Filed under SEC
Rule 424 (b)(2)
Registration No. 33-44271
HILB, ROGAL AND HAMILTON COMPANY
SUPPLEMENT TO
PROSPECTUS DATED FEBRUARY 12, 1992
RELATING TO ACQUISITION OF
CROSS KEYS INSURANCE AGENCY, INC.
The following information is furnished to supplement and complete the
information contained in the Prospectus dated February 12, 1992 ("Prospectus"),
relating to the offering of shares of the Common Stock of Hilb, Rogal and
Hamilton Company ("Company") to the shareholders of Cross Keys Insurance
Agency, Inc. ("Cross Keys") of Baltimore, Maryland to consummate the merger
of Cross Keys and the Company.
Terms of the Transaction
(a) (1) Effective July 1, 1995, a subsidiary of the Company will
consummate an Agreement of Merger with Cross Keys whereby the shareholders of
Cross Keys will receive 40,000 shares of Common Stock of the Company
("Shares") plus two future cash payments subject to (i) all necessary
corporate approvals of each corporation, (ii) all authorizations, consents
and approvals of all federal, state, local and foreign governmental agencies
and authorities required to be obtained, and (iii) all other conditions
precedent as outlined in the Agreement of Merger (see Exhibit 2.21). The
number of shares distributed to the shareholders of Cross Keys will be
adjusted based upon the final determination of net worth as defined in the
Agreement of Merger. The cash payments will be made based upon commission
income realized in the subsequent two year period which will increase the
purchase price by .675 times every $1 in commission income in excess of $900,000
during the first and second 12 months periods following closing. The
contingent payment includes imputed interest at the lowest applicable federal
rate allowed under the Internal Revenue Code of 1986, as amended.
Cross Keys Insurance Agency, Inc. will merge into Hilb, Rogal and Hamilton
Company of Baltimore, a wholly-owned subsidiary of the Company.
(2) The merger with Cross Keys by the Company has been agreed upon
because the Company is engaged in the business of owning insurance agencies
and because the shareholders of Cross Keys have determined that a merger with
the Company is beneficial to the growth of Cross Keys' insurance operations.
Cross Keys' operations will add approximately 10 employees and $900,000 of
revenues to the Company.
(3) Cross Keys was incorporated in 1987 in the state of Maryland,
and has 25,000 authorized shares of common stock, no par value. There are 3,150
issued outstanding shares of common stock.
(4) There are no material differences between the rights of the
security holders of Cross Keys and the rights of security holders of the
Company.
(5) The acquisition will be treated using the purchase method of
accounting for acquisitions under generally accepted accounting principles.
(6) Cross Keys will be included in the consolidated return of the
Company as of the effective date. The acquisition will be recorded as a tax
free exchange under the rules of I.R.C. Sections 368(a)(1)(A) and 368(a)(2)(D).
(c) The acquisition agreement is incorporated into this supplement as
Exhibit 2.21.
Pro Forma Financial Information
See attached - Schedule A
Material Contracts with Seller
There have been no material contracts between the Company and Cross Keys
prior to the proposed effective date of the Agreement of Merger.
Information with Respect to
Cross Keys Insurance Agency, Inc.
Cross Keys was incorporated in 1987 and operates from an office in
Baltimore, Maryland.
Cross Keys provides insurance brokerage services for personal and
commercial and industrial accounts. Services provided include personal and
commercial property and casualty insurance (97% of commissions and fees) and
group and individual life and health insurance products (3% of commissions
and fees).
The shares to be issued represent less than .3% of outstanding shares of
the Company at the time of acquisition and the assets of Cross Keys as of
December 31, 1994 and pre-tax earnings for the year then ended represent
less than .2% and .7%, respectively, of the consolidated amounts of the
Company. Accordingly, due to the small size, and closely held nature of the
insurance agency, it is not practical or cost effective to provide
financial statements (other than attached pro forma financial information) and
related financial information and analyses. Accordingly, the shares will be
restricted as to resale until such time as the Company files audited
financial statements which include the results of operations of Cross Keys.
The restriction should end no later than March 31, 1996 when the Company
files its Form 10-K for 1995.
Common Stock and Dividend Data
There is no established public trading market for the stock of Cross Keys.
There are three shareholders of the corporation. See Shareholder Information
below for information regarding shares held and information regarding
authorized and issued shares.
There have been no common stock dividend distributions during the prior
three years.
Shareholder Information
(a) (1) WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT
TO SEND US A PROXY.
(2) & (3) Cross Keys has agreed to submit the Agreement of Merger to
its shareholders for adoption by unanimous written consent after receipt and
review of this supplement to the Prospectus. Since the Agreement of Merger
requires that the merger can be completed only with the unanimous consent of the
shareholders of the company being acquired (Cross Keys), notice requirements
shall have been met and there shall be no dissenters.
(4) & (5) There are no material interests, direct or indirect of
affiliates, officers or directors of the registrant or of the company being
acquired (Cross Keys) in the proposed transaction.
(6) Cross Keys has 25,000 authorized shares of common stock, no par
value. Shares issued and outstanding are as follows:
Number of
Shareholder Common Shares Percentage
Edwin B. Jarrett, Jr. 1,050 33 1/3%
Herbert K. Thompson 1,050 33 1/3%
Jeffrey L. McKew 1,050 33 1/3%
----- --------
3,150 100.00%
===== =======
(7) Upon completion of the proposed acquisition, no shareholder of
Cross Keys will be serving as a director or executive officer of the
registrant.
Hilb, Rogal and Hamilton Company
Date of this Supplement: June 22, 1995
<PAGE>
SCHEDULE A - PRO FORMA CONDENSED
FINANCIAL STATEMENTS (UNAUDITED)
The following pro forma condensed consolidated balance sheet as of
March 31, 1995 and the pro forma consolidated income statements for the three
months ended March 31, 1995 and the years ended December 31, 1994, 1993 and 1992
give effect to the pooling-of-interests merger with R. E. Lipman Insurance
Brokers, Inc. ("Lipman," effective on May 1, 1995); the proposed acquisition
of Cross Keys Insurance Agency, Inc. ("Cross Keys") and other purchase
transactions which are expected to be effective July 1, 1995; and the
acquisition of certain assets and liabilities of four insurance agencies
purchased in 1995 and four insurance agencies purchased in 1994. The pro forma
information is based on the historical financial statements of Hilb, Rogal
and Hamilton Company and the acquired agencies, giving effect to the
transactions under the purchase method or pooling-of-interests method of
accounting and the assumptions and adjustments in the accompanying notes to
the pro forma financial statements. The pro forma consolidated income
statements give effect to the purchase method acquisitions and proposed
purchase method acquisitions as if they had occurred on January 1, 1994, and
the pooling-of-interest as if it had occurred prior to all periods presented.
The pro forma condensed consolidated balance sheet gives effect to the
business combinations which occurred or are probable of occurring subsequent
to March 31, 1995, as if they had occurred before March 31, 1995.
The pro forma statements have been prepared by management based upon the
historical financial statements of Hilb, Rogal and Hamilton Company,
Lipman, Cross Keys and other acquired agencies. These pro forma statements may
not be indicative of the results that actually would have occurred if the
combination had been in effect on the dates indicated or which may be
obtained in the future. The pro forma financial statements should be read
in conjunction with the audited financial statements and notes of the Company
included in the Company's 1994 Annual Report to Shareholders which is
incorporated by reference in the Company's Annual Report on Form 10-K, which is
incorporated herein by reference.
<PAGE>
HILB, ROGAL & HAMILTON COMPANY
PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
HILB, ROGAL POOLING-OF- PRO FORMA ACQUISITIONS PRO FORMA ADJUSTMENTS PRO FORMA
AND HAMILTON INTERESTS COMBINED (PURCHASES) FOR PURCHASE ACQUISITIONS CONSOLIDATED
COMPANY MERGER POOLED
TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS $ 13,069,902 $323,110 $ 13,393,012 $2,035,856 $ (65,011)(1) $ 30,000 (3) $ 14,097,857
(1,296,000)(2)
INVESTMENTS 27,753,702 0 27,753,702 604,305 28,358,007
RECEIVABLES & OTHER 43,975,812 149,200 44,125,012 1,995,956 (18,330)(1) 46,102,638
-----------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 84,799,416 472,310 85,271,726 4,636,117 N/A (1,349,341) 88,558,502
----------------------------------------------------------------------------------------------------------
INVESTMENTS 8,220,000 8,220,000 8,220,000
PROPERTY & EQUIPMENT 12,310,113 46,103 12,356,216 278,802 (271,366)(1) 145,000 (3) 12,508,652
INTANGIBLE ASSETS 49,494,816 0 49,494,816 34,000 (34,000)(1) 8,133,293 (3) 57,628,109
OTHER ASSETS 3,582,109 0 3,582,109 45,113 0 0 3,627,222
-----------------------------------------------------------------------------------------------------------
TOTAL ASSETS $158,406,454 $518,413 $158,924,867 $4,994,032 N/A $6,623,586 $170,542,485
===========================================================================================================
LIABILITIES & EQUITY:
PREMIUMS PAYABLE-INS CO 64,996,844 378,188 $65,375,032 3,803,378 $69,178,410
OTHER ACCRUED LIABILITIES 17,427,338 20,129 17,447,467 1,312,628 (130,378)(1) 18,629,717
-----------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 82,424,182 398,317 82,822,499 5,116,006 N/A (130,378) 87,808,127
LONG-TERM DEBT 2,961,780 2,961,780 404,890 1,406,060 (2) 4,772,730
OTHER LONG-TERM LIAB. 2,859,807 2,859,807 127,040 2,288,000 (3) 5,274,847
SHAREHOLDERS' EQUITY
COMMON STOCK 44,282,775 1,000 44,283,775 95,185 (95,185)(4) 2,406,000 (2) 46,689,775
RETAINED EARNINGS 25,877,910 119,096 25,997,006 (749,089) 749,089 (4) 25,997,006
-----------------------------------------------------------------------------------------------------------
70,160,685 120,096 70,280,781 (653,904) N/A 3,059,904 72,686,781
-----------------------------------------------------------------------------------------------------------
$158,406,454 $518,413 $158,924,867 $4,994,032 N/A $6,623,586 $170,542,485
===========================================================================================================
</TABLE>
(1) TO ADJUST FOR ASSETS AND LIABILITIES NOT ACQUIRED.
(2) TO REFLECT PURCHASE PRICE OF ASSETS AND LIABILITIES ACQUIRED SUBSEQUENT TO
MARCH 31, 1995 IN PURCHASE TRANSACTIONS.
(3) TO ADJUST FOR ASSET VALUATIONS UNDER PURCHASE ACCOUNTING.
(4) TO ELIMINATE SHAREHOLDERS' EQUITY OF ACQUIRED ENTITIES.
<PAGE>
HILB, ROGAL & HAMILTON COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, 1995
---------------------------------------------------------------------------------------------
HILB, ROGAL POOLING-OF- PRO FORMA ACQUISITIONS PRO FORMA ADJUSTMENTS PRO FORMA
& HAMILTON CO. INTERESTS COMBINED (PURCHASES) FOR PURCHASE CONSOLIDATED
MERGER POOLED ACQUISITIONS
TOTAL
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
COMMISSIONS & FEES $38,081,734 $96,594 $38,178,328 $1,854,032 $40,032,360
INTEREST INCOME 512,748 1,498 514,246 131,460 ($19,440) (1) 626,266
OTHER 761,655 376 762,031 762,031
---------------------------------------------------------------------------------------------
TOTAL REVENUES 39,356,137 98,468 39,454,605 1,985,492 (19,440) 41,420,657
---------------------------------------------------------------------------------------------
OPERATING EXPENSES:
COMPENSATION AND BENEFITS 20,599,309 55,180 20,654,489 960,115 21,614,604
OTHER OPERATING EXPENSES 8,752,895 62,623 8,815,518 792,628 (43,584) (2) 9,564,562
AMORTIZATION OF INTANGIBLES 1,648,058 1,648,058 44,772 94,176 (3) 1,787,006
INTEREST EXPENSE 110,237 110,237 10,258 24,947 (4) 145,442
---------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 31,110,499 117,803 31,228,302 1,807,773 75,539 33,111,614
---------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 8,245,638 (19,335) 8,226,303 177,719 (94,979) 8,309,043
INCOME TAXES 3,298,255 3,298,255 33,096 (5) 3,331,351
---------------------------------------------------------------------------------------------
NET INCOME $4,947,383 ($19,335) $4,928,048 $177,719 ($128,075) $4,977,692
=============================================================================================
NET INCOME PER COMMON SHARE $0.34 $0.33 $0.33
=============================================================================================
SHARES ISSUED AND OUTSTANDING 14,759,524 37,000 14,796,524 195,000 14,991,524
---------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES
OUTSTANDING 14,757,450 37,000 14,794,450 236,667 15,031,117
---------------------------------------------------------------------------------------------
</TABLE>
(1) TO ADJUST HISTORICAL INTEREST AND TO ADJUST FOR LOST INTEREST EARNED FROM
FROM CASH PAID FOR ACQUIRED AGENCIES.
(2) TO REFLECT ADJUSTMENTS TO OTHER OPERATING EXPENSES TO REFLECT ADJUSTED
DEPRECIATION EXPENSE, RENT EXPENSE, ETC.
(3) TO REFLECT ADJUSTMENTS TO AMORTIZATION OF INTANGIBLES DUE TO VALUATION
OF AGENCY ASSETS ON THE PURCHASE BASIS OF ACCOUNTING. INTANGIBLE
ASSETS REPRESENT EXPIRATION RIGHTS, THE EXCESS OF COSTS OVER THE
FAIR VALUE OF NET ASSETS ACQUIRED AND NONCOMPETITION AGREEMENTS.
(4) TO REFLECT INTEREST ON ACQUISITION DEBT AND TO ADJUST HISTORICAL
INTEREST FOR DEBT NOT ASSUMED.
(5) TO REFLECT ESTIMATED TAXES AND THE TAX EFFECT OF PROFORMA ADJUSTMENTS
ON NET INCOME.
<PAGE>
HILB, ROGAL & HAMILTON COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994
----------------------------------------------------------------------------------------------
HILB, ROGAL POOLING-OF- PRO FORMA ACQUISITIONS PRO FORMA ADJUSTMENTS PRO FORMA
& HAMILTON CO. INTERESTS COMBINED (PURCHASES) FOR PURCHASE CONSOLIDATED
MERGER POOLED ACQUISITIONS
TOTAL
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
COMMISSIONS & FEES $132,914,113 $339,483 $133,253,596 $16,361,209 $149,614,805
INTEREST INCOME 1,899,803 9,147 1,908,950 298,308 ($357,135) (1) 1,850,123
OTHER 5,995,698 2,084 5,997,782 27,037 6,024,819
----------------------------------------------------------------------------------------------
TOTAL REVENUES 140,809,614 350,714 141,160,328 16,686,554 (357,135) 157,489,747
----------------------------------------------------------------------------------------------
OPERATING EXPENSES:
COMPENSATION AND BENEFITS 78,310,999 240,592 78,551,591 10,099,119 88,650,710
OTHER OPERATING EXPENSES 35,975,715 134,437 36,110,152 5,141,717 (376,149) (2) 40,875,720
AMORTIZATION OF INTANGIBLES 6,436,119 6,436,119 871,742 288,966 (3) 7,596,827
INTEREST EXPENSE 812,216 812,216 418,095 (81,421) (4) 1,148,890
POOLING-OF-INTERESTS EXPENSE 487,986 487,986 487,986
----------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 122,023,035 375,029 122,398,064 16,530,673 (168,604) 138,760,133
----------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 18,786,579 (24,315) 18,762,264 155,881 (188,531) 18,729,614
INCOME TAXES 7,394,296 (6,350) 7,387,946 (13,060) (5) 7,374,886
----------------------------------------------------------------------------------------------
NET INCOME $11,392,283 ($17,965) $11,374,318 $155,881 ($175,471) $11,354,728
==============================================================================================
NET INCOME PER COMMON SHARE $0.77 $0.77 $0.75
==============================================================================================
SHARES ISSUED AND OUTSTANDING 14,679,464 37,000 14,716,464 320,000 15,036,464
----------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES
OUTSTANDING 14,778,304 37,000 14,815,304 329,375 15,144,679
----------------------------------------------------------------------------------------------
</TABLE>
(1) TO ADJUST HISTORICAL INTEREST AND TO ADJUST FOR LOST INTEREST EARNED FROM
FROM CASH PAID FOR ACQUIRED AGENCIES.
(2) TO REFLECT ADJUSTMENTS TO OTHER OPERATING EXPENSES TO REFLECT ADJUSTED
DEPRECIATION EXPENSE, RENT EXPENSE, ETC.
(3) TO REFLECT ADJUSTMENTS TO AMORTIZATION OF INTANGIBLES DUE TO VALUATION
OF AGENCY ASSETS ON THE PURCHASE BASIS OF ACCOUNTING. INTANGIBLE
ASSETS REPRESENT EXPIRATION RIGHTS, THE EXCESS OF COSTS OVER THE
FAIR VALUE OF NET ASSETS ACQUIRED AND NONCOMPETITION AGREEMENTS.
(4) TO REFLECT INTEREST ON ACQUISITION DEBT AND TO ADJUST HISTORICAL
INTEREST FOR DEBT NOT ASSUMED.
(5) TO REFLECT ESTIMATED TAXES AND THE TAX EFFECT OF PROFORMA ADJUSTMENTS
ON NET INCOME.
<PAGE>
HILB, ROGAL & HAMILTON COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
- -----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993
---------------------------------------------
HILB, ROGAL POOLING-OF- PRO FORMA
& HAMILTON CO. INTERESTS COMBINED
MERGERS POOLED
TOTAL
- -----------------------------------------------------------------------------
REVENUES:
COMMISSIONS & FEES $137,662,048 $403,680 $138,065,728
INTEREST INCOME 1,558,982 9,678 1,568,660
OTHER 2,435,150 1,978 2,437,128
---------------------------------------------
TOTAL REVENUES 141,656,180 415,336 142,071,516
---------------------------------------------
OPERATING EXPENSES:
COMPENSATION AND BENEFITS 82,469,714 286,526 82,756,240
OTHER OPERATING EXPENSES 37,773,552 139,098 37,912,650
AMORTIZATION OF INTANGIBLES 6,581,550 0 6,581,550
INTEREST EXPENSE 1,270,268 0 1,270,268
POOLING-OF-INTERESTS EXPENSE 503,207 503,207
---------------------------------------------
TOTAL OPERATING EXPENSES 128,598,291 425,624 129,023,915
---------------------------------------------
INCOME BEFORE INCOME TAXES 13,057,889 (10,288) 13,047,601
INCOME TAXES 4,764,496 (3,672) 4,760,824
---------------------------------------------
NET INCOME $8,293,393 ($6,616) $8,286,777
=============================================
NET INCOME PER COMMON SHARE $0.57 $0.57
=============================================
SHARES ISSUED AND OUTSTANDING 14,800,904 37,000 14,837,904
---------------------------------------------
WEIGHTED AVERAGE SHARES
OUTSTANDING 14,456,055 37,000 14,493,055
---------------------------------------------
<PAGE>
HILB, ROGAL & HAMILTON COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
- -----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1992
---------------------------------------------
HILB, ROGAL POOLING-OF- PRO FORMA
& HAMILTON CO. INTERESTS COMBINED
MERGERS POOLED
TOTAL
- -----------------------------------------------------------------------------
REVENUES:
COMMISSIONS & FEES $137,296,081 $423,032 $137,719,113
INTEREST INCOME 1,374,949 12,097 1,387,046
OTHER 1,789,925 677 1,790,602
--------------------------------------------
TOTAL REVENUES 140,460,955 435,806 140,896,761
--------------------------------------------
OPERATING EXPENSES:
COMPENSATION AND BENEFITS 81,939,724 277,357 82,217,081
OTHER OPERATING EXPENSES 36,208,784 142,421 36,351,205
AMORTIZATION OF INTANGIBLES 6,557,924 0 6,557,924
INTEREST EXPENSE 1,820,819 0 1,820,819
POOLING-OF-INTERESTS EXPENSE 532,960 532,960
--------------------------------------------
TOTAL OPERATING EXPENSES 127,060,211 419,778 127,479,989
--------------------------------------------
INCOME BEFORE INCOME TAXES 13,400,744 16,028 13,416,772
INCOME TAXES 4,809,342 10,141 4,819,483
--------------------------------------------
NET INCOME $8,591,402 $5,887 $8,597,289
============================================
NET INCOME PER COMMON SHARE $0.65 $0.65
============================================
SHARES ISSUED AND OUTSTANDING 13,242,808 37,000 13,279,808
--------------------------------------------
WEIGHTED AVERAGE SHARES
OUTSTANDING 13,241,030 37,000 13,278,030
--------------------------------------------
AGREEMENT OF MERGER
OF
CROSS KEYS INSURANCE AGENCY, INC.
INTO
HILB, ROGAL AND HAMILTON COMPANY OF BALTIMORE
THIS MERGER AGREEMENT ("Agreement"), to be effective as
of 12:01 a.m. on July 1, 1995, or at such other time as may be
agreed upon by the parties hereto, is made and entered into by and
among HILB, ROGAL AND HAMILTON COMPANY, a Virginia
corporation ("Parent"), Parent's wholly-owned subsidiary, HILB,
ROGAL AND HAMILTON COMPANY OF BALTIMORE, a Maryland
corporation ("Survivor"), and CROSS KEYS INSURANCE AGENCY,
INC., a Maryland corporation ("Merging Entity"), and the three
shareholders of Merging Entity, EDWIN B. JARRETT, JR. ("Mr.
Jarrett"), HERBERT K. THOMPSON ("Mr. Thompson"), and JEFFERY
L. MCKEW ("Mr. McKew") (with Messrs. Jarrett, Thompson and
McKew hereinafter sometimes collectively referred to as
"Shareholders" or any one of the foregoing hereinafter sometimes
referred to as "Shareholder"), with reference to the following facts:
A. Shareholders are the owners and holders of all of the
issued and outstanding shares of the authorized capital stock
(referred to below as the "Common Stock") of Merging Entity which
is engaged in the business of owning and operating a general
insurance agency.
B. Parent is engaged in the business of owning and operating
insurance agencies and Survivor is a full-line insurance agency
operating in the Baltimore area.
C. Shareholders, Survivor, Parent and Merging Entity have
reached an understanding with respect to the merger of Merging
Entity into Survivor ("Merger") for which Shareholders shall receive
that amount of Parent's common stock and certain future cash
payments (contingent in amount based on the revenues realized from
the book of business acquired from Merging Entity) as the
consideration stated herein.
D. The parties hereto intend that this Agreement be
characterized as a forward triangular statutory merger pursuant to
Sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code
of 1986 ("Code") and further be accounted for, for financial
accounting purposes, as a "purchase" in accordance with the
principles of the Financial Accounting Standards Board and other
applicable guidelines.
In consideration of the foregoing facts and of the respective
representations, warranties, covenants, conditions and agreements
set forth below, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. PLAN OF MERGER.
1.1 Effective Date. Subject to fulfillment of the conditions
precedent in Sections 6 and 7 of this Agreement, Merging Entity and
Survivor (collectively, "Constituents") will cause Articles of Merger
to be signed, verified and delivered on or before July 1, 1995 (or at
such later time as may be agreed upon by the parties), to the
Secretary of State of the State of Maryland and to be effective as of
12:01 a.m. on July 1, 1995 (or at such later time as may be agreed
upon by the parties) ("Effective Date"), as provided by the laws of
the State of Maryland. On the Effective Date, the separate
existence of each entity of Constituents shall cease and Merging
Entity shall be merged with and into Survivor, which shall then
become the Surviving Corporation.
1.2 Corporate Structure of Surviving Corporation.
(a) On the Effective Date, by virtue of the completion
of the Merger, and thereafter until amended as provided by law, the
name of Surviving Corporation and the articles of incorporation of
Surviving Corporation shall be the name and articles of incorporation
of Survivor in effect immediately prior to the completion of the
Merger.
(b) On the Effective Date, by virtue of the completion
of the Merger, the bylaws of Survivor in effect on the Effective Date
shall be the bylaws for Surviving Corporation.
(c) On the Effective Date, by virtue of the completion
of the Merger, the names and addresses of the directors of Surviving
Corporation shall continue to be the same as for Survivor:
(d) On the Effective Date, by virtue of completion of
the Merger, the officers of Surviving Corporation shall be the officers
of Survivor immediately prior to the Merger, and the following
persons shall be elected to the following positions:
Mr. Edwin B. Jarrett, Jr. Vice President
Mr. Herbert K. Thompson Vice President
Mr. Jeffrey L. McKew Vice President
Ms. Deborah Caparolla Vice President
1.3 Effect of Merger.
(a) On the Effective Date, the assets and liabilities of
Merging Entity shall be taken on the books of Survivor at the amount
at which they shall at that time be carried on the books of Merging
Entity, subject to such adjustments to the books of Merging Entity, if
any, as may be necessary to conform to the accounting procedures
of Parent. The books of the Constituents, as so adjusted, shall
become the books of Surviving Corporation.
(b) On the Effective Date and thereafter, Surviving
Corporation shall possess all the rights, privileges, immunities,
powers, franchises and authority, both public and private, of each
Constituent. All property of every description, including every
interest therein and all obligations of or belonging to or due to each
of Constituents shall thereafter be taken and deemed to be
transferred to and vested in Surviving Corporation, without further
act or deed, although Survivor and Merging Entity from time to time,
as and when required by Surviving Corporation, shall execute and
deliver, or cause to be executed and delivered, all such deeds and
other instruments and shall take, or cause to be taken, such further
action as Surviving Corporation may deem necessary or desirable to
confirm the transfer to and vesting in Surviving Corporation of title
to and possession of all such rights, privileges, immunities,
franchises and authority. All rights of creditors of each of
Constituents shall be preserved unimpaired, limited in lien to the
property affected by such liens immediately prior to the Effective
Date, and Surviving Corporation shall thenceforth be liable for all the
obligations of each of Constituents.
1.4 Conversion of Shares of Common Stock.
(a) All of the outstanding capital stock of Merging
Entity comprises the Common Stock, which is owned, collectively,
by Shareholders. Each of Shareholders owns, free and clear of any
liens, encumbrances, restrictions or adverse claims whatsoever
except as set forth in Schedule 2.4, the number of shares of
Merging Entity set forth below opposite his name and each
Shareholder shall receive therefor for each share of Common Stock
the number of shares of no par value common stock of Parent and
other consideration as described herein:
Shareholder Number of Shares Percentage
----------- ---------------- ----------
Edwin B. Jarrett, Jr. 1050 33 1/3
Herbert K. Thompson 1050 33 1/3
Jeffrey L. McKew 1050 33 1/3
---- ------
3150 100%
In exchange for all of the shares of Common Stock, Shareholders
shall collectively receive 40,000 shares of common stock of Parent,
plus the two payments referenced below, subject to adjustment as
provided in Section 14.6 and to all the terms and conditions
contained herein. This Agreement shall not be consummated under
any circumstances unless 100% of the shares of Common Stock are
exchanged for shares of Parent common stock.
(b) The manner and basis of conversion of shares on
the Effective Date shall be as follows:
(i) Each share of common stock of Survivor
which is issued and outstanding on the Effective Date, with all rights
with respect thereto, shall become one share of common stock, $1
par value, of Surviving Corporation.
(ii) Each share of Common Stock which is issued
and outstanding on the Effective Date, with all rights with respect
thereto, shall be converted into 12.698413 shares (which number of
shares is subject to adjustment as provided in Section 14.6) of
common stock, no par value, of Parent, plus the right to receive the
proportionate share of the two contingent payments described below
in subsection (f), each of which contingent payments shall not in the
aggregate exceed $135,000 nor be less than zero (before any
applicable indemnity). Such deferred payments shall have interest
imputed at the lowest applicable federal rate allowed under the
Internal Revenue Code of 1986, as amended ("Code"). No fractional
shares of Parent common stock will be issued as the number of
shares to be issued to any Shareholder in accordance with the
preceding sentence shall be rounded up or down to the nearest
whole number (a fractional share of 0.5 or more will be rounded up;
less than 0.5 will be rounded down). Each shareholder of Common
Stock, upon delivery to Parent or its duly authorized agent for
cancellation of certificates representing such shares and subject to
the ten percent holdback of shares described later herein, shall
thereafter be entitled to receive certificates representing the number
of shares of Parent common stock to which such Shareholder is
entitled.
(c) Appropriate adjustment shall be made on the number of
shares of Parent common stock to be issued upon conversion if,
during the period commencing on May 31, 1995, and ending on the
Effective Date, Parent: (i) effects any dividend payable in shares of
common stock; (ii) splits or combines the outstanding shares of
Parent common stock; (iii) effects any extraordinary distribution on
Parent common stock; (iv) effects any reorganization or
reclassification of Parent common stock; or (v) fixes a record date
for the determination of shareholders entitled to any of the
foregoing.
(d) Upon delivery of Common Stock to Parent pursuant
to subsection 1.4(b)(ii), Parent shall receive all of the shares of
common stock of Surviving Corporation outstanding pursuant to
subsection 1.4(b)(i).
(e) Until its surrender, each certificate comprising
Common Stock referred to in subsection 1.4(b)(ii) herein shall be
deemed for all corporate purposes, other than the payment of
dividends, to evidence ownership of the number of full shares of
Parent common stock into which such shares of Common Stock
shall have been changed by virtue of the merger. Unless and until
any such outstanding certificates of Common Stock shall be so
surrendered, no dividend payable to the holders of record of Parent
common stock, as of any date subsequent to the Effective Date,
shall be paid to the holders of such outstanding certificates, but
upon such surrender of any such certificate or certificates there shall
be paid to the record holder of the certificate or certificates of Parent
common stock into which the shares represented by the surrendered
certificate or certificates shall have been so changed the amount of
such dividends which theretofore became payable with respect to
such shares of Parent.
(f) Contingent Consideration Based on Amount of Year 1
Revenue and Year 2 Revenue.
(i) As used herein, the term "Revenue" shall mean, for the
twelve month periods beginning July 1, 1995 ("Year 1") and July 1,
1996 ("Year 2"), renewal property and casualty income, renewal group
commissions, recurring service fees, and recurring brokered business
(net of commission expense) generated from the existing book of
business of Merging Entity as of June 30, 1995, and specifically
excluding contingency income, overrides, life commissions, and one-
time surety and consulting fees, all determined in accordance with
generally accepted accounting principles of Parent as described in
Section 2.7 hereof, applied on a consistent basis, and applied
uniformly in determining the net profit of each subsidiary of Parent.
Parent shall cause the Revenue to be determined, and the amount
thereof communicated to the Shareholders, as soon as is reasonably
practicable after Year 1 and Year 2, and, in all events, within sixty- two
(62) days thereafter. In the event of a disagreement by the
Shareholders, collectively, as to the computation of Revenue for Year 1
or Year 2, such disagreement shall be resolved in the same manner as
provided in the case of a disagreement as to the Merger Balance
Sheet under the provisions of Section 14.6.
(ii) To the extent the Year 1 Revenue shall be more than
$900,000 (with such excess being the "Year 1 Excess"), then for each
$1 of Year 1 Excess, Parent shall deliver to Shareholders the
aggregate payment of $0.675 on September 1, 1996 ("Year 1
Payment").
(iii) To the extent the Year 2 Revenue shall be more than
$900,000 (with such excess being the "Year 2 Excess"), then for each
$1 of Year 2 Excess, Parent shall deliver to Shareholders the
aggregate payment of $0.675 on September 1, 1997 ("Year 2
Payment").
(iv) No payment shall be due for Year 1 or Year 2 if Revenue
for such year is $900,000 or less. Neither the Year 1 Payment (if any)
or the Year 2 Payment (if any) shall exceed $135,000 in the case of
Year 1 Revenue or Year 2 Revenue, respectively, in excess of
$1,100,000. If any Year 1 Payment or Year 2 Payment is due, before
offset or indemnity, such payment shall be subject to the right of offset
by Surviving Corporation and Parent and any indemnity obligations of
the Shareholders.
1.5 Closing Date. The closing of the transactions contemplated
by this Agreement ("Closing") shall take place at the offices of Survivor,
located at Baltimore, Maryland, at 11 o'clock a.m. on June 28, 1995, or
at such other place and time as shall be mutually agreed upon by the
parties to this Agreement ("Closing Date").
2. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS. Shareholders,
jointly and severally, represent and warrant to Parent as follows:
2.1 Organization and Standing of Merging Entity. Merging
Entity is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland ("Home State") and
has full power and authority to carry on its business as it is now being
conducted and to own or hold under lease the properties and assets it
now owns or holds under lease. Except as set forth in Schedule 2.1 to
this Agreement, Merging Entity is not qualified to do business in any
state or other jurisdiction other than Home State. Except as set forth
in Schedule 2.1, the nature of the business conducted by Merging
Entity and the character or ownership of properties owned by it does
not require Merging Entity to be qualified to do business in any other
jurisdiction. Furthermore, except as set forth in Schedule 2.1 to this
Agreement, the nature of the business conducted by Merging Entity
does not require it or any of its employees to qualify for, or to obtain
any insurance agency, brokerage, adjuster, or other similar license in
any jurisdiction other than Home State. The copy of the articles of
incorporation, and all amendments thereto, of Merging Entity
heretofore delivered to Parent and which have been or will be initialed
for identification purposes by the President of Merging Entity is
complete and correct as of the date hereof. The copy of the bylaws,
and all amendments thereto, of Merging Entity heretofore delivered to
Parent and which have been or will be initialed for identification
purposes by the President of Merging Entity is complete and correct
as of the date hereof. The minute book or minute books of Merging
Entity contain a complete and accurate record in all material respects
of all meetings and other corporate actions of the shareholders and
directors of Merging Entity.
2.2 Name. Neither Merging Entity nor any of Shareholders has
granted to anyone any right to use the corporate name or any name
similar to the corporate name of Merging Entity.
2.3 Capitalization of Merging Entity. The capitalization of
Merging Entity is as follows:
(a) Merging Entity is authorized to issue _____ shares of voting
common stock, __ par value. Merging Entity is not authorized to issue, and has
not issued, any shares of any other class. All of the shares comprising Common
Stock outstanding and owned as of the date hereof are as set forth in
Section 1.4(a), supra.
(b) All of the outstanding shares of Common Stock have
been duly and validly issued and are fully paid and nonassessable.
The issuance of all shares of Common Stock was and has been in
compliance with all applicable statutes, rules and regulations,
including, without limitation, all applicable federal and state securities
laws. There is no existing option, warrant, call or commitment to
which Merging Entity is a party requiring the issuance of any additional
shares of common stock of Merging Entity or of any other securities
convertible into shares of common stock of Merging Entity or any
other equity security of Merging Entity of any class or character
whatsoever.
(c) No shares of the authorized stock of Merging Entity
have ever been registered under the provisions of any federal or state
securities law, nor has Merging Entity filed or been required to file any
report with any federal or state securities commission, department,
division or other governmental agency.
(d) No present or prior holder of any shares of the
authorized stock of Merging Entity is entitled to any dividends with
respect to any such shares now or heretofore outstanding.
2.4 Ownership of Common Stock. Except as set forth in
Schedule 2.4, each Shareholder is the record owner, free and clear of
any and all liens, encumbrances, restrictions and adverse claims
whatsoever, of the number of shares of Common Stock set forth
opposite his name in subsection 1.4(a). Each such lien, encumbrance,
restriction or adverse claim can and will be removed at or prior to the
Closing.
2.5 Authority. Shareholders, individually and collectively, have
full and complete authority to enter into this Agreement and to transfer
in accordance with the terms and conditions of this Agreement all of
the shares of Common Stock, free and clear of all liens,
encumbrances, restrictions and adverse claims whatsoever. The
execution, delivery and performance of this Agreement by Merging
Entity does not violate, result in a breach of, or constitute a default
under, the articles of incorporation or bylaws of Merging Entity or any
indenture, contract, agreement or other instrument to which it is a
party or is bound, or to the best knowledge of Shareholders and
Merging Entity, any applicable laws, rules or regulations.
2.6 Subsidiaries and Other Relationships. Except as disclosed
on Schedule 2.6, Merging Entity does not own any stock or other
interest in any other corporation, nor is it a participant in any joint
entity. Except as disclosed on Schedule 2.6, any stock owned by
Merging Entity in any other entity represents one hundred percent
(100%) ownership of such entity, is owned free and clear of any and
all liens, encumbrances, restrictions and adverse claims, has been
duly and validly issued and is fully paid and nonassessable.
2.7 Financial Statements. Shareholders and Merging Entity will
cause to be delivered to Parent a true and complete copy of the
financial statements of Merging Entity as of and for the period ended
June 30, 1995 ("Merger Balance Sheet"), prepared under the
accounting guidelines of Parent, previously provided to them in the
form of Parent's Accounting Policies and Procedures Manual ("GAAP
Policy"). Additionally, Shareholder and Merging Entity will deliver the
unaudited financial statements for the three most recent calendar years
of Merging Entity including, without limitation, balance sheets and
statements of income for the periods referred to above and the
unaudited financial statements of Merging Entity for the most recent
month ended, including, without limitation, a balance sheet and
statement of income for such period then ended (collectively,
"Financial Statements"). Each of the Financial Statements is true and
correct, is in accordance with the books and records of Merging Entity,
presents fairly the financial condition and results of operations of
Merging Entity as of the date and for the period indicated, and has
been prepared in accordance with accounting policies consistently
applied throughout the periods covered by such statements.
Furthermore, the Financial Statements did not contain any untrue
statement of any material fact nor omitted to state any material fact
required to be stated to make such Financial Statements not
misleading. Without limiting the generality of the foregoing, the
commission income reflected in each of the Financial Statements is or
will be true and correct, and the accounts payable reflected in each of
the Financial Statements is or will be true and correct.
2.8 Absence of Undisclosed Liabilities. (The term "Most Recent
Balance Sheet," as used in this Agreement, means the balance sheet
of Merging Entity at May 31, 1995. Also, the term "Most Recent
Balance Sheet Date," as used in this Agreement, means May 31,
1995.) Except as and to the extent specifically reflected,
provided for or reserved against in the Most Recent Balance Sheet or
except as disclosed in any Schedule to this Agreement, Merging
Entity, as of the Most Recent Balance Sheet Date, did not have any
indebtedness, liability or obligation of any nature whatsoever, whether
accrued, absolute, contingent or otherwise, and whether due or to
become due, including, without limitation, tax liabilities due or to
become due, and whether incurred in respect of or measured by the
income of Merging Entity for any period prior to the Most Recent
Balance Sheet Date, or arising out of transactions entered into, or any
state of facts existing, prior thereto, and none of Shareholders knows
or has reasonable grounds to know of any basis for the assertion
against Merging Entity, as of the Most Recent Balance Sheet Date, of
any indebtedness, liability or obligation of any nature or in any amount
not fully reflected or reserved against in the Most Recent Balance
Sheet or otherwise disclosed in any Schedule to this Agreement.
2.9 No Adverse Change. Since the Most Recent Balance Sheet
Date, there has been no material change in the financial condition,
results of operations or business prospects of Merging Entity other
than changes occurring in the ordinary course of business or except
as otherwise disclosed in any of the Schedules to this Agreement,
which changes have not had a material adverse effect on the financial
condition, results of operations or business prospects of Merging
Entity. Without limiting the generality of the foregoing, since the Most
Recent Balance Sheet Date, there has been no material adverse
change in the insurance accounts included within the "Book of
Business" of Merging Entity, and none of Shareholders knows or has
reasonable grounds to know of any basis for any material adverse
change in such insurance accounts between the date hereof and the
Effective Date. For purposes hereof, "material adverse change" in the
insurance accounts included in the "Book of Business" of Merging
Entity means, without limitation, the loss of any account generating an
aggregate annual gross income (commission or otherwise) of $5,000
or more.
2.10 Taxes. Merging Entity has filed all federal, state and local
income, withholding, social security, unemployment, excise, real
property tax, tangible personal property tax, intangible personal
property tax and all other tax returns and reports required to be filed
by it to the date hereof and all of such returns and reports are true and
correct. All taxes, assessments, fees, penalties, interest and other
governmental charges which were required to be paid by Merging
Entity on such returns and reports have been duly paid and satisfied
on or before their respective due dates. No tax deficiency or penalty
has been asserted or threatened with respect to Merging Entity. No
federal or state income tax return of Merging Entity has been audited
or, to the knowledge of any Shareholder, proposed to be audited, by
any federal or state taxing authority, including, without limitation, the
U.S. Internal Revenue Service and the Maryland Department of
Revenue and Assessments, and no waiver of any statute of limitations
has been given or is in effect with respect to the assessment of any
taxes against Merging Entity. The provisions for taxes included in the
Most Recent Balance Sheet and in the Financial Statements were
sufficient for the payment of all accrued and unpaid federal, state and
local income, withholding, social security, unemployment, excise, real
property, tangible personal property, intangible personal property and
other taxes of Merging Entity, whether or not disputed, for the periods
reflected, and for all years and periods prior thereto.
2.11 Real and Personal Property Owned by Merging Entity.
Except as set forth in Schedule 2.11, Merging Entity does not own any
real property ("Real Property"). Merging Entity has good and
marketable title to the Real Property and owns the Real Property free
and clear of any liens, encumbrances or claims, except as further set
forth in Schedule 2.11. Schedule 2.11 also consists of a copy of the
depreciation schedules filed as a part of the two prior annual Federal
income tax returns of Merging Entity (with deletions of any items
disposed of prior to the date of this Agreement), a separate list of each
item of depreciable personal property acquired by Merging Entity since
the Most Recent Balance Sheet Date and having a cost of $1,000.00 or
more, and a separate list of each item of intangible personal property
presently owned by Merging Entity. Merging Entity also owns various
items of disposable type personal property such as office supplies that
are not listed in Schedule 2.11. Merging Entity has good and
marketable title to all such tangible and intangible personal property, in
each case free and clear of all mortgages, security interests,
conditional sales agreements, claims, restrictions, charges or other
liens or encumbrances whatsoever except as otherwise stated in
Schedule 2.11.
2.12 Leases. Schedule 2.12 contains a correct and complete
list and brief description of all leases or other agreements under which
Merging Entity is a tenant or lessee of, or holds or operates any
property, real or personal, owned by any third party. Merging Entity is
the owner and holder of the leasehold estates granted by each of the
instruments described in Schedule 2.12 except as otherwise stated in
Schedule 2.12. Each of said leases and agreements is in full force
and effect and constitutes a legal, valid and binding obligation of the
respective parties thereto, enforceable in accordance with its terms.
Merging Entity enjoys peaceful and undisturbed possession of all
properties covered by all such leases and agreements, and there is
not any existing default or event or condition, including the Merger
contemplated herein, which with notice or lapse of time, or both, would
constitute an event of default under any of such leases or agreements.
2.13 Insurance. Schedule 2.13 contains a correct and
complete list, as of the date hereof, of all policies of casualty, fire and
extended coverage, theft, errors and omissions, liability, life, and other
forms of insurance owned or maintained by Merging Entity. All
business operations of Merging Entity are and have been continually
insured against errors and omissions. Such policies are in amounts
deemed by Shareholders to be adequate. Each such policy is, on the
date hereof, in full force and effect, and Merging Entity is not in default
with respect to any such policy.
Furthermore, Schedule 2.13 contains a correct and complete list
of all group life, group medical and disability or other similar forms of
insurance which constitute an obligation of or benefit provided by
Merging Entity as well as a list of any material (hospital or home care)
services known by Shareholders and Merging Entity to have been
incurred by Merging Entity's group health plan within 90 days of this
date, which list details with reasonable accuracy the recipients of such
services and the date of service. Schedule 2.13 also contains a list of
any former employees or their dependents who are presently under
COBRA continuation coverage and describes with reasonable
particularity the pertinent factors about each such person listed.
With respect to errors and omissions (professional liability)
insurance policies listed in Schedule 2.13 (which lists for each such
policy the carrier, retrodate, claims made or occurrence policy and
limits), prior to the effective dates of such policies, Merging Entity had
not given notice to any prior insurer of any act, error or omission in
services rendered by any agent or employee of such corporation or
that should have been rendered by any agent or employee of such
corporation arising out of the operations of Merging Entity.
Furthermore, to the best knowledge of Shareholders, no agent or
employee of Merging Entity breached any such professional duty or
obligation prior to the effective dates of such policies. With respect to
such policies, Merging Entity has given notice of any and all claims for
any act, error or omission by any agent or employee of such
corporation with respect to professional services rendered or that
should have been rendered as required by the terms of such policies
(if any such notice has been given, its contents are described in
Schedule 2.13). To the best knowledge of Shareholders, Merging
Entity has not taken, nor has it failed to take, any action which would
provide the insurer with a defense to its obligation under any such
policy; neither Merging Entity nor any Shareholder has received from
any such insurer any notice of cancellation or nonrenewal of any such
policy, and, except as set forth in Schedule 2.13, no Shareholder has
any basis to believe that Merging Entity, or any agent or employee of
Merging Entity, has breached any professional duty or obligation.
2.14 Insurance Companies. Schedule 2.14 contains a correct
and complete list of all insurance companies with respect to which
Merging Entity has an agency contract or similar relationship. Except
as identified in Schedule 2.14, all relations between Merging Entity and
the insurance companies represented by it are good, and no
Shareholder has any knowledge of any proposed termination of, or
modification to, the existing relations between Merging Entity and any
of such insurance companies. Furthermore, except as otherwise set
forth in Schedule 2.14, all accounts with all insurance companies
represented by Merging Entity or with whom it transacts business are
current and there are no disagreements or unreconciled discrepancies
between Merging Entity and any such company as to the amounts
owed by Merging Entity.
2.15 Customers. Except as identified in Schedule 2.15, all
relations between Merging Entity and its present customers are good,
and no Shareholder has any knowledge of any proposed termination
of any insurance account presently written or serviced by Merging
Entity. Also, except as otherwise set forth in Schedule 2.15, all
customer accounts, including, without limitation, those accounts with
respect to which Merging Entity financed any premiums, are current.
For purposes of Section 2.15, the terms "insurance account" and
"customer account" shall be limited to accounts which generate an
aggregate annual gross income (commission or otherwise) of $5,000
or more.
2.16 Officers and Directors; Banks; Powers of Attorney. Schedule 2.16
contains a correct and complete list of all officers and directors of
Merging Entity, a correct and complete list of the names and addresses of
each bank in which Merging Entity has any account or safe deposit box,
together with the names of all persons authorized to draw on each such
account or having access to any such safe deposit box, and a correct and
complete list of the names of all persons holding powers of attorney from
Merging Entity.
2.17 Compensation and Fringe Benefits. Schedule 2.17
contains a correct and complete list of each officer, director, employee
or agent of Merging Entity in the format as set forth in Schedule 2.17.
Also, Schedule 2.17 contains a description of all fringe benefits
presently being provided by Merging Entity to any of its employees or
agents.
2.18 Patents; Trademarks; Copyrights and Trade Names.
Merging Entity owns or is possessed of or is licensed under such
patents, trademarks, trade names and copyrights (including, without
limitation, software) as are used in, and are of material importance to,
the conduct of its business, all of which are in good standing and
uncontested. Schedule 2.18 contains a correct and complete list of all
material patents, patent applications filed or to be filed, trademarks,
trademark registrations and applications, trade names, copyrights and
copyright registrations and applications owned by or registered in the
name of Merging Entity. There is no material claim pending or, to the
best knowledge of Shareholders, threatened against Merging Entity
with respect to any alleged infringement of any patent, trademark,
trade name or copyright owned or licensed to anyone other than
Merging Entity.
2.19 Indebtedness. Schedule 2.19 contains a correct and
complete list of all instruments, agreements or arrangements pursuant
to which Merging Entity has borrowed any money, incurred any
indebtedness or established any line of credit which represents a
liability of Merging Entity on the date hereof. True and complete
copies of all such written instruments, agreements or arrangements
have heretofore been delivered to, or made available for inspection by,
Parent. Merging Entity has performed all of the obligations required to
be performed by it to date, and is not in default in any material respect
under the terms of any such written instruments, agreements or
arrangements, and no event has occurred which, but for the passage
of time or the giving of notice, or both, would constitute such a default.
2.20 Employment Agreements and Other Material Contracts.
Schedule 2.20 contains a complete copy of every employment
agreement, independent contractor and brokerage agreement, and a
list and brief description of all other material contracts, agreements
and other instruments to which Merging Entity is a party at the date
hereof. Except as identified in Schedule 2.20, or in any other
Schedule attached to this Agreement, Merging Entity is not a party to
any oral or written: (i) material contract, agreement or other instrument
not made in the ordinary course of business; (ii) contract for the
employment of any person which is not terminable (without liability) on
30 days or less notice; (iii) license, franchise, distributorship, dealer,
manufacturer's representative, sales agency or advertising agreement;
(iv) contract with any labor organization; (v) lease, mortgage, pledge,
conditional sales contract, security agreement, factoring agreement or
other similar agreement with respect to any real or personal property,
whether as lessor, lessee or otherwise; (vi) contract to provide
facilities, equipment, services or merchandise to any other person, firm
or corporation; (vii) contract for the future purchase of materials,
supplies, services, merchandise or equipment; (viii) profit-sharing,
bonus, deferred compensation, stock option, severance pay, pension,
retirement or other plan or agreement providing employee benefits; (ix)
agreement or arrangement for the sale of any of its properties, assets
or rights or for the grant of any preferential rights to purchase any of
its assets, properties, or rights; (x) guaranty, subordination or other
similar or related type of agreement; (xi) contract or commitment for
capital expenditures; (xii) agreement or covenant not to compete,
solicit or enter into any particular line of business; or (xiii) agreement
for the acquisition of any business or substantially all of the properties,
assets or stock or other securities of any business under which there
are any continuing or unperformed obligations on the part of Merging
Entity. Merging Entity is not in default in any material respect under
any agreement, lease, contract or other instrument to which it is a
party. No party with whom Merging Entity has any agreement which is
of material importance to its business is in default thereunder.
2.21 Absence of Certain Events. Since the Most Recent
Balance Sheet Date, the business of Merging Entity has been
conducted only in the ordinary course and in substantially the same
manner as theretofore conducted, and, except as set forth in Schedule
2.21 attached to this Agreement, or in any other Schedule attached to
this Agreement, Merging Entity has not, since the Most Recent Balance
Sheet Date: (i) issued any stocks, bonds or other corporate securities
or granted any options, warrants or other rights calling for the issue
thereof; (ii) incurred, or become subject to, any material obligation or
liability (whether absolute or contingent) except (A) current liabilities
incurred in the ordinary course of business, (B) obligations under
contracts entered into in the ordinary course of business and (C)
obligations under contracts not entered into in the ordinary course of
business which are listed in Schedule 2.20; (iii) discharged or satisfied
any lien or encumbrance or paid any obligation or liability (whether
absolute or contingent) other than current liabilities shown on the Most
Recent Balance Sheet and current liabilities incurred since the Most
Recent Balance Sheet Date in the ordinary course of business; (iv)
declared or made any payment of dividends or distribution of any
assets of any kind whatsoever to stockholders or purchased or
redeemed any of its capital stock; (v) mortgaged, pledged or
subjected to lien, charge or any other encumbrance, any of its assets
and properties, real, tangible or intangible; (vi) sold or transferred any
of its assets, properties or rights, or cancelled any debts or claims,
except in each case in the ordinary course of business, or entered into
any agreement or arrangement granting any preferential rights to
purchase any of its assets, properties or rights or which required the
consent of any party to the transfer and assignment of any of its
assets, properties or rights; (vii) suffered any extraordinary losses
(whether or not covered by insurance) or waived any extraordinary
rights of value; (viii) entered into any transaction other than in the
ordinary course of business except as herein stated; (ix) amended its
articles of incorporation or bylaws; (x) increased the rate of
compensation payable or to become payable by it to any of its
employees or agents over the rate being paid to them at the Most
Recent Balance Sheet Date; (xi) made or permitted any amendment to
or termination of any material contract, agreement or license to which
it is a party other than in the ordinary course of business; or (xii) made
capital expenditures or entered into any commitments therefor
aggregating more than $5,000.00. Except as contemplated by this
Agreement, or the Schedules referred to in this Agreement, between
the date hereof and the Closing Date, Merging Entity will not, without
the prior written consent of Parent, do any of the things listed above in
clauses (i) through (xii) of this Section 2.21.
2.22 Investigations and Litigation. There is no investigation by
any governmental agency pending, or, to the best knowledge of
Shareholders, threatened against or adversely affecting Merging Entity,
and except as set forth on Schedule 2.22, there is no action, suit,
proceeding or claim pending, or, to the best knowledge of
Shareholders, threatened against Merging Entity, or any of its
businesses, properties, assets or goodwill, which might have a material
adverse effect on such corporation, or against or affecting the
transactions contemplated by this Agreement. There is no outstanding
order, injunction, judgment or decree of any court, government or
governmental agency against or affecting Merging Entity, or any of its
businesses, properties, assets or goodwill.
2.23 Overtime, Back Wages, Vacation and Minimum Wages.
To the best knowledge of Shareholders, no present or former
employee of Merging Entity has any claim against Merging Entity
(whether under federal or state law) under any employment
agreement, or otherwise, on account of or for: (i) overtime pay for any
period other than the current payroll period; (ii) wages or salary for any
period other than the current payroll period; (iii) vacation or time off (or
pay in lieu thereof), other than that earned in respect of the current
fiscal year; or (iv) any violation of any statute, ordinance, rule or
regulation relating to minimum wages or maximum hours of work,
except as otherwise set forth in Schedule 2.23.
2.24 Discrimination, Occupational Safety and Other Statutes
and Regulations. To the best knowledge of Shareholders, no persons
or parties (including, without limitation, governmental agencies of any
kind) have any claim, or basis for any claim, action or proceeding,
against Merging Entity arising out of any statute, ordinance, rule or
regulation relating to discrimination in employment or employment
practices or occupational safety and health standards (including,
without limitation, The Occupational Safety and Health Act, The Fair
Labor Standards Act, Title VII of the Civil Rights Act of 1964, The Civil
Rights Act of 1992, The Americans with Disabilities Act, and The Age
Discrimination in Employment Act of 1967, as any of the same may
have been amended).
2.25 Employee Benefit Plans.
(A) There are no employee benefit plans or
arrangements of any type, including but not limited to any retirement,
health, welfare, insurance, bonus, executive compensation, incentive
compensation, stock bonus, stock option, deferred compensation,
commission, severance, parachute, rabbi trust program or plan
described in Section 3(3) of the Employee Retirement Income Security
Act of 1974 ("ERISA"), maintained by Merging Entity, or with respect to
which Merging Entity has a liability, other than those set forth in
Schedule 2.25(a) ("Employee Benefit Plans").
(B) With respect to each Employee Benefit Plan, except
as set forth in Schedule 2.25(b): (i) if intended to qualify under
Sections 79, 105, 106, 125, 129, 401(a), 401(k), 403(a), or 409, or
other Sections, of the Internal Revenue Code ("Code"), such plan so
qualifies, and if applicable, its trust is exempt from federal income tax
under Code Section 501(a); (ii) if intended to qualify as an organization
described in Section 501(c)(9) of the Code, such organization so
qualifies and any trusts established pursuant to its constitution are
exempt from federal income tax under Section 501(a) of the Code; (iii)
such plan has been administered and enforced in accordance with its
terms and applicable law; (iv) no breaches of fiduciary duty by
Merging Entity, the Trustees, or, to the best knowledge and belief of
Merging Entity and Shareholders after reasonable investigation, any
other person, have occurred; (v) no disputes are pending, or, to the
knowledge of Merging Entity and Shareholders, threatened; (vi) no
nonexempt prohibited transaction has occurred; (vii) there has been
no reportable event for which the 30-day notice requirement under
ERISA has not been waived; (viii) all contributions and premiums due
have been made on a timely basis (including, if applicable, the time
limited established under Code Sections 404 and 412); (ix) all
contributions made or required to be made meet the requirements for
deductibility under the Code; (x) all contributions which have not been
made have been properly recorded in the financial records of Merging
Entity; and (xi) except as set forth in Schedule 2.25(b), no liability
(whether an indebtedness, a fine, a penalty, a tax or any other amount)
has been incurred or will be incurred by Merging Entity as a result of
its maintenance, operation or termination of any Employee Benefit
Plan.
(C) No Employee Benefit Plan is a multiemployer plan,
as defined in Section 4001(a)(3) of ERISA or a multiple employer plan.
The consummation of the transactions contemplated by this
Agreement will not entitle any individual to severance pay, and will not
accelerate the time of payment or vesting, or increase the amount, of
compensation due to any individual.
(D) With respect to each Employee Benefit Plan, Merging
Entity has delivered or caused to be delivered to Parent true and
complete copies, where applicable, of (i) all plan documents,
amendments and trust agreements currently in effect; (ii) all summary
plan descriptions, or other notices or summaries of modifications,
which have been prepared by, or on behalf of Merging Entity; (iii) all
material employee communications; (iv) the five (5) most recent annual
reports (Forms 5500); (v) the most recent annual and any subsequent
periodic accounting of plan assets; and, (vi) the most recent
determination letter received from the IRS.
(E) With respect to each Employee Benefit Plan, there is
no pending claim or lawsuit which has been asserted against that
Employee Benefit Plan, the assets of any of the trusts under such
Employee Benefit Plan, Merging Entity, or any fiduciary of such
Employee Benefit Plan with respect to the operation of such Employee
Benefit Plan. Merging Entity and Shareholders, after
reasonable investigation, know of no facts or circumstances which
could form the basis for any such claim or lawsuit.
(F) All amendments required to have been made to bring
each Employee Benefit Plan into conformity in all material respects
with all of the applicable provisions of the Code, ERISA and other
applicable laws have been made.
(G) Each Employee Benefit Plan has met, by its terms
and in its operation, all applicable requirements for an exemption from
federal income taxation under Section 501(a) of the Code.
(H) Each Employee Benefit Plan has at all times been
maintained in accordance with all applicable laws, has complied with
applicable ERISA or other requirements; and, there are no actions,
audits, suits or claims which are threatened or pending against any
such Employee Benefit Plan, any fiduciary of any of the Employee
Benefit Plans, or against any of the assets of the Employee Benefit
Plans.
(I) Merging Entity has made full and timely payment of
all amounts required to be contributed under the terms of each
Employee Benefit Plan and no event or condition exists regarding any
of the Employee Benefit Plans which could be deemed a "reportable
event" with respect to which the 30-day notice has not been waived
which could result in a material liability to Merging Entity and no event
exists which would subject Merging Entity to a material fine under
Section 4701 of ERISA.
(J) Merging Entity is not subject to any material liability,
tax or penalty and the termination of or withdrawal from any Employee
Benefits Plan will not subject Merging Entity to any additional
contribution requirement and the execution or performance of the
transactions contemplated by this Agreement will not create,
accelerate or increase any obligations under any Employee Benefit
Plan.
(K) Merging Entity has no obligation to any retired or
former employee or any current employee upon retirement under any
Employee Benefit Plan.
(L) Each Employee Benefit Plan maintained by Merging
Entity has at all times been maintained, by its terms and in operation,
in accordance with all applicable laws in all material respects,
including (to the extent applicable) Code Section 4980B. Further,
there has been no failure to comply with applicable ERISA or other
requirements concerning the filing of reports, documents and notices
with the Secretary of Labor and Secretary of Treasury or the furnishing
of such documents to participants or beneficiaries that could subject
any Employee Benefit Plan to any material civil or any criminal
sanction or could require any such person to indemnify any other
person for such a sanction. There are no actions, audit, suits or
claims known to Merging Entity or Shareholders which are pending or
threatened against any Employee Benefit Plan, any fiduciary of any of
the Employee Benefit Plans with respect to the Employee Benefit Plans
or against the assets of any of the Employee Benefit Plans, except
claims for benefits made in the ordinary course of the operation of
such plans.
(M) Merging Entity is not subject to any material liability,
tax or penalty whatsoever to any person whomsoever as a result of
Merging Entity engaging in a prohibited transaction under ERISA or
the Code, and neither Merging Entity nor any of the Shareholders has
knowledge of any circumstances which reasonably might result in any
such material liability, tax or penalty as a result of a breach of fiduciary
duty under ERISA. The termination of or withdrawal from any
Employee Benefit Plan maintained by Merging Entity which is subject
to Title IV of ERISA, or any other Employee Benefit Plan, will not
subject Merging Entity to any additional contribution requirement or to
any other liability, tax or penalty whatsoever. The execution or
performance of the transactions contemplated by this Agreement will
not create, accelerate or increase any obligations under any Employee
Benefit Plan. Merging Entity has no obligation to any retired or former
employee, or any current employee upon retirement, under any
Employee Benefit Plan.
2.26 Competitors. Except as disclosed in Schedule 2.26, none
of Shareholders has any interest, direct or indirect, as an owner,
partner, agent, shareholder, officer, director, employee, consultant or
otherwise, in any firm, partnership, corporation or other entity that is
engaged in the insurance agency business, or any aspect thereof,
other than Merging Entity or a corporation listed on a national
securities exchange or a corporation whose securities are traded in the
over-the- counter market.
2.27 Accounts and Notes Receivable. Except for the accounts
receivable set forth in Schedule 2.27, all accounts receivable and all
notes receivable of Merging Entity reflected in the Most Recent
Balance Sheet are fully collectible when due at the aggregate amount
shown, less a bad debt allowance of two percent (2%) of the accounts
receivable as so reflected, it being the intent of all of the parties to this
Agreement that Shareholders are hereby representing and warranting
to Parent the full collectibility when due of all of the notes receivable
and accounts receivable of Merging Entity in the aggregate amount
shown in each such balance sheet, less the accounts receivable so set
forth in Schedule 2.27 and such bad debt allowance. Except as set
forth in Schedule 2.27, all notes receivable of Merging Entity are due
and payable within one year after the Effective Date. Any such notes
receivable due and payable more than one year after the Effective
Date ("Long Term Notes") are fully collectible when due at the
aggregate amount shown. Except as further set forth in Schedule
2.27, no Long Term Notes are secured by any interest in property,
whether it be real, personal or intangible. In the event of any
delinquency or nonpayment of any portion of a Long Term Note,
Shareholders shall be obligated to satisfy such deficiency in the same
manner as specified below for all other receivables of Merging Entity.
2.28 Permits and Licenses. All permits, licenses and approvals
of all federal, state or local regulatory agencies, which are required in
order to permit Merging Entity and its employees and agents to carry
on business as now conducted by it, have been obtained by it and are
current.
2.29 No Violation or Default. The execution, delivery and
performance of this Agreement by Shareholders and Merging Entity
will not violate, result in a breach of, or constitute a default under, the
articles of incorporation or bylaws of Merging Entity or of any
indenture, contract, agreement or other instrument to which Merging
Entity is a party or is bound including, without limitation, any agency
contract with any insurance company.
2.30 Common Stock of Parent. Shareholders understand and
acknowledge that the common stock of Parent to be received pursuant
to this Agreement is subject to Rule 145 of the Securities Exchange
Commission ("SEC"); such stock is being acquired for investment
purposes only and not with a view to distribution or resale; any sale or
other disposition of such stock shall be made pursuant to the
regulations promulgated under Rule 145 and in compliance with all
other applicable laws, regulations and interpretations, including,
without limitation, any accounting interpretations of the SEC with
regard to maintenance of the pooling-of-interests contemplated herein.
2.31 Financing Statements. Except as disclosed on Schedule
2.31, there are no financing statements or other security interests of
any kind filed or required to be filed against Merging Entity's assets or
affecting the use of, or title to, such assets ("Financing Statements").
Except as further disclosed on Schedule 2.31, there are no deferred
money purchase notes related to Merging Entity's acquisition of any
portion of its assets ("Notes"). Any such liabilities related to the
Financing Statements or Notes can be discharged or prepaid prior to
their stated maturities without penalty, except as further detailed on
Schedule 2.31. The assumption by Surviving Corporation of such
liabilities will not result in a default of any Financing Statement or Note.
2.32 Brokers. Except as disclosed in Schedule 2.32, neither
Merging Entity nor any Shareholder has employed any broker or finder
for the purposes of completing the transactions contemplated herein
such that no commission, finder's fee, brokerage fee or similar charge
will be incurred for the consummation of the transactions contemplated
herein.
2.33 Disclosure. Shareholders have each received a copy of
Parent's current S-4 registration statement dated February 12, 1992,
most recent annual report, Form 10-K and Form 10-Q and will
acknowledge receipt of an amendment or supplement to such
registration statement.
2.34 Material Misstatements or Omissions. No representation or
warranty by Shareholders or Merging Entity, or any of them, contained in this
Agreement or in any document, statement, certificate, Schedule or financial
statement furnished or to be furnished to Parent by or on behalf of
Shareholders or Merging Entity, or any of them, pursuant to this Agreement or
in connection with the transactions contemplated by this Agreement
contains, or will when furnished contain, any untrue statements of a
material fact, or omits, or will then omit to state, a material fact
necessary to make the statements contained herein or therein not
misleading.
3. COVENANTS OF SHAREHOLDERS AND MERGING ENTITY
PRIOR TO EFFECTIVE DATE. Shareholders and Merging Entity
covenant with Parent that, between the date of the execution of this
Agreement and the Effective Date, unless prior written consent to the
contrary is obtained from Parent:
3.1 Operate in Ordinary Course. Merging Entity will be
operated only in the ordinary course of business.
3.2 Negative Covenants. Except as contemplated by this
Agreement, Merging Entity will not do any of the things listed in
clauses (i) through (xii) of Section 2.21 of this Agreement.
3.3 Continuing Accuracy of Representations. There shall be no action, or
failure to act, which would render any of the representations and
warranties of Shareholders contained in this Agreement untrue or
incorrect in any material respect.
3.4 Preserve Business Organizations. Except as otherwise
requested by Parent, and without making any commitment on Parent's
behalf, Shareholders will use their best efforts to preserve the business
organizations of Merging Entity intact, to keep available to Parent the
services of its present employees, and to preserve for Parent the
goodwill of its customers and others having business relations with
them.
3.5 Corporate Approvals. The board of directors of Merging
Entity will recommend to Shareholders that Shareholders adopt this
Agreement. Merging Entity agrees to submit this Agreement to
Shareholders for adoption by unanimous written consent with waiver of
notice of the terms of this Agreement prior to the Effective Date, but
only after delivery by Parent to
Shareholders and Merging Entity of an amended or supplemented S-4
registration statement for Parent's common stock to be issued
pursuant to this Agreement and after Shareholders have had an
effective opportunity of at least ten (10) days to review such
prospectus. Unless there is a failure of Parent to fulfill its conditions
set forth in Section 7 hereof or there is a material adverse change in
the financial conditions of Parent, Shareholders covenant to adopt this
Agreement and to approve all aspects of the Merger within the time
period contemplated herein.
4. ACCESS AND INFORMATION. Throughout the period
between the date of the execution of this Agreement by Shareholders
and Merging Entity and the Closing Date, Shareholders shall cause
Merging Entity and all its employees to give to Parent, and any and all
authorized representatives of Parent (including auditors and attorneys),
full and unrestricted access, during normal business hours, to the
offices, assets, properties, contracts, books and records of Merging
Entity in order to give Parent full opportunity to make such
investigations as it deems appropriate with respect to the affairs of
Merging Entity, and shall further cause Merging Entity, and all of its
employees to provide to Parent during such period such additional
information concerning the affairs of Merging Entity as Parent may
reasonably request. All information obtained from any such
investigation shall be held in confidence, and, in the event of the
termination of this Agreement, Parent covenants with Shareholders and
Merging Entity that Parent will use its best efforts to return all such
documents, working papers and other written information concerning
Shareholders and Merging Entity obtained or prepared in connection
with any such investigation.
Regardless of any such investigation by Parent, all
representations and warranties of Shareholders contained in this
Agreement shall remain in full force and effect and no such
investigation shall cause or result in a waiver by Parent of any of the
representations and warranties of Shareholders contained herein.
5. REPRESENTATIONS AND WARRANTIES OF PARENT.
Parent represents and
warrants to Shareholders as follows:
5.1 Organization and Standing of Parent and Survivor. Parent
is a corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Virginia. Survivor is a
corporation, duly organized, validly existing and in good standing
under the laws of the State of Maryland.
5.2 Authority. Except for: (i) the approval of the transactions
contemplated hereby by the board of directors of Parent and by the
board of directors and shareholder of Survivor (ii) amendment or
supplementation of Parent's registration statement pursuant to this
Agreement; (iii) approval by the New York Stock Exchange of the
listing of the shares of Parent common stock to be issued pursuant to
this Agreement; and (iv) the issuance of a certificate of merger to be
issued by the Secretary of the State of Maryland, no governmental or
other authorization, approval or consent for the execution, delivery and
performance of this Agreement by Parent or Survivor is required. The
execution, delivery and performance of this Agreement by Parent and
Survivor will not violate, result in a breach of, or constitute a default
under, the articles of incorporation or bylaws of any such corporation
or any indenture, contract, agreement or other instrument to which
such corporation is a party or is bound.
5.3 Capitalization of Parent and Survivor. As of March 31,
1995, the authorized capital stock of Parent consisted of 50,000,000
shares of common stock, no par value, of which 14,759,524 shares
were issued and outstanding, fully paid and nonassessable. The
authorized capital stock of Survivor consists of 5,000 shares of
common stock, $1 par value, of which 100 shares are issued and
outstanding, fully paid and nonassessable and owned of record and
beneficially by Parent. There are no outstanding options, warrants or
other rights to subscribe for or purchase capital stock of Survivor or
securities convertible into or exchangeable for capital stock of Survivor.
5.4 Status of Parent common stock. The shares of Parent
common stock to be issued to Shareholders pursuant to this
Agreement will, when so issued, be duly and validly authorized and
issued, fully paid and nonassessable.
5.5 Brokers' or finders' fees. No agent, broker, person, or firm
acting on behalf of Parent or any of its subsidiaries or under the
authority of any of them is or will be entitled to any commission or
broker's or finder's fee or financial advisory fee from Parent or Survivor
in connection with any of the transactions contemplated herein.
5.6 Financial Statements. Parent has delivered to Shareholders
a true and complete copy of its financial statements for calendar years
1992, 1993 and 1994 ("Parent's Financial Statements") Parent's
Financial Statements were prepared under the GAAP Policy and are
true and correct, are in accordance with the consolidated books and
records of Parent, and present fairly the consolidated financial
condition and results of operations of Parent as of the date and for the
period indicated.
5.7 Absence of Undisclosed Liabilities. (The term "Parent's
Most Recent Balance Sheet," as used in this Agreement, means the
balance sheet of Parent at March 31, 1995. Also, the term "Parent's
Most Recent Balance Sheet Date," as used in this Agreement, means
March 31, 1995.)
Except as and to the extent specifically reflected, provided for or
reserved against in Parent's Most Recent Balance Sheet or except as
disclosed in any Schedule to this Agreement, Parent, as of Parent's
Most Recent Balance Sheet Date, did not have any material
indebtedness, liability or obligation arising outside of the ordinary
course of business due or to become due, including, without limitation,
tax liabilities due or to become due, and whether incurred in respect of
or measured by the consolidated income of Parent for any period prior
to Parent's Most Recent Balance Sheet Date, and Parent neither knows
nor has reasonable grounds to know of any basis for the assertion
against Parent, on a consolidated basis, as of Parent's Most Recent
Balance Sheet Date, of any material indebtedness, liability or obligation
of any nature not arising in the ordinary course of business which is
not fully reflected or reserved against in Parent's Most Recent Balance
Sheet or otherwise disclosed in any Schedule to this Agreement.
5.8 No Adverse Change. Since Parent's Most Recent Balance
Sheet Date, there has been no material adverse change in the financial
condition, results of operations or business prospects of Parent, on a
consolidated basis, other than changes occurring in the ordinary
course of business or except as otherwise disclosed in any of the
Schedules to this Agreement, which changes have not had a material
adverse effect on the financial condition, results of operations or
business prospects of Parent on a consolidated basis.
6. CONDITIONS PRECEDENT TO PERFORMANCE BY PARENT
AND SURVIVOR. The obligation of Parent and Survivor to consummate
the transactions contemplated by this Agreement shall be subject to
the satisfaction or fulfillment, on or prior to the Closing Date, of the
following conditions precedent, in addition to all other conditions
precedent contained in this Agreement, each of which may be waived
by Parent:
6.1 Representations. Parent shall not have discovered any
material error, misstatement or omission in any of the representations
and warranties made by Shareholders contained in this Agreement, or
in any financial statement, certificate, Schedule, exhibit or other
document attached to or delivered pursuant to this Agreement, and all
representations and warranties of Shareholders, or any of them,
contained in this Agreement and in any financial statement, certificate,
Schedule, exhibit or other document attached to or delivered pursuant
to this Agreement shall be true and correct in all material respects on
and as of the Closing Date with the same force and effect, except as
affected by transactions expressly authorized herein or otherwise
approved in writing by Parent, as though such representations and
warranties had been made on and as of the Closing Date.
6.2 Covenants. Merging Entity and Shareholders shall have
performed and complied in all material respects with all covenants,
agreements and conditions required under this Agreement to be
performed or complied with by them on or before the Closing Date.
6.3 Litigation. No suit, action or proceeding, or governmental
investigation, against or concerning, directly or indirectly, Merging
Entity, or any of its assets and properties, shall have been instituted or
reinstituted, nor shall any basis therefor have arisen, that might result
in any order or judgment of any court or of any administrative agency
which, in the opinion of counsel for Parent, renders it impossible or
inadvisable for Parent to consummate or cause to be consummated
the transactions contemplated by this Agreement.
6.4 Approval by Counsel. All transactions contemplated
hereby, and the form and substance of all legal proceedings and of all
instruments used or delivered hereunder, shall be reasonably
satisfactory to counsel for Parent.
6.5 Opinion. Parent shall have received a favorable opinion,
dated as of the Closing Date, from the law firm of _________, counsel
for Shareholders and Merging Entity, in form and substance as set
forth in Schedule 6.5 and otherwise reasonably satisfactory to counsel
for Parent.
6.6 Delivery of Common Stock. There shall be duly delivered for
cancellation to Parent at the Closing not less than 100% of the shares of
Common Stock issued and outstanding at the time of the Closing, free and
clear of any liens or encumbrances as required to be listed on Schedule 2.4.
6.7 Continuation of Agency Contracts. To the extent desired by
Parent, Parent shall have obtained a statement in writing from Ohio
Casualty and such of the insurance companies listed in Schedule 2.14
of this Agreement and identified by Parent, in form satisfactory to
Parent and Parent's counsel, by which each such insurance company
agrees that it will not terminate its insurance agency contract solely by
reason of the transactions contemplated in this Agreement, and further
agrees that it will continue to recognize Surviving Corporation, and its
successors and assigns, as its agent under the existing agency
contract between such company and Merging Entity or that it will enter
into a substantially similar agency contract with Surviving Corporation,
or its successors and assigns.
6.8 Shareholder Employment Agreements. Employment
Agreements between Surviving Corporation, as Employer, and each of
the Shareholders, respectively, as Employee, in form and substance as
set forth in Schedule 6.8 attached hereto, shall have been duly
executed by each of them and delivered to Parent.
6.9 Other Employment Agreements. Employment Agreements
between Surviving Corporation, as Employer, and the producers of
Merging Entity (other than the Shareholders, being Deborah Caparolla
and Tom Wells) as shall be specified by Parent, in form previously
approved by the President of Parent, shall be in full force and effect or
such new agreements as have been requested by Parent shall have
been executed, in form and substance as set forth in Schedule 6.9
attached hereto.
6.10 Employee Benefit Plans. Parent shall have been furnished
evidence satisfactory to Parent that all Employee Benefit Plans
identified in Schedule 2.25 attached to this Agreement have been, as
directed by Parent, either continued, modified in conformity with
Parent's plans or terminated and, in the event of termination, the
benefits thereunder have either been "frozen" or provision has been
made for the distribution thereof in accordance with the terms of such
Employee Benefit Plans.
6.11 Material Adverse Change. There shall have been no
material adverse change in Merging Entity's business, business
prospects, Book of Business, assets and properties, or goodwill
between the date of the execution of this Agreement and the Closing
Date.
6.12 Tail Insurance. Unless notified in writing to the contrary,
Shareholders and Merging Entity shall have delivered to Parent, in
form reasonably satisfactory to Parent and Parent's counsel, evidence
of insurability, to be effective as of the Effective Date, for an extended
reporting period for errors and omissions of a minimum three year
duration with deductible limits reasonably acceptable to Parent and
Parent's counsel, which insurance, if bound, would insure Merging
Entity its agents and employees for the extended reporting period for
claims arising under errors and omissions occurring prior to the
Effective Date. Such tail insurance shall be bound as soon after the
Effective Date as possible. If such insurance is not purchased within
one week after Closing, Parent shall have the right to purchase such
tail insurance deemed acceptable to it. The cost for the tail insurance
actually bound by, or on behalf of, Merging Entity shall be borne by
Merging Entity and shall be reflected on the Merger Balance Sheet (as
defined in Section 14.6) as if such coverage had been bound prior to
the Effective Date and the Shareholders shall be responsible for any
deductible amounts to be paid under such tail policy.
6.13 Related Party Transactions. All "related party" (i.e. a
Shareholder, a member of a Shareholder's family, a business or entity
affiliated with any of the foregoing) receivables and payables of
Merging Entity and any receivables or payables from or to an
employee of Merging Entity on favorable terms shall have been
removed from the books of Merging Entity for their cash equivalent
face amounts.
6.14 Lease. The existing lease covering the premises presently
occupied by Merging Entity, in the form attached hereto as Schedule
6.14, shall be in full force and effect with no defaults occurring as a
result of Merging Entity's action or inaction.
6.15 Resolutions. Parent shall receive certified copies of
resolutions of the board of directors and Shareholders of Merging
Entity, to the extent deemed necessary by, and in form satisfactory to,
counsel for Parent, authorizing the execution and delivery of this
Agreement by Merging Entity and the consummation of the
transactions contemplated hereby.
6.16 Approvals. All statutory requirements for the valid
consummation by Merging Entity of the transactions contemplated by
this Agreement shall have been fulfilled; all authorizations, consents
and approvals of all federal, state, local and foreign governmental
agencies and authorities required to be obtained in order to permit
consummation by Merging Entity of the transactions contemplated by
this Agreement and to permit the business presently carried on by
Merging Entity to continue unimpaired immediately following the
Effective Date of this Agreement shall have been obtained.
6.17 Registration Statement. Parent shall have filed an
amended or supplemented S-4 registration statement with the SEC.
6.18 Deferred Compensation Agreements Fully Reserved. All
deferred compensation agreements with Merging Entity shall be fully
reserved in the Merger Balance Sheet of Merging Entity or shall be
paid off prior to the Effective Date.
7. CONDITIONS PRECEDENT TO PERFORMANCE BY
SHAREHOLDERS AND MERGING ENTITY. The obligation of
Shareholders and Merging Entity to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction or
fulfillment on or prior to the Closing Date, of the following conditions,
in addition to any other conditions contained in this Agreement, each
of which may be waived, collectively, by a majority in interest of
Shareholders and Merging Entity:
7.1 Representations. Shareholders shall not have discovered
any material error, misstatement or omission in any of the
representations and warranties made by Parent or Survivor contained
in this Agreement, and all representations and warranties of Parent
contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect,
except as otherwise approved in writing by Shareholders and Merging
Entity, as though such representations and warranties had been made
on and as of the Closing Date.
7.2 Covenants. Parent and Survivor shall have performed and
complied in all material respects with all covenants, agreements and
conditions required under this Agreement to be performed and
complied with by Parent and Survivor and shall have caused all
corporate actions for the consummation of this Agreement to have
been taken by each of them.
7.3 Effective Registration Statement. The registration statement
on Form S-4 under the Securities Act of 1933 referred to in Section
2.34 hereof shall have been amended or supplemented and be
effective under such Act and not the subject of any "stop order" or
threatened "stop order" and the amended or supplemented prospectus
shall have been delivered to Shareholders and Merging Entity.
7.4 Prospectus Approval. After delivery and review of the
aforementioned amendment or supplement to Parent's S-4 registration
sttaement, and subject to the limitations on disapproval set forth in
Section 3.5, Shareholders and Merging Entity shall have approved this
Agreement and the consummation of all transactions contemplated
thereby.
8. POST-MERGER COVENANTS.
8.1 POST-MERGER COVENANTS OF PARENT AND
SURVIVOR. Parent and Survivor covenant to Shareholders as follows:
A. Collection. To cause Surviving Corporation to use its
reasonable business efforts, at least comparable in quality to those of
Merging Entity prior to the Effective Date, to collect all notes receivable
and accounts receivable as described in Section 2.27.
B. Payment. Subject to Merging Entity fulfilling its
Tangible Net Worth requirements, as set forth in Section 14.6, and
subject to the fulfillment by Shareholders of their covenants set forth in
Section 8.2, to cause Surviving Corporation to pay timely all liabilities
of Merging Entity which have been properly reserved for in the Merger
Balance Sheet, as defined in Section 8.2.A.
8.2 POST-MERGER COVENANTS OF SHAREHOLDERS.
Shareholders, jointly and severally, covenant to Parent and Survivor as
follows:
A. Delivery of Merger Balance Sheet. To cause to be
delivered to Parent as soon after the Closing Date as is practicable,
and in all events no later than sixty (60) days after the Effective Date,
the Merger Balance Sheet, as defined in Section 14.6(a), and its
related work papers and other financial documents prepared therefor.
The Merger Balance Sheet will be true and correct, will be in
accordance with the books and records of Merging Entity, will present
fairly the financial conditions and results of operations of Merging
Entity as of the date and for the period indicated, will not contain any
untrue statement of a material fact nor will omit to state any material
fact required to be stated to make the Merger Balance Sheet not
misleading.
B. Post-Merger Filings. To cause to be timely filed, at no
expense which has not previously been reserved for on the Merger
Balance Sheet, all federal, state and local tax returns of all kinds
required to be filed by Merging Entity for all tax periods ending on or
prior to the Effective Date ("Post-Merger Filings"). All Post-Merger
Filings will be true and correct and, prior to actual filing thereof,
Shareholders shall deliver drafts of such filings to Parent for its review.
C. Employee Benefit Plans. Unless written directive from
Parent stating otherwise is delivered to Shareholders prior to the
Closing Date , to cause, at no expense which has not previously been
reserved for in the Merger Balance Sheet, all Employee Benefit Plans
of Merging Entity to have been terminated with any benefits thereunder
having been either "frozen" or provisions having been made for
distribution thereof in accordance with the terms of such Employee
Benefit Plan. Shareholders specifically understand that they have
covenanted hereby to take any and all actions reasonably required to
eliminate any and all potential liability of Surviving Corporation and
Parent with respect to such Employee Benefits Plans.
D. Bind Tail Coverage. To bind the tail coverage
referenced in Section 6.12 as soon after the Effective Date as is
possible and in no event later than seven (7) days after the Effective
Date, and to pay any and all deductibles accruing under such tail
policy during the period of three years after the Effective Date.
Shareholders acknowledge that Parent shall have the right to bind tail
coverage for Merging Entity if Shareholders do not produce an
appropriate certificate of insurance within thirty (30) days after Closing.
Any costs for such tail coverage shall be reflected on the Merger
Balance Sheet as if such coverage had been bound prior to the
Effective Date.
E. Disposition of Shares. To hold the shares of Parent
common stock received in this Merger and not to dispose of such
shares in either a manner or volume or at a time which would cause
this Merger not to be treated as a merger.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
AND INDEMNIFICATION.
9.1 Survival of Representations and Warranties of Parent. All
representations, warranties and covenants made herein or pursuant
hereto by Parent shall survive the Closing only for three years (3) after
the Effective Date.
9.2 Survival of Representations and Warranties of Shareholders.
Except for the specific contingencies detailed below in subparagraphs
(ix) and (xiv) of Section 9.3 for which Parent shall be indemnified for
the periods stated therein, all representations, warranties and
covenants made herein or pursuant hereto by Shareholders shall
survive the Closing only for three (3) years after the Effective
Date.
9.3 Indemnification Agreement by Shareholders. Shareholders,
jointly and severally, shall indemnify and hold harmless Parent and
Surviving Corporation, and their respective successors and assigns,
from and against and in respect of:
(i) All indebtednesses, obligations and liabilities of
Merging Entity of any nature whatsoever, whether accrued, absolute,
contingent or otherwise, existing at the close of business as of the day
prior to the Effective Date to the extent not reflected or reserved
against in full in the Merger Balance Sheet, including, without
limitation, any tax liabilities to the extent not so reflected or reserved
against, accrued in respect of, or measured by the income of Merging
Entity for any period prior to the Effective Date, or arising out of
transactions entered into, or any state of facts existing, prior to such
date;
(ii) Without limiting the generality of the indemnity set
forth in Section 9.3(i) above, any and all tax liabilities of Merging Entity,
whether federal, state, local or otherwise, resulting from a lawful
deficiency for any time period prior to the Effective Date;
(iii) All liabilities of, or claims against, Merging Entity
arising out of any contract or commitment of the character described
in Section 2.20 hereof and not listed or described in Schedule 2.20
attached to this Agreement, or arising out of any contract or
commitment entered into or made by Merging Entity between the date
of the execution of this Agreement and the Closing Date except as
expressly permitted under any of the provisions of this Agreement;
(iv) Subject to the provisions of Section 2.27 hereof, any
nonpayment on demand, when due, of any accounts receivable or
notes receivable of Merging Entity;
(v) Any and all claims, demands, actions and causes of
action arising out of or in any way relating to any health benefit plan or
to any Employee Benefit Plan (as described in Section 2.25) presently
maintained or heretofore maintained by Merging Entity or arising out of
or in any way relating to the termination or "freezing" of any such
Employee Benefit Plan;
(vi) Any loss, damage, liability or deficiency resulting from
any misrepresentation, breach of warranty or nonfulfillment of any
covenant or agreement on the part of Shareholders or Merging Entity,
or any of them, under the terms of this Agreement, or from any
misrepresentation in or omission from any financial statement,
certificate, Schedule, exhibit or other document proposed by or at the
direction of Shareholders, or any of them, and attached to this
Agreement or delivered or to be delivered to Parent under the terms of
this Agreement;
(vii) Any and all claims, demands, actions and causes of
action arising out of or in any way relating to errors and omissions and
all other types of litigation and claims, which are attributable to
Merging Entity prior to the Effective Date;
(viii) To the extent not previously cured in the manner
specified in Section 14.6, the amount by which Tangible Net Worth (as
defined in Section 14.6), shall be less than the amount of negative
$772,233;
(ix) Until ninety (90) days after the expiration of the
applicable statute of limitations, any and all tax liabilities arising out of
all open returns of Merging Entity for all periods ending on or prior to
the Effective Date and relating to amortization of intangibles,
deductions for compensation, "listed" property, or travel and
entertainment expenses or the tax characterization of expenses
incident to this Agreement, any and all claims or liabilities arising out
of or in any way relating to any health benefit plan or to any Employee
Benefit Plan (as described in Section 2.25) presently or heretofore
maintained by Merging Entity or arising out of or in any way relating to
the termination, modification or "freezing" of any such Employee
Benefit Plan, and any and all claims or liabilities arising out of
Post-Merger Filings or for a violation of the covenants set forth in
Section 8.E hereof;
(x) All deductibles arising under the tail coverage
referenced in Section 6.12;
(xi) Any and all claims, demands, actions or causes of
action arising out of or in any way relating to any of the pending or
threatened litigation disclosed or required to be disclosed on Schedule
2.22;
(xii) Any existing unreconciled discrepancies as or to
have been disclosed on Schedule 2.14;
(xiii) Any and all losses, claims, demands or deficiencies
arising out of or in any way relating to the ownership by Merging Entity
of the intangible assets of Merging Entity;
(xiv) Until ninety (90) days after the expiration of the
applicable statute of limitations, any and all liabilities, claims, losses
demands or deficiencies of any nature whatsoever arising out of a
"Known Misrepresentation" (a representation or warranty made with
actual knowledge of its falsity or with reckless indifference to the truth)
or due to the ownership of the common stock not being as set forth in
Section 1.4(a); and
(xv) All demands, claims, actions, suits, proceedings,
loss, damage, liability, judgments, costs and expenses (including,
without limitation, court costs, experts' and attorneys' fees at the trial
level and in connection with all appellate proceedings) incident to any
of the foregoing.
Subject to the provisions of Section 9.5, below, dealing with the
assertion of an indemnified claim, each of the Year 1 Payment and
Year 2 Payment is subject to the right of offset by Parent.
9.4 Indemnification Agreement by Parent. Parent shall
indemnify and hold harmless Shareholders, and each of them, and
their respective heirs and personal representatives from and against
and in respect of:
(i) Any loss, damage, liability or deficiency resulting from any
misrepresentation, breach of warranty or nonfulfillment of any covenant
or agreement on the part of the Parent under the terms of this
Agreement;
(ii) All demands, claims, actions, suits, proceedings, loss,
damage, liability, judgments, costs and expenses (including, without
limitation, court costs, experts' and attorneys' fees at the trial level and
in connection with all appellate proceedings) incident to any of the
foregoing.
9.5 Assertion of Indemnification Claim. Either the
Shareholders or Parent, as the case may be (an "Indemnified Party"),
shall give notice to the other (an "Indemnifying Party") as soon as
possible after the Indemnified Party has actual knowledge of any claim
as to which indemnification may be sought and the amount thereof, if
known, and supply any other information in the possession of the
Indemnified Party regarding such claim, and will permit the
Indemnifying Party (at its expense) to assume the defense of any third
party claim and any litigation resulting therefrom, provided that counsel
for the Indemnifying Party who shall conduct the defense of such claim
or litigation shall be reasonably satisfactory to the Indemnified Party,
and provided further that the omission by the Indemnified Party to give
notice as provided herein will not relieve the Indemnifying Party of its
indemnification obligations hereunder except to the extent that the
omission results in a failure of actual notice to the Indemnifying Party
and the Indemnifying Party is materially damaged as a result of the
failure to give notice. The Indemnifying Party may settle or
compromise any third party claim or litigation with the consent of the
Indemnified Party which consent may not be unreasonably withheld.
The Indemnified Party shall have the right at all times to
participate in the defense, settlement, negotiations or litigation relating
to any third party claim or demand at its own expense. In the event
that the Indemnifying Party does not assume the defense of any matter
as above provided, then the Indemnified Party shall have the right to
defend any such third party claim or demand, and will be entitled to
settle any such claim or demand in its discretion. In any event, the
Indemnified Party will cooperate in the defense of any such action and
the records of each party shall be available to the other with respect to
such defense.
9.6 Limitation of Amount of Indemnity and Escrow of Parent
Common Stock. The indemnity provided to Parent pursuant to
Section 9.3 and the indemnity provided by Parent to Shareholders
pursuant to Section 9.4 shall be limited to an amount equal to 40,000
shares of Parent's common stock times $12.50 per share, plus
$772,233, which is the approximate minimum value upon which this
Agreement is predicated.
Notwithstanding anything in the foregoing to the contrary,
Parent shall retain on the Effective Date from the shares of its common
stock to be delivered to the Shareholders, according to the percentage
ownership each such Shareholder has in Merging Entity, as security
for the indemnity provided to it herein, 8,000 shares of its common
stock ("Escrowed Shares"). By their signatures to this Agreement,
each Shareholder has granted to Parent a security interest in his
portion of the Escrowed Shares, and has consented to the escrow
provision described herein and has granted unto Parent a continuing
limited power of attorney to act over his proportionate number of the
Escrowed Shares pursuant to this Agreement, which power of attorney
is coupled with an interest and is not revocable until the later of: (i)
March 31, 1996; (ii) determination and settlement of any amounts
pursuant to Section 14.6; and (iii) determination and settlement of any
amounts claimed by Parent as of March 31, 1996, pursuant to Section
9.3 ("Release Date").
Between the Effective Date and the Release Date, Parent shall
hold the Escrowed Shares and shall deposit any dividends received
thereon in an interest-bearing account. Upon the Release Date, and
absent a written directive to the contrary from each such Shareholder
not desiring to receive his shares pro rata, Parent shall distribute the
Escrowed Shares, less any decrease in such shares pursuant to this
Agreement, plus any additional shares issued pursuant to this
Agreement, to the Shareholders, pro rata. Dividends on the Escrowed
Shares and the interest earned thereon ("Escrow Funds") shall be
distributed in the same manner determined according to the
immediately preceding sentence. If Escrowed Shares were decreased
to satisfy the indemnity provided herein, the Escrow Funds shall be
reduced by a percentage equal to the fraction established where the
numerator is the number of Escrowed Shares used to satisfy such
indemnity and the denominator is the number of Escrowed Shares.
10. EXPENSES. All expenses (including, without limitation,
legal, auditing, accounting and other related expenses such as
preparation of Post-Merger Filings and the Merger Balance Sheet)
incurred in connection with this transaction by Merging Entity and
Shareholders, or any of them, shall be the sole responsibility of
Merging Entity or Shareholders (depending upon the nature of the
expense), and all expenses incurred by Parent in connection with this
transaction shall be the sole responsibility of Parent.
11. DEFAULT.
11.1 Default by Shareholders or Merging Entity. Except as
otherwise expressly provided in this Agreement, if Shareholders or
Merging Entity, or any of them, shall fail to perform or comply with any
covenant, agreement or condition contained in this Agreement that is
required to be performed or complied with by Shareholders or
Merging Entity on or prior to the Closing Date, then Parent shall have
the option to seek specific performance of this Agreement or to sue
such defaulting party for damages. If Parent elects to sue for specific
performance, Shareholders and Merging Entity expressly waive any
claim or defense that Parent has an adequate remedy at law. 11.2
Default by Parent. Except as otherwise expressly provided in this
Agreement, if Parent shall fail to perform or comply with any covenant,
agreement or condition contained in this Agreement that is required to
be performed or complied with by Parent on or prior to the Closing
Date, then Shareholders and Merging Entity, at the unanimous option
of Shareholders and Merging Entity, may seek specific performance of
this Agreement or may elect to sue for damages. If Shareholders and
Merging Entity elect to sue for specific performance, Parent expressly
waives any claim or defense that Shareholders and Merging Entity
have an adequate remedy at law.
12. NOTICES. All notices or other communications permitted
or required to be given hereunder by any party to any other party shall
be in writing and shall be delivered personally or by telecopier, telex or
other similar communication or sent by registered or certified mail,
postage prepaid:
(a) If to Shareholders or Merging Entity:
Mr. Edwin B. Jarrett, Jr., President
Cross Key Insurance Agency, Inc.
7800 York Road, Suite 201
Baltimore, Maryland 21204-7454
With copy to:
(b) If to Parent or Survivor:
Mr. Robert H. Hilb, President
HILB, ROGAL AND HAMILTON COMPANY
4235 Innslake Drive
Post Office Box 1220
Glen Allen, Virginia 23060-1220
With copy to:
Walter L. Smith, Esquire
HILB, ROGAL AND HAMILTON COMPANY
4235 Innslake Drive
Post Office Box 1220
Glen Allen, Virginia 23060-1220
Notices delivered personally or by telecopier, telex or other similar
communication shall be effective when delivered. Notices forwarded
by registered or certified mail shall be deemed effective when received
or in any event not later than ten (10) days after deposit in the mails,
postage prepaid. Any party wishing to change any above named
person or address may do so by complying with the notice provisions
of this Section.
13. EXTENSION OF TIME AND WAIVER.
(a) Time is of the essence with respect to this
Agreement. However, the parties hereto may, by mutual agreement in
writing, extend the time for the performance of any of the obligations of
the parties hereto.
(b) Each party for whose benefit a representation,
warranty, covenant, agreement or condition is intended may, in writing:
(i) waive any inaccuracies in the warranties and representations
contained in this Agreement; and (ii) waive compliance with any of the
covenants, agreements or conditions contained herein and so waive
performance of any of the obligations of the other parties hereto, and
any default hereunder; provided, however, that any such waiver shall
not affect or impair the waiving party's rights in respect to any other
representation, warranty, covenant, agreement or condition or any
default with respect thereto.
14. MISCELLANEOUS PROVISIONS.
14.1 Counterparts. Any number of counterparts of this
Agreement may be signed and delivered, each of which shall be
considered the original and all of which, together, shall constitute one
and the same instrument.
14.2 Governing Law. EXCEPT FOR THE MERGER OF
MERGING ENTITY INTO SURVIVOR, WHICH SHALL BE GOVERNED
BY MARYLAND LAW, THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF VIRGINIA.
14.3 Entire Agreement. This Agreement constitutes the entire
Agreement and understanding between the parties hereto with respect
to the transactions contemplated hereby, expressly superseding all
prior Agreements and understandings, whether oral or written, and no
change, modification, termination or attempted waiver of any of the
provisions of this Agreement shall be binding unless reduced to writing
and signed by the party or parties against whom enforcement is
sought.
14.4 Section Headings. The section headings in this
Agreement are for convenience of reference only and shall not be
deemed to alter or affect any provision hereof.
14.5 No Assignment. Neither this Agreement, nor any rights or
liabilities hereunder, may be assigned by any party without the prior
written consent of all of the other parties.
14.6 Adjustment Based on Merger Balance Sheet.
(a) Determination of Merger Balance Sheet. For
purposes hereof, "Merger Balance Sheet" means an unaudited balance
sheet of Merging Entity, as of the close of business on June 30, 1995,
computed under Parent's GAAP Policy referenced in Section 2.7
hereof and in accordance with Section 2.27 hereof and after having
reconciled any differences between the tax and financial accounting so
that Surviving Corporation shall not be responsible for any liabilities
unless and to the extent the same are reflected on the Merger Balance
Sheet. Additionally, besides the normal operating accruals required
under Parents' GAAP Policy, the Merger Balance Sheet shall reflect all
costs of completing the Merger and the accrual of the deferred
compensation referenced in Section 6.18. The Merger Balance Sheet
shall be deemed accepted by Parent if no objections thereto are made
within fifteen (15) days of delivery. If Parent objects to the Merger
Balance Sheet within fifteen (15) days of delivery, then the parties shall
have fifteen (15) days to resolve any objections of Parent to the Merger
Balance Sheet. If the parties are unable to resolve such differences,
one arbitrator shall be selected by Shareholders and one arbitrator
shall be selected by Parent. The two arbitrators shall then pick one
mutually acceptable arbitrator (the "Arbitrator") to resolve all questions
in dispute. The decision of the Arbitrator shall be final and the fees for
his services shall be borne fifty percent (50%) by Parent and fifty
percent (50%) by Shareholders.
Notwithstanding anything in the foregoing to the contrary, if the
Merger Balance Sheet is not submitted within seventy-five (75) days
after the Effective Date, then Parent shall submit a Merger Balance
Sheet within fifteen (15) days thereafter which shall be final, conclusive
and binding on all parties hereto, and not subject to any of the
arbitration provisions described above.
(b) Tangible Net Worth. The term "Tangible Net Worth"
means the remainder arrived at from the Merger Balance Sheet when
total liabilities and furniture, fixtures and equipment are subtracted from
total assets, and intangible assets other than cash, cash equivalents
and net receivables are then subtracted from that remainder (total
assets - total liabilities - furniture, fixtures and equipment - intangible
assets other than cash, cash equivalents and net receivables).
(c) Adjustment. The number of shares to be delivered by
Parent to Shareholders pursuant to Section 1.4 shall be adjusted as
follows:
(i) If Tangible Net Worth exceeds negative
$772,233 (with such deficiency being referred to as "Deficiency
Tangible Net Worth"), then the number of shares shall be increased by
the number of shares determined by dividing Deficiency Tangible Net
Worth by $12.50; and
(ii) If Tangible Net Worth is less than negative
$772,233 (with such shortfall being referred to as "Insufficient Tangible
Net Worth"), then the number of shares shall be decreased by the
number of shares determined by dividing Insufficient Tangible Net
Worth by $12.50.
In the event of an increase in the number of shares of common
stock of Parent to be issued to Shareholders, such additional shares
shall be issued, promptly after determination of such number, by
Parent to Shareholders in the same proportion as set forth in Section
1.4(a). In the event of a decrease in the number of shares of common
stock of Parent, such shares shall be assigned, promptly after
determination of such number, to Parent (at Parent's discretion either
from the Escrowed Shares or the Shareholders or both) in the same
proportions as set forth in Section 1.4(a), unless Parent shall have
received a differing written directive pursuant to Section 9.6. The
value of any shares of Parent common stock to be issued or returned
pursuant to this Agreement shall be adjusted to reflect the occurrence
after the Effective Date of any of the events specified in Section 1.4(c).
14.7 Survival. Notwithstanding anything in the foregoing to the
contrary, any rights which Shareholders or Parent may have at law or
in equity against the other for a misstatement or omission by such
party which should have been made, corrected or disclosed by such
party, at or prior to the Effective Date, shall survive for the applicable
period provided by law or equity for the remedy of such act or
omission.
14.8 Schedules. Schedules referenced in this Agreement are
an integral part of this Agreement and are to be deemed a part of this
Agreement whether attached hereto on execution of this Agreement or
anytime thereafter.
14.9 Nonsolicitation Covenant. Each of the Shareholders, by
signature hereto, covenants that he shall not for a period of five (5)
years after the Effective Date, directly or indirectly, except on behalf of
Surviving Corporation, its successors or assigns, solicit or accept risk
management, insurance or bond business from any of the customers
of Merging Entity as of the moment immediately preceding the
Effective Date. Each of the Shareholders, by signature hereto,
acknowledges: (i) that this covenant is ancillary to this Merger
Agreement, is integral hereto and is independent of any other
provision herein, (ii) that this covenant is reasonably necessary for the
protection of Surviving Corporation's legitimate business interests; (iii)
that this covenant poses no undue hardship on the Shareholders and
is reasonably limited as to duration and scope; and (iv) that this
covenant is in addition to any covenants which Shareholders may
make in any employment or other agreements executed or to be
executed with Surviving Corporation. Further, if any part of this
covenant is deemed overbroad or void as against public policy, each
of the Shareholders, by signature hereto, acknowledges that such
invalid portions shall be severable from this covenant and specifically
requests that, upon such event, this covenant be reformed ("blue-
pencilled") to permit Surviving Corporation to obtain the maximum
permissible benefit from this covenant.
14.10 Acceptance. The binding date of acceptance of this
Agreement shall be the Date on which the last of the parties executes
the same.
EXECUTED by Shareholders and Merging Entity at Baltimore,
Maryland, this ____ day of _______, 1995.
SHAREHOLDERS:
___________________________
EDWIN B. JARRETT, JR.
___________________________
HERBERT K. THOMPSON
___________________________
JEFFERY L. MCKEW
MERGING ENTITY:
CROSS KEYS INSURANCE AGENCY,
INC.
By________________________
_________________, its
_________________
<PAGE>
EXECUTED by Parent and Survivor at Baltimore, Maryland, this
___ day of _______, 1995.
HILB, ROGAL AND HAMILTON
COMPANY
By_______________________
_______________, its
_______________
HILB, ROGAL AND HAMILTON
COMPANY OF BALTIMORE
By_________________________
________________, its
________________
