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
BARTLETT AGENCY, INC.
The following information is furnished to supplement
and complete the information contained in the Prospectus
dated February 12, 1992, relating to the offering of shares
of the Common Stock of Hilb, Rogal and Hamilton Company (the
"Company") to the shareholders of Bartlett Agency, Inc.
("Bartlett") in exchange for certain assets of Bartlett.
Terms of the Transaction
(a) (1) Effective October 1, 1996, the shareholders
of Bartlett have agreed to sell assets of Bartlett's
insurance agency operations including their insurance
customer lists, expiration lists and records, book of
business, business records, files and daily reports;
furniture, fixtures and equipment; rights and interest in
and to agency and other agreements; certain maintenance
agreements; goodwill; and non-competition agreements in
exchange for $2,695,000 in cash, shares of Common Stock of
the Company valued at $650,000 based on the average closing
price on the New York Stock Exchange over a period of five
consecutive trading days ending ten days prior to the
earlier of the effective date or closing date of the
agreement and three installments payable based upon profits
realized in the subsequent three year period which can
increase the purchase price up to a maximum of $1,516,667 in
each year (subject to a minimum of $650,000 in each year)
payable in 14, 26 and 38 months. Each contingent payment
includes interest imputed at the lowest federal rate allowed
pursuant to Section 1274 of the Internal Revenue Code of
1986 with monthly compounding.
The acquisitions are 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 Agreements of
Purchase and Sale (see Exhibit 2.27).
The assets purchased will be incorporated into the
assets of Hilb, Rogal and Hamilton Company of the Quad
Cities, a newly formed wholly-owned subsidiary of the
Company.
(2) The acquisition of Bartlett by the Company
has been agreed upon because the Company is engaged in the
business of owning insurance agencies and because the
shareholders of Bartlett have determined that a merger with
the Company is beneficial to the growth of their insurance
operations.
Bartlett's operations will add approximately 45
employees and approximately $3,900,000 of revenues to the
Company.
(3) Bartlett's predecessor business was
established in the 1940's and operated as a family business
for many years. The current corporation was incorporated in
1981 and elected S Corporation status as provided by the
Internal Revenue Code. Bartlett has 10,000 authorized
shares of common stock, no par value. There are 1,000
shares issued and 600 shares outstanding.
(4) There are no material differences between the
rights of the security holders of Bartlett and the rights of
security holders of the Company.
(5) & (6) The acquisition will be treated as a
purchase and the assets purchased will be incorporated into
the assets of Hilb, Rogal and Hamilton Company of the Quad
Cities. The assets will be recorded at fair market value
for accounting and tax purposes by the Company.
(c) The acquisition agreement is incorporated into
this supplement as Exhibit 2.27.
Pro Forma Financial Information
See attached - Schedule A
Material Contracts with Seller.
There have been no material contracts between the
Company and Bartlett prior to the proposed effective date of
the Agreement of Purchase and Sale.
Information with Respect to Bartlett Agency, Inc.
Bartlett is located in Moline, Illinois. Bartlett was
incorporated in 1981 and elected S Corporation status as
provided by the Internal Revenue Code. Its predecessor
business was organized in the 1940's and operated as a
family business for many years.
Bartlett provides insurance brokerage services for
personal and small-to-medium size commercial and industrial
accounts. Combined services provided include personal and
commercial property and casualty insurance (approximately
65% of revenues) and group and individual life and health
insurance products (approximately 35% of revenues).
The shares to be issued represent less than .4% of
outstanding shares of the Company at the time of acquisition
and the assets of Bartlett as of December 31, 1995 and pre
tax earnings for the year then ended represent approximately
1.87% and 2.93%, respectively, of the consolidated amounts
of the Company. Furthermore, the Company's investment in
Bartlett will represent approximately 3.3% of consolidated
assets 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 audited financial
statements. Accordingly, the shares will be restricted as
to resale until such time as the Company files audited
financial statements which include the proforma results of
operations of the Company including the operations of
Bartlett. The restriction should end no later than March
31, 1997 when the Company files its Form 10-K for 1996.
Common Stock and Dividend Data
There is no established public trading market for the
stock of Bartlett. There are four shareholders of Bartlett.
See Shareholder Information below for information regarding
shares held by each shareholder and information regarding
authorized and issued shares.
Shareholders distributions from the S Corporation
during the years ended December 31, 1995, 1994 and 1993 were
$391,775, $270,350 and $274,700, respectively.
Shareholder Information
(a) (1) WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY.
(2) & (3) Bartlett has agreed to submit the
Agreement of Purchase and Sale to their shareholders for
adoption by unanimous written consent after receipt and
review of the Prospectus. Since the acquisition can be
completed only with the unanimous consent of the
shareholders of the company being acquired (Bartlett),
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 companies being acquired (Bartlett) in
the proposed transaction.
(6) Bartlett has 10,000 authorized shares of
common stock, no par value. There are 1,000 shares issued
and 600 shares outstanding.
The ownership of the outstanding shares of Bartlett is
as follows:
NUMBER OF
NAME SHARES PERCENTAGE
Richard J. Miles 264 44.0%
Thomas K. Bracke 208 34.7
John J. Barrett 101 16.8
Bradley T. Boyle 27 4.5
--- -----
600 100.0%
=== ======
(7) Upon completion of the proposed acquisition,
no shareholder of Bartlett will serve as a director or
executive officer of the registrant.
Hilb, Rogal and Hamilton Company
Date of this Supplement: August 23, 1996
SCHEDULE A - PRO FORMA CONDENSED
FINANCIAL STATEMENTS (UNAUDITED)
The following pro forma condensed consolidated balance
sheet as of June 30, 1996 and the pro forma
consolidated income statements for the six months ended
June 30, 1996 and the year ended December 31, 1995 give
effect to the proposed acquisition of Bartlett Agency,
Inc. ("Bartlett," expected to be effective on October
1, 1996); and the acquisition of certain assets and
liabilities of ten insurance agencies purchased in 1996
and 13 insurance agencies purchased in 1995. 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 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, 1995. The pro forma condensed consolidated balance
sheet gives effect to the business combinations which
occurred or are probable of occurring subsequent to
June 30, 1996, as if they had occurred before June 30,
1996.
The pro forma statements have been prepared by
Management based upon the historical financial statements
of Hilb, Rogal and Hamilton Company, Bartlett 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 1995 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)
JUNE 30, 1996
<TABLE>
<CAPTION>
HILB, ROGAL ACQUISITIONS PRORORMA ADJUSTMENTS PROFORMA
AND HAMILTON (PURCHASES) FOR PURCHASE ACQUISITIONS CONSOLIDATED
COMPANY
<S> <C> <C> <C> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS $21,482,227 $1,439,995 (2,905,000)(2) $20,017,222
INVESTMENTS 5,352,730 5,352,730
RECEIVABLES & OTHER 45,846,017 1,351,357 (306,051)(1) 46,891,323
------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 72,680,974 2,791,352 N/A (3,211,051) 72,261,275
INVESTMENTS 5,770,000 5,770,000
PROPERTY & EQUIPMENT 14,969,938 64,249 (64,249)(1) 175,000(3) 15,144,938
INTANGIBLE ASSETS 64,391,946 5,103,301(3) 69,495,247
OTHER ASSETS 4,469,728 220,825 (217,070)(1) 4,473,483
------------------------------------------------------------------------------
TOTAL ASSETS $162,282,586 $3,076,426 N/A $1,785,931 $167,144,943
==============================================================================
LIABILITIES & EQUITY:
PREMIUMS PAYABLE-INS CO $67,191,549 $2,328,245 $69,519,794
OTHER ACCRUED LIABILITIES 15,124,267 98,239 15,222,506
------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 82,315,816 2,426,484 N/A 0 84,742,300
LONG-TERM DEBT 15,801,391 23,083 1,723,301(2) 17,547,775
OTHER LONG-TERM LIABILITIES 8,289,192 39,489 8,328,681
SHAREHOLDERS' EQUITY
COMMON STOCK 25,350,220 702,000 (702,000)(4) 650,000(2) 26,000,220
RETAINED EARNINGS 30,525,967 (114,630) 114,630 (4) 30,525,967
------------------------------------------------------------------------------
55,876,187 587,370 N/A 62,630 56,526,187
------------------------------------------------------------------------------
$162,282,586 $3,076,426 N/A $1,785,931 $167,144,943
==============================================================================
</TABLE>
(1) TO ADJUST FOR ASSETS AND LIABILITIES NOT ACQUIRED.
(2) TO REFLECT PURCHASE PRICE OF ASSETS AND LIABILITIES
ACQUIRED SUBSEQUENT TO JUNE 30, 1996 IN
PURCHASE TRANSACTIONS.
(3) TO ADJUST FOR ASSET VALUATIONS UNDER PURCHASE ACCOUNTING.
(4) TO ELIMINATE SHAREHOLDERS' EQUITY OF ACQUIRED ENTITIES.
<PAGE>
HILB, ROGAL AND HAMILTON COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
------------------------------------------------------------------------
HILB, ROGAL ACQUISITIONS PROFORMA ADJUSTMENTS PROFORMA
& HAMILTON CO. (PURCHASES) FOR PURCHASE ACQUISITIONS CONSOLIDATED
<S> <C> <C> <C> <C>
REVENUES:
COMMISSIONS AND FEES $78,768,286 3,387,820 $82,156,106
INTEREST AND OTHER INCOME 2,243,540 42,102 ($124,330) (1) 2,161,312
----------------------------------------------------------------------
TOTAL REVENUES 81,011,826 3,429,922 (124,330) 84,317,418
OPERATINGEXPENSES:
COMPENSATION AND BENEFITS 44,115,134 2,194,929 46,310,063
OTHER OPERATING EXPENSES 19,603,610 878,046 (66,119) (2) 20,415,537
AMORTIZATION OF INTANGIBLES 3,666,605 11,571 223,577 (3) 3,901,753
INTEREST EXPENSE 461,460 9,460 49,899 (4) 520,819
----------------------------------------------------------------------
TOTAL OPERATING EXPENSE 67,846,809 3,094,006 207,357 71,148,172
----------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 13,165,017 335,916 (331,687) 13,169,246
INCOME TAXES 5,328,496 1,692 (5) 5,330,188
----------------------------------------------------------------------
NET INCOME $7,836,521 $335,916 ($333,379) $7,839,058
======================================================================
NET INCOME PER COMMON $0.58 $0.57
======================================================================
SHARES ISSUED AND OUTSTANDING 13,368,868 50,000 13,418,868
======================================================================
WEIGHTED AVERAGE SHARES
OUTSTANDING 13,626,914 96,949 13,723,863
======================================================================
</TABLE>
(1) TO ADJUST HISTORICAL INTEREST AND TO ADJUST FOR LOST INTEREST EARNED
FROM CASH PAID FOR ACQUIRED AGENCIES.
(2) TO REFLECT ADJUSTMENTS TO COMPENSATION AND OTHER OPERATING EXPENSES TO
REFLECT ADJUSTED COMPENSATION,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 ADJUST HISTORICAL INTEREST AND REFLECT INTEREST ON ACQUISITION
DEBT.
(5) TO REFLECT ESTIMATED TAXES AND THE TAX EFFECT OF PROFORMA ADJUSTMENTS
ON NET INCOME.
<PAGE>
HILB, ROGAL & HAMILTON COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------------------------------
HILB, ROGAL ACQUISITIONS PROFORMA ADJUSTMENTS PROFORMA
& HAMILTON CO. (PURCHASES) FOR PURCHASE ACQUISITIONS CONSOLIDATED
<S> <C> <C> <C> <C>
REVENUES:
COMMISSIONS & FEES $141,555,188 $17,988,986 $159,544,174
INTEREST AND OTHER INCOME 6,591,850 335,807 (653,508) (1) 6,274,149
--------------------------------------------------------------------------
TOTAL REVENUES 148,147,038 18,324,793 (653,508) 165,818,323
OPERATING EXPENSES:
COMPENSATION AND BENEFITS 82,760,664 10,738,984 (442,931) (2) 93,056,717
OTHER OPERATING EXPENSES 38,264,085 6,714,049 (366,883) (2) 44,611,251
AMORTIZATION OF INTANGIBLES 6,965,947 218,067 914,588 (3) 8,098,602
INTEREST EXPENSE 559,654 174,728 35,415 (4) 769,797
--------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 128,550,350 17,845,828 140,189 146,536,367
INCOME BEFORE INCOME TAXES 19,596,688 478,965 (793,697) 19,281,956
INCOME TAXES 7,767,778 (125,893) (5) 7,641,885
-------------------------------------------------------------------------
NET INCOME $11,828,910 $478,965 ($667,804) $11,640,071
=========================================================================
NET INCOME PER COMMON SHARE $0.82 $0.79
=========================================================================
SHARES ISSUED AND OUTSTANDING 13,706,764 194,848 13,901,612
=========================================================================
WEIGHTED AVERAGE SHARES
OUTSTANDING 14,470,407 293,294 14,763,701
=========================================================================
</TABLE>
(1) TO ADJUST HISTORICAL INTEREST AND TO ADJUST FOR LOST INTEREST EARNED
FROM CASH PAID FOR ACQUIRED AGENCIES.
(2) TO REFLECT ADJUSTMENTS TO COMPENSATION AND OTHER OPERATING EXPENSES TO
REFLECT ADJUSTED COMPENSATION, 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 OVERTHE
FAIR VALUE OF NET ASSETS ACQUIRED AND NONCOMPETITION AGREEMENTS.
(4) TO ADJUST HISTORICAL INTEREST AND REFLECT INTEREST ON ACQUISITION
DEBT.
(5) TO REFLECT ESTIMATED TAXES AND THE TAX EFFECT OF PROFORMA ADJUSTMENTS
ON NET INCOME.
<PAGE>
AGREEMENT OF PURCHASE AND SALE
BY AND BETWEEN
HILB, ROGAL AND HAMILTON COMPANY OF THE QUAD CITIES
AND
BARTLETT AGENCY, INC.
THIS AGREEMENT, effective as of 12:01 a.m. on _____________ 1,
1996 ("Effective Date"), is made and entered into this _____ day
of _________, 1996, by and between HILB, ROGAL AND HAMILTON
COMPANY OF THE QUAD CITIES, an Illinois corporation ("Buyer"),
HILB, ROGAL AND HAMILTON COMPANY, a Virginia corporation ("HRH"),
BARTLETT AGENCY, INC., an Illinois corporation ("Seller"),
RICHARD J. MILES ("Mr. Miles"), THOMAS K. BRACKE ("Mr. Bracke"),
JOHN J. BARRETT ("Mr. Barrett") and BRADLEY T. BOYLE ("Mr.
Boyle"), with Messrs. Miles, Bracke, Barrett and Boyle
collectively being referred to herein as "Shareholders".
W I T N E S S E T H:
WHEREAS, HRH is engaged in the business of owning insurance
agencies;
WHEREAS, Seller currently conducts an insurance agency
business in and around the quad cities area of Illinois and Iowa
(Moline, Rock Island, Davenport and Bettendorf);
WHEREAS, Shareholders own Seller;
WHEREAS, Shareholders desire that Seller sell certain of its
assets utilized in that business under the terms hereinafter
provided;
WHEREAS, HRH desires that Buyer purchase certain of Seller's
assets utilized in such business.
NOW THEREFORE, in consideration of the premises and of the
mutual promises and covenants hereinafter set forth, and
intending to be legally bound, the parties hereto agree as
follows:
PORTIONS OF THIS AGREEMENT ARE SUBJECT TO ARBITRATION.
1. Sale and Assignment of Assets. Subject to the terms and
conditions contained in this Agreement, Seller hereby agrees to
sell convey, transfer, assign and deliver to Buyer, free and
clear of any judgment, mortgage, pledge, lien, conditional sale
agreement, security interest, option, or other encumbrance or
claim of any nature whatsoever, all of Seller's right, title and
interest in and to the following assets ("Assets"): (i) its
insurance customer lists, expiration lists and records, book of
business, business records, files and daily reports; (ii) all
furniture, fixtures and equipment identified on Schedule 1
attached hereto, all of which are used in, or form a part of,
Seller's insurance agency business; (iii) all of its rights and
interest in and to its agency agreements with those insurance
companies for which it acts as agent, including all contingency
and profit sharing agreements with such companies; (iv) certain
maintenance agreements related to the assets listed on Schedule
1; (v) all restrictive covenants or other agreements protecting
or prohibiting any of the accounts transferred in (i) above from
being solicited by others; and (vi) the goodwill of Seller,
including, but not limited to, the corporate name of "Bartlett
Agency, Inc." and any trade names related thereto. Seller shall
sign such Bills of Sale in form and substance as set forth in
Schedule 1.1, or other documents of assignment or transfer as
Buyer shall request.
Buyer is not acquiring, and is hereby expressly excluded from
acquiring from Seller, the following assets of the Seller which
the Seller retains: (i) cash or other readily liquid working
capital on hand as of the close of business of Seller on the day
prior to the Effective Date ("Pre-Effective Moment"); (ii)
accounts and other receivables as of the Pre-Effective Moment,
including commissions earned but not paid on business billed by
Seller which was written and having an effective date prior to
the Pre-Effective Moment, but excluding direct bill commissions
which shall be treated as earned when received; and (iii)
prepaid insurance, finance charges, taxes and licenses. Except
for Seller's lease and the obligations listed in Schedule 6.K,
Buyer is not assuming any liabilities of Seller of any kind and
shall be fully indemnified therefor.
2. Purchase Price. In consideration for the transfer and
assignment of the above-described Assets, the Buyer shall pay to
the Seller at the times specified herein the potential maximum
volume of SEVEN MILLION ONE HUNDRED NINETY-FIVE THOUSAND DOLLARS
($7,195,000) payable as follows (with the payments referenced
below in A, B and C being hereafter collectively referred to as
"Purchase Price"):
A. On the later of the Closing Date or the Effective
Date ("Transfer Date"), Buyer shall deliver to Seller the sum of
ONE MILLION NINE HUNDRED NINETY-FIVE THOUSAND DOLLARS
($1,995,000);
B. On the Transfer Date, Buyer shall deliver to Seller
a certificate equaling, or certificates totalling, the value of
SIX HUNDRED FIFTY THOUSAND and 00/100 DOLLARS ($650,000) in
shares of the common stock of HRH ("HRH Stock") where the HRH
Stock is valued at its average closing price on the New York
Stock Exchange over a period of five (5) consecutive trading
days, with the fifth and final trading day being the last trading
day which is more than ten (10) days prior to the earlier of the
Effective Date or the Closing Date. To the extent the total
number of shares of HRH Stock so calculated is not in a whole
number of shares, Buyer shall round up any fraction of 0.5 or
greater and shall round down any fraction less than 0.5.
C. Buyer shall deliver the balance of the Purchase Price to the
Seller in the form of three variable payments which will be
payable, respectively, fourteen, twenty-six and thirty-eight
months after the Effective Date (or as soon thereafter as the
Year 1, Year 2 and Year 3 Agency Profits, as hereinafter defined,
are finally determined) in the potential maximum amounts of
$1,516,667, $1,516,667 and $1,516,667, respectively ("Buyer's
Deferred Obligations"). Buyer's Deferred Obligations shall have
interest imputed at the lowest applicable federal rate allowed
Buyer pursuant to Section 1274 of the Internal Revenue Code of
1986 ("Code") with monthly compounding and any such imputed
interest shall not be charged against Year 1, Year 2 or Year 3
Agency Profits. Buyer's Deferred Obligations shall contain a
right of offset as specified in Sections 3 and 13 hereof.
D. On the Transfer Date, Buyer shall pay to each of
the Shareholders, not as a part of the Purchase Price (as herein
defined) but as an integral part of the transactions contemplated
herein, that sum called for in the Employment Agreement and
Covenant Not to Compete for such Shareholder to receive for
covenanting not to compete with Buyer or HRH. These payments
have been separately bargained for by the parties and represent
full and fair value to each of the Shareholders for his
individual covenant not to compete. For purposes of satisfying
certain terms and conditions contained in Sections 8.1.J and 12
of this Agreement, a pro rata portion of these payments to the
Shareholders for covenanting not to compete may be drawn from to
satisfy the amount of cash required to be withheld to satisfy the
terms and conditions contained therein.
E. In exchange for the promise to deliver the Purchase
Price to Seller, Buyer shall receive the Assets from Seller free
and clear of any lien or encumbrance of any kind whatsoever.
3. Abatement of the Purchase Price.
A. Abatement of Purchase Price Based on Year 1 Agency
Profit.
(1) As used herein, the term "Year 1 Agency
Profit" shall mean the net profit of Buyer earned from the Assets
for the twelve month period beginning September 1, 1996, and
ending August 31, 1997 ("Year 1"), determined in accordance with
generally accepted accounting principles applied on a consistent
basis, but subject to certain accounting policies (which shall
satisfy generally accepted accounting principles) adopted from
time to time by HRH and applied uniformly in determining the net
profit of each subsidiary of HRH, before any provision for
federal or state income taxes and before any provision for
amortization of any portion of the Assets which are intangible
and before any provision for any overhead charge by HRH, as the
parent of the Buyer, to the Buyer. Additionally, the parties
have reached special agreement with regard to the calculation of
Year 1 Agency Profit as it relates to interest income and
expense, profit sharing expense, bad debt expense, depreciation,
professional fees, business insurance and other direct corporate
costs, and a new producer's salary as set forth in this
subsection. Specifically, interest income and expense shall be
calculated in a manner consistent with the pro forma such that
interest income and expense shall reflect the true operating
results and shall not be unnecessarily credited or charged with
excessive interest income or expense; profit sharing expense
shall be set at 7% of eligible compensation, regardless of the
actual number (higher or lower) actually determined to be
contributed to HRH's Pension and Profit Sharing Plan; bad debt
expense charged against earnings from the use of the Assets shall
be $40,000 or the actual bad debt expense booked against the use
of the Assets according to HRH accounting policy, whichever is
greater; depreciation charges shall be set at $40,000 for the
purpose of establishing a proper charge to fund replacements; the
charges against the earnings from the use of the Assets for
professional fees, business insurance and other direct corporate
costs shall be $130,000, regardless of the actual costs incurred
therefor by Buyer; and Year 1 Agency Profit shall not be charged
with up to $30,000 of a new producer's salary provided that such
new producer produces commission income from new accounts, which
accounts were not acquired as part of the Assets or from existing
customers of Seller or Buyer, equal to at least 50% of such
salary. A hypothetical example of such calculations is attached
hereto as Schedule 3.A.1.
The Buyer shall cause the Year 1 Agency Profit to be determined,
and the amount thereof communicated to the Shareholders, as soon
as is reasonably practicable after Year 1, and, in all events, no
later than sixty-two (62) days after Year 1. In the event of a
disagreement by the Shareholders, collectively, as to the
computation of the Year 1 Agency Profit, such disagreement shall
be resolved in the manner described in subparagraph D., below.
(2) To the extent the Year 1 Agency Profit shall
be less than $1,200,000 (with such deficiency being the "Year 1
Deficiency"), then for each $1 of Year 1 Deficiency, Buyer shall
be entitled to reduce the portion of the Purchase Price payable
in fourteen months by aggregate amounts of $2.1667 down to a
minimum aggregate amount payable, before applicable offset or
indemnity, of $650,000 for $800,000 or less of Year 1 Agency
Profit. For example, if the Year 1 Deficiency equals $50,000,
the fourteen month payment to be received by Seller would be
reduced by $108,325 to the aggregate amount payable, before
applicable offset or indemnity, of $1,408,332. If the Year 1
Deficiency equals or exceeds $400,000, the fourteen month payment
to be received by Seller would be reduced by the maximum amount
of $866,667 to the minimum aggregate amount payable, before
applicable offset or indemnity, of $650,000.
B. Abatement of Purchase Price Based on Year 2 Agency
Profit.
(1) As used herein, the term "Year 2 Agency
Profit" shall mean the net profit of the Buyer earned from the
Assets for the twelve month period beginning September 1, 1997,
and ending August 31, 1998 ("Year 2"), determined in accordance
with generally accepted accounting principles applied on a
consistent basis, but subject to certain accounting policies
(which shall satisfy generally accepted accounting principles)
adopted from time to time by HRH and applied uniformly in
determining the net profit of each subsidiary of HRH, before any
provision for federal or state income taxes, before any provision
for amortization of any portion of the Assets which are
intangible and before any provision for any overhead charge by
HRH, as the parent of the Buyer, to the Buyer. Additionally, the
parties have reached special agreement with regard to the
calculation of Year 2 Agency Profit as it relates to interest
income and expense, profit sharing expense, bad debt expense,
depreciation, professional fees, business insurance and other
direct corporate costs, and a new producer's salary as set forth
in this subsection. Specifically, interest income and expense
shall be calculated in a manner consistent with the pro forma
such that interest income and expense shall reflect the true
operating results and shall not be unnecessarily credited or
charged with excessive interest income or expense; profit sharing
expense shall be set at 7% of eligible compensation, regardless
of the actual number (higher or lower) actually determined to be
contributed to HRH's Pension and Profit Sharing Plan; bad debt
expense charged against earnings from the use of the Assets shall
be $40,000 or the actual bad debt expense booked against the use
of the Assets according to HRH accounting policy, whichever is
greater; depreciation charges shall be set at $40,000 for the
purpose of establishing a proper charge to fund replacements; the
charges against the earnings from the use of the Assets for
professional fees, business insurance and other direct corporate
costs shall be $130,000, regardless of the actual costs incurred
therefor by Buyer; and Year 2 Agency Profit shall not be charged
with up to $30,000 of a new producer's salary provided that such
new producer produces commission income from new accounts, which
accounts were not acquired as part of the Assets or from existing
customers of Seller or Buyer, equal to at least 50% of such
salary. A hypothetical example of such calculations is attached
hereto as Schedule 3.B.1.
The Buyer shall cause the Year 2 Agency Profit to be determined,
and the amount thereof communicated to the Shareholders, as soon
as is reasonably practicable after Year 2, and, in all events, no
later than sixty-two (62) days after Year 2. In the event of any
disagreement by the Shareholders, collectively, as to the
computation of the Year 2 Agency Profit, such disagreement shall
be resolved in the manner described in subparagraph D., below.
(2) To the extent the Year 2 Agency Profit shall
be less than $1,200,000 (with such deficiency being the "Year 2
Deficiency"), then for each $1 of Year 2 Deficiency, Buyer shall
be entitled to reduce the portion of the Purchase Price payable
in twenty-six months by aggregate amounts of $2.1667, down to a
minimum aggregate amount payable, before applicable offset or
indemnity, of $650,000 for $800,000 or less of Year 2 Agency
Profit. For example, if the Year 2 Deficiency equals $50,000,
the twenty-six month payment to be received by Seller would be
reduced by $108,325 to the aggregate amount payable, before
applicable offset or indemnity, of $1,408,332. If the Year 2
Deficiency equals or exceeds $400,000, the twenty-six month
payment to be received by Seller would be reduced by the maximum
amount of $866,667 to the minimum aggregate amount payable,
before applicable offset or indemnity, of $650,000.
C. Abatement of Purchase Price Based on Year 3 Agency
Profit.
(1) As used herein, the term "Year 3 Agency
Profit" shall mean the net profit of the Buyer earned from the
Assets for the twelve month period beginning September 1, 1998,
and ending August 31, 1999 ("Year 3"), determined in accordance
with generally accepted accounting principles applied on a
consistent basis, but subject to certain accounting policies
(which shall satisfy generally accepted accounting principles)
adopted from time to time by HRH and applied uniformly in
determining the net profit of each subsidiary of HRH, before any
provision for federal or state income taxes, before any provision
for amortization of any portion of the Assets which are
intangible and before any provision for any overhead charge by
HRH, as the parent of the Buyer, to the Buyer. Additionally, the
parties have reached special agreement with regard to the
calculation of Year 3 Agency Profit as it relates to interest
income and expense, profit sharing expense, bad debt expense,
depreciation, professional fees, business insurance and other
direct corporate costs, and a new producer's salary as set forth
in this subsection. Specifically, interest income and expense
shall be calculated in a manner consistent with the pro forma
such that interest income and expense shall reflect the true
operating results and shall not be unnecessarily credited or
charged with excessive interest income or expense; profit sharing
expense shall be set at 7% of eligible compensation, regardless
of the actual number (higher or lower) actually determined to be
contributed to HRH's Pension and Profit Sharing Plan; bad debt
expense charged against earnings from the use of the Assets shall
be $40,000 or the actual bad debt expense booked against the use
of the Assets according to HRH accounting policy, whichever is
greater; depreciation charges shall be set at $40,000 for the
purpose of establishing a proper charge to fund replacements; the
charges against the earnings from the use of the Assets for
professional fees, business insurance and other direct corporate
costs shall be $130,000, regardless of the actual costs incurred
therefor by Buyer; and Year 3 Agency Profit shall not be charged
with up to $30,000 of a new producer's salary provided that such
new producer produces commission income from new accounts, which
accounts were not acquired as part of the Assets or from existing
customers of Seller or Buyer, equal to at least 50% of such
salary. A hypothetical example of such calculations is attached
hereto as Schedule 3.C.1.
The Buyer shall cause the Year 3 Agency Profit to be determined,
and the amount thereof communicated to the Shareholders, as soon
as is reasonably practicable after Year 3, and, in all events, no
later than sixty-two (62) days after Year 3. In the event of any
disagreement by the Shareholders, collectively, as to the
computation of the Year 3 Agency Profit, such disagreement shall
be resolved in the manner described in subparagraph D., below.
(2) To the extent the Year 3 Agency Profit shall
be less than $1,200,000 (with such deficiency being the "Year 3
Deficiency"), then for each $1 of Year 3 Deficiency, Buyer shall
be entitled to reduce the portion of the Purchase Price payable
in twenty-six months by aggregate amounts of $2.1667, down to a
minimum aggregate amount payable, before applicable offset or
indemnity, of $650,000 for $800,000 or less of Year 3 Agency
Profit. For example, if the Year 3 Deficiency equals $50,000,
the twenty-six month payment to be received by Seller would be
reduced by $108,325 to the aggregate amount payable, before
applicable offset or indemnity, of $1,408,332. If the Year 3
Deficiency equals or exceeds $400,000, the twenty-six month
payment to be received by Seller would be reduced by the maximum
amount of $866,667 to the minimum aggregate amount payable,
before applicable offset or indemnity, of $650,000.
D. Determination of Agency Profit.
(1) As soon as practicable after Year 1, Year 2
and Year 3, and in all events, no later than sixty-two (62) days
after each of Year 1, Year 2 and Year 3, respectively, Buyer or
HRH shall deliver to the Shareholders the determination of the
Year 1 Agency Profit , the Year 2 Agency Profit and the Year 3
Agency Profit ("Profit Statements"). In addition, the
Shareholders or any firm or certified public accountants
designated by the Shareholders (referred to below as the
"Seller's Reviewer") shall be permitted reasonable access to the
work papers, schedules, memoranda and other documents used in
preparing the Profit Statements.
(2) As soon as is reasonably practicable after
delivery to the Shareholders of the Profit Statements, and, in
all events, within thirty (30) days after such delivery, the
Shareholders shall give written notice to the Buyer either to the
effect that the Profit Statement is acceptable as prepared or
specifying any disagreement with respect to any item in such
document. In the event of any disagreement, the Shareholders, on
the one hand, and the Buyer, on the other hand, shall each make a
reasonable attempt to reconcile the difference; however, if they
are unable to reconcile all differences within a period of
fourteen (14) days after notification to the Buyer of such
disagreement, then the Shareholders, on the one hand, and the
Buyer, on the other hand, shall submit all questions in dispute
to one of the "Big Six" firms of certified public accountants
(other than Seller's Reviewer or the accounting firm normally
employed by Seller, HRH or Buyer, if applicable, and from a
neutral location) as may be agreed upon by the Shareholders, on
the one hand, and the Buyer, on the other hand, or, in default of
such agreement, as may be determined by the President at such
time of the American Institute of Certified Public Accountants,
which chosen accounting firm ("Umpire") shall, within a period of
thirty (30) days after submission, determine and report to the
Shareholders, on the one hand, and the Buyer, on the other hand,
upon all questions in dispute, and the report of the Umpire shall
be final, conclusive and binding on the Seller, Shareholders and
the Buyer. The fees charged by the Umpire shall be equally
divided between the Seller and the Buyer.
The Profit Statements, as prepared by the Buyer or HRH, or,
if varied by agreement between the Shareholders, on the one hand,
and the Buyer, on the other hand, or by the report of the Umpire,
then as so varied, shall be final, conclusive and binding on the
Seller, Shareholders and the Buyer.
E. No Commissions Counted Twice. Notwithstanding
anything in the foregoing to the contrary, the accounting for any
account for purposes of determining Year 1 Agency Profit, Year 2
Agency Profit and Year 3 Agency Profit shall be done in such a
manner as to prevent any commissions which are earned in one year
from being counted in two years and in such a manner as to
prevent two years of commissions from any such account as being
earned in any one year.
4. Allocation of Purchase Price. The Purchase Price shall
be allocated at Closing in the manner prescribed under Section
1060 of the Code and the regulations promulgated thereunder.
Buyer and Seller intend to allocate the Purchase Price, after
imputation of interest, among the Assets as follows:
Expiration Lists $4,858,000
Furniture, Fixtures
and Equipment $160,000
Goodwill Balance of Purchase Price
To the extent any payment based on Year 1 Agency Profit or Year 2
Agency Profit is less than the maximum payment called for herein,
Buyer and Seller shall first apply such reduction to goodwill.
If such reductions eliminate goodwill, then such reduction shall
next be applied to the value of the expiration lists. If any
payment is made pursuant to the Agreement in excess of the
Purchase Price, such excess shall be allocable to goodwill. All
adjustments shall be discounted to their present value at the
time of such adjustment by using the imputed interest percentage
which shall adjust the amount of imputed interest accordingly.
Buyer and Seller mutually covenant and agree that for tax
purposes each of them will report the purchase and sale
consummated hereunder on the basis of the foregoing allocation.
5. Closing. The closing ("Closing") shall be held at the
offices of Seller on ___________, 1996, at _______ _.m. ("Closing
Date").
6. Representations and Warranties of Seller and
Shareholders. Seller and Shareholders, jointly and severally,
hereby represent and warrant to the Buyer and HRH as follows:
A. Seller has good and marketable title to, and owns, the Assets
to be sold, assigned and transferred hereunder, and the Assets
are free and clear from any and all judgments, mortgages,
pledges, liens, conditional sales agreements, security interest,
options or other encumbrances or claims of every nature and kind
whatsoever.
B. Seller is a corporation duly organized, validly existing and
in good standing as a domestic corporation under the laws of the
State of Illinois; Seller possesses all necessary power to enter
into this Agreement and to consummate the transactions
contemplated hereby; the Shareholders and Board of Directors of
Seller have taken, or will have taken by the Closing Date, all
necessary corporate actions to authorize the execution and
delivery of this Agreement and the consummation of the
transactions contemplated hereby; and neither the execution and
delivery of this Agreement nor the consummation of the
transactions contemplated hereby will breach or violate any
provision of Seller's articles of incorporation or bylaws or of
any statute, ordinance, contract, agreement or other such
instrument to which Seller is a party or by which it is bound.
C. No notice, report or other filing is required to be submitted
to, and no consent, approval or authorization is required to be
received from, any governmental authority or other person or
entity in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated
hereunder.
D. Seller is not in default under any agreement which is being
assigned to Buyer hereunder.
E. There are no judgments, actions, suits, levies, attachments
or governmental or administrative agency proceedings pending or
threatened against or affecting the Assets or the transactions
contemplated by this Agreement, nor are there any such actions
pending or threatened between Seller and any of its clients or
insurance companies for which it acts as agent.
F. Seller is, and has been, in full compliance with all
licensing and other regulatory laws for the conduct of its
present operations (including, without limitation, its property
and casualty, personal lines and life businesses) and all of
Seller's employees or agents who write any type of insurance for
Seller (including the Shareholders) are and have been, in full
compliance with all licensing and other regulatory laws such that
Seller and Shareholders have no liabilities of any nature related
to any failure, whether intentional or inadvertent, to comply
with any such laws and which may attach to, or affect the use of,
the Assets by the Buyer or HRH. Attached hereto as Schedule 6.F
is a complete list of all insurance licenses held by Seller and
all states in which it is qualified to transact business.
G. Seller maintains errors and omissions coverage for all of its
operations in amounts which it deems to provide adequate
coverage; all such policies are described on Schedule 6.G
(carrier, retrodate, claims made or occurrence policy, deductible
and limits); and there are no claims against Seller, its agents,
employees or directors or any of the Shareholders.
H. Seller has no employment agreement with any employee which is
not terminable at will and no employee pension, profit-sharing,
or other retirement plan.
I. The list of Seller's liabilities as of the Pre-Effective
Moment, including liabilities for credit receivables and
liabilities to insurance companies for all lines of insurance
business outstanding as of the Pre-Effective Moment (which
liabilities shall be separately stated and referred to as "Credit
Receivables" and as "Insurance Company Payables"), to be attached
hereto at Closing (or as soon thereafter as is practicable) as
Schedule 6.I, will be complete and correct; and Seller and the
Shareholders are and will be responsible for all liabilities of
Seller of any type whatsoever accrued as of the Effective Date
and agree to indemnify Buyer and HRH to the extent either pays
any such liabilities, including without limitation any costs
incurred in paying such liabilities.
J. Seller and Shareholders understand and acknowledge that the
HRH Stock to be received pursuant to this Agreement is registered
and is subject to Rule 145 of the Securities Exchange Commission;
the HRH Stock is being acquired for investment purposes only and
not with a view to distribution or resale; any sale or other
disposition of the HRH Stock shall be made pursuant to the
regulations promulgated under Rule 145 or other applicable
federal or state securities laws and in compliance with such laws
and regulations.
K. Except as disclosed on Schedule 6.K, there are no maintenance
or other continuing agreements affecting or concerning the use of
the Assets.
L. Seller has timely filed all tax returns required of it and
timely paid all tax liabilities owed by it, such that no tax
liabilities to Buyer or HRH of any kind whatsoever could be
attached to or associated with the Assets.
M. Seller and Shareholders have caused (or will cause) to be
delivered to Buyer true and complete copies of Seller's federal
and state income tax returns and financial statements for the
most recent three years (compiled or audited, as the case may
be). Seller and Shareholders shall cause any newly-prepared
financial information (including interim management reports) to
be delivered promptly to the Buyer.
Each of the foregoing financial statements is or will be
true and correct, is or will be in accordance with the books and
records of Seller, presents fairly, or will present fairly, the
financial condition and results of operations of Seller as of and
for the periods indicated, and has been prepared, or will be
prepared, in accordance with generally accepted accounting
principles consistently applied throughout the periods covered by
such statements. All such financial statements did not contain
and will not contain any untrue statement of any material fact
nor omitted to state, or will omit to state, any material fact
required to be stated to make such financial statements not
misleading.
N. Except as disclosed on Schedule 6.N, there are no financing
statements or other security interests of any kind filed or
required to be filed against the Assets or affecting the use of,
or title to, the Assets ("Financing Statements"). Except as
further disclosed on Schedule 6.N, there are no deferred money
purchase notes related to the Seller's acquisition of any portion
of the Assets ("Notes"). Any such liabilities related to the
Financing Statements or Notes can and will be paid off at or
prior to Closing, except as further detailed on Schedule 6.N.
O. Except as disclosed on Schedule 6.0, Seller and Shareholders
have not employed any broker or finder for the purposes of
completing the transactions contemplated herein or for any
transaction similar to 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.
P. Except for the transactions contemplated herein, neither
Seller nor Shareholders have entered into any agreement for the
sale of the Assets (or any portion thereof) or for the direct or
indirect sale or exchange of Seller.
Q. Seller and Shareholders have received a copy of HRH'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.
R. Shareholders and Seller understand and acknowledge that
errors and omissions prior to the Effective Date remain their
risk exclusively and are not insured under Buyer's or HRH's
insurance program, and have been advised to, and will, take out
insurance, effective as of the Effective Date to insure each
Shareholder and the Seller for claims arising under errors and
omissions occurring prior to the Effective Date; and when such
insurance is purchased, Shareholders and Seller will furnish all
such certificates of insurance to Buyer and HRH as soon as is
practicable.
S. Except as identified in Schedule 6.S, all relations between
Seller and the present customers of Seller are good, and
Shareholders have no knowledge of any proposed termination of
any insurance account presently written or serviced by Seller.
Also, except as otherwise set forth in Schedule 6.S, all customer
accounts, including, without limitation, those accounts with
respect to which Seller financed any premiums are current. For
purposes of this Section, the terms "insurance account" and
"customer account" shall be limited to accounts which generate
aggregate annual income (commissions and fees) of $25,000 or
more.
T. The census data for all of Seller's employees as of the date
hereof, in the form provided in Schedule 6.T, is true and
complete in all material respects.
U. The foregoing representations and warranties shall survive
the Closing.
7. Representations and Warranties of Buyer and HRH. Buyer and
HRH hereby represent and warrant to the Seller and the
Shareholders as follows:
A. Buyer is duly organized, validly existing and in good
standing as a domestic corporation under the laws of the State of
Illinois; HRH is duly organized, validly existing and in good
standing as a domestic corporation under the laws of the
Commonwealth of Virginia; each has the corporate power to enter
into the transactions hereby contemplated.
B. This Agreement and the transactions contemplated hereby will
not breach or violate any provision of Buyer's or HRH's articles
of incorporation or bylaws.
C. Neither Buyer nor HRH has employed a broker or finder for the
purposes of completing the transactions contemplated hereby.
D. The foregoing representations and warranties shall survive
the Closing.
8. Conditions Precedent.
8.1 Conditions Precedent to Performance by Buyer and HRH. The
obligation of Buyer and HRH to perform under this Agreement is
contingent upon the following conditions being fulfilled at or
prior to Closing (or the Effective Date, where stated to be
applicable):
A. At or prior to the Closing, each of the Shareholders shall
have entered into an Employment Agreement and Covenant Not to
Compete with Buyer, in form and substance as set forth in
Schedule 8.1.A attached hereto.
B. At or prior to the Closing, Robert Avon, James Reier, Jon
Pohlmann, Chris Slattery and Brent McCormick shall have entered
into an Employment Agreement with Buyer, in form and substance as
set forth in Schedule 8.1.B attached hereto.
C. At or prior to the Closing, Buyer and HRH shall have received
Boseman, Neighbour, Patton & Noe, counsel to Seller, an opinion,
in form and substance as set forth in Schedule 8.1.C attached
hereto, dated as of the Closing Date, that the representations
and warranties contained in Sections 6.A, 6.B, 6.C, 6.D, 6.E, and
6.F made by Seller and Shareholders to Buyer and HRH are true,
correct and complete and that the transfer of the Assets has been
completed without any liability to Buyer or HRH for sales or use
taxes or for failure to comply with the Bulk Sales Act.
D. The Shareholders and Seller shall have complied in all
material respects with all representations, warranties,
conditions, covenants and agreements required under this
Agreement to be performed or complied with by Seller or the
Shareholders on or before the Closing Date; and the Shareholders
and Seller shall have delivered to the Buyer a Certificate to the
foregoing effect, dated the Closing Date, in form and substance
as set forth in Schedule 8.1.D attached hereto.
E. No suit, action or proceeding, or governmental investigation,
against or concerning, directly or indirectly, Seller, or any of
Seller's 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 the counsel for
the Buyer, renders it impossible or inadvisable for the Buyer to
consummate or cause to be consummated the transactions
contemplated by this Agreement.
F. 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 the Buyer.
G. To the extent desired by the Buyer, the Buyer shall have
obtained a statement in writing from each of the insurance
companies identified (or to be identified) in Schedule 6.I of
this Agreement, in form satisfactory to the Buyer and Buyer'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 recognize Buyer, its successors and assigns,
as its agent under the existing agency contract between such
company and Seller or that it will enter into a substantially
similar agency contract with Buyer, its successors and assigns.
H. There shall have been no material adverse change in Seller's
business, business prospects, assets and properties, or goodwill
between the date of the execution of this Agreement and the
Closing Date. For purposes hereof, "material adverse change"
means, without limitation, the loss of any one account generating
an aggregate annual commission income of $5,000 or more.
I. The Buyer shall receive certified copies of resolutions of
the Board of Directors and Shareholders of the Seller, to the
extent deemed necessary by, and in form satisfactory to, counsel
for the Buyer, authorizing the execution and delivery of this
Agreement by the Seller and the consummation of the transactions
contemplated hereby.
J. At or prior to the Closing, unless waived in writing by HRH,
all of the liabilities listed or required to be listed in
Schedule 6.I as Insurance Company Payables and all of the
liabilities listed or required to be listed in Schedule 6.N shall
have been satisfied in the manner prescribed in Section 12,
infra.
K. At or prior to the Closing, each of the Shareholders, and, if
applicable, all those persons designated in Section 8.1.B, above,
shall have obtained all licenses and other regulatory approvals
necessary to operate lawfully the property and casualty, personal
lines and life insurance businesses (in a manner similar to the
present conduct of such businesses by Seller) to be conducted by
Buyer and each of its agents, solicitors and employees.
L. At or prior to the Closing, the lease for Seller's premises
shall have been amended to the satisfaction of HRH and Buyer and
been assigned to Buyer, together with an acceptable estoppel
certificate.
M. Subject to fulfillment of certain conditions precedent by HRH
and Buyer, the board of directors of Seller will recommend to the
Shareholders that Shareholders adopt this Agreement. Seller
agrees to submit this Agreement to the Shareholders for adoption
by unanimous written consent with written waiver of notice of the
terms of this Agreement prior to the Effective Date, but only
after delivery by HRH to the Shareholders and the Seller of an
amended or supplemented S-4 registration statement for HRH's
common stock to be issued pursuant to this Agreement and after
the Shareholders have had an effective opportunity to review such
prospectus.
N. [This Section is intentionally left blank.]
O. The Management Incentive Agreement attached hereto as
Schedule 8.1.O shall have been executed by all applicable
parties.
8.2 Conditions Precedent to Performance by Seller and
Shareholders. The obligation of the Shareholders and the Seller
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 the
Shareholders and the Seller:
The registration statement on Form S-4 under the Securities Act
of 1933 referred to in Section 8.1.M 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 the Shareholders and the Seller for their review and
subsequent approval of this Agreement and the transactions
contemplated thereby.
9. Covenants of Seller and Shareholders. Seller and
Shareholders covenant and agree that, except as otherwise
consented to in writing by Buyer and HRH:
A. Regular Course of Business. Prior to the Transfer Date,
Seller will carry on its business diligently and in the ordinary
course consistent with past management practices, except as
otherwise contemplated by this Agreement.
B. Restricted Activities and Transactions of Seller. Prior to
the Transfer Date, except as contemplated by this Agreement,
Seller will not engage in any one or more of the following
activities or transactions:
(1) except for indebtedness in the ordinary
course of business, issue, sell, deliver or agree to issue, sell
or deliver any stock, bonds or other corporate securities of
which Seller is the issuer (whether authorized and unissued or
held in treasury), or grant or issue or agree to grant or issue
any options, warrants or other rights calling for the issue
thereof;
(2) borrow or agree to borrow any funds or
voluntarily incur, or assume or become subject to, whether
directly or by way of guarantee or otherwise, any obligation or
liability (absolute or contingent) except obligations and
liabilities incurred in the ordinary course of business;
(3) except in the ordinary course of business,
mortgage, pledge or encumber any part of its assets, tangible or
intangible;
(4) sell or transfer, or agree to sell or
transfer, any substantial part of its assets, property or rights;
or cancel, or agree to cancel, any substantial debts or claims;
(5) except in the ordinary course of business,
enter, or agree to enter, into any agreement or arrangement
granting any preferential rights to purchase any of the assets,
property, or rights of Seller or requiring the consent of any
party to the transfer and assignment of any such assets, property
or rights;
(6) except in the ordinary course of business,
make or permit any amendment or termination of any material
contract, agreement or license to which it is a party;
(7) make any material change in any
profit-sharing, bonus, deferred compensation, insurance, pension,
retirement or other employee benefit plan, payment or
arrangement, except as required by law;
(8) except for minor acquisitions or
dispositions effected in the ordinary course of business, merge
or consolidate with any other corporation, acquire control of any
other corporation or business entity, or take any steps incident
to or in furtherance of any of such actions whether by entering
into an agreement providing therefor or otherwise;
(9) make any material alteration in the manner
of keeping its books, accounts or records or in the accounting
practices therein reflected; or
(10) except for transactions not referred in
clauses (1) - (9), above, and except in the ordinary course of
business, enter into any other material contract, agreement,
course of action or transaction.
C. Confidentiality. Seller will, and will use its reasonable
efforts to cause its authorized representatives (including,
without limitation, the Shareholders) to, hold in strict
confidence and not disclose to any other party without the prior
written consent of Buyer and HRH, all information received by
them from Buyer or HRH in connection with the transactions
contemplated hereby, and the terms of this Agreement, except such
information may be disclosed (i) where necessary to any
regulatory authorities or governmental agencies, (ii) if required
by court order or decree or applicable law, (iii) if it is
publicly available or (iv) if it is otherwise contemplated
herein.
D. Consents. Seller will use its best efforts to obtain or take
at the earliest practicable date and in any event before Closing,
all consents, estoppel certificates and filings necessary to the
consummation of the transactions contemplated hereby which are
necessary to be obtained by Seller or which are reasonably
requested by Buyer or HRH.
E. No Change in Ownership. Between the date hereof and the
Transfer Date, Seller and Shareholders shall use their best
efforts to ensure that there shall be no change in ownership of
Seller and no change in the interests of Seller held by each
Shareholder.
F. Reasonable Efforts. Between the date hereof and the
Transfer Date, Seller and Shareholders shall use their reasonable
efforts (i) to fulfill the conditions set forth in Section 8.1
hereof and (ii) to cause the representations and warranties under
Section 6 hereof to be and to remain true and correct.
G. Winding Up. Seller's conduct of business shall be wound up
and concluded as soon as practicable with the result being that
all such business shall have been transferred to Buyer. All
costs of winding down, including, without limitation, the
termination or freezing of Seller's benefit plans, shall be borne
by Seller; however, to the extent HRH aids Seller in any such
benefit plan work, no costs shall be imposed on Seller by HRH for
its work.
H. Nonsolicitation Covenant. Each of the Shareholders, by
signature hereto, covenants that he shall not for a period of
five (5) years after the Effective Date, directly or indirectly,
except on behalf of Buyer, its successors or assigns, solicit or
accept risk management, insurance or bond business from any of
the customers of Seller 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
Agreement, is integral hereto and is independent of any other
provision herein, (ii) that this covenant is reasonably necessary
for the protection of Buyer'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 Buyer. 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 Buyer to
obtain the maximum permissible benefit from this covenant.
10. Covenants of Buyer and HRH. Buyer and HRH covenant and
agree that, except as otherwise consented to in writing by Seller
and Shareholders:
A. Confidentiality. Buyer and HRH each will, and each will use
its reasonable efforts to cause its authorized representatives
to, hold in strict confidence and not disclose to any other party
without the prior written consent of Seller and Shareholders, all
information received by them from Seller and Shareholders in
connection with the transactions contemplated hereby, and the
terms of this Agreement, except such information may be disclosed
(i) where necessary to any regulatory authorities or governmental
agencies, (ii) if required by court order or decree or applicable
law, (iii) if it is publicly available or (iv) if it is otherwise
contemplated herein.
B. Reasonable Efforts. Between the date hereof and the
Transfer Date, Buyer and HRH shall use their reasonable efforts
(i) to fulfill the conditions set forth in Section 8.2 hereof and
(ii) to cause the representations and warranties under Section 7
hereof to remain true and correct.
11. Accounts and Other Receivables. Seller and Buyer agree
that all accounts receivable of Seller as of the Pre-Effective
Moment (including commissions earned but not paid on business
billed by Seller which was written and having an effective date
prior to the Effective Date, but excluding direct bill
commissions not received by Seller prior to the Effective Date)
to be attached hereto at Closing (or as soon thereafter as is
practicable) as Schedule 11 belong to Seller and shall be paid to
Seller in the manner described below. Buyer shall collect for a
period of six months after the Effective Date all receivables
paid to it which belong to Seller as determined by specific
invoice. If there is no invoice enclosed or to which such
payment is attributable and neither Seller nor Buyer is aware of
a dispute as to the oldest balance of such account, then each
payment shall be applied to the oldest balance of that account
first. Not later than twenty (20) days after the end of any
month, Buyer shall remit to Seller all receivables so collected
for the Seller, or if the escrow account to be established
pursuant to Section 12 is underfunded, then, and to such extent
to such escrow account. This arrangement shall continue until
(i) all such existing receivables as of the Pre-Effective Moment
have either been paid to Seller or been determined by Seller to
be bad debts or (ii) six months after the Effective Date,
whichever occurs first. If all such receivables of Seller's have
not been collected or determined by Seller to be bad debts by
March 1, 1997, any remaining accounts shall be the sole
responsibility of Seller to collect. Seller agrees that it will
not litigate any accounts receivable claim without the prior
written consent of Buyer and HRH.
12. Accounts Payable and Other Liabilities of Seller.
Seller and Buyer mutually acknowledge and agree that Buyer is not
assuming any of Seller's accounts payable or other liabilities of
any kind whatsoever, whether arising prior to, on or after the
Effective Date. A list with Seller's Insurance Company Payables
is to be attached hereto as Schedule 6.I. Seller and
Shareholders covenant and agree to pay all liabilities and
payables owed by Seller which are related to its insurance
business as they become due, other than any such liabilities or
payables with respect to which there exists a reasonable basis to
dispute the legal obligation to pay such liability or account
payable. To ensure full payment of Seller's liabilities, Buyer
and Seller agree that an amount equal to the sum of 120% of the
amount listed or required to be listed on Schedule 6.I as
Insurance Company Payables, plus 100% of the amount listed or
required to be listed on Schedule 6.I as Credit Receivables plus
100% of the amount listed or required to be listed on Schedule
6.N as Notes or Financing Statements shall be drawn from the cash
at Closing (including cash to be paid to each of the Shareholders
for his covenant not to compete, if necessary) or shall be
collected from the receivables of Seller in due course after
Closing and held in co-escrow in an interest-bearing account in
favor of Seller at a financial institution of Seller's choosing
(which institution shall be reasonably available to HRH and
Buyer, and, for the choice of which, neither HRH nor Buyer shall
be liable in any way to Seller or Shareholders) and drawn upon by
an officer of Buyer and the President of Seller ("Escrow Agents")
to extinguish Seller's Insurance Company Payables, Credit
Receivables and any other liabilities, whether listed or not and
to pay off the Notes and the Financing Statements. Receivables
of Seller collected by Buyer after the Effective Date may be
deposited into the Escrow Account to the extent the Escrow
Account is underfunded for as long as is necessary to extinguish
the debts of Seller contemplated herein. When all such
liabilities required to be listed as Insurance Company Payables,
Credit Receivables, Notes or Financing Statements, or at Buyer's
discretion, when all such liabilities listed as Insurance Company
Payables, Credit Receivables, Notes or Financing Statements other
than those for which there is a reasonable basis to dispute
Seller's legal obligation to pay, have been paid or been adjusted
and satisfied, the Escrow Agents shall release the balance of the
cash (including interest accrued) to Seller (and Shareholders, if
applicable). Evidence of such payment shall be in the form of a
cancelled check or written receipt from the creditor or a
statement that all amounts owed or accrued up to the Effective
Date have been paid. The release of the Balance of the cash to
Seller (and Shareholders, if applicable) shall not relieve Seller
of its obligation to pay any of its liabilities, including any
contested liabilities should Seller be found liable.
13. Indemnification of Buyer and HRH. Seller and
Shareholders covenant and agree that each shall jointly and
severally indemnify and hold Buyer and HRH harmless from any and
all damages or expenses (including legal costs and attorneys'
fees) which Buyer or HRH may suffer due to any breach by Seller
or Shareholders of any representations, warranties, conditions or
covenants hereunder. In addition, Seller and Shareholders shall
indemnify and hold Buyer and HRH harmless from any damages or
expenses (including legal costs and attorneys' fees) which either
may suffer or incur as a result of any claim which relates back
on or prior to the Effective Date and which may be asserted
against Buyer or HRH or any legal proceeding in which either may
be made a party as a result of the purchase of the Assets, as a
result of the conduct or operation of its business using the
Seller's Assets prior to the Closing or as a result of Closing
prior to the Effective Date of the transfer of the Assets.
Buyer's Deferred Obligations contain a right of offset to secure
this indemnity provided herein.
14. Miscellaneous.
A. Binding Nature, Assignments. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto
and their respective heirs, guardians, personal representatives,
successors and assigns. No amendment, modification, termination
or waiver of any provision of this Agreement shall be effective
unless the same shall be in writing and signed by all parties
hereto.
B. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF ILLINOIS.
C. Headings and Exhibits. The headings of the various Sections
herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof. All Schedules
and other documents referred to in this Agreement are an integral
part of this Agreement.
D. Notices. Any notices or other communications
required or permitted hereunder shall be in writing and delivered
at the addressesdesignated below, or mailed by overnight mail,
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows, or to such other address or
addresses as may hereafter be furnished by one party to the other
in compliance with the terms hereof:
If to Buyer or HRH, to:
Mr. Robert H. Hilb, President
Hilb, Rogal and Hamilton Company
4235 Innslake Drive
P.O. Box 1220
Glen Allen, Virginia 23060-1220
With a copy to:
Walter L. Smith, Esquire
Hilb, Rogal and Hamilton Company
4235 Innslake Drive
P.O. Box 1220
Glen Allen, Virginia 23060-1220
If to Seller or Shareholders, to:
Mr. Richard J. Miles, President
Bartlett Agency, Inc.
P. O. Box 970
Moline, Illinois 61266-0970
With a copies to:
Mr. Douglas A. Yoh
Marsh, Berry and Company, Inc.
7466 Auburn Road
Concord, Ohio 44077
Gary L. Sissel, Esquire
Boseman, Neighbour, Patton & Noe
Fifth Avenue Building
1630 Fifth Avenue
P. O. Box 659
Moline, Illinois 61266-0659
All such notices and other communications shall be effective when
delivered at the designated addresses or deposited in the mails
in conformity with the provisions hereof.
E. Public Releases. Buyer and Seller agree that HRH may
publicly release the announcement attached as Schedule 14.E
concerning the purchase of the Assets.
F. Casualty Loss. The Seller shall bear the risk of loss,
destruction, or damage to the Assets caused by fire or other
casualty through Closing Date. Thereafter such risk shall shift
to the Buyer.
G. Payment of Fees. Buyer, Seller, HRH and
Shareholders shall each pay their own attorneys' fees and other
expenses relating to this transaction.
H. Further Instruments and Actions. The parties shall execute
and deliver such other documents and instruments as may be
reasonably necessary (including, without limitation, obtaining
the signatures of spouses) and shall take such further action as
may be necessary or appropriate, to carry out the terms and
purposes of this Agreement.
I. Right to Modify or Amend. The parties may at any time by
mutual agreement modify or amend this Agreement in any manner as
agreed upon by them in writing.
J. Termination. At any time prior to the Closing, the parties
may by mutual written agreement terminate this Agreement. In the
event this Agreement is so terminated, the parties shall have no
liability to each other hereunder.
K. Complete Agreement. This Agreement and the Schedules hereto
constitute the entire Agreement between the parties hereto with
respect to the transactions contemplated herein. No
representation, promise or inducement not included or required to
be included herein shall be binding upon any party hereto.
L. Execution and Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an
original, but all of which shall represent one agreement.
M. Severability. Any provision of this Agreement which is
invalid, illegal or unenforceable shall be ineffective to the
extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof.
N. Understanding of Agreement. Seller, Shareholders, HRH and
Buyer acknowledge that each has read and understood the
provisions of this Agreement, and that this Agreement entered
into voluntarily and after having had all opportunities to seek
such advice as each may have wished to receive.
O. Later Acquisitions. Seller and Shareholders acknowledge
that a later acquisition by Buyer of another insurance agency
could affect the determination of Year 1, Year 2 and Year 3
Agency Profit and agree to cooperate with Buyer and HRH in making
any adjustments as necessary to this Agreement to carry out its
intent. Prior to September 1, 1999, HRH may not cause Buyer to
make any acquisitions affecting Year 1, Year 2 or Year 3 Agency
Profits unless either Mr. Miles or Mr. Bracke has consented
thereto.
P. Case and Gender. Wherever required by the context of this
Agreement, the singular and plural cases and the masculine,
feminine and neuter genders shall be interchangeable.
Q. HRH Policy on Post-Acquisition Cash Held by Buyer. Seller
and Shareholders acknowledge that they have been informed of the
policy of HRH not to allow cash and cash equivalents in excess of
what HRH 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, Seller and
Shareholders acknowledge that HRH, subject to any applicable
state law restrictions, will cause any such excessive amounts of
cash and equivalents to be dividended to HRH, that such dividends
would reduce interest earnings attributable to Buyer after the
Effective Date, and that HRH has the right to declare such
dividends.
R. Nonwaiver. The waiver by HRH or Buyer of any provision of
this Agreement shall not operate or be construed as a waiver of
any other provisions of this Agreement.
WITNESS the following signatures and seals:
BUYER:
HILB, ROGAL AND HAMILTON COMPANY
OF THE QUAD CITIES
By______________________________________
Its _____________________________________
SELLER:
BARTLETT AGENCY, INC.
By ______________________________________
Its _____________________________________
HRH:
HILB, ROGAL AND HAMILTON COMPANY
By______________________________________
Its _____________________________________
SHAREHOLDERS:
_________________________________________
Richard J. Miles
_________________________________________
Thomas K. Bracke
_________________________________________
John J. Barrett
_________________________________________
Bradley T. Boyle
Guaranty:
The obligation of Buyer to make any payments to Seller is hereby
guaranteed by HRH to the same extent as the Buyer is obligated to
make any such payments. In seeking to enforce any such guaranty,
Seller need not exhaust all collection efforts or remedies
against Buyer first.
HILB, ROGAL AND HAMILTON COMPANY
By______________________________________
Its ____________________________________
