AGREEMENT OF MERGER
OF
HILB, ▇▇▇▇▇ AND ▇▇▇▇▇▇▇▇ CONSULTING COMPANY OF
ALABAMA, INC.
INTO
▇▇▇▇▇▇▇▇▇ CONSULTING GROUP, INC.
THIS MERGER AGREEMENT ("Agreement"), to be effective as of
12:01 a.m. on January 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, ▇▇▇▇▇
AND ▇▇▇▇▇▇▇▇ COMPANY, a Virginia corporation ("Parent"), for itself
and as agent for its wholly-owned subsidiary to be formed pursuant to this
Agreement, HILB, ▇▇▇▇▇ AND ▇▇▇▇▇▇▇▇ CONSULTING COMPANY
OF ALABAMA, INC., an Alabama corporation ("HRH Merger Subsidiary"),
and ▇▇▇▇▇▇▇▇▇ CONSULTING GROUP, INC., an Alabama corporation
("Merging Entity"), and the two shareholders, husband and wife, of Merging
Entity, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ("▇▇. ▇▇▇▇▇▇▇▇▇"), and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ ("▇▇▇. ▇▇▇▇▇▇▇▇▇") (with ▇▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇. ▇▇▇▇▇▇▇▇▇
hereinafter sometimes collectively referred to as "Shareholders" or any one of
the foregoing hereinafter sometimes referred to as "Shareholder"), with
reference to the following facts:
A. Shareholders are the owners and holders of all of the issued and
outstanding shares of the authorized capital stock (referred to below as the
"Common Stock") of Merging Entity which is engaged in the business of
owning and operating an insurance agency specializing in flexible and pension
benefits consulting.
B. Parent is engaged in the business of owning and operating insurance
agencies and will form HRH Merger Subsidiary for the purposes contemplated
herein. Parent also owns as wholly-owned Alabama subsidiaries general insurance
agencies in Birmingham and Mobile, which subsidiaries will merge as of 11:59
p.m. on December 31, 1995, and will operate under the new combined name of
Hilb, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Company of Alabama, Inc. ("HRH-Alabama").
C. Shareholders, Parent and Merging Entity have reached an understanding
with respect to the merger of HRH Merger Subsidiary into Merging Entity
("Merger") for which Shareholders shall receive that amount of Parent's common
stock as the consideration stated herein.
D. The parties hereto intend that this Agreement be characterized as a
reverse, triangular statutory merger pursuant to Sections 368(a)(1)(A) and
368(a)(2)(E) of the Internal Revenue Code of 1986 ("Code") and further be
accounted for as a "purchase" in accordance with Accounting Principles Board
Opinion Number 16 and other applicable guidelines. Immediately after the
Merger contemplated herein, Parent will then contribute all of the outstanding
capital stock of Surviving Corporation to HRH-Alabama, which will then be the
corporate parent of Surviving Corporation. HRH-Alabama will then be the
employer of ▇▇. ▇▇▇▇▇▇▇▇▇ and will charge him with operating Surviving
Corporation.
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 January 1, 1996 (or at such later time as
may be agreed upon by the parties), to the Secretary of State of Alabama and
to be effective as of 12:01 a.m. on January 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 Alabama. 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:
▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(d) On the Effective Date, by virtue of completion of the Merger,
the officers of Surviving Corporation shall be:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III Chairman
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ President
▇▇▇▇▇▇ ▇. ▇▇▇▇ Vice President
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Vice President
▇▇▇▇▇▇ ▇. ▇▇▇ Secretary
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Secretary/Treasurer
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Treasurer
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 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, collectively, by Shareholders. Each of
Shareholders owns, free and clear of any liens, encumbrances, restrictions or
adverse claims whatsoever except as set forth in Schedule 2.4, the number of
shares of Merging Entity set forth below opposite his name and each
Shareholder shall receive therefor for each share of Common Stock the number
of shares of no par value common stock of Parent as described herein:
Shareholder Number of Shares Percentage
▇▇. ▇▇▇▇▇▇▇▇▇ 900 90%
▇▇▇. ▇▇▇▇▇▇▇▇▇ 100 10%
----- ----
1,000 100%
===== ====
In exchange for all of the shares of Common Stock, Shareholders shall
collectively receive 40,000 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 forty (40) 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 twenty-five percent (25%) 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 November 15, 1995, 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 Sirote & Permutt,
located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, at 11:00 o'clock
a.m. on December 28, 1995, or at such other place and time as shall be
mutually agreed upon by the parties to this Agreement ("Closing Date").
2. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS.
Shareholders, jointly and severally, represent and warrant to Parent as follows:
2.1 Organization and Standing of Merging Entity. Merging Entity is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Alabama ("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. Neither Merging Entity nor any of Shareholders has granted to
anyone any right to use the corporate name or any name similar to the corporate
name of Merging Entity.
2.3 Capitalization of Merging Entity. The capitalization of Merging
Entity is as follows:
(a) Merging Entity is authorized to issue ______ 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, each
Shareholder is the record owner, free and clear of any and all liens,
encumbrances, restrictions and adverse claims whatsoever, of the number of
shares of Common Stock set forth opposite his name in subsection 1.4(a).
Each such lien, encumbrance, restriction or adverse claim can and will be
removed at or prior to the Closing.
2.5 Authority. Shareholders, individually and collectively, have full
and complete authority to enter into this Agreement and to transfer in
accordance with the terms and conditions of this Agreement all of the shares of
Common Stock, free and clear of all liens, encumbrances, restrictions and
adverse claims whatsoever. The execution, delivery and performance of this
Agreement by Merging Entity does not violate, result in a breach of, or
constitute a default under, the articles of incorporation or bylaws of
Merging Entity or any indenture, contract, agreement or other instrument to
which it is a party or is bound, or to the best knowledge of Shareholders and
Merging Entity, any applicable laws, rules or regulations.
2.6 Subsidiaries and Other Relationships. Except as disclosed on
Schedule 2.6, Merging Entity does not own any stock or other interest in any
other corporation, nor is it a participant in any joint entity. Except as
disclosed on Schedule 2.6, any stock owned by Merging Entity in any other
entity represents one hundred percent (100%) ownership of such entity, is
owned free and clear of any and all liens, encumbrances, restrictions and
adverse claims, has been duly and validly issued and is fully paid and
nonassessable.
2.7 Financial Statements. Shareholders and Merging Entity have caused or
will cause to be delivered to Parent a true and complete copy of the audited
financial statements of Merging Entity, prepared under the accounting
guidelines of Parent, previously provided to them in the form of Parent's
Accounting Policies and Procedures Manual ("GAAP Policy"), for the three most
recent calendar years of Merging Entity including, without limitation,
balance sheets and statements of income for the periods referred to above
(collectively, "Financial Statements"). In addition, Shareholders and Merging
Entity have delivered to Parent a true and complete copy of the unaudited
financial statements of Merging Entity for the most recent 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 and fee 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
October 31, 1995. Also, the term "Most Recent Balance Sheet Date," as used in
this Agreement, means October 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
Schedule 2.8 or in any other Schedule to this Agreement, Merging Entity, as of
the Most Recent Balance Sheet Date, did not have any indebtedness, liability or
obligation of any nature whatsoever, whether accrued, absolute, contingent or
otherwise, and whether due or to become due, including, without limitation,
tax liabilities due or to become due, and whether incurred in respect of
or measured by the income of Merging Entity for any period prior to the Most
Recent Balance Sheet Date, or arising out of transactions entered into, or any
state of facts existing, prior thereto, and none of Shareholders knows or has
reasonable grounds to know of any basis for the assertion against Merging
Entity, as of the Most Recent Balance Sheet Date, of any indebtedness,
liability or obligation of any nature or in any amount not fully reflected or
reserved against in the Most Recent Balance Sheet or otherwise disclosed in
any Schedule to this Agreement.
2.9 No Adverse Change. Since the Most Recent Balance Sheet Date, there
has been no material change in the financial condition, results of operations or
business prospects of Merging Entity other than changes occurring in the
ordinary course of business or except as otherwise disclosed in any of the
Schedules to this Agreement, which changes have not had a material adverse
effect on the financial condition, results of operations or business
prospects of Merging Entity. Without limiting the generality of the
foregoing, since the Most Recent Balance Sheet Date, there has been no material
adverse change in the insurance accounts included within the "Book of Business"
of Merging Entity, and none of Shareholders knows or has reasonable grounds to
know of any basis for any material adverse change in such insurance accounts
between the date hereof and the Effective Date. For purposes hereof,
"material adverse change" in the insurance accounts included in the "Book of
Business" of Merging Entity means, without limitation, the loss of any
account generating an aggregate annual gross income (commission or otherwise) of
$10,000 or more.
2.10 Taxes. Merging Entity has filed all federal, state and local income,
withholding, social security, unemployment, excise, real property tax, tangible
personal property tax, intangible personal property tax and all other tax
returns and reports required to be filed by it to the date hereof and all of
such returns and reports are true and correct. All taxes, assessments, fees,
penalties, interest and other governmental charges which were required to be
paid by Merging Entity on such returns and reports have been duly paid and
satisfied on or before their respective due dates. No tax deficiency or
penalty has been asserted or threatened with respect to Merging Entity. No
federal or state income tax return of Merging Entity has been audited or, to
the knowledge of any Shareholder, proposed to be audited, by any federal or
state taxing authority, including, without limitation, the U.S. Internal
Revenue Service and the Alabama Department of Revenue, and no waiver of any
statute of limitations has been given or is in effect with respect to the
assessment of any taxes against Merging Entity. The provisions for taxes
included in the Most Recent Balance Sheet and in the Prior Years Financial
Statements were sufficient for the payment of all accrued and unpaid federal,
state and local income, withholding, social security, unemployment, excise,
real property, tangible personal property, intangible personal property and
other taxes of Merging Entity, whether or not disputed, for the periods
reflected, and for all years and periods prior thereto.
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, liability, life, and other forms of insurance owned or maintained by
Merging Entity. The business operations of Merging Entity have not been
insured against errors and omissions since __________________, 1995. Such
policies are in amounts deemed by Shareholders to be adequate. Each such
policy is, on the date hereof, in full force and effect, and Merging
Entity is not in default with respect to any such policy.
Furthermore, Schedule 2.13 contains a correct and complete list of all
group life, group medical and disability or other similar forms of insurance
which constitute an obligation of or benefit provided by Merging Entity as
well as a list of any material (hospital or home care) services known by
Shareholders and Merging Entity to have been incurred by Merging Entity's
group health plan within 90 days of this date, which list details with
reasonable accuracy the recipients of such services and the date of service.
Schedule 2.13 also contains a list of any former employees or their
dependents who are presently under COBRA continuation coverage and describes
with reasonable particularity the pertinent factors about each such person
listed.
With respect to errors and omissions (professional liability) insurance
policies listed in Schedule 2.13 (which lists for each such policy the
carrier, retrodate, claims made or occurrence policy and limits), prior to
the effective dates of such policies, Merging Entity had not given notice to
any prior insurer of any act, error or omission in services rendered by any
agent or employee of such corporation or that should have been rendered by any
agent or employee of such corporation arising out of the operations of
Merging Entity. Furthermore, to the best knowledge of Shareholders, no agent or
employee of Merging Entity breached any such professional duty or obligation
prior to the effective dates of such policies. With respect to such
policies, Merging Entity has given notice of any and all claims for any act,
error or omission by any agent or employee of such corporation with
respect to professional services rendered or that should have been rendered
as required by the terms of such policies (if any such notice has been given,
its contents are described in Schedule 2.13). To the best knowledge of
Shareholders, Merging Entity has not taken, nor has it failed to take, any
action which would provide the insurer with a defense to its obligation under
any such policy; neither Merging Entity nor any Shareholder has received
from any such insurer any notice of cancellation or nonrenewal of any such
policy, and, except as set forth in Schedule 2.13, no Shareholder has any basis
to believe that Merging Entity, or any agent or employee of Merging Entity, has
breached any professional duty or obligation.
2.14 Insurance Companies. Schedule 2.14 contains a correct and complete
list of all insurance companies with respect to which Merging Entity has an
agency contract or similar relationship. Except as identified in Schedule 2.14,
all relations between Merging Entity and the insurance companies represented
by it are good, and no Shareholder has any knowledge of any proposed
termination of, or modification to, the existing relations between Merging
Entity and any of such insurance companies. Furthermore, except as otherwise
set forth in Schedule 2.14, all accounts with all insurance companies
represented by Merging Entity or with whom it transacts business are current and
there are no disagreements or unreconciled discrepancies between Merging
Entity and any such company as to the amounts owed by Merging Entity.
2.15 Customers. Except as identified in Schedule 2.15, all relations
between Merging Entity and its present customers are good, and no Shareholder
has any knowledge of any proposed termination of any insurance account
presently written or serviced by Merging Entity. Also, except as otherwise
set forth in Schedule 2.15, all customer accounts, including, without
limitation, those accounts with respect to which Merging Entity financed any
premiums, are current. For purposes of Section 2.15, the terms "insurance
account" and "customer account" shall be limited to accounts which generate an
aggregate annual gross income (commission or otherwise) of $10,000 or more.
2.16 Officers and Directors; Banks; Powers of Attorney. Schedule 2.16
contains a correct and complete list of all officers and directors of Merging
Entity, a correct and complete list of the names and addresses of each bank
in which Merging Entity has any account or safe deposit box, together with
the names of all persons authorized to draw on each such account or having
access to any such safe deposit box, and a correct and complete list of the
names of all persons holding powers of attorney from Merging Entity.
2.17 Compensation and Fringe Benefits. Schedule 2.17 contains a correct
and complete list of each officer, director, employee or agent of 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 Shareholders,
threatened against or adversely affecting Merging Entity, and except as set
forth on Schedule 2.22, there is no action, suit, proceeding or claim
pending, or, to the best knowledge of Shareholders, threatened against
Merging Entity, or any of its businesses, properties, assets or goodwill, which
might have a material adverse effect on such corporation, or against or
affecting the transactions contemplated by this Agreement. There is no
outstanding order, injunction, judgment or decree of any court, government or
governmental agency against or affecting Merging Entity, or any of its
businesses, properties, assets or goodwill.
2.23 Overtime, Back Wages, Vacation and Minimum Wages. To the best
knowledge of Shareholders, no present or former employee of Merging Entity has
any claim against Merging Entity (whether under federal or state law) under any
employment agreement, or otherwise, on account of or for: (i) overtime pay for
any period other than the current payroll period; (ii) wages or salary for any
period other than the current payroll period; (iii) vacation or time off (or
pay in lieu thereof), other than that earned in respect of the current fiscal
year; or (iv) any violation of any statute, ordinance, rule or regulation
relating to minimum wages or maximum hours of work, except as otherwise set
forth in Schedule 2.23.
2.24 Discrimination, Occupational Safety and Other Statutes and
Regulations. To the best knowledge of Shareholders, no persons or parties
(including, without limitation, governmental agencies of any 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 Shareholders, threatened; (vi) no nonexempt prohibited transaction has
occurred; (vii) there has been no reportable event for which the 30-day
notice requirement under ERISA has not been waived; (viii) all contributions and
premiums due have been made on a timely basis (including, if applicable, the
time limited established under Code Sections 404 and 412); (ix) all
contributions made or required to be made meet the requirements for
deductibility under the Code; (x) all contributions which have not been
made have been properly recorded in the financial records of Merging Entity;
and (xi) except as set forth in Schedule 2.25(b), no liability (whether an
indebtedness, a fine, a penalty, a tax or any other amount) has been incurred
or will be incurred by Merging Entity as a result of its maintenance, operation
or termination of any Employee Benefit Plan.
(C) No Employee Benefit Plan is a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA or a multiple employer plan. The consummation of
the transactions contemplated by this Agreement will not entitle any individual
to severance pay, and will not accelerate the time of payment or vesting, or
increase the amount, of compensation due to any individual.
(D) With respect to each Employee Benefit Plan, Merging Entity has
delivered or caused to be delivered to Parent true and complete copies, where
applicable, of (i) all plan documents, amendments and trust agreements currently
in effect; (ii) all summary plan descriptions, or other notices or summaries of
modifications, which have been prepared by, or on behalf of Merging Entity;
(iii) all material employee communications; (iv) the five (5) most recent annual
reports (Forms 5500); (v) the most recent annual and any subsequent periodic
accounting of plan assets; and, (vi) the most recent determination letter
received from the IRS.
(E) With respect to each Employee Benefit Plan, there is no pending
claim or lawsuit which has been asserted against that Employee Benefit Plan,
the assets of any of the trusts under such Employee Benefit Plan, Merging
Entity, or any fiduciary of such Employee Benefit Plan with respect to the
operation of such Employee Benefit Plan. Merging Entity and Shareholders,
after reasonable investigation, know of no facts or circumstances which could
form the basis for any such claim or lawsuit.
(F) All amendments required to have been made to bring each Employee
Benefit Plan into conformity in all material respects with all of the applicable
provisions of the Code, ERISA and other applicable laws have been made.
(G) Each Employee Benefit Plan has met, by its terms and in its
operation, all applicable requirements for an exemption from federal income
taxation under Section 501(a) of the Code.
(H) Each Employee Benefit Plan has at all times been maintained in
accordance with all applicable laws, has complied with applicable ERISA or
other requirements; and, there are no actions, audits, suits or claims which are
threatened or pending against any such Employee Benefit Plan, any fiduciary of
any of the Employee Benefit Plans, or against any of the assets of the Employee
Benefit Plans.
(I) Merging Entity has made full and timely payment of all amounts
required to be contributed under the terms of each Employee Benefit Plan and
no event or condition exists regarding any of the Employee Benefit Plans which
could be deemed a "reportable event" with respect to which the 30-day notice has
not been waived which could result in a material liability to Merging Entity
and no event exists which would subject Merging Entity to a material fine under
Section 4701 of ERISA.
(J) Merging Entity is not subject to any material liability, tax or
penalty and the termination of or withdrawal from any Employee Benefits Plan
will not subject Merging Entity to any additional contribution requirement and
the execution or performance of the transactions contemplated by this Agreement
will not create, accelerate or increase any obligations under any Employee
Benefit Plan.
(K) Merging Entity has no obligation to any retired or former
employee or any current employee upon retirement under any Employee Benefit
Plan.
(L) Each Employee Benefit Plan maintained by Merging Entity has at
all times been maintained, by its terms and in operation, in accordance with all
applicable laws in all material respects, including (to the extent applicable)
Code Section 4980B. Further, there has been no failure to comply with
applicable ERISA or other requirements concerning the filing of reports,
documents and notices with the Secretary of Labor and Secretary of Treasury
or the furnishing of such documents to participants or beneficiaries
that could subject any Employee Benefit Plan to any material civil or any
criminal sanction or could require any such person to indemnify any other person
for such a sanction. There are no actions, audit, suits or claims known to
Merging Entity or Shareholders which are pending or threatened against any
Employee Benefit Plan, any fiduciary of any of the Employee Benefit Plans
with respect to the Employee Benefit Plans or against the assets of any of
the Employee Benefit Plans, except claims for benefits made in the ordinary
course of the operation of such plans.
(M) Merging Entity is not subject to any material liability, tax or
penalty whatsoever to any person whomsoever as a result of Merging Entity
engaging in a prohibited transaction under ERISA or the Code, and neither
Merging Entity nor any of the Shareholders has knowledge of any circumstances
which reasonably might result in any such material liability, tax or penalty
as a result of a breach of fiduciary duty under ERISA. The termination of or
withdrawal from any Employee Benefit Plan maintained by Merging Entity which
is subject to Title IV of ERISA, or any other Employee Benefit Plan, will not
subject Merging Entity to any additional contribution requirement or to any
other liability, tax or penalty whatsoever. The execution or performance of
the transactions contemplated 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, none of
Shareholders has any interest, direct or indirect, as an owner, partner, agent,
shareholder, officer, director, employee, consultant or otherwise, in any firm,
partnership, corporation or other entity that is engaged in the insurance agency
business, or any aspect thereof, other than Merging Entity or a corporation
listed on a national securities exchange or a corporation whose securities
are traded in the over-the- counter market.
2.27 Accounts and Notes Receivable. The reserve for bad debts, if any,
contained in the Most Recent Balance Sheet and the Financial Statements was
calculated on a consistent basis which, in the light of past experience, is
considered adequate. All accounts receivable and all notes receivable of
Merging Entity reflected in the Most Recent Balance Sheet are fully
collectible when due at the aggregate amount shown, less the bad debt
allowance stated therein, it being the intent of all of the parties to this
Agreement that Shareholders are hereby representing and warranting to Parent
the full collectibility when due of all of the notes receivable and accounts
receivable of Merging Entity in the aggregate amount shown in each such
balance sheet, less the bad debt allowance stated therein. Except as set
forth in Schedule 2.27, all notes receivable of Merging Entity are due and
payable within one year after the Effective Date. Any such notes receivable
due and payable more than one year after the Effective Date ("Long Term Notes")
are fully collectible when due at the aggregate amount shown. Except as
further set forth in Schedule 2.27, no Long Term Notes are secured by any
interest in property, whether it be real, personal or intangible. In the
event of any delinquency or nonpayment of any portion of a Long Term Note,
Shareholders shall be obligated to satisfy such deficiency in the same manner
as specified below for all other receivables of Merging Entity.
2.28 Permits and Licenses. All permits, licenses and approvals of all
federal, state or local regulatory agencies, which are required in order to
permit Merging Entity and its employees and agents to carry on business as
now conducted by it, have been obtained by it and are current.
2.29 No Violation or Default. The execution, delivery and performance
of this Agreement by Shareholders and Merging Entity will not violate, result
in a breach of, or constitute a default under, the articles of incorporation
or bylaws of Merging Entity or of any indenture, contract, agreement or other
instrument to which Merging Entity is a party or is bound including, without
limitation, any agency contract with any insurance company.
2.30 Common Stock of Parent. Shareholders understand and acknowledge
that the common stock of Parent to be received pursuant to this Agreement is
subject to Rule 145 of the Securities Exchange Commission ("SEC"); such stock
is being acquired for investment purposes only and not with a view to
distribution or resale; any sale or other disposition of such stock shall be
made pursuant to the regulations promulgated under Rule 145 and in compliance
with all other applicable laws, regulations and interpretations, including,
without limitation, any accounting interpretations of the SEC. Shareholders
acknowledge that the Financial Statements have not been audited and that the
shares of Parent common stock will be otherwise restricted until filing of
Parent's 1996 10-K, which is expected to occur on or before March 31, 1997.
2.31 Financing Statements. Except as disclosed on Schedule 2.31, there
are no financing statements or other security interests of any kind filed or
required to be filed against Merging Entity's assets or affecting the use of,
or title to, such assets ("Financing Statements"). Except as further disclosed
on Schedule 2.31, there are no deferred money purchase notes related to
Merging Entity's acquisition of any portion of its assets ("Notes"). Any
such liabilities related to the Financing Statements or Notes can be
discharged or prepaid prior to their stated maturities without penalty, except
as further detailed on Schedule 2.31. The assumption by Surviving Corporation
of such liabilities will not result in a default of any Financing Statement
or Note.
2.32 Brokers. Except as disclosed in Schedule 2.32, neither Merging
Entity nor any Shareholder has employed any broker or finder for the purposes
of completing the transactions contemplated herein such that no commission,
finder's fee, brokerage fee or similar charge will be incurred for the
consummation of the transactions contemplated herein.
2.33 Disclosure. Shareholders have each received a copy of Parent's
current S-4 registration statement dated February 12, 1992, most recent annual
report, Form 10-K and Form 10-Q and will acknowledge receipt of an amendment or
supplement to such registration statement.
2.34 Material Misstatements or Omissions. No representation or warranty
by Shareholders or Merging Entity, or any of them, contained in this Agreement
or in any document, statement, certificate, Schedule or financial statement
furnished or to be furnished to Parent by or on behalf of Shareholders or
Merging Entity, or any of them, pursuant to this Agreement or in connection
with the transactions contemplated by this Agreement contains, or will when
furnished contain, any untrue statements of a material fact, or omits, or
will then omit to state, a material fact necessary to make the statements
contained herein or therein not misleading.
3. COVENANTS OF SHAREHOLDERS AND MERGING ENTITY PRIOR TO
EFFECTIVE DATE. Shareholders and Merging Entity covenant with Parent that,
between the date of the execution of this Agreement and the Effective Date,
unless prior written consent to the contrary is obtained from Parent:
3.1 Operate in Ordinary Course. Merging Entity will be operated only
in the ordinary course of business.
3.2 Negative Covenants. Except as contemplated by this Agreement, Merging
Entity will not do any of the things listed in clauses (i) through (xii) of
Section 2.21 of this Agreement.
3.3 Continuing Accuracy of Representations. There shall be no action, or
failure to act, which would render any of the representations and warranties of
Shareholders contained in this Agreement untrue or incorrect in any material
respect.
3.4 Preserve Business Organizations. Except as otherwise requested by
Parent, and without making any commitment on Parent's behalf, Shareholders will
use their best efforts to preserve the business organizations of Merging Entity
intact, to keep available to Parent the services of its present employees, and
to preserve for Parent the goodwill of its customers and others having business
relations with them.
3.5 Corporate Approvals. The board of directors of Merging Entity will
recommend to Shareholders that Shareholders adopt this Agreement. Merging
Entity agrees to submit this Agreement to Shareholders for adoption by
unanimous written consent with waiver of notice of the terms of this Agreement
prior to the Effective Date, but only after delivery by Parent to
Shareholders and Merging Entity of an amended or supplemented S-4 registration
statement for Parent's common stock to be issued pursuant to this Agreement and
after Shareholders have had an effective opportunity of at least ten (10) days
to review such prospectus. Unless there is a failure of Parent to fulfill its
conditions set forth in Section 7 hereof or there is a material adverse
change in the financial conditions of Parent, Shareholders covenant to adopt
this Agreement and to approve all aspects of the Merger within the time
period contemplated herein.
4. ACCESS AND INFORMATION. Throughout the period between the date of
the execution of this Agreement by Shareholders and Merging Entity and the
Closing Date, Shareholders shall cause Merging Entity and all its employees to
give to Parent, and any and all authorized representatives of Parent deemed by
Parent as needing to know (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 Shareholders and Merging Entity that Parent will use its
best efforts to return all such documents, working papers and other written
information concerning Shareholders and Merging Entity obtained or prepared
in connection with any such investigation, which information shall nonetheless
remain confidential (whether returned or not).
Regardless of any such investigation by Parent, all representations and
warranties of Shareholders contained in this Agreement shall remain in full
force and effect and no such investigation shall cause or result in a waiver by
Parent of any of the representations and warranties of Shareholders contained
herein.
5. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent represents and
warrants to Shareholders as follows:
5.1 Organization and Standing of Parent and HRH Merger Subsidiary. Parent
is a corporation duly organized, validly existing and in good standing under
the laws of the Commonwealth of Virginia. HRH Merger Subsidiary, will, as of
the Effective Date, be duly organized, validly existing and in good standing
under the laws of the State of Alabama.
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 Alabama, 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 _____ shares of common stock, __ par value, of
which 1,000 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. HRH Merger Subsidiary will, as of the Effective Date,
have a "Tangible Net Worth" (as defined in Section 14.6) of zero.
5.4 Status of Parent common stock. The shares of Parent common stock to
be issued to Shareholders pursuant to this Agreement will, when so issued, be
duly and validly authorized and issued, fully paid and nonassessable. Such
shares, however, will be subject to the restrictions described in the prospectus
to be delivered to Shareholders (due to the lack of historical audited
statements).
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.
5.6 Reporting. Parent's common stock is registered pursuant to
Section 12 of the Securities Exchange Act of 1934 (the "34 Act"). Parent will
use its best efforts to continue such registration for at least three (3) years
after the Merger. Parent has been subject to the reporting requirements of
Section 13 of the 34 Act for a period of at least 90 days immediately
preceding the date hereof and has filed, and, if required by law during
the first three (3) years after the Merger, will file, all the reports
required to be filed under Section 13 of the 34 Act. To the best of Parent's
knowledge, all material information required to be disclosed in such filings
has been disclosed by Parent.
6. CONDITIONS PRECEDENT TO PERFORMANCE BY PARENT AND HRH
MERGER SUBSIDIARY. The obligation of Parent and HRH Merger Subsidiary to
consummate the transactions contemplated by this Agreement shall be subject
to the satisfaction or fulfillment, on or prior to the Closing Date, of the
following conditions precedent, in addition to all other conditions precedent
contained in this Agreement, each of which may be waived by Parent:
6.1 Representations. Parent shall not have discovered any material
error, misstatement or omission in any of the representations and warranties
made by Shareholders contained in this Agreement, or in any financial statement,
certificate, Schedule, exhibit or other document attached to or delivered
pursuant to this Agreement, and all representations and warranties of
Shareholders, or any of them, contained in this Agreement and in any
financial statement, certificate, Schedule, exhibit or other document
attached to or delivered pursuant to this Agreement shall be true and correct
in all material respects on and as of the Closing Date with the same force and
effect, except as affected by transactions expressly authorized herein or
otherwise approved in writing by Parent, as though such representations and
warranties had been made on and as of the Closing Date; and Shareholders and
Merging Entity shall have delivered to Parent a certificate, dated the
Closing Date, and signed by all of them, to the foregoing effect, in form and
substance as set forth in Schedule 6.1.
6.2 Covenants. Merging Entity and Shareholders shall have performed and
complied in all material respects with all covenants, agreements and conditions
required under this Agreement to be performed or complied with by them on or
before the Closing Date; and Merging Entity and Shareholders shall have
delivered to Parent a certificate dated the Closing Date, and signed by all of
them, to the foregoing effect, in form and substance as set forth in
Schedule 6.1.
6.3 Litigation. No suit, action or proceeding, or governmental
investigation, against or concerning, directly or indirectly, Merging Entity,
or any of its assets and properties, shall have been instituted or reinstituted,
nor shall any basis therefor have arisen, that might result in any order or
judgment of any court or of any administrative agency which, in the opinion of
counsel for Parent, renders it impossible or inadvisable for Parent to
consummate or cause to be consummated the transactions contemplated by this
Agreement.
6.4 Approval by Counsel. All transactions contemplated hereby, and the
form and substance of all legal proceedings and of all instruments used or
delivered hereunder, shall be reasonably satisfactory to counsel for Parent.
6.5 Opinion. Parent shall have received a favorable opinion, dated as
of the Closing Date, from the law firm of Sirote & Permutt, counsel for
Shareholders and Merging Entity, in form and substance as set forth in
Schedule 6.5 and otherwise reasonably satisfactory to counsel for Parent.
6.6 Delivery of Common Stock. There shall be duly delivered for
cancellation to Parent at the Closing not less than 100% of the shares of
Common Stock issued and outstanding at the time of the Closing, free and clear
of any liens or encumbrances as required to be listed on Schedule 2.4.
6.7 Continuation of Agency Contracts. To the extent desired by Parent,
Parent shall have obtained a statement in writing from each of the insurance
companies identified in Schedule 2.14 of this Agreement, in form satisfactory
to Parent and Parent's counsel, by which each such insurance company agrees
that it will not terminate its insurance agency contract solely by reason of
the transactions contemplated in this Agreement, and further agrees that it
will continue to recognize Surviving Corporation, and its successors and
assigns, as its agent under the existing agency contract between such company
and Merging Entity or that it will enter into a substantially similar agency
contract with Surviving Corporation, or its successors and assigns.
6.8 Shareholder Employment Agreements. An Employment Agreement between
HRH-Alabama, as Employer, and ▇▇. ▇▇▇▇▇▇▇▇▇, 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. An Employment Agreement between HRH-
Alabama, as Employer, and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, as Employee, 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 [This Section is intentionally left blank.]
6.13 Related Party Transactions. All "related party" (i.e. a Shareholder,
a member of a Shareholder's family, a business or entity affiliated with any of
the foregoing) receivables and payables of Merging Entity and any receivables or
payables from or to an employee of Merging Entity on favorable terms shall have
been removed from the books of Merging Entity for their cash equivalent face
amounts.
6.14 Lease. The existing lease covering the premises presently occupied
by Merging Entity shall continue to be on a month-to-month basis, shall not be
in default, and shall not have been terminated as a result of the Merger.
6.15 Resolutions. Parent shall receive certified copies of resolutions
of the board of directors and Shareholders of Merging Entity, to the extent
deemed necessary by, and in form satisfactory to, counsel for Parent,
authorizing the execution and delivery of this Agreement by Merging Entity and
the consummation of the transactions contemplated hereby.
6.16 Approvals. All statutory requirements for the valid consummation by
Merging Entity of the transactions contemplated by this Agreement shall have
been fulfilled; all authorizations, consents and approvals of all federal,
state, local and foreign governmental agencies and authorities required to be
obtained in order to permit consummation by Merging Entity of the transactions
contemplated by this Agreement and to permit the business presently carried on
by Merging Entity to continue unimpaired immediately following the Effective
Date of this Agreement shall have been obtained.
6.17 Registration Statement. Parent shall have filed an amended or
supplemented S-4 registration statement with the SEC, which registration
statement shall show that the transactions contemplated herein shall be treated
as a purchase for accounting purposes.
7. CONDITIONS PRECEDENT TO PERFORMANCE BY SHAREHOLDERS
AND MERGING ENTITY. The obligation of Shareholders and Merging Entity to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction or fulfillment on or prior to the Closing Date, of the
following conditions, in addition to any other conditions contained in this
Agreement, each of which may be waived, collectively, by a majority in interest
of Shareholders and Merging Entity:
7.1 Representations. Shareholders shall not have discovered any material
error, misstatement or omission in any of the representations and warranties
made by Parent contained in this Agreement, and all representations and
warranties of Parent contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date with the same force and
effect, except as otherwise approved in writing by Shareholders and Merging
Entity, as though such representations and warranties had been made on and as
of the Closing Date; and Parent shall have delivered to Shareholders and
Merging Entity a certificate to the foregoing effect, dated the Closing Date,
in form and substance as set forth in Schedule 7.1.
7.2 Covenants. Parent shall have performed and complied in all material
respects with all covenants, agreements and conditions required under this
Agreement to be performed and complied with by Parent and shall have caused all
corporate actions necessary for the formation of HRH Merger Subsidiary and for
the consummation of this Agreement to have been taken by it and HRH Merger
Subsidiary; and Parent shall have delivered to Shareholders and Merging Entity
a certificate to the foregoing effect, dated the Closing Date, in form and
substance as set forth in Schedule 7.1.
7.3 Effective Registration Statement. The registration statement on
Form S-4 under the Securities Act of 1933 referred to in Section 2.34 hereof
shall have been amended or supplemented and be effective under such Act and not
the subject of any "stop order" or threatened "stop order" and the amended or
supplemented prospectus shall have been delivered to Shareholders and Merging
Entity.
7.4 Prospectus Approval. After delivery and review of the aforementioned
amendment or supplement to Parent's S-4 registration statement, and subject to
the limitations on disapproval set forth in Section 3.5, Shareholders and
Merging Entity shall have approved this Agreement and the consummation of all
transactions contemplated thereby.
8. POST-MERGER COVENANTS.
8.1 POST-MERGER COVENANTS OF PARENT. Parent covenants to
Shareholders as follows:
A. Collection. To cause Surviving Corporation to use its reasonable
business efforts, at least comparable in quality to those of Merging Entity
prior to the Effective Date, to collect all notes receivable and accounts
receivable as described in Section 2.27.
B. Payment. Subject to Merging Entity fulfilling its Tangible Net
Worth requirements, as set forth in Section 14.6, and subject to the
fulfillment by Shareholders of their covenants set forth in Section 8.2, to
cause Surviving Corporation to pay timely all liabilities of Merging Entity
which have been properly reserved for in the Merger Balance Sheet, as defined
in Section 8.2.A.
8.2 POST-MERGER COVENANTS OF SHAREHOLDERS. Shareholders, jointly
and severally, covenant to Parent as follows:
A. Delivery of Merger Balance Sheet and Audited Financials. 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
other audited statements as of and for the period ended December 31,
1995, and their related work papers and other financial documents prepared
therefor (collectively, "Audited Financials"). The Audited Financials 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 Audited Financials not
misleading.
B. Post-Merger Filings. To cause to be timely filed, at no
expense which has not previously been reserved for on the Merger Balance Sheet,
all federal, state and local tax returns of all kinds required to be filed by
Merging Entity for all tax periods ending on or prior to the Effective Date
("Post-Merger Filings"). All Post-Merger Filings will be true and correct and,
prior to actual filing thereof, Shareholders shall deliver drafts of such
filings to Parent for its review.
C. Employee Benefit Plans. Unless written directive from Parent
stating otherwise is delivered to Shareholders prior to the Closing Date , to
cause, at no expense which has not previously been reserved for in the Merger
Balance Sheet, all Employee Benefit Plans of 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. Shareholders specifically understand
that they have covenanted hereby to take any and all actions reasonably
required to eliminate any and all potential liability of Surviving
Corporation and Parent with respect to such Employee Benefits Plans.
D. [This Section is intentionally left blank.]
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 until December 31, 1998.
9.2 Survival of Representations and Warranties of Shareholders. 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 until
December 31, 1998.
9.3 Indemnification Agreement by Shareholders. Shareholders shall
indemnify and hold harmless (with respect to ▇▇. ▇▇▇▇▇▇▇▇▇, jointly and
severally, and severally as to ▇▇▇. ▇▇▇▇▇▇▇▇▇) Parent and Surviving
Corporation, and their respective successors and assigns, from and against
and in respect of:
(i) All indebtedness, obligations and liabilities of Merging Entity
of any nature whatsoever, whether accrued, absolute, contingent or otherwise
(except for those obligations arising out of the disclosures on Schedule 2.8
which can only be reflected on the Merger Balance Sheet through December 31,
1995), existing at the close of business as of December 31, 1995, 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 which has not been fully reflected or
reserved against in the Merger Balance Sheet;
(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 (which, upon indemnification, shall be assigned to Shareholders);
(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 the amount of $0 (zero);
(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) [This Section is intentionally left blank.]
(xi) Any and all claims, demands, actions or causes of action
arising out of or in any way relating to any of the pending or threatened
litigation disclosed or required to be disclosed on Schedule 2.22;
(xii) Any existing unreconciled discrepancies as or to have been
disclosed on Schedule 2.14;
(xiii) Any and all losses, claims, demands or deficiencies arising
out of or in any way relating to the ownership by Merging Entity of the
intangible assets of Merging Entity;
(xiv) Until one year after the expiration of the applicable statute
of limitations, any and all liabilities, claims, losses demands or deficiencies
of any nature whatsoever arising out of a "Known Misrepresentation" (a
representation or warranty made with actual knowledge of its falsity or with
reckless indifference to the truth) or due to the ownership of the common stock
not being as set forth in Section 1.4(a); and
(xv) All demands, claims, actions, suits, proceedings, loss, damage,
liability, judgments, costs and expenses (including, without limitation, court
costs, experts' and attorneys' fees at the trial level and in connection with
all appellate proceedings) incident to any of the foregoing.
9.4 Indemnification Agreement by Parent. Parent shall indemnify and hold
harmless Shareholders, and each of them, and their respective heirs and
personal representatives from and against and in respect of:
(i) Any loss, damage, liability or deficiency resulting from any
misrepresentation, breach of warranty or nonfulfillment of any covenant or
agreement on the part of the Parent under the terms of this Agreement;
(ii) All demands, claims, actions, suits, proceedings, loss, damage,
liability, judgments, costs and expenses (including, without limitation, court
costs, experts' and attorneys' fees at the trial level and in connection with
all appellate proceedings) incident to any of the foregoing.
9.5 Assertion of Indemnification Claim. Either the Shareholders or
Parent, as the case may be (an "Indemnified Party"), shall give notice to the
other (an "Indemnifying Party") as soon as possible after the Indemnified Party
has actual knowledge of any claim as to which indemnification may be sought
and the amount thereof, if known, and supply any other information in the
possession of the Indemnified Party regarding such claim, and will permit the
Indemnifying Party (at its expense) to assume the defense of any third party
claim and any litigation resulting therefrom, provided that counsel for the
Indemnifying Party who shall conduct the defense of such claim or litigation
shall be reasonably satisfactory to the Indemnified Party, and provided further
that the omission by the Indemnified Party to give notice as provided herein
will not relieve the Indemnifying Party of its indemnification obligations
hereunder except to the extent that the omission results in a failure of
actual notice to the Indemnifying Party and the Indemnifying Party is materially
damaged as a result of the failure to give notice. The Indemnifying Party may
settle or compromise any third party claim or litigation with the consent of the
Indemnified Party which consent may not be unreasonably withheld.
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. Further, in calculating all such indemnifiable
claims, the parties agree to calculate such indemnities, so far as practicable,
net of any tax effects and insurance recoveries, and at their net present value.
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 Shareholders pursuant to Section 9.4 shall be limited to
an amount equal to 40,000 shares of Parent's common stock times $13.75 per
share, which is the approximate per share 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 and particularly in light of Merging Entity's lack of errors and
omissions coverage, 10,000 shares of its common stock ("Escrowed Shares"). By
their signatures to this Agreement, each Shareholder has granted to Parent a
security interest in his portion of the Escrowed Shares, and has consented to
the escrow provision described herein and has granted unto Parent a
continuing limited power of attorney to act over his proportionate number of the
Escrowed Shares pursuant to this Agreement, which power of attorney is coupled
with an interest and is not revocable until the later of: (i) December 31, 1997;
(ii) determination and settlement of any amounts pursuant to Section 14.6; and
(iii) determination and settlement of any amounts claimed by Parent as of
December 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, and absent a written directive
to the contrary from each such Shareholder not desiring to receive his shares
pro rata, Parent shall distribute the Escrowed Shares, less any decrease in
such shares pursuant to this Agreement, plus any additional shares issued
pursuant to this Agreement, to the Shareholders, pro rata. Dividends on the
Escrowed Shares and the interest earned thereon ("Escrow Funds") shall be
distributed in the same manner determined according to the immediately preceding
sentence. If Escrowed Shares were decreased to satisfy the indemnity provided
herein, the Escrow Funds shall be reduced by a percentage equal to the fraction
established where the numerator is the number of Escrowed Shares used to satisfy
such indemnity and the denominator is the number of Escrowed Shares.
10. EXPENSES. All expenses (including, without limitation, legal,
auditing, accounting and other related expenses such as preparation of Post-
Merger Filings and the Merger Balance Sheet) incurred in connection with this
transaction by Merging Entity and Shareholders, or any of them, shall be the
sole responsibility of Merging Entity or Shareholders (depending upon the
nature of the expense), and all expenses incurred by Parent in connection
with this transaction shall be the sole responsibility of Parent.
11. DEFAULT.
11.1 Default by Shareholders or Merging Entity. Except as otherwise
expressly provided in this Agreement, if Shareholders or Merging Entity, or any
of them, shall fail to perform or comply with any covenant, agreement or
condition contained in this Agreement that is required to be performed or
complied with by Shareholders or Merging Entity on or prior to the Closing Date,
then Parent shall have the option to seek specific performance of this Agreement
or to ▇▇▇ such defaulting party for damages. If Parent elects to ▇▇▇ for
specific performance, Shareholders and Merging Entity expressly waive any
claim or defense that Parent has an adequate remedy at law.
11.2 Default by Parent. Except as otherwise expressly provided in this
Agreement, if Parent shall fail to perform or comply with any covenant,
agreement or condition contained in this Agreement that is required to be
performed or complied with by Parent on or prior to the Closing Date, then
Shareholders and Merging Entity, at the unanimous option of Shareholders and
Merging Entity, may seek specific performance of this Agreement or may elect to
▇▇▇ for damages. If Shareholders and Merging Entity elect to ▇▇▇ for specific
performance, Parent expressly waives any claim or defense that Shareholders
and Merging Entity have an adequate remedy at law.
12. NOTICES. All notices or other communications permitted or required to
be given hereunder by any party to any other party shall be in writing and
shall be delivered personally or by telecopier, telex or other similar
communication or sent by registered or certified mail, postage prepaid:
(a) If to Shareholders or Merging Entity:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
▇▇▇▇▇▇▇▇▇ CONSULTING GROUP, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
With copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
SIROTE & PERMUTT
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(b) If to Parent or HRH Merger Subsidiary:
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇, President
HILB, ▇▇▇▇▇ AND ▇▇▇▇▇▇▇▇ COMPANY
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Post ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
With copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
HILB, ▇▇▇▇▇ AND ▇▇▇▇▇▇▇▇ COMPANY
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Post ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
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
ALABAMA 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
Shareholders and one arbitrator shall be selected by Parent. The two
arbitrators shall then pick one mutually acceptable arbitrator (the
"Arbitrator") to resolve all questions in dispute. The decision of the
Arbitrator shall be final and the fees for his services shall be borne fifty
percent (50%) by Parent and fifty percent (50%) by Shareholders.
Notwithstanding anything in the foregoing to the contrary, if the Merger
Balance Sheet is not submitted within seventy-five (75) days after the
Effective Date, then Parent shall submit a Merger Balance Sheet within fifteen
(15) days thereafter which shall be final, conclusive and binding on all parties
hereto, and not subject to any of the arbitration provisions described above.
(b) Tangible Net Worth. The term "Tangible Net Worth" means the
remainder arrived at from the Merger Balance Sheet when total liabilities are
subtracted from total assets, and furniture, fixtures and equipment and
intangible assets other than cash, cash equivalents and net receivables are
then subtracted from that remainder (total assets - total liabilities -
furniture, fixtures and equipment - intangible assets other than cash, cash
equivalents and net receivables).
(c) Adjustment. The number of shares to be delivered by Parent to
Shareholders pursuant to Section 1.4 shall be adjusted as follows:
(i) If Tangible Net Worth exceeds $0 (zero) (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 $13.75; and
(ii) If Tangible Net Worth is less than $0 (zero) (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 $13.75.
In the event of an increase in the number of shares of common stock of
Parent to be issued to Shareholders, such additional shares shall be issued,
promptly after determination of such number, by Parent to Shareholders in the
same proportion as set forth in Section 1.4(a). In the event of a decrease in
the number of shares of common stock of Parent, such shares shall be assigned,
promptly after determination of such number, to Parent (at Parent's discretion
either from the Escrowed Shares or the Shareholders or both) in the same
proportions as set forth in Section 1.4(a), unless Parent shall have received
a differing written directive pursuant to Section 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 Shareholders or Parent may have at law or in equity against
the other for a misstatement or omission by such party which should have been
made, corrected or disclosed by such party, at or prior to the Effective Date,
shall survive for the applicable period provided by law or equity for the
remedy of such act or omission.
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 Nonsolicitation Covenant. Each of the Shareholders, by signature
hereto, covenants that he shall not for a period equal to the lessor of:
(i) five (5) years after the Effective Date; or (ii) three (3) years after ▇▇.
▇▇▇▇▇▇▇▇▇'▇ employment with HRH-Alabama ends; directly or indirectly, except on
behalf of Surviving Corporation, its successors or assigns, solicit or accept
risk management, insurance, insurance annuity, pension consulting, or bond
business from any of the customers of Merging Entity as of the moment
immediately preceding the Effective Date. Each of the Shareholders, by
signature hereto, acknowledges: (i) that this covenant is ancillary to this
Merger Agreement, is integral hereto and is independent of any other provision
herein, (ii) that this covenant is reasonably necessary for the protection of
Surviving Corporation's legitimate business interests; (iii) that this covenant
poses no undue hardship on the Shareholders and is reasonably limited as to
duration and scope; and (iv) that this covenant is in addition to any
covenants which Shareholders may make in any employment or other agreements
executed or to be executed with Surviving Corporation. Further, if any part
of this covenant is deemed overbroad or void as against public policy, each of
the Shareholders, by signature hereto, acknowledges that such invalid portions
shall be severable from this covenant and specifically requests that, upon such
event, this covenant be reformed ("blue-pencilled") to permit Surviving
Corporation to obtain the maximum permissible benefit from this covenant.
14.10 Acceptance. The binding date of acceptance of this Agreement
shall be the Date on which the last of the parties executes the same.
EXECUTED by Shareholders and Merging Entity at Birmingham, Alabama,
this ____ day of December, 1995.
SHAREHOLDERS:
__________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
__________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
MERGING ENTITY:
▇▇▇▇▇▇▇▇▇ CONSULTING GROUP, INC.
By________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, its President
EXECUTED by Parent at ____________, ___________, this ___ day of
December, 1995.
HILB, ▇▇▇▇▇ AND ▇▇▇▇▇▇▇▇ COMPANY
By________________________________________
_____________________________________, its
_____________________________________
