AGREEMENT OF MERGER
OF
HRH MERGER CORPORATION
INTO
CLOVER INSURANCE AGENCY, INC.
THIS MERGER AGREEMENT ("Agreement"), to be effective
as of the 12:01 a.m. on March 1, 1996, 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, HRH MERGER
CORPORATION, a California corporation ("HRH Merger Subsidiary"),
and CLOVER INSURANCE AGENCY, INC., a California corporation
("Merging Entity"), and the sole shareholder of Merging Entity,
XXXXXX X. XXXXX ("Shareholder"), with reference to the following
facts:
A. Shareholder is the owner and holder of all of the issued and
outstanding shares of the authorized capital stock (referred to below as
the "Common Stock") of Merging Entity which is engaged in the
business of owning and operating a general insurance agency.
B. Parent is engaged in the business of owning and operating
insurance agencies and will
form HRH Merger Subsidiary for the purposes contemplated herein.
C. Shareholder, Parent and Merging Entity have reached an
understanding with respect to the merger of HRH Merger Subsidiary
into Merging Entity ("Merger") for which Shareholder shall receive that
amount of Parent's common stock as the consideration stated herein.
D. The parties hereto intend that this Agreement be
characterized as a 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 March 1,
1996 (or at such later time as may be agreed upon by the parties), to the
Secretary of State of the State of California and to be effective as of
12:01 a.m. on March 1, 1996, (or at such later time as may be agreed
upon by the parties) ("Effective Date"), as provided by the laws of the
State of California. 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:
Xxxxxx X. Xxxx
0000
Xxxxxxxx Xxxxx, X.X. Xxx 0000
Xxxx Xxxxx, Xxxxxxxx 00000-0000
Xxxxxx X. Xxxxx
Warner Centre
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Xxxx X. Xxxxx, Xx.
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:
Xxxxxx X. Xxxxx, President
Xxxxxx X. Xxxx, Vice President
Xxxxxx X. Xxx, Secretary
Xxxxxxx X. Xxxxxx, Treasurer
Xxxxxx X. Xxxxx, Assistant 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 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 by Shareholder.
Shareholder owns, free and clear of any liens, encumbrances, restrictions
or adverse claims whatsoever except as set forth in Schedule 2.4, the
number of shares of Merging Entity set forth below opposite his name
and 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
Xxxxxx X. Xxxxx 255
100%
In exchange for all of the shares of Common Stock, Shareholder shall
receive 72,000 shares of common stock of Parent, subject to adjustment
as provided in Section 14.6 and to all the terms and conditions
contained herein. This Agreement shall not be consummated under any
circumstances unless 100% of the shares of Common Stock are
exchanged for shares of Parent common stock.
(b) The manner and basis of conversion of shares on the
Effective Date shall be as follows:
(i) Each share of common stock of 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, __ 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 282.35294 shares (which number of
shares is subject to adjustment as provided in Section 14.6) of common
stock, no par value, of Parent. No fractional shares of Parent common
stock will be issued as the number of shares to be issued to 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 the ten percent holdback of shares described later herein,
shall thereafter be entitled to receive certificates representing the
number of shares of Parent common stock to which such Shareholder is
entitled.
(c) Appropriate adjustment shall be made on the number
of shares of Parent common stock to be issued upon conversion if,
during the period commencing on January 5, 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) Until its surrender, each certificate comprising
Common Stock referred to in subsection 1.4(b)(ii) herein shall be
deemed for all corporate purposes, other than the payment of dividends,
to evidence ownership of the number of full shares of Parent common
stock into which such shares of Common Stock shall have been changed
by virtue of the merger. Unless and until any such outstanding
certificates of Common Stock shall be so surrendered, no dividend
payable to the holders of record of Parent common stock, as of any date
subsequent to the Effective Date, shall be paid to the holders of such
outstanding certificates, but upon such surrender of any such certificate
or certificates there shall be paid to the record holder of the certificate
or certificates of Parent common stock into which the shares
represented by the surrendered certificate or certificates shall have been
so changed the amount of such dividends which theretofore became
payable with respect to such shares of Parent.
1.5 Closing Date. The closing of the transactions contemplated
by this Agreement ("Closing") shall take place at the offices of
_______________, located at ___________________________, at __
o'clock _.m. on February, 1996, or at such other place and time as shall
be mutually agreed upon by the parties to this Agreement ("Closing
Date").
2. REPRESENTATIONS AND WARRANTIES OF
SHAREHOLDER. Shareholder represents and warrants to Parent as
follows:
2.1 Organization and Standing of Merging Entity. Merging Entity
is a corporation duly organized, validly existing and in good standing
under the laws of the State of California ("Home State") and has full
power and authority to carry on its business as it is now being conducted
and to own or hold under lease the properties and assets it now owns or
holds under lease. Except as set forth in Schedule 2.1 to this
Agreement, Merging Entity is not qualified to do business in any state
or other jurisdiction other than Home State. Except as set forth in
Schedule 2.1, the nature of the business conducted by Merging Entity
and the character or ownership of properties owned by it does not
require Merging Entity to be qualified to do business in any other
jurisdiction. Furthermore, except as set forth in Schedule 2.1 to this
Agreement, the nature of the business conducted by Merging Entity
does not require it or any of its employees to qualify for, or to obtain
any insurance agency, brokerage, adjuster, or other similar license in any
jurisdiction other than Home State. The copy of the articles of
incorporation, and all amendments thereto, of Merging Entity
heretofore delivered to Parent and which have been or will be initialed
for identification purposes by the President of Merging Entity is
complete and correct as of the date hereof. The copy of the bylaws, and
all amendments thereto, of Merging Entity heretofore delivered to
Parent and which have been or will be initialed for identification
purposes by the President of Merging Entity is complete and correct as
of the date hereof. The minute book or minute books of Merging
Entity contain a complete and accurate record in all material respects of
all meetings and other corporate actions of the shareholders and
directors of Merging Entity.
2.2 Name. Except for Clover Financial in which Shareholder was
once a shareholder, neither Merging Entity nor Shareholder has granted
to anyone any right to use the corporate name or any name similar to
the corporate name of Merging Entity.
2.3 Capitalization of Merging Entity. The capitalization of
Merging Entity is as follows: (a) Merging Entity is
authorized to issue ______ shares of voting common stock, __ par value.
Merging Entity is not authorized to issue, and has not issued, any shares
of any other class. All of the shares comprising Common Stock
outstanding and owned as of the date hereof are as set forth in Section
1.4(a), supra.
(b) All of the outstanding shares of Common Stock have
been duly and validly issued and are fully paid and nonassessable. The
issuance of all shares of Common Stock was and has been in compliance
with all applicable statutes, rules and regulations, including, without
limitation, all applicable federal and state securities laws. There is no
existing option, warrant, call or commitment to which Merging Entity is
a party requiring the issuance of any additional shares of common stock
of Merging Entity or of any other securities convertible into shares of
common stock of Merging Entity or any other equity security of Merging
Entity of any class or character whatsoever.
(c) No shares of the authorized stock of Merging Entity
have ever been registered under the provisions of any federal or state
securities law, nor has Merging Entity filed or been required to file any
report with any federal or state securities commission, department,
division or other governmental agency.
(d) No present or prior holder of any shares of the
authorized stock of Merging Entity is entitled to any dividends with
respect to any such shares now or heretofore outstanding.
2.4 Ownership of Common Stock. Except as set forth in
Schedule 2.4, Shareholder is the record owner, free and clear of any and
all liens, encumbrances, restrictions and adverse claims whatsoever, of
the number of shares of Common Stock set forth opposite his name in
subsection 1.4(a). Each such lien, encumbrance, restriction or adverse
claim can and will be removed at or prior to the Closing.
2.5 Authority. Shareholder has full and complete authority to
enter into this Agreement and to transfer in accordance with the terms
and conditions of this Agreement all of the shares of Common Stock,
free and clear of all liens, encumbrances, restrictions and adverse claims
whatsoever. The execution, delivery and performance of this Agreement
by Merging Entity does not violate, result in a breach of, or constitute a
default under, the articles of incorporation or bylaws of Merging Entity
or any indenture, contract, agreement or other instrument to which it is
a party or is bound, or to the best knowledge of Shareholder 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. Shareholder 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,
Shareholder and Merging Entity have delivered to Parent a true and
complete copy of the unaudited financial statements of Merging Entity
for the most recent month ended, including, without limitation, a
balance sheet and statement of income for such period then ended
("Interim Statements"). Each of the Financial Statements is true and
correct, is in accordance with the books and records of Merging Entity,
presents fairly the financial condition and results of operations of
Merging Entity as of the date and for the period indicated, and has been
prepared in accordance with 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
December 31, 1995. Also, the term "Most Recent Balance Sheet Date,"
as used in this Agreement, means December 31, 1995.)
Except as and to the extent specifically reflected, provided for or
reserved against in the Most Recent Balance Sheet or except as
disclosed in any Schedule to this Agreement, Merging Entity, as of the
Most Recent Balance Sheet Date, did not have any indebtedness,
liability or obligation of any nature whatsoever, whether accrued,
absolute, contingent or otherwise, and whether due or to become due,
including, without limitation, tax liabilities due or to become due, and
whether incurred in respect of or measured by the income of Merging
Entity for any period prior to the Most Recent Balance Sheet Date, or
arising out of transactions entered into, or any state of facts existing,
prior thereto, and Shareholder neither knows nor has reasonable
grounds to know of any basis for the assertion against Merging Entity, as
of the Most Recent Balance Sheet Date, of any indebtedness, liability or
obligation of any nature or in any amount not fully reflected or reserved
against in the Most Recent Balance Sheet or otherwise disclosed in any
Schedule to this Agreement.
2.9 No Adverse Change. Since the Most Recent Balance Sheet
Date, there has been no material change in the financial condition,
results of operations or business prospects of Merging Entity other than
changes occurring in the ordinary course of business or except as
otherwise disclosed in any of the Schedules to this Agreement, which
changes have not had a material adverse effect on the financial
condition, results of operations or business prospects of Merging Entity.
Without limiting the generality of the foregoing, since the Most Recent
Balance Sheet Date, there has been no material adverse change in the
insurance accounts included within the "Book of Business" of Merging
Entity, and Shareholder neither knows nor has reasonable grounds to
know of any basis for any material adverse change in such insurance
accounts between the date hereof and the Effective Date. For purposes
hereof, "material adverse change" in the insurance accounts included in
the "Book of Business" of Merging Entity means, without limitation, the
loss of any account generating an aggregate annual gross income
(commission or otherwise) of $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. Except as disclosed on
Schedule 2.10, no federal or state income tax return of Merging Entity
has been audited or, to the knowledge of Shareholder, proposed to be
audited, by any federal or state taxing authority, including, without
limitation, the U.S. Internal Revenue Service and the California
Franchise Tax Board, 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.
2.11 Real and Personal Property Owned by Merging Entity.
Except as set forth in Schedule 2.11, Merging Entity does not own any
real property ("Real Property"). Merging Entity has good and
marketable title to the Real Property and owns the Real Property free
and clear of any liens, encumbrances or claims, except as further set
forth in Schedule 2.11. Schedule 2.11 also consists of a copy of the
depreciation schedules filed as a part of the two prior annual Federal
income tax returns of Merging Entity (with deletions of any items
disposed of prior to the date of this Agreement), a separate list of each
item of depreciable personal property acquired by Merging Entity since
the Most Recent Balance Sheet Date and having a cost of $1,000.00 or
more, and a separate list of each item of intangible personal property
presently owned by Merging Entity. Merging Entity also owns various
items of disposable type personal property such as office supplies that
are not listed in Schedule 2.11. Merging Entity has good and
marketable title to all such tangible and intangible personal property, in
each case free and clear of all mortgages, security interests, conditional
sales agreements, claims, restrictions, charges or other liens or
encumbrances whatsoever except as otherwise stated in Schedule 2.11.
2.12 Leases. Schedule 2.12 contains a correct and complete list
and brief description of all leases or other agreements under which
Merging Entity is a tenant or lessee of, or holds or operates any
property, real or personal, owned by any third party. Merging Entity is
the owner and holder of the leasehold estates granted by each of the
instruments described in Schedule 2.12 except as otherwise stated in
Schedule 2.12. Each of said leases and agreements is in full force and
effect and constitutes a legal, valid and binding obligation of the
respective parties thereto, enforceable in accordance with its terms.
Merging Entity enjoys peaceful and undisturbed possession of all
properties covered by all such leases and agreements, and there is not
any existing default or event or condition, including the Merger
contemplated herein, which with notice or lapse of time, or both, would
constitute an event of default under any of such leases or agreements.
2.13 Insurance. Schedule 2.13 contains a correct and complete
list, as of the date hereof, of all policies of casualty, fire and extended
coverage, theft, errors and omissions, liability, life, and other forms of
insurance owned or maintained by Merging Entity. All business
operations of Merging Entity are and have been continually insured
against errors and omissions. Such policies are in amounts deemed by
Shareholder to be adequate. Each such policy is, on the date hereof, in
full force and effect, and Merging Entity is not in default with respect to
any such policy.
Furthermore, Schedule 2.13 contains a correct and complete list
of all group life, group medical and disability or other similar forms of
insurance which constitute an obligation of or benefit provided by
Merging Entity as well as a list of any material (hospital or home care)
services known by Shareholder and Merging Entity to have been
incurred by Merging Entity's group health plan within 90 days of this
date, which list details with reasonable accuracy the recipients of such
services and the date of service. Schedule 2.13 also contains a list of any
former employees or their dependents who are presently under COBRA
continuation coverage and describes with reasonable particularity the
pertinent factors about each such person listed.
With respect to errors and omissions (professional liability)
insurance policies listed in Schedule 2.13 (which lists for each such
policy the carrier, retrodate, claims made or occurrence policy and
limits), prior to the effective dates of such policies, Merging Entity had
not given notice to any prior insurer of any act, error or omission in
services rendered by any agent or employee of such corporation or that
should have been rendered by any agent or employee of such
corporation arising out of the operations of Merging Entity.
Furthermore, to the best knowledge of Shareholder, no agent or
employee of Merging Entity breached any such professional duty or
obligation prior to the effective dates of such policies. With respect to
such policies, Merging Entity has given notice of any and all claims for
any act, error or omission by any agent or employee of such corporation
with respect to professional services rendered or that should have been
rendered as required by the terms of such policies (if any such notice
has been given, its contents are described in Schedule 2.13). To the best
knowledge of Shareholder, Merging Entity has not taken, nor has it
failed to take, any action which would provide the insurer with a defense
to its obligation under any such policy; neither Merging Entity nor
Shareholder has received from any such insurer any notice of
cancellation or nonrenewal of any such policy, and, except as set forth in
Schedule 2.13, Shareholder has no basis to believe that Merging Entity,
or any agent or employee of Merging Entity, has breached any
professional duty or obligation.
2.14 Insurance Companies. Schedule 2.14 contains a correct and
complete list of all insurance companies with respect to which Merging
Entity has an agency contract or similar relationship. Except as
identified in Schedule 2.14, all relations between Merging Entity and the
insurance companies represented by it are good, and Shareholder has no
knowledge of any proposed termination of, or modification to, the
existing relations between Merging Entity and any of such insurance
companies. Furthermore, except as otherwise set forth in Schedule 2.14,
all accounts with all insurance companies represented by Merging Entity
or with whom it transacts business are current and there are no
disagreements or unreconciled discrepancies between Merging Entity
and any such company as to the amounts owed by Merging Entity.
2.15 Customers. Except as identified in Schedule 2.15, all
relations between Merging Entity and its present customers are good,
and Shareholder has no knowledge of any proposed termination of any
insurance account presently written or serviced by Merging Entity. Also,
except as otherwise set forth in Schedule 2.15, all customer accounts,
including, without limitation, those accounts with respect to which
Merging Entity financed any premiums, are current. For purposes of
Section 2.15, the terms "insurance account" and "customer account" shall
be limited to accounts which generate an aggregate annual gross income
(commission or otherwise) of $10,000 or more.
2.16 Officers and Directors; Banks; Powers of Attorney.
Schedule 2.16 contains a correct and complete list of all officers and
directors of Merging Entity, a correct and complete list of the names
and addresses of each bank in which Merging Entity has any account or
safe deposit box, together with the names of all persons authorized to
draw on each such account or having access to any such safe deposit
box, and a correct and complete list of the names of all persons holding
powers of attorney from Merging Entity.
2.17 Compensation and Fringe Benefits. Schedule 2.17 contains
a correct and complete list of each officer, director, employee or agent
of Merging Entity in the format as set forth in Schedule 2.17. Also,
Schedule 2.17 contains a description of all fringe benefits presently being
provided by Merging Entity to any of its employees or agents.
2.18 Patents; Trademarks; Copyrights and Trade Names.
Merging Entity owns or is possessed of or is licensed under such patents,
trademarks, trade names and copyrights (including, without limitation,
software) as are used in, and are of material importance to, the conduct
of its business, all of which are in good standing and uncontested.
Schedule 2.18 contains a correct and complete list of all material
patents, patent applications filed or to be filed, trademarks, trademark
registrations and applications, trade names, copyrights and copyright
registrations and applications owned by or registered in the name of
Merging Entity. There is no material claim pending or, to the best
knowledge of Shareholders, threatened against Merging Entity with
respect to any alleged infringement of any patent, trademark, trade
name or copyright owned or licensed to anyone other than Merging
Entity.
2.19 Indebtedness. Schedule 2.19 contains a correct and
complete list of all instruments, agreements or arrangements pursuant to
which Merging Entity has borrowed any money, incurred any
indebtedness or established any line of credit which represents a liability
of Merging Entity on the date hereof. True and complete copies of all
such written instruments, agreements or arrangements have heretofore
been delivered to, or made available for inspection by, Parent. Merging
Entity has performed all of the obligations required to be performed by
it to date, and is not in default in any material respect under the terms
of any such written instruments, agreements or arrangements, and no
event has occurred which, but for the passage of time or the giving of
notice, or both, would constitute such a default.
2.20 Employment Agreements and Other Material Contracts.
Schedule 2.20 contains a complete copy of every employment agreement,
independent contractor and brokerage agreement, and a list and brief
description of all other material contracts, agreements and other
instruments to which Merging Entity is a party at the date hereof.
Except as identified in Schedule 2.20, or in any other Schedule attached
to this Agreement, Merging Entity is not a party to any oral or written:
(i) material contract, agreement or other instrument not made in the
ordinary course of business; (ii) contract for the employment of any
person which is not terminable (without liability) on 30 days or less
notice; (iii) license, franchise, distributorship, dealer, manufacturer's
representative, sales agency or advertising agreement; (iv) contract with
any labor organization; (v) lease, mortgage, pledge, conditional sales
contract, security agreement, factoring agreement or other similar
agreement with respect to any real or personal property, whether as
lessor, lessee or otherwise; (vi) contract to provide facilities, equipment,
services or merchandise to any other person, firm or corporation; (vii)
contract for the future purchase of materials, supplies, services,
merchandise or equipment; (viii) profit-sharing, bonus, deferred
compensation, stock option, severance pay, pension, retirement or other
plan or agreement providing employee benefits; (ix) agreement or
arrangement for the sale of any of its properties, assets or rights or for
the grant of any preferential rights to purchase any of its assets,
properties, or rights; (x) guaranty, subordination or other similar or
related type of agreement; (xi) contract or commitment for capital
expenditures; (xii) agreement or covenant not to compete, solicit or
enter into any particular line of business; or (xiii) agreement for the
acquisition of any business or substantially all of the properties, assets or
stock or other securities of any business under which there are any
continuing or unperformed obligations on the part of Merging Entity.
Merging Entity is not in default in any material respect under any
agreement, lease, contract or other instrument to which it is a party. No
party with whom Merging Entity has any agreement which is of material
importance to its business is in default thereunder.
2.21 Absence of Certain Events. Since the Most Recent Balance
Sheet Date, the business of Merging Entity has been conducted only in
the ordinary course and in substantially the same manner as theretofore
conducted, and, except as set forth in Schedule 2.21 attached to this
Agreement, or in any other Schedule attached to this Agreement,
Merging Entity has not, since the Most Recent Balance Sheet Date: (i)
issued any stocks, bonds or other corporate securities or granted any
options, warrants or other rights calling for the issue thereof; (ii)
incurred, or become subject to, any material obligation or liability
(whether absolute or contingent) except (A) current liabilities incurred
in the ordinary course of business, (B) obligations under contracts
entered into in the ordinary course of business and (C) obligations
under contracts not entered into in the ordinary course of business
which are listed in Schedule 2.20; (iii) discharged or satisfied any lien or
encumbrance or paid any obligation or liability (whether absolute or
contingent) other than current liabilities shown on the Most Recent
Balance Sheet and current liabilities incurred since the Most Recent
Balance Sheet Date in the ordinary course of business; (iv) declared or
made any payment of dividends or distribution of any assets of any kind
whatsoever to stockholders or purchased or redeemed any of its capital
stock; (v) mortgaged, pledged or subjected to lien, charge or any other
encumbrance, any of its assets and properties, real, tangible or
intangible; (vi) sold or transferred any of its assets, properties or rights,
or cancelled any debts or claims, except in each case in the ordinary
course of business, or entered into any agreement or arrangement
granting any preferential rights to purchase any of its assets, properties
or rights or which required the consent of any party to the transfer and
assignment of any of its assets, properties or rights; (vii) suffered any
extraordinary losses (whether or not covered by insurance) or waived
any extraordinary rights of value; (viii) entered into any transaction
other than in the ordinary course of business except as herein stated;
(ix) amended its articles of incorporation or bylaws; (x) increased the
rate of compensation payable or to become payable by it to any of its
employees or agents over the rate being paid to them at the Most
Recent Balance Sheet Date; (xi) made or permitted any amendment to
or termination of any material contract, agreement or license to which it
is a party other than in the ordinary course of business; or (xii) made
capital expenditures or entered into any commitments therefor
aggregating more than $5,000.00. Except as contemplated by this
Agreement, or the Schedules referred to in this Agreement, between the
date hereof and the Closing Date, Merging Entity will not, without the
prior written consent of Parent, do any of the things listed above in
clauses (i) through (xii) of this Section 2.21.
2.22 Investigations and Litigation. There is no investigation by
any governmental agency pending, or, to the best knowledge of
Shareholder, threatened against or adversely affecting Merging Entity,
and except as set forth on Schedule 2.22, there is no action, suit,
proceeding or claim pending, or, to the best knowledge of Shareholder,
threatened against Merging Entity, or any of its businesses, properties,
assets or goodwill, which might have a material adverse effect on such
corporation, or against or affecting the transactions contemplated by this
Agreement. There is no outstanding order, injunction, judgment or
decree of any court, government or governmental agency against or
affecting Merging Entity, or any of its businesses, properties, assets or
goodwill.
2.23 Overtime, Back Wages, Vacation and Minimum Wages. To
the best knowledge of Shareholder, no present or former employee of
Merging Entity has any claim against Merging Entity (whether under
federal or state law) under any employment agreement, or otherwise, on
account of or for: (i) overtime pay for any period other than the current
payroll period; (ii) wages or salary for any period other than the current
payroll period; (iii) vacation or time off (or pay in lieu thereof), other
than that earned in respect of the current fiscal year; or (iv) any
violation of any statute, ordinance, rule or regulation relating to
minimum wages or maximum hours of work, except as otherwise set
forth in Schedule 2.23.
2.24 Discrimination, Occupational Safety and Other Statutes and
Regulations. To the best knowledge of Shareholder, no persons or
parties (including, without limitation, governmental agencies of any
kind) have any claim, or basis for any claim, action or proceeding,
against Merging Entity arising out of any statute, ordinance, rule or
regulation relating to discrimination in employment or employment
practices or occupational safety and health standards (including, without
limitation, The Occupational Safety and Health Act, The Fair Labor
Standards Act, Title VII of the
Civil Rights Act of 1964, The Civil Rights Act of 1992, The Americans
with Disabilities Act, and The Age Discrimination in Employment Act
of 1967, as any of the same may have been amended). 2.25
Employee Benefit Plans.
(A) There are no employee benefit plans or arrangements
of any type, including but not limited to any retirement, health, welfare,
insurance, bonus, executive compensation, incentive compensation, stock
bonus, stock option, deferred compensation, commission, severance,
parachute, rabbi trust program or plan described in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"),
maintained by Merging Entity, or with respect to which Merging Entity
has a liability, other than those set forth in Schedule 2.25(a) ("Employee
Benefit Plans").
(B) With respect to each Employee Benefit Plan, except as
set forth in Schedule 2.25(b): (i) if intended to qualify under Sections
79, 105, 106, 125, 129, 401(a), 401(k), 403(a), or 409, or other Sections,
of the Internal Revenue Code ("Code"), such plan so qualifies, and if
applicable, its trust is exempt from federal income tax under Code
Section 501(a); (ii) if intended to qualify as an organization described in
Section 501(c)(9) of the Code, such organization so qualifies and any
trusts established pursuant to its constitution are exempt from federal
income tax under Section 501(a) of the Code; (iii) such plan has been
administered and enforced in accordance with its terms and applicable
law; (iv) no breaches of fiduciary duty by Merging Entity, the Trustees,
or, to the best knowledge and belief of 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
Shareholder, threatened; (vi) no nonexempt prohibited transaction has
occurred; (vii) there has been no reportable event for which the 30-day
notice requirement under ERISA has not been waived; (viii) all
contributions and premiums due have been made on a timely basis
(including, if applicable, the time limited established under Code
Sections 404 and 412); (ix) all contributions made or required to be
made meet the requirements for deductibility under the Code; (x) all
contributions which have not been made have been properly recorded in
the financial records of Merging Entity; and (xi) except as set forth in
Schedule 2.25(b), no liability (whether an indebtedness, a fine, a penalty,
a tax or any other amount) has been incurred or will be incurred by
Merging Entity as a result of its maintenance, operation or termination
of any Employee Benefit Plan.
(C) No Employee Benefit Plan is a multiemployer plan,
as defined in Section 4001(a)(3) of ERISA or a multiple employer plan.
The consummation of the transactions contemplated by this Agreement
will not entitle any individual to severance pay, and will not accelerate
the time of payment or vesting, or increase the amount, of compensation
due to any individual.
(D) With respect to each Employee Benefit Plan,
Merging Entity has delivered or caused to be delivered to Parent true
and complete copies, where applicable, of (i) all plan documents,
amendments and trust agreements currently in effect; (ii) all summary
plan descriptions, or other notices or summaries of modifications, which
have been prepared by, or on behalf of Merging Entity; (iii) all material
employee communications; (iv) the five (5) most recent annual reports
(Forms 5500); (v) the most recent annual and any subsequent periodic
accounting of plan assets; and, (vi) the most recent determination letter
received from the IRS.
(E) With respect to each Employee Benefit Plan, there is
no pending claim or lawsuit which has been asserted against that
Employee Benefit Plan, the assets of any of the trusts under such
Employee Benefit Plan, Merging Entity, or any fiduciary of such
Employee Benefit Plan with respect to the operation of such Employee
Benefit Plan. Merging Entity and Shareholder, after
reasonable investigation, know of no facts or circumstances which could
form the basis for any such claim or lawsuit.
(F) All amendments required to have been made to bring
each Employee Benefit Plan into conformity in all material respects with
all of the applicable provisions of the Code, ERISA and other applicable
laws have been made.
(G) Each Employee Benefit Plan has met, by its terms
and in its operation, all applicable requirements for an exemption from
federal income taxation under Section 501(a) of the Code.
(H) Each Employee Benefit Plan has at all times been
maintained in accordance with all applicable laws, has complied with
applicable ERISA or other requirements; and, there are no actions,
audits, suits or claims which are threatened or pending against any such
Employee Benefit Plan, any fiduciary of any of the Employee Benefit
Plans, or against any of the assets of the Employee Benefit Plans.
(I) Merging Entity has made full and timely payment of
all amounts required to be contributed under the terms of each
Employee Benefit Plan and no event or condition exists regarding any of
the Employee Benefit Plans which could be deemed a "reportable event"
with respect to which the 30-day notice has not been waived which could
result in a material liability to Merging Entity and no event exists which
would subject Merging Entity to a material fine under Section 4701 of
ERISA.
(J) Merging Entity is not subject to any material liability,
tax or penalty and the termination of or withdrawal from any Employee
Benefits Plan will not subject Merging Entity to any additional
contribution requirement and the execution or performance of the
transactions contemplated by this Agreement will not create, accelerate
or increase any obligations under any Employee Benefit Plan.
(K) Merging Entity has no obligation to any retired or
former employee or any current employee upon retirement under any
Employee Benefit Plan.
(L) Each Employee Benefit Plan maintained by Merging
Entity has at all times been maintained, by its terms and in operation, in
accordance with all applicable laws in all material respects, including (to
the extent applicable) Code Section 4980B. Further, there has been no
failure to comply with applicable ERISA or other requirements
concerning the filing of reports, documents and notices with the
Secretary of Labor and Secretary of Treasury or the furnishing of such
documents to participants or beneficiaries that could subject any
Employee Benefit Plan to any material civil or any criminal sanction or
could require any such person to indemnify any other person for such a
sanction. There are no actions, audit, suits or claims known to Merging
Entity or Shareholder which are pending or threatened against any
Employee Benefit Plan, any fiduciary of any of the Employee Benefit
Plans with respect to the Employee Benefit Plans or against the assets of
any of the Employee Benefit Plans, except claims for benefits made in
the ordinary course of the operation of such plans.
(M) Merging Entity is not subject to any material liability,
tax or penalty whatsoever to any person whomsoever as a result of
Merging Entity engaging in a prohibited transaction under ERISA or
the Code, and neither Merging Entity nor the Shareholder 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 obligation to any retired or former employee, or
any current employee upon retirement, under any Employee Benefit
Plan.
2.26 Competitors. Except as disclosed in Schedule 2.26,
Shareholder has no interest, direct or indirect, as an owner, partner,
agent, shareholder, officer, director, employee, consultant or otherwise,
in any firm, partnership, corporation or other entity that is engaged in
the insurance agency business, or any aspect thereof, other than Merging
Entity or a corporation listed on a national securities exchange or a
corporation whose securities are traded in the over-the- counter market.
2.27 Accounts and Notes Receivable. The reserve for bad debts,
if any, contained in the Most Recent Balance Sheet and the Financial
Statements was calculated on a consistent basis which, in the light of
past experience, is considered adequate. All accounts receivable and all
notes receivable of Merging Entity reflected in the Most Recent Balance
Sheet are fully collectible when due at the aggregate amount shown, less
the bad debt allowance stated therein, it being the intent of all of the
parties to this Agreement that Shareholder is hereby representing and
warranting to Parent the full collectibility when due of all of the notes
receivable and accounts receivable of Merging Entity in the aggregate
amount shown in each such balance sheet, less the bad debt allowance
stated therein. Except as set forth in Schedule 2.27, all notes receivable
of Merging Entity are due and payable within one year after the
Effective Date. Any such notes receivable due and payable more than
one year after the Effective Date ("Long Term Notes") are fully
collectible when due at the aggregate amount shown. Except as further
set forth in Schedule 2.27, no Long Term Notes are secured by any
interest in property, whether it be real, personal or intangible. In the
event of any delinquency or nonpayment of any portion of a Long Term
Note, Shareholder shall be obligated to satisfy such deficiency in the
same manner as specified below for all other receivables of Merging
Entity.
2.28 Permits and Licenses. All permits, licenses and approvals of
all federal, state or local regulatory agencies, which are required in order
to permit Merging Entity and its employees and agents to carry on
business as now conducted by it, have been obtained by it and are
current. 2.29 No Violation or Default. The execution, delivery
and performance of this Agreement by Shareholder and Merging Entity
will not violate, result in a breach of, or constitute a default under, the
articles of incorporation or bylaws of Merging Entity or of any
indenture, contract, agreement or other instrument to which Merging
Entity is a party or is bound including, without limitation, any agency
contract with any insurance company.
2.30 Common Stock of Parent. Shareholder understands and
acknowledges that the common stock of Parent to be received pursuant
to this Agreement is subject to Rule 145 of the Securities Exchange
Commission ("SEC"); such stock is being acquired for investment
purposes only and not with a view to distribution or resale; any sale or
other disposition of such stock shall be made pursuant to the regulations
promulgated under Rule 145 and in compliance with all other applicable
laws, regulations and interpretations, including, without limitation, any
accounting interpretations of the SEC.
2.31 Financing Statements. Except as disclosed on Schedule
2.31, there are no financing statements or other security interests of any
kind filed or required to be filed against Merging Entity's assets or
affecting the use of, or title to, such assets ("Financing Statements").
Except as further disclosed on Schedule 2.31, there are no deferred
money purchase notes related to Merging Entity's acquisition of any
portion of its assets ("Notes"). Any such liabilities related to the
Financing Statements or Notes can be discharged or prepaid prior to
their stated maturities without penalty, except as further detailed on
Schedule 2.31. The assumption by Surviving Corporation of such
liabilities will not result in a default of any Financing Statement or Note.
2.32 Brokers. Except as disclosed in Schedule 2.32, neither
Merging Entity nor Shareholder has employed any broker or finder for
the purposes of completing the transactions contemplated herein such
that no commission, finder's fee, brokerage fee or similar charge will be
incurred for the consummation of the transactions contemplated herein.
2.33 Disclosure. Shareholder has received a copy of Parent's
current S-4 registration statement dated February 12, 1992, most recent
annual report, Form 10-K and Form 10-Q and will acknowledge receipt
of an amendment or supplement to such registration statement.
2.34 Material Misstatements or Omissions. No representation or
warranty by Shareholder or Merging Entity 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
Shareholder or Merging Entity, or any of them, pursuant to this
Agreement or in connection with the transactions contemplated by this
Agreement contains, or will when furnished contain, any untrue
statements of a material fact, or omits, or will then omit to state, a
material fact necessary to make the statements contained herein or
therein not misleading.
3. COVENANTS OF SHAREHOLDER AND MERGING
ENTITY PRIOR TO EFFECTIVE DATE. Shareholder and Merging
Entity covenant with Parent that, between the date of the execution of
this Agreement and the Effective Date, unless prior written consent to
the contrary is obtained from Parent:
3.1 Operate in Ordinary Course. Merging Entity will be
operated only in the ordinary course of business.
3.2 Negative Covenants. Except as contemplated by this
Agreement, Merging Entity will not do any of the things listed in clauses
(i) through (xii) of Section 2.21 of this Agreement.
3.3 Continuing Accuracy of Representations. There shall be no
action, or failure to act, which would render any of the representations
and warranties of 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.
3.5 Corporate Approvals. The board of directors of Merging
Entity will recommend to Shareholder that Shareholder adopt this
Agreement. Merging Entity agrees to submit this Agreement to
Shareholder for adoption by unanimous written consent with waiver of
notice of the terms of this Agreement prior to the Effective Date, but
only after delivery by Parent to
Shareholder and Merging Entity of an amended or supplemented S-4
registration statement for Parent's common stock to be issued pursuant
to this Agreement and after Shareholder has had an effective
opportunity of at least ten (10) days to review such prospectus. Unless
there is a failure of Parent to fulfill its conditions set forth in Section 7
hereof or there is a material adverse change in the financial conditions
of Parent, Shareholder covenants to adopt this Agreement and to
approve all aspects of the Merger within the time period contemplated
herein.
4. ACCESS AND INFORMATION. Throughout the period
between the date of the execution of this Agreement by Shareholder and
Merging Entity and the Closing Date, Shareholder shall cause Merging
Entity and all its employees to give to Parent, and any and all
authorized representatives of Parent (including auditors and attorneys),
full and unrestricted access, during normal business hours, to the offices,
assets, properties, contracts, books and records of Merging Entity in
order to give Parent full opportunity to make such investigations as it
deems appropriate with respect to the affairs of Merging Entity, and
shall further cause Merging Entity, and all of its employees to provide to
Parent during such period such additional information concerning the
affairs of Merging Entity as Parent may reasonably request. All
information obtained from any such investigation shall be held in
confidence, and, in the event of the termination of this Agreement,
Parent covenants with Shareholder and Merging Entity that Parent will
use its best efforts to return all such documents, working papers and
other written information concerning Shareholder and Merging Entity
obtained or prepared in connection with any such investigation.
Regardless of any such investigation by Parent, all representations
and warranties of Shareholder contained in this Agreement shall remain
in full force and effect and no such investigation shall cause or result in
a waiver by Parent of any of the representations and warranties of
Shareholder contained herein.
5. REPRESENTATIONS AND WARRANTIES OF PARENT.
Parent represents and
warrants to Shareholder as follows:
5.1 Organization and Standing of Parent and 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 California.
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 Parent common 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 California, 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
September 30, 1995, the authorized capital stock of Parent consisted of
50,000,000 shares of common stock, no par value, of which 14,173,064
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 255 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 Parent common stock. The shares of Parent
common stock to be issued to Shareholder pursuant to this Agreement
will, when so issued, be duly and validly authorized and issued, fully paid
and nonassessable.
5.5 Brokers' or finders' fees. No agent, broker, person, or firm
acting on behalf of Parent or any of its subsidiaries or under the
authority of any of them is or will be entitled to any commission or
broker's or finder's fee or financial advisory fee from Parent or 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 Shareholder contained in this Agreement, or in
any financial statement, certificate, Schedule, exhibit or other document
attached to or delivered pursuant to this Agreement, and all
representations and warranties of Shareholders contained in this
Agreement and in any financial statement, certificate, Schedule, exhibit
or other document attached to or delivered pursuant to this Agreement
shall be true and correct in all material respects on and as of the Closing
Date with the same force and effect, except as affected by transactions
expressly authorized herein or otherwise approved in writing by Parent,
as though such representations and warranties had been made on and as
of the Closing Date; and Shareholder and Merging Entity shall have
delivered to Parent 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 Shareholder shall have
performed and complied in all material respects with all covenants,
agreements and conditions required under this Agreement to be
performed or complied with by them on or before the Closing Date; and
Merging Entity and Shareholder shall have delivered to Parent 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 _________________,
counsel for Shareholder and Merging Entity, in form and substance as
set forth in Schedule 6.5 and otherwise reasonably satisfactory to counsel
for Parent. 6.6 Delivery of Common Stock. There shall be
duly delivered for cancellation to Parent at the Closing not less than
100% of the shares of Common Stock issued and outstanding at the
time of the Closing, free and clear of any liens or encumbrances as
required to be listed on Schedule 2.4. 6.7 Continuation of
Agency Contracts. To the extent desired by Parent, Parent shall have
obtained a statement in writing from each of the insurance companies
identified in Schedule 2.14 of this Agreement, in form satisfactory to
Parent and Parent's counsel, by which each such insurance company
agrees that it will not terminate its insurance agency contract solely by
reason of the transactions contemplated in this Agreement, and further
agrees that it will continue to recognize Surviving Corporation, and its
successors and assigns, as its agent under the existing agency contract
between such company and Merging Entity or that it will enter into a
substantially similar agency contract with Surviving Corporation, or its
successors and assigns.
6.8 Shareholder Employment Agreement. An Employment
Agreement between Surviving Corporation, as Employer, and
Shareholder, as Employee, in form and substance as set forth in
Schedule 6.8 attached hereto, shall have been duly executed by each of
them and delivered to Parent.
6.9 Other Employment Agreements. Employment Agreements
between Surviving Corporation, as Employer, and
__________________________ and such of the other employees of
Merging Entity (other than Shareholder) 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, as
directed by Parent, either continued, modified in conformity with
Parent's plans or terminated and, in the event of termination, the
benefits thereunder have either been "frozen" or provision has been
made for the distribution thereof in accordance with the terms of such
Employee Benefit Plans.
6.11 Material Adverse Change. There shall have been no
material adverse change in Merging Entity's business, business prospects,
Book of Business, assets and properties, or goodwill between the date of
the execution of this Agreement and the Closing Date.
6.12 Tail Insurance. Unless notified in writing to the contrary,
Shareholder and Merging Entity shall have delivered to Parent, in form
reasonably satisfactory to Parent and Parent's counsel, evidence of
insurability, to be effective as of the Effective Date, for an extended
reporting period for errors and omissions of a minimum three year
duration with deductible limits reasonably acceptable to Parent and
Parent's counsel, which insurance, if bound, would insure Merging Entity
its agents and employees for the extended reporting period for claims
arising under errors and omissions occurring prior to the Effective Date.
Such tail insurance shall be bound as soon after the Effective Date as
possible. If such insurance is not purchased within one week after
Closing, Parent shall have the right to purchase such tail insurance
deemed acceptable to it. The cost for the tail insurance actually bound
by, or on behalf of, Merging Entity shall be borne by Merging Entity
and shall be reflected on the Merger Balance Sheet (as defined in
Section 14.6) as if such coverage had been bound prior to the Effective
Date and the Shareholders shall be responsible for any deductible
amounts to be paid under such tail policy.
6.13 Related Party Transactions. All "related party" (i.e.
Shareholder, a member of a Shareholder's family, a business or entity
affiliated with any of the foregoing) receivables and payables of Merging
Entity and any receivables or payables from or to an employee of
Merging Entity on favorable terms shall have been removed from the
books of Merging Entity for their cash equivalent face amounts.
6.14 Lease. The existing lease covering the premises presently
occupied by Merging Entity, in the form attached hereto as Schedule
6.14, shall have been amended to provide for a lease term ending
____________ ____________________, on terms and at a rental rate
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 Shareholder of Merging Entity,
to the extent deemed necessary by, and in form satisfactory to, counsel
for Parent, authorizing the execution and delivery of this Agreement by
Merging Entity and the consummation of the transactions contemplated
hereby.
6.16 Approvals. All statutory requirements for the valid
consummation by Merging Entity of the transactions contemplated by
this Agreement shall have been fulfilled; all authorizations, consents and
approvals of all federal, state, local and foreign governmental agencies
and authorities required to be obtained in order to permit
consummation by Merging Entity of the transactions contemplated by
this Agreement and to permit the business presently carried on by
Merging Entity to continue unimpaired immediately following the
Effective Date of this Agreement shall have been obtained.
6.17 Registration Statement. Parent shall have filed an amended
or supplemented S-4 registration statement with the SEC.
6.18 Completed Acquisition of Clover Insurance Benefits. All
actions necessary to the purchase of substantially all of the operating
assets of Clover Insurance Benefits by Merging Entity (after it has
become a wholly owned subsidiary of Parent) shall have been taken by
Shareholder (including, without limitation, the redemption of all capital
stock of Clover Insurance Benefits owned by Xxxx Xxxxxx).
7. CONDITIONS PRECEDENT TO PERFORMANCE BY
SHAREHOLDER AND MERGING ENTITY. The obligation of
Shareholder and Merging Entity to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction or
fulfillment on or prior to the Closing Date, of the following conditions,
in addition to any other conditions contained in this Agreement, each of
which may be waived by Shareholder and Merging Entity:
7.1 Representations. Shareholder shall not have discovered any
material error, misstatement or omission in any of the representations
and warranties made by Parent contained in this Agreement, and all
representations and warranties of Parent contained in this Agreement
shall be true and correct in all material respects on and as of the Closing
Date with the same force and effect, except as otherwise approved in
writing by Shareholder and Merging Entity, as though such
representations and warranties had been made on and as of the Closing
Date; and Parent shall have delivered to Shareholder and Merging
Entity 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 Shareholder 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 Shareholder and
Merging Entity.
7.4 Prospectus Approval. After delivery and review of the
aforementioned amendment or supplement to Parent's S-4 registration
sttaement, and subject to the limitations on disapproval set forth in
Section 3.5, Shareholder and Merging Entity shall have approved this
Agreement and the consummation of all transactions contemplated
thereby.
8. POST-MERGER COVENANTS.
8.1 POST-MERGER COVENANTS OF PARENT. Parent
covenants to Shareholder as follows:
A. Collection. To cause Surviving Corporation to use its
reasonable business efforts, at least comparable in quality to those of
Merging Entity prior to the Effective Date, to collect all notes receivable
and accounts receivable as described in Section 2.27.
B. Payment. Subject to Merging Entity fulfilling its
Tangible Net Worth requirements, as set forth in Section 14.6, and
subject to the fulfillment by Shareholder of his covenants set forth in
Section 8.2, to cause Surviving Corporation to pay timely all liabilities of
Merging Entity which have been properly reserved for in the Merger
Balance Sheet, as defined in Section 8.2.A.
8.2 POST-MERGER COVENANTS OF SHAREHOLDER.
Shareholder 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 Shareholder prior to the Closing
Date , to cause, at no expense which has not previously been reserved
for in the Merger Balance Sheet, all Employee Benefit Plans of Merging
Entity to have been terminated with any benefits thereunder having
been either "frozen" or provisions having been made for distribution
thereof in accordance with the terms of such Employee Benefit Plan.
Shareholder specifically understands that he has covenanted hereby to
take any and all actions reasonably required to eliminate any and all
potential liability of Surviving Corporation and Parent with respect to
such Employee Benefits Plans.
D. Bind Tail Coverage. To bind the tail coverage
referenced in Section 6.12 as soon after the Effective Date as is possible
and in no event later than seven (7) days after the Effective Date, and
to pay any and all deductibles accruing under such tail policy during the
period of three years after the Effective Date. Shareholder
acknowledges that Parent shall have the right to bind tail coverage for
Merging Entity if Shareholder does not produce an appropriate
certificate of insurance within thirty (30) days after Closing. Any costs
for such tail coverage shall be reflected on the Merger Balance Sheet as
if such coverage had been bound prior to the Effective Date.
E. Disposition of Shares. To hold the shares of Parent
common stock received in this Merger and not to dispose of such shares
in either a manner or volume or at a time which would cause this
Merger not to be treated as a tax-free merger.
9. SURVIVAL OF REPRESENTATIONS AND
WARRANTIES AND INDEMNIFICATION.
9.1 Survival of Representations and Warranties of Parent. All
representations, warranties and covenants made herein or pursuant
hereto by Parent shall survive the Closing only until January 31, 1999.
9.2 Survival of Representations and Warranties of Shareholder.
Except for the specific contingencies detailed below in subparagraphs
(ix) through (xiv), inclusive, of Section 9.3 for which Parent shall be
indemnified for the periods stated therein, all representations, warranties
and covenants made herein or pursuant hereto by Shareholders shall
survive the Closing only until the earlier to occur of January 31, 1999.
9.3 Indemnification Agreement by Shareholder. Shareholder
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,
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 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 required the amount of
$354,000;
(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) Until three (3) years after the Effective Date, all
deductibles arising under the tail coverage referenced in Section 6.12;
(xi) Until January 31, 2001, any and all claims, demands,
actions or causes of action arising out of or in any way relating to any of
the pending or threatened litigation disclosed or required to be disclosed
on Schedule 2.22;
(xii) Until January 31, 2001, any existing unreconciled
discrepancies as or to have been disclosed on Schedule 2.14;
(xiii) Until January 31, 2001, any and all losses, claims,
demands or deficiencies arising out of or in any way relating to the
ownership by Merging Entity of the intangible assets of Merging Entity;
(xiv) Until one year after the expiration of the applicable
statute of limitations, any and all liabilities, claims, losses demands or
deficiencies of any nature whatsoever arising out of a "Known
Misrepresentation" (a representation or warranty made with actual
knowledge of its falsity or with reckless indifference to the truth) or due
to the ownership of the common stock not being as set forth in Section
1.4(a); and
(xv) All demands, claims, actions, suits, proceedings, loss,
damage, liability, judgments, costs and expenses (including, without
limitation, court costs, experts' and attorneys' fees at the trial level and
in connection with all appellate proceedings) incident to any of the
foregoing.
9.4 Indemnification Agreement by Parent. Parent shall
indemnify and hold harmless Shareholder and his respective heirs and
personal representatives from and against and in respect of: (i)
Any loss, damage, liability or deficiency resulting from any
misrepresentation, breach of warranty or nonfulfillment of any covenant
or agreement on the part of the Parent under the terms of this
Agreement;
(ii) All demands, claims, actions, suits, proceedings, loss, damage,
liability, judgments, costs and expenses (including, without limitation,
court costs, experts' and attorneys' fees at the trial level and in
connection with all appellate proceedings) incident to any of the
foregoing.
9.5 Assertion of Indemnification Claim. Either the
Shareholder or Parent, as the case may be (an "Indemnified Party"),
shall give notice to the other (an "Indemnifying Party") as soon as
possible after the Indemnified Party has actual knowledge of any claim
as to which indemnification may be sought and the amount thereof, if
known, and supply any other information in the possession of the
Indemnified Party regarding such claim, and will permit the
Indemnifying Party (at its expense) to assume the defense of any third
party claim and any litigation resulting therefrom, provided that counsel
for the Indemnifying Party who shall conduct the defense of such claim
or litigation shall be reasonably satisfactory to the Indemnified Party,
and provided further that the omission by the Indemnified Party to give
notice as provided herein will not relieve the Indemnifying Party of its
indemnification obligations hereunder except to the extent that the
omission results in a failure of actual notice to the Indemnifying Party
and the Indemnifying Party is materially damaged as a result of the
failure to give notice. The Indemnifying Party may settle or compromise
any third party claim or litigation with the consent of the Indemnified
Party which consent may not be unreasonably withheld.
The Indemnified Party shall have the right at all times to
participate in the defense, settlement, negotiations or litigation relating
to any third party claim or demand at its own expense. In the event that
the Indemnifying Party does not assume the defense of any matter as
above provided, then the Indemnified Party shall have the right to
defend any such third party claim or demand, and will be entitled to
settle any such claim or demand in its discretion. In any event, the
Indemnified Party will cooperate in the defense of any such action and
the records of each party shall be available to the other with respect to
such defense.
9.6 Limitation of Amount of Indemnity and Escrow of Parent
Common Stock. The indemnity provided to Parent pursuant to Section
9.3 and the indemnity provided by Parent to Shareholder pursuant to
Section 9.4 shall be limited to an amount equal to $475,000 plus 72,000
shares of Parent's common stock times $14 per share, which is the
approximate total value upon which this Agreement is predicated.
Notwithstanding anything in the foregoing to the contrary,
Parent shall retain on the Effective Date from the shares of its common
stock to be delivered to the Shareholders, according to the percentage
ownership each such Shareholder has in Merging Entity, as security for
the indemnity provided to it herein, 10,600 shares of its common stock
("Escrowed Shares"). By his signature to this Agreement, 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) March 31, 1997; (ii) determination
and settlement of any amounts pursuant to Section 14.6; and (iii)
determination and settlement of any amounts claimed by Parent as of
March 31, 1997, pursuant to Section 9.3 ("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, 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 Shareholder. Dividends on the Escrowed
Shares and the interest earned thereon ("Escrow Funds") shall be
distributed in the same manner determined according to the
immediately preceding sentence. If Escrowed Shares were decreased to
satisfy the indemnity provided herein, the Escrow Funds shall be
reduced by a percentage equal to the fraction established where the
numerator is the number of Escrowed Shares used to satisfy such
indemnity and the denominator is the number of Escrowed Shares.
10. EXPENSES. All expenses (including, without limitation,
legal, auditing, accounting and other related expenses such as
preparation of Post-Merger Filings and the Merger Balance Sheet)
incurred in connection with this transaction by Merging Entity and
Shareholder shall be the sole responsibility of Merging Entity or
Shareholder (depending upon the nature of the expense), and all
expenses incurred by Parent in connection with this transaction shall be
the sole responsibility of Parent.
11. DEFAULT.
11.1 Default by Shareholder or Merging Entity. Except as
otherwise expressly provided in this Agreement, if Shareholder or
Merging Entity shall fail to perform or comply with any covenant,
agreement or condition contained in this Agreement that is required to
be performed or complied with by Shareholder or Merging Entity on or
prior to the Closing Date, then Parent shall have the option to seek
specific performance of this Agreement or to xxx such defaulting party
for damages. If Parent elects to xxx for specific performance,
Shareholder and Merging Entity expressly waive any claim or defense
that Parent has an adequate remedy at law.
11.2 Default by Parent. Except as otherwise expressly provided
in this Agreement, if Parent shall fail to perform or comply with any
covenant, agreement or condition contained in this Agreement that is
required to be performed or complied with by Parent on or prior to the
Closing Date, then Shareholder and Merging Entity may seek specific
performance of this Agreement or may elect to xxx for damages. If
Shareholder and Merging Entity elect to xxx for specific performance,
Parent expressly waives any claim or defense that Shareholder and
Merging Entity have an adequate remedy at law.
12. NOTICES. All notices or other communications permitted
or required to be given hereunder by any party to any other party shall
be in writing and shall be delivered personally or by telecopier, telex or
other similar communication or sent by registered or certified mail,
postage prepaid:
(a) If to Shareholders or Merging Entity:
Xx. Xxxxxx X. Xxxxx, President
CLOVER INSURANCE AGENCY, INC.
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
With copies to:
Xxxx X. Xxxxxx, Inc.
000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Xxxxxx X. Xxxxx, Esquire
00 Xxxxx XX, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
(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.
13. EXTENSION OF TIME AND WAIVER.
(a) Time is of the essence with respect to this Agreement.
However, the parties hereto may, by mutual agreement in writing,
extend the time for the performance of any of the obligations of the
parties hereto.
(b) Each party for whose benefit a representation,
warranty, covenant, agreement or condition is intended may, in writing:
(i) waive any inaccuracies in the warranties and representations
contained in this Agreement; and (ii) waive compliance with any of the
covenants, agreements or conditions contained herein and so waive
performance of any of the obligations of the other parties hereto, and
any default hereunder; provided, however, that any such waiver shall not
affect or impair the waiving party's rights in respect to any other
representation, warranty, covenant, agreement or condition or any
default with respect thereto.
14. MISCELLANEOUS PROVISIONS.
14.1 Counterparts. Any number of counterparts of this
Agreement may be signed and delivered, each of which shall be
considered the original and all of which, together, shall constitute one
and the same instrument.
14.2 Governing Law. EXCEPT FOR THE MERGER OF HRH
MERGER SUBSIDIARY INTO MERGING ENTITY, WHICH
SHALL BE GOVERNED BY CALIFORNIA LAW, THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH
OF VIRGINIA.
14.3 Entire Agreement. This Agreement constitutes the entire
Agreement and understanding between the parties hereto with respect
to the transactions contemplated hereby, expressly superseding all prior
Agreements and understandings, whether oral or written, and no change,
modification, termination or attempted waiver of any of the provisions
of this Agreement shall be binding unless reduced to writing and signed
by the party or parties against whom enforcement is sought.
14.4 Section Headings. The section headings in this Agreement
are for convenience of reference only and shall not be deemed to alter
or affect any provision hereof.
14.5 No Assignment. Neither this Agreement, nor any rights or
liabilities hereunder, may be assigned by any party without the prior
written consent of all of the other parties.
14.6 Adjustment Based on Merger Balance Sheet.
(a) Determination of Merger Balance Sheet. For purposes
hereof, "Merger Balance Sheet" means an unaudited balance sheet of
Merging Entity, as of the close of business on the day immediately
preceding the Effective Date, 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, one
arbitrator shall be selected by Shareholder and one arbitrator shall be
selected by Parent. The two arbitrators shall then pick one mutually
acceptable arbitrator (the "Arbitrator") to resolve all questions in
dispute. The decision of the Arbitrator shall be final and the fees for
his services shall be borne fifty percent (50%) by Parent and fifty
percent (50%) by Shareholder.
Notwithstanding anything in the foregoing to the contrary, if the
Merger Balance Sheet is not submitted within seventy-five (75) days
after the Effective Date, then Parent shall submit a Merger Balance
Sheet within fifteen (15) days thereafter which shall be final, conclusive
and binding on all parties hereto, and not subject to any of the
arbitration provisions described above.
(b) Tangible Net Worth. The term "Tangible Net Worth"
means the remainder arrived at from the Merger Balance Sheet when
total liabilities are subtracted from total assets, and 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 Shareholder pursuant to Section 1.4 shall be adjusted as
follows:
(i) If Tangible Net Worth exceeds $354,000
(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 $14; and
(ii) If Tangible Net Worth is less than $354,000
(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 $14.
In the event of an increase in the number of shares of common
stock of Parent to be issued to Shareholder, such additional shares shall
be issued, promptly after determination of such number, by Parent to
Shareholder in the same proportion as set forth in Section 1.4(a). In
the event of a decrease in the number of shares of common stock of
Parent, such shares shall be assigned, promptly after determination of
such number, to Parent (at Parent's discretion either from the Escrowed
Shares or the Shareholder or both) in the same proportions as set forth
in Section 1.4(a), unless Parent shall have received a differing written
directive pursuant to Section 9.6. The value of any shares of Parent
common stock to be issued or returned pursuant to this Agreement shall
be adjusted to reflect the occurrence after the Effective Date of any of
the events specified in Section 1.4(c).
14.7 Survival. Notwithstanding anything in the foregoing to the
contrary, any rights which Shareholder or Parent may have at law or in
equity against the other for a misstatement or omission by such party
which should have been made, corrected or disclosed by such party, at
or prior to the Effective Date, shall survive for the applicable period
provided by law or equity for the remedy of such act or omission.
14.8 Schedules. Schedules referenced in this Agreement are
an integral part of this Agreement and are to be deemed a part of this
Agreement whether attached hereto on execution of this Agreement or
anytime thereafter.
14.9 Parent Policy on Post-Acquisition Cash Held by Surviving
Corporation. Merging Entity and Shareholder 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 Shareholder 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.
14.10 Subsequent Acquisitions. Merging Entity and Shareholder
acknowledge that a later acquisition by Surviving Corporation of another
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.
14.11 Nonsolicitation Covenant. Shareholder, by signature
hereto, covenants that he shall not for a period of five (5) years after the
Effective Date, directly or indirectly, except on behalf of Surviving
Corporation, its successors or assigns, solicit or accept risk management,
insurance or bond business from any of the customers of Merging Entity
as of the moment immediately preceding the Effective Date.
Shareholder, by signature hereto, acknowledges: (i) that this covenant is
ancillary to this Merger Agreement, is integral hereto and is
independent of any other provision herein, (ii) that this covenant is
reasonably necessary for the protection of Surviving Corporation's
legitimate business interests; (iii) that this covenant poses no undue
hardship on the 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.
14.12 Acceptance. The binding date of acceptance of this
Agreement shall be the Date on which the last of the parties executes
the same.
EXECUTED by Shareholder and Merging Entity at ____________,
___________, this _______ day of _________, 1996.
SHAREHOLDER:
_____________________________________
Xxxxxx X. Xxxxx
MERGING
ENTITY:
CLOVER
INSURANCE AGENCY, INC.
By
__________________________________
Xxxxxx X.
Xxxxx, its
President
EXECUTED by Parent at ____________, ___________, this
______ day of _________, 1996.
HILB, XXXXX AND
XXXXXXXX COMPANY
By_________________________________________
_____________________________________, its
_____________________________________
