<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997 or
---------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission file number 0-19239
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LAW COMPANIES GROUP, INC.
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(Exact name of registrant as specified in its charter)
Georgia 58-0537111
- -------------------------------- ---------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
114 TownPark Drive, Kennesaw, Georgia 30144
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 590-4600
----------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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
---- ----
The number of shares of Common Stock of the Company, par value $1.00 per
share, outstanding at April 30, 1997 was 1,894,797.
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TABLE OF CONTENTS
PAGE
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
as of March 31, 1997 and December 31, 1996.............. 1
Condensed Consolidated Statements of Operations
for the Quarters Ended March 31, 1997 and 1996.......... 3
Condensed Consolidated Statements of Cash Flows
for the Quarters Ended March 31, 1997 and 1996.......... 4
Notes to Condensed Consolidated
Financial Statements.................................... 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.................................... 6
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................. 11
SIGNATURE.......................................................... 13
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
LAW COMPANIES GROUP, INC.
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 8,262 $ 8,097
Billed fees receivable, net of
allowance 52,178 57,015
Unbilled work in progress 30,555 29,961
Other receivables 670 805
Employee advances 473 586
Prepaid expenses 3,343 2,599
Deferred income taxes 185 200
-------- --------
Total current assets 95,666 99,263
Property and equipment:
Land and buildings 8,390 8,448
Equipment 34,571 34,656
Automobiles 3,521 3,674
Furniture and fixtures 12,447 12,329
Leasehold improvements 3,799 3,792
-------- --------
62,728 62,899
Less accumulated depreciation and
amortization 41,402 40,263
-------- --------
21,326 22,636
Other Assets:
Equity investments 1,139 1,313
Goodwill, net 13,684 14,136
Other assets 2,372 1,349
-------- --------
17,195 16,798
-------- --------
$134,187 $138,697
======== ========
</TABLE>
See accompanying notes.
1
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<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
LAW COMPANIES GROUP, INC.
(IN THOUSANDS)
March 31, December 31,
1997 1996
---------- ------------
<S> <C> <C>
Liabilities and shareholders' equity
Current liabilities:
Short-term borrowings $ 673 $ 240
Accounts payable 14,850 18,383
Billings in excess of costs and fees
earned on contracts in progress 12,474 14,771
Accrued payroll and other employee
benefits 12,791 11,584
Accrued professional liability reserve 3,632 4,367
Other accrued expenses 16,367 14,194
Income taxes payable 5,885 5,059
Current portion of long-term debt 28,332 2,206
-------- --------
Total current liabilities 95,004 70,804
Long-term debt 14,918 42,847
Deferred income taxes 5,286 6,363
Minority interest in equity of
subsidiaries 1,132 1,093
Shareholders' equity:
Common stock--$1 par value:
authorized: 10,000,000 shares; issued
and outstanding: 1,894,797
shares in 1997 and 1,905,422
shares in 1996 1,895 1,905
Additional paid in capital 15,062 15,063
Retained earnings 6,589 5,683
Foreign currency translation adjustment (5,699) (5,061)
-------- --------
17,847 17,590
-------- --------
$134,187 $138,697
======== ========
</TABLE>
See accompanying notes.
2
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
LAW COMPANIES GROUP, INC.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the Quarter
Ended March 31,
---------------------
1997 1996
---------- ---------
<S> <C> <C>
Gross fees $75,491 $83,016
Less: Cost of outside services 8,098 10,348
------- -------
Net fees 67,393 72,668
Direct costs and expenses:
Payroll 20,009 21,479
Job related expenses 7,669 7,547
------- -------
Gross profit 39,715 43,642
Indirect costs and expenses:
Payroll 15,968 16,662
Other expenses 20,656 24,932
------- -------
Operating income 3,091 2,048
Other expense:
Interest expense (955) (1,101)
Deferred financing costs (345) (1,070)
Other expense (23) (13)
------- -------
Income (loss) before income taxes
and equity investments 1,768 (136)
Income tax provision (813) (100)
Equity investments (49) --
------- -------
Net income (loss) $ 906 $ (236)
======= =======
Net income (loss) per common share $.48 $(.12)
======= =======
</TABLE>
See accompanying notes.
3
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<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
LAW COMPANIES GROUP, INC.
(IN THOUSANDS)
For the Quarter
Ended March 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 906 $ (236)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 2,037 2,028
Provision for losses on receivables 75 524
Provision for losses on claims 89 7
Deferred income taxes (1,062) (35)
Undistributed losses from equity
investments 49 --
Gain (loss) on disposal of
property and equipment 16 13
Changes in operating assets and
liabilities:
Billed fees receivable 4,761 3,913
Unbilled work in progress (594) (2,181)
Other current assets (495) (28)
Accounts payable and
accrued expenses (151) (2,575)
Billings in excess of
costs and fees earned on
contracts in progress (2,297) 2,241
------- -------
Net cash provided by operating
activities 3,334 3,671
INVESTING ACTIVITIES
Purchases of property and equipment (452) (920)
Proceeds from disposal of property
and equipment and equity investments 5 5
Other, net 160 974
------- -------
Net cash provided by (used in)
investing activities (287) 59
FINANCING ACTIVITIES
Net (payments) proceeds on short-term
borrowings 434 (239)
Net (payments) proceeds on revolving
line of credit and long-term
borrowings (1,804) (4,108)
Deferred financing costs (1,348) 1,070
Issuance of common stock -- 210
Repurchase and retirement of
common stock (11) --
------- -------
Net cash used by financing
activities (2,729) (3,067)
Effect of exchange rate changes on cash (153) (46)
------- -------
Increase in cash and cash equivalents 165 617
Cash and cash equivalents at beginning
of period 8,097 4,913
------- -------
Cash and cash equivalents at end of
period $ 8,262 $ 5,530
======= =======
See accompanying notes.
</TABLE>
4
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
LAW COMPANIES GROUP, INC.
NOTE 1 - There have been no significant changes in the accounting policies of
the Company during the periods presented, except as noted below. For a
description of these policies, see Note 1 of Notes to Consolidated Financial
Statements for the year ended December 31, 1996 in the Company's Form 10-K.
NOTE 2 - The unaudited condensed consolidated financial statements presented
herein have been prepared in accordance with the instructions to Form 10-Q and
do not include all of the information and note disclosures required by generally
accepted accounting principles. These statements should be read in conjunction
with the Consolidated Financial Statements and Notes for the year ended December
31, 1996 included in the Company's Form 10-K. The accompanying condensed
consolidated financial statements at and for the three months ended March 31,
1997 and 1996 have not been audited by independent auditors in accordance with
generally accepted auditing standards, but in the opinion of management such
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary to summarize fairly the Company's consolidated
financial position and results of operations. The results of operations for the
three months ended March 31, 1997 may not be indicative of the results that may
occur during the year ending December 31, 1997.
NOTE 3 - On February 7, 1997, the Company obtained an amendment to its credit
facilities from its banks, extending the maturity date through February 6, 1998.
Consequently, the long-term debt of approximately $26 million under these
amended facilities has been classified as current as of March 31, 1997. For a
description of these credit facilities, see Note 3 of Notes to Consolidated
Financial Statements for the year ended December 31, 1996 in the Company's Form
10-K.
NOTE 4 - On February 14, 1997, the Board of Directors approved a curtailment in
the United States defined benefit pension plan effective March 28, 1997.
Benefits will no longer accrue to vested participants after March 28, 1997. As
a result, the Company recognized a gain on curtailment of $1.8 million in the
first quarter.
NOTE 5 - On March 14, 1997, the Board of Directors approved an agreement to
issue to an investor $10 million of 8% redeemable preferred stock (redeemable on
or after the seventh anniversary of issuance), together with separate warrants
exercisable for a period of 12 years and representing 33% of the Common Stock
outstanding plus options to acquire up to 900,000 shares of Common Stock through
December 31, 2006. On May 6, 1997, this transaction was approved by shareholders
and consummated on the same date.
NOTE 6 - In February 1997, the Financial Accounting Standard Board issued
Statement No. 128, Earnings Per Share, which is required to be adopted on
December 31,1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. The impact is expected to
result in no change to primary earnings per share for the first quarter ended
March 31, 1997 and March 31, 1996. The impact of Statement 128 on the
calculation of fully diluted earnings per share for these quarters is not
expected to be material.
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth, for the three month periods indicated, (i) the
percentage of net fees represented by certain items reflected in the Company's
condensed consolidated statements of income and (ii) the percentage increase or
decrease in each of such items in 1997 from the comparable period in the prior
year. The Company measures its operating performance on the basis of net fees
since a substantial portion of gross fees flow through to clients as costs of
subcontractors and other project-specific outside services. Net fees are
determined by deducting the cost of these outside services from gross fees.
This table and the subsequent discussion should be read in conjunction with the
Condensed Consolidated Financial Statements and notes to Condensed Consolidated
Financial Statements contained elsewhere in this Form 10-Q.
<TABLE>
<CAPTION>
Year to Year
Percentage
Three Month Increase
Periods Ended March 31, (Decrease)
------------------------ ------------
1997 1996 1997 Vs 1996
------------------------ ------------
<S> <C> <C> <C>
Net fees 100.0% 100.0% (7.3%)
Gross profit 58.9% 60.1% (9.0%)
Indirect costs and expenses 54.3% 57.2% (11.9%)
Operating income 4.6% 2.8% 50.9%
Net income (loss) 1.3% (0.3%) 483.9%
</TABLE>
RESULTS OF OPERATIONS
Consolidated net fees of $67.4 million for the first three months of 1997
decreased 7.3% from net fees of $72.7 million for the same period in 1996. The
Domestic Group's net fees decreased 10.3% from $48.4 million for the first three
months of 1996 to $43.4 million for the same period in 1997. This decrease was
due to the effects of the Company's focus on its cost structure and
competitiveness as opposed to growth, lack of regulatory pressure to drive
environmental markets, and overall competitive pressures in the markets served
by the Domestic Group.
The International Group's net fees for the first quarter of 1997 decreased 1.0%
from $24.3 million to $24.0 million. This decrease was primarily due to
decreases in exchange rates within the European Union as well as a hold on
government expenditures surrounding the United Kingdom general election.
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The gross profit margin decreased from 60.1% in the first quarter of 1996 to
58.9% for the same period in 1997. The Domestic Group's gross profit margin
decreased to 64.9% in the first quarter of 1997 from 65.7% for the same period
in 1996. The small change in margin reflects the Company's focus on improved
operating procedures in response to difficult market conditions encountered by
the Domestic Group. The International Group's gross profit margin decreased
slightly from 48.8% in the first quarter of 1996 to 48.2% for the same period in
1997. This slight decrease was primarily due to project performance issues and
increased competitive pressures in several of the International Group's
markets.
Indirect costs and expenses were $36.6 million, or 54.3% of 1997 first quarter
net fees, compared with $41.6 million, or 57.2% of 1996 first quarter net fees.
This decrease of 11.9% is attributable to the Company's 1996 cost reduction and
labor utilization initiatives and their continued positive impact in 1997.
These initiatives were designed to maximize efficiency and profitability, to
effect substantive change in the culture of the Company, and to improve
utilization. The activity that produced the greatest level of savings was re-
aligning staffing levels and matching human resources to a lower level of
revenue. The Company has also focused on improving procurement activities in
order to reduce material and services costs by taking advantage of negotiated
national contracts which leverage the Company's purchasing power for its U.S.
operations. During 1996, national contracts were implemented which consolidated
the purchasing of office supplies, travel services, office equipment,
telecommunications and cellular services, off-site data management, forms
management, and vehicle leasing. The reductions in the corporate overhead
functions during 1996 consisted primarily of departmental realignment and the
resulting elimination of positions, as well as staff reductions through
attrition. The Company continues to review its overhead costs structure to
analyze the functions provided by each department and the related value of these
functions.
Additionally, in the first quarter of 1997, the Company curtailed its United
States defined benefit pension plan. As a result, the Company recognized a gain
on curtailment of $1.8 million in the quarter and has recorded the gain as a
reduction of other indirect costs and expenses.
Interest expense decreased to $1.0 million in 1997's first quarter compared to
$1.1 million for the same period in 1996. This decrease was related to lower
average outstanding debt. Deferred financing costs of $.3 million relating to
the renegotiation of the Company's credit facilities were also recorded in the
first quarter of 1997 compared to $1.1 million for the same period in 1996.
The effective income tax rates for the first three months of 1997 and 1996 were
46.0% and (73.5%), respectively. The effective tax rates were higher than the
statutory federal rate of 34% due primarily to the effect of state income taxes
and certain nondeductible expenses. The decrease in the effective tax rates from
1996 to 1997 was due to the combination of lower pre-tax earnings and higher
levels of non-deductible expenses in 1996 vs. 1997.
In the first quarter of 1997, the Company recorded net income of $906,000, or
$.48 per share, compared to a net loss of $236,000, or ($0.12) per share, for
the first quarter of 1996.
CURRENCY TRANSLATION
The translation of the Company's foreign subsidiaries' financial statements into
U.S. dollars is done in multiple steps. First, all foreign operations are
measured into the functional currencies of the foreign subsidiaries' economic
environments by utilizing a combination of current, average, and historic
exchange rates, with translation impacts included in income. The foreign
subsidiaries' functional currency financial statements are translated into U.S.
dollars, the Company's reporting currency, utilizing current and average
exchange rates, resulting in an adjustment to shareholders' equity. In
7
<PAGE>
addition, transactions denominated in different currencies result in exchange
gains or losses which are included in income. The impact of foreign currency
translation and exchange transactions included in income was not significant in
the first quarter of 1997. The translation of the Company's foreign
subsidiaries' in the first quarter of 1997 resulted in a $.6 million change in
the Foreign Currency Translation Adjustment component of shareholders' equity.
This change was caused by a 3.6% decrease in the strength of the dollar relative
to the pound sterling from the rate at December 31, 1996 to the rate at March
31, 1997.
DEBT AND SHORT-TERM BORROWINGS
The Company reported debt and short-term borrowings of $43.9 million at March
31, 1997, compared to $45.3 million at December 31, 1996. On February 7, 1997,
the Company amended and restated its current credit facilities (the "1997
Facilities") with an extension to February 6, 1998. Consequently, borrowings of
$26.1 million under these facilities are classified as current at March 31,
1997. The 1997 Facilities may be extended by the Company's banks for up to two
additional years. The 1997 Facilities include certain restrictions relating
to, among other things, maintaining debt within approved limits, limitations on
capital expenditures and share repurchases, achievement of certain fixed charge
and interest coverage ratios, and other financial covenants, and are secured by
substantially all assets of the Company and substantially all stock of its
subsidiaries. As of March 31, 1997, the Company was in compliance with all of
these covenants and restrictions.
LIQUIDITY AND CAPITAL RESOURCES
Prior to 1995, certain of the Company's subsidiaries filed their federal income
tax returns on the cash basis of accounting. Effective January 1, 1995, these
subsidiaries changed their method of accounting from the cash to the accrual
method for federal income tax purposes. Accordingly, previously deferred income
of approximately $47 million at January 1, 1995 will be included in taxable
income over a four year period, which began in 1995, resulting in an accelerated
tax liability of $16 million. The Company made income tax payments of
approximately $.6 million in the first quarter of 1997 and anticipates
additional payments of approximately $3.4 million for the remainder of 1997
related to this change in income tax accounting.
The Company believes that its cash provided by operations and borrowings
available under the bank credit facilities will be sufficient to meet its base
operating requirements, capital expenditures and tax payment obligations through
December 31, 1997. The Company's ability to fund growth, other than at minimum
levels, will depend on continued profitability and continued focus on working
capital management, primarily in the areas of accounts receivable and work in
progress. Management believes that the Company's operating performance is
improving, thus reducing the likelihood of both operating profit and working
capital management falling below acceptable levels.
On May 6, 1997, shareholders approved a transaction (see "Subsequent Event"
discussion following) to issue equity securities to Virgil R. Williams and
James M. Williams for $10 million in cash. The Company believes the equity
investment should provide improved financial strength and stability because it
is long-term equity capital. As a result of this equity investment, the Company
should have the ability, among other things, to address longer-term
opportunities such as devoting capital resources and management time to the
growth of its market share in the U.S. and internationally, and to strategically
integrate its U.S. and international operations with expanded business
development efforts. Additionally, the Company believes that a stronger equity
base will allow it to maintain and
8
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broaden relationships with its customers, employees and suppliers as a result of
these constituencies' increased confidence in the Company's stability and in the
Company's enhanced flexibility to service particular needs.
The Company's 401(k) Savings Plan (the "Plan") permitted employees to elect to
invest their Plan contributions in Company Common Stock, and provided that the
Company's matching contributions, if any, under the Plan be made in the form of
Company Common Stock. As of May 10, 1996, the Board of Directors of the Company
decided to terminate the Company Common Stock fund under the Plan, whether as
employee contributions or as Company matching contributions. Consistent with
that decision, employees are allowed to trade out of (but not into) shares of
the Company's Common Stock held in their individual 401(k) accounts, in
accordance with Plan provisions. In the first quarter, such trades out of the
Plan totalled $11,000.
SUBSEQUENT EVENT
In the second quarter of 1996, the Company engaged Alex. Brown & Sons
Incorporated ("Alex. Brown") to provide investment banking and financial
advisory services, to analyze the Company's capital structure, and to evaluate
both debt and equity options which would be consistent with the Company's
strategic objectives and existing market conditions. A special committee of the
Board of Directors was formed to receive, review, and recommend appropriate
action to the full Board, based upon the findings and recommendations of Alex.
Brown.
On March 21, 1997, the Company entered into a Securities Purchase Agreement by
and between the Company, Virgil R. Williams and James M. Williams (collectively,
"Buyer"), whereby Buyer, for an aggregate of $10 million in cash, would purchase
equity securities consisting of 8% redeemable preferred stock (redeemable on or
after the seventh anniversary of issuance) together with separate warrants
exercisable for a period of 12 years plus options to acquire up to 900,000
shares of Common Stock and options to additional shares of Common Stock
representing one-half of the number of shares subject to any incentive stock
options granted as of the closing to certain optionholders. On May 6, 1997,
this transaction was approved by the shareholders and consummated on the same
date.
FORWARD LOOKING STATEMENTS
The above statements contained herein under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties, and other factors which may cause the actual
results, performance, or achievements of the Company to be materially different
from any future results, performance, or achievements expressed or implied by
such forward-looking statements. Such factors include, among other things,
business conditions and growth in the economy, including the construction sector
in particular, competitive factors, including price pressures, the ability to
control internal costs that are not passed on to the Company's clients, the
ability to manage cash flow and working capital, the ability to obtain longer
term financing on acceptable terms to support the Company's operations, and
other factors referenced elsewhere herein.
9
<PAGE>
EFFECT OF INFLATION
General economic inflation had the effect of increasing the Company's basic
costs of operations. These increased costs were generally recovered through
increases in contract prices.
CASH PROVIDED BY OPERATIONS
Cash provided by operations in the first quarter of 1997 of $3.3 million
slightly decreased from $3.7 million in 1996. However, the Company realized
improved cash flow in the first quarter of 1997 from profitable operations
($906,000 net income versus $236,000 net loss for the same period in 1996) as
well as improved working capital management.
CAPITAL EXPENDITURES
Capital expenditures for the first three months of 1997 were $.5 million
compared to $1 million for the first three months of 1996. This $.5 million
decrease from the first three months of 1996 was in line with the Company's 1997
capital expenditures plan, as well as within the limits imposed by the revised
credit facilities. The Company is required to limit capital spending to
approximately $9.6 million in 1997. In order to continue to enhance productivity
and potentially increase earnings, the Company has continued, and will continue,
its capital spending programs, particularly for computer and other technology-
related equipment. The Company has no other material commitments for purchases
of additional equipment.
DIVIDENDS
Dividends are prohibited under the 1997 bank credit facilities for the Common
Stock, however, the holders of the Preferred Stock issued pursuant to the equity
investment by Virgil R. Williams and James M. Williams shall receive an 8%
dividend.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.01 Restated Articles of Incorporation of Law Companies
Group, Inc.
3.02 Restated Bylaws of Law Companies Group, Inc.
10.01 Warrant Agreement dated May 6, 1997 by and among Law
Companies Group, Inc., Virgil R. Williams and James M.
Williams
10.02 Stock Option Agreement dated May 6, 1997 by and among
Law Companies Group, Inc., Virgil R. Williams and James
M. Williams
10.03 Plan Option Agreement dated May 6, 1997 by and among Law
Companies Group, Inc., Virgil R. Williams and James M.
Williams
10.04 Preferred Shareholder Agreement dated May 6, 1997 by and
among Law Companies Group, Inc., Virgil R. Williams and
James M. Williams
10.05 Registration Rights Agreement dated May 6, 1997 by and
among Law Companies Group, Inc., Virgil R. Williams and
James M. Williams
11.00 Computation of Earnings Per Share
27.00 Financial Data Schedule
99.1 Press Release issued by Law Companies Group, Inc. dated
May 6, 1997
(b) Reports on Form 8-K
Form 8-K filed January 3, 1997 Items 5 and 7
11
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SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant, Law Companies Group, Inc., has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
LAW COMPANIES GROUP, INC.
/s/ R. B. Fooshee
- ---------------------------------------
Robert B. Fooshee
Chief Financial Officer and Treasurer
Dated: May 15, 1997
13
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EXHIBIT 3.01
RESTATED
ARTICLES OF INCORPORATION
OF
LAW COMPANIES GROUP, INC.
(ADOPTED ON MAY 6, 1997)
I.
The name of the Corporation is:
LAW COMPANIES GROUP, INC.
II.
The Corporation is organized pursuant to the provisions of the Georgia
Business Corporation Code.
III.
The Corporation shall have perpetual duration.
IV.
The purposes of the Corporation shall be to engage in engineering,
environmental and related services throughout the world, to form and to hold
stock of other corporations, including corporations which provide engineering
and related services, and to engage in any other lawful businesses from time to
time without limitations.
V.
The aggregate number of shares which the Corporation shall have the
authority to issue is twelve million five hundred thousand (12,500,000), divided
as follows:
A. COMMON STOCK. The Corporation shall have the authority to issue ten
------------
million (10,000,000) shares of Common Stock, with a par value of One Dollar
($1.00) per share ("Common Stock").
<PAGE>
B. PREFERRED STOCK. The Corporation shall have the authority to issue
---------------
two million five hundred thousand (2,500,000) shares of Cumulative Convertible
Redeemable Preferred Stock, with no par value per share ("Preferred Stock").
VI.
The Common Stock and the Preferred Stock shall have the rights and
preferences described in this Article VI.
A. VOTING.
------
1. Common Stock. The Common Stock shall have unlimited voting
------------
rights under the Georgia Business Corporation Code (the "Code"), except upon
matters expressly reserved for approval solely by another class or series of
stock under the Code, these Articles of Incorporation, or the Bylaws of the
Corporation. Each share of Common Stock shall entitle its holder to one vote on
each matter upon which the holders of the Common Stock are entitled to vote.
2. Preferred Stock. The Preferred Stock shall have unlimited voting
---------------
rights under the Code, except (a) it shall only vote separately as a class with
respect to (i) the election of directors, (ii) on matters as provided in the
Bylaws of the Corporation, and (iii) as required by applicable law, and (b) it
shall not vote on matters expressly reserved for approval solely by another
class or series or stock under the Code, these Articles of Incorporation, or the
Bylaws of the Corporation, and it shall be subject to the elimination of voting
rights with respect to individual shares of Preferred Stock upon the occurrence
of a Preferred Vote Expiration Event (as defined below). Simultaneously with
the issuance of each share of the Preferred Stock, the Corporation shall issue
a warrant to purchase a correlating share of Common Stock (each, a "Correlating
Warrant") pursuant to the Warrant dated the same date as the date on which these
Articles are restated (the "Warrant"). Until the occurrence of a Preferred Vote
Expiration Event, each share of Preferred Stock shall entitle its holder to a
number of votes equal to the number of whole shares of Common Stock for which
the Preferred Share's Correlating Warrant is exercisable as of the record date
for the determination of the stockholders entitled to vote on a matter or, if no
such record date is established, the date such vote is taken or any written
consent of stockholders is solicited. Fractional votes shall not be permitted,
and any fractional voting rights shall be rounded to the nearest whole number
(with one-half being rounded upward). A "Preferred Vote Expiration Event" shall
occur upon the exercise (in accordance with the terms of the Warrant) of a
Correlating Warrant and the payment of the Exercise Price (as defined in the
Warrant). Except as otherwise expressly provided in these Articles of
Incorporation, the Bylaws of the Corporation, or as required by applicable law,
the holders of the Preferred Stock and Common Stock shall vote together as a
single class. In the event of any stock dividend, stock split, reverse stock
split, reclassification, or similar event which results in a different number of
shares of Common Stock outstanding, the number of shares of Preferred Stock
outstanding shall be adjusted in a like manner and at the same time.
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B. DIVIDENDS.
---------
1. Preferred Dividends.
-------------------
(a) Subject to Section VI,B,1(b), on March 31, June 30, September
30, and December 31 of each year (the period of a year ending on each such
date, a "Fiscal Quarter"), the holders of the issued and then outstanding
Preferred Stock shall be entitled to receive a "Preferred Dividend" (as
defined below) on each issued and outstanding share of Preferred Stock,
prior and in preference to the payment of any dividend on the Common Stock,
other than a stock dividend declared and paid on the Common Stock that is
payable in shares of Common Stock (a "Common Stock Dividend"). "Preferred
Dividend" shall mean a cash dividend which shall begin to accrue on the
date on which the first shares of Preferred Stock are issued by the
Corporation (the "Original Issue Date"), in an amount determined by the
following formula:
8%, divided by 4, multiplied by the Original Issue Price (as used in
---------- -------------
these Restated Articles, such term shall have the meaning ascribed to
it in the Warrant).
For the purpose of this Section VI, B, 1, and wherever else the concept of
Original Issue Price is used in these Articles of Incorporation, the
Original Issue Price shall be subject to appropriate adjustment in the
event of stock dividends, stock splits, reverse stock splits,
reclassifications, or similar events which result in all holders of
Preferred Stock holding a different number of shares of Preferred Stock
after such event (other than an issuance of additional shares of Preferred
Stock pursuant to Section VI, B, 1(b) in the event that Preferred Dividends
are not paid on the Preferred Stock). In such event, the Original Issue
Price shall be multiplied by a fraction, the numerator of which is the
number of shares of Preferred Stock outstanding immediately prior to such
event, and the denominator of which is the number of shares of Preferred
Stock outstanding immediately after such event.
Preferred Dividends shall be cumulative such that no dividends,
other than a Common Stock Dividend, shall be paid with respect to the
Common Stock during any Fiscal Quarter unless dividends in the total amount
of the then payable Preferred Dividend shall have first been paid in full.
The Board of Directors may fix a record date for the determination of
holders of Preferred Stock entitled to receive dividends, which record date
shall not be more than 60 days prior to the date fixed for payment.
(b) For any Fiscal Quarter in which the Corporation fails to pay
the full Preferred Dividend to the holders of the Preferred Stock, the
Corporation shall issue to the holders of the Preferred Stock an additional
number of shares of Preferred Stock in lieu of the unpaid portion of the
Preferred Dividend, together with an equal number of Correlating Warrants
for Common Stock, such Correlating Warrants to be in a form substantially
identical to the Warrant, except that the Exercise Price (as defined in the
Warrant) shall be $.01. The
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<PAGE>
number of shares of Preferred Stock and Correlating Warrants to be issued
in such event shall be determined according to the following formula
(rounded to the nearest whole number):
(aggregate Preferred Dividend owed to holder of Preferred Stock minus
-----
aggregate cash dividend actually paid to such holder) / the Original Issue
Price.
No fractional shares of Preferred Stock or fractional Correlating Warrants shall
be issued. Once such Preferred Stock and Correlating Warrants are issued, the
Preferred Dividend for such Fiscal Quarter shall be deemed to have been paid in
full for all purposes.
2. Common Dividends; No Participation Rights. After dividends in
-----------------------------------------
the full preferential amount specified in Section VI, B, 1 have been paid or
declared and set apart, the Board of Directors may declare additional dividends
payable to holders of Common Stock out of funds legally available therefor. Any
such dividends shall be declared solely on the Common Stock, and the Preferred
Stock shall have no right of participation.
C. PREEMPTIVE RIGHTS.
-----------------
1. Generally. In connection with the issuance by the Corporation of
---------
either: (i) shares of Common Stock, or (ii) any security convertible into or
carrying a right to subscribe for or acquire shares of Common Stock (other than
options issued to employees) (together, "New Shares"), each holder of Preferred
Stock shall be entitled to preemptive rights as provided by the Code as in
effect on the date of the Issuance Notice referred to in Section VI,C,2. For
such purpose, each holder of Preferred Stock shall be deemed to presently hold
that number of shares of Common Stock equal to the number of shares of Common
Stock issuable upon the exercise of any Correlating Warrants which correspond to
the Preferred Stock then held by such holder of Preferred Stock. Holders of
Common Stock shall not have preemptive rights.
2. Procedures. In the event that the Corporation proposes to
----------
undertake an issuance of New Shares, it shall give the holders of Preferred
Stock written notice of its intention to issue such shares (the "Issuance
Notice"), which shall state the price and the general terms upon which the
Corporation proposes to issue such shares. Each holder of Preferred Stock shall
have fifteen (15) days from the date of mailing any such Issuance Notice to
agree in writing to purchase its pro-rata share of such shares for the price and
upon the terms specified in the Issuance Notice by giving written notice to the
Corporation and stating therein the quantity of shares to be purchased.
3. Applicability; Expiration. The rights granted pursuant to this
-------------------------
Section VI, C shall not apply to any issuance of New Shares which has been
approved by at least a three-quarters affirmative vote of the Board of Directors
of the Corporation (the "Board"), and shall expire upon (and not be applicable
to) the first sale of Common Stock or other securities of the Corporation to the
public, which sale is effected pursuant to a registration statement underwritten
by a nationally recognized underwriting firm and filed with, and declared
effective by, the Securities and Exchange Commission, and in connection with
which such Common Stock or other equity securities are listed
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on a national securities exchange (as defined in the Securities Exchange Act of
1934) and the Company receives at least $20,000,000 in proceeds (a "Listing
Event").
D. BOARD OF DIRECTORS.
------------------
1. Size. Upon adoption of these Restated Articles, the Board of
----
Directors of the Corporation (the "Board") shall consist of thirteen (13)
members. The size of the Board may be changed by a majority affirmative vote of
the Board (subject to compliance with these Restated Articles and the Bylaws of
the Corporation as in effect from time to time (the "Bylaws"), provided that as
long as any shares of Preferred Stock remain outstanding, the Board shall
consist of at least nine (9) members. In all events, the Board shall consist of
an odd number of members.
2. Right of Appointment of Preferred Stock. So long as any
---------------------------------------
Preferred Stock is outstanding, the holders of a majority of the outstanding
Preferred Stock shall have the unrestricted right to elect six (6) members of
the Board (or one less than a majority of the Board if the Board is larger or
smaller than thirteen (13) members) (the "Preferred Directors"). In the event
that no shares of Preferred Stock remain outstanding, the right to appoint the
Preferred Directors to the Board shall revert to the holders of the Common
Stock, such number of directors to be elected to be determined in accordance
with the provisions of the Bylaws of the Corporation as in effect from time to
time, and all Preferred Directors and the "Swing Director" (as hereinafter
defined) shall cease to serve on the Board effective upon the next succeeding
meeting of the shareholders at which directors are elected.
3. Right of Appointment of Common Stock. So long as any shares of
------------------------------------
Preferred Stock are outstanding, the holders of the Common Stock shall have the
unrestricted right to elect six (6) members of the Board (or one less than a
majority of the Board if the Board is larger or smaller than thirteen (13)
members), and such holders shall also have the right to elect an additional
member (the "Swing Director") to serve on the Board (collectively, the "Common
Directors"); provided, however, that the Swing Director shall be nominated by
the Common Directors then holding office and such nomination of the Swing
Director shall be subject to the approval of the Preferred Directors, which
approval shall not be unreasonably withheld. The Preferred Directors shall be
deemed to have finally and irrevocably approved a nominee submitted by or on
behalf of the holders of Common Stock in the event that the Preferred Directors
do not object (as provided below) to such nominee within five (5) business days
after receipt of notice of the name of such nominee. To object to the
appointment of a nominee, the Preferred Directors shall submit to the Common
Directors (as representatives of the holders of Common Shares) in writing in
reasonable detail their reasons for objecting to such nominee. If the Common
Directors choose not to submit an alternative nominee, the issue of the
appointment of such nominee to the Board shall be submitted to arbitration
before the American Arbitration Association in accordance with its rules of
commercial arbitration then in effect. The exclusive location of such
arbitration shall be Atlanta, Georgia, and the governing law shall be the law of
the State of Georgia.
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4. Failure to Meet Benchmarks; Merger Proposal.
-------------------------------------------
(a) Upon the occurrence of a "Preferred Stock Event" (as defined in
the Bylaws), the size of the Board shall automatically increase to fifteen (15)
members (or, in the case of a Board which is larger or smaller than thirteen
(13) members, such number as required to accommodate the appointment of two
additional members), and the holders of the Preferred Stock shall have the right
to elect two (2) additional members of the Board (the "Additional Directors").
In the event Additional Directors are elected to the Board by reason of a
Preferred Stock Event, such directors shall continue to serve until the
occurrence of a Cure Event (as defined in the Bylaws), at which time such
Additional Directors shall cease to serve and the Board shall automatically
revert to its size immediately prior to the election of Additional Directors
under this Section VI, D, 4(a). If the holders of the Preferred Stock become
entitled to elect Additional Directors pursuant to this subsection a second
time, such Additional Directors shall be entitled to continue to serve so long
as any Preferred Stock remains outstanding, after which time such Additional
Directors shall cease to serve and the Board shall automatically revert to its
size immediately prior to the election of Additional Directors on such second
occasion.
(b) If a majority of the Preferred Directors propose in writing to the
full Board a plan of merger or share exchange to which the Corporation would be
a party, or a sale of all or substantially all of the assets of the Corporation,
the Board shall have an obligation to submit such proposal (with or without
their recommendation) to all shareholders for their consideration and vote. If
such proposal is not submitted to the shareholders for a vote within 120 days
after such proposal is delivered in writing to the full Board (or such longer
time as shall be required solely by reason of the necessity to comply with
applicable law, including laws and regulations administered by the Securities
and Exchange Commission and those related to the Hart-Scott-Rodino Act), then
for the limited purpose of this subsection, the size of the Board shall be
increased to fifteen (15) members (or, in the case of a Board which is larger or
smaller than thirteen (13) members, such number as required to accommodate the
appointment of two additional members) and the holders of the Preferred Stock
shall have the right to elect two (2) Additional Directors for the limited
purpose of recommending and submitting such plan to the shareholders, after
which time such Additional Directors shall cease to serve and the Board shall
automatically revert to its size immediately prior to the appointment of
Additional Directors pursuant to this Section VI,D,4(b).
5. Removal of Directors. The holders of Common Stock may at any
--------------------
time, with or without cause, remove any Common Director from office. The
holders of Preferred Stock may at any time, with or without cause, remove any
Preferred Director from office.
E. LIQUIDATION RIGHTS. In the event of any liquidation, dissolution or
------------------
winding up of the Corporation, whether voluntary or involuntary, the funds and
assets of the Corporation that may be legally distributed to the Corporation's
stockholders (the "Available Funds and Assets") shall be distributed to
stockholders in the following manner:
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1. Preferred Stock. Each share of Preferred Stock then outstanding
---------------
shall entitle its holder to be paid, out of the Available Funds and Assets, and
prior and in preference to any payment or distribution (or any setting apart of
any payment or distribution) of any Available Funds and Assets on any shares of
Common Stock or any other class or series of capital stock of the Corporation,
an amount per share (the "Liquidation Preference") equal to the Original Issue
Price (as adjusted from time to time) plus all accrued but unpaid Preferred
Dividends on such share of Preferred Stock. If the Available Funds and Assets
are insufficient to permit the payment to holders of the Preferred Stock their
full preferential amount described in this subsection, then the Available Funds
and Assets shall be distributed among the holders of the then outstanding
Preferred Stock pro rata according to the number of shares of Preferred Stock
held by each.
2. Remaining Assets. If there are any Available Funds and Assets
----------------
remaining after the payment or distribution (or the setting aside for payment or
distribution) to the holders of the Preferred Stock of their full preferential
amounts described in Section VI, B, 1, then all such remaining Available Funds
and Assets shall be distributed among the holders of the then outstanding Common
Stock pro-rata according to the number of shares of Common Stock held by each.
F. REDEMPTION OF PREFERRED STOCK. All or a portion of the Preferred
------------------------------
Stock shall be redeemed by the Corporation as provided in this Section VI, F. In
all events, the redemption price for each redeemed share shall be the Original
Issue Price (as adjusted from time to time) plus any accrued but unpaid
Preferred Dividends with respect to such share.
1. At the option of the holder, all of such holder's Preferred Stock
shall be redeemed at any time on or after the seventh anniversary of the
Original Issue Date. If redemption occurs pursuant to this subsection, the
Corporation shall redeem as many of such shares for cash as possible without
violating any loan covenants to which the Company is subject, applicable law, or
the terms of any contract which was approved by at least a three-quarters
affirmative vote of the Board. If the Corporation is unable to redeem all of
such Preferred Stock for cash, such holder, at its option, may elect not to
require the redemption of all or a portion of the Preferred Stock, or may
require the Corporation, subject to compliance with applicable law, to redeem
the shares of Preferred Stock not redeemed for cash in exchange for a senior
subordinated note (a "Subordinated Note") of the Corporation (i) ranking pari
passu with any other issue of the Corporation's most senior subordinated notes
outstanding; (ii) bearing interest, payable quarterly, at the rate per annum
equal to 5.5% above the yield on five-year treasury notes in effect at the close
of business on the day immediately prior to the issuance of the Subordinated
Note; (iii) which shall permit the prepayment of principal at any time, without
premium or penalty; and (iv) which if issued pursuant to this Section VI,F,1,
shall provide for principal payments to be due in three equal installments: on
the date of redemption, on the first anniversary of the issuance of such
Subordinated Note, and on the second anniversary of the issuance of such
Subordinated Note. Each Subordinated Note issued by the Company shall be in the
form of note attached to the Corporation's Restated Bylaws.
2. At the option of the holder, all of such holder's Preferred
Stock shall be redeemed at any time during which the holders of Preferred Stock
are entitled to elect Additional
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<PAGE>
Directors under Section VI, D, 4(a) by exchanging such Preferred Stock for a
Subordinated Note, the principal of which shall be due in three equal
installments on the seventh, eighth and ninth anniversaries of the Original
Issue Date.
3. At the option of the Corporation (as determined solely by the
Common Directors), all or a portion of the Preferred Stock may be redeemed on or
after the seventh anniversary of the Original Issue Date, but only in the event
the only form of consideration paid by the Corporation for such shares so
redeemed is cash. Any holder of shares of Preferred Stock shall have thirty
(30) days after receipt of notice from the Corporation that his shares will be
redeemed pursuant to this subsection to convert such shares of Preferred Stock
to shares of Common Stock in accordance with these Restated Articles.
4. At any time Preferred Stock is redeemed in exchange for one or
more Subordinated Notes under Sections VI,F,1 or VI,F,2, the holders of the
Preferred Stock shall collectively be entitled to retain at least one share of
Preferred Stock (thus retaining all rights under Section V, D hereof), until
such Subordinated Notes are paid in full. The Corporation shall not be entitled
to redeem the remaining share or shares of Preferred Stock until such
Subordinated Notes have been paid in full, but upon payment in full of such
notes, the Corporation shall thereupon be (or become) entitled to redeem the
remaining share or shares of Preferred Stock.
G. PREFERRED STOCK PROTECTIVE PROVISIONS. So long as any shares of
-------------------------------------
Preferred Stock remain outstanding, the Corporation shall not, without the
approval by vote or written consent of a majority of the Preferred Directors, do
the following:
1. amend its Articles of Incorporation in a manner that would
require the approval of the holders of Preferred Stock under O.C.G.A. (S)14-2-
1004, as such Code section exists on the date on which these Articles are
restated, or amend its Bylaws in a manner that would adversely affect the
rights, preferences, or privileges of, or restrictions on, the Preferred Stock;
or
2. reclassify any outstanding shares of capital stock of the
Corporation into shares having rights, preferences or privileges senior to or on
parity with the Preferred Stock; or
3. authorize or issue any other equity securities having rights or
preferences senior to or on parity with the Preferred Stock, other than in
connection with the modification of subordinated notes in existence on the
Original Issue Date or securities issued as part of bank financings; or
4. engage in any transaction or series of related transactions which
would result in a change of ownership of more than 25% of the Corporation's
equity securities; or
5. sell more than 25% of the Corporation's operating assets in a
single transaction or series of related transactions; or
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6. enter into any proposed transaction or related series of
transactions in which the Corporation issues securities, the result of which has
the effect of issuing Common Stock at less than the Original Issue Price.
H. CONVERSION RIGHTS OF PREFERRED STOCK. Shares of Preferred Stock are
------------------------------------
convertible into shares of Common Stock as follows:
1. Except as provided in Section VI, H, 2 below, each share of
Preferred Stock is convertible at the option of the holder into one share of
Common Stock, upon written notice to the Corporation (provided that the
Correlating Warrant for such share of Preferred Stock has not been exercised).
2. If a conversion is to be made at any time on or after the seventh
anniversary of the Original Issue Date, then each share of Preferred Stock is
convertible at the option of the holder into the "Adjusted Number" (as
hereinafter defined) of shares of Common Stock (provided that the Correlating
Warrant for such share of Preferred Stock has not been exercised); provided that
as a result of such conversion (together with any other simultaneous
conversions) all shares of Common Stock issuable pursuant to the Warrant have
been issued. The Adjusted Number shall be an amount equal to the total number
of shares of Preferred Stock being converted multiplied by a fraction, the
-------------
denominator of which is the Exercise Price (as defined in the Warrant) then in
effect, and the numerator of which is the Original Issue Price (as defined in
the Warrant); provided, that in no event shall shares of Preferred Stock be
convertible into a number of shares of Common Stock which is greater than the
total number of shares of Common Stock which may be issued pursuant to the
Warrant, taking into account all prior and simultaneous conversions and
exercises under the Warrant).
3. The Corporation shall, as soon as practicable after shares of
Preferred Stock are surrendered for conversion, issue and deliver to such holder
of Preferred Stock, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled in accordance with this
Section VI, H. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Preferred Stock to be converted, and the holder exercising such right of
conversion shall be treated for all purposes as the record holder of such shares
of Common Stock as of such date (or, if such shares of Preferred Stock are
surrendered on a day other than a day on which the Corporation is open for
business, then such holder shall be treated for all purposes as the record
holder of such shares of Common Stock as of the close of business on the next
succeeding day on which the Corporation is open for business). Upon any such
conversion, the Correlating Warrant for each such share of Preferred Stock so
converted shall be delivered, automatically cancelled, and each such Correlating
Warrant shall be of no further force or effect.
4. To the extent that any shares of Preferred Stock remain
outstanding after such time as the Warrant has either expired or been fully
exercised, such shares of Preferred Stock shall retain all rights granted to
such Preferred Stock under these Restated Articles of Incorporation except for
the right to convert set forth in this Section VI, H.
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VII.
A director of the Corporation shall not be liable to the Corporation or its
shareholders for monetary damages for breach of duty of care or other duty as a
director, except to the extent such exemption from liability or limitation
thereof is not permitted under the Georgia Business Corporation Code as
currently in effect or as the same may be hereafter amended. No amendment,
modification or repeal of this Article shall adversely affect any right or
protection of a director that exists at the time of such amendment,
modification, or repeal.
VII.
Each person who is or was or had agreed to become a director or officer of
the Corporation, and each such person who is or was serving or who had agreed to
serve at the request of the Board or an officer of the Corporation as an
employee or agent of the Corporation or as a director or officer of another
corporation, partnership, limited liability company, joint venture, trust or
other enterprise (including the heirs, executors, administrators or estate of
such person), shall be indemnified by the Corporation to the full extent
permitted by the Georgia Business Corporation Code or any other applicable laws
as presently or hereafter in effect. No amendment, modification or repeal of
this Article shall adversely affect any right or protection of a director or
officer that exists at the time of such amendment, modification or repeal.
IX.
Any issued and outstanding shares of stock of the Corporation which are
repurchased by the Corporation shall become treasury shares which shall be held
in treasury by the Corporation until resold or retired and cancelled in the
discretion of the Board. Any treasury shares which are retired and cancelled
shall constitute authorized but unissued shares.
X.
These Restated Articles of Incorporation contain amendments which require
shareholder approval. These Restated Articles of Incorporation were duly
approved by the shareholders of the Corporation on May 6, 1997, in accordance
with the provisions of O.C.G.A . (S)14-2-1003, and all other applicable laws.
None of the holders of shares was entitled to vote as a class thereon.
10
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XI.
These Restated Articles of Incorporation amend, restate and supersede the
Corporation's Third Restated Articles of Incorporation, as amended.
LAW COMPANIES GROUP, INC.
[CORPORATE SEAL] By: /s/ Bruce C. Coles
------------------
Bruce C. Coles
Chairman, CEO and President
Attested by: /s/ Darryl B. Segraves
------------------------------
Darryl B. Segraves
Secretary
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<PAGE>
EXHIBIT 3.02
BYLAWS
OF
LAW COMPANIES GROUP, INC.
A GEORGIA CORPORATION
AS RESTATED ON
MAY 6, 1997
<PAGE>
ARTICLE ONE
OFFICES
1.1 The Corporation shall maintain a registered office and shall appoint a
registered agent at such office. The registered office of the
Corporation and the registered agent of the Corporation at such office
may be changed from time to time by the Board of Directors in the manner
specified by law.
1.2 The Corporation may have offices at such place or places (within or
without the State of Georgia) as the Board of Directors may from time to
time appoint or the business of the Corporation may require or make
desirable.
ARTICLE TWO
SHAREHOLDERS' MEETINGS
2.1 All meetings of the shareholders shall be held at the principal offices
of the Corporation, or at such place as may be fixed from time to time
by the Board of Directors.
2.2 An annual meeting of the shareholders shall be held in May in each year
at the principal office of the Corporation or at such other time and
place as may be fixed from time to time by the Board of Directors. At
such meeting, or at a substitute annual meeting of shareholders or at a
special meeting of shareholders, the shareholders shall elect by a
plurality vote a Board of Directors and transact such other business as
may properly be brought before the meeting. Unless a shareholder so
demands, the election of directors need not be by written ballot.
2.3 Unless otherwise prescribed by law or by the Restated Articles of
Incorporation of the Corporation (as such Articles may be amended from
time to time, the "Articles of Incorporation"):
(a) Special meetings of the shareholders, for any purpose or purposes,
may be called by the Chairman of the Board or the Chief Executive
Officer and shall be called by the Chairman of the Board, Chief
Executive Officer, or the Secretary when so directed by the Board
of Directors or required under the Articles of Incorporation, or
at the request, in writing, of a majority of the directors, or at
the request, in writing, of shareholders owning at least a
majority in amount of the entire capital stock of the Corporation
issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting.
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(b) Special meetings of the holders of Common Stock (as defined in the
Articles of Incorporation), for any purpose or purposes, shall be
called by the Chairman of the Board, the Chief Executive Officer,
or the Secretary, at the written request of any two or more Common
Directors (as defined in the Articles of Incorporation), or at the
written request of holders of a majority in amount of the issued
and outstanding Common Stock. Such request shall state the purpose
or purposes of the proposed meeting.
(c) Special meetings of the holders of Preferred Stock (as defined in
the Articles of Incorporation), for any purpose or purposes, shall
be called by the Chairman of the Board, the Chief Executive
Officer, or the Secretary, at the written request of any two or
more Preferred Directors (as defined in the Articles of
Incorporation), or at the written request of holders of a majority
in amount of the issued and outstanding Preferred Stock. Such
request shall state the purpose or purposes of the proposed
meeting.
2.4 Except as otherwise required by statute or the Articles of
Incorporation, written notice of each meeting of the shareholders,
whether annual or special, shall be served, either personally or by
mail, upon each shareholder of record entitled to vote at such meeting,
not less than ten, nor more than fifty days, before such meeting. If
mailed, such notice shall be directed to a shareholder at his post
office address last shown on the records of the Corporation. Notice of
any special meeting of shareholders shall state the purpose or purposes
for which the meeting is called. Notice of any meeting of shareholders
shall not be required to be given to any shareholder who, in person or
by his attorney thereunto authorized, either before or after such
meeting, shall waive such notice. Attendance of a shareholder at a
meeting, either in person or by proxy, shall of itself constitute waiver
of notice and waiver of any and all objections to the place of the
meeting, the time of the meeting, and to the manner in which it has been
called or convened, except when a shareholder attends a meeting solely
for the purpose of stating, at the beginning of the meeting, any such
objection or objections to the transactions of business. The notice of
any adjourned meeting need not be given otherwise than by announcement
at the meeting at which the adjournment is taken.
2.5 The holders of a majority of the stock issued and outstanding and
entitled to vote, present in person or represented in proxy, shall be
requisite and shall constitute a quorum at all meetings of the
shareholders for the transaction of business, except as otherwise
provided by law, by the Articles of Incorporation or by these Bylaws.
If. however, such majority shall not be present or represented at any
meeting of the shareholders, the shareholders entitled to vote thereat,
present in person or by proxy, shall have power to adjourn the meeting
from time to time, without notice other than announcement at the
meeting, until the requisite amount of voting stock shall be present. At
such adjourned meeting at which a quorum shall be present in person or
by proxy, any business may be transacted that might have been transacted
at the meeting as originally called.
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2.6 At every meeting of the shareholders, including meetings of shareholders
for the election of directors, any shareholder having the right to vote
shall be entitled to vote in person or by proxy, but no proxy shall be
voted after eleven months from its date unless said proxy provides for a
longer period. Each shareholder shall have one vote for each share of
stock having voting power, registered in his name on the books of the
Corporation. If a quorum is present, the affirmative vote of the
majority of the shares represented at the meeting and entitled to vote
on the subject matter shall be the act of the shareholders, except as
otherwise provided by law, by the Articles of Incorporation or by these
Bylaws.
2.7 Whenever the vote of shareholders at a meeting thereof is required or
permitted to be taken in connection with any corporate action, the
notice of the meeting, the meeting and vote of the shareholders may be
dispensed with, if all of the shareholders who would have been entitled
to vote upon the action if such meeting were held shall consent in
writing to such corporate action being taken.
ARTICLE THREE
DIRECTORS
3.1 Except as may be otherwise provided by any legal agreement among
shareholders, or by the Articles of Incorporation, or by these Bylaws,
the property, business and affairs of the Corporation shall be managed
under the direction of its Board of Directors. In addition to the powers
and authority by these Bylaws expressly conferred upon it, the Board of
Directors may exercise all such powers of the Corporation and do all
such lawful acts and things as are not by law, by any legal agreement
among shareholders, by the Articles of Incorporation or by these Bylaws
directed or required to be exercised or done by the shareholders.
3.2 The Board of Directors shall consist of an odd number of members, and
shall consist of at least nine members, the precise number to be fixed
by resolution of the directors from time to time. Except as specifically
noted below or in the Articles of Incorporation, each director (whether
elected at an annual meeting of shareholders or otherwise) shall hold
office until the annual meeting of shareholders held next after his
election and until a qualified successor shall be elected, or until his
earlier death, resignation, incapacity to serve or removal. Directors
need not be shareholders. Outside directors shall not be considered to
be employees even though they are compensated for their services.
Outside directors may be compensated as determined from time to time by
resolution of the Board of Directors. No person shall serve as a
director until he reaches the age of 25 or after he reaches the age of
75.
3.3 If any vacancy shall occur among the directors by reason of death,
removal, resignation, incapacity to serve, increase in the authorized
number of directors, removal, or otherwise,
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the remaining directors shall continue to act, and such vacancies may be
filled, subject to the requirements of the Articles of Incorporation,
for the unexpired term, in the case of a Preferred Director vacancy, by
a majority of the holders of a majority of the Preferred Stock, and in
the case of a Common Director vacancy, by a majority of the remaining
Common Directors, in either case, though less than a quorum, and, if not
theretofore filled by such action, may be filled by the shareholders at
any meeting held during the existence of such vacancy subject to the
requirements of the Articles of Incorporation. Notwithstanding the
foregoing, in the event there is a vacancy in the position of "Swing
Director" (as defined in the Articles of Incorporation), the Preferred
Directors shall maintain their right to approve the person nominated to
fill such vacancy, which approval shall not be unreasonably withheld. A
director may resign at any time and acceptance of his resignation shall
not be necessary to make it effective. Such resignation shall take
effect at the time stated.
3.4 Directors who are also employees of the Corporation, and directors who
are also holders of Preferred Stock shall not be allowed additional
compensation (in addition to their regular employment compensation) for
attendance at regular or special meetings of the Board of Directors or
of any special or standing committees thereof.
ARTICLE FOUR
COMMITTEES
4.1(a) The Board of Directors, by resolution adopted by a three-quarters
majority of the entire Board, may designate an Executive Committee (and
other committees) of not fewer than two directors, and shall designate a
chairman. The Executive Committee shall include the Chief Executive
Officer (or, only if there are more Preferred Directors on the Board
than Common Directors, one of the Common Directors) and one of the
Preferred Directors, and such other directors as may be selected by
majority vote of the Board of Directors; provided, however, no action of
the Executive Committee shall be taken without the affirmative vote of
the Chief Executive Officer (or such Common Director, as applicable) and
such Preferred Director. The Chairman of the Board and the Chief
Executive Officer shall be ex-officio members of the other committees,
which shall have and may exercise such powers as delegated to it by the
Board of Directors in the management of the property, business and
affairs of the Corporation, except the powers denied to the Executive
Committee by these Bylaws.
4.1(b) The Board shall have power at any time by a three-quarters majority vote
of the entire Board of Directors to remove any member of any committee,
including the Executive Committee, with or without cause, and to fill
vacancies in and to dissolve the Executive Committee.
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4.1(c) Each member of the Executive Committee shall hold office until the first
meeting of the Board of Directors after the annual meeting of
shareholders next following his election and until his successor member
of the Executive Committee is elected, or until his death, resignation
or removal, or until he shall cease to be a director.
4.1(d) During the intervals between the meetings of the Board of Directors, the
Executive Committee may exercise all of the powers of the Board of
Directors in the management of property, business, and affairs of the
Corporation, including all powers herein or in the Articles of
Incorporation specifically granted to the Board of Directors, and may
authorize the seal of the Corporation to be affixed to all papers which
may require it; provided, however, that the Executive Committee shall
not have authority as to the following matters:
(1) The voluntary dissolution of the Corporation or a revocation of any
such voluntary dissolution;
(2) The merger or consolidation of the Corporation;
(3) The sale, lease or exchange of 25% or more of the Corporation's
operating assets in a single transaction or series of related
transactions;
(4) The recommendation to the shareholders of any amendment to the
Articles of Incorporation;
(5) The removal of Directors or the filling of vacancies on the Board;
(6) The designation of any committee of Directors or the filling of any
vacancies in any such committee;
(7) The fixing of compensation of the Directors for serving on the
Board or any committee of Directors;
(8) The amendment or repeal of these Bylaws, or the adopting of new
Bylaws;
(9) The amendment or repeal of any resolution of the Board which by its
terms shall not be so amendable or repealable;
(10) The declaration or authorization of the payment of any dividend in
cash, property or stock, except with respect to any dividends
payable with respect to Preferred Stock;
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(11) Any action which, by virtue of the Articles of Incorporation or any
agreement with the Corporation, must be taken by a vote of the
Common Directors or the Preferred Directors.
(12) Such other matters as a three-fourths majority of the Board shall
assign to another committee of the Board or reserve to the Board
itself.
4.1(e) The Executive Committee shall meet from time to time on call of the
Chairman of the Board or the Chief Executive Officer (or, only if there
are more Preferred Directors on the Board than Common Directors, by one
Common Director), or of any two or more members of the Executive
Committee. Meetings of the Executive Committee may be held at such place
or places within or without the State of Georgia, as the Executive
Committee shall determine or as may be specified or fixed in the
respective notices or waivers of such meetings. The Executive Committee
may fix its own rules of procedure including provision for notice of its
meetings. It shall keep a record of its proceedings and shall report
these proceedings to the Board of Directors at the meeting thereof held
next after they have been taken, and all such proceedings shall be
subject to revision or alteration by the Board of Directors, except
where action shall have been taken by the Corporation or third parties
have relied upon such proceedings before such revision or alteration.
4.1(f) The Executive Committee shall act by majority vote of its members,
subject to the requirements of Section 4.1(a).
4.1(g) The Board of Directors, by resolution adopted in accordance with
paragraph (a) of this section, may designate one or more directors as
alternate members of any such committee, who may act in the place and
stead of any absent member or members at any meeting of such committee.
ARTICLE FIVE
MEETINGS OF THE BOARD OF DIRECTORS
5.1 The Board of Directors shall hold at least four regular meetings each
year.
5.2 Regular meetings of the Board of Directors may be held without notice at
such time and place (within or without the State of Georgia) as shall
from time to time be determined by the Board of Directors.
5.3 Special meetings of the Board of Directors may be called by the Chairman
of the Board or the Chief Executive Officer on not less than two days
notice by mail, telephonically, via facsimile, or by telegram, cablegram
or personal delivery to each director and shall be
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called by the Chairman of the Board, the Chief Executive Officer, or the
Secretary in like manner and on like notice on the written request of a
majority of directors. In addition, up to one special meeting of the
Board of Directors in each fiscal year may be called by at least one-
third of the Preferred Directors in like manner and on like notice.
Special meetings of the Common Directors shall be called by the Chairman
of the Board, the Chief Executive Officer, or the Secretary, in like
manner and on like notice on the written request of at least one-half of
the Common Directors. Special meetings of the Preferred Directors shall
be called by the Chairman of the Board, the Chief Executive Officer, or
the Secretary, in like manner and on like notice on the written request
of at least one-half of the Preferred Directors. Any such special
meeting shall be held at such time and place (within or without the
State of Georgia) as shall be stated in the notice of the meeting.
5.4 Notice of any special meeting of the Board of Directors, the Common
Directors, or the Preferred Directors, shall state the purposes thereof.
5.5 At all meetings of the Board of Directors, the presence of a majority of
the authorized number of directors (and with respect to meetings of the
Common Directors and Preferred Directors, a majority of such directors
then in office) shall be necessary and sufficient to constitute a quorum
for the transaction of business. The act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of
the Board of Directors (or the Common Directors or the Preferred
Directors, as applicable), except as may be otherwise specifically
provided by law, by the Articles of Incorporation or by these Bylaws. In
the absence of a quorum at any such meeting, a majority of the directors
present at any meeting may adjourn the meeting from time to time until a
quorum be present. Notice of any adjourned meeting need only be given by
announcement at the meeting at which the adjournment is taken.
5.6 Action by Consent. Any action required or permitted to be taken at a
meeting of the Board of Directors or of any committee thereof, or by the
Common Directors, or by the Preferred Directors, may be taken without a
meeting if written consent setting forth the action so taken shall be
signed by all the Directors, or all the members of the committee, or all
Common Directors, or all Preferred Directors, as the case may be, and be
filed with the minutes of the proceedings of the Board of Directors or
such committee. Such consent shall have the same force and effect as a
unanimous vote.
5.7 Action by Telephone Conference Call. Members of the Board of Directors,
or any committee designated by the Board of Directors, or the Common
Directors, or the Preferred Directors, may participate in a meeting of
the Board or such committee, or a meeting of the Common Directors or the
Preferred Directors, as the case may be, by means of conference
telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other and
participation in a meeting pursuant to this section shall constitute
presence in person at such meeting.
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5.8 Directors may not vote by proxy at a meeting of the Board, the Common
Directors, or the Preferred Directors, and each director shall have one
vote on each question.
ARTICLE SIX
OFFICERS
6.1 The Board of Directors at its first meeting after each annual meeting of
shareholders shall elect by a majority vote a Chairman of the Board, a
President, a Secretary and a Treasurer. The Board at its first such
meeting shall also designate by a majority vote a Chief Executive
Officer. The Executive Committee or any member of the Board may from
time to time nominate to the Board of Directors other officers including
one or more Executive Vice Presidents, one or more Senior Vice
Presidents, one or more Vice Presidents, one or more Assistant Vice
Presidents, one or more Assistant Treasurers, and one or more Assistant
Secretaries and such other officers as the Executive Committee or
members of the Board shall deem necessary. The Board of Directors shall
elect any or all of such other officers from such nominations and such
other officers shall hold their offices for such terms as shall be
determined by the Board of Directors and shall exercise such powers and
perform such duties as shall be determined from time to time by the
Board of Directors. Officers may be elected and any vacancies may be
filled by election at any meeting of the Board. The Chief Executive
Officer shall have the authority to appoint such Assistant Secretaries
and Assistant Treasurers as he may deem necessary, subject to
ratification at the next regularly scheduled meeting of the Board.
6.2 Any person may hold any two or more offices, except that no person may
hold both the offices of President and Secretary. No officer need be a
shareholder.
6.3 The total compensation of all the officers of the Corporation shall be
fixed by the Board of Directors. The Board may delegate to a committee
of directors the power to fix or approve the total compensation of
officers. No person who is also a director shall vote as a director or
member of a committee in the determination of the amount of compensation
payable to him.
6.4 Each officer of the Corporation shall hold office until his successor is
chosen or until his earlier resignation, death or removal, or the
termination of his office. Notwithstanding any powers or authority given
to the Executive Committee, the Chairman of the Board, the Chief
Executive Officer, the President, the Secretary and the Treasurer may be
removed only by the Board of Directors. Any other officer may be removed
by the Board or by the Executive Committee. Any such removal by the
Board or by the Executive Committee may be with or without cause. An
officer may resign at any time and acceptance of the resignation shall
not be necessary to make it effective. Such resignation shall take
effect at the time stated.
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CHAIRMAN OF THE BOARD
6.5 The Board shall elect a Chairman of the Board by a majority vote from
their members at the first board meeting subsequent to the annual
meeting of shareholders. He shall call, or shall direct the Secretary to
call, all regular meetings of the Board and shareholders and shall
preside at such meetings and perform such other duties as these Bylaws
or the Board may prescribe. He shall be ex-officio a member of all Board
committees. The Board of Directors at any time and from time to time may
elect by a majority vote an Acting Chairman or a Temporary Chairman of
the Board. The Acting Chairman or Temporary Chairman shall have the
powers and perform the duties of the Chairman while acting in that
capacity.
DUTIES OF THE CHIEF EXECUTIVE OFFICER
6.6(a) The Chief Executive Officer shall have general and active supervision
and control of the property, business and affairs of the Corporation.
6.6(b) Without limiting the generality of the foregoing, the Chief Executive
Officer shall:
(1) Have authority to designate, appoint, and remove, with or without
cause, any agent or employee of the Corporation, but he shall have
no authority to appoint or remove any director or any officer
elected by the Board of Directors, except as provided in Section
6.1;
(2) See that all resolutions, orders and directives of the Board are
carried into effect;
(3) Be an ex-officio member of all committees of the Board;
(4) Keep the Board and any committees of the Board fully informed as to
the affairs of the Corporation and shall freely consult them
concerning the affairs of the Corporation;
(5) Have authority to sign, execute and deliver, with any other
appropriate officer (if required), corporate instruments of
conveyance, instruments of indebtedness and obligation (including
bonds), and contracts and other instruments and documents which may
be authorized by the Board, except in cases where the signing,
execution, or delivery thereof shall have been delegated by these
Bylaws or by the Board to some other officer or agent of the
Corporation, or shall be required by law otherwise to be signed,
executed or delivered; and
(6) Perform all duties incident to the office of the Chief Executive
Officer as are specifically imposed upon him by law and such other
duties as the Board may prescribe from time to time.
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DUTIES OF THE PRESIDENT
6.7(a) The President shall have those duties assigned to him from time to time
by the Board of Directors. In the event of the death or disability of
the Chairman of the Board or the Chief Executive Officer, or when
specifically authorized by the Board of Directors, the President shall
have the powers and perform the duties of the Chairman of the Board
and/or the Chief Executive Officer.
6.7(b) Without limiting the generality of the foregoing, the President shall:
(1) Direct, administer and coordinate the activities of the Corporation
in accordance with policies, goals, and objectives established by
the Chief Executive Officer and the Board of Directors, and assist
the Chief Executive Officer in the development of corporate
policies and goals that cover Corporation operations, personnel,
financial performance and growth;
(2) Direct corporate operations to achieve budgeted profit results and
other financial criteria;
(3) Direct the development and preparation of short-term plans and
budgets based upon the broad corporate goals and growth objectives
and recommends their adoption to the Chief Executive Officer and
Board of Directors;
(4) Develop and maintain a sound plan of Corporate organization and
establish policies to insure adequate management development and to
provide for capable management successions;
(5) Direct the development and installation of corporate procedures and
controls to maintain communication and adequate flow of information
and to maintain adequate management control and direction of the
enterprise;
(6) Develop and establish corporate operating policies consistent with
the Chief Executive Officer's broad policies and objectives and
ensure the adequate execution thereof;
(7) Appraise and evaluate the results of overall operations regularly
and systematically and report these results to the Chief Executive
Officer and Board of Directors;
(8) Direct the development and establishment of adequate and equitable
personnel policies, salary administration policies, and employee
benefit plans throughout the Corporation;
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(9) Assume other special activities and responsibilities from time to
time as directed by the Chief Executive Officer; and
(10) Perform all duties incident to the office of President as are
specifically imposed upon him by law and such other duties the
Board may prescribe from time to time.
VICE PRESIDENTS
6.8(a) The Vice Presidents shall perform such duties as are generally performed
by vice presidents. One or more Vice Presidents may be designated as an
Executive Vice President. The Vice Presidents shall perform such other
duties and exercise such other powers as the Board of Directors, the
Chief Executive Officer, or the President shall request or delegate. The
Assistant Vice Presidents shall have such powers, and shall perform such
duties, as may be prescribed from time to time by the Board of
Directors, the Chief Executive Officer, or the President.
6.8(b) In the absence of the President, or in the event of his death or
inability to act, the powers, duties and functions of his office shall
be temporarily performed and exercised by the Chief Executive Officer.
If the office of Chief Executive Officer is vacant, then one or more of
the Vice Presidents as prescribed or directed by the Board shall assume
such powers, duties and functions and when acting in such capacity the
Chief Executive Officer or such Vice President(s) shall be subject to
all restrictions upon the President.
SECRETARY
6.9(a) The Secretary shall attend all sessions of the Board of Directors and
all meetings of the shareholders and record all votes and the minutes of
all proceedings in books to be kept for that purpose and shall perform
like duties for the Board committee when required. He shall give, or
cause to be given, any notice required to be given, or cause to be
given, any notice required to be given of any meetings of the
shareholders and of the Board of Directors, and shall perform such other
duties as may be prescribed by the Board of Directors, the Chief
Executive Officer, or the President. The Assistant Secretary or
Assistant Secretaries shall, in the absence or disability of the
Secretary, or at his request, perform his duties and exercise his powers
and authority.
6.9(b) He shall assure that minutes of all Board, committee or shareholders
meetings shall be reported as outlined above and submitted in final form
to the proper parties in due course after meetings of the Board,
committees or shareholders.
6.9(c) He shall maintain custody of the seal of the Corporation and see that it
is affixed to all corporate documents required to be executed under
seal.
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6.9(d) He shall have custody of the general records and documents of the
Corporation other than those required to be kept in the custody of the
Treasurer and/or the Controller, pursuant to any directive of the Board,
the Chief Executive Officer, or the President consistent with these
Bylaws.
TREASURER
6.10(a) The Treasurer shall have charge of and be responsible for all funds,
securities, receipts and disbursements of the Corporation and shall
deposit, or cause to be deposited, in the name of the Corporation, all
monies or other valuable effects, in such banks, trust companies or
other depositories as shall, from time to time, be selected by the Board
or the Chief Executive Officer,.
6.10(b) He shall keep accurate records of same and keep the Chief Executive
Officer, the President and the Board fully informed as to all matters
relating to the business and affairs of the Corporation for which he is
responsible.
6.10(c) He shall render to the Chief Executive Officer, the President and the
Board of Directors, whenever requested, an account of the financial
condition of the Corporation.
6.10(d) In general, he shall perform all duties incident to the office of a
Treasurer of a Corporation, and such other duties as may be assigned to
him by the Board of Directors, the Chief Executive Officer, or the
President.
ABSENCE OF OFFICER
6.11 In case of the absence of any officer of the Corporation, or for any
other reason that the Board of Directors may deem sufficient, the Board
of Directors may by a majority vote delegate, for the time being, any or
all of the powers or duties of such officer to any officer or to any
director pursuant to the requirements of these Bylaws.
ARTICLE SEVEN
CAPITAL STOCK
7.1 The interest of each shareholder shall be evidenced by a certificate or
certificates representing shares of stock of the Corporation which shall
be in such form as the Board of Directors may from time to time adopt
and shall be numbered and shall be entered in the books of the
Corporation as they are issued. Each certificate shall exhibit the
holder's name, the number of shares and class of shares and series, if
any represented thereby, a statement that the Corporation is organized
under the laws of the State of Georgia, and the par value of each share
or a statement that the shares are without par value. Each
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certificate shall be signed by the President or a Vice President and the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary and shall be sealed with the seal of the Corporation;
provided, however that where such certificate is signed by a transfer
agent, or by a transfer clerk acting on behalf of the Corporation, and a
registrar, the signature of any such officer and such seal may be
facsimile. In case any officer or officers who shall have signed, or
whose 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,
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
delivered as though the person or persons who signed such certificates
or whose facsimile signatures shall have been used thereon had not
ceased to be such officer or officers.
7.2 The Corporation shall keep a record of the shareholders of the
Corporation which readily shows, in alphabetical order or by
alphabetical index, and by classes of stock, if there be more than one
class, the names of the shareholders entitled to vote, with the address
of, and the number of shares held by each, the date on which the
certificate was issued and the date on which the certificate was
canceled, if such be the case. Said record shall be made available at
all meetings of the shareholders.
7.3(a) Transfers of stock shall be made on the books of the Corporation only by
the person named in the certificate or by his legal representative, or
by an agent or his attorney duly constituted in writing, and upon
surrender of the certificate therefor, or in the case of a certificate
alleged to have been lost, stolen or destroyed, upon compliance with the
provisions of Section 7.7 of these Bylaws.
7.3(b) The Board may make or authorize the making of additional rules and
regulations consistent with law and these Bylaws, which it may deem
expedient for the issue, transfer and registration or transfer of
securities of the Corporation.
7.4(a) For the purpose of determining shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof, or
entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the Board of
Directors may provide that the stock transfer books shall be closed for
a stated period but not to exceed fifty days. If the stock transfer
books shall be closed for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of shareholders, such
books shall be closed for at least ten days immediately preceding such
meeting.
7.4(b) In lieu of closing the stock transfer books, the Board of Directors may
fix in advance a date as the record date for any such determination of
shareholders, such date to be not more than fifty days, and in case of a
meeting of shareholders, not less than ten days, prior
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to the date on which the particular action, requiring such determination
of shareholders, is to be taken.
7.5 The Corporation shall be entitled to treat the holder of any share of
stock of the Corporation as the person entitled to vote such share, to
receive any dividend or other distribution with respect to such share,
and for all other purposes and accordingly shall not be bound to
recognize any equitable or other claim to or interest in such share on
the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by law.
7.6 The Board of Directors may appoint one or more transfer agents and one
or more registrars and may require each stock certificate to bear the
signature or signatures of a transfer agent or a registrar or both.
7.7 Any person claiming a certificate of stock to be lost, stolen or
destroyed shall make an affidavit or affirmation of the fact in such
manner as the Board of Directors may require and shall, if the directors
so require, give the Corporation a bond of indemnity in form and amount
and with one or more sureties satisfactory to the Board of Directors,
whereupon an appropriate new certificate may be issued in lieu of the
one alleged to have been lost, stolen or destroyed.
ARTICLE EIGHT
PROVISIONS RELATING TO PREFERRED STOCK;
SUBORDINATED NOTE
8.1 The holders of the Preferred Stock, or any affiliate thereof, may enter
into contractual relationships with the Corporation only upon approval
by a majority of the Common Directors; provided, that the foregoing
shall not limit the rights of either the holders of Preferred Stock or
the Preferred Directors under Section VI,D,4(b) of the Articles of
Incorporation.
8.2 Benchmarks shall be determined in accordance with the procedures set out
in the attached Exhibit A.
8.3 As used in the Articles of Incorporation and these Bylaws, a "Preferred
Stock Event" shall mean the occurrence of any of the following: (1) the
Corporation fails to meet 80% of its quarterly Benchmarks in any four
consecutive fiscal quarters commencing with third quarter, 1997; (2) the
Corporation fails for the four fiscal quarters ended June 30, 1998, to
meet 70% of its cumulative Benchmarks in such four fiscal quarters; (3)
the Corporation fails for the four fiscal quarters ended September 30,
1998, to meet 72.5% of its cumulative Benchmarks in such four fiscal
quarters; (4) the Corporation fails for the
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four fiscal quarters ended December 31, 1998, to meet 75% of its
cumulative Benchmarks in such four fiscal quarters; (5) the Corporation
fails for the four fiscal quarters ended March 31, 1999, to meet 77.5%
of its cumulative Benchmarks in such four fiscal quarters; (6) the
Corporation fails to meet 80% of its cumulative Benchmarks in any four
consecutive fiscal quarter period ending on or after June 30, 1999; or
(7) the Corporation fails to make timely cash dividend payments on the
Preferred Stock for any six fiscal quarters.
8.4 As used in the Articles of Incorporation and these Bylaws, a "Cure
Event" shall occur whenever, subsequent to the occurrence of a Preferred
Stock Event, the Corporation achieves ninety percent (90%) of its
cumulative Benchmarks for any four consecutive fiscal quarters. A Cure
Event may only occur once.
8.5 The form of "Subordinated Note" (as defined in the Articles of
Incorporation) is attached as Exhibit B.
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8.6 So long as any shares of Preferred Stock remain outstanding, this
Article Eight may only be amended by the affirmative vote of a majority
of the holders of the Common Stock and the holders of the Preferred
Stock, each voting separately as a class.
ARTICLE NINE
MISCELLANEOUS
SEAL
9.1 The corporate seal shall be in such form as the Board of Directors may
from time to time determine. In the place of the corporate seal, the
words "Corporate Seal" within brackets may be used, and shall have the
same legal effect as use of the corporate seal.
ANNUAL STATEMENTS
9.2 Not later than four months after the close of each fiscal year, and in
any case prior to the next annual meeting of shareholders, the
Corporation shall prepare:
(1) A balance sheet showing in reasonable detail the financial condition
of the Corporation as of the close of its fiscal year; and
(2) A profit and loss statement showing the results of its operation
during its fiscal year. Upon written request, the Corporation
promptly shall mail to any shareholder of record a copy of the most
recent such balance sheet and profit and loss statement.
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INDEMNIFICATION
9.3 Each person who is or was or had agreed to become a director or officer
of the Corporation, and each such person who is or was serving or who
had agreed to serve at the request of the Board or an officer of the
Corporation as a director or officer of another corporation,
partnership, joint venture, trust, limited liability company or other
enterprise (including the heirs, executors, administrators or estate of
such person), shall be indemnified by the Corporation to the fullest
extent permitted by the Georgia Business Corporation Code or any other
applicable laws as such Code and such laws may be amended from time to
time. No amendment, modification or repeal of this Section shall
adversely affect any right or protection of a director or officer that
exists at the time of such amendment, modification or repeal. The
Corporation shall advance funds to pay for or reimburse the reasonable
expenses incurred by a director or officer who is entitled to
indemnification hereunder to the fullest extent permitted by the Georgia
Business Corporation Code or any other applicable laws as such Code and
such laws may be amended from time to time, provided that such director
or officer complies with O.C.G.A Section 14-2-853 (or any successor
statute thereto).
9.4 Use in these Bylaws of words of inclusion shall not be construed as
terms of limitation, so that references to "included" matters shall be
regarded as non-exclusive, non-characterizing illustrations.
FAIR PRICE REQUIREMENTS
9.5 The provisions of Article 11, Part 2 of the Georgia Business Corporation
Code, as amended, shall apply to the business and affairs of the
Corporation unless and until this provision is repealed in accordance
with the Code and these Bylaws.
BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS
9.6 The provisions of Article 11, Part 3 of the Georgia Business Corporation
Code, as amended, shall apply to the business and affairs of the
Corporation unless and until this provision is repealed in accordance
with the Code and these Bylaws.
ARTICLE TEN
NOTICES; WAIVERS OF NOTICE
10.1 Except as otherwise specifically provided in these Bylaws, whenever
under the provisions of these Bylaws notice is required to be given to
any shareholder, director or officer, it
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shall not be construed to mean only personal notice, but such notice may
also be given by mail by depositing the same in the post office or
letter box in a postpaid sealed envelope, or telegram or cablegram,
addressed to such shareholder, officer or director at such address as
appears on the books of the Corporation, or telephonically or by
facsimile, and such notice shall be deemed to be given at the time when
the same shall be thus personally delivered, mailed, verbally
communicated by telephone or sent.
10.2 When any notice whatsoever is required to be given by law, by the
Articles of Incorporation or by these Bylaws, a waiver thereof by the
person or persons entitled to said notice given before or after the time
stated therein, in writing, which shall include a waiver given by
telegraph, or cable, shall be deemed equivalent thereto. No notice of
any meeting need be given to any person who shall attend such meeting.
ARTICLE ELEVEN
AMENDMENTS
11.1 Except as otherwise provided in these Bylaws, the Bylaws of the
Corporation may be altered, amended or repealed and new Bylaws may be
adopted by three-fourths majority vote of all of the members of the
Board of Directors at any regular or special meeting of the Board of
Directors. Such power and authority of the Board of Directors to alter,
amend, repeal or adopt Bylaws shall extend to any and all subject matter
contained in the Bylaws at any time, subject only to the limitations
contained in the Georgia Business Corporation Code. The Shareholders may
also alter, amend or repeal the Corporation's Bylaws, or adopt new
Bylaws, by a majority vote of the holders of the Common Stock and
Preferred Stock, each voting separately as a class, even though the
Bylaws may also be amended or repealed by the Board of Directors as
stated above.
ARTICLE TWELVE
ENGINEER IN RESPONSIBLE CHARGE
12.1 Where required by state law, the Corporation shall maintain a currently
registered Civil Engineer or other registered Professional Engineer in
each branch office or state where such practice is performed who shall
be designated in responsible charge of all practice of Professional
Engineering. The registrant shall have full authority for the
Corporation with regard to all Professional Engineering decisions and
projects performed in said branch office or state.
17
<PAGE>
EXHIBIT A TO BYLAWS
-------------------
PROCEDURE FOR DETERMINING BENCHMARKS
------------------------------------
1. The Benchmarks for the Corporation's fiscal years 1997 through 2000 are
attached hereto as Schedule 1.
----------
2. Before December 31, 2000, a majority of the entire Board shall approve
quarterly Benchmarks for the period ending December 31, 2003.
Thereafter, so long as the Preferred Stock is outstanding, the Board
shall approve quarterly Benchmarks for each succeeding full three-year
period. The Benchmarks shall be approved by the affirmative vote of a
majority of the Directors. In the event the Directors cannot agree on
appropriate Benchmarks for any period after December 31, 2000, the
disagreement shall be submitted to arbitration under the commercial
arbitration rules of the American Arbitration Association. The exclusive
location for such arbitration shall be Atlanta, Georgia, and all matters
shall be decided under Georgia law.
3. In all cases, measurements of the Corporation's actual net income, as
reported (in future quarters, starting with the third quarter of
calendar 1997) in accordance with generally accepted accounting
principles, applied on a consistent basis, shall, prior to measurement
against the Benchmarks, be adjusted for (and shall exclude any effect
of) the following: (i) amortization of financing costs (over and above
amounts already assumed in the Benchmarks); (ii) changes in tax laws or
regulations which increase or decrease the tax rate, (iii) taxes
resulting from repatriation or deemed repatriation of foreign income
earned prior to the issuance of the Preferred Stock; (iv) any loss with
respect to write-offs of leases or subleases, and expenses incurred in
connection with subleasing any unused or underutilized property; (v) any
gain or loss with respect to the sale of any real estate or leasehold
interest; (vi) any severance or salary continuance payments or other
obligations with respect to terminated employees; (vii) any impairment
in long-lived asset value as set forth in Statement of Financial
Accounting Standards No. 121; and (viii) any amounts paid pursuant to
the Corporation's indemnification obligations under that certain
Securities Purchase Agreement dated March 21, 1997.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1 TO EXHIBIT A TO BYLAWS
- --------------------------------------------------------------------------------
LAW COMPANIES GROUP, INC.
FORECASTED QUARTERLY BENCHMARK NET INCOME - 1997 THROUGH 2000
($ IN $000'S)
----------------------------------------------------------------------------------------------------------------
1997 1998 1999 2000
----------------------------------------------------------------------------------------------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BENCHMARK NET INCOME 1,286 1,464 1,676 2,057 1,981 1,905 2,210 2,713 2,612 2,512 2,647 3,245 3,128 3,008
</TABLE>
18
<PAGE>
EXHIBIT B TO BYLAWS
-------------------
PROMISSORY NOTE
---------------
$____________ [DATE]
FOR VALUE RECEIVED, LAW COMPANIES GROUP, INC., a Georgia corporation
(hereinafter referred to as "Maker") promises to pay to the order of
____________________, a ________ _______________ (hereinafter referred to as
"Holder"), the principal sum of ___________________________________
_________________________ ($__________) in legal tender of the United States of
America for the debts and dues, public and private with interest on the unpaid
principal balance thereof until paid from the date hereof at the rate of ____
[five and one-half percent (5.5%) above the yield on five (5) year treasury
notes in effect as of [date noted above]], per annum, said interest to be due
and payable on the last day of each calendar quarter, beginning ____________,
____ and the principal payable as follows: [IF ISSUED PURSUANT TO SECTION V,F,1
OF THE RESTATED ARTICLES OF INCORPORATION OF MAKER (THE "ARTICLES"), ONE-THIRD
OF THE PRINCIPAL AMOUNT ON [DATE NOTED ABOVE]; ONE-THIRD OF THE PRINCIPAL AMOUNT
ON THE FIRST ANNIVERSARY OF THE DATE HEREOF; AND THE ENTIRE UNPAID BALANCE PLUS
ACCRUED INTEREST ON THE SECOND ANNIVERSARY OF THE DATE HEREOF] OR [ IF ISSUED
PURSUANT TO SECTION V,F,2 OF THE ARTICLES, ONE THIRD OF THE PRINCIPAL AMOUNT ON
THE SEVENTH ANNIVERSARY OF THE "ORIGINAL ISSUE DATE"(AS DEFINED IN THE
ARTICLES); ONE THIRD OF THE PRINCIPAL AMOUNT ON THE EIGHTH ANNIVERSARY OF THE
ORIGINAL ISSUE DATE; AND THE ENTIRE UNPAID BALANCE PLUS ACCRUED INTEREST ON THE
NINTH ANNIVERSARY OF THE ORIGINAL ISSUE DATE.]
Principal and interest are payable at ___________________________, or at
such other place as Holder hereof may designate in writing.
Should any installment of interest or principal not be paid when due,
the entire unpaid principal sum evidenced by this Note, with all accrued
interest, shall, at the option of Holder, and upon ten (10) days written notice
to the undersigned Maker, become due and may be collected forthwith. It is
further agreed that failure of Holder to exercise this right of accelerating the
maturity of the debt, or indulgence granted from time to time, shall in no event
be considered as a waiver of such right of acceleration or stop Holder from
exercising such right.
The indebtedness evidenced by this Note represents a primary obligation
of Law Companies Group, Inc. and shall be subject to the subordination
provisions set forth in Annex A, which is attached hereto and incorporated
-------
herein by reference.
Amounts due hereunder may be prepaid at any time without premium or
penalty. Time is of the essence of this Note, and except as otherwise provided
herein, demand, protest, notice of demand, protest and non-payment, and all
other notices whatsoever, are hereby waived by Maker.
This Note shall be governed by, and construed in accordance with, the
laws of the State of Georgia and any action brought under the terms of this
Promissory Note shall be brought in the courts of Georgia.
19
<PAGE>
Neither this Note nor any rights thereunder may be assigned by Holder
without the written consent of Maker.
Should any installment of interest or principal not be paid when due, or
should Maker otherwise be in material default under the terms of this Note,
Holder shall have the right to notify Maker in writing of such failure to timely
pay or other material default (a "Default"), and Maker shall have fifteen (15)
days after receipt of such notice to cure such Default. If Maker fails to cure
such Default within said (15) day period, then the entire unpaid principal sum
evidenced by this Note, with all accrued interest, shall, at the option of
Holder, and upon ten (10) days written notice to the undersigned Maker, become
due and may be collected forthwith. It is further agreed that failure of Holder
to exercise this right of accelerating the maturity of the debt, or indulgence
granted from time to time, shall in no event be considered as a waiver of such
right of acceleration or stop Holder from exercising such right. In addition,
commencing on the date a Default occurs hereunder, regardless of whether there
has been an acceleration of the indebtedness evidenced hereby, until such
Default is cured, interest shall accrue on the outstanding principal balance of
this Note at an interest rate which is two percent (2%) above the interest rate
that would be in effect hereunder absent such Default.
IN WITNESS WHEREOF, Maker has executed this Note and has caused its seal
to be affixed hereunto, all by its duly authorized officers, as of the date
first above written.
LAW COMPANIES GROUP, INC.
By: _________________________________
Title: ____________________________
20
<PAGE>
ANNEX A
Subordination Terms
-------------------
All indebtedness evidenced by this Note is hereby subordinated and made
junior in right of payment to all indebtedness now or hereafter owned by Maker
to any bank (the "Senior Debt"), including, without limitation, SunTrust Bank,
Atlanta, National Bank of Canada or Barclays Bank PLC, (collectively, the
"Senior Lenders"). For so long as the Senior Debt is outstanding, no direct or
indirect payment (by set-off or otherwise) shall be made or agreed to made on
account of this Note, or in respect of any redemption, retirement, purchase or
other acquisition by Maker of this Note, and no collateral shall be granted or
obtained as security for this Note if, on or prior to the date of such payment,
Holder shall have knowledge, or have received written notice from any Senior
Lender that any default or event of default exists or would occur upon or by
reason of such payment under any of the terms of the agreements between Maker
and the Senior Lenders.
In the event of any Proceeding (as defined below), (a) the Senior Debt
shall first be indefeasibly paid in full, before any payment or distribution
shall be made in respect of this Note; (b) any payment or distribution of assets
which would otherwise (but for this Note) be payable or deliverable in respect
of this Note shall be paid or delivered directly to the Senior Lenders for
application and payment of the Senior Debt in accordance with the priorities
established by this Note until the Senior Debt shall have been indefeasibly paid
in full; (c) Holder agrees to cooperate with Senior Lenders' reasonable requests
relating to the collection of payments and distributions under this Note for the
account of the Senior Lenders; and (d) the Senior Lenders are hereby irrevocably
authorized and empowered (in their own name or in the name of Holder or
otherwise), but shall have no obligation, if, after demand Holder refuses to do
so, to demand, sue for, collect and receive every payment or distribution
referred to in subsection (b) above and give acquittance therefor and to file
claims and proofs of claim and take such other action (including, without
limitation, voting this Note) as it may deem reasonably necessary or advisable
for the exercise or enforcement of any of its rights or interest hereunder.
For purposes of this Note the term "Proceeding" shall mean any (a)
insolvency, bankruptcy, receivership, liquidation, reorganization, readjustment,
composition or other similar proceeding relating to Maker, its properties or its
creditors as such, (b) proceeding for liquidation, dissolution or other winding-
up of Maker, whether voluntary or involuntary, whether or not involving
insolvency or bankruptcy proceeding, or (c) assignment for the benefit of
creditors or marshaling of the assets of Maker.
If any payment, distribution or security, whether in cash, securities or
other property, shall be received by Holder in contravention of any of the terms
hereof, such payment, distribution or security shall be received and held in
trust for the benefit of, and shall be promptly paid over and delivered and
transferred to, SunTrust Bank, Atlanta (or any successor agent), on behalf of
the Senior Lenders for application to the payment of the Senior Debt to the
extent necessary to cause the Senior Debt to be indefeasibly paid in full.
21
<PAGE>
Until the Senior Debt shall have been indefeasibly paid in full, Holder
hereby waives any and all subrogation rights and all other rights as to the
Senior Lenders. At such time as the Senior Debt has been indefeasibly paid in
full, Holder shall be subrogated, from and after such time, to any rights of the
Senior Lenders to receive any further payments for distributions of assets of
Maker applicable to the Senior Debt until this Note shall be paid in full. For
purposes of such subrogation, no payments or distributions to the Senior Lenders
of any cash, property or securities to which Holder would be entitled except for
the provisions of this Note shall, as between Maker and its creditors other than
the Senior Lenders on the one hand and Holder on the other hand, be deemed to
have been made as a payment by Maker to or on account of the Senior Debt.
For so long as the Senior Debt is outstanding, Holder may not (i)
secure, ask, demand or sue for any payment, distribution or the remedy in
respect of this Note, (ii) commence, or join with any other creditor in
commencing, any Proceeding, or (iii) declare any amount of this Note to be due
and payable, in each case during the times that Holder be prohibited from
receiving any payments in respect of this Note under this Note; provided,
--------
however, that such restriction shall terminate automatically upon the
- -------
commencement of a Proceeding.
The provisions of this Note shall continue to be effective or be
reinstated, as the case may be, if at any time any payment in respect of the
Senior Debt is rescinded or must otherwise be returned by the Senior Lenders in
the event of any Proceeding, all as though such payment had not been made.
For so long as the Senior Debt is outstanding, Holder agrees not to
accept prepayment of any amounts outstanding under this Note before such amounts
become due and payable pursuant to the first paragraph hereof, and to the extent
Maker delivers any such prepayments to Holder, Holder agrees to hold such
amounts in trust for, and to deliver such amounts promptly to SunTrust Bank,
Atlanta (or any successor agent) on behalf of, the Senior Lenders.
22
<PAGE>
EXHIBIT 10.01
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE BEEN
ISSUED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933 (THE "1933 ACT"), SECTION 10-5-9(13) OF THE OFFICIAL CODE
OF GEORGIA ANNOTATED (THE "GEORGIA CODE"), AND APPROPRIATE EXEMPTIONS FROM
REGISTRATION UNDER THE SECURITIES LAWS OF OTHER APPLICABLE JURISDICTIONS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR TRANSFERRED OTHER THAN PURSUANT
TO AN EFFECTIVE REGISTRATION OR AN EXEMPTION SATISFACTORY TO THE ISSUER OF
COMPLIANCE WITH THE 1933 ACT, THE GEORGIA CODE AND THE APPLICABLE SECURITIES
LAWS OF ANY OTHER JURISDICTION. THE ISSUER SHALL BE ENTITLED TO REQUIRE AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE WITH
THE 1933 ACT AND OTHER APPLICABLE LAWS.
WARRANT
For the Purchase of Common Stock
of
LAW COMPANIES GROUP, INC.
Expires: May 6, 2009
THIS CERTIFIES THAT, for value received, Virgil R. Williams and James M.
Williams (jointly and severally, "Holder") is entitled to purchase from LAW
COMPANIES GROUP, INC., a Georgia corporation (the "Company"), at a price
determined in accordance with Section 2 of this Warrant, up to 963,398.23 shares
of Common Stock of the Company (the "Common Stock"), subject to and in
accordance with the terms and provisions of this Warrant. This Warrant is
issued under and is subject to (i) the Securities Purchase Agreement dated as of
March 21, 1997, by and between the Company and Holder (the "Securities Purchase
Agreement"), (ii) the Restated Articles of Incorporation of the Company (the
"Restated Articles"), (iii) the Restated Bylaws of the Company (the "Restated
Bylaws"), and (iv) the Preferred Shareholder Agreement dated as of May 6, 1997
by and between Company and Holder (the "Preferred Shareholder Agreement"). This
Warrant is a "Correlating Warrant" (as such is defined in the Restated Articles)
and this Warrant and the shares of Common Stock purchasable hereunder correlate
(share for share) to certain shares of Preferred Stock of the Company as set
forth in the register kept by the Company pursuant to Section 14 of this
Warrant.
<PAGE>
1. TERM. This Warrant is exercisable, in whole or in part, at any
----
time and from time to time from and after the date hereof (the "Issuance Date")
and prior to the Expiration Date (as defined herein). This Warrant shall expire
and be of no further force and effect upon the earlier to occur of (i) the time
when it has been exercised with respect to all shares of Common Stock which the
Holder is or may become entitled to purchase hereunder, (ii) the time when
shares of Preferred Stock issued pursuant to the Securities Purchase Agreement
have been converted into the maximum number of shares of Common Stock into which
such shares of Preferred Stock may be converted; or (iii) May 6, 2009 (the
"Expiration Date").
2. EXERCISE PRICE. Subject to the adjustments set forth herein, this
--------------
Warrant is exercisable at a price per share of Common Stock (the "Exercise
Price") determined as follows:
(a) If the Exercise Date (as defined below) is on or before June 30,
1998, the Exercise Price will be an amount per share equal to
$10,000,000 divided by the number of shares of Preferred Stock
----------
purchased by Holder under the Securities Purchase Agreement (the
"Original Issue Price").
(b) If the Exercise Date is after June 30, 1998 and on or before
December 31, 2000:
(i) if the Company meets or exceeds the cumulative Benchmarks
(as defined in the Restated Bylaws) for the period
commencing on the first day of the fiscal quarter
immediately following the fiscal quarter in which the
Issuance Date occurs and ending on the last day of the
fiscal quarter immediately preceding the Exercise Date
(the "Relevant Period"), the Exercise Price will be equal
to the Original Issue Price; or
(ii) if the Company meets 60% or less of the cumulative
Benchmarks for the Relevant Period, the Exercise Price
will be $.01; or
(iii) if the Company meets more than 60% but less than 100% of
the cumulative Benchmarks for the Relevant Period, the
Exercise Price will be prorated on a straight-line basis
between $.01 and the Original Issue Price accordingly.
(For example, assuming the Original Issue Price is equal
to $10.45, then if the Company meets 90% of the Cumulative
Benchmarks for the Relevant Period, the Exercise Price
would be (90 - 60) / (100 - 60) X ($10.45 - $.01) =
$7.84).
(c) If the Exercise Date is after December 31, 2000, the Exercise
Price shall be determined as set forth in Section 2 (b), except
that the Relevant Period shall be the period commencing on the
first day of the fiscal quarter immediately
2
<PAGE>
following the fiscal quarter in which the Issuance Date occurs
and ending on December 31, 2000.
3. EXERCISE OF WARRANT. The purchase rights represented by this
-------------------
Warrant may be exercised by the Holder as provided in Section 1 in whole or in
part by delivery of all of the following to the Board of Directors of the
Company at the Company's principal office in Atlanta, Georgia: (a) this Warrant,
(b) a written notice stating that the Holder intends to purchase all or a
specified number of shares of Common Stock pursuant to this Warrant and
specifying the name or names in which the Holder wishes the certificate or
certificates for the shares of Common Stock to be issued, and (c) payment of the
Exercise Price for the shares then purchased. The date upon which this Warrant
is surrendered and payment of the Exercise Price for the Shares in accordance
herewith is made, shall be referred to herein as the "Exercise Date." Payment
shall be made, at the option of the Holder, by cashier's check payable to the
order of the Company or by wire transfer of immediately available funds to an
account designated by the Company for such purpose. If the number of shares of
Common Stock then purchased is less than the total number of shares of Common
Stock then issuable upon exercise of this Warrant, the Company shall cancel this
Warrant upon surrender and shall execute and deliver a new Warrant of like tenor
and date for the balance of the shares issuable upon the exercise of this
Warrant (provided, that if only a fractional share remains unexercised, the
Company shall make a cash payment therefor in lieu of issuing a new Warrant).
As promptly as practicable after the Exercise Date, the Company shall issue and
deliver to the Holder, at such address as designated by Holder, a certificate or
certificates for the applicable number of shares of Common Stock. Certificates
representing shares of Common Stock purchased pursuant to this Warrant shall
bear restrictive legends substantially similar to those at the head of this
Warrant, a legend referencing any transfer restrictions set forth in the
Restated Articles, and any other legend required pursuant to any federal, state,
local or foreign law governing the Common Stock.
The Company promptly shall give notice to the owner of the shares of
Preferred Stock to which this Warrant and the shares of Common Stock purchasable
hereunder correlate (as shown in the register kept by the Company pursuant to
Section 12 herein), (i) that the Holder has exercised its rights hereunder to
purchase Common Stock of the Company, (ii) the number of shares of Common Stock
purchased by Holder pursuant to that exercise to which the shares of Preferred
Stock correlate, and (iii) that such exercise constitutes a "Preferred Vote
Expiration" (as defined in the Restated Articles).
4. VOTING. This Warrant shall not entitle the Holder to any voting
------
rights or other rights as a holder of Common Stock of the Company, and no
dividend or interest shall be payable or accrue in respect of this Warrant or
the interest represented by or the shares purchasable under this Warrant until
and unless, and except to the extent that, this Warrant shall be exercised in
accordance with the terms hereof. Upon the exercise of this Warrant, the shares
of Common Stock issued upon such exercise shall be subject to the restrictions
set forth in the Preferred Shareholder Agreement, and otherwise be subject to
the provisions of the Restated Articles and the Restated Bylaws.
3
<PAGE>
5. RESERVATION OF SHARES; VALIDITY OF ISSUANCE. The Company
-------------------------------------------
covenants and agrees that it shall reserve for issuance upon the exercise of
this Warrant and keep available out of its authorized but unissued Common Stock,
such number of shares of Common Stock for which this Warrant shall from time to
time be exercisable. The Company represents and warrants that all shares issued
upon the exercise of this Warrant will, upon issuance, be fully paid and
nonassessable and be free from all liens and charges in respect of their
issuance, with all taxes payable by the Company with respect to such issuance
fully paid by the Company.
6. MERGER, CONSOLIDATION OR SALE OF ASSETS. In the event of any
---------------------------------------
capital reorganization or any consolidation or merger of the Company with or
into another person (each, a "Reorganization"), the Holder shall have the right
to purchase and receive, upon the basis and upon the terms and conditions
specified in this Warrant and in lieu of the shares of the Common Stock of the
Company then purchasable and receivable upon the exercise of the rights
represented by this Warrant, the kind and number of shares of stock, securities
or other property (including cash) of the Company, or other corporation
resulting from such Reorganization, to which the holder of the number of
outstanding shares of such Common Stock equal to the number of shares of such
stock then purchasable and receivable upon the exercise of the rights
represented by this Warrant immediately prior to such Reorganization would have
been entitled to receive with respect to such Reorganization, and in any such
case appropriate provision shall be made in the application of the provisions
herein set forth with respect to the rights and interests thereafter of the
Holder to the end that the provisions herein set forth shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares, other
securities or property thereafter deliverable upon the exercise of this Warrant.
The provisions of this Section 6 shall similarly apply to successive
Reorganizations.
7. ADJUSTMENTS FOR STOCK SPLITS AND COMBINATIONS. If presently
---------------------------------------------
outstanding shares of Common Stock shall be subdivided into a greater number of
shares, or a dividend in Common Stock or other securities of the Corporation
convertible or exchangeable into shares of Common Stock (in which latter event
the number of shares of Common Stock issuable upon the conversion or exchange of
such securities shall be deemed to have been distributed), shall be paid in
respect to the Common Stock (but in all cases excluding any such events if
material value is paid to the Corporation in connection therewith), (a) the
number of shares of Common Stock which may be acquired by the Holder upon the
exercise of this Warrant shall, simultaneously with the effectiveness of such
subdivision or immediately after the record date of such dividend, be
proportionately increased, and (b) the Exercise Price shall be adjusted to a
price determined by multiplying the Exercise Price in effect immediately prior
to such subdivision or dividend by a fraction, the numerator of which is the
number of shares of Common Stock for which this Warrant is exercisable
immediately before such subdivision or dividend, and the denominator of which is
the number of shares of Common Stock for which this Warrant is exercisable
immediately after giving effect to such subdivision or dividend. Conversely, if
the outstanding shares of Common Stock shall be combined into a smaller number
of shares, the number of shares of Common Stock which may be acquired by the
Holder upon the exercise of this Warrant shall, simultaneously with the
effectiveness of such combination, be proportionately reduced, and the Exercise
Price shall be adjusted in accordance herewith.
4
<PAGE>
8. ISSUANCE OF ADDITIONAL SHARES. If the Company shall issue Common
-----------------------------
Stock at a price per share less than the Exercise Price per share of Common
Stock on the date of such issuance (the "Determination Date"), if Holder does
not exercise any preemptive rights to acquire stock in connection with such
issuance, then and in each such case, the Exercise Price shall be adjusted to a
price determined by dividing the sum of (a) the number of shares of Common Stock
outstanding immediately prior to the Determination Date multiplied by the
Exercise Price immediately prior to the Determination Date, plus (b) the
aggregate consideration, if any, received by the Company upon such issuance of
additional shares on the Determination Date, by the sum of (x) the number of
shares of Common Stock outstanding immediately prior to the Determination Date,
plus (y) the number of additional shares of Common Stock issued on the
Determination Date. The number of shares of Common Stock into which this
Warrant is exercisable at the opening of business on the next day following the
Determination Date shall also be adjusted to equal the number of shares into
which this Warrant is exercisable immediately prior to the Determination Date
multiplied by a fraction, the denominator of which is the Exercise Price after
giving effect to the adjustment in this Section 8, and the numerator of which is
the Exercise Price in effect immediately prior to the Determination Date.
9. ISSUANCE OF CONVERTIBLE SECURITIES. If the Company shall issue,
----------------------------------
sell, distribute or otherwise grant any rights to subscribe for, or to purchase,
or any warrants or options (other than options issued to employees) for the
purchase of Common Stock or any stock or securities convertible into or
exchangeable for Common Stock (collectively, "Convertible Securities"), whether
or not such Convertible Securities are immediately exercisable, and the price
per share for which Common Stock is issuable upon the exercise of such
Convertible Securities (determined by dividing the total amount, if any,
received or receivable by the Company as consideration for such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the exercise of any Convertible Securities or
the exchange therefore, by the maximum aggregate number of shares of Common
Stock issuable upon the exercise of such Convertible Securities) shall be less
than the Exercise Price per share of Common Stock in effect immediately prior to
the time of the granting or issuance of such Convertible Securities, then the
aggregate number of shares of Common Stock issuable upon the exercise of this
Warrant and the Exercise Price of this Warrant shall both be adjusted in
accordance with Section 8 hereof as though such shares of Common Stock for which
such Convertible Securities are convertible or exchangeable were actually issued
at the aforementioned price on the date of the issuance of such Convertible
Securities; provided however, that upon the expiration of such Convertible
Securities without exercise, conversion, or exchange, the Exercise Price and the
number of common shares issuable upon the exercise of this Warrant shall both be
readjusted as though such Convertible Securities had not been issued.
10. NO ADJUSTMENT FOR CERTAIN ISSUANCES AND CERTAIN RESTRICTIONS UPON
-----------------------------------------------------------------
VOTING.
- ------
(a) Notwithstanding anything in this Warrant to the contrary, no
adjustment to the Exercise Price or to the number of shares of
Common Stock into which
5
<PAGE>
this Warrant is exercisable shall be made for shares of Common
Stock, or Convertible Securities convertible or exchangeable into
shares of Common Stock, issued or paid to Holder.
(b) The shares issued pursuant to this Warrant shall be subject to
the restrictions upon voting in certain instances as set forth in
Section 1(d) of the Preferred Shareholder Agreement. The holder
of such shares shall acknowledge such restrictions in such form
as the Company shall reasonably request.
11. NOTICE OF CERTAIN EVENTS. In case at any time:
------------------------
(i) the Company shall declare or pay any dividend or make any
distribution to the holders of its Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class or other
rights;
(iii) there shall be any capital reorganization or
reclassification of the capital stock of the Company or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of the above cases, the Company shall give written
notice delivered personally, or by registered or certified mail (including by
overnight courier or express mail), postage or fees prepaid, addressed to the
Holder at the address of the Holder as shown on the books of the Company, of the
date on which (i) the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of record
shall participate in said dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be. Such
written notice shall be given not less than 30 days prior to the record date or
the date on which the transfer books of the Company are closed in respect to
such record date in the case of an action specified in clause (i) and at least
30 days prior to the action in question in the case of an action specified in
clauses (ii) or (iii). Any notice which is delivered personally in the manner
provided herein shall be deemed to have been duly given to Holder upon actual
receipt by such party or the office of Holder. Any notice which is addressed and
mailed in the manner herein provided shall be conclusively presumed to have been
duly given to Holder at the close of business on the fourth business day after
the day it is so placed in the mail or, if earlier, at the time of actual
receipt.
6
<PAGE>
12. NO IMPAIRMENT. The Company will not, by amendment of its
-------------
Restated Articles or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by the Company under this Warrant, but
will at all times in good faith assist in the carrying out of all the provisions
of this Warrant and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder.
13. STOCK CERTIFICATES. The issue of stock certificates upon the
------------------
exercise of this Warrant shall be made without charge to the Holder for any tax
in respect of the issue of such stock (other than (i) income taxes and (ii)
transfer taxes resulting from issuance of stock certificates to a person other
than the Holder). The Holder shall for all purposes be deemed to have become
the holder of record of the shares issued upon exercise of this Warrant on the
Exercise Date, irrespective of the date of delivery of the certificate for such
shares, except that, if the Exercise Date is a date the Company is closed for
business, the Holder shall be deemed to have become the holder of such shares at
the close of business on the next succeeding date on which the Company is open
for business.
14. REGISTRATION OF CORRELATING WARRANTS AND RELATED SECURITIES. The
-----------------------------------------------------------
Company shall keep at its principal executive office, a register in which it
shall provide for the registration of (i) the Correlating Warrants and the
number of shares of Common Stock purchasable pursuant thereto, and (ii) the
Preferred Shares to which the Correlating Warrants and the shares of Common
Stock purchasable pursuant thereto correlate (share for share). Upon the
exercise of all or part of the Correlating Warrants or any transfer of the
Correlating Warrants in accordance with the terms of the Correlating Warrants
and the Restated Articles, the Company, in addition to its other obligations
under this Warrant, shall make the appropriate record of such exercise or
transfer so that at any time, the outstanding Correlating Warrants (and the
number of shares of Common Stock purchasable pursuant thereto) and the shares of
Preferred Stock to which the Correlating Warrants correlate may be properly
accounted for in determining the voting rights of all stockholders of the
Company.
15. CANCELLATION OF CORRELATING WARRANTS. Notwithstanding any other
------------------------------------
provision of this Warrant, upon the conversion of one or more shares of
Preferred Stock into Common Stock, as provided in Section VI, J of the Restated
Articles, each Correlating Warrant for each such converted share of Preferred
Stock shall be canceled and shall be of no further force or effect.
16. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. Upon receipt of
--------------------------------------------
evidence reasonably satisfactory to the Company of the loss, theft, mutilation
or destruction of this Warrant, and in case of loss, theft or destruction, upon
the agreement of the Holder to indemnify the Company, or in the case of
mutilation, upon surrender and cancellation of this Warrant, the Company shall
issue a new Warrant of like denomination and tenor as the Warrant so lost,
stolen, mutilated or destroyed which shall correlate to the Preferred Stock.
Any such new Warrant shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall be at any time enforceable by anyone.
7
<PAGE>
17. TRANSFERABILITY. This Warrant shall be transferable, in whole or
---------------
in part. Upon any transfer of this Warrant, in whole or in part, Holder shall
promptly deliver this Warrant to the Company along with written notice of such
transfer and the name and address of such transferee. The Company shall make the
appropriate record of such transfer on the register kept by the Company pursuant
to Section 14 hereof and shall issue and deliver to transferee a new warrant of
like tenor in the name of transferee. If such transfer is for a only portion of
this Warrant, the Company shall issue and deliver to Holder a new Warrant of
like tenor for the balance of the shares retained by Holder. Any attempted
transfer of this Warrant by Holder without compliance with this Section 17 shall
be null and void and of no force and effect.
18. GOVERNING LAW. This Warrant shall be construed in accordance
-------------
with and governed by the laws of the State of Georgia without giving effect to
the principles of conflicts of law thereof.
IN WITNESS WHEREOF, the Company has duly executed this Warrant as of the
6th day of May, 1997.
LAW COMPANIES GROUP, INC.
By: /s/ Bruce C. Coles
--------------------------
Bruce C. Coles
Chairman, CEO and President
Accepted and Agreed:
Holder:
/s/ Virgil R. Williams
- ----------------------
Virgil R. Williams
/s/ James M. Williams
- ---------------------
James M. Williams
8
<PAGE>
EXHIBIT 10.02
THE SECURITIES REPRESENTED BY THIS AGREEMENT (THE "SECURITIES") HAVE BEEN ISSUED
AND SOLD IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933 (THE "1933 ACT"), SECTION 10-5-9(13) OF THE OFFICIAL CODE OF GEORGIA
ANNOTATED (THE "GEORGIA CODE"), AND APPROPRIATE EXEMPTIONS FROM REGISTRATION
UNDER THE SECURITIES LAWS OF OTHER APPLICABLE JURISDICTIONS. THE SECURITIES
MAY NOT BE OFFERED FOR SALE, SOLD OR TRANSFERRED OTHER THAN PURSUANT TO AN
EFFECTIVE REGISTRATION OR AN EXEMPTION SATISFACTORY TO THE ISSUER OF COMPLIANCE
WITH THE 1933 ACT, THE GEORGIA CODE AND THE APPLICABLE SECURITIES LAWS OF ANY
OTHER JURISDICTION. THE ISSUER SHALL BE ENTITLED TO REQUIRE AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE WITH THE 1933
ACT AND OTHER APPLICABLE LAWS.
STOCK OPTION AGREEMENT
----------------------
THIS OPTION AGREEMENT (this "Agreement"), effective as of May 6, 1997, by
and between LAW COMPANIES GROUP, INC., a Georgia corporation (the "Company") and
Virgil R. Williams and James M. Williams, each a resident of the State of
Georgia (jointly and severally, "Optionee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and Optionee have entered into a Securities Purchase
Agreement dated March 21, 1997 (the "Securities Purchase Agreement").
WHEREAS, pursuant to the Securities Purchase Agreement, the Company has
agreed to grant to Optionee an option to purchase up to 900,000 shares of Common
Stock of the Company.
WHEREAS, the Company and Optionee desire to enter into this Agreement to
set forth the terms and conditions upon which such option shall be granted by
the Company and exercised by Optionee.
NOW, THEREFORE, in consideration of the mutual benefits to each party, it
is agreed as follows:
1. OPTION. Subject to the terms and conditions set forth herein,
------
Optionee shall have the right to purchase at any time on or before December 31,
2006 (the "Expiration Date"), up to 900,000 shares of Common Stock of the
Company (subject to certain adjustments set forth herein); such
<PAGE>
shares hereinafter are referred to as the "Option Shares," and this option
hereinafter is referred to as the "Option."
2. OPTION PRICE. Subject to adjustment in accordance with the terms of
------------
this Agreement, the price per share for each of the Option Shares to be paid by
Optionee shall be as follows (the "Option Price"):
(a) With respect to Option Shares purchased at any time from July 1,
1997 through June 30, 1998, the Option Price shall be $16.50 per Option Share;
(b) With respect to Option Shares purchased at any time from July 1,
1998 through June 30, 1999, the Option Price shall be $20.00;
(c) With respect to Option Shares purchased at any time from July 1,
1999 through June 30, 2000, the Option Price shall be $24.50;
(d) With respect to Option Shares purchased at any time from July 1,
2000 through June 30, 2001, the Option Price shall be $29.00; and
(e) With respect to Option Shares purchased at any time after June 30,
2001 and on or before the Expiration Date, the Option Price shall be $33.00.
Each of the twelve-month periods specified above are referred to hereinafter as
a "Twelve-Month Period."
3. EXERCISE TERMS.
--------------
(a) Method of Exercise. This Option may be exercised only by
------------------
delivery, from Optionee to the Board of Directors of the Company (the "Board")
or the Board's designee, of (a) a written notice of exercise executed by
Optionee (the "Notice of Exercise"), and (b) the delivery of a cashier's check
payable to the Company or by wire transfer of immediately available funds to an
account designated from time to time by the Company for such purpose, of the
amount equal to the number of shares being purchased as stated in the Notice of
Exercise multiplied by the Option Price per share. The Notice of Exercise shall
be substantially in the form set forth as Exhibit A attached hereto and made a
---------
part hereof and shall identify this Option, together with the number of shares
with respect to which Optionee is exercising the Option. As promptly as
practicable after receipt of both payment and the Notice of Exercise, the
Company shall issue and deliver to Optionee a certificate or certificates for
the applicable number of shares of Common Stock. Such certificates evidencing
the shares of Common Stock purchased pursuant to the exercise of this Option
shall bear restrictive legends similar to those at the head of this Agreement, a
legend referencing transfer restrictions set forth in the Company's Restated
Articles of Incorporation, and any other legend required pursuant to any
federal, state, local or foreign law governing the Common Stock.
(b) Available Exercise Amount. Optionee may exercise this Option for
-------------------------
all of the then available Option shares or may exercise this Option for less
than the full number of the then available Option Shares; provided, that in any
Twelve-Month Period following a Twelve-Month Period in which Optionee does not
exercise any portion of this Option or exercises this Option for
-2-
<PAGE>
less than the full number of the then available Option Shares, the number of
Option Shares available to be purchased in such following Twelve-Month Period
shall be reduced (but not below 200,000) as follows (the number of shares by
which the number of available Option Shares is reduced each Twelve-Month Period
in accordance herewith shall be referred to herein as the "Takeaway"):
(i) After June 30, 1998, if Optionee has not purchased any
Option Shares pursuant to this Option prior to June 30, 1998, the Takeaway
each Twelve-Month Period shall be 175,000 shares. For example, if no Option
Shares are purchased prior to June 30, 1998, the number of available Option
Shares for the period from July 1, 1998 through June 30, 1999 will be
900,000 - 175,000, or 725,000, and then, if no Option Shares are purchased
during the period from July 1, 1998 through June 30, 1999, the number of
available Option Shares for the period from July 1, 1999 through June 30,
2000 will be 550,000.
(ii) In each Twelve-Month Period that Optionee exercises this
Option for less than all of the Option Shares available in that particular
Twelve-Month Period (the "Base Year"), the Takeaway for the following
Twelve-Month Period shall be determined by multiplying the Takeaway for the
Base Year by a fraction, the denominator of which is the maximum number of
Option Shares available at the beginning of the Base Year and the numerator
of which is the remaining number of Option Shares available for exercise at
the end of the Base Year. For example, if no Option Shares were purchased
in prior to June 30, 1998, and 100,000 Option Shares were purchased during
the period from July 1, 1998 through June 30, 1999, (from the 725,000
available Option Shares for such period), the Takeaway for 1999 would be
(725,000 - 100,000)/725,000 X 175,000, or 150,862. Therefore, 725,000 -
100,000 - 150,862, or 474,138 Option Shares would be available for the
period from July 1, 1999 through June 30, 2000. The reduced Takeaway
determined by the formula described herein shall then be applicable for
each following Twelve-Month Period, subject to further reduction in
accordance with such formula by reason of any exercise of part of the
Option during subsequent Twelve-Month Periods.
(iii) In no event shall the Takeaway reduce the number of Option
Shares available to be purchased pursuant to this Option to less than
200,000 Option Shares.
(c) Adjustments Upon Certain Events. The number of Option Shares
-------------------------------
available and the Option Price shall be adjusted as follows:
(i) In the event of any capital reorganization or any
consolidation or merger of the Company with or into another person (each, a
"Reorganization"), Optionee shall have the right to purchase and receive, upon
the basis and upon the terms and conditions specified in this Option and in lieu
of the shares of the Common Stock of the Company then purchasable and receivable
upon the exercise of the rights represented by this Option, the kind and number
of shares of stock, securities or other property (including cash) of the
Company, or other corporation resulting from such consolidation or surviving
such merger, to which the holder of the number of outstanding shares of such
Common Stock equal to the number of shares of such stock then purchasable and
receivable upon the exercise of the rights represented by this Option
immediately prior to such Reorganization would have been entitled to receive
with respect to such Reorganization, and in any
-3-
<PAGE>
such case appropriate provision shall be made in the application of the
provisions herein set forth with respect to the rights and interests thereafter
of Optionee to the end that the provisions herein set forth shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares, other
securities or property thereafter deliverable upon the exercise of this Option.
The provisions of this Section 3(c)(i) shall similarly apply to successive
Reorganizations.
(ii) If outstanding shares of Common Stock shall be subdivided into
a greater number of shares, or a dividend in Common Stock or other securities of
the Corporation convertible or exchangeable into shares of Common Stock (in
which latter event the number of shares of Common Stock issuable upon the
conversion or exchange of such securities shall be deemed to have been
distributed), shall be paid in respect to the Common Stock (but in all cases
excluding any such events if material value is paid to the Corporation in
connection therewith), (a) the number of shares of Common Stock which may be
acquired by Optionee upon the exercise of this Option shall, simultaneously with
the effectiveness of such subdivision or immediately after the record date of
such dividend, be proportionately increased, and (b) the Option Price shall be
adjusted to a price determined by multiplying the Option Price in effect
immediately prior to such subdivision or dividend by a fraction, the numerator
of which is the number of shares of Common Stock for which this Option is
exercisable immediately before such subdivision or dividend, and the denominator
of which is the number of shares of Common Stock for which this Option is
exercisable immediately after giving effect to such subdivision or dividend.
Conversely, if the outstanding shares of Common Stock shall be combined into a
smaller number of shares, the number of shares of Common Stock which may be
acquired by Optionee upon the exercise of this Option shall, simultaneously with
the effectiveness of such combination, be proportionately reduced and the Option
Price shall be adjusted in accordance herewith.
(iii) If the Company shall issue Common Stock at a price per
share less than the Option Price per share of Common Stock on the date of such
issuance (the "Determination Date"), then and in each such case, the Option
Price shall be adjusted to a price determined by dividing the sum of (a) the
number of shares of Common Stock outstanding immediately prior to the
Determination Date multiplied by the Option Price in effect immediately prior to
the Determination Date, plus (b) the aggregate consideration, if any, received
by the Company upon such issuance of additional shares, by the sum of (x) the
number of shares of Common Stock outstanding immediately prior to the
Determination Date, plus (y) the number of additional shares of Common Stock
issued. The number of shares of Common Stock into which this Option is
exercisable at the opening of business on the next day following the
Determination Date shall also be adjusted to equal the number of shares into
which this Option is exercisable immediately prior to the Determination Date
multiplied by a fraction, the denominator of which is the Option Price after
giving effect to the adjustment in this Section 3(c)(iii), and the numerator of
which is the Option Price in effect immediately prior to the Determination Date.
(iv) If the Company shall issue, sell, distribute or otherwise grant
any rights to subscribe for, or to purchase, or any warrants or options (other
than options issued to employees) for the purchase of Common Stock or any stock
or securities convertible into or exchangeable for Common Stock (collectively,
"Convertible Securities"), whether or not such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock is
issuable upon the
-4-
<PAGE>
exercise of such Convertible Securities (determined by dividing the total
amount, if any, received or receivable by the Company as consideration for such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of any
Convertible Securities or the exchange therefore, by the maximum aggregate
number of shares of Common Stock issuable upon the exercise of such Convertible
Securities) shall be less than the Option Price per share of Common Stock in
effect immediately prior to the time of the granting or issuance of such
Convertible Securities, then the aggregate number of shares of Common Stock
available under this Option and the Option Price shall both be adjusted in
accordance with Section 3(c)(iii) hereof as though such shares of Common Stock
for which such Convertible Securities are convertible or exchangeable were
actually issued at the aforementioned price on the date of the issuance of such
Convertible Securities; provided however, that upon the expiration of such
Convertible Securities without exercise, conversion, or exchange, the Exercise
Price and the number of common shares issuable upon the exercise of this Option
shall both be readjusted as though such Convertible Securities had not been
issued.
(v) Notwithstanding anything in this Section 3(c) to the
contrary, no adjustment to the number of available Option Shares or to the
Option Price shall be made for shares of Common Stock, or Convertible Securities
convertible or exchangeable for shares of Common Stock, issued or paid to
Optionee.
4. NOTICE OF CERTAIN EVENTS. In case at any time:
------------------------
(i) the Company shall declare or pay any dividend or make any
distribution to the holders of its Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class or other
rights;
(iii) there shall be any capital reorganization or
reclassification of the capital stock of the Company or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of the above cases, the Company shall give written
notice to Optionee in accordance with this Agreement of the date on which (i)
the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or (ii) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice shall also specify
the date as of which the holders of Common Stock of record shall participate in
said dividend, distribution or subscription rights, or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be. Such written notice shall be
given not less than 30 days prior to the record date or the date on which the
transfer books of the Company are closed in respect to such record date in the
case of an
-5-
<PAGE>
action specified in clause (i), and at least 30 days prior to the action in
question in the case of an action specified in clauses (ii) or (iii).
5. AGREEMENT OF OPTIONEE. Optionee hereby agrees to hold all of the
---------------------
Option Shares acquired by Optionee pursuant to Optionee's exercise of this
Option for investment purposes and not with a view to resale or distribution
thereof to the public. Optionee hereby agrees to execute such documents as the
Board may require with respect to state and federal securities laws.
6. NO IMPAIRMENT. The Company will not, by amendment of its Restated
-------------
Articles or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by the Company under this Option, but will at all times in
good faith assist in the carrying out of all the provisions of this Option and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Optionee.
7. NO VOTING RIGHTS. This Option shall not entitle the Optionee to any
----------------
voting rights or other rights as a stockholder of the Company, and no dividend
or interest shall be payable or accrue in respect of this Option or the interest
represented by or the shares purchasable under this Option until and unless, and
except to the extent that, this Option shall be exercised.
8. STOCK CERTIFICATES. The issuance of stock certificates upon the
------------------
exercise of this Option shall be made without charge to the Optionee for any tax
(other than taxes attributable to any difference between the fair market value
and the Option Price on the date of the exercise of this Option or transfer
taxes resulting from issuance of stock certificates to a person other than the
Optionee) in respect of the issue of such stock. The Optionee shall for all
purposes be deemed to have become the holder of record of the shares issued upon
exercise of this Option on the date both payment and the Notice of Exercise are
delivered to the Company, irrespective of the date of delivery of the
certificate for such shares, except that, if the date the Notice of Exercise is
delivered to the Company is a date the Company is closed for business, the
Optionee shall be deemed to have become the holder of such shares at the close
of business on the next succeeding date on which the Company is open for
business.
9. MISCELLANEOUS.
-------------
(a) Any notice, request, instruction or other document to be given
hereunder by any party hereto to any other party hereto shall be in writing and
delivered personally or sent by registered or certified mail (including by
overnight courier or express mail service), postage or fees prepaid,
if to the Company to:
Law Companies Group, Inc.
3 Ravinia Drive, Suite 1830
Atlanta, Georgia 30346
Attention: Mr. Bruce C. Coles
-6-
<PAGE>
with a copy to:
Long Aldridge Norman LLP
303 Peachtree Street, N.E., Suite 5300
Atlanta, Georgia 30308
Attention: Mr. F. T. Davis, Jr.
if to Optionee to:
Mr. Virgil R. Williams
Mr. James M. Williams
2076 West Park Place
Stone Mountain, Georgia 30087
with a copy to:
Arnall Golden & Gregory, LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Attention: Mr. Jonathan Golden
or at such other address for a party as shall be specified by like notice. Any
notice which is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party or the office of such party. Any notice which is
addressed and mailed in the manner herein provided shall be conclusively
presumed to have been duly given to the party to which it is addressed at the
close of business, local time of the recipient, on the fourth business day after
the day it is so placed in the mail or, if earlier, the time of actual receipt.
(b) This Agreement is being made in, and shall be construed in
accordance with and governed by the laws of the State of Georgia, without giving
effect to, the principles of conflicts of law thereof.
(c) This Agreement, together with the other "Transaction Documents"
(as defined in the Security Purchase Agreement), constitute the sole
understanding of the parties with respect to the subject matter hereof.
(d) The headings of the Sections and paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
(e) This Agreement may be executed in multiple counterparts, each of
which shall for all purposes be deemed to be an original and all of which shall
constitute the same instrument.
-7-
<PAGE>
(f) The Board shall have the sole and final authority in any matter
relating to the interpretation of this Agreement or any provision of this
Agreement.
(g) This Agreement shall be transferable, in whole or in part. Upon
any such transfer, Optionees shall promptly notify the Company of the name and
address of any such transferee.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed on its behalf as of the date indicated on the first page
hereof.
LAW COMPANIES GROUP, INC.
By: /s/ Bruce C. Coles
------------------------------------------
Bruce C. Coles,
Chairman, CEO and President
OPTIONEE:
/s/ Virgil R. Williams
----------------------------------------------
Virgil R. Williams
/s/ James M. Williams
---------------------------------------------
James M. Williams
-8-
<PAGE>
EXHIBIT 10.03
THE SECURITIES REPRESENTED BY THIS AGREEMENT (THE "SECURITIES") HAVE BEEN ISSUED
AND SOLD IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933 (THE "1933 ACT"), SECTION 10-5-9(13) OF THE OFFICIAL CODE OF GEORGIA
ANNOTATED (THE "GEORGIA CODE"), AND APPROPRIATE EXEMPTIONS FROM REGISTRATION
UNDER THE SECURITIES LAWS OF OTHER APPLICABLE JURISDICTIONS. THE SECURITIES
MAY NOT BE OFFERED FOR SALE, SOLD OR TRANSFERRED OTHER THAN PURSUANT TO AN
EFFECTIVE REGISTRATION OR AN EXEMPTION SATISFACTORY TO THE ISSUER OF COMPLIANCE
WITH THE 1933 ACT, THE GEORGIA CODE AND THE APPLICABLE SECURITIES LAWS OF ANY
OTHER JURISDICTION. THE ISSUER SHALL BE ENTITLED TO REQUIRE AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE WITH THE 1933
ACT AND OTHER APPLICABLE LAWS.
PLAN OPTION AGREEMENT
THIS PLAN OPTION AGREEMENT, effective as of the 6th day of May, 1997, by
and between LAW COMPANIES GROUP, INC., a Georgia corporation (the "Company"),
and Virgil R. Williams and James M. Williams, each a resident of the State of
Georgia (jointly and severally, "Optionee").
W I T N E S S E T H:
WHEREAS, the Company has contemporaneously herewith sold to Optionee, and
Optionee has purchased from the Company, certain securities of the Company as
more particularly described in the Securities Purchase Agreement of even date
herewith, by and between the Company and Optionee (the "Securities Purchase
Agreement").
WHEREAS, pursuant to and in accordance with the terms and conditions of
Section 1.01(d) of the Securities Purchase Agreement, the Company and Optionee
desire to enter into this Agreement with respect to an option on certain shares
of common stock of the Company (the "Common Stock") in order to set forth the
terms and conditions upon which such option shall be granted by the Company and
exercised by Optionee.
NOW, THEREFORE, in consideration of the mutual benefits to each party, it
is agreed as follows:
1. Grant of Option. Subject to the terms and conditions set forth
herein, Optionee shall have the right to purchase a number of shares of Common
Stock equal one-half (1/2) of the number of "Scheduled Option Shares" (as
defined below); such shares hereinafter are referred to as the "Option Shares,"
and this option hereinafter is referred to as the "Option". "Scheduled Option
Shares" means those shares of Common Stock which may be, subject to various
agreements
<PAGE>
evidencing "Scheduled Options" (as defined below), purchased by "Scheduled
Option Holders" (as defined below), as set forth in Schedule A. The aggregate
----------
number of Scheduled Option Shares shall be equal to the aggregate number of
shares subject to Scheduled Options. "Scheduled Options" shall mean those
options set forth on Schedule A which have been, on or before the date hereof,
----------
granted to Scheduled Option Holders. "Scheduled Option Holder(s)" shall mean
those individuals who have been granted Scheduled Options on or before the date
hereof.
2. Exercise of Option.
(a) Vesting of Option Contingent Upon Exercise of Scheduled Options
and Purchase of Scheduled Option Shares. Immediately upon the exercise after
the date hereof of any Scheduled Options and purchase of Scheduled Option Shares
by a Scheduled Option Holder (a "Vesting Event"), the Option shall become
exercisable with respect to the number of Option Shares equal to one-half ( 1/2)
of the number of Scheduled Option Shares purchased by such Scheduled Option
Holder (the "Vesting Event Number") at the same price per share as such
Scheduled Option Shares were purchased (the "Vesting Event Price"). Prior to
the occurrence of a Vesting Event, no portion of the Option shall be exercisable
by Optionee, and Option Shares shall become subject to purchase under the terms
and provisions of the Option only to the extent that Vesting Events occur as set
forth in the preceding sentence.
(b) Notification of Exercise of Scheduled Options. Each time any
Vesting Event occurs, the Company shall promptly, and in no event later than
thirty (30) days following such Vesting Event, notify Optionee of the Vesting
Event Number and the Vesting Event Price with respect to such Vesting Event, and
the date on which such Vesting Event occurred.
(c) Method of Exercise and Payment. When Option Shares become subject
to purchase upon the occurrence of a Vesting Event, the Option Shares which
Optionee desires to purchase may be exercised by Optionee's delivery to the
Secretary of the Company of one or more Notices of Exercise, in the form of
Schedule B, each accompanied by payment in full of the "Option Price" (as
- ----------
defined below). Such delivery must be made within ninety (90) days of the date
on which the Vesting Event occurred. The "Option Price" shall be an amount
equal to the number of Option Shares purchased multiplied by the Vesting Event
-------------
Price, and shall be paid by cashier's check payable to the Company or by wire
transfer of immediately available funds to an account designated from time to
time by the Company for such purpose.
3. Termination of Option and Option Rights. The Option shall not be
exercisable either in whole or in part after the date on which all Scheduled
Options have either expired and are no longer exercisable, or have been fully
exercised. Furthermore, portions of the Option shall terminate (and Option
Shares shall no longer be subject to purchase by Optionee) as follows:
(a) Partial Termination Upon Failure to Exercise. Upon the occurrence
of a Vesting Event, any Option Shares which become subject to purchase by
Optionee in accordance with the provisions of Section 2 above and which Optionee
fails to purchase within ninety (90) days of the
2
<PAGE>
date on which such Vesting Event occurred shall cease to be subject to purchase
under the Option, and such portion of the Option shall no longer be exercisable.
(b) Partial Termination Upon Termination of Underlying Scheduled
Options. To the extent that any Scheduled Option Shares are no longer subject
to purchase by a Scheduled Option Holder due to the expiration or termination of
all or a portion of a Scheduled Option, or for any other reason, any Option
Shares which could have become subject to purchase by Optionee in accordance
with the provisions of Section 2 above with respect to a Vesting Event involving
such Scheduled Option Shares shall cease to be subject to purchase under the
Option, and such portion of the Option shall no longer be exercisable.
4. Agreement of Optionee. Optionee hereby agrees to hold all of the
Option Shares acquired by Optionee pursuant to Optionee's exercise of this
Option for investment purposes and not with a view to resale or distribution
thereof to the public. Optionee hereby agrees to execute such documents as the
Board of Directors of the Company may require with respect to state and federal
securities laws and any restrictions on the resale of the Option Shares which
may be applicable.
5. No Impairment. The Company will not, by amendment of its Restated
Articles or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by the Company under this Option, but will at all times in
good faith assist in the carrying out of all the provisions of this Option and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of Optionee.
6. No Voting Rights. This Option shall not entitle Optionee to any
voting rights or other rights as a stockholder of the Company, and no dividend
or interest shall be payable or accrue in respect of this Option or the interest
represented by or the shares purchasable under this Option until and unless, and
except to the extent that, this Option shall be exercised.
7. Stock Certificates. The issuance of stock certificates upon the
exercise of this Option shall be made without charge to Optionee for any tax
(other than (i) income taxes and (ii) transfer taxes resulting from issuance of
stock certificates to a person other than Optionee) in respect of the issue of
such stock. Optionee shall for all purposes be deemed to have become the holder
of record of the shares issued upon exercise of this Option on the date both the
Option Price and the Notice of Exercise are delivered to the Company,
irrespective of the date of delivery of the certificate for such shares, except
that, if the date the Notice of Exercise and the Option Price are delivered to
the Company is a date the Company is closed for business, Optionee shall be
deemed to have become the holder of such shares at the close of business on the
next succeeding date on which the Company is open for business. Such
certificates evidencing the shares of Common Stock issued pursuant to the
exercise of this Option shall bear restrictive legends similar to those at the
head of this Agreement, a legend referencing transfer restrictions set forth in
the Company's Restated Articles of Incorporation, and any other legend required
pursuant to any federal, state, local or foreign law governing the Common Stock.
3
<PAGE>
8. Miscellaneous.
(a) Any notice, request, instruction or other document to be given
hereunder by any party hereto to any other party hereto shall be in writing and
delivered personally or sent by registered or certified mail (including by
overnight courier or express mail service), postage or fees prepaid,
if to the Company to:
Law Companies Group, Inc.
3 Ravinia Drive, Suite 1830
Atlanta, Georgia 30346
Attention: Mr. Bruce C. Coles
with a copy to:
Long Aldridge Norman LLP
303 Peachtree Street, N.E., Suite 5300
Atlanta, Georgia 30308
Attention: Mr. F. T. Davis, Jr.
if to Optionee to:
Mr. Virgil R. Williams
Mr. James M. Williams
2076 West Park Place
Stone Mountain, Georgia 30087
with a copy to:
Arnall Golden & Gregory, LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Attention: Mr. Jonathan Golden
or at such other address for a party as shall be specified by like notice. Any
notice which is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party or the office of such party. Any notice which is
addressed and mailed in the manner herein provided shall be conclusively
presumed to have been duly given to the party to which it is addressed at the
close of business, local time of the recipient, on the fourth business day after
the day it is so placed in the mail or, if earlier, the time of actual receipt.
4
<PAGE>
(b) This Agreement is being made in, and shall be construed in accordance
with and governed by the laws of the State of Georgia, without giving effect to,
the principles of conflicts of law thereof.
(c) This Agreement, together with the other "Transaction Documents" (as
defined in the Securities Purchase Agreement), constitute the sole understanding
of the parties with respect to the subject matter hereof.
(d) The headings of the Sections and paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
(e) This Agreement may be executed in multiple counterparts, each of which
shall for all purposes be deemed to be an original and all of which shall
constitute the same instrument.
(f) The Board shall have the sole and final authority in any matter
relating to the interpretation of this Agreement or any provision of this
Agreement.
(g) This Agreement shall not be assigned by Optionee without the prior
written consent of the Company.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed on its behalf as of the date indicated on the first page
hereof.
COMPANY:
LAW COMPANIES GROUP, INC.
By: /s/ Bruce C. Coles
------------------------------------
Bruce C. Coles
Chairman, CEO and President
OPTIONEE:
/s/ Virgil R. Williams
------------------------------------
Virgil R. Williams
/s/ James M. Williams
------------------------------------
James M. Williams
5
<PAGE>
EXHIBIT 10.04
PREFERRED SHAREHOLDER AGREEMENT
THIS PREFERRED SHAREHOLDER AGREEMENT (this "Agreement"), effective as of
the 6th day of May, 1997, by and between LAW COMPANIES GROUP, INC., a Georgia
corporation (the "Company") and Virgil R. Williams and James M. Williams, each a
resident of the State of Georgia (jointly and severally, "Shareholder").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to that certain Securities Purchase Agreement, dated as
of March 21, 1997, by and between the Company and Shareholder (the "Securities
Purchase Agreement"), Shareholder purchased 963,398.23 shares of Preferred Stock
issued by the Company (the "Preferred Shares"), together with certain warrants
(the "Warrants") and options to purchase shares of Common Stock under terms and
conditions set forth therein, and in accordance therewith, became a shareholder
of the Company.
WHEREAS, the Company and Shareholder deem it in the best interests of the
Company to make provision herein for any future disposition of the Preferred
Shares, and certain rights and restrictions related thereto, and related to the
Warrants.
NOW, THEREFORE, in consideration of the mutual benefits to each party, it
is agreed as follows:
SECTION 1. CERTAIN RESTRICTIONS.
--------------------
(a) For a period of two (2) years from the date hereof, Shareholder will
not transfer, sell, assign, pledge or otherwise convey (collectively, a
"Transfer") any of its Preferred Shares or any of the rights associated with
such shares, unless (i) a majority of the Common Directors (as defined in the
Company's Restated Articles of Incorporation) consent to such Transfer in
writing; or (ii) either Virgil R. Williams or James M. Williams should die; or
(iii) such Transfer is to an "Affiliate" (as hereinafter defined). An Affiliate
shall be any of the following: (A) Virgil R. Williams, James M. Williams, or any
of their respective immediate family members; (B) a trust exclusively for the
benefit of any one or more persons named in (A); or (C) a presently existing
corporation, at least 51% of the outstanding capital stock of which, as of March
21, 1997, is owned and controlled by one or both of Virgil R. Williams and James
M. Williams (or an Affiliate under subsection (A) or (B)); or (D) a corporation
formed on or after March 21, 1997, at least 80% of the outstanding capital stock
of which is owned and controlled by one or both of Virgil R. Williams and James
M. Williams (or an Affiliate under subsection (A) or (B)); provided that any
Affiliate, as a condition to such Transfer, shall be required to become a party
to this Agreement and be bound by all the terms and conditions hereof, pursuant
to documents in form and substance acceptable to the Company; and provided
further, that in the case of a Transfer to a corporation pursuant to (C) above,
the shareholders of such corporation who are, or who qualify as, an Affiliate,
shall be required as an additional condition to
<PAGE>
such Transfer, to agree to restrictions on the transfer of capital stock and
ownership of the corporation, pursuant to agreements in form and substance
reasonably acceptable to the Company. In the event of a Transfer pursuant to
Section 1(a)(ii), the Company shall be given a right of first refusal with
respect to any proposed Transfer to a third party following such death as set
forth below in Section 2.
(b) (i) For a period of two (2) years from the date hereof, neither
Shareholder nor any transferee permitted under this subparagraph (b) will
acquire, directly or indirectly, any Common Stock, subscriptions, options,
preemptive rights, warrants, calls, commitments or rights of any character,
including any right of conversion or exchange under any outstanding security or
other instrument, from any other shareholder or shareholders of the Company
unless a majority of the Common Directors consent to such acquisition in
writing.
(ii) (A) For a period beginning two (2) years after the date hereof
and ending four (4) years after the date hereof, neither Shareholder nor any
transferee permitted under subparagraph (b) above will acquire or hold, directly
or indirectly, Common Stock, subscriptions, options, preemptive rights,
warrants, calls, commitments or rights of any character, including any right of
conversion or exchange under any outstanding security or other instrument
(collectively, "Securities"), from any other shareholder or shareholders of the
Company, which, together with the shares underlying the Warrants and the
Independent Options (each as defined in the Securities Purchase Agreement), will
exceed fifty percent (50%) of the outstanding shares of the Company on a fully
diluted basis (including, but not limited to consolidation of the dilutive
effect of any possible future exchange of "Jersey Shares" or "HKS Shares" (each
as hereinafter defined), unless a majority of the Common Directors consent to
such acquisition in writing; provided, however, that in determining whether
Shareholder has exceeded the fifty percent (50%) limitation, any options, which
at the time of making the calculation set forth above have an exercise price
that exceeds by twenty-five percent (25%) the value of the Common Stock of the
Company, shall not be included in such determination (such value shall be the
value determined by the appraisal required under the Company's 401(k) plan, as
long as such appraisals are regularly performed; if such appraisals are no
longer regularly performed at the time of such determination, then such value
shall be the value agreed upon by the Company and Shareholder, and if no such
agreement is reached within thirty (30) days after Shareholder shall give a
written notice to the Company requesting agreement on such value, then such
value shall be determined by arbitration pursuant to the commercial arbitration
rules of the American Arbitration Association).
(B) In the event the foregoing Section 1(b)(ii)(A) is violated for
whatever reason, then a "Requisite Amount" of such Securities shall be deemed to
be non-voting, and Shareholder acknowledges and agrees that it shall not vote
and shall have no right or authority to vote with respect to such Requisite
Amount of Securities (but Shareholder shall have all economic rights with
respect to such Securities, including the right to receive dividends and
distributions). "Requisite Amount" shall mean the minimum amount of Securities
necessary so that Shareholder holds the same number of voting shares of Common
Stock as all other holders of Common Stock combined who are eligible to vote at
the date upon which said vote is taken.
2
<PAGE>
(c) The parties acknowledge and agree that there are presently certain (i)
outstanding Preference Shares issued by Law Companies Group, Ltd. (the "Jersey
Shares"), and (ii) outstanding "A" shares of HKS Law Gibb Share Trust
(Proprietary) Ltd. (the "HKS Shares"). Shareholder agrees that until after the
fourth anniversary of the date hereof it will not have the right to vote (for
any purpose) a number (the "Restricted Amount") of shares of stock (whether
Common Stock or Preferred Stock) owned by Shareholder. The Restricted Amount
shall be equal to the sum of all outstanding Jersey Shares and outstanding HKS
Shares, divided by two.
----------
(d) Shareholder agrees that as long as any shares of Preferred Stock
remain outstanding, Shareholder shall in no event, with respect to shares of
Common Stock owned by Shareholder, either as a result of its exercise of
Warrants or as a result of conversion of Preferred Stock, be entitled to vote
(for any purpose), and Shareholder agrees not to vote, more than one-ninth (1/9)
of the total outstanding shares of Common Stock of the Company.
(e) All of the restrictions set forth herein shall also apply to Virgil R.
Williams and James M. Williams and their respective Affiliates and permitted
assignees.
SECTION 2. RIGHT OF FIRST REFUSAL. For a period of two (2) years after
----------------------
the date hereof, if a Transfer is permitted under Section 1(a) (ii) of this
Agreement and a holder, Affiliate or permitted transferee thereof intends to
engage in a Transfer pursuant to such provision, then Shareholder shall first
give written notice to the Company (the "Notice of Proposed Transfer")
specifying the name of the proposed purchaser(s) of the Preferred Shares (the
"Proposed Purchaser(s)"), the total number of Preferred Shares which Shareholder
desires to sell to the Proposed Purchaser(s) pursuant to a Transfer permitted by
Section 1(a)(ii) (the "Offered Shares"), all of the material terms, including
the price, upon which Shareholder proposes to sell the Offered Shares to the
Proposed Purchaser(s), and stating that the Company has the right to purchase
all (but not less than all) of the Offered Shares at said price and on such
terms (including by payment of the form of consideration specified in the Notice
of Proposed Transfer). During the 60-day period following delivery of the Notice
of Proposed Transfer, the Company shall have the option to exercise its right to
purchase all (but not less than all) of the Offered Shares before the same shall
be sold, transferred or assigned to the Proposed Purchaser(s). The Company shall
give written notice of its election to Shareholder during such 60-day period. If
the Company has not exercised its right to acquire the Offered Shares within the
aforementioned 60-day period or consummated the acquisition of the Offered
Shares within the 120-day period following delivery of the Notice of Proposed
Transfer, then Shareholder shall have the right for a period of 60 days after
the expiration of such applicable period to transfer the Offered Shares to the
Proposed Purchaser(s) at the price and on terms substantially the same as
specified in the Notice of Proposed Transfer.
SECTION 3. RIGHTS OF CO-SALE.
------------------
(a) Rights of Co-Sale. If at any time in accordance with the terms of
-----------------
this Agreement, Shareholder proposes to transfer, sell, assign or otherwise
convey any Preferred Shares or Warrants
3
<PAGE>
to an unaffiliated third party (the "Transaction"), then to the extent the
Company has not exercised its right of first refusal pursuant to Section 2
hereof as to any Preferred Shares being sold, any holder of Common Stock of the
Company (an "Eligible Holder") who notifies the Company in writing within 30
days after receipt of notification of the Transaction shall have the opportunity
to sell to such third party shares of Common Stock held by such Eligible Holder
in the same proportion as the Preferred Shares (or Warrants, as the case may be)
which Shareholder proposes to sell bear to the total number of Preferred Shares
(or Warrants, as the case may be) held by Shareholder (a "Pro Rata Portion");
whereupon Shareholder shall assign so much of its interest in the agreement of
sale as the Eligible Holder shall be entitled to and shall request hereunder,
and the Eligible Holder shall assume such part of the obligations of Shareholder
under such agreement as shall relate to the sale of the Common Stock by the
Eligible Holder. Each Eligible Holder shall notify Shareholder whether he/she
elects to sell an amount equal to or less than its Pro Rata Portion. The
Eligible Holders shall be entitled to sell their Common Stock to any proposed
purchaser (the "Proposed Purchaser") hereunder of the Preferred Shares at a
purchase price equal to the fair market value of the Common Stock in light of
the transaction contemplated with the Proposed Purchaser(s) as determined by an
appraisal made by an independent investment banker.
(b) Notice. Prior to any proposed Transaction, Shareholder shall notify
------
the Company, in writing, of its intention to enter into such proposed
Transaction, setting forth the general terms of the proposed Transaction. In the
event the Company does not exercise its right of first refusal, the Company
shall, simultaneously with notifying Shareholder that it does not wish to
exercise its right of first refusal, send written notice to each Eligible
Holder, setting forth the general terms of the transaction.
(c) Failure to Notify. If within 30 days after Shareholder gives its
-----------------
notice to the Eligible Holders, the Eligible Holders do not notify the Company
that they desire to sell all of their Pro Rata Portion of Common Stock at the
price and on the terms and conditions set forth in such notice, then Shareholder
may, not later than 60 days following delivery of the notice under Section 3(b),
as to the Pro Rata Portion of Preferred Shares (or Warrants, as the case may be)
to the Common Stock of which the Eligible Holders do not indicate a desire to
sell, conclude a transfer on the terms and conditions described in the notice.
In the event Shareholder has not sold the Preferred Shares (or Warrants, as the
case may be) or entered into an agreement to sell the Preferred Shares (or
Warrants, as the case may be) within such 60-day period, Shareholder shall not
thereafter sell any Preferred Shares (or Warrants, as the case may be) without
first notifying the Eligible Holders and the Company in the manner provided
above. The exercise or non-exercise of the right to participate in one or more
sales of Preferred Shares (or Warrants, as the case may be) made by Shareholder
shall not adversely affect an Eligible Holder's right to participate in
subsequent sales of Preferred Shares (or Warrants, as the case may be) by
Shareholder pursuant to Section 3(a) hereof.
4
<PAGE>
(d) Termination. The obligations of Shareholder under this Section 3
-----------
shall terminate and be of no further force and effect upon the earlier of: (i)
the date on which no shares of Preferred Stock remain outstanding; or (ii) the
death of either Virgil R. Williams or James M. Williams; or (iii) the occurrence
of a "Listing Event" (as defined in the Company's Restated Articles of
Incorporation).
SECTION 4. REMEDIES. The Company and Shareholder acknowledge and agree
--------
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof, in addition to any other remedy to which they may be entitled
at law or equity.
SECTION 5. ENTIRE AGREEMENT. This Agreement, together with the other
----------------
"Transaction Documents" (as defined in the Securities Purchase Agreement),
constitute the sole understanding of the parties with respect to the subject
matter hereto, and supersede and cancel any and all prior agreements,
communications, and representations, whether oral or written, relating to the
subject matter hereof.
SECTION 6. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be for all purposes deemed an original and all
of which shall constitute one and the same instrument.
SECTION 7. NOTICES. Any notice, request, instruction or other document to
-------
be given hereunder by any party hereto to any other party hereto shall be in
writing and delivered personally or sent by registered or certified mail
(including by overnight courier or express mail service), postage or fees
prepaid,
if to the Company to:
Law Companies Group, Inc.
3 Ravinia Drive, Suite 1830
Atlanta, Georgia 30346
Attention: Mr. Bruce C. Coles
with a copy to:
Long Aldridge Norman LLP
303 Peachtree Street, N.E., Suite 5300
Atlanta, Georgia 30308
Attention: Mr. F. T. Davis, Jr.
5
<PAGE>
if to Shareholder to:
Mr. Virgil R. Williams
Mr. James M. Williams
2076 West Park Place
Stone Mountain, Georgia 30087
with a copy to:
Arnall Golden & Gregory, LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Attention: Mr. Jonathan Golden
or at such other address for a party as shall be specified by like notice. Any
notice which is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party or the office of such party. Any notice which is addressed
and mailed in the manner herein provided shall be conclusively presumed to have
been duly given to the party to which it is addressed at the close of business,
local time of the recipient, on the fourth business day after the day it is so
placed in the mail or, if earlier, the time of actual receipt.
SECTION 8. GOVERNING LAW. This Agreement is executed by the parties in,
-------------
and shall be construed in accordance with and governed by the laws of, the State
of Georgia (without giving effect to the principles of conflict of law thereto).
SECTION 9. AMENDMENT. No amendment, modification or alteration of the
---------
terms or provisions of this Agreement shall be binding unless the same shall be
in writing and duly executed by the parties hereto.
SECTION 10. FURTHER ACTS. The parties agree to perform any further acts
------------
and to execute and deliver any instruments or documents that may be necessary to
carry out the purposes of this Agreement.
SECTION 11. SEVERABILITY. In the event that any one or more of the
------------
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, the same shall not invalidate
or otherwise affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision or
portion thereof had never been contained herein.
6
<PAGE>
SECTION 12. HEADINGS. The headings of the Sections and paragraphs of this
--------
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
SECTION 13. MODIFICATION AND WAIVER. Any of the terms or conditions of
-----------------------
this Agreement may be waived in writing at any time by the party which is
entitled to the benefits thereof. No waiver of any of the provisions of this
Agreement shall be deemed to or shall constitute a waiver of any other provision
hereof (whether or not similar).
SECTION 14. PARTIES BOUND BY AGREEMENT; SUCCESSORS AND ASSIGNS. The terms,
--------------------------------------------------
conditions and obligations of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and the respective successors and assigns
thereof. Without the prior written consent of the other party hereto, the
Company may assign its rights, duties or obligations hereunder (including but
not limited to the Preferred Shares) or any part thereof to any other person or
entity, except that Shareholder may assign its rights hereunder to a corporation
at least 51% of the outstanding capital stock of which, as of March 21, 1997, is
owned and controlled by one or both of Virgil R. Williams and James M. Williams
(or an Affiliate), or a corporation formed on or after March 21, 1997, at least
80% of the outstanding capital stock of which is owned and controlled by one or
both of Virgil R. Williams and James M. Williams (or an Affiliate), which
assumes in writing all of Shareholder's obligations hereunder; provided,
however, no assignment pursuant hereto shall relieve the Shareholder from
liability for any breach of noncompliance with the terms of this Agreement
whether before or after such assignment, and provided further that any such
assignment shall be accomplished pursuant to documents in form and substance
acceptable to the Company.
SECTION 15. "INCLUDING." Words of inclusion shall not be construed as
----------
terms of limitation herein, so that references to "included" matters shall be
regarded as non-exclusive, non-characterizing illustrations.
7
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed on its behalf as of the date indicated on the first page
hereof.
THE COMPANY:
-----------
LAW COMPANIES GROUP, INC.
By: /s/ Bruce C. Coles
----------------------------------------
Bruce C. Coles
Chairman, CEO and President
SHAREHOLDER:
/s/ Virgil R. Williams
-------------------------------------------
Virgil R. Williams
/s/ James M. Williams
-------------------------------------------
James M. Williams
8
<PAGE>
EXHIBIT 10.05
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
May 6, 1997 by and among LAW COMPANIES GROUP, INC., a Georgia corporation (the
"Company"), and VIRGIL R. WILLIAMS and JAMES M. WILLIAMS, each a resident of the
State of Georgia (jointly and severally, "Buyer").
W I T N E S S E T H:
WHEREAS, the parties hereto have entered into that certain Securities
Purchase Agreement (the "Securities Purchase Agreement") effective as of March
21, 1997.
WHEREAS, pursuant to the Securities Purchase Agreement, the Company agreed
to grant Buyer certain registration rights.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
the parties hereby agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
"Buyer" shall mean Buyer or any permitted transferee thereof who then
-----
holds any outstanding Registrable Securities.
"Commission" shall mean the Securities and Exchange Commission or any
----------
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, $1.00 par value per share,
------------
of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Options" shall mean the options issued pursuant to the Independent
-------
Options Agreement and the Plan Option Agreement (each as defined in the
Securities Purchase Agreement).
"Preferred Shares" shall in this Agreement mean the Preferred Shares
----------------
issued pursuant to the Securities Purchase Agreement.
The terms "register," "registered" and "registration" refer to a
-------- ---------- ------------
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
<PAGE>
"Registrable Securities" means (i) shares of Common Stock issued
----------------------
pursuant to the conversion of the Preferred, which have not been resold,
transferred or otherwise conveyed by Buyer, (ii) shares of Common Stock issued
in respect of the shares of the Company's Common Stock or other securities
issued pursuant to the conversion of the Preferred upon any stock split, stock
dividend, recapitalization or similar event, which have not been resold,
transferred or otherwise conveyed by Buyer, (iii) shares of Common Stock issued
pursuant to the exercise of the Warrants, which have not been resold,
transferred or otherwise conveyed by Buyer, (iv) shares of Common Stock issued
pursuant to the exercise of the Options, which have not been resold, transferred
or otherwise conveyed by Buyer, and (v) shares of Common Stock issued upon
conversion, exchange or exercise of any securities acquired pursuant to the
exercise of the Warrants or the Options referred to in clauses (iii) and (iv) of
this paragraph, which have not been resold, transferred or otherwise conveyed by
Buyer, other than to a permitted assignee.
"Registration Expenses" shall mean all expenses other than Selling
---------------------
Expenses incurred by the Company in complying with Section 2 hereof, including,
without limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company, blue
sky fees and expenses, and the expense of any special audits incident to or
required by any such registration in connection with any registration hereunder.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
--------------
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts and selling
----------------
commissions applicable to the sale by, and all fees and disbursements of counsel
or other professionals for, Buyer (other than as set forth in the definition of
Registration Expenses).
"Warrants" shall mean the warrants issued pursuant to the Securities
--------
Purchase Agreement.
2. COMPANY REGISTRATION.
--------------------
(a) If, at any time or from time to time, the Company shall determine
to register any of its securities, either for its own account or for the account
of any shareholder of the Company, or both, other than (x) a registration
relating solely to employee benefit plans on Form S-1, S-3 or S-8 or similar
forms which may be promulgated in the future, or (y) a registration on Form S-4
or similar form which may be promulgated in the future relating solely to a
Securities and Exchange Commission Rule 145 transaction, the Company will:
(i) promptly give to Buyer written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to attempt to
qualify such securities under the applicable Blue Sky or other state securities
laws); and
(ii) include in such registration (and any related qualification
under Blue Sky laws or other compliance) , and in any underwriting involved
therein, all Registrable Securities
2
<PAGE>
specified in a written request or requests made to the Company by Buyer within
15 days after receipt of such written notice from the Company to Buyer.
(b) Piggy-Back Registration Rights. If the registration of which the
------------------------------
Company gives notice is for a registered public offering involving a firm
commitment underwriting, the Company shall so advise Buyer as a part of the
written notice given pursuant to Section 2(a)(i) hereof. In such event the
right of Buyer to registration pursuant to Section 2 hereof shall be conditioned
upon Buyer agreeing to participate in such underwriting and in the inclusion of
Buyer's Registrable Securities in the underwriting to the extent provided
herein. If Buyer proposes to distribute his securities through such
underwriting, then Buyer shall (together with the Company and the other
shareholders distributing their securities through such underwriting (the "Other
Buyers")) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 2, if the underwriter
determines that marketing factors require a limitation of the number of shares
to be underwritten, the underwriter may reduce the number of Registrable
Securities requested to be registered, first by reducing the Registrable
Securities held by those shareholders without a contractual right to participate
in the offering, and then if necessary, by reducing the Registrable Securities,
pro rata, held by all other shareholders. The Company shall so advise Buyer and
the Other Buyers requesting to distribute their securities through such
underwriting, and the number of Registrable Securities and other securities that
may be included in the registration. If Buyer disapproves of the terms of any
such underwriting, he may elect to withdraw therefrom by giving written notice
to the Company and the underwriter prior to the effective date of such
registration statement.
(c) Demand Registration Rights. Buyer shall have the right, which
--------------------------
right may be exercised one time and only after a "Listing Event" (as defined in
the Restated Articles of Incorporation of the Company), to request the Company
to register under the Securities Act, any portion of the shares of Common Stock
of the Company then owned by Buyer. Upon receipt of such request in writing,
the Company shall use its reasonable efforts to promptly effect such
registration under the Securities Act (including any related qualification under
Blue Sky laws or other compliance).
3. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
------------------------
connection with any registration, qualification or compliance pursuant to
Section 2 shall be borne by the Company. All Selling Expenses relating to
securities so registered by Buyer shall be borne by Buyer.
4. REGISTRATION PROCEDURES. In the case of each registration,
-----------------------
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep Buyer advised in writing as to the initiation of each
registration, qualification and compliance and as to the completion thereof. At
its expense the Company will:
(a) Keep such registration, qualification or compliance effective for
a period of one hundred twenty (120) days or until Buyer has completed the
distribution described in the registration statement relating thereto, whichever
first occurs;
3
<PAGE>
(b) Furnish such number of prospectuses and other documents incident
thereto as Buyer from time to time may reasonably request;
(c) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement and with the provisions of
Section 4(a) of this Agreement;
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by Buyer, provided
that the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions;
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form and, in the case of a registration pursuant to Section 2 hereof, reasonably
satisfactory to Buyer who shall be a party thereto, with the managing
underwriter of such offering. Buyer shall also enter into and perform its
obligations under such an agreement; and
(f) Notify Buyer of Registrable Securities covered by such
registration statement, at any time (i) when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, or (ii) when the Commission has suspended the effectiveness of such
registration statement or has requested that the Company amend or supplement
such registration statement.
5. INDEMNIFICATION.
---------------
(a) The Company will indemnify Buyer and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages and liabilities
(or actions in respect thereof), including without limitation any of the
foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, incident to
any such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, or any violation by the Company of any
rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification or compliance,
and will pay to Buyer, each such underwriter and each person who controls any
such underwriter, as actually incurred, any legal and any other expenses
reasonably and actually incurred
4
<PAGE>
in connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by Buyer or
underwriter and stated to be specifically for use therein.
(b) Buyer will, if Registrable Securities held by Buyer are included
in the securities as to which such registration, qualification or compliance is
being effected, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act, and each such Other Buyer, each of
its officers and directors and partners and each person controlling such Other
Buyer within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages and liabilities (or actions in respect
thereof), including without limitation any of the foregoing incurred in
settlement of any litiga tion commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances in
which they were made, not misleading, and will pay to the Company, such Other
Buyers, such directors, officers, partners, persons, underwriters or control
persons, as actually incurred, any legal or any other expenses reasonably and
actually incurred in connection with investigating, preparing or defending any
such claim, loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document or any amendment or supplement
thereto in reliance upon and in conformity with written information furnished to
the Company by an instrument duly executed by Buyer and stated to be
specifically for use therein; provided, however, that the obligations of Buyer
hereunder shall be limited to an amount equal to the proceeds to Buyer of
Registrable Securities sold as contemplated herein, unless such liability arises
out of or is based on gross negligence or willful misconduct by Buyer.
(c) Each party entitled to indemnification under this Section 5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of-such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at its own
expense, and provided further that the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Agreement unless such failure to give such notice is
materially prejudicial to the Indemnifying Party's ability to defend such
action. Notwithstanding the above, however, if representation of one or more
Indemnified Parties by the counsel retained by the Indemnifying Party would be
inappropriate due to actual conflicting
5
<PAGE>
interests between such Indemnified Parties (the "Conflicting Indemnified
Parties") and any other party represented by such counsel in such proceeding,
then such Conflicting Indemnified Parties shall have the right to retain one
separate counsel, chosen by Buyers of a majority of the Registrable Securities
included by such Conflicting Indemnified Parties in the registration, at the
expense of the Indemnifying Party. No Indemnifying Party, (i) in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, which consent shall not be unreasonably withheld, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation, or (ii)
shall be liable for amounts paid in any settlement if such settlement is
effected without the consent of the Indemnifying Party, which consent shall not
be unreasonably withheld.
6. INFORMATION ABOUT BUYER. Buyer shall furnish to the Company such
-----------------------
information regarding Buyer and the distribution proposed by Buyer as the
Company may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Agreement.
7. RULE 144. With a view to making available the benefits of certain
--------
rules and regulations of the Commission which may at any time permit the sale of
the Registrable Securities to the public without registration, the Company
agrees to:
(a) use its best efforts to make and keep public information
available, as those terms are understood and defined in Rule 144 under the
Securities Act, at all times;
(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) So long as Buyer owns any Registrable Securities to furnish to
Buyer forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Company as Buyer may reasonably request in availing itself of any rule or
regulation of the Commission allowing such Buyer to sell any such securities
without registration.
8. TRANSFER OF REGISTRATION RIGHTS. The registration rights granted to
-------------------------------
Buyer under Section 2 may be assigned, transferred or otherwise conveyed only in
connection with such assignments and transfers permitted by (i) the Securities
Purchase Agreement, (ii) the Preferred Shareholder Agreement, (iii) the
Warrant, (iv) the Stock Option Agreement, and (v) the Plan Option Agreement, all
of even date herewith.
9. TERMINATION OF REGISTRATION RIGHTS. The registration rights granted
----------------------------------
pursuant to this Agreement shall terminate as to Buyer at such time as all
Registrable Securities held by such Buyer can be sold within a given three-month
period without compliance with the registration requirements of the Securities
Act pursuant to Rule 144 supported by a written opinion of legal counsel for the
Company.
6
<PAGE>
10. "MARKET STAND OFF" AGREEMENT. Buyer hereby agrees that he shall not,
----------------------------
to the extent requested by the Company and an underwriter of Common Stock (or
other securities) of the Company, sell or otherwise transfer or dispose (other
than to donees who agree to be similarly bound) of any Registrable Securities
during a period of up to one hundred eighty (180) days following the effective
date of a registration statement of the Company filed under the Securities Act;
provided, however, that such agreement shall not apply to Registrable Securities
being registered and sold pursuant to such registration statement.
11. MISCELLANEOUS.
-------------
(a) Any notice, request, instruction or other document to be given
hereunder by any party hereto to any other party hereto shall be in writing and
delivered personally or sent by registered or certified mail (including by
overnight courier or express mail service), postage or fees prepaid,
if to the Company to:
Law Companies Group, Inc.
3 Ravinia Drive, Suite 1830
Atlanta, Georgia 30346
Attention: Mr. Bruce C. Coles
with a copy to:
Long Aldridge Norman LLP
303 Peachtree Street, N.E., Suite 5300
Atlanta, Georgia 30308
Attention: Mr. F. T. Davis, Jr.
if to Buyer to:
Mr. Virgil R. Williams
Mr. James M. Williams
2076 West Park Place
Stone Mountain, Georgia 30087
with a copy to:
Arnall Golden & Gregory, LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Attention: Mr. Jonathan Golden
7
<PAGE>
or at such other address for a party as shall be specified by like notice. Any
notice which is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party or the office of such party. Any notice which is
addressed and mailed in the manner herein provided shall be conclusively
presumed to have been duly given to the party to which it is addressed at the
close of business, local time of the recipient, on the fourth business day after
the day it is so placed in the mail or, if earlier, the time of actual receipt.
(b) This Agreement is being made in, and shall be construed in
accordance with and governed by the laws of the State of Georgia, without giving
effect to, the principles of conflicts of law thereof.
(c) This Agreement, together with the other "Transaction Documents"
(as defined in the Securities Purchase Agreement), constitute the sole
understanding of the parties with respect to the subject matter hereof.
(d) The headings of the Sections and paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
(e) This Agreement may be executed in multiple counterparts, each of
which shall for all purposes be deemed to be an original and all of which shall
constitute the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
THE COMPANY: LAW COMPANIES GROUP, INC.
- -----------
By: /s/ Burce C. Coles
--------------------------------
Bruce C. Coles
Chairman, CEO & President
BUYER:
- -----
/s/ Virgil R. Williams
-----------------------------------
Virgil R. Williams
/s/ James M. Williams
-----------------------------------
James M. Williams
8
<PAGE>
EXHIBIT 11
LAW COMPANIES GROUP, INC.
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the Quarter Ended
-----------------------
March 31, March 31,
1997 1996
---------- ----------
<S> <C> <C>
Net income (loss) $ 906 $ (236)
====== ======
Average number of shares of capital
stock outstanding 1,898 1,903
Assuming exercise of options based on
the treasury stock method using
average market price -- --
------ ------
Average number of primary shares of
capital stock outstanding 1,898 1,903
====== ======
Primary earnings (loss) per share $ .48 $ (.12)
====== ======
Average number of shares of capital
stock outstanding 1,898 1,903
Assuming exercise of options based on
the treasury stock method using
end of period market price -- --
------ ------
Average number of shares of capital
stock outstanding assuming full
dilution 1,898 1,903
====== ======
Fully diluted earnings (loss) per share $ .48 $ (.12)
====== ======
</TABLE>
12
<PAGE>
Exhibit 99.1
[LAW COMPANIES LETTERHEAD APPEARS HERE]
FOR IMMEDIATE RELEASE
LAW COMPANIES ANNOUNCES TRANSACTION
WITH VIRGIL AND JAMES WILLIAMS
Atlanta, GA, May 6, 1997...Law Companies Group, Inc. announced today that its
shareholders have approved its transaction with Virgil R. Williams and James M.
Williams, Jr.
"After a long and careful process, we have now obtained the patient equity
base that will permit Law Companies to pursue aggressively its long-term
strategic plan," said Law Companies Chairman Bruce C. Coles. "I look forward to
our association with our new shareholders, Virgil and James Williams, and
particularly to the benefits that Law Companies will obtain from their noted
expertise in industries complementary to ours."
Under the terms of the relevant agreements, which were approved by Law
Companies' shareholders at its annual meeting, the Williams' invested $10
million cash in the Company for the purchase of preferred stock, warrants and
options which reflect approximately 33% of the outstanding stock of the Company
today. The new Board of directors of Law Companies will consist of Virgil R.
Williams, James M. Williams, Jr., Thomas D. Moreland, Steven Muller, Michael D.
Williams, Joe A. Mason, Bruce C. Coles, Robert B. Fooshee, Walter T. Kiser, John
Y. Williams, Clay E. Sams, Peter D. Brettell and Frank B. Lockridge.
Law Companies Group, Inc. is a worldwide professional service from
operating mainly in the engineering services industry. Law Companies provides
consulting, design, and management services in the water, environmental,
transportation, buildings and government sectors.
6
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 8,262
<SECURITIES> 0
<RECEIVABLES> 54,897
<ALLOWANCES> 2,719
<INVENTORY> 30,555
<CURRENT-ASSETS> 95,666
<PP&E> 62,728
<DEPRECIATION> 41,402
<TOTAL-ASSETS> 134,187
<CURRENT-LIABILITIES> 95,004
<BONDS> 0
0
0
<COMMON> 1,895
<OTHER-SE> 15,952
<TOTAL-LIABILITY-AND-EQUITY> 134,187
<SALES> 75,491
<TOTAL-REVENUES> 75,491
<CGS> 0
<TOTAL-COSTS> 35,776
<OTHER-EXPENSES> 36,549
<LOSS-PROVISION> 75
<INTEREST-EXPENSE> 955
<INCOME-PRETAX> 1,768
<INCOME-TAX> 813
<INCOME-CONTINUING> 906
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 906
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
</TABLE>
