1
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
STEVENSON INSURANCE SERVICES, INC.
The following information is furnished to supplement and
complete the information contained in the Prospectus dated
February 12, 1992, relating to the offering of shares of the
Common Stock of Hilb, Rogal and Hamilton Company (the "Company")
to the shareholders of Stevenson Insurance Services, Inc.
("Stevenson") of Houston, Texas to consummate the merger of
Stevenson and the Company.
Terms of the Transaction
------------------------
(a) (1) Effective on or around November 9, 1998, a
subsidiary of the Company will consummate an Agreement of Merger
with Stevenson whereby the shareholders of Stevenson will receive
$600,000 in cash and shares of Common Stock of the Company valued
at $1,000,000 based on the average closing price for the 10
trading days from that trading date which is two weeks prior to
November 1, 1998, ("Shares") plus three future stock payments
subject to (i) all necessary corporate approvals of each
corporation, (ii) all authorizations, consents and approvals of
all federal, state, local and foreign governmental agencies and
authorities required to be obtained, and (iii) all other
conditions precedent as outlined in the Agreement of Merger (see
Exhibit 2.33). The number of shares distributed to the
shareholders of Stevenson will be adjusted based upon the final
determination of net worth as defined in the Agreement of Merger.
The future stock payments will be made at applicable market
prices based upon profits realized in the subsequent three year
period which may increase the purchase price up to a maximum of
shares valued at $900,000 plus 100% of applicable profit above
the maximum target profit, as specified in the Merger Agreement,
in each year (subject to a minimum, before any applicable
indemnity, of shares valued at $300,000 in each year). The
contingent payments include imputed interest at the lowest
applicable federal rate allowed under the Internal Revenue Code
of 1986, as amended.
Stevenson Insurance Services, Inc. will merge into HRH
Merger Company, a wholly-owned subsidiary of the Company.
<PAGE>
(2) The acquisition of Stevenson by the Company has
been agreed upon because the Company is engaged in the business
of owning insurance agencies and because the shareholders of
Stevenson have determined that a merger with the Company is
beneficial to the growth of Stevenson's insurance operations.
The combined operations will add approximately 16 employees
and approximately $1,800,000 of revenues to the Company.
(3) Stevenson formed in 1978 and incorporated in the
state of Texas in 1992. Stevenson has 100,000 authorized shares
of common stock, $1 par value. There are 1,050 shares issued and
outstanding.
(4) There are no material differences between the
rights of the security holder of Stevenson and the rights of
security holders of the Company.
(5) & (6) The acquisition of Stevenson will be treated
using the purchase method of accounting for acquisitions under
generally accepted accounting principles.
Stevenson 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 2.33.
Pro Forma Financial Information
-------------------------------
See attached - Schedule A
Material Contracts with Seller
------------------------------
There have been no material contracts between the Company
and Stevenson prior to the proposed effective date of the
transaction.
Information with Respect to Stevenson Insurance Services, Inc.
--------------------------------------------------------------
Stevenson was incorporated in 1992 as a Texas corporation.
Stevenson maintains its primary location in Houston, Texas with
branch offices in Austin, Texas and Dallas, Texas.
Stevenson provides employee benefit services for trade
associations. Services provided include group health insurance
products which approximate 100% of revenues.
<PAGE>
The shares to be issued represent less than .51% of
outstanding shares of the Company at the time of acquisition and
the assets of Stevenson as of December 31, 1997 and pre-tax
earnings for the year then ended represent approximately .16% and
.20%, respectively, of the consolidated amounts of the Company.
Furthermore, the Company's investment in Stevenson will
represent approximately 1.24% 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 Stevenson. The restriction should end no later
than March 31, 1999 when the Company files its Form 10-K for
1998.
Common Stock and Dividend Data
------------------------------
There is no established public trading market for the stock
of Stevenson. There are four shareholders of Stevenson. 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
Stevenson during the six months ended June 30, 1998 or the years
ended December 31, 1997, 1996 and 1995.
Shareholder Information
-----------------------
(a) (1) WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY.
(2) & (3) Stevenson has agreed to submit the
acquisition agreement to its shareholders for adoption by
unanimous written consent after receipt and review of the Prospec
tus. Since the acquisition can be completed only with the
unanimous consent of the shareholder of the company being
acquired (Stevenson), 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 (Stevenson) in the
proposed transaction.
(6) Stevenson has 100,000 authorized shares of
common stock, $1 par value. There are 1,050 shares issued and
outstanding.
<PAGE>
The ownership of the outstanding shares of Stevenson as
follows:
Number of
Shareholders Common Shares Percentage
------------ ------------- ----------
Gerald Stevenson 728 69.3%
Brian Stevenson 136 13.0%
Gregory Stevenson 136 13.0%
Richard Weinstein 50 4.7%
----- -----
1,050 100.0%
===== =====
(7) Upon completion of the proposed acquisition, no
shareholder of Stevenson will serve as a director or executive
officer of the registrant.
Hilb, Rogal and Hamilton Company
Date of this Supplement: October 30, 1998
<PAGE>
SCHEDULE A - PRO FORMA CONDENSED
FINANCIAL STATEMENTS (UNAUDITED)
The following pro forma condensed consolidated balance sheet
as of June 30, 1998 and the pro forma consolidated income state
ments for the six months ended June 30, 1998 and the year ended
December 31, 1997 give effect to the proposed acquisition of
Stevenson Insurance Services, Inc. ("Stevenson") expected to be
effective on November 1, 1998; and the acquisition of certain
assets and liabilities of four insurance agencies purchased in
1998 and six insurance agencies purchased in 1997. 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 ac
counting and the assumptions and adjustments in the accompanying
notes to the pro forma financial statements. The pro forma con
solidated income statements give effect to the purchase method
acquisitions and proposed purchase method acquisitions as if they
had occurred on January 1, 1997. The pro forma condensed con
solidated balance sheet gives effect to the business combinations
which occurred or are probable of occurring subsequent to June
30, 1998, as if they had occurred before June 30, 1998.
The pro forma statements have been prepared by management
based upon the historical financial statements of Hilb, Rogal
and Hamilton Company, Stevenson 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 1997 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)
6/30/98
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 $28,144,592 $847,092 (499,157)(1),(3) (2,225,000) (2) $26,267,527
INVESTMENTS 2,509,086 0 2,509,086
RECEIVABLES & OTHER 49,310,706 349,721 0 (3) 49,660,427
------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 79,964,384 1,196,813 N/A (2,724,157) 78,437,040
INVESTMENTS 4,491,383 0 4,491,383
PROPERTY & EQUIPMENT 11,303,758 269,033 (257,279)(1) 200,000 (3) 11,515,512
INTANGIBLE ASSETS 82,640,121 0 0 8,832,042 (3) 91,472,163
OTHER ASSETS 5,419,956 44,584 5,464,540
------------------------------------------------------------------------------------
TOTAL ASSETS $183,819,602 $1,510,430 N/A $6,050,606 $191,380,638
====================================================================================
LIABILITIES & EQUITY:
PREMIUMS PAYABLE-INS CO $68,349,289 $238,464 $68,587,753
OTHER ACCRUED LIABILITIES 23,279,515 265,530 0 23,545,045
------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 91,628,804 503,994 N/A 0 92,132,798
LONG-TERM DEBT 31,598,133 0 0 3,041,042 (2) 34,639,175
OTHER LONG-TERM LIAB. 10,032,807 0 2,016,000 (2) 12,048,807
SHAREHOLDERS' EQUITY
COMMON STOCK 9,352,650 7,405 (7,405) (4) 2,000,000 (2) 11,352,650
RETAINED EARNINGS 41,207,208 999,031 (999,031) (4) 41,207,208
------------------------------------------------------------------------------------
50,559,858 1,006,436 N/A 993,564 52,559,858
------------------------------------------------------------------------------------
$183,819,602 $1,510,430 N/A $6,050,606 $191,380,638
====================================================================================
</TABLE>
(1) TO ADJUST FOR ASSETS AND LIABILITIES NOT ACQUIRED.
(2) TO REFLECT PURCHASE PRICE OF ASSETS AND LIABILITIES ACQUIRED SUBSEQUENT TO
TO JUNE 30, 1998 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, 1998
-----------------------------------------------------------------------------
HILB, ROGAL ACQUISITIONS PRO FORMA ADJUSTMENTS PRO FORMA
& HAMILTON CO. (PURCHASES) FOR PURCHASE CONSOLIDATED
ACQUISITIONS
<S> <C> <C> <C> <C> <C>
REVENUES:
COMMISSIONS & FEES $91,031,861 $3,603,314 0 $94,635,175
INTEREST AND OTHER INCOME 3,589,614 23,392 ($75,625) (1) 3,537,381
-----------------------------------------------------------------------------
TOTAL REVENUES 94,621,475 3,626,706 (75,625) 98,172,556
OPERATING EXPENSES:
COMPENSATION AND BENEFITS 49,287,468 1,571,974 0 50,859,442
OTHER OPERATING EXPENSES 22,735,267 1,161,986 (69,090) (2) 23,828,163
AMORTIZATION OF INTANGIBLES 3,896,708 9,198 265,765 (3) 4,171,671
INTEREST EXPENSE 1,099,061 42,043 85,134 (4) 1,226,239
-----------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 77,018,504 2,785,202 281,809 80,085,515
-----------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 17,602,971 841,504 (357,434) 18,087,041
INCOME TAXES 7,211,833 193,628 (5) 7,405,461
-----------------------------------------------------------------------------
NET INCOME $10,391,138 $841,504 ($551,062) $10,681,580
=============================================================================
NET INCOME PER COMMON SHARE $0.82 $0.83
=============================================================================
NET INCOME PER COMMON SHARE
- Assuming dilution $0.80 $0.81
=============================================================================
SHARES ISSUED AND OUTSTANDING 12,434,137 118,056 12,552,193
=============================================================================
WEIGHTED AVERAGE SHARES
OUTSTANDING 12,663,328 235,417 12,898,745
=============================================================================
WEIGHTED AVERAGE SHARES
OUTSTANDING - Assuming dilution 12,911,810 235,417 13,147,227
=============================================================================
</TABLE>
(1) TO ADJUST HISTORICAL INTEREST AND TO ADJUST FOR LOST INTEREST EARNED
FROM CASH PAID FOR ACQUIRED AGENCIES.
(2) TO REFLECT ADJUSTMENTS TO OTHER OPERATING EXPENSES TO
REFLECT ADJUSTED DEPRECIATION EXPENSE, RENT EXPENSE, ETC.
(3) TO REFLECT ADJUSTMENTS TO AMORTIZATION OF INTANGIBLES DUE TO VALUATION
OF AGENCY ASSETS ON THE PURCHASE BASIS OF ACCOUNTING. INTANGIBLE
ASSETS REPRESENT EXPIRATION RIGHTS, THE EXCESS OF COSTS OVER THE
FAIR VALUE OF NET ASSETS ACQUIRED AND NONCOMPETITION AGREEMENTS.
(4) TO ADJUST HISTORICAL INTEREST AND REFLECT INTEREST ON ACQUISITION DEBT.
(5) TO REFLECT ESTIMATED TAXES AND THE TAX EFFECT OF PROFORMA ADJUSTMENTS
ON NET INCOME.
<PAGE>
HILB, ROGAL & HAMILTON COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 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 $168,558,411 $9,622,606 0 $178,181,017
INTEREST AND OTHER INCOME 5,150,469 137,180 ($251,875) (1) 5,035,774
-----------------------------------------------------------------------------
TOTAL REVENUES 173,708,880 9,759,786 (251,875) 183,216,791
OPERATING EXPENSES:
COMPENSATION AND BENEFITS 96,239,782 5,794,178 0 102,033,960
OTHER OPERATING EXPENSES 45,476,904 2,834,801 (201,091) (2) 48,110,614
AMORTIZATION OF INTANGIBLES 8,110,010 85,786 629,409 (3) 8,825,205
INTEREST EXPENSE 2,037,338 53,635 143,424 (4) 2,234,397
-----------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 151,864,034 8,768,400 571,742 161,204,176
-----------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 21,844,846 991,386 (823,617) 22,012,615
INCOME TAXES 9,054,995 67,108 (5) 9,122,103
-----------------------------------------------------------------------------
NET INCOME $12,789,851 $991,386 ($890,725) $12,890,512
=============================================================================
NET INCOME PER COMMON SHARE $0.98 $0.97
=============================================================================
NET INCOME PER COMMON SHARE
- assuming dilution $0.97 $0.96
=============================================================================
SHARES ISSUED AND OUTSTANDING 12,813,023 118,056 12,931,079
=============================================================================
WEIGHTED AVERAGE SHARES
OUTSTANDING 13,099,217 256,250 13,355,467
=============================================================================
WEIGHTED AVERAGE SHARES
OUTSTANDING - assuming dilution 13,214,719 256,250 13,470,969
=============================================================================
</TABLE>
(1) TO ADJUST HISTORICAL INTEREST AND TO ADJUST FOR LOST INTEREST EARNED
FROM CASH PAID FOR ACQUIRED AGENCIES.
(2) TO REFLECT ADJUSTMENTS TO OTHER OPERATING EXPENSES TO
REFLECT ADJUSTED DEPRECIATION EXPENSE, RENT EXPENSE, ETC.
(3) TO REFLECT ADJUSTMENTS TO AMORTIZATION OF INTANGIBLES DUE TO VALUATION
OF AGENCY ASSETS ON THE PURCHASE BASIS OF ACCOUNTING. INTANGIBLE
ASSETS REPRESENT EXPIRATION RIGHTS, THE EXCESS OF COSTS OVER THE
FAIR VALUE OF NET ASSETS ACQUIRED AND NONCOMPETITION AGREEMENTS.
(4) TO ADJUST HISTORICAL INTEREST AND REFLECT INTEREST ON ACQUISITION DEBT.
(5) TO REFLECT ESTIMATED TAXES AND THE TAX EFFECT OF PROFORMA ADJUSTMENTS
ON NET INCOME.
_________________________________________________________________________
______________________
Stevenson Insurance Services, Inc. Merger
Page 1 of 58
AGREEMENT OF MERGER
OF
STEVENSON INSURANCE SERVICES, INC.
INTO
HRH MERGER COMPANY
THIS MERGER AGREEMENT ("Agreement"), to be effective upon the filing
with the Secretary of State of Articles of Merger ("Merger Effective
Date"), but to be accounted for as if effective as of 12:01 a.m. on
November 1, 1998 ("Effective Date"), is made and entered into by and
among HILB, ROGAL AND HAMILTON COMPANY, a Virginia corporation
("Parent"), its wholly-owned subsidiary, HRH MERGER COMPANY, a Texas
corporation ("Survivor"), and STEVENSON INSURANCE SERVICES, INC., a
Texas corporation ("Merging Entity"), and the four shareholders of
Merging Entity, GERALD STEVENSON ("Mr. Ge. Stevenson"), BRIAN STEVENSON
("Mr. B. Stevenson"), GREGORY STEVENSON ("Mr. Gr. Stevenson"), and
RICHARD WEINSTEIN ("Mr. Weinstein"), (with Messrs. Ge. Stevenson, B.
Stevenson, Gr. Stevenson and Weinstein hereinafter sometimes collectively
referred to as "Shareholders" or any one of the foregoing hereinafter
sometimes referred to as "Shareholder"), with reference to the following
facts:
A. Shareholders are the owners and holders of all of the issued
and outstanding shares of the authorized capital stock (referred to below
as the "Common Stock") of Merging Entity which is engaged in the business
of owning and operating a general insurance agency.
B. Parent is engaged in the business of owning and operating
insurance agencies and has formed Survivor for the purposes contemplated
herein.
C. Shareholders, Parent and Merging Entity have reached an
understanding with respect to the merger of Merging Entity into Survivor
("Merger") for which Shareholders shall receive that amount of cash,
other property and Parent's common stock as the consideration stated
herein.
D. The parties hereto intend that this Agreement be characterized
as a forward, triangular statutory merger pursuant to Sections
368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code of 1986, as
amended ("Code"), and further be accounted for as a "purchase" in
accordance with Accounting Principles Board Opinion Number 16 and other
applicable guidelines.
E. The parties agree that this Merger shall be subject to a
condition subsequent ("Condition Subsequent") set forth in Section 15.10,
namely approval by the Board of Directors of Parent, expected to occur on
November 9, 1998, but that the Merger shall be accounted for on the
Merger Balance Sheet and elsewhere as if effective as of the Effective
Date.
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 to the Secretary of State of Texas as
soon as practiable after the fulfillment of the Condition Subsequent, but
to be accounted for as if effective as of 12:01 a.m. on November 1, 1998
("Effective Date"). As provided by the laws of the State of Texas, on
the Merger Effective Date, the separate existence of Constituents shall
cease and Merging Entity shall be merged with and into Survivor, which
shall then become the Surviving Corporation.
1.2 Corporate Structure of Surviving Corporation.
(a) On the Merger Effective Date, by virtue of the completion
of the Merger, and thereafter until amended as provided by law, the name
of Surviving Corporation and the articles of incorporation of Surviving
Corporation shall be the name and articles of incorporation of Survivor
in effect immediately prior to the completion of the Merger.
(b) On the Merger Effective Date, by virtue of the completion
of the Merger, the bylaws of Survivor in effect on the Merger Effective
Date shall be the bylaws for Surviving Corporation.
(c) On the Merger Effective Date, by virtue of the completion
of the Merger, 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 Merger Effective Date, by virtue of completion of
the Merger, the officers of Surviving Corporation shall be:
Andrew L. Rogal President
Timothy J. Korman Vice President
Walter L. Smith Assistant Vice President and
Secretary
Carolyn Jones Assistant Vice President and
Treasurer
1.3 Effect of Merger.
(a) On the Merger 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 to the books of Survivor, if any, as
may be necessary to conform to the accounting procedures of Parent and to
account for the Merger as if it had occurred as of the Effective Date.
The books of the Constituents, as so adjusted, shall become the books of
Surviving Corporation.
(b) On the Merger Effective Date and thereafter, Surviving
Corporation shall possess all the rights, privileges, immunities, powers,
franchises and authority, both public and private, of each Constituent.
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
Surviving Corporation, without further act or deed, although Survivor and
Merging Entity from time to time, as and when required by Surviving
Corporation, 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 Surviving Corporation may deem
necessary or desirable to confirm the transfer to and vesting in
Surviving Corporation 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
Merger Effective Date, and Surviving Corporation shall thenceforth be
liable for all the obligations of each of Constituents.
1.4 Conversion of Shares of Common Stock.
(a) All of the outstanding capital stock of Merging Entity
comprises the Common Stock, which is owned, collectively, by
Shareholders. Each of Shareholders owns, free and clear of any liens,
encumbrances, restrictions or adverse claims whatsoever except as set
forth in Schedule 2.4, the number of shares of Merging Entity set forth
below opposite his name and each Shareholder shall receive therefor for
each share of Common Stock the number of shares of no par value common
stock of Parent as described herein:
Shareholder Number of Shares Percentage
Gerald Stevenson 728 69.33
Brian Stevenson 136 12.95
Gregory Stevenson 136 12.95
Richard Weinstein 50 4.76
In exchange for all of the shares of Common Stock, Shareholders shall
collectively receive $600,000 in cash and $3,700,000 worth of shares of
common stock of Parent ("HRH Stock"), subject to upward and downward
adjustment and valued as provided in Section 14 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 HRH 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, $1 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 $571.43 plus a value of shares (which number of
shares is subject to adjustment and is to be delivered as provided in
Section 14) of common stock, no par value, of Parent. No fractional
shares of HRH Stock will be issued as the number of shares to be issued
to any Shareholder in accordance with the preceding sentence shall be
rounded up or down to the nearest whole number (a fractional share of 0.5
or more will be rounded up; less than 0.5 will be rounded down). Each
Shareholder, upon delivery to Parent or its duly authorized agent for
cancellation of certificates representing Common Stock and subject to any
other limitations herein, shall thereafter be entitled to receive (i)
certificates representing the number of shares of HRH Stock to which such
Shareholder is entitled and (ii) a cash payment by wire transfer equal to
the amount of cash to which such Shareholder is entitled.
(c) Appropriate adjustment shall be made on the number of
shares of HRH Stock to be issued upon conversion if, during the period
commencing on October 22, 1998, 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 HRH Stock; (iii) effects any
extraordinary distribution on HRH Stock; (iv) effects any reorganization
or reclassification of HRH 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 HRH 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 HRH
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 HRH 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 Brown,
Parker & Leahy, L.L.P., located at 1200 Smith Street, Houston, Texas, at
10:00 a.m. on October 30, 1998, or at such other place and time as shall
be mutually agreed upon by the parties to this Agreement ("Closing
Date").
2. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS. Shareholders,
jointly and severally, represent and warrant to Parent as follows:
2.1 Organization and Standing of Merging Entity. Merging Entity is
a corporation duly organized, validly existing and in good standing under
the laws of the State of Texas ("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
or where failure to qualify to do business would not have a material
adverse effect on Merging Entity, 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 or where failure to qualify for or obtain such license
would not have a material adverse effect on Merging Entity, 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 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
is complete and correct as of the date hereof. The minute book or minute
books of Merging Entity contain a complete and accurate record in all
material respects of all meetings and other corporate actions of the
shareholders and directors of Merging Entity.
2.2 Name. Neither Merging Entity nor any of Shareholders has
granted to anyone any right to use the corporate name or any name similar
to the corporate name of Merging Entity.
2.3 Capitalization of Merging Entity. The capitalization of
Merging Entity is as follows: (a) Merging Entity is authorized
to issue 100,000 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, each Shareholder is
the record owner, free and clear of any and all liens, encumbrances,
restrictions and adverse claims whatsoever, of the number of shares of
Common Stock set forth opposite his name in subsection 1.4(a). Each such
lien, encumbrance, restriction or adverse claim on the Common Stock can
and will 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 two years
as well as the legitimate purpose (i.e. other than effecting this
Agreement) for each such transaction.
2.5 Authority. Shareholders, individually and collectively, have
full and complete authority to enter into this Agreement and to transfer
in accordance with the terms and conditions of this Agreement all of the
shares of Common Stock, free and clear of all liens, encumbrances,
restrictions and adverse claims whatsoever. The execution, delivery and
performance of this Agreement by Merging Entity does not violate, result
in a breach of, or constitute a default under, the articles of
incorporation or bylaws of Merging Entity or any material indenture,
contract, agreement or other instrument to which it is a party or is
bound, or to the best knowledge of Shareholders and Merging Entity, any
applicable laws, rules or regulations.
2.6 Subsidiaries and Other Relationships. Except as disclosed on
Schedule 2.6, Merging Entity does not own any stock or other interest in
any other corporation, nor is it a participant in any joint entity.
Except as disclosed on Schedule 2.6, any stock owned by Merging Entity in
any other entity represents one hundred percent (100%) ownership of such
entity, is owned free and clear of any and all liens, encumbrances,
restrictions and adverse claims, has been duly and validly issued and is
fully paid and nonassessable.
2.7 Financial Statements. Shareholders and Merging Entity have
caused or will cause to be delivered to Parent a true and complete copy
of the compiled financial statements of Merging Entity as of September
30, 1998 ("Financial Statements"), which compilation has not been
prepared under the accounting guidelines of Parent as set forth in
Parent's Accounting Policies and Procedures Manual ("GAAP Policy"). The
Financial Statements are true and correct, are in accordance with the
books and records of Merging Entity and present fairly the financial
condition and results of operations of Merging Entity as of the date and
for the period indicated. Furthermore, the Financial Statements did not
contain any untrue statement of any material fact or omit to state any
material fact required to be stated to make such Financial Statements not
misleading. Without limiting the generality of the foregoing, the
commission income reflected in the Financial Statements is 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 September 30, 1998. Also, the term "Most Recent
Balance Sheet Date," as used in this Agreement, means September 30,
1998.) Except as and to the extent specifically reflected,
provided for or reserved against in the Most Recent Balance Sheet or
except as disclosed in any Schedule to this Agreement, Merging Entity, as
of the Most Recent Balance Sheet Date, did not have any indebtedness,
liability or obligation of any nature whatsoever, whether accrued,
absolute, contingent or otherwise, and whether due or to become due,
including, without limitation, tax liabilities due or to become due, and
whether incurred in respect of or measured by the income of Merging
Entity for any period prior to the Most Recent Balance Sheet Date, or
arising out of transactions entered into, or any state of facts existing,
prior thereto, and none of Shareholders knows or has reasonable grounds
to know of any basis for the assertion against Merging Entity, as of the
Most Recent Balance Sheet Date, of any indebtedness, liability or
obligation of any nature or in any amount not fully reflected or reserved
against in the Most Recent Balance Sheet or otherwise disclosed in any
Schedule to this Agreement.
2.9 No Adverse Change. Since the Most Recent Balance Sheet Date,
there has been no material change in the financial condition, results of
operations or business prospects of Merging Entity other than changes
occurring in the ordinary course of business or except as otherwise
disclosed in any of the Schedules to this Agreement, which changes have
not had a material adverse effect on the financial condition, results of
operations or business prospects of Merging Entity. Without limiting the
generality of the foregoing, since the Most Recent Balance Sheet Date,
there has been no material adverse change in the insurance accounts
included within the "Book of Business" of Merging Entity, and no
Shareholder knows or has reasonable grounds to know of any basis for any
material adverse change in such insurance accounts between the date
hereof and the Effective Date. For purposes hereof, "material adverse
change" in the insurance accounts included in the "Book of Business" of
Merging Entity means, without limitation, the loss of any account
generating an aggregate annual gross income (commission or otherwise) of
$10,000 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 in all
material respects. 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, to the knowledge of Shareholders, 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
Texas Comptroller's office, 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 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 period reflected.
2.11 Real and Personal Property Owned by Merging Entity. Merging
Entity does not own any real property. Schedule 2.11 also consists of a
copy of the depreciation schedules filed as a part of the two prior
annual Federal income tax returns of Merging Entity (with deletions of
any items disposed of prior to the date of this Agreement), a separate
list of each item of depreciable personal property acquired by Merging
Entity since the Most Recent Balance Sheet Date and having a cost of
$1,000.00 or more, and a separate list of each item of intangible
personal property presently owned by Merging Entity. Merging Entity also
owns various items of disposable type personal property such as office
supplies that are not listed in Schedule 2.11. Merging Entity has good
and marketable title to all such tangible and intangible personal
property, in each case free and clear of all mortgages, security
interests, conditional sales agreements, claims, restrictions, charges or
other liens or encumbrances whatsoever except as otherwise stated in
Schedule 2.11. 2.12 Leases. Schedule 2.12 contains a correct
and complete list and brief description of all leases or other agreements
under which Merging Entity is a tenant or lessee of, or holds or operates
any property, real or personal, owned by any third party. Merging Entity
is the owner and holder of the leasehold estates granted by each of the
instruments described in Schedule 2.12 except as otherwise stated in
Schedule 2.12. Each of said leases and agreements is in full force and
effect and, to the knowledge of Shareholders, 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, to the knowledge of Shareholders, there is not any existing default
or event or condition, including the Merger contemplated herein, which
with notice or lapse of time, or both, would constitute an event of
default under any of such leases or agreements.
2.13 Insurance. Schedule 2.13 contains a correct and complete list,
as of the date hereof, of all policies of casualty, fire and extended
coverage, theft, errors and omissions, liability, life, and other forms
of insurance owned or maintained by Merging Entity. All business
operations of Merging Entity are and have been continually insured
against errors and omissions. Such policies are in amounts deemed by
Shareholders to be adequate. Each such policy is, on the date hereof, in
full force and effect, and, to the knowledge of Shareholders, 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. Schedule 2.13 also contains a list of any former
employees or their dependents who are presently under COBRA continuation
coverage and describes with reasonable particularity the pertinent
factors about each such person listed.
With respect to errors and omissions (professional liability)
insurance policies listed in Schedule 2.13 (which lists for each such
policy the carrier, retrodate, claims made or occurrence policy and
limits), prior to the effective dates of such policies, Merging Entity
had not given notice to any prior insurer of any act, error or omission
in services rendered by any agent or employee of such corporation or that
should have been rendered by any agent or employee of such corporation
arising out of the operations of Merging Entity. Furthermore, to the
best knowledge of Shareholders, no agent or employee of Merging Entity
breached any such professional duty or obligation prior to the effective
dates of such policies. With respect to such policies, to the knowledge
of Shareholders, Merging Entity has given notice of any and all claims
for any act, error or omission by any agent or employee of such
corporation with respect to professional services rendered or that should
have been rendered as required by the terms of such policies (if any such
notice has been given, its contents are described in Schedule 2.13). To
the best knowledge of Shareholders, Merging Entity has not taken, nor has
it failed to take, any action which would provide the insurer with a
defense to its obligation under any such policy; neither Merging Entity
nor any Shareholder has received from any such insurer any notice of
cancellation or nonrenewal of any such policy, and, except as set forth
in Schedule 2.13, no Shareholder has any basis to believe that Merging
Entity, or any agent or employee of Merging Entity, has breached any
professional duty or obligation.
2.14 Insurance Companies. Schedule 2.14 contains a correct and
complete list of all insurance companies with respect to which Merging
Entity has an agency contract or similar relationship. Except as
identified in Schedule 2.14, all relations between Merging Entity and the
insurance companies represented by it are believed to be good, and no
Shareholder has any knowledge of any proposed termination of, or
modification to, the existing relations between Merging Entity and any of
such insurance companies. Furthermore, except as otherwise set forth in
Schedule 2.14, all material accounts with all insurance companies
represented by Merging Entity or with whom it transacts business are
current and there are no material 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 believed
to be good, and no Shareholder has any knowledge of any proposed
termination of any insurance account presently written or serviced by
Merging Entity. For purposes of Section 2.15, the term "insurance
account" shall be limited to accounts which generate an aggregate annual
gross income (commission or otherwise) of $10,000 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 Shareholders, threatened against Merging Entity with respect
to any alleged infringement of any patent, trademark, trade name or
copyright owned or licensed to anyone other than Merging Entity.
2.19 Indebtedness. Schedule 2.19 contains a correct and complete
list of all instruments, agreements or arrangements pursuant to which
Merging Entity has borrowed any money, incurred any indebtedness outside
of the ordinary course of business 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, to the knowledge
of Shareholders, is not in default in any material respect under the
terms of any such written instruments, agreements or arrangements, and,
to the knowledge of Shareholders, 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 list of every employment agreement, independent
contractor and brokerage agreement (copies of same having been previously
provided to Parent), 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. To the knowledge of
Shareholders, no party with whom Merging Entity has any agreement which
is of material importance to its business is in default thereunder.
2.21 Absence of Certain Events. Since the Most Recent Balance Sheet
Date, the business of Merging Entity has been conducted only in the
ordinary course and in substantially the same manner as theretofore
conducted, and, except as set forth in Schedule 2.21 attached to this
Agreement, or in any other Schedule attached to this Agreement, Merging
Entity has not, since the Most Recent Balance Sheet Date: (i) issued any
stocks, bonds or other corporate securities or granted any options,
warrants or other rights calling for the issue thereof; (ii) incurred, or
become subject to, any material obligation or liability (whether absolute
or contingent) except (A) current liabilities incurred in the ordinary
course of business, (B) obligations under contracts entered into in the
ordinary course of business and (C) obligations under contracts not
entered into in the ordinary course of business which are listed in
Schedule 2.20; (iii) discharged or satisfied any lien or encumbrance or
paid any obligation or liability (whether absolute or contingent) other
than current liabilities shown on the Most Recent Balance Sheet and
current liabilities incurred since the Most Recent Balance Sheet Date in
the ordinary course of business; (iv) declared or made any payment of
dividends or distribution of any assets of any kind whatsoever to
stockholders or purchased or redeemed any of its capital stock; (v)
mortgaged, pledged or subjected to lien, charge or any other encumbrance,
any of its assets and properties, real, tangible or intangible; (vi) sold
or transferred any of its assets, properties or rights, or cancelled any
debts or claims, except in each case in the ordinary course of business,
or entered into any agreement or arrangement granting any preferential
rights to purchase any of its assets, properties or rights or which
required the consent of any party to the transfer and assignment of any
of its assets, properties or rights; (vii) suffered any extraordinary
losses (whether or not covered by insurance) or waived any extraordinary
rights of value; (viii) entered into any transaction other than in the
ordinary course of business except as herein stated; (ix) amended its
articles of incorporation or bylaws; (x) increased the rate of
compensation payable or to become payable by it to any of its employees
or agents over the rate being paid to them at the Most Recent Balance
Sheet Date; (xi) made or permitted any amendment to or termination of any
material contract, agreement or license to which it is a party other than
in the ordinary course of business; or (xii) made capital expenditures or
entered into any commitments therefor aggregating more than $5,000.00.
Except as contemplated by this Agreement, or the Schedules referred to in
this Agreement, between the date hereof and the Closing Date, Merging
Entity will not, without the prior written consent of Parent, do any of
the things listed above in clauses (i) through (xii) of this Section
2.21.
2.22 Investigations and Litigation. There is no investigation by
any governmental agency pending, or, to the best knowledge of
Shareholders, threatened against or adversely affecting Merging Entity,
and except as set forth on Schedule 2.22, there is no action, suit,
proceeding or claim pending, or, to the best knowledge of Shareholders,
threatened against Merging Entity, or any of its businesses, properties,
assets or goodwill, which could reasonably be expected to have a material
adverse effect on such corporation, or against or affecting the
transactions contemplated in this Agreement. There is no outstanding
order, injunction, judgment or decree of any court, government or
governmental agency against or affecting Merging Entity, or any of its
businesses, properties, assets or goodwill.
2.23 Overtime, Back Wages, Vacation and Minimum Wages. To the best
knowledge of Shareholders, no present or former employee of Merging
Entity has any claim against Merging Entity (whether under federal or
state law) under any employment agreement, or otherwise, on account of or
for: (i) overtime pay for any period other than the current payroll
period; (ii) wages or salary for any period other than the current
payroll period; (iii) vacation or time off (or pay in lieu thereof),
other than that earned in respect of the current fiscal year; or (iv) any
violation of any statute, ordinance, rule or regulation relating to
minimum wages or maximum hours of work, except as otherwise set forth in
Schedule 2.23.
2.24 Discrimination, Occupational Safety and Other Statutes and
Regulations. To the best knowledge of Shareholders, no persons or
parties (including, without limitation, governmental agencies of any
kind) have any claim, or basis for any claim, action or proceeding,
against Merging Entity arising out of any statute, ordinance, rule or
regulation relating to discrimination in employment or employment
practices or occupational safety and health standards (including, without
limitation, The Occupational Safety and Health Act, The Fair Labor
Standards Act, Title VII of the Civil Rights Act of 1964, The Civil
Rights Act of 1992, The Americans with Disabilities Act, and The Age
Discrimination in Employment Act of 1967, as any of the same may have
been amended).
2.25 Employee Benefit Plans.
(a) There are no employee benefit plans or arrangements of any
type, including but not limited to any retirement, health, welfare,
insurance, bonus, executive compensation, incentive compensation, stock
bonus, stock option, deferred compensation, commission, severance,
parachute, rabbi trust program or plan described in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), maintained by
Merging Entity, or with respect to which Merging Entity has a liability,
other than those set forth in Schedule 2.25(a) ("Employee Benefit
Plans").
(b) With respect to each Employee Benefit Plan, to the
knowledge of Shareholders, except as set forth in Schedule 2.25(b): (i)
if intended to qualify under Sections 79, 105, 106, 125, 129, 401(a),
401(k), 403(a), or 409, or other Sections, of the Internal Revenue Code
("Code"), such plan so qualifies, and if applicable, its trust is exempt
from federal income tax under Code Section 501(a); (ii) if intended to
qualify as an organization described in Section 501(c)(9) of the Code,
such organization so qualifies and any trusts established pursuant to its
constitution are exempt from federal income tax under Section 501(a) of
the Code; (iii) such plan has been administered and enforced in
accordance with its terms and applicable law; (iv) no breaches of
fiduciary duty by Merging Entity, the Trustees, or, to the best knowledge
and belief of Merging Entity and Shareholders after reasonable
investigation, any other person, have occurred; (v) no disputes are
pending, or, to the knowledge of Merging Entity and Shareholders,
threatened; (vi) no nonexempt prohibited transaction has occurred; (vii)
there has been no reportable event for which the 30-day notice
requirement under ERISA has not been waived; (viii) all contributions and
premiums due have been made on a timely basis (including, if applicable,
the time limited established under Code Sections 404 and 412); (ix) all
contributions made or required to be made meet the requirements for
deductibility under the Code; (x) all contributions which have not been
made have been properly recorded in the financial records of Merging
Entity; and (xi) except as set forth in Schedule 2.25(b), no liability
(whether an indebtedness, a fine, a penalty, a tax or any other amount)
has been incurred or will be incurred by Merging Entity as a result of
its maintenance, operation or termination of any Employee Benefit Plan.
(c) No Employee Benefit Plan is a multiemployer plan, as
defined in Section 4001(a)(3) of ERISA or a multiple employer plan. The
consummation of the transactions contemplated by this Agreement will not
entitle any individual to severance pay, and will not accelerate the time
of payment or vesting, or increase the amount, of compensation due to any
individual.
(d) With respect to each Employee Benefit Plan, Merging Entity
has delivered or caused to be delivered to Parent true and complete
copies, where applicable, of (i) all plan documents, amendments and trust
agreements currently in effect; (ii) all summary plan descriptions, or
other notices or summaries of modifications, which have been prepared by,
or on behalf of Merging Entity; (iii) all material employee
communications; (iv) the three (3) most recent annual reports (Forms
5500); (v) the most recent annual and any subsequent periodic accounting
of plan assets; and, (vi) the most recent determination letter received
from the IRS.
(e) With respect to each Employee Benefit Plan, there is no
pending claim or lawsuit which has been asserted against that Employee
Benefit Plan, the assets of any of the trusts under such Employee Benefit
Plan, Merging Entity, or any fiduciary of such Employee Benefit Plan with
respect to the operation of such Employee Benefit Plan. Merging Entity
and Shareholders, after reasonable investigation, know of no facts or
circumstances which could form the basis for any such claim or lawsuit.
(f) All amendments required to have been made to bring each
Employee Benefit Plan into conformity in all material respects with all
of the applicable provisions of the Code, ERISA and other applicable laws
have been made.
(g) Each Employee Benefit Plan has met, by its terms and in
its operation, all applicable requirements for an exemption from federal
income taxation under Section 501(a) of the Code.
(h) Each Employee Benefit Plan has at all times been
maintained in accordance with all applicable laws, has complied with
applicable ERISA or other requirements; and, there are no actions,
audits, suits or claims which are threatened or pending against any such
Employee Benefit Plan, any fiduciary of any of the Employee Benefit
Plans, or against any of the assets of the Employee Benefit Plans.
(i) Merging Entity has made full and timely payment of all
amounts required to be contributed under the terms of each Employee
Benefit Plan and no event or condition exists regarding any of the
Employee Benefit Plans which could be deemed a "reportable event" with
respect to which the 30-day notice has not been waived which could result
in a material liability to Merging Entity and no event exists which would
subject Merging Entity to a material fine under Section 4701 of ERISA.
(j) Merging Entity is not subject to any material liability,
tax or penalty and the termination of or withdrawal from any Employee
Benefits Plan will not subject Merging Entity to any additional
contribution requirement and the execution or performance of the
transactions contemplated by this Agreement will not create, accelerate
or increase any obligations under any Employee Benefit Plan.
(k) Merging Entity has no obligation to any retired or former
employee or any current employee upon retirement under any Employee
Benefit Plan.
(l) Each Employee Benefit Plan maintained by Merging Entity
has at all times been maintained, by its terms and in operation, in
accordance with all applicable laws in all material respects, including
(to the extent applicable) Code Section 4980B. Further, there has been
no failure to comply with applicable ERISA or other requirements
concerning the filing of reports, documents and notices with the
Secretary of Labor and Secretary of Treasury or the furnishing of such
documents to participants or beneficiaries that could subject any
Employee Benefit Plan to any material civil or any criminal sanction or
could require any such person to indemnify any other person for such a
sanction. There are no actions, audit, suits or claims known to Merging
Entity or Shareholders which are pending or threatened against any
Employee Benefit Plan, any fiduciary of any of the Employee Benefit Plans
with respect to the Employee Benefit Plans or against the assets of any
of the Employee Benefit Plans, except claims for benefits made in the
ordinary course of the operation of such plans.
(m) Merging Entity is not subject to any material liability,
tax or penalty whatsoever to any person whomsoever as a result of Merging
Entity engaging in a prohibited transaction under ERISA or the Code, and
neither Merging Entity nor any of the Shareholders has knowledge of any
circumstances which reasonably might result in any such material
liability, tax or penalty as a result of a breach of fiduciary duty under
ERISA. The termination of or withdrawal from any Employee Benefit Plan
maintained by Merging Entity which is subject to Title IV of ERISA, or
any other Employee Benefit Plan, will not subject Merging Entity to any
additional contribution requirement or to any other liability, tax or
penalty whatsoever. The execution or performance of the transactions
contemplated in this Agreement will not create, accelerate or increase
any obligations under any Employee Benefit Plan. Merging Entity has no
obligation to any retired or former employee, or any current employee
upon retirement, under any Employee Benefit Plan.
2.26 Competitors. Except as disclosed in Schedule 2.26, none of
Shareholders has any interest, direct or indirect, as an owner, partner,
agent, shareholder, officer, director, employee, consultant or otherwise,
in any firm, partnership, corporation or other entity that is engaged in
the insurance agency business, or any aspect thereof, other than Merging
Entity or a corporation listed on a national securities exchange or a
corporation whose securities are traded in the over-the- counter market.
2.27 Accounts and Notes Receivable. The reserve for bad debts, if
any, contained in the Most Recent Balance Sheet and the Financial
Statements was calculated on a consistent basis which, in the light of
past experience, is considered adequate. To the knowledge of
Shareholders, 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. 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, to the
knowledge of Shareholders, 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.
2.28 Permits and Licenses. All material permits, licenses and
approvals of all federal, state or local regulatory agencies, which are
required in order to permit Merging Entity and its employees and agents
to carry on business as now conducted by it, have been obtained by it and
are current.
2.29 No Violation or Default. The execution, delivery and
performance of this Agreement by Shareholders and Merging Entity will not
violate, result in a breach of, or constitute a default under, the
articles of incorporation or bylaws of Merging Entity or of any material
indenture, contract, agreement or other instrument to which Merging
Entity is a party or is bound including, without limitation, any agency
contract with any insurance company.
2.30 Common Stock of Parent. Shareholders understand and
acknowledge that the common stock of Parent to be received pursuant to
this Agreement is subject to Rule 145 of the Securities Exchange
Commission ("SEC"); such stock is being acquired for investment purposes
only and not with a view to distribution or resale; any sale or other
disposition of such stock shall be made pursuant to the regulations
promulgated under Rule 145 and in compliance with all other applicable
laws, regulations and interpretations.
2.31 Financing Statements. Except as disclosed on Schedule 2.31,
there are no financing statements or other security interests of any kind
filed or required to be filed against Merging Entity's assets or
affecting the use of, or title to, such assets ("Financing Statements").
Except as further disclosed on Schedule 2.31, there are no deferred money
purchase notes related to Merging Entity's acquisition of any portion of
its assets ("Notes"). Any such liabilities related to the Financing
Statements or Notes can be discharged or prepaid prior to their stated
maturities without penalty, except as further detailed on Schedule 2.31.
The assumption by Surviving Corporation of such liabilities will not
result in a default of any Financing Statement or Note.
2.32 Brokers. Except as disclosed in Schedule 2.32, neither Merging
Entity nor any Shareholder has employed any broker or finder for the
purposes of completing the transactions contemplated herein such that no
commission, finder's fee, brokerage fee or similar charge will be
incurred for the consummation of the transactions contemplated herein.
2.33 Disclosure. Shareholders have each received a copy of Parent's
current S-4 registration statement dated February 12, 1992, most recent
annual report, Form 10-K and Form 10-Q and will acknowledge receipt of an
amendment or supplement to such registration statement. 2.34
Material Misstatements or Omissions. No representation or warranty by
Shareholders or Merging Entity, or any of them, contained in this
Agreement or in any document, statement, certificate, Schedule or
financial statement furnished or to be furnished to Parent by or on
behalf of Shareholders or Merging Entity, or any of them, pursuant to
this Agreement or in connection with the transactions contemplated by
this Agreement contains, or will when furnished contain, any untrue
statements of a material fact, or omits, or will then omit to state, a
material fact necessary to make the statements contained herein or
therein not misleading.
3. APPROVAL OF MERGER BY SHAREHOLDERS AND MERGING ENTITY. The
board of directors of Merging Entity will recommend to Shareholders that
Shareholders adopt this Agreement. Merging Entity agrees to submit this
Agreement to Shareholders for adoption by unanimous written consent with
waiver of notice of the terms of this Agreement prior to the Effective
Date, but only after delivery by Parent to Shareholders and Merging
Entity of an amended or supplemented S-4 registration statement for
Parent's common stock to be issued pursuant to this Agreement and after
Shareholders have had an effective opportunity of at least seven (7) days
to review such prospectus. Unless there is a failure of Parent to
fulfill its conditions set forth in Section 7 hereof or there is a
material adverse change in the financial conditions of Parent,
Shareholders covenant to adopt this Agreement and to approve all aspects
of the Merger within the time period contemplated herein.
4. ACCESS AND INFORMATION. Prior to the execution of this
Agreement, Shareholders caused Merging Entity and all its employees to
give to Parent, and any and all authorized representatives of Parent
(including auditors and attorneys), 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
investigation as it deemed appropriate with respect to the affairs of
Merging Entity, and caused Merging Entity, and all of its employees to
provide to Parent such additional information concerning the affairs of
Merging Entity as Parent reasonably requested.
Regardless of any such investigation by Parent, all representations
and warranties of Shareholders contained in this Agreement shall remain
in full force and effect and no such investigation shall cause or result
in a waiver by Parent of any of the representations and warranties of
Shareholders contained herein.
5. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent represents
and
warrants to Shareholders as follows:
5.1 Organization and Standing of Parent and Survivor. Parent is a
corporation duly organized, validly existing and in good standing under
the laws of the Commonwealth of Virginia. Survivor is duly organized,
validly existing and in good standing under the laws of the State of
Texas.
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 HRH 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 Texas, 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 material indenture, contract, agreement or other instrument to which
such corporation is a party or is bound, or, to the best knowledge of
Parent, any applicable laws, rules or regulations.
5.3 Capitalization of Parent and Survivor. As of June 30, 1998,
the authorized capital stock of Parent consisted of 50,000,000 shares of
common stock, no par value, of which 12,434,137 shares were issued and
outstanding, fully paid and nonassessable. The authorized capital stock
of Survivor consists of 5,000 shares of common stock, $1 par value, of
which 100 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 HRH Stock. The shares of HRH Stock to be issued to
Shareholders pursuant to this Agreement will, when so issued, be duly and
validly authorized and issued, fully paid and nonassessable.
5.5 Brokers' or finders' fees. No agent, broker, person, or firm
acting on behalf of Parent or any of its subsidiaries or under the
authority of any of them is or will be entitled to any commission or
broker's or finder's fee or financial advisory fee from Parent or
Survivor in connection with any of the transactions contemplated herein.
5.6 SEC Compliance. Parent has filed with the SEC and has
delivered to each of the Shareholders, all forms, reports, schedules,
statements and other documents required to be filed by it since January
1, 1997, under the Securities Act of 1933 and the Exchange Act of 1934
(such documents, as amended from time to time, being the "Parent SEC
Documents"). Each Parent SEC Document, including without limitation any
financial statements or schedules included therein, (a) did not, at the
time filed (or, in the case of any Parent SEC Document that has been
amended prior to the date hereof, at the time of the filing of such
amendment), contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (b) at the time filed, complied
in all material respects with the applicable requirements of the
Securities Act of 1933 and the Exchange Act of 1934.
5.7 Material Misstatements or Omissions. No representation or
warranty by Parent contained in this Agreement or in any document,
statement, certificate, Schedule or financial statement furnished or to
be furnished to Merging Entity or Shareholders by or on behalf of Parent
pursuant to this Agreement or in connection with the transactions
contemplated in 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.
5.8 No Adverse Change. Since June 30, 1998, there has been no
material change in the financial condition, results of operations or
business prospects of Parent other than changes occurring in the ordinary
course of business, which changes have not had a material adverse effect
on the financial condition, results of operations or business prospects
of Parent.
5.9 Investigations and Litigation. There is no investigation by
any governmental agency pending, or, to the best knowledge of Parent,
threatened against or adversely affecting Parent, and except for routine
errors and omissions claims which are being defended by Parent's
insurance carrier, there is no material action, suit, proceeding or claim
pending, or, to the best knowledge of Parent, threatened against Parent,
or any of its businesses, properties, assets or goodwill, which could
reasonably be expected to have a material adverse effect on such
corporation, or against or affecting the transactions contemplated in
this Agreement.
6. CONDITIONS PRECEDENT TO PERFORMANCE BY PARENT AND SURVIVOR. The
obligation of Parent and Survivor to consummate the transactions
contemplated in this Agreement shall be subject to the satisfaction or
fulfillment, on or prior to the Closing Date, of the following conditions
precedent, in addition to all other conditions precedent contained in
this Agreement, each of which may be waived by Parent:
6.1 Representations. Parent shall not have discovered any material
error, misstatement or omission in any of the representations and
warranties made by Shareholders contained in this Agreement, or in any
financial statement, certificate, Schedule, exhibit or other document
attached to or delivered pursuant to this Agreement, and all
representations and warranties of Shareholders, or any of them, contained
in this Agreement and in any financial statement, certificate, Schedule,
exhibit or other document attached to or delivered pursuant to this
Agreement shall be true and correct in all material respects on and as of
the Closing Date with the same force and effect, except as affected by
transactions expressly authorized herein or otherwise approved in writing
by Parent, as though such representations and warranties had been made on
and as of the Closing Date.
6.2 Covenants. Merging Entity and Shareholders shall have
performed and complied in all material respects with all covenants,
agreements and conditions required under this Agreement to be performed
or complied with by them on or before the Closing Date.
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 in this Agreement.
6.4 Approval by Counsel. All transactions contemplated herein, and
the form and substance of all legal proceedings and of all instruments
used or delivered hereunder, shall be reasonably satisfactory to counsel
for Parent.
6.5 Opinion. Parent shall have received a favorable opinion, dated
as of the Closing Date, from the law firm of Brown, Parker & Leahy,
L.L.P., counsel for Shareholders and Merging Entity, in form and
substance as set forth in Schedule 6.5 and otherwise reasonably
satisfactory to counsel for Parent.
6.6 Delivery of Common Stock. There shall be duly delivered for
cancellation to Parent at the Closing not less than 100% of the shares of
Common Stock issued and outstanding at the time of the Closing, free and
clear of any liens or encumbrances as required to be listed on Schedule
2.4.
6.7 Continuation of Agency Contracts. To the extent desired by
Parent, Parent shall have obtained a statement in writing from each of
the insurance companies identified in Schedule 2.14 of this Agreement, in
form satisfactory to Parent and Parent's counsel, by which each such
insurance company agrees that it will not terminate its insurance agency
contract solely by reason of the transactions contemplated in this
Agreement, and further agrees that it will continue to recognize
Surviving Corporation, 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
Surviving Corporation, or its successors and assigns.
6.8 Shareholder Employment Agreements. Employment Agreements
between Surviving Corporation, as Employer, and each of the Shareholders,
respectively, as Employee, in form and substance as set forth in Schedule
6.8 attached hereto, shall have been duly executed by each of them and
delivered to Parent.
6.9 Other Employment Agreements. Employment Agreements between
Surviving Corporation, as Employer, and such of the other employees of
Merging Entity (other than Shareholders) as shall be specified by Parent,
in form previously approved by the President of Parent, shall be in full
force and effect or such new agreements as have been requested by Parent
shall have been executed, in form and substance as set forth in Schedule
6.9 attached hereto.
6.10 Employee Benefit Plans. Parent shall have been furnished
evidence satisfactory to Parent that all Employee Benefit Plans
identified in Schedule 2.25 attached to this Agreement have been
terminated and provision has been made for the distribution of all
benefits thereunder in accordance with the terms of such Employee Benefit
Plans.
6.11 Material Adverse Change. There shall have been no material
adverse change in Merging Entity's business, business prospects, Book of
Business, assets and properties, or goodwill between the date of the
execution of this Agreement and the Closing Date.
6.12 Tail Insurance. Unless notified in writing to the contrary,
Shareholders and Merging Entity shall have delivered to Parent, in form
reasonably satisfactory to Parent and Parent's counsel, evidence of
insurability, to be effective as of the Effective Date, for an extended
reporting period for errors and omissions of a minimum three year
duration with deductible limits reasonably acceptable to Parent and
Parent's counsel, which insurance, if bound, would insure Merging Entity
its agents and employees for the extended reporting period for claims
arising under errors and omissions occurring prior to the Effective Date.
Such tail insurance shall be bound as soon after the Effective Date as
possible. If such insurance is not purchased within one week after
Closing, Parent shall have the right to purchase such tail insurance
deemed acceptable to it. The cost for the tail insurance actually bound
by, or on behalf of, Merging Entity shall be borne by Merging Entity and
shall be reflected on the Merger Balance Sheet (as defined in Section
14.6) as if such coverage had been bound prior to the Effective Date and
the Shareholders shall be responsible for any deductible amounts to be
paid under such tail policy.
6.13 Related Party Transactions. All "related party" (i.e. a
Shareholder, a member of a Shareholder's family, a business or entity
affiliated with any of the foregoing) receivables and payables of Merging
Entity and any receivables or payables from or to an employee of Merging
Entity on favorable terms shall have been removed from the books of
Merging Entity for their cash equivalent face amounts.
6.14 Lease. The existing lease 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 January 31,
1999, on terms otherwise acceptable to Parent and, as amended, shall be
in full force and effect with no defaults occurring as a result of
Merging Entity's action or inaction.
6.15 Resolutions. Parent shall receive certified copies of
resolutions of the board of directors and Shareholders of Merging Entity,
to the extent deemed necessary by, and in form satisfactory to, counsel
for Parent, authorizing the execution and delivery of this Agreement by
Merging Entity and the consummation of the transactions contemplated
herein.
6.16 Approvals. All statutory requirements for the valid
consummation by Merging Entity of the transactions contemplated in 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 in 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 except where failure to obtain such approval
would not have a material adverse effect.
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 "purchase" for accounting purposes.
6.18 Dividend of Certain Assets and Liabilities. Surviving
Corporation shall have declared a dividend, by virtue of resolutions
adopted by each of the Constituents in approving the Merger, payable
immediately upon effectiveness of the Merger, in an amount exactly equal
to all assets and liabilities of Merging Entity as of the effectiveness
of the Merger (with all such dividended assets and liabilities being
hereinafter referred to as "Merging Entity Dividend").
6.19 Contribution of Merging Entity Dividend to Capital of Hilb,
Rogal and Hamilton Company of Texas. Parent, as sole shareholder of
Surviving Corporation and the recipient of the Merging Entity Dividend,
shall have adopted resolutions by its Board of Directors, which,
immediately after payment of the Merging Entity Dividend, contribute the
Merging Entity Dividend to the capital of Parent's wholly-owned
subsidiary (and grandfathered managing general agent), Hilb, Rogal and
Hamilton Company of Texas ("HRH Texas").
6.20 Pre-Merger Distribution. Immediately prior to the Merger, all
benefit and burden relating to the dispute between Merging Entity and
PacifiCare, Inc. shall have been distributed to Shareholders ("Pre-Merger
Distribution").
7. CONDITIONS PRECEDENT TO PERFORMANCE BY SHAREHOLDERS AND MERGING
ENTITY. The obligation of Shareholders and Merging Entity to consummate
the transactions contemplated in this Agreement shall be subject to the
satisfaction or fulfillment on or prior to the Closing Date, of the
following conditions, in addition to any other conditions contained in
this Agreement, each of which may be waived, collectively, by a majority
in interest of Shareholders and Merging Entity:
7.1 Representations. Shareholders shall not have discovered any
material error, misstatement or omission in any of the representations
and warranties made by Parent contained in this Agreement, and all
representations and warranties of Parent contained in this Agreement
shall be true and correct in all material respects on and as of the
Closing Date with the same force and effect, except as otherwise approved
in writing by Shareholders and Merging Entity, as though such
representations and warranties had been made on and as of the Closing
Date
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 formation of
HRH Merger Subsidiary and for the consummation of this Agreement to have
been taken by it and HRH Merger Subsidiary
7.3 Effective Registration Statement. The registration statement
on Form S-4 under the Securities Act of 1933 referred to in Section 2.34
hereof shall have been amended or supplemented and be effective under
such Act and not the subject of any "stop order" or threatened "stop
order" and the amended or supplemented prospectus shall have been
delivered to Shareholders and Merging Entity.
7.4 Prospectus Approval. After delivery and review of the
aforementioned amendment or supplement to Parent's S-4 registration
statement, and subject to the limitations on disapproval set forth in
Section 3.5, Shareholders and Merging Entity shall have approved this
Agreement and the consummation of all transactions contemplated therein.
8. POST-MERGER COVENANTS.
8.1 Post-Merger Covenants of Parent. Parent covenants to
Shareholders as follows:
A. Collection. To cause Surviving Corporation to use its
reasonable business efforts, at least comparable in quality to those of
Merging Entity prior to the Effective Date, to collect all notes
receivable and accounts receivable as described in Section 2.27.
B. Payment. To cause Surviving Corporation to pay timely all
liabilities of Merging Entity which have been properly reserved for in
the Merger Balance Sheet, as defined in Section 8.2.A.
8.2 Post-Merger Covenants of Shareholders. Shareholders, jointly
and severally, covenant to Parent as follows:
A. Delivery of Merger Balance Sheet. To cause to be
delivered to Parent, at Parent's expense not to exceed $7,500, as soon
after the Closing Date as is practicable, and in all events no later than
sixty (60) days after the Effective Date, the Merger Balance Sheet, as
defined in Section 14.6(a), and its related work papers and other
financial documents prepared therefor. The Merger Balance Sheet will be
true and correct, will be in accordance with the books and records of
Merging Entity, will present fairly the financial conditions and results
of operations of Merging Entity as of the date and for the period
indicated, will not contain any untrue statement of a material fact nor
will omit to state any material fact required to be stated to make the
Merger Balance Sheet not misleading.
B. Post-Merger Filings. To cause to be timely filed, at no
expense which has not previously been reserved for on the Merger Balance
Sheet, all federal, state and local tax returns of all kinds required to
be filed by Merging Entity for all tax periods ending on or prior to the
Effective Date ("Post-Merger Filings"). All Post-Merger Filings will be
true and correct in all material respects and, prior to actual filing
thereof, Shareholders shall deliver drafts of such filings to Parent for
its review.
C. Employee Benefit Plans. Unless written directive from
Parent stating otherwise is delivered to Shareholders prior to the
Closing Date , to cause, at no expense which has not previously been
reserved for in the Merger Balance Sheet, all Employee Benefit Plans of
Merging Entity to have been terminated with provisions having been made
for distribution thereof in accordance with the terms of such Employee
Benefit Plan. Shareholders specifically understand that they have
covenanted hereby to take any and all actions reasonably required to
eliminate any and all potential liability of Surviving Corporation and
Parent with respect to such Employee Benefits Plans.
D. Bind Tail Coverage. To bind the tail coverage referenced
in Section 6.12 as soon after the Effective Date as is possible and in no
event later than seven (7) days after the Effective Date, and to pay any
and all deductibles accruing under such tail policy during the period of
three years after the Effective Date. Shareholders acknowledge that
Parent shall have the right to bind tail coverage for Merging Entity if
Shareholders do not produce an appropriate certificate of insurance
within thirty (30) days after Closing. Any costs for such tail coverage
shall 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.
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 until October 31, 2001.
9.2 Survival of Representations and Warranties of Shareholders.
Except for the specific contingencies detailed below in subparagraphs
(vii) and (x) 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 October 31, 2001.
9.3 Indemnification Agreement by Shareholders. Shareholders,
jointly and severally, shall indemnify and hold harmless Parent and
Surviving Corporation, 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 to
the extent not reflected or reserved against in full in the Merger
Balance Sheet, whether federal, state, local or otherwise, resulting from
a lawful deficiency for any time period prior to the Effective Date;
(iii) 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;
(iv) Any loss, damage, liability or deficiency resulting from
any misrepresentation, breach of warranty or nonfulfillment of any
covenant or agreement on the part of Shareholders or Merging Entity, or
any of them, under the terms of this Agreement, or from any
misrepresentation in or omission from any financial statement,
certificate, Schedule, exhibit or other document proposed by or at the
direction of Shareholders, or any of them, and attached to this Agreement
or delivered or to be delivered to Parent under the terms of this
Agreement;
(v) 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;
(vi) 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 $275,000;
(vii) 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 to the extent not reflected or reserved against in full in
the Merger Balance Sheet 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;
(viii) All deductibles arising under the tail coverage
referenced in Section 6.12;
(ix) Any and all claims, demands, actions or causes of action
arising out of or in any way relating to the Pre-Merger Distribution;
(x) 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
(xi) All demands, claims, actions, suits, proceedings, loss,
damage, liability, judgments, costs and expenses (including, without
limitation, court costs, experts' and reasonable attorneys' fees at the
trial level and in connection with all appellate proceedings) incident to
any of the foregoing.
9.4 Indemnification Agreement by Parent. Parent shall indemnify
and hold harmless Shareholders, and each of them, and their respective
heirs and personal representatives from and against and in respect of:
(i) Any loss, damage, liability or deficiency resulting from
any misrepresentation, breach of warranty or nonfulfillment of any
covenant or agreement on the part of the Parent under the terms of this
Agreement;
(ii) All demands, claims, actions, suits, proceedings, loss,
damage, liability, judgments, costs and expenses (including, without
limitation, court costs, experts' and reasonable attorneys' fees at the
trial level and in connection with all appellate proceedings) incident to
any of the foregoing.
9.5 Assertion and Limitation of Indemnification Claim. Either the
Shareholders or Parent, as the case may be (an "Indemnified Party"),
shall give notice to the other (an "Indemnifying Party") as soon as
possible after the Indemnified Party has actual knowledge of any claim as
to which indemnification may be sought and the amount thereof, if known,
and supply any other information in the possession of the Indemnified
Party regarding such claim, and will permit the Indemnifying Party (at
its expense) to assume the defense of any third party claim and any
litigation resulting therefrom, provided that counsel for the
Indemnifying Party who shall conduct the defense of such claim or
litigation shall be reasonably satisfactory to the Indemnified Party, and
provided further that the omission by the Indemnified Party to give
notice as provided herein will not relieve the Indemnifying Party of its
indemnification obligations hereunder except to the extent that the
omission results in a failure of actual notice to the Indemnifying Party
and the Indemnifying Party is materially damaged as a result of the
failure to give notice. The Indemnifying Party may settle or compromise
any third party claim or litigation with the consent of the Indemnified
Party which consent may not be unreasonably withheld. Any claim for
indemnification shall be reduced by insurance proceeds or other
applicable recovery received by or for the Indemnified Party. In no
event shall the amount of indemnity provided herein by an Indemnifying
Party exceed the Purchase Price (as defined in Section 14.1) for the
Common Stock.
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.
10. EXPENSES. All expenses (including, without limitation, legal,
accounting and other related expenses such as preparation of Post-Merger
Filings and purchase of the tail insurance) incurred in connection with
this transaction by Merging Entity and Shareholders, or any of them,
shall be the sole responsibility of Merging Entity or Shareholders
(depending upon the nature of the expense), and all expenses incurred by
Parent in connection with this transaction shall be the sole
responsibility of Parent. As stated in Section 8.2.A, Parent is paying
up to $7,500 for the Merger Balance Sheet.
11. DEFAULT.
11.1 Default by Shareholders or Merging Entity. Except as otherwise
expressly provided in this Agreement, if Shareholders or Merging Entity,
or any of them, shall fail to perform or comply with any material
covenant, agreement or condition contained in this Agreement that is
required to be performed or complied with by Shareholders or Merging
Entity on or prior to the Closing Date, then Parent shall have the option
to seek specific performance of this Agreement or to sue such
defaulting party for damages. If Parent elects to sue for specific
performance, Shareholders and Merging Entity expressly waive any claim or
defense that Parent has an adequate remedy at law. 11.2 Default
by Parent. Except as otherwise expressly provided in this Agreement,
if Parent shall fail to perform or comply with any covenant, agreement or
condition contained in this Agreement that is required to be performed or
complied with by Parent on or prior to the Closing Date, then
Shareholders and Merging Entity, at the unanimous option of Shareholders
and Merging Entity, may seek specific performance of this Agreement or
may elect to sue for damages. If Shareholders and Merging Entity elect
to sue for specific performance, Parent expressly waives any claim or
defense that Shareholders and Merging Entity have an adequate remedy at
law.
12. NOTICES. All notices or other communications permitted or
required to be given hereunder by any party to any other party shall be
in writing and shall be delivered personally or by telecopier, telex or
other similar communication or sent by registered or certified mail,
postage prepaid:
(a) If to Shareholders or Merging Entity:
Mr. Gerald Stevenson, President
Stevenson Insurance Services, Inc.
7324 S. W. Freeway, #900
Houston, Texas 77074
With copy to:
Mark B. Hughes, Esquire
Brown, Parker & Leahy, L.L.P.
1200 Smith Street, Suite 3600
Houston, Texas 77002
(b) If to Parent or Survivor:
Mr. Andrew L. Rogal, 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. CALCULATION OF HRH STOCK TO BE DELIVERED AND OTHER ADJUSTMENTS.
14.1 Maximum Amount of HRH Stock to be Delivered. The purchase
price (the "Purchase Price") for the Common Stock will be $4,300,000,
before application of the Adjustment Amounts, payable as follows: (i)
$1,000,000 of HRH Stock plus $600,000 as soon after the Merger Effective
Date as practicable; (ii) $900,000 of HRH Stock, plus or minus the Year 1
Purchase Adjustment, if any, fourteen (14) months after Closing (January
4, 1999); (iii) $900,000 of HRH Stock, plus or minus the Year 2 Purchase
Adjustment, if any, twenty-six (26) months after Closing (January 3,
2000) and (iv) $900,000 of HRH Stock, plus or minus the Year 3 Purchase
Adjustment, if any, thirty-eight (38) months after Closing (January 3,
2001). Payments of the Purchase Price are subject to the right of Parent
to assert set-off in addition to any reduction arising as a result of the
Adjustment Amounts.
14.2 Definitions. "Year 1" shall mean the period November 1, 1998,
through October 31, 1999. "Year 2" shall mean the period November 1,
1999, through October 31, 2000. "Year 3" shall mean the period November
1, 2000, through October 31, 2001.
"Agency Profit" shall mean the consolidated net profit as derived
from the next six following sentences, during Year 1, Year 2 or Year 3,
determined in accordance with the GAAP Policy, before any provision for
federal or state income taxes and before any provision of amortization of
intangibles attributable to the continuing operations of Merging Entity.
Agency Profit under Parent's pricing formula means the commission income
less direct expenses (compensation and benefits (of Shareholders and
staff) and promotion, travel and entertainment) of Merging Entity's book
of business during the first, second and third 12 month periods following
Closing determined in accordance with generally accepted accounting
principles and policies adopted by HRH, before amortization of
intangibles, and federal and state income taxes but after a set overhead
charge (in lieu of all other operating charges such as depreciation,
interest, rent, and other operating and overhead expenses). Commission
income, under this formula, means new and renewal commission and fee
income generated by Merging Entity's accounts and production staff,
exclusive of income derived from brokered business, contingency income,
investment income or override commissions. Further, commission income
shall include, under this formula, 20% of the first year only of any
property and casualty business generated from Merging Entity's accounts,
but written through other of Parent's offices (i.e. a 20% finder's fee).
To determine Agency Profit, it will be necessary to estimate an amount of
expense paid by Parent's other Houston office and to be charged to the
continuing operations of Merging Entity for facilities, depreciation,
interest, office operations and other expenses (primarily professional
fees, insurance and regional expenses) related to Merging Entity's
continuing operations. An amount of $300,000 (approximately 16.7% of
Merging Entity's commission income) will be deducted from the Agency
Profit calculation for such costs in Year 1. Thereafter, the charge will
be computed based upon 16.7% of prior year actual commission income used
in determining Agency Profit. Parent shall cause the Agency Profit to be
determined and the amount thereof communicated to Shareholders, as soon
as is reasonably practicable after each of Year 1, Year 2 and Year 3 and,
in all events, within sixty-two (62) days after each such year ("Annual
Income Statement").
"Target Profit" shall mean that amount of Year 1 Agency Profit, Year
2 Agency Profit and Year 3 which would eliminate any negative Year 1
Purchase Adjustment, Year 2 Purchase adjustment and Year 3 Purchase
Adjustment, respectively, which for each such Year is as follows:
Year 1 $ 700,000
Year 2 $ 800,000
Year 3 $ 900,000
14.3 Determination of Annual Income Statements. If within thirty
days following delivery of an Annual Income Statement, Shareholders have
not given Parent notice of its objection to such Annual Income Statements
(such notice must contain a statement of the basis of Shareholders'
objections), then the Agency Profit reflected in the Annual Income
Statement will be used in computing the Year 1, Year 2 or Year 3 Purchase
Adjustment. If Shareholders give such notice of objection and the items
in dispute cannot be resolved by agreement between Shareholders and
Parent within sixty (60) days, then the issues in dispute will be
submitted to a mutually agreed firm of certified public accountants or,
in absence of agreement, a neutral Big Six accounting firm in Houston
selected randomly (the "Accountants") for resolution. If issues in
dispute are submitted to the Accountants for resolution, (i) each party
will furnish to the Accountants such workpapers and other documents and
information relating to the disputed issues as the Accountants may
request and are available to that party, and will be afforded the
opportunity to present to the Accountants any material relating to the
determination and to discuss the determination with the Accountants; (ii)
the determination by the Accountants, as set forth in a notice delivered
to both parties by the Accountants, will be binding and conclusive on the
parties; and (iii) the non-prevailing party, as determined by the
Accountants, shall pay the fees of the Accountants for such determination
and, in lieu of any such designation by the Accountants, such fees shall
be paid 50% by Parent and 50% by Shareholders.
14.4 Value of HRH Stock. HRH Stock shall be valued by taking the
average of the New York Stock Exchange closing price for the previous 10
trading days from that trading date which is two weeks prior to the due
date. For example, the HRH Stock to be delivered as of November 1, 1998,
shall be valued at the average closing price of Parent's common stock for
the period October 5, 1998, through October 16, 1998 (with such value for
the Closing being referred to hereafter as "Closing Stock Value").
14.5. Purchase Adjustment.
(a) If Year 1 Agency Profit exceeds $700,000, the Year 1
Purchase Adjustment shall be an aggregate payment of HRH Stock to
Shareholders equal to the amount of such excess. If Year 1 Agency Profit
is less than $700,000, the Year 1 Purchase Adjustment shall be equal to
the lesser of (i) $600,000; or (ii) two times the remainder when Year 1
Agency Profit is subtracted from Target Profit. For example: (i) if
Target Profit less Year 1 Agency Profit equals $100,000, the fourteen
month payment of HRH Stock would be reduced in the aggregate by $200,000
down to the aggregate value of $700,000; (ii) if the Target Profit less
Year 1 Agency Profit equals or exceeds $300,000, the fourteen month
payment of HRH Stock would be reduced in the aggregate by the maximum
amount of $600,000 down to the minimum amount of $300,000; and (iii) if
Year 1 Agency Profit equals $800,000, Shareholders shall receive an
additional $100,000 of HRH Stock.
(b) If Year 2 Agency Profit exceeds $800,000, the Year 2
Purchase Adjustment shall be an aggregate payment of HRH Stock to
Shareholders equal to the amount of such excess. If Year 2 Agency Profit
is less than $800,000, the Year 2 Purchase Adjustment shall be equal to
the lesser of (i) $600,000; or (ii) two times the remainder when Year 2
Agency Profit is subtracted from Target Profit. For example: (i) if
Target Profit less Year 2 Agency Profit equals $150,000, the twenty-six
month payment of HRH Stock would be reduced in the aggregate by $300,000
down to the amount of $600,000; (ii) if the Target Profit less Year 2
Agency Profit equals or exceeds $300,000, the twenty-six month payment of
HRH Stock would be reduced in the aggregate by the maximum amount of
$600,000 down to the minimum amount of $300,000; and (iii) if Year 2
Agency Profit equals $1,000,000, Shareholders shall receive an additional
$200,000 of HRH Stock.
(c) If Year 3 Agency Profit exceeds $900,000, the Year 3
Purchase Adjustment shall be an aggregate payment of HRH Stock to
Shareholders equal to the amount of such excess. If Year 3 Agency Profit
is less than $900,000, the Year 3 Purchase Adjustment shall be equal to
the lesser of (i) $600,000; or (ii) two times the remainder when Year 3
Agency Profit is subtracted from Target Profit. For example: (i) if
Target Profit less Year 3 Agency Profit equals $200,000, the thirty-eight
month payment of HRH Stock would be reduced in the aggregate by $400,000
down to the amount of $500,000; (ii) if the Target Profit less Year 3
Agency Profit equals or exceeds $300,000, the thirty-eight month payment
of HRH Stock would be reduced in the aggregate by the maximum amount of
$600,000 down to the minimum amount of $300,000; and (iii) if Year 3
Agency Profit equals $1,200,000, Shareholders shall receive an additional
$300,000 of HRH Stock.
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 the close of business on October 31, 1998, 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 the tax and financial accounting so that Surviving Corporation
shall not be responsible for any liabilities unless and to the extent the
same are reflected on the Merger Balance Sheet. The Merger Balance Sheet
shall be deemed accepted by Parent if no objections thereto are made
within fifteen (15) days of delivery. If Parent objects to the Merger
Balance Sheet within fifteen (15) days of delivery, then the parties
shall have fifteen (15) days to resolve any objections of Parent to the
Merger Balance Sheet. If the parties are unable to resolve such
differences, the procedure set forth in Section 14.2 shall be used.
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 all furniture, fixtures
and equipment other than the furniture purchased recently for Brian
Stevenson, and intangible assets other than cash, cash equivalents and
net receivables are then subtracted from that remainder (total assets -
total liabilities - all furniture, fixtures and equipment other than the
furniture purchased recently for Brian Stevenson - intangible assets
other than cash, cash equivalents and net receivables).
(c) Adjustment. The number of shares to be delivered by
Parent to Shareholders pursuant to Section 1.4 shall be adjusted as
follows:
(i) If Tangible Net Worth exceeds $275,000 (with such
excess being referred to as "Excess Tangible Net Worth"), then the number
of shares shall be increased by the number of shares determined by
dividing Excess Tangible Net Worth by the Closing Stock Value; and
(ii) If Tangible Net Worth is less than $275,000 (with
such shortfall being referred to as "Insufficient Tangible Net Worth"),
then the number of shares shall be decreased by the number of shares
determined by dividing Insufficient Tangible Net Worth by the Closing
Stock Value.
In the event of an increase in the number of shares of common stock
of Parent to be issued to Shareholders, such additional shares shall be
issued, promptly after determination of such number, by Parent to
Shareholders in the same proportion as set forth in Section 1.4(a). In
the event of a decrease in the number of shares of common stock of
Parent, such shares shall be assigned, promptly after determination of
such number, to Parent in the same proportions as set forth in Section
1.4(a). The value of any shares of HRH 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).
15. MISCELLANEOUS PROVISIONS.
15.1 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.
15.2 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
15.3 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.
15.4 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.
15.5 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.
15.6 Survival. Notwithstanding anything in the foregoing to the
contrary, any rights which Shareholders or Parent may have at law or in
equity against the other for a misstatement or omission by such party
which should have been made, corrected or disclosed by such party, at or
prior to the Effective Date, shall survive for the applicable period
provided by law or equity for the remedy of such act or omission.
15.7 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.
15.8 Nonsolicitation Covenant. Each of the Shareholders, by
signature hereto, covenants that he shall not for a period of five (5)
years after the Effective Date, directly or indirectly, except on behalf
of Parent's Houston operation, its successors or assigns, solicit or
accept risk management, insurance or bond business from any of the
customers of Merging Entity as of the moment immediately preceding the
Effective Date. Each of the Shareholders, by signature hereto,
acknowledges: (i) that this covenant is ancillary to this Merger
Agreement, is integral hereto and is independent of any other provision
herein, (ii) that this covenant is reasonably necessary for the
protection of Parent's Houston operation's legitimate business interests;
(iii) that this covenant poses no undue hardship on the Shareholders and
is reasonably limited as to duration and scope; and (iv) that this
covenant is in addition to any covenants which Shareholders may make in
any employment or other agreements executed or to be executed with Hilb,
Rogal and Hamilton Company of Texas. Further, if any part of this
covenant is deemed overbroad or void as against public policy, each of
the Shareholders, by signature hereto, acknowledges that such invalid
portions shall be severable from this covenant and specifically requests
that, upon such event, this covenant be reformed ("blue-pencilled") to
permit Parent and its Houston operation to obtain the maximum permissible
benefit from this covenant.
15.9 Acceptance. The binding date of acceptance of this Agreement
shall be the Date on which the last of the parties executes the same.
15.10 Condition Subsequent. The Board of Directors of Parent
has not yet approved the transaction contemplated herein and such
approval at the Board's meeting on November 9, 1998, is the Condition
Subsequent. If the Condition Subsequent is not fulfilled by 5:00 p.m.
E.S.T. on November 9, 1998, then the Merger will be of no effect. If the
Condition Subsequent is timely approved, the parties shall cause the
Articles of Merger to be filed as soon thereafter as practicable and
Parent shall deliver the $1,000,000 of HRH Stock and $600,000 by wire
transfer as soon as practicable. Each party covenants to operate its
business the ordinary course between the Closing Date and the Merger
Effective Date, so that the Merger Balance Sheet shall be accounted for
as of the Effective Date, with no changes other than the transactions
contemplated herein arising outside of the ordinary course of business
prior to the Merger Effective Date.
EXECUTED by Shareholders and Merging Entity at Houston, Texas, this
30th day of October, 1998.
SHAREHOLDERS:
______________________________________
Gerald Stevenson
______________________________________
Brian Stevenson
______________________________________
Gregory Stevenson
______________________________________
Richard Weinstein
MERGING ENTITY:
STEVENSON INSURANCE SERVICES, INC.
By____________________________________
___________________________________, its
__________________________________
EXECUTED by Parent and Survivor at Glen Allen, Virginia, this 30th
day of October, 1998.
HILB, ROGAL AND HAMILTON COMPANY
By____________________________________
___________________________________, its
___________________________________
HRH MERGER COMPANY
By____________________________________
___________________________________, its
___________________________________
a:\merger-3 [wls] Edited: October 29, 1998 9:10 AM Printed: October
29, 1998 at 9:10 AM
