AGREEMENT OF MERGER
OF
HILB, XXXXX AND XXXXXXXX COMPANY OF BUFFALO
INTO
GOW MANAGEMENT SERVICES, INC.
THIS MERGER AGREEMENT ("Agreement"), to be effective upon filing of
a Certificate of Merger on or around January 7, 1997, but to be accounted
for as if effective as of 12:01 a.m. on January 1, 1997, or at such other
time as may be agreed upon by the parties hereto, is made and entered
into by and among HILB, XXXXX AND XXXXXXXX COMPANY, a Virginia
corporation ("Parent"), for itself and as agent for its wholly-owned
subsidiary to be formed pursuant to this Agreement, HILB, XXXXX AND
XXXXXXXX COMPANY OF BUFFALO, a Delaware corporation ("HRH Merger
Subsidiary"), and GOW MANAGEMENT SERVICES, INC., a Delaware corporation
("Merging Entity"), and the three shareholders of Merging Entity, XXXXXXX
XXX ("Xx. X. Xxx"), XXXXXXX XXX ("Xx. X. Xxx") and XXXXXXX XXXXX ("Xx.
Xxxxx"), (with Messrs. Xxxxx, X. Xxx and X. Xxx hereinafter sometimes
collectively referred to as "Shareholders" or any one of the foregoing
hereinafter sometimes referred to as "Shareholder"), with reference to
the following facts:
A. Shareholders are the owners and holders of all of the issued
and outstanding shares of the authorized capital stock (referred to below
as the "Common Stock") of Merging Entity which engages in an affiliated
service business to a sister corporation, X. X. Xxx & Company, Inc.,
which operates a general insurance agency.
B. Immediately following the consummation of the transactions
contemplated by this Agreement, Merging Entity, which will then be a
wholly-owned subsidiary of Parent, will acquire substantially all of the
assets and business of X. X. Xxx & Company, Inc. pursuant to an Agreement
of Purchase and Sale entered into simultaneously herewith.
C. Parent is engaged in the business of owning and operating
insurance agencies and will form HRH Merger Subsidiary for the purposes
contemplated herein.
D. 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.
E. 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, as
amended ("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 a Certificate
of Merger to be signed, verified and delivered on or before January 7,
1997 (or at such later time as may be agreed upon by the parties), to the
Secretary of State of the State of Delaware ("Effective Date"), as
provided by the laws of the State of Delaware. On the Effective Date,
the separate existence of each of Constituents shall cease and HRH Merger
Subsidiary shall be merged with and into Merging Entity, which shall be
the surviving corporation of the Merger (hereinafter referred to as 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 certificate of incorporation of Surviving
Corporation shall be the name and certificate 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:
Xxxxxx X. Xxxx
0000 Xxxxxxxx Xxxxx, X.X. Xxx 0000
Xxxx Xxxxx, Xxxxxxxx 00000-0000
Xxxxxx X. Xxxxx
0000 Xxxxxxxx Xxxxx, X.X. Xxx 0000
Xxxx Xxxxx, Xxxxxxxx 00000-0000
Xxxxxxx X. Xxxxxx
0000 Xxxxxxxx Xxxxx, X.X. Xxx 0000
Xxxx Xxxxx, Xxxxxxxx 00000-0000
(d) On the Effective Date, by virtue of completion of the
Merger, the officers of Surviving Corporation shall be:
Xxxxxxx X. Xxx Chairman
Xxxxxxx Xxxxx President
Xxxxxx X. Xxxx Vice President
Xxxxxx X. Xxxxx Vice President
Xxxxxx X. Xxx Secretary
Xxxxxxx X. Xxxxxx Treasurer
Xxxxxx X. Xxxxx Vice President
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 in the manual provided to Merging Entity and titled
"Accounting Policies and Procedures" ("GAAP Policy"). 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
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 Shareholder owns, free and clear of any liens,
encumbrances, restrictions or adverse claims whatsoever except as set
forth in Schedule 2.4, the number of shares of Merging Entity set forth
below opposite his name and 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
Voting Nonvoting
Xx. Xxxxxxx Xxx 34 1,292 44.74%
Mr. Xxxxxxx Xxx 34 1,292 44.74%
Mr. Xxxxxxx Xxxxx 10 304 10.52%
In exchange for all of the shares of Common Stock, Shareholders shall
collectively receive $300,000 worth of shares of common stock of Parent,
valued at the average closing price for such stock over the period
December 9, 1996, through December 20, 1996 ("Average Price"), subject to
adjustment as provided in Section 13.6 and to all the terms and
conditions contained herein. This Agreement shall not be consummated
under any circumstances unless 100% of the shares of Common Stock are
exchanged for shares of Parent common stock.
(b) The manner and basis of conversion of shares on the
Effective Date shall be as follows:
(i) Each share of common stock of HRH Merger Subsidiary
which is issued and outstanding on the Effective Date, with all rights
with respect thereto, shall become one (1) share of Class A voting common
stock, $1.00 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 that number of shares (which number of shares is
subject to adjustment as provided in Section 13.6) of common stock, no
par value, of Parent to which it is entitled on a pro rata basis. No
fractional shares of Parent common stock will be issued as the number of
shares to be issued to any Shareholder in accordance with the preceding
sentence shall be rounded up or down to the nearest whole number (a
fractional share of 0.5 or more will be rounded up; less than 0.5 will be
rounded down). Each Shareholder, upon delivery to Parent or its duly
authorized agent for cancellation of certificates representing all of his
shares of Common Stock , and subject to the ten percent holdback of
shares described in Section 8.6, shall thereafter be entitled to receive
certificates representing the duly issued and outstanding number of
shares of Parent common stock to which such Shareholder is entitled.
(c) Appropriate adjustment (i.e. to ensure that Shareholders
collectively receive $300,000 of Parent Common Stock) shall be made on
the number of shares of Parent common stock to be issued upon conversion
if, during the period commencing on November 1, 1996, and ending on the
Effective Date, Parent: (i) effects any dividend payable in shares of
common stock; (ii) splits or combines the outstanding shares of Parent
common stock; (iii) effects any extraordinary distribution on Parent
common stock; (iv) effects any reorganization or reclassification of
Parent common stock; or (v) fixes a record date for the determination of
shareholders entitled to any of the foregoing.
(d) Upon delivery of Common Stock to Parent pursuant to
subsection 1.4(b)(ii), Parent shall receive all of the shares of common
stock of Surviving Corporation outstanding pursuant to subsection
1.4(b)(i).
(e) After the Effective Date and until its surrender, each
certificate comprising Common Stock referred to in subsection 1.4(b)(ii)
herein shall be deemed for all corporate purposes, other than the payment
of dividends, to evidence ownership of the number of full shares of
Parent common stock into which such shares of Common Stock shall have
been changed by virtue of the merger. Unless and until any such
outstanding certificates of Common Stock shall be so surrendered, no
dividend payable to the holders of record of Parent common stock, as of
any date subsequent to the Effective Date, shall be paid to the holders
of such outstanding certificates, but upon such surrender of any such
certificate or certificates there shall be paid to the record holder of
the certificate or certificates of Parent common stock into which the
shares represented by the surrendered certificate or certificates shall
have been so changed the amount of such dividends which theretofore
became payable with respect to such shares of Parent common stock.
1.5 Closing Date. The closing of the transactions contemplated by
this Agreement ("Closing") shall take place at the offices of Xxxxxxx,
Xxxx, Xxxxxxx, Xxxxx & Goodyear, LLP, located at 1800 One M&T Plaza,
Buffalo, New York, at 10:00 o'clock a.m. on January 7, 1997, or at such
other place and time as shall be mutually agreed upon by the parties to
this Agreement ("Closing Date").
2. REPRESENTATIONS AND WARRANTIES OF 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 Delaware ("Home State") and has full power and
authority to carry on its business as it is now being conducted and to
own or hold under lease the properties and assets it now owns or holds
under lease. Except as set forth in Schedule 2.1 to this Agreement,
Merging Entity is not qualified to do business in any state or other
jurisdiction other than Home State. Except as set forth in Schedule 2.1
or where failure to qualify to do business would not have a material
adverse effect, the nature of the business conducted by Merging Entity
and the character or ownership of properties owned by it do 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 certificate of incorporation, and all
amendments thereto, of Merging Entity heretofore delivered to Parent is
complete and correct as of the date hereof. The copy of the bylaws, and
all amendments thereto, of Merging Entity heretofore delivered to Parent
is complete and correct as of the date hereof. The minute book or minute
books of Merging Entity contain a complete and accurate record in all
material respects of all meetings and other corporate actions of the
shareholders and directors of Merging Entity.
2.2 Name. Neither Merging Entity nor any of Shareholders has
granted to anyone any right to use the corporate name or any name similar
to the corporate name of Merging Entity, except that its sister company,
X.X. Xxx & Company, Inc., has a similar name.
2.3 Capitalization of Merging Entity. The capitalization of
Merging Entity is as follows:
(a) Merging Entity is authorized to issue 100 shares of Class
A voting common stock, $1.00 par value and 2,900 shares of Class B
nonvoting common stock, $1.00 par value. Merging Entity is not
authorized to issue, and has not issued, any shares of any other class.
All of the shares comprising Common Stock outstanding and owned as of the
date hereof are as set forth in Section 1.4(a), supra.
(b) All of the outstanding shares of Common Stock have been
duly and validly issued and are fully paid and nonassessable. The
issuance of all shares of Common Stock was and has been in compliance
with all applicable statutes, rules and regulations, including, without
limitation, all applicable federal and state securities laws. There is
no existing option, warrant, call or commitment to which Merging Entity
is a party requiring the issuance of any additional shares of common
stock of Merging Entity or of any other securities convertible into
shares of common stock of Merging Entity or any other equity security of
Merging Entity of any class or character whatsoever.
(c) No shares of the authorized stock of Merging Entity have
ever been registered under the provisions of any federal or state
securities law, nor has Merging Entity filed or been required to file any
report with any federal or state securities commission, department,
division or other governmental securities agency.
(d) No present or prior holder of any shares of the authorized
stock of Merging Entity is entitled to any dividends with respect to any
such shares now or heretofore outstanding.
2.4 Ownership of Common Stock. Except as set forth in Schedule
2.4, each Shareholder is the record owner, free and clear of any and all
liens, encumbrances, restrictions and adverse claims whatsoever, of the
number of shares of Common Stock set forth opposite his name in
subsection 1.4(a). Each such lien, encumbrance, restriction or adverse
claim can and will be removed at or prior to the Closing.
2.5 Authority. Shareholders, individually and collectively, have
full and complete authority to enter into this Agreement and to transfer
in accordance with the terms and conditions of this Agreement all of the
shares of Common Stock, free and clear of all liens, encumbrances,
restrictions and adverse claims whatsoever. The execution, delivery and
performance of this Agreement by Merging Entity does not violate, result
in a breach of, or constitute a default under, the certificate of
incorporation or bylaws of Merging Entity or any material indenture,
contract, agreement or other instrument to which it is a party or is
bound, or to the best knowledge of Shareholders and Merging Entity, any
applicable laws, rules or regulations.
2.6 Subsidiaries and Other Relationships. Merging Entity does not
own any stock or other interest in any other corporation, nor is it a
participant in any joint entity.
2.7 Financial Statements. Shareholders and Merging Entity have
caused to be delivered to Parent a true and complete copy of the audited
financial statements of Merging Entity, conformed to GAAP Policy,
together with an unqualified opinion and an accountant's consent to use
such statements in a Securities and Exchange Commission ("SEC")
registration statement, for the calendar year of Merging Entity ended
December 31, 1995, and unaudited financial statements for calendar years
1993 and 1994, including, without limitation, balance sheets and
statements of income for such period (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 nine-month period ended September
30, 1996 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 , in the case of the audited statements, 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 contains any untrue statement of
any material fact or omits to state any material fact required to be
stated to make such Financial Statements or Interim Statements not
misleading.
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 November 30, 1996. Also, the term "Most Recent Balance
Sheet Date," as used in this Agreement, means November 30, 1996.) 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 material indebtedness, liability or
obligation of any nature whatsoever, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, including,
without limitation, tax liabilities due or to become due, and whether
incurred in respect of or measured by the income of Merging Entity for
any period prior to the Most Recent Balance Sheet Date, or arising out of
transactions entered into, or any state of facts existing, prior thereto,
and none of Shareholders knows of any basis for the assertion against
Merging Entity, as of the Most Recent Balance Sheet Date, of any material
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 adverse change in the financial condition or
results of operations 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.
2.10 Taxes. Merging Entity has filed all federal, state and local
income, withholding, social security, unemployment, excise, real property
tax, tangible personal property tax, intangible personal property tax and
all other tax returns and reports required to be filed by it to the date
hereof and all of such returns and reports are true and correct in all
material respects. All taxes, assessments, fees, penalties, interest and
other governmental charges which were required to be paid by Merging
Entity on such returns and reports have been duly paid and satisfied on
or before their respective due dates. No tax deficiency or penalty has
been asserted or, to the best knowledge of each of the Shareholders,
threatened with respect to Merging Entity. No federal or state income
tax return of Merging Entity has been audited during the past five years
or, to the knowledge of any Shareholder, is proposed to be audited, by
any federal or state taxing authority, including, without limitation, the
U.S. Internal Revenue Service and the New York Department of Taxation and
Finance, and no waiver of any statute of limitations has been given or is
in effect with respect to the assessment of any taxes against Merging
Entity. The provisions for taxes included in the Most Recent Balance
Sheet and in the Financial Statements were sufficient for the payment of
all accrued and unpaid federal, state and local income, withholding,
social security, unemployment, excise, real property, tangible personal
property, intangible personal property and other taxes of Merging Entity,
whether or not disputed, for the periods reflected.
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 most recent annual
Federal income tax returns of Merging Entity (with deletions of any items
disposed of prior to the date of this Agreement). Merging Entity also
owns various items of disposable type personal property such as office
supplies that are not listed in Schedule 2.11. Merging Entity has good
and marketable title to all such tangible and intangible personal
property, in each case free and clear of all mortgages, security
interests, conditional sales agreements, claims, restrictions, charges or
other liens or encumbrances whatsoever except as otherwise stated in
Schedule 2.11.
2.12 Leases. Schedule 2.12 contains a correct and complete list and
brief description of all leases or other agreements under which Merging
Entity is a tenant or lessee of, or holds or operates any property, real
or personal, owned by any third party. Merging Entity is the owner and
holder of the leasehold estates granted by each of the instruments
described in Schedule 2.12 except as otherwise stated in Schedule 2.12.
Each of said leases and agreements is in full force and effect and
constitutes a legal, valid and binding obligation of the respective
parties thereto, enforceable in accordance with its terms. Merging Entity
enjoys peaceful and undisturbed possession of all properties covered by
all such leases and agreements, and there is not any existing default or
event or condition, including the Merger contemplated herein, which with
notice or lapse of time, or both, would constitute an event of default
under any of such leases or agreements.
2.13 Insurance. Schedule 2.13 contains a correct and complete list,
as of the date hereof, of all policies of casualty, fire and extended
coverage, theft, errors and omissions, liability, life, and other forms
of insurance owned or maintained by Merging Entity. All business
operations of Merging Entity are and have been continually insured
against errors and omissions. Such policies are in amounts deemed by
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. Schedule 2.13 also contains a list of any former
employees or their dependents who are presently under COBRA continuation
coverage and describes with reasonable particularity the pertinent
factors about each such person listed.
With respect to errors and omissions (professional liability)
insurance policies listed in Schedule 2.13 (which lists for each such
policy the carrier, retrodate, claims made or occurrence policy and
limits), prior to the effective dates of such policies, Merging Entity
had not, within the prior three (3) years, 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. 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 of which Shareholders have knowledge 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.
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, no Shareholder has any knowledge of any
proposed termination of, or modification to, the existing relations
between Merging Entity and any of such insurance companies. Furthermore,
except as otherwise set forth in Schedule 2.14, all accounts with all
insurance companies represented by Merging Entity or with whom it
transacts business are current and there are no material disagreements or
unreconciled discrepancies between Merging Entity and any such company as
to the amounts owed by Merging Entity.
2.15 Officers and Directors; Banks; Powers of Attorney. Schedule
2.15 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.
2.16 Compensation and Fringe Benefits. Schedule 2.16 contains a
correct and complete list of each officer, director, employee or agent of
Merging Entity in the format as set forth in Schedule 2.16. Also,
Schedule 2.16 contains a description of all fringe benefits presently
being provided by Merging Entity to any of its employees or agents.
2.17 Patents; Trademarks; Copyrights and Trade Names. Merging
Entity owns or is possessed of or is licensed under such copyrights
(including, without limitation, software) as are used in, and are of
material importance to, the conduct of its business. Merging Entity owns
no patents, patent applications, trademarks, trademark registrations or
applications, trade names (other than its corporate name), copyrights or
copyright registrations or applications.
2.18 Indebtedness. Schedule 2.18 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 in all material respects 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, to the best knowledge of Shareholders, no event has
occurred which, but for the passage of time or the giving of notice, or
both, would constitute such a default.
2.19 Employment Agreements and Other Material Contracts. Schedule
2.19 contains (a) a complete list of every employment agreement,
independent contractor and brokerage agreement to which Merging Entity is
a party, copies of which have been provided to Parent and (b) 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.
Merging Entity is not in default in any material respect under any
material agreement, lease, contract or other instrument to which it is a
party. To the best knowledge of Shareholders, no party with whom Merging
Entity has any agreement which is of material importance to its business
is in default thereunder.
2.20 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 2.20 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 2.19; (iii) discharged or satisfied any material lien or
encumbrance or paid any obligation or liability (whether absolute or
contingent) other than current liabilities shown on the Most Recent
Balance Sheet and current liabilities incurred since the Most Recent
Balance Sheet Date in the ordinary course of business; (iv) declared or
made any payment of dividends or distribution of any assets of any kind
whatsoever to stockholders or purchased or redeemed any of its capital
stock; (v) mortgaged, pledged or subjected to lien, charge or any other
encumbrance, any of its assets and properties, real, tangible or
intangible; (vi) sold or transferred any of its assets, properties or
rights, or cancelled any debts or claims, except in each case in the
ordinary course of business, or entered into any agreement or arrangement
granting any preferential rights to purchase any of its assets,
properties or rights or which required the consent of any party to the
transfer and assignment of any of its assets, properties or rights; (vii)
suffered any extraordinary losses (whether or not covered by insurance)
or waived any extraordinary rights of value; (viii) entered into any
transaction other than in the ordinary course of business except as
herein stated; (ix) amended its certificate 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 $25,000.00. 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 2.20.
2.21 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 2.21, 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.
2.22 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 2.22.
2.23 Discrimination, Occupational Safety and Other Statutes and
Regulations. To the best knowledge of Shareholders, no persons or
parties (including, without limitation, governmental agencies of any
kind) have any claim, 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).
2.24 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 2.24 ("Employee Benefit Plans").
(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, participation
in or termination of any Employee Benefit Plan, except for regular,
periodic, current contributions to any such Employee Benefit Plan.
(C) The consummation of the transactions contemplated by this
Agreement will not entitle any individual to severance pay, and will not
accelerate the time of payment or vesting, or increase the amount, of
compensation due to any individual.
(D) No pending claim or lawsuit has been asserted against
Merging Entity with respect to the operation of any Employee Benefit
Plan. Merging Entity and Shareholders know of no facts or circumstances
which could form the basis for any such claim or lawsuit.
(E) 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.
(F) 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.
(G) Merging Entity has no obligation to any retired or former
employee or any current employee upon retirement under any Employee
Benefit Plan.
2.25 Competitors. Except as disclosed in Schedule 2.25, 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, its sister company, X.X. Xxx & Company, Inc., or a corporation
listed on a national securities exchange or a corporation whose
securities are traded in the over-the-counter market.
2.26 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. All notes receivable, if any, of Merging Entity are due
and payable within one year after the Effective Date.
2.27 Permits and Licenses. All material permits, licenses and
approvals of all federal, state or local regulatory agencies, which are
required in order to permit Merging Entity and its employees and agents
to carry on business as now conducted by it, have been obtained by it and
are current.
2.28 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 SEC; any sale or other
disposition of such stock shall be made pursuant to the regulations
promulgated under Rule 145 and in compliance with all other applicable
laws, regulations and interpretations.
2.29 Financing Statements. 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. There are no deferred money purchase notes related to
Merging Entity's acquisition of any portion of its assets.
2.30 Brokers. Except for fees owing to Marsh, Berry & Company,
Inc., which fees shall be the responsibility of Shareholders, no
commission, finder's fee, brokerage fee or similar charge will be
incurred by Merging Entity or any Shareholder for the consummation of the
transactions contemplated herein.
2.31 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 when received.
3. ACCESS AND INFORMATION. Throughout the period prior to the
Effective Date, Shareholders caused Merging Entity and all its employees
to give to Parent, and any and all authorized representatives of Parent
(including auditors and attorneys), reasonable access upon prior notice,
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 deemed appropriate
with respect to the affairs of Merging Entity, and further caused 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 have reasonably requested.
Regardless of any such investigation by Parent, all representations
and warranties of Shareholders contained in this Agreement shall remain
in full force and effect and no such investigation shall cause or result
in a waiver by Parent of any of the representations and warranties of
Shareholders contained herein; provided, however, that to the extent that
as a result of any such investigation prior to Closing (a) Parent has
actual knowledge that any representation or warranty of Shareholders is
untrue and (b) Shareholders do not have actual knowledge that such
representation or warranty is untrue, then Shareholders shall have no
liability with respect to such untrue representation or warranty.
4. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent represents
and
warrants to Shareholders as follows:
4.1 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 Delaware.
4.2 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
Parent common stock to be issued pursuant to this Agreement; and (v) the
filing of a certificate of merger with the Secretary of State of the
State of Delaware (each of which actions in (i) through (v) Parent
covenants to use its best reasonable efforts to cause to occur prior to
the Effective Date), no governmental or other authorization, approval or
consent for the execution, delivery and performance of this Agreement,
including the issuance of Parent Stock, 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 or
any applicable laws, rules or regulations.
Each of Parent and HRH Merger Subsidiary has, or will prior to
Closing have, all necessary power and authority and will have taken all
action necessary to authorize, execute and deliver this Agreement, and to
perform its obligations under this Agreement, including without
limitation the obligation of Parent to issue the shares of the common
stock of Parent to the Shareholders pursuant to Section 1.4.
4.3 Capitalization of Parent and HRH Merger Subsidiary. As of June
30, 1996, the authorized capital stock of Parent consisted of 50,000,000
shares of common stock, no par value, of which 13,368,868 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 ___ 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.
4.4 Status of Parent common stock. The shares of Parent common
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 and will be registered, when issued, pursuant to Parent's S-
4 registration statement and supplement thereto under the Securities Act
of 1933.
4.5 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.
4.6 SEC Compliance. Parent has filed with the SEC all forms,
reports, schedules, statements and other documents required to be filed
by it since January 1, 1993 under the Securities Act of 1933 and the
Exchange Act of 1934 (such documents, as amended from time to time, being
the "Parent SEC Documents"). Each Parent SEC Document, including without
limitation any financial statements or schedules included therein, (a)
did not, at the time filed (or, in the case of any Parent SEC Document
that has been amended prior to the date hereof, at the time of the filing
of such amendment), contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and (b) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Act of 1933 and the Exchange Act of 1934. Parent has made
available to the Shareholders, or will make available to the Shareholders
before Closing, a supplement to its S-4 registration statement which
complies with all applicable SEC rules, together with all other
prospectus and other materials and information required to be disclosed
pursuant to all applicable federal and state securities laws and
regulations, including without limitation such information as is
necessary in compliance with Rule 145 to enable Shareholders to sell any
shares of common stock of Parent received pursuant to this Agreement.
5. 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:
5.1 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.
5.2 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.
5.3 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.
5.4 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.
5.5 Opinion. Parent shall have received a favorable opinion, dated
as of the Closing Date, from the law firm of Xxxxxxx, Xxxx, Xxxxxxx,
Xxxxx & Goodyear, LLP, counsel for Shareholders and Merging Entity, in
form and substance as set forth in Schedule 5.5 and otherwise reasonably
satisfactory to counsel for Parent.
5.6 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.
5.7 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. 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 13.6) 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.
5.8 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.
5.9 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.
5.10 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, except where failure to obtain such approval
would not have a material adverse effect.
5.11 Registration Statement. Parent shall have filed an
amended or supplemented S-4 registration statement with the SEC.
6. 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
Shareholders and Merging Entity:
6.1 Representations. Shareholders shall not have discovered any
material error, misstatement or omission in any of the representations
and warranties made by Parent contained in this Agreement, and all
representations and warranties of Parent contained in this Agreement
shall be true and correct in all material respects on and as of the
Closing Date with the same force and effect, except as otherwise approved
in writing by Shareholders and Merging Entity, as though such
representations and warranties had been made on and as of the Closing
Date.
6.2 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.
6.3 Effective Registration Statement. The registration statement
on Form S-4 under the Securities Act of 1933 referred to in Sections
2.31, 4.4 and 4.6 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.
6.4 Prospectus Approval. After delivery and review of the
aforementioned amendment or supplement to Parent's S-4 registration
statement, Shareholders and Merging Entity shall have approved this
Agreement and the consummation of all transactions contemplated thereby.
7. POST-MERGER COVENANTS.
7.1 POST-MERGER COVENANTS OF PARENT. Parent covenants to
Shareholders as follows:
A. Collection. To cause Surviving Corporation to use its
reasonable business efforts, at least comparable in quality to those of
Merging Entity prior to the Effective Date, to collect all notes
receivable and accounts receivable as described in Section 2.26.
B. Payment. To pay timely all liabilities of Merging Entity which
have been properly reserved for in the Merger Balance Sheet, as
defined in Section 7.2.A.
C. Employee Benefit Plans. To take all actions required of
it pursuant to Schedule 7.1.C at the times specified therein.
7.2 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 13.6(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 prepared and
delivered to the Surviving Corporation for filing, at no expense to the
Surviving Corporation which has not previously been reserved for on the
Merger Balance Sheet, all federal, state and local tax returns of all
kinds required to be filed by Merging Entity for all tax periods ending
on or prior to the Effective Date ("Post-Merger Filings"). All Post-
Merger Filings will be true and correct in all material respects and,
prior to actual filing thereof, Shareholders shall deliver drafts of such
filings to Parent for its review.
C. Employee Benefit Plans. To take all actions required of
them pursuant to Schedule 7.1.C at the times specified therein.
D. Bind Tail Coverage. To bind the tail coverage referenced
in Section 5.7 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.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION.
8.1 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 31, 1999.
8.2 Survival of Representations and Warranties of Shareholders.
Except for the representations and warranties relating to taxes contained
in Section 2.10, which shall survive until one year after the expiration
of the applicable statute of limitations, all representations, warranties
and covenants made herein or pursuant hereto by Shareholders shall
survive the Closing until December 31, 1999.
8.3 Indemnification Agreement by Shareholders. Shareholders,
jointly and severally, shall indemnify and hold harmless Parent and
Surviving Corporation, and their respective successors and assigns, from
and against and in respect of:
(i) Any loss, damage, liability or deficiency resulting from
any misrepresentation, breach of warranty or nonfulfillment of any
covenant or agreement on the part of Merging Entity or any Shareholder
under the terms of this Agreement; and
(ii) All demands, claims, actions, suits, proceedings,
loss, damage, liability, judgments, costs and expenses (including,
without limitation, court costs, experts' and reasonable attorneys' fees
at the trial level and in connection with all appellate proceedings)
incident to any of the foregoing.
Notwithstanding the foregoing, to the extent any amount for
which Shareholders would otherwise be liable to indemnify Parent and
Surviving Corporation is covered by any tail insurance coverage required
to be provided by Shareholders hereunder, Shareholders obligation to
indemnify Parent and Surviving Corporation shall be reduced by the amount
of any proceeds of any such tail coverage.
8.4 Indemnification Agreement by Parent. Parent shall indemnify
and hold harmless Shareholders, and each of them, and their respective
heirs and personal representatives from and against and in respect of:
(i) Any loss, damage, liability or deficiency resulting from any
misrepresentation, breach of warranty or nonfulfillment of any covenant
or agreement on the part of the Parent under the terms of this Agreement;
and
(ii) All demands, claims, actions, suits, proceedings, loss,
damage, liability, judgments, costs and expenses (including, without
limitation, court costs, experts' and reasonable attorneys' fees at the
trial level and in connection with all appellate proceedings) incident to
any of the foregoing.
8.5 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.
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.
8.6 Limitation of Amount of Indemnity and Escrow of Parent Common
Stock. The indemnity provided by Shareholders to Parent and Surviving
Corporation pursuant to Section 8.3 and the indemnity provided by Parent
to Shareholders pursuant to Section 8.4 shall in each case be limited to
a maximum aggregate amount equal to $300,000.
Notwithstanding anything in the foregoing to the contrary, Parent
shall retain on the Effective Date from the shares of its common stock to
be delivered to the Shareholders, according to the percentage ownership
each such Shareholder has in Merging Entity, as security for the
indemnity provided to it herein, $30,000 of shares of its common stock,
valued at the Average Price ("Escrowed Shares"). By their signatures to
this Agreement, each Shareholder has granted to Parent a security
interest in his portion of the Escrowed Shares, and has consented to the
escrow provision described herein and has granted unto Parent a
continuing limited power of attorney to act over his proportionate number
of the Escrowed Shares pursuant to this Agreement, which power of
attorney is coupled with an interest and is not revocable until the later
of: (i) December 31, 1997; (ii) determination and settlement of any
amounts pursuant to Section 13.6; and (iii) determination and settlement
of any amounts claimed by Parent as of December 31, 1997, pursuant to
Section 8.3 ("Release Date").
Between the Effective Date and the Release Date, Parent shall hold
the Escrowed Shares and shall deposit any dividends received thereon in
an interest-bearing account. Upon the Release Date, and absent a written
directive to the contrary from each such Shareholder not desiring to
receive his shares pro rata, Parent shall distribute the Escrowed Shares,
less any decrease in such shares pursuant to this Agreement, plus any
additional shares issued pursuant to this Agreement, to the Shareholders,
pro rata. Dividends on the Escrowed Shares and the interest earned
thereon ("Escrow Funds") shall be distributed in the same manner
determined according to the immediately preceding sentence. If Escrowed
Shares were decreased to satisfy the indemnity provided herein, the
Escrow Funds shall be reduced by a percentage equal to the fraction
established where the numerator is the number of Escrowed Shares used to
satisfy such indemnity and the denominator is the number of Escrowed
Shares.
9. 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.
10. DEFAULT.
10.1 Default by Shareholders or Merging Entity. Except as otherwise
expressly provided in this Agreement, if Shareholders or Merging Entity,
or any of them, shall fail to perform or comply with any material
covenant, agreement or condition contained in this Agreement that is
required to be performed or complied with by Shareholders or Merging
Entity on or prior to the Closing Date, then Parent, after notice to
Shareholders and failure to cure within thirty (30) days after notice,
shall have the option to seek specific performance of this Agreement or
to xxx such defaulting party for damages. If Parent elects to xxx for
specific performance, Shareholders and Merging Entity expressly waive any
claim or defense that Parent has an adequate remedy at law.
10.2 Default by Parent. Except as otherwise expressly provided in
this Agreement, if Parent shall fail to perform or comply with any
material covenant, agreement or condition contained in this Agreement
that is required to be performed or complied with by Parent on or prior
to the Closing Date, then Shareholders and Merging Entity, at the
unanimous option of Shareholders and Merging Entity, after notice to
Parent and failure to cure within thirty (30) days after notice, may seek
specific performance of this Agreement or may elect to xxx for damages.
If Shareholders and Merging Entity elect to xxx for specific performance,
Parent expressly waives any claim or defense that Shareholders and
Merging Entity have an adequate remedy at law.
11. 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:
Xx. Xxxxxxx Xxx
______________________
______________________
Mr. Xxxxxxx Xxx
______________________
______________________
Mr. Xxxxxxx Xxxxx
______________________
______________________
With copies to:
Xx. Xxxxxxx X. Xxx
Marsh, Berry & Company, Inc.
0000 Xxxxxx Xxxx
Xxxxxxx, Xxxx 00000
Xxxxxxx, Xxxx, Xxxxxxx, Xxxxx & Goodyear, LLP
0000 Xxx X&X Xxxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
(b) If to Parent or HRH Merger Subsidiary:
Xx. Xxxxxx X. Xxxx, President
HILB, XXXXX AND XXXXXXXX COMPANY
0000 Xxxxxxxx Xxxxx
Post Xxxxxx Xxx 0000
Xxxx Xxxxx, Xxxxxxxx 00000-0000
With copy to:
Xxxxxx X. Xxxxx, Esquire
HILB, XXXXX AND XXXXXXXX COMPANY
0000 Xxxxxxxx Xxxxx
Post Xxxxxx Xxx 0000
Xxxx Xxxxx, Xxxxxxxx 00000-0000
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.
12. EXTENSION OF TIME AND WAIVER.
(a) Time is of the essence with respect to this Agreement.
However, the parties hereto may, by mutual agreement in writing, extend
the time for the performance of any of the obligations of the parties
hereto.
(b) Each party for whose benefit a representation, warranty,
covenant, agreement or condition is intended may, in writing: (i) waive
any inaccuracies in the warranties and representations contained in this
Agreement; and (ii) waive compliance with any of the covenants,
agreements or conditions contained herein and so waive performance of any
of the obligations of the other parties hereto, and any default
hereunder; provided, however, that any such waiver shall not affect or
impair the waiving party's rights in respect to any other representation,
warranty, covenant, agreement or condition or any default with respect
thereto.
13. MISCELLANEOUS PROVISIONS.
13.1 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.
13.2 Governing Law. EXCEPT FOR THE MERGER OF HRH MERGER SUBSIDIARY INTO
MERGING ENTITY, WHICH SHALL BE GOVERNED BY DELAWARE LAW, THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF VIRGINIA.
13.3 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.
13.4 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.
13.5 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.
13.6 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 December 31, 1996,
computed under the GAAP Policy referenced in Section 2.7 hereof and in
accordance with Section 2.26 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, one arbitrator shall be selected by Shareholders and
one arbitrator shall be selected by Parent. The two arbitrators shall
then pick one mutually acceptable arbitrator (the "Arbitrator") to
resolve all questions in dispute. The decision of the Arbitrator shall
be final and the fees for his services shall be borne fifty percent (50%)
by Parent and fifty percent (50%) by Shareholders.
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
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 zero ($0.00) (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 Average Price; and
(ii) If Tangible Net Worth is less than zero ($0.00) (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 Average
Price.
In the event of an increase in the number of shares of common stock
of Parent to be issued to Shareholders, such additional shares shall be
issued, promptly after determination of such number, by Parent to
Shareholders in the same proportion as set forth in Section 1.4(a). In
the event of a decrease in the number of shares of common stock of
Parent, such shares shall be assigned, promptly after determination of
such number, to Parent (at Parent's discretion either from the Escrowed
Shares or the Shareholders or both) in the same proportions as set forth
in Section 1.4(a), unless Parent shall have received a differing written
directive pursuant to Section 8.6.
The value of any shares of Parent common stock to be issued or
returned pursuant to this Agreement shall be adjusted to reflect the
occurrence after the Effective Date of any of the events specified in
Section 1.4(c).
13.7 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.
13.8 Nonsolicitation Covenant. Each of the Shareholders, by
signature hereto, covenants that he shall not for a period of five (5)
years after the Effective Date, directly or indirectly, except on behalf
of 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.
13.9 Acceptance. The binding date of acceptance of this Agreement
shall be the Date on which the last of the parties executes the same.
EXECUTED by Shareholders and Merging Entity at Buffalo, New York,
this 7th day of January, 1997.
SHAREHOLDERS:
_________________________________________
Xxxxxxx Xxx
_________________________________________
Xxxxxxx Xxx
_________________________________________
Xxxxxxx Xxxxx
MERGING ENTITY:
GOW MANAGEMENT SERVICES, INC.
By_______________________________________
___________________________________, its
___________________________________
EXECUTED by Parent at Buffalo , New York, this 7th day of January,
1997.
HILB, XXXXX AND XXXXXXXX COMPANY
By_______________________________________
____________________________________, its
____________________________________
