<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1999
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
LawGibb Group, Inc.
-------------------------------------------------
(Exact name of Registrant as specified in its charter)
Georgia 58-0537111
- ------------------------------------ ----------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
1105 Sanctuary Parkway, Suite 300, Alpharetta, GA 30004
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(770) 360-0600
(Registrant's telephone number including area code)
Law Companies Group, Inc.
(Former name, former address, and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| NO |_|
The number of shares of Common Stock of the Company, par value $1.00 per share,
outstanding at August 13, 1999 was 2,624,312.
<PAGE>
3
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
as of June 30, 1999 and December 31, 1998............................1
Condensed Consolidated Statements of Income and Comprehensive Income
for the Quarters and Six-Month Periods Ended June 30, 1999 and 1998..2
Condensed Consolidated Statements of Cash Flows
for the Six-Month Periods Ended June 30, 1999 and 1998...............3
.
Notes to Condensed Consolidated
Financial Statements.................................................4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......6
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK...................................9
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES..............................10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS................................10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...................10
SIGNATURE.....................................................................11
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
LAWGIBB GROUP, INC.
(unaudited - dollars in thousands, except per share data)
June 30, December 31,
1999 1998
----------------- -----------------
Assets
Current assets:
Cash and cash equivalents $ 19,046 $ 11,022
Billed fees receivable,
net of allowance 56,274 55,346
Unbilled work in progress 32,034 31,464
Other current assets 7,750 9,041
----------------- -----------------
Total current assets 115,104 106,873
Property and equipment, net 21,807 23,442
Equity investments 1,417 1,587
Goodwill, net 12,568 13,250
Other assets 5,293 5,759
----------------- -----------------
Total assets $ 156,189 $ 150,911
================= =================
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings $ 1,333 $ 902
Accounts payable 12,731 15,858
Billings in excess of costs and fees
earned on contracts in progress 13,394 13,805
Current portion of long-term debt 5,114 5,220
Other accrued expenses 14,510 16,745
Other current liabilities 15,987 15,283
----------------- -----------------
Total current liabilities 63,069 67,813
Long-term debt 37,922 41,979
Deferred income taxes 1,992 1,983
Minority interest in equity of subsidiaries 200 208
Cumulative convertible redeemable preferred
stock; Issued and Outstanding: 963,398
shares in 1999 and 1998 9,896 9,886
Shareholders' equity:
Common stock--$1 par value:
authorized: 10,000,000 shares;
issued and outstanding: 2,040,711
shares in 1999 and 2,045,870 shares
in 1998 2,041 2,046
Common stock subscribed (584,028 shares
in 1999) 584 --
Additional paid - in capital 29,101 18,046
Retained earnings 20,023 15,931
Accumulated other comprehensive
income (8,639) (6,981)
----------------- -----------------
43,110 29,042
----------------- -----------------
Total Liabilities and
Shareholders' Equity $ 156,189 $ 150,911
================= =================
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
LAWGIBB GROUP, INC.
(unaudited - in thousands, except per share data)
For the Quarters For the Six Months
Ended June 30, Ended June 30,
--------------------------------- ----------------------------------
1999 1998 1999 1998
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Gross fees $ 77,090 $ 77,855 $ 151,995 $ 151,510
Less: Cost of outside services 9,772 8,810 18,049 16,742
--------------- -------------- --------------- ---------------
Net fees 67,318 69,045 133,946 134,768
Direct costs and expenses:
Payroll 20,256 20,481 40,531 40,139
Job related expenses 7,409 8,156 14,448 15,499
--------------- -------------- --------------- ---------------
Gross profit 39,653 40,408 78,967 79,130
Indirect costs and expenses:
Payroll 15,513 15,617 31,982 31,245
Other expenses 17,982 20,601 36,754 40,290
--------------- -------------- --------------- ---------------
Operating income 6,158 4,190 10,231 7,595
Other income (expense):
Interest expense (971) (1,136) (1,973) (2,191)
Deferred financing costs (23) (24) (46) (61)
Other income (expense) 23 236 50 237
--------------- -------------- --------------- ---------------
Income before income taxes
and equity investments 5,187 3,266 8,262 5,580
Income tax provision (2,178) (1,502) (3,470) (2,567)
Equity investments (17) 1 (18) (7)
--------------- -------------- --------------- ---------------
Net income 2,992 1,765 4,774 3,006
--------------- -------------- --------------- ---------------
Less: Preferred stock dividend
and accretion (282) (282) (564) (564)
--------------- -------------- --------------- ---------------
Net income available to common
shareholders $ 2,710 $ 1,483 $ 4,210 $ 2,442
=============== ============== =============== ===============
Basic earnings per
common share $ 1.33 $ .78 $ 2.06 $ 1.29
=============== ============== =============== ===============
Diluted earnings per
common share $ .89 $ .58 $ 1.44 $ 1.01
=============== ============== =============== ===============
Statements of Comprehensive Income
Net income $ 2,992 $ 1,765 $ 4,774 $ 3,006
Other comprehensive income:
Foreign currency translation
adjustment (867) (869) (1,658) (9)
--------------- -------------- --------------- ---------------
Comprehensive income $ 2,125 $ 896 $ 3,116 $ 2,997
=============== ============== =============== ===============
</TABLE>
See accompanying notes.
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
LAWGIBB GROUP, INC.
(unaudited - dollars in thousands, except per share data)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30
-------------------------------------
1999 1998
----------------- ----------------
<S> <C> <C>
Operating activities
Net income $ 4,774 $ 3,006
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,397 3,344
Provision for losses on receivables 333 398
Deferred income taxes 3 (2,805)
Undistributed losses from equity investments 18 7
Loss on disposal of property and equipment 34 62
Changes in operating assets and liabilities:
Billed fees receivable (2,462) (1,541)
Unbilled work in progress (1,337) (2,830)
Other current assets 1,151 (656)
Accounts payable and accrued expenses (3,218) 3,906
Billings in excess of costs and fees earned on
contracts in progress (1,398) (1,299)
----------------- ----------------
Net cash provided by operating activities 1,295 1,592
Investing activities
Purchases of property and equipment (1,812) (2,732)
Proceeds from disposal of property and equipment 71 13
Other, net 1,172 (1,657)
----------------- ----------------
Net cash used by investing activities (569) (4,376)
Financing activities
Net (payments) proceeds on short-term borrowings 431 (234)
Net (payments) proceeds on revolving line of credit and
long-term borrowings (4,160) 1,782
Deferred financing and preferred stock issuance costs - (369)
Proceeds from exercise of stock options 11,700 2,888
Repurchase and retirement of shares (184) (291)
Preferred dividends paid (400) (400)
----------------- ----------------
Net cash provided by financing activities 7,387 3,376
Effect of exchange rate changes on cash (89) (16)
----------------- ----------------
Increase in cash and cash equivalents 8,024 576
Cash and cash equivalents at beginning of period 11,022 9,527
----------------- ----------------
Cash and cash equivalents at end of period $ 19,046 $ 10,103
================= ================
</TABLE>
See accompanying notes.
<PAGE>
12
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
LAWGIBB GROUP, INC.
(unaudited - dollars in thousands, except per share data)
NOTE 1 - There have been no significant changes in the accounting policies of
the Company during the periods presented. For a description of these policies,
see Note 1 of Notes to Consolidated Financial Statements for the year ended
December 31, 1998 in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998 (the "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, 1998 included in the Form 10-K. The accompanying condensed consolidated
financial statements for the quarter and six months ended June 30, 1999 and 1998
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 second
quarter ended June 30, 1999 may not be indicative of the results that may occur
during the year ending December 31, 1999.
NOTE 3 - The Company's operations are conducted principally in the United
States, Europe, and Africa. Accordingly, the Company considers its operating
segments to be defined as United States Operations and International Operations.
For financial reporting purposes, International Operations results are presented
separately for operations in the United Kingdom, Europe, Africa, and other
countries. The net fees for each segment as described in the table below
correspond directly to the net revenues attributable to the geographic areas
that are represented by these segments. Inter-segment revenues related to these
geographic areas were not material. The table that follows represents combined
disclosure for both business segment and geographic area information.
For the Quarters Ended For the Six Months Ended
June 30 June 30
----------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ------------ -----------
Net Fees
United States Operations $ 45,226 $ 45,067 $ 90,052 $ 87,910
International Operations
United Kingdom 7,372 7,940 15,028 15,729
Europe 4,460 4,315 8,831 8,690
Africa 6,490 7,746 12,475 14,383
Other 3,770 3,977 7,560 8,056
----------- ----------- ------------ -----------
Total $ 67,318 $ 69,045 $ 133,946 $ 134,768
=========== =========== ============ ===========
Operating Income
United States Operations $ 5,070 $ 3,711 $ 8,649 $ 6,764
International Operations
United Kingdom 122 69 273 142
Europe 345 94 607 325
Africa 483 530 509 615
Other 138 (214) 193 (251)
----------- ----------- ------------ -----------
Total $ 6,158 $ 4,190 $ 10,231 $ 7,595
=========== =========== ============ ===========
June 30, December 31,
1999 1998
----------- -----------
Assets
United States Operations $ 93,155 $ 84,801
International Operations
United Kingdom 34,770 37,373
Europe 5,399 4,875
Africa 14,440 15,636
Other 8,425 8,226
----------- -----------
Total $ 156,189 $ 150,911
=========== ===========
<PAGE>
<TABLE>
<CAPTION>
NOTE 4 - Computation of Earnings Per Share
LAWGIBB GROUP, INC.
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
For the Quarter Ended June 30, For the Six Months Ended September 30,
---------------------------------------------------------------------------
1999 1998 1999 1998
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Numerator:
Net income $ 2,992 $ 1,765 $ 4,774 $ 3,006
Preferred stock dividends and accretion (282) (282) (564) (564)
---------------------------------------------------------------------------
Numerator for basic earnings per share -
income available to common shareholders 2,710 1,483 4,210 2,442
Effect of dilutive securities:
Preferred stock dividends and accretion 282 282 564 564
---------------------------------------------------------------------------
Numerator for diluted earnings per
share - income available to common
shareholders $ 2,992 $ 1,765 $ 4,774 $ 3,006
Denominator:
Denominator for basic earnings per share -
weighted-average shares 2,042 1,893 2,044 1,893
Effect of dilutive securities:
Employee stock options 178 79 167 74
Other stock options 165 91 136 48
Cumulative convertible redeemable
preferred stock 963 963 963 963
---------------------------------------------------------------------------
Dilutive potential common shares 1,306 1,133 1,266 1,085
---------------------------------------------------------------------------
Denominator for diluted earnings per
share-adjusted weighted-average shares 3,348 3,026 3,310 2,978
===========================================================================
Basic earnings per common share $ 1.33 $ .78 $ 2.06 $ 1.29
===========================================================================
Diluted earnings per common share $ .89 $ .58 $ 1.44 $ 1.01
===========================================================================
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following table sets forth, for the quarters and six months 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 the 1999 periods from the
comparable periods 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. The following 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>
Qtr to Qtr Year to Year
Dollar Dollar
Quarters Ended Increase Six Month Periods Ended Increase
June 30, (Decrease) June 30, (Decrease)
-------------------- --------------- ------------------------ ----------------
1999 1998 1999 vs 1998 1999 1998 1999 vs 1998
--------- --------- --------------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net fees 100.0% 100.0% (2.5%) 100.0% 100.0% (0.6%)
Gross profit 58.9% 58.5% (1.9%) 59.0% 58.7% (0.2%)
Indirect costs
and expenses 49.8% 52.5% (7.5%) 51.3% 53.1% (3.9%)
Operating income 9.1% 6.1% 47.0% 7.6% 5.6% 34.7%
Net income 4.4% 2.6% 69.4% 3.6% 2.2% 58.8%
</TABLE>
Results of Operations
Increases in the Company's US Operations net fees combined with improved
management of indirect costs and expenses resulted in improvements of 69.4% and
58.8% in net income for the quarter and six months ended June 30, 1999,
respectively. Consolidated net fees of $67.3 million for the second quarter of
1999 represented a 2.5% decrease from $69.0 million for the same period in 1998.
For the six-month period ended June 30, 1999, consolidated net fees of $133.9
million represented a 0.6% decrease from $134.8 million for the same period in
1998. For both the second quarter and six-month year-to-date periods, indirect
costs and expenses, operating income, and net income improved as a percentage of
net fees compared to 1998.
Net fees from the Company's United States operations increased 0.4% from $45.1
million for the second quarter of 1998 to $45.2 million for the same period in
1999. For the first six months of 1999, net fees from the Company's United
States operations increased 2.4% from $87.9 million for the first six months of
1998 to $90.1 million.
Net fees from the Company's International operations decreased 7.9% from $24.0
million for the second quarter of 1998 to $22.1 million for the same period in
1999. For the first six months of 1999, net fees from the Company's
International operations decreased 6.3% from $46.9 million for the first six
months of 1998 to $43.9 million for the same period in 1999. This decrease was
primarily the result of a significant strengthening in the value of the United
States dollar compared to the local currencies for these operations. The value
of the pound sterling compared to the United States dollar has declined 4.2%
since December 31, 1998.
The Company's gross profit margin of 58.9% for the second quarter of 1999
reflected a small increase compared to 58.5% for the same period of 1998. For
the six months ended June 30, 1999, the Company's gross profit margin of 59.0%
also reflected a small increase compared to 58.7% for the same period of 1998.
For the six month period ended June 30, 1999, the gross profit margin of 64.0%
for United States operations decreased compared to 65.0% during the first six
months of 1998. The International Group's gross profit margin increased to 48.4%
from 47.0% for the first six months of 1999 compared to the same period in 1998,
primarily as a result of improved management of direct costs. Indirect costs and
expenses, which include expenses related to both operations support as well as
administrative support functions, were $68.7 million, or 51.3% of net fees, for
the first six months of 1999, compared with $71.5 million, or 53.1% of net fees,
for the same period in 1998. This decrease as a percentage of net fees is
attributable to the continued positive impact of the Company's expense reduction
initiatives in insurance costs, professional services, facilities expense, and
other areas.
Interest expense was $1.0 million and $2.0 million for the second quarter and
first six months of 1999, respectively. This compares to interest expense of
$1.1 million and $2.2 million for the second quarter and first six months of
1998, respectively. These decreases were primarily the result of the reduction
of the Company's outstanding debt, which has declined 7.8% since December
31,1998.
The effective income tax rate was 42.0% for the first six months of 1999,
compared to 46.0% for the first six months of 1998. This decrease was
attributable to changes in permanent book versus tax differences.
For the second quarter of 1999, the Company recorded net income of $3.0 million
($1.33 per common share - basic and $.89 per common share - diluted) which is an
increase from $1.8 million in 1998 ($.78 per common share basic and $.58 per
common share- diluted). For the first six months of 1999, the Company recorded
net income of $4.8 million ($2.06 per common share - basic and $1.45 per common
share - diluted) which is an increase from $3.0 million in 1998 ($1.29 per
common share - basic and $1.02 per common share - diluted).
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' operating
environments by utilizing a combination of current, monthly 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 month-end and
monthly average exchange rates, resulting in an adjustment to shareholders'
equity. In 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
significant during the first six months of 1999. The translation of the
Company's foreign subsidiaries for the first six months of 1999 resulted in a
change of $1.7 million in the foreign currency translation adjustment component
of shareholders' equity. This component is reported on the company's condensed
consolidated balance sheet in the line item entitled Accumulated Other
Comprehensive Income. This fluctuation was caused primarily by increased
strength of the U.S. dollar relative to the British pound sterling and the South
African rand from December 31, 1998 to June 30, 1999.
Debt and Short-term Borrowings
The Company reported debt and short-term borrowings of $44.3 million at June 30,
1999, compared to $48.1 million at December 31, 1998. Debt and short-term
borrowings as a percentage of total capitalization amounted to 45.6% at June 30,
1999, compared to 55.3% at December 31, 1998.
Liquidity and Capital Resources
While the Company anticipates continuing capital requirements to support growth,
expansion of services, and capital expenditures, the Company believes that its
cash provided by operations and borrowings available under its credit facility
will be sufficient to meet its requirements for the foreseeable future.
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 use of Company Common Stock 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. Over the first six months of 1999, 6,140 shares
totaling $171,073 were traded out of the Plan and repurchased by the Company.
<PAGE>
On May 6, 1997, the shareholders of the Company authorized and approved a
transaction between the Company and Virgil R. Williams and James M. Williams,
Jr., each a director of the Company (collectively, the "Investors"), pursuant to
which the Company sold to the Investors (including, in the case of James M.
Williams, a family partnership that he controls) a combination of Preferred
Stock, Common Stock warrants, and options to purchase shares of Common Stock
(the "Options"). The Options are eligible to be exercised in various quantities
and at various prices through December 31, 2006. On June 30, 1999, Virgil R.
Williams and James M. Williams exercised all remaining options to purchase an
aggregate of 584,028 shares of the Company's Common Stock at an exercise price
of $20.00 per share. The options were exercised on June 30,1999 subject to
Hart-Scott-Rodino approval, which occurred on July 23,1999. The proceeds of
$11.7 million received by the Company will be used initially to pay down bank
debt and further position the Company for future growth initiatives.
Cash Provided by Operations
Cash provided by operations over the first six months of 1999 of $1.3 million
decreased from $1.6 million during the first six months of 1998. This decrease
was primarily due to increased working capital requirements for other current
assets as well as accounts payable and accrued other expenses.
Capital Expenditures
Capital expenditures during the first six months of 1999 and the first six
months of 1998 were $1.8 million and $2.7 million, respectively. In order to
continue to enhance productivity the Company has continued, and will continue,
its capital spending programs, particularly for computer and other
technology-related equipment. The Company believes that the capital spending
amount allowed by its credit facility ($7.0 million per year) is sufficient to
meet foreseeable requirements.
Dividends
Cash dividends on Common Stock have been and continue to be prohibited under the
current and previous bank credit facilities. As required by the terms of the
Company's outstanding Cumulative Convertible Redeemable Preferred Stock and
permitted by the 1998 credit facility, the Company paid dividends to the holders
of the Preferred Stock. For the second quarter, dividends totaled $0.2 million,
or $0.21 per preferred share. For the six months ended June 30, 1999, dividends
totaled $0.4 million, or $0.42 per preferred share.
Year-2000
The Company recognizes the need to address potential problems in both
information technology and non-information technology systems, which could
result in improper handling of the date change to the year 2000. As the
Company's core business services are engineering and environmental science
professional consulting services, delivery of these services is not critically
dependent on any mainframe, mini-computer or personal computer-based systems or
software applications. Where computer systems and software applications are used
to support the delivery of services to clients, these systems and applications
are largely personal computer-based and are not considered likely to experience
year-2000 related problems. For certain applications which are used to support
administrative operations of the Company and certain systems and applications
used to support the Company's international operations, year-2000 readiness
projects are currently in the process of being implemented. These projects are
substantially complete as of June 30,1999.
The Company has spent a total of approximately $150,000 to address known
year-2000 issues. Additionally, the Company does not anticipate a material
adverse effect on the Company's business, results of operations, or financial
condition associated with any currently identified or anticipated year-2000
readiness issue, inclusive of internal systems and software applications and
those systems of other parties with whom the Company does business. As part of
the Company's contingency plan to address year-2000 matters, a centralized task
force has been established to coordinate identification, evaluation, and
implementation of any year-2000 contingency plans or future compliance
requirements. This task force is evaluating all of its major external providers
of essential goods and services for year-2000 readiness. Based on the critical
nature of any goods or services, the task force is developing a contingency plan
regardless of the reported year-2000 readiness of the provider or industry. The
Company expects all phases to be substantially complete during the third
quarter, 1999.
<PAGE>
While the Company is taking steps that it believes to be reasonable and prudent
to assess the year-2000 readiness of third parties with whom the Company does
business, the failure of any of these third parties to correct a material
year-2000 problem could result in an interruption in, or a failure of, certain
normal business activities or operations. Due to the general uncertainty
inherent in the year-2000 problem, resulting in part from the uncertainty of the
year-2000 readiness of third party suppliers and customers, the Company is
unable to determine at this time whether the consequences of year-2000 failures
will have a material impact on the Company's results of operations, liquidity,
or financial condition. Readers are cautioned that forward-looking statements
contained in this year-2000 update should be read in conjunction with the
Company's disclosures under the heading: "Forward Looking Statements," which
follow this section.
Forward Looking Statements
This Quarterly Report on Form 10-Q contains "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995 which
represent the company's expectations or beliefs. These statements by their
nature involve substantial risks and uncertainties, certain of which are beyond
the Company's control. The Company cautions that various factors, including, but
not limited to, the factors described in the Company's filings with the
Securities and Exchange Commission, the uncertain timing of awards and
contracts, increasing competition by foreign and domestic competitors, the
impact of year-2000 issues, general economic and regulatory conditions in each
of the geographic regions served by the Company, industry trends, and other
risks could cause actual results or outcomes to differ materially from those
expressed in any forward-looking statements.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to various types of market risks in the normal course of
business, including the impact of interest rate changes and foreign currency
exchange rate fluctuations. Except for the effect of foreign currency
translation discussed previously, there have been no material changes in these
exposures during the periods presented. For a description of these market risks,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's Form 10-K.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On May 6, 1997, the shareholders of the Company authorized and approved a
transaction between the Company and Virgil R. Williams and James M. Williams,
Jr., each a director of the Company (collectively, the "Investors"), pursuant to
which the Company sold to the Investors (including, in the case of James M.
Williams, a family partnership that he controls) a combination of Preferred
Stock, Common Stock warrants, and options to purchase shares of Common Stock
(the "Options"). The Options are eligible to be exercised in various quantities
and at various prices through December 31, 2006. On June 30, 1999, Virgil R.
Williams and James M. Williams exercised all remaining options to purchase an
aggregate of 584,028 shares of the Company's Common Stock at an exercise price
of $20.00 per share. The options were exercised on June 30,1999 subject to
Hart-Scott-Rodino approval, which occurred on July 23, 1999. The proceeds of
$11.7 million received by the Company will be used initially to pay down bank
debt and position the Company for future growth initiatives.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held May 11, 1999 in Atlanta,
Georgia for the purpose of considering and voting on a proposal (the" Proposal")
to elect seven (7) directors to serve on the Board of Directors of the Company
until the 2000 Annual Meeting and until their successors are duly elected and
qualified.
The votes for the Proposal are detailed below:
Directors For Withheld
- ------------------------ ----------- -----------
Peter D. Brettell 1,321,848 60,203
Bruce C. Coles 1,304,216 77,835
Robert B. Fooshee 1,328,458 53,593
Walter T. Kiser 1,336,887 45,164
Steven Muller 1,322,741 59,310
Clay E. Sams 1,348,922 33,129
John Y. Williams 1,346,588 35,463
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits below are filed as part of this report
10.1 Supplemental Executive Retirement Plan dated
May 10, 1996.
10.2 First Amendment to Supplemental Executive
Retirement Plan dated August 10, 1999.
27.1 Financial Data Schedule for the six months
ended June 30,1999.
(b) Reports on Form 8-K
Current Report on Form 8-K, filed May 14, 1999,
reporting under Item 5 the announcement of the change
of the name of the Company from Law Companies Group,
Inc. to LawGibb Group, Inc.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant, LawGibb Group, Inc., has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
LAWGIBB GROUP, INC.
/s/ R.B. Fooshee
- ------------------------------------------------------------
Robert B. Fooshee
Chief Financial Officer and Treasurer
Dated: August 13, 1999
LAW COMPANIES GROUP, INC. SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
<PAGE>
LAW COMPANIES GROUP, INC
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, it is in the best interest of Law Companies Group, Inc. (the "Company")
to employ and retain competent loyal management personnel; and
WHEREAS, Bruce Coles requires a supplemental retirement benefit.
NOW THEREFORE, the Company hereby establishes the following Supplemental
Retirement Plan effective August 1, 1996 ("Effective Date") which constitutes an
unfunded nonqualified plan that benefits an employee who is within a select
group of key management or highly compensated employees.
<PAGE>
ARTICLE I
DEFINITIONS
1.1 Account. "Account" means with respect to the Participant or his
Beneficiary, the total dollar amount or value evidenced by the last
balance posted in accordance with the terms of the Plan, to the account
record established for the Participant or his Beneficiary.
1.2 Beneficiary. "Beneficiary" means a person or entity designated by the
Participant under the terms of this Plan to receive any amounts
distributable under the Plan upon the death of the Participant.
1.3 Board of Directors. "Board of Directors" means the Board of Directors
of Law Companies Group, Inc.
1.4 Code. "Code" means the Internal Revenue Code of 1986, as amended.
1.5 Company. "Company" means Law Companies Group, Inc.
1.6 Interest Rate. "Interest Rate" means for each Valuation Date, the rate
of interest credited to the Participant's Account that is derived from
the investment of Company Contributions made to the Trust.
1.7 Normal Retirement Age. "Normal Retirement Age" means age 65.
1.8 Participant. "Participant" means Bruce Coles, who is one of a select
group of management and highly compensated employees.
1.9 Plan. "Plan" means the Law Companies Group, Inc. Supplemental
Executive Retirement Plan set forth in this document, as amended
from time to time.
1.10 Plan Administrator. "Plan Administrator" means the individual or
group of individuals who shall act on behalf of
the Company to administer the Plan.
1.11 Plan Year. "Plan Year" means the calendar year.
1.12 Trust. "Trust" means the "rabbi trust" entered into in conjunction
with this Plan which is entitled Law Companies Group, Inc.
Supplemental Executive Retirement Trust.
1.13 Valuation Date. "Valuation Date" means the last day of each
calendar year or any other period as designated by the Plan
Administrator.
ARTICLE II
PARTICIPANT ACCOUNT
2.1 Participant's Account.
(a) Establishment of Account. The Plan Administrator shall
establish and maintain an Account on behalf of the
Participant. The Account shall be credited with (i)
Contributions made by the Company in accordance with Schedule
A, attached hereto and made a part hereof, until the earlier
of the date the Participant attains Normal Retirement Age or
terminates employment with the Company and (ii) earnings
attributable to the Account. The Account shall be maintained
until the total value thereof has been distributed to or on
behalf of the Participant or his Beneficiary. If the
Participant terminates during a Plan Year, a pro rata
portion of the contribution will be made for that year. For
example, if the Participant terminates employment on July 31,
2002, he shall receive a contribution of 7/12 of $65,437 for
the year 2002.
(b) Nature of Contributions and Accounts. The Contributions and
earnings credited to the Participant's Account shall be
represented solely by bookkeeping entries. All payments to a
Participant under the Plan shall be made from the general
assets of the Company. Any assets which may be set aside in
the Trust or otherwise acquired by the Company in anticipation
of its obligations under the Plan shall be part of the general
assets of the Company. The Company's obligation to pay
benefits under the Plan constitutes a mere promise of the
Company to pay such benefits, and a Participant or Beneficiary
shall be and remain no more than an unsecured, general
creditor of the Company.
(c) Crediting of Earnings. The Plan Administrator or its designee
shall credit to the Participant's Account as of each Valuation
Date the amount of earnings and/or losses applicable thereto
for the period since the immediately preceding Valuation Date
as follows:
(1) First, the Interest Rate(s) for the period since the
immediately preceding Valuation Date shall be
determined for each investment fund;
(2) Next, the amount of each Participant's Account as of
the immediately preceding Valuation Date minus the
amount of any distributions debited from the amount
since the immediately preceding Valuation Date shall
be determined; and
(3) The Interest Rate(s) for such Valuation Date shall be
applied to the Participant's Account for such
Valuation Date, and the total amount of earnings
and/or losses resulting therefrom shall be credited
to such Participant's Account as of the applicable
Valuation Date.
2.2 Retirement. The Participant shall be entitled to receive the entire
amount credited to his Account as of the date of distribution, on the
first day of the month after the Participant attains Normal Retirement
Age. Such amounts shall be paid in a single lump sum as soon as
practical after the Participant becomes entitled to a distribution.
However, at least one year prior to the Participant's attainment of
Normal Retirement Age, the Participant may make an irrevocable
election to receive his Account balance in installments. Installment
payments shall be made in substantially equal annual installments
(adjusted for interest income between payments); provided, in no event
shall such payments be made over a period in excess of 15 years.
The initial value of the obligation for the installment payments
shall be equal to the amount of the Participant's Account balance
calculated in accordance with the terms of the Section 2.1.
2.3 Death Benefit. If the Participant dies prior to his termination of
employment, the Company shall pay the Participant's Account balance on
his date of death, to the Participant's designated Beneficiary. If the
Participant dies after payment of his benefit from the Plan has begun,
but before his entire benefit has been distributed, the remaining
amount of his Account balance shall be distributed to the Participant's
designated Beneficiary. The Participant's designated Beneficiary will
receive the benefit in one lump sum as soon as practicable following
the Participant's death.
2.4 Termination of Employment. If the Participant terminates employment
from the Company prior to Normal Retirement Age, the Participant shall
be entitled to receive his benefit from this Plan on the first day of
the month after he terminates in one lump sum.
2.5 Debiting of Distributions. As of each Valuation Date, the Plan
Administrator shall debit the Participant's Account for any amount
distributed from such Account since the immediately preceding Valuation
Date.
2.6 Change in Control. In the case of a change in the ownership of the
Company, a change in effective control of the Company or a change in
ownership of a substantial portion of the assets of the Company (as
defined-under Code Section 280G), the Participant's Account balance at
the time of such change shall become immediately due and payable in one
lump sum even if the Participant had previously elected installment
payments in accordance with Section 2.2.
2.7 Beneficiary. If a Participant dies prior to receiving all amounts
distributable under the Plan, the Beneficiary named by the Participant
will receive the amounts due under the Plan. The Participant shall file
with the Company a designation of one or more Beneficiaries to whom the
benefit under the Plan will be payable if the Participant dies prior to
receipt of his entire benefit. The designation will be effective upon
receipt by the Company of a properly executed form. If there is no
valid designation of Beneficiary on file with Company at the time of
the Participant's death or if all of the Beneficiaries designated the
Beneficiary designation have predeceased the Participant, the
Beneficiary will be the Participant's spouse, if the spouse survives
the Participant, or otherwise the Participants estate.
2.8 Vesting. The Participant's Account balance Under this Plan shall
always be 100% vested.
2.9 Acceleration of Payment. If any federal or state income taxes become
due and payable for amounts contributed under this Plan prior to the
time such amounts become distributable to the Participant, the amounts
upon which taxes are due shall become immediately payable to the
Participant.
<PAGE>
ARTICLE III
EVENTS CAUSING FORFEITURE
Forfeiture For Cause. If the Participant is discharged by the Company for a
conviction for fraud, embezzlement, theft or any felony in the course of his
employment by the Company which damages the Company, the entire benefit accrued
for the benefit of the Participant and/or his Beneficiaries under this Plan will
be forfeited. The decision of the Board o Directors of the Company as to the
cause of the former Participant's discharge and damage done to the Company will
be final. No decision of the Company will affect finality of the discharge of
the Participant by the Company in any manner. This provision shall not operate
to waive or otherwise forego any other rights or benefits the Participant may
have.
<PAGE>
ARTICLE IV
CLAIMS
Claims Procedure. The Company shall make all determinations as to the right of
the Participant to a benefit. If any application for payment of a benefit under
the Plan shall be denied, the Company shall notify the claimant within ninety
(90) days of such denial setting forth the specific reason therefore and afford
such claimant a reasonable opportunity for a full and fair review of the
decision denying his claim. Notice of such denial shall set forth, in addition
to the specific reasons for the denial, reference to pertinent provisions of the
Plan, such information as may be relevant to denial of the claim, an explanation
of the claims review procedure and advice that such claimant may request the
opportunity to review pertinent Plan documents and submit a statement of issues
and comments. Within sixty (60) days following advice of denial of his claim,
upon request made by any claimant for a review of such denial, the Company shall
take appropriate steps to review its decision in light of any further
information or comments submitted by such claimant. The Company may, in its
discretion, hold a hearing at which such claimant shall be entitled to present
the basis of his claim for review and at which he may be represented by counsel.
The Company shall render a decision within sixty (60) days after claimant's
request for review (which may be extended to 120 days if circumstances so
require) and shall advise claimant in writing of its decision on such review,
specifying its reasons and identifying appropriate provisions of the Plan.
<PAGE>
ARTICLE V
AMENDMENT AND/OR TERMINATION
5.1 Amendment or Termination of the Plan. The Board of Directors may amend
or terminate this Plan at any time by an instrument in writing with the
consent of the Participant.
5.2 No Retroactive Effect on Awarded Benefits. No amendment will affect the
rights of the Participant to the benefit provided under this Plan
previously accrued by the Participant without his consent. However, the
Board of Directors shall retain the right at any time to change in any
manner the benefits provided in Article II but only as to amounts
contributed after the date of the amendment.
5.3 Effect of Termination. If the Plan is terminated, no further
contributions will be made to the Plan. The Participant's benefit as
of the date of termination will be payable under the conditions, at the
time and in the form then provided in the Plan.
<PAGE>
ARTICLE VI
FUNDING
6.1 Corporate Obligation. The Company shall pay the benefits due the
Participant under this Plan; however, should it fail to do so when a
benefit is due, such benefit shall be paid by the Trustee of the Trust
Agreement entered into contemporaneously with this Plan. In any event,
if the Trust fails to pay for any reason, the Company still remains
liable for the payment of all benefits provided by this Plan. The
Company shall contribute to the Trust as designated in the Trust
Agreement. All assets contributed shall be held in and administered
according to the terms of the Trust Agreement, a copy of which is
attached to this Plan and incorporated by reference for all purposes.
However, in no event shall the rights of the Participant in the assets
held by the Trust be greater than the rights of unsecured creditors of
the Company in the case of bankruptcy or insolvency of the Company.
Nothing contained in this Plan or that Trust Agreement constitutes a
secured promise by the Company that the assets of the Company will be
sufficient to pay any benefit to any person.
6.2 Participant Must Rely Only on General Credit of the Company. It is
specifically recognized by both the Company and the Participant that
this Plan is only a general corporate commitment and that the
Participant must rely upon the general credit of the Company for the
fulfillment of its obligations hereunder. Under all circumstances the
rights of the Participant to any asset held by the Company will be no
greater than the rights expressed in this Plan. Nothing contained in
this Plan will constitute a guarantee by the Company that the assets of
the Company will be sufficient to pay any benefits under this Plan or
would place the Participant in a secured position ahead of general
creditors of the Company. Though the Company may establish a Trust to
accumulate assets to fulfill its obligations, the Plan and any such
Trust will not create any lien, claim, encumbrance, right, title, or
other interest of any kind whatsoever of any Participant in any asset
held by the Company, contributed to any such trust or otherwise
designated to be used for payment of any of its obligations created in
this Plan. No policy or other specific asset of the Company has been or
will be set aside, or will in any way be transferred to any trust or
will be pledged in any way for the performance of the Company's
obligations under this Plan which would remove the policy or asset from
being subject to the general creditors of the Company.
<PAGE>
ARTICLE VII
MISCELLANEOUS
7.1 Limitation of Rights. Nothing in this Plan will be construed
(a) to give a Participant any right with respect to any benefit except in
accordance with the terms of this Plan;
(b) to limit in any way the right of the Company to terminate a Participant's
employment with the Company at any time;
(c) to evidence any agreement or understanding, expressed or implied, that the
Company will employ a Participant in any particular position or for any
particular remuneration; or
(d) to give a Participant or any other person claiming through him any interest
or right under this Plan other than that of any unsecured general creditor of
the Company.
7.2 Distributions to Incompetents or Minors. Should a Participant become
incompetent or should a Participant designate a Beneficiary who is a
minor or incompetent, the Company is authorized to pay the funds due to
the parent of the minor or to the guardian of the minor or incompetent
or directly to the minor or to apply those funds for the benefit of the
minor or incompetent in any manner the Committee determines in its sole
discretion.
7.3 Nonalienation of Benefits. No right or benefit provided in this Plan
will be transferable by the Participant except, upon his death, to a
named Beneficiary as provided in this Plan. No right or benefit under
this Plan will be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance or charge, and any attempt to
anticipate, alienate, sell, assign, pledge, encumber, or charge the
same will be void. No right or benefit under this Plan will in any
manner be liable for or subject to any debts, contracts, liabilities or
torts of the person entitled to such benefits.
7.4 Responsibility for Distributions and Withholding of Taxes. The Company,
will calculate the deductions from the amount of the benefit paid under
the Plan for any taxes required to be withheld by federal, state or
local government based on the Participant's instructions, and will
cause them to be withheld.
7.5 Severability. If any term, provision, convenient or condition of the
Plan is held to be invalid, void or otherwise unenforceable, the rest
of the Plan will remain in full force and effect and will in no way be
affected, impaired or invalidated.
7.6 Notice. Any notice or filing required or permitted to be given to the
Company or the Participant will be sufficient if in writing and hand
delivered or sent by U.S. mail to the principal office of the Company
or to the residential mailing address of the Participant. Notice will
be deemed to be given as of the date of hand delivery or if delivery is
by mail, as of the date shown on the postmark.
7.7 Gender. Whenever any words are used in this Plan in the masculine,
feminine, or neuter gender they are to be construed as though they were
also used in another gender in all cases where they would so apply.
7.8 Governing Law. The Plan will be construed, administered and governed in
all respects by the laws of the State of Georgia to the extent they are
not preempted by Federal law.
7.9 Effective Date. This Plan will be operative and effective on
August 1, 1996.
IN WITNESS WHEREOF, the Company and the Participant have executed this document
to evidence the Plan as adopted by the Board of Directors of Law Companies
Group, Inc. on May 10, 1996.
LAW COMPANIES GROUP, INC.
By: /s/ Darryl B. Segraves
---------------------------------------------
/s/ Bruce C. Coles
---------------------------------------------
BRUCE COLES
<PAGE>
CERTIFIED RESOLUTION
RESOLVED, that the Board of Directors of Law Companies Group, Inc. (the
"Company") has approved the adoption of the supplemental retirement pay plan for
the benefit of Bruce Coles, who is among a select group of highly paid or
management employees, embodied in the document entitled "Law Companies Group,
Inc. Supplemental Executive Retirement Plan" (the "Plan"), effective as of
August 1, 1996; and
RESOLVED FURTHER, that the Board of Directors of the Company has approved the
adoption of the grantor trust created to hold assets for paying benefits under
the Plan, embodied in the document entitled "Law Companies Group, Inc.
Supplemental Executive Retirement Trust" (the "Trust"); and
RESOLVED FURTHER, that the proper Officers of the Company are hereby authorized
and instructed to take any and all actions and to execute any instruments deemed
necessary and desirable to carry the Plan into effect.
* * * * * * * * * * * * * * * * * * *
I, Darryl B. Segraves, Secretary, hereby certify that the foregoing is
a true and exact copy of the Resolution adopted by the Board of Directors of the
Corporation at a meeting held on the ____ day of ___ 19___ , and entered upon
the regular Minute Book of said Corporation and is now in full force and effect.
I further certify that the Board of Directors of the Corporation at the time of
adoption of this Resolution had full powers and lawful authority to adopt this
Resolution.
ATTEST: LAW COMPANIES GROUP, INC.
/s/ Ashley M. Hodges By: /s/ Darryl B. Segraves
Title
<PAGE>
SCHEDULE A
1996 $ 43,603
1997 $ 46,655
1998 $ 49,921
1999 $ 53,416
2000 $ 57,155
2001 $ 61,155
2002 $ 65,437
2003 $ 70,017
2004 $ 74,918
2005 $ 80,163
2006 $ 85,774
2007 $ 91,778
2008 $ 98,202
2009 $105,077
<PAGE>
LAW COMPANIES GROUP, INC. SUPPLEMENTAL EXECUTIVE
RETIREMENT TRUST
<PAGE>
AGREEMENT OF TRUST
This Agreement made this ___ day of _______________ by and between Law Companies
Group, Inc. (the "Company") and SunTrust Bank, Atlanta (the "Trustee").
WITNESSETH THAT:
WHEREAS, the Company has adopted the nonqualified deferred compensation plan
referred to as Law Companies, Group, Inc. Supplement Executive Retirement Plan
for Bruce Coles (the "Plan").
WHEREAS, the Company has incurred or expects to incur liability under the terms
of such Plan with respect to the individual participating in such Plan;
WHEREAS, the Company wishes to establish a trust (the "Trust") and to contribute
to the Trust assets that shall be held therein, subject to the claims of the
Company's creditors in the event of the Company's Insolvency, as herein defined,
until paid to the Plan participant and/or his beneficiaries in such manner and
at such times as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust shall constitute an
unfunded arrangement and shall not affect the status of the Plan as an unfunded
plan maintained for the purpose of providing deferred compensation for one of a
select group of management or highly compensated employees for purposes of Title
I of the Employee Retirement Income Security Act of 1974;
WHEREAS, it is the intention of the Company to make contributions to the Trust
to provide itself with a source of funds to assist it in the meeting of its
liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that the
Trust shall be comprised, held and disposed of as follows:
<PAGE>
2
I -
SECTION I
ESTABLISHMENT OF TRUST
1.01 The Company hereby deposits with the Trustee in trust $ 43,603 which
shall become the principal of the Trust to be held, administered and
disposed of by the Trustee as provided in this Trust Agreement.
1.02 The Trust shall become irrevocable (subject to Section IV of the Trust,
return of excess assets) upon approval by the Board of Directors.
1.03 The Trust is intended to be a grantor trust, of which the Company is
the grantor, within the meaning of subpart E, part I, subchapter J,
chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended,
and shall be construed accordingly.
1.04 The principal of the Trust, and any earnings thereon shall be held
separate and apart from other funds of the Company and shall be used
exclusively for the uses and purposes of Plan participants and general
creditors as herein set forth. Plan participants and their
beneficiaries shall have no preferred claim on, or any beneficial
ownership interest in, any assets of the Trust. Any rights created
under the Plan and this Trust Agreement shall be mere unsecured
contractual rights of Plan participants and their beneficiaries against
the Company. Any assets held by the Trust will be subject to the claims
of the Company's general creditors under federal and state law in the
event of Insolvency, as defined in Section 3.01 herein.
1.05 The Company, in its sole discretion, may at any time, or from time to
time, make additional deposits of cash or other property in trust with
the Trustee to augment the principal to be held administered and
disposed of by the Trustee as provided in this Trust Agreement. Neither
the Trustee nor any Plan participant or beneficiary shall have any
right to compel such additional deposits.
Upon a Change of Control, as defined in Section 13.04 the Company
shall, as soon as possible, but in no event longer than 30 days
following the Changes in Control, make an irrevocable contribution to
the Trust in an amount that is sufficient to pay the participant or his
beneficiary the benefits to which the participant or his beneficiary
would be entitled pursuant to the terms of the Plan as of the date on
which the Change of Control occurred.
<PAGE>
1
II -
SECTION II
PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES
2.01 The Company shall deliver to the Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each Plan
participant (and his or her beneficiaries), that provides a formula or
other instructions acceptable to the Trustee for determining the
amounts so payable, the form in which such amount is to be paid (as
provided for or available under the Plan), and the time of commencement
for payment of such amounts. Except as otherwise provided herein, the
Trustee shall make payments to the Plan participant and beneficiaries
in accordance with such Payment Schedule. The Trustee shall make
provision for the reporting and withholding of any federal, state or
local taxes that may be required to be withheld with respect to the
payment of benefits pursuant to the terms of the Plan and shall pay
amounts withheld to the appropriate taxing authorities or determine
that such amounts have been reported, withheld and paid by the Company.
2.02 The entitlement of a Plan participant or his or her beneficiaries to
benefits under the Plan shall be determined by the Company or such
party as it shall designate under the Plan, and any claim for such
benefits shall be considered and reviewed under the procedures set out
in the Plan.
2.03 The Company may make payment of benefits directly to Plan participants
or their beneficiaries as they become due under the terms of the Plan.
The Company shall notify the Trustee of its decision to make payment of
benefits directly prior to the time amounts are payable to participants
or their beneficiaries. In addition, if the principal of the Trust, and
any earnings thereon, are not sufficient to make payments of benefits
in accordance with the terms of the Plan, the Company shall make the
balance of each such payment as it falls due. The Trustee shall notify
the Company where principal and earnings are not sufficient.
<PAGE>
2
III -
SECTION III
TRUSTEE RESPONSIBILITY REGARDING PAYMENT
TO TRUST BENEFICIARY WHEN COMPANY IS INSOLVENT
3.01 The Trustee shall cease payment of benefits to Plan participants and
their beneficiaries if the Company is Insolvent. The Company shall be
considered "Insolvent" for purposes of this Trust Agreement if (i) the
Company is unable to pay its debts as they become due, or (ii) the
Company is subject to a pending proceeding as a debtor under the United
States Bankruptcy Code.
3.02 At all times during the continuance of this Trust, as provided in
Section 1.04 hereof, the principal and income of the Trust shall be
subject to claims of general creditors of the Company under federal and
state law as set forth below:
(a) The Board of Directors and the Chief Executive Officer of the
Company shall have the duty of inform Trustee in writing of the
Company's Insolvency. If a person claiming to be a creditor of the
Company alleges in writing to the Trustee that the Company has
become Insolvent, the Trustee shall determine whether the Company
is Insolvent and, pending such determination, the Trustee shall
discontinue payment of benefits to Plan participants or their
beneficiaries.
(b) Unless the Trustee has actual knowledge of the Company's
Insolvency, or has received notice from the Company or a person
claiming to be a creditor alleging that the Company is Insolvent,
the Trustee shall have the duty to inquire whether the Company is
Insolvent. The Trustee may in all events rely on such evidence
concerning the Company's solvency as may be furnished to the
Trustee by the Company that provides the Trustee with a reasonable
basis for making a determination concerning the Company's
solvency.
(c) If at any time the Trustee has determined that the Company is
Insolvent, the Trustee shall discontinue payments to Plan
participants or their beneficiaries and shall hold the assets of
the Trust for the benefit of the Company's general creditors.
Nothing in this Trust Agreement shall in any way diminish any
rights of Plan participants of their beneficiaries to pursue their
rights as general creditors of the Company with respect to
benefits due under the Plan or otherwise.
(d) The Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with Section 2
of this Trust Agreement only after the Trustee has determined that
the Company is not Insolvent (or is no longer Insolvent).
3.03 Provided that there are sufficient assets, if the Trustee discontinues
the payment of benefits from the Trust pursuant to Section 3.02 hereof
and subsequently resumes such payments, the first payment following
such discontinuance shall include the aggregate amount of all payments
due to Plan participants or their beneficiaries under the terms of the
Plan for the period of such discontinuance, less the aggregate amount
of any payments made to Plan participants or their beneficiaries by the
Company in lieu of the payments provided for hereunder during any such
period of discontinuance.
<PAGE>
1
IV -
SECTION IV
PAYMENTS TO COMPANY
Except as provided in Section 3 hereof, after the Trust has become irrevocable,
the Company shall have no right or power to direct the Trustee to return to the
Company or to divert to others any of the Trust assets before all payment of
benefits have been made to Plan participants and their beneficiaries pursuant to
the terms of the Plan. Notwithstanding the proceeding, the Trustee may return to
the Company any excess assets that remain in the Trust if the value of the
assets exceeds the present value of benefits payable.
<PAGE>
3
V -
SECTION V
INVESTMENT AUTHORITY
5.01 General Trustee Powers and Investment Authority: In addition to all
other powers and authorizations arising under this Trust or otherwise,
the Trustee shall do and have done with respect to the Trust property
all things which in its sole discretion are necessary or desirable to
promote and conserve the Trust assets for the benefit of the Company as
if the Trustee were the sole owner of the property, subject, however,
to any limitations expressly provided in this Trust. These powers
and authorizations include,
(a) To purchase, sell,or invest Trust assets as Trustee deems advisable
in its sole discretion, without regard to limitations imposed by
statue, rule of law, legal decisions, or principles of investment
diversification, the only standard begin that the Trustee act in
good faith. Permissible investments of Trust assets include,
without limitation, (i) Trust assets in the form delivered to
Trustee by the Company;(ii) options, rights or warrants relating to
such investments; (iv) securities or property issued, owned,
maintained or managed by Trustee, its parent, or any of their
affiliates, whether in a fiduciary or trust capacity or otherwise,
and (v) investments which produce a low yield or no yield, such
investments being made in anticipation of future increase in value.
(b) The Trustee is authorized to invest Trust assets in any open-end or
closed-end management type investment company or investment trust
registered under the investment Company Act of 1940, as from time
to time amended, notwithstanding the fact that Trustee or any of
its affiliates is providing services to such investment company or
investment trust and is receiving reasonable compensation for such
services, in addition to Trustee's compensation.
(c) To appoint, employ, remove and compensate such attorneys, tax
advisors, accountants, appraisers, or other agents, as the Trustee
deems necessary or desirable for the administration of the Trust.
(d) To determine whether any money, property or receipts coming into
its hands shall be treated as a part of the principal or part of
the income of the Trust, and to apportion between principal and
income any loss or expenditure in connection with the Trust,
including Trustee's compensation and expenses.
5.02 Funding Policy: The Company shall establish and carry out a funding
policy consistent with the purpose of the Plan and the requirements of
applicable law, as may be appropriate from time to time. The discretion
of the Trustee in investing and reinvesting the principal and income of
the Trust Fund shall be subject to such funding policy, and any changes
thereof from time to time, as the Company may, pursuant to the Plan,
adopt from time to time and communicate to the Trustee in writing. As
part of such funding policy, the Company shall from time to time direct
the Trustee to exercise the Trustee's investment discretion so as to
provide sufficient cash assets in an amount determined by the Company,
under the funding policy then in effect, to be necessary to meet the
liquidity requirements for the administration of the Plan. It shall be
the duty of the Trustee to act strictly in accordance with such funding
policy, and any changes therein as so communicated to the Trustee from
time to time in wriang.
5.03 Participant Directions: The Company may permit the Participant to
choose from among a specified group of investments in which the amounts
in his Account shall be invested. If the Participant is given the
authority to direct such investments, the Company shall give written
notice to the Trustee.
5.04 Appointment of Investment Manager :
(a)The Company may from time to time appoint (and remove)an investment fund
manager (the "Investment Manger") who shall have authority to direct
investments to be made by the Trustee with respect to all or any part
of the assets of the Trust Fund and who shall have and exercise, with
respect to all assets subject to its investment direction, all of the
investment powers and duties reserved to the Trustee under this
Section V during the period of such appointment. Any Investment
Manager appointed under this Section shall acknowledge, in writing,
its acceptance of such appointment, and that it is a Fiduciary with
respect to the assets of the Trust Fund subject to its investment
direction, and that it is registered under the Investment Advisor Act
of 1940. If the Investment Manager is removed, the Company shall give
prompt written notice of such removal to the Trustee, and if a
successor Investment Manager is, not appointed, the Trustee shall
thereupon assume all of the investment powers.
(b) Upon receipt of written notice that the Company or the Participant
shall direct investments or the Company has appointed an Investment
Manager, the Trustee shall perform such custodial and disbursing
functions and ministerial acts relating to investments directed by the
Company, the Participant or the Investment Manager as may be required
to carry out the administration of the Trust Fund but shall be subject
to all proper directions of the Company, Participant or the Investment
Manager, except that the Trustee may, but shall not be required to,
invest and reinvest income and principal cash in U.S. Treasury bills,
commercial paper, or other short term investments pending receipt of
directions as to the investment or disposition of such cash. The
charges and expenses of any Investment Manager shall be charged
against the Trust Fund to the extent that they are not paid by the
Company. The Trustee shall have no duty to review or recommend the
sale, retention or other disposition of any asset purchased or
retained at the direction of the Investment Manger, nor shall the
Trustee have any personal liability or responsibility for any loss to
or depreciation of the Trust Fund occasioned by reason of the
purchase, sale or retention of any asset in accordance with the
direction of the Investment Manager, or by reason of not having sold
such assets so purchased or retained in the absence of any direction
from the Participant or the Investment Manager to make such sale. All
directions given to the Trustee by the Participant or the Investment
Manger, including brokers' confirmations, shall be given in writing or
by such other means as may be mutually agreed upon. All terms and
conditions of any agreement between the Company and an Investment
Manager appointed in accordance with the provisions of this Section
shall become a part of the terms and conditions of this Agreement, but
shall not be binding on the Trustee or change the powers or duties of
the Trustee without its consent.
<PAGE>
VI - 1
SECTION VI
DISPOSITION OF-INCOME
During the term of this Trust, all of the income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
<PAGE>
1
VII -
SECTION VII
ACCOUNTING BY TRUSTEE
The Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between the
Company and the Trustee. Within 90 days following the close of each calendar
year and within 90 days after the removal or resignation of the Trustee, the
Trustee shall deliver to the Company a written account of its administration of
the Trust during such year or during the period from the close of the last
preceding year to the date of such removal or resignation, setting for all the
investments, receipts, disbursements and other transactions effected by it,
including a description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued interest paid
or receivable being shown separately), and showing all cash, securities and
other property held in the Trust at the end of such year or as of the date of
such removal or resignation, as the case may be.
<PAGE>
2
VIII -
SECTION VIII
RESPONSIBILITY OF TRUSTEE
8.01 The Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in
like capacity and familiar with such matters would use in the conduct
of an enterprise of a like character and with like aims, provided,
however, that the Trustee shall incur no liability to any person for
any action taken pursuant to a direction, request or approval given by
the Company which is contemplated by, and in conformity with, the
terms, of the Plan or this Trust and is given in writing by the
Company. In the event of a dispute between the Company and a party, the
Trustee may apply to a court of competent jurisdiction to resolve the
dispute.
8.02 If the Trustee undertakes or defends any litigation arising in
connection with this Trust the Company agrees to indemnify the Trustee
against the Trustee's costs, expenses and liabilities (including,
without limitation, attorney's fees and expenses) relating thereto and
to be primarily liable for such payments. If the Company does not pay
such costs, expenses and liabilities in reasonably timely manner, the
Trustee may obtain payment from the Trust.
8.03 The Trustee may consult with legal counsel (who may also be counselor
for the Company generally) with respect to any of its duties or
obligations hereunder.
8.04 The Trustees may hire agents, accountants, actuaries, investment
advisors, financial consultants o other professionals to assist it in
performing any of its duties or obligations hereunder.
8.05 The Trustee shall have, without exclusion, all powers conferred on it
by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of
the Trust, the Trustee shall have no power to name a beneficiary of the
policy other than the Trust, to assign the policy (as distinct from
conversion of the policy to a different form) other than to a successor
Trustee, or to loan to any person the proceeds of any borrowing against
such policy.
8.06 Notwithstanding any powers granted to the Trustee pursuant to this
Trust Agreement or to applicable law, the Trustee shall not have any
power that could give this Trust the objective of carrying on a
business and dividing the gains therefrom, within the meaning of
section 301.7701-2 of the Procedure and Administrative Regulations
promulgated pursuant to the Internal Revenue Code.
<PAGE>
1
IX -
SECTION IX
COMPENSATION AND EXPENSES OF TRUSTEE
The Company shall pay all reasonably incurred administrative fees and Trustee's
fees and expenses. If not so paid, such reasonably incurred fees and expenses
shall be paid from the Trust.
<PAGE>
1
X -
SECTION X
RESIGNATION AND REMOVAL OF TRUSTEE
10.01 The Trustee may resign at any time by written notice to the Company,
which shall be effective 60 days after receipt of such notice unless
the Company and the Trustee agree otherwise.
10.02 The Trustee may be removed by the Company on 30 days notice or upon
shorter notice accepted by the Trustee.
10.03 Upon a Change of Control, as defined herein, the Trustee may not be
removed by the Company until the Participant retires. If the Trustee
resigns before that time, the Company shall apply to a court of
competent jurisdiction of the appointment of a successor or the
instruction.
10.04 Upon resignation or removal of the Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the
successor Trustee. The Transfer shall be completed within 90 days after
receipt of notice or resignation, removal under paragraphs (a) or (b)
of this section. If no such appointment has been made, the Trustee may
apply to a court of competent jurisdiction for appointment of a
successor or for instructions. All expenses of the Trustee in
connection with the proceeding shall be allowed as administrative
expenses of the Trust.
10.05 If the Trustee resigns or is removed, a successor shall be appointed,
in accordance with Section 11 hereof, by the effective date of
resignation or removal under Section 10.01 or 10.02 of this section. If
no such appointment has been made, the Trustee may apply to a court of
competent jurisdiction for appointment of a successor or for
instruction. All expenses of the Trustee in connection with the
proceeding shall be allowed as an administrative expense of the Trust.
10.01
<PAGE>
1
XI -
SECTION XI
SUCCESSOR TRUSTEE
11.01 If the Trustee resigns (or is removed) in accordance with Section 10.01
or 10.02 hereof, the Company may appoint any third party, such as a
bank trust department or other party that may be granted corporate
trustee powers under state law, as a successor to replace the Trustee
upon resignation or removal. The appointment shall be effective when
accepted in writing by the new Trustee, who shall have all of the
rights and powers of the former Trustee including ownership rights in
the Trust assets. The former Trustee shall execute any instrument
necessary or reasonably requested by the Company or the successor
Trustee to evidence the transfer.
11.02 If the Trustee resigns or is removed pursuant to the provision of
Section 10.05 hereof and selects a successor Trustee, the Trustee may
appoint a third party such as a bank trust department to other party
that may be granted corporate trustee powers under state law. The
appointment of a successor Trustee shall be effective when accepted in
writing by the new Trustee. The new Trustee shall have all the rights
and powers of the former Trustee, including ownership rights in the
successor Trustee to evidence the transfer.
11.01
<PAGE>
SECTION XII
AMENDMENT OR TERMINATION
12.01 This Trust Agreement may be amended by a written instrument executed by
the Trustee and the Company. Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Plan or shall make the
Trust revocable after it has become irrevocable in accordance with
Section 1.02 thereof.
12.02 The Trust shall not terminate until the date on which Plan participants
and their beneficiaries are no longer entitled to benefits pursuant to
the term of the Plan. Upon termination of the trust any assets
remaining in the Trust shall be returned to the Company.
12.03 Upon written approval of the Participant or beneficiaries entitled to
payment of benefits pursuant to the terms of the Plan, the Company may
terminate this Trust prior to the time all benefit payments under the
Plan have been made. All assets in the Trust at termination shall be
returned to the Company. Provided, however, following a Change of
Control, as defined herein, Article II of the Plan may not be amended
by the Company until the Participant attains age 65.
<PAGE>
1
XIII -
SECTION XIII
MISCELLANEOUS
13.01 Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating
the remaining provisions hereof.
13.02 Benefits payable to Plan Participant and his beneficiary under this
Trust Agreement may not be anticipated, assigned (either at law of in
equity), alienated, pledged, encumbered, or subjected to attachment,
garnishment, levy, execution or other legal or equitable process.
13.03 This Trust Agreement shall be governed by and construed in accordance
with the laws of the State of Georgia.
13.04 For purposes of this Trust, Change of Control shall mean the purchase
or other acquisition by any person, entity or group of persons, within
the meaning of section 13(d) or 14(d) of the Securities Exchange Act of
1934 ("Act"), or any comparable successor provisions, of beneficial
ownership of 30 percent or more of either the outstanding voting
securities entitled to vote generally, or the approval by the
stockholders of the Company if a reorganization, merger, or
consolidation, in to which persons who were stockholders of the Company
immediately prior to such reorganization, merger or consolidation do
not, immediately thereafter own more than 50 percent reorganized,
merged or consolidated Company's then outstanding securities or a
dissolution of the Company or of the sale of all or substantially all
of the Company's assets.
<PAGE>
SECTION XIV
EFFECTIVE DATE
The effective date of this Trust Agreement shall be _______________1996.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be signed and corporate seal affixed and attested by their respective
officers, this _____ day of _______________, 19___.
LAW COMPANIES GROUP, INC.
WITNESS:_____________________________ By:___________________________
COMPANY
SUNTRUST BANK, ATLANTA
WITNESS:_____________________________ By:___________________________
AMENDMENT TO LAW COMPANIES GROUP, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
This Amendment to the Law Companies Group, Inc. Supplemental Executive
Retirement Plan ("Amendment") is entered into and made effective this 10th day
of August, 1999, by and between LawGibb Group, Inc., f/k/a Law Companies Group,
Inc. (the "Company") and Bruce C. Coles (the "Participant"). Capitalized terms
used herein and not otherwise defined shall have the meaning ascribed to such
terms in the Plan.
WHEREAS, by Resolution adopted May 10, 1996, the Board of Directors of
the Company established a Supplemental Executive Retirement Plan effective as of
September 1, 1995 (the "Plan"); and
WHEREAS, the Plan document stated in error that the Plan was effective
on August 31, 1996; and
WHEREAS, consistent with and subsequent to the effective date of the
Plan, the Company has made an annual contribution to the Account on or about
September 1 of each year, for the twelve-month period ending August 31 of that
year; and
WHEREAS, the parties desire to amend the Plan to make certain technical
corrections consistent with the prior direction of the Company's Board of
Directors.
NOW, THEREFORE, in consideration of the mutual recitals set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Amendment to Introductory Paragraph. The introductory paragraph
beginning with the words "NOW THEREFORE," and ending in the words "compensated
employees." is hereby deleted in its entirety and replaced with the following:
"NOW THEREFORE, the Company hereby establishes the following
Supplemental Executive Retirement Plan effective September 1,
1995 ("Effective Date") which constitutes an unfunded
nonqualified plan that benefits an employee who is within a
select group of key management or highly compensated
employees."
2. Amendment to Section 1.11. Section 1.11 is hereby deleted
in its entirety and replaced with the following:
"1.11 Plan Year. "Plan Year" means the twelve-month period
beginning September 1 of each year and ending August 31 of the
following year."
3. Amendment to Section 2.1. The last sentence of Section 2.1(a) is
hereby deleted in its entirety and replaced with the following:
"For example, if the Participant terminates employment with
the Company on July 31, 2002, the Account shall be credited
with a contribution of 11/12 of $65,437.00 for Plan Year 2002.
4. Amendment to Section 7.9. Section 7.9 is hereby deleted in
its entirety and replaced with the following:
"7.9 Effective Date. This Plan will be operative and
effective on September 1, 1995."
5. Effect of Amendment. Except as expressly provided herein, all other
terms and provisions of the Plan shall remain in full force and effect.
6. Counterparts. This Amendment may be executed in multiple
counterparts, each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and the Participant have executed this
Amendment on the date first above written.
LawGibb Group, Inc.
f/k/a Law Companies Group, Inc.
Attest:
By: /s/ Steven Muller
/s/ R.B. Fooshee -------------------------------
______________________________ Name: Dr. Steven Muller
Its Executive Vice President & CFO
Title: Director & Chairman,
/s/ Keith C. Groen Compensation Committee
- ------------------------------
Its Secretary
/s/ Bruce C. Coles
--------------------------------
Bruce C. Coles
<TABLE> <S> <C>
<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>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-1-1999
<PERIOD-END> Jun-30-1999
<CASH> 19,046
<SECURITIES> 0
<RECEIVABLES> 59,805
<ALLOWANCES> 3,531
<INVENTORY> 32,034
<CURRENT-ASSETS> 115,104
<PP&E> 68,150
<DEPRECIATION> 46,343
<TOTAL-ASSETS> 156,189
<CURRENT-LIABILITIES> 63,069
<BONDS> 0
9,896
0
<COMMON> 2,625
<OTHER-SE> 40,485
<TOTAL-LIABILITY-AND-EQUITY> 156,189
<SALES> 151,995
<TOTAL-REVENUES> 151,995
<CGS> 0
<TOTAL-COSTS> 73,028
<OTHER-EXPENSES> 68,399
<LOSS-PROVISION> 333
<INTEREST-EXPENSE> 1,973
<INCOME-PRETAX> 8,262
<INCOME-TAX> 3,470
<INCOME-CONTINUING> 4,774
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,774
<EPS-BASIC> 2.06
<EPS-DILUTED> 1.44
</TABLE>
