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 THE ACQUISITION OF ALL OF THE CAPITAL STOCK
OF 2992575 LTD. WHICH OWNS ALL OF THE CAPITAL STOCK OF
DEPRES HARLAND & ASSOCIATES INSURANCE & SURETY BROKERS, LTD.
The following information is furnished to supplement and complete the
information contained in the Prospectus dated February 12, 1992 ("Prosp-
ectus"), relating to the offering of shares of the Common Stock of Hilb,
Rogal and Hamilton Company ("Company") and certain other consideration to
the shareholders of 2992575 Ltd., which owns 100% of the capital stock of
Depres Harland & Associates Insurance & Surety Brokers, Ltd. ("Depres"), in
exchange for 100% of the capital stock of 2992575 Ltd.
Terms of the Transaction
(a) (1) Effective on or about March 1, 1996, Hayhurst Elias Dudek,
Inc. ("HED"), a wholly-owned subsidiary of Hilb, Rogal and Hamilton
Company of Canada ("HRH Canada") which is a wholly-owned subsidiary of
the Company will consummate a Stock Purchase Agreement for all of the
capital stock of 2992575 Ltd. ("Stock Purchase Agreement") whereby the
shareholders of this entity will receive shares of Common Stock of the
Company valued at CDN $600,000 based on the average closing price on the
New York Stock Exchange for each of the ten consecutive trading days with
the tenth and final trading day being the last trading day which is ten
trading days prior to closing date ("Shares") plus cash of CDN $400,000
plus three future cash payments subject to (i) all necessary corporate
approvals of each corporation, (ii) all authorizations, consents and
approvals of all federal, state, local and foreign governmental agencies
and authorities required to be obtained, and (iii) the satisfaction of
all other conditions precedent as outlined in the Stock Purchase
Agreement (see Exhibit 2.25). The purchase price will be adjusted after
closing based upon the final determination of net worth as defined in
the Agreement of Purchase. The future cash payments will be made based
upon revenues realized in the subsequent three year period which
may increase the purchase price up to a maximum of CDN $316,668 in each
year.
Immediately after the completion of the transfer of the 2992575 Ltd.
stock to HED, 2992575 Ltd., Depres and HED will be amalgamated pursuant
to the provisions of the Canada Corporation Act ("the Amalgamation") to
form Hayhurst Elias Dudek, Inc., a surviving corporation qualified and
validly existing under the Laws of Canada ("the Surviving Corporation").
After the completion of the Amalgamation, the Surviving Corporation will
be a wholly-owned subsidiary of HRH Canada.
2992575 Ltd. has no other significant assets and liabilities other
than the investment in Depres. Accordingly, financial information and
other data included herein is limited to that of the operations of Depres.
(2) The acquisition of Depres by the Company has been
agreed upon because the Company is engaged in the business of owning
insurance agencies and because the shareholders of Depres have determined
that a sale to the Company is beneficial to the growth of Depres' insurance
operations in Canada.
Depres' operations will add approximately 12 employees and CDN
$1,000,000 of revenues to the Company.
(3) The stock issued in the transaction will be shares of
Company Common Stock, no par value, valued at CDN $600,000 based on the
average closing price on the New York Stock Exchange for each of the ten
consecutive trading days with the tenth and final trading day being the
last trading day which is ten trading days prior to closing date. For a
description of the Company Common Stock refer to the section entitled
"Description of Common Stock" in the Prospectus.
(4) There are no material differences between the rights of
the security holders of Depres and the rights of security holders of the
Company.
(5) The acquisition will be treated using the purchase method
of accounting for acquisitions under generally accepted accounting
principles.
(6) The Surviving Company will be included in a Canadian
tax return of the Canadian operations as of the effective date. The
acquisition will be recorded as a tax free exchange.
(c) The acquisition agreement is incorporated into this supplement
as Exhibit 2.25.
Pro Forma Financial Information
See attached - Schedule A
Material Contracts with Seller
There have been no material contracts between the Company and
2992575 Ltd. or Depres prior to the proposed effective date of the
Agreement of Merger.
Information with Respect to
Depres Harland & Associates Insurance & Surety Brokers, Ltd.
Depres was founded in 1985. Depres is a general insurance and surety
brokerage agency with its principal offices located in Winnipeg, Manitoba,
Canada.
Common Stock and Dividend Data
There is no established public trading market for the stock of 2992575
Ltd. or Depres. 2992575 Ltd. has four shareholders and owns 100% of the
Capital Stock of Depres.
Dividends paid by Depres have totalled CDN$115,000, CDN$118,686
and CDN$39,319 during the fiscal years ended May 31, 1995, 1994 and 1993,
respectively. There have been no dividend distributions by Depres since
May 31, 1995.
Shareholder Information
(a) (1) WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY.
(2) & (3) 2992575 Ltd. and Depres have agreed to submit the
Stock Purchase Agreement to its shareholders for adoption by unanimous
written consent after receipt and review of this supplement to the
Prospectus. Since the Stock Purchase Agreement requires that the
transaction can be completed only with the unanimous consent of the
shareholders of the companies being acquired, 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 in the proposed transaction.
(6) Depres has 40,000 authorized shares of common stock, no
par value of which there are 1,000 shares issued and outstanding. In
addition, Depres has 4,000 authorized shares of preferred stock of which
there are 100 shares issued and outstanding.
2992575 Ltd. has 2,000 5,000, 2,000 and 10,000 authorized shares of
Class A Common Stock, Class A Preferred Stock, Class B Common Stock and
Class B Preferred Stock, respectively. Shares issued and outstanding
are as follows:
Class A Common Stock Class B Preferred Stock
Number Percentage Number Percentage
George R. Depres 560 70% 10,000 100%
Robert R. Depres 80 10%
George A. Peters 80 10%
Nelson W. Hoe 80 10%
--- ---- ------ ----
800 100% 10,000 100%
=== ==== ====== ====
(7) Upon completion of the proposed acquisition, no share-
holder of 2992575 Ltd. or Depres will be serving as a director or
executive officer of the registrant.
Experts
The financial statements of Depres Harland & Associates Insurance &
Surety Brokers, Ltd. as of and for the fiscal year ended May 31, 1995
appearing in this supplement to the Amended Prospectus dated February 12,
1992, and in the Registration Statement have been audited by Knowles,
Warkentin & Bridges, independent auditors, as set forth in their reports
thereon appearing elsewhere herein and are included in reliance upon such
reports given on the authority of such firm as experts in accounting and
auditing.
Hilb, Rogal and Hamilton Company
Date of this Supplement: February 26, 1996
<PAGE>
SCHEDULE A - PRO FORMA CONDENSED
FINANCIAL STATEMENTS (UNAUDITED)
The following pro forma condensed consolidated balance sheet as of
September 30, 1995 and the pro forma consolidated income statements for the
nine months ended September 30, 1995 and the years ended December 31,
1994, 1993 and 1992 give effect to the pooling-of-interests merger with
R. E. Lipman Insurance Brokers, Inc. ("Lipman," effective on May 1, 1995);
the proposed acquisition of Depres Harland & Associates Insurance & Surety
Brokers, Ltd. ("Depres," expected to be effective on or about March 1,
1996); and the acquisition of certain assets and liabilities of three
insurance agencies purchased in 1996, 13 insurance agencies purchased in
1995 and four insurance agencies purchased in 1994. The pro forma
information is based on the historical financial statements of Hilb, Rogal
and Hamilton Company and the acquired agencies, giving effect to the
transactions under the purchase method or pooling-of-interests method of
accounting and the assumptions and adjustments in the accompanying notes to
the pro forma financial statements. The pro forma consolidated income
statements give effect to the purchase method acquisitions and proposed
purchase method acquisitions as if they had occurred on January 1, 1994,
and the pooling-of-interest as if it had occurred prior to all periods
presented. The pro forma condensed consolidated balance sheet gives
effect to the business combinations which occurred or are probable
of occurring subsequent to September 30, 1995, as if they had occurred
before September 30, 1995.
The pro forma statements have been prepared by management based
upon the historical financial statements of Hilb, Rogal and Hamilton
Company, Depres, Lipman 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)
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
HILB, ROGAL ACQUISITIONS PRO FORMA ADJUSTMENTS PRO FORMA
AND HAMILTON (PURCHASES) FOR PURCHASE ACQUISITIONS CONSOLIDATED
COMPANY
==============================
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS $18,406,721 $361,305 (36,539)(1) (1,357,400)(2) $17,374,087
INVESTMENTS 15,187,654 15,187,654
RECEIVABLES & OTHER 55,042,632 996,080 (249,937)(1) 55,788,775
------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 88,637,007 1,357,385 N/A (1,643,876) 88,350,516
INVESTMENTS 4,550,000 4,550,000
PROPERTY & EQUIPMENT 13,269,289 146,580 (146,580)(1) 59,400 (3) 13,328,689
INTANGIBLE ASSETS 61,207,058 122,390 (122,390)(1) 2,736,560 (3) 63,943,618
OTHER ASSETS 5,124,817 218,703 0 0 5,343,520
------------------------------------------------------------------------------------
TOTAL ASSETS $172,788,171 $1,845,058 N/A $883,114 $175,516,343
====================================================================================
LIABILITIES & EQUITY:
PREMIUMS PAYABLE-INS CO $75,750,131 $979,063 $76,729,194
OTHER ACCRUED LIABILITIES 16,527,253 217,783 16,745,036
------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 92,277,384 1,196,846 N/A 0 93,474,230
LONG-TERM DEBT 8,843,045 163,788 (88,767)(1) 8,918,066
OTHER LONG-TERM LIAB. 7,621,649 17,745 456,560 (3) 8,095,954
SHAREHOLDERS' EQUITY
COMMON STOCK 36,344,803 6,244 (6,244)(4) 982,000 (2) 37,326,803
RETAINED EARNINGS 27,638,984 460,435 (460,435)(4) 27,638,984
CUMULATIVE TRANSLATION AD 62,306 62,306
------------------------------------------------------------------------------------
64,046,093 466,679 N/A 515,321 0 65,028,093
------------------------------------------------------------------------------------
$172,788,171 $1,845,058 N/A $883,114 $175,516,343
====================================================================================
</TABLE>
(1) TO ADJUST FOR ASSETS AND LIABILITIES NOT ACQUIRED.
(2) TO REFLECT PURCHASE PRICE OF ASSETS AND LIABILITIES ACQUIRED SUBSEQUENT TO
SEPTEMBER 30, 1995 IN PURCHASE TRANSACTIONS.
(3) TO ADJUST FOR ASSET VALUATIONS UNDER PURCHASE ACCOUNTING.
(4) TO ELIMINATE SHAREHOLDERS' EQUITY OF ACQUIRED ENTITIES.
<PAGE>
HILB, ROGAL & HAMILTON COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1995
-----------------------------------------------------------------------------
HILB, ROGAL ACQUISITIONS PRO FORMA ADJUSTMENTS PRO FORMA
& HAMILTON CO. (PURCHASES) FOR PURCHASE CONSOLIDATED
ACQUISITIONS
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
COMMISSIONS & FEES $106,995,550 $9,429,580 $116,425,130
INTEREST INCOME 1,519,707 116,310 ($284,098) (1) 1,351,919
OTHER 3,907,591 107,098 (79,990) (2) 3,934,699
-----------------------------------------------------------------------------
TOTAL REVENUES 112,422,848 9,652,988 (364,088) 121,711,748
-----------------------------------------------------------------------------
OPERATING EXPENSES:
COMPENSATION AND BENEFITS 61,872,170 5,186,315 (442,931) (2) 66,615,554
OTHER OPERATING EXPENSES 27,278,034 4,339,615 (190,488) (2) 31,427,161
AMORTIZATION OF INTANGIBLES 5,182,985 151,295 398,202 (3) 5,732,482
INTEREST EXPENSE 324,126 137,584 (68,346) (4) 393,364
-----------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 94,657,315 9,814,809 (303,563) 104,168,561
-----------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 17,765,533 (161,821) (60,525) 17,543,187
INCOME TAXES 7,138,296 (88,938) (5) 7,049,358
-----------------------------------------------------------------------------
NET INCOME $10,627,237 ($161,821) $28,413 $10,493,829
=============================================================================
NET INCOME PER COMMON SHARE $0.73 $0.71
=============================================================================
SHARES ISSUED AND OUTSTANDING 14,173,064 72,848 14,245,912
-----------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES
OUTSTANDING 14,616,707 204,110 14,820,817
-----------------------------------------------------------------------------
</TABLE>
(1) TO ADJUST HISTORICAL INTEREST AND TO ADJUST FOR LOST INTEREST EARNED FROM
CASH PAID FOR ACQUIRED AGENCIES.
(2) TO REFLECT ADJUSTMENTS TO HISTORICAL AMOUNTS TO REFLECT ADJUSTED
COMPENSATION, DEPRECIATION EXPENSE, RENT EXPENSE, ELIMINATION OF
NONRECURRING ITEMS, 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, 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 $25,678,340 $158,931,936
INTEREST INCOME 1,899,803 9,147 1,908,950 336,471 ($784,562) (1) 1,460,859
OTHER 5,995,698 2,084 5,997,782 191,802 (125,879) (2) 6,063,705
------------------------------------------------------------------------------------------
TOTAL REVENUES 140,809,614 350,714 141,160,328 26,206,613 (910,441) 166,456,500
------------------------------------------------------------------------------------------
OPERATING EXPENSES:
COMPENSATION AND BENEFITS 78,310,999 240,592 78,551,591 14,719,759 (554,565) (2) 92,716,785
OTHER OPERATING EXPENSES 35,975,715 134,437 36,110,152 9,943,975 (569,490) (2) 45,484,637
AMORTIZATION OF INTANGIBLES 6,436,119 6,436,119 993,078 711,355 (3) 8,140,552
INTEREST EXPENSE 812,216 812,216 637,197 (300,939) (4) 1,148,474
POOLING-OF-INTERESTS EXPENSE 487,986 487,986 487,986
------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 122,023,035 375,029 122,398,064 26,294,009 (713,639) 147,978,434
------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 18,786,579 (24,315) 18,762,264 (87,396) (196,802) 18,478,066
INCOME TAXES 7,394,296 (6,350) 7,387,946 (113,679) (5) 7,274,267
------------------------------------------------------------------------------------------
NET INCOME $11,392,283 ($17,965) $11,374,318 ($87,396) ($83,123) $11,203,799
==========================================================================================
NET INCOME PER COMMON SHARE $0.77 $0.77 $0.74
==========================================================================================
SHARES ISSUED AND OUTSTANDING 14,679,464 37,000 14,716,464 390,574 15,107,038
------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES
OUTSTANDING 14,778,304 37,000 14,815,304 399,949 15,215,253
------------------------------------------------------------------------------------------
</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 HISTORICAL AMOUNTS TO REFLECT ADJUSTED
COMPENSATION, DEPRECIATION EXPENSE, RENT EXPENSE, ELIMINATION OF
NONRECURRING ITEMS, 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 13,279,80
-----------------------------------------
WEIGHTED AVERAGE SHARES
OUTSTANDING 13,241,030 37,000 13,278,030
-----------------------------------------
<PAGE>
AUDITED FINANCIAL STATEMENTS
DEPRES, HARLAND & ASSOCIATES INSURANCE & SURETY BROKERS, LTD.
<PAGE>
AUDITORS' REPORT
To the Shareholders of
Depres, Harland & Associates Insurance & Surety Brokers Ltd.
We have audited the balance sheet of Depres, Harland & Associates Insurance
& Surety Brokers Ltd. as at May 31, 1995 and the statements of income,
shareholders' equity and cash flow for the year then ended. These financial
statements are the responsibility of the company's management. Our respon-
sibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence sup-
porting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at May 31, 1995 and the
results of its operations and the changes in its financial position for the
year then ended in accordance with generally accepted accounting
principles.
Knowles, Warkentin & Bridges
Chartered Accountants
Winnipeg, Canada
February 14, 1996
<PAGE>
DEPRES, HARLAND & ASSOCIATES INSURANCE & SURETY BROKERS LTD.
BALANCE SHEET
As at May 31, 1995
1995 1994
(unaudited)
Current Assets
Cash $ 62,012 $ 16,918
Receivables
Premiums, less allowance for doubtful
accounts of $10,000 and $2,000 respectively 774,526 790,331
Prepaid expenses 6,940 2,214
---------- ----------
Total Current Assets 843,478 809,463
Investment 80,417 85,417
Property and Equipment, net 51,332 69,318
---------- ----------
$ 975,227 $ 964,198
========== ==========
LIABILITIES
Current Liabilities
Premiums payable to insurance companies $ 715,712 $ 673,365
Accounts payable and accrued expenses 73,162 48,725
Current portion of long-term debt 34,002 32,629
---------- ----------
Total Current Liabilities 822,876 754,719
Long-Term Debt 38,783 72,786
Other Long-Term Liabilities 3,687 68,492
Contingent Liability - Note 4
---------- ----------
865,346 895,997
---------- ----------
SHAREHOLDERS' EQUITY
Common stock, no par value; authorized 40,000
shares; outstanding 1,000 shares 100 100
Preferred stock, no par value; authorized 4,000
shares; outstanding 100 shares 100 100
---------- ----------
200 200
Retained Earnings 109,681 68,001
---------- ----------
109,881 68,201
---------- ----------
$ 975,227 $ 964,198
========== ==========
<PAGE>
DEPRES, HARLAND & ASSOCIATES INSURANCE & SURETY BROKERS LTD.
STATEMENT OF INCOME
For the year ended May 31, 1995
1995 1994 1993
12 months 12 months 11 months
(unaudited) (unaudited)
Income
Commissions and fees $ 980,179 $ 998,604 $ 744,565
Other 7,553 10,737 2,813
---------- ---------- ----------
987,732 1,009,341 747,378
---------- ---------- ----------
Operating expenses
Compensation and employee benefits 533,310 560,445 548,204
Other operating expenses 236,654 285,504 239,057
Amortization of intangibles 5,000 5,000 4,583
Interest expense 10,090 10,639 5,569
---------- ---------- ----------
785,054 861,588 797,413
---------- ---------- ----------
Income (loss) before income taxes 202,678 147,753 ( 50,035)
Income taxes (recoverable) 45,998 34,928 ( 10,716)
---------- ---------- -----------
Net income (loss) for the year $ 156,680 $ 112,825 ($ 39,319)
========== ========== ==========
Net income per common share $156.68 $112.83 $ -
======= ======= =======
Weighted average number of shares
of common stock outstanding 1,000 1,000 1,000
===== ===== =====
<PAGE>
DEPRES, HARLAND & ASSOCIATES INSURANCE & SURETY BROKERS LTD.
STATEMENT OF SHAREHOLDERS' EQUITY
As at May 31, 1995
Preferred Common Retained
Stock Stock Earnings
Balance at June 30, 1992 $ 100 $ 100 $ 113,181
Net income (loss) for the year ( 39,319)
---------- ---------- ----------
Balance at May 31, 1993 100 100 73,862
Payment of dividends ($118.68 per share) ( 118,686)
Net income for the year 112,825
---------- ---------- ----------
Balance at May 31, 1994 100 100 68,001
Payment of dividends ($115.00 per share) (115,000)
Net income for the year 156,680
---------- ---------- ----------
Balance at May 31, 1995 $ 100 $ 100 $ 109,681
========== ========== ==========
<PAGE>
DEPRES, HARLAND & ASSOCIATES INSURANCE & SURETY BROKERS LTD.
STATEMENT OF CASH FLOW
For the year ended May 31, 1995
1995 1994 1993
12 months 12 months 11 months
(unaudited) (unaudited)
Operating activities
Net income (loss) for the year $ 156,680 $ 112,825 ($ 39,319)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 26,224 36,960 15,769
---------- ---------- ----------
182,904 149,785 ( 23,550)
Changes in operating assets and liabilities
net of effects from insurance agency
acquisitions
(Increase) decrease in:
Accounts receivable 15,805 ( 176,383) 155,951
Prepaid expenses ( 4,726) 8,282 2,206
Increase (decrease) in:
Premiums payable to insurance
companies 42,347 139,612 ( 232,808)
Accounts payable and accrued
expenses 24,437 23,406 ( 18,649)
----------- ---------- ----------
Net cash provided by (used in)
operating activities 260,767 144,702 ( 116,850)
----------- ---------- ----------
Investing activities
Purchase of property and equipment ( 3,238)( 71,564)( 11,305)
Other investing activities - - 7,870
----------- ---------- ----------
Net cash provided by (used in)
investing activities ( 3,238)( 71,564)( 3,435)
----------- ----------- ----------
Financing activities
Proceeds from long-term debt - 70,000 -
Principal payments on long-term debt( 32,630)( 27,850)( 9,856)
Dividends ( 115,000)( 118,686) -
Other financing activities ( 64,805) 64,988 ( 26,901)
----------- ---------- ----------
Net cash provided by (used in)
financing activities ( 212,435)( 11,548)( 36,757)
----------- ---------- -----------
Increase (decrease) in cash and cash
equivalents 45,094 61,590 ( 157,042)
Cash and cash equivalents,
beginning of year 16,918 ( 44,672) 112,370
---------- ---------- ----------
Cash and cash equivalents, end of year $ 62,012 $ 16,918 ($ 44,672)
========== ========== ===========
<PAGE>
DEPRES, HARLAND & ASSOCIATES INSURANCE & SURETY BROKERS LTD.
NOTES TO THE FINANCIAL STATEMENTS
May 31, 1995
1. Significant Accounting Policies
These financial statements reflect the following policies:
Capital assets 1995 1994
(unaudited)
At cost
Computer system $ 121,427 $ 118,190
Furniture and fixtures 31,521 31,521
Office equipment 1,893 1,893
Leasehold improvements 23,834 23,834
---------- ----------
178,675 175,438
Accumulated amortization 127,343 106,120
---------- ----------
$ 51,332 $ 69,318
========== ==========
Amortization on capital assets has been provided for at the following
rates:
Computer system - 30% Diminishing balance
Furniture and equipment - 20% Diminishing balance
Office equipment - 20% Diminishing balance
Leasehold improvements - 1/5 Straight line
2. Investment
The company purchased a book of business and has recorded the investment at
cost. Amortization will be calculated at 5% per year on a straight-line
basis.
1995 1994
(unaudited)
Original cost $ 100,000 $ 100,000
Accumulated amortization 19,583 14,583
---------- ----------
$ 80,417 $ 85,417
========== ==========
DEPRES, HARLAND & ASSOCIATES INSURANCE & SURETY BROKERS LTD.
NOTES TO THE FINANCIAL STATEMENTS
May 31, 1995
3. Long-Term Debt 1995 1994
(unaudited)
Term loan, interest at 7% per annum,
monthly blended payments of $1,775,
maturity September 30, 1996 $ 27,292 $ 45,918
Loan for purchase of computer equipment.
Interest at prime plus 1.5%. Monthly
principal payments of $1,167 plus inte-
rest, secured by a general security
agreement registered in Manitoba 45,493 59,497
72,785 105,415
---------- ----------
Payments due within one year 34,002 32,629
---------- ----------
$ 38,783 $ 72,786
========== ==========
Approximate principal payments due within the next five years:
1996 - $34,002
1997 - 21,298
1998 - 14,004
1999 - 3,481
2000 - -
4. Contingent Liability
The company is presently disputing two legal matters. At the time of this
report, the liability amount, if any, is not determinable.
5. Lease Obligations
The company's premises are leased at $3,530 per month up to May 31, 1996.
The non-due unpaid portion at May 31, 1995 is $42,360.
DEPRES, HARLAND & ASSOCIATES INSURANCE & SURETY BROKERS LTD.
NOTES TO THE FINANCIAL STATEMENTS
May 31, 1995
6. Selected Financial Data (in thousands, except per share amounts)
For the years ended
May 31 May 31 May 31 June 30 June 30
1995 1994 1993 1992 1991
12 months 12 months 11 months 12 months 12 months
(unaudited)unaudited)(unaudited)(unaudited)
Statement of income data
Commissions and fees $ 980 $ 999 $ 744 $ 985 $ 759
Investment income & other 8 10 3 14 11
------ ------ ------ ------ ------
Total revenues 988 1,009 747 999 770
Compensation and employees'
benefits 533 560 548 601 365
Other operating expenses 237 285 239 389 312
Amortization of intangibles 5 5 4 5 -
Interest expense 10 11 6 6 9
------ ------ ------ ------ ------
Total expenses 785 861 797 1,001 686
------ ------ ------ ------ ------
Income (loss) before income
taxes 203 148 ( 50) ( 2) 84
Income taxes (recoverable) 46 35 ( 11) - 19
------ ------ ------ ------ ------
Net income (loss) $ 157 $ 113 ($ 39) ($ 2) $ 65
====== ====== ====== ====== ======
Per share amounts
Net income per common
share $156.68 $112.83 $ - $ - $ .06
======= ======= ======== ======= =======
Weighted average number of
common shares
outstanding 1,000 1,000 1,000 1,000 1,000
===== ===== ====== ====== =====
Dividends paid per common
share $115.00 $118.68 $ - $ - $ -
======= ======== ======= ======= =======
Balance sheet data:
Intangible assets, net $ 80 $ 85 $ 90 $ 95 $ -
Total assets 975 964 764 1,036 790
Long-term debt, less
current portion 39 73 46 70 3
Other long-term liabilities 4 68 12 39 49
Total shareholders' equity110 68 74 113 115
UNAUDITED INTERIM FINANCIAL STATEMENTS
DEPRES, HARLAND & ASSOCIATES INSURANCE & SURETY BROKERS, LTD.
<PAGE>
DEPRES, HARLAND & ASSOCIATES INSURANCE & SURETY BROKERS, LTD.
INTERIM BALANCE SHEET
(unaduited)
ASSETS
November 30,
1995 1994
Current assets
Cash $ 97,063 $ 23,636
Receivables
Premiums 965,397 886,553
Prepaid expenses 6,940 11,958
---------- ----------
Total Current Assets 1,069,400 922,147
Investment 77,917 82,917
Property and Equipment, net 47,160 62,995
Other Assets 98,372 55,472
---------- ----------
$1,292,849 $1,123,531
========== ==========
LIABILITIES
Current Liabilities
Premiums payable to insurance companies $ 796,633 $ 751,589
Accounts payable and accrued expenses 148,856 121,300
Current portion of long-term debt 34,002 32,629
---------- ----------
Total Current Liabilities 979,491 905,518
Long-Term Debt 22,018 56,654
---------- ----------
1,001,509 962,172
---------- ----------
SHAREHOLDERS' EQUITY
Common stock, no par value; authorized 40,000
shares; outstanding 1,000 shares 100 100
Preferred stock, no par value; authorized 4,000
shares; outstanding 100 shares 100 100
---------- ----------
200 200
Retained Earnings 291,140 161,159
---------- ----------
291,340 161,359
---------- ----------
$1,292,849 $1,123,531
========== ==========
DEPRES, HARLAND & ASSOCIATES INSURANCE & SURETY BROKERS LTD.
INTERIM STATEMENT OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1995 1994 1995 1994
<C> <C> <C> <C> <C>
Income
Commissions and fees $586,695 $508,246 $277,026 $247,937
Other 13,990 4,142 5,193 2,460
-------- -------- -------- --------
600,685 512,388 282,219 250,397
-------- -------- -------- --------
Operating expenses
Compensation and employee benefits 233,978 272,126 122,934 137,442
Other operating expenses 125,550 112,413 58,881 54,377
Amortization of intangibles 2,500 2,500 1,250 1,250
Interest expenses 3,926 4,841 1,828 2,304
--------- --------- --------- ---------
365,954 391,880 184,893 195,373
--------- --------- --------- ---------
Income before income taxes 234,731 120,508 97,326 55,024
Income taxes 53,272 27,350 22,088 12,488
--------- --------- --------- --------
Net income for the period $181,459 $ 93,158 $ 75,238 $ 42,536
======== ======== ========= =========
</TABLE>
INTERIM STATEMENT OF CASH FLOW
For the six months ended November 30, 1995
(unaudited)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Operating activities
Net income for the period $ 181,459 $ 93,158
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 9,884 13,112
--------- ---------
191,343 106,270
Changes in operating assets and liabilities
net of effects from insurance agency
acquisitions
(Increase) decrease in:
Accounts receivable (190,871) (96,222)
Prepaid expenses - (9,744)
Increase (decrease) in:
Premiums payable to insurance companies 80,921 78,224
Accounts payable and accrued expenses 75,694 72,575
--------- ---------
Net cash provided by (used in) operating
activities 157,087 151,103
--------- ---------
Investing activities
Purchase of property and equipment (455) (3,238)
--------- ---------
Net cash provided by (used in) investing
activities (455) (3,238)
--------- ----------
Financing activities
Principal payments on long-term debt (16,785) (16,132)
Other financing activities (104,796) (125,015)
--------- ----------
Net cash provided by (used in) financing
activities (121,581) (141,147)
---------- -----------
Increase in cash and cash equivalents 35,051 6,718
Cash and cash equivalents, beginning of period 62,012 16,918
--------- ------------
Cash and cash equivalents, end of period $ 97,063 $ 23,636
========== =========
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
DEPRES, HARLAND & ASSOCIATES INSURANCE & SURETY BROKERS LTD.
(Unaduited)
Basis of Presentation
The financial statements of Depres, Harland & Associates Insurance & Surety
Brokers Ltd. have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered for a fair
presentation have been included. Operating results for six months ended
November 30, 1995, are not necessarily indicative of the results that may be
expected for the year ending May 31, 1996. For further information, refer to
the Company's financial statements and footnotes for the year ended May 31,
1995 included elsewhere herein.
Depres Harland & Associates
Insurance & Surety Brokers Ltd.
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
The income of Depres Harland & Associates is principally derived
from commissions earned from the placement of insurance policies and
surety bonds with various insurance and surety carriers. Commissions
are generally a percentage of the premiums charged by the various
carriers for the issuance of insurance policies and surety bonds, as
well as fees for the provision of surety facilities. Depres Harland
is somewhat insulated from the vagaries of the insurance market
because of the relative stability of surety rates. During the past
three years the company has also received the benefit of a "firming"
trend in the insurance market, although conditions could certainly
not be termed as "hard market". This trend has caused premium levels
to end their slide that commenced in the late 1980's, with the
occasional opportunity for minor rate recovery. The addition of new
business coupled with a an upturn in the economy has enabled the
firm to enjoy steady growth in revenues during this period.
Management cannot predict the timing or extent of changes in market
conditions and the subsequent effect this can have on future
earnings potential.
The following discussion should be read in conjunction with the
attached comparative statement of income prepared for ease of
reference.
RESULTS OF OPERATIONS:
Total revenues for 1995 were $987,732.00 including $55,518.00 of
financial services revenue from a division that discontinued
operations effective November 1, 1994. This amounts to net revenue
of $932,214.00, a true increase of $105,967.00 or 12.8% over 1994.
In 1994 total net revenues were $826,247.00 ( Gross Revenue of
$1,009,341.00 including $183,094.00 of financial services revenue),
an increase of $10,926.00 or 1.3% over the twelve month pro-rata
equivalent for 1993. Total revenues per the 1993 year end statement
were $747,378.00, although it should be noted this was an eleven
month fiscal year that became necessary as a result of a corporate
restructuring that took place effective May 1, 1993. Pro-rated
revenue for a twelve month fiscal year equates to $815,321.00.
Commissions and fees for 1995 increased by $109,151 or 13.4% over
1994 and also increased in 1994 by $3,257.00 or .4% over annualized
1993 levels. The substantial increase in 1995 was attributable to
both the addition of new business and a return to more traditional
activity levels by our clientele. The lack of growth in 1994 was due
to continued effects of the recession and the high priority placed
on corporate reorganization.
Interest income and other revenue decreased by $3,184.00 in 1995,
while having increased in the previous year by $7,924.00. The
increase in 1994 was primarily attributable to improvements in
collection of accounts, while the drop in 1995 related to reductions
in interest rates available.
Total operating expenses in 1995 were $785,054 including $53,500.00
for the five months that the financial services division was
contributing to the operation's revenue base. This amounts to a net
operating expense of $731,554.00, a marginal decrease of $1,634.00
from 1994. In 1994, the firm's net operating expenses were
$733,188.00, a substantial decrease of $136,717.00 or 15.1% from
1993's annualized operating expenses of $869,905.00. At the time of
the corporate reorganization in May of 1993, the decision was made
to substantially reduce overhead through the termination of
employment of two management level individuals and through
negotiation of a reduced salary level for a previous principal of
the corporation who was bought out under the terms of the
reorganization.. Additional cost reductions in the area of support
personnel were implemented , but the effects of these cost
reductions were largely offset by increased costs associated with
the introduction of a new computer system.
Compensation and employee benefits for 1995 amounted to $484,310.00
or 9.4% more than 1994. The expense level for 1994 was $442,845.00
or 23.8% lower than 1993. Compensation and Employee benefit in 1993
totaled $548,204.00. All of the above figures are net of financial
services compensation and employee benefit expenses of $117,600.00
and $49,000.00 in 1994 and 1995 respectively.
Other operating expenses decreased in 1995 by $42,550.00 or 15.5%
from 1994. The decreases were primarily attributable to ongoing
measures to improve cost effectiveness. For 1994, other operating
expenses increased $13,915.00 or 5.3% from the annualized 1993 level
of $260,789.00.
RECENT INTERIM RESULTS
For the six month period ending November 30, 1995 total revenues
have increased $143,815.00 from the six months ended November 30,
1994 (net of $55,518.00 financial services revenue included in
1994). This is attributable to the addition of new business, growth
of many long term customers of the firm and continued improvement in
the economy that is returning some accounts to activity levels seen
prior to the recession. Total revenues for the six months ending
November 30, 1995 are $600,685.00.
Total operating expenses for the same period have increased
$27,574.00 or 8.1% (net of $53,500.00 allowance for Financial
Services overhead in 1994) from the same period in 1994. This
experience reflects the success of management's continuing efforts
to maximize production while maintaining a firm hold on expenses. A
substantial portion of the credit is attributable to the positive
effects of the computer improvements implemented over the past two
and a half years. Combined with changes in personnel, the company
has managed to handle substantial increases in revenue without
proportionate increases in overhead.
Net profit for the six months ended November 30, 1995 has increased
$88,301.00 or 94.8% from the same period in 1994. This amounts to a
six month profit of $181,459.00 vs. $93,158.00 for the same period
in the previous fiscal year.
</TABLE>
DRAFT - 2/15/96
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is
made and entered into as of the 1st day of March, 1996 by and
between the following:
HILB, ROGAL AND HAMILTON COMPANY, a corporation
incorporated under the laws of the Commonwealth of
Virginia ("HRH"); and
HAYHURST ELIAS DUDEK, INC. (the "Buyer"), a
corporation incorporated under the laws of Canada which
is a wholly-owned subsidiary of Hilb, Rogal and Hamilton
Company of Canada, Limited ("HRH Canada"), which
itself is a corporation incorporated under the laws of
Canada and is a wholly-owned subsidiary of HRH; and
2992575 MANITOBA LTD., a corporation incorporated
under the laws of the Province of Manitoba ("2992575
Ltd."); and
DEPRES HARLAND & ASSOCIATES INSURANCE & SURETY BROKERS, LTD.,
a corporation incorporated under the laws of the Province of
Manitoba (the "Agency"); and
_____________________, an individual who is a resident of
Winnipeg, Manitoba, Canada (the "Seller").
BACKGROUND STATEMENTS
A. Description of Agency Business. The Agency is engaged
in the business of owning and operating a general insurance and
surety brokerage agency with its principal offices located in Winnipeg,
Manitoba, Canada. The insurance business and surety brokerage and
operations of the Agency are referred to in this Agreement as the
"Agency Business."
B. Current Stock Ownership of the Agency. George R.
Depres, Robert R. Depres, George A. Peters and Nelson W. Hoe (each,
individually a "Shareholder" and collectively, the "Shareholders")
collectively own all of the issued and outstanding capital stock of
2992575 Ltd. (the "2992575 Ltd. Stock") as described on Schedule
A which is attached hereto. 2992575 Ltd., in turn, owns all of the
issued and outstanding capital stock of the Agency (the "Agency
Stock") which capital stock is also described on Schedule A.
C. The Stock Acquisition. Effective as of 12:01 a.m. on the
Closing Date, the Buyer desires to purchase and acquire all of the
issued and outstanding shares of 2992575 Ltd. Stock owned by the
Seller, and the Seller desires to sell, assign and transfer all of his
2992575 Ltd. Stock to the Buyer, for the consideration and pursuant
to the terms and conditions set forth in this Agreement (the "Stock
Acquisition"). The Buyer desires to purchase and acquire all of the
issued and outstanding 2992575 Ltd. Stock from all of the
Shareholders in order to acquire the Agency, and the Shareholders
desire to sell, assign and transfer all of their 2992575 Ltd. Stock to
the Buyer concurrently, for the consideration and pursuant to the
terms and conditions set forth in this Agreement. Each Shareholder
desires to execute and deliver a separate stock purchase agreement
individually substantially in the form of this Agreement (the "Stock
Purchase Agreement(s)") to convey their respective holdings of
2992575 Ltd. Stock to the Buyer. The obligation of the Buyer to
purchase the Seller's 2992575 Ltd. Stock will be contingent upon the
concurrent purchase of all of the issued and outstanding shares of
2992575 Ltd. Stock from all of the Shareholders.
D. The Amalgamation. Immediately after the completion of
the Stock Acquisition, and effective as of 12:02 a.m. on the Closing
Date, the Buyer, 2992575 Ltd. and the Agency will be amalgamated
pursuant to the provisions of the Canada Business Corporations Act
(the "Amalgamation") to form Hayhurst Elias Dudek, Inc., a surviving
corporation qualified and validly existing under the laws of Canada
(the "Surviving Corporation"). After the completion of the
Amalgamation, the Surviving Corporation will be a wholly-owned
subsidiary of HRH Canada and shall own and operate all of the
Agency Business and all of the business currently owned and operated
by the Buyer.
TERMS OF AGREEMENT
In consideration of the foregoing facts and of the respective
representations, warranties, covenants and agreements set forth
below, the parties hereto, intending to be legally bound, hereby
covenant and agree as follows:
PART A:
THE STOCK ACQUISITION AND AMALGAMATION
AND THE CLOSING
1. THE STOCK ACQUISITION.
1.1 Purchase and Sale of Stock. Effective as of 12:01
a.m. on the Closing Date, the Seller shall sell, assign and transfer to
the Buyer, and the Buyer shall purchase and accept from the Seller, all
of the issued and outstanding shares of 2992575 Ltd. Stock owned
by the Seller. The obligation of the Buyer to purchase the Seller's
2992575 Ltd. Stock shall be contingent upon the concurrent purchase
of all of the issued and outstanding shares of 2992575 Ltd. Stock
from all of the Shareholders. Each Shareholder shall execute and
deliver a Stock Purchase Agreement substantially in the form of this
Agreement. By purchasing and acquiring all of the issued and
outstanding shares of 2992575 Ltd. Stock, the Buyer shall also
acquire, as an asset of 2992575 Ltd., all of the issued and
outstanding shares of Agency Stock. The number of shares of capital
stock set forth on Schedule A shall constitute all of the shares of
capital stock, equities, securities or other interests of or in 2992575
Ltd. and the Agency, and shall be the stock acquired by the Buyer.
Upon completion of the Stock Acquisition, the Buyer shall have
acquired all of the business and operations comprising the Agency.
1.2 Consideration; No Encumbrances. For the
Consideration (as defined in Section 2 below), the Seller shall deliver
to the Buyer, free and clear of all mortgages, charges, pledges,
security interests, conditional sales agreements, liens, encumbrances,
actions, claims, demands, restrictions, equities of any nature
whatsoever or howsoever arising, any adverse claims whatsoever or
howsoever arising, and any rights or privileges capable of becoming
any of the foregoing ("Encumbrances"), the number of shares of the
capital stock of 2992575 Ltd. owned by the Seller as described on
Schedule A, and the Seller shall receive therefor the Consideration as
described in Section 2 below. The Consideration to be received by
the Seller shall be subject to any rights of reduction and/or offset set
forth in this Agreement or otherwise. The Buyer, in reliance on the
representations, warranties, covenants and agreements of 2992575
Ltd., the Agency, and the Seller (collectively referred to herein as the
"Warranting Persons," and individually as a "Warranting Person,") in
this Agreement and of the other Shareholders in their respective Stock
Purchase Agreements, and subject to all of the terms and conditions
contained herein, shall purchase and accept all of the Seller's
2992575 Ltd. Stock from the Seller free and clear of all Encumbrances
and shall pay and tender the Consideration to the Seller. This
Agreement shall not, under any circumstances, be consummated and
the Consideration shall not be paid to the Seller, unless one hundred
percent (100%) of the shares of 2992575 Ltd. Stock are tendered to
the Buyer by all of the Shareholders and one hundred percent of the
Agency Stock is also acquired in accordance with the terms of this
Agreement.
2. THE CONSIDERATION.
2.1 Consideration for the 2992575 Ltd. Stock. The
total consideration (referred to in this Agreement as the
"Consideration" and stated in dollar amounts of the lawful money of
Canada) shall be paid or delivered by the Buyer to the Seller on the
Closing Date and shall consist of the following:
(a) HRH Stock. Subject to the provisions of
Section 2.2 below, stock certificates evidencing that number of shares
of HRH's common stock ("HRH Stock") which equals a value of [CDN
$253,846 for George Depres, and CDN $115,385 each for each other
Shareholder], when such HRH Stock is valued, per share, at the
average of the closing price on the New York Stock Exchange for
common stock of HRH for each of ten (10) consecutive trading days
with the tenth and final trading day being the last trading day which is
ten (10) trading days prior to the Closing Date.
(b) Cash Consideration. As provided in Section
2.2 below, the aggregate cash sum of [CDN $169,231 for George
Depres, and CDN $76,923 each for each other Shareholder], by
certified check, wire transfer of collected funds or intra-bank transfer
(referred to herein as the "Closing Cash Consideration").
(c) Contingent Consideration. The amount of
Contingent Consideration (as defined in Section 3.1(d) below), if any,
to which the Seller is entitled to receive pursuant to Section 3 below.
The Seller acknowledges and agrees that he is also subject to the
Consideration Reduction, as defined in Section 3.1(e) below.
(d) Deferred Consideration. Subject to the
applicable provisions of Section 3 below, a deferred cash balance,
which shall consist of three (3) payments, due fourteen (14),
twenty-six (26) and thirty-eight (38) months after the Closing Date in
the maximum amounts, before offset or reduction, each of [CDN
$133,974 for George Depres, and CDN $60,898 for each other
Shareholder] (the "Deferred Consideration"). If applicable, imputed
interest will be factored into each Deferred Payment (as defined
below) in accordance with the Canadian Income Tax Act, but the
maximum amount of each Payment shall not be increased. The
fourteen-month payment of the Deferred Consideration shall be
referred to in this Agreement as the "First Deferred Payment," the
twenty-six-month payment of the Deferred Consideration shall be
referred to in this Agreement as the "Second Deferred Payment," and
the thirty-eight-month payment of the Deferred Consideration shall be
referred to in this Agreement as the "Third Deferred Payment."
(d) Exchange Rate. For all deliveries of
Consideration or any other payments which are made under this
Agreement other than those that are in collected funds in the currency
specified hereunder, the exchange rate for Canadian or United States
dollars shall be the average of the exchange rates published in the
Wall Street Journal for each of ten (10) consecutive business days
with the tenth and final business day being the last business day
which is ten (10) business days prior to the payment due date (the
"Exchange Rate").
(e) Rights of Offset, Reduction and
Indemnification. The Consideration (whether comprised of HRH
Stock, Cash, Contingent or Deferred Consideration) shall be subject to
a right of offset as available at law, and such other rights of
indemnification, offset and reduction as provided in this Agreement.
2.2 Delivery and Payment of Consideration; Escrow.
At the Closing, in exchange for the Seller's 2992575 Ltd. Stock, the
Buyer shall pay and deliver to the Seller (i) the HRH Stock less the
amount of such Stock that shall be held by the Buyer and/or HRH in
escrow pursuant to Section 13.5 of this Agreement (the "Escrowed
Stock"), and (ii) the Closing Cash Consideration. The Escrowed Stock
shall be subject to a right of offset as available at law, and such other
rights of indemnification, offset and reduction as provided in this
Agreement.
3. CONTINGENT CONSIDERATION AND CONSIDERATION
REDUCTION.
3.1 Determination of Contingent Consideration and
Consideration Reduction; Financial Statements.
(a) Preparation of Financial Statements. As
soon as practicable after the close of business of the Agency on
February 29, 1996, (the "Pre-Effective Moment") and, in any event,
within sixty-two (62) days after the Closing Date, the Shareholders
shall cause the firm of Knowles, Warkentin & Bridges, Chartered
Accountants, of Winnipeg, Manitoba (the "Designated Accountants")
to prepare and deliver to them, HRH and the Surviving Corporation,
audited balance sheets of the Agency and 2992575 Ltd., prepared in
accordance with HRH GAAP Policy (as defined below), and with
disclosure similar to the form of the financial statements attached
hereto as Exhibit 3.1(a) (the "Acquisition Audited Balance Sheets"
which shall then be consolidated and referred to herein as the
"Consolidated Balance Sheet"), together with the customary opinion
of the Designated Accountants given with respect to such financial
statements. For the purposes of this Agreement, "HRH GAAP Policy"
shall mean the generally accepted accounting principles of HRH which
are applied uniformly in determining the net profit of each subsidiary
of HRH and which have been provided to the Shareholders in the form
of HRH's Accounting Policies and Procedures Manual.
The Shareholders also shall cause the Designated
Accountants to prepare and deliver (not later than twenty days prior to
the Closing) to them, HRH and the Buyer, prior to the Closing Date,
(1) audited financial statements of the Agency and 2992575 Ltd., in
the case of the Agency as of May 31, 1995 and as of and for the
most recent annual period of 2992575 Ltd., prepared in accordance
with HRH GAAP Policy in Securities and Exchange Commission format
(the "Prior Year 1 Financial Statements"), together with the
customary opinion of the Designated Accountants given with respect
to such financial statements; (2) unaudited comparison statements for
the periods ended May 31, 1994 in the case of the Agency and as of
and for the 1994 year end of 2992575 Ltd. (the "Prior Year 2
Financial Statements"); (3) unaudited comparison statements for the
periods ended May 31, 1993 in the case of the Agency and as of and
for the 1993 year end of 2992575 Ltd. (the "Prior Year 3 Financial
Statements"); (4) unaudited comparison statements for the Agency for
the quarters ended December 31, 1995, and December 31, 1994 (the
"Quarterly Statements"); and (5) unaudited comparison statements for
the seven month stub periods beginning with the fiscal year and
ending December 31, 1994, and December 31, 1995 ( the Stub
Statements ). The Prior Year 1 Financial Statements, Prior Year 2
Financial Statements, Prior Year 3 Financial Statements, Quarterly
Statements and the Stub Statements are attached hereto as Exhibit
3.1(a) and are collectively referred to herein as the "Prior Years'
Financial Statements." In addition, the Shareholders shall cause the
Designated Accountants to permit Buyer's in-house financial officer or
any firm of certified public accountants (if U.S.) or chartered
accountants (if Canadian) designated by the Buyer (referred to below
as the "Buyer's Reviewer") reasonable access to the work papers,
schedules, memoranda and other documents used in preparing the
Prior Years' Financial Statements.
(b) Review and Adjustment of Acquisition
Audited Balance Sheets. As soon as is reasonably practicable after
delivery to the Surviving Corporation of the Acquisition Audited
Balance Sheets, and, in any event, within thirty (30) days after such
delivery, the Surviving Corporation shall give written notice to the
Shareholders accepting the Acquisition Audited Balance Sheets as
prepared or specifying any disagreement with respect to any item in
such document. In the event of a disagreement, the Shareholders and
the Surviving Corporation shall each make a good faith attempt to
reconcile the differences; however, if they are unable to reconcile all
differences within a period of fourteen (14) days after notification to
the Shareholders of such disagreement, then the Shareholders and the
Surviving Corporation shall submit all questions in dispute to one of
the "Big Six" firms of chartered accountants (other than the Buyer's
Reviewer, the Surviving Corporation's outside auditors and the
Designated Accountants) located in the Winnipeg, Manitoba region, as
may be agreed upon by the Shareholders and the Surviving
Corporation or, in default of such Agreement, as may be determined
by the President of the Canadian Institute of Chartered Accountants,
which chosen accounting firm ("Umpire") shall, within a period of
thirty (30) days after submission, determine and report to the
Shareholders and the Surviving Corporation upon all questions in
dispute, and the report of the Umpire shall be final, conclusive and
binding on the Shareholders and the Surviving Corporation. The fees
charged by the Umpire shall be equally divided between the
Shareholders and the Surviving Corporation.
(c) Definition of Tangible Net Worth. As used
herein, the term "Tangible Net Worth" shall mean the amount
determined from Consolidated Balance Sheet when intangible assets
and fixed assets (except for CDN $20,000.00 of value) are subtracted
from stockholders' equity. For the purposes of determining Tangible
Net Worth, it is acknowledged that HRH GAAP Policy recognizes
direct bill and contingent commission income when received, and that
HRH has assumed that 2992575 Ltd. will have CDN $230,000.00 of
cash and no liabilities in its Acquisition Audited Balance Sheet.
(d) Determination and Payment of Contingent
Consideration. If the Tangible Net Worth shall exceed CDN $250,000
(Two Hundred Fifty Thousand Canadian Dollars) (the amount of such
excess being referred to below as "Contingent Consideration"), then,
within a period of fifteen (15) days after the final determination of the
Tangible Net Worth in accordance with foregoing provisions of this
Section 3.1, the Surviving Corporation shall pay to the Seller, as
additional Consideration, _____ percent [42.30769% for George
Depres, and 19.23077% for each other Shareholder] of the
Contingent Consideration.
(e) Determination of Consideration Reduction.
If, on the other hand, the Tangible Net Worth shall be less than CDN
$250,000 (Two Hundred Fifty Thousand Canadian Dollars) (the
amount of such deficit being referred to below as "Consideration
Reduction"), then, the Consideration for the 2992575 Ltd. Stock to be
received by all Shareholders shall be deemed automatically reduced,
on a dollar-for-dollar basis, by an amount equal to the Consideration
Reduction, and the Seller shall individually be obligated for _____
percent [42.30769% for George Depres, and 19.23077% for each
other Shareholder] of the Consideration Reduction. In such event, the
provisions of subparagraph (i) below shall become applicable or, if the
Shareholders, collectively, do not comply with the provisions of
subparagraph (i) below, then the provisions of subparagraph (ii) below
automatically shall become applicable:
(i) Within a period of fifteen (15) days
after the final determination of the Tangible Net Worth in accordance
with the foregoing provisions of this Section 3.1, the Shareholders
shall refund to the Surviving Corporation, as a reduction in the
aggregate Consideration, an amount equal to their percentage portion
of the Consideration Reduction in the form of one or more cashier's
checks made payable to the Surviving Corporation.
(ii) If the Shareholders having received
any Consideration shall fail or refuse to comply with the provisions of
subparagraph (i) above within the time limit specified therein, then in
addition to all other remedies at law or in equity which the Surviving
Corporation might have, and without limiting the foregoing, the
Surviving Corporation shall be entitled to reduce the amount of such
of the HRH Stock being held pursuant to the escrow and apply such
HRH Stock against the Consideration Reduction and/or to reduce any
Deferred Payments pursuant to Section 3.2 hereof (in addition to any
other reduction provided for therein) to any of the Shareholders
effective retroactively to the Closing Date, by a pro rata portion of the
amount, plus interest computed from the Closing Date at the rate of
ten percent (10%) per annum compounded daily. Each Shareholder
shall be jointly and severally liable for the repayment of the
Consideration Reduction.
3.2 Reduction of Deferred Consideration.
(a) Determination of Agency Core Revenue. As
used herein, the term "Agency Core Revenue" shall mean the net
commissions and fees recognized by the Surviving Corporation from
the fifteen (15) largest accounts of the Agency, which accounts shall
initially be determined as of December 31,1995 and shall be set forth
in Schedule 3.2 (and which accounts shall be referred to herein as the
Core Accounts ), and for each of the twelve (12) month periods
beginning March 1, 1996 ("Year 1"), March 1, 1997 ("Year 2"), and
March 1, 1998 ("Year 3"). The Warranting Persons represent and
warrant, jointly and severally as if such representation and warranty
were made a part of Section 6 of this Agreement, that the Core
Accounts and Agency Core Revenue determined as of December 31,
1995 have been determined in accordance with HRH GAAP Policy and
are true, accurate and complete as of that date. The Seller agrees
that, for periods after December 31, 1995, the Core Accounts and the
Agency Core Revenue shall be determined in a manner consistent with
the initial determination (i.e., in accordance with HRH GAAP Policy)
and as otherwise set forth on Schedule 3.2.
The parties acknowledge that annualized revenue
of Agency is approximately CDN $1,100,000, but have agreed to
determine the Deferred Payments based on the concept of net
commissions from the Core Accounts, plus a growth potential
specified herein. The parties agree that the annualized net
commissions and fees from the Core Accounts as of December 31,
1995, is CDN $464,960.00 ( the Threshold ), and that the maximum
Deferred Payment results when Agency Core Revenue for either Year
1, Year 2 or Year 3 equals or exceeds the sum of the Threshold plus
CDN $133,333. Finally, the parties to this Agreement and the other
Shareholders agree that, for contingent commission income of the
Agency attributable to any period prior to January 1, 1996 and
received prior to July 1, 1996 (whether such receipt is by the
Acquired Corporations or the Surviving Corporation), fifty percent
(50%) of such income shall be paid to the Buyer, and the other fifty
percent (50%) shall be paid to the Shareholders, of which the Seller
shall receive ____% [42.30769% for George Depres, and 19.23077%
for each other Shareholder], except to the extent the Seller shall not
have complied with any repayment obligation set forth in Section
3.1(e), if any. All contingent commission income, whether attributable
to the Agency operations before January 1, 1996 or not, and received
after June 30, 1996, shall be paid to and retained by the Surviving
Corporation. The Surviving Corporation shall cause the Agency Core
Revenue to be determined, and the amount thereof communicated to
the Shareholders, as soon as is reasonably practicable after Year 1,
Year 2, and Year 3, and, in any event, within sixty-two (62) days
thereafter. In the event of a disagreement by the Shareholders,
collectively, as to the computation of the Agency Core Revenue for
any given Year, such disagreement shall be resolved in the same
manner as provided in the case of a disagreement as to the
Acquisition Audited Balance Sheet under the provisions of Section 3.1
above.
(b) Reduction of Deferred Payments. To the
extent that Agency Core Revenue in any of Year 1, Year 2 or Year 3
shall be less than [CDN $598,293.00], then for each dollar (CDN $1)
of such deficiency in any one Year up to CDN $133,333.00 (for
Agency Core Revenue of CDN $464,960.00) the Surviving
Corporation shall be entitled, automatically without any further action,
to reduce (before any offset or indemnity) the applicable aggregate
Deferred Payment to all the Shareholders by CDN $0.50; and, to the
extent Agency Core Revenue in any of Year 1, Year 2 or Year 3 shall
be less than CDN $464,960.00, then for each dollar (CDN $1) of such
further deficiency below CDN $464,960.00 in any one Year up to
CDN $333,333.00 (for Agency Core Revenue of CDN $131,627.00)
the Surviving Corporation shall be entitled, automatically without any
further action, to reduce further (before any offset or indemnity) the
applicable aggregate Deferred Payment to all of the Shareholders by
CDN $0.75. For example, if the Year 1 deficiency equals CDN
$100,000.00 for Agency Core Revenue of CDN $498,293.00, the
First Deferred Payment would be reduced in the aggregate by CDN
$50,000.00 down to the aggregate amount payable of CDN
$266,667.00, and Seller s portion thereof shall be [CDN $112,821.00
for George Depres, and CDN $51,282.00 for each other Shareholder].
If the Year 2 deficiency equals CDN $200,000 for Agency Core
Revenue of CDN $398,293.00, the Second Deferred Payment due to
the Shareholders collectively would be reduced in the aggregate by
CDN $116,667.00 (50% of the first $133,333.00 plus 75% of the
remaining $66,667.00) down to the aggregate amount payable of
CDN $200,000.00, and Seller s portion thereof shall be [CDN
$84,615.00 for George Depres, and CDN $38,462.00 for each other
Shareholder]. If the Agency Core Revenue of any Year is less than
CDN $131,627.00, the Shareholders shall not be entitled to any of
the Deferred Payment payable for that Year.
3.3 No Commissions Counted Twice. Notwithstanding
anything in the foregoing to the contrary, the accounting for any
account for purposes of determining Year 1, Year 2 or Year 3 Agency
Core Revenue 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. AMALGAMATION.
4.1 Amalgamation. Immediately after the completion
of the Stock Acquisition, and effective as of 12:02 a.m. on the
Closing Date, the Buyer, 2992575 Ltd. and the Agency will be
amalgamated pursuant to the provisions of the Canada Business
Corporations Act to form Hayhurst Elias Dudek, Inc., a corporation
qualified and validly existing under the laws of Canada. Immediately
upon the completion of the Amalgamation, the Surviving Corporation
shall (i) be a wholly-owned subsidiary of HRH Canada, and (ii) among
other things, own all of the assets and have all of the authority,
power, licenses and permits of the Agency to conduct the Agency's
business, own its properties and continue its operations. Prior to, and
in connection with the Amalgamation, the Shareholders shall cause, to
the extent they are not already, 2992575 Ltd. and the Agency to be
continued federally pursuant to the Canada Business Corporations Act
in order to facilitate their amalgamation to form the Surviving
Corporation.
4.2 Deliveries in Connection with the Amalgamation.
Upon the completion of the Amalgamation, (1) the Buyer shall
promptly be provided with an original copy of the fully executed
amalgamation agreement by the Shareholders, (2) the Buyer shall
promptly be provided with originals of all stock certificates duly
endorsed evidencing the cancellation of the issued and outstanding
2992575 Ltd. Stock and Agency Stock as a result of the
amalgamation by the Shareholders, (3) one share certificate in the
name of HRH Canada evidencing all of the issued and outstanding
shares of the Surviving Corporation shall be issued by the Surviving
Corporation, (4) the Buyer shall promptly be provided with originals of
appropriate federal and/or provincial certificates confirming the
completion of the Amalgamation by the Shareholders, (5) originals of
appropriate provincial certificates confirming that the Surviving
Corporation is duly qualified to conduct its business and operations in
all provinces that it was qualified to do business prior to the
Amalgamation shall be obtained by the Surviving Corporation, and
(6) such other documentation reasonably requested by HRH Canada in
connection with such transactions shall be promptly provided to it.
5. CLOSING. The closing of the transactions contemplated
by this Agreement shall include the completion and consummation in
immediate succession of (1) the Stock Acquisition which shall be
effective as of 12:01 a.m. on the Closing Date, and (2) the
Amalgamation which shall be effective as of 12:02 a.m. on the
Closing Date (which transactions are collectively referred to in this
Agreement as the "Closing"). The Closing shall take place at the
offices of the Buyer in Winnipeg, Manitoba on March 1, 1996 (the
"Closing Date"), or at such other place and at such other time as shall
be mutually agreed upon by the parties to this Agreement.
PART B:
REPRESENTATIONS AND WARRANTIES
6. REPRESENTATIONS AND WARRANTIES OF THE
WARRANTING PERSONS. The Warranting Persons, jointly and
severally, represent and warrant, both as of the date of this
Agreement and as of the Closing Date, to the Buyer and HRH as
follows, and confirm that the Buyer and HRH are relying upon the
accuracy of each of such representations and warranties in
connection with the purchase of the 2992575 Ltd. Stock and the
Agency Stock, and the completion of the other transactions
hereunder:
6.1 Organization and Standing of 2992575 Ltd. and
the Agency.
(a) Each of 2992575 and the Agency (also
referred to herein as an "Acquired Corporation" or the "Acquired
Corporations") is a corporation duly incorporated and organized,
validly existing and in good standing in all respects, and is validly
registered in all respects, under the laws of the jurisdiction of its
incorporation and has all necessary 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.
(b) Each Acquired Corporation is duly licensed,
registered and qualified to do business, is up-to-date in the filing of all
required corporate returns and other notices and filings and is
otherwise in good standing in all respects, in each jurisdiction in which
(i) it owns or leases property, or (ii) the nature or conduct of its
business or any part thereof, or the nature of the property of the
Acquired Corporation or any part thereof, makes such qualification
necessary or desirable to enable its business to be carried on as now
conducted or to enable the property and assets of the Acquired
Corporation to be owned, leased and/or operated by it. Each Acquired
Corporation is licensed, registered and qualified to do business in the
Province of Manitoba and the Northwest Territories, and the nature of
the business conducted by each Acquired Corporation and the
character or ownership of properties owned and/or leased by it do not
require it to be licensed, registered or qualified to do business in any
other province or jurisdiction. Furthermore, the nature of the
business conducted by each Acquired Corporation does not require it
or any of its employees to qualify for, or to obtain any insurance
agency, brokerage, adjuster, or other similar license or permit in any
jurisdiction other than the Province of Manitoba and the Northwest
Territories.
(c) The copies of the articles of incorporation,
bylaws and other constating documents, and all amendments thereto,
of each Acquired Corporation, attached hereto as Schedule 6.1(c),
are complete and correct as of the date hereof. Each Acquired
Corporation's minute book or minute books contain a complete and
accurate record in all material respects of all meetings and other
corporate actions of each Acquired Corporation's shareholders and
directors.
6.2 Corporate Name and Intellectual Property Matters.
Neither any of the Acquired Corporations nor any of the Warranting
Persons has granted to anyone any right to use the Agency's
corporate name or any name similar to the Agency's corporate name.
Also:
(a) Schedule 6.2(a) attached hereto lists and
contains a description of:
(1) all patents, patent applications and
registrations, trade marks, trade mark applications and registrations,
copyrights, copyright applications and registrations, trade names and
industrial designs, domestic or foreign, owned or used by the Agency
or relating to the operation of the Agency's business;
(2) all trade secrets, know-how,
inventions and other intellectual property owned or used by the
Agency or relating to its business, and
(3) all computer systems and application
software, including without limitation all documentation relating
thereto and the latest revisions of all related object and source codes
therefor, owned or used by the Agency or relating to the Agency's
business,
(all of the foregoing being hereinafter collectively called the
"Intellectual Property").
(b) The Acquired Corporations have good and
valid title to all of the Intellectual Property, free and clear of any and
all Encumbrances. Complete and correct copies of all agreements
whereby any rights in any of the Intellectual Property have been
granted or licensed to the Acquired Corporations have been provided
to the Buyer. No royalty or other fee is required to be paid by the
Acquired Corporations to any other person in respect of the use of any
of the Intellectual Property except as provided in such agreements
delivered to Buyer. The Acquired Corporations have protected the
Agency's rights in the Intellectual Property in the manner and to the
extent described in Schedule 6.2(a). The Acquired Corporations have
the exclusive right to use all of the Intellectual Property and have not
granted any license or other rights to any other person in respect of
the Intellectual Property. Complete and correct copies of all
agreements whereby any rights in any of the Intellectual Property have
been granted or licensed by the Acquired Corporations to any other
person have been provided to the Buyer.
(c) There are no restrictions on the ability of the
Acquired Corporations or any successor to or assignee from them to
use and exploit all rights in the Intellectual Property. All statements
contained in all applications for registration of the Intellectual Property
were true and correct as of the date of such applications. Each of the
trade marks and trade names included in the Intellectual Property is in
use. None of the rights of the Acquired Corporations in the
Intellectual Property will be impaired or affected in any way by the
transactions contemplated by this Agreement.
(d) The conduct of the Agency's Business and
the use of the Intellectual Property does not infringe, and neither the
Agency nor the Acquired Corporations have received any notice,
complaint, threat or claim alleging infringement of, any patent, trade
mark, trade name, copyright, industrial design, trade secret or other
Intellectual Property or propriety right of any other person, and the
conduct of the Agency's or their business does not include any
activity which may constitute passing off.
(e) To the best of the Warranting Persons'
knowledge, the computer systems, including hardware and software,
are free from viruses and the Warranting Persons have taken, and will
continue to take, all steps and implement all procedures necessary to
ensure, so far as reasonably possible, that such systems are free from
viruses and will remain so until the Closing Date.
6.3 Capitalization of Acquired Corporations. The
capitalization of each Acquired Corporation is as follows:
(a) Each Acquired Corporation is authorized to
issue the number of shares of capital stock set forth on Schedule 6.3
attached hereto. The number of issued and outstanding shares of
capital stock of each Acquired Corporation is also set forth on
Schedule 6.3 attached hereto.
(b) All of the issued and outstanding shares of
2992575 Ltd. Stock and Agency Stock (collectively, the "Stock")
have been duly and validly issued and are fully paid and
nonassessable. The issuance of all shares of such Stock was and has
been in compliance with all applicable statutes, rules and regulations,
including, without limitation, all applicable federal, provincial and state
securities laws. There is no existing option, warrant, call or
commitment to which any Acquired Corporation is a party requiring
the issuance of any additional shares of Stock or of any other
securities convertible into shares of Stock or any other equity security
of any class or character whatsoever.
(c) Each Acquired Corporation is a "private
company", as defined in the Securities Act, R.S.M. 1988, c. S50
(Manitoba). No shares of the authorized stock of any Acquired
Corporation have ever been registered under the provisions of any
federal, provincial or state securities law and no Acquired Corporation
has ever filed or been required to file any report with any federal,
provincial or state securities commission, department, division or other
governmental agency. No shares or other securities of any Acquired
Corporation have been issued in violation of any laws, the articles of
incorporation, bylaws or other constating documents of any Acquired
Corporation or the terms of any shareholders' agreement or any
agreement to which any Acquired Corporation is or has been a party
or by which it is or has been bound.
(d) No present or prior holder of any shares of the
authorized capital of any Acquired Corporation is entitled to any
dividends or other distributions with respect to any such shares now
or heretofore outstanding.
6.4 Ownership of the Acquired Stock.
(a) As of the date of this Agreement and as of
the effective time of the Stock Acquisition, each Shareholder and
2992575 Ltd. is the shareholder of record and the beneficial owner,
with good and marketable title thereto, of the number of shares of
Stock set forth opposite its or his name in Schedule A of this
Agreement, free and clear of any and all Encumbrances. There are no
marital or other rights or interests of any spouses, past or present, of
the parties to this Agreement in or to the Stock of any kind. All
persons (including the spouse of the Seller) who have any marital or
other rights or interests in or to the Stock are parties to this
Agreement.
(b) No person has any agreement, option,
understanding or commitment, or any right or privilege (whether by
law, pre-emptive or contractual) capable of becoming an agreement,
option or commitment, including convertible securities, warrants or
convertible obligations of any nature, for:
(1) the purchase, subscription, allotment
or issuance of, or conversion into, any of the unissued shares in the
capital of any Acquired Corporation or any securities of an Acquired
Corporation;
(2) the purchase from any Warranting
Person of any of the Stock, or
(3) the purchase or other acquisition from
any Acquired Corporation of any its undertaking, property or assets,
other than in the ordinary course of its business.
(c) As of the Closing, there shall be no
shareholders' agreements, pooling agreements, voting trusts or other
similar agreements with respect to the ownership or voting of any of
the shares of any Acquired Corporation.
6.5 Authority.
(a) The Warranting Persons, individually and
collectively, have full and complete authority to enter into this
Agreement and to perform all of their obligations under this
Agreement. The Warranting Persons agree that they shall take all
steps and perform all actions necessary to cause the approval of the
Agreement and the transactions contemplated hereby by the Acquired
Corporations within the time period called for herein.
(b) Each of the Acquired Corporations and their
respective shareholders and boards of directors have taken all
necessary or desirable actions, steps and corporate and other
proceedings to approve or authorize, validly and effectively, the
entering into, and the execution, delivery and performance of this
Agreement and all ancillary documents and agreements for the
consummation of the transactions contemplated herein (the "Ancillary
Agreements").
(c) This Agreement and each Ancillary
Agreement is a legal, valid and binding obligation of the Warranting
Persons and the Shareholders enforceable against each of them in
accordance with its terms.
6.6 Subsidiaries and Other Relationships. The Acquired
Corporations do not own any stock or other interest in any other
corporation, nor are they a participant in any joint venture, partnership
or similar enterprise with any other person or entity. No Acquired
Corporation is subject to any obligation to make any investment in or
to provide funds by way of loan, capital contribution or otherwise to
any person or entity. Disclosed on Schedule 6.6 attached hereto is a
description of all of the business activities of each Acquired
Corporation. The Acquired Corporations have not operated any
business other than as described in Schedule 6.6, and no Acquired
Corporation has conducted any active business since its respective
date of incorporation. 2992575 Ltd. has only acted as a holding
corporation to own only the stock of the Agency.
6.7 Financial Statements. The Warranting Persons have
caused to be delivered to the Buyer a true and complete copy of the
Prior Years Financial Statements, of which copies are attached hereto
as Exhibit 3.1(a). In addition, the Warranting Persons shall cause to
be prepared and promptly delivered to the Buyer, as soon as available
and, in all events within sixty-two (62) days after the Closing Date,
the Acquisition Audited Balance Sheets (referenced in Section 3.1(a)
above). Each of the foregoing financial statements is or will be true
and correct in all respects, is or will be in accordance with the books
and records of the Acquired Corporations, presents or will present
fairly the financial condition and results of operations of the Acquired
Corporations as of the date and for the period indicated, and has
been prepared, or will be prepared, in accordance with HRH 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 as
of the Pre-Effective Moment). Furthermore, all such financial
statements do not contain and will not contain any untrue statement
of any material fact nor omit to state or will omit to state any material
fact required to be stated to make such financial statements not
misleading. Without limiting the generality of the foregoing, the
commission income reflected in each of the foregoing statements of
income is or will be true and correct, and the accounts payable
reflected in each of the foregoing statements is or will be true and
correct.
6.8 Absence of Undisclosed Liabilities. The term "Most
Recent Balance Sheet," as used in this Section, means the balance
sheet of the Agency at December 31, 1995. Also, the term "Most
Recent Balance Sheet Date," as used in this Section, means December
31, 1995. Except as and to the extent specifically reflected, provided
for or reserved against in the Most Recent Balance Sheet or except as
disclosed in Schedule 6.8 to this Agreement, the Acquired
Corporations, 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 the Acquired Corporations 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 the
Warranting Persons knows or has reasonable grounds to know of any
basis for the assertion against any Acquired Corporation, 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.
6.9 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 any Acquired
Corporation 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 any Acquired Corporation. 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 Agency's "Book of Business," and none of the Warranting
Persons knows or has reasonable grounds to know of any basis for
any material adverse change in the insurance accounts included in the
Agency's "Book of Business" between the date hereof and the
Closing Date. For purposes hereof, "material adverse change" in the
insurance accounts included in the Agency's "Book of Business"
means, without limitation, the loss of any account generating an
aggregate annual commission or fee income of CDN $5,000.00 or
more or the loss of any program generating CDN $10,000 or more of
revenues.
6.10 Taxes.
(a) Each Acquired Corporation has filed all
federal, provincial, state, municipal, 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 in a timely
manner, and all of such returns and reports are true and correct. All
taxes, assessments, reassessments, fees, penalties, interest, rates,
levies and other governmental charges (collectively, "Government
Charges") which were required to be paid by an Acquired Corporation
on such returns and reports have been duly paid and satisfied on or
before their respective due date.
(b) Canadian federal and provincial income tax
assessments have been issued to each Acquired Corporation covering
all past periods up to and including the most recent fiscal year. There
are no actions, suits, proceedings, investigations, enquiries or claims
now pending or made, or, to the best of the knowledge of the
Warranting Persons and the Acquired Corporations, threatened against
any Acquired Corporation in respect to any Government Charge. No
tax deficiency or penalty has been asserted or threatened with respect
to any Acquired Corporation. There are no agreements, waivers or
other arrangements providing for any extension of time with respect to
the filing of any tax return or other document or the payment of any
Government Charge by any Acquired Corporation or the period for any
assessment or reassessment of such tax. Only the fiscal year of the
Acquired Corporations subsequent to ____________ remains open for
reassessment for additional taxes.
(c) No federal, provincial, municipal or state
income tax return of an Acquired Corporation has been audited or, to
the knowledge of any of the Warranting Persons, proposed to be
audited, by any federal, provincial, municipal or state taxing authority,
including, without limitation, the U.S. Internal Revenue Service,
Revenue Canada and any provincial agency, authority, board or
commission, and no waiver of any statute of limitations has been
given or is in effect with respect to the assessment of any
Government Charges against any Acquired Corporation. The
provisions for Government Charges included in the Most Recent
Balance Sheet and in the Prior Years Financial Statements, have been
or will be sufficient for the payment of all accrued and unpaid federal,
provincial, state and local income, withholding, social security,
unemployment, excise, real property, tangible personal property,
intangible personal property and other taxes of each Acquired
Corporation, whether or not disputed, for the period reflected, and for
all years and periods prior thereto. The provisions for Government
Charges to be included in the Acquisition Audited Balance Sheets will
be sufficient for the payment of all federal, provincial, state and local
income, withholding, social security, unemployment, excise, real
property, tangible personal property, intangible personal property and
other taxes of each Acquired Corporation attributable to the period
between the end of Prior Year 1 and the Pre-Effective Moment.
(d) Each Acquired Corporation has withheld
from each amount paid or credited to any person the amount of
Government Charges required to be withheld therefrom and has
remitted such Governmental Charges to the proper tax or other
receiving authorities within the time required under applicable
legislation.
(e) Schedule 6.10 attached to this Agreement
accurately sets out, for purposes of the Income Tax Act, R.S.C. 1985,
c. 1 (5th Supp.) (Canada) (the "Canadian Income Tax Act"), the
following:
(1) the paid-up capital of all issued and
outstanding shares in the capital of the Acquired Corporations;
(2) all non-capital losses of the Acquired
Corporations;
(3) all net capital losses of the Acquired
Corporations;
(4) the amount of all investment tax
credits available to the Acquired Corporations;
(5) the adjusted cost base of the
Acquired Corporations' capital properties;
(6) the cost of the Acquired Corporations'
depreciable properties, the capital cost allowance taken in respect of
each class of such properties and the undepreciated capital cost of
each class of such properties;
(7) the amount (if any) of the Acquired
Corporations' capital dividend account;
(8) the amount (if any) of the Acquired
Corporations' cumulative eligible capital account; and
(9) the amount (if any) of the Acquired
Corporations' refundable dividend tax on hand.
(f) Each Acquired Corporation is a
Canadian-controlled private corporation, as defined in the Canadian
Income Tax Act, and has been one since the date of its incorporation.
6.11 Real and Personal Property Owned by the Acquired
Corporations. The Acquired Corporations own no real property.
Schedule 6.11 attached to this Agreement consists of a copy of the
depreciation schedules filed as a part of the Acquired Corporations'
two prior annual federal income tax returns (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 each
Acquired Corporation since the Most Recent Balance Sheet Date and
having a cost of CDN $1,000.00 or more, and a separate list of each
item of intangible personal property presently owned by the Acquired
Corporations. Certain of the Acquired Corporations also own various
items of disposable type personal property such as office supplies that
are not listed in Schedule 6.11. Each Acquired Corporation is the
owner of and has good and marketable title to all of its properties and
assets, whether tangible or intangible, in each case free and clear of
all Encumbrances whatsoever, except as otherwise stated in
Schedule 6.11. No other person or entity owns any asset which is
being used in the business of each Acquired Corporation, except for
premises and personal property leased by them. There are no
agreements or commitments to purchase property or assets by the
Acquired Corporations, other than in the ordinary course of their
businesses.
6.12 Leases. Schedule 6.12 attached to this Agreement
is a correct and complete list and brief description of all leases or
other agreements under which each Acquired Corporation is a tenant
or lessee of, or holds or operates any property, real or personal,
owned by any third party. Each Acquired Corporation is the owner
and holder of the leasehold estates granted by each of the
instruments described in Schedule 6.12 except as otherwise stated in
Schedule 6.12. 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.
Each Acquired Corporation 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
which with notice or lapse of time, or both, would constitute an event
of default under any of such leases or agreements. Each Acquired
Corporation is exclusively entitled to all rights and benefits as lessee
under such leases and agreements and each Acquired Corporation has
not sublet, assigned, licensed or otherwise conveyed any rights in any
leased premises or in any leases and agreements to any other person
or entity. The names of the other parties to the leases, the description
of the leased premises, the term, rent and other amounts payable
under the leases and all renewal options available under the leases
are accurately described in Schedule 6.12. All rental and other
payments and other obligations required to be paid and performed by
each Acquired Corporation pursuant to the leases have been duly paid
and performed. No Acquired Corporation is in default of any of its
obligations under the leases and, to the best of the knowledge of the
Warranting Parties, none of the landlords or other parties to the leases
are in default of any of their obligations under the leases. The terms
and conditions of the leases will not be affected by, nor will any of the
leases be in default as a result of, the completion of the transactions
contemplated hereunder. The use by each Acquired Corporation of
the leased premises is not in breach of any building, zoning or other
statute, by-law, ordinance, regulation, covenant, restriction or official
plan. Each Acquired Corporation has adequate rights of ingress to and
egress from the leased premises for the operation of its business in
the ordinary course.
6.13 Insurance.
(a) Schedule 6.13(a) attached to this Agreement
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 each Acquired Corporation. Such policies are in
amounts deemed by the Warranting Persons to be adequate. Each
such policy is, on the date hereof, in full force and effect, and no
Acquired Corporation is in default with respect to the payment of any
premium or compliance with any provision contained in any such
policy.
(b) Furthermore, Schedule 6.13(b) and Schedule
6.17 attached to this Agreement contain 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
each Acquired Corporation.
(c) With respect to errors and omissions
(professional liability) insurance policies listed in Schedule 6.13(c)
(and showing in detail for each such policy, the carrier, retrodate,
claims made or occurrence policy and limits), prior to the effective
dates of such policies, except as set forth on Schedule 6.13(c)
attached hereto, no Acquired Corporation has given notice to any
insurer of any act, error or omission in services rendered by any agent
or employee of an Acquired Corporation or that should have been
rendered by any agent or employee of an Acquired Corporation arising
out of the operations of the Acquired Corporation. Furthermore, no
agent or employee of an Acquired Corporation has breached any such
professional duty or obligation prior to the effective dates of such
policies. With respect to such policies, each Acquired Corporation has
given notice of any and all claims for any act, error or omission by any
agent or employee of the Acquired 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 6.13(c)). No Acquired
Corporation has taken or has failed to take any action which would
provide the insurer with a defense to its obligation under any such
policy, neither have each Acquired Corporation nor any of the
Warranting Persons received from any such insurer any notice of
cancellation or non-renewal of any such policy, and, except as set
forth in Schedule 6.13(c), none of the Warranting Persons has any
basis to believe that any Acquired Corporation, or any agent or
employee of an Acquired Corporation, has breached any professional
duty or obligation.
6.14 Insurance Companies. Schedule 6.14 attached to
this Agreement contains a correct and complete list of all insurance
companies with respect to which each Acquired Corporation has an
agency contract or similar relationship. Except as identified in
Schedule 6.14, all relations between the Acquired Corporations and
the insurance companies represented by them are good, and none of
the Warranting Persons has any knowledge of any proposed
termination of, or modification to, the existing relations between an
Acquired Corporation and any of such insurance companies.
Furthermore, except as otherwise set forth in Schedule 6.14, all
accounts with all insurance companies represented by an Acquired
Corporation or with whom an Acquired Corporation transacts business
are current and there are no disagreements or unreconciled
discrepancies between any Acquired Corporation and any such
company as to the amounts owed by an Acquired Corporation.
6.15 Customers. Except as identified in Schedule 6.15
attached to this Agreement, all relations between the Acquired
Corporations and the present customers of any Acquired Corporation,
including without limitation the relations and contractual arrangements
and agreements with associations, are good and anticipated to
continue unchanged after Closing, and no Warranting Person has any
knowledge of any proposed termination of any insurance account
presently written or serviced by an Acquired Corporation. Also,
except as otherwise set forth in Schedule 6.15, all customer
accounts, including, without limitation, those accounts with respect to
which any Acquired Corporation has financed any premiums, are
current. For purposes of Section 6.15, the terms "insurance account"
and "customer account" shall be limited to accounts which generate
an aggregate annual commission income of CDN $1,000.00 or more.
The Warranting Persons have no knowledge of any facts which could
reasonably be expected to result in the loss of any customers or
sources or revenue of the business which, in the aggregate, would be
material to the business or condition of any Acquired Corporation.
6.16 Officers and Directors; Banks and Credit Cards;
Powers of Attorney. Schedule 6.16 attached to this Agreement
contains a correct and complete list of all officers and directors of
each Acquired Corporation, a correct and complete list of the names
and addresses of each bank in which an Acquired Corporation 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 having credit cards or holding powers of attorney from an
Acquired Corporation.
6.17 Compensation and Fringe Benefits. Schedule 6.17
attached to this Agreement contains a correct and complete list of
each officer, director, employee or agent of each Acquired Corporation
and the compensation paid to each such person. Also, Schedule 6.17
contains a description of all fringe benefits presently being provided by
each Acquired Corporation to any employees or agents of an
Acquired Corporation. Schedule 6.17 attached hereto sets forth the
name, job title, duration of employment, vacation entitlement,
employee benefit entitlement and rate of remuneration (including
bonus and commission entitlement) of each employee of the Acquired
Corporations. Schedule 6.17 also sets forth the names of all
employees of the Acquired Corporations who are now on disability,
maternity or other authorized leave or who are receiving workers'
compensation or short-term or long-term disability benefits.
6.18 Patents, Trademarks, Copyrights and Trade Names.
Each Acquired Corporation owns or is possessed of or is licensed
under such patents, trademarks, trade names and copyrights as are
used in, and are of material importance to, the conduct of the
Acquired Corporation's business, all of which are in good standing
and uncontested. Schedule 6.2(a) attached to this Agreement
contains a correct and complete list of all patents, trademarks, trade
names and copyrights owned by or registered in the name of an
Acquired Corporation. There is no material claim pending or, to the
best knowledge of any of the Warranting Persons, threatened against
an Acquired Corporation with respect to any alleged infringement of
any patent, trademark, trade name or copyright owned or licensed to
anyone other than an Acquired Corporation.
6.19 Indebtedness. Schedule 6.19 attached to this
Agreement contains a correct and complete list of all instruments,
agreements or arrangements pursuant to which an Acquired
Corporation has borrowed any money, incurred any indebtedness or
established any line of credit which represents a liability of an
Acquired Corporation. True and complete copies of all such written
instruments, agreements or arrangements have heretofore been
delivered to, or made available for inspection by, Buyer. Each
Acquired Corporation 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.
6.20 Employment Agreements and Other Material
Contracts. Schedule 6.20 attached to this Agreement contains a
complete list of every employment agreement, independent
contractors and brokerage agreement, and a list and brief description
of all material contracts, agreements and other instruments to which
each Acquired Corporation is a party at the date hereof. Except as
identified in Schedule 6.20, or in any other Schedule attached to this
Agreement, no Acquired Corporation is 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 notice permitted at
law; (iii) license, franchise, distributorship, dealer, manufacturer's
representative, sales agency or advertising agreement; (iv) contract
with any labor union or 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 (other
than severance on termination of employment as permitted at law),
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 an Acquired Corporation. No Acquired
Corporation is in default in any material respect under any agreement,
lease, contract or other instrument to which it is a party. No party
with whom an Acquired Corporation has any agreement which is of
material importance to any Acquired Corporation's business is in
material default thereunder. All such contracts, agreements,
commitments, indentures and other instruments are now in good
standing and in full force and effect without amendment thereto, each
Acquired Corporation is entitled to all benefits thereunder and, to the
best of the knowledge of the Warranting Persons, the other parties to
such contracts, agreements, commitments, indentures and other
instruments are not in default or breach of any of their obligations
thereunder. There are no contracts, agreements, commitments,
indentures or other instruments under which an Acquired
Corporation's rights or the performance of its obligations are
dependent upon or supported by the guarantee of or any security
provided by any other person.
6.21 Absence of Certain Events. Since the Most Recent
Balance Sheet Date, the business of all Acquired Corporations has
been conducted only in the ordinary course and in substantially the
same manner as theretofore conducted, and no Acquired Corporation
has, 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, or increased any form of compensation or other
benefits payable or to become payable to any of the employees,
directors or officers of an Acquired Corporation;
(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 6.20
attached hereto;
(iii) discharged or satisfied any 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 any
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;
(xii) made capital expenditures or entered into any
commitments therefor aggregating more than CDN $1,000.00;
(xiii) purchased, leased or otherwise acquired any
properties or assets, except in the ordinary course of business;
(xiv) waived, cancelled or written-off any rights,
claims, accounts receivable or any amounts payable to an Acquired
Corporation, except in the ordinary course of business;
(xv) had any customer terminate, or communicate
to an Acquired Corporation the intention or threat to terminate, its
relationship with an Acquired Corporation, except in the case of
customers whose business are not individually or in the aggregate
material to any Acquired Corporation's business; or
(xvi) made any material change with respect to any
method of management, operation or accounting in respect of any
Acquired Corporation's business.
Except as contemplated by this Agreement, or the Schedules
referred to in this Agreement, between the date hereof and the
Closing Date, no Acquired Corporation will, without the prior written
consent of the Buyer, do any of the things listed above in clauses (i)
through (xvi) of this Section 6.21.
6.22 Investigations and Litigation. There is no
investigation by any governmental agency pending, or, to the best
knowledge of the Warranting Persons, threatened, against or
adversely affecting any Acquired Corporation, and except as set forth
on Schedule 6.22, there is no action, suit, proceeding or claim
pending, judicial or administrative, or, to the best knowledge of the
Warranting Persons, threatened, against any Acquired Corporation, or
its business, properties, assets or goodwill, which might have a
material adverse effect on any Acquired 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 any Acquired
Corporation, or its business, properties, assets or goodwill.
6.23 Overtime, Back Wages, Vacation and Minimum
Wages. To the best knowledge of the Warranting Persons, no present
or former employee of any Acquired Corporation has any claim against
any Acquired Corporation (whether under federal, provincial, state or
other 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 6.23 to this Agreement.
6.24 Discrimination, Occupational Safety and Other
Statutes and Regulations. No persons or parties (including, without
limitation, governmental agencies of any kind) have any claim, or basis
for any claim, action or proceeding, against any Acquired Corporation
arising out of any statute, ordinance, rule or regulation relating to
discrimination in employment or employment practices or occupational
safety and health standards.
6.25 Labor Matters, Employment Standards and
Employee Benefit Plans.
(a) No Acquired Corporation is subject to any
agreement with any labor union or employee association and has not
made any commitment to or conducted negotiations with any labor
union or employee association with respect to any future agreement
and, to the best of the knowledge of the Warranting Persons, during
the period of five (5) years preceding the date of this Agreement there
has been no attempt to organize, certify or establish any labor union
or employee association in relation to any of the employees of any
Acquired Corporation.
(b) There are no existing or, to the best of the
knowledge of the Warranting Persons, threatened, labor strikes or
labor disputes, grievances, controversies or other labor troubles
affecting any Acquired Corporation or their businesses.
(c) Each Acquired Corporation has complied
with all laws, rules, regulations and orders applicable to it relating to
employment, including those relating to wages, hours, collective
bargaining, occupational health and safety, workers' hazardous
materials, employment standards, pay equity and workers'
compensation. There are no outstanding charges or complaints
against any Acquired Corporation relating to unfair labor practices or
discrimination or under any legislation relating to employees. Each
Acquired Corporation has paid in full all amounts owing under the
Workers' Compensation Act, R.S.M. 1987, c. W200 (Manitoba) or
other applicable provincial legislation, and the workers' compensation
claims experience of any Acquired Corporation would not permit a
penalty reassessment under such legislation.
(d) Except as listed in Schedule 6.25 or
Schedule 6.17 attached to this Agreement, no Acquired Corporation
has, and is not subject to, any present or future obligation or liability
under, any pension plan, deferred compensation plan, retirement
income plan, stock option or stock purchase plan, profit sharing plan,
bonus plan or policy, employee group insurance plan, hospitalization
plan, disability plan or other employee benefit plan, program, policy or
practice, formal or informal, with respect to any of its employees,
other than the Canada Pension Plan, R.S.C. 1985, c. C-8, and other
similar health plans established pursuant to statute and specified on
Schedule 6.25. Schedule 6.25 also lists the general policies,
procedures and work-related rules in effect with respect to employees
of each Acquired Corporation, whether written or oral, including but
not limited to policies regarding holidays, sick leave, vacation,
disability and death benefits, termination and severance pay,
automobile allowances and rights to company-provided automobiles
and expense reimbursements. (The plans, programs, policies,
practices and procedures listed in Schedule 6.25 are hereinafter
collectively called the "Benefit Plans"). Complete and correct copies
of all documentation establishing or relating to the Benefit Plans listed
in Schedule 6.25 or, where such Benefit Plans are oral commitments,
written summaries of the terms thereof, and the most recent financial
statements and actuarial reports related thereto and all reports and
returns in respect thereof filed with any regulatory agency within three
(3) years prior to the date hereof have been provided to Buyer.
(e) No Acquired Corporation has, or has ever
had, any pension plans included in the Benefit Plans for any of their
employees.
(f) There are no pending claims by any
employee covered under the Benefit Plans or by any other person
which allege a breach of fiduciary duties or violation of governing law
or which may result in liability to any Acquired Corporation and, to the
best of the knowledge of the Warranting Persons, there is no basis for
such a claim. There are no employees or former employees of any
Acquired Corporation who are receiving from any Acquired
Corporation any pension or retirement payments, or who are entitled
to receive any such payments, not covered by a pension plan to which
any Acquired Corporation is a party.
6.26 Competitors. Except as disclosed in Schedule
6.26 attached to this Agreement, none of the Warranting Persons 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 a
corporation listed on a national securities exchange or a corporation
whose securities are traded in the over-the-counter market.
6.27 Accounts and Notes Receivable. The reserve for
bad debts, if any, contained in the Most Recent Balance Sheet and to
be contained in the Acquisition Audited Balance Sheet was, or, as the
case may be, will be, calculated on a consistent basis which, in the
light of past experience, is considered adequate. Except as set forth
in Schedule 6.27 attached hereto, all accounts receivable and all notes
receivable of the Acquired Corporations or any entities related to them
reflected in the Acquisition Audited Balance Sheet are and will be 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 the Warranting Persons are hereby representing
and warranting to Buyer the full collectibility when due of all of the
notes receivable and accounts receivable of each Acquired
Corporation in the aggregate amount shown in the Acquisition Audited
Balance Sheet, less the bad debt allowance stated therein. Except as
set forth in Schedule 6.27, all notes receivable of each Acquired
Corporation are due and payable within one year after the Closing
Date. Any such notes receivable due and payable more than one year
after the Closing Date ("Long Term Notes") will be fully collectible
when due at the aggregate amount shown. Except as further set
forth in Schedule 6.27, no Long Term Notes are secured by any
interest in property, whether it be real, personal or intangible. The
parties acknowledge that after the Amalgamation, the collection
policies of Buyer shall apply to all of the accounts of Agency acquired
by Buyer and Buyer shall be able to cancel for nonpayment any of the
former Agency accounts which are not current under Buyer s
guidelines.
6.28 Permits, Licenses and Consents.
(a) All permits, licenses and approvals of all
federal, provincial, state or local regulatory agencies, which are
required in order to permit each Acquired Corporation and its
employees and agents to carry on business as now conducted by each
Acquired Corporation, have been obtained by such Acquired
Corporation and are current.
(b) Except as specified in Schedule 6.28,
attached hereto, none of the Acquired Corporations and no Warranting
Person is under any obligation, contractual or otherwise, to request or
obtain the consent of any person, and no permits, licenses,
certifications, authorizations or approvals of, or notifications to, any
federal, provincial, municipal or local government or governmental
agency, board, commission or authority are required to be obtained by
the Acquired Corporations or the Warranting Persons (or will need to
be obtained by Buyer):
(1) in connection with the execution,
delivery or performance of this Agreement or the completion of any of
the transactions contemplated herein;
(2) to avoid the loss of any permit,
license, certification or other authorization; or
(3) in order that the authority of the
Acquired Corporations to carry on the business of the Agency in the
ordinary course and in the same manner as presently conducted
remain in good standing and in full force and effect as of and
following the closing of the transactions contemplated hereunder.
Complete and correct copies of any agreements under
which the Acquired Corporations and the Warranting Persons are
obligated to request or obtain any such consent have been provided to
Buyer and identified on Schedule 6.20.
(c) All of Acquired Corporations' licenses are
listed in Schedule 6.28 attached hereto and are valid and subsisting.
Complete and correct copies of the licenses have been delivered to
Buyer. Each Acquired Corporation is in compliance with all terms and
conditions of the licenses. There are no proceedings in progress,
pending or, to the best of the knowledge of the Warranting Persons,
threatened, which could result in the revocation, cancellation or
suspension of any of the licenses.
6.29 No Violation or Default.
(a) The execution and delivery of this
Agreement by the Warranting Parties and the Acquired Corporations,
and the performance of this Agreement by them, will not violate,
result in a breach of, or constitute a default under, the articles of
incorporation or bylaws of any Acquired Corporation or of any
indenture, contract, agreement or other instrument to which any
Acquired Corporation is a party or is bound including, without
limitation, any program or agency contract with any insurance
company.
(b) There are no outstanding work orders,
non-compliance orders, deficiency notices or other such notices
relative to the leased premises of any Acquired Corporation, the other
properties and assets of any Acquired Corporation or its business
which have been issued by any regulatory authority, police or fire
department, sanitation, environment, labor, health or other
governmental authorities or agencies. There are no matters under
discussion with any such department or authority relating to work
orders, non-compliance orders, deficiency notices or other such
notices. Each Acquired Corporation's business is not being carried on,
and none of the leased premises or the other properties or assets of
an Acquired Corporation are being operated in a manner which is in
contravention of any statute, regulation, rule, code, standard or policy.
No amounts are owing by any Acquired Corporation in respect of its
leased premises to any governmental authority or public utility, other
than current accounts which are not in arrears.
6.30 HRH Stock. The Warranting Persons understand
and acknowledge that the HRH Stock to be received by the
Shareholders pursuant to this Agreement is registered and is subject
to Rule 145 of the Securities Exchange Commission and any other
applicable rules; 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 all
applicable laws and regulations.
6.31 Financing Statements. Except as disclosed on
Schedule 6.31, there are no financing statements or other security
interests of any kind filed or required to be filed against any of the
Acquired Corporations' assets or affecting the use of, or title to, such
assets ("Financing Statements"). Except as further disclosed on
Schedule 6.31, there are no deferred money purchase notes related to
any Acquired Corporation's acquisition of any portion of its 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 6.31 and agreed to by Buyer.
6.32 Brokers. Except as disclosed in Schedule 6.32,
neither the Acquired Corporations nor any of the Warranting Persons
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.
6.33 Disclosure. On or before February 1, 1996, each
Shareholder received copies of (i) a prospectus used in connection
with the offering of up to 5,000,000 shares of common stock of HRH,
dated February 12, 1992, (ii) Buyer's 1994 annual report, (iii) Buyer's
Form 10-K for 1994, and (iv) Form 10-Q of Buyer as of September 30,
1995, and will acknowledge receipt of the supplement to the
prospectus in connection with the registration of the HRH Stock with
the Securities and Exchange Commission.
6.34 Warranting Person's Residency and Investment
Canada Act. The Warranting Persons are not non-residents of Canada
within the meaning of the Canadian Income Tax Act. Other than
notification to Investment Canada under Section 11 of the Investment
Canada Act, R.S.C. 1985, c. 28 (1st Supp.) (the "Investment Canada
Act"), there are no other governmental notices that must be filed or
delivered in connection with the consummation of this transaction.
The transactions contemplated by this Agreement are not considered
"reviewable" under the Investment Canada Act, and only notice of
this transaction need be made to Investment Canada officials in
connection with the acquisition of the Acquired Corporations. Notice
under the Investment Canada Act may be made within thirty (30) days
after the Closing Date without prejudice or penalty, and such notice
shall be in the form of Exhibit 6.34 attached hereto.
6.35 Corporate Records. The corporate records and
minute books of the Acquired Corporations, all of which shall have
been provided to Buyer at Closing, contain complete and accurate
minutes of all meetings of the directors and shareholders of the
Acquired Corporations held since their incorporation, and original
signed copies of all resolutions and bylaws duly passed or confirmed
by the directors or shareholders of each Acquired Corporation other
than at a meeting. All such meetings were duly called and held. The
share certificate books, register of security holders, register of
transfers and register of directors and any similar corporate records of
each Acquired Corporation are complete and accurate. All exigible
security transfer tax or similar tax payable in connection with the
transfer of any securities of each Acquired Corporation has been duly
paid.
6.36 Environmental Matters.
(a) For the purposes of this Agreement, the
following terms and expressions shall have the following meanings:
(1) "Environmental Laws" means all
applicable statutes, regulations, ordinances, by-laws, and codes and
all international treaties and agreements, now or hereafter in existence
in Canada (whether federal, provincial or municipal) and in the United
States (whether federal, state or local) relating to the protection and
preservation of the environment, occupational health and safety,
product safety, product liability or Hazardous Substances, including,
without limitation, the Dangerous Goods Handling and Transportation
Act, R.S.M. 1987, c. D12 (Manitoba), as amended from time to time
(the "DGHTA"), and the Canadian Environmental Protection Act,
R.S.C. 1985, c. 16 (4th Supp.), as amended from time to time (the
"CEPA").
(2) "Environmental Permits" includes all
orders, permits, certificates, approvals, consents, registrations and
licenses issued by any authority of competent jurisdiction under
Environmental Laws.
(3) "Hazardous Substance" means,
collectively, any contaminant (as defined in the DGHTA), toxic
substance (as defined in the CEPA), dangerous goods (as defined in
the Transportation of Dangerous Goods Act, R.S.C. 1985, c. T-19
(Canada), as amended from time to time) or pollutant or any other
substance which when released to the natural environment is likely to
cause, at some immediate or future time, material harm or degradation
to the natural environment or material risk to human health.
(4) "Release" means any release, spill,
leak, emission, discharge, leach, dumping, escape or other disposal
which is or has been made in contravention of any Environmental
Laws.
(b) The Acquired Corporations, the operation of
their business, the property and assets owned or used by any
Acquired Corporation and the use, maintenance and operation thereof
have been and are in compliance with all Environmental Laws. Each
Acquired Corporation has complied with all reporting and monitoring
requirements under all Environmental Laws. No Acquired Corporation
has received any notice of any non-compliance with any
Environmental Laws, and no Acquired Corporation has ever been
convicted of an offence for non-compliance with any Environmental
Laws or been fined or otherwise sentenced or settled such prosecution
short of conviction.
(c) Each Acquired Corporation has obtained all
Environmental Permits necessary to conduct its business and to own,
use and operate the properties and assets of the Agency. All such
Environmental Permits are listed in Schedule 6.36 and complete and
correct copies thereof have been provided to Buyer.
(d) There are no Hazardous Substances located
on or in any of the properties or assets owned or used by any
Acquired Corporation, and no Release of any Hazardous Substances
has occurred on or from the properties and assets of an Acquired
Corporation or has resulted from the operation of the business and the
conduct of all other activities of an Acquired Corporation. No
Acquired Corporation has used any of its properties or assets to
produce, generate, store, handle, transport or dispose of any
Hazardous Substances and none of the real properties or leased
premises of any Acquired Corporation has been or is being used as a
landfill or waste disposal site.
(e) Without limiting the generality of the
foregoing, there are no underground or surface storage tanks or urea
formaldehyde foam insulation, asbestos, polychlorinated biphenyls
(PCBs) or radioactive substances located on or in any of the properties
or assets owned or used by any Acquired Corporation. No Acquired
Corporation is, and there is no basis upon which any Acquired
Corporation could become, responsible for any clean-up or corrective
action under any Environmental Laws. No Acquired Corporation has
ever conducted or caused to be conducted an environmental audit,
assessment or study of any of its properties or assets.
6.37 Restrictions on Doing Business. No Acquired
Corporation is a party to or bound by any agreement which would
restrict or limit its right to carry on any business or activity or to
solicit business from any person or in any geographical area or otherwise
to conduct its business as it may determine. No Acquired Corporation
is subject to any legislation or any judgment, order or requirement of
any court or governmental authority which is not of general
application to persons carrying on a business similar to its business.
To the best of the knowledge of the Warranting Persons, there are no
facts or circumstances which could materially adversely affect the
ability of the Agency to continue to operate its business as presently
conducted following the completion of the transactions contemplated
by this Agreement.
6.38 Non-Arm's Length Matters. No Acquired
Corporation is a party to or bound by any agreement with, is not
indebted to, and no amount is owing to an Acquired Corporation by,
the Warranting Persons or any of their affiliates or any officers, former
officers, directors, former directors, shareholders, former shareholders,
employees (except for oral employment agreements with employees)
or former employees of the Acquired Corporations or any person not
dealing at arm's length with any of the foregoing. Since December
31, 1995, no Acquired Corporation has made or authorized any
payments to the Shareholders or any of their affiliates or any officers,
former officers, directors, former directors, shareholders, former
shareholders, employees or former employees of an Acquired
Corporation or to any person not dealing at arm's length with any of
the foregoing, except for salaries and other employment compensation
payable to employees of an Acquired Corporation in the ordinary
course of the routine daily affairs of the Acquired Corporations'
business and at the regular rates payable to them. "Arm's length" will
have the meaning ascribed to such term under the Canadian Income
Tax Act.
6.39 Government Assistance. Schedule 6.39 attached
hereto describes all agreements, loans, other funding arrangements
and assistance programs (collectively called "Government Assistance
Programs") which are outstanding in favor of the Acquired
Corporations from any federal, provincial, municipal or other
government or governmental agency, board, commission or authority,
domestic or foreign (collectively called "Government Agencies").
Complete and correct copies of all documents relating to the
Government Assistance Programs have been delivered to Buyer. Each
Acquired Corporation has performed all of its obligations under the
Government Assistance Programs, and no basis exists for any
Government Agencies to seek payment or repayment by any Acquired
Corporation of any amount or benefit received by it under any
Government Assistance Programs.
6.40 Material Misstatements or Omissions. No
representation or warranty by the Warranting Persons, or any of them,
contained in this Agreement, or in any document, statement,
certificate, Schedule, financial statement or other information
furnished or to be furnished to Buyer by or on behalf of the Warranting
Persons, or any of them (whether before or after the execution of this
Agreement), pursuant to this Agreement, or at any time in connection
with the transactions contemplated by this Agreement has contained,
contains, or will when furnished contain, any untrue statement 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.
7. REPRESENTATIONS AND WARRANTIES OF HRH AND THE
BUYER. HRH and Buyer, jointly and severally, represent and warrant,
as of the date hereof and as of the Closing Date, to the Seller as
follows:
7.1 Organization and Standing of HRH and Buyer. HRH
is a corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Virginia. Buyer is a
corporation duly organized, validly existing and in good standing under
the laws of Canada.
7.2 Authority. The execution, delivery and performance
of this Agreement by HRH and Buyer have been duly and validly
approved by all necessary corporate actions. Except for any securities
or stock exchange approvals which shall have been obtained prior to
the Closing Date, no governmental or other authorization, approval or
consent for the execution, delivery and performance of this Agreement
by HRH and Buyer is required. The execution and delivery of this
Agreement by HRH and Buyer and the performance of this Agreement
by HRH and Buyer will not violate, result in a breach of, or constitute
a default under, the articles of incorporation or bylaws of HRH or
Buyer or any indenture, contract, agreement or other instrument to
which HRH and/or Buyer is a party or is bound.
7.3 Capitalization of HRH and Buyer. As of December
31, 1995, the authorized capital stock of HRH consisted of
50,000,000 shares of common stock, no par value, of which
13,706,764 shares were issued and outstanding, fully paid and
nonassessable, and as of the date of this Agreement the authorized
capital stock of Buyer consisted of an unlimited number of Classes
A,B,C and D common and preferred shares, and an unlimited number
of Classes E and F preferred shares, of which 200 Class A common,
1,691,810 Class A preferred, 211,838 Class B common, 2,344,010
Class B preferred and 14,180 Class C preferred shares were issued
and outstanding, fully paid and nonassessable.
7.4 Status of HRH Stock. The HRH Stock to be issued
to the Seller pursuant to this Agreement will, when so issued, be duly
and validly authorized and issued, fully paid and nonassessable.
7.5 Brokers' or Finders' Fees. No agent, broker, person,
or firm acting on behalf of HRH 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 in connection with any
of the transactions contemplated herein.
7.6 Investment Canada Act. HRH is an "American" for
purposes of and within the meaning of the Investment Canada Act.
PART C:
PRE-CLOSING AGREEMENTS
8. ACCESS AND INFORMATION. The Shareholders shall
cause the Acquired Corporations and all employees of the Acquired
Corporations to give to Buyer, and any and all authorized
representatives of the Buyer (including auditors and attorneys), full
and unrestricted access, during normal business hours, to the offices,
assets, properties, contracts, books and records of the Acquired
Corporations in order to give the Buyer full opportunity to make such
investigations as it deems appropriate with respect to the affairs of
the Agency, and shall further cause the Acquired Corporations, and all
employees of the Acquired Corporations, to provide to the Buyer
during such period such additional information concerning the affairs
of the Acquired Corporations as the Buyer 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,
the Buyer covenants with the Warranting Persons that the Buyer will
use its best efforts to deliver to the Shareholders all documents,
working papers and other written information concerning the Acquired
Corporations obtained or prepared in connection with any such
investigation. Regardless of any such investigation by the Buyer, all
representations and warranties of the Warranting Persons contained in
this Agreement shall remain in full force and effect and no such
investigation shall cause or result in a waiver by the Buyer of any of
the representations and warranties of the Warranting Persons
contained herein.
9. CONDUCT OF THE ACQUIRED CORPORATIONS
PENDING THE CLOSING DATE. The Warranting Persons represent
and covenant that, since December 31, 1995 and the Closing Date:
9.1 Operate in Ordinary Course. The Acquired
Corporations will have been operated only in the ordinary course of
business.
9.2 Negative Covenants. The Acquired
Corporations will not have done any of the things listed in clauses (i)
through (xvi) of Section 6.21 of this Agreement.
9.3 Continuing Accuracy of Representations.
There shall have been no action, or failure to act, which would render
any of the representations and warranties of the Warranting Persons
contained in this Agreement or in any other information or document
delivered or provided to the Buyer by the Acquired Corporations or the
Shareholders prior to the execution of this Agreement untrue or
incorrect in any material respect.
9.4 Preserve Business Organizations. Except as
otherwise requested by the Buyer, and without making any
commitment on the Buyer's behalf, the Shareholders will have used
their best efforts to preserve the Acquired Corporations' business
organizations intact, to keep available to the Buyer the services of its
present employees, and to preserve for the Buyer the goodwill of the
Acquired Corporations' customers and others having business
relations with them.
9.5 Corporate Approvals. The boards of directors
of the Acquired Corporations will have recommended to the applicable
Warranting Persons that they adopt this Agreement. Each Acquired
Corporation agrees to have submitted this Agreement to the applicable
shareholders for adoption by unanimous written consent with waiver
of notice of the terms of this Agreement prior to the Closing Date.
Unless there is a failure of the Buyer to fulfill its conditions set forth
in Section 11 hereof or there is a material adverse change in the financial
conditions of the Buyer, the Warranting Persons covenant to adopt
this Agreement and to approve all related aspects of this Agreement
within the time period contemplated herein.
PART D:
CONDITIONS PRECEDENT TO PERFORMANCE
10. CONDITIONS PRECEDENT TO PERFORMANCE BY THE
BUYER. The obligation of the Buyer 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 Buyer:
10.1 Representations and Warranties. Buyer shall
not have discovered any material error, misstatement or omission in
any of the representations and warranties made by the Warranting
Persons 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 the Warranting Persons, or any of them, contained in
this Agreement and in any financial statement, certificate, Schedule,
Exhibit or other document attached to or delivered pursuant to this
Agreement, shall be true and correct in all material respects on and as
of the Closing Date with the same force and effect, except as affected
by transactions expressly authorized herein or otherwise approved in
writing by Buyer, as though such representations and warranties had
been made on and as of the Closing Date; and the Warranting Persons
shall have delivered to Buyer a certificate, dated the Closing Date, and
signed by all of them, to the foregoing effect, substantially in the form
and substance as set forth in Exhibit 10.1.
10.2 Covenants. The Acquired Corporations and the
Warranting Persons 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 the Acquired Corporations and the
Warranting Persons shall have delivered to Buyer a certificate dated
the Closing Date, and signed by all of them, to the foregoing effect,
substantially in the form and substance as set forth in Exhibit 10.1.
10.3 Litigation. No suit, action or proceeding, or
governmental investigation, against or concerning, directly or
indirectly, any Acquired Corporation, or any of the Acquired
Corporations' 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 Buyer, renders it impossible or
inadvisable for Buyer to consummate or cause to be consummated the
transactions contemplated by this Agreement.
10.4 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 Buyer.
10.5 Opinion of Counsel. Buyer shall have received
a favorable opinion, dated as of the Closing Date, from the law firm of
__________________, counsel for the Acquired Corporations and the
Shareholders, substantially in the form and substance as set forth in
Exhibit 10.5 and otherwise reasonably satisfactory to counsel for
Buyer.
10.6 Delivery of Acquired Stock. There shall be
duly tendered to Buyer at the Closing not less than one hundred
percent (100%) of the shares of the Acquired Stock issued and
outstanding at the time of the Closing.
10.7 Continuation of Acquired Corporation
Contracts. To the extent desired by Buyer, Buyer shall have obtained
a statement in writing from each of the insurance companies identified
in Schedule 6.14 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 program or insurance agency contract
solely by reason of the transactions contemplated in this Agreement,
and further agrees that it will continue to recognize the Agency, and
its successors and assigns, as its agent under the existing contract
between such company and the Agency or that it will enter into a
substantially similar contract with the Agency, or its successors and
assigns.
10.8 Shareholder Employment Agreements. An
Employment Agreement between the Surviving Corporation, as the
employer, and the Seller, as the employee in form and substance as
set forth in Exhibit 10.8 attached hereto, shall have been duly
executed by the Seller and delivered to Buyer.
10.9 Other Employment Agreements. Employment
Agreements between the Surviving Corporation, as the employer, and
such of its employees as specified in Schedule 10.9 attached hereto,
in form previously approved by the President of Buyer, shall be in full
force and effect or such new agreements as have been requested by
Buyer shall have been executed, substantially in the form and
substance as set forth in Exhibit 10.9 attached hereto.
10.10 No Material Adverse Change. There shall have
been no material adverse change in the Acquired Corporations'
business, business prospects, assets and properties, or goodwill
between the date of the execution of this Agreement and the Closing
Date. Without limiting the foregoing, the definition of material adverse
change with respect to the insurance accounts and programs included
in the Agency's "Book of Business" contained in Section 6.9 above is,
by this reference, incorporated herein.
10.11 Satisfaction of Certain Obligations. At or prior
to the Closing, unless waived in writing by Buyer, all of the liabilities
listed or required to be listed in Schedule 6.31 as Financing
Statements or Notes shall have been satisfied in full.
10.12 Leases. The lease described in Schedule 6.12
shall be terminated.
10.13 Resolutions. Buyer shall receive certified
copies of resolutions adopted by the unanimous written consent of the
board of directors and shareholders of each Acquired Corporation, in
form satisfactory to counsel for Buyer, authorizing the execution and
delivery of this Agreement by the Acquired Corporations and the
consummation of the transactions contemplated hereby, including,
without limitation, the resignation (as officers and directors) of all
officers and members of the board of directors of each Acquired
Corporation.
10.14 Approvals and Consents. All statutory
requirements for the valid consummation by Warranting Persons of the
transactions contemplated by this Agreement shall have been fulfilled;
and, all authorizations, consents and approvals of all federal,
provincial, state, local and foreign governmental agencies and
authorities, and all consents and approvals under contracts to which
the Acquired Corporations are parties, required to be obtained in order
to permit consummation by Warranting Persons of the transactions
contemplated by this Agreement and to permit the business presently
carried on by the Agency to continue unimpaired immediately
following the Closing Date of this Agreement shall have been
obtained.
10.15 Unanimous Shareholder Agreements. The
shareholder of the Surviving Corporation shall have executed an
Unanimous Shareholder Agreement substantially in the form of
agreement attached hereto as Exhibit 10.15 and the respective boards
of directors of Buyer and the Surviving Corporation shall be comprised
of an appropriate number of Canadian residents so as to comply with
the provisions of the Canada Business Corporations Act.
10.16 Rule 145 Compliance. The persons and
entities listed on Exhibit 10.16 shall have executed and delivered to
Buyer a letter agreement substantially in the form attached as part of
Exhibit 10.16 agreeing to comply with the provisions of Rule 145.
10.17 Full Releases. Each Warranting Person shall
have executed and delivered a full release of any and all claims,
demands or interests of any kind that they may have as to any
Acquired Corporation substantially in the form attached hereto as
Exhibit 10.17.
10.18 Indemnity Agreement. Seller shall have
executed the Indemnity Agreement attached hereto as Exhibit 10.18 ,
whereby Shareholders have agreed to indemnify Buyer and HRH jointly
and severally for any matter for which a Seller agrees to indemnify
Buyer and HRH herein.
10.19 Tail Insurance. The Warranting Persons shall
collectively obtain tail insurance coverage for claims arising under
errors and omissions in form and substance satisfactory to HRH and
Buyer, and shall name HRH, HRH Canada and the Surviving
Corporation as additional named insureds for all prior acts.
11. CONDITIONS PRECEDENT TO PERFORMANCE BY THE
WARRANTING PERSONS. The obligations of the Warranting Persons
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 all of the Warranting Persons:
11.1 Representations. The Warranting Persons shall
not have discovered any material error, misstatement or omission in
any of the representations and warranties made by Buyer contained in
this Agreement, and all representations and warranties of Buyer
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 the Warranting
Persons, as though such representations and warranties had been
made on and as of the Closing Date; and Buyer shall have delivered to
the Warranting Persons a certificate, dated the Closing Date, to the
foregoing effect, substantially in the form and substance as set forth
in Exhibit 11.1.
11.2 Covenants. Buyer 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 Buyer; and Buyer shall have delivered to the
Warranting Persons a certificate dated the Closing Date, to the
foregoing effect, substantially in the form and substance as set forth
in Exhibit 11.1.
11.3 Effective Registration Statement. The
registration statement on Form S-4 under the Securities Act of 1933
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 for their review and subsequent approval
of this Agreement and the transactions contemplated thereby.
11.4 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 the Warranting Persons.
11.5 Opinion of Counsel. The Shareholders shall
have received a favorable opinion, dated as of the Closing Date, from
the law firm of Williams, Mullen, Christian & Dobbins, counsel for
Buyer, substantially in the form and substance as set forth in Exhibit
11.5 and otherwise reasonably satisfactory to counsel for the
Warranting Persons.
11.6 Delivery of HRH Stock. There shall be
delivered to the Seller at the Closing the shares of HRH Stock
comprising the Consideration, other than the Escrowed Shares.
11.7 Resolutions. The Seller shall receive certified
copies of resolutions adopted by the boards of directors of HRH and
Buyer, in form satisfactory to counsel for the Seller, authorizing the
execution and delivery of this Agreement by HRH and Buyer and the
consummation of the transactions contemplated hereby.
PART E:
CLOSING AND POST-CLOSING COVENANTS
12. ADDITIONAL REQUIREMENTS ON CLOSING AND
POST-CLOSING MATTERS AND AGREEMENTS.
12.1 Resignations. At the Closing, the Warranting
Persons shall deliver to the Buyer, unless otherwise instructed by the
Buyer, the written resignations of all officers and directors of the
Acquired Corporations, effective as of the Closing Date, and shall
take, or cause to be taken, all other actions as the Buyer may request
with respect to changes in the officers and directors of the Acquired
Corporations as the Buyer, in the sole discretion of the Buyer, may
deem advisable.
12.2 Minute Books. At the Closing, the Warranting
Persons shall cause to be delivered to the Buyer the minute book or
minute books of the Acquired Corporations, all stock books of the
Acquired Corporations, the corporate seals of the Acquired
Corporations, if any, and all books and records pertaining to the
Acquired Corporations and the Acquired Corporations' business assets
and properties and liabilities.
12.3. Delivery of Acquisition Audit Balance Sheet.
The Shareholders shall cause to be delivered to the Surviving
Corporation as soon after the Closing Date as is practicable, and in all
events no later than sixty-two (62) days after the Closing Date, the
Acquisition Audit Balance Sheets, as defined in Section 3.1(a), and its
related work papers and other financial documents prepared therefor.
The Acquisition Audit Balance Sheets will be true and correct, will be
in accordance with the books and records of the Acquired
Corporations, will present fairly the financial conditions and results of
operations of the Acquired Corporations 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 Acquisition Audit Balance Sheets not misleading.
12.4. Post-Acquisition Filings. The Shareholders
shall cause to be timely filed, at no expense which has not previously
been reserved for on the Acquisition Audit Balance Sheets, all federal,
provincial, state and local tax returns of all kinds required to be filed
by the Acquired Corporations for all tax periods ending on or prior to
the Closing Date ("Post-Acquisition Filings"). All Post-Acquisition
Filings will be true and correct and, prior to actual filing thereof,
Shareholders shall deliver drafts of such filings to the Surviving
Corporation for its review. The Surviving Corporation shall allow the
Shareholders, upon receiving reasonable written notice, all necessary
access to the books and records of the Acquired Corporations in order
to allow the Shareholders to comply with this provision.
12.5 Accounts Receivable. In the event of any
delinquency or nonpayment of any portion of a Long Term Note, the
Shareholders shall be obligated to satisfy such deficiency in the same
manner as specified below for all other receivables of the Acquired
Corporations. The Surviving Corporation will use reasonable efforts in
accordance with its customary collection practices to collect all such
notes receivable, the accounts receivable, debit balances in the
company payables of the Acquired Corporations. However, if, after
the last day of the three-month period commencing on the Closing
Date, the Surviving Corporation shall not have received payment of
the accounts receivable, notes receivable, debit balances in the
company payables (other than Long Term Notes) of the Surviving
Corporation in the aggregate amount reflected in the Acquisition
Audited Balance Sheet, less the reserve for bad debts stated therein,
then, upon notice to the Shareholders, and the submission to him from
time to time of reasonable evidence of nonpayment, the Shareholders
shall at such times be unconditionally obligated to forthwith pay the
full amount of the difference to the Surviving Corporation against the
delivery to the Shareholders of an assignment of such defaulted
accounts, notes, balances and payables and of any security held for
any such accounts, notes, balances and payables. In such event, the
Shareholders shall have the right to institute any collection
proceedings desired in the name of the Agency, provided that the
Shareholders shall indemnify and hold harmless the Surviving
Corporation from and against any and all demands, claims, actions
and causes of action arising out of or in any manner relating to or
arising out of any such collection proceeding, and from and against
any and all loss, damage, liability, cost and expense, including
attorneys' fees at the trial level and in connection with all appellate
proceedings, incident thereto.
12.6 Investment Canada Act. The Shareholders
shall cooperate with the Surviving Corporation and HRH in the
preparation and filing of notice to all appropriate Canadian federal
governmental officials of any notice required under the Investment
Canada Act.
12.7 Further Assurances. The Seller hereby
covenants and agrees that at any time and from time to time after the
Closing Date he will, upon the request of the Surviving Corporation,
do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged and delivered all such further acts, deeds, assignments,
transfers, conveyances and assurances (including the obtaining of
consents not obtained prior to Closing) as may be required for the
better carrying out and performance of all the terms of this
Agreement.
PART F:
INDEMNIFICATION
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
AND INDEMNIFICATION.
13.1 Survival of Representations and Warranties.
Except with respect to the representations and warranties as to the
ownership of the Stock contained in Section 6.4 and the
representations and warranties as to the title to the properties and
assets of the Acquired Corporations contained in Section 6.11, all of
which shall survive in perpetuity, and except with respect to the
representations and warranties as to tax liabilities of the Acquired
Corporations contained in Section 6.10, which shall survive until one
(1) year after the expiration of any applicable statute of limitations, the
representations and warranties made herein or pursuant hereto by the
Warranting Persons shall survive the Closing only for a period of three
(3) years from and after the Closing Date.
All representations and warranties made herein or
pursuant hereto by Buyer shall survive the Closing only for a period of
three (3) years from and after the Closing Date.
13.2 Indemnification Agreement by Warranting
Persons. The Warranting Persons jointly and severally, shall indemnify
and hold harmless the Buyer, HRH, the Acquired Corporations and the
Surviving Corporation, and their respective successors and assigns
from and against and in respect of one hundred percent (100%) of:
(i) All indebtednesses, obligations and
liabilities of the Acquired Corporations or the Surviving Corporation of
any nature whatsoever, whether accrued, absolute, contingent or
otherwise, existing at the close of business as of the Pre-Effective
Moment to the extent not reflected or reserved against in full in the
Acquisition Audited Balance Sheets (defined in Section 3 hereof),
including, without limitation, any claims for errors and omissions (to
the extent not covered by insurance) and any tax liabilities to the
extent not so reflected or reserved against, accrued in respect of, or
measured by the income of any Acquired Corporation for any period
on or prior to the Closing 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 13.2(i) above, (1) any and all tax
liabilities, whether federal, provincial, state, local or otherwise,
including interest and penalties for any time period on or prior to the
Closing Date, and (2) any and all tax liabilities arising or resulting from
the transactions consummated in connection with this Agreement;
(iii) All liabilities of, or claims against, any
Acquired Corporation or the Surviving Corporation arising out of any
contract or commitment of the character described in Section 6.20
hereof and not listed or described in Schedule 6.20 attached to this
Agreement, or arising out of any contract or commitment entered into
or made by any Acquired Corporation 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 Sections
6.27 and 12.5 of this Agreement, any nonpayment on demand, when
due, of any accounts receivable or notes receivable of the Acquired
Corporations;
(v) Any and all claims, demands, actions
and causes of action arising out of or in any way relating to any
Benefit Plan ever maintained by any Acquired Corporation;
(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 the
Warranting Persons, 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 the Warranting Persons, or any of
them, and attached to this Agreement or delivered or to be delivered
to the Buyer under the terms of this Agreement, irrespective of any
due diligence review or investigation that may have been conducted
by HRH or its representatives or the delivery of any documents or
information by any Warranting Person to HRH or its representatives
prior to the execution of this Agreement; and
(vii) All demands, claims, actions, suits,
proceedings, loss, damage, liability, judgments, costs and expenses
(including, without limitation, court costs and attorneys' fees at the
trial level and in connection with all appellate proceedings) incident to
any of the foregoing.
In addition, Buyer shall have the right to assert offset
against any of Buyer's Deferred Obligations which may be due to the
Shareholders on account of, and to the extent of, the foregoing. It is
acknowledged that any loss, damage, liability or deficiency suffered
by Buyer for which the Warranting Persons are to indemnify Buyer
pursuant to the foregoing shall be the net after tax amount of any
such loss, damage, liability or deficiency suffered by Buyer.
13.3 Indemnification Agreement by HRH and Buyer.
HRH and the Surviving Corporation shall indemnify and hold harmless
the 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 Buyer
under the terms of this Agreement; and
(ii) All demands, claims, actions, suits,
proceedings, loss, damage, liability, judgments, costs and expenses
(including, without limitation, court costs and attorneys' fees at the
trial level and in connection with all appellate proceedings) incident to
any of the foregoing.
13.4 Assertion of Indemnification Claim. Either the
Seller or HRH, or the Surviving Corporation, 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.
13.5 Limitation of Amount of Indemnity and Escrow
of HRH Stock. Notwithstanding anything in the foregoing to the
contrary, HRH and the Surviving Corporation shall retain on the
Closing Date from the HRH Stock to be delivered to the Shareholders,
as security for the indemnity provided to it herein, CDN $50,000
worth of shares of the HRH Stock ("Escrowed Shares"). By his
execution of this Agreement, the Seller has granted to HRH and the
Surviving Corporation a security interest in his portion of the Escrowed
Shares, and has consented to the escrow provision described herein
and has granted unto HRH and the Surviving Corporation 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 1, 1997; (ii) determination and settlement of any
amounts pursuant to Section 3.1(e); and (iii) determination and
settlement of any amounts claimed by Buyer as of March 1, 1997,
pursuant to Section 13.4 ("Escrow Release Date").
Between the Closing Date and the Escrow Release
Date, HRH and the Surviving Corporation shall hold the Escrowed
Shares and shall deposit any dividends received thereon in an interest-
bearing account. Upon the Escrow Release Date, and absent a written
directive to the contrary from each such Shareholder not desiring to
receive his shares pro rata, HRH and the Surviving Corporation shall
distribute the Escrowed Shares, less any reduction in such shares
pursuant to the resolution of a claim under this Agreement, plus any
additional shares issued pursuant to this Agreement, to the
Shareholders pro rata in accordance with the following percentages:
42.30769% for George R. Depres, and 19.23077% for each other
Shareholder. 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 are used 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. The value of the Escrowed Shares as of
the date of any satisfaction of such indemnity shall be the value, per
share, at the average of the closing price on the New York Stock
Exchange for common stock of HRH for each of ten (10) consecutive
trading days with the tenth and final trading day being the last trading
day which is ten (10) trading days prior to the realization of such
indemnity, and the Exchange Rate to be applied to determine the
amount to satisfy an indemnity shall be determined in the same
manner as set forth in Section 2.1(d). For the period from the Closing
Date to the Escrow Release Date, the Shareholders shall be entitled to
exercise all voting rights which may attach to the Escrowed Shares.
13.6 Remedies Cumulative. The rights and remedies
of the parties under this Agreement are cumulative and in addition to
and not in substitution for any rights or remedies provided by law.
Any single or partial exercise by any party hereto of any right or
remedy for default or breach of any term, covenant or condition of this
Agreement does not waive, alter, affect or prejudice any other right or
remedy to which such party may be lawfully entitled for the same
default or breach.
PART G:
MISCELLANEOUS PROVISIONS
14. EXPENSES. All expenses (including, without
limitation, legal, auditing and other related expenses) incurred in
connection with this transaction by the Acquired Corporations and the
Shareholders shall be the joint and several responsibility of the
Shareholders, and all expenses incurred by HRH and the Buyer in
connection with this transaction shall be the sole responsibility of the
Surviving Corporation.
15. DEFAULT.
15.1 Default by the Warranting Persons. Except as
otherwise expressly provided in this Agreement, if the Warranting
Persons 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 the Warranting Persons on or prior to
the Closing Date, then the Buyer, at the option of the Buyer, may seek
specific performance of this Agreement or the Buyer, at the option of
the Buyer, may elect to sue such defaulting party for damages. In the
event the Buyer elects to sue for specific performance, the Warranting
Persons expressly waive any claim or defense that Buyer has an
adequate remedy at law.
15.2 Default by the Buyer. Except as otherwise
expressly provided in this Agreement, if the Buyer 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 the
Buyer on or prior to the Closing Date, then the Seller may seek
specific performance of this Agreement or may elect to sue for
damages. In the event the Seller elects to sue for specific
performance, the Buyer expressly waives any claim or defense that
the Seller has an adequate remedy at law.
16. 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 sent by
registered or certified mail, postage prepaid:
(a) If to the Seller:
With copy to:
(b) If to Buyer:
Mr. Robert H. Hilb, President
HILB, ROGAL AND HAMILTON COMPANY
4235 Innslake Drive
P.O. Box 1220
Glen Allen, Virginia 23060-1220
With copy to:
Walter L. Smith, Esquire
HILB, ROGAL AND HAMILTON COMPANY
4235 Innslake Drive
P.O. Box 1220
Glen Allen, Virginia 23060-1220
and to:
William J. Benos, Esquire
WILLIAMS, MULLEN, CHRISTIAN & DOBBINS
1021 East Cary Street
Richmond, Virginia 23219
Notices delivered personally or by telecopier, telex or other
similar communication shall be effective when delivered. Notices
forwarded by registered, certified or overnight 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.
17. EXTENSION OF TIME AND WAIVER.
17.1 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.
17.2 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.
18. MISCELLANEOUS PROVISIONS.
18.1 Counterparts and Execution.
(a) Any number of counterparts of this
Agreement and its Ancillary Agreements 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 and shall be
effective as of the date thereof.
(b) This Agreement and its Ancillary
Agreements may be executed by one or more of the parties by
facsimile transmitted signature and all parties agree that the
reproduction of signatures by way of facsimile device will be treated
as though such reproductions were executed originals.
18.2 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
Province of Manitoba and the laws of Canada applicable therein.
18.3 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.
18.4 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.
18.5 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, except
that Buyer, without the consent of anyone, may assign this
Agreement to a subsidiary of Buyer. In the event of any such
assignment by Buyer, Buyer shall remain liable to the Shareholders for
the payment of Buyer's Deferred Obligations in the same manner as if
no assignment had been made.
18.6 Survival. Notwithstanding anything in the
foregoing to the contrary, any rights which the Warranting Persons,
HRH or Buyer 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 Closing
Date, shall survive for the applicable period provided by Section 13.1.
In addition, all covenants of the parties under this Agreement,
including without limitation the nonsolicitation covenant contained in
Section 18.13 below, shall survive the Closing.
18.7 Schedules and Exhibits. The Schedules and
Exhibits 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.
18.8 Acceptance. The binding date of acceptance
of this Agreement shall be the date on which the last of the parties
executes the same.
18.9 Singular and Plural Cases and Gender.
Notwithstanding anything in the foregoing to the contrary, where
required by the context, the singular and plural cases and the
masculine, feminine and neuter genders, respectively, shall be
interchangeable.
18.10 Knowledge. Any reference herein to "the best
of (a party's) knowledge" or to a party's "knowledge" will mean the
actual knowledge of that party and the knowledge which they would
have had if they had conducted a diligent inquiry into the relevant
subject matter.
18.11 Binding Effect. Except as otherwise provided
in this Agreement, the provisions hereof shall be binding upon, and
shall inure to the benefit of, the parties hereto, and their respective
heirs, devisees, personal representatives, successors and assigns.
18.12 Announcements. No public announcement
with respect to the transactions contemplated by this Agreement shall
be made by any of the parties hereto without the prior written
approval of HRH.
18.13 Nonsolicitation. Seller, by signature hereto,
covenants that he shall not for a period of three (3) years after the
effective date of the Amalgamation, 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 Agency as of February 29, 1996. Seller, by signature
hereto, acknowledges: (i) that this covenant is ancillary to this Stock
Purchase 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 Seller
and is reasonably limited as to duration and scope; and (iv) that this
covenant is in addition to any covenants which Seller 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, Seller, 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.
EXECUTED by the parties to this Agreement as of the ______
day of March, 1996.
2992575 MANITOBA LTD.
By: __________________
Its: __________________
DEPRES HARLAND & ASSOCIATES
INSURANCE & SURETY
BROKERS, LTD.
By: __________________
Its: __________________
SELLER:
HILB, ROGAL AND HAMILTON
COMPANY
By: ____________________
Its:____________________
HAYHURST ELIAS DUDEK, INC.
By: ____________________
Its:____________________
c:\wmcdlib\billben\0237748.02
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 14, 1996, except as to Note 6, with respect
to the financial statements of Depres, Harland & Associates Insurance &
Surety Brokers Ltd. included in the Registration Statement (Form S-4 No.
33-44271) and related prospectus of Hilb, Rogal and Hamilton Company, dated
February 12, 1992, and related Supplement to Prospectus dated February 26, 1996.
Knowles, Warkentin & Bridges
Chartered Accountants
Winnipeg, Canada
February 23, 1996
