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
REICHART-SILVERSMITH LIFE, 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 Reichart-Silversmith Life,
Inc. ("R-S Life") of Denver, Colorado to consummate the merger of R-S Life and
the Company.
Terms of the Transaction
(a) (1) Effective on or about May 1, 1995, a subsidiary of the Company
will consum- mate an Agreement of Merger with R-S Life whereby the shareholders
of R-S Life will receive 50,000 shares of Common Stock of the Company ("Shares")
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 and amendment
thereto, (see Exhibit 2.20). The number of shares distributed to the
shareholders of R-S Life will be adjusted based upon the final determination of
net worth as defined in the Agreement of Merger.
Reichart-Silversmith Life, Inc. will merge into Hilb, Rogal and Hamilton
Company of Denver, a wholly-owned subsidiary of the Company.
(2) The merger with R-S Life by the Company has been agreed
upon because the Company is engaged in the business of owning insurance agencies
and because the shareholders of R-S Life have determined that a merger with the
Company is beneficial to the growth of R-S Life's insurance operations.
R-S Life's operations will add approximately three employees and $420,000
of revenues to the Company.
(3) R-S Life was incorporated in 1980 in the state of Colorado,
and has 1,000 authorized shares of common stock, no par value. There are 500
shares issued and outstanding.
(4) There are no material differences between the rights of the
security holders of R-S Life and the rights of security holders of the Company.
<PAGE>
(5) The acquisition will be treated using the purchase method
of accounting for acquisitions under generally accepted accounting principles.
(6) R-S Life 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 and amendment thereto is incorporated
into this supplement as Exhibit 2.20.
Pro Forma Financial Information
See attached - Schedule A
Material Contracts with Seller
There have been no material contracts between the Company and R-S Life
prior to the proposed effective date of the Agreement of Merger.
Information with Respect to
Reichart-Silversmith Life, Inc.
R-S Life was formed in 1980 and operates from an office in Denver,
Colorado.
R-S Life provides insurance brokerage services for personal and
commercial and industrial accounts. Services primarily consist of group and
individual life and health insurance products.
The shares to be issued represent less than .3% of outstanding shares of
the Company at the time of acquisition and the assets of R-S Life as of December
31, 1994 and pre-tax earnings for the year then ended represent less than .05%
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 R-S Life. 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 R-S Life.
There are two shareholder 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 years
ended December 31, 1994, 1993 and 1992.
Shareholder Information
(a) (1) WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY.
(2) & (3) R-S Life 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 (R-S Life), 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 (R-S Life) in the proposed transaction.
(6) R-S Life has 1,000 authorized shares of common stock, no par.
Shares issued and outstanding are as follows:
Number of
Shareholder Common Shares Percentage
Bruce D. Abramson 490 98%
Constance M. Abramson 10 2%
--- ----
500 100%
=== ====
(7) Upon completion of the proposed acquisition, no shareholder of
R-S Life will be serving as a director or executive officer of the registrant.
Hilb, Rogal and Hamilton Company
Date of this Supplement: April 21, 1995
<PAGE>
SCHEDULE A - PRO FORMA CONDENSED
FINANCIAL STATEMENTS (UNAUDITED)
The following pro forma condensed consolidated balance sheet as of
December 31, 1994 and the pro forma consolidated income statements for the years
ended December 31, 1994, 1993 and 1992 give effect to the proposed
pooling-of-interests merger with R. E. Lipman Insurance Brokers, Inc. ("Lipman,"
expected to be effective on May 1, 1995); the proposed acquisition of
Reichart-Silversmith Life, Inc. ("R-S Life," expected to be effective on
May 1, 1995); and the acquisition of certain assets and liabilities of one
insurance agency 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 pool- ing-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 proposed
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 December
31, 1994, as if they had occurred before December 31, 1994.
The pro forma statements have been prepared by management based upon the
historical financial statements of Hilb, Rogal and Hamilton Company, Lipman,
R-S Life 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)
DECEMBER 31, 1994
<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>
ASSETS
CASH AND CASH EQUIVALENTS 12,615,132 323,110 $12,938,242 964,833 (226,446)(1) 30,000 (3) $13,706,629
INVESTMENTS 23,131,550 0 23,131,550 23,131,550
RECEIVABLES & OTHER 49,160,330 149,200 49,309,530 912,661 0 207,227 (3) 50,429,418
----------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 84,907,012 472,310 85,379,322 1,877,494 N/A 10,781 87,267,597
----------------------------------------------------------------------------------------------------------
INVESTMENTS 9,470,000 9,470,000 9,470,000
PROPERTY & EQUIPMENT 12,426,949 46,103 12,473,052 85,034 (85,034)(1) 37,773 (3) 12,510,825
INTANGIBLE ASSETS 48,729,409 0 48,729,409 166,212 (166,212)(1) 3,107,287 (3) 51,836,696
OTHER ASSETS 3,361,425 0 3,361,425 3,376 0 0 3,364,801
----------------------------------------------------------------------------------------------------------
TOTAL ASSETS $158,894,795 $518,413 $159,413,208 $2,132,116 N/A $2,904,595 $164,449,919
==========================================================================================================
LIABILITIES & EQUITY:
PREMIUMS PAYABLE-INS CO 65,361,846 378,188 $65,740,034 1,365,353 0 $67,105,387
OTHER ACCRUED LIABILITIES 21,785,184 20,129 21,805,313 282,268 0 22,087,581
----------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 87,147,030 398,317 87,545,347 1,647,621 N/A 0 89,192,968
LONG-TERM DEBT 3,173,405 3,173,405 0 440,412 (2) 3,613,817
OTHER LONG-TERM LIAB. 2,144,204 2,144,204 6,803 920,000 (3) 3,071,007
SHAREHOLDERS' EQUITY
COMMON STOCK 43,426,295 1,000 43,427,295 43,844 (43,844)(4) 2,021,875 (2) 45,449,170
RETAINED EARNINGS 23,003,861 119,096 23,122,957 433,848 (433,848)(4) 23,122,957
----------------------------------------------------------------------------------------------------------
66,430,156 120,096 66,550,252 477,692 N/A 1,544,183 68,572,127
----------------------------------------------------------------------------------------------------------
$158,894,795 $518,413 $159,413,208 $2,132,116 N/A $2,904,595 $164,449,919
==========================================================================================================
</TABLE>
(1) TO ADJUST FOR ASSETS AND LIABILITIES NOT ACQUIRED.
(2) TO REFLECT PURCHASE PRICE OF ASSETS AND LIABILITIES ACQUIRED
SUBSEQUENT TO DECEMBER 31, 1994 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>
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 $9,057,074 $142,310,670
INTEREST INCOME 1,899,803 9,147 1,908,950 165,574 ($279,375) (1) 1,795,149
OTHER 5,995,698 2,084 5,997,782 27,037 6,024,819
--------------------------------------------------------------------------------------------
TOTAL REVENUES 140,809,614 350,714 141,160,328 9,249,685 (279,375) 150,130,638
--------------------------------------------------------------------------------------------
OPERATING EXPENSES:
COMPENSATION AND BENEFITS 78,310,999 240,592 78,551,591 5,870,006 84,421,597
OTHER OPERATING EXPENSES 35,975,715 134,437 36,110,152 2,350,223 (234,445) (2) 38,225,930
AMORTIZATION OF INTANGIBLES 6,436,119 6,436,119 681,316 122,928 (3) 7,240,363
INTEREST EXPENSE 812,216 812,216 378,042 (171,690) (4) 1,018,568
POOLING-OF-INTERESTS EXPENSE 487,986 487,986 487,986
--------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 122,023,035 375,029 122,398,064 9,279,587 (283,207) 131,394,444
--------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 18,786,579 (24,315) 18,762,264 (29,902) 3,832 18,736,194
INCOME TAXES 7,394,296 (6,350) 7,387,946 (10,428) (5) 7,377,518
--------------------------------------------------------------------------------------------
NET INCOME $11,392,283 ($17,965) $11,374,318 ($29,902) $14,260 $11,358,676
============================================================================================
NET INCOME PER COMMON SHARE $0.77 $0.77 $0.76
============================================================================================
SHARES ISSUED AND OUTSTANDING 14,679,464 37,000 14,716,464 175,000 14,891,464
--------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES
OUTSTANDING 14,778,304 37,000 14,815,304 184,375 14,999,679
--------------------------------------------------------------------------------------------
</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
REICHART-SILVERSMITH LIFE, INC.
INTO
HILB, ROGAL AND HAMILTON COMPANY OF DENVER
THIS MERGER AGREEMENT ("Agreement"), to be effective as of 12:01 a.m.
on May 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"), its wholly-owned subsidiary,
HILB, ROGAL AND HAMILTON COMPANY OF DENVER, a Colorado corporation
("Survivor"), and REICHART-SILVERSMITH LIFE, INC., a Colorado corporation
("Merging Entity"), and the two shareholders of Merging Entity, BRUCE D.
ABRAMSON ("Mr. Abramson") and CONSTANCE M. ABRAMSON ("Mrs. Abramson") (with
Mr. Abramson and Mrs. Abramson 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 an insurance agency dealing primarily in life and
group benefits.
B. Parent is engaged in the business of owning and operating
insurance agencies and Survivor is an operating insurance agency.
C. Merging Entity and Survivor have for many years had a business
relationship, predating even the ownership of Survivor by Parent.
D. Shareholders, Parent, Survivor 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 as the consideration stated herein.
E. The parties hereto intend that this Agreement be characterized as
a triangular statutory merger pursuant to Sections 368(a)(1)(A) and
368(a)(2)(D) of the Internal Revenue Code of 1986 ("Code").
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 April 30, 1995 (or at such
later time as may be agreed upon by the parties), to the Secretary of State
of Colorado and to be effective as of 12:01 a.m. on May 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 Colorado. 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 become the
Surviving Corporation.
1.2 Organization of Survivor.
(a) On the Effective Date, and thereafter until amended as
provided by law, the articles of incorporation of Survivor in effect on the
Effective Date shall be the articles of incorporation for the Surviving
Corporation.
(b) On the Effective Date, and thereafter until amended as
provided by law, the bylaws of Survivor in effect on the Effective Date
shall be the bylaws for the Surviving Corporation. (c) On the
Effective Date, and thereafter until changed as provided by law, the names
and addresses of the directors for Surviving Corporation shall be:
Robert H. Hilb
4235 Innslake Drive, P.O. Box 1220
Glen Allen, Virginia 23060-1220
Andrew L. Rogal
Warner Centre
333 Forbes Avenue
Pittsburgh, Pennsylvania 15222
John C. Adams, Jr.
4235 Innslake Drive, P.O. Box 1220
Glen Allen, Virginia 23060-1220
(d) On the Effective Date, and thereafter until changed as
provided by law, the officers of Survivor on the Effective Date shall be
the officers of Surviving Corporation and Mr. Abramson shall be a Vice
President of the Surviving Corporation.
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, if any, as may be necessary to conform to the accounting
procedures of Survivor.
(b) On the Effective Date and thereafter, Survivor shall possess
all the rights, privileges, immunities, powers, franchises and authority,
both public and private, of each of the corporations comprising
Constituents. 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 Survivor, without further act or deed, although Merging Entity
from time to time, as and when required by Survivor, 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
Survivor may deem necessary or desirable to confirm the transfer to and
vesting in Survivor 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 Survivor 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 as
described herein:
Shareholder Number of Shares Percentage
Mr. Abramson 490 98%
Mrs. Abramson 10 2%
Shareholders 500 100%
In exchange for all of the shares of Common Stock, Shareholders shall
collectively receive 50,000 shares of common stock of Parent, 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 (1) share of common stock, no 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 100 shares (which number of shares is subject to
adjustment as provided in Section 14.6) of common stock, no par value, of
Parent. 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 March 8, 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.
1.5 Closing Date. The closing of the transactions contemplated by
this Agreement ("Closing") shall take place at the offices of Survivor,
located at Denver, Colorado, at __ o'clock _.m. on April __, 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 Colorado ("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 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 have
caused to be delivered to Parent a true and complete copy of the unaudited
financial statements of Merging Entity, prepared under the accounting
guidelines of Parent, previously provided to them in the form of Parent's
Accounting Policies and Procedures Manual ("GAAP Policy"), 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
(collectively, "Financial Statements"). In addition, Shareholders and
Merging Entity have delivered to Parent a true and complete copy of 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 ("Interim 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 Parent's GAAP Policy
consistently applied throughout the periods covered by such statements
(including, but not limited to, the establishment of reserves for bad debts
and accruals for all outstanding debts and expenses). Furthermore, neither
the Financial Statements nor the Interim Statements contained any untrue
statement of any material fact or omitted to state any material fact
required to be stated to make such Financial Statements or Interim
Statements not misleading. Without limiting the generality of the
foregoing, the commission income reflected in each of the Financial
Statements and the Interim Statements is true and correct, and the accounts
payable reflected in each of the Financial Statements and Interim
Statements is 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 February 28, 1995. Also, the term "Most Recent Balance
Sheet Date," as used in this Agreement, means February 28, 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 $2,500 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 Colorado Department
of Revenue, 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 $2,500 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. The reserve for bad debts, if
any, contained in the Most Recent Balance Sheet and the Financial
Statements was calculated on a consistent basis which, in the light of past
experience, is considered adequate. 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 the bad debt
allowance stated therein, 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 bad debt allowance stated therein. 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 Colorado.
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 State of
Colorado, 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 December 31, 1994,
the authorized capital stock of Parent consisted of 50,000,000 shares of
common stock, no par value, of which 14,679,464 shares were issued and
outstanding, fully paid and nonassessable. The authorized capital stock of
Survivor consists of 50,000 shares of common stock, no par value, of which
1,500 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.
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 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; and Shareholders and Merging Entity shall have delivered to Parent a
certificate, dated the Closing Date, and signed by all of them, to the
foregoing effect, in form and substance as set forth in Schedule 6.1.
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; and Merging Entity and Shareholders
shall have delivered to Parent a certificate dated the Closing Date, and
signed by all of them, to the foregoing effect, in form and substance as
set forth in Schedule 6.1.
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 each of the
insurance companies identified in Schedule 2.14 of this Agreement, 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 Survivor, 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 Survivor, or its successors and
assigns.
6.8 Mr. Abramson Employment Agreement. An Employment Agreement
between Survivor, as Employer, and Mr. Abramson, 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 Agreement. An Employment Agreement between
Survivor, as Employer, and David S. Goldman, as Employee, 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.
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 arrangement covering the premises
presently occupied by Merging Entity shall have been terminated.
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, which registration
statement shall show that the transactions contemplated herein shall be
treated as a "pooling of interests" for accounting purposes.
6.18 Termination of Other Agreements. The Buy-Sell Agreement and
Business Operating Agreement between Survivor and Merging Entity shall each
have been terminated.
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 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; and Parent shall
have delivered to Shareholders and Merging Entity a certificate to the
foregoing effect, dated the Closing Date, in form and substance as set
forth in Schedule 7.1.
7.2 Covenants. Parent 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 shall
have caused all corporate actions necessary for the consummation of this
Agreement to have been taken by it and Survivor; and Parent shall have
delivered to Shareholders and Merging Entity a certificate to the foregoing
effect, dated the Closing Date, in form and substance as set forth in
Schedule 7.2.
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
statement, 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. Parent covenants 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 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 tax-free 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 until the earlier to occur of: (i)
March 31 of the year in the year following the Effective Date of this
Merger; or (ii) one year after the Effective Date.
9.2 Survival of Representations and Warranties of Shareholders.
Except for the specific contingencies detailed below in subparagraphs (ix)
through (xiv), inclusive, 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 until the earlier to occur of: (i) March 31 of the year in
the year following the Effective Date of the Merger; or (ii) one year after
the Effective Date.
9.3 Indemnification Agreement by Shareholders. Shareholders, jointly
and severally, shall indemnify and hold harmless Parent and Survivor, 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) Until April 30, 2000, and 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
$30,000;
(ix) Until one year 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) Until three (3) years after the Effective Date, all
deductibles arising under the tail coverage referenced in Section 6.12;
(xi) Until April 30, 2000, 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) Until April 30, 2000, any existing unreconciled
discrepancies as or to have been disclosed on Schedule 2.14;
(xiii) Until April 30, 2000, 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 one year 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.
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 50,000 shares of Parent's common stock
times $12 per share, which is the approximate per share 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, 5,000 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. Bruce D. Abramson, President
REICHART-SILVERSMITH LIFE, INC.
501 South Cherry Street, Suite 300
Denver, Colorado 80222
With copy to:
_____________, Esquire
______________________
______________________
______________________
(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 THE MERGING ENTITY INTO
SURVIVOR, WHICH SHALL BE GOVERNED BY COLORADO 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 the day immediately preceding the Effective
Date, 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 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. 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
are subtracted from total assets, and furniture, fixtures and equipment 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 $30,000 (with such
excess being referred to as "Excess Tangible Net Worth"), then the number
of shares shall be increased by the number of shares determined by dividing
Excess Tangible Net Worth by $12; and (ii) If
Tangible Net Worth is less than $30,000 (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. 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 Parent Policy on Post-Acquisition Cash Held by Survivor.
Merging Entity and Shareholders acknowledge that they have been informed of
the policy of Parent not to allow cash and cash equivalents in excess of
what Parent believes to be the appropriate amount of working capital for
any of its operating offices to remain in an interest-earning account for
the benefit of that office. As such, Merging Entity and Shareholders
acknowledge that Parent will cause any such excessive amounts of cash and
equivalents to be dividended to Parent, that such dividends would reduce
interest earnings attributable to Surviving Corporation after the Effective
Date, and that Parent has the right to declare such dividends.
14.10 Subsequent Acquisitions. Merging Entity and Shareholders
acknowledge that a later acquisition by Surviving Corporation of another
insurance agency could affect the determination of subsequent year
profitability and agree to cooperate with Parent in making any adjustments
as necessary to this Agreement and any ancillary agreements to carry out
their intent.
14.11 Nonsolicitation Covenant. Each of the Shareholders, by
signature hereto, covenants that he shall not for a period of three (3)
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.
14.12 Acceptance. The binding date of acceptance of this Agreement
shall be the Date on which the last of the parties executes the same.
<PAGE>
EXECUTED by Shareholders and Merging Entity at Denver, Colorado, this
_______ day of _____________________, 1995.
SHAREHOLDERS:
___________________________
BRUCE D. ABRAMSON
___________________________
CONSTANCE M. ABRAMSON
MERGING ENTITY:
REICHART-SILVERSMITH LIFE, INC.
By ________________________
_________________, its
President
<PAGE>
EXECUTED by Parent and Survivor at ____________, _____________, this
___ day of _____________________, 1995.
PARENT:
HILB, ROGAL AND HAMILTON
COMPANY
By_______________________
_______________, its
______________
SURVIVOR:
HILB, ROGAL AND HAMILTON
COMPANY OF DENVER
By_______________________
________________, its
