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 ACQUISITION OF
HUNT INSURANCE GROUP, INC.
The following information is furnished to supplement and complete the
information contained in the Prospectus dated February 12, 1992 ("Prospectus"),
relating to the offering of shares of the Common Stock of Hilb, Rogal and
Hamilton Company ("Company") to the shareholders of Hunt Insurance Group, Inc.
("Hunt") of Tallahassee, Florida to consummate the merger of Hunt and the
Company.
Terms of the Transaction
(a) (1) Effective on October 1, 1998, a subsidiary of the Company will
consummate an Agreement of Merger with Hunt whereby the shareholders of Hunt
will receive shares of Common Stock of the Company valued at $1,000,000 based on
the average closing price for the period September 3, 1998 through September 17,
1998 ("Shares") plus five 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 2.32). The number of shares
distributed to the shareholders of Hunt 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 five year period which may increase the purchase
price up to a maximum of shares valued at $745,000 in each year (subject to
a minimum, before any applicable indemnity, of shares valued at $220,000 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.
Hilb, Rogal and Hamilton Company of Tallahassee, a newly formed subsidiary
of the Company, will merge into Hunt Insurance Group, Inc. and the surviving
corporation will be a wholly-owned subsidiary of the Company (the "Merger").
(2) The Merger with Hunt by the Company has been agreed upon because
the Company is engaged in the business of owning insurance agencies and because
the shareholders of Hunt have determined that a merger with the Company is
beneficial to the growth of Hunt's operations.
Hunt's operations will add approximately 40 employees and $3,500,000 of
revenues to the Company.
<PAGE>
(3) Hunt was incorporated in 1984 in the state of Florida, and has
10,000 authorized shares of common stock, $1 par value. There are 5,375 shares
issued and outstanding.
(4) There are no material differences between the rights of the
security holders of Hunt and the rights of security holders of the Company.
(5) The acquisition will be treated using the purchase method of
accounting for acquisitions under generally accepted accounting principles.
(6) Hunt 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)(E).
(c) The acquisition agreement is incorporated into this supplement as
Exhibit 2.32.
Pro Forma Financial Information
See attached - Schedule A
Material Contracts with Seller
There have been no material contracts between the Company and Hunt prior to
the proposed effective date of the Agreement of Merger.
Information with Respect to
Hunt Insurance Group, Inc.
Hunt was founded in 1984 and maintains its office in Tallahassee, Florida.
Hunt specializes in administration of self-insurance funds and reinsurance
programs directed primarily at law enforcement agencies. Services provided
include administration fees (approximately 92% of commissions and fees),
personal and commercial property and casualty insurance (approximately 3% of
commissions and fees) and group and individual life and health insurance
products (approximately 5% of commissions and fees).
Common Stock and Dividend Data
There is no established public trading market for the stock of Hunt. There
are five shareholders of the corporation. See Shareholder Information below for
information regarding shares held and information regarding authorized and
issued shares.
There were no common stock dividend distributions during the six months
ended June 30, 1998 or the years ended December 31, 1997, 1996 and 1995.
<PAGE>
Shareholder Information
(a) (1) We are not asking you for a proxy and you are requested not send
us a proxy.
(2) & (3) Hunt has agreed to submit the acquisition agreement to its
shareholders for adoption by unanimous written consent after receipt and review
of the Prospectus. Since the acquisition can be completed only with the
unanimous consent of the shareholders of the company being acquired (Hunt),
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 (Hunt) in the proposed transaction.
(6) Hunt has 10,000 authorized shares of common
stock,$1 par value. Shares outstanding are as follows:
Number of
Shareholders Common Percentage
Shares
----------------------------------------------
John E. Hunt, Jr. 3,635 67.6%
Richard T. Hunt 735 13.7
Scott P. Hunt 735 13.7
David J. Jilk 135 2.5
P. Daniel Condon 135 2.5
------ ------
5,375 100.0%
====== ======
(7) Upon completion of the proposed acquisition,no shareholder
of Hunt will be serving as a director or executive officer of the registrant.
Experts
The consolidated financial statements of Hunt Insurance Group, Inc. as of
and for the year ended December 31, 1997 appearing in this supplement to the
Amended Prospectus dated February 12, 1992, and in the Registration Statement
have been audited by Catledge, Sanders & Sanders, independent auditors, as set
forth in their report thereon appearing elsewhere herein and are included in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
Hilb, Rogal and Hamilton Company
Date of this Supplement: September 29, 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 statements for the six months ended
June 30, 1998 and the year ended December 31, 1997 give effect to the proposed
acquisition of Hunt Insurance Group, Inc. ("Hunt"); and the acquisition of
certain assets and liabilities of six insurance agencies purchased in 1997 and
one insurance agency purchased in 1998. The pro forma information is based on
the historical financial statements of Hilb, Rogal and Hamilton Company and the
acquired agencies, giving effect to the transactions under the purchase method
of accounting and the assumptions and adjustments in the accompanying notes to
the pro forma financial statements. The pro forma consolidated income
statements give effect to the purchase method acquisitions and proposed
purchase method acquisitions as if they had occurred on January 1, 1997.
The pro forma condensed consolidated 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, Hunt 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> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS $28,144,592 $592,936 (421,130) (1),(3) (700,000) (2) $27,616,398
INVESTMENTS 2,509,086 0 2,509,086
RECEIVABLES & OTHER 49,310,706 320,458 0 (3) 49,631,164
--------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 79,964,384 913,394 N/A (1,121,130) 79,756,648
INVESTMENTS 4,491,383 0 4,491,383
PROPERTY & EQUIPMENT 11,303,758 205,137 (205,137) (1) 150,000 (3) 11,453,758
INTANGIBLE ASSETS 82,640,121 0 0 3,869,535 (3) 86,509,656
OTHER ASSETS 5,419,956 23,352 5,443,308
--------------------------------------------------------------------------------------
TOTAL ASSETS $183,819,602 $1,141,883 N/A $2,693,268 $187,654,753
LIABILITIES & EQUITY:
PREMIUMS PAYABLE-INS CO $68,349,289 $228,346 $68,577,635
OTHER ACCRUED LIABILITIES 23,279,515 262,270 0 23,541,785
--------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 91,628,804 490,616 N/A 0 92,119,420
LONG-TERM DEBT 31,598,133 0 0 1,544,535 (2) 33,142,668
OTHER LONG-TERM LIAB. 10,032,807 0 800,000 (2) 10,832,807
SHAREHOLDERS' EQUITY
COMMON STOCK 9,352,650 5,375 (5,375) (4) 1,000,000 (2) 10,352,650
RETAINED EARNINGS 41,207,208 645,892 (645,892) (4) 41,207,208
-------------------------------------------------------------------------------------
50,559,858 651,267 N/A 348,733 51,559,858
-------------------------------------------------------------------------------------
$183,819,602 $1,141,883 N/A $2,693,268 $187,654,753
=====================================================================================
</TABLE>
(1) TO ADJUST FOR ASSETS AND LIABILITIES NOT ACQUIRED.
(2) TO REFLECT PURCHASE PRICE OF ASSETS AND LIABILITIES ACQUIRED SUBSEQUENT
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>
<TABLE>
<CAPTION>
HILB, ROGAL & HAMILTON COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
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 $1,790,576 0 $92,822,437
INTEREST AND OTHER INCOME 3,589,614 18,676 ($17,500) (1) 3,590,789
--------------------------------------------------------------------------
TOTAL REVENUES 94,621,475 1,809,252 (17,500) 96,413,226
OPERATING EXPENSES:
COMPENSATION AND BENEFITS 49,287,468 849,704 0 50,137,172
OTHER OPERATING EXPENSES 22,735,267 385,781 (10,504) (2) 23,110,542
AMORTIZATION OF INTANGIBLES 3,896,708 0 107,577 (3) 4,004,282
INTEREST EXPENSE 1,099,061 1,336 81,429 (4) 1,181,822
-------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 77,018,504 1,236,821 178,502 78,433,818
-------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 17,602,971 572,431 (196,002) 17,979,408
INCOME TAXES 7,211,833 150,572 (5) 7,362,400
------------------------------------------------------------------------
NET INCOME $10,391,138 $572,431 ($346,574) $10,617,008
========================================================================
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 55,556 12,489,693
========================================================================
WEIGHTED AVERAGE SHARES
OUTSTANDING 12,663,328 116,667 12,779,995
WEIGHTED AVERAGE SHARES ========================================================================
OUTSTANDING -
Assuming dilution 12,911,810 116,667 13,028,477
========================================================================
</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>
<TABLE>
<CAPTION>
HILB, ROGAL & HAMILTON COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
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 $5,906,310 0 $174,464,721
INTEREST AND OTHER INCOME 5,150,469 129,504 ($135,625) (1) 5,144,348
---------------------------------------------------------------------------
TOTAL REVENUES 173,708,880 6,035,814 (135,625) 179,609,069
OPERATING EXPENSES:
COMPENSATION AND BENEFITS 96,239,782 3,652,279 0 99,892,061
OTHER OPERATING EXPENSES 45,476,904 1,395,126 (88,764) (2) 46,783,266
AMORTIZATION OF INTANGIBLES 8,110,010 0 380,423 (3) 8,490,433
INTEREST EXPENSE 2,037,338 8,655 99,578 (4) 2,145,571
---------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 151,864,034 5,056,059 391,237 157,311,330
---------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 21,844,846 979,755 (526,862) 22,297,738
INCOME TAXES 9,054,995 181,157 (5) 9,236,152
---------------------------------------------------------------------------
NET INCOME $12,789,851 $979,755 ($708,019) $13,061,586
===========================================================================
NET INCOME PER COMMON SHARE $0.98 $0.99
NET INCOME PER COMMON SHARE ===== =====
- assuming dilution $0.97 $0.98
===== =====
SHARES ISSUED AND OUTSTANDING 12,813,023 55,556 12,868,579
===========================================================================
WEIGHTED AVERAGE SHARES
OUTSTANDING 13,099,217 137,500 13,236,717
===========================================================================
WEIGHTED AVERAGE SHARES
OUTSTANDING
- assuming dilution 13,214,719 137,500 13,352,219
===========================================================================
</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>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
FINANCIAL STATEMENTS
Year Ended December 31, 1997
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
YEAR ENDED DECEMBER 31, 1997
C O N T E N T S
Independent Auditors' Report
Balance Sheet,
December 31, 1997 EXHIBIT A
Statement of Income and Retained Earnings,
Year Ended December 31, 1997 EXHIBIT B
Statement of Cash Flows,
Year Ended December 31, 1997 EXHIBIT C
Notes to Financial Statements
December 31, 1997
Management's Discussion and Analysis of
Financial Condition and Results
of Operations
(2)
<PAGE>
Independent Auditor's Report
To The Board of Directors and Stockholders
Hunt Insurance Group, Inc.
2324 Centerville Road
Tallahassee, Florida 32308
We have audited the accompanying balance sheet of HUNT INSURANCE
GROUP, INC. as of December 31, 1997, and the related statements of
income and retained earnings and cash flows for the year then
ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express on opinion
on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements present fairly, in all
material respects, the financial position of HUNT INSURANCE GROUP,
INC. as of December 31, 1997, and the results of its operations and
its cash flows for the year then ended in conformity with generally
accepted accounting principles.
As discussed in Note 12 to the financial statements, management
discovered adjustments necessary to deferred administrator's fees
and directors' fees as of January 1, and December 31, 1997.
Accordingly, these financial statements have been revised to
include the correct amounts.
CATLEDGE, SANDERS & SANDERS
Certified Public Accountants
July 29, 1998
(3)
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
BALANCE SHEET
DECEMBER 31, 1997
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 933,615
Receivables:
Administrator's Fees 242,660
Other 19,959
Prepaid expenses and other current
assets 219,492
----------
TOTAL CURRENT ASSETS 1,415,726
PROPERTY AND EQUIPMENT, NET 149,884
OTHER ASSETS 23,528
----------
$1,589,138
LIABILITIES AND STOCKHOLDERS' EQUITY ==========
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 463,321
Deferred administrator's fees 779,270
Current portion of long-term debt 36,407
----------
TOTAL CURRENT LIABILITIES 1,278,998
----------
LONG-TERM DEBT 16,641
----------
SHAREHOLDERS' EQUITY
Common Stock, par value $1, authorized
10,000 shares; issued 5,375 shares 5,375
Paid in excess of par value 216,082
Retained Earnings 72,042
----------
293,499
----------
$1,589,138
==========
Read Accompanying Notes
EXHIBIT A
(4)
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
STATEMENT OF INCOME AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1997
REVENUES
Commissions and fees $3,079,274
Investment and other income 25,728
----------
3,105,002
OPERATING EXPENSES ----------
Compensation and employee
benefits 2,033,751
Other operating expenses 741,750
Interest expense 8,655
----------
2,784,156
----------
INCOME BEFORE INCOME TAXES 320,846
Income taxes 130,652
----------
NET INCOME 190,194
Retained earnings,
January 1, 1997 ( 118,152)
----------
RETAINED EARNINGS,
DECEMBER 31, 1997 $ 72,042
===========
NET INCOME PER COMMON SHARE:
BASIC $ 36.04
DILUTED $ 36.04
Read the Accompanying Notes
EXHIBIT B
(5)
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (Exhibit B) $ 190,194
Adjustments to reconcile net income to net
cash flows provided by operating activities:
Depreciation expense 67,943
Directors' fees paid by issuance of
capital stock 27,972
Decrease in accounts receivable 567,083
Increase in prepaid expense and other
current assets 13,753
Decrease in other assets 27,178
Decrease in accounts payable
and accrued expenses ( 101,678)
Increase in deferred administrator's fees 79,122
Net realized gains on available-for-sale
securities ( 998)
Gain on disposition of equipment ( 1,474)
-------------
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 869,095
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment ( 65,064)
Proceeds from sale of equipment 10,757
Loans to officers and employees ( 112,829)
Net cash flows used by ------------
investing activities ( 167,136)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of short-term debt ( 54,428)
Repayment of long-term debt ( 22,038)
Net cash flows used by ------------
financing activities ( 76,466)
-------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 625,493
Cash and cash equivalents, January 1, 1997 308,122
-------------
CASH AND CASH EQUIVALENTS, DECEMBER 31, 1997 $ 933,615
=============
SUPPLEMENTAL DISCLOSURES
Interest paid $ 8,655
Income taxes paid $ 37,688
Read the Accompanying Notes
EXHIBIT C (6)
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
HUNT INSURANCE GROUP, INC. is a Florida Corporation located in
Tallahassee, Florida. Its income is derived principally from
management of self-insurance funds for law enforcement agencies
in the State of Florida, consulting fees, and insurance commissions.
ACCOUNTING METHOD - Assets, liabilities, income and expenses are
recognized on the accrual basis of accounting.
DEPRECIATION - Property and equipment are depreciated over the
estimated useful lives of the assets by use of accelerated and
straight-line methods.
CASH AND CASH EQUIVALENTS - For purposes of the statement of cash
flows, the Company considers all highly liquid debt instruments
purchased with a maturity date of three months or less to be cash
equivalents.
ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could
differ from those estimates.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1997 consist of the following:
Classification Cost
-------------- --------
Automobiles $ 54,484
Communication Equipment 58,100
Computer Equipment 285,332
Furniture & Equipment 180,723
Leasehold Improvements 67,745
--------
Total Cost 646,384
Less Accumulated Depreciation 496,500
--------
Net Property and Equipment $149,884
========
Depreciation expense for 1997 was $67,943.
NOTE 3 - RENT
The Company rents its physical location on a month-to-month basis
from its major stockholders. Total rents paid for 1997 were
$110,098.
(7)
<PAGE>
NOTES TO FINANCIAL STATEMENT (Continued)
NOTE 4 - INCOME TAX EFFECT
Various income and expense items of the Company are non-taxable or non-
deductible for Federal and State income taxes. As a result, the Company's
taxable income is $274,925.
Income tax expense is computed as follows:
Federal Florida Total
-------------------------------
Income Tax Expense $112,002 $18,650 $130,652
Income Tax Per Tax Returns 90,471 15,710 106,181
-------- ------- --------
Reduction in Deferred Tax Asset $ 21,531 $ 2,940 $ 24,471
======== ======= ========
The balance of the deferred tax asset of $36,740, resulting from deferred
compensation, is included in the financial statements as an other current
asset.
NOTE 5 - NOTES PAYABLE Total Current Long-Term
Debt Portion Portion
------- ------- ---------
Description
Bank note, payable monthly at $602
including interest at 8.75% per annum
collateralized by $27,911 of automotive
equipment. $22,142 $ 5,501 $16,641
Bank note, payable monthly at $3,403,
plus interest at prime rate of
Sun Bank. Principal balance due on
May 17, 1998. Management intends to
renew at the same monthly repayment
terms for an additional year. No
collateral. 30,656 30,656
Bank lines of credit, no collateral,
total commitment of $700,000. 250 250
------- ------- -------
Totals $53,048 $36,407 $16,641
Scheduled future maturities of debt outstanding at December 31, 1997 are:
1998 - $36,407; 1999 - $6,002; 2000 - $6,547; 2001 - $4,092.
(8)
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 6 - EQUIPMENT LEASE COMMITMENTS
The Company leases vehicles and equipment under operating lease agreements.
The future minimum lease payments are as follows:
Year Ended Amount
---------- -------
12/31/98 $16,738
12/31/99 12,802
12/31/00 12,802
12/31/01 9,964
-------
Total $52,306
=======
NOTE 7 - CASH DEPOSITS IN EXCESS OF INSURED LIMITS
The company maintains bank accounts with balances in excess of the
federally insured limits.
NOTE 8 - CONTINGENCIES
The Company has entered into an indemnity agreement with one of the
self-insurance funds it administers. The Company agreed to hold the
Fund harmless from any liability the Fund incurs as a result of a
legal action against the Fund, if the liability is the result of
the Company's negligence. The legal action is for $758,034 plus
interest and fees. The Fund's attorneys are contesting the legal
action. The Company's attorneys are of the opinion the Company will
not incur liability as a result of this matter. Also, the Company
has insurance coverage available to cover this type of claim.
Therefore, no liability is provided for this contingency.
NOTE 9 - RISKS AND UNCERTAINTIES
The Company's administration contracts are with a small number of
self-insurance funds. Loss of a major contract agreement could
have a significant financial impact on the Company.
NOTE 10 - PENSION PLAN
The Company has a 401-K plan covering substantially all of its
employees. The plan allows employees to defer up to 15% of their
compensation on an elective, pretax basis, subject to the maximum
limit allowed by law. The Company also has the option each year to
make a discretionary contribution to the plan on behalf of the
employees. Company contributions and other expenses of the plan
were $66,685 for the current year.
(9)
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 11 - RESTATEMENT OF DECEMBER 31,1997 FINANCIAL STATEMENTS
Management discovered adjustments necessary to the balances of
deferred administrator's fees, and directors' fee expense, as of
the current and prior year ends. Accordingly, these financial
statements have been revised to include the correct balances as
follows:
Revised Prior
Financial Financial
Statements Statements Change
---------- ---------- --------
Prepaid Expenses $ 36,740 $ 36,740
Deferred Administrator's Fees $779,270 $510,161 $269,109
Beginning Retained Earnings ($118,152) $264,748 ($382,900)
Net Income $190,194 $144,635 $ 45,559
NOTE 12 - CAPITAL STOCK
Board of Directors' fees were paid by issuing 50 shares of the
Company's capital stock. This was recorded as an operating expense
in the amount of $27,972.
(10)
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
FINANCIAL STATEMENTS
Year Ended December 31, 1996
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
YEAR ENDED DECEMBER 31, 1996
C O N T E N T S
Accountants' Report
Balance Sheet,
December 31, 1996 EXHIBIT A
Statement of Income and Retained Earnings,
Year Ended December 31, 1996 EXHIBIT B
Statement of Cash Flows,
Year Ended December 31, 1996 EXHIBIT C
Notes to Financial Statements
December 31, 1996
Management's Discussion and Analysis of
Financial Condition and Results
of Operations
(2)
<PAGE>
Accountants' Report
To The Board of Directors and Stockholders
Hunt Insurance Group, Inc.
2324 Centerville Road
Tallahassee, Florida 32308
We have reviewed the accompanying balance sheet of HUNT INSURANCE
GROUP, INC. as of December 31, 1996, and the related statements
of income and retained earnings and cash flows for the year then
ended, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified
Public Accountants. All information included in these financial
statements is the representation of the management of Hunt
Insurance Group, Inc.
A review consists principally of inquiries of Company personnel
and analytical procedures applied to financial data. It is
substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying financial
statements in order for them to be in conformity with generally
accepted accounting principles.
As discussed in Note 11 to the financial statements, management
discovered adjustments necessary to the financial statements as
of January 1, and December 31, 1996, subsequent to the issuance
of our report on those financial statements dated March 31, 1997.
Accordingly, these financial statements have been restated to
include the necessary adjustments.
CATLEDGE, SANDERS & SANDERS
Certified Public Accountants
July 29, 1998
(3)
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 308,122
Receivables:
Premiums, less allowance for doubtful
accounts of $53,273 350,945
Administrator's fees 468,367
Other 10,390
Prepaid expenses and other current assets 120,416
----------
TOTAL CURRENT ASSETS 1,258,240
PROPERTY AND EQUIPMENT, NET 162,047
OTHER ASSETS 49,707
----------
$1,469,994
==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 564,999
Deferred administrator's fees 700,148
Current portion of long-term debt 90,835
----------
TOTAL CURRENT LIABILITIES 1,355,982
----------
LONG-TERM DEBT 38,679
----------
SHAREHOLDER'S EQUITY
Common Stock, par value $1, authorized
10,000 shares; issued 5,325 shares 5,325
Paid in excess of par value 188,160
Retained earnings ( 118,152)
----------
75,333
----------
$1,469,994
==========
Read Accompanying Notes and Accountants' Report
EXHIBIT A
(4)
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
STATEMENT OF INCOME AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1996
REVENUES
Commissions and fees $2,621,827
Investment and other income 1,761
----------
2,623,588
----------
OPERATING EXPENSES
Compensation and employee benefits 1,724,286
Other operating expenses 709,366
Interest expense 20,824
----------
2,454,476
----------
INCOME BEFORE INCOME TAXES 169,112
Income taxes 67,944
----------
NET INCOME 101,168
Retained earnings,
January 1, 1996 ( 219,320)
----------
RETAINED EARNINGS,
DECEMBER 31, 1996 ($ 118,152)
==========
NET INCOME PER COMMON SHARE:
BASIC $ 19.23
DILUTED $ 19.23
Read the Accompanying Notes and Accountants' Report
EXHIBIT B
(5)
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $2,451,066
Income tax refund 9,639
Interest and other income received 13,309
Cash provided by ----------
operating activities $2,474,014
Cash paid for operating expenses 2,222,838
Cash paid for interest expense 20,824
----------
Cash paid for operating activities 2,243,662
Net cash flows provided by ----------
operating activities 230,352
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment ( 81,125)
Proceeds from sale of equipment 13,533
Proceeds of life insurance
cash values 103,525
Loans to officers and employees ( 41,679)
----------
Net cash flows used by
investing activities ( 5,746)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of long-term debt 29,155
Repayment of short-term debt ( 135,265)
Repayment of long-term debt ( 39,202)
----------
Net cash flows used by
financing activities ( 145,312)
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 79,294
Cash and cash equivalents, January 1, 1996 228,828
-----------
CASH AND CASH EQUIVALENTS, DECEMBER 31, 1996 $ 308,122
===========
RECONCILIATION OF NET INCOME TO NET CASH FLOWS
FROM OPERATING ACTIVITIES
Net income (Exhibit B) $ 101,168
Adjustments to reconcile net income to net
cash flows provided by operating activities:
Depreciation expense 64,433
Directors' fees paid by issue of
capital stock 77,000
Increase in accounts receivable ( 595,361)
Increase in prepaid expense ( 29,827)
Decrease in other assets 100,374
Increase in accounts payable
and accrued expenses 363,354
Increase in deferred administrator's fees 135,001
Loss on disposition of equipment 14,210
-----------
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES $ 230,352
===========
Read the Accompanying Notes and Accountants' Report.
EXHIBIT C
(6)
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
HUNT INSURANCE GROUP, INC. is a Florida Corporation located in
Tallahassee, Florida. Its income is derived principally from
management of self-insurance funds for law enforcement agencies
in the State of Florida, consulting fees, and insurance commissions.
ACCOUNTING METHOD - Assets, liabilities, income and expenses are
recognized on the accrual basis of accounting.
DEPRECIATION - Property and equipment are depreciated over the
estimated useful lives of the assets by use of accelerated and
straight-line methods.
CASH AND CASH EQUIVALENTS - For purposes of the statement of cash
flows, the Company considers all highly liquid debt instruments
purchased with a maturity date of three months or less to be cash
equivalents.
ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ
from those estimates.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 consist of the following:
Classification Cost
-------------- --------
Automobiles $ 74,685
Communication Equipment 44,155
Computer Equipment 245,254
Furniture & Equipment 175,468
Leasehold Improvements 63,370
--------
Total Cost 602,932
Less Accumulated Depreciation 440,885
--------
Net Property and Equipment $162,047
========
Depreciation expense for 1996 was $64,433.
NOTE 3 - RENT
The Company rents its physical location on a month-to-month basis
from its major stockholders. Total rents paid for 1996 were
$106,731.
(7)
<PAGE>
NOTES TO FINANCIAL STATEMENT (Continued)
NOTE 4 - INCOME TAX EFFECT
Various income and expense items of the Company are non-taxable or
non-deductible for Federal and State income taxes. As a result, the Company's
taxable income is $77,483.
Income tax expense is computed on this amount as follows:
Federal Florida Total
------- ------- -------
Income Tax Expense $60,995 $ 6,949 $67,944
Income Tax Per Tax Returns 14,573 4,215 18,788
------- ------- -------
Reduction in Deferred Tax Asset $46,422 $ 2,734 $49,156
======= ======= =======
The balance of the net deferred tax asset of $61,211 is included in the
financial statements as an other current asset. Components of the deferred
tax asset are as follows:
Deferred Administrator's Fees $ 77,457
Deferred Compensation ( 16,246)
--------
Total $ 61,211
========
NOTE 5 - NOTES PAYABLE Total Current Long-Term
Debt Portion Portion
-------- ------- ---------
Description
Bank note, payable monthly at $1,583,
plus interest at prime rate of Sun
Bank. No collateral. $ 9,500 $ 9,500
Bank note, payable monthly at $602
including interest at 8.75% per annum
collateralized by $27,911 of automotive
equipment. 27,184 5,042 $ 22,142
Bank note, payable monthly at $3,403,
plus interest at prime rate of
Sun Bank. Principal balance due on
May 17, 1997. Management intends to
renew at the same monthly repayment
terms for an additional year. No
collateral. 71,472 71,472
Note payable monthly to individual
at $501, including interest at 7.75%
per annum. No collateral. 21,108 4,571 16,537
Bank lines of credit, no collateral,
total commitment of $700,000. 250 250
-------- -------- --------
Totals $129,514 $ 90,835 $ 38,679
======== ======== ========
Scheduled future maturities of outstanding debt at December 31, 1996 are:
1997 - $90,835; 1998 - $10,403; 1999 - $11,298; 2000 - $12,271 and
thereafter - $4,707.
(8)
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 6 - EQUIPMENT LEASE COMMITMENTS
The Company leases vehicles under operating lease agreements.
The future minimum lease payments are as follows:
Year Ended Amount
---------- -------
12/31/97 $ 8,723
12/31/98 3,936
-------
Total $12,659
=======
Total lease expense under these leases for 1996 was $16,858.
NOTE 7 - CASH DEPOSITS IN EXCESS OF INSURED LIMITS
The company maintains bank accounts with balances in excess of
the federally insured limits.
NOTE 8 - CONTINGENCIES
The Company entered into an indemnity agreement with one of the
self-insurance funds it administers. The Company agreed to hold
the Fund harmless from any liability the Fund incurs as a result
of a legal action against the Fund, if the liability is the
result of the Company's negligence. The legal action is for
$758,034 plus interest and fees. The Fund's attorneys are
contesting the legal action. The Company's attorneys are of the
opinion the Company will not incur liability as a result of this
matter. Also, the Company has insurance coverage available to
cover this type of claim. Therefore, no liability is provided for
this contingency.
NOTE 9 - RISKS AND UNCERTAINTIES
The Company's administration contracts are with a small number of
self-insurance funds. Loss of a major contract agreement could
have a significant financial impact on the Company.
NOTE 10 - RESTATEMENT OF DECEMBER 31, 1996 FINANCIAL STATEMENTS
Management discovered adjustments necessary to the balances of
deferred administrator's fees, as of the current and prior year
ends, and directors' fee expense for the current year end.
Accordingly, these financial statements have been revised to
include the correct balances as follows:
Revised Prior
Financial Financial
Statements Statements Change
---------- ---------- --------
Prepaid Expense $120,416 $ 59,205 $ 61,211
Deferred Administrator's Fees $700,148 $700,148
Beginning Retained Earnings ($219,320) $235,460 ($454,780)
Net Income $101,168 $ 29,288 $ 71,880
(9)
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 11 - CAPITAL STOCK
Board of Directors' fees were paid by issuing 175 shares of the
Company's capital stock. This was recorded as an operating expense
in the amount of $77,000.
NOTE 12 - PENSION PLAN
The Company has a 401-K plan covering substantially all of its
employees. The plan allows employees to defer up to 15% of their
compensation on an elective, pretax basis, subject to the maximum
limit allowed by law. The Company also has the option each year to
make a discretionary contribution to the plan on behalf of the
employees. Company contributions and other expenses of the plan
were $56,491 for 1996.
(10)
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
FINANCIAL STATEMENTS
Year Ended December 31, 1995
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
YEAR ENDED DECEMBER 31, 1995
C O N T E N T S
Accountants' Report
Balance Sheet,
December 31, 1995 EXHIBIT A
Statement of Income and Retained Earnings,
Year Ended December 31, 1995 EXHIBIT B
Statement of Cash Flows,
Year Ended December 31, 1995 EXHIBIT C
Notes to Financial Statements
December 31, 1995
Management's Discussion and Analysis of
Financial Condition and Results
of Operations
(2)
<PAGE>
Accountants' Report
To The Board of Directors and Stockholders
Hunt Insurance Group, Inc.
2324 Centerville Road
Tallahassee, Florida 32308
We have reviewed the accompanying balance sheet of HUNT INSURANCE
GROUP, INC. as of December 31, 1995, and the related statements of
income and retained earnings and cash flows for the year then
ended, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified
Public Accountants. All information included in these financial
statements is the representation of the management of Hunt
Insurance Group, Inc.
A review consists principally of inquiries of Company personnel and
analytical procedures applied to financial data. It is
substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements in
order for them to be in conformity with generally accepted
accounting principles.
As discussed in Note 10 to the financial statements, management
discovered adjustments necessary to the financial statements as of
January 1, and December 31, 1995, subsequent to the issuance of our
report on those financial statements dated February 21, 1996.
Accordingly, these financial statements have been restated to
include the necessary adjustments.
CATLEDGE, SANDERS & SANDERS
Certified Public Accountants
July, 29, 1998 (3)
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
BALANCE SHEET
DECEMBER 31, 1995
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 228,828
Receivables:
Administrator's fees 136,896
Other 97,445
Prepaid expenses and other current assets 152,235
---------
TOTAL CURRENT ASSETS 615,404
PROPERTY AND EQUIPMENT, NET 173,098
OTHER ASSETS 150,081
---------
$ 938,583
=========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 201,645
Deferred administrator's fees 565,147
Current portion of long-term debt 232,784
---------
TOTAL CURRENT LIABILITIES 999,576
---------
LONG-TERM DEBT 41,842
---------
SHAREHOLDERS' EQUITY
Common Stock, par value $1, authorized
10,000 shares; issued 5,150 5,150
Paid in excess of par value 111,335
Retained earnings ( 219,320)
---------
( 102,835)
---------
$ 938,583
=========
Read Accompanying Notes and Accountants' Report
EXHIBIT A
(4)
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
STATEMENT OF INCOME AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1995
REVENUES
Commissions and fees $2,125,881
Investment and other income 9,103
----------
2,134,984
OPERATING EXPENSES
Compensation and employee benefits 1,526,302
Other operating expenses 620,018
Interest expense 45,293
----------
2,191,613
INCOME (LOSS) BEFORE INCOME TAXES ( 56,629)
Income tax benefit ( 6,639)
----------
NET INCOME (LOSS) ( 49,990)
Retained earnings,
January 1, 1995 ( 131,052)
Retirement of treasury stock ( 38,278)
----------
RETAINED EARNINGS,
DECEMBER 31, 1995 ($ 219,320)
==========
NET INCOME (LOSS) PER COMMON SHARE:
BASIC ($ 9.71)
DILUTED ($ 9.71)
Read Accompanying Notes and Accountants' Report
EXHIBIT B
(5)
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $2,246,236
Interest and other income received 9,103
----------
Cash provided by
operating activities $2,255,339
Cash paid for operating expenses 2,164,901
Cash paid for interest expense 45,293
Cash paid for income taxes 3,987
----------
Cash paid for operating activities 2,214,181
---------
Net cash flows provided by
operating activities 41,158
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment ( 2,234)
-----------
Net cash flows used by
investing activities ( 2,234)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of long-term debt 101,050
Repayment of long-term debt ( 63,263)
----------
Net cash flows provided by
financing activities 37,787
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 76,711
Cash and cash equivalents, January 1, 1995 152,117
-----------
CASH AND CASH EQUIVALENTS, DECEMBER 31, 1995 $ 228,828
===========
RECONCILIATION OF NET INCOME TO NET CASH FLOWS
FROM OPERATING ACTIVITIES
Net income (loss) (Exhibit B) ($ 49,990)
Adjustments to reconcile net income to net
cash flows provided by operating activities:
Depreciation expense 51,900
Decrease in accounts receivable 108,654
Increase in prepaid expense ( 13,749)
Increase in other assets ( 15,711)
Decrease in accounts payable
and accrued expenses ( 50,686)
Increase in deferred administrator's fees 10,740
-----------
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES $ 41,158
===========
Read the Accompanying Notes and Accountants' Report.
EXHIBIT C
(6)
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
HUNT INSURANCE GROUP, INC. is a Florida Corporation located in
Tallahassee, Florida. Its income is derived principally from
management of self-insurance funds, consulting fees, and
insurance commissions.
ACCOUNTING METHOD - Assets, liabilities, income and expenses are
recognized on the accrual basis of accounting.
DEPRECIATION - Property and equipment are depreciated over the
estimated useful lives of the assets by use of accelerated and
straight-line methods.
CASH AND CASH EQUIVALENTS - For purposes of the statement of cash
flows, the Company considers all highly liquid debt instruments
purchased with a maturity date of three months or less to be cash
equivalents.
ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could
differ from those estimates.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 consist of the
following:
Classification Cost
-------------- --------
Automobiles $111,030
Communication Equipment 44,156
Computer Equipment 198,032
Furniture & Equipment 174,709
Leasehold Improvements 58,596
--------
Total Cost 586,523
Less Accumulated Depreciation 413,425
--------
Net Property and Equipment $173,098
========
Depreciation expense for 1995 was $51,900.
NOTE 3 - RENT
The Company rents its physical location on a month-to-month basis
from its major stockholders. Total rents paid for 1995 were
$125,601.
(7)
<PAGE>
NOTES TO FINANCIAL STATEMENT (Continued)
NOTE 4 - INCOME TAX EFFECT
Various income and expenses of the Company are non-taxable and non-deductible
for Federal and State income taxes. As a result, the Company's net operating
loss is $17,023.
The income tax effect of this loss carried back to 1992 for Federal tax
purposes is a refund due of $6,639.
A deferred tax asset of $110,367, resulting from deferred administrator's
fees, is included in the financial statements as an other current asset.
NOTE 5 - NOTES PAYABLE Total Current Long-Term
Debt Portion Portion
-------- --------- ----------
Description
Bank note, payable monthly at $1,583,
plus interest at prime rate of Sun
Bank. No collateral. $ 28,300 $ 19,000 $ 9,300
Bank note, payable monthly at $623
including interest at 7.40% per annum
collateralized by $20,000 of automotive
equipment. 4,850 4,850
Bank note, payable monthly at $3,403,
plus interest at prime rate of
Sun Bank. Principal balance due on
May 17, 1996. Management intends to
renew at the same monthly repayment
terms for an additional year. No
collateral. 105,487 105,487
Note payable monthly to individual
at $501, including interest at 7.75%
per annum. No collateral. 34,689 3,447 31,242
Bank line of credit, no collateral,
due on demand, interest at .5% above
the bank's prime rate, payable
quarterly. 100,000 100,000
Bank lines of credit, no collateral,
total commitment of $700,000. 1,300 1,300
-------- -------- --------
Totals $274,626 $232,784 $ 41,842
======== ======== ========
Scheduled future maturities of outstanding debt at December 31, 1995 are:
1996 - $232,784; 1997 - $13,025; 1998 - $4,024; 1999 - $4,347; 2000 - $4,696;
and thereafter - $15,750.
(8)
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 6 - RETIREMENT PLANS
The Company adopted a profit sharing plan effective January 1,
1985. The Plan covers all eligible employees. Determination of
the amount contributed to the plan is made by the Board of
Directors annually. There was no contribution for 1995.
During 1995 a 401-K plan was adopted effective January 1, 1995,
covering all substantially all employees of the Company. The plan
allows employees to defer up to 15% of their compensation on an
elective, pretax basis, subject to the maximum limit allowed by
law. The Company also has the option to make a discretionary
contribution to the plan on behalf of the employees. The Company
paid $2,710 in administrative costs for the plan in 1995.
NOTE 7 - TREASURY STOCK
During 1994 the Company purchased 110 shares of its outstanding
common stock for $38,388. This stock was retired in 1995 and shown
as a reduction of outstanding stock and retained earnings at cost.
NOTE 8 - EQUIPMENT LEASE COMMITMENTS
The Company leases vehicles under operating lease agreements. The
future minimum lease payments are as follows:
Year Ended Amount
---------- -------
12/31/96 $12,922
12/31/97 851
-------
Total $13,773
=======
Total lease expense under these leases for 1995 was $23,721.
NOTE 9 - CASH DEPOSITS IN EXCESS OF INSURED LIMITS
The Company maintains bank accounts with balances in excess of
federally insured limits.
NOTE 10 - RESTATEMENT OF DECEMBER 31, 1995 FINANCIAL STATEMENTS
Management discovered adjustments necessary to the balances of
deferred administrator's fees as of the current and prior year
ends. Accordingly, these financial statements have been revised
to include the correct balances as follows:
Revised Prior
Financial Financial
Statements Statements Change
---------- ---------- --------
Prepaid Expense $152,235 $ 41,868 $110,367
Deferred Administrator's Fees $565,147 $565,147
Beginning Retained Earnings ($131,052) $312,988 ($444,040)
Net Income (Loss) ($ 49,990) ($ 39,250) ($ 10,740)
(9)
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 1998 and 1997
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
_________________________________________________
C O N T E N T S
_______________
Accountant's Report
Balance Sheets,
June 30, 1998 and
December 31, 1997 EXHIBIT A
Statements of Income and Retained Earnings,
Three and six months ended
June 30, 1998 and 1997 EXHIBIT B
Statements of Cash Flows,
Six months ended
June 30, 1998 and 1997 EXHIBIT C
Notes to financial statements
Management's Discussion and Analysis
of Financial Condition and Results
of Operations
(2)
<PAGE>
Accountant's Report
- -------------------
To The Board of Directors and Stockholders
Hunt Insurance Group, Inc.
2324 Centerville Road
Tallahassee, Florida 32308
We have compiled the accompanying balance sheets of HUNT INSURANCE GROUP,
INC. (a corporation) as of June 30, 1998, and December 31, 1997, and the
related statements of income and retained earnings for the three and six
months ended June 30, 1998 and 1997, and cash flows for the six months
ended June 30, 1998 and 1997, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not
express an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures ordinarily
included in financial statements prepared in accordance with generally accepted
accounting principles. If the omitted disclosures were included in the
financial statements, they might influence the user's conclusions about the
company's assets, liabilities, equity, revenues, and expenses. Accordingly,
these financial statements are not designed for those who are not informed
about such matters.
CATLEDGE, SANDERS & SANDERS
Certified Public Accountants
August 17, 1998
(3)
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
1998 1997
ASSETS ------ -----
CURRENT ASSETS
Cash and cash equivalents $ 592,936 $ 933,615
Receivables:
Administrator's fees 45,351 242,660
Other 45,857 19,959
Prepaid expenses and other current assets 229,250 219,492
---------- ----------
TOTAL CURRENT ASSETS 913,394 1,415,726
PROPERTY AND EQUIPMENT, NET 205,137 149,884
OTHER ASSETS 23,352 23,528
---------- ----------
$1,141,883 $1,589,138
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 228,346 $ 463,321
Deferred administrator's fees 262,020 779,270
Current portion of long-term debt 250 36,407
---------- ----------
TOTAL CURRENT LIABILITIES 490,616 1,278,998
---------- ----------
LONG-TERM DEBT - 16,641
---------- ----------
SHAREHOLDERS' EQUITY
Common Stock, par value $1, authorized
10,000 shares; issued 5,375 5,375 5,375
Paid in excess of par value 216,082 216,082
Retained earnings 429,810 72,042
---------- ----------
651,267 293,499
---------- ----------
$1,141,883 $1,589,138
========== ==========
Read Accountant's Report
EXHIBIT A
(4)
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
STATEMENTS OF INCOME AND RETAINED EARNINGS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1998 1997 1998 1997
------------------------------------------
REVENUES
Commissions and fees $901,604 $717,828 $1,790,576 $1,411,043
Investment and other income 8,680 29,774 18,676 48,989
-------- -------- ---------- ----------
910,284 747,602 1,809,252 1,460,032
OPERATING EXPENSES -------- -------- ---------- ----------
Compensation and employee
benefits 473,168 363,459 849,704 728,914
Other operating expenses 209,863 188,247 385,781 380,461
Interest expense 286 2,191 1,336 4,898
-------- -------- ---------- ----------
683,317 553,897 1,236,821 1,114,273
-------- -------- ---------- ----------
INCOME BEFORE INCOME TAXES 226,967 193,705 572,431 345,759
Income taxes 85,113 72,640 214,662 129,660
-------- -------- ---------- ----------
NET INCOME 141,854 121,065 357,769 216,099
Retained earnings, Beginning 287,956 ( 23,118) 72,041 ( 118,152)
-------- --------- ---------- ------------
RETAINED EARNINGS, ENDING $429,810 $ 97,947 $ 429,810 $ 97,947
======== ========= ========== ============
NET INCOME PER COMMON SHARE:
BASIC $ 26.39 $ 22.73 $ 66.56 $ 40.58
DILUTED $ 26.39 $ 22.73 $ 66.56 $ 40.58
Read Accountant's Report
EXHIBIT B
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (Exhibit B) $357,769 $216,099
Adjustments to reconcile net income to net
cash flows provided by operating activities:
Depreciation expense 25,504 24,535
Gain on sale of equipment ( 1,275)
(Increase) decrease in accounts receivable 171,411 760,082
(Increase) decrease in prepaid expense
and other current assets ( 9,758) ( 22,782)
Increase (decrease) in other assets 175 ( 309)
Decrease in accounts payable
and accrued expenses ( 234,973) ( 320,062)
Decrease in deferred administrator's fees ( 517,250) ( 527,875)
---------- ----------
NET CASH FLOWS PROVIDED (USED) BY
OPERATING ACTIVITIES ( 207,122) 128,413
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of equipment - 9,599
Purchase of equipment ( 80,759) ( 22,876)
Net cash flows used by ---------- ----------
investing activities ( 80,759) ( 13,277)
CASH FLOWS FROM FINANCING ACTIVITIES ---------- ----------
Repayment of short-term debt ( 36,157) ( 40,389)
Increase (repayment) of long-term debt ( 16,641) 5,776
Net cash flows used by ---------- ----------
financing activities ( 52,798) ( 34,613)
---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ( 340,679) 80,523
Cash and cash equivalents, January 1 933,615 308,122
---------- ----------
CASH AND CASH EQUIVALENTS, JUNE 30 $592,936 $388,645
========== ==========
SUPPLEMENTAL DISCLOSURES
Interest paid $ 1,336 $ 4,898
Read Accountant's Report
EXHIBIT C (6)
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Hunt Insurance Group,
Inc. have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the six month period ended June 30, 1998 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1998. For further information, refer to the financial statements and
footnotes thereto for the year ended December 31, 1997.
NOTE 2 - INCOME TAXES
A deferred tax asset of $36,740 at June 30, 1998, and $48,975 for June 30, 1997
is included in other current assets. The deferred taxes result from temporary
differences between the reporting for income tax and financial statement
purposes primarily related to deferred administrator's fees and deferred
compensation arrangements.
NOTE 3 - NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted net income
per share.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1998 1997 1998 1997
----------------------------------------
Numerator for basic and
dilutive net income
per share - net income $141,854 $121,065 $357,769 $216,099
-------- -------- -------- --------
Denominator
Weighted average shares
for basic and dilutive
net income per share 5,375 5,325 5,375 5,325
-------- -------- -------- --------
Net income per common share
Basic $ 26.39 $ 22.73 $ 66.56 $ 40.58
======== ======== ======== ========
Diluted $ 26.39 $ 22.73 $ 66.56 $ 40.58
======== ======== ======== ========
(7)
<PAGE>
<TABLE>
<CAPTION>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
SELECTED FINANCIAL DATA
Year Ended December 31 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Consolidated Income Data:
Commissions and Fees $ 3,079,274 $ 2,621,827 $ 2,125,881 $ 2,254,480 $ 2,471,245
Investment and other income 25,728 1,761 9,103 5,178 19,251
Total revenues 3,105,002 2,623,588 2,134,984 2,259,658 2,490,496
Compensation and employee benefits 2,033,751 1,724,286 1,526,302 1,574,564 1,681,911
Other operating expenses 741,750 709,366 620,018 712,059 740,262
Amortization of intangibles - - - - -
Interest expense 8,655 20,824 45,293 26,116 27,677
Total expenses 2,784,156 2,454,476 2,191,613 2,312,739 2,449,850
Income before income taxes 320,846 169,112 (56,629) (53,081) 40,646
Income taxes 130,652 67,944 (6,639) 1,059 24,424
Net income (loss) $ 190,194 $ 101,168 $ (49,990) $ (54,140) $ 16,222
Net income (loss) per Common Share:
Basic $ 36.04 $ 19.23 $ (9.71) $ (10.51) $ 3.08
Diluted $ 36.04 $ 19.23 $ (9.71) $ (10.51) $ 3.08
Weighted average number of shares outstanding:
Basic 5,277 5,261 5,150 5,150 5,260
Diluted 5,277 5,261 5,150 5,150 5,260
Dividends paid per Common Share - - - - -
Consolidated Balance Sheet Data:
Intangible assets, net
Total assets $ 1,589,138 $ 1,469,994 $ 938,583 $ 991,394 $ 1,400,657
Long-term debt, less current portion 16,641 38,679 41,842 67,840 167,388
Other long-term liabilities - - - - -
Total shareholders' equity 293,499 75,333 (102,835) (52,845) 59,684
</TABLE>
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Year Ended December 31, 1997
RESULTS OF OPERATIONS
Total revenues for 1997 were $3,105,002, an increase of
$481,414 or 18% over 1996.
Fund administration fees increased to $2,440,052, an
increase of $325,393, or 15% over 1996. The remaining
$156,021 increase in revenue was a result of various
increases in other fees, commissions and investment income.
Total operating expenses were $2,784,156, an increase of
$329,680 or 13% over 1996. An increase in compensation and
employee benefits by $309,465 to $2,033,751 or 18% over
1996, accounted for most of this increase.
Income tax expense of $130,652 represents an effective tax
rate of 41% for the year.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations totaled $869,095 for the
year. Capital expenditures of $65,064, and loans to
officers and employees of $112,829, were financed by
internally generated cash. Financing activities utilized
cash of $76,466 to repay short and long-term debts during
the year.
The Company expects to have sufficient cash generated from
operations to meet short-term funding needs.
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Year Ended December 31, 1996
RESULTS OF OPERATIONS
Total revenues for 1996 were $2,623,588, an increase of
$488,604 or 23% over 1995. Fund administration fees
increased to $2,114,659, an increase of $442,958, or 26.5%
over 1995. The remaining $45,646 increase in revenue was a
result of various increases in other fees, commissions and
investment income.
Total operating expenses were $2,454,476, an increase of
$262,863 or 12% over 1995. An increase in compensation and
employee benefits of $197,984 to $1,724,286 or 13% over
1995, accounted for most of this increase. Directors' fees
of $77,000, paid by issuing shares of the Company's capital
stock, resulted in the balance of the increase in operating
expenses.
Income tax expense of $67,944 represents an effective tax
rate of 40% for the year.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations totaled $228,360 for the
year. Capital expenditures of $81,125, and loans to
officers and employees of $41,679, were financed by
internally generated cash. Net loans against life insurance
cash values totaled $103,525. Financing activities consisted
of net repayment of debt of $145,112.
The Company expects to have sufficient cash generated from
operations to meet short-term funding needs.
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Year Ended December 31, 1995
RESULTS OF OPERATIONS
Total revenues for 1995 were $2,134,984, an decrease of
$124,674 or 6% less than 1994.
Fund administration fees decreased to $1,671,701 a decrease
of 13% from 1994. This was primarily due to discontinuance
of services to the Louisiana SHARP program which generated a
fee of $180,000 during 1994.
Total operating expenses were $2,191,613, a decrease of
$121,126 or 5% less than 1994. A decrease in compensation
and employee benefits of $48,262 to $1,526,302 or 3% less
than 1994, accounted for a large portion of this. Also
contributing to the decline in operating expenses, travel
expenses decreased by $36,595 and legal and accounting by
$47,160.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations totaled $41,158 for the
year. Capital expenditures were very low at $2,234.
Financing activities consisted of an increase in debt of
$37,787 to meet funding requirements during the year.
The Company expects an increase in revenues and profits for
1996 that will generate sufficient cash from operations to
meet short-term funding needs without an increase in
borrowings.
<PAGE>
HUNT INSURANCE GROUP, INC.
Tallahassee, Florida
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1998
RESULTS OF OPERATIONS:
For the three months ended June 30, 1998 commissions and fees were
$901,604, an increase of 25.6% over $717,828 for the comparable period of
the prior year. This was primarily a result of an increase in fund
administration fees of $110,720.
Operating expenses increased by $129,420 for the three months ended June
30, 1998 over the comparable period of the prior year. The primary
increase was in compensation and benefits in the amount of $109,709.
The Company's overall tax rate for the three months ended June 30, 1998 was
37.5%, which was comparable to the same period of the prior year.
For the six months ended June 30, 1998, commissions and fees were
$1,790,576, an increase of 26.9%, or $379,533 over the six months ended
June 30,1997. An increase in fund administrative fees of $364,715
accounted for the majority of this increase.
Operating expenses increased by $122,420 for the six months ended June 30,
1998 over the six months ended June 30, 1997, primarily due to an increase
in compensation and benefits of $120,790.
The Company's overall tax rate of 37.5% for the six months ended June 30,
1998 was comparable to prior periods.
The timing of various items of income and expense may cause revenues,
expenses and net income to vary significantly from quarter to quarter. As
a result of the factors described above, operating results for the six
months ended June 30, 1998 should not be considered indicative of the
results that may be expected for the entire year ending December 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES:
Net cash used by operating activities totaled $207,122 for the six months
ended June 30, 1998. Net cash provided by operating activities was
$128,413 for the six months ended June 30, 1997. Net cash provided by
operations is primarily dependent upon the timing of the collection of fund
administration fees.
<PAGE>
Management's Discussion and Analysis
Page two
Purchases of equipment totaled $80,759 and $22,876 for the six months ended
June 30, 1998 and 1997 respectively. The Company is generating sufficient
cash from operations to finance its current needs for equipment.
During the six months ended June 30, 1998 the Company utilized $52,798 to
repay significantly all of its debt. During the same period of the prior
year, $34,613 was utilized to decrease the Company's debt.
The company believes that cash generated from operations will provide
sufficient funds to meet the Company's short and long-term funding needs.
AGREEMENT OF MERGER
OF
HILB, ROGAL AND HAMILTON COMPANY OF TALLAHASSEE
INTO
HUNT INSURANCE GROUP, INC.
THIS MERGER AGREEMENT ("Agreement"), to be effective as of 12:01
a.m., on October 1, 1998, or at such other time as may be agreed upon by
the parties hereto, is made and entered into by and among HILB, ROGAL AND
HAMILTON COMPANY, a Virginia corporation ("Parent"), for itself and as
agent for its wholly-owned subsidiary to be formed pursuant to this
Agreement, HILB, ROGAL AND HAMILTON COMPANY OF TALLAHASSEE, a Florida
corporation ("HRH Merger Subsidiary"), and HUNT INSURANCE GROUP, INC., a
Florida corporation ("Merging Entity"), and the five shareholders of
Merging Entity, JOHN E. HUNT, JR. ("Mr. J. Hunt"), SCOTT P. HUNT ("Mr.
S. Hunt"), RICHARD T. HUNT ("Mr. R. Hunt"), DAVID J. JILK ("Mr. Jilk"),
and P. DANIEL CONDON ("Mr. Condon"), (with Messrs. J. Hunt, S. Hunt, R.
Hunt, Jilk and Condon hereinafter sometimes collectively referred to as
"Shareholders" or any one of the foregoing hereinafter sometimes referred
to as "Shareholders"), 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.
_________________________________________________________________________
______________________
Hunt Insurance Group Merger _ Draft 2 Page 1 of 59
<PAGE>
B. Parent is engaged in the business of owning and operating
insurance agencies and will form HRH Merger Subsidiary for the purposes
contemplated herein.
C. Shareholders, Parent and Merging Entity have reached an
understanding with respect to the merger of HRH Merger Subsidiary into
Merging Entity ("Merger") for which Shareholders shall receive that
amount of Parent's common stock as the consideration stated herein.
D. The parties hereto intend that this Agreement be characterized
as a reverse, triangular statutory merger pursuant to Sections
368(a)(1)(A) and 368(a)(2)(E) of the Internal Revenue Code of 1986
("Code") and further be accounted for as a "purchase" in accordance with
Accounting Principles Board Opinion Number 16 and other applicable
guidelines.
In consideration of the foregoing facts and of the respective
representations, warranties, covenants, conditions and agreements set
forth below, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. PLAN OF MERGER.
1.1 Effective Date. Subject to fulfillment of the conditions
precedent in Sections 6 and 7 of this Agreement, Merging Entity and HRH
Merger Subsidiary (collectively, "Constituents") will cause Articles of
Merger to be signed, verified and delivered on or before October 1, 1998
(or at such later time as may be agreed upon by the parties), to the
Secretary of State of Florida and to be effective as of 12:01 a.m. on
October 1, 1998 (or at such later time as may be agreed upon by the
parties) ("Effective Date"), as provided by the laws of the State of
_________________________________________________________________________
______________________
Hunt Insurance Group Merger _ Draft 2 Page 2 of 59
<PAGE>
Florida. On the Effective Date, the separate existence of each entity of
Constituents shall cease and HRH Merger Subsidiary shall be merged with
and into Merging Entity, which shall then become the Surviving
Corporation.
1.2 Corporate Structure of Surviving Corporation.
(a) On the 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 Merging
Entity in effect immediately prior to the completion of the Merger.
(b) On the Effective Date, by virtue of the completion of the
Merger, the bylaws of Merging Entity in effect on the Effective Date
shall be the bylaws for Surviving Corporation.
(c) On the 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 Effective Date, by virtue of completion of the
Merger, the officers of Surviving Corporation shall be:
John E. Hunt, Jr. President and
Chairman
_________________________________________________________________________
______________________
Hunt Insurance Group Merger _ Draft 2 Page 3 of 59
<PAGE>
Scott P. Hunt Executive Vice
President
Richard T. Hunt Vice President
P. Daniel Condon Vice President
Andrew L. Rogal Vice President
Timothy J. Korman Vice President
Carolyn Jones Vice President
David J. Jilk Treasurer,
Assistant Secretary
Walter L. Smith Secretary
1.3
Effect of Merger.
(a) On the Effective Date, the assets and liabilities of HRH
Merger Subsidiary shall be taken on the books of Merging Entity at the
amount at which they shall at that time be carried on the books of HRH
Merger Subsidiary, subject to such adjustments to the books of Merging
Entity, if any, as may be necessary to conform to the accounting
procedures of Parent. The books of the Constituents, as so adjusted,
shall become the books of Surviving Corporation.
(b) On the 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 HRH Merger
Subsidiary 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
_________________________________________________________________________
______________________
Hunt Insurance Group Merger _ Draft 2 Page 4 of 59
<PAGE>
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
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
John E. Hunt, Jr. 3,635 67.628%
Scott P. Hunt 735 13.674%
Richard T. Hunt 735 13.674%
David J. Jilk 135 2.512%
P. Daniel Condon 135 2.512%
In exchange for all of the shares of Common Stock, Shareholders shall
collectively receive up to $4,725,000 worth of shares of common stock of
Parent (_HRH Stock_), subject to adjustment as provided in Section 14 and
to all the terms and conditions contained herein. This Agreement shall
_________________________________________________________________________
______________________
Hunt Insurance Group Merger _ Draft 2 Page 5 of 59
<PAGE>
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 HRH Merger Subsidiary
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 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 of Common Stock, upon delivery to Parent or its duly
authorized agent for cancellation of certificates representing such
shares and subject to any other limitations herein, shall thereafter be
entitled to receive certificates representing the number of shares of HRH
Stock 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 September 10, 1998, and ending on the Effective Date,
Parent: (i) effects any dividend payable in shares of common stock; (ii)
_________________________________________________________________________
______________________
Hunt Insurance Group Merger _ Draft 2 Page 6 of 59
<PAGE>
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 Cooper,
Coppins & Monroe, located at Tallahassee, Florida, at 11:00 o'clock a.m.
_________________________________________________________________________
______________________
Hunt Insurance Group Merger _ Draft 2 Page 7 of 59
<PAGE>
on September 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 Florida ("Home State") and has full power and
authority to carry on its business as it is now being conducted and to
own or hold under lease the properties and assets it now owns or holds
under lease. Except as set forth in Schedule 2.1 to this Agreement,
Merging Entity is not qualified to do business in any state or other
jurisdiction other than Home State. Except as set forth in Schedule 2.1,
the nature of the business conducted by Merging Entity and the character
or ownership of properties owned by it does not require Merging Entity to
be qualified to do business in any other jurisdiction. Furthermore,
except as set forth in Schedule 2.1 to this Agreement, the nature of the
business conducted by Merging Entity does not require it or any of its
employees to qualify for, or to obtain any insurance agency, brokerage,
adjuster, or other similar license in any jurisdiction other than Home
State. The copy of the articles of incorporation, and all amendments
thereto, of Merging Entity heretofore delivered to Parent and which have
been or will be initialed for identification purposes by the President of
Merging Entity is complete and correct as of the date hereof. The copy
of the bylaws, and all amendments thereto, of Merging Entity heretofore
delivered to Parent and which have been or will be initialed for
identification purposes by the President of Merging Entity is complete
_________________________________________________________________________
______________________
Hunt Insurance Group Merger _ Draft 2 Page 8 of 59
<PAGE>
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 10,000 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
_________________________________________________________________________
______________________
Hunt Insurance Group Merger _ Draft 2 Page 9 of 59
<PAGE>
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 ofCommon 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 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 three
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
_________________________________________________________________________
______________________
Hunt Insurance Group Merger _ Draft 2 Page 10 of 59
<PAGE>
performance of this Agreement by Merging Entity does not violate, result
in a breach of, or constitute a default under, the articles of
incorporation or bylaws of Merging Entity or any indenture, contract,
agreement or other instrument to which it is a party or is bound, or to
the best knowledge of 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 audited financial statements of Merging Entity, prepared under the
accounting guidelines of Parent, previously provided to them in the form
of Parent's Accounting Policies and Procedures Manual ("GAAP Policy"),
together with an unqualified opinion and an accountant's consent to use
such statements in a SEC registration statement, for the three most
recent calendar years of Merging Entity including, without limitation,
balance sheets and statements of income for the periods referred to above
(collectively, "Financial Statements"). In addition, Shareholders and
Merging Entity have delivered to Parent a true and complete copy of the
unaudited financial statements of Merging Entity for the most recent
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month ended, including, without limitation, a balance sheet and statement
of income for such period then ended ("Interim Statements"). Each of the
Financial Statements is true and correct, is in accordance with the books
and records of Merging Entity, presents fairly the financial condition
and results of operations of Merging Entity as of the date and for the
period indicated, and has been prepared in accordance with Parent's GAAP
Policy consistently applied throughout the periods covered by such
statements (including, but not limited to, the establishment of reserves
for bad debts and accruals for all outstanding debts and expenses).
Furthermore, neither the Financial Statements nor the Interim Statements
contained any untrue statement of any material fact or omitted to state
any material fact required to be stated to make such Financial Statements
or Interim Statements not misleading. Without limiting the generality of
the foregoing, the commission income reflected in each of the Financial
Statements and Interim Statements is or will be true and correct, and the
accounts payable reflected in each of the Financial Statements and
Interim Statements is or will be true and correct.
2.8
Absence of Undisclosed Liabilities. (The term "Most Recent
Balance Sheet," as used in this Agreement, means the balance sheet of
Merging Entity at August 30, 1998. Also, the term "Most Recent Balance
Sheet Date," as used in this Agreement, means August 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,
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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 Shareholder
neither knows nor has reasonable grounds to know of any basis for any
material adverse change in such insurance accounts between the date
hereof and the Effective Date. For purposes hereof, "material adverse
change" in the insurance accounts included in the "Book of Business" of
Merging Entity means, without limitation, the loss of any account
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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. All
taxes, assessments, fees, penalties, interest and other governmental
charges which were required to be paid by Merging Entity on such returns
and reports have been duly paid and satisfied on or before their
respective due dates. No tax deficiency or penalty has been asserted or
threatened with respect to Merging Entity. No federal or state income
tax return of Merging Entity has been audited or, to the knowledge of any
Shareholder, proposed to be audited, by any federal or state taxing
authority, including, without limitation, the U.S. Internal Revenue
Service and the Florida Department of Revenue, and no waiver of any
statute of limitations has been given or is in effect with respect to the
assessment of any taxes against Merging Entity. The provisions for taxes
included in the Most Recent Balance Sheet and in the Prior Years
Financial Statements were sufficient for the payment of all accrued and
unpaid federal, state and local income, withholding, social security,
unemployment, excise, real property, tangible personal property,
intangible personal property and other taxes of Merging Entity, whether
or not disputed, for the periods reflected, and for all years and periods
prior thereto.
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2.11 Real and Personal Property Owned by Merging Entity
. Merging
Entity does not own any real property. Schedule 2.11 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
constitutes a legal, valid and binding obligation of the respective
parties thereto, enforceable in accordance with its terms. Merging Entity
enjoys peaceful and undisturbed possession of all properties covered by
all such leases and agreements, and there is not any existing default or
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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 since January 1, 1989,
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 Merging Entity is not in
default with respect to any such policy.
Furthermore, Schedule 2.13 contains a correct and complete list of
all group life, group medical and disability or other similar forms of
insurance which constitute an obligation of or benefit provided by
Merging Entity as well as a list of any material (hospital or home care)
services known by Shareholders and Merging Entity to have been incurred
by Merging Entity's group health plan within 90 days of this date, which
list details with reasonable accuracy the recipients of such services and
the date of service. Schedule 2.13 also contains a list of any former
employees or their dependents who are presently under COBRA continuation
coverage and describes with reasonable particularity the pertinent
factors about each such person listed.
With respect to errors and omissions (professional liability)
insurance policies listed in Schedule 2.13 (which lists for each such
policy the carrier, retrodate, claims made or occurrence policy and
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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, 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 good, and no Shareholder has
any knowledge of any proposed termination of, or modification to, the
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existing relations between Merging Entity and any of such insurance
companies. Furthermore, except as otherwise set forth in Schedule 2.14,
all accounts with all insurance companies represented by Merging Entity
or with whom it transacts business are current and there are no
disagreements or unreconciled discrepancies between Merging Entity and
any such company as to the amounts owed by Merging Entity.
2.15 Customers
. Except as identified in Schedule 2.15, all
relations between Merging Entity and its present customers are good, and
no Shareholder has any knowledge of any proposed termination of any
insurance account presently written or serviced by Merging Entity. Also,
except as otherwise set forth in Schedule 2.15, all customer accounts,
including, without limitation, those accounts with respect to which
Merging Entity financed any premiums, are current. For purposes of
Section 2.15, the terms "insurance account" and "customer account" shall
be limited to accounts which generate an aggregate annual gross income
(commission or otherwise) of $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
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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 or
established any line of credit which represents a liability of Merging
Entity on the date hereof. True and complete copies of all such written
instruments, agreements or arrangements have heretofore been delivered
to, or made available for inspection by, Parent. Merging Entity has
performed all of the obligations required to be performed by it to date,
and is not in default in any material respect under the terms of any such
written instruments, agreements or arrangements, and no event has
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occurred which, but for the passage of time or the giving of notice, or
both, would constitute such a default.
2.20
Employment Agreements and Other Material Contracts. Schedule
2.20 contains a complete copy of every employment agreement, independent
contractor and brokerage agreement, and a list and brief description of
all other material contracts, agreements and other instruments to which
Merging Entity is a party at the date hereof. Except as identified in
Schedule 2.20, or in any other Schedule attached to this Agreement,
Merging Entity is not a party to any oral or written: (i) material
contract, agreement or other instrument not made in the ordinary course
of business; (ii) contract for the employment of any person which is not
terminable (without liability) on 30 days or less notice; (iii) license,
franchise, distributorship, dealer, manufacturer's representative, sales
agency or advertising agreement; (iv) contract with any labor
organization; (v) lease, mortgage, pledge, conditional sales contract,
security agreement, factoring agreement or other similar agreement with
respect to any real or personal property, whether as lessor, lessee or
otherwise; (vi) contract to provide facilities, equipment, services or
merchandise to any other person, firm or corporation; (vii) contract for
the future purchase of materials, supplies, services, merchandise or
equipment; (viii) profit-sharing, bonus, deferred compensation, stock
option, severance pay, pension, retirement or other plan or agreement
providing employee benefits; (ix) agreement or arrangement for the sale
of any of its properties, assets or rights or for the grant of any
preferential rights to purchase any of its assets, properties, or rights;
(x) guaranty, subordination or other similar or related type of
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agreement; (xi) contract or commitment for capital expenditures; (xii)
agreement or covenant not to compete, solicit or enter into any
particular line of business; or (xiii) agreement for the acquisition of
any business or substantially all of the properties, assets or stock or
other securities of any business under which there are any continuing or
unperformed obligations on the part of Merging Entity. Merging Entity is
not in default in any material respect under any agreement, lease,
contract or other instrument to which it is a party. No party with whom
Merging Entity has any agreement which is of material importance to its
business is in default thereunder.
2.21 Absence of Certain Events.
Since the Most Recent Balance Sheet Date, the business of Merging Entity
has been conducted only in the ordinary course and in substantially the
same manner as theretofore conducted, and, except as set forth in
Schedule 2.21 attached to this Agreement, or in any other Schedule
attached to this Agreement, Merging Entity has not, since the Most Recent
Balance Sheet Date: (i) issued any stocks, bonds or other corporate
securities or granted any options, warrants or other rights calling for
the issue thereof; (ii) incurred, or become subject to, any material
obligation or liability (whether absolute or contingent) except (A)
current liabilities incurred in the ordinary course of business, (B)
obligations under contracts entered into in the ordinary course of
business and (C) obligations under contracts not entered into in the
ordinary course of business which are listed in Schedule 2.20; (iii)
discharged or satisfied any lien or encumbrance or paid any obligation or
liability (whether absolute or contingent) other than current liabilities
shown on the Most Recent Balance Sheet and current liabilities incurred
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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.
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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 might have a material adverse effect on such
corporation, or against or affecting the transactions contemplated by
this Agreement. There is no outstanding order, injunction, judgment or
decree of any court, government or governmental agency against or
affecting Merging Entity, or any of its businesses, properties, assets or
goodwill.
2.23 Overtime, Back Wages, Vacation and Minimum Wages
. To the best
knowledge of 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
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Hunt Insurance Group Merger _ Draft 2 Page 23 of 59
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kind) have any claim, or basis for any claim, action or proceeding,
against Merging Entity arising out of any statute, ordinance, rule or
regulation relating to discrimination in employment or employment
practices or occupational safety and health standards (including, without
limitation, The Occupational Safety and Health Act, The Fair Labor
Standards Act, Title VII of the Civil Rights Act of 1964, The Civil
Rights Act of 1992, The Americans with Disabilities Act, and The Age
Discrimination in Employment Act of 1967, as any of the same may have
been amended).
2.25 Employee Benefit Plans
.
(a) There are no employee benefit plans or arrangements of any
type, including but not limited to any retirement, health, welfare,
insurance, bonus, executive compensation, incentive compensation, stock
bonus, stock option, deferred compensation, commission, severance,
parachute, rabbi trust program or plan described in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), maintained by
Merging Entity, or with respect to which Merging Entity has a liability,
other than those set forth in Schedule 2.25(a) ("Employee Benefit
Plans").
(b) With respect to each Employee Benefit Plan, except as set
forth in Schedule 2.25(b): (i) if intended to qualify under Sections 79,
105, 106, 125, 129, 401(a), 401(k), 403(a), or 409, or other Sections, of
the Internal Revenue Code ("Code"), such plan so qualifies, and if
applicable, its trust is exempt from federal income tax under Code
Section 501(a); (ii) if intended to qualify as an organization described
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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
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of payment or vesting, or increase the amount, of compensation due to any
individual.
(d) With respect to each Employee Benefit Plan, Merging Entity
has delivered or caused to be delivered to Parent true and complete
copies, where applicable, of (i) all plan documents, amendments and trust
agreements currently in effect; (ii) all summary plan descriptions, or
other notices or summaries of modifications, which have been prepared by,
or on behalf of Merging Entity; (iii) all material employee
communications; (iv) the five (5) most recent annual reports (Forms
5500); (v) the most recent annual and any subsequent periodic accounting
of plan assets; and, (vi) the most recent determination letter received
from the IRS.
(e) With respect to each Employee Benefit Plan, there is no
pending claim or lawsuit which has been asserted against that Employee
Benefit Plan, the assets of any of the trusts under such Employee Benefit
Plan, Merging Entity, or any fiduciary of such Employee Benefit Plan with
respect to the operation of such Employee Benefit Plan. 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.
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(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
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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 by this Agreement will not create, accelerate or increase
any obligations under any Employee Benefit Plan. Merging Entity has no
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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. All accounts receivable and all
notes receivable of Merging Entity reflected in the Most Recent Balance
Sheet are fully collectible when due at the aggregate amount shown, less
the bad debt allowance stated therein, it being the intent of all of the
parties to this Agreement that Shareholders are hereby representing and
warranting to Parent the full collectibility when due of all of the notes
receivable and accounts receivable of Merging Entity in the aggregate
amount shown in each such balance sheet, less the bad debt allowance
stated therein. Except as set forth in Schedule 2.27, all notes
receivable of Merging Entity are due and payable within one year after
the Effective Date. Any such notes receivable due and payable more than
one year after the Effective Date ("Long Term Notes") are fully
collectible when due at the aggregate amount shown. Except as further
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set forth in Schedule 2.27, no Long Term Notes are secured by any
interest in property, whether it be real, personal or intangible. In the
event of any delinquency or nonpayment of any portion of a Long Term
Note, Shareholders shall be obligated to satisfy such deficiency in the
same manner as specified below for all other receivables of Merging
Entity.
2.28 Permits and Licenses
. All permits, licenses and approvals of
all federal, state or local regulatory agencies, which are required in
order to permit Merging Entity and its employees and agents to carry on
business as now conducted by it, have been obtained by it and are
current.
2.29 No Violation or Default. The execution, delivery and
performance of this Agreement by 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
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.
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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
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this Agreement or in connection with the transactions contemplated by
this Agreement contains, or will when furnished contain, any untrue
statements of a material fact, or omits, or will then omit to state, a
material fact necessary to make the statements contained herein or
therein not misleading.
3. COVENANTS OF SHAREHOLDERS AND MERGING ENTITY PRIOR TO EFFECTIVE
DATE. Shareholders and Merging Entity covenant with Parent that, between
the date of the execution of this Agreement and the Effective Date,
unless prior written consent to the contrary is obtained from Parent:
3.1 Operate in Ordinary Course
. Merging Entity will be operated
only in the ordinary course of business.
3.2 Negative Covenants
. Except as contemplated by this Agreement,
Merging Entity will not do any of the things listed in clauses (i)
through (xii) of Section 2.21 of this Agreement.
3.3 Continuing Accuracy of Representations
. There shall be no
action, or failure to act, which would render any of the representations
and warranties of Shareholders contained in this Agreement untrue or
incorrect in any material respect.
3.4 Preserve Business Organizations
. Except as otherwise requested
by Parent, and without making any commitment on Parent's behalf,
Shareholders will use their best efforts to preserve the business
organizations of Merging Entity intact, to keep available to Parent the
services of its present employees, and to preserve for Parent the
goodwill of its customers and others having business relations with them.
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3.5 Corporate Approvals
. 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 ten (10) days to review such prospectus. Unless there is a
failure of Parent to fulfill its conditions set forth in Section 7 hereof
or there is a material adverse change in the financial conditions of
Parent, Shareholders covenant to adopt this Agreement and to approve all
aspects of the Merger within the time period contemplated herein.
4.
ACCESS AND INFORMATION. Throughout the period between the date
of the execution of this Agreement by Shareholders and Merging Entity and
the Closing Date, Shareholders shall cause Merging Entity and all its
employees to give to Parent, and any and all authorized representatives
of Parent (including auditors and attorneys), full and unrestricted
access, during normal business hours, to the offices, assets, properties,
contracts, books and records of Merging Entity in order to give Parent
full opportunity to make such investigations as it deems appropriate with
respect to the affairs of Merging Entity, and shall further cause Merging
Entity, and all of its employees to provide to Parent during such period
such additional information concerning the affairs of Merging Entity as
Parent may reasonably request. All information obtained from any such
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investigation shall be held in confidence, and, in the event of the
termination of this Agreement, Parent covenants with Shareholders and
Merging Entity that Parent will use its best efforts to return all such
documents, working papers and other written information concerning
Shareholders and Merging Entity obtained or prepared in connection with
any such investigation.
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 HRH Merger Subsidiary
.
Parent is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia. HRH Merger
Subsidiary, will, as of the Effective Date, be duly organized, validly
existing and in good standing under the laws of the State of Florida.
5.2 Authority. Except for: (i) the incorporation of HRH Merger
Subsidiary; (ii) the approval of the transactions contemplated hereby by
the board of directors of Parent and by the board of directors and
shareholder of HRH Merger Subsidiary; (iii) amendment or supplementation
of Parent's registration statement pursuant to this Agreement; (iv)
approval by the New York Stock Exchange of the listing of the shares of
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HRH Stock to be issued pursuant to this Agreement; and (v) the issuance
of a certificate of merger to be issued by the Secretary of State of the
State of Florida, no governmental or other authorization, approval or
consent for the execution, delivery and performance of this Agreement by
Parent or HRH Merger Subsidiary is required. The execution, delivery
and performance of this Agreement by Parent and HRH Merger Subsidiary
will not violate, result in a breach of, or constitute a default under,
the articles of incorporation or bylaws of any such corporation or any
indenture, contract, agreement or other instrument to which such
corporation is a party or is bound.
5.3 Capitalization of Parent and HRH Merger Subsidiary. 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 HRH Merger Subsidiary will consist of 5,000 shares of
common stock, $1 par value, of which 100 shares will be issued and
outstanding, fully paid and nonassessable and owned of record and
beneficially by Parent prior to, and as of, the Effective Date. Except
for the shares to be subscribed for by Parent pursuant to this Agreement,
there are no outstanding options, warrants or other rights to subscribe
for or purchase capital stock of HRH Merger Subsidiary or securities
convertible into or exchangeable for capital stock of HRH Merger
Subsidiary.
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.
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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 HRH
Merger Subsidiary in connection with any of the transactions contemplated
herein.
6. CONDITIONS PRECEDENT TO PERFORMANCE BY PARENT AND HRH MERGER
SUBSIDIARY. The obligation of Parent and HRH Merger Subsidiary to
consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction or fulfillment, on or prior to the Closing
Date, of the following conditions precedent, in addition to all other
conditions precedent contained in this Agreement, each of which may be
waived by Parent:
6.1 Representations. Parent shall not have discovered any material
error, misstatement or omission in any of the representations and
warranties made by 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; and Shareholders and Merging Entity shall
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have delivered to Parent a certificate, dated the Closing Date, and
signed by all of them, to the foregoing effect, in form and substance as
set forth in Schedule 6.1.
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; and Merging
Entity and Shareholders shall have delivered to Parent a certificate
dated the Closing Date, and signed by all of them, to the foregoing
effect, in form and substance as set forth in Schedule 6.1.
6.3 Litigation. No suit, action or proceeding, or governmental
investigation, against or concerning, directly or indirectly, Merging
Entity, or any of its assets and properties, shall have been instituted
or reinstituted, nor shall any basis therefor have arisen, that might
result in any order or judgment of any court or of any administrative
agency which, in the opinion of counsel for Parent, renders it impossible
or inadvisable for Parent to consummate or cause to be consummated the
transactions contemplated by this Agreement.
6.4 Approval by Counsel. All transactions contemplated hereby, and
the form and substance of all legal proceedings and of all instruments
used or delivered hereunder, shall be reasonably satisfactory to counsel
for Parent.
6.5 Opinion. Parent shall have received a favorable opinion, dated
as of the Closing Date, from the law firm of Cooper, Coppins & Monroe,
counsel for Shareholders and Merging Entity, in form and substance as set
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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
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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
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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 2.12,
shall have been terminated, and a new lease, in the form set forth as
Schedule 6.14 shall have been executed to provide for a lease term ending
September 30, 2003, 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
hereby.
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6.16 Approvals. All statutory requirements for the valid
consummation by Merging Entity of the transactions contemplated by this
Agreement shall have been fulfilled; all authorizations, consents and
approvals of all federal, state, local and foreign governmental agencies
and authorities required to be obtained in order to permit consummation
by Merging Entity of the transactions contemplated by this Agreement and
to permit the business presently carried on by Merging Entity to continue
unimpaired immediately following the Effective Date of this Agreement
shall have been obtained.
6.17 Registration Statement. Parent shall have filed an
amended or supplemented S-4 registration statement with the SEC, which
registration statement shall show that the transactions contemplated
herein shall be treated as a "purchase" for accounting purposes.
6.18 Other Items. Merging Entity, in addition to the financial
clean-up contemplated in Section 6.13, shall have removed all company
cars and cash value life insurance from its books for the respective cash
or book value of each such item.
7. CONDITIONS PRECEDENT TO PERFORMANCE BY SHAREHOLDERS AND MERGING
ENTITY. The obligation of Shareholders and Merging Entity to consummate
the transactions contemplated by this Agreement shall be subject to the
satisfaction or fulfillment on or prior to the Closing Date, of the
following conditions, in addition to any other conditions contained in
this Agreement, each of which may be waived, collectively, by a majority
in interest of Shareholders and Merging Entity:
7.1 Representations. Shareholders shall not have discovered any
material error, misstatement or omission in any of the representations
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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; and Parent shall have delivered to Shareholders and Merging Entity
a certificate to the foregoing effect, dated the Closing Date, in form
and substance as set forth in Schedule 7.1.
7.2 Covenants. Parent shall have performed and complied in all
material respects with all covenants, agreements and conditions required
under this Agreement to be performed and complied with by Parent and
shall have caused all corporate actions necessary for the formation of
HRH Merger Subsidiary and for the consummation of this Agreement to have
been taken by it and HRH Merger Subsidiary; and Parent shall have
delivered to Shareholders and Merging Entity a certificate to the
foregoing effect, dated the Closing Date, in form and substance as set
forth in Schedule 7.1.
7.3 Effective Registration Statement. The registration statement
on Form S-4 under the Securities Act of 1933 referred to in Section 2.34
hereof shall have been amended or supplemented and be effective under
such Act and not the subject of any "stop order" or threatened "stop
order" and the amended or supplemented prospectus shall have been
delivered to Shareholders and Merging Entity.
7.4 Prospectus Approval. After delivery and review of the
aforementioned amendment or supplement to Parent's S-4 registration
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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 thereby.
8. POST-MERGER COVENANTS.
8.1 Post-Merger Covenants of Parent. Parent covenants to
Shareholders until October 1, 2003, as follows:
A. Collection. To cause Surviving Corporation to use its
reasonable business efforts, at least comparable in quality to those of
Merging Entity prior to the Effective Date, to collect all notes
receivable and accounts receivable as described in Section 2.27.
B. Payment. Subject to Merging Entity fulfilling its
Tangible Net Worth requirements, as set forth in Section 14.6, and
subject to the fulfillment by Shareholders of their covenants set forth
in Section 8.2, to cause Surviving Corporation to pay timely all
liabilities of Merging Entity which have been properly reserved for in
the Merger Balance Sheet, as defined in Section 8.2.A.
C. Not to interfere with or attempt to control the operations
of Surviving Corporation or direct assets or programs of Surviving
Corporation to another subsidiary of Parent, except (i) where a majority
in interest of the remaining Shareholders has agreed to do so; or (ii)
after Shareholders have received two consecutive years of the minimum
payments due hereunder, and then Parent must still act in good faith.
D. Not to sell the Surviving Corporation, or its assets,
unless as part of a sale of Parent, to any third party without giving a
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majority in interest of Shareholders fifteen (15) days to match any such
offer and an additional forty-five (45) days to close such offer.
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 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 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
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Merging Entity (other than its Section 125 plan) to have been terminated
with provisions having been made for distribution thereof in accordance
with the terms of such Employee Benefit Plan. The Section 125 plan shall
continue through calendar year 1998. 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.
E. Disposition of Shares. To hold the shares of HRH Stock
received in this Merger and not to dispose of such shares in either a
manner or volume or at a time which would cause this Merger not to be
treated as a tax-free merger or as a pooling-of-interests.
9.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION.
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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 December 1, 2003.
9.2 Survival of Representations and Warranties of Shareholders
.
Except for the specific contingencies detailed below in subparagraphs
(ix) and (xiv) 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 December 1, 2003.
9.3 Indemnification Agreement by Shareholders. Shareholders,
jointly and severally with respect to Messrs. J. Hunt, R. Hunt and S.
Hunt, and pro rata with respect to Messrs. Jilk and Condon, 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,
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whether federal, state, local or otherwise, resulting from a lawful
deficiency for any time period prior to the Effective Date;
(iii) All liabilities of, or claims against, Merging Entity
arising out of any contract or commitment of the character described in
Section 2.20 hereof and not listed or described in Schedule 2.20 attached
to this Agreement, or arising out of any contract or commitment entered
into or made by Merging Entity between the date of the execution of this
Agreement and the Closing Date except as expressly permitted under any of
the provisions of this Agreement;
(iv) Subject to the provisions of Section 2.27 hereof, any
nonpayment on demand, when due, of any accounts receivable or notes
receivable of Merging Entity;
(v) Any and all claims, demands, actions and causes of action
arising out of or in any way relating to any health benefit plan or to
any Employee Benefit Plan (as described in Section 2.25) presently
maintained or heretofore maintained by Merging Entity or arising out of
or in any way relating to the termination or "freezing" of any such
Employee Benefit Plan;
(vi) Any loss, damage, liability or deficiency resulting from
any misrepresentation, breach of warranty or nonfulfillment of any
covenant or agreement on the part of 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
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or delivered or to be delivered to Parent under the terms of this
Agreement;
(vii) Any and all claims, demands, actions and causes of
action arising out of or in any way relating to errors and omissions and
all other types of litigation and claims, which are attributable to
Merging Entity prior to the Effective Date;
(viii) To the extent not previously cured in the manner
specified in Section 14.6, the amount by which Tangible Net Worth (as
defined in Section 14.6), shall be less than the amount of $175,000;
(ix) Until one year after the expiration of the applicable
statute of limitations, any and all tax liabilities arising out of all
open returns of Merging Entity for all periods ending on or prior to the
Effective Date and relating to amortization of intangibles, deductions
for compensation, "listed" property, or travel and entertainment expenses
or the tax characterization of expenses incident to this Agreement, any
and all claims or liabilities arising out of or in any way relating to
any health benefit plan or to any Employee Benefit Plan (as described in
Section 2.25) presently or heretofore maintained by Merging Entity or
arising out of or in any way relating to the termination,
modification or "freezing" of any such Employee Benefit Plan, and any and
all claims or liabilities arising out of Post-Merger Filings or for a
violation of the covenants set forth in Section 8.E hereof; (x)
All deductibles arising under the tail coverage referenced in
Section 6.12;
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Hunt Insurance Group Merger _ Draft 2 Page 48 of 59
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(xi) Any and all claims, demands, actions or causes of action
arising out of or in any way relating to any of the pending or threatened
litigation disclosed or required to be disclosed on Schedule 2.22;
(xii) Any existing unreconciled discrepancies as or to have
been disclosed on Schedule 2.14;
(xiii) Any and all losses, claims, demands or deficiencies
arising out of or in any way relating to the ownership by Merging Entity
of the intangible assets of Merging Entity;
(xiv) Until one year after the expiration of the applicable
statute of limitations, any and all liabilities, claims, losses demands
or deficiencies of any nature whatsoever arising out of a "Known
Misrepresentation" (a representation or warranty made with actual
knowledge of its falsity or with reckless indifference to the truth) or
due to the ownership of the common stock not being as set forth in
Section 1.4(a); and
(xv) All demands, claims, actions, suits, proceedings, loss,
damage, liability, judgments, costs and expenses (including, without
limitation, court costs, experts' and attorneys' fees at the trial level
and in connection with all appellate proceedings) incident to any of the
foregoing.
9.4 Indemnification Agreement by Parent. Parent shall indemnify
and hold harmless 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
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Hunt Insurance Group Merger _ Draft 2 Page 49 of 59
<PAGE>
covenant or agreement on the part of the Parent under the terms of this
Agreement;
(ii) All demands, claims, actions, suits, proceedings, loss,
damage, liability, judgments, costs and expenses (including, without
limitation, court costs, experts' and attorneys' fees at the trial level
and in connection with all appellate proceedings) incident to any of the
foregoing.
9.5 Assertion of Indemnification Claim. Either the 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.
_________________________________________________________________________
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Hunt Insurance Group Merger _ Draft 2 Page 50 of 59
<PAGE>
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, auditing, accounting and other related expenses such as
preparation of Post-Merger Filings and the Merger Balance Sheet) incurred
in connection with this transaction by Merging Entity and 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.
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 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
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Hunt Insurance Group Merger _ Draft 2 Page 51 of 59
<PAGE>
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:
John E. Hunt, Jr.
9089 Centerville Road
Tallahassee, Florida 32308
Scott P. Hunt
8031 Evening Star Lane
Tallahassee, Florida 32312
Richard T. Hunt
2742 Shiloh Way, E.
Tallahassee, Florida 32308
_________________________________________________________________________
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Hunt Insurance Group Merger _ Draft 2 Page 52 of 59
<PAGE>
P. Daniel Condon
5431 Lawton Court
Tallahassee, Florida 32311
David J. Jilk
1306 Lawndale Road
Tallahassee, Florida 32311
With copy to:
John C. Cooper, Esquire
COOPER, COPPINS & MONROE
1319 Thomaswood Drive
Tallahassee, Florida 32317
(b) If to Parent or HRH Merger Subsidiary:
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
_________________________________________________________________________
______________________
Hunt Insurance Group Merger _ Draft 2 Page 53 of 59
<PAGE>
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 $4,725,000,
before application of the Adjustment Amounts, payable as follows: (i)
$1,000,000 of HRH Stock at Closing; (ii) $745,000 of HRH Stock, less the
Year 1 Purchase Adjustment, if any, fourteen (14) months after Closing
(December 1, 1999); (iii) $745,000 of HRH Stock, less the Year 2 Purchase
Adjustment, if any, twenty-six (26) months after Closing (December 1,
2000); (iv) $745,000 of HRH Stock, less the Year 3 Purchase Adjustment,
if any, thirty-eight (38) months after Closing (December 1, 2001); (v)
$745,000 of HRH Stock, less the Year 4 Purchase Adjustment, if any, fifty
(50) months after Closing (December 1, 2002); and (vi) $745,000 of HRH
_________________________________________________________________________
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Hunt Insurance Group Merger _ Draft 2 Page 54 of 59
<PAGE>
Stock, less the Year 5 Purchase Adjustment, if any, sixty-two (62) months
after Closing (December 1, 2003). Payments of the Purchase Price are
subject to the right of Buyer to assert set-off in addition to any
reduction arising as a result of the Adjustment Amounts. Further,
Purchase Price does not include the aggregate sum of $1,400,000 being
paid to Shareholders pursuant to the Employment Agreements as additional
compensation for restrictive covenants therein.
14.2 Definitions
. _Year 1_ shall mean the period October 1, 1998,
through September 30, 1999. _Year 2_ shall mean the period October 1,
1999, through September 30, 2000. _Year 3_ shall mean the period October
1, 2000, through September 30, 2001. _Year 4_ shall mean the period
October 1, 2001, through September 30, 2002. _Year 5_ shall mean the
period October 1, 2002, through September 30, 2003.
_Agency Profit_ shall mean the consolidated net profit of the
Surviving Corporation during Year 1, Year 2, Year 3, Year 4 or Year 5,
determined in accordance with the GAAP Policy, before any provision for
federal or state income taxes and before any provision of amortization of
intangibles of the Surviving Corporation, but after a special overhead
charge by the Buyer to the Seller for indirect costs borne by Buyer, such
as general insurance, professional fees and other corporate costs as set
forth in this subsection. The annual overhead charge shall be $120,000,
regardless of the actual costs incurred therefor. Buyer 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,
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______________________
Hunt Insurance Group Merger _ Draft 2 Page 55 of 59
<PAGE>
Year 2, Year 3, Year 4 and Year 5 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, Year 3 Agency Profit, Year 4 Agency Profit and Year 5
Agency Profit which would eliminate any Year 1 Purchase Adjustment, Year
2 Purchase Adjustment, Year 3 Purchase Adjustment, Year 4 Purchase
Adjustment and Year 5 Purchase Adjustment, respectively, which for each
such Year is as follows:
Year 1 $ 875,000
Year 2 $1,000,000
Year 3 $1,150,000
Year 4 $1,325,000
Year 5 $1,525,000
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, Year 3, Year 4 or
Year 5 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 _Big Six_ firm of
certified public accountants not used by Merging Entity or Parent (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
_________________________________________________________________________
______________________
Hunt Insurance Group Merger _ Draft 2 Page 56 of 59
<PAGE>
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)
Parent and Shareholders will each bear 50% of the fees of the Accountants
for such determination.
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, since the New York Stock Exchange was closed on
September 7, 1998, and the HRH Stock is to be delivered on October 1,
1998, the average closing price of Parent's common stock for the period
September 3, 1998, through September 17, 1998, shall establish the value
(with such value for the Closing being referred to hereafter as _Closing
Stock Value_).
14.5.
Purchase Adjustment.
(a) The Year 1 Purchase Adjustment shall be zero ($0) for Year
1 Agency Profit of $875,000 or more. If Year 1 Agency Profit is less
than $875,000, the Year 1 Purchase Adjustment shall be equal to the
lesser of (i) $525,000; or (ii) three times the remainder when Year 1
Agency Profit is subtracted from Target Profit. For example, if Target
Profit less Year 1 Agency Profit equals $100,000, the fourteen month
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Hunt Insurance Group Merger _ Draft 2 Page 57 of 59
<PAGE>
payment of HRH Stock would be reduced in the aggregate by $300,000 down
to the aggregate value of $445,000. If the Target Profit less Year 1
Agency Profit equals or exceeds $175,000, the fourteen month payment of
HRH Stock would be reduced in the aggregate by the maximum amount of
$525,000 down to the minimum amount of $220,000.
(b) The Year 2 Purchase Adjustment shall be zero ($0) for Year
2 Agency Profit of $1,000,000 or more. If Year 2 Agency Profit is less
than $1,000,000, the Year 2 Purchase Adjustment shall be equal to the
lesser of (i) $525,000; or (ii) 1.75 times the remainder when Year 2
Agency Profit is subtracted from Target Profit. For example, if Target
Profit less Year 2 Agency Profit equals $100,000, the twenty-six month
payment of HRH Stock would be reduced in the aggregate by $175,000 down
to the amount of $570,000. 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 $525,000
down to the minimum amount of $220,000.
(c) The Year 3 Purchase Adjustment shall be zero ($0) for Year
3 Agency Profit of $1,150,000 or more. If Year 3 Agency Profit is less
than $1,150,000, the Year 3 Purchase Adjustment shall be equal to the
lesser of (i) $525,000; or (ii) 1.18 times the remainder when Year 3
Agency Profit is subtracted from Target Profit. For example, if Target
Profit less Year 3 Agency Profit equals $100,000, the thirty-eight month
payment of HRH Stock would be reduced in the aggregate by $118,000 down
to the amount of $627,000. If the Target Profit less Year 3 Agency
Profit equals or exceeds $449,915, the thirty-eight month payment of HRH
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Hunt Insurance Group Merger _ Draft 2 Page 58 of 59
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Stock would be reduced in the aggregate by the maximum amount of $525,000
down to the minimum amount of $220,000.
(d) The Year 4 Purchase Adjustment shall be zero ($0) for Year
4 Agency Profit of $1,325,000 or more. If Year 4 Agency Profit is less
than $1,325,000, the Year 4 Purchase Adjustment shall be equal to the
lesser of (i) $525,000; or (ii) 0.85 times the remainder when Year 4
Agency Profit is subtracted from Target Profit. For example, if Target
Profit less Year 4 Agency Profit equals $100,000, the fiftieth month
payment of HRH Stock would be reduced in the aggregate by $85,000 down to
the amount of $660,000. If the Target Profit less Year 4 Agency Profit
equals or exceeds $617,647, the fiftieth month payment of HRH Stock would
be reduced in the aggregate by the maximum amount of $525,000 down to the
minimum amount of $220,000.
(e) The Year 5 Purchase Adjustment shall be zero ($0) for Year
5 Agency Profit of $1,525,000 or more. If Year 5 Agency Profit is less
than $1,525,000, the Year 5 Purchase Adjustment shall be equal to the
lesser of (i) $525,000; or (ii) 0.60 times the remainder when Year 5
Agency Profit is subtracted from Target Profit. For example, if Target
Profit less Year 5 Agency Profit equals $100,000, the sixty-second month
payment of HRH Stock would be reduced in the aggregate by $60,000 down to
the amount of $685,000. If the Target Profit less Year 5 Agency Profit
equals or exceeds $875,000, the sixty-second month payment of HRH Stock
would be reduced in the aggregate by the maximum amount of $525,000 down
to the minimum amount of $220,000.
_________________________________________________________________________
______________________
Hunt Insurance Group Merger _ Draft 2 Page 59 of 59
<PAGE>
14.6 Adjustment Based on Merger Balance Sheet
.
(a)
Determination of Merger Balance Sheet. For purposes
hereof, "Merger Balance Sheet" means an unaudited balance sheet of
Merging Entity, as of the close of business on September 30, 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 intangible assets other
than cash, cash equivalents and net receivables are then subtracted from
_________________________________________________________________________
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Hunt Insurance Group Merger _ Draft 2 Page 60 of 59
<PAGE>
that remainder (total assets - total liabilities - 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 $175,000 (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 $175,000 (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 not
be issued until September 30, 1999, with the intent being to apply such
positive amount to the resolution of the litigation disclosed on Schedule
2.22. Once such resolution has occurred and a positive number remains,
Parent shall promptly issue to Shareholders the remaining number of
shares of Parent common stock in the same proportion as set forth in
Section 1.4(a). In other words, Excess Net Worth shall be kept open
until September 30, 1999 as a reserve account for deductibles and costs
arising out of the litigation disclosed in Schedule 2.22. 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
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Hunt Insurance Group Merger _ Draft 2 Page 61 of 59
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Parent from the Shareholders 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
. EXCEPT FOR THE MERGER OF HRH MERGER SUBSIDIARY
INTO MERGING ENTITY, WHICH SHALL BE GOVERNED BY FLORIDA LAW, THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE COMMONWEALTH OF VIRGINIA.
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.
_________________________________________________________________________
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<PAGE>
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
Parent Policy on Post-Acquisition Cash Held by Surviving
Corporation. Merging Entity and Shareholders acknowledge that they have
been informed of the policy of Parent not to allow cash and cash
equivalents in excess of what Parent believes to be the appropriate
amount of working capital for any of its operating offices to remain in
an interest-earning account for the benefit of that office. As such,
Merging Entity and Shareholders acknowledge that Parent will cause any
such excessive amounts of cash and equivalents to be dividended to
Parent, that such dividends would reduce interest earnings attributable
to Surviving Corporation after the Effective Date, and that Parent has
the right to declare such dividends.
15.9
Subsequent Acquisitions. Merging Entity and Shareholders
acknowledge that a later acquisition by Surviving Corporation of another
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Hunt Insurance Group Merger _ Draft 2 Page 63 of 59
<PAGE>
insurance agency could affect the determination of subsequent year
profitability and agree to cooperate with Parent in making any
adjustments as necessary to this Agreement and any ancillary agreements
to carry out their intent.
15.10
Nonsolicitation Covenant. Each of the Shareholders, by
signature hereto, covenants that he shall not for a period of three (3)
years after the Effective Date, directly or indirectly, except on behalf
of Surviving Corporation, its successors or assigns, solicit or accept
risk management, insurance or bond business from any of the customers of
Merging Entity as of the moment immediately preceding the Effective Date.
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 Surviving Corporation'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 Surviving Corporation. 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 Surviving Corporation to obtain the maximum permissible benefit
from this covenant.
_________________________________________________________________________
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<PAGE>
15.11 Acceptance
. The binding date of acceptance of this
Agreement shall be the Date on which the last of the parties executes the
same.
_________________________________________________________________________
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Hunt Insurance Group Merger _ Draft 2 Page 65 of 59
<PAGE>
EXECUTED by Shareholders and Merging Entity at Tallahassee, Florida,
this _______ day of September, 1998.
SHAREHOLDERS:
______________________________________
John E. Hunt, Jr.
______________________________________
Scott P. Hunt
______________________________________
Richard T. Hunt
______________________________________
David J. Jilk
______________________________________
P. Daniel Condon
MERGING ENTITY:
HUNT INSURANCE GROUP, INC.
By_______________________________
_________________________________, its
_________________________________
EXECUTED by Parent at Glen Allen, Virginia, this ______ day of
September, 1998.
HILB, ROGAL AND HAMILTON COMPANY
By____________________________________
__
___________________________________, its
___________________________________
_________________________________________________________________________
______________________
Hunt Insurance Group Merger _ Draft 2 Page 66 of 59
<PAGE>
CONSENT OF CATLEDGE, SANDERS & SANDERS INDEPENDENT ACCOUNTANTS
We consent to the reference of our firm under the caption
"Experts" and to the use of our report dated July 29, 1998 with
respect to the financial statements of Hunt Insurance Group, Inc.
included in the Supplement to Prospectus dated February 12, 1992
and related Registration Statement (Form S-4, No. 33-44271) of
Hilb, Rogal, and Hamilton Company.
/s Catledge, Sanders & Sanders
CATLEDGE, SANDERS & SANDERS
Certified Public Accountants
September 24, 1998
