AGREEMENT OF PURCHASE AND SALE
BY AND BETWEEN
GOW MANAGEMENT SERVICES, INC.
AND
▇. ▇. ▇▇▇ & COMPANY, INC.
THIS AGREEMENT, effective as of 12:02 a.m. on January 1, 1997
("Effective Date"), is made and entered into this _____ day of January,
1997, by and between HILB, ▇▇▇▇▇ AND ▇▇▇▇▇▇▇▇ COMPANY, a Virginia
corporation ("HRH"), acting on behalf of itself and the wholly owned
subsidiary of Seller it will acquire upon completion of a merger on or
around January 7, 1997, but will be accounted for as if effective as of
12:01 a.m. on January 1, 1997, GOW MANAGEMENT SERVICES, INC., a Delaware
corporation ("Buyer"); ▇. ▇. ▇▇▇ & COMPANY, INC., a Delaware corporation
("Seller"); and Seller's three shareholders, ▇▇▇▇▇▇▇ ▇▇▇ ("▇▇. ▇. ▇▇▇"),
▇▇▇▇▇▇▇ ▇▇▇ ("▇▇. ▇. ▇▇▇"), and ▇▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇. ▇▇▇▇▇"), with Messrs.
▇▇▇▇▇, ▇. ▇▇▇ and ▇. ▇▇▇ collectively being referred to herein as
"Shareholders".
W I T N E S S E T H:
WHEREAS, HRH is engaged in the business of owning insurance
agencies;
WHEREAS, Seller currently conducts an insurance agency business in
and around Buffalo, New York;
WHEREAS, simultaneously herewith, HRH and Buyer have entered into an
Agreement of Merger pursuant to which HRH will acquire Buyer from
Shareholders, effective upon filing of the Certificate of Merger on or
around January 7, 1997, but to be accounted for as if effective as of
12:01 a.m. on January 1, 1997 (the "Agreement of Merger");
WHEREAS, Shareholders desire that Seller sell certain of its assets
utilized in that business under the terms hereinafter provided;
WHEREAS, HRH desires that Buyer, after it has been acquired by HRH
pursuant to the Agreement of Merger, purchase certain of Seller's assets
utilized in such business.
NOW THEREFORE, in consideration of the premises and of the mutual
promises and covenants hereinafter set forth, and intending to be legally
bound, the parties hereto agree as follows:
PORTIONS OF THIS AGREEMENT ARE SUBJECT TO ARBITRATION.
1. Sale and Assignment of Assets. Subject to the terms and
conditions contained in this Agreement, Seller hereby agrees to sell
convey, transfer, assign and deliver to Buyer, free and clear of any
judgment, mortgage, pledge, lien, conditional sale agreement, security
interest, option, or other encumbrance or claim of any nature whatsoever
(other than liens which relate to liabilities expressly assumed by Buyer
hereunder), all of Seller's right, title and interest in and to the
following assets ("Assets"): (i) its insurance customer lists,
expiration lists and records, book of business, business records, files
and daily reports; (ii) all furniture, fixtures and equipment identified
on Schedule 1 attached hereto, all of which are used in, or form a part
of, Seller's insurance agency business; (iii) all of its rights and
interest in and to its agency agreements with those insurance companies
for which it acts as agent, including all contingency and profit sharing
agreements with such companies; (iv) certain maintenance and other
agreements listed on Schedule 1; (v) all of its rights or interests in
restrictive covenants or other agreements protecting or prohibiting any
of the accounts transferred in (i) above from being solicited by others;
(vi) cash of Seller in amount equal to "pre-billed" accounts to be
assumed by Buyer (i.e., premiums collected with respect to policies which
are effective on or after the Effective Date); and (vii) the goodwill of
Seller, including, but not limited to, the corporate name of "▇. ▇. ▇▇▇ &
Company, Inc." and any trade names related thereto. Seller shall sign
such Bills of Sale in form and substance as set forth in Schedule 1.1, or
other documents of assignment or transfer as Buyer shall request.
Buyer is not acquiring, and is hereby expressly excluded from
acquiring from Seller, the following assets of the Seller which the
Seller retains: (i) except as provided in clause (vi) of the preceding
paragraph, cash or other readily liquid working capital on hand as of the
close of business of Seller on the day prior to the Effective Date
("Pre-Effective Moment"); (ii) accounts and other receivables as of the
Pre-Effective Moment, including commissions earned but not paid on
business billed by Seller which was written and having an effective date
prior to the Pre-Effective Moment, but excluding direct ▇▇▇▇ commissions
which shall be treated as earned when received; and (iii) prepaid
insurance, finance charges, taxes and licenses. Except for those
liabilities of Seller listed in Schedule 6.K (the "Assumed Liabilities"),
Buyer is not assuming any liabilities of Seller of any kind and shall be
fully indemnified therefor.
2. Purchase Price. In consideration for the transfer and
assignment of the above-described Assets, the Buyer shall pay to the
Seller at the times specified herein the sums referred to in A, B, C, and
D (collectively the "Purchase Price"), payable as follows:
A. On the later of the Closing Date or the Effective Date
("Transfer Date"), Buyer shall deliver to Seller the sum of TWO MILLION
FOUR HUNDRED SEVENTY-FIVE THOUSAND AND NO/100 DOLLARS ($2,475,000);
B. On March 3, 1998, Buyer shall pay Seller, before
application of any applicable offset or indemnity, that sum determined to
be due pursuant to Section 3.A, which amount shall not be greater than
$1,278,450, nor less than $675,000;
C. On March 2, 1999, Buyer shall pay Seller, before
application of any applicable offset or indemnity, that sum determined to
be due pursuant to Section 3.B, which amount shall not be greater than
$1,278,450, nor less than $675,000;
D. On March 1, 2000, Buyer shall pay Seller, before
application of any applicable offset or indemnity, that sum determined to
be due pursuant to Section 3.C, which amount shall not be greater than
$1,278,450, nor less than $675,000;
E. Additionally, not as a part of Purchase Price, but as
additional consideration to bind their restrictive covenants, Buyer shall
disburse at the same time as the payments in B, C and D are made,
respectively an aggregate amount of money before application of any
applicable offset or indemnity, to ▇▇. ▇▇▇▇▇ and those individuals named
in Section 8.B equal to 49.14243% of the amount by which each of the
payments determined pursuant to B, C and D exceeds $675,000. For
example, if the amount determined to be due Seller pursuant to Section
3.A is $1,000,000, then the aggregate amount to be distributed among the
eligible individuals would be $159,712.90 (($1,000,000 - 675,000) x
.4914243)). As a second example, if the amount determined to be due
Seller pursuant to Section 3.B is the maximum amount of $1,278,450, then
the aggregate amount to be distributed among the eligible individuals
would also be the maximum amount of $296,550. As the third and final
example, if the amount determined to be due Seller pursuant to Section
3.C is the minimum amount of $675,000, then the aggregate amount to be
distributed among the eligible individuals would also be the minimum
amount of $0 (zero).
F. The payments referenced in B, C and D above are hereafter
referred to as "Buyer's Deferred Obligations." Each of Buyer's Deferred
Obligations shall have interest imputed at the lowest applicable federal
rate allowed Buyer pursuant to Section 1274 of the Internal Revenue Code
of 1986, as amended ("Code"), with respect to such Buyer's Deferred
Obligation (for Buyer's Deferred Obligation due March 3, 1998: 5.63%; for
Buyer's Deferred Obligation due March 2, 1999: 5.63%; for Buyer's
Deferred Obligation due March 1, 2000: 6.10%). Buyer's Deferred
Obligations shall contain a right of offset as specified in Sections 3
and 13 hereof.
G. On the Transfer Date, Buyer shall pay to each of the
Shareholders, not as a part of the Purchase Price (as herein defined) but
as an integral part of the transactions contemplated herein, that sum
called for in the Employment Agreement and Covenant Not to Compete for
such Shareholder to receive for covenanting not to compete with Buyer or
HRH. These payments have been separately bargained for by the parties
and represent full and fair value to each of the Shareholders for his
individual covenant not to compete.
H. On the Transfer Date, in exchange for the present payment
and the future payments of the Purchase Price to Seller, each at the
times specified herein, Buyer shall receive the Assets from Seller free
and clear of any lien or encumbrance of any kind whatsoever, other than
liens related to the Assumed Liabilities.
3. Abatement of the Purchase Price.
A. Abatement of Purchase Price Based on Year 1 Agency Profit.
(1) As used herein, the term "Year 1 Agency Profit" shall
mean the net profit of Buyer for calendar year 1997 ("Year 1"),
determined in accordance with generally accepted accounting principles
applied on a consistent basis, but subject to Buyer's accounting policies
(which shall satisfy generally accepted accounting principles) as set
forth from in HRH's Accounting Policies and Procedures Manual previously
provided to Seller ("Buyer's GAAP") and applied uniformly in determining
the net profit of each subsidiary of HRH, before any provision for
federal or state income taxes and before any provision for amortization
of any portion of the Assets which are intangible and before any
provision for any overhead charge by HRH, as the parent of the Buyer, to
the Buyer. Additionally, the parties have reached special agreement with
regard to the calculation of Year 1 Agency Profit as it relates to
interest income and expense, profit sharing expense, bad debt expense,
depreciation, professional fees, business insurance and other direct
corporate costs, and a new producer's salary as set forth in this
subsection. Specifically, interest income and expense shall be
calculated in the manner described below and, to the extent not
inconsistent therewith, in a manner consistent with the pro forma
financial statements attached hereto as Schedule 3, such that interest
income and expense shall reflect the true operating results and shall not
be unnecessarily credited or charged with excessive interest income or
expense; profit sharing expense shall be set at 7% of eligible
compensation, regardless of the actual number (higher or lower) actually
determined to be contributed to HRH's Pension and Profit Sharing Plan;
bad debt expense charged against earnings shall be the actual bad debt
expense booked according to HRH accounting policy; depreciation charges
shall be the actual depreciation charged; the charges against the
earnings for professional fees (other than "hearing" legal costs),
business insurance and other direct corporate costs shall be $216,000,
regardless of the actual costs incurred therefor by Buyer; Year 1 Agency
Profit shall not be charged with up to $30,000 of a new producer's salary
provided that such new producer produces commission income from new
accounts, which accounts were not acquired as part of the Assets or from
existing customers of Seller or Buyer, equal to at least 50% of such
excluded amount; Seller shall reimburse the costs incurred by Buyer with
respect to the employment of ▇▇▇▇▇▇▇ ▇. ▇▇▇ (except for expenses incurred
for benefits provided to all employees of Buyer), and such reimbursed
amount shall not be charged as an expense in computing Year 1 Agency
Profit; and Seller shall reimburse Buyer $26,000 with respect to the
lease by Buyer from Seller of certain premises at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, and such amount shall not be charged as an expense in
computing Year 1 Agency Profit.
The Buyer shall cause the Year 1 Agency Profit to be determined, and
the amount thereof communicated to the Shareholders, as soon as is
reasonably practicable after Year 1, and, in all events, no later than
sixty-two (62) days after Year 1. In the event of a disagreement by the
Shareholders, collectively, as to the computation of the Year 1 Agency
Profit, such disagreement shall be resolved in the manner described in
subsection D., below.
(2) To the extent the Year 1 Agency Profit shall be less
than $1,350,000 (with such deficiency being the "Year 1 Deficiency"),
then for each $1 of Year 1 Deficiency, Buyer shall be entitled to reduce
the portion of the Purchase Price payable in fourteen months by aggregate
amounts of $1.341 down to a minimum aggregate amount payable of $675,000.
For example, if the Year 1 Deficiency equals $50,000, the fourteen month
payment to be received by Seller would be reduced by $67,050 to the
aggregate amount payable of $1,211,400. If the Year 1 Deficiency equals
or exceeds $450,000, the fourteen month payment to be received by Seller
would be reduced by the maximum amount of $603,450 to the minimum
aggregate amount payable of $675,000.00.
B. Abatement of Purchase Price Based on Year 2 Agency Profit.
(1) As used herein, the term "Year 2 Agency Profit" shall
mean the net profit of the Buyer for calendar year 1998 ("Year 2"),
determined in accordance with Buyer's GAAP and applied uniformly in
determining the net profit of each subsidiary of HRH, before any
provision for federal or state income taxes, before any provision for
amortization of any portion of the Assets which are intangible and before
any provision for any overhead charge by HRH, as the parent of the Buyer,
to the Buyer. Additionally, the parties have reached special agreement
with regard to the calculation of Year 2 Agency Profit as it relates to
interest income and expense, profit sharing expense, bad debt expense,
depreciation, professional fees, business insurance and other direct
corporate costs, and a new producer's salary as set forth in this
subsection. Specifically, interest income and expense shall be
calculated in the manner described below and, to the extent not
inconsistent therewith, in a manner consistent with the pro forma
financial statements attached hereto as Schedule 3, such that interest
income and expense shall reflect the true operating results and shall not
be unnecessarily credited or charged with excessive interest income or
expense; profit sharing expense shall be set at 7% of eligible
compensation, regardless of the actual number (higher or lower) actually
determined to be contributed to HRH's Pension and Profit Sharing Plan;
bad debt expense charged against earnings shall be the actual bad debt
expense booked according to HRH accounting policy; depreciation charges
shall be the actual depreciation charged; the charges against the
earnings for professional fees (other than "hearing" legal costs),
business insurance and other direct corporate costs shall be $216,000,
regardless of the actual costs incurred therefor by Buyer; Year 2 Agency
Profit shall not be charged with up to $30,000 of a new producer's salary
provided that such new producer produces commission income from new
accounts, which accounts were not acquired as part of the Assets or from
existing customers of Seller or Buyer, equal to at least 50% of such
excluded amount; Seller shall reimburse the costs incurred by Buyer with
respect to the employment of ▇▇▇▇▇▇▇ ▇. ▇▇▇ (except for expenses incurred
for benefits provided to all employees of Buyer), and such reimbursed
amount shall not be charged as an expense in computing Year 2 Agency
Profit; and Seller shall reimburse Buyer $26,000 with respect to the
lease by Buyer from Seller of certain premises at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, and such amount shall not be charged as an expense in
computing Year 2 Agency Profit.
The Buyer shall cause the Year 2 Agency Profit to be determined, and
the amount thereof communicated to the Shareholders, as soon as is
reasonably practicable after Year 2, and, in all events, no later than
sixty-two (62) days after Year 2. In the event of any disagreement by
the Shareholders, collectively, as to the computation of the Year 2
Agency Profit, such disagreement shall be resolved in the manner
described in subsection D, below.
(2) To the extent the Year 2 Agency Profit shall be less
than $1,350,000 (with such deficiency being the "Year 2 Deficiency"),
then for each $1 of Year 2 Deficiency, Buyer shall be entitled to reduce
the portion of the Purchase Price payable in twenty-six months by
aggregate amounts of $1.341, down to a minimum aggregate amount payable
of $675,000. For example, if the Year 2 Deficiency equals $50,000, the
twenty-six month payment to be received by Seller would be reduced by
$67,050 to the aggregate amount payable of $1,211,400. If the Year 2
Deficiency equals or exceeds $450,000, the twenty-six month payment to be
received by Seller would be reduced by the maximum amount of $603,450 to
the minimum aggregate amount payable of $675,000.
C. Abatement of Purchase Price Based on Year 3 Agency Profit.
(1) As used herein, the term "Year 3 Agency Profit" shall
mean the net profit of the Buyer for calendar year 1999 ("Year 3"),
determined in accordance with Buyer's GAAP and applied uniformly in
determining the net profit of each subsidiary of HRH, before any
provision for federal or state income taxes, before any provision for
amortization of any portion of the Assets which are intangible and before
any provision for any overhead charge by HRH, as the parent of the Buyer,
to the Buyer. Additionally, the parties have reached special agreement
with regard to the calculation of Year 3 Agency Profit as it relates to
interest income and expense, profit sharing expense, bad debt expense,
depreciation, professional fees, business insurance and other direct
corporate costs, and a new producer's salary as set forth in this
subsection. Specifically, interest income and expense shall be
calculated in the manner described below and, to the extent not
inconsistent therewith, in a manner consistent with the pro forma
financial statements attached hereto as Schedule 3, such that interest
income and expense shall reflect the true operating results and shall not
be unnecessarily credited or charged with excessive interest income or
expense; profit sharing expense shall be set at 7% of eligible
compensation, regardless of the actual number (higher or lower) actually
determined to be contributed to HRH's Pension and Profit Sharing Plan;
bad debt expense charged against earnings shall be the actual bad debt
expense booked according to HRH accounting policy; depreciation charges
shall be the actual depreciation charged; the charges against the
earnings for professional fees (other than "hearing" legal costs),
business insurance and other direct corporate costs shall be $216,000,
regardless of the actual costs incurred therefor by Buyer; `Year 3 Agency
Profit shall not be charged with up to $30,000 of a new producer's salary
provided that such new producer produces commission income from new
accounts, which accounts were not acquired as part of the Assets or from
existing customers of Seller or Buyer, equal to at least 50% of such
excluded amount; Seller shall reimburse the costs incurred by Buyer with
respect to the employment of ▇▇▇▇▇▇▇ ▇. ▇▇▇ (except for expenses incurred
for benefits provided to all employees of Buyer), and such reimbursed
amount shall not be charged as an expense in computing Year 3 Agency
Profit; and Seller shall reimburse Buyer $26,000 with respect to the
lease by Buyer from Seller of certain premises at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, and such amount shall not be charged as an expense in
computing Year 3 Agency Profit.
The Buyer shall cause the Year 3 Agency Profit to be determined, and
the amount thereof communicated to the Shareholders, as soon as is
reasonably practicable after Year 3, and, in all events, no later than
sixty-two (62) days after Year 3. In the event of any disagreement by
the Shareholders, collectively, as to the computation of the Year 3
Agency Profit, such disagreement shall be resolved in the manner
described in subsection D., below.
(2) To the extent the Year 3 Agency Profit shall be less
than $1,350,000 (with such deficiency being the "Year 3 Deficiency"),
then for each $1 of Year 3 Deficiency, Buyer shall be entitled to reduce
the portion of the Purchase Price payable in twenty-six months by
aggregate amounts of $1.341, down to a minimum aggregate amount payable
of $675,000. For example, if the Year 3 Deficiency equals $50,000, the
twenty-six month payment to be received by Seller would be reduced by
$67,050 to the aggregate amount payable of $1,211,400. If the Year 3
Deficiency equals or exceeds $450,000, the twenty-six month payment to be
received by Seller would be reduced by the maximum amount of $603,450 to
the minimum aggregate amount payable of $675,000.
D. Determination of Agency Profit.
(1) As soon as practicable after Year 1, Year 2 and Year
3, and in all events, no later than sixty-two (62) days after Year 1,
Year 2 and Year 3, respectively, Buyer or HRH shall deliver to the
Shareholders the determination of the Year 1 Agency Profit, Year 2 Agency
Profit and Year 3 Agency Profit ("Profit Statements"). In addition, the
Shareholders or any firm or certified public accountants designated by
the Shareholders (referred to below as the "Seller's Reviewer") shall be
permitted reasonable access to the work papers, schedules, memoranda and
other documents used in preparing the Profit Statements.
(2) As soon as is reasonably practicable after delivery
to the Shareholders of the Profit Statements, and, in all events, within
fifteen business (15) days after such delivery, the Shareholders shall
give written notice to the Buyer either to the effect that the Profit
Statement is acceptable as prepared or specifying any disagreement with
respect to any item in such document. In the event of any disagreement,
the Shareholders, on the one hand, and the Buyer, on the other hand,
shall each make a good faith attempt to reconcile the difference;
however, if they are unable to reconcile all differences within a period
of fourteen (14) days after notification to the Buyer of such
disagreement, then the Shareholders, on the one hand, and the Buyer, on
the other hand, shall submit all questions in dispute to one of the "Big
Six" firms of certified public accountants (other than Seller's Reviewer
or the accounting firm normally employed by Seller, HRH or Buyer, if
applicable) located at a mutually agreed neutral site, as may be agreed
upon by the Shareholders, on the one hand, and the Buyer, on the other
hand, or, in default of such agreement, as may be determined by the
President at such time of the American Institute of Certified Public
Accountants, which chosen accounting firm ("Umpire") shall, within a
period of thirty (30) days after submission, determine and report to the
Shareholders, on the one hand, and the Buyer, on the other hand, upon all
questions in dispute, and the report of the Umpire shall be final,
conclusive and binding on the Shareholders and the Buyer. The fees
charged by the Umpire shall be equally divided among the Shareholders, on
the one hand, and the Buyer on the other hand.
The Profit Statements, as prepared by the Buyer or HRH, or, if
varied by agreement between the Shareholders, on the one hand, and the
Buyer, on the other hand, or by the report of the Umpire, then as so
varied, shall be final, conclusive and binding on the Shareholders and
the Buyer.
E. No Commissions Counted Twice. Notwithstanding anything in
the foregoing to the contrary, the accounting for any account for
purposes of determining Year 1 Agency Profit, Year 2 Agency Profit and
Year 3 Agency Profit shall be done in such a manner as to prevent any
commissions which are earned in one year from being counted in two years
and in such a manner as to prevent two years of commissions from any such
account as being earned in any one year.
4. Allocation of Purchase Price. The Purchase Price shall be
allocated at Closing in the manner prescribed under Section 1060 of the
Code and the regulations promulgated thereunder. Buyer and Seller intend
to allocate the Purchase Price, after imputation of interest, among the
Assets as follows:
Expiration Lists 4,867,825
Furniture, Fixtures
and Equipment Adjusted tax basis as of 12/31/96
Goodwill Balance of Purchase Price
To the extent any payment based on Year 1 Agency Profit, Year 2 Agency
Profit and Year 3 Agency Profit is less than the maximum payment called
for herein, Buyer and Seller shall first apply such reduction to
goodwill. If such reductions eliminate goodwill, then such reduction
shall next be applied to the value of the expiration lists. If any
payment is made pursuant to the Agreement in excess of the Purchase
Price, such excess shall be allocable to goodwill. All adjustments shall
be discounted to their present value at the time of such adjustment by
using the imputed interest percentage which shall adjust the amount of
imputed interest accordingly. Buyer and Seller mutually covenant and
agree that for tax purposes each of them will report the purchase and
sale consummated hereunder on the basis of the foregoing allocation in
compliance with Section 1060 of the Code.
5. Closing. The closing ("Closing") shall be held at the offices
of ▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Goodyear, LLP on January 7, 1997, at
10:00 a.m. ("Closing Date").
6. Representations and Warranties of Seller and Shareholders.
Seller and Shareholders, jointly and severally, hereby represent and
warrant to the Buyer and HRH as follows:
A. Except as set forth in Schedule 6.A, Seller has good and
marketable title to, and owns, the Assets to be sold, assigned and
transferred hereunder, and the Assets are, or will be as of the Effective
Date, free and clear from any and all judgments, mortgages, pledges,
liens, conditional sales agreements, security interest, options or other
encumbrances or claims of every nature and kind whatsoever, other than
liens on any Assets transferred subject to any Assumed Liabilities.
B. Seller is a corporation duly organized, validly existing
and in good standing as a domestic corporation under the laws of the
State of Delaware; Seller possesses all necessary corporate power to
enter into this Agreement and to consummate the transactions contemplated
hereby; the Shareholders and Board of Directors of Seller have taken, or
will have taken by the Closing Date, all necessary corporate actions to
authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby; and except as set
forth on Schedule 6.B, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby
will breach or violate any provision of Seller's certificate of
incorporation or bylaws, any statute or ordinance, or any material
contract, agreement or other instrument to which Seller is a party or by
which it is bound.
C. Except as set forth on Schedule 6.C, no notice, report or
other filing is required to be submitted to, and no consent, approval or
authorization is required to be received from, any governmental authority
or other person or entity in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated
hereunder, except where failure to do so will not have a material adverse
effect.
D. Seller is not in default under any material agreement
which is being assigned to Buyer hereunder.
E. Except as set forth on Schedule 6.E, there are no
judgments, actions, suits, levies, attachments or governmental or
administrative agency proceedings pending or, to the best knowledge of
Shareholders, threatened against or affecting the Assets or the
transactions contemplated by this Agreement, nor are there any such
actions pending or, to the best knowledge of Shareholders, threatened
between Seller and any of its clients or insurance companies for which it
acts as agent.
F. Seller is, and has during the past five years been, in
full compliance in all material respects with all licensing and other
regulatory laws for the conduct of its present operations (including,
without limitation, its property and casualty, personal lines and life
businesses) and all of Seller's employees or agents who write any type of
insurance for Seller (including the Shareholders) are and have been, in
full compliance in all material respects with all licensing and other
regulatory laws such that Seller and Shareholders have no liabilities of
any nature related to any failure, whether intentional or inadvertent, to
comply with any such laws and which may attach to, or affect the use of,
the Assets in a materially adverse manner by the Buyer or HRH. Attached
hereto as Schedule 6.F is a complete list of all insurance licenses held
by Seller and all states in which it is qualified to transact business.
G. Seller maintains errors and omissions coverage for all of
its operations in amounts which it deems to provide adequate coverage;
all such policies are described on Schedule 6.G (carrier, retrodate,
claims made or occurrence policy, deductible and limits); and except as
set forth on Schedule 6.G, neither Seller nor Shareholders have received
any notice of any claim against Seller, its agents, employees or
directors or any of the Shareholders.
H. (1) Schedule 6.H. contains a true and complete list of
each "employee pension benefit plan" (within the meaning of Section 3(2)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (including without limitation multiemployer plans within the
meaning of ERISA Section 3(37)), under which any employee or former
employee of Seller has any present or future right to benefits or under
which Seller have any present or future liability. All such plans,
agreements, programs, policies and arrangements shall be collectively
referred to as the "Seller Plans".
(2) Each Seller Plan which is intended to be qualified
within the meaning of section 401(a) of the Code is so qualified and has
received a favorable determination letter as to its qualification, or
application has been made to the Internal Revenue Service for the
issuance of such letter.
(3) No Seller Plan is a multiemployer plan within the
meaning of Section 4001(a)(3) of ERISA or is an "employee pension benefit
plan" within the meaning of Section 3(2) of ERISA subject to Title IV of
ERISA.
(4) Except as disclosed on Schedule 6.H, Seller has no
employment agreement with any employee which is not terminable at will
and no employee pension, profit-sharing, or other retirement plan.
I. The list of Seller's liabilities, including liabilities
for credit receivables and liabilities to insurance companies for all
lines of insurance business outstanding as of the Pre-Effective Moment
(which liabilities shall be separately stated and referred to as "Credit
Receivables" and as "Insurance Company Payables"), attached hereto as
Schedule 6.I is complete and correct as of the date hereof and will be
updated as soon as practicable after the date hereof to reflect a
complete and correct list of such Seller's liabilities as of the Pre-
Effective Moment; and other than the Assumed Liabilities, Seller and the
Shareholders are and will be responsible for all liabilities of Seller of
any type whatsoever accrued as of the Effective Date.
J. Schedule 6.J contains a correct and complete list of all
insurance companies with respect to which Seller has an agency contract
or similar relationship. Except as identified in Schedule 6.J, no
Shareholder has any knowledge of any proposed termination of, or
modification to, the existing relations between Seller and any of such
insurance companies. Furthermore, except as otherwise set forth in
Schedule 6.J, all accounts with all insurance companies represented by
Seller or with whom it transacts business are current and there are no
material disagreements or unreconciled discrepancies between Seller and
any such company as to the amounts owed by Seller.
K. Except as disclosed on Schedule 6.K, there are no
maintenance or other continuing agreements affecting or concerning the
use of the Assets or Seller's insurance agency business.
L. Seller has timely filed or will file all tax returns
required of it and timely paid all tax liabilities owed by it, such that
no tax liabilities to Buyer or HRH of any kind whatsoever could be
attached to or associated with the Assets.
M. Seller and Shareholders have caused to be delivered to HRH
and Buyer true and complete copies of (1) Seller's 1995 federal and state
income tax returns, (2) Seller's audited financial statements for the
period ended December 31, 1995 and (3) Seller's compiled financial
statements for the nine-month period ended September 30, 1996, and the
calendar years ended in 1993 and 1994. Seller and Shareholders shall
cause any newly-prepared financial information for periods through the
Effective Date (including interim management reports) to be delivered
promptly to the Buyer.
Each of the foregoing financial statements is true and correct, is
in accordance with the books and records of Seller, presents fairly the
financial condition and results of operations of Seller as of and for the
periods indicated, and has been prepared, or will be prepared, in
accordance with generally accepted accounting principles consistently
applied throughout the periods covered by such statements. All such
financial statements do not contain any untrue statement of any material
fact nor omit to state any material fact required to be stated to make
such financial statements not misleading.
N. Except as disclosed on Schedule 6.A, there are no
financing statements or other security interests of any kind filed or
required to be filed against the Assets or affecting the use of, or title
to, the Assets ("Financing Statements"). Except as further disclosed on
Schedule 6.A, there are no deferred money purchase notes related to the
Seller's acquisition of any portion of the Assets ("Notes"). Any such
liabilities related to the Financing Statements or Notes can and will be
paid off at or prior to Closing, except for liens relating to Assets
transferred subject to any Assumed Liabilities as further detailed on
Schedule 6.A.
O. Other than fees owing to Marsh, Berry & Company, Inc.,
which fees are the responsibility of Seller and Shareholders, Seller and
Shareholders have not employed any broker or finder for the purposes of
completing the transactions contemplated herein or for any transaction
similar to 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.
P. Except for the transactions contemplated herein, neither
Seller nor Shareholders have entered into any agreement for the sale of
the Assets (or any portion thereof) or for the direct or indirect sale or
exchange of Seller.
Q. Shareholders and Seller understand and acknowledge that
errors and omissions prior to the Effective Date remain their risk
exclusively and are not insured under Buyer's or HRH's insurance program,
and have been advised to, and will, take out insurance, effective as of
the Effective Date to insure each Shareholder and the Seller for claims
arising under errors and omissions occurring prior to the Effective Date;
and when such insurance is purchased, Shareholders and Seller will
furnish all such certificates of insurance to Buyer and HRH as soon as is
practicable.
R. Except as identified in Schedule 6.R, Shareholders have no
knowledge of any proposed termination of any insurance account presently
written or serviced by Seller. Also, except as otherwise set forth in
Schedule 6.R, all customer accounts, including, without limitation, those
accounts with respect to which Seller financed any premiums, are current.
For purposes of this Section, the terms "insurance account" and "customer
account" shall be limited to accounts which generate aggregate annual
income (commissions and fees) of $25,000 or more.
The census data for all of Seller's employees as of the date
hereof, in the form provided in Schedule 6.S , is true and complete in all
material respects.
The foregoing representations and warranties shall survive the
Closing until March 1, 2000.
7. Representations and Warranties of Buyer and HRH. Buyer and HRH
hereby represent and warrant to the Seller and the Shareholders as
follows:
A. Buyer is duly organized, validly existing and in good
standing as a domestic corporation under the laws of the State of
Delaware; HRH is duly organized, validly existing and in good standing as
a domestic corporation under the laws of the Commonwealth of Virginia;
each of Buyer and HRH has the corporate power to enter into this
Agreement and to consummate the transactions hereby contemplated and has
taken all actions necessary to authorize the execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby.
B. This Agreement and the transactions contemplated hereby
will not breach or violate any provision of Buyer's or HRH's articles of
incorporation or bylaws or any statute, rule, regulation or material
agreement to which either is a party or by which either is bound.
C. Neither Buyer nor HRH has employed a broker or finder for
the purposes of completing the transactions contemplated hereby.
D. HRH has, and Buyer will have as of each time contemplated
for it to make such a payment, adequate financial resources and
capability to consummate the transactions contemplated by this Agreement.
Neither HRH nor Buyer will be or become insolvent as a result of
consummating the transactions contemplated by this Agreement.
E. Except for necessary reports and other filings with the
SEC and New York Stock Exchange, each of which has been or will be made
prior to Closing, no notice, report or other filing is required to be
submitted to, and no consent, approval or authorization is required to be
received from, any governmental authority or other person or entity in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
F. The foregoing representations and warranties shall survive
the Closing until March 1, 2000.
8. Conditions Precedent to Performance by Buyer and HRH. The
obligation of Buyer and HRH to perform under this Agreement is contingent
upon the following conditions being fulfilled at or prior to Closing (or
the Effective Date, where stated to be applicable), any of which may be
waived in Buyer's or HRH's sole discretion without impairing any right of
indemnification or other right or remedy under this Agreement:
A. R. ▇▇▇▇▇ shall have entered into an Employment Agreement
and Covenant Not to Compete with Buyer and each of ▇. ▇▇▇ and ▇. ▇▇▇
shall have entered into a Covenant Not to Compete with Buyer, in form and
substance as set forth in Schedule 8.A attached hereto.
B. Each of the individuals listed on Schedule 8.B shall have
entered into an Employment Agreement and Covenant Not to Compete with
Buyer, substantially in form and substance as set forth in Schedule 8.B
attached hereto.
C. Buyer and HRH shall have received from ▇▇▇▇▇▇▇, ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Goodyear, LLP, counsel to Seller, an opinion in form and
substance as set forth in Schedule 8.C attached hereto.
D. The Shareholders and Seller shall have complied in all
material respects with all representations, warranties, conditions,
covenants and agreements required under this Agreement to be performed or
complied with by Seller or the Shareholders on or before the Closing.
E. No suit, action or proceeding, or governmental
investigation, against or concerning, directly or indirectly, Seller, or
any of Seller's 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 the counsel for Buyer, renders it impossible or
inadvisable for Buyer to consummate or cause to be consummated the
transactions contemplated by this Agreement.
F. 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
Buyer.
G. The Buyer shall have received certified copies of
resolutions of the Board of Directors and Shareholders of Seller, to the
extent deemed necessary by, and in form satisfactory to, counsel for
Buyer, authorizing the execution and delivery of this Agreement by Seller
and the consummation of the transactions contemplated hereby.
H. The escrow provided for in Section 12 hereof shall have
been established and funded in accordance with such Section 12.
I. Each of the Shareholders, and, if applicable, all those
persons designated in Section 8.B, above, shall have obtained
substantially all of the material licenses and other regulatory approvals
necessary to operate lawfully the property and casualty, personal lines
and life insurance businesses (in a manner similar to the present conduct
of such businesses by Seller) to be conducted by Buyer and each of its
agents, solicitors and employees.
J. HRH shall have completed the acquisition by merger of
Buyer, except for the actual filing of the Certificate of Merger which
shall be submitted for filing on the date of Closing.
8.1. Conditions Precedent to Performance by Seller and Shareholders.
The obligation of Seller and Shareholders to perform under this Agreement
is contingent upon the following conditions being fulfilled at or prior
to Closing (or the Effective Date, where stated to be applicable), any of
which may be waived in Seller's or Shareholders' sole discretion without
impairing any right of indemnification or other right or remedy under
this Agreement:
A. Buyer shall have entered into an Employment Agreement and
Covenant Not to Compete with ▇. ▇▇▇▇▇ and shall have entered into a
Covenant Not to Compete with ▇. ▇▇▇ and ▇. ▇▇▇, in form and substance as
set forth in Schedule 8.A attached hereto.
B. Buyer shall have entered into an Employment Agreement and
Covenant Not to Compete with each of the individuals listed in Schedule
8.B, substantially in form and substance as set forth in Schedule 8.B
attached hereto.
C. Buyer and HRH shall have complied in all material respects
with all representations, warranties, conditions, covenants and
agreements required under this Agreement to be performed or complied with
by Buyer or HRH on or before Closing.
D. No material suit, action or proceeding, or governmental
investigation, against or concerning, directly or indirectly, Buyer or
HRH which has not been previously disclosed to Seller, 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 the counsel for the
Seller, renders it impossible or inadvisable for the Seller to consummate
or cause to be consummated the transactions contemplated by this
Agreement.
E. 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 the
Seller.
F. The Seller shall have received certified copies of
resolutions of the boards of directors of Buyer and HRH, to the extent
deemed necessary by, and in form satisfactory to, counsel for the Seller,
authorizing the execution and delivery of this Agreement by the Buyer and
HRH and the consummation of the transactions contemplated hereby.
G. HRH shall have completed the acquisition by merger of
Buyer, except for the actual filing of the Certificate of Merger which
shall be submitted for filing on the date of Closing.
H. Buyer shall have delivered such instruments of assignment
and assumption as are necessary to evidence Buyer's assumption of the
Assumed Liabilities.
I. Buyer shall have delivered the cash portion of the
Purchase Price pursuant to Section 2.A, and the contemplated noncompete
payments under the agreements referenced in Section 8.A.
J. Buyer shall have executed and delivered a lease agreement
for the premises located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
substantially in the form attached hereto as Exhibit 8.1.J.
9. Covenants of Seller and Shareholders. Seller and Shareholders
covenant and agree that, except as otherwise consented to in writing by
Buyer and HRH:
A. Regular Course of Business. Prior to the Transfer Date,
Seller will carry on its business diligently and in the ordinary course
consistent with past management practices, except as otherwise
contemplated by this Agreement.
B. Restricted Activities and Transactions of Seller. Prior
to the Transfer Date, except as contemplated by this Agreement, Seller
will not engage in any one or more of the following activities or
transactions:
(1) except for indebtedness in the ordinary course of
business, issue, sell, deliver or agree to issue, sell or deliver any
stock, bonds or other corporate securities of which Seller is the issuer
(whether authorized and unissued or held in treasury), or grant or issue
or agree to grant or issue any options, warrants or other rights calling
for the issue thereof;
(2) borrow or agree to borrow any funds or voluntarily
incur, or assume or become subject to, whether directly or by way of
guarantee or otherwise, any obligation or liability (absolute or
contingent) except obligations and liabilities incurred in the ordinary
course of business;
(3) except in the ordinary course of business, mortgage,
pledge or encumber any part of its assets, tangible or intangible;
(4) sell or transfer, or agree to sell or transfer, any
substantial part of its assets, property or rights; or cancel, or agree
to cancel, any substantial debts or claims;
(5) except in the ordinary course of business, enter, or
agree to enter, into any agreement or arrangement granting any
preferential rights to purchase any of the assets, property, or rights of
Seller or requiring the consent of any party to the transfer and
assignment of any such assets, property or rights;
(6) except in the ordinary course of business, make or
permit any amendment or termination of any material contract, agreement
or license to which it is a party;
(7) make any material change in any profit-sharing,
bonus, deferred compensation, insurance, pension, retirement or other
employee benefit plan, payment or arrangement, except as required by law;
(8) except for minor acquisitions or dispositions
effected in the ordinary course of business, merge or consolidate with
any other corporation, acquire control of any other corporation or
business entity, or take any steps incident to or in furtherance of any
of such actions whether by entering into an agreement providing therefor
or otherwise;
(9) make any material alteration in the manner of keeping
its books, accounts or records or in the accounting practices therein
reflected; or
(10) except for transactions not referred in clauses (1) -
(9), above, and except in the ordinary course of business, enter into any
other material contract, agreement, course of action or transaction.
C. Confidentiality. Seller will, and will use its reasonable
efforts to cause its authorized representatives (including, without
limitation, the Shareholders) to, hold in strict confidence and not
disclose to any other party without the prior written consent of Buyer
and HRH, all information received by them from Buyer or HRH in connection
with the transactions contemplated hereby, and the terms of this
Agreement, except such information may be disclosed (i) where necessary
to any regulatory authorities or governmental agencies, (ii) if required
by court order or decree or applicable law, (iii) if it is or becomes
publicly available without violation of any covenant of confidentiality
or (iv) if it is otherwise contemplated herein.
D. Consents. Seller will use its best reasonable efforts to
obtain or make at the earliest practicable date (and, with respect to
those consents identified in Section 8.I, before Closing), all consents,
estoppel certificates and filings necessary to the consummation of the
transactions contemplated hereby which are necessary to be obtained by
Seller or which are reasonably requested by Buyer or HRH.
E. Nonsolicitation Covenant. Each of the Shareholders, by
signature hereto, covenants that he shall not for a period of five (5)
years after the Effective Date, directly or indirectly, except on behalf
of Buyer, its successors or assigns, solicit or accept risk management,
insurance or bond business from any of the customers of Seller as of the
moment immediately preceding the Effective Date. Each of the
Shareholders, by signature hereto, acknowledges: (i) that this covenant
is ancillary to this Agreement, is integral hereto and is independent of
any other provision herein, (ii) that this covenant is reasonably
necessary for the protection of Buyer'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 Buyer.
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 Buyer to obtain the maximum
permissible benefit from this covenant.
Change of Name. Immediately after the Closing, Seller and
Shareholders will change Seller's corporate name, thereby allowing Buyer
to change its name to "▇. ▇. ▇▇▇ & Company, Inc." Plans.
To take the actions required of them in Schedule 9.G at the times specified
therein.
10. Covenants of Buyer and HRH. Buyer and HRH covenant and agree
that, except as otherwise consented to in writing by Seller and
Shareholders:
Confidentiality. Buyer and HRH each will, and each will use its
reasonable efforts to cause its authorized representatives to, hold in
strict confidence and not disclose to any other party without the prior
written consent of Seller and Shareholders, all information received by
them from Seller and Shareholders in connection with the transactions
contemplated hereby, and the terms of this Agreement, except such
information may be disclosed (i) where necessary to any regulatory
authorities or governmental agencies, (ii) if required by court order or
decree or applicable law, (iii) if it is or becomes publicly available
without violation of any covenant of confidentiality or (iv) if it is
otherwise contemplated herein.
Financial Access for Shareholders. From and after the Closing
and continuing until the last payment owing from Buyer to Seller pursuant to
Section 2 hereof is made, Buyer shall deliver to each Shareholder (i)
within 30 days after the end of each calendar quarter, internally
prepared financial statements of Buyer for the quarterly period then
ended (and year ended, when applicable) in the form required to be
provided to HRH, and (ii) upon the request of any Shareholder with at
least 30 days prior notice, internally prepared financial statements of
Buyer for any specific month in the form required to be provided to HRH,
as well as any other financial information reasonably requested by any
Shareholder relevant to (i) the payments required under this Agreement,
(ii) any tax return of Seller or Shareholders with respect to periods
prior to the Effective Date or (iii) any litigation or other legal
proceeding involving matters relating to the operation of Seller's
business prior to the Effective Date.
Plans. To take the actions required of them in Schedule 9.G at
the times specified therein.
11. Accounts and Other Receivables. Seller and Buyer agree that
all accounts receivable of Seller as of the Pre-Effective Moment
(including commissions earned but not paid on business billed by Seller
which was written and having an effective date prior to the Effective
Date, but excluding direct ▇▇▇▇ commissions not received by Seller prior
to the Effective Date) to be attached hereto at Closing (and to be
updated, if necessary, as soon thereafter as is practicable) as Schedule
11 belong to Seller and shall be paid to Seller in the manner described
below. Buyer shall collect all such accounts receivable for a period of
six months after the Effective Date using collection practices and
procedures which are substantially the same as those used by other HRH
offices to collect their own receivables. If any payment is received
without an invoice enclosed or without reference to any specific invoice,
and if neither Seller nor Buyer is aware of a dispute as to the oldest
balance of such account, then each such payment shall be applied to the
oldest balance of that account first. Not later than twenty (20) days
after the end of any month, Buyer shall remit to Seller all receivables
so collected for Seller, or if the escrow account to be established
pursuant to Section 12 is underfunded, then and only to such extent,
Buyer shall instead deposit such amounts in such escrow account. This
arrangement shall continue until (i) all such existing receivables as of
the Pre-Effective Moment have either been paid to Seller or (ii) six
months after the Effective Date, whichever occurs first. If at the end
of such six month period any of such accounts receivable have not been
collected, Seller shall have the right to continue to attempt to collect
such amounts for its own account; provided that Seller agrees that it
will not litigate any accounts receivable claim without the prior written
consent of Buyer and HRH. If Buyer does not grant such approval to
Seller within five (5) business days after written request, then Buyer
shall purchase such receivable at its face value and Seller shall not
pursue further collection efforts on such receivable.
12. Accounts Payable and Other Liabilities of Seller. Seller and
Buyer mutually acknowledge and agree that Buyer is not assuming any of
Seller's accounts payable or other liabilities of any kind whatsoever,
whether arising prior to, on or after the Effective Date, other than the
Assumed Liabilities. A list with Seller's Insurance Company Payables is
attached hereto as Schedule 6.I. Seller and Shareholders covenant and
agree to pay all liabilities and payables owed by Seller which are
related to its insurance business as they become due, other than any such
liabilities or payables with respect to which there exists a reasonable
basis to dispute the legal obligation to pay such liability or account
payable. To ensure full payment of Seller's liabilities, Buyer and
Seller agree that an amount equal to the greater of $450,000 or 100% of
Insurance Company Payables ("Escrow Amount"), consisting of (a)
$_______________ drawn from the cash payable to Seller at Closing
pursuant to Section 2.A and (b) $_______________ to be collected from the
accounts receivable of Seller in due course after Closing, shall be held
in co-escrow in an interest-bearing account at a financial institution of
Seller's choosing (which institution shall be reasonably available to HRH
and Buyer, and, for the choice of which, neither HRH nor Buyer shall be
liable in any way to Seller or Shareholders) and shall be drawn upon by
joint signature of an officer of Buyer and the President of Seller
("Escrow Agents") and used to pay Seller's Insurance Company Payables,
Credit Receivables and other accounts payable listed on Schedule 6.I.
Receivables of Seller collected by Buyer after the Effective Date may be
deposited into the Escrow Account if and to the extent the Escrow Account
is underfunded. When all such liabilities required to be listed on
Schedule 6.I have been paid, excluding any such liabilities with respect
to which, at Buyer's sole discretion, there is a reasonable basis to
dispute Seller's legal obligation to pay, the Escrow Agents shall release
the balance of the cash (including interest accrued) to Seller. Evidence
of payment of any such liability of Seller shall be in the form of a
cancelled check, written receipt from the creditor or other evidence
reasonably satisfactory to Buyer that all amounts owed or accrued up to
the Effective Date have been paid. The release of the balance of the
cash to Seller shall not relieve Seller of its obligation to pay any of
its liabilities, including any contested liabilities should Seller be
found liable.
13. Indemnification.
A. Indemnification by Seller and Shareholders. Seller and
Shareholders covenant and agree that they shall jointly and severally
indemnify and hold Buyer and HRH harmless from any and all damages or
expenses (including legal costs and reasonable attorneys' fees) which
Buyer or HRH may suffer due to (a) any breach by Seller or Shareholders
of any representations, warranties, conditions or covenants hereunder or
(b) the assertion against Buyer or HRH of any liability or claim relating
to the operation of the business of Seller prior to the Effective Date
(except to the extent it is an Assumed Liability).
B. Indemnification by Buyer and HRH. Buyer and HRH covenant
and agree that each shall jointly and severally indemnify and hold Seller
and Shareholders harmless from any and all damages or expenses (including
legal costs and reasonable attorney's fees) which Seller and Shareholders
may suffer due to (a) any breach by Buyer or HRH of any representations,
warranties, conditions or covenants hereunder, (b) any failure of Buyer
or HRH to pay or perform the Assumed Liabilities or (c) the assertion
against Seller or any Shareholder or any liability or claim relating to
the operation of the business of Buyer from and after the Effective Date.
C. Limitations on Indemnity. Notwithstanding anything to the
contrary in this Section 13, the maximum aggregate amount for which
Sellers and Shareholders, on one hand, or Buyer and HRH, on the other
hand, shall be liable to the other at any time pursuant to this Section
13 shall be limited to the Purchase Price.
D. Right of Offset. Buyer shall be entitled to offset
against any of the Deferred Obligations any and all amounts for which
Seller and Shareholders are required to indemnify Buyer and HRH pursuant
to this Section 13.
Buyer shall not have the right to exercise any right of
setoff pursuant to this Section 13.D until (i) with respect to any amount
claimed in good faith to be owing directly from Seller or Shareholders to
Buyer (including, without limitation, in the event of a breach of a
representation or warranty), Buyer has given Seller and Shareholders
written notice of such setoff at least fifteen (15) days prior to
exercising such right of setoff and either (A) neither Seller nor
Shareholders have objected to the amount of the setoff within such 15 day
period or (B) if Seller or Shareholders have so objected in good faith to
the amount of the setoff, the appropriate amount of setoff has been
determined by good faith discussion between the parties or by arbitration
as provided below or (ii) with respect to any amount owing from Seller or
Shareholders to Buyer for indemnification of amounts incurred by Buyer to
any third person, Buyer shall have been required to make payment to such
third Person.
In the event that Seller or Shareholders object in good faith
to the amount of any setoff claimed by Buyer pursuant to this Section and
Buyer and Seller or Shareholders, acting diligently and in good faith,
are unable to mutually agree upon the amount of such setoff within
fifteen (15) days after Seller or Shareholders receive notice of the
claim for setoff from Buyer, then either Buyer or Seller or Shareholders
shall have the right, upon written notice to the other, to submit the
dispute to arbitration in accordance with Section 3.D.2 hereof.
14. Miscellaneous.
A. Binding Nature, Assignments. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, guardians, personal representatives, successors
and assigns. No amendment, modification, termination or waiver of any
provision of this Agreement shall be effective unless the same shall be
in writing and signed by all parties hereto.
B. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
VIRGINIA.
C. Headings and Exhibits. The headings of the various
Sections herein are for convenience of reference only and shall not
define or limit any of the terms or provisions hereof. All Schedules and
other documents referred to in this Agreement are an integral part of
this Agreement.
D. Notices. Any notices or other communications required or
permitted hereunder shall be in writing and delivered at the addresses
designated below, or mailed by overnight mail, registered or certified
mail, return receipt requested, postage prepaid, addressed as follows, or
to such other address or addresses as may hereafter be furnished by any
party to the others in compliance with the terms hereof:
If to Buyer or HRH, to:
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇, Chairman and
Chief Executive Officer
Hilb, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Company
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
Hilb, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Company
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
If to Seller or Shareholders, to:
▇▇. ▇▇▇▇▇▇▇ ▇▇▇
____________________
____________________
Mr. ▇▇▇▇▇▇▇ ▇▇▇
____________________
____________________
Mr. ▇▇▇▇▇▇▇ ▇▇▇▇▇
____________________
____________________
With a copies to:
▇▇▇▇▇▇▇ ▇. ▇▇▇
▇▇▇▇▇/▇▇▇▇▇ & Company
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Goodyear, LLP
▇▇▇▇ ▇▇▇ ▇&▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
All such notices and other communications shall be effective when
delivered at the designated addresses or deposited in the mails in
conformity with the provisions hereof.
E. Public Releases. Buyer and Seller agree that they will
jointly approve public releases or letters to customers or the press
concerning the consummation of the transactions contemplated by this
Agreement.
F. Casualty Loss. The Seller shall bear the risk of loss,
destruction, or damage to the Assets caused by fire or other casualty
through Closing Date. Thereafter such risk shall shift to the Buyer.
G. Payment of Fees. Buyer, Seller, HRH and Shareholders
shall each pay their own attorneys' fees and other expenses relating to
this transaction.
H. Further Instruments and Actions. The parties shall
execute and deliver such other documents and instruments as may be
reasonably necessary (including, without limitation, obtaining the
signatures of spouses) and shall take such further action as may be
necessary or appropriate, to carry out the terms and purposes of this
Agreement.
I. Right to Modify or Amend. The parties may at any time by
mutual agreement modify or amend this Agreement in any manner as agreed
upon by them in writing.
J. Termination. At any time prior to the Closing, the
parties may by mutual written agreement terminate this Agreement. In the
event this Agreement is so terminated, the parties shall have no
liability to each other hereunder.
K. Complete Agreement. This Agreement and the Schedules
hereto constitute the entire Agreement between the parties hereto with
respect to the transactions contemplated herein. No representation,
promise or inducement not included or required to be included herein
shall be binding upon any party hereto.
L. Execution and Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original, but all of which shall represent one agreement.
M. Severability. Any provision of this Agreement which is invalid,
illegal or unenforceable shall be ineffective to the extent of such
invalidity, illegality or unenforceability, without affecting in any way
the remaining provisions hereof.
N. Understanding of Agreement. Seller, Shareholders, HRH and
Buyer acknowledge that each has read and understood the provisions of
this Agreement, and that this Agreement entered into voluntarily and
after having had all opportunities to seek such advice as each may have
wished to receive.
O. Later Acquisitions. Seller and Shareholders acknowledge
that a later acquisition by Buyer of another insurance agency could
affect the determination of Year 1, Year 2 and Year 3 Agency Profit and
agree to cooperate with Buyer and HRH in making any adjustments as
necessary to this Agreement to carry out its intent. Any such
acquisition proposed to be consummated prior to March 1, 2000 shall be
subject to (a) the prior consent of ▇▇. ▇▇▇▇▇ and (b) an agreement
between Shareholders and Parent as to what adjustments are to be made in
the determination of Agency Profit for each of the affected years.
P. Case and Gender. Wherever required by the context of this
Agreement, the singular and plural cases and the masculine, feminine and
neuter genders shall be interchangeable.
Q. HRH Policy on Post-Acquisition Cash Held by Buyer. Seller
and Shareholders acknowledge that they have been informed of the policy
of HRH not to allow cash and cash equivalents in excess of what HRH
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, Seller and Shareholders acknowledge
that HRH will cause any such excessive amounts of cash and equivalents to
be dividended to HRH, that such dividends would reduce interest earnings
attributable to Buyer after the Effective Date, and that HRH has the
right to declare such dividends.
R. Nonwaiver. The waiver by any party of any provision of
this Agreement shall not operate or be construed as a waiver of any other
provisions of this Agreement.
S. Guaranty of HRH. HRH guarantees (a) the timely payment,
without any setoff or reduction (except as specifically agreed to
herein), of all indebtedness, liabilities and obligations for the payment
of money, regardless of kind, incurred for any purpose, now existing or
hereafter arising, direct or indirect, absolute or contingent, similar or
dissimilar, related or unrelated, due or not due, contractual or
tortious, liquidated or unliquidated or arising by operation of law or
otherwise, and (b) the timely performance of all other obligations
whatsoever, that are now or hereafter owing by Buyer and Seller or
Shareholders pursuant to this Agreement or pursuant to any other
agreement, instrument or certificate executed and delivered pursuant to
or in connection with this Agreement, or arising in connection with the
transactions contemplated hereby. Such guaranty is a continuing guaranty
and, to the extent it relates to the payment of any such amount, a
guaranty of payment rather than collection. Such guaranty is independent
of and in addition to any other collateral or other security for the
payment of any such amount or the performance of any such other
obligations.
WITNESS the following signatures:
SELLER:
▇. ▇. ▇▇▇ & COMPANY, INC.
By ______________________________________
Its ______________________________________
HRH, ON BEHALF OF ITSELF AND
ITS TO BE ACQUIRED COMPANY, BUYER:
HILB, ▇▇▇▇▇ AND ▇▇▇▇▇▇▇▇ COMPANY
By ______________________________________
Its ______________________________________
SHAREHOLDERS:
_________________________________________
▇▇▇▇▇▇▇ ▇▇▇
_________________________________________
▇▇▇▇▇▇▇ ▇▇▇
_________________________________________
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