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 ACQUISITIONS OF
HUGH HOLLEY & ASSOCIATES, INC.
The following information is furnished to supplement and
complete the information contained in the Prospectus dated
February 12, 1992, relating to the offering of shares of the
Common Stock of Hilb, Rogal and Hamilton Company (the "Company")
to the sole shareholder of Hugh Holley & Associates, Inc. also
doing business as Professional Insurance Associates and
Professional Liability Purchaser's Group ("HHA") of Marietta,
Georgia to consummate the merger of HHA and the Company.
Terms of the Transaction
(a) (1) Effective September 1, 1997, a subsidiary of the
Company will consummate an Agreement of Merger with HHA whereby
the sole shareholder of HHA will receive 31,250 shares of Common
Stock of the Company ("Shares") subject to (i) all necessary
corporate approvals of each corporation, (ii) all authorizations,
consents and approvals of all federal, state, local and foreign
governmental agencies and authorities required to be obtained,
and (iii) all other conditions precedent as outlined in the
Agreement of Merger (see Exhibit 2.31). The number of shares
distributed to the sole shareholder of HHA will be adjusted based
upon the final determination of net worth as defined in the
Agreement of Merger.
Hugh Holley & Associates, Inc. will merge into Hilb, Rogal
and Hamilton Company of Atlanta, Inc., a wholly-owned subsidiary
of the Company.
(2) The acquisition of HHA by the Company has been
agreed upon because the Company is engaged in the business of
owning insurance agencies and because the sole shareholder of HHA
has determined that a merger with the Company is beneficial to
the growth of his insurance operation.
The combined operations will add approximately six employees
and approximately $500,000 of revenues to the Company.
<PAGE>
(3) HHA was incorporated in 1979 and elected S
Corporation status as provided by the Internal Revenue Code in
1987. HHA has 50,000 authorized shares of common stock, $1 par
value. There are 500 shares issued and outstanding.
(4) There are no material differences between the
rights of the security holder of HHA and the rights of security
holders of the Company.
(5) & (6) The acquisition of HHA will be treated using
the purchase method of accounting for acquisitions under
generally accepted accounting principles.
HHA will be included in the consolidated return of the
Company as of the effective date. The acquisition will be
recorded as a tax free exchange under the rules of I.R.C.
Sections 368(a)(1)(A) and 368(a)(2)(D).
(c) The acquisition agreement is incorporated into this
supplement as Exhibit 2.31.
Pro Forma Financial Information
See attached - Schedule A
Material Contracts with Seller.
There have been no material contracts between the Company
and HHA prior to the proposed effective date of the transaction.
Information with Respect to Hugh Holley & Associates, Inc.
HHA was incorporated in 1979 and elected S Corporation
status as provided by the Internal Revenue Code in 1987. HHA
maintains its primary location in Marietta, Georgia.
HHA provides professional liability services for architects
and engineers. Services provided include personal and commercial
professional liability insurance (approximately 98% of revenues)
and group and individual life and health insurance products
(approximately 2% of revenues).
The shares to be issued represent less than .24% of
outstanding shares of the Company at the time of acquisition and
the assets of HHA as of December 31, 1996 and pre-tax earnings
for the year then ended represent approximately .17% and .28%,
respectively, of the consolidated amounts of the Company.
Furthermore, the Company's investment in HHA will represent
approximately .27% 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
HHA. The restriction should end no later than March 31, 1998
when the Company files its Form 10-K for 1997.
<PAGE>
Common Stock and Dividend Data
There is no established public trading market for the stock
of HHA. There is one shareholder of HHA. See Shareholder
Information below for information regarding shares held by each
shareholder and information regarding authorized and issued
shares.
There have been no common stock dividend distributions by
HHA during the six months ended June 30, 1997 or the years ended
December 31, 1996, 1995 and 1994.
Shareholder Information
(a) (1) WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY.
(2) & (3) HHA has agreed to submit the acquisition
agreement to its sole shareholder 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 shareholder of the company being acquired (HHA),
notice requirements shall have been met and there shall be no
dissenters.
(4) & (5) There are no material interests, direct
or indirect, of affiliates, officers or directors of the
registrant or of the company being acquired (HHA) in the proposed
transaction.
(6) HHA has 50,000 authorized shares of common
stock, $1 par value. There are 500 shares issued and
outstanding.
The ownership of the outstanding shares of HHA as follows:
Number of
Shareholders Common Shares Percentage
Wm. Hugh Holley 500 100%
(7) Upon completion of the proposed acquisition, no
shareholder of HHA will serve as a director or executive officer
of the registrant.
Hilb, Rogal and Hamilton Company
Date of this Supplement: August 22, 1997
SCHEDULE A - PRO FORMA CONDENSED
FINANCIAL STATEMENTS (UNAUDITED)
The following pro forma condensed consolidated balance sheet
as of June 30, 1997 and the pro forma consolidated income state
ments for the six months ended June 30, 1997 and the year ended
December 31, 1996 give effect to the proposed acquisition of Hugh
Holley & Associates, Inc. ("HHA") expected to be effective on
September 1, 1997; and the acquisition of certain assets and
liabilities of three insurance agencies purchased in 1997 and 15
insurance agencies purchased in 1996. 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, 1996. The pro forma condensed consolidated balance
sheet gives effect to the business combinations which occurred or
are probable of occurring subsequent to June 30, 1997, as if they
had occurred before June 30, 1997.
The pro forma statements have been prepared by management
based upon the historical financial statements of Hilb, Rogal
and Hamilton Company, HHA 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 1996 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>
<TABLE>
<CAPTION>
HILB, ROGAL & HAMILTON COMPANY
PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
6/30/97
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 $27,262,327 $304,548 (79,060) (1) 0 $27,487,815
INVESTMENTS 6,620,567 0 6,620,567
RECEIVABLES &
OTHER 47,661,000 0 0 47,661,000
-------------------------------------------------------------------
TOTAL CURRENT ASSETS 81,543,894 304,548 N/A 0 81,769,382
INVESTMENTS 4,758,339 0 4,758,339
PROPERTY &
EQUIPMENT 15,534,952 0 0 0 15,534,952
INTANGIBLE ASSETS 80,449,290 0 0 500,000 (3) 80,949,290
OTHER ASSETS 5,737,393 0 5,737,393
-------------------------------------------------------------------
TOTAL ASSETS $188,023,868 $304,548 N/A $500,000 $188,749,356
===================================================================
LIABILITIES & EQUITY:
PREMIUMS PAYABLE-
INS CO $69,418,567 $225,488 $69,644,055
OTHER ACCRUED
LIABILITIES 24,525,285 0 0 24,525,285
-------------------------------------------------------------------
TOTAL CURRENT
LIABILITIES 93,943,852 225,488 N/A 0 94,169,340
===================================================================
LONG-TERM DEBT 29,029,634 0 0 0 29,029,634
OTHER LONG-TERM LIAB. 9,750,147 0 0 9,750,147
SHAREHOLDERS' EQUITY
COMMON STOCK 20,356,793 500 (500) (4) 500,000 (2) 20,856,793
RETAINED EARNINGS 34,943,442 78,560 (78,560) (4) 34,943,442
-------------------------------------------------------------------
55,300,235 79,060 N/A 420,940 55,800,235
-------------------------------------------------------------------
$188,023,868 $304,548 N/A $420,940 $188,749,356
===================================================================
</TABLE>
(1) TO ADJUST FOR ASSETS AND LIABILITIES NOT ACQUIRED.
(2) TO REFLECT PURCHASE PRICE OF ASSETS AND LIABILITIES ACQUIRED SUBSEQUENT
TO JUNE 30, 1997 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, 1997
---------------------------------------------------------------------------
HILB, ROGAL ACQUISITIONS PRO FORMA ADJUSTMENTS PRO FORMA
& HAMILTON CO. (PURCHASES) FOR PURCHASE CONSOLIDATED
ACQUISITIONS
<S> <C> <C> <C> <C> <C>
REVENUES:
COMMISSIONS & FEES $88,952,127 $237,376 $89,189,503
INTEREST AND OTHER INCOME 3,283,828 7,346 3,291,174
TOTAL REVENUES 92,235,955 244,722 92,480,677
OPERATING EXPENSES:
COMPENSATION AND BENEFITS 48,867,525 130,061 48,997,586
OTHER OPERATING EXPENSES 22,920,710 39,547 (7,359) (1) 22,952,897
AMORTIZATION OF INTANGIBLES 4,225,709 16,668 (2) 4,242,375
INTEREST EXPENSE 1,032,170 0 1,032,170
-------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 77,046,114 169,608 9,309 77,225,028
---------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 15,189,841 75,114 (9,309) 15,255,649
INCOME TAXES 6,246,054 26,322 (3) 6,272,373
-------------------------------------------------------------------------
NET INCOME $8,943,787 $75,114 ($35,631) $8,983,276
=========================================================================
NET INCOME PER COMMON SHARE $0.68 $0.68
=========================================================================
SHARES ISSUED AND
OUTSTANDING 13,000,139 31,250 13,031,339
=========================================================================
WEIGHTED AVERAGE SHARES
OUTSTANDING 13,239,878 31,250 13,271,128
=========================================================================
</TABLE>
(1) TO REFLECT ADJUSTMENTS TO COMPENSATION AND OTHER OPERATING EXPENSES TO
REFLECT ADJUSTED COMPENSATION, DEPRECIATION EXPENSE, RENT EXPENSE, ETC.
(2) 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.
(3) 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, 1996
-------------------------------------------------------------------------
HILB, ROGAL ACQUISITIONS PRO FORMA ADJUSTMENTS PRO FORMA
& HAMILTON CO. (PURCHASES) FOR PURCHASE CONSOLIDATED
ACQUISITIONS
<S> <C> <C> <C> <C> <C>
REVENUES:
COMMISSIONS & FEES $153,967,914 $15,591,766 $169,559,680
INTEREST AND OTHER INCOME 4,275,186 342,491 ($374,978) (1) 4,242,699
--------------------------------------------------------------------------
TOTAL REVENUES 158,243,100 15,934,257 (374,978) 173,802,379
OPERATING EXPENSES:
COMPENSATION AND BENEFITS 88,406,342 10,666,873 99,073,215
OTHER OPERATING EXPENSES 41,950,933 4,153,431 (178,691) (2) 45,925,673
AMORTIZATION OF INTANGIBLES 7,596,274 139,900 860,992 (3) 8,597,166
INTEREST EXPENSE 1,244,729 139,426 49,017 (4) 1,433,172
--------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 139,198,278 15,099,630 731,318 155,029,226
--------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 19,044,822 834,627 (1,106,296) 18,773,153
INCOME TAXES 7,638,431 (108,668) (5) 7,529,763
--------------------------------------------------------------------------
NET INCOME $11,406,391 $834,627 ($997,628) $11,243,390
==========================================================================
NET INCOME PER COMMON SHARE $0.85 $0.82
==========================================================================
SHARES ISSUED AND
OUTSTANDING 13,320,577 53,892 13,374,469
==========================================================================
WEIGHTED AVERAGE SHARES
OUTSTANDING 13,493,255 136,666 13,629,921
==========================================================================
</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.
AGREEMENT OF MERGER
OF
HUGH HOLLEY & ASSOCIATES, INC.
INTO
HILB, ROGAL AND HAMILTON COMPANY OF ATLANTA, INC.
THIS MERGER AGREEMENT ("Agreement"), to be effective as of 12:01
a.m. on September 1, 1997, or at such other time as may be agreed upon by
the parties hereto, is made and entered into by and among HILB, ROGAL AND
HAMILTON COMPANY, a Virginia corporation ("Parent"), its wholly-owned
subsidiary, HILB, ROGAL AND HAMILTON COMPANY OF ATLANTA, INC., a Georgia
corporation ("Survivor"), and HUGH HOLLEY & ASSOCIATES, INC., a Georgia
corporation also doing business as "Professional Insurance Associates"
and "Professional Liability Purchaser's Group" ("Merging Entity"), and
the sole shareholder of Merging Entity, WILLIAM HUGH HOLLEY
("Shareholder"), with reference to the following facts:
A. Shareholder is the owner and holder of all of the issued and
outstanding shares of the authorized capital stock (referred to below as
the "Common Stock") of Merging Entity which is engaged in the business of
owning and operating a general insurance agency.
B. Parent is engaged in the business of owning and operating
insurance agencies and Survivor is an operating insurance agency.
C. Shareholder, Parent, Survivor and Merging Entity have reached an
understanding with respect to the merger of Merging Entity into Survivor
("Merger") for which Shareholder shall receive that amount of Parent's
common stock as the consideration stated herein.
D. The parties hereto intend that this Agreement be characterized
as a triangular statutory merger pursuant to Sections 368(a)(1)(A) and
368(a)(2)(D) of the Internal Revenue Code of 1986 ("Code") and further be
accounted for as a "purchase" in accordance with Accounting Principles
Board Opinion Number 16 and other applicable guidelines.
In consideration of the foregoing facts and of the respective
representations, warranties, covenants, conditions and agreements set
forth below, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. PLAN OF MERGER.
1.1 Effective Date. Subject to fulfillment of the conditions
precedent in Sections 6 and 7 of this Agreement, Merging Entity and
Survivor (collectively, "Constituents") will cause Articles of Merger to
be signed, verified and delivered on or before August 29, 1997 (or at
such later time as may be agreed upon by the parties), to the Secretary
of State of Georgia and to be effective as of 12:01 a.m. on September 1,
1997 (or at such later time as may be agreed upon by the parties)
("Effective Date"), as provided by the laws of the State of Georgia. On
the Effective Date, the separate existence of each entity of Constituents
shall cease and Merging Entity shall be merged with and into Survivor,
which shall become the Surviving Corporation.
1.2 Organization of Survivor.
(a) On the Effective Date, and thereafter until amended as
provided by law, the articles of incorporation of Survivor in effect on
the Effective Date shall be the articles of incorporation for the
Surviving Corporation.
(b) On the Effective Date, and thereafter until amended as
provided by law, the bylaws of Survivor in effect on the Effective Date
shall be the bylaws for the Surviving Corporation.
(c) On the Effective Date, and thereafter until changed as
provided by law, the names and addresses of the directors for Surviving
Corporation shall be:
Andrew L. Rogal
4235 Innslake Drive, P.O. Box 1220
Glen Allen, Virginia 23060-1220
Timothy J. Korman
4235 Innslake Drive, P.O. Box 1220
Glen Allen, Virginia 23060-1220
Walter L. Smith
4235 Innslake Drive, P.O. Box 1220
Glen Allen, Virginia 23060-1220
(d) On the Effective Date, and thereafter until changed as
provided by law, the officers of Survivor on the Effective Date shall be
the officers of Surviving Corporation.
1.3 Effect of Merger.
(a) On the Effective Date, the assets and liabilities of
Merging Entity shall be taken on the books of Survivor at the amount at
which they shall at that time be carried on the books of Merging Entity,
subject to such adjustments, if any, as may be necessary to conform to
the accounting procedures of Survivor.
(b) On the Effective Date and thereafter, Survivor shall
possess all the rights, privileges, immunities, powers, franchises and
authority, both public and private, of each of the corporations
comprising Constituents. All property of every description, including
every interest therein and all obligations of or belonging to or due to
each of Constituents shall thereafter be taken and deemed to be
transferred to and vested in Survivor, without further act or deed,
although Merging Entity from time to time, as and when required by
Survivor, shall execute and deliver, or cause to be executed and
delivered, all such deeds and other instruments and shall take, or cause
to be taken, such further action as Survivor may deem necessary or
desirable to confirm the transfer to and vesting in Survivor of title to
and possession of all such rights, privileges, immunities, franchises and
authority. All rights of creditors of each of Constituents shall be
preserved unimpaired, limited in lien to the property affected by such
liens immediately prior to the Effective Date, and Survivor shall
thenceforth be liable for all the obligations of each of Constituents.
1.4 Conversion of Shares of Common Stock.
(a) All of the outstanding capital stock of Merging Entity
comprises the Common Stock, which is owned by Shareholder. Shareholder
owns, free and clear of any liens, encumbrances, restrictions or adverse
claims whatsoever except as set forth in Schedule 2.4, the number of
shares of Merging Entity set forth below opposite his name and
Shareholder shall receive therefor for each share of Common Stock the
number of shares of no par value common stock of Parent as described
herein:
Shareholder Number of Shares
Percentage
William Hugh Holley 500
100%
In exchange for all of the shares of Common Stock, Shareholder shall
receive 31,250 shares of common stock of Parent, subject to adjustment as
provided in Section 14.6 and to all the terms and conditions contained
herein. This Agreement shall not be consummated under any circumstances
unless 100% of the shares of Common Stock are exchanged for shares of
Parent common stock. (b) The manner and basis of conversion of
shares on the Effective Date shall be as follows:
(i) Each share of common stock of Survivor which is
issued and outstanding on the Effective Date, with all rights with
respect thereto, shall become one (1) share of common stock, $10 par
value, of Surviving Corporation.
(ii) Each share of Common Stock which is issued and
outstanding on the Effective Date, with all rights with respect thereto,
shall be converted into 62.5 shares (which number of shares is subject to
adjustment as provided in Section 14.6) of common stock, no par value, of
Parent. No fractional shares of Parent common stock will be issued as
the number of shares to be issued to Shareholder in accordance with the
preceding sentence shall be rounded up or down to the nearest whole
number (a fractional share of 0.5 or more will be rounded up; less than
0.5 will be rounded down). Each shareholder of Common Stock, upon
delivery to Parent or its duly authorized agent for cancellation of
certificates representing such shares and subject to the ten percent
holdback of shares described later herein, shall thereafter be entitled
to receive certificates representing the number of shares of Parent
common stock to which such Shareholder is entitled.
(c) Appropriate adjustment shall be made on the number of
shares of Parent common stock to be issued upon conversion if, during the
period commencing on July 29, 1997, and ending on the Effective Date,
Parent: (i) effects any dividend payable in shares of common stock; (ii)
splits or combines the outstanding shares of Parent common stock; (iii)
effects any extraordinary distribution on Parent common stock; (iv)
effects any reorganization or reclassification of Parent common stock; or
(v) fixes a record date for the determination of shareholders entitled to
any of the foregoing.
(d) Upon delivery of Common Stock to Parent pursuant to
subsection 1.4(b)(ii), Parent shall receive all of the shares of common
stock of Surviving Corporation outstanding pursuant to subsection
1.4(b)(i).
(e) Until its surrender, each certificate comprising Common
Stock referred to in subsection 1.4(b)(ii) herein shall be deemed for all
corporate purposes, other than the payment of dividends, to evidence
ownership of the number of full shares of Parent common stock into which
such shares of Common Stock shall have been changed by virtue of the
merger. Unless and until any such outstanding certificates of Common
Stock shall be so surrendered, no dividend payable to the holders of
record of Parent common stock, as of any date subsequent to the Effective
Date, shall be paid to the holders of such outstanding certificates, but
upon such surrender of any such certificate or certificates there shall
be paid to the record holder of the certificate or certificates of Parent
common stock into which the shares represented by the surrendered
certificate or certificates shall have been so changed the amount of such
dividends which theretofore became payable with respect to such shares of
Parent.
1.5 Closing Date. The closing of the transactions contemplated by
this Agreement ("Closing") shall take place at the offices of Survivor,
located at Atlanta, Georgia, at 10:00 a.m. on August 28, 1997, or at such
other place and time as shall be mutually agreed upon by the parties to
this Agreement ("Closing Date").
2. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER. Shareholder
represents and warrants to Parent as follows:
2.1 Organization and Standing of Merging Entity. Merging Entity is
a corporation duly organized, validly existing and in good standing under
the laws of the State of Georgia ("Home State") and has full power and
authority to carry on its business as it is now being conducted and to
own or hold under lease the properties and assets it now owns or holds
under lease. Except as set forth in Schedule 2.1 to this Agreement,
Merging Entity is not qualified to do business in any state or other
jurisdiction other than Home State. Except as set forth in Schedule 2.1,
the nature of the business conducted by Merging Entity and the character
or ownership of properties owned by it does not require Merging Entity to
be qualified to do business in any other jurisdiction. Furthermore,
except as set forth in Schedule 2.1 to this Agreement, the nature of the
business conducted by Merging Entity does not require it or any of its
employees to qualify for, or to obtain any insurance agency, brokerage,
adjuster, or other similar license in any jurisdiction other than Home
State. The copy of the articles of incorporation, and all amendments
thereto, of Merging Entity heretofore delivered to Parent and which have
been or will be initialed for identification purposes by the President of
Merging Entity is complete and correct as of the date hereof. The copy
of the bylaws, and all amendments thereto, of Merging Entity heretofore
delivered to Parent and which have been or will be initialed for
identification purposes by the President of Merging Entity is complete
and correct as of the date hereof. The minute book or minute books of
Merging Entity contain a complete and accurate record in all material
respects of all meetings and other corporate actions of the shareholders
and directors of Merging Entity.
2.2 Name. Neither Merging Entity nor Shareholder has granted to
anyone any right to use the corporate name or any name similar to the
corporate name of Merging Entity.
2.3 Capitalization of Merging Entity. The capitalization of
Merging Entity is as follows: (a) Merging Entity is
authorized to issue 50,000 shares of voting common stock, $1 par value.
Merging Entity is not authorized to issue, and has not issued, any shares
of any other class. All of the shares comprising Common Stock
outstanding and owned as of the date hereof are as set forth in Section
1.4(a), supra.
(b) All of the outstanding shares of Common Stock have been
duly and validly issued and are fully paid and nonassessable. The
issuance of all shares of Common Stock was and has been in compliance
with all applicable statutes, rules and regulations, including, without
limitation, all applicable federal and state securities laws. There is
no existing option, warrant, call or commitment to which Merging Entity
is a party requiring the issuance of any additional shares of common
stock of Merging Entity or of any other securities convertible into
shares of common stock of Merging Entity or any other equity security of
Merging Entity of any class or character whatsoever.
(c) No shares of the authorized stock of Merging Entity have
ever been registered under the provisions of any federal or state
securities law, nor has Merging Entity filed or been required to file any
report with any federal or state securities commission, department,
division or other governmental agency.
(d) No present or prior holder of any shares of the authorized
stock of Merging Entity is entitled to any dividends with respect to any
such shares now or heretofore outstanding. 2.4 Ownership of
Common Stock. Except as set forth in Schedule 2.4, Shareholder is the
record owner, free and clear of any and all liens, encumbrances,
restrictions and adverse claims whatsoever, of the number of shares of
Common Stock set forth opposite his name in subsection 1.4(a). Each such
lien, encumbrance, restriction or adverse claim can be removed at or
prior to the Closing.
Merging Entity is autonomous and has never been a subsidiary or
division of another enterprise. There has been no change in the equity
interest of Merging Entity in contemplation of effecting this Agreement,
such as excessive distributions or additional issuances, exchanges or
retirements of securities. Any shares of Common Stock reacquired by
Merging Entity were reacquired only for legitimate purposes other than
business combinations. Schedule 2.4 describes all changes, issuances,
exchanges and retirements of equity securities within the last three
years as well as the legitimate purpose (i.e. other than effecting this
Agreement) for each such transaction.
2.5 Authority. Shareholder has full and complete authority to
enter into this Agreement and to transfer in accordance with the terms
and conditions of this Agreement all of the shares of Common Stock, free
and clear of all liens, encumbrances, restrictions and adverse claims
whatsoever. The execution, delivery and performance of this Agreement by
Merging Entity does not violate, result in a breach of, or constitute a
default under, the articles of incorporation or bylaws of Merging Entity
or any indenture, contract, agreement or other instrument to which it is
a party or is bound, or to the best knowledge of Shareholder, any
applicable laws, rules or regulations.
2.6 Subsidiaries and Other Relationships. Except as disclosed on
Schedule 2.6, Merging Entity does not own any stock or other interest in
any other corporation, nor is it a participant in any joint entity.
Except as disclosed on Schedule 2.6, any stock owned by Merging Entity in
any other entity represents one hundred percent (100%) ownership of such
entity, is owned free and clear of any and all liens, encumbrances,
restrictions and adverse claims, has been duly and validly issued and is
fully paid and nonassessable.
2.7 Financial Statements. Shareholder and Merging Entity have
caused to be delivered to Parent a true and complete copy of the
financial statements of Merging Entity (which statements have not been
prepared under the accounting guidelines of Parent set forth in Parent's
Accounting Policies and Procedures Manual ("GAAP Policy")), for the three
most recent calendar years of Merging Entity including, without
limitation, balance sheets and statements of income for the periods
referred to above (collectively, "Financial Statements"). In addition,
Shareholder and Merging Entity have delivered to Parent a true and
complete copy of the unaudited financial statements of Merging Entity for
the most recent month ended, including, without limitation, a balance
sheet and statement of income for such period then ended ("Interim
Statements"). Each of the Financial Statements is true and correct, is
in accordance with the books and records of Merging Entity, presents
fairly the financial condition and results of operations of Merging
Entity as of the date and for the period indicated, and has been prepared
in accordance with principles consistently applied throughout the
periods covered by such statements. Furthermore, neither the Financial
Statements nor the Interim Statements contained any untrue statement of
any material fact or omitted to state any material fact required to be
stated to make such Financial Statements or Interim Statements not
misleading. Without limiting the generality of the foregoing, the
commission income reflected in each of the Financial Statements and the
Interim Statements is true and correct, and the accounts payable
reflected in each of the Financial Statements and the Interim Statements
is true and correct.
2.8 Absence of Undisclosed Liabilities. (The term "Most Recent
Balance Sheet," as used in this Agreement, means the balance sheet of
Merging Entity at June 30, 1997. Also, the term "Most Recent Balance
Sheet Date," as used in this Agreement, means June 30, 1997.)
Except as and to the extent specifically reflected, provided for or
reserved against in the Most Recent Balance Sheet or except as disclosed
in any Schedule to this Agreement, Merging Entity, as of the Most Recent
Balance Sheet Date, did not have any indebtedness, liability or
obligation of any nature whatsoever, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, including,
without limitation, tax liabilities due or to become due, and whether
incurred in respect of or measured by the income of Merging Entity for
any period prior to the Most Recent Balance Sheet Date, or arising out of
transactions entered into, or any state of facts existing, prior thereto,
and Shareholder neither knows nor has reasonable grounds to know of any
basis for the assertion against Merging Entity, as of the Most Recent
Balance Sheet Date, of any indebtedness, liability or obligation of any
nature or in any amount not fully reflected or reserved against in the
Most Recent Balance Sheet or otherwise disclosed in any Schedule to this
Agreement.
2.9 No Adverse Change. Since the Most Recent Balance Sheet Date,
there has been no material change in the financial condition, results of
operations or business prospects of Merging Entity other than changes
occurring in the ordinary course of business or except as otherwise
disclosed in any of the Schedules to this Agreement, which changes have
not had a material adverse effect on the financial condition, results of
operations or business prospects of Merging Entity. Without limiting the
generality of the foregoing, since the Most Recent Balance Sheet Date,
there has been no material adverse change in the insurance accounts
included within the "Book of Business" of Merging Entity, and Shareholder
neither knows nor has reasonable grounds to know of any basis for any
material adverse change in such insurance accounts between the date
hereof and the Effective Date. For purposes hereof, "material adverse
change" in the insurance accounts included in the "Book of Business" of
Merging Entity means, without limitation, the loss of any account
generating an aggregate annual gross income (commission or otherwise) of
$5,000 or more.
2.10 Taxes. Merging Entity has filed all federal, state and local
income, withholding, social security, unemployment, excise, real property
tax, tangible personal property tax, intangible personal property tax and
all other tax returns and reports required to be filed by it to the date
hereof and all of such returns and reports are true and correct. All
taxes, assessments, fees, penalties, interest and other governmental
charges which were required to be paid by Merging Entity on such returns
and reports have been duly paid and satisfied on or before their
respective due dates. No tax deficiency or penalty has been asserted or
threatened with respect to Merging Entity. No federal or state income
tax return of Merging Entity has been audited or, to the knowledge of any
Shareholder, proposed to be audited, by any federal or state taxing
authority, including, without limitation, the U.S. Internal Revenue
Service and the Georgia Department of Revenue, and no waiver of any
statute of limitations has been given or is in effect with respect to the
assessment of any taxes against Merging Entity. The provisions for taxes
included in the Most Recent Balance Sheet and in the Financial Statements
were sufficient for the payment of all accrued and unpaid federal, state
and local income, withholding, social security, unemployment, excise,
real property, tangible personal property, intangible personal property
and other taxes of Merging Entity, whether or not disputed, for the
periods reflected, and for all years and periods prior thereto.
2.11 Real and Personal Property Owned by Merging Entity. Merging
Entity does not own any real property. Schedule 2.11 contains of a copy
of the depreciation schedules filed as a part of the two prior annual
Federal income tax returns of Merging Entity (with deletions of any items
disposed of prior to the date of this Agreement), a separate list of each
item of depreciable personal property acquired by Merging Entity since
the Most Recent Balance Sheet Date and having a cost of $1,000.00 or
more, and a separate list of each item of intangible personal property
presently owned by Merging Entity. Merging Entity also owns various
items of disposable type personal property such as office supplies that
are not listed in Schedule 2.11. Merging Entity has good and marketable
title to all such tangible and intangible personal property, in each case
free and clear of all mortgages, security interests, conditional sales
agreements, claims, restrictions, charges or other liens or encumbrances
whatsoever except as otherwise stated in Schedule 2.11. 2.12
Leases. Schedule 2.12 contains a correct and complete list and brief
description of all leases or other agreements under which Merging Entity
is a tenant or lessee of, or holds or operates any property, real or
personal, owned by any third party. Merging Entity is the owner and
holder of the leasehold estates granted by each of the instruments
described in Schedule 2.12 except as otherwise stated in Schedule 2.12.
Each of said leases and agreements is in full force and effect and
constitutes a legal, valid and binding obligation of the respective
parties thereto, enforceable in accordance with its terms. Merging Entity
enjoys peaceful and undisturbed possession of all properties covered by
all such leases and agreements, and there is not any existing default or
event or condition, including the Merger contemplated herein, which with
notice or lapse of time, or both, would constitute an event of default
under any of such leases or agreements.
2.13 Insurance. Schedule 2.13 contains a correct and complete list,
as of the date hereof, of all policies of casualty, fire and extended
coverage, theft, errors and omissions, liability, life, and other forms
of insurance owned or maintained by Merging Entity. All business
operations of Merging Entity are and have been continually insured
against errors and omissions. Such policies are in amounts deemed by
Shareholder to be adequate. Each such policy is, on the date hereof, in
full force and effect, and Merging Entity is not in default with respect
to any such policy.
Furthermore, Schedule 2.13 contains a correct and complete list of
all group life, group medical and disability or other similar forms of
insurance which constitute an obligation of or benefit provided by
Merging Entity as well as a list of any material (hospital or home care)
services known by Shareholder and Merging Entity to have been incurred by
Merging Entity's group health plan within 90 days of this date, which
list details with reasonable accuracy the recipients of such services and
the date of service. Schedule 2.13 also contains a list of any former
employees or their dependents who are presently under COBRA continuation
coverage and describes with reasonable particularity the pertinent
factors about each such person listed.
With respect to errors and omissions (professional liability)
insurance policies listed in Schedule 2.13 (which lists for each such
policy the carrier, retrodate, claims made or occurrence policy and
limits), prior to the effective dates of such policies, Merging Entity
had not given notice to any prior insurer of any act, error or omission
in services rendered by any agent or employee of such corporation or that
should have been rendered by any agent or employee of such corporation
arising out of the operations of Merging Entity. Furthermore, to the best
knowledge of Shareholder, no agent or employee of Merging Entity breached
any such professional duty or obligation prior to the effective dates of
such policies. With respect to such policies, Merging Entity has given
notice of any and all claims for any act, error or omission by any agent
or employee of such corporation with respect to professional services
rendered or that should have been rendered as required by the terms of
such policies (if any such notice has been given, its contents are
described in Schedule 2.13). To the best knowledge of Shareholder,
Merging Entity has not taken, nor has it failed to take, any action which
would provide the insurer with a defense to its obligation under any such
policy; neither Merging Entity nor Shareholder has received from any such
insurer any notice of cancellation or nonrenewal of any such policy, and,
except as set forth in Schedule 2.13, Shareholder has no basis to
believe that Merging Entity, or any agent or employee of Merging Entity,
has breached any professional duty or obligation.
2.14 Insurance Companies. Schedule 2.14 contains a correct and
complete list of all insurance companies with respect to which Merging
Entity has an agency contract or similar relationship. Except as
identified in Schedule 2.14, all relations between Merging Entity and the
insurance companies represented by it are good, and Shareholder has no
knowledge of any proposed termination of, or modification to, the
existing relations between Merging Entity and any of such insurance
companies. Furthermore, except as otherwise set forth in Schedule 2.14,
all accounts with all insurance companies represented by Merging Entity
or with whom it transacts business are current and there are no
disagreements or unreconciled discrepancies between Merging Entity and
any such company as to the amounts owed by Merging Entity.
2.15 Customers. Except as identified in Schedule 2.15, all
relations between Merging Entity and its present customers are good, and
Shareholder has no knowledge of any proposed termination of any insurance
account presently written or serviced by Merging Entity. Also, except as
otherwise set forth in Schedule 2.15, all customer accounts, including,
without limitation, those accounts with respect to which Merging Entity
financed any premiums, are current. For purposes of Section 2.15, the
terms "insurance account" and "customer account" shall be limited to
accounts which generate an aggregate annual gross income (commission or
otherwise) of $5,000 or more. 2.16 Officers and Directors; Banks;
Powers of Attorney. Schedule 2.16 contains a correct and complete list
of all officers and directors of Merging Entity, a correct and complete
list of the names and addresses of each bank in which Merging Entity has
any account or safe deposit box, together with the names of all persons
authorized to draw on each such account or having access to any such safe
deposit box, and a correct and complete list of the names of all persons
holding powers of attorney from Merging Entity.
2.17 Compensation and Fringe Benefits. Schedule 2.17 contains a
correct and complete list of each officer, director, employee or agent of
Merging Entity in the format as set forth in Schedule 2.17. Also,
Schedule 2.17 contains a description of all fringe benefits presently
being provided by Merging Entity to any of its employees or agents.
2.18 Patents; Trademarks; Copyrights and Trade Names. Merging
Entity owns or is possessed of or is licensed under such patents,
trademarks, trade names and copyrights (including, without limitation,
software) as are used in, and are of material importance to, the conduct
of its business, all of which are in good standing and uncontested.
Schedule 2.18 contains a correct and complete list of all material
patents, patent applications filed or to be filed, trademarks, trademark
registrations and applications, trade names, copyrights and copyright
registrations and applications owned by or registered in the name of
Merging Entity. There is no material claim pending or, to the best
knowledge of Shareholder, threatened against Merging Entity with respect
to any alleged infringement of any patent, trademark, trade name or
copyright owned or licensed to anyone other than Merging Entity.
2.19 Indebtedness. Schedule 2.19 contains a correct and complete
list of all instruments, agreements or arrangements pursuant to which
Merging Entity has borrowed any money, incurred any indebtedness or
established any line of credit which represents a liability of Merging
Entity on the date hereof. True and complete copies of all such written
instruments, agreements or arrangements have heretofore been delivered
to, or made available for inspection by, Parent. Merging Entity has
performed all of the obligations required to be performed by it to date,
and is not in default in any material respect under the terms of any such
written instruments, agreements or arrangements, and no event has
occurred which, but for the passage of time or the giving of notice, or
both, would constitute such a default.
2.20 Employment Agreements and Other Material Contracts. Schedule
2.20 contains a complete copy of every employment agreement, independent
contractor and brokerage agreement, and a list and brief description of
all other material contracts, agreements and other instruments to which
Merging Entity is a party at the date hereof. Except as identified in
Schedule 2.20, or in any other Schedule attached to this Agreement,
Merging Entity is not a party to any oral or written: (i) material
contract, agreement or other instrument not made in the ordinary course
of business; (ii) contract for the employment of any person which is not
terminable (without liability) on 30 days or less notice; (iii) license,
franchise, distributorship, dealer, manufacturer's representative, sales
agency or advertising agreement; (iv) contract with any labor
organization; (v) lease, mortgage, pledge, conditional sales contract,
security agreement, factoring agreement or other similar agreement with
respect to any real or personal property, whether as lessor, lessee or
otherwise; (vi) contract to provide facilities, equipment, services or
merchandise to any other person, firm or corporation; (vii) contract for
the future purchase of materials, supplies, services, merchandise or
equipment; (viii) profit-sharing, bonus, deferred compensation, stock
option, severance pay, pension, retirement or other plan or agreement
providing employee benefits; (ix) agreement or arrangement for the sale
of any of its properties, assets or rights or for the grant of any
preferential rights to purchase any of its assets, properties, or rights;
(x) guaranty, subordination or other similar or related type of
agreement; (xi) contract or commitment for capital expenditures; (xii)
agreement or covenant not to compete, solicit or enter into any
particular line of business; or (xiii) agreement for the acquisition of
any business or substantially all of the properties, assets or stock or
other securities of any business under which there are any continuing or
unperformed obligations on the part of Merging Entity. Merging Entity is
not in default in any material respect under any agreement, lease,
contract or other instrument to which it is a party. No party with whom
Merging Entity has any agreement which is of material importance to its
business is in default thereunder. 2.21 Absence of Certain
Events. Since the Most Recent Balance Sheet Date, the business of
Merging Entity has been conducted only in the ordinary course and in
substantially the same manner as theretofore conducted, and, except as
set forth in Schedule 2.21 attached to this Agreement, or in any other
Schedule attached to this Agreement, Merging Entity has not, since the
Most Recent Balance Sheet Date: (i) issued any stocks, bonds or other
corporate securities or granted any options, warrants or other rights
calling for the issue thereof; (ii) incurred, or become subject to, any
material obligation or liability (whether absolute or contingent) except
(A) current liabilities incurred in the ordinary course of business, (B)
obligations under contracts entered into in the ordinary course of
business and (C) obligations under contracts not entered into in the
ordinary course of business which are listed in Schedule 2.20; (iii)
discharged or satisfied any lien or encumbrance or paid any obligation or
liability (whether absolute or contingent) other than current liabilities
shown on the Most Recent Balance Sheet and current liabilities incurred
since the Most Recent Balance Sheet Date in the ordinary course of
business; (iv) declared or made any payment of dividends or distribution
of any assets of any kind whatsoever to stockholders or purchased or
redeemed any of its capital stock; (v) mortgaged, pledged or subjected to
lien, charge or any other encumbrance, any of its assets and properties,
real, tangible or intangible; (vi) sold or transferred any of its assets,
properties or rights, or cancelled any debts or claims, except in each
case in the ordinary course of business, or entered into any agreement or
arrangement granting any preferential rights to purchase any of its
assets, properties or rights or which required the consent of any party
to the transfer and assignment of any of its assets, properties or
rights; (vii) suffered any extraordinary losses (whether or not covered
by insurance) or waived any extraordinary rights of value; (viii) entered
into any transaction other than in the ordinary course of business except
as herein stated; (ix) amended its articles of incorporation or bylaws;
(x) increased the rate of compensation payable or to become payable by it
to any of its employees or agents over the rate being paid to them at the
Most Recent Balance Sheet Date; (xi) made or permitted any amendment to
or termination of any material contract, agreement or license to which it
is a party other than in the ordinary course of business; or (xii) made
capital expenditures or entered into any commitments therefor aggregating
more than $5,000.00. Except as contemplated by this Agreement, or the
Schedules referred to in this Agreement, between the date hereof and the
Closing Date, Merging Entity will not, without the prior written consent
of Parent, do any of the things listed above in clauses (i) through (xii)
of this Section 2.21.
2.22 Investigations and Litigation. There is no investigation by
any governmental agency pending, or, to the best knowledge of
Shareholder, threatened against or adversely affecting Merging Entity,
and except as set forth on Schedule 2.22, there is no action, suit,
proceeding or claim pending, or, to the best knowledge of Shareholder,
threatened against Merging Entity, or any of its businesses, properties,
assets or goodwill, which might have a material adverse effect on such
corporation, or against or affecting the transactions contemplated by
this Agreement. There is no outstanding order, injunction, judgment or
decree of any court, government or governmental agency against or
affecting Merging Entity, or any of its businesses, properties, assets or
goodwill.
2.23 Overtime, Back Wages, Vacation and Minimum Wages. To the best
knowledge of Shareholder, no present or former employee of Merging Entity
has any claim against Merging Entity (whether under federal or state law)
under any employment agreement, or otherwise, on account of or for: (i)
overtime pay for any period other than the current payroll period; (ii)
wages or salary for any period other than the current payroll period;
(iii) vacation or time off (or pay in lieu thereof), other than that
earned in respect of the current fiscal year; or (iv) any violation of
any statute, ordinance, rule or regulation relating to minimum wages or
maximum hours of work, except as otherwise set forth in Schedule 2.23.
2.24 Discrimination, Occupational Safety and Other Statutes and
Regulations. To the best knowledge of Shareholder, no persons or parties
(including, without limitation, governmental agencies of any kind) have
any claim, or basis for any claim, action or proceeding, against Merging
Entity arising out of any statute, ordinance, rule or regulation relating
to discrimination in employment or employment practices or occupational
safety and health standards (including, without limitation, The
Occupational Safety and Health Act, The Fair Labor Standards Act, Title
VII of the Civil Rights Act of 1964, The Civil Rights Act of 1992, The
Americans with Disabilities Act, and The Age Discrimination in Employment
Act of 1967, as any of the same may have been amended).
2.25 Employee Benefit Plans.
(A) There are no employee benefit plans or arrangements of any
type, including but not limited to any retirement, health, welfare,
insurance, bonus, executive compensation, incentive compensation, stock
bonus, stock option, deferred compensation, commission, severance,
parachute, rabbi trust program or plan described in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), maintained by
Merging Entity, or with respect to which Merging Entity has a liability,
other than those set forth in Schedule 2.25(a) ("Employee Benefit
Plans").
(B) With respect to each Employee Benefit Plan, except as set
forth in Schedule 2.25(b): (i) if intended to qualify under Sections 79,
105, 106, 125, 129, 401(a), 401(k), 403(a), or 409, or other Sections, of
the Internal Revenue Code ("Code"), such plan so qualifies, and if
applicable, its trust is exempt from federal income tax under Code
Section 501(a); (ii) if intended to qualify as an organization described
in Section 501(c)(9) of the Code, such organization so qualifies and any
trusts established pursuant to its constitution are exempt from federal
income tax under Section 501(a) of the Code; (iii) such plan has been
administered and enforced in accordance with its terms and applicable
law; (iv) no breaches of fiduciary duty by Merging Entity, the Trustees,
or, to the best knowledge and belief of Shareholder after reasonable
investigation, any other person, have occurred; (v) no disputes are
pending, or, to the knowledge of Shareholder, threatened; (vi) no
nonexempt prohibited transaction has occurred; (vii) there has been no
reportable event for which the 30-day notice requirement under ERISA has
not been waived; (viii) all contributions and premiums due have been made
on a timely basis (including, if applicable, the time limited established
under Code Sections 404 and 412); (ix) all contributions made or required
to be made meet the requirements for deductibility under the Code; (x)
all contributions which have not been made have been properly recorded in
the financial records of Merging Entity; and (xi) except as set forth in
Schedule 2.25(b), no liability (whether an indebtedness, a fine, a
penalty, a tax or any other amount) has been incurred or will be incurred
by Merging Entity as a result of its maintenance, operation or
termination of any Employee Benefit Plan.
(C) No Employee Benefit Plan is a multiemployer plan, as
defined in Section 4001(a)(3) of ERISA or a multiple employer plan. The
consummation of the transactions contemplated by this Agreement will not
entitle any individual to severance pay, and will not accelerate the time
of payment or vesting, or increase the amount, of compensation due to any
individual.
(D) With respect to each Employee Benefit Plan, Merging Entity
has delivered or caused to be delivered to Parent true and complete
copies, where applicable, of (i) all plan documents, amendments and trust
agreements currently in effect; (ii) all summary plan descriptions, or
other notices or summaries of modifications, which have been prepared by,
or on behalf of Merging Entity; (iii) all material employee
communications; (iv) the five (5) most recent annual reports (Forms
5500); (v) the most recent annual and any subsequent periodic accounting
of plan assets; and, (vi) the most recent determination letter received
from the IRS.
(E) With respect to each Employee Benefit Plan, there is no
pending claim or lawsuit which has been asserted against that Employee
Benefit Plan, the assets of any of the trusts under such Employee Benefit
Plan, Merging Entity, or any fiduciary of such Employee Benefit Plan with
respect to the operation of such Employee Benefit Plan. Shareholder,
after reasonable investigation, knows of no facts or circumstances which
could form the basis for any such claim or lawsuit.
(F) All amendments required to have been made to bring each
Employee Benefit Plan into conformity in all material respects with all
of the applicable provisions of the Code, ERISA and other applicable laws
have been made.
(G) Each Employee Benefit Plan has met, by its terms and in
its operation, all applicable requirements for an exemption from federal
income taxation under Section 501(a) of the Code.
(H) Each Employee Benefit Plan has at all times been
maintained in accordance with all applicable laws, has complied with
applicable ERISA or other requirements; and, there are no actions,
audits, suits or claims which are threatened or pending against any such
Employee Benefit Plan, any fiduciary of any of the Employee Benefit
Plans, or against any of the assets of the Employee Benefit Plans.
(I) Merging Entity has made full and timely payment of all
amounts required to be contributed under the terms of each Employee
Benefit Plan and no event or condition exists regarding any of the
Employee Benefit Plans which could be deemed a "reportable event" with
respect to which the 30-day notice has not been waived which could result
in a material liability to Merging Entity and no event exists which would
subject Merging Entity to a material fine under Section 4701 of ERISA.
(J) Merging Entity is not subject to any material liability,
tax or penalty and the termination of or withdrawal from any Employee
Benefits Plan will not subject Merging Entity to any additional
contribution requirement and the execution or performance of the
transactions contemplated by this Agreement will not create, accelerate
or increase any obligations under any Employee Benefit Plan.
(K) Merging Entity has no obligation to any retired or former
employee or any current employee upon retirement under any Employee
Benefit Plan.
(L) Each Employee Benefit Plan maintained by Merging Entity
has at all times been maintained, by its terms and in operation, in
accordance with all applicable laws in all material respects, including
(to the extent applicable) Code Section 4980B. Further, there has been
no failure to comply with applicable ERISA or other requirements
concerning the filing of reports, documents and notices with the
Secretary of Labor and Secretary of Treasury or the furnishing of such
documents to participants or beneficiaries that could subject any
Employee Benefit Plan to any material civil or any criminal sanction or
could require any such person to indemnify any other person for such a
sanction. There are no actions, audit, suits or claims known to Merging
Entity or Shareholder which are pending or threatened against any
Employee Benefit Plan, any fiduciary of any of the Employee Benefit Plans
with respect to the Employee Benefit Plans or against the assets of any
of the Employee Benefit Plans, except claims for benefits made in the
ordinary course of the operation of such plans.
(M) Merging Entity is not subject to any material liability,
tax or penalty whatsoever to any person whomsoever as a result of Merging
Entity engaging in a prohibited transaction under ERISA or the Code, and
Shareholder has no knowledge of any circumstances which reasonably might
result in any such material liability, tax or penalty as a result of a
breach of fiduciary duty under ERISA. The termination of or withdrawal
from any Employee Benefit Plan maintained by Merging Entity which is
subject to Title IV of ERISA, or any other Employee Benefit Plan, will
not subject Merging Entity to any additional contribution requirement or
to any other liability, tax or penalty whatsoever. The execution or
performance of the transactions contemplated by this Agreement will not
create, accelerate or increase any obligations under any Employee Benefit
Plan. Merging Entity has no obligation to any retired or former
employee, or any current employee upon retirement, under any Employee
Benefit Plan.
2.26 Competitors. Except as disclosed in Schedule 2.26, Shareholder
has no interest, direct or indirect, as an owner, partner, agent,
shareholder, officer, director, employee, consultant or otherwise, in any
firm, partnership, corporation or other entity that is engaged in the
insurance agency business, or any aspect thereof, other than Merging
Entity or a corporation listed on a national securities exchange or a
corporation whose securities are traded in the over-the-counter market.
2.27 Accounts and Notes Receivable. The reserve for bad debts, if
any, contained in the Most Recent Balance Sheet and the Financial
Statements was calculated on a consistent basis which, in the light of
past experience, is considered adequate. All accounts receivable and all
notes receivable of Merging Entity reflected in the Most Recent Balance
Sheet are fully collectible when due at the aggregate amount shown, less
the bad debt allowance stated therein, it being the intent of all of the
parties to this Agreement that Shareholder is hereby representing and
warranting to Parent the full collectibility when due of all of the notes
receivable and accounts receivable of Merging Entity in the aggregate
amount shown in each such balance sheet, less the bad debt allowance
stated therein. Except as set forth in Schedule 2.27, all notes
receivable of Merging Entity are due and payable within one year after
the Effective Date. Any such notes receivable due and payable more than
one year after the Effective Date ("Long Term Notes") are fully
collectible when due at the aggregate amount shown. Except as further
set forth in Schedule 2.27, no Long Term Notes are secured by any
interest in property, whether it be real, personal or intangible. In the
event of any delinquency or nonpayment of any portion of a Long Term
Note, Shareholder shall be obligated to satisfy such deficiency in the
same manner as specified below for all other receivables of Merging
Entity.
2.28 Permits and Licenses. All permits, licenses and approvals of
all federal, state or local regulatory agencies, which are required in
order to permit Merging Entity and its employees and agents to carry on
business as now conducted by it, have been obtained by it and are
current. 2.29 No Violation or Default. The execution, delivery
and performance of this Agreement by Shareholder and Merging Entity will
not violate, result in a breach of, or constitute a default under, the
articles of incorporation or bylaws of Merging Entity or of any
indenture, contract, agreement or other instrument to which Merging
Entity is a party or is bound including, without limitation, any agency
contract with any insurance company.
2.30 Common Stock of Parent. Shareholder understands and
acknowledges that the common stock of Parent to be received pursuant to
this Agreement is subject to Rule 145 of the Securities Exchange
Commission ("SEC"); such stock is being acquired for investment purposes
only and not with a view to distribution or resale; any sale or other
disposition of such stock shall be made pursuant to the regulations
promulgated under Rule 145 and in compliance with all other applicable
laws, regulations and interpretations. Shareholder understands that the
common stock of Parent will not be saleable prior to the filing of
Parent's 1997 10-K.
2.31 Financing Statements. Except as disclosed on Schedule
2.31, there are no financing statements or other security interests of
any kind filed or required to be filed against Merging Entity's assets or
affecting the use of, or title to, such assets ("Financing Statements").
Except as further disclosed on Schedule 2.31, there are no deferred money
purchase notes related to Merging Entity's acquisition of any portion of
its assets ("Notes"). Any such liabilities related to the Financing
Statements or Notes can be discharged or prepaid prior to their stated
maturities without penalty, except as further detailed on Schedule 2.31.
The assumption by Surviving Corporation of such liabilities will not
result in a default of any Financing Statement or Note.
2.32 Brokers. Except as disclosed in Schedule 2.32, neither Merging
Entity nor Shareholder has employed any broker or finder for the purposes
of completing the transactions contemplated herein such that no
commission, finder's fee, brokerage fee or similar charge will be
incurred for the consummation of the transactions contemplated herein.
2.33 Disclosure. Shareholder has received a copy of Parent's
current S-4 registration statement dated February 12, 1992, most recent
annual report, Form 10-K and Form 10-Q and will acknowledge receipt of an
amendment or supplement to such registration statement.
2.34 Material Misstatements or Omissions. No representation or
warranty by Shareholder or Merging Entity, or any of them, contained in
this Agreement or in any document, statement, certificate, Schedule or
financial statement furnished or to be furnished to Parent by or on
behalf of either Shareholder or Merging Entity pursuant to this Agreement
or in connection with the transactions contemplated by this Agreement
contains, or will when furnished contain, any untrue statements of a
material fact, or omits, or will then omit to state, a material fact
necessary to make the statements contained herein or therein not
misleading.
3. COVENANTS OF SHAREHOLDER AND MERGING ENTITY PRIOR TO EFFECTIVE
DATE. Shareholder and Merging Entity covenant with Parent that, between
the date of the execution of this Agreement and the Effective Date,
unless prior written consent to the contrary is obtained from Parent:
3.1 Operate in Ordinary Course. Merging Entity will be operated
only in the ordinary course of business.
3.2 Negative Covenants. Except as contemplated by this Agreement,
Merging Entity will not do any of the things listed in clauses (i)
through (xii) of Section 2.21 of this Agreement.
3.3 Continuing Accuracy of Representations. There shall be no
action, or failure to act, which would render any of the representations
and warranties of Shareholder contained in this Agreement untrue or
incorrect in any material respect.
3.4 Preserve Business Organizations. Except as otherwise requested
by Parent, and without making any commitment on Parent's behalf,
Shareholder will use his best efforts to preserve the business
organizations of Merging Entity intact, to keep available to Parent the
services of its present employees, and to preserve for Parent the
goodwill of its customers and others having business relations with them.
3.5 Corporate Approvals. The board of directors of Merging Entity
will recommend to Shareholder that Shareholder adopt this Agreement.
Merging Entity agrees to submit this Agreement to Shareholder for
adoption by unanimous written consent with waiver of notice of the terms
of this Agreement prior to the Effective Date, but only after delivery by
Parent to Shareholder and Merging Entity of an amended or supplemented
S-4 registration statement for Parent's common stock to be issued
pursuant to this Agreement and after Shareholder has had an effective
opportunity of at least ten (10) days to review such prospectus. Unless
there is a failure of Parent to fulfill its conditions set forth in
Section 7 hereof or there is a material adverse change in the financial
conditions of Parent, Shareholder covenants to adopt this Agreement and
to approve all aspects of the Merger within the time period contemplated
herein.
4. ACCESS AND INFORMATION. Throughout the period between the date
of the
execution of this Agreement by Shareholder and Merging Entity and the
Closing Date, Shareholder shall cause Merging Entity and all its
employees to give to Parent, and any and all authorized representatives
of Parent (including auditors and attorneys), full and unrestricted
access, during normal business hours, to the offices, assets, properties,
contracts, books and records of Merging Entity in order to give Parent
full opportunity to make such investigations as it deems appropriate with
respect to the affairs of Merging Entity, and shall further cause Merging
Entity, and all of its employees to provide to Parent during such period
such additional information concerning the affairs of Merging Entity as
Parent may reasonably request. All information obtained from any such
investigation shall be held in confidence, and, in the event of the
termination of this Agreement, Parent covenants with Shareholder and
Merging Entity that Parent will use its best efforts to return all such
documents, working papers and other written information concerning
Shareholder and Merging Entity obtained or prepared in connection with
any such investigation.
Regardless of any such investigation by Parent, all representations
and warranties of Shareholder contained in this Agreement shall remain in
full force and effect and no such investigation shall cause or result in
a waiver by Parent of any of the representations and warranties of
Shareholder contained herein.
5. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent represents
and warrants to Shareholder as follows:
5.1 Organization and Standing of Parent and Survivor. Parent is a
corporation duly organized, validly existing and in good standing under
the laws of the Commonwealth of Virginia. Survivor is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Georgia.
5.2 Authority. Except for: (i) the approval of the transactions
contemplated hereby by the board of directors of Parent and by the board
of directors and shareholder of Survivor; (ii) amendment or
supplementation of Parent's registration statement pursuant to this
Agreement; (iii) approval by the New York Stock Exchange of the listing
of the shares of Parent common stock to be issued pursuant to this
Agreement; and (iv) the issuance of a certificate of merger to be issued
by the Secretary of State of the State of Georgia, no governmental or
other authorization, approval or consent for the execution, delivery and
performance of this Agreement by Parent or Survivor is required. The
execution, delivery and performance of this Agreement by Parent and
Survivor will not violate, result in a breach of, or constitute a default
under, the articles of incorporation or bylaws of any such corporation or
any indenture, contract, agreement or other instrument to which such
corporation is a party or is bound.
5.3 Capitalization of Parent and Survivor. As of June 30, 1997,
the authorized capital stock of Parent consisted of 50,000,000 shares of
common stock, no par value, of which 13,000,139 shares were issued and
outstanding, fully paid and nonassessable. The authorized capital stock
of Survivor consists of 1,000 shares of common stock, $10 par value, of
which 50 shares are issued and outstanding, fully paid and nonassessable
and owned of record and beneficially by Parent. There are no outstanding
options, warrants or other rights to subscribe for or purchase capital
stock of Survivor or securities convertible into or exchangeable for
capital stock of Survivor.
5.4 Status of Parent common stock. The shares of Parent common
stock to be issued to Shareholder pursuant to this Agreement will, when
so issued, be duly and validly authorized and issued, fully paid and
nonassessable.
5.5 Brokers' or finders' fees. No agent, broker, person, or firm
acting on behalf of Parent or any of its subsidiaries or under the
authority of any of them is or will be entitled to any commission or
broker's or finder's fee or financial advisory fee from Parent or
Survivor in connection with any of the transactions contemplated herein.
6. CONDITIONS PRECEDENT TO PERFORMANCE BY PARENT AND SURVIVOR.
The obligation of Parent and Survivor to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction or
fulfillment, on or prior to the Closing Date, of the following conditions
precedent, in addition to all other conditions precedent contained in
this Agreement, each of which may be waived by Parent:
6.1 Representations. Parent shall not have discovered any material
error, misstatement or omission in any of the representations and
warranties made by Shareholder 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 Shareholder contained in this Agreement
and in any financial statement, certificate, Schedule, exhibit or other
document attached to or delivered pursuant to this Agreement shall be
true and correct in all material respects on and as of the Closing Date
with the same force and effect, except as affected by transactions
expressly authorized herein or otherwise approved in writing by Parent,
as though such representations and warranties had been made on and as of
the Closing Date; and Shareholder and Merging Entity shall have delivered
to Parent an executed certificate, dated the Closing Date, to the
foregoing effect, in form and substance as set forth in Schedule 6.1.
6.2 Covenants. Merging Entity and Shareholder shall have performed
and complied in all material respects with all covenants, agreements and
conditions required under this Agreement to be performed or complied with
by them on or before the Closing Date; and Merging Entity and Shareholder
shall have delivered to Parent an executed certificate dated the Closing
Date, to the foregoing effect, in form and substance as set forth in
Schedule 6.1.
6.3 Litigation. No suit, action or proceeding, or governmental
investigation, against or concerning, directly or indirectly, Merging
Entity, or any of its assets and properties, shall have been instituted
or reinstituted, nor shall any basis therefor have arisen, that might
result in any order or judgment of any court or of any administrative
agency which, in the opinion of counsel for Parent, renders it impossible
or inadvisable for Parent to consummate or cause to be consummated the
transactions contemplated by this Agreement.
6.4 Approval by Counsel. All transactions contemplated hereby, and
the form and substance of all legal proceedings and of all instruments
used or delivered hereunder, shall be reasonably satisfactory to counsel
for Parent and Merging Entity.
6.5 [This Section is intentionally left blank.]
6.6 Delivery of Common Stock. There shall be duly delivered for
cancellation to Parent at the Closing not less than 100% of the shares of
Common Stock issued and outstanding at the time of the Closing, free and
clear of any liens or encumbrances as required to be listed on Schedule
2.4.
6.7 Continuation of Agency Contracts. To the extent desired
by Parent, Parent shall have obtained a statement in writing from each of
the insurance companies identified in Schedule 2.14 of this Agreement, in
form satisfactory to Parent and Parent's counsel, by which each such
insurance company agrees that it will not terminate its insurance agency
contract solely by reason of the transactions contemplated in this
Agreement, and further agrees that it will continue to recognize
Survivor, and its successors and assigns, as its agent under the existing
agency contract between such company and Merging Entity or that it will
enter into a substantially similar agency contract with Survivor, or its
successors and assigns.
6.8 Shareholder Employment Agreement. An Employment Agreement
between Survivor, as Employer, and Shareholder, as Employee, in form and
substance as set forth in Schedule 6.8 attached hereto, shall have been
duly executed by each of them and delivered to Parent.
6.9 [This Section is intentionally left blank.]
6.10 Employee Benefit Plans. Parent shall have been furnished
evidence satisfactory to Parent that all Employee Benefit Plans
identified in Schedule 2.25 attached to this Agreement have been, as
directed by Parent, either continued, modified in conformity with
Parent's plans or terminated and, in the event of termination, the
benefits thereunder have either been "frozen" or provision has been made
for the distribution thereof in accordance with the terms of such
Employee Benefit Plans.
6.11 Material Adverse Change. There shall have been no material
adverse change in Merging Entity's business, business prospects, Book of
Business, assets and properties, or goodwill between the date of the
execution of this Agreement and the Closing Date.
6.12 Tail Insurance. Unless notified in writing to the contrary,
Shareholder and Merging Entity shall have delivered to Parent, in form
reasonably satisfactory to Parent and Parent's counsel, evidence of
insurability, to be effective as of the Effective Date, for an extended
reporting period for errors and omissions of a minimum three year
duration with deductible limits reasonably acceptable to Parent and
Parent's counsel, which insurance, if bound, would insure Merging Entity
its agents and employees for the extended reporting period for claims
arising under errors and omissions occurring prior to the Effective Date.
6.13 Related Party Transactions. All "related party" (i.e.
Shareholder, a member of Shareholder's family, a business or entity
affiliated with any of the foregoing) receivables and payables of Merging
Entity and any receivables or payables from or to an employee of Merging
Entity on favorable terms shall have been removed from the books of
Merging Entity for their cash equivalent face amounts.
6.14 Lease. The existing lease covering the premises presently
occupied by Merging Entity, in the form attached hereto as Schedule 6.14,
shall have been amended to provide for a lease term ending August 31,
1997, on terms otherwise acceptable to Parent.
6.15 Resolutions. Parent shall receive certified copies of
resolutions of the board of directors and Shareholder of Merging Entity,
to the extent deemed necessary by, and in form satisfactory to, counsel
for Parent, authorizing the execution and delivery of this Agreement by
Merging Entity and the consummation of the transactions contemplated
hereby.
6.16 Approvals. All statutory requirements for the valid
consummation by Merging Entity of the transactions contemplated by this
Agreement shall have been fulfilled; all authorizations, consents and
approvals of all federal, state, local and foreign governmental agencies
and authorities required to be obtained in order to permit consummation
by Merging Entity of the transactions contemplated by this Agreement and
to permit the business presently carried on by Merging Entity to continue
unimpaired immediately following the Effective Date of this Agreement
shall have been obtained.
6.17 Registration Statement. Parent shall have filed an
amended or supplemented S-4 registration statement with the SEC, which
registration statement shall show that the transactions contemplated
herein shall be treated as a "pooling of interests" for accounting
purposes.
7. CONDITIONS PRECEDENT TO PERFORMANCE BY SHAREHOLDER AND MERGING
ENTITY. The obligation of Shareholder and Merging Entity to consummate
the transactions contemplated by this Agreement shall be subject to the
satisfaction or fulfillment on or prior to the Closing Date, of the
following conditions, in addition to any other conditions contained in
this Agreement, each of which may be waived, collectively, by a majority
in interest of Shareholder and Merging Entity:
7.1 Representations. Shareholder shall not have discovered any
material error, misstatement or omission in any of the representations
and warranties made by Parent contained in this Agreement, and all
representations and warranties of Parent contained in this Agreement
shall be true and correct in all material respects on and as of the
Closing Date with the same force and effect, except as otherwise approved
in writing by Shareholder and Merging Entity, as though such
representations and warranties had been made on and as of the Closing
Date; and Parent shall have delivered to Shareholder and Merging Entity
an executed certificate to the foregoing effect, dated the Closing Date,
in form and substance as set forth in Schedule 7.1.
7.2 Covenants. Parent shall have performed and complied in all
material respects with all covenants, agreements and conditions required
under this Agreement to be performed and complied with by Parent and
shall have caused all corporate actions necessary for the consummation of
this Agreement to have been taken by it and Survivor; and Parent shall
have delivered to Shareholder and Merging Entity an executed certificate
to the foregoing effect, dated the Closing Date, in form and substance as
set forth in Schedule 7.1.
7.3 Effective Registration Statement. The registration statement
on Form S-4 under the Securities Act of 1933 referred to in Section 2.34
hereof shall have been amended or supplemented and be effective under
such Act and not the subject of any "stop order" or threatened "stop
order" and the amended or supplemented prospectus shall have been
delivered to Shareholder and Merging Entity.
7.4 Prospectus Approval. After delivery and review of the
aforementioned amendment or supplement to Parent's S-4 registration
statement, and subject to the limitations on disapproval set forth in
Section 3.5, Shareholder and Merging Entity shall have approved this
Agreement and the consummation of all transactions contemplated thereby.
8. POST-MERGER COVENANTS.
8.1 POST-MERGER COVENANTS OF PARENT. Parent covenants to
Shareholder as follows:
A. Collection. To cause Surviving Corporation to use its
reasonable business efforts, at least comparable in quality to those of
Merging Entity prior to the Effective Date, to collect all notes
receivable and accounts receivable as described in Section 2.27.
B. Payment. Subject to Merging Entity fulfilling its
Tangible Net Worth requirements, as set forth in Section 14.6, and
subject to the fulfillment by Shareholder of his covenants set forth in
Section 8.2, to cause Surviving Corporation to pay timely all liabilities
of Merging Entity which have been properly reserved for in the Merger
Balance Sheet, as defined in Section 8.2.A.
8.2 POST-MERGER COVENANTS OF SHAREHOLDER. Shareholder covenants to
Parent as follows:
A. Delivery of Merger Balance Sheet. To cause to be
delivered to Parent as soon after the Closing Date as is practicable, and
in all events no later than sixty (60) days after the Effective Date, the
Merger Balance Sheet, as defined in Section 14.6(a), and its related work
papers and other financial documents prepared therefor. The Merger
Balance Sheet will be true and correct, will be prepared under Parent's
GAAP Policy and will otherwise be in accordance with the books and
records of Merging Entity, will present fairly the financial conditions
and results of operations of Merging Entity as of the date and for the
period indicated, will not contain any untrue statement of a material
fact nor will omit to state any material fact required to be stated to
make the Merger Balance Sheet not misleading.
B. Post-Merger Filings. To cause to be timely filed, at no
expense which has not previously been reserved for on the Merger Balance
Sheet, all federal, state and local tax returns of all kinds required to
be filed by Merging Entity for all tax periods ending on or prior to the
Effective Date ("Post-Merger Filings"). All Post-Merger Filings will be
true and correct and, prior to actual filing thereof, Shareholder shall
deliver drafts of such filings to Parent for its review.
C. Employee Benefit Plans. Unless written directive from
Parent stating otherwise is delivered to Shareholder prior to the Closing
Date , to cause, at no expense which has not previously been reserved for
in the Merger Balance Sheet, all Employee Benefit Plans of Merging Entity
to have been terminated with any benefits thereunder having been either
"frozen" or provisions having been made for distribution thereof in
accordance with the terms of such Employee Benefit Plan. Shareholder
specifically understands that he has covenanted hereby to take any and
all actions reasonably required to eliminate any and all potential
liability of Surviving Corporation and Parent with respect to such
Employee Benefits Plans.
D. Bind Tail Coverage. To bind the tail coverage referenced
in Section 6.12 as soon after the Effective Date as is possible and in no
event later than seven (7) days after the Effective Date, and to pay any
and all deductibles accruing under such tail policy during the period of
three years after the Effective Date. Shareholder acknowledges that
Parent shall have the right to bind tail coverage for Merging Entity if
Shareholder does not produce an appropriate certificate of insurance
within thirty (30) days after Closing. Any costs for such tail coverage
shall have been expensed as if such coverage had been bound prior to the
Effective Date and shall not be reflected as an asset on the Merger
Balance Sheet.
E. Disposition of Shares. To hold the shares of Parent
common stock received in this Merger and not to dispose of such shares in
either a manner or volume or at a time which would cause this Merger not
to be treated as a tax-free merger.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION.
9.1 Survival of Representations and Warranties of Parent. All
representations, warranties and covenants made herein or pursuant hereto
by Parent shall survive the Closing only until August 31, 2000.
9.2 Survival of Representations and Warranties of Shareholders.
Except for the specific contingencies detailed below in subparagraphs
(ix) through (xiv), inclusive, of Section 9.3 for which Parent shall be
indemnified for the periods stated therein, all representations,
warranties and covenants made herein or pursuant hereto by Shareholders
shall survive the Closing only until August 31, 2000.
9.3 Indemnification Agreement by Shareholder. Shareholder shall
indemnify and hold harmless Parent and Survivor, and their respective
successors and assigns, from and against and in respect of:
(i) All indebtednesses, obligations and liabilities of Merging
Entity of any nature whatsoever, whether accrued, absolute, contingent or
otherwise, existing at the close of business as of the day prior to the
Effective Date to the extent not reflected or reserved against in full in
the Merger Balance Sheet, including, without limitation, any tax
liabilities to the extent not so reflected or reserved against, accrued
in respect of, or measured by the income of Merging Entity for any period
prior to the Effective Date, or arising out of transactions entered into,
or any state of facts existing, prior to such date;
(ii) Without limiting the generality of the indemnity set forth
in Section 9.3(i) above, any and all tax liabilities of Merging Entity,
whether federal, state, local or otherwise, resulting from a lawful
deficiency for any time period prior to the Effective Date;
(iii) All liabilities of, or claims against, Merging Entity
arising out of any contract or commitment of the character described in
Section 2.20 hereof and not listed or described in Schedule 2.20 attached
to this Agreement, or arising out of any contract or commitment entered
into or made by Merging Entity between the date of the execution of this
Agreement and the Closing Date except as expressly permitted under any of
the provisions of this Agreement;
(iv) Subject to the provisions of Section 2.27 hereof, any
nonpayment on demand, when due, of any accounts receivable or notes
receivable of Merging Entity;
(v) Any and all claims, demands, actions and causes of action
arising out of or in any way relating to any health benefit plan or to
any Employee Benefit Plan (as described in Section 2.25) presently
maintained or heretofore maintained by Merging Entity or arising out of
or in any way relating to the termination or "freezing" of any such
Employee Benefit Plan;
(vi) Any loss, damage, liability or deficiency resulting from
any misrepresentation, breach of warranty or nonfulfillment of any
covenant or agreement on the part of Shareholder or Merging Entity, or
any of them, under the terms of this Agreement, or from any
misrepresentation in or omission from any financial statement,
certificate, Schedule, exhibit or other document proposed by or at the
direction of Shareholder, or any of them, and attached to this Agreement
or delivered or to be delivered to Parent under the terms of this
Agreement;
(vii) Any and all claims, demands, actions and causes of
action arising out of or in any way relating to errors and omissions and
all other types of litigation and claims, which are attributable to
Merging Entity prior to the Effective Date;
(viii) To the extent not previously cured in the manner
specified in Section 14.6, the amount by which Tangible Net Worth (as
defined in Section 14.6) shall be less than the amount of $0 (zero);
(ix) Until one year after the expiration of the applicable
statute of limitations, any and all tax liabilities arising out of all
open returns of Merging Entity for all periods ending on or prior to the
Effective Date and relating to amortization of intangibles, deductions
for compensation, "listed" property, or travel and entertainment expenses
or the tax characterization of expenses incident to this Agreement, any
and all claims or liabilities arising out of or in any way relating to
any health benefit plan or to any Employee Benefit Plan (as described in
Section 2.25) presently or heretofore maintained by Merging Entity or
arising out of or in any way relating to the termination, modification or
"freezing" of any such Employee Benefit Plan, and any and all claims or
liabilities arising out of Post-Merger Filings or for a violation of the
covenants set forth in Section 8.E hereof;
(x) Until five (5) years after the Effective Date, all
deductibles arising under the tail coverage referenced in Section 6.12;
(xi) Until August 31, 2002, any and all claims, demands,
actions or causes of action arising out of or in any way relating to any
of the pending or threatened litigation disclosed or required to be
disclosed on Schedule 2.22;
(xii) Until August 31, 2002, any existing unreconciled
discrepancies as or to have been disclosed on Schedule 2.14;
(xiii) Until August 31, 2002, any and all losses, claims,
demands or deficiencies arising out of or in any way relating to the
ownership by Merging Entity of the intangible assets of Merging Entity;
(xiv) Until one year after the expiration of the applicable
statute of limitations, any and all liabilities, claims, losses demands
or deficiencies of any nature whatsoever arising out of a "Known
Misrepresentation" (a representation or warranty made with actual
knowledge of its falsity or with reckless indifference to the truth) or
due to the ownership of the common stock not being as set forth in
Section 1.4(a); and
(xv) All demands, claims, actions, suits, proceedings, loss,
damage, liability, judgments, costs and expenses (including, without
limitation, court costs, experts' and attorneys' fees at the trial level
and in connection with all appellate proceedings) incident to any of the
foregoing.
9.4 Indemnification Agreement by Parent. Parent shall indemnify
and hold harmless Shareholder and his respective heirs and personal
representatives from and against and in respect of:
(i) Any loss, damage, liability or deficiency resulting from
any misrepresentation, breach of warranty or nonfulfillment of any
covenant or agreement on the part of the Parent under the terms of this
Agreement;
(ii) All demands, claims, actions, suits, proceedings, loss,
damage, liability, judgments, costs and expenses (including, without
limitation, court costs, experts' and attorneys' fees at the trial level
and in connection with all appellate proceedings) incident to any of the
foregoing.
9.5 Assertion of Indemnification Claim. Either the Shareholder or
Parent, as the case may be (an "Indemnified Party"), shall give notice to
the other (an "Indemnifying Party") as soon as possible after the
Indemnified Party has actual knowledge of any claim as to which
indemnification may be sought and the amount thereof, if known, and
supply any other information in the possession of the Indemnified Party
regarding such claim, and will permit the Indemnifying Party (at its
expense) to assume the defense of any third party claim and any
litigation resulting therefrom, provided that counsel for the
Indemnifying Party who shall conduct the defense of such claim or
litigation shall be reasonably satisfactory to the Indemnified Party, and
provided further that the omission by the Indemnified Party to give
notice as provided herein will not relieve the Indemnifying Party of its
indemnification obligations hereunder except to the extent that the
omission results in a failure of actual notice to the Indemnifying Party
and the Indemnifying Party is materially damaged as a result of the
failure to give notice. The Indemnifying Party may settle or compromise
any third party claim or litigation with the consent of the Indemnified
Party which consent may not be unreasonably withheld.
The Indemnified Party shall have the right at all times to
participate in the defense, settlement, negotiations or litigation
relating to any third party claim or demand at its own expense. In the
event that the Indemnifying Party does not assume the defense of any
matter as above provided, then the Indemnified Party shall have the right
to defend any such third party claim or demand, and will be entitled to
settle any such claim or demand in its discretion. In any event, the
Indemnified Party will cooperate in the defense of any such action and
the records of each party shall be available to the other with respect to
such defense.
9.6 Limitation of Amount of Indemnity and Escrow of Parent Common
Stock. Except for the provisions of subparagraphs (ix) through (xiv),
inclusive, of Section 9.3 (and so much of subparagraph (xv) of Section
9.3 as relates to the foregoing) which shall be unlimited in the amount
of indemnity (the "Continuing Indemnity"), the remainder of indemnity
provided to Parent pursuant to Section 9.3 ("General Indemnity") and the
indemnity provided by Parent to Shareholder pursuant to Section 9.4 shall
be limited to an amount equal to 31,250 shares of Parent's common stock
times $16 per share, which is the approximate per share value upon which
this Agreement is predicated.
Notwithstanding anything in the foregoing to the contrary, Parent
shall retain on the Effective Date from the shares of its common stock to
be delivered to the Shareholder as security for the indemnity provided to
it herein, 3,125 shares of its common stock ("Escrowed Shares"). By his
signature to this Agreement, Shareholder has granted to Parent a security
interest in the Escrowed Shares, and has consented to the escrow
provision described herein and has granted unto Parent a continuing
limited power of attorney to act over 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) August 31, 1998; and (ii)
determination and settlement of any amounts pursuant to Section 14.6
("Release Date").
Between the Effective Date and the Release Date, Parent shall hold
the Escrowed Shares and shall deposit any dividends received thereon in
an interest-bearing account. Upon the Release Date, Parent shall
distribute the Escrowed Shares, less any decrease in such shares pursuant
to this Agreement, plus any additional shares issued pursuant to this
Agreement, to 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 were decreased to satisfy the indemnity provided herein,
the Escrow Funds shall be reduced by a percentage equal to the fraction
established where the numerator is the number of Escrowed Shares used to
satisfy such indemnity and the denominator is the number of Escrowed
Shares.
10. EXPENSES. All expenses (including, without limitation, legal,
auditing, accounting and other related expenses such as preparation of
Post-Merger Filings and the Merger Balance Sheet) incurred in connection
with this transaction by Merging Entity and Shareholder, or any of them,
shall be the sole responsibility of Merging Entity or Shareholder
(depending upon the nature of the expense), and all expenses incurred by
Parent in connection with this transaction shall be the sole
responsibility of Parent.
11. DEFAULT.
11.1 Default by Shareholder or Merging Entity. Except as otherwise
expressly provided in this Agreement, if Shareholder or Merging Entity,
or any of them, shall fail to perform or comply with any covenant,
agreement or condition contained in this Agreement that is required to be
performed or complied with by Shareholder or Merging Entity on or prior
to the Closing Date, then Parent shall have the option to seek specific
performance of this Agreement or to sue such defaulting party for
damages. If Parent elects to sue for specific performance, Shareholder
and Merging Entity expressly waive any claim or defense that Parent has
an adequate remedy at law. 11.2 Default by Parent. Except as
otherwise expressly provided in this Agreement, if Parent shall fail to
perform or comply with any covenant, agreement or condition contained in
this Agreement that is required to be performed or complied with by
Parent on or prior to the Closing Date, then Shareholder and Merging
Entity, at the unanimous option of Shareholder and Merging Entity, may
seek specific performance of this Agreement or may elect to sue for
damages. If Shareholder and Merging Entity elect to sue for specific
performance, Parent expressly waives any claim or defense that
Shareholder and Merging Entity have an adequate remedy at law.
12. NOTICES. All notices or other communications permitted or
required to be given hereunder by any party to any other party shall be
in writing and shall be delivered personally or by telecopier, telex or
other similar communication or sent by registered or certified mail,
postage prepaid:
(a) If to Shareholder or Merging Entity:
William Hugh Holley, President
Hugh Holley & Associates, Inc.
1965 Lower Roswell Road
Marietta, Georgia 30068
(b) If to Parent or Survivor:
Mr. Robert H. Hilb, President
HILB, ROGAL AND HAMILTON COMPANY
4235 Innslake Drive
Post Office Box 1220
Glen Allen, Virginia 23060-1220
With copy to:
Walter L. Smith, Esquire
HILB, ROGAL AND HAMILTON COMPANY
4235 Innslake Drive
Post Office Box 1220
Glen Allen, Virginia 23060-1220
Notices delivered personally or by telecopier, telex or other
similar communication shall be effective when delivered. Notices
forwarded by registered or certified mail shall be deemed effective when
received or in any event not later than ten (10) days after deposit in
the mails, postage prepaid. Any party wishing to change any above named
person or address may do so by complying with the notice provisions of
this Section.
13. EXTENSION OF TIME AND WAIVER.
(a) Time is of the essence with respect to this Agreement.
However, the parties hereto may, by mutual agreement in writing, extend
the time for the performance of any of the obligations of the parties
hereto.
(b) Each party for whose benefit a representation, warranty,
covenant, agreement or condition is intended may, in writing: (i) waive
any inaccuracies in the warranties and representations contained in this
Agreement; and (ii) waive compliance with any of the covenants,
agreements or conditions contained herein and so waive performance of any
of the obligations of the other parties hereto, and any default
hereunder; provided, however, that any such waiver shall not affect or
impair the waiving party's rights in respect to any other representation,
warranty, covenant, agreement or condition or any default with respect
thereto.
14. MISCELLANEOUS PROVISIONS.
14.1 Counterparts. Any number of counterparts of this Agreement may
be signed and delivered, each of which shall be considered the original
and all of which, together, shall constitute one and the same instrument.
14.2 Governing Law. EXCEPT FOR THE MERGER OF THE MERGING ENTITY
INTO SURVIVOR, WHICH SHALL BE GOVERNED BY GEORGIA LAW, THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF VIRGINIA.
14.3 Entire Agreement. This Agreement constitutes the entire
Agreement and understanding between the parties hereto with respect to
the transactions contemplated hereby, expressly superseding all prior
Agreements and understandings, whether oral or written, and no change,
modification, termination or attempted waiver of any of the provisions of
this Agreement shall be binding unless reduced to writing and signed by
the party or parties against whom enforcement is sought.
14.4 Section Headings. The section headings in this Agreement are
for convenience of reference only and shall not be deemed to alter or
affect any provision hereof.
14.5 No Assignment. Neither this Agreement, nor any rights or
liabilities hereunder, may be assigned by any party without the prior
written consent of all of the other parties.
14.6 Adjustment Based on Merger Balance Sheet.
(a) Determination of Merger Balance Sheet. For purposes
hereof, "Merger Balance Sheet" means an audited balance sheet of Merging
Entity, as of 11:59 p.m. on August 31, 1997, computed under Parent's GAAP
Policy referenced in Section 2.7 hereof and in accordance with Section
2.27 hereof and after having reconciled any differences between tax and
financial accounting so that Surviving Corporation shall not be
responsible for any liabilities unless and to the extent the same are
reflected on the Merger Balance Sheet. The Merger Balance Sheet shall be
deemed accepted by Parent if no objections thereto are made within thirty
(30) days of delivery. If Parent objects to the Merger Balance Sheet
within thirty (30) days of delivery, then the parties shall have thirty
(30) days to resolve any objections of Parent to the Merger Balance
Sheet. If the parties are unable to resolve such differences, one
arbitrator shall be selected by Shareholder and one arbitrator shall be
selected by Parent. The two arbitrators shall then pick one mutually
acceptable arbitrator (the "Arbitrator") to resolve all questions in
dispute. The decision of the Arbitrator shall be final and the fees for
his services shall be borne fifty percent (50%) by Parent and fifty
percent (50%) by Shareholder. Notwithstanding anything in the foregoing
to the contrary, if the Merger Balance Sheet is not submitted within
seventy-five (75) days after the Effective Date, then Parent shall
submit a Merger Balance Sheet within fifteen (15) days thereafter, which
shall be final, conclusive and binding on all parties hereto and not
subject to any of the arbitration provisions described above.
(b) Tangible Net Worth. The term "Tangible Net Worth" means
the remainder arrived at from the Merger Balance Sheet when total
liabilities are subtracted from total assets, and furniture, fixtures and
equipment and intangible assets other than cash, cash equivalents and net
receivables are then subtracted from that remainder (total assets - total
liabilities - furniture, fixtures and equipment - intangible assets other
than cash, cash equivalents and net receivables). (c)
Adjustment. The number of shares to be delivered by Parent to
Shareholder pursuant to Section 1.4 shall be adjusted as follows:
(i) If Tangible Net Worth exceeds $0 (zero) (with such
excess being referred to as "Excess Tangible Net Worth"), then the number
of shares shall be increased by the number of shares determined by
dividing Excess Tangible Net Worth by $16; and
(ii) If Tangible Net Worth is less than $0 (zero) (with such shortfall
being referred to as "Insufficient Tangible Net Worth"), then the number
of shares shall be decreased by the number of shares determined by
dividing Insufficient Tangible Net Worth by $16. In the event
of an increase in the number of shares of common stock of Parent to be
issued to Shareholder, such additional shares shall be issued, promptly
after determination of such number, by Parent to Shareholder in the same
proportion as set forth in Section 1.4(a). In the event of a decrease in
the number of shares of common stock of Parent, such shares shall be
assigned, promptly after determination of such number, to Parent (at
Parent's discretion either from the Escrowed Shares or the Shareholder or
both) in the same proportions as set forth in Section 1.4(a), unless
Parent shall have received a differing written directive pursuant to
Section 9.6. The value of any shares of Parent common stock to be
issued or returned pursuant to this Agreement shall be adjusted to
reflect the occurrence after the Effective Date of any of the events
specified in Section 1.4(c).
14.7 Survival. Notwithstanding anything in the foregoing to the
contrary, any rights which Shareholder or Parent may have at law or in
equity against the other for a misstatement or omission by such party
which should have been made, corrected or disclosed by such party, at or
prior to the Effective Date, shall survive for the applicable period
provided by law or equity for the remedy of such act or omission.
14.8 Schedules. Schedules referenced in this Agreement are an
integral part of this Agreement and are to be deemed a part of this
Agreement whether attached hereto on execution of this Agreement or
anytime thereafter.
14.9 Nonsolicitation Covenant. Shareholder, by signature hereto,
covenants that he shall not for a period of five (5) years after the
Effective Date, directly or indirectly, except on behalf of Surviving
Corporation, its successors or assigns, solicit or accept risk
management, insurance or bond business from any of the customers of
Merging Entity as of the moment immediately preceding the Effective Date.
Shareholder, by signature hereto, acknowledges: (i) that this covenant is
ancillary to this Merger Agreement, is integral hereto and is independent
of any other provision herein, (ii) that this covenant is reasonably
necessary for the protection of Surviving Corporation's legitimate
business interests; (iii) that this covenant poses no undue hardship on
the Shareholder and is reasonably limited as to duration and scope; and
(iv) that this covenant is in addition to any covenants which Shareholder
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, Shareholder, by
signature hereto, acknowledges that such invalid portions shall be
severable from this covenant and specifically requests that, upon such
event, this covenant be reformed ("blue-pencilled") to permit Surviving
Corporation to obtain the maximum permissible benefit from this covenant.
14.10 Acceptance. The binding date of acceptance of this
Agreement shall be the Date on which the last of the parties executes the
same.
EXECUTED by Shareholder and Merging Entity at Atlanta, Georgia, this
_______ day of August, 1997.
SHAREHOLDER:
______________________________________
__
William Hugh Holley
MERGING ENTITY:
HUGH HOLLEY & ASSOCIATES, INC. d/b/a
PROFESSIONAL INSURANCE ASSOCIATES
and PROFESSIONAL LIABILITY PURCHASER'S
GROUP
By
_____________________________________
__________________________________, its
_____________________________________
EXECUTED by Parent at Glen Allen, Virginia, this ____ day of
August, 1997, and by Survivor at Atlanta, Georgia, this ___ day of
August, 1997.
PARENT:
HILB, ROGAL AND HAMILTON COMPANY
By_________________________________
_______________________________,
its
__________________________________
SURVIVOR:
HILB, ROGAL AND HAMILTON COMPANY
OF ATLANTA, INC.
By_________________________________
______________________________,
its
_________________________________
A:\merger-2 [wls] Edited: March 9, 1995 5:04 pm Printed: August 21,
1997 at 2:55 PM
