
HILB, ROGAL & HAMILTON COMPANY
By /s/ Walter L. Smith
-----------------------------------
Hilb, Rogal and Hamilton Company
Amended and Restated Outside Directors Deferral Plan
Effective
April 1, 1998
Amended and Restated
February 2, 1999
TABLE OF CONTENTS
Page
ARTICLE I Definition of Terms 1
1.1 Account 1
1.2 Administrator 1
1.3 Affiliate 1
1.4 Beneficiary 1
1.5 Benefit Commencement Date 1
1.6 Board 2
1.7 Code 2
1.8 Compensation 2
1.9 Corporation 2
1.10 Death Benefit 2
1.11 Deferral Amount 2
1.12 Deferral Benefit 2
1.13 Deferral Contributions 2
1.14 Deferral Year 2
1.15 Deferral Election 2
1.16 Deferred Cash Account 2
1.17 Deferred Stock Unit 3
1.18 Deferred Stock Unit Account 3
1.19 Director 3
1.20 Effective Date 3
1.21 Eligible Director 3
1.22 Former Plan 3
1.23 Participant 3
1.24 Plan 3
1.25 Plan Year 3
1.26 Rate of Return 4
1.27 Short Plan Year 4
ARTICLE II - Eligibility and Participation 4
2.1 Eligibility 4
2.2 Notice and Election Regarding Active Participation 4
2.3 Commencement of Active Participation 4
2.4 Length of Participation 4
ARTICLE III Determination of Deferral 5
3.1 Deferral Benefit 5
3.2 Transition Credits 5
3.3 Deferral Election 5
3.4 Subtractions from Deferred Cash Account and
Deferred Stock Unit Account 6
3.5 Crediting of Interest to Deferred Cash Account 7
3.6 Equitable Adjustment in Case of Error or Omission 7
3.7 Statement of Benefits 7
ARTICLE IV Accounts and Investments 7
4.1 Accounts 7
4.2 Deferred Stock Units 7
4.3 Hypothetical Nature of Accounts and Investments 8
ARTICLE V Vesting 8
5.1 Vesting 8
ARTICLE VI Death Benefits 9
6.1 Pre-Benefit Commencement Date Death Benefit 9
6.2 Post-Benefit Commencement Date Death Benefit 9
ARTICLE VII Payment of Benefits 9
7.1 Payment of Deferral Benefit 9
7.2 Payment of Death Benefit 9
7.3 Form of Payment of Deferral Benefit 9
7.4 Benefit Determination and Payment Procedure 10
7.5 Payments to Minors and Incompetents 10
7.6 Distribution of Benefit When Distributee Cannot Be
Located 10
ARTICLE VIII Beneficiary Designation 10
8.1 Beneficiary Designation 10
ARTICLE IX Withdrawals 11
9.1 No Withdrawals Permitted 11
9.2 Hardship Exemption 11
ARTICLE X Funding 11
10.1 Funding 11
ARTICLE XI Change of Control 12
11.1 Change of Control 12
11.2 Effect of Change of Control. 14
ARTICLE XII Plan Administrator 14
12.1 Appointment of Administrator 14
12.2 Duties and Responsibilities of Plan Administrator 14
ARTICLE XIII Amendment or Termination of Plan 15
13.1 Amendment or Termination of the Plan 15
ARTICLE XIV Miscellaneous 15
14.1 Non-assignability 15
14.2 Notices and Elections 15
14.3 Delegation of Authority 15
14.4 Service of Process 15
14.5 Governing Law 15
14.6 Binding Effect 16
14.7 Severability 16
14.8 Gender and Number 16
14.9 Titles and Captions 16
Hilb, Rogal and Hamilton Company
Amended and Restated Outside Directors Deferral Plan
Effective January 1, 1995, the Board of Directors of Hilb,
Rogal and Hamilton Company (the "Corporation") adopted the
Outside Directors Deferral Plan, under which non-employee
directors of the Corporation had the opportunity to defer receipt
of certain compensation until retirement or departure from the
Board.
The Board of Directors determined it to be in the best
interests of the Corporation to allow non-employee directors of
the Corporation to continue to have the opportunity to defer
receipt of certain compensation until retirement or departure
from the Board provided that the deferred amounts are aligned
with the interests of the Corporation by being tied to the
performance of the Corporation's common stock. Effective
________, 1999, the Board of Directors has determined it to be in
the best interests of the Corporation to make certain amendments
to the Outside Directors Deferral Plan. Therefore, the Board of
Directors believes it to be in the best interest of the
Corporation to amend and restate the Outside Directors Deferral
Plan for such purposes.
Pursuant to action taken by the Board of Directors, the
Hilb, Rogal and Hamilton Company Amended and Restated Outside
Directors Deferral Plan (the "Plan") is amended and restated in
its entirety as follows:
ARTICLE I
Definition of Terms
The following words and terms as used in this Plan shall
have the meaning set forth below, unless a different
meaning is clearly required by the context:
1.1 "Account": A bookkeeping account established for a
Participant under Article IV hereof.
1.2 "Administrator": The Compensation Committee of the
Board is the Plan Administrator unless responsibility is
delegated as provided for in Article XII hereof.
1.3 "Affiliate": Any subsidiary, parent, affiliate, or
other related business entity to the Corporation.
1.4 "Beneficiary": The person or persons designated by a
Participant or otherwise entitled pursuant to Section 8.1 to
receive benefits under the Plan attributable to such Participant
after the death of such Participant.
1.5 "Benefit Commencement Date": The date irrevocably
elected by the Participant pursuant to Section 3.3, which date
may not be later than the January 1 following the Participant's
75th birthday. The same Benefit Commencement Date shall be
required for all Deferral Contributions made and Deferral
Benefits attributable to a Deferral Year.
1.6 "Board": The present and any succeeding Board of
Directors of the Corporation, unless such term is used with
respect to a particular Affiliate and its Directors, in which
event it shall mean the present and any succeeding Board of
Directors of that Affiliate.
1.7 "Code": The Internal Revenue Code of 1986, as the same
may be amended from time to time.
1.8 "Compensation": Fees payable to a Participant for
service as a member of the Board, including (i) annual retainer
fee ("Retainer") and (ii) meeting or committee fees (collectively
referred to as "Additional Fees") paid by the Corporation to an
Eligible Director, but excluding any such compensation deferred
from a prior period, expense reimbursement and allowances and
benefits not normally paid in cash to the Participant.
1.9 "Corporation": Hilb, Rogal and Hamilton Company, or any
successor thereto.
1.10 "Death Benefit": The benefit with respect to a
Participant due a Participant's Beneficiary, determined in
accordance with Article VI hereof.
1.11 "Deferral Amount": With respect to each Plan Year, the
sum of the Deferral Contributions of a Participant with respect
to his Retainer and/or his Additional Fees to be paid during the
Plan Year.
1.12 "Deferral Benefit": The balance in a Participant's
Deferred Cash Account and Deferred Stock Unit Account.
1.13 "Deferral Contributions": That portion of a
Participant's Compensation which is deferred under the Plan or
which has been deferred under the Former Plan.
1.14 "Deferral Year": The Plan Year with respect to which a
Deferral Contribution is made. For purposes hereof, a Deferral
Contribution is considered made with respect to the Plan Year in
which the amount would otherwise have been paid to the
Participant.
1.15 "Deferral Election": An irrevocable election of a
Deferral Amount in writing executed by the Eligible Director or
Participant and timely filed with the Administrator.
1.16 "Deferred Cash Account": An unfunded, bookkeeping
account maintained on the books of the Corporation for a
Participant which reflects his interest in amounts attributable
to his Deferred Contributions under the Former Plan. The
Deferred Cash Account of a Participant consists of his Deferral
Contributions made under the Former Plan with respect to
Compensation earned after December 31, 1994 and before April 1,
1998. Separate subdivisions of the Deferred Cash Account shall
continue to be maintained to reflect Deferral Contributions made
and Deferral Benefits attributable with respect to each Deferral
Year and within each Deferral Year, the Deferral Contributions
and Deferral Benefits attributable to Deferral Contributions of
Retainer and Deferral Contributions of Additional Fees.
1.17 "Deferred Stock Unit": A hypothetical share of the
Corporation's common stock.
1.18 "Deferred Stock Unit Account": An unfunded, bookkeeping
account maintained on the books of the Corporation for a
Participant which reflects his interest in amounts attributable
to his Deferred Contributions under the Plan. The Deferred Stock
Unit Account of a Participant consists of his Deferral
Contributions made under the Plan with respect to Compensation
earned after April 1, 1998. Separate subdivisions of the
Deferred Stock Unit Account shall be maintained to reflect
Deferral Contributions made and Deferral Benefits attributable
with respect to each Deferral Year and within each Deferral Year,
the Deferral Contributions and Deferral Benefits attributable to
Deferral Contributions of Retainer and Deferral Contributions of
Additional Fees.
1.19 "Director": An individual who serves as a member of the
Board.
1.20 "Effective Date": The Effective Date of the Plan is
April 1, 1998.
1.21 "Eligible Director": A Director who is not an employee
of the Corporation and who has not reached the age of 75 before
the Deferral Year.
1.22 "Former Plan": The Hilb Rogal and Hamilton Company
Outside Directors Deferral Plan effective January 1, 1995.
1.23 "Participant": An Eligible Director who elects to
participate in the Plan, and further differentiated as follows:
(i) "Active Participant": A Participant who has an
election to make Deferral Contributions to the Plan in
effect at the time in question.
(ii) "Inactive Participant": A Participant who does not
have an election to make Deferral Contributions to the Plan
in effect at the time in question.
1.24 "Plan": This document, as contained herein or duly
amended, which shall be known as the "Hilb, Rogal and Hamilton
Amended and Restated Outside Directors Deferral Plan".
1.25 "Plan Year": The calendar year or any Short Plan Year.
1.26 "Rate of Return": Nine percent (9%) for the 1995
through 1999 Deferral Years, and nine percent (9%) for Deferral
Years after 1999 until, if ever, increased by the Compensation
Committee.
1.27 "Short Plan Year": The remaining portion of the
calendar year after the Effective Date of this Plan.
ARTICLE II
Eligibility and Participation
2.1 Eligibility. Each Eligible Director shall be eligible
to participate in the Plan and to defer Compensation hereunder
for such Plan Year.
2.2 Notice and Election Regarding Active Participation.
(a) The Administrator shall notify each Eligible Director
within a reasonable period of time prior to the beginning of each
Plan Year.
(b) In order to become an Active Participant and to make
Deferral Contributions with respect to a Plan Year, an Eligible
Director must file with the Administrator a Deferral Election, as
provided in Section 3.3 which is effective as of the first day of
the Plan Year, such election must be filed by the date
established by the Administrator, which date shall be no later
than the December 31 preceding such Plan Year or the last day
before the commencement of a Short Plan Year, whichever is
applicable.
(c) By executing and filing such election with the
Administrator, an Eligible Director consents and agrees to the
following:
(i) To execute such applications and take such
physical examinations and to supply truthfully and
completely such information as may be requested by any
health questionnaire provided by the Administrator;
(ii) To be bound by all terms and conditions of the
Former Plan, the Plan and all amendments thereto.
2.3 Commencement of Active Participation. An Eligible
Director shall become an Active Participant with respect to a
Plan Year only if he is expected to have Compensation during such
Plan Year, and he timely files and has in effect a Deferral
Election for such Plan Year.
2.4 Length of Participation. An individual who is or
becomes a Participant shall be or remain an Active Participant as
long as he has a Deferral Election in effect; and he shall be or
remain an Inactive Participant as long as he is entitled to
future benefits under the terms of the Plan and is not considered
an Active Participant.
ARTICLE III
Determination of Deferral
3.1 Deferral Benefit. For purposes hereof, a Participant's
Deferral Benefit shall be the balance in his Deferred Cash
Account and his Deferred Stock Unit Account at the time in
question.
3.2 Transition Credits. Each Participant who has a balance
standing to his credit in the Former Plan as of April 1, 1998,
shall be permitted a one-time election, on or before April 1,
1998, to convert all or a portion of the balance standing to his
credit in the Former Plan to Deferred Stock Units as of April 1,
1998. A Participant who elects to convert all or a portion of
his Deferral Account (as defined in the Former Plan) in the
Former Plan to Deferred Stock Units shall be credited with the
number of Deferred Stock Units determined by dividing the portion
of his Deferred Cash Account under the Former Plan on April 1,
1998 for which such election is made, by the Closing Price of the
common stock of the Corporation on the date of the Participant's
election. If the formula produces a fractional Deferred Stock
Unit, then the fractional Deferred Stock shall be rounded off to
the nearest thousandth and credited to the Participant. Once a
Participant has made an election under this Section 3.2 to
convert some or all of his Deferred Cash Account to Deferred
Stock Units of the Corporation, the Corporation's rights and
obligations, if any, with respect to the Deferred Stock Units
will be governed by this Plan.
3.3 Deferral Election.
(a) Subject to the restrictions and conditions hereinafter
provided, a Participant may irrevocably elect, as a Deferral
Contribution with respect to a Plan Year, to receive an amount of
his Compensation which is specified by his Deferral Election for
such Plan Year in the form of Deferred Stock Units. Any such
election must be filed with the Administrator at the time
required under Section 2.2(b).
(b) The following conditions apply:
(i) The maximum Deferral Contribution of Retainer with
respect to any Participant for a Plan Year shall be one
hundred percent (100%) of his Retainer for such Plan Year
and such election shall be made in whole dollar amounts. A
Participant who elects to receive his Retainer in Deferred
Stock Units shall have credited to his Deferred Stock Unit
Account as of the first day of each calendar quarter the
number of Deferred Stock Units determined by dividing that
portion of his accrued, deferred Retainer for the quarter
(determined by dividing the amount of such Retainer
previously selected by the Participant to be applied to the
purchase of Deferred Stock Units by four) by the Closing
Price as of the first day of such calendar quarter.
(ii) The maximum Deferral Contribution of Additional
Fees with respect to any Participant for a Plan Year shall
be one hundred percent (100%) of his Additional Fees for
such Plan Year and such election shall be made in twenty-
five percent (25%) increments. A Participant who elects to
receive his Additional Fees in Deferred Stock Units shall
have credited to his Deferred Stock Unit Account as of the
day on which the Additional Fees are accrued the number of
Deferred Stock Units determined by multiplying his accrued
Additional Fees on said day by the percentage of such
Additional Fees previously selected by the Participant to be
applied to the purchase of Deferred Stock Units, and
dividing the product thereof by the Closing Price as of the
day on which the Additional Fees are accrued.
(iii) A Participant who elects to defer one hundred
percent (100%) of his Compensation shall receive additional
Deferred Stock Units equal to thirty percent (30%) of said
Participant's Compensation for the Plan Year. Such Deferred
Stock Units shall be credited to the Participant in addition
to the Deferred Stock Units received as a result of the
election to defer the Retainer and Additional Fees in the
manner provided by subsections (i) and (ii) above.
(iv) A separate Deferral Election must be filed for
each Plan Year.
(v) Each Deferral Election shall be made on a form
provided by the Administrator and shall specify the Deferral
Amount and source of deferrals and such additional
information as the Administrator may require.
(vi) A Deferral Election must specify the period of
payment. A Participant may elect to receive a lump sum
payment or installment payments over periods of five, ten or
fifteen years beginning on the January 1 after age 55, 60,
65, 70 or 75.
(vii) A Participant shall have the option of
postponing the elected Benefit Commencement Date of a
Deferral Benefit specified in 3.3 (b) (vi) above by making
an irrevocable election to roll over such Deferral Benefit
at least one year before such Deferral Benefit is payable,
provided that the Participant may not change his previous
allocation of amounts to his Deferred Cash Account and
Deferred Stock Unit Account at such time and provided that
the Participant may not postpone the elected Benefit
Commencement Date past the January 1 following the
Participant's 75th birthday. A Participant shall make such
election on a form designated by the Administrator.
3.4 Subtractions from Deferred Cash Account and Deferred
Stock Unit Account. All distributions from a Participant's
Deferred Cash Account and Deferred Stock Unit Account shall be
subtracted when such distributions are made.
3.5 Crediting of Interest to Deferred Cash Account. There
shall be credited to each Participant's Deferred Cash Account an
amount representing interest on the balance of such account.
Under the Former Plan, the interest was credited as of the first
day of the Deferral Year. Under this Plan, interest shall be
credited as earned. Such interest shall be based on the
applicable Rate of Return for the Deferral Year.
3.6 Equitable Adjustment in Case of Error or Omission. If
an error or omission is discovered in the Deferred Cash Account
and Deferred Stock Unit Account of a Participant, the
Administrator shall make such equitable adjustment as the
Administrator deems appropriate.
3.7 Statement of Benefits. Within a reasonable time after
the end of the Plan Year and at the date a Participant's Deferral
Benefit or Death Benefit becomes payable under the Plan, the
Administrator shall provide to each Participant (or, if deceased,
to his Beneficiary) a statement of the benefit under the Plan.
ARTICLE IV
Accounts and Investments
4.1 Accounts. A separate Account under the Plan shall be
established for each Participant. Such Account shall be (a)
credited with the amounts credited in accordance with Sections
3.2 and 3.3, (b) credited (or charged, as the case may be) with
the investment results determined in accordance with Sections 4.2
and 4.3, and (c) charged with the amounts paid by the Plan to or
on behalf of the Participant in accordance with Article VII.
With each Participant's Account, separate subaccounts (including,
as necessary, a Deferred Stock Unit Account and a Deferred Cash
Account) shall be maintained to the extent that the Board
determines them necessary or useful in the administration of the
Plan.
4.2 Deferred Stock Units. Except as provided below, a
Participant's Deferred Stock Unit Account shall be treated as if
it were invested in Deferred Stock Units that are equivalent in
value to the fair market value of the shares of the Corporation's
common stock in accordance with the following rules:
(a) Before the Benefit Commencement Date, the number of
Deferred Stock Units credited to a Participant's Deferred Stock
Unit Account shall be increased on each date on which a dividend
is paid on the Corporation's common stock. The number of
additional Deferred Stock Units credited to a Participant's
Deferred Stock Unit Account as a result of such increase shall be
determined by (i) multiplying the total number of Deferred Stock
Units (with fractional Deferred Stock Units rounded off to the
nearest thousandth) credited to the Participant's Deferred Stock
Unit Account immediately before such increase by the amount of
the dividend paid per share of the Corporation's common stock on
the dividend payment date, and (ii) dividing the product so
determined by the Closing Price on the dividend payment date.
(b) The dollar value of the Deferred Stock Units credited
to a Participant's Deferred Stock Unit Account on any date shall
be determined by multiplying the number of Deferred Stock Units
(including fractional Deferred Stock Units) credited to the
Participant's Deferred Stock Unit Account by the Closing Price on
that date.
(c) In the event of a transaction or event described in
this subsection (c), the number of Deferred Stock Units credited
to a Participant's Deferred Stock Unit Account shall be adjusted
in such manner as the Board, in its sole discretion, deems
equitable. A transaction or event is described in this
subsection (c) if (i) it is a dividend (other than regular
quarterly dividends) or other distribution (whether in the form
of cash, shares, other securities, or other property),
extraordinary cash dividend, recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-
up, spin-off, repurchase, or exchange of shares or other
securities, the issuance or exercisability of stock purchase
rights, the issuance of warrants or other rights to purchase
shares or other securities, or other similar corporate
transaction or event and (ii) the Board determines that such
transaction or event affects the shares of the Corporation's
common stock, such that an adjustment pursuant to this paragraph
(c) is appropriate to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available
under the Plan.
(d) A Participant who elects to receive distribution of his
Accounts in annual installments will not have his or her Deferred
Stock Unit Account credited with Deferred Stock Units on or after
the Benefit Commencement Date.
(e) On the Benefit Commencement Date, the Deferred Stock
Unit Account of a Participant who has elected to receive his
Deferral Benefit in quarterly installments shall be converted to
a Deferred Cash Account which shall accrue annual interest at the
Rate of Return.
4.3 Hypothetical Nature of Accounts and Investments. Each
Account established under this Article IV shall be maintained for
bookkeeping purposes only. Neither the Plan nor any of the
Accounts established under the Plan shall hold any actual funds
or assets. The Deferred Stock Units established hereunder shall
be used solely to determine the amounts to be paid hereunder,
shall not represent an equity security of the Corporation, shall
not be convertible into or otherwise entitle a Participant to
acquire an equity security of the Corporation and shall not carry
any voting or dividend rights.
ARTICLE V
Vesting
5.1 Vesting. A Participant's Deferred Cash Account and
Deferred Stock Unit Account shall be fully vested and non-
forfeitable at all times.
ARTICLE VI
Death Benefits
6.1 Pre-Benefit Commencement Date Death Benefit. In the
event that a Participant dies prior to his Benefit Commencement
Date, then the Participant's Deferred Stock Unit Account shall be
converted to a Deferred Cash Account as of the first of January
following the Participant's date of death, which Deferred Cash
Account shall accrue annual interest thereafter at the Rate of
Return to the extent not paid out in a lump sum pursuant to the
Participant's election form. If the Participant has not reached
age 65 at the time of the Participant's death, the Beneficiary of
such Participant shall be entitled to receive as a Death Benefit
an amount equal to the Deferral Benefit as of the Benefit
Commencement Date that the Participant would have received had
the Participant lived to received the full Deferral Benefit. If
the Participant is age 65 or older at the time of the
Participant's death, the Beneficiary of such Participant shall be
entitled to receive as a Death Benefit an amount equal to the
Deferral Benefit as of the first of January following the
Participant's date of death. This Death Benefit shall be paid
pursuant to the Participant's election form except that the
payment shall be made, or begin, on the first of January after
the Participant's date of death.
6.2 Post-Benefit Commencement Date Death Benefit. In the
event that a Participant dies after his Benefit Commencement
Date, then the Beneficiary of such participant shall be entitled
to receive as a Death Benefit a continuation of the payment of
the Deferral Benefit in the same manner and in the same amount
that the Participant would have received had the Participant
lived to receive the Deferral Benefit.
ARTICLE VII
Payment of Benefits
7.1 Payment of Deferral Benefit. A Participant's Deferral
Benefit, if any, shall become payable to the Participant as of
the Benefit Commencement Date specified in his Deferral Election
or as soon thereafter as is administratively practical. If the
Participant has elected to receive the Deferral Benefit in
quarterly installments, each of the Participant's quarterly
installment payments shall be comprised of accrued interest, if
any, and that portion of the Participant's Deferral Benefit equal
to the balance in the Participant's Deferred Cash Account divided
by the number of remaining annual installment payments to be made
to the Participant.
7.2 Payment of Death Benefit. A Participant's pre-
commencement Death Benefit shall be payable to his Beneficiary as
set forth in Article VI. A Participant's post-commencement Death
Benefit shall be paid in installments payable quarterly over the
period irrevocably elected by the Participant pursuant to his
Deferral Election.
7.3 Form of Payment of Deferral Benefit. A Participant
shall be paid his Deferral Benefit beginning at the Benefit
Commencement Date in a lump sum or in periodic installment
payments payable quarterly over a period of five, ten, or fifteen
years as irrevocably elected by the Participant pursuant to
Section 3.3.
7.4 Benefit Determination and Payment Procedure. The
Administrator shall make all determinations concerning
eligibility for benefits under the Plan, the time or terms of
payment, and the form or manner of payment to the Participant or
the Participant's Beneficiary, in the event of the death of the
Participant. The Administrator shall promptly notify the
Corporation of each such determination that benefit payments are
due and provide to the Corporation all other information
necessary to allow the Corporation to carry out said
determination, whereupon the Corporation shall pay such benefits
in accordance with the Administrator's determination.
7.5 Payments to Minors and Incompetents. If a Participant
or Beneficiary entitled to receive any benefits hereunder is a
minor or is adjudged to be legally incapable of giving valid
receipt and discharge for such benefits, or is deemed so by the
Administrator, benefits will be paid to such person as the
Administrator may designate for the benefit of such Participant
or Beneficiary. Such payments shall be considered a payment to
such Participant or Beneficiary and shall, to the extent made, be
deemed a complete discharge of any liability for such payments
under the Plan.
7.6 Distribution of Benefit When Distributee Cannot Be
Located. The Administrator shall make all reasonable attempts to
determine the identity and/or whereabouts of a Participant or a
Participant's Beneficiary entitled to benefits under the Plan,
including the mailing by certified mail of a notice to the last
known address shown on the Corporation's or the Administrator's
records. If the Administrator is unable to locate such a person
entitled to benefits hereunder, or if there has been no claim
made for such benefits, the Corporation shall continue to hold
the benefit due such person, subject to any applicable statute of
escheats.
ARTICLE VIII
Beneficiary Designation
8.1 Beneficiary Designation.
(a) A Participant may designate a Beneficiary as part of
his Deferral Election. Any Beneficiary designation made
hereunder shall be effective only if properly signed and dated by
the Participant and delivered to the Administrator prior to the
time of the Participant's death. Any Beneficiary designation
hereunder shall remain effective until changed or revoked
hereunder.
(b) A Beneficiary designation may be changed by the
Participant at any time, or from time to time, by filing a new
designation in writing with the Administrator.
(c) If the Participant dies without having designated a
Beneficiary, or if the Beneficiary so designated has predeceased
him, then his estate shall be deemed to be his Beneficiary.
(e) If a Beneficiary of the Participant shall survive the
Participant but shall die before the Participant's entire benefit
under the Plan has been distributed, then the unpaid balance
thereof shall be distributed to any other beneficiary named by
the deceased Beneficiary to receive his interest or, if none, to
the estate of the deceased Beneficiary.
ARTICLE IX
Withdrawals
9.1 No Withdrawals Permitted. No withdrawals or other
distributions shall be permitted from the Deferred Cash Account
and Deferred Stock Unit Account except as provided in Article
VII.
9.2 Hardship Exemption.
(a) A distribution of a portion of the Participant's
Deferral Account because of an Unforeseeable Emergency will be
permitted only to the extent required by the Participant to
satisfy the emergency need. Whether an Unforeseeable Emergency
has occurred will be determined solely by the Administrator.
Distributions in the event of an Unforeseeable Emergency may be
made by and with the approval of the Administrator upon written
request by a Participant.
(b) An "Unforeseeable Emergency" is defined as a severe
financial hardship to the Participant resulting from a sudden and
unexpected illness or accident of the Participant or of a
dependent of the Participant, loss of the Participant's property
due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the
Participant's control. The circumstances that will constitute an
Unforeseeable Emergency will depend upon the facts of each case,
but, in any event, any distribution under this Section 9.2 shall
not exceed the remaining amount required by the Participant to
resolve the hardship after (i) reimbursement or compensation
through insurance or otherwise, (ii) obtaining liquidation of the
Participant's assets, to the extent such liquidation would not
itself cause a severe financial hardship, or (iii) suspension of
deferrals under the Plan.
ARTICLE X
Funding
10.1 Funding.
(a) All Plan Participants and Beneficiaries are general
unsecured creditors of the Corporation with respect to the
benefits due hereunder and the Plan constitutes a mere promise by
the Corporation to make benefit payments in the future. It is
the intention of the Corporation that the Plan be considered
unfunded for tax purposes.
(b) The Corporation may, but is not required to, purchase
life insurance in amounts sufficient to provide some or all of
the benefits provided under this Plan or may otherwise segregate
assets for such purpose.
(c) The Corporation may, but is not required to, establish
a grantor trust which may be used to hold assets of the
Corporation which are maintained as reserves against the
Corporation's unfunded, unsecured obligations hereunder. Such
reserves shall at all times be subject to the claims of the
Corporation's creditors. To the extent such trust or other
vehicle is established, and assets contributed, for the purpose
of fulfilling the Corporation's obligation hereunder, then such
obligation of the Corporation shall be reduced to the extent such
assets are utilized to meet its obligations hereunder. Any such
trust and the assets held thereunder are intended to conform in
substance to the terms of the model trust described in Revenue
Procedure 92-64.
ARTICLE XI
Change of Control
11.1 Change of Control.
A "Change of Control" shall mean
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 25% or more of
either (i) the then outstanding shares of common stock of the
Corporation (the "Outstanding Corporation Common Stock") or (ii)
the combined voting power of the then outstanding voting
securities of the Corporation entitled to vote generally in the
election of directors (the "Outstanding Corporation Voting
Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a
Change of Control: (i) any acquisition directly from the
Corporation, (ii) any acquisition by the Corporation, (iii) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Corporation or any corporation
controlled by the Corporation or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses
(i), (ii) and (iii) of subsection (c) of this Section; or
(b) Individuals who, as of February 2, 1999,
constitute the Board "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to February 2,
1999 whose election, or nomination for election by the
Corporation's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially
all of the assets of the Corporation (a "Business Combination"),
in each case, unless, following such Business Combination, (i) all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Corporation
Common Stock and Outstanding Corporation Voting Securities
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power
of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including,
without limitation a corporation which as a result of such
transaction owns the Corporation or all or substantially all of
the Corporation's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Corporation Common Stock and Outstanding Corporation
Voting Securities, as the case may be, (ii) no Person (excluding
any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Corporation or
such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of
the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board
at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Corporation of
a complete liquidation or dissolution of the Corporation.
Notwithstanding the foregoing, for purposes of subsection
(a) of this Section, a Change of Control shall not be deemed to
have taken place if, as a result of an acquisition by the
Corporation which reduces the Outstanding Corporation Common
Stock or the Outstanding Corporation Voting Securities, the
beneficial ownership of a Person increases to 25% or more of the
Outstanding Corporation Common Stock or the Outstanding
Corporation Voting Securities; provided, however, that if a
Person shall become the beneficial owner of 25% or more of the
Outstanding Corporation Common Stock or the Outstanding
Corporation Voting Securities by reason of share purchases by the
Corporation and, after such share purchases by the Corporation,
such Person becomes the beneficial owner of any additional shares
of the Outstanding Corporation Common Stock or the Outstanding
Corporation Voting Stock through any means except an acquisition
directly from the Company, for purposes of subsection (a) of this
Section, a Change of Control shall be deemed to have taken place.
11.2 Effect of Change of Control.
Notwithstanding any other provision in any other Article of
this Plan to the contrary, (i) the value of all amounts deferred
by a Participant which have not yet been credited to the
Participant's Account and (ii) the value of such Participant's
Account shall be paid to such Participant in each case in a lump-
sum cash payment on the occurrence of a Change of Control or as
soon thereafter as practicable, but in no event later than five
days after the Change of Control. The amount of cash credited to
each Participant's Account prior to determining the amount of
cash to be paid from the Account shall be determined by the Board
(which, for this purpose, shall be comprised of employee members
of the Board prior to the Change of Control) so as to reflect
fairly and equitably appropriate interest and dividends and
circumstances as the Board deems appropriate, including, without
limitation, the recent price of shares of the Corporation's
common stock. For purposes of payments under this Article XI,
the value of a Deferred Stock Unit shall be computed as the
greater of (1) the Closing Price on or nearest the date on which
the Change of Control is deemed to occur, or (2) the highest per
share price for shares of the Corporation's common stock actually
paid in connection with the Change of Control.
ARTICLE XII
Plan Administrator
12.1 Appointment of Administrator.
(a) The Compensation Committee may appoint one or more
persons to serve as the Plan Administrator (the "Administrator")
for the purpose of administering the Plan. In the event more
than one person is appointed, the persons shall form a committee
for the purpose of functioning as the Administrator of the Plan.
The person or committeemen serving as Administrator shall serve
for indefinite terms at the pleasure of the Compensation
Committee, and may, by thirty (30) days prior written notice to
the Compensation Committee, terminate such appointment.
12.2 Duties and Responsibilities of Plan Administrator.
(a) The Administrator shall maintain and retain necessary
records regarding its administration of the Plan.
(b) The Administrator is empowered to settle claims against
the Plan and to make such equitable adjustments in a
Participant's or Beneficiary's rights or entitlements under the
Plan as it deems appropriate in the event an error or omission is
discovered or claimed in the operation or administration of the
Plan.
(c) The Administrator may construe the Plan, correct
defects, supply omissions or reconcile inconsistencies to the
extent necessary to effectuate the Plan, and such action shall be
conclusive.
ARTICLE XIII
Amendment or Termination of Plan
13.1 Amendment or Termination of the Plan. The Plan may be
terminated or amended at any time by the Board, effective as of
any date specified. Any such action taken by the Board shall be
evidenced by a resolution and shall be communicated to
Participants and Beneficiaries prior to the effective date
thereof. No amendment or termination shall decrease a
Participant's Deferral Benefit accrued prior to the effective
date of the amendment or termination. The Board reserves the
right to unilaterally shorten the deferral period of any
Participant hereunder in its sole discretion if, in its sole
discretion, it determines that to do so will be fair and
equitable to the Participant.
<PAGE>
ARTICLE XIV
Miscellaneous
14.1 Non-assignability. The interests of each Participant
under the Plan are not subject to claims of the Participant's
creditors; and neither the Participant nor his Beneficiary shall
have any right to sell, assign, transfer or otherwise convey the
right to receive any payments hereunder or any interest under the
Plan, which payments and interest are expressly declared to be
non-assignable and non-transferable.
14.2 Notices and Elections. All notices required to be given
in writing and all elections required to be made in writing under
any provision of the Plan shall be invalid unless made on such
forms as may be provided or approved by the Administrator and, in
the case of a notice or election by a Participant or Beneficiary,
unless executed by the Participant or Beneficiary giving such
notice or making such election. Notices and elections shall be
deemed given or made when received by any member of the committee
that serves as Administrator.
14.3 Delegation of Authority. Whenever the Corporation is
permitted or required to perform any act, such act may be
performed by its Chief Executive Officer or President or other
person duly authorized by its Chief Executive Officer or
President or its Board.
14.4 Service of Process. The Administrator shall be the
agent for service of process on the Plan.
14.5 Governing Law. The Plan shall be construed, enforced
and administered in accordance with the laws of the Commonwealth
of Virginia.
14.6 Binding Effect. The Plan shall be binding upon and
inure to the benefit of the Corporation, its successors and
assigns, and the Participant and his heirs, executors,
administrators and legal representatives.
14.7 Severability. If any provision of the Plan should for
any reason be declared invalid or unenforceable by a court of
competent jurisdiction, the remaining provisions shall
nevertheless remain in full force and effect.
14.8 Gender and Number. In the construction of the Plan, the
masculine shall include the feminine or neuter and the singular
shall include the plural and vice-versa in all cases where such
meanings would be appropriate.
14.9 Titles and Captions. Titles and captions and headings
herein have been inserted for convenience of reference only and
are to be ignored in any construction of the provisions hereof.
IN WITNESS WHEREOF, the Corporation has caused the Plan, as
amended and restated, to be signed on its behalf by its duly
authorized officer on the __ day of Feb, 1999.
Hilb, Rogal and Hamilton Company
By: /s/ Walter L. Smith
--------------------------------------
Its VP, CC & Sec
--------------------------------------
Exhibit 10.10
AMENDED AND RESTATED
HILB, ROGAL AND HAMILTON COMPANY
NON-EMPLOYEE DIRECTORS STOCK INCENTIVE PLAN
1. Purpose. The Purpose of the Hilb, Rogal and Hamilton
Company Non-employee Directors Stock Incentive Plan (the "Plan")
is to encourage ownership in the Company by non-employee members
of the Board, to promote long-term shareholder value and to
provide non-employee members of the Board with an incentive to
continue as directors of the Company. The Plan was originally
adopted by the Board and Shareholders of the Company as of May 5,
1998, amended as of August 4, 1998, and amended and restated by
the Board effective February 2, 1999.
2. Definitions. As used in the Plan, the following terms
have the meanings indicated:
(a) "Act" means the Securities Exchange Act of 1934,
as amended.
(b) "Agreement" means a written agreement (including
any amendment or supplement thereto) between the
Company and an Eligible Director specifying the
terms and conditions of an Option granted to such
Eligible Director.
(c) "Annual Meeting" means the annual meeting of
shareholders at which members of the Board are
routinely elected.
(d) "Board" means the Board of Directors of the
Company.
(e) "Change of Control" shall mean
(i) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Act, (a "Person") of
beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Act) of 25%
or more of either (a) the then outstanding
shares of common stock of the Company (the
"Outstanding Company Common Stock") or (b)
the combined voting power of the then
outstanding voting securities of the Company
entitled to vote generally in the election of
directors (the "Outstanding Company Voting
Securities"); provided, however, that for
purposes of this subsection (i), the
following acquisitions shall not constitute a
Change of Control: (w) any acquisition
directly from the Company, (x) any
acquisition by the Company, (y) any
acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the
Company or any corporation controlled by the
Company or (z) any acquisition by any
corporation pursuant to a transaction which
complies with clauses (a), (b) and (c) of
subsection (iii) of this Section; or
(ii) Individuals who, as of February 2, 1999,
constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a
majority of the Board; provided, however,
that any individual becoming a director
subsequent to February 2, 1999 whose
election, or nomination for election by the
Company's shareholders, was approved by a
vote of at least a majority of the directors
then comprising the Incumbent Board shall be
considered as though such individual were a
member of the Incumbent Board, but excluding,
for this purpose, any such individual whose
initial assumption of office occurs as a
result of an actual or threatened election
contest with respect to the election or
removal of directors or other actual or
threatened solicitation of proxies or con
sents by or on behalf of a Person other than
the Board; or
(iii)Consummation of a reorganization, merger
or consolidation or sale or other disposition
of all or substantially all of the assets of
the Company (a "Business Combination"), in
each case, unless, following such Business
Combination, (a) all or substantially all of
the individuals and entities who were the
beneficial owners, respectively, of the
Outstanding Company Common Stock and
Outstanding Company Voting Securities
immediately prior to such Business Combination
beneficially own, directly or indirectly, more
than 50% of, respectively, the then
outstanding shares of common stock and the
combined voting power of the then outstanding
voting securities entitled to vote generally
in the election of directors, as the case may
be, of the corporation resulting from such
Business Combination (including, without
limitation a corporation which as a result of
such transaction owns the Company or all or
substantially all of the Company's assets
either directly or through one or more
subsidiaries) in substantially the same
proportions as their ownership, immediately
prior to such Business Combination of the
Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the
case may be, (b) no Person (excluding any
corporation resulting from such Business
Combination or any employee benefit plan (or
related trust) of the Company or such
corporation resulting from such Business
Combination) beneficially owns, directly or
indirectly, 25% or more of, respectively, the
then outstanding shares of common stock of the
corporation resulting from such Business
Combination or the combined voting power of
the then outstanding voting securities of such
corporation except to the extent that such
ownership existed prior to the Business
Combination and (c) at least a majority of the
members of the board of directors of the
corporation resulting from such Business
Combination were members of the Incumbent
Board at the time of the execution of the
initial agreement, or of the action of the
Board, providing for such Business
Combination; or
(iv) Approval by the shareholders of the Company
of a complete liquidation or dissolution of
the Company.
Notwithstanding the foregoing, for purposes
of subsection (i) of this Section, a Change
of Control shall not be deemed to have taken
place if, as a result of an acquisition by
the Company which reduces the Outstanding
Company Common Stock or the Outstanding
Company Voting Securities, the beneficial
ownership of a Person increases to 25% or
more of the Outstanding Company Common Stock
or the Outstanding Company Voting Securities;
provided, however, that if a Person shall
become the beneficial owner of 25% or more of
the Outstanding Company Common Stock or the
Outstanding Company Voting Securities by
reason of share purchases by the Company and,
after such share purchases by the Company,
such Person becomes the beneficial owner of
any additional shares of the Outstanding
Company Common Stock or the Outstanding
Company Voting Stock through any means except
an acquisition directly from the Company, for
purposes of subsection (i) of this Section, a
Change of Control shall be deemed to have
taken place.
(f) "Company" means Hilb, Rogal and Hamilton Company.
(g) "Committee" means the Compensation Committee of
the Board.
..
(h) "Common Stock" means the Common Stock of the
Company. In the event of a change in the capital
structure of the Company (as provided in Section
13), the shares resulting from such a change shall
be deemed to be the Common Stock within the
meaning of the Plan.
(i) "Date of Grant" means the date as of which a
director is automatically awarded an Option
pursuant to Section 6.
(j) "Effective Date" means the date the Plan is
adopted by shareholders of the Company.
(k) "Eligible Director" means a member of the Board
who is not an employee of the Company or any
Subsidiary.
(l) "Fair Market Value" means, on any given date, the
closing price per share of Common Stock, as
reported on the New York Stock Exchange composite
tape on that day or, if the Common Stock was not
traded on such day, then on the next preceding day
that the Common Stock was traded on such exchange,
all as reported by such source as the Committee
may select.
(m) "Fees" means all amounts payable to an Eligible
Director for services rendered as a director,
including retainer fees, meeting fees, and
committee fees, but excluding travel and other out
of pocket expense reimbursements.
(n) "Option" means a stock option, not otherwise
specifically qualified for favorable tax treatment
under a section of the Internal Revenue Code, that
entitles the holder to purchase from the Company a
stated number of shares of Common Stock at the
price set forth in an Agreement under the terms of
this Plan, at a price determined in accordance
with the Plan.
(o) "Plan Year" means the calendar year or the
remaining portion of the calendar year after the
Effective Date of this Plan.
(p) "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations
beginning with the Company if each of the
corporations in the unbroken chain (other than the
last corporation) owns stock possessing at least
50% of the total combined voting power of all
classes of stock in one of the other corporations
in such chain.
3. Participation in the Plan. Each Eligible Director who
was not an employee of the Company or Subsidiary for at least one
year before the Date of Grant of an Option shall be eligible to
receive Options under Section 6. Each Eligible Director shall be
eligible to elect to receive Common Stock in lieu of Fees under
Section 7.
4. Stock Subject to the Plan. The maximum number of
shares of Common Stock that may be issued upon exercise of
Options granted or Stock Elections pursuant to the Plan shall be
200,000, subject to adjustment as provided in Section 13.
5. Non-Statutory Stock Options. All Options granted under
the Plan shall be non-statutory in nature and shall not be
entitled to special tax treatment under Internal Revenue Code
Section 422.
6. Award, Terms, Conditions and Form of Options. Each
Option shall be evidenced by a written agreement in such form as
the Committee shall from time to time approve, which Agreement
shall comply with and be subject to the following terms and
conditions:
(a) Each Eligible Director shall receive a grant of an
Option for the purchase of 5,000 shares of Common
Stock on the first business day following the
Annual Meeting of the Company's Shareholders. If
at any time under the Plan there are not
sufficient shares of Common Stock available to
permit fully the Option grants described in this
Section 6(a), the Option grants shall be reduced
pro rata (to zero, if necessary) so as not to
exceed the number of shares of Common Stock
available.
(b) The Option exercise price shall be the Fair Market
Value of the Common Stock on the Date of Grant.
(c) Subject to Section 6(e) below, all Options shall
become exercisable immediately or after any term
of months or years and may remain exercisable for
any term of months or years as set by the
Committee in its discretion at the time of
granting. Further, the date upon which any Option
granted becomes exercisable may be accelerated by
the Committee in its discretion and the term of
exercisability for any Option granted may be
extended by the Committee. The terms of any
Option granted by the Committee may provide that
the Option is exercisable in whole or in part from
time to time over such period of time as the
Committee shall consider appropriate.
(d) An Option may be exercised in whole at any time or
in part from time to time at such times and in
compliance with the applicable Agreement. A
partial exercise of an Option shall not affect the
right to exercise the Option from time to time in
accordance with this Plan with respect to
remaining shares subject to the Option.
(e) Unless otherwise provided by the Agreement payment
of the Option price shall be made in cash (in
United States dollars) or a cash equivalent
acceptable to the Committee. If the Agreement so
provides, payment of all or a part of the Option
price for a non-statutory Option may be effected
by a "cashless exercise" thereof (i) by the
Eligible Director surrendering shares of Common
Stock to the Company, or (ii) by the Eligible
Director delivering to a broker instructions to
sell a sufficient number of the shares of Common
Stock being acquired upon exercise of the Option
to cover the Option price and any additional costs
and expenses associated with the cashless
exercise. If Common Stock is surrendered to pay
all or part of the Option price, the shares
surrendered must have a Fair Market Value
(determined as of the date of exercise of the
Option) that is not less than such Option price or
part thereof.
(f) Options shall become fully exercisable upon a
Change of Control.
7. Receipt of Fees in Stock.
(a) An Eligible Director may elect to receive up to
100 percent of his or her Fees in shares ofCommon
Stock (a "Stock Election"). A Stock Election must
be in writing and shall be delivered to the Corporate
Secretary of the Company prior to the Annual Meeting
for the Plan Year to which the Stock Election pertains.
Except as provided in Section 7(c), a Stock Election
may be revoked prior to the last day of any calendar
quarter for all calendar quarters beginning after the
revocation. A Stock Election must specify the
applicable percentage of the Fees that the Eligible
Director wishes to receive in shares of Common Stock
(the "Designated Percentage").
(b) If a Stock Election is made, the number of shares
of Common Stock to be issued in lieu of the Fees
shall be determined by multiplying the Designated
Percentage times the Fees at the time that such
Fees are earned and dividing that product by the
Fair Market Value of the Common Stock on the day on
which the Fees are earned. The portion of an
Eligible Director's Fees which is the Eligible
Director's retainer is earned as of the first day
of the quarter for which the retainer is paid. The
portion of an Eligible Director's Fees which are
the Eligible Director's meeting fees is earned as the
date on which the meeting for which the Eligible Director
is paid occurs. The number of shares of Common Stock
is to be issued in lieu of the Fees for each calendar
quarter shall be issued on the last day of such calendar
quarter to an Eligible Director. At the time the
shares of Common Stock are to be issued to the Eligible
Director, if the formula used to calculate the total number of
shares of Common Stock earned by the Eligible
Director (including, if applicable, any 30% increase
under Section 7(c)) results in a fractional share,
the number of shares of Common Stock issued to the
Eligible Director shall be rounded down to the next
whole share.
(c) If the Designated Percentage in a Stock Election is
100 percent, the number of shares of Common Stock
as determined under Section 7(b) shall be increased by 30
percent at each time that the Eligible Director's Fees
are earned and issued as provided under Section 7(b).
To receive the increased amount of Common Stock, the
Stock Election must be irrevocable in respect to the
Plan Year to which it pertains.
8. Withholding. In the case of the exercise of an Option,
the Eligible Director shall pay to the Company in cash the full
amount of all federal and state income and employment taxes
required to be withheld by the Company in respect of the taxable
income of the Eligible Director from such exercise. If the
Agreement so provides, payment of all or a part of such taxes may
be made by the Eligible Director surrendering shares of Common
Stock to the Company, provided the shares have a Fair Market
Value (determined as of the date of exercise of the Option) that
is not less than the amount of such taxes or part thereof, or by
the sale of shares of Common Stock upon the cashless exercise of
an Option through a broker.
9. Transferability. An Option shall not be transferable
by the optionee otherwise than by will, or by the laws of descent
and distribution, and shall be exercised during the lifetime of
the optionee only by him; provided that an Eligible Director may
transfer any Option to members of the Eligible Director's
immediate family or trusts or family partnerships for the benefit
of such persons, subject to such terms and conditions as may be
established by the Committee. Except as specifically provided in
the Agreement, no Option or interest therein may be transferred,
assigned, pledged or hypothecated by the optionee during his or
her lifetime, whether by operation of law or otherwise, or be
made subject to execution, attachment or similar process.
10. Administration. The Plan shall be administered by the
Committee. The Committee shall have all powers necessary to
administer the Plan, including, without limitation, the authority
(within the limitations described herein) to construe the Plan,
to determine all questions arising under the Plan, and to adopt
and amend rules and regulations for the administration of the
Plan as it may deem desirable. Any decision of the Committee in
the administration of the Plan shall be final and conclusive.
The Committee may act only by a majority of its members in
office, except that members thereof may authorize any one or more
of their number or any officer of the Company to execute and
deliver documents on behalf of the Committee. No member of the
Committee shall be liable for anything done or omitted to be done
by him or any other member of the Committee in connection with
the Plan, except for his or her own willful misconduct or as
expressly provided by statute.
11. Termination. The Plan shall terminate upon the earlier
of:
(a) the adoption of a resolution of the Board
terminating the Plan; or
(b) the date shares of Common Stock are no longer
available under the Plan for the automatic award
of Option shares; or
(c) The tenth anniversary of the Effective Date. No
termination of the Plan shall materially and
adversely affect any of the rights or obligations
of any Eligible Director under any Option
previously granted by the Plan without such
Eligible Director's consent.
12. Limitation of Rights
(a) Neither the Plan nor any other action taken
pursuant to the Plan, shall constitute or be
evidence of any agreement or understanding,
express or implied, that the Company will retain
any person as a director for any period of time.
(b) An optionee shall have no rights as a shareholder
with respect to shares of Common Stock covered by
his or her Options until the date of exercise of
the Option, and, except as provided in Section 13,
no adjustment will be made for dividends or other
rights for which the record date is prior to the
date of such exercise.
13. Changes in Capital Structure.
(a) Subject to any required action by the shareholders
of the Company, the number of shares of Common
Stock covered by each outstanding Option and the
price per share thereof shall be adjusted
proportionately for any increase or decrease in
the number of issued and outstanding shares of
Common Stock of the Company by reason of any stock
dividend, stock split, combination,
reclassification, recapitalization, or the general
issuance to holders of Common Stock of rights to
purchase Common Stock at substantially below its
then fair market value, or any change in the
number of shares of Common Stock outstanding
effected without receipt of cash, property, labor
or services by the Company, or any spin-off or
other type of distribution of assets to
shareholders. In the event of a change in the
Common Stock of the Company as presently
constituted, which is limited to a change of all
or part of its authorized shares without par value
into the same number of shares with a par value,
or any subsequent change into the same number of
shares with a different par value, the shares
resulting from any such change shall be deemed to
be the Common Stock within the meaning of the
Plan.
(b) Except as expressly provided above in this Section
6(e) or Section 13, an Eligible Director shall
have no rights by reason of any subdivision or
consolidation of shares of stock of any class or
the payment of any stock dividend or any other
increase or decrease in the number of shares of
stock of any class or by reason of any
dissolution, liquidation, merger, or consolidation
or spin-off of assets or stock of another
corporation. Any issue by the Company of shares
of stock of any class, or securities convertible
into shares of stock of any class, shall not
affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of
shares of Common Stock subject to any Option.
(c) The grant of an Option award pursuant to the Plan
shall not affect in any way the right or power of
the Company to make adjustments,
reclassifications, reorganizations or changes of
its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell,
or transfer all or any part of its business or
assets.
14. Amendment of the Plan. The Plan may be terminated or
amended at any time by the Board, effective as of any date
specified, except as required by applicable law. No amendment or
termination shall decrease an Eligible Director's accrued benefit
prior to the effective date of the amendment or termination.
15. Notice. All notices and other communications required
or permitted to be given under this Plan shall be in writing and
shall be deemed to have been duly given if delivered personally
or mailed first class, postage prepaid, as follows: (a) if to the
Company - at its principal business address to the attention of
the Treasurer; (b) if to any Participant - to the Participants'
address as reflected on the records of the Company.
16. Non-Assignability. Each Participant's rights under the
Plan shall be non-assignable.
17. Responsibility for Legal Effect. Neither the Committee
nor the Company makes any representations or warranties, express
or implied, or assumes any responsibility concerning the legal,
tax or other implications or effects of this Plan.
18. Successors, Acquisitions, Mergers, Consolidations. The
terms and conditions of the Plan shall inure to the benefit of
and bind the Company and the Participants, and their successors,
assigns and personal representatives.
19. Controlling Law. The Plan shall be construed in
accordance with the laws of the Commonwealth of Virginia to the
extent not preempted by laws of the United States of America.
20 Gender and Number. In the construction of the Plan, the
masculine shall include the feminine or neuter and the singular
shall include the plural and vice-versa in all cases where such
meanings would be appropriate.
21 Titles and Captions. Titles and captions and headings
herein have been inserted for convenience of reference only and
are to be ignored in any construction of the provisions hereof.
SALE AND QUITCLAIM AGREEMENT
Agreement dated as of January 1,1996, between HILB, ROGAL AND
HAMILTON COMPANY OF PITTSBURGH, INC., a corporation ("Purchaser"), and
HAROLD J. BIGLER ("Mr. Bigler"), CHANDLER G. KETCHUM ("Mr. Ketchum") and
RICHARD F. GALARDINI ("Mr. Galardini") (with Messrs. Bigler, Ketchum and
Galardini collectively being referred to herein as "Seller").
Recitals
1. Purchaser is the surviving corporation of a merger with Bigler-
Ketchum Group, Inc. ("B-K").
2. Seller, at the time of the merger, negotiated a special
incentive with respect to business that B-K had pursued but had not yet
written ("Chamber Business"), which is hereafter defined to mean all
business written by Purchaser in conjunction with the Chambers of
Commerce Service Corporation.
3. Purchaser, in order to consummate the merger with B-K, agreed
to compensate Seller if the Chamber Business were ultimately written by
Purchaser (the "Contingent Interest").
4. The Chamber Business was written by Purchaser (as the successor
to B-K) and continues to be written by Purchaser.
5. Purchaser desires to purchase the Contingent Interest so that
Seller shall have no claim or right to any of the Chamber Business or any
of Purchaser's business at all.
6. Each of Mr. Bigler, Mr. Ketchum, and Mr. Galardini is agreeable
to the terms expressed herein for his sale of the Contingent Interest and
quitclaim of any interest in Purchaser's business.
Agreements
1. Seller and Purchaser agree that, as of January 1, 1996
("Effective Date"), Purchaser owns the Contingent Interest and, except as
stated herein in paragraph 2, none of Mr. Bigler, Mr. Ketchum and Mr.
Galardini has any interest in any of Purchaser's business which each of
them hereby expressly quitclaim to Purchaser.
2. The purchase price for the Contingent Interest and the
quitclaim shall be determined based on the resulting amount of Chamber
Business, and the profitability to Purchaser thereon, to be realized
during the five calendar years 1996 through 2000. Attached hereto as
Exhibit 1 is Purchaser's calculation of profitability on the Chamber
Business for calendar year 1995. Gross revenues and Required Profit
Margin to Purchaser on the Chamber Business shall be calculated in a
similar manner for calendar years 1996 through 2000, except that payments
of the purchase price to Seller shall also be deducted (also on an
accrual basis). For purposes herein, Required Profit Margin shall mean
20%.
A. The purchase price to Mr. Galardini for the purchase of his
Contingent Interest and quitclaim is 10% of the Chamber Business to be
realized in each of the years 1996 through 2000, subject to a maximum
payment for any such year of $150,000 for $1,500,000 or more of Chamber
Business. Each such payment shall be due in full on or before February
15 after such year end, but shall be contingent upon Mr. Galardini
continuing to be the primary producer and servicer of Chamber Business
for each such year. Additionally, should Mr. Galardini remain in the
employ of Purchaser beyond 2000, and for each full calendar year he shall
do so through 2005 and continue to be the primary producer and servicer
of the Chamber Business, Mr. Galardini shall receive a bonus of 10% of
Chamber Business for such year, subject to a maximum payment for any such
year of $150,000 for $1,500,000 or more in Chamber Business.
B. With respect to Mr. Bigler and Mr. Ketchum, for each of
calendar years 1996 through 2000, the purchase price for his Contingent
Interest and quitclaim, to be paid in full on February 15 of each
following year, shall be one of the following amounts:
(i) If Chamber Business for such calendar year was $1,000,000
or less and the Required Profit Margin is not attained, each of Mr.
Bigler and Mr. Ketchum shall receive an amount equal to 10% of Chamber
Business, less his half of that amount of purchase price reduction
necessary to achieve the Required Profit Margin;
(ii) if Chamber Business for such calendar year was $1,000,000
or less and the Required Profit Margin is attained, each of Mr. Bigler
and Mr. Ketchum shall receive an amount equal to 10% of Chamber Business;
(iii) if Chamber Business for such calendar year exceeds
$1,000,000 but is less than or equal to $1,750,000, and the Required
Profit Margin is not attained, each of Mr. Bigler and Mr. Ketchum shall
receive $175,000 less his half of that amount of purchase price reduction
necessary to achieve the Required Profit Margin;
(iv) if Chamber Business for such calendar year exceeds
$1,000,000, but is less than or equal to $1,750,000, and the Required
Profit Margin is attained, each of Mr. Bigler and Mr. Ketchum shall
receive $175,000;
(v) if Chamber Business for such calendar year exceeds
$1,750,000, and the Required Profit Margin is not attained, each of Mr.
Bigler and Mr. Ketchum shall receive an amount equal to twelve percent
(12%) of Chamber Business for such year, less his half of the amount of
purchase price reduction necessary to achieve the Required Profit Margin;
or
(vi) if Chamber Business for such calendar year exceeds
$1,750,000 and the Required Profit Margin is attained, each of Mr. Bigler
and Mr. Ketchum shall receive an amount equal to twelve percent (12%) of
Chamber Business.
C. To the extent the foregoing formula should result for any year
in a chargeback to Mr. Bigler and Mr. Ketchum for failure to achieve the
Required Profit Margin, then such chargebacks may be recaptured in
subsequent years through December 31, 2000, at the time of the February
15 payment, to the extent the Required Profit Margin has been exceeded in
one or more subsequent years. Recapture of any such prior year amounts
shall be treated as reducing profits in the year just ended.
D. The foregoing purchase price calculation may be demonstrated by
the following example. For calendar years 1996 through 2000, suppose
that Chamber Business and Profit Margin, respectively are as follows:
Year Chamber Business Profit Margin
1996 $ 900,000 18%
1997 $ 1,200,000 19%
1998 $ 1,600,000 21%
1999 $ 1,800,000 18%
2000 $ 2,000,000 23%
It is noted that the Profit Margin calculation deducts purchase
price payments on an accrual basis (i.e. prior to final and full payment
on February 15 of the following year).
Based on the foregoing, for calendar years 1996 through 2000, the
purchase price payable to each of Messrs. Bigler, Ketchum and Galardini,
respectively, before offset or deduction, shall be as follows:
<TABLE>
<CAPTION>
Year Mr. Bigler Mr. Ketchum Mr. Galardini
<S> <C> <C> <C>
1996 $ 81,000 (90,000-9,000) $ 81,000 (90,000-9,000) $ 90,000
1997 $169,000 (175,000-6,000) $169,000 (175,000-6,000) $120,000
1998 $183,000 (175,000+8,000 recaptured) $183,000 (175,000+8,000 recaptured) $150,000
1999 $198,000 (216,000-18,000) $198,000 (216,000- 18,000) $150,000
2000 $265,000 (240,000+25,000 recaptured) $265,000 (240,000+25,000 recaptured) $150,000
</TABLE>
To the extent any sums shall be due Purchaser from Seller at the
time Purchaser is to pay any of the purchase price to Seller, Purchaser
shall have the right to offset such obligation against the payment due to
Seller.
E. Notwithstanding that final payment for any year is due on
February 15 of the following year, Purchaser has agreed as of April 30,
1996, to make semi-monthly payments equal to 90% of the estimated
payments of the purchase price due to each of Messrs. Galardini, Bigler
and Ketchum for each such year. Purchaser estimates that calendar year
1996 will produce $1,400,000 of Chamber Business and the Required Profit
Margin. Purchaser shall have the right to adjust these semi-monthly
payments quarterly to reflect actual results and amounts due. Within
twenty (20) days of the close of each quarter during the term of this
Agreement, Purchaser shall provide to each of Sellers true and correct
copies of all financial statements and reports as are prepared by and/or
for Purchaser pertaining to either the amount of Chamber Business or the
Required Profit Margin during the preceding quarter. All estimates and
adjustments by Purchaser shall be made in good faith and final payments
for each such year shall be reconciled and paid by February 15 of the
following year.
Additionally, although it has always been contemplated that
this Agreement takes effect as of January 1, 1996, each of Messrs.
Bigler, Ketchum and Galardini has been mistakenly paid an amount of
salary relating to the Chamber Business for the period January 1, 1996,
through April 15, 1996. In Mr. Bigler's case, such amount is $38,550; in
Mr. Ketchum's case, such amount is $38,550; and in Mr. Galardini's case,
such amount is $36,000. The parties agree that each such amount shall be
treated as a credit against the payment of the purchase price due him
based on calendar year 1996. Upon consummation of this Agreement,
Purchaser will make all payments necessary to bring current the sums due
to Seller (after the foregoing credits).
F. Notwithstanding anything in the foregoing to the contrary,
the fundamental expectations of the parties hereto could be drastically
altered if the Chambers of Commerce Service Corporation elects to
terminate the contract pursuant to which Chamber Business has been
written ("Contract") at any time prior to January 1, 2001. The Contract
provides that, upon termination, Purchaser shall be paid 2% of premiums
for Chamber Business written in the two years prior to such termination.
If the Contract is terminated prior to January 1, 2001, then upon
termination and continuing through the earlier of two years after
termination or December 31, 2000, the payment structure referenced in
paragraphs 2.A, 2.B and 2.C shall cease and Purchaser shall pay Seller,
collectively, half of such termination payments (one-third of such half
payments to each of Messrs. Bigler, Ketchum and Galardini).
Additionally, within 45 days after termination of the Contract, the prior
period year shall be calculated and paid, prorated by days in the year
completed as to target revenue and purchase price payment (but not as to
Required Profit Margin).
3. Seller and Purchaser covenant and agree, pursuant to Section
1060 of the Internal Revenue Code of 1986, as amended ("Code"), to
allocate and report all purchase price payments herein for the
acquisition of expiration data , except to the extent the Code may
require imputation of interest and recharacterization of some portion of
the payments herein as interest.
4. At the end of the five (5) year period referred to in paragraph
2 hereof, no further payments of any kind shall be made or due to Seller
for the sale of the Contingent Interest and quitclaim, and the Chamber
Business and all other business of Purchaser shall continue to belong to
Purchaser with no claims of any kind whatsoever being against such
business.
5. Seller agrees, during the term of this Agreement and for a
period of five (5) years thereafter, that Seller will not, directly or
indirectly, without the prior consent of Purchaser, on Seller's own
behalf or as a partner or an employee, officer, director or shareholder
of any corporation, association or other entity, solicit or accept
insurance or bond business from, or act as the insurance agent of, any of
the customers included within the Chamber Business, nor for the same
period will Seller encourage or aid anyone who is not an employee of
Purchaser in the solicitation of customers included within the Chamber
Business. Finally, for the same period, each of the Sellers covenants to
use his best efforts to ensure that the Contract remains in force, nor
will he encourage anyone that it be terminated.
6. Purchaser shall not be obligated to close this Agreement until
the lease for 1026 Fifth Avenue is terminated without any further
liability to Purchaser and Purchaser has executed a new for such space
for the period May 1, 1996, through April 30, 1997, at an annual rental
rate of $46,800 or upon such other circumstances reasonably satisfactory
to Purchaser that its liability under the lease has been extinguished.
Upon such occurrences, Purchaser shall cause certain shares of HRH stock
owned by Mr. Bigler and Mr. Ketchum, but held by Purchaser's parent
corporation pursuant to an escrow agreement, to be returned to them.
7. In the event of any disagreement, the Seller and the Buyer
shall each make a good faith attempt to reconcile the difference;
however, if they are unable to reconcile all differences within a period
of fourteen (14) days after notification to the Buyer of such
disagreement, then the Seller and the Buyer shall submit all questions in
dispute to one of the "Big Six" firms of certified public accountants
(other than Seller's Reviewer or the accounting firm normally employed by
Seller, HRH or Buyer, if applicable) located at Allegheny County,
Pennsylvania, as may be agreed upon by the Seller and the Buyer or, in
default of such agreement, as may be determined by the President at such
time of the American Institute of Certified Public Accountants, which
chosen accounting firm ("Umpire") shall, within a period of thirty (30)
days after submission, determine and report to the Seller and the Buyer
upon all questions in dispute, and the report of the Umpire shall be
final, conclusive and binding on the Seller and the Buyer. The fees
charged by the Umpire shall be equally divided among the Seller and the
Buyer.
The Profit Statements, as prepared by the Buyer or HRH, or, if
varied by agreement between the Seller and the Buyer or by the report of
the Umpire, then as so varied, shall be final, conclusive and binding on
the Seller and the Buyer.
8. This Agreement shall inure to the benefit of and be binding
upon and enforceable against the heirs and legal representatives of
Seller and the successors and assigns of Purchaser. In the event of the
death, disability or incapacity of any of the Sellers prior to January 1,
2001, any amounts due or to become due to said Seller pursuant to this
Agreement shall be paid as scheduled herein to his estate or grantor
trust. Except to his estate or a grantor trust owned by Seller, Seller
may not assign any of its rights or obligations hereunder without the
written consent of Purchaser.
IN WITNESS WHEREOF, the parties have executed this Agreement this
___ day of May, 1996.
SELLER:
MR. BIGLER
/s/ Harold S. Bigler
--------------------------------------
Harold S. Bigler
MR. KETCHUM
/s/ Chandler G. Ketchum
--------------------------------------
Chandler G. Ketchum
MR. GALARDINI
/s/ Richard F. Galardini
--------------------------------------
Richard F. Galardini
PURCHASER:
HILB, ROGAL AND HAMILTON COMPANY
OF PITTSBURGH, INC.
By: /s/
----------------------------------
Its:
----------------------------------
EXHIBIT 1
CHAMBER BUSINESS REVENUE AND PROFIT MARGIN
(Calculated as per agreement and per accounting guidelines attached as E
XHIBIT 2)
EXHIBIT 2
4.3 REVENUES
HRH's policy for recognizing revenue generally follows industry practice
as summarized below:
4.3.1 AGENCY BILLED COMMISSIONS
Agency Billed Commission Income (Account 401) together with the
applicable premiums due from customers and payable to insurancecompanies, are
recorded on the later of the billing date or effective date. Income should
never be recognized before the effective date of the policy. This practice
follows accepted insurance industry practice. However, at year-end; commission
income and receivables for policies with effective dates prior to December 31st
should be accrued where coverage is bound and the premium billed, as with a
binder. The related company payables and producer commissions should also be
recorded but it may be necessary to charge miscellaneous company/producer codes
and later re-enter them to the proper codes as a means of maintaining your
normal payables cycle. In no instance should the billing of a premium be
unreasonably delayed.
A. Regular Premiums - Generally, policies are billed at the
effective date. If the entire premium is billed, then the entire commission
income is recognized.
B. Installment Premiums - If the billing is on an installment
basis, the commissions earned are recorded as billed (normally, over the
policy year). (Audits are billed upon receipt of the audit).
C. Worker's Compensation Premiums - Worker's compensation
policies and other policies normally subject to audit at the end of the policy
year are recorded as billed (normally, over the policy year). Audits are
billed upon receipt of the audit.
D. Financed Premiums - In-house financing is discouraged
because it is usually not worth the related risk and additional record keeping
burdens. When in use, premiums financed in-house should be recorded in their
entirety at the effective date of the policy and set up as Notes Receivable-
Customers (Account 107).
4.3.2 DIRECT BILL, CONTINGENT AND LIFE INSURANCE COMMISSIONS
Direct Bill Commissions (Account 402), Contingent Commissions
(Account 415), and Life Product Commissions (Accounts 404, 405) are recorded
when received.
4.3.3 COMMISSION ADJUSTMENTS
Average Commission Adjustments (Account 403) such as commission
rate adjustments and policy cancellations are normally recorded when billed.
4.3.4 OTHER COMMISSIONS AND FEES
Miscellaneous Commission Income (Account 409) and Bonus
Commissions (Account 407) is recorded when received. Service Fee Income
(Account 408) is recorded when earned.
4.3.5 FINANCE CHARGES
Late Charge Income (Account 430) is required by HRH and should
be accumulated as part of Accounts Receivable Premiums (Account 105) on a
monthly basis when statements are sent to customers. Many states require
all customers to be treated equally. Therefore, finance charges should
be uniformly attached to all customer accounts over 30 days "past due".
4.3.6 INTEREST INCOME
Interest Income (Accounts 420, 421) should be recorded on the
accrual basis each month based on a best estimate of amounts receivable from
either the HRH cash management program or outside sources. The
accounting entry to record such an accrual would be:
112 Interest Receivable - HRH XXX
420 Interest Income - HRH Program XXX
4.3.7 OTHER INCOME
Dividend Income (Account 422), Rental Income (Account 432) and
Other Income (Account 433) should be recorded on the accrual basis and unpaid
amounts earned should be recorded at a minimum at year-end. The
accounting entry to record such an accrual (using rental income as an
example) would be:
109 Accounts Receivable - Other XXX
432 Rental Income XXX
When payment of any accrued revenue is received, the appropriate
receivable account should be credited.
Other income usually includes non-recurring, non-insurance related
items of revenue. Insurance related revenues should be categorized in a
different revenue account.
Exhibit 10.12
HILB, ROGAL AND HAMILTON COMPANY
Change of Control Employment Agreement With
_______________________
[CORPORATE EMPLOYEE]
<PAGE>
CHANGE OF CONTROL EMPLOYMENT AGREEMENT
AGREEMENT by and between Hilb, Rogal and Hamilton Company, a
Virginia corporation (the "Company"), and ___ (the "Executive"),
dated as of the 1st day of July, 1998.
The Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and
its shareholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is
imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to
encourage the Executive's full attention and dedication to the
Company currently and in the event of any threatened or pending
Change of Control, and to provide the Executive with compensation
and benefits arrangements upon a Change of Control which ensure
that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these
objectives, the Board has caused the Company to enter into this
Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) The "Effective Date" shall mean the first date
during the Change of Control Period (as defined in Section 1(b))
on which a Change of Control (as defined in Section 2) occurs.
Anything in this Agreement to the contrary notwithstanding, if a
Change of Control occurs and if the Executive's employment with
the Company is terminated prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the
request of a third party who has taken steps reasonably
calculated to effect a Change of Control or (ii) otherwise arose
in connection with or anticipation of a Change of Control, then
for all purposes of this Agreement the "Effective Date" shall
mean the date immediately prior to the date of such termination
of employment.
(b) The "Change of Control Period" shall mean the
period commencing on the date hereof and ending on the third
anniversary of the date hereof; provided, however, that
commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the
"Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless at least 60 days prior
to the Renewal Date the Company shall give notice to the
Executive that the Change of Control Period shall not be so
extended.
(c) "Subsidiary" shall mean any corporation that is
directly, or indirectly though one or more intermediaries,
controlled by the Company.
2. Change of Control. For the purpose of this Agreement,
a "Change of Control" shall be deemed to have taken place if:
(a) any individual, entity or "group" (within the
meaning of Sections 13(d)(3) or 14(d)(2) of the Exchange Act)
becomes the beneficial owner of shares of the Company having 25
percent or more of the total number of votes that may be cast for
the election of directors of the Company, other than (i) as a
result of any acquisition directly from the Company, or (ii) as a
result of any acquisition by any employee benefit plans (or
related trusts) sponsored or maintained by the Company or its
Subsidiaries; or
(b) there is a change in the composition of the Board
such that the individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
for purposes of this definition, that any individual who becomes
a member of the Board subsequent to the date hereof whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of
those individuals who are members of the Board and who were also
members of the Incumbent Board (or deemed to be such pursuant to
this proviso) shall be considered as though such individual were
a member of the Incumbent Board; but, provided further, that any
such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board shall not be so considered as a member of
the Incumbent Board; or
(c) if at any time, (i) the Company shall consolidate
with, or merge with, any other Person and the Company shall not
be the continuing or surviving corporation, (ii) any Person shall
consolidate with, or merge with, the Company, and the Company
shall be the continuing or surviving corporation and in
connection therewith, all or part of the outstanding Common Stock
shall be changed into or exchanged for stock or other securities
of any other Person or cash or any other property, (iii) the
Company shall be a party to a statutory share exchange with any
other Person after which the Company is a Subsidiary of any other
Person, or (iv) the Company shall sell or otherwise transfer 50%
or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons.
3. Employment Period; Guaranty. If the Executive is
employed by the Company and/or a Subsidiary on the Effective
Date, the Company hereby agrees to continue to employ and to
cause such Subsidiary to continue to employ the Executive, and
the Executive hereby agrees to remain in the employ of the
Company and/or such Subsidiary, subject to the terms and
conditions of this Agreement, for the period commencing on the
Effective Date and ending on the third anniversary of such date
(the "Employment Period"). For purposes of this Agreement,
unless expressly limited to Hilb, Rogal and Hamilton Company,
"Company" hereinafter shall mean each of Hilb, Rogal and Hamilton
Company and/or any of its Subsidiaries that employ the Executive.
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the
Executive's position (including status, offices, titles and
reporting requirements), authority, duties and responsibilities
shall be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at any
time during the 120-day period immediately preceding the
Effective Date and (B) the Executive's services shall be
performed at the location where the Executive was employed
immediately preceding the Effective Date or any office or
location less than 35 miles from such location.
(ii) During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and
time during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period
it shall not be a violation of this Agreement for the Executive
to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly
interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the
extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature
and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base
Salary"), which shall be paid at a monthly rate, at least equal
to twelve times the highest monthly base salary paid or payable,
including any base salary which has been earned but deferred, to
the Executive by the Company and its affiliated companies in
respect of the twelve-month period immediately preceding the
month in which the Effective Date occurs. During the Employment
Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive
prior to the Effective Date and thereafter at least annually.
Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any
such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As
used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common
control with the Company.
(ii) Annual Bonus. In addition to Annual Base
Salary, the Executive shall be awarded, for each fiscal year
ending during the Employment Period, an annual bonus (the "Annual
Bonus") in cash at least equal to the Executive's highest bonus
under annual incentive plans of the Company and its affiliated
companies or any comparable bonus under any predecessor or
successor plan, for the last three full fiscal years prior to the
Effective Date (annualized in the event that the Executive was
not employed by the Company for the whole of such fiscal year)
(the "Recent Annual Bonus"). Each such Annual Bonus shall be
paid no later than the end of the third month of the fiscal year
next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of
such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans.
During the Employment Period, the Executive shall be entitled to
participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to other
peer executives of the Company and its affiliated companies, but
in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case,
less favorable, in the aggregate, than the most favorable of
those provided by the Company and its affiliated companies for
the Executive under such plans, practices, policies and programs
as in effect at any time during the 120-day period immediately
preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case
may be, shall be eligible for participation in and shall receive
all benefits under welfare benefit plans, practices, policies and
programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company and
its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with
benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in
effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(v) Expenses. During the Employment Period the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the most favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the Executive
at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment
Period, the Executive shall be entitled to fringe benefits,
including, without limitation, tax and financial planning
services, payment of club dues, and, if applicable, use of an
automobile and payment of related expenses, in accordance with
the most favorable plans, practices, programs and policies of the
Company and its affiliated companies in effect for the Executive
at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the
Employment Period, the Executive shall be entitled to an office
or offices of a size and with furnishings and other appointments,
and to exclusive personal secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to
the Executive by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period,
the Executive shall be entitled to paid vacation in accordance
with the most favorable plans, policies, programs and practices
of the Company and its affiliated companies as in effect for the
Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its
affiliated companies.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment
shall terminate automatically upon the Executive's death during
the Employment Period. If the Company determines in good faith
that the Disability of the Executive has occurred during the
Employment Period (pursuant to the definition of Disability set
forth below), it may give to the Executive written notice in
accordance with Section 12(b) of this Agreement of its intention
to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective
on the 30th day after receipt of such notice by the Executive
(the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of
this Agreement, "Disability" shall mean that the Executive is
unable, by reason of physical or mental incapacity, to perform
his duties to the Company on a full-time basis for a period
longer than three (3) consecutive months or more than six (6)
months in any consecutive twelve (12)-month period. The existence
of a Disability shall be determined by the Board of Directors of
the Company, based upon due consideration of the opinion of the
Executive's personal physician or physicians and of the opinion
of any physician or physicians selected by the Board of Directors
for these purposes. If the Executive's personal physician
disagrees with the physician retained by the Company, the Board
of Directors will retain an impartial physician selected by the
Executive's personal physician and the Company's physician and
the opinion of the impartial physician shall be binding upon the
Company and the Executive. The Executive shall submit to
examination by any physician or physicians so selected by the
Board of Directors, and shall otherwise cooperate with the Board
of Directors in making the determination contemplated hereunder,
such cooperation to include, without limitation, consenting to
the release of information by any such physician(s) to the Board
of Directors.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties with
the Company or one of its affiliates (other than any such failure
resulting from incapacity due to physical or mental illness),
after a written demand for substantial performance is delivered
to the Executive by the Board or the Chief Executive Officer of
the Company which specifically identifies the manner in which the
Board or Chief Executive Officer believes that the Executive has
not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in
illegal conduct or gross misconduct which is materially and
demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the
part of the Executive, shall be considered "willful" unless it is
done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive's action or omission
was in the best interests of the Company. Any act, or failure to
act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief
Executive Officer or a senior officer of the Company or based
upon the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company. The
cessation of employment of the Executive shall not be deemed to
be for Cause unless and until there shall have been delivered to
the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Executive is guilty of the
conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason; Window Period. The Executive's
employment may be terminated (i) during the Employment Period by
the Executive for Good Reason or (ii) during the Window Period by
Executive without any reason. For purposes of this Agreement,
"Window Period" shall mean the 30-day period immediately
following the first anniversary of the Effective Date. For
purposes of this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section
4(a) of this Agreement, or any other action by the Company which
results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company to comply with any
of the provisions of Section 4(b) of this Agreement, other than
an isolated, insubstantial and inadvertent failure not occurring
in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to
be based at any office or location other than as provided in
Section 4(a)(i)(B) hereof or the Company's requiring the
Executive to travel on Company business to a substantially
greater extent than required immediately prior to the Effective
Date;
(iv) any purported termination by the Company of
the Executive's employment otherwise than as expressly permitted
by this Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination
of "Good Reason" made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive during the Window Period
or for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with
Section 12(b) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement
relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide
a basis for termination of the Executive's employment under the
provision so indicated and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than
thirty days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the
Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting such fact
or circumstance in enforcing the Executive's or the Company's
rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive during the Window Period or for
Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the
Executive's employment is terminated by the Company other than
for Cause or Disability, the Date of Termination shall be the
date on which the Company notifies the Executive of such
termination and (iii) if the Executive's employment is terminated
by reason of death or Disability, the Date of Termination shall
be the date of death of the Executive or the Disability Effective
Date, as the case may be.
6. Obligations of the Company upon Termination.
(a) During the Window Period. If, during the
Employment Period, the Executive shall terminate employment
without any reason during the Window Period:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of Termination the
sum of (1) the Executive's Annual Base Salary through the Date of
Termination to the extent not theretofore paid and (2) the
product of (x) the higher of (I) the Recent Annual Bonus and (II)
the Annual Bonus paid or payable, including any bonus or portion
thereof which has been earned but deferred (and annualized for
any fiscal year consisting of less than twelve full months or
during which the Executive was employed for less than twelve full
months), for the most recently completed fiscal year during the
Employment Period, if any (such higher amount being referred to
as the "Highest Annual Bonus") and (y) a fraction, the numerator
of which is the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is 365, in
each case to the extent not theretofore paid (the sum of the
amounts described in clauses (1) and (2) shall be hereinafter
referred to as the "Accrued Obligations"); and
(ii) the amount equal to the sum of (x) the
Executive's Annual Base Salary and (y) the Highest Annual Bonus;
and
(iii) for three years after the Executive's
Date of Termination, or such longer period as may be provided by
the terms of the appropriate plan, program, practice or policy,
the Company shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been
provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b)(iv) of this
Agreement if the Executive's employment had not been terminated
or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the
Company and its affiliated companies and their families,
provided, however, that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other
welfare benefits under another employer provided plan, the
medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining
eligibility (but not the time of commencement of benefits) of the
Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have
remained employed until three years after the Date of Termination
and to have retired on the last day of such period; and
(iv) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive under any
plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies (such other amounts and
benefits shall be hereinafter referred to as the "Other
Benefits").
(b) Good Reason; Other Than for Cause, Death or
Disability. If, during the Employment Period, the Company shall
terminate the Executive's employment other than for Cause, Death
or Disability or the Executive shall terminate employment for
Good Reason:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of Termination the
aggregate of the following amounts:
A. the Accrued Obligations; and
B. the amount equal to the product of (1)
three and (2) the sum of (x) the Executive's Annual Base Salary
and (y) the Highest Annual Bonus; and
C. an amount equal to the excess of (a) the
actuarial equivalent of the benefit under the qualified defined
benefit retirement plan of the Company or any of its affiliated
companies (the "Retirement Plan") (utilizing actuarial
assumptions no less favorable to the Executive than those in
effect under the Retirement Plan immediately prior to the
Effective Date), and any excess or supplemental retirement plan
of the Company or any of its affiliated companies in which the
Executive participates (together, the "BRP") which the Executive
would receive if the Executive's employment continued for three
years after the Date of Termination assuming for this purpose
that all accrued benefits are fully vested, and, assuming that
the Executive's compensation in each of the three years is that
required by Section 4(b)(i) and Section 4(b)(ii), over (b) the
actuarial equivalent of the Executive's actual benefit (paid or
payable), if any, under the Retirement Plan and the BRP as of the
Date of Termination;
(ii) for three years after the Executive's Date of
Termination, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy, the
Company shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been
provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b)(iv) of this
Agreement if the Executive's employment had not been terminated
or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the
Company and its affiliated companies and their families,
provided, however, that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other
welfare benefits under another employer provided plan, the
medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining
eligibility (but not the time of commencement of benefits) of the
Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have
remained employed until three years after the Date of Termination
and to have retired on the last day of such period;
(iii) the Company shall, at its sole expense
as incurred, provide the Executive with outplacement services the
scope and provider of which shall be selected by the Executive in
his sole discretion; and
(iv) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive under any
plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies (such other amounts and
benefits shall be hereinafter referred to as the "Other
Benefits").
(c) Death. If the Executive's employment is
terminated by reason of the Executive's death during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days
of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this
Section 6(c) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits
provided by the Company and affiliated companies to the estates
and beneficiaries of peer executives of the Company and such
affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with
respect to other peer executives and their beneficiaries at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate
and/or the Executive's beneficiaries, as in effect on the date of
the Executive's death with respect to other peer executives of
the Company and its affiliated companies and their beneficiaries.
(d) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other
Benefits as utilized in this Section 6(d) shall include, and the
Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its
affiliated companies to disabled executives and/or their families
in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with
respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and its
affiliated companies and their families.
(e) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to
the Executive (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously
deferred by the Executive, and (z) Other Benefits, in each case
to the extent theretofore unpaid. If the Executive voluntarily
terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for
Accrued Obligations and the timely payment or provision of Other
Benefits. In such case, all Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided
by the Company or any of its affiliated companies and for which
the Executive may qualify, nor, subject to Section 12(f), shall
anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Amounts which are
vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of its affiliated
companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program
or contract or agreement except as explicitly modified by this
Agreement.
8. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform
its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Executive or others. In
no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of
this Agreement and such amounts shall not be reduced whether or
not the Executive obtains other employment. The Company agrees
to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur
as a result of any contest (regardless of the outcome thereof) by
the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest
on any delayed payment at the applicable Federal rate provided
for in Section 7872(f)(2)(A) of the Internal Revenue Code of
1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the event it
shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive (whether paid or
payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 9) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties are incurred by the Executive
with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment")
in an amount such that after payment by the Executive of all
taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect thereto) and
Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 9(a), if it shall be determined that
the Executive is entitled to a Gross-Up Payment, but that the
Payments do not exceed 110% of the greatest amount that could be
paid to the Executive such that the receipt of Payments would not
give rise to any Excise Tax (the "Reduced Amount"), then no Gross-
Up Payment shall be made to the Executive and the Payments, in
the aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by a
nationally recognized certified public accounting firm as may be
designated by the Executive (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and
the Executive within 15 business days of the receipt of notice
from the Executive that there has been a Payment, or such earlier
time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the
Executive shall appoint another nationally recognized accounting
firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm
hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 9, shall be paid by the
Company to the Executive within five days of the receipt of the
Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have
been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 9(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly
paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten business days after the Executive is informed in
writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it
gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior
to the expiration of such period that it desires to contest such
claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably request in
writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith
in order effectively to contest such claim, and
(iv) permit the Company to participate in any pro
ceedings relating to such claim; provided, however, that the
Company shall bear and pay directly all costs and expenses
(including additional interest and penalties),incurred in
connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment
of costs and expenses. Without limitation on the foregoing
provisions of this Section 9(c), the Company shall control all
proceedings taken in connection with such contest and, at its
sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company
shall determine; provided, however, that if the Company directs
the Executive to pay such claim and sue for a refund, the Company
shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income
tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder
and the Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 9(c), the
Executive becomes entitled to receive any refund with respect to
such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Restrictive Covenants.
(a) Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any
of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it.
(b) Nonraiding of Employees. The Executive covenants
that during his employment hereunder and for a period of two (2)
years immediately following the date of termination of
Executive's employment, but only if said termination is voluntary
or for 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 the Executive's employment,
are employees of the Company or its affiliates, nor will he
directly or indirectly solicit, induce or encourage any of the
Company's or its affiliates' employees to seek employment with
any other business, whether or not the Executive is then
affiliated with such business.
In no event shall an asserted violation of the
provisions of this Section 10 constitute a basis for deferring or
withholding any amounts otherwise payable to the Executive under
this Agreement.
11. Successors.
(a) This Agreement is personal to the Executive
and without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of
descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia
without reference to principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
If to the Company:
Hilb, Rogal and Hamilton Company
4235 Innslake Drive
Glen Allen, Virginia 23060
Attention: Chief Executive Officer
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any pro
vision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or
the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to
Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be
a waiver of such provision or right or any other provision or
right of this Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written
agreement between the Executive and the Company, the employment
of the Executive by the Company is "at will" and, subject to
Section 1(a) hereof, prior to the Effective Date, the Executive's
employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date,
in which case the Executive shall have no further rights under
this Agreement. From and after the Effective Date, this
Agreement shall become effective, and shall replace and supercede
any existing Employment Agreement between the Company and the
Executive, to the extent its terms are more advantageous to the
Executive, except that any covenants contained in any prior
agreement between Executive and the Company restricting
Executive's ability to compete with or to solicit the employees,
clients or customers of the Company, or to use or disclose any
Confidential Information (as that term is defined in any such
agreement), shall remain in full force and effect.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
HILB, ROGAL AND HAMILTON COMPANY
By:
_____________________________________
Title:
_____________________________________
__________________________________________
[Name of Executive]
Exhibit 10.13
HILB, ROGAL AND HAMILTON COMPANY
Change of Control Employment Agreement With
_
[FIELD EMPLOYEE]
<PAGE>
CHANGE OF CONTROL EMPLOYMENT AGREEMENT
AGREEMENT by and between Hilb, Rogal and Hamilton Company, a
Virginia corporation (the "Company"), and __ (the "Executive"),
dated as of the 1st day of July, 1998.
The Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and
its shareholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is
imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to
encourage the Executive's full attention and dedication to the
Company currently and in the event of any threatened or pending
Change of Control, and to provide the Executive with compensation
and benefits arrangements upon a Change of Control which ensure
that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these
objectives, the Board has caused the Company to enter into this
Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) The "Effective Date" shall mean the first date
during the Change of Control Period (as defined in Section 1(b))
on which a Change of Control (as defined in Section 2) occurs.
Anything in this Agreement to the contrary notwithstanding, if a
Change of Control occurs and if the Executive's employment with
the Company is terminated prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the
request of a third party who has taken steps reasonably
calculated to effect a Change of Control or (ii) otherwise arose
in connection with or anticipation of a Change of Control, then
for all purposes of this Agreement the "Effective Date" shall
mean the date immediately prior to the date of such termination
of employment.
(b) The "Change of Control Period" shall mean the
period commencing on the date hereof and ending on the third
anniversary of the date hereof; provided, however, that
commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the
"Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless at least 60 days prior
to the Renewal Date the Company shall give notice to the
Executive that the Change of Control Period shall not be so
extended.
(c) "Subsidiary" shall mean any corporation that is
directly, or indirectly though one or more intermediaries,
controlled by the Company.
2. Change of Control. For the purpose of this Agreement,
a "Change of Control" shall be deemed to have taken place if:
(a) any individual, entity or "group" (within the
meaning of Sections 13(d)(3) or 14(d)(2) of the Exchange Act)
becomes the beneficial owner of shares of the Company having 25
percent or more of the total number of votes that may be cast for
the election of directors of the Company, other than (i) as a
result of any acquisition directly from the Company, or (ii) as a
result of any acquisition by any employee benefit plans (or
related trusts) sponsored or maintained by the Company or its
Subsidiaries; or
(b) there is a change in the composition of the Board
such that the individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
for purposes of this definition, that any individual who becomes
a member of the Board subsequent to the date hereof whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of
those individuals who are members of the Board and who were also
members of the Incumbent Board (or deemed to be such pursuant to
this proviso) shall be considered as though such individual were
a member of the Incumbent Board; but, provided further, that any
such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board shall not be so considered as a member of
the Incumbent Board; or
(c) if at any time, (i) the Company shall consolidate
with, or merge with, any other Person and the Company shall not
be the continuing or surviving corporation, (ii) any Person shall
consolidate with, or merge with, the Company, and the Company
shall be the continuing or surviving corporation and in
connection therewith, all or part of the outstanding Common Stock
shall be changed into or exchanged for stock or other securities
of any other Person or cash or any other property, (iii) the
Company shall be a party to a statutory share exchange with any
other Person after which the Company is a Subsidiary of any other
Person, or (iv) the Company shall sell or otherwise transfer 50%
or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons.
3. Employment Period; Guaranty. If the Executive is
employed by the Company and/or a Subsidiary on the Effective
Date, the Company hereby agrees to continue to employ and to
cause such Subsidiary to continue to employ the Executive, and
the Executive hereby agrees to remain in the employ of the
Company and/or such Subsidiary, subject to the terms and
conditions of this Agreement, for the period commencing on the
Effective Date and ending on the third anniversary of such date
(the "Employment Period"). For purposes of this Agreement,
unless expressly limited to Hilb, Rogal and Hamilton Company,
"Company" hereinafter shall mean each of Hilb, Rogal and Hamilton
Company and/or any of its Subsidiaries that employ the Executive.
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the
Executive's position (including status, offices, titles and
reporting requirements), authority, duties and responsibilities
shall be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at any
time during the 120-day period immediately preceding the
Effective Date and (B) the Executive's services shall be
performed at the location where the Executive was employed
immediately preceding the Effective Date or any office or
location less than 35 miles from such location.
(ii) During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and
time during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period
it shall not be a violation of this Agreement for the Executive
to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly
interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the
extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature
and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base
Salary"), which shall be paid at a monthly rate, at least equal
to twelve times the highest monthly base salary paid or payable,
including any base salary which has been earned but deferred, to
the Executive by the Company and its affiliated companies in
respect of the twelve-month period immediately preceding the
month in which the Effective Date occurs. During the Employment
Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive
prior to the Effective Date and thereafter at least annually.
Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any
such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As
used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common
control with the Company.
(ii) Annual Bonus. In addition to Annual Base
Salary, the Executive shall be awarded, for each fiscal year
ending during the Employment Period, an annual bonus (the "Annual
Bonus") in cash at least equal to the Executive's highest bonus
under annual incentive plans of the Company and its affiliated
companies or any comparable bonus under any predecessor or
successor plan, for the last three full fiscal years prior to the
Effective Date (annualized in the event that the Executive was
not employed by the Company for the whole of such fiscal year)
(the "Recent Annual Bonus"). Each such Annual Bonus shall be
paid no later than the end of the third month of the fiscal year
next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of
such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans.
During the Employment Period, the Executive shall be entitled to
participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to other
peer executives of the Company and its affiliated companies, but
in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case,
less favorable, in the aggregate, than the most favorable of
those provided by the Company and its affiliated companies for
the Executive under such plans, practices, policies and programs
as in effect at any time during the 120-day period immediately
preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case
may be, shall be eligible for participation in and shall receive
all benefits under welfare benefit plans, practices, policies and
programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company and
its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with
benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in
effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(v) Expenses. During the Employment Period the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the most favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the Executive
at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment
Period, the Executive shall be entitled to fringe benefits,
including, without limitation, tax and financial planning
services, payment of club dues, and, if applicable, use of an
automobile and payment of related expenses, in accordance with
the most favorable plans, practices, programs and policies of the
Company and its affiliated companies in effect for the Executive
at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the
Employment Period, the Executive shall be entitled to an office
or offices of a size and with furnishings and other appointments,
and to exclusive personal secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to
the Executive by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period,
the Executive shall be entitled to paid vacation in accordance
with the most favorable plans, policies, programs and practices
of the Company and its affiliated companies as in effect for the
Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its
affiliated companies.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment
shall terminate automatically upon the Executive's death during
the Employment Period. If the Company determines in good faith
that the Disability of the Executive has occurred during the
Employment Period (pursuant to the definition of Disability set
forth below), it may give to the Executive written notice in
accordance with Section 12(b) of this Agreement of its intention
to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective
on the 30th day after receipt of such notice by the Executive
(the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of
this Agreement, "Disability" shall mean that the Executive is
unable, by reason of physical or mental incapacity, to perform
his duties to the Company on a full-time basis for a period
longer than three (3) consecutive months or more than six (6)
months in any consecutive twelve (12)-month period. The existence
of a Disability shall be determined by the Board of Directors of
the Company, based upon due consideration of the opinion of the
Executive's personal physician or physicians and of the opinion
of any physician or physicians selected by the Board of Directors
for these purposes. If the Executive's personal physician
disagrees with the physician retained by the Company, the Board
of Directors will retain an impartial physician selected by the
Executive's personal physician and the Company's physician and
the opinion of the impartial physician shall be binding upon the
Company and the Executive. The Executive shall submit to
examination by any physician or physicians so selected by the
Board of Directors, and shall otherwise cooperate with the Board
of Directors in making the determination contemplated hereunder,
such cooperation to include, without limitation, consenting to
the release of information by any such physician(s) to the Board
of Directors.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties with
the Company or one of its affiliates (other than any such failure
resulting from incapacity due to physical or mental illness),
after a written demand for substantial performance is delivered
to the Executive by the Board or the Chief Executive Officer of
the Company which specifically identifies the manner in which the
Board or Chief Executive Officer believes that the Executive has
not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in
illegal conduct or gross misconduct which is materially and
demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the
part of the Executive, shall be considered "willful" unless it is
done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive's action or omission
was in the best interests of the Company. Any act, or failure to
act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief
Executive Officer or a senior officer of the Company or based
upon the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company. The
cessation of employment of the Executive shall not be deemed to
be for Cause unless and until there shall have been delivered to
the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Executive is guilty of the
conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason; Window Period. The Executive's
employment may be terminated (i) during the Employment Period by
the Executive for Good Reason or (ii) during the Window Period by
Executive without any reason. For purposes of this Agreement,
"Window Period" shall mean the 30-day period immediately
following the first anniversary of the Effective Date. For
purposes of this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section
4(a) of this Agreement, or any other action by the Company which
results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company to comply with any
of the provisions of Section 4(b) of this Agreement, other than
an isolated, insubstantial and inadvertent failure not occurring
in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to
be based at any office or location other than as provided in
Section 4(a)(i)(B) hereof or the Company's requiring the
Executive to travel on Company business to a substantially
greater extent than required immediately prior to the Effective
Date;
(iv) any purported termination by the Company of
the Executive's employment otherwise than as expressly permitted
by this Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination
of "Good Reason" made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive during the Window Period
or for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with
Section 12(b) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement
relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide
a basis for termination of the Executive's employment under the
provision so indicated and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than
thirty days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the
Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting such fact
or circumstance in enforcing the Executive's or the Company's
rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive during the Window Period or for
Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the
Executive's employment is terminated by the Company other than
for Cause or Disability, the Date of Termination shall be the
date on which the Company notifies the Executive of such
termination and (iii) if the Executive's employment is terminated
by reason of death or Disability, the Date of Termination shall
be the date of death of the Executive or the Disability Effective
Date, as the case may be.
6. Obligations of the Company upon Termination.
(a) During the Window Period. If, during the
Employment Period, the Executive shall terminate employment
without any reason during the Window Period:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of Termination the
sum of (1) the Executive's Annual Base Salary through the Date of
Termination to the extent not theretofore paid and (2) the
product of (x) the higher of (I) the Recent Annual Bonus and (II)
the Annual Bonus paid or payable, including any bonus or portion
thereof which has been earned but deferred (and annualized for
any fiscal year consisting of less than twelve full months or
during which the Executive was employed for less than twelve full
months), for the most recently completed fiscal year during the
Employment Period, if any (such higher amount being referred to
as the "Highest Annual Bonus") and (y) a fraction, the numerator
of which is the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is 365, in
each case to the extent not theretofore paid (the sum of the
amounts described in clauses (1) and (2) shall be hereinafter
referred to as the "Accrued Obligations"); and
(ii) the amount equal to the product of (1) one-
half and (2) the sum of (x) the Executive's Annual Base Salary
and (y) the Highest Annual Bonus; and
(iii) for three years after the Executive's
Date of Termination, or such longer period as may be provided by
the terms of the appropriate plan, program, practice or policy,
the Company shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been
provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b)(iv) of this
Agreement if the Executive's employment had not been terminated
or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the
Company and its affiliated companies and their families,
provided, however, that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other
welfare benefits under another employer provided plan, the
medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining
eligibility (but not the time of commencement of benefits) of the
Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have
remained employed until three years after the Date of Termination
and to have retired on the last day of such period; and
(iv) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive under any
plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies (such other amounts and
benefits shall be hereinafter referred to as the "Other
Benefits").
(b) Good Reason; Other Than for Cause, Death or
Disability. If, during the Employment Period, the Company shall
terminate the Executive's employment other than for Cause, Death
or Disability or the Executive shall terminate employment for
Good Reason:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of Termination the
aggregate of the following amounts:
A. the Accrued Obligations; and
B. the amount equal to the product of (1)
two and (2) the sum of (x) the Executive's Annual Base Salary and
(y) the Highest Annual Bonus; and
C. an amount equal to the excess of (a) the
actuarial equivalent of the benefit under the qualified defined
benefit retirement plan of the Company or any of its affiliated
companies (the "Retirement Plan") (utilizing actuarial
assumptions no less favorable to the Executive than those in
effect under the Retirement Plan immediately prior to the
Effective Date), and any excess or supplemental retirement plan
of the Company or any of its affiliated companies in which the
Executive participates (together, the "BRP") which the Executive
would receive if the Executive's employment continued for three
years after the Date of Termination assuming for this purpose
that all accrued benefits are fully vested, and, assuming that
the Executive's compensation in each of the three years is that
required by Section 4(b)(i) and Section 4(b)(ii), over (b) the
actuarial equivalent of the Executive's actual benefit (paid or
payable), if any, under the Retirement Plan and the BRP as of the
Date of Termination;
(ii) for three years after the Executive's Date of
Termination, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy, the
Company shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been
provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b)(iv) of this
Agreement if the Executive's employment had not been terminated
or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the
Company and its affiliated companies and their families,
provided, however, that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other
welfare benefits under another employer provided plan, the
medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining
eligibility (but not the time of commencement of benefits) of the
Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have
remained employed until three years after the Date of Termination
and to have retired on the last day of such period;
(iii) the Company shall, at its sole expense
as incurred, provide the Executive with outplacement services the
scope and provider of which shall be selected by the Executive in
his sole discretion; and
(iv) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive under any
plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies (such other amounts and
benefits shall be hereinafter referred to as the "Other
Benefits").
(c) Death. If the Executive's employment is
terminated by reason of the Executive's death during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days
of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this
Section 6(c) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits
provided by the Company and affiliated companies to the estates
and beneficiaries of peer executives of the Company and such
affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with
respect to other peer executives and their beneficiaries at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate
and/or the Executive's beneficiaries, as in effect on the date of
the Executive's death with respect to other peer executives of
the Company and its affiliated companies and their beneficiaries.
(d) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other
Benefits as utilized in this Section 6(d) shall include, and the
Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its
affiliated companies to disabled executives and/or their families
in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with
respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and its
affiliated companies and their families.
(e) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to
the Executive (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously
deferred by the Executive, and (z) Other Benefits, in each case
to the extent theretofore unpaid. If the Executive voluntarily
terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for
Accrued Obligations and the timely payment or provision of Other
Benefits. In such case, all Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided
by the Company or any of its affiliated companies and for which
the Executive may qualify, nor, subject to Section 12(f), shall
anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Amounts which are
vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of its affiliated
companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program
or contract or agreement except as explicitly modified by this
Agreement.
8. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform
its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Executive or others. In
no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of
this Agreement and such amounts shall not be reduced whether or
not the Executive obtains other employment. The Company agrees
to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur
as a result of any contest (regardless of the outcome thereof) by
the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest
on any delayed payment at the applicable Federal rate provided
for in Section 7872(f)(2)(A) of the Internal Revenue Code of
1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the event it
shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive (whether paid or
payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 9) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties are incurred by the Executive
with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment")
in an amount such that after payment by the Executive of all
taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect thereto) and
Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 9(a), if it shall be determined that
the Executive is entitled to a Gross-Up Payment, but that the
Payments do not exceed 110% of the greatest amount that could be
paid to the Executive such that the receipt of Payments would not
give rise to any Excise Tax (the "Reduced Amount"), then no Gross-
Up Payment shall be made to the Executive and the Payments, in
the aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by a
nationally recognized certified public accounting firm as may be
designated by the Executive (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and
the Executive within 15 business days of the receipt of notice
from the Executive that there has been a Payment, or such earlier
time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the
Executive shall appoint another nationally recognized accounting
firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm
hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 9, shall be paid by the
Company to the Executive within five days of the receipt of the
Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have
been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 9(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly
paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten business days after the Executive is informed in
writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it
gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior
to the expiration of such period that it desires to contest such
claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably request in
writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith
in order effectively to contest such claim, and
(iv) permit the Company to participate in any pro
ceedings relating to such claim; provided, however, that the
Company shall bear and pay directly all costs and expenses
(including additional interest and penalties),incurred in
connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment
of costs and expenses. Without limitation on the foregoing
provisions of this Section 9(c), the Company shall control all
proceedings taken in connection with such contest and, at its
sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company
shall determine; provided, however, that if the Company directs
the Executive to pay such claim and sue for a refund, the Company
shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income
tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder
and the Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 9(c), the
Executive becomes entitled to receive any refund with respect to
such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Restrictive Covenants.
(a) Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any
of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it.
(b) Nonraiding of Employees. The Executive covenants
that during his employment hereunder and for a period of two (2)
years immediately following the date of termination of
Executive's employment, but only if said termination is voluntary
or for 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 the Executive's employment,
are employees of the Company or its affiliates, nor will he
directly or indirectly solicit, induce or encourage any of the
Company's or its affiliates' employees to seek employment with
any other business, whether or not the Executive is then
affiliated with such business.
In no event shall an asserted violation of the provisions of this
Section 10 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
11. Successors.
(a) This Agreement is personal to the Executive
and without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of
descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia
without reference to principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
If to the Company:
Hilb, Rogal and Hamilton Company
4235 Innslake Drive
Glen Allen, Virginia 23060
Attention: Chief Executive Officer
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any pro
vision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or
the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to
Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be
a waiver of such provision or right or any other provision or
right of this Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written
agreement between the Executive and the Company, the employment
of the Executive by the Company is "at will" and, subject to
Section 1(a) hereof, prior to the Effective Date, the Executive's
employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date,
in which case the Executive shall have no further rights under
this Agreement. From and after the Effective Date, this
Agreement shall become effective, and shall replace and supercede
any existing Employment Agreement between the Company and the
Executive, to the extent its terms are more advantageous to the
Executive, except that any covenants contained in any prior
agreement between Executive and the Company restricting
Executive's ability to compete with or to solicit the employees,
clients or customers of the Company, or to use or disclose any
Confidential Information (as that term is defined in any such
agreement), shall remain in full force and effect.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
HILB, ROGAL AND HAMILTON COMPANY
By:
_____________________________________
Title:
_____________________________________
[NAME OF SUBSIDIARY]
By:
_____________________________________
Title:
_____________________________________
_________________________________________
Exhibit 10.14
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated June 3, 1986, is made between HILB,
ROGAL AND HAMILTON COMPANY OF PITTSBURGH, INC., a Pennsylvania
corporation ("Employer"), and JOHN P. MCGRATH ("Employee")
residing at 350 Queenswood Drive, Zelienople, Pennsylvania 16063.
In consideration of 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. Employer agrees to employ Employee as ACCOUNT EXECUTIVE
for a term of one (1) year and to pay Employee such compensation
as is mutually agreed upon; provided, however, that during such
term either party may terminate this Agreement, with or without
cause, by giving thirty (30) days written notice to the other of
its intent to do so. Unless this agreement has been previously
terminated or unless either party gives thirty (30) days written
notice to the other to the contrary, this Agreement shall renew
upon the same terms and conditions for like one (1) year terms
upon the expiration of the initial term and each succeeding
renewal term. Employee's compensation shall be reviewed by
Employer not less frequently than annually during the term of
this Agreement and any renewals or extensions thereof, and shall
be full compensation for all services performed by Employee under
this Agreement.
2. 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 interest of
the Employer and the related business interests of Hilb, Rogal
and Hamilton Company ("HRH") 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. (HRH and its
subsidiary corporations, including Employer, are herein referred
to as the "HRH Companies").
3. All business, including insurance, bond, risk
management, self-insurance and other services (collectively, the
"HRH Business"), transacted through the efforts of Employee 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 fees 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 assured or purchaser by Employer or one of the other HRH
Companies. All checks or bank drafts received by Employee from
any assured or purchaser shall be made payable to such company
and all amounts collected by Employee shall be promptly turned
over to Employer.
4. Employee acknowledges that, in the course of his
employment hereunder, he will become acquainted and entrusted
with certain confidential information and trade secrets of
Employer and the HRH Companies, concerning customers of the HRH
Companies ("HRH Customers") and sources with which insurance is
placed, which confidential information includes, but is not
limited to, financial data and marketing programs for the HRH
Companies, policy expiration dates, policy terms, conditions and
rates, customers' risk characteristics, and information
concerning the insurance market for large or unusual commercial
risks. Employee agrees that he will safeguard all such
confidential information from exposure to or appropriation by
unauthorized persons and that he will not, without the prior
written consent of Employer or other applicable HRH Company
during the term of this Agreement or any time thereafter, divulge
or make any use of such confidential information except as may be
required in the course of his employment hereunder. Upon
termination of his employment, Employee promises to deliver to
Employer all materials, including personal notes and
reproductions relating to the Employer and HRH Companies and to
the HRH Business, which are in his possession or control.
Employee agrees that compensation and benefits otherwise owing to
him may be withheld for failure to comply with the terms of this
paragraph.
5. In the event of any termination of Employee's
employment hereunder whether by Employer or by Employee, Employee
agrees that for a period of three years following such
termination he will not, without the prior written consent of
Employer or HRH, directly or indirectly, solicit or accept
insurance or bond business from, or perform any of the services
included within the HRH Business, for any HRH Customer with whom
he or any HRH Company office in which he has worked has had
business relations.
6. If, during the period of three years following the
termination of employment hereunder, any commission or fee
becomes payable to Employee or to any person, firm or corporation
by whom Employee is then employed, as a result of a violation by
Employee of the provisions of paragraphs 4 or 5 of this
Agreement, Employee agrees to promptly pay to Employer an amount
equal to 75% of such commission or fee. In addition, the parties
agree that in the event of a breach by Employee of the terms of
paragraphs 4 and/or 5 monetary damages alone will not be
sufficient to protect the interest of Employer and the HRH
Companies and, as a result, that Employer and the HRH Companies
shall be entitled to injunctive relief against Employee to
prevent the breach of any such provision hereunder. It is
further agreed that the foregoing remedies shall be cumulative
and not exclusive, and shall be in addition to any other remedies
available to Employer and the HRH Companies at law or in equity.
7. In the event that on the date of this Agreement
Employee is employed under the terms of a prior separate
employment agreement with Employer or any other of the HRH
Companies ("prior employment agreement"), such prior employment
agreement shall not be terminated by the executive of this
Agreement. Rather the two Agreements shall be read as
constituting one employment agreement; provided, however, that in
the event of conflicts in the interpretation of the two
Agreements, the terms of this Agreement will determine the
resolution of said conflict of interpretation.
8. If any provision of this Agreement or any part of any
provisions of this Agreement is determined to be unenforceable
for any reason whatsoever, it 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.
WITNESS the following signatures.
EMPLOYER:
HILB, ROGAL AND HAMILTON COMPANY
OF PITTSBURGH, INC.
By: /s/
---------------------------------
EMPLOYEE:
/s/ JOHN C. MCGRATH
------------------------------(SEAL)
JOHN C. MCGRATH
Exhibit 10.15
PITTSBURGH PRODUCER'S
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated February 28, 1992, is made between
HILB, ROGAL AND HAMILTON COMPANY OF PITTSBURGH, INC., a
Pennsylvania corporation ("Employer"), and Richard E. Galardini
("Employee"), a resident of South Park Township, Pennsylvania.
RECITALS
WHEREAS, Employer is a wholly-owned subsidiary of Hilb,
Rogal and Hamilton Company, a Virginia corporation ("HRH");
WHEREAS, HRH and Employer desire that Employee be employed
primarily for the production of new business and secondarily for
the servicing of such of Employer's clients assigned by Employer
to Employee for service and for the period of time specified
herein; and
WHEREAS, Employee desires to accept such employment subject
to the terms and conditions specified herein; and
WHEREAS, HRH and Employer aver and Employee acknowledges
that HRH and Employer will incur substantial costs in developing,
increasing and protecting its business, including costs for
training employees and advertising the business of the Employer;
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 for an initial term of three years
("Initial Term"), effective as of March 1, 1992 ("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 thirty (30) 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 (including the Initial Term), with or
without cause, upon the giving of thirty (30) days written notice
to the other of its intent to do so. Employee's compensation
shall be reviewed by 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 attorney's 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 interest of the
Employer and the related business interests of HRH 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 business
which competes with the business of Employer without the written
consent of HRH.
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 HRH or
any of its subsidiary corporations (HRH and its subsidiary
corporations, including Employer, 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 assured or purchaser by Employer or one of the
other HRH Companies. All checks or bank drafts received by
Employee from any assured or purchaser shall be made payable to
such company and all amounts collected by Employee shall be
promptly turned over to Employer. If Employee fails to turn over
any such amounts, Employer retains the right to collect such
amounts by deducting same from Employee's compensation.
4. CONFIDENTIAL INFORMATION. For purposes of this
paragraph 4, the following words shall have the following
respective meanings:
"Employer" shall mean Hilb, Rogal and Hamilton Company
of Pittsburgh, Inc., any of its predecessors and any
person or entity from which it has, now or at the time
of termination, acquired accounts;
"HRH Companies" means Employer, HRH and any subsidiary
of HRH;
"HRH Customers" means the customers of the HRH
Companies; and
"Confidential Information" shall mean the confidential
information and trade secrets of Employer and the HRH
Companies, which shall include, but not be limited to,
information about the HRH Customers such as customer
lists, customer risk characteristics, policy expiration
dates, policy terms, conditions and rates, and
information about the HRH Companies such as financial
data, marketing programs and specialized insurance
markets.
Employee acknowledges that, in the course of his employment
hereunder, he will become acquainted and entrusted with the
Confidential Information which is the exclusive property of
employer. Employee agrees and covenants that he will safeguard
the Confidential Information from exposure to, or appropriation
by, unauthorized persons and that he will not, directly or
indirectly, without the prior written consent of Employer and HRH
during the term of this Agreement or any time thereafter, divulge
or make any use of the 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 the Confidential Information, the
HRH Companies, and the HRH Customers, which are in his possession
or control. Employee agrees that, in addition to any other
remedies available herein, compensation and benefits otherwise
owing to him may be withheld for failure to comply with the terms
of his paragraph.
5. EMPLOYEE COVENANTS. Employee recognizes that over a
period of many years that Employer (specifically including for
the purposes of this paragraph 5 any predecessors of Employer or
entities from which it might have acquired insurance accounts)
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 Employer, Employee will have
substantial contact with these customers and prospective
customers. In order to protect the value of the Employer's
business, Employee covenants voluntary or involuntary, he shall
not directly or indirectly as an owner, stockholder, director,
employee, partner, agent, broker, consultant or other
participant, for a period of three (3) years from the date of
such termination ("Restricted Period"):
(a) approach, contact or solicit, or continue to allow
himself to be approached or contacted by, any individual or firm,
which was a Customer (as hereinafter defined), or Prospective
Customer (as hereinafter defined), of the Employer, for the
purpose of offering, obtaining, selling, diverting or receiving,
to or from said individual or firm, services in the field of
insurance or any other business engaged in by the Employer during
Employee's term of employment;
(b) approach, contact, or solicit, or continue to allow
himself to be approached or contacted by, any individual or firm,
which was a Customer, or Prospective Customer, of the Employer
with whom Employee had personal contact or whose name became
known to him in the course of the performance of his employment
duties while in the employ of the Employer, for the purpose of
offering, obtaining, selling, diverting or receiving, to or from
said individual or firm, services in the field of insurance or
any other business engaged in by the Employer during the
Employee's term of employment;
(c) approach, contact or solicit, or continue to allow
himself to be approached or contacted by, any individual or firm,
which was a Customer, or Prospective Customer, of the Employer
other than those Customers and Prospective Customers with whom
Employee had personal contact while in the employ of Employer,
for the purpose of offering, obtaining, selling, diverting or
receiving, to or from said individual or firm, services in the
field of insurance or any other business engaged in by the
Employer during Employee's term of employment; and
(d) approach, contact or solicit, or continue to allow
himself to be approached or contacted by, any individual or firm:
(i) described above in subparagraph (a), (b) or (c); and (ii)
located within the Restricted Area (as hereinafter defined); for
the purpose of offering, obtaining, selling, diverting or
receiving, to or from said individual or firm, services in the
field of insurance or any other business engaged in by the
Employer during Employee's term of employment.
As used herein, "Customers" shall be limited to those
customers of Employer for whom there is insurance coverage in
force or to or for whom Employer is rendering services as of the
date of termination of employment, "Prospective Customers" shall
mean those parties known by Employee to have been solicited by an
employee or agent of Employer (such solicitation, having been
made within the twelve (12) months preceding the date of
termination of employment); and "Restricted Area" shall mean the
counties of Allegheny, Beaver, Lawrence, butler, Armstrong,
Indiana, Westmoreland, Fayette, Greene and Washington, any
political subdivision thereof and any independent cities or towns
contained within the geographic area of the foregoing counties.
Subparagraphs (a), (b), (c) and (d) are separate and
divisible covenants; if for any reason any one covenant is held
to be invalid or unenforceable, in whole or in part, the same
shall not be held to affect the validity or enforceability of the
others. 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.
6. NONRAIDING OF EMPLOYEES. Employee covenants that
during his employment hereunder (including renewals) and for an
additional period of six (6) months after termination of his
employment hereunder for any reason, he will not hire any
employees of Employer for work in a business in competition with
Employer, nor will he directly or indirectly aid or encourage any
of the Employer's employees to seek employment with a business in
competition with Employer, whether or not Employee is then
affiliated with such competing 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
located within the Restricted Area, 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.
8. EMPLOYEE BREACH OF AGREEMENT. If, during the
Restricted Period, any commission or fee becomes payable to
Employee or to any person, firm, partnership, corporation or
other entity by or with whom Employee is then employed or
affiliated, as a result of a violation by Employee of the
provisions of paragraph 4 or 5 of this Agreement, Employee agrees
to promptly pay Employer as liquidated damages for such one or
more accounts ("Stolen Accounts") the amount determined to be
Employer's damages as follows:
Employee acknowledges that it would be difficult to
calculate the damages incurred by Employer in the event
of a breach by the Employee of paragraphs 4 or 5,
therefore, the Employee acknowledges that the following
liquidated damages clause is necessary and reasonable
for the protection of the Employer.
Employee further acknowledges that an industry rule of
thumb for valuation of an entire agency is 1.5 times
revenue and that, on the margin, a selected account may
be worth 2 times revenue. Accordingly, whenever there
is a Stolen Account, Employee shall immediately pay
Employer on Employer's written demand an amount equal
to ONE HUNDRED SEVENTY FIVE PERCENT (175%) of the
greater of the annualized commissions and fees (i)
realized by Employer from such Stolen Accounts during
the twelve months preceding the date of the conversion,
if any, or (ii) estimated by Employer to be realized
(based on premiums, rates, coverages, etc.) in the
Stolen Account. If Employee does not pay such amount
within ten (10) days of written demand therefor,
Employer may, in its sole discretion, and provided that
Employee pays Employer 100% of the commissions and fees
realized from such Stolen Accounts in the initial
twelve months of its being written directly or
indirectly by Employee, allow Employee to refinance the
remainder of the amount due for a period of one year
with interest, compounded monthly, at the lesser of the
annual rate of 15% or the maximum legal rate, and due
in a lump sum on the first anniversary date of the
conversion date.
In addition, the parties agree that, in the event of a breach by
Employee of the terms of paragraph 4, 5, 6 or 7, monetary damages
alone will not be sufficient to protect the interests of Employer
and the HRH Companies and, as a result, that Employer and the HRH
Companies shall be entitled to injunctive relief against Employee
to prevent the breach of any such provisions hereunder. It is
further agreed that the breach of any such provisions hereunder.
It is further agreed 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.
9. TOLLING OF RESTRICTIVE COVENANTS DURING VIOLATION. If
a violation by Employee of any of the restrictive covenants of
this Agreement occurs, nothing herein shall limit the authority
of a judge or arbiter to extend the period of such violated
covenant for 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 an 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
criminal or immoral conduct or any one or more acts which will
have more than a nominal adverse effect against the Employer or
any of the HRH Companies and shall also include the failure of
Employee, whether through incompetence, inefficiency, negligence,
inability, incapacity or otherwise, to observe or perform any of
his duties or obligations hereunder.
11. ATTORNEYS' FEES. Except as set forth in the next
sentence, in any dispute over this Agreement or in pursuit of any
remedy permitted under this Agreement, each party shall bear its
own costs and fees, including attorney's fees, irrespective of
the laws of that jurisdiction concerning such fees and costs. In
the case of a material violation of paragraph 4, 5, 6 or 7 which
violation becomes the gravamen of an action by Employer against
Employee, then Employee shall pay all of the Employer's costs and
fees, including reasonable attorneys' fees and costs, incurred in
enforcing such one or more restrictive covenants.
12. DELINQUENT CUSTOMER ACCOUNTS; COLLECTION. Employer
may, at its discretion, require Employee to take any and all
actions deemed necessary by Employer to recover the balance of
any customer account sold or serviced by Employee which account
has not been paid in a timely fashion and which has not been
collected in accordance with the normal procedures of Employer
(with such account being referred to as a "Delinquent Customer
Account"). If a Delinquent Customer Account exists, Employee
shall be responsible for full payment of such amounts and
Employer may deduct such delinquent amounts from Employee's
compensation.
13. 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.
14. GOVERNING LAW. This Agreement shall be construed under
and governed by the laws of the State of Pennsylvania.
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 HRH or 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. EACH OF EMPLOYER AND
EMPLOYEE KNOWINGLY AND VOLUNTARILY WAIVES THE RIGHT TO A JURY
TRIAL IN RESPECT OF ANY LEGAL PROCEEDINGS IN STATE OR FEDERAL
COURT ARISING IN CONNECTION HEREWITH. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR EMPLOYER TO ENTER INTO THIS AGREEMENT.
________________________________ ________________________________
EMPLOYER EMPLOYEE
<PAGE>
WITNESS the following signatures.
EMPLOYER:
HILB, ROGAL AND HAMILTON COMPANY
OF PITTSBURGH, INC.
By: /s/
-----------------------------------
Its:
----------------------------------
EMPLOYEE:
/s/ RICHARD F. GALARDINI
--------------------------------------
RICHARD F. GALARDINI
<PAGE>
EXHIBIT A
Employee shall be paid an annual salary of $100,000, payable
semi-monthly, as earned. Future changes in compensation need not
be reflected by amendment hereto as Employer may effect such
change through signature of a payroll authorization form.
Exhibit 10.16
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated June 21, 1993, is made between HILB,
ROGAL AND HAMILTON COMPANY OF ARIZONA, an Arizona corporation
("Employer"), and MICHAEL A. JANES ("Employee"), a resident of
Phoenix, Arizona.
RECITALS
WHEREAS, Employer is a wholly-owned subsidiary of HILB,
ROGAL AND HAMILTON COMPANY, a Virginia corporation ("HRH");
WHEREAS, Employee has been a Vice President of Employer;
WHEREAS, the former president of Employer has terminated
employment and Employer desires for Employee to be promoted to
President;
WHEREAS, HRH and Employer desire that Employee be employed
as President with primary responsibility for the overall
management and profitability of Employer, and secondary
responsibility for the production of new business and for the
servicing of business coded to Employee for service and for the
period of time specified herein;
WHEREAS, Employee desires to accept such employment subject
to the terms and conditions specified herein; and
WHEREAS, HRH and Employer aver and Employee acknowledges
that HRH and Employer will incur substantial costs in developing,
increasing and protecting its business, including costs for
training employees and advertising the business of the Employer;
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 for an initial term of three (3) years
("Initial Term"), effective as of April 1, 1993 ("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 thirty (30) 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 thirty (30) days written notice
to the other of its intent to do so. If this Agreement is
terminated by either party on thirty (30) days 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.
Except as limited in the next following sentence, Employee's
compensation shall be reviewed by 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. During the Initial
Term, Employee's compensation may be reduced only for "Cause."
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 HRH 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
HRH.
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 HRH or any of
its subsidiary corporations (HRH and its subsidiary corporations,
including Employer, 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:
"Employer" shall mean Hilb, Rogal and Hamilton Company of Arizona, 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, HRH and any
subsidiary of HRH;
"HRH Customers" means the customers of the HRH
Companies; and
"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 lists, customer risk
characteristics, policy expiration dates, policy
terms, conditions and rates, information about
prospective customers, and information about the HRH
Companies such as financial data, marketing programs
and specialized insurance markets. 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.
Employee acknowledges that, in the course of his employment
hereunder, he will become acquainted and entrusted with the
Confidential Information which is the exclusive property of
Employer. Employee agrees and covenants that he will safeguard
the 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 the 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 the 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;
"Known Customers" shall be limited to those "Customers"
with whom Employee had personal contact, or for whom
Employee handled insurance or bonds, or whose names
became known to Employee, in the course of the
performance of his employment duties for Employer;
"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, by an employee
(including Employee) or agent of Employer and with or
from whom, within the twelve (12) month period
preceding the date of termination of Employee's
employment, an employee (including Employee) or agent
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; and
"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 (specifically including for the purposes of this
paragraph 5 any predecessors of Employer or entities from which
it might have acquired insurance accounts) 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 Employer, Employee will have substantial contact with 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 or Prospective Customer for the
purpose of providing Prohibited Services to such Customer or
Prospective Customer;
(b) solicit a Known Customer or Prospective Customer for
the purpose of providing Prohibited Services to such Known
Customer or Prospective Customer; and
(c) accept an unsolicited invitation from a Known Customer
or Prospective Customer to provide Prohibited Services to such
Known Customer or Prospective Customer without first complying
with the provisions of paragraph 8(b) hereof.
Subparagraphs (a), (b) and (c) 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.
6. NONRAIDING OF EMPLOYEES. Employee covenants that during
his employment hereunder (including renewals) and for twelve (12)
months after termination of his employment, whether voluntary or
involuntary, with or without cause, he will not hire any
individuals who, as of the date of termination of Employee's
employment, were employees of Employer or had been preceding
Employee's termination, nor will employees of Employer within the
six (6) month period 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
located within the Restricted Area, 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.
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 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 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.
(a) Notwithstanding the foregoing, if Employee breaches
paragraph S(a) or S(b) of this Agreement, Employer may, at its
sole option, seek liquidated damages with respect to each
Customer, Known Customer or Prospective Customer procured by or
through Employee, directly or indirectly, in violation of
paragraph S(a) or S(b) of this Agreement (with such Customers and
Known 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 or Known 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~o 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.
(b) If in accordance with the provisions of paragraph 5(c)
hereof, a Known Customer or Prospective Customer desires to have
Employee as its agent of record, then Employee, upon making
arrangements reasonably satisfactory to Employer for payment, may
purchase such Known Customer or Prospective Customer account from
Employer for a price equal to the price established above for a
Lost Customer or Lost Prospect, whichever is applicable. The
payment of half of such purchase price upon binding of coverage
or bonding in the first year Employee accepts such account during
the Restricted Period and of the remaining half of the purchase
price on the anniversary date in the following year is hereby
covenanted by Employer to be reasonably satisfactory to it.
Employee acknowledges that failure to pay timely for such
accounts permitted to be purchased herein pursuant to paragraphs
5(c) and 8(b) hereof shall entitle Employer to receive injunctive
relief. Employer acknowledges that payment for such accounts
permitted to be purchased by Employee pursuant to paragraphs S(c)
and 8(b) shall prohibit Employer from obtaining injunctive relief
with respect to such accounts.
(c) Employee acknowledges that a broker of record letter
written during the Restricted Period, as a result of Employee's
efforts, by a Customer, Known 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, and shall establish a rebuttable presumption
of, a violation of paragraph S 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 Known
Customer or Prospective Customer that he cannot accept its
business unless he pays for such business pursuant to paragraph
8(b) hereof, until
after the Restricted Period and that he must minimize all contact
with such Known Customer or Prospective Customer during the
Restricted Period.
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 an 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 or any of the HRH
Companies. Also, Employer agrees that the settlement of the
lawsuits with Amos Lovitt Touche ("ALT") and The Mahoney Group
and the potential settlement of a lawsuit with Jack Puckett are
not factors to be considered in determining "Cause," and
specifically, the reversal of the accrual for a receivable from
ALT and the return of overpaid purchase price to ALT are not due
to Employee's doing anything wrong.
11. ATTORNEYS' FEES. In addition to any other remedies and
damages available to Employer or the HRH Companies, if Employee
violates paragraph 4, 5, 6 or 7 of this Agreement, which
violation becomes the gravamen of an action by Employer or the
HRH Companies against Employee, then Employee shall pay all costs
and fees, including attorneys' fees and costs, incurred by
Employer and the HRH Companies in enforcing such one or more
restrictive covenants.
12. DELINQUENT CUSTOMER ACCOUNTS: COLLECTION. Employer may,
at its discretion, require Employee to take any and all actions
deemed necessary by Employer to recover the balance of any
customer account sold or serviced by Employee which account has
not been paid in a timely fashion and which has not been
collected in accordance with the normal procedures of Employer
due to a violation of such procedures by Employee (with such
account being referred to as a "Delinquent Customer Account"). If
a Delinquent Customer Account exists, Employee shall be
responsible for full payment of such amounts.
13. 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.
14. 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.
15. 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.
16. GOVERNING LAW. This Agreement shall be construed under
and governed by the laws of the State of Arizona.
17. 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 HRH or 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.
WITNESS the following signatures.
EMPLOYER:
HILB, ROGAL AND HAMILTON COMPANY
OF ARIZONA
By: /s/
---------------------------------
Its:
--------------------------------
EMPLOYEE:
/s/ MICHAEL A. JANES
-------------------------------------
MICHAEL A. JANES
<PAGE>
EXHIBIT A
Employee shall be paid an annual salary of $150,000, payable
semi-monthly, as earned. Future changes in compensation need not
be reflected by amendment hereto as Employer may effect such
change through signature of a payroll authorization form.
Employer shall recommend to the Compensation Committee of
the Board of Directors of HRH for consideration at the May 4,
1993, meeting that Employee be granted a nonqualified stock
option at the market price that day for 4,000 shares of HRH
stock, vesting at the rate of 800 shares for each full year of
service from the date of grant.
Employee shall also be provided with an automobile allowance
in accordance with normal guidelines for Presidents of HRH
offices.
Exhibit 21
Subsidiaries of Hilb, Rogal and Hamilton Company
<TABLE>
<CAPTION>
State/Province of
Name of Subsidiary Incorporation
------------------ -------------
<S> <C>
HRH Financial Institutions Group, Inc. Pennsylvania
HRH Insurance Services of the Coachella Valley, Inc. (2 locations) California
HRH Insurance Services of Central California, Inc. (3 locations) California
HRH of Connecticut (3 locations) Connecticut
HRH of Northern California Insurance Services, Inc. (5 locations) California
Hilb, Rogal and Hamilton Company of Alabama, Inc. (4 locations) Alabama
Hilb, Rogal and Hamilton Company of Arizona (4 locations) Arizona
Hilb, Rogal and Hamilton Company of Atlanta, Inc. Georgia
Hilb, Rogal and Hamilton Company of Baltimore Maryland
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 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 Company of Oklahoma Oklahoma
Hilb, Rogal and Hamilton Company of Orlando Florida
Hilb, Rogal and Hamilton Company of Pittsburgh, Inc.(3 locations) Pennsylvania
Hilb, Rogal and Hamilton Company of Port Huron (2 locations) Michigan
Hilb, Rogal and Hamilton Company of the Quad Cities (2 locations) Illinois
Hilb, Rogal and Hamilton Company of St. Simons Island Georgia
Hilb, Rogal and Hamilton Company of Savannah, Inc. Georgia
Hilb, Rogal and Hamilton Company of Tampa Bay, Inc. Florida
Hilb, Rogal and Hamilton Company of Texas (8 locations) Texas
Hilb, Rogal and Hamilton Company of Virginia (2 locations) Virginia
Hilb, Rogal and Hamilton Realty Company Delaware
Hilb, Rogal and Hamilton Resource Group, Ltd. Virginia
Hunt Insurance Group, Inc. Florida
Professional Practice Insurance Brokers, Inc. (3 locations) California
S. H. Gow & Company, Inc. (3 locations) Delaware
</TABLE>
Each of the above subsidiaries is 100% owned by the registrant.
Exhibit 23
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-4 No. 33-44271, Form S-8 No. 33-59866 and Form S-8 No. 333-44735) of
Hilb, Rogal and Hamilton Company and in the related Prospectuses of our report
dated February 10, 1999 (except for Note M, as to which the date is March 30,
1999), 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, 1998.
Ernst & Young LLP
Richmond, Virginia
March 30, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 19,394,958
<SECURITIES> 3,383,742
<RECEIVABLES> 53,075,990
<ALLOWANCES> 1,505,000
<INVENTORY> 0
<CURRENT-ASSETS> 78,201,785
<PP&E> 34,556,088
<DEPRECIATION> 22,168,894
<TOTAL-ASSETS> 188,065,826
<CURRENT-LIABILITIES> 88,505,264
<BONDS> 43,658,306
3,831,208
0
<COMMON> 0
<OTHER-SE> 41,879,167
<TOTAL-LIABILITY-AND-EQUITY> 188,065,826
<SALES> 0
<TOTAL-REVENUES> 181,047,893
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 153,367,164
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,317,195
<INCOME-PRETAX> 25,363,534
<INCOME-TAX> 10,418,469
<INCOME-CONTINUING> 14,945,065
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,945,065
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 1.18
</TABLE>
