Filed under SEC
Rule 424 (b)(2)
Registration No. 33-44271
HILB, ROGAL AND HAMILTON COMPANY
SUPPLEMENT TO
PROSPECTUS DATED FEBRUARY 12, 1992
RELATING TO ACQUISITION OF
BARTLETT, BOZEMAN & LEVIN, LLC
The following information is furnished to supplement and
complete the information contained in the Prospectus dated
February 12, 1992, relating to the offering of shares of the
Common Stock of Hilb, Rogal and Hamilton Company (the "Company")
to the owners of Bartlett, Bozeman & Levin, LLC ("LLC") in
exchange for certain assets of LLC.
Terms of the Transaction
(a) (1) On October 1, 1996, Hilb, Rogal and Hamilton
Company of the Quad Cities ("HRH of the Quad Cities"), a wholly-
owned subsidiary of the Company, acquired substantially all of
the operating assets of Bartlett Agency, Inc. ("Bartlett").
Bartlett, along with two individuals, owns all of LLC which
operates an insurance agency in the Chicago area. The members of
LLC and the Shareholders of Bartlett now collectively wish to
have substantially all of the operating assets of LLC conveyed to
HRH of the Quad Cities on substantially the same terms as
Bartlett sold its assets to HRH of the Quad Cities. Accordingly,
retroactive to October 1, 1996, the shareholders of LLC have
agreed to sell assets of LLC's insurance agency operations
including their insurance customer lists, expiration lists and
records, book of business, business records, files and daily
reports; furniture, fixtures and equipment; rights and interest
in and to agency and other agreements; certain maintenance agree
ments; goodwill; and non-competition agreements in exchange for
$414,000 in cash (including $110,000 in the form of non-
competition agreements), 7,797 shares of Common Stock of the
Company and three installments payable based upon profits
realized in the subsequent three year period which can increase
the purchase price in each year payable in 14, 26 and 38 months.
Each contingent payment includes interest imputed at the lowest
federal rate allowed pursuant to Section 1274 of the Internal
Revenue Code of 1986 with monthly compounding. The Purchase
Agreement with Bartlett has been amended to incorporate the
acquisition of LLC (the "Amended Purchase Agreement").
The acquisition is subject to (i) all necessary corporate
approvals of each corporation, (ii) all authorizations, consents
and approvals of all federal, state, local and foreign
governmental agencies and authorities required to be obtained,
and (iii) all other conditions precedent as outlined in the
Amended Agreement (see Exhibit 2.29).
The assets purchased will be incorporated into the assets of
HRH of the Quad Cities.
(2) The acquisition of LLC by the Company has been
agreed upon because the Company is engaged in the business of
owning insurance agencies and because the owners of LLC have
determined that a merger with the Company is beneficial to the
growth of their insurance operations.
LLC's operations will add approximately six employees and
approximately $600,000 of revenues to the Company.
(3) LLC was incorporated in 1995 and operates as a
limited liability company under Illinois law.
(4) There are no material differences between the
rights of the security holders of LLC and the rights of security
holders of the Company.
(5) & (6) The acquisition will be treated as a purchase
and the assets purchased will be incorporated into the assets of
HRH of the Quad Cities. The assets will be recorded at fair
market value for accounting and tax purposes by the Company.
(c) The Amended Purchase Agreement is incorporated into
this supplement as Exhibit 2.29.
Pro Forma Financial Information
See attached - Schedule A
Material Contracts with Seller.
There have been no material contracts between the Company
and LLC prior to the proposed effective date of the Amended
Purchase Agreement.
Information with Respect to Bartlett, Bozeman & Levin, LLC
LLC is located in Chicago, Illinois. LLC was organized in
1995 and operates as a limited liability company under Illinois
law.
LLC provides insurance brokerage services for personal and
small-to-medium size commercial and industrial accounts.
Services provided include personal and commercial property and
casualty insurance and group and individual life and health
insurance products.
The shares to be issued represent less than .1% of
outstanding shares of the Company at the time of acquisition and
the assets of LLC as of December 31, 1995 and pre-tax earnings
for the year then ended represent approximately .47% and .44%,
respectively, of the consolidated amounts of the Company.
Furthermore, the Company's investment in LLC will represent
approximately .5% of consolidated assets of the Company.
Accordingly, due to the small size, and closely held nature of
the insurance agency, it is not practical or cost effective to
provide audited financial statements. Accordingly, the shares
will be restricted as to resale until such time as the Company
files audited financial statements which include the proforma
results of operations of the Company including the operations of
LLC. The restriction should end no later than March 31, 1997
when the Company files its Form 10-K for 1996.
Common Stock and Dividend Data
There is no established public trading market for the
owners' interests of LLC. There are three owners of LLC. See
Shareholder Information below for information regarding
ownership.
There have been no distributions to owners since the
formation of LLC.
Shareholder Information
(a) (1) WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE RE
QUESTED NOT TO SEND US A PROXY.
(2) & (3) LLC has agreed to submit the Amended Purchase
Agreement to its owners for adoption by unanimous written consent
after receipt and review of the Prospectus. Since the acquisition
can be completed only with the unanimous consent of the owners of
the company being acquired (LLC), 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 (LLC) in the proposed transac
tion.
(6) LLC is a limited liability company.
The ownership interest of LLC is as follows:
OWNERSHIP
NAME INTEREST
Bartlett Agency, Inc. 33 1/3%
David Bozeman 33 1/3
Stewart Levin 33 1/3
-------
100%
=======
(7) Upon completion of the proposed acquisition, no
owner of LLC will serve as a director or executive officer of the
registrant.
Hilb, Rogal and Hamilton Company
Date of this Supplement: October 8, 1996
<PAGE>
SCHEDULE A - PRO FORMA CONDENSED
FINANCIAL STATEMENTS (UNAUDITED)
The following pro forma condensed consolidated balance sheet
as of June 30, 1996 and the pro forma consolidated income state
ments for the six months ended June 30, 1996 and the year ended
December 31, 1995 give effect to the proposed acquisition of
Bartlett, Bozeman & Levin, LLC ("LLC," expected to be effective
on October 1, 1996); and the acquisition of certain assets and
liabilities of ten insurance agencies purchased in 1996 and 13
insurance agencies purchased in 1995. The pro forma information
is based on the historical financial statements of Hilb, Rogal
and Hamilton Company and the acquired agencies, giving effect to
the transactions under the purchase method of accounting and the
assumptions and adjustments in the accompanying notes to the pro
forma financial statements. The pro forma consolidated income
statements give effect to the purchase method acquisitions and
proposed purchase method acquisitions as if they had occurred on
January 1, 1995. The pro forma condensed consolidated balance
sheet gives effect to the business combinations which occurred or
are probable of occurring subsequent to June 30, 1996, as if they
had occurred before June 30, 1996.
The pro forma statements have been prepared by management
based upon the historical financial statements of Hilb, Rogal
and Hamilton Company, LLC and other acquired agencies. These
pro forma statements may not be indicative of the results that
actually would have occurred if the combination had been in
effect on the dates indicated or which may be obtained in the
future. The pro forma financial statements should be read in
conjunction with the audited financial statements and notes of
the Company included in the Company's 1995 Annual Report to
Shareholders which is incorporated by reference in the Company's
Annual Report on Form 10-K, which is incorporated herein by
reference.
<PAGE>
HILB, ROGAL & HAMILTON COMPANY
PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
JUNE 30, 1996
<TABLE>
<CAPTION>
HILB, ROGAL ACQUISITIONS PRO FORMA ADJUSTMENTS PRO FORMA
AND HAMILTON (PURCHASES) FOR PURCHASE ACQUISITIONS CONSOLIDATED
COMPANY
<S> <C> <C> <C> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS $21,482,227 $1,956,659 (3,289,000) (2) $20,149,886
INVESTMENTS 5,352,730 124,425 5,477,155
RECEIVABLES & OTHER 45,846,017 2,569,204 (306,051) (1) 48,109,170
---------------------------------------------------------------------------
TOTAL CURRENT ASSETS 72,680,974 4,650,288 N/A (3,595,051) 73,736,211
INVESTMENTS 5,770,000 5,770,000
PROPERTY & EQUIPMENT 14,969,938 406,565 (406,565) (1) 515,000 (3) 15,484,938
INTANGIBLE ASSETS 64,391,946 333,356 (333,356) (1) 12,488,108 (3) 76,880,054
OTHER ASSETS 4,469,728 304,604 (1)(217,070) (1) 4,557,262
---------------------------------------------------------------------------
TOTAL ASSETS $162,282,586 $5,694,813 N/A $8,451,066 $176,428,465
===========================================================================
LIABILITIES & EQUITY:
PREMIUMS PAYABLE-INS CO $67,191,549 $3,541,010 $70,732,559
OTHER ACCRUED LIABILITIES 15,124,267 457,735 15,582,002
----------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 82,315,816 3,998,745 N/A 0 86,314,561
LONG-TERM DEBT 15,801,391 531,408 (271,226)(1) 2,325,600 18,387,181
OTHER LONG-TERM LIAB. 8,289,192 172,844 3,260,000 (3) 11,722,036
SHAREHOLDERS' EQUITY
COMMON STOCK 25,350,220 1,133,233 (1,133,233) (4) 4,128,500 (2) 29,478,720
RETAINED EARNINGS 30,525,967 (141,417) 141,417 (4) 30,525,967
----------------------------------------------------------------------------
55,876,187 991,816 N/A 3,136,684 60,004,687
----------------------------------------------------------------------------
$162,282,586 $5,694,813 N/A $8,451,066 $176,428,465
=============================================================================
</TABLE>
(1) TO ADJUST FOR ASSETS AND LIABILITIES NOT ACQUIRED.
(2) TO REFLECT PURCHASE PRICE OF ASSETS AND LIABILITIES
ACQUIRED SUBSEQUENT TO JUNE 30, 1996 IN PURCHASE TRANSACTIONS.
(3) TO ADJUST FOR ASSET VALUATIONS UNDER PURCHASE ACCOUNTING.
(4) TO ELIMINATE SHAREHOLDERS' EQUITY OF ACQUIRED ENTITIES.
<PAGE>
HILB, ROGAL & HAMILTON COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
HILB,ROGAL ACQUISITIONS PRO FORMA ADJUST- PRO FORMA
& HAMILTON CO. (PURCHASES) MENTS FOR PURCHASE CONSOLIDATED
ACQUISITONS
<S> <C> <C> <C> <C>
REVENUES:
COMMISSIONS & FEES $78,768,286 $6,444,435 $85,212,721
INTEREST AND OTHER INCOME 2,243,540 59,430 ($135,85O) (1) 2,167,120
-----------------------------------------------------------
TOTAL REVENUES 81,011,826 6,503,865 (135,850) 87,379,841
OPERATING EXPENSES:
COMPENSATION AND BENEFITS 44,115,134 3,949,409 48,064,543
OTHER OPERATING EXPENSES 19,603,610 1,681,422 (136,050) (2) 21,148,982
AMORTIZATION OF INTANGIBLES 3,666,605 67,267 358,730 (3) 4,092,602
INTEREST EXPENSE 461,460 46,843 33,939 (4) 542,242
-----------------------------------------------------------
TOTAL OPERATING EXPENSE 67,846,809 5,744,941 256,619 73,848,369
-----------------------------------------------------------
INCOME BEFORE INCOME TAXES 13,165,017 758,924 (392,469) 13,531,472
INCOME TAXES 5,328,496 146,582 (5) 5,475,078
-----------------------------------------------------------
NET INCOME $7,836,521 $758,924 ($539,051) $8,056,394
===========================================================
NET INCOME PER COMMON SHARE $0.58 $0.58
===========================================================
SHARES ISSUED AND
OUTSTANDING 13,368,868 334,538 13,703,406
===========================================================
WEIGHTED AVERAGE SHARES
OUTSTANDING 13,626,914 381,487 14,008,401
===========================================================
</TABLE>
(1) TO ADJUST HISTORICAL INTEREST AND TO ADJUST FOR LOST INTEREST EARNED
FROM CASH PAID FOR ACQUIRED AGENCIES.
(2) TO REFLECT ADJUSTMENTS TO COMPENSATION AND OTHER OPERATING EXPENSES TO
REFLECT ADJUSTED COMPENSATION, DEPRECIATION EXPENSE, RENT EXPENSE, ETC.
(3) TO REFLECT ADJUSTMENTS TO AMORTIZATION OF INTANGIBLES DUE TO VALUATION
OF AGENCY ASSETS ON THE PURCHASE BASIS OF ACCOUNTING. INTANGIBLE ASSETS
REPRESENT EXPIRATION RIGHTS, THE EXCESS OF COSTS OVER THE FAIR
VALUE OF NET ASSETS ACQUIRED AND NONCOMPETITION AGREEMENTS.
(4) TO ADJUST HISTORICAL INTEREST AND REFLECT INTEREST ON ACQUISITION
DEBT.
(5) TO REFLECT ESTIMATED TAXES AND THE TAX EFFECT OF PROFORMA ADJUSTMENTS
ON NET INCOME.
<PAGE>
HILB, ROGAL & HAMILTON COMPANY
CONDENSED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
HILB, ROGAL ACQUISITIONS PRO FORMA ADJUST- PRO FORMA
& HAMILTON CO. (PURCHASES) MENTS FOR CONSOLIDATED
ACQUISITIONS
<S> <C> <C> <C> <C>
REVENUES:
COMMISSIONS & FEES $141,555,188 $23,793,697 $165,348,885
INTEREST AND OTHER INCOME 6,591,850 424,653 ($676,548) (1) 6,339,955
-------------------------------------------------------------
TOTAL REVENUES 148,147,038 24,218,350 (676,548) 171,688,840
OPERATING EXPENSES:
COMPENSATION AND BENEFITS 82,760,664 14,821,313 (442,931) (2) 97,139,046
OTHER OPERATING EXPENSES 38,264,085 8,224,127 (411,581) (2) 46,076,631
AMORTIZATION OF INTANGIBLES 6,965,947 375,297 1,139,066 (3) 8,480,310
INTEREST EXPENSE 559,654 264,555 (11,567) (4) 812,642
-------------------------------------------------------------
TOTAL OPERATING EXPENSES 128,550,350 23,685,292 272,987 152,508,629
-------------------------------------------------------------
INCOME BEFORE INCOME TAXES 19,596,688 533,058 (949,535) 19,180,211
INCOME TAXES 7,767,778 (166,591) (5) 7,601,187
-------------------------------------------------------------
NET INCOME $11,828,910 $533,058 ($782,944) $11,579,024
=============================================================
NET INCOME PER COMMON SHARE $0.82 $0.77
=============================================================
SHARES ISSUED AND
OUTSTANDING 13,706,764 479,386 14,186,150
=============================================================
WEIGHTED AVERAGE SHARES
OUTSTANDING 14,470,407 577,832 15,048,239
=============================================================
</TABLE>
(1) TO ADJUST HISTORICAL INTEREST AND TO ADJUST FOR LOSTINTEREST EARNED
FROM CASH PAID FOR ACQUIRED AGENCIES.
(2) TO REFLECT ADJUSTMENTS TO COMPENSATION AND OTHER OPERATING EXPENSES TO
REFLECT ADJUSTED COMPENSATION, DEPRECIATION EXPENSE, RENT EXPENSE, ETC.
(3) TO REFLECT ADJUSTMENTS TO AMORTIZATION OF INTANGIBLES DUE TO VALUATION
OF AGENCY ASSETS ON THE PURCHASE BASIS OF ACCOUNTING. INTANGIBLE
ASSETS REPRESENT EXPIRATION RIGHTS, THE EXCESS OF COSTS OVER THE
FAIR VALUE OF NET ASSETS ACQUIRED AND NONCOMPETITION AGREEMENTS.
(4) TO ADJUST HISTORICAL INTEREST AND REFLECT INTEREST ON ACQUISITION
DEBT.
(5) TO REFLECT ESTIMATED TAXES AND THE TAX EFFECT OF PROFORMA ADJUSTMENTS
ON NET INCOME.
PURCHASE AGREEMENT
FOR
BARTLETT, BOZEMAN & LEVIN, LLC
AND
BARTLETT AGENCY, INC.
BY
HILB, ROGAL AND HAMILTON COMPANY OF THE QUAD CITIES
1. On September 30, 1996, Hilb, Rogal and Hamilton
Company of the Quad Cities, an Illinois corporation
("Buyer") and a wholly-owned subsidiary of Hilb, Rogal and
Hamilton Company ("HRH"), acquired substantially all of the
operating assets of Bartlett Agency, Inc., an Illinois
corporation ("Bartlett").
2. Bartlett, along with David Bozeman and Stewart
Levin, owns all of Bartlett, Bozeman & Levin, LLC, which
operates an insurance agency in the Chicago area ("LLC").
The members of LLC and the Shareholders of Bartlett now
collectively wish to have substantially all of the operating
assets of LLC conveyed to Buyer on substantially the same
terms as Bartlett sold its assets to Buyer. Accordingly,
the numbers in the Management Incentive Agreement and the
terms of the Purchase Agreement are modified as shown on
Exhibits 1 and 2 attached hereto. All references in such
agreement to Seller and to Shareholders, respectively, shall
be deemed to include LLC and the members of LLC,
respectively.
3. LLC has attached hereto as Exhibit 3 all those
disclosures it would have been required to make had it
originally been a party to the Purchase Agreement set forth
in Exhibit 2.
4. LLC and Bartlett have reached agreement among
themselves as to allocation of proceeds pursuant to this
Purchase Agreement, as set forth in Exhibit 4.
5. The obligation of Buyer to conclude this Purchase
Agreement is conditioned upon:
a. LLC executing the bill of sale set forth as
Exhibit 5;
b. Messrs. Bozeman and Levin executing the
employment agreements set forth as Exhibits 6
and 7;
c. LLC purchasing adequate tail insurance;
d. LLC making proper arrangements to assign its
lease to Buyer; and
e. LLC clearing title to the assets conveyed,
including the deposit of adequate funds into an
escrow account to pay LLC's insurance company
payables.
6. HRH's signature hereto acts as the same guaranty
as given to Bartlett in the original purchase agreement.
7. HRH will not deliver its common stock for LLC
until it has filed the S-4 registering 7,797 shares of HRH
stock and the members of LLC have signed an acknowledgment
thereafter requesting delivery of such shares.
WITNESS the signature of all parties hereto this 7th day of
October, 1996.
HILB, ROGAL AND HAMILTON COMPANY
By:_____________________________________
Its:_____________________________________
BARTLETT AGENCY, INC.
By:_____________________________________
Its:_____________________________________
BARTLETT, BOZEMAN & LEVIN, LLC
By:_____________________________________
Its:_____________________________________
_________________________________ ________________________________
Richard J. Miles David Bozeman
_________________________________ _________________________________
Thomas K. Bracke Stewart Levin
_________________________________
John J. Barrett
_________________________________
Bradley T. Boyle
EXHIBIT 2
AGREEMENT OF PURCHASE AND SALE
BY AND BETWEEN
HILB, ROGAL AND HAMILTON COMPANY OF THE QUAD CITIES
AND
BARTLETT AGENCY, INC.
AND
BARTLETT, BOZEMAN & LEVIN, LLC
THIS AGREEMENT, effective as of 12:01 a.m. on October
1, 1996 ("Effective Date"), is made and entered into this
30th day of September, 1996, by and between HILB, ROGAL AND
HAMILTON COMPANY OF THE QUAD CITIES, an Illinois
corporation ("Buyer"), HILB, ROGAL AND HAMILTON COMPANY, a
Virginia corporation ("HRH"), BARTLETT AGENCY, INC., an
Illinois corporation ("Bartlett"), and BARTLETT, BOZEMAN &
LEVIN, LLC, an Illinois limited liability company ("LLC")
(Bartlett and LLC, collectively, "Seller"), RICHARD J. MILES
("Mr. Miles"), THOMAS K. BRACKE ("Mr. Bracke"), JOHN J.
BARRETT ("Mr. Barrett"), DAVID BOZEMAN ("Mr. Bozeman"),
STEWART LEVIN ("Mr. Levin") and BRADLEY T. BOYLE ("Mr.
Boyle"), with Messrs. Miles, Bracke, Barrett and Boyle and
the members of LLC collectively being referred to herein as
"Shareholders".
W I T N E S S E T H:
WHEREAS, HRH is engaged in the business of owning
insurance agencies;
WHEREAS, Seller currently conducts an insurance agency
business in and around the quad cities area of Illinois and
Iowa (Moline, Rock Island, Davenport and Bettendorf) and
greater Chicago;
WHEREAS, Shareholders own Seller;
PORTIONS OF THIS AGREEMENT ARE SUBJECT TO ARBITRATION.
WHEREAS, Shareholders desire that Seller sell certain
of its assets utilized in that business under the terms
hereinafter provided;
WHEREAS, HRH desires that Buyer purchase certain of
Seller's assets utilized in such business.
NOW THEREFORE, in consideration of the premises and of
the mutual promises and covenants hereinafter set forth, and
intending to be legally bound, the parties hereto agree as
follows:
1. Sale and Assignment of Assets. Subject to the
terms and conditions contained in this Agreement, Seller
hereby agrees to sell convey, transfer, assign and deliver
to Buyer, free and clear of any judgment, mortgage, pledge,
lien, conditional sale agreement, security interest, option,
or other encumbrance or claim of any nature whatsoever, all
of Seller's right, title and interest in and to the
following assets ("Assets"): (i) its insurance customer
lists, expiration lists and records, book of business,
business records, files and daily reports; (ii) all
furniture, fixtures and equipment identified on Schedule 1
attached hereto, all of which are used in, or form a part
of, Seller's insurance agency business; (iii) all of its
rights and interest in and to its agency agreements with
those insurance companies for which it acts as agent,
including all contingency and profit sharing agreements with
such companies; (iv) certain maintenance agreements related
to the assets listed on Schedule 1; (v) all restrictive
covenants or other agreements protecting or prohibiting any
of the accounts transferred in (i) above from being
solicited by others; and (vi) the goodwill of Seller,
including, but not limited to, the corporate name of
"Bartlett Agency, Inc.," the name "Bartlett, Bozeman and
Levin" and any trade names related thereto. Seller shall
sign such Bills of Sale in form and substance as set forth
in Schedule 1.1, or other documents of assignment or
transfer as Buyer shall request.
Buyer is not acquiring, and is hereby expressly excluded
from acquiring from Seller, the following assets of the
Seller which the Seller retains: (i) cash or other readily
liquid working capital on hand as of the close of business
of Seller on the day prior to the Effective Date
("Pre-Effective Moment"); (ii) accounts and other
receivables as of the Pre-Effective Moment, including
commissions earned but not paid on business billed by Seller
which was written and having an effective date prior to the
Pre-Effective Moment, but excluding direct bill commissions
which shall be treated as earned when received; and (iii)
prepaid insurance, finance charges, taxes and licenses.
Except for Seller=s lease and the obligations listed in
Schedule 6.K, Buyer is not assuming any liabilities of
Seller of any kind and shall be fully indemnified therefor.
2. Purchase Price. In consideration for the transfer
and assignment of the above-described Assets, the Buyer
shall pay to the Seller at the times specified herein the
potential maximum value of EIGHT MILLION TWO HUNDRED EIGHTY-
FIVE THOUSAND DOLLARS ($8,285,000) payable as follows (with
the payments referenced below in A, B and C being hereafter
collectively referred to as APurchase Price@):
A. On the later of the Closing Date or the
Effective Date ("Transfer Date"), Buyer shall deliver to
Seller the sum of TWO MILLION TWO HUNDRED NINETY-NINE
THOUSAND DOLLARS ($2,299,000) ($1,995,000 on September 30,
1996, and $304,000 on October 7, 1996);
B. On the Transfer Date, Buyer shall deliver to
Seller a certificate equaling, or certificates totalling,
the value of SEVEN HUNDRED FIFTY-THREE THOUSAND FIVE HUNDRED
and 00/100 DOLLARS ($753,500) in shares of the common stock
of HRH ("HRH Stock") ($650,000 on September 30, 1996 and
$103,500 on October 7, 1996) where the HRH Stock is valued
at its average closing price on the New York Stock Exchange
over a period of five (5) consecutive trading days, with the
fifth and final trading day being the last trading day which
is more than ten (10) days prior to the earlier of the
Effective Date or the Closing Date, which amount is $13.275.
To the extent the total number of shares of HRH Stock so
calculated is not in a whole number of shares, Buyer shall
round up any fraction of 0.5 or greater and shall round down
any fraction less than 0.5.
C. Buyer shall deliver the balance of the
Purchase Price to the Seller in the form of three variable
payments which will be payable, respectively, fourteen,
twenty-six and thirty-eight months after the Effective Date
(or as soon thereafter as the Year 1, Year 2 and Year 3
Agency Profits, as hereinafter defined, are finally
determined) in the potential maximum amounts of $1,744,167,
$1,744,167 and $1,744,167, respectively ("Buyer's Deferred
Obligations"). Buyer's Deferred Obligations shall have
interest imputed at the lowest applicable federal rate
allowed Buyer pursuant to Section 1274 of the Internal
Revenue Code of 1986 ("Code") with monthly compounding and
any such imputed interest shall not be charged against Year
1, Year 2 or Year 3 Agency Profits. Buyer's Deferred
Obligations shall contain a right of offset as specified in
Sections 3 and 13 hereof.
D. On the Transfer Date (and on October 7,
1996), Buyer shall pay to each of the Shareholders (other
than Bartlett), not as a part of the Purchase Price (as
herein defined) but as an integral part of the transactions
contemplated herein, that sum called for in the Employment
Agreement and Covenant Not to Compete for such Shareholder
to receive for covenanting not to compete with Buyer or HRH.
These payments have been separately bargained for by the
parties and represent full and fair value to each of the
Shareholders for his individual covenant not to compete.
For purposes of satisfying certain terms and conditions
contained in Sections 8.1.J and 12 of this Agreement, a pro
rata portion of these payments to the Shareholders for
covenanting not to compete may be drawn from to satisfy the
amount of cash required to be withheld to satisfy the terms
and conditions contained therein.
E. In exchange for the promise to deliver the
Purchase Price to Seller, Buyer shall receive the Assets
from Seller free and clear of any lien or encumbrance of any
kind whatsoever.
3. Abatement of the Purchase Price.
A. Abatement of Purchase Price Based on Year 1
Agency Profit. (1) As used herein,
the term "Year 1 Agency Profit" shall mean the net profit of
Buyer earned from the Assets for the twelve month period
beginning October 1, 1996, and ending September 30, 1997
("Year 1"), determined in accordance with generally accepted
accounting principles applied on a consistent basis, but
subject to certain accounting policies (which shall satisfy
generally accepted accounting principles) adopted from time
to time by HRH and applied uniformly in determining the net
profit of each subsidiary of HRH, before any provision for
federal or state income taxes and before any provision for
amortization of any portion of the Assets which are
intangible and before any provision for any overhead charge
by HRH, as the parent of the Buyer, to the Buyer.
Additionally, the parties have reached special agreement
with regard to the calculation of Year 1 Agency Profit as it
relates to interest income and expense, profit sharing
expense, bad debt expense, depreciation, professional fees,
business insurance and other direct corporate costs, and a
new producer's salary as set forth in this subsection.
Specifically, interest income and expense shall be
calculated in a manner consistent with the pro forma such
that interest income and expense shall reflect the true
operating results and shall not be unnecessarily credited or
charged with excessive interest income or expense; profit
sharing expense shall be set at 7% of eligible compensation,
regardless of the actual number (higher or lower) actually
determined to be contributed to HRH's Pension and Profit
Sharing Plan; bad debt expense charged against earnings from
the use of the Assets shall be $45,000 or the actual bad
debt expense booked against the use of the Assets according
to HRH accounting policy, whichever is greater; depreciation
charges shall be set at $45,000 for the purpose of
establishing a proper charge to fund replacements; the
charges against the earnings from the use of the Assets for
professional fees, business insurance and other direct
corporate costs shall be $150,000, regardless of the actual
costs incurred therefor by Buyer; and Year 1 Agency Profit
shall not be charged with up to $30,000 of a new producer's
salary provided that such new producer produces commission
income from new accounts, which accounts were not acquired
as part of the Assets or from existing customers of Seller
or Buyer, equal to at least 50% of such salary.
The Buyer shall cause the Year 1 Agency Profit to be
determined, and the amount thereof communicated to the
Shareholders, as soon as is reasonably practicable after
Year 1, and, in all events, no later than sixty-two (62)
days after Year 1. In the event of a disagreement by the
Shareholders, collectively, as to the computation of the
Year 1 Agency Profit, such disagreement shall be resolved in
the manner described in subparagraph D., below.
(2) To the extent the Year 1 Agency Profit
shall be less than $1,380,000 (with such deficiency being
the "Year 1 Deficiency"), then for each $1 of Year 1
Deficiency, Buyer shall be entitled to reduce the portion of
the Purchase Price payable in fourteen months by aggregate
amounts of $2.1667 down to a minimum aggregate amount
payable, before applicable offset or indemnity, of $747,500
for $920,000 or less of Year 1 Agency Profit. For example,
if the Year 1 Deficiency equals $50,000, the fourteen month
payment to be received by Seller would be reduced by
$108,335 to the aggregate amount payable, before applicable
offset or indemnity, of $1,635,832. If the Year 1
Deficiency equals or exceeds $460,000, the fourteen month
payment to be received by Seller would be reduced by the
maximum amount of $996,667 to the minimum aggregate amount
payable, before applicable offset or indemnity, of $747,500.
B. Abatement of Purchase Price Based on Year 2
Agency Profit. (1) As used herein,
the term "Year 2 Agency Profit" shall mean the net profit of
the Buyer earned from the Assets for the twelve month period
beginning October 1, 1997, and ending September 30, 1998
("Year 2"), determined in accordance with generally accepted
accounting principles applied on a consistent basis, but
subject to certain accounting policies (which shall satisfy
generally accepted accounting principles) adopted from time
to time by HRH and applied uniformly in determining the net
profit of each subsidiary of HRH, before any provision for
federal or state income taxes, before any provision for
amortization of any portion of the Assets which are
intangible and before any provision for any overhead charge
by HRH, as the parent of the Buyer, to the Buyer.
Additionally, the parties have reached special agreement
with regard to the calculation of Year 2 Agency Profit as it
relates to interest income and expense, profit sharing
expense, bad debt expense, depreciation, professional fees,
business insurance and other direct corporate costs, and a
new producer's salary as set forth in this subsection.
Specifically, interest income and expense shall be
calculated in a manner consistent with the pro forma such
that interest income and expense shall reflect the true
operating results and shall not be unnecessarily credited or
charged with excessive interest income or expense; profit
sharing expense shall be set at 7% of eligible compensation,
regardless of the actual number (higher or lower) actually
determined to be contributed to HRH's Pension and Profit
Sharing Plan; bad debt expense charged against earnings from
the use of the Assets shall be $45,000 or the actual bad
debt expense booked against the use of the Assets according
to HRH accounting policy, whichever is greater; depreciation
charges shall be set at $45,000 for the purpose of
establishing a proper charge to fund replacements; the
charges against the earnings from the use of the Assets for
professional fees, business insurance and other direct
corporate costs shall be $150,000, regardless of the actual
costs incurred therefor by Buyer; and Year 2 Agency Profit
shall not be charged with up to $30,000 of a new producer's
salary provided that such new producer produces commission
income from new accounts, which accounts were not acquired
as part of the Assets or from existing customers of Seller
or Buyer, equal to at least 50% of such salary.
The Buyer shall cause the Year 2 Agency Profit to be
determined, and the amount thereof communicated to the
Shareholders, as soon as is reasonably practicable after
Year 2, and, in all events, no later than sixty-two (62)
days after Year 2. In the event of any disagreement by the
Shareholders, collectively, as to the computation of the
Year 2 Agency Profit, such disagreement shall be resolved in
the manner described in subparagraph D., below.
(2) To the extent the Year 2 Agency Profit
shall be less than $1,380,000 (with such deficiency being
the "Year 2 Deficiency"), then for each $1 of Year 2
Deficiency, Buyer shall be entitled to reduce the portion of
the Purchase Price payable in twenty-six months by aggregate
amounts of $2.1667, down to a minimum aggregate amount
payable, before applicable offset or indemnity, of $747,500
for $920,000 or less of Year 2 Agency Profit. For example,
if the Year 2 Deficiency equals $50,000, the twenty-six
month payment to be received by Seller would be reduced by
$108,335 to the aggregate amount payable, before applicable
offset or indemnity, of $1,635,832. If the Year 2
Deficiency equals or exceeds $460,000, the twenty-six month
payment to be received by Seller would be reduced by the
maximum amount of $996,667 to the minimum aggregate amount
payable, before applicable offset or indemnity, of $747,500.
C. Abatement of Purchase Price Based on Year 3
Agency Profit. (1) As used herein,
the term "Year 3 Agency Profit" shall mean the net profit of
the Buyer earned from the Assets for the twelve month period
beginning October 1, 1998, and ending September 30, 1999
("Year 3"), determined in accordance with generally accepted
accounting principles applied on a consistent basis, but
subject to certain accounting policies (which shall satisfy
generally accepted accounting principles) adopted from time
to time by HRH and applied uniformly in determining the net
profit of each subsidiary of HRH, before any provision for
federal or state income taxes, before any provision for
amortization of any portion of the Assets which are
intangible and before any provision for any overhead charge
by HRH, as the parent of the Buyer, to the Buyer.
Additionally, the parties have reached special agreement
with regard to the calculation of Year 3 Agency Profit as it
relates to interest income and expense, profit sharing
expense, bad debt expense, depreciation, professional fees,
business insurance and other direct corporate costs, and a
new producer's salary as set forth in this subsection.
Specifically, interest income and expense shall be
calculated in a manner consistent with the pro forma such
that interest income and expense shall reflect the true
operating results and shall not be unnecessarily credited or
charged with excessive interest income or expense; profit
sharing expense shall be set at 7% of eligible compensation,
regardless of the actual number (higher or lower) actually
determined to be contributed to HRH's Pension and Profit
Sharing Plan; bad debt expense charged against earnings from
the use of the Assets shall be $45,000 or the actual bad
debt expense booked against the use of the Assets according
to HRH accounting policy, whichever is greater; depreciation
charges shall be set at $45,000 for the purpose of
establishing a proper charge to fund replacements; the
charges against the earnings from the use of the Assets for
professional fees, business insurance and other direct
corporate costs shall be $150,000, regardless of the actual
costs incurred therefor by Buyer; and Year 3 Agency Profit
shall not be charged with up to $30,000 of a new producer's
salary provided that such new producer produces commission
income from new accounts, which accounts were not acquired
as part of the Assets or from existing customers of Seller
or Buyer, equal to at least 50% of such salary.
The Buyer shall cause the Year 3 Agency Profit to be
determined, and the amount thereof communicated to the
Shareholders, as soon as is reasonably practicable after
Year 3, and, in all events, no later than sixty-two (62)
days after Year 3. In the event of any disagreement by the
Shareholders, collectively, as to the computation of the
Year 3 Agency Profit, such disagreement shall be resolved in
the manner described in subparagraph D., below.
(2) To the extent the Year 3 Agency Profit
shall be less than $1,380,000 (with such deficiency being
the "Year 3 Deficiency"), then for each $1 of Year 3
Deficiency, Buyer shall be entitled to reduce the portion of
the Purchase Price payable in thirty-eight months by
aggregate amounts of $2.1667, down to a minimum aggregate
amount payable, before applicable offset or indemnity, of
$747,500 for $920,000 or less of Year 3 Agency Profit. For
example, if the Year 3 Deficiency equals $50,000, the thirty-
eighth month payment to be received by Seller would be
reduced by $108,335 to the aggregate amount payable, before
applicable offset or indemnity, of $1,635,832. If the Year
3 Deficiency equals or exceeds $460,000, the thirty-eight
month payment to be received by Seller would be reduced by
the maximum amount of $996,667 to the minimum aggregate
amount payable, before applicable offset or indemnity, of
$747,500.
D. Determination of Agency Profit.
(1) As soon as practicable after Year 1,
Year 2 and Year 3, and in all events, no later than
sixty-two (62) days after each of Year 1, Year 2 and Year 3,
respectively, Buyer or HRH shall deliver to the Shareholders
the determination of the Year 1 Agency Profit , the Year 2
Agency Profit and the Year 3 Agency Profit ("Profit
Statements"). In addition, the Shareholders or any firm or
certified public accountants designated by the Shareholders
(referred to below as the "Seller's Reviewer") shall be
permitted reasonable access to the work papers, schedules,
memoranda and other documents used in preparing the Profit
Statements.
(2) As soon as is reasonably practicable
after delivery to the Shareholders of the Profit Statements,
and, in all events, within thirty (30) days after such
delivery, the Shareholders shall give written notice to the
Buyer either to the effect that the Profit Statement is
acceptable as prepared or specifying any disagreement with
respect to any item in such document. In the event of any
disagreement, the Shareholders, on the one hand, and the
Buyer, on the other hand, shall each make a reasonable
attempt to reconcile the difference; however, if they are
unable to reconcile all differences within a period of
fourteen (14) days after notification to the Buyer of such
disagreement, then the Shareholders, on the one hand, and
the Buyer, on the other hand, shall submit all questions in
dispute to one of the "Big Six" firms of certified public
accountants (other than Seller's Reviewer or the accounting
firm normally employed by Seller, HRH or Buyer, if
applicable, and from a neutral location) as may be agreed
upon by the Shareholders, on the one hand, and the Buyer, on
the other hand, or, in default of such agreement, as may be
determined by the President at such time of the American
Institute of Certified Public Accountants, which chosen
accounting firm ("Umpire") shall, within a period of thirty
(30) days after submission, determine and report to the
Shareholders, on the one hand, and the Buyer, on the other
hand, upon all questions in dispute, and the report of the
Umpire shall be final, conclusive and binding on the Seller,
Shareholders and the Buyer. The fees charged by the Umpire
shall be equally divided between the Seller and the Buyer.
The Profit Statements, as prepared by the Buyer or HRH,
or, if varied by agreement between the Shareholders, on the
one hand, and the Buyer, on the other hand, or by the report
of the Umpire, then as so varied, shall be final, conclusive
and binding on the Seller, Shareholders and the Buyer.
E. No Commissions Counted Twice.
Notwithstanding anything in the foregoing to the contrary,
the accounting for any account for purposes of determining
Year 1 Agency Profit, Year 2 Agency Profit and Year 3 Agency
Profit shall be done in such a manner as to prevent any
commissions which are earned in one year from being counted
in two years and in such a manner as to prevent two years of
commissions from any such account as being earned in any one
year.
4. Allocation of Purchase Price. The Purchase Price
shall be allocated at Closing in the manner prescribed under
Section 1060 of the Code and the regulations promulgated
thereunder. Buyer and Seller intend to allocate the
Purchase Price, after imputation of interest, among the
Assets as follows:
Expiration Lists $5,605,385
Furniture, Fixtures and Equipment $160,000
Goodwill Balance of Purchase
Price
To the extent any payment based on Year 1 Agency Profit or
Year 2 Agency Profit is less than the maximum payment called
for herein, Buyer and Seller shall first apply such
reduction to goodwill. If such reductions eliminate
goodwill, then such reduction shall next be applied to the
value of the expiration lists. If any payment is made
pursuant to the Agreement in excess of the Purchase Price,
such excess shall be allocable to goodwill. All adjustments
shall be discounted to their present value at the time of
such adjustment by using the imputed interest percentage
which shall adjust the amount of imputed interest
accordingly. Buyer and Seller mutually covenant and agree
that for tax purposes each of them will report the purchase
and sale consummated hereunder on the basis of the foregoing
allocation.
5. Closing. The closing ("Closing") shall be held at
the offices of Seller on September 30, 1996, at 1:00 p.m.
("Closing Date") and at the offices of LLC on October 7,
1996, for the purchase of that portion of Assets from LLC.
6. Representations and Warranties of Seller and
Shareholders. Seller and Shareholders, jointly and
severally, hereby represent and warrant to the Buyer and HRH
as follows:
A. Seller has good and marketable title to, and
owns, the Assets to be sold, assigned and transferred
hereunder, and the Assets are free and clear from any and
all judgments, mortgages, pledges, liens, conditional sales
agreements, security interest, options or other encumbrances
or claims of every nature and kind whatsoever.
B. Bartlett is a corporation and LLC is a
limited liability company duly organized, validly existing
and in good standing as a domestic corporation or limited
liability company under the laws of the State of Illinois;
Seller possesses all necessary power to enter into this
Agreement and to consummate the transactions contemplated
hereby; the Shareholders and Board of Directors or members
of Seller have taken, or will have taken by the Closing
Date, all necessary actions to authorize the execution and
delivery of this Agreement and the consummation of the
transactions contemplated hereby; and neither the execution
and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will breach or violate any
provision of Seller's articles of incorporation or
organization or bylaws or of any statute, ordinance,
contract, agreement or other such instrument to which Seller
is a party or by which it is bound.
C. No notice, report or other filing is required
to be submitted to, and no consent, approval or
authorization is required to be received from, any
governmental authority or other person or entity in
connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated
hereunder.
D. Seller is not in default under any agreement
which is being assigned to Buyer hereunder.
E. There are no judgments, actions, suits,
levies, attachments or governmental or administrative agency
proceedings pending or threatened against or affecting the
Assets or the transactions contemplated by this Agreement,
nor are there any such actions pending or threatened between
Seller and any of its clients or insurance companies for
which it acts as agent.
F. Seller is, and has been, in full compliance
with all licensing and other regulatory laws for the conduct
of its present operations (including, without limitation,
its property and casualty, personal lines and life
businesses) and all of Seller's employees or agents who
write any type of insurance for Seller (including the
Shareholders) are and have been, in full compliance with all
licensing and other regulatory laws such that Seller and
Shareholders have no liabilities of any nature related to
any failure, whether intentional or inadvertent, to comply
with any such laws and which may attach to, or affect the
use of, the Assets by the Buyer or HRH. Attached hereto as
Schedule 6.F is a complete list of all insurance licenses
held by Seller and all states in which it is qualified to
transact business.
G. Seller maintains errors and omissions
coverage for all of its operations in amounts which it deems
to provide adequate coverage; all such policies are
described on Schedule 6.G (carrier, retrodate, claims made
or occurrence policy, deductible and limits); and there are
no claims against Seller, its agents, employees or directors
or any of the Shareholders.
H. Except as disclosed on Schedule 6.H, Seller
has no employment agreement with any employee which is not
terminable at will and no employee pension, profit-sharing,
or other retirement plan.
I. The list of Seller's liabilities as of the
Pre-Effective Moment, including liabilities for credit
receivables and liabilities to insurance companies for all
lines of insurance business outstanding as of the
Pre-Effective Moment (which liabilities shall be separately
stated and referred to as "Credit Receivables" and as
"Insurance Company Payables"), to be attached hereto at
Closing (or as soon thereafter as is practicable) as
Schedule 6.I, will be complete and correct; and Seller and
the Shareholders are and will be responsible for all
liabilities of Seller of any type whatsoever accrued as of
the Effective Date and agree to indemnify Buyer and HRH to
the extent either pays any such liabilities, including
without limitation any costs incurred in paying such
liabilities.
J. Seller and Shareholders understand and
acknowledge that the HRH Stock to be received pursuant to
this Agreement is registered and is subject to Rule 145 of
the Securities Exchange Commission; the HRH Stock is being
acquired for investment purposes only and not with a view to
distribution or resale; any sale or other disposition of the
HRH Stock shall be made pursuant to the regulations
promulgated under Rule 145 or other applicable federal or
state securities laws and in compliance with such laws and
regulations.
K. Except as disclosed on Schedule 6.K, there
are no maintenance or other continuing agreements affecting
or concerning the use of the Assets.
L. Seller has timely filed all tax returns
required of it and timely paid all tax liabilities owed by
it, such that no tax liabilities to Buyer or HRH of any kind
whatsoever could be attached to or associated with the
Assets.
M. Seller and Shareholders have caused (or will
cause) to be delivered to Buyer true and complete copies of
Seller's federal and state income tax returns and financial
statements for the most recent three years (compiled or
audited, as the case may be). Seller and Shareholders shall
cause any newly-prepared financial information (including
interim management reports) to be delivered promptly to the
Buyer.
Each of the foregoing financial statements is or will
be true and correct, is or will be in accordance with the
books and records of Seller, presents fairly, or will
present fairly, the financial condition and results of
operations of Seller as of and for the periods indicated,
and has been prepared, or will be prepared, in accordance
with generally accepted accounting principles consistently
applied throughout the periods covered by such statements.
All such financial statements did not contain and will not
contain any untrue statement of any material fact nor
omitted to state, or will omit to state, any material fact
required to be stated to make such financial statements not
misleading.
N. Except as disclosed on Schedule 6.N, there
are no financing statements or other security interests of
any kind filed or required to be filed against the Assets or
affecting the use of, or title to, the Assets ("Financing
Statements"). Except as further disclosed on Schedule 6.N,
there are no deferred money purchase notes related to the
Seller's acquisition of any portion of the Assets ("Notes").
Any such liabilities related to the Financing Statements or
Notes can and will be paid off at or prior to Closing,
except as further detailed on Schedule 6.N.
O. Except as disclosed on Schedule 6.0, Seller
and Shareholders have not employed any broker or finder for
the purposes of completing the transactions contemplated
herein or for any transaction similar to the transactions
contemplated herein such that no commission, finder's fee,
brokerage fee or similar charge will be incurred for the
consummation of the transactions contemplated herein.
P. Except for the transactions contemplated
herein, neither Seller nor Shareholders have entered into
any agreement for the sale of the Assets (or any portion
thereof) or for the direct or indirect sale or exchange of
Seller.
Q. Seller and Shareholders have received a copy
of HRH=s current S-4 registration statement dated February
12, 1992, most recent annual report, Form 10-K and Form 10-Q
and will acknowledge receipt of an amendment or supplement
to such registration statement.
R. Shareholders and Seller understand and
acknowledge that errors and omissions prior to the Effective
Date remain their risk exclusively and are not insured under
Buyer's or HRH's insurance program, and have been advised
to, and will, take out insurance, effective as of the
Effective Date to insure each Shareholder and the Seller for
claims arising under errors and omissions occurring prior to
the Effective Date; and when such insurance is purchased,
Shareholders and Seller will furnish all such certificates
of insurance to Buyer and HRH as soon as is practicable.
S. Except as identified in Schedule 6.S, all
relations between Seller and the present customers of Seller
are good, and Shareholders have no knowledge of any
proposed termination of any insurance account presently
written or serviced by Seller. Also, except as otherwise
set forth in Schedule 6.S, all customer accounts, including,
without limitation, those accounts with respect to which
Seller financed any premiums are current. For purposes of
this Section, the terms "insurance account" and "customer
account" shall be limited to accounts which generate
aggregate annual income (commissions and fees) of $25,000 or
more.
T. The census data for all of Seller's employees
as of the date hereof, in the form provided in Schedule 6.T,
is true and complete in all material respects.
U. The foregoing representations and warranties
shall survive the Closing.
7. Representations and Warranties of Buyer and HRH.
Buyer and HRH hereby represent and warrant to the Seller and
the Shareholders as follows:
A. Buyer is duly organized, validly existing and
in good standing as a domestic corporation under the laws of
the State of Illinois; HRH is duly organized, validly
existing and in good standing as a domestic corporation
under the laws of the Commonwealth of Virginia; each has the
corporate power to enter into the transactions hereby
contemplated.
B. This Agreement and the transactions
contemplated hereby will not breach or violate any provision
of Buyer's or HRH's articles of incorporation or bylaws.
C. Neither Buyer nor HRH has employed a broker
or finder for the purposes of completing the transactions
contemplated hereby.
D. The shares of HRH common stock to be issued
pursuant to this Agreement will, when so issued, be (i) duly
and validly authorized and issued, fully paid and
nonassessable, (ii) duly registered under the Securities Act
of 1933, as amended, and (iii) listed on the New York Stock
Exchange, subject only to the restrictions described in the
Prospectus.
E. The foregoing representations and warranties
shall survive the Closing.
8. Conditions Precedent.
8.1 Conditions Precedent to Performance by Buyer and
HRH. The obligation of Buyer and HRH to perform under this
Agreement is contingent upon the following conditions being
fulfilled at or prior to Closing (or the Effective Date,
where stated to be applicable):
A. At or prior to the Closing, each of the
Shareholders (other than Bartlett) shall have entered into
an Employment Agreement and Covenant Not to Compete with
Buyer, in form and substance as set forth in Schedule 8.1.A
attached hereto.
B. At or prior to the Closing, Robert Avon,
James Reier, Jon Pohlmann, Chris Slattery and Brent
McCormick shall have entered into an Employment Agreement
with Buyer, in form and substance as set forth in Schedule
8.1.B attached hereto.
C. At or prior to the Closing, Buyer and HRH
shall have received Boseman, Neighbour, Patton & Noe,
counsel to Seller, an opinion, in form and substance as set
forth in Schedule 8.1.C attached hereto, dated as of the
Closing Date, that the representations and warranties
contained in Sections 6.A, 6.B, 6.C, 6.D, 6.E, and 6.F made
by Seller and Shareholders to Buyer and HRH are true,
correct and complete and that the transfer of the Assets has
been completed without any liability to Buyer or HRH for
sales or use taxes or for failure to comply with the Bulk
Sales Act. This opinion will not be required for the
portion of the Assets purchased from LLC on October 7, 1996.
D. The Shareholders and Seller shall have
complied in all material respects with all representations,
warranties, conditions, covenants and agreements required
under this Agreement to be performed or complied with by
Seller or the Shareholders on or before the Closing Date.
E. No suit, action or proceeding, or
governmental investigation, against or concerning, directly
or indirectly, Seller, or any of Seller's assets and
properties, shall have been instituted or reinstituted, nor
shall any basis therefor have arisen, that might result in
any order or judgment of any court or of any administrative
agency which, in the opinion of the counsel for the Buyer,
renders it impossible or inadvisable for the Buyer to
consummate or cause to be consummated the transactions
contemplated by this Agreement.
F. All transactions contemplated hereby, and the
form and substance of all legal proceedings and of all
instruments used or delivered hereunder, shall be reasonably
satisfactory to counsel for the Buyer.
G. To the extent desired by the Buyer, the Buyer
shall have obtained a statement in writing from each of the
insurance companies identified (or to be identified) in
Schedule 6.I of this Agreement, in form satisfactory to the
Buyer and Buyer's counsel, by which each such insurance
company agrees that it will not terminate its insurance
agency contract solely by reason of the transactions
contemplated in this Agreement and further agrees that it
will recognize Buyer, its successors and assigns, as its
agent under the existing agency contract between such
company and Seller or that it will enter into a
substantially similar agency contract with Buyer, its
successors and assigns.
H. There shall have been no material adverse
change in Seller's business, business prospects, assets and
properties, or goodwill between the date of the execution of
this Agreement and the Closing Date. For purposes hereof,
"material adverse change" means, without limitation, the
loss of any one account generating an aggregate annual
commission income of $25,000 or more.
I. The Buyer shall receive certified copies of
resolutions of the Board of Directors and Shareholders of
Bartlett, to the extent deemed necessary by, and in form
satisfactory to, counsel for the Buyer, authorizing the
execution and delivery of this Agreement by Bartlett and the
consummation of the transactions contemplated hereby.
J. At or prior to the Closing, unless waived in
writing by HRH, all of the liabilities listed or required to
be listed in Schedule 6.I as Insurance Company Payables and
all of the liabilities listed or required to be listed in
Schedule 6.N shall have been satisfied in the manner
prescribed in Section 12, infra.
K. At or prior to the Closing, each of the
Shareholders (other than Bartlett), and, if applicable, all
those persons designated in Section 8.1.B, above, shall have
obtained all licenses and other regulatory approvals
necessary to operate lawfully the property and casualty,
personal lines and life insurance businesses (in a manner
similar to the present conduct of such businesses by Seller)
to be conducted by Buyer and each of its agents, solicitors
and employees.
L. At or prior to the Closing, the parties shall
have reached an acceptable understanding with respect to
Bartlett's and LLC's existing leases of their office
premises and Buyer's extent of assumption thereof.
M. Subject to fulfillment of certain conditions
precedent by HRH and Buyer, the board of directors of Seller
will recommend to the Shareholders that Shareholders adopt
this Agreement. Seller agrees to submit this Agreement to
the Shareholders for adoption by unanimous written consent
with written waiver of notice of the terms of this Agreement
prior to the Effective Date, but only after delivery by HRH
to the Shareholders and the Seller of an amended or
supplemented S-4 registration statement for HRH's common
stock to be issued pursuant to this Agreement and after the
Shareholders have had an effective opportunity to review
such prospectus.
N. The Management Incentive Agreement attached
hereto as Schedule 8.1.N shall have been executed by all
applicable parties. [Exhibit 1 to the modified Purchase
Agreement]
8.2 Conditions Precedent to Performance by Seller and
Shareholders. The obligation of the Shareholders and the
Seller to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction or
fulfillment on or prior to the Closing Date, of the
following conditions, in addition to any other conditions
contained in this Agreement, each of which may be waived,
collectively, by a majority in interest of the Shareholders
and the Seller:
The registration statement on Form S-4 under the Securities
Act of 1933 referred to in Section 8.1.M hereof shall have
been amended or supplemented and be effective under such Act
and not the subject of any "stop order" or threatened "stop
order" and the amended or supplemented prospectus shall have
been delivered to the Shareholders and the Seller for their
review and subsequent approval of this Agreement and the
transactions contemplated thereby.
9. Covenants of Seller and Shareholders. Seller and
Shareholders covenant and agree that, except as otherwise
consented to in writing by Buyer and HRH:
A. Regular Course of Business. Prior to the
Transfer Date, Seller will carry on its business diligently
and in the ordinary course consistent with past management
practices, except as otherwise contemplated by this
Agreement.
B. Restricted Activities and Transactions of
Seller. Prior to the Transfer Date, except as contemplated
by this Agreement, Seller will not engage in any one or more
of the following activities or transactions:
(1) except for indebtedness in the ordinary
course of business, issue, sell, deliver or agree to issue,
sell or deliver any stock, bonds or other corporate
securities of which Seller is the issuer (whether authorized
and unissued or held in treasury), or grant or issue or
agree to grant or issue any options, warrants or other
rights calling for the issue thereof;
(2) borrow or agree to borrow any funds or
voluntarily incur, or assume or become subject to, whether
directly or by way of guarantee or otherwise, any obligation
or liability (absolute or contingent) except obligations and
liabilities incurred in the ordinary course of business;
(3) except in the ordinary course of
business, mortgage, pledge or encumber any part of its
assets, tangible or intangible;
(4) sell or transfer, or agree to sell or
transfer, any substantial part of its assets, property or
rights; or cancel, or agree to cancel, any substantial debts
or claims;
(5) except in the ordinary course of
business, enter, or agree to enter, into any agreement or
arrangement granting any preferential rights to purchase any
of the assets, property, or rights of Seller or requiring
the consent of any party to the transfer and assignment of
any such assets, property or rights;
(6) except in the ordinary course of
business, make or permit any amendment or termination of any
material contract, agreement or license to which it is a
party;
(7) make any material change in any
profit-sharing, bonus, deferred compensation, insurance,
pension, retirement or other employee benefit plan, payment
or arrangement, except as required by law;
(8) except for minor acquisitions or
dispositions effected in the ordinary course of business,
merge or consolidate with any other corporation, acquire
control of any other corporation or business entity, or take
any steps incident to or in furtherance of any of such
actions whether by entering into an agreement providing
therefor or otherwise;
(9) make any material alteration in the
manner of keeping its books, accounts or records or in the
accounting practices therein reflected; or
(10) except for transactions not referred in
clauses (1) - (9), above, and except in the ordinary course
of business, enter into any other material contract,
agreement, course of action or transaction.
C. Confidentiality. Seller will, and will use
its reasonable efforts to cause its authorized
representatives (including, without limitation, the
Shareholders) to, hold in strict confidence and not disclose
to any other party without the prior written consent of
Buyer and HRH, all information received by them from Buyer
or HRH in connection with the transactions contemplated
hereby, and the terms of this Agreement, except such
information may be disclosed (i) where necessary to any
regulatory authorities or governmental agencies, (ii) if
required by court order or decree or applicable law, (iii)
if it is publicly available or (iv) if it is otherwise
contemplated herein.
D. Consents. Seller will use its best efforts
to obtain or take at the earliest practicable date and in
any event before Closing, all consents, estoppel
certificates and filings necessary to the consummation of
the transactions contemplated hereby which are necessary to
be obtained by Seller or which are reasonably requested by
Buyer or HRH.
E. No Change in Ownership. Between the date
hereof and the Transfer Date, Seller and Shareholders shall
use their best efforts to ensure that there shall be no
change in ownership of Seller and no change in the interests
of Seller held by each Shareholder.
F. Reasonable Efforts. Between the date hereof
and the Transfer Date, Seller and Shareholders shall use
their reasonable efforts (i) to fulfill the conditions set
forth in Section 8.1 hereof and (ii) to cause the
representations and warranties under Section 6 hereof to be
and to remain true and correct.
G. Winding Up. Seller's conduct of business
shall be wound up and concluded as soon as practicable with
the result being that all such business shall have been
transferred to Buyer. All costs of winding down, including,
without limitation, the termination or freezing of Seller=s
benefit plans (which shall be handled as set forth in
Schedule 9.G.), shall be borne by Seller; however, to the
extent HRH aids Seller in any such benefit plan work, no
costs shall be imposed on Seller by HRH for its work.
H. Nonsolicitation Covenant. Each of the
Shareholders, by signature hereto, covenants that he shall
not for a period of five (5) years after the Effective Date,
directly or indirectly, except on behalf of Buyer, its
successors or assigns, solicit or accept risk management,
insurance or bond business from any of the customers of
Seller as of the moment immediately preceding the Effective
Date. Each of the Shareholders, by signature hereto,
acknowledges: (i) that this covenant is ancillary to this
Agreement, is integral hereto and is independent of any
other provision herein, (ii) that this covenant is
reasonably necessary for the protection of Buyer's
legitimate business interests; (iii) that this covenant
poses no undue hardship on the Shareholders and is
reasonably limited as to duration and scope; and (iv) that
this covenant is in addition to any covenants which
Shareholders may make in any employment or other agreements
executed or to be executed with Buyer. Further, if any part
of this covenant is deemed overbroad or void as against
public policy, each of the Shareholders, by signature
hereto, acknowledges that such invalid portions shall be
severable from this covenant and specifically requests that,
upon such event, this covenant be reformed ("blue-
pencilled") to permit Buyer to obtain the maximum
permissible benefit from this covenant.
10. Covenants of Buyer and HRH. Buyer and HRH
covenant and agree that, except as otherwise consented to in
writing by Seller and Shareholders:
A. Confidentiality. Buyer and HRH each will,
and each will use its reasonable efforts to cause its
authorized representatives to, hold in strict confidence and
not disclose to any other party without the prior written
consent of Seller and Shareholders, all information received
by them from Seller and Shareholders in connection with the
transactions contemplated hereby, and the terms of this
Agreement, except such information may be disclosed (i)
where necessary to any regulatory authorities or
governmental agencies, (ii) if required by court order or
decree or applicable law, (iii) if it is publicly available
or (iv) if it is otherwise contemplated herein.
B. Reasonable Efforts. Between the date hereof
and the Transfer Date, Buyer and HRH shall use their
reasonable efforts (i) to fulfill the conditions set forth
in Section 8.2 hereof and (ii) to cause the representations
and warranties under Section 7 hereof to remain true and
correct.
11. Accounts and Other Receivables. Seller and Buyer
agree that all accounts receivable of Seller as of the
Pre-Effective Moment (including commissions earned but not
paid on business billed by Seller which was written and
having an effective date prior to the Effective Date, but
excluding direct bill commissions not received by Seller
prior to the Effective Date) to be attached hereto at
Closing (or as soon thereafter as is practicable) as
Schedule 11 belong to Seller and shall be paid to Seller in
the manner described below. Buyer shall collect for a
period of six months after the Effective Date all
receivables paid to it which belong to Seller as determined
by specific invoice. If there is no invoice enclosed or to
which such payment is attributable and neither Seller nor
Buyer is aware of a dispute as to the oldest balance of such
account, then each payment shall be applied to the oldest
balance of that account first. Not later than twenty (20)
days after the end of any month, Buyer shall remit to Seller
all receivables so collected for the Seller, or if the
escrow account to be established pursuant to Section 12 is
underfunded, then, and to such extent to such escrow
account. This arrangement shall continue until (i) all such
existing receivables as of the Pre-Effective Moment have
either been paid to Seller or been determined by Seller to
be bad debts or (ii) six months after the Effective Date,
whichever occurs first. If all such receivables of Seller's
have not been collected or determined by Seller to be bad
debts by April 1, 1997, any remaining accounts shall be the
sole responsibility of Seller to collect. Seller agrees
that it will not litigate any accounts receivable claim
without the prior written consent of Buyer and HRH.
12. Accounts Payable and Other Liabilities of Seller.
Seller and Buyer mutually acknowledge and agree that Buyer
is not assuming any of Seller's accounts payable or other
liabilities of any kind whatsoever, whether arising prior
to, on or after the Effective Date. A list with Seller's
Insurance Company Payables is to be attached hereto as
Schedule 6.I. Seller and Shareholders covenant and agree to
pay all liabilities and payables owed by Seller which are
related to its insurance business as they become due, other
than any such liabilities or payables with respect to which
there exists a reasonable basis to dispute the legal
obligation to pay such liability or account payable. To
ensure full payment of Seller's liabilities, Buyer and
Seller agree that an amount equal to the sum of 120% of the
amount listed or required to be listed on Schedule 6.I as
Insurance Company Payables, plus 100% of the amount listed
or required to be listed on Schedule 6.I as Credit
Receivables plus 100% of the amount listed or required to be
listed on Schedule 6.N as Notes or Financing Statements
shall be drawn from the cash at Closing (including cash to
be paid to each of the Shareholders for his covenant not to
compete, if necessary) or shall be collected from the
receivables of Seller in due course after Closing and held
in co-escrow in an interest-bearing account in favor of
Seller at a financial institution of Seller's choosing
(which institution shall be reasonably available to HRH and
Buyer, and, for the choice of which, neither HRH nor Buyer
shall be liable in any way to Seller or Shareholders) and
drawn upon by an officer of Buyer and the President of
Seller ("Escrow Agents") to extinguish Seller's Insurance
Company Payables, Credit Receivables and any other
liabilities, whether listed or not and to pay off the Notes
and the Financing Statements. Receivables of Seller
collected by Buyer after the Effective Date may be deposited
into the Escrow Account to the extent the Escrow Account is
underfunded for as long as is necessary to extinguish the
debts of Seller contemplated herein. When all such
liabilities required to be listed as Insurance Company
Payables, Credit Receivables, Notes or Financing Statements,
or at Buyer's discretion, when all such liabilities listed
as Insurance Company Payables, Credit Receivables, Notes or
Financing Statements other than those for which there is a
reasonable basis to dispute Seller's legal obligation to
pay, have been paid or been adjusted and satisfied, the
Escrow Agents shall release the balance of the cash
(including interest accrued) to Seller (and Shareholders, if
applicable). Evidence of such payment shall be in the form
of a cancelled check or written receipt from the creditor or
a statement that all amounts owed or accrued up to the
Effective Date have been paid. The release of the balance
of the cash to Seller (and Shareholders, if applicable)
shall not relieve Seller of its obligation to pay any of its
liabilities, including any contested liabilities should
Seller be found liable.
13. Indemnification Provisions.
A. Indemnification of Buyer and HRH. Seller and
Shareholders covenant and agree that each shall jointly and
severally indemnify and hold Buyer and HRH harmless from any
and all damages or expenses (including legal costs and
attorneys' fees) which Buyer or HRH may suffer due to any
breach by Seller or Shareholders of any representations,
warranties, conditions or covenants hereunder. In addition,
Seller and Shareholders shall indemnify and hold Buyer and
HRH harmless from any damages or expenses (including legal
costs and attorneys' fees) which either may suffer or incur
as a result of any claim which relates back on or prior to
the Effective Date and which may be asserted against Buyer
or HRH or any legal proceeding in which either may be made a
party as a result of the purchase of the Assets, as a result
of the conduct or operation of its business using the
Seller's Assets prior to the Closing or as a result of
Closing prior to the Effective Date of the transfer of the
Assets. The foregoing indemnities shall be joint and
several as to Seller and Messrs. Miles and Bracke and shall
be pro rata as to Messrs. Barrett and Boyle. Buyer's
Deferred Obligations contain a right of offset to secure
this indemnity provided herein.
B. Collection of Indemnity. In seeking to
collect this indemnity, Buyer and HRH shall first make
written demand on Seller (or shall offset from sums due to
Seller) and if such demand shall not be satisfied within
thirty (30) days of receipt, Buyer and HRH may then make
such demand on Shareholders. Nothing herein shall be deemed
to require Buyer and HRH to exhaust all potential collection
remedies against Seller before making demand of any
Shareholder.
C. Limitations on Indemnity. The time period
for assertion of this indemnity shall expire with the
payment to Seller based on Year 3 Agency Profit
(approximately thirty-eight (38) months after the Effective
Date). Any claim for indemnification shall not survive such
payment unless made in writing at or prior to the time of
such Year 3 payment of the Purchase Price. The aggregate
amount of potential liability for this indemnity is limited
to the Purchase Price.
14. Miscellaneous.
A. Binding Nature, Assignments. This Agreement
shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, guardians,
personal representatives, successors and assigns. No
amendment, modification, termination or waiver of any
provision of this Agreement shall be effective unless the
same shall be in writing and signed by all parties hereto.
B. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF ILLINOIS.
C. Headings and Exhibits. The headings of the
various Sections herein are for convenience of reference
only and shall not define or limit any of the terms or
provisions hereof. All Schedules and other documents
referred to in this Agreement are an integral part of this
Agreement.
D. Notices. Any notices or other communications
required or permitted hereunder shall be in writing and
delivered at the addressesdesignated below, or mailed by
overnight mail, registered or certified mail, return receipt
requested, postage prepaid, addressed as follows, or to such
other address or addresses as may hereafter be furnished by
one party to the other in compliance with the terms hereof:
If to Buyer or HRH, to:
Mr. Robert H. Hilb, President
Hilb, Rogal and Hamilton Company
4235 Innslake Drive
P.O. Box 1220
Glen Allen, Virginia 23060-1220
With a copy to:
Walter L. Smith, Esquire
Hilb, Rogal and Hamilton Company
4235 Innslake Drive
P.O. Box 1220
Glen Allen, Virginia 23060-1220
If to Seller or Shareholders, to:
Mr. Richard J. Miles, President
Bartlett Agency, Inc.
P. O. Box 970
Moline, Illinois 61266-0970
With a copies to:
Mr. Douglas A. Yoh
Marsh, Berry and Company, Inc.
7466 Auburn Road
Concord, Ohio 44077
Gary L. Sissel, Esquire
Boseman, Neighbour, Patton & Noe
Fifth Avenue Building
1630 Fifth Avenue
P. O. Box 659
Moline, Illinois 61266-0659
All such notices and other communications shall be effective
when delivered at the designated addresses or deposited in
the mails in conformity with the provisions hereof.
E. Public Releases. Buyer and Seller agree that
HRH may publicly release the announcement attached as
Schedule 14.E concerning the purchase of the Assets.
F. Casualty Loss. The Seller shall bear the
risk of loss, destruction, or damage to the Assets caused by
fire or other casualty through Closing Date. Thereafter
such risk shall shift to the Buyer.
G. Payment of Fees. Buyer, Seller, HRH and
Shareholders shall each pay their own attorneys' fees and
other expenses relating to this transaction.
H. Further Instruments and Actions. The parties
shall execute and deliver such other documents and
instruments as may be reasonably necessary (including,
without limitation, obtaining the signatures of spouses) and
shall take such further action as may be necessary or
appropriate, to carry out the terms and purposes of this
Agreement.
I. Right to Modify or Amend. The parties may at
any time by mutual agreement modify or amend this Agreement
in any manner as agreed upon by them in writing.
J. Termination. At any time prior to the
Closing, the parties may by mutual written agreement
terminate this Agreement. In the event this Agreement is so
terminated, the parties shall have no liability to each
other hereunder.
K. Complete Agreement. This Agreement and the
Schedules hereto constitute the entire Agreement between the
parties hereto with respect to the transactions contemplated
herein. No representation, promise or inducement not
included or required to be included herein shall be binding
upon any party hereto.
L. Execution and Counterparts. This Agreement
may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which shall
represent one agreement.
M. Severability. Any provision of this
Agreement which is invalid, illegal or unenforceable shall
be ineffective to the extent of such invalidity, illegality
or unenforceability, without affecting in any way the
remaining provisions hereof.
N. Understanding of Agreement. Seller,
Shareholders, HRH and Buyer acknowledge that each has read
and understood the provisions of this Agreement, and that
this Agreement entered into voluntarily and after having had
all opportunities to seek such advice as each may have
wished to receive. O. Later
Acquisitions. Seller and Shareholders acknowledge that a
later acquisition by Buyer of another insurance agency could
affect the determination of Year 1, Year 2 and Year 3 Agency
Profit and agree to cooperate with Buyer and HRH in making
any adjustments as necessary to this Agreement to carry out
its intent. Prior to October 1, 1999, HRH may not cause
Buyer to make any acquisitions affecting Year 1, Year 2 or
Year 3 Agency Profits unless either Mr. Miles or Mr. Bracke
has consented thereto.
P. Case and Gender. Wherever required by the
context of this Agreement, the singular and plural cases and
the masculine, feminine and neuter genders shall be
interchangeable.
Q. HRH Policy on Post-Acquisition Cash Held by
Buyer. Seller and Shareholders acknowledge that they have
been informed of the policy of HRH not to allow cash and
cash equivalents in excess of what HRH believes to be the
appropriate amount of working capital for any of its
operating offices to remain in an interest-earning account
for the benefit of that office. As such, Seller and
Shareholders acknowledge that HRH, subject to any applicable
state law restrictions, will cause any such excessive
amounts of cash and equivalents to be dividended to HRH,
that such dividends would reduce interest earnings
attributable to Buyer after the Effective Date, and that HRH
has the right to declare such dividends.
R. Nonwaiver. The waiver by HRH or Buyer of any
provision of this Agreement shall not operate or be
construed as a waiver of any other provisions of this
Agreement.
WITNESS the following signatures and seals:
BUYER:
HILB, ROGAL AND HAMILTON COMPANY
OF THE QUAD CITIES
By ______________________________________
Its ______________________________________
SELLER:
BARTLETT AGENCY, INC.
By ______________________________________
Its ______________________________________
HRH:
HILB, ROGAL AND HAMILTON COMPANY
By ______________________________________
Its ______________________________________
SHAREHOLDERS:
_________________________________________
Richard J. Miles
_________________________________________
Thomas K. Bracke
_________________________________________
John J. Barrett
_________________________________________
Bradley T. Boyle
Guaranty:
The obligation of Buyer to make any payments to Seller is
hereby guaranteed by HRH to the same extent as the Buyer is
obligated to make any such payments. In seeking to enforce
any such guaranty, Seller need not exhaust all collection
efforts or remedies against Buyer first.
HILB, ROGAL AND HAMILTON COMPANY
By ______________________________________
Its ______________________________________
