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 September 30, 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: 1-11794
E. W. Blanch Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware 41-1741779
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3500 West 80th Street, Minneapolis, Minnesota 55431
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 835-3310
NONE
(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 the Registrant's common stock outstanding as of
November 5, 1997 was 12,579,000.
<PAGE>
Part 1. Financial Information
Item 1. Financial Statements
E. W. Blanch Holdings, Inc.
Consolidated Statements of Income
(in thousands, except per share amounts)
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Brokerage commissions and fees $ 43,009 $ 27,948 $116,095 $ 73,196
Investment income 2,361 1,880 6,368 5,381
-------- -------- -------- --------
Total revenues 45,370 29,828 122,463 78,577
Expenses:
Salaries and benefits 20,613 10,985 56,521 32,075
Travel and marketing 2,020 1,735 9,465 5,313
General and administrative 7,109 5,091 21,275 14,404
Amortization of goodwill 689 784 1,967 2,320
Interest and other expense 365 62 962 172
-------- -------- -------- --------
Total expenses 31,796 18,657 90,190 54,284
-------- -------- -------- --------
Income before taxes 13,574 11,171 32,273 24,293
Income taxes 5,311 4,312 12,657 9,393
-------- -------- -------- --------
Net income before minority interest 8,263 6,859 19,616 14,900
Minority interest, net of tax 282 -- 371 --
-------- -------- -------- --------
Net income $ 7,981 $ 6,859 $ 19,245 $ 14,900
======== ======== ======== ========
Net income per share $ 0.62 $ 0.52 $ 1.49 $ 1.12
======== ======== ======== ========
Weighted average number of shares of Common
Stock outstanding 12,933 13,296 12,892 13,292
======== ======== ======== ========
Cash dividends declared per share $ 0.10 $ 0.10 $ 0.30 $ 0.30
======== ======== ======== ========
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
E. W. Blanch Holdings, Inc.
Consolidated Balance Sheets
(in thousands)
SEPTEMBER 30, DECEMBER 31,
1997 1996
-------- --------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 16,366 $ 1,069
Due from fiduciary accounts 20,743 13,624
Premium finance notes -- 14,931
Prepaid insurance 1,937 1,749
Other current assets 6,595 4,467
-------- --------
Total current assets 45,641 35,840
Long-term investments, available for sale 10,670 9,793
Property and equipment, net 23,657 13,001
Goodwill, net 30,441 17,490
Other assets 12,995 9,452
Fiduciary accounts--assets 777,800 429,180
-------- --------
Total assets $901,204 $514,756
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued compensation $ 4,457 $ 4,176
Notes payable to banks -- 1,340
Accounts payable 13,059 3,939
Current portion of long-term liabilities 3,925 1,685
Other current liabilities 5,786 2,014
-------- --------
Total current liabilities 27,227 13,154
Long-term debt, less current portion 13,464 1,188
Other liabilities, less current portion 9,781 2,781
Fiduciary accounts--liabilities 777,800 429,180
-------- --------
Total liabilities 828,272 446,303
Minority interest 1,896 --
SHAREHOLDERS' EQUITY 71,036 68,453
-------- --------
Total liabilities and shareholders' equity $901,204 $514,756
======== ========
SEE ACCOMPANYING NOTES.
<PAGE>
E. W. Blanch Holdings, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Unaudited
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 19,245 $ 14,900
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 6,074 4,458
Changes in operating assets and liabilities:
Due from fiduciary accounts (3,458) (6,636)
Other current assets (5,048) (4,222)
Accrued compensation 280 (884)
Accounts payable and other current liabilities 8,892 89
Other, net (2,446) (441)
-------- --------
Net cash provided by operating activities 25,539 7,264
INVESTING ACTIVITIES
Purchases of property and equipment (8,730) (2,950)
Issuance of finance notes receivable, net (14) (3,773)
Purchases of investments 1,342 (1,227)
Excess of cash acquired from purchase of subsidiary 480 --
Proceeds from the sale of subsidiary 15,092 --
Proceeds from sale of investments 866 513
Other investing activities, net 18 (84)
-------- --------
Net cash provided by (used) in investing activities 9,054 (7,521)
FINANCING ACTIVITIES
Purchase of treasury shares (14,550) --
Proceeds from the issuance of treasury shares to
employee benefit plans 1,297 928
Dividends paid (3,841) (3,971)
Net (repayments) borrowings on lines of credit 1,340 1,557
Payments on long-term debt 881 (1,275)
Other financing activities, net 257 (184)
-------- --------
Net cash (used in) financing activities (17,296) (2,945)
-------- --------
Net increase (decrease) in cash and cash equivalents 15,297 (3,202)
Cash and cash equivalents at beginning of period 1,069 4,977
-------- --------
Cash and cash equivalents at end of period $ 16,366 $ 1,775
======== ========
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
E. W. Blanch Holdings, Inc.
Notes to Consolidated Financial Statements
September 30, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and in accordance with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the interim periods are
not necessarily indicative of the results for the full year. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report to shareholders for the year
ended December 31, 1996.
E.W. Blanch Holdings, Inc. ("the Company") and its predecessor organizations
have been in operation since 1957. The Company is a leading international
provider of integrated risk management and distribution services including
reinsurance intermediary services, risk management consulting and administration
services, and primary insurance distribution services. The consolidated
financial statements include the accounts of the Company and its wholly and
majority owned subsidiaries. In 1997, the Company purchased a 70% interest in
Swire Fraser Insurance (Holdings) Limited (Swire Fraser) and an additional 20%
interest in the Swire Blanch joint venture. The combined operations of Swire
Fraser and Swire Blanch were merged into a single operation under the Swire
Blanch name, which is owned 70% by the Company and 30% by Swire Pacific Limited
(Swire Pacific).
2. ACCOUNTING POLICIES
Principles Of Consolidation
The accompanying consolidated financial statements include the accounts and
operations of the Company and its wholly and majority owned subsidiaries. All
material intercompany accounts and transactions have been eliminated.
Foreign Currency Translation
The Company's primary functional currency is the U.S. dollar. The functional
currency of the Company's foreign operations is the British pound sterling. The
Company translates income and expense accounts at the average rate in effect for
the period. Balance sheet accounts are translated at the period end exchange
rate. Adjustments resulting from the balance sheet translation are reflected in
Shareholder's Equity. The cumulative translation adjustment at September 30,
1997 is an $8,000 gain.
<PAGE>
3. NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued Statement No. 128, "Earnings per
Share" in February 1997. The Company will adopt the statement in the fourth
quarter of 1997, as required, and early adoption is not permitted. Upon
adoption, prior periods will be restated. The Company has completed an initial
analysis and does not expect the difference in earnings per share to be
material.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
SFAS No. 130 defines the financial statement presentation for "all changes in a
company's equity during a period except those resulting from investments by
owners and distributions to owners." SFAS No. 130 is effective for financial
statements issued for fiscal years beginning after December 15, 1997 and will be
adopted by the Company in the first quarter of 1998. Because the statement is
merely an adjustment of presentation, the Company does not expect the adoption
of this statement to have any impact on the amount of net income, earnings per
share or total shareholders' equity reported.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 supersedes SFAS No. 14 and
defines financial and descriptive information about a Company's operating
segments that is to be disclosed in financial statements. The Company is
developing allocation methods to assess performance on a business segment basis.
Once completed, additional disclosures will be provided in accordance with this
Statement.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FORWARD LOOKING STATEMENTS
Except for the historical information contained herein, the matters discussed in
this quarterly report on Form 10-Q are forward looking statements that involve
risks and uncertainties, many of which are outside the Company's control and,
accordingly, actual results may differ materially. These risks and uncertainties
include competition, dependence on key personnel, market conditions in the
insurance and reinsurance industries, government regulation, fiduciary funds,
international operations and the impact of specific engagements and new
opportunities. The Company's Annual Report on Form 10-K filed with the SEC on
March 31, 1997 includes a discussion of these risk factors and is incorporated
herein by reference.
GENERAL
The Company is a leading international provider of integrated risk management
and distribution services including reinsurance intermediary services, risk
management consulting and administration services, and primary insurance
distribution services.
In February 1997, the Company purchased a 70% interest in Swire Blanch
(previously named Swire Fraser). The consideration for the Swire Blanch purchase
included the assumption of certain existing indebtedness of (pound)6.2 million
($10.2 million at purchase date) and a cash payment of (pound)1.8 million ($2.9
million). As part of the purchase agreement, after a minimum of three years
either party has the option to request the purchase by the Company of the 30%
minority interest at a price defined by formula. The combined Swire Fraser and
Swire Blanch operations had revenues of (pound)22.6 million ($36.9 million) in
1996, and showed a loss primarily due to the recognition of charges associated
with the Lloyd's Reconstruction and Reconciliation Agreement and reserves for
real estate no longer occupied by Swire Fraser.
In February 1997, the Company purchased 750,000 shares of its common stock, at a
negotiated price of $19.40 per share, from its Chairman. Total consideration was
$14.6 million.
As part of the restructuring of its primary insurance distribution operations,
the Company completed the sale of its premium finance business in February 1997.
The Company received $15.2 million in exchange for the outstanding stock of the
premium finance subsidiaries. The net proceeds equaled the Company's investment
in the business, resulting in no gain or loss from the transaction.
Due to the integrated nature of the Company's risk management and distribution
business, and because the primary insurance distribution operations after
restructuring are no longer significant, the Company has discontinued its
financial reporting by business segment. Current year operations reflect the
operations from the Swire Blanch acquisition discussed above on a consolidated
basis from the date of acquisition, due to the Company's 70% controlling
interest. Prior year results of foreign operations include only the equity or
loss in the earnings of the Swire Blanch international reinsurance intermediary,
jointly owned 50% by the Company and 50% by Swire Pacific. The
<PAGE>
following is a summary of revenues and income before taxes by geographic area
for the periods indicated (in thousands):
Quarter ended Quarter ended
September 30, 1997 September 30, 1996
-------------------- --------------------
Income Income
Revenues before taxes Revenues before taxes
-------- -------- -------- --------
Domestic operations $ 33,619 $ 11,517 $ 29,717 $ 11,060
Foreign operations 11,751 2,057 111 111
-------- -------- -------- --------
$ 45,370 $ 13,574 $ 29,828 $ 11,171
======== ======== ======== ========
Nine months ended Nine months ended
September 30, 1997 September 30, 1996
-------------------- --------------------
Income Income
Revenues before taxes Revenues before taxes
-------- -------- -------- --------
Domestic operations $ 94,640 $ 28,810 $ 78,370 $ 24,086
Foreign operations 27,823 3,463 207 207
-------- -------- -------- --------
$122,463 $ 32,273 $ 78,577 $ 24,293
======== ======== ======== ========
Domestic operations include the reinsurance intermediary services provided by
E.W. Blanch Co., Inc. (EWBCo.), the risk management consulting and
administration services provided by Paragon Reinsurance Risk Management
Services, Inc. (Paragon), the program distribution services of Rockwood
Programs, Inc. (Rockwood), the policy distribution capabilities of Alternative
Distribution Managers (Alternative Distribution), and the general agency
operations of Blanch Insurance Services, Inc. (Blanch GA). The services provided
by EWBCo., Paragon, Rockwood and Alternative Distribution are focused on
providing solutions for the management and distribution of risk to a client base
which is primarily comprised of property and casualty insurance companies. These
services are generally recurring and, due to the Company's expertise and the
value-added nature of its services, have been able to operate at relatively
higher operating margins. The services provided by Blanch GA are focused on the
primary distribution of insurance to property and casualty insurance companies,
largely through independent insurance agents. Due to the competitive nature of
Blanch GA's business, the Company's profit margins for these services are
relatively lower. Corporate services, which includes the operations of the
holding company are also included in domestic operations.
Foreign operations include Swire Blanch, the Company's international insurance
and reinsurance broker headquartered in London. Swire Blanch includes a Lloyd's
insurance and reinsurance broking operation and international reinsurance
intermediary operations. Swire Blanch also provides financial services through
the sale of pension plan products for insurance companies. Primary insurance
distribution services of Swire Blanch include the retail operations of Swire
Renshaw, located in northern England, and Swire Insurance Brokers, located in
Hong Kong. Approximately 75%, of Swire Blanch's revenues are generated in the
United Kingdom with the remainder primarily from the Pacific Rim. The Company's
foreign operations currently do not enjoy the relatively higher profit margins
of the Company's domestic risk management and distribution services. This is due
to a number of factors, including competitive market conditions for Lloyd's
brokers, the small, start-up nature of many of the international offices, the
competitiveness of the Swire Renshaw primary insurance distribution business,
and the capitalization of acquisition costs associated with the purchase of
Swire Fraser. The Company seeks to grow its international profitability through
the integration of systems, services and expertise in order to increase revenue
production and processing efficiencies.
<PAGE>
The Company plans to increase its investments in technology, particularly in the
areas of risk management and risk distribution, which includes both catastrophic
modeling and consulting capabilities.
THIRD QUARTER 1997 COMPARED WITH THIRD QUARTER 1996
BROKERAGE COMMISSIONS AND FEES
The following are the components of brokerage commissions and fees for the
quarter ended September 30 (in thousands):
1997 1996
-------- --------
DOMESTIC OPERATIONS
Reinsurance brokerage $27,069 $23,611
Risk management fees 1,666 1,015
Program and policy distribution fees 840 173
General agency commissions 2,327 3,038
-------- --------
31,902 27,837
FOREIGN OPERATIONS
Reinsurance brokerage 3,528 111
Specialty lines 2,763 --
Financial services fees 2,658 --
Swire Renshaw 1,705 --
Swire Insurance Brokers 453 --
-------- --------
11,107 111
$43,009 $27,948
======== ========
Domestic operations reinsurance brokerage increased $3.6 million, or 14.6%, from
the prior year primarily as a result of growth in existing accounts and new
production. Risk management fees include Paragon's consulting and administration
services and software licensing and maintenance business, a business which began
July 1, 1996. These fees were $1.7 million for the quarter ended September 30,
1997 compared to $1.0 million the prior year, an increase of $0.7 million, or
64.1%. This increase is attributable to fees related to the software licensing
and maintenance business, $0.1 million, and additional administrative services,
$0.6 million. Program and policy distribution fees increased $0.7 million, or
48.5%, to $0.8 million for the quarter. This increase is primarily the result of
new production which commenced in late 1996. General agency commissions
decreased $0.7 million, or 30.5%, to $2.3 million for the quarter ended
September 30, 1997 compared to $3.0 million the prior year. This is primarily
the result of decreased premium volume, $17.3 million for the quarter ended
September 30, 1997 compared to $24.3 million in 1996. The decrease in premium
volume is the result of the decision to exit the personal lines business in the
fourth quarter of the previous fiscal year.
International operations had $11.1 million of brokerage commission and fees in
the quarter ended September 30, 1997. Reinsurance intermediary services, which
include those in London and other international offices, had $3.5 million of
brokerage. Specialty lines, which includes the specialty insurance distribution
services based in London, contributed $2.8 million of revenues. Financial
services fees, generated from the sale of various pension plan products for
insurance companies, were $2.7 million. Finally, Swire Renshaw and Swire
Insurance Brokers generated $1.7 million and
<PAGE>
$0.5 million of revenues, respectively, from the primary distribution of
insurance from their offices in northern England and Hong Kong, respectively.
For the quarter ended September 30, 1996 foreign revenues were $0.1 million and
comprised only the Company's 50% equity in the net income of the Swire Blanch
joint venture.
INVESTMENT INCOME
The following are the components of investment income for the three months ended
September 30, 1997 (in thousands):
1997 1996
--------- ---------
DOMESTIC OPERATIONS
Fiduciary investment income $1,607 $1,185
Corporate investment income 110 112
Premium finance interest and fees -- 583
--------- ---------
1,717 1,880
FOREIGN OPERATIONS
Fiduciary investment income 499 --
Corporate investment income 145 --
--------- ---------
644 --
$2,361 $1,880
========= =========
Investment income was $2.4 million for the quarter ended September 30, 1997
compared to $1.9 million the prior year, an increase of $0.5 million or 25.6%.
The primary sources of investment income are from fiduciary funds and corporate
capital.
Fiduciary investment income from domestic operations was $1.6 million for the
quarter ended September 30, 1997 compared to $1.2 million the prior year, an
increase of $0.4 million or 35.7%. The average balance of domestic funds for the
quarter was $115.7 million (compared to $86.5 million for the prior year), at an
average yield of 5.6% (compared to 5.1% the prior year). Swire Blanch also
earned $0.5 million of fiduciary investment income in the nine months ended
September 30, 1997.
Corporate investment income from domestic operations was the same as prior year.
Swire Blanch earned $0.1 million of corporate investment income for the nine
months ended September 30, 1997.
Prior year investment income included $0.6 million of premium finance interest
and fees. This business was sold in February 1997.
EXPENSES
Domestic operating expenses increased $3.4 million to $22.0 million, or 18.1%,
for the quarter ended September 30, 1997 compared to $18.7 million the prior
year. The increase is primarily a result of increases in salaries and benefits
expenses including normal salary progressions, increases in benefit costs and an
increase in employees as of September 30, 1997 compared to the prior year. The
increase in employees is due to increased business levels and the growth of
businesses acquired and started in 1996. Domestic operations also experienced
increases in travel and marketing and general and administrative expenses offset
by a reduction in goodwill amortization, the result of the goodwill writedown
recorded in fiscal 1996.
<PAGE>
Operating expenses for international operations in the quarter ended September
30, 1997 were $9.8 million. Similar to the Company's domestic operations,
approximately two-thirds of these expenses relate to salaries and benefits for
employees.
PROFIT MARGINS
Operating profit margins, calculated as income before taxes as a percentage of
total revenues, were 34.3% for domestic operations for the quarter ended
September 30, 1997, compared to 37.2% for the same period in the prior year.
Gross profit margins, calculated as income before corporate services expenses
and before taxes, were a loss of 16.6% for Blanch GA for the quarter ended
September 30, 1997, compared to a profit of 2.4% for the same period in the
prior year. The Company's remaining domestic risk management and distributions
services earned a gross profit margin of 55.0% for the quarter ended September
30, 1997, compared to a gross profit margin of 52.2% for the same period in the
prior year.
Operating profit margins were 17.4% for foreign operations for the quarter ended
September 30, 1997. Gross profit margins for the quarter ended September 30,
1997 were 22.0% for the primary insurance distribution operations of Swire
Renshaw and Swire Insurance Brokers and 16.3% for the remaining foreign
reinsurance and specialty risk management and distribution services, including a
number of start-up operations around the globe. The majority of operating profit
from primary insurance distribution operations is recorded in the first half of
the year.
NINE MONTHS ENDED 1997 COMPARED WITH NINE MONTHS ENDED 1996
BROKERAGE COMMISSIONS AND FEES
The following are the components of brokerage commissions and fees for the nine
months ended September 30 (in thousands):
1997 1996
--------- --------
DOMESTIC OPERATIONS
Reinsurance brokerage $ 73,700 $ 61,360
Risk management fees 5,306 2,179
Program and policy distribution fees 2,866 1,033
General agency commissions 7,938 8,417
--------- --------
89,810 72,989
FOREIGN OPERATIONS
Reinsurance brokerage 7,639 207
Specialty lines 7,380 --
Financial services fees 5,544 --
Swire Renshaw 3,978 --
Swire Insurance Brokers 1,744 --
--------- --------
26,285 207
$116,095 $ 73,196
========= ========
For the nine months ended September 30, 1997, domestic operations reinsurance
brokerage increased $12.3 million, or 20.1%, from the prior year primarily as a
result of growth in existing accounts and new production. Risk management fees
include the consulting and administration
<PAGE>
services and software licensing and maintenance business, a business which began
July 1, 1996, of Paragon. These fees were $5.3 million for the nine months ended
September 30, 1997 compared to $2.2 million the prior year, an increase of $3.1
million, or 143.5%. This increase is attributable to fees related to the
software licensing and maintenance business, $2.0 million, and additional
administrative services, $1.1 million. Program and policy distribution fees
increased $1.8 million, or 177.4%, to $2.8 million for the nine months ended
September 30. This increase is primarily the result of new production which
commenced in late 1996. General agency commissions decreased $0.5 million, or
5.7%, to $7.9 million for the nine months ended September 30, 1997 compared to
$8.4 million the prior year.
International operations had $26.3 million of brokerage commissions and fees in
the nine months ended September 30, 1997. Reinsurance intermediary services,
which include those in London and other international offices, had $7.6 million
in brokerage. Specialty lines, which includes the specialty insurance
distribution services based in London, contributed $7.4 million of revenues.
Financial services fees, generated from the sale of various pension plan
products for insurance companies, were $5.5 million. Finally, Swire Renshaw and
Swire Insurance Brokers generated $4.0 million and $1.7 million of revenues,
respectively, from the primary distribution of insurance from their offices in
northern England and Hong Kong, respectively. For the nine months ended
September 30, 1996 foreign revenues were $0.2 million and comprised only the
Company's 50% equity in the net income of the Swire Blanch joint venture.
INVESTMENT INCOME
The following are the components of investment income for the nine months ended
September 30, 1997 (in thousands):
1997 1996
------- -------
DOMESTIC OPERATIONS
Fiduciary investment income $4,149 $3,427
Corporate investment income 494 271
Premium finance interest and fees 187 1,683
------- -------
4,830 5,381
FOREIGN OPERATIONS
Fiduciary investment income 1,171 --
Corporate investment income 367 --
------- -------
1,538 --
$6,368 $5,381
======= =======
Investment income was $6.4 million for the nine months ended September 30, 1997
compared to $5.4 million the prior year, an increase of $1.0 million or 18.3%.
The primary sources of investment income are from fiduciary funds and corporate
capital.
Fiduciary investment income from domestic operations was $4.1 million for the
nine months ended September 30, 1997 compared to $3.4 million the prior year, an
increase of $0.7 million or 21.1%. The average balance of domestic funds for the
nine months ended September 30, 1997 was $102.5 million (compared to $85.0
million for the prior year), at an average yield of 5.4% (compared to 5.4% the
prior year). Swire Blanch also earned $1.2 million of fiduciary investment
income in the nine months ended September 30, 1997.
<PAGE>
Corporate investment income from domestic operations increased to $0.5 million
from $0.3 million as a result of larger invested balances in 1997. Swire Blanch
earned $0.4 million of corporate investment income for the nine months ended
September 30, 1997.
Premium finance interest and fees were $0.2 million for the nine months ended
September 30, 1997 compared to $1.7 million the prior year. The decrease is the
result of the sale of the premium finance business in February 1997.
EXPENSES
Domestic operating expenses increased $11.5 million to $65.8 million, or 21.1%,
for the nine months ended September 30, 1997 compared to $54.3 million the prior
year. The increase is primarily a result of increases in salaries and benefits
expenses including normal salary progression, increased employee benefit cost
and an increase of employees as of September 30, 1997 compared to the prior
year. The increase in employees is due to increased business levels and
businesses acquired or started in 1996. Domestic operations also experienced
increases in travel and marketing and general and administrative expenses offset
by a reduction in goodwill amortization, the result of the goodwill writedown
recorded in fiscal 1996.
Operating expenses for the eight months of international operations included in
the nine months ended September 30, 1997 were $24.4 million. Similar to the
Company's domestic operations, approximately two-thirds of these expenses relate
to salaries and benefits for employees.
PROFIT MARGINS
Operating profit margins, calculated as income before taxes as a percentage of
total revenues, were 30.5% for domestic operations for the nine months ended
September 30, 1997, compared to 31.0% for the same period in the prior year.
Gross profit margins, calculated as income before corporate services expenses
and before taxes, were a loss of 5.8% for the Blanch GA for the nine months
ended September 30, 1997, compared to a loss of 6.6% for the same period in the
prior year. The Company's remaining domestic risk management and distributions
services earned a gross profit margin of 51.8% for the nine months ended
September 30, 1997, compared to a gross profit margin of 48.3% for the same
period in the prior year.
Operating profit margins were 12.4% for foreign operations for the nine months
ended September 30, 1997. Gross profit margins for the nine months ended
September 30, 1997 were 17.5% for the primary insurance distribution operations
of Swire Renshaw and Swire Insurance Brokers and 11.1% for the remaining foreign
reinsurance and specialty risk management and distribution services, including a
number of start-up operations around the globe. The majority of operating profit
from primary insurance operations is recorded in the first half of the year.
INCOME TAXES
The Company's combined federal and state effective tax rate for domestic
operations continues to be 39%. The effective tax rate provided for the
Company's foreign operations is expected to be 35%.
LIQUIDITY AND CAPITAL RESOURCES
The Company's sources of funds consist primarily of brokerage commissions and
fees and investment income. Funds are applied generally to the payment of
operating expenses, the purchase
<PAGE>
of equipment used in the ordinary course of business, the repayment of
outstanding indebtedness, and the distribution of earnings. The Company's cash
and cash equivalents were $16.4 million at September 30, 1997.
The Company generated $23.5 million of cash from operations during the first
nine months of 1997 compared with $7.3 million for the same period in 1996. The
increase in operating cash flow in 1997 is primarily due to the increase in net
income, the timing of cash distributions from the fiduciary accounts to the
Company and the timing of changes in various operating assets and liabilities.
Cash flow from investing activities was $9.1 million for the nine months ended
September 30, 1997. During the nine months ended September 30, 1997, the Company
received net proceeds of $15.1 million from the sale of its premium finance
operations. Consideration for the Swire Blanch transaction was $2.9 million in
cash and the assumption of (pound)6.2 million of debt (approximately $10.2
million at the acquisition date). The Company believes the operations of Swire
Blanch will provide sufficient cash flows to satisfy the debt. Swire Blanch's
cash at the purchase date was $3.4 million, thus providing $0.5 million of net
cash from the acquisition. The Company also used $8.7 million of cash for the
purchase of property and equipment, primarily computerized systems. The Company
intends to increase its investment in such systems. The Company's investment in
new software includes the requirements associated with year 2000 compliance. The
additional investment to ensure all current software is year 2000 compliant is
not expected to be material. During 1996, the Company used cash in investing
activities primarily for a $3.8 million net issuance of premium finance notes
and $3.0 million for the purchase of property and equipment.
The primary uses of cash for financing activities for the nine months ended
September 30, 1997 were $14.6 million for the purchase of treasury stock, $3.8
million of dividends paid to shareholders and $1.3 million for the net repayment
of lines of credit. In the prior year, net cash used by financing activities was
$2.9 million, consisting primarily of cash dividends paid to shareholders and
net repayments of lines of credit. The Company issued $1.2 million and $0.8
million of treasury stock to fund employee benefit plans in the nine months
ended September 30, 1997 and 1996, respectively.
The Company's long-term investment portfolio at September 30, 1997 was $10.7
million, comprised of equity and debt instruments. The market value of the
Company's investment portfolio at September 30, 1997 approximated cost. Cash,
short-term investments and the Company's line of credit are available and
managed for the payment of its operating and capital expenditures. The Company
is not subject to any regulatory capital requirements in connection with its
business.
On January 24, 1997, the Board of Directors declared a regular quarterly cash
dividend of $0.10 per share, payable March 3, 1997 to shareholders of record as
of February 7, 1997. On April 24, 1997, the Board of Directors declared a
regular quarterly cash dividend of $0.10 per share, payable June 2, 1997 to
shareholders of record as of May 9, 1997. On July 24, 1997, the Board of
Directors declared a regular quarterly dividend of $0.10 per share payable on
September 2, 1997 to shareholders of record as of August 12, 1997. On October
23, 1997, the Board of Directors declared a regular quarterly dividend of $0.10
per share payable on December 1, 1997 to shareholders of record as of November
10, 1997.
The Company believes that its cash and investments, combined with its borrowing
facilities and internally generated funds, will be sufficient to meet its
present and reasonably foreseeable long-term capital needs.
<PAGE>
E. W. BLANCH HOLDINGS, INC.
Part II. Other Information
Items 1, 2, 3, 4 and 5 are not applicable and have been omitted.
Item 6. Exhibits and Reports on Form 8-K.
(a.) Exhibits
Exhibit 10 Specimen Severance Agreement
Exhibit 10.1 Schedule of Executives Receiving Severance
Agreement
Exhibit 11 Statement Re: Computation of Per Share Earnings
Exhibit 27 Financial Data Schedule
(b.) The registrant did not file a current report on Form 8-K
during the quarter ended September 30, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
E. W. BLANCH HOLDINGS, INC.
Dated: November 11, 1997 /s/ Ian D. Packer
Ian D. Packer
Executive Vice President
and Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit 10 Specimen Severance Agreement
Exhibit 10.1 Schedule of Employees Receiving Severance Agreements
Exhibit 11 Statement Re: Computation of Per Share Earnings
Exhibit 27 Financial Data Schedule
EXHIBIT 10
FORM OF SEVERANCE AGREEMENT
This Agreement is made as of the 24th day of July, 1997, between E.W.
Blanch Holdings, Inc., a Delaware corporation, with its principal offices at
3500 W. 80th Street, Minneapolis, Minnesota (the "Company") and [[NAME]]
("Employee"), residing at [[ADDRESS]].
WITNESSETH THAT:
WHEREAS, this Agreement is intended to specify the financial
arrangements that the Company will provide to the Employee upon Employee's
separation from employment with the Company under any of the circumstances
described herein; and
WHEREAS, this Agreement is entered into by the Company in the belief
that it is in the best interests of the Company and its shareholders to provide
stable conditions of employment for Employee notwithstanding the possibility,
threat or occurrence of certain types of change in control, thereby enhancing
the Company's ability to attract and retain highly qualified people.
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of Employee notwithstanding the possibility, threat or occurrence of
a bid to take over control of the Company, and to induce Employee to remain in
the employ of the Company, and for other good and valuable consideration, the
Company and Employee agree as follows:
1. Term of Agreement. The term of this Agreement shall commence on the
date hereof as first written above and shall continue through April 1, 2001;
provided that commencing on March 31, 2001 and each March 31 thereafter, the
term of this Agreement shall automatically be extended for one additional year
unless not later than December 31 of the preceding year, the Company shall have
given notice that it does not wish to extend this Agreement; and provided
further that notwithstanding any such notice by the Company not to extend, this
Agreement shall continue in effect for a period of 24 months beyond the term
provided herein if a Change in Control (as defined in Section 3(i) hereof) shall
have occurred during such term.
2. Termination of Employment.
(i) Prior to a Change in Control. Employee's rights upon
termination of employment prior to a Change in Control (as defined in
Section 3(i) hereof) shall be governed by the Company's standard
employment termination policy applicable to Employee in effect at the
time of termination and by any other employment agreements that may
exist between the Employee and the Company.
<PAGE>
(ii) After a Change in Control.
(a) From and after the date of a Change in Control
(as defined in Section 3(i) hereof) during the term of this
Agreement, the Company shall not terminate Employee from
employment with the Company except as provided in this Section
2(ii) or as a result of Employee's Disability (as defined in
Section 3(iv) hereof) or his death.
(b) From and after the date of a Change in Control
(as defined in Section 3(i) hereof) during the term of this
Agreement, the Company shall have the right to terminate
Employee from employment with the Company at any time during
the term of this Agreement for Cause (as defined in Section
3(iii) hereof), by written notice to the Employee, specifying
the particulars of the conduct of Employee forming the basis
for such termination.
(c) From and after the date of a Change in Control
(as defined in Section 3(i) hereof) during the term of this
Agreement (x) the Company shall have the right to terminate
Employee's employment without Cause (as defined in Section
3(iii) hereof), at any time; and (y) the Employee shall, upon
the occurrence of such a termination by the Company without
Cause, or upon the voluntary termination of Employee's
employment by Employee for Good Reason (as defined in Section
3(ii) hereof), be entitled to receive the benefits provided in
Section 4 hereof. Employee shall evidence a voluntary
termination for Good Reason by written notice to the Company
given within 60 days after the date of the occurrence of any
event that Employee knows or should reasonably have known
constitutes Good Reason for voluntary termination. Such notice
need only identify the Employee and set forth in reasonable
detail the facts and circumstances claimed by Employee to
constitute Good Reason.
Any notice given by Employee pursuant to this Section
2 shall be effective five business days after the date it is
given by Employee.
3. Definitions.
(i) A "Change in Control" shall mean:
(a) a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule
14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or
successor provision thereto, whether or not the Company is
then subject to such reporting requirement;
(b) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 promulgated under
the Exchange Act), directly or indirectly, of securities of
the
<PAGE>
Company representing 20% or more of the combined voting power
of the Company's then outstanding securities;
(c) the Continuing Directors (as defined in Section
3(v) hereof) cease to constitute a majority of the Company's
Board of Directors; provided that such change is the direct or
indirect result of a proxy fight and contested election or
elections for positions on the Board of Directors; or
(d) the majority of the Continuing Directors (as
defined in Section 3(v) hereof) determine in their sole and
absolute discretion that there has been a change in control of
the Company.
(ii) "Good Reason" shall mean the occurrence of any of the
following events, except for the occurrence of such an event in
connection with the termination or reassignment of Employee's
employment by the Company for Cause (as defined in Section 3(iii)
hereof), for Disability (as defined in Section 3(iv) hereof) or for
death:
(a) the assignment to Employee of employment
responsibilities which are not of comparable responsibility
and status as the employment responsibilities held by Employee
immediately prior to a Change in Control;
(b) reduction by the Company in Employee's base
salary as in effect immediately prior to a Change in Control;
(c) an amendment or modification of the Company's
incentive compensation program (except as may by required by
applicable law) which affects the terms or administration of
the program in a manner adverse to the interest of Employee as
compared to the terms and administration of such program
immediately prior to a Change in Control;
(d) the Company's requiring Employee to be based
anywhere other than within 50 miles of Employee's office
location immediately prior to a Change in Control, except for
requirements of temporary travel on the Company's business to
an extent substantially consistent with Employee's business
travel obligations immediately prior to a Change in Control;
(e) except to the extent otherwise required by
applicable law, the failure by the Company to continue in
effect any benefit or compensation plan, stock ownership plan,
stock purchase plan, bonus plan, life insurance plan,
health-and-accident plan, or disability plan in which Employee
is participating immediately prior to a Change in Control (or
plans providing Employee with substantially similar benefits),
the taking of any action by the Company, which would adversely
affect Employee's participation in, or materially reduce
Employee's benefits under, any of such plans or deprive
Employee of any material fringe benefit enjoyed by Employee
immediately prior to such Change in Control, or the failure by
the Company to provide Employee with the number of paid
vacation days to which Employee is
<PAGE>
entitled immediately prior to such Change in Control in
accordance with the Company's vacation policy as then in
effect; or
(f) the failure by the Company to obtain, as
specified in Section 6(i) hereof, an assumption of the
obligations of the Company to perform this Agreement by any
successor to the Company.
(iii) "Cause" shall mean termination by the Company of
Employee's employment based upon (a) the willful and continued failure
by Employee substantially to perform his duties and obligations (other
than any such failure resulting from his incapacity due to physical or
mental illness or any such actual or anticipated failure resulting from
Employee's termination for Good Reason) or (b) the willful engaging by
Employee in misconduct which is materially injurious to the Company,
monetarily or otherwise. For purposes of this Section 3(iii), no action
or failure to act on Employee's part shall be considered "willful"
unless done, or omitted to be done, by Employee in bad faith and
without reasonable belief that his action or omission was in the best
interest of the Company.
(iv) "Disability" shall mean any physical or mental condition
with would qualify Employee for a disability benefit under the
Company's long-term disability plan.
(v) "Continuing Director" shall mean any person who is a
member of the Board of Directors of the Company, while such person is a
member of the Board of Directors, who is not an Acquiring Person (as
hereinafter defined) or an Affiliate or Associate (as hereinafter
defined) of an Acquiring Person, or a representative of an Acquiring
Person or of any such Affiliate or Associate, and who (a) was a member
of the Board of Directors on the date of this Agreement as first
written above or (b) subsequently becomes a member of the Board of
Directors, if such person's nomination for election or initial election
to the Board of Directors is recommended or approved by a majority of
the Continuing Directors. For purposes of this Section 3(v): "Acquiring
Person" shall mean any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) who or which, together with all
Affiliates and Associates of such person, is the "beneficial owner" (as
defined in Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of the shares of Common Stock of the Company then outstanding, but
shall not include the Company, any subsidiary of the Company, or any
employee benefit plan of the Company or of any subsidiary of the
Company or any entity holding shares of Common Stock organized,
appointed, or established for, or pursuant to the terms of, any such
plan; and "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 promulgated under the
Exchange Act.
4. Benefits upon Termination under Section 2(ii)(c).
(i) Upon the termination (voluntary or involuntary) of the
employment of Employee pursuant to Section 2(ii)(c) hereof, Employee
shall be entitled to receive the benefits specified in this Section 4.
The amounts due to Employee under subparagraph (a) of this Section 4(i)
shall be paid to Employee, at Employee's election as specified in a
written notice delivered by the Employee to the Company on the date of
this Agreement and which is attached hereto as Exhibit A and made a
part hereof, either (a) in a lump sum not later than
<PAGE>
one business day prior to the date that the termination of Employee's
employment becomes effective or (b) in 36 equal installments, payable
monthly, on the last business day of the month, for 36 consecutive
months following the date that the termination of Employee's employment
becomes effective. The amounts due to Employee under subparagraphs (b),
(c) and (d) of this Section 4(i) shall be paid to Employee not later
than one business day prior to the date that the termination of
Employee's employment becomes effective. Subject to the provisions of
Section 4(ii) hereof, all benefits to Employee pursuant to this Section
4(i) shall be subject to any applicable payroll or other taxes required
by law to be withheld.
(a) The Company shall pay as severance pay to
Employee an amount equal to [[AMOUNT]] times Employee's
highest annual rate of salary from the Company, including both
base compensation and any bonus or incentive plan payments,
for any year during the 36 months preceding the date the
termination of Employee's employment became effective.
(b) The Employee shall be entitled to receive a
lump-sum amount equal to the equivalent, determined as of the
date that the termination of Employee's employment became
effective, of the benefit under the Company's retirement plan
(including cash payments in excess of ERISA contribution
limits) the Employee would receive as if the Employee had
three additional years of benefit service beyond such date
under the Company's retirement plan at the compensation level
provided for in Section 4(i)(a) of this Agreement.
(c) The Company shall pay to Employee (1) any amount
earned by Employee as a bonus with respect to the fiscal year
of the Company preceding the termination of his employment if
such bonus has not theretofore been paid to Employee, and (2)
an amount representing credit for any vacation earned or
accrued by him but not taken.
(d) The Company shall also pay to Employee all legal
fees and expenses incurred by employee as a result of such
termination of employment (including all fees and expenses, if
any, incurred by Employee in seeking to obtain or enforce any
right or benefit provided to Employee by this Agreement
whether by arbitration or otherwise); and
(e) Any and all contracts, agreements, or
arrangements between the Company and Employee prohibiting or
restricting the Employee from owning, operating, participating
in, or providing employment or consulting services to, any
business or company competitive with the Company at any time
or during any period after the date the termination of
Employee's employment becomes effective, shall be deemed
terminated and of no further force or effect as of the date
the termination of Employee's employment becomes effective, to
the extent, but only to the extent, such contracts,
agreements, or arrangements so prohibit or restrict the
Employee; provided that the foregoing provision shall not
constitute a license or right to use any proprietary
information of the Company and shall in not way affect any
such contracts, agreements, or arrangements insofar as they
relate to nondisclosure and
<PAGE>
nonuse of proprietary information of the Company
notwithstanding the fact that such nondisclosure and nonuse
may prohibit or restrict the Employee in certain competitive
activities.
(ii) In the Event that any payment or benefit received or to
be received by Employee in connection with a Change in Control of the
Company or termination of Employee's employment (whether payable
pursuant to the terms of this Agreement or any other plan, contract,
agreement, or arrangement with the Company, with any person whose
actions result in a Change in Control of the Company or with any person
constituting a member of an "affiliated group" as defined in Section
280G(d)(5) of the Internal Revenue Code of 1986, as amended (the
"Code"), with the Company or with any person whose actions result in a
Change in Control of the Company (collectively, the "Total Payments"))
would be subject to the excise tax imposed by Section 4999 of the Code
or any interest, penalties or additions to tax with respect to such
excise tax such excise tax, together with any such interest, penalties
or additions to tax, are collectively referred to as the "Excise Tax"),
then the Employee shall be entitled to receive from the Company
additional cash payment (a "Gross-Up Payment") within thirty business
days of such determination in an amount such that after payment by the
Employee of all taxes (including any interest, penalties or additions
to tax imposed with respect to such taxes), including any Excise Tax,
imposed upon the Gross-Up Payment, the Employee retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Total
Payments. All determinations required to be made under this Section
4(ii), including whether a Gross-Up Payment is required and the amount
of such Gross-Up Payment, shall be made by the independent accounting
firm retained by the Company on the date of the Change in Control (the
"Accounting Firm"), which shall provide detailed supporting
calculations both to the Company and the Employee within 15 business
days of the date that the termination of Employee's employment becomes
effective, or such earlier time as is requested by the Company. If the
Accounting Firm determines that no Excise Tax is payable by the
Employee, it shall furnish the Employee with an opinion that the
Employee has substantial authority not to report any Excise Tax on his
or her federal income tax return.
Any uncertainty in the application of Section 4999 of the Code
at the time of the initial determination by the Accounting Firm
hereunder shall be resolved in favor of the Employee. As a result of
the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it
is possible that at a later time there will be a determination that the
Gross-Up Payments made by the Company were less than the Gross-Up
Payments that should have been made by the Company ("Underpayment"),
consistent with the calculations required to be made hereunder. In the
event that the Employee is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the
Underpayment, if any, that has occurred and any such Underpayment shall
be promptly paid by the Company to or for the benefit of the Employee.
As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting
Firm hereunder, it is possible that at a later time there will be a
determination that the Gross-Up Payments made by the Company were more
than the Gross-Up Payments that should have been made by the Company
("Overpayment"), consistent with the calculations required to be made
hereunder. Employee agrees to refund
<PAGE>
to the Company the amount of any Overpayment that the Accounting Firm
shall determine has occurred hereunder. Any determination by the
Accounting Firm as to the amount of any Gross-Up Payment, including the
amount of any Underpayment or Overpayment, shall be binding upon the
Company and the Employee.
(iii) Any payment not made to Employee when due hereunder
shall thereafter, until paid in full, bear interest at the rate of
interest equal to the reference rate announced from time to time by
First Bank National Association, plus two percent, with such interest
to be paid to Employee upon demand or monthly in the absence of a
demand.
(iv) Employee shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other employment
or otherwise. The amount of any payment or benefit provided in this
Section 4 shall not be reduced by any compensation earned by Employee
as a result of any employment by another employer.
5. Employee's Agreements.
Employee agrees that:
(i) Without the consent of the Company, Employee will not
terminate his employment with the Company without giving 60 days prior
notice to the Company, and during such 60-day period Employee will
assist the Company, as and to the extent reasonably requested by the
Company, in training the successor to Employee's position with the
Company. The provisions of this Section 5(i) shall not apply to any
termination (voluntary or involuntary) of the employment of Employee
pursuant to Section 2(ii)(c) hereof.
(ii) Without the consent of the Company or except as may be
required by law, Employee will not at any time after termination of his
employment with the Company disclose to any person, corporation, firm,
or other entity, confidential information concerning the Company of
which Employee has gained knowledge during his employment with the
Company.
(iii) In the event that Employee has received any benefits
from the Company under Section 4 of this Agreement, then, during the
period of 36 months following the date that the termination of
Employee's employment became effective, Employee, upon request by the
Company:
(a) Will consult with one or more of the executive
officers concerning the business and affairs of the Company
for not to exceed four hours in any month at times and places
selected by Employee as being convenient to him, all without
compensation other than what is provided for in Section 4 of
this Agreement; and
(b) Will testify as a witness on behalf of the
Company in any legal proceedings involving the Company which
arise out of events or circumstances that occurred or existed
prior to the date that the termination of Employee's
employment became effective (except for any such proceedings
relating to this Agreement),
<PAGE>
without compensation other than what is provided for in
Section 4 of this Agreement, provided that all out-of-pocket
expenses incurred by Employee in connection with serving as a
witness shall be paid by the Company.
Employee shall not be required to perform his obligations
under this Section 5(iii) if and so long as the Company is in default
with respect to the performance of any of its obligations under this
Agreement.
6. Successors and Binding Agreement.
(i) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company), by
agreement in form and substance satisfactory to Employee, to expressly
assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no
such succession had taken place. Failure of the Company to obtain such
agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle Employee to compensation
from the Company in the same amount and on the same terms as Employee
would be entitled hereunder if employee terminated his employment after
a Change in Control for Good Reason, except that for purposes of
implementing of the foregoing, the date on which any such succession
becomes effective shall be deemed the date that the termination of
Employee's employment becomes effective. As used in this Agreement,
"Company" shall mean the Company and any successor to its business
and/or assets which executes and delivers the agreement provided for in
this Section 6(i) or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
(ii) This Agreement is personal to Employee, and Employee may
not assign or transfer any part of his rights or duties hereunder, or
any compensation due to him hereunder, to any other person.
Notwithstanding the foregoing, this Agreement shall inure to the
benefit of and be enforceable by Employee's personal or legal
representatives, executors, administrators, heirs, distributees,
devisees, and legatees.
7. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
the Minneapolis, Minnesota area, in accordance with the applicable rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
8. Modification; Waiver. No provisions of this Agreement may be
modified, waived, or discharged unless such waiver, modifications, or discharge
is agreed to in a writing signed by Employee and such officer as may be
specifically designated by the Board of Directors of the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
<PAGE>
9. Notice. All notices, requests, demands, and all other communications
required or permitted by either party to the other party by this Agreement
(including, without limitation, any notice of termination of employment and any
notice of an intention to arbitrate) shall be in writing and shall be deemed to
have been duly given when delivered personally or received by certified or
registered mail, return receipt requested, postage prepaid, at the address of
the other party, at first written above (directed to the attention of the Board
of Directors and Corporate Secretary in the case of the Company). Either party
hereto may change its address for purposes of this Section 9 by giving 15 days'
prior notice to the other party hereto.
10. Severability. If any term or provision of this Agreement or the
application hereof to any person or circumstances shall to any extent be invalid
or unenforceable, the remainder of this Agreement or the application of such
term or provision to persons or circumstances other than those as to which it is
held invalid or unenforceable shall not be affected thereby, and each term and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
11. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12. Governing Law. This Agreement has been executed and delivered in
the State of Minnesota, and shall, in all respects, be governed by, and
construed and enforced in accordance with the laws of the State of Minnesota,
including all matters of constructions, validity, and performance.
13. Effect of Agreement; Entire Agreement. The Company and the Employee
understand and agree that this Agreement is intended to reflect their agreement
only with respect to payments and benefits upon termination in certain cases and
is not intended to create any obligation on the part of either party to continue
employment. This Agreement supersedes any and all other oral or written
agreements or policies made relating to the subject matter hereof and
constitutes the entire agreement of the parties relating to the subject matter
hereof; provided that this Agreement shall not supersede or limit in any way
Employee's rights under any benefit plan, program or arrangements in accordance
with their terms.
14. ERISA. For purposes of the Employee Retirement Income Security Act
of 1974, this Agreement is intended to be a severance pay employee welfare
benefit plan, and not an employee pension benefit plan, and shall be construed
and administered with that intention.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in its name by a duly authorized director and officer, and Employee has
hereunto set his hand, all as of the date first written above.
E. W. BLANCH HOLDINGS, INC.
By: ________________________________
[[SIGNERA]]
and
By: ________________________________
[[SIGNERB]], Secretary
EMPLOYEE
_____________________________________
[[NAME]]
<PAGE>
EXHIBIT A
NOTICE
The undersigned ("Employee") does hereby notify E. W. Blanch Holdings,
Inc. (the "Company") pursuant to Section 4(i) of that certain Severance
Agreement dated as of the date hereof between the Company and Employee (the
"Agreement") that Employee has elected to be paid any amounts which become
payable under Section 4(i)(a) of the Agreement as follows:
(check one)
____ in a lump sum not later than one business day prior to the
date that the termination of Employee's employment becomes
effective.
____ in 36 equal installments payable monthly, on the last business
day of the month, for 36 consecutive months following the date
that the termination of Employee's employment becomes
effective.
Dated: ______________, 19__
Employee:
___________________________
[[NAME]]
L:\AGREMENT\SEVERANC.DOC
EXHIBIT 10.1
SCHEDULE OF EXECUTIVES RECEIVING SEVERANCE AGREEMENTS
Name of Executive Severance Amount (4(i)(a))
- ------------------------------------- --------------------
E. W. Blanch, Jr. three (3)
Ian D. Packer three (3)
Chris L. Walker three (3)
Frank S. Wilkinson, Jr. three (3)
James E. Erickson two (2)
Daniel P. O'Keefe two (2)
Exhibit 11 - Statement Re: Computation of Per share Earnings
<TABLE>
<CAPTION>
(in thousands, except per share amounts)
Quarter ended Nine months ended
September 30 September 30
------------------ ------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding 12,575 13,254 12,683 13,219
Net effect of dilutive stock options-
based on the treasury stock method
using average market price 358 42 209 73
------- ------- ------- -------
Total 12,933 13,296 12,892 13,292
======= ======= ======= =======
Net income $ 7,981 $ 6,859 $19,245 $14,900
======= ======= ======= =======
Per share amount $ 0.62 $ 0.52 $ 1.49 $ 1.12
======= ======= ======= =======
Fully Diluted:
Average shares outstanding 12,575 13,254 12,603 13,219
Net effect of dilutive stock options-
based on the treasury stock method
using the year-end market price, if
higher than average market price 398 42 398 93
------- ------- ------- -------
Total 12,973 13,296 13,081 13,292
======= ======= ======= =======
Net income $ 7,981 $ 6,859 $19,245 $14,900
======= ======= ======= =======
Per share amount $ 0.62 $ 0.52 $ 1.47 $ 1.12
======= ======= ======= =======
</TABLE>
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