-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UvuBiG6o6ZeJAF7QH5Sc2ZJFgy6QIeLtvOx7Y+tMeFd4c7MytyI37LVXA4BO9+zD tLWWy3y1SOBYfC8tJjqLwA== 0000814898-96-000014.txt : 19961009 0000814898-96-000014.hdr.sgml : 19961009 ACCESSION NUMBER: 0000814898-96-000014 CONFORMED SUBMISSION TYPE: 424B2 PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19961008 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HILB ROGAL & HAMILTON CO /VA/ CENTRAL INDEX KEY: 0000814898 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 541194795 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B2 SEC ACT: 1933 Act SEC FILE NUMBER: 033-44271 FILM NUMBER: 96640776 BUSINESS ADDRESS: STREET 1: 4235 INNSLAKE DR CITY: GLEN ALLEN STATE: VA ZIP: 23060 BUSINESS PHONE: 8047476500 MAIL ADDRESS: STREET 1: P O BOX 1220 CITY: GLEN ALLEN STATE: VA ZIP: 23060 424B2 1 Filed under SEC Rule 424 (b)(2) Registration No. 33-44271 HILB, ROGAL AND HAMILTON COMPANY SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 12, 1992 RELATING TO ACQUISITION OF BARTLETT, BOZEMAN & LEVIN, LLC The following information is furnished to supplement and complete the information contained in the Prospectus dated February 12, 1992, relating to the offering of shares of the Common Stock of Hilb, Rogal and Hamilton Company (the "Company") to the owners of Bartlett, Bozeman & Levin, LLC ("LLC") in exchange for certain assets of LLC. Terms of the Transaction (a) (1) On October 1, 1996, Hilb, Rogal and Hamilton Company of the Quad Cities ("HRH of the Quad Cities"), a wholly- owned subsidiary of the Company, acquired substantially all of the operating assets of Bartlett Agency, Inc. ("Bartlett"). Bartlett, along with two individuals, owns all of LLC which operates an insurance agency in the Chicago area. The members of LLC and the Shareholders of Bartlett now collectively wish to have substantially all of the operating assets of LLC conveyed to HRH of the Quad Cities on substantially the same terms as Bartlett sold its assets to HRH of the Quad Cities. Accordingly, retroactive to October 1, 1996, the shareholders of LLC have agreed to sell assets of LLC's insurance agency operations including their insurance customer lists, expiration lists and records, book of business, business records, files and daily reports; furniture, fixtures and equipment; rights and interest in and to agency and other agreements; certain maintenance agree ments; goodwill; and non-competition agreements in exchange for $414,000 in cash (including $110,000 in the form of non- competition agreements), 7,797 shares of Common Stock of the Company and three installments payable based upon profits realized in the subsequent three year period which can increase the purchase price in each year payable in 14, 26 and 38 months. Each contingent payment includes interest imputed at the lowest federal rate allowed pursuant to Section 1274 of the Internal Revenue Code of 1986 with monthly compounding. The Purchase Agreement with Bartlett has been amended to incorporate the acquisition of LLC (the "Amended Purchase Agreement"). The acquisition is subject to (i) all necessary corporate approvals of each corporation, (ii) all authorizations, consents and approvals of all federal, state, local and foreign governmental agencies and authorities required to be obtained, and (iii) all other conditions precedent as outlined in the Amended Agreement (see Exhibit 2.29). The assets purchased will be incorporated into the assets of HRH of the Quad Cities. (2) The acquisition of LLC by the Company has been agreed upon because the Company is engaged in the business of owning insurance agencies and because the owners of LLC have determined that a merger with the Company is beneficial to the growth of their insurance operations. LLC's operations will add approximately six employees and approximately $600,000 of revenues to the Company. (3) LLC was incorporated in 1995 and operates as a limited liability company under Illinois law. (4) There are no material differences between the rights of the security holders of LLC and the rights of security holders of the Company. (5) & (6) The acquisition will be treated as a purchase and the assets purchased will be incorporated into the assets of HRH of the Quad Cities. The assets will be recorded at fair market value for accounting and tax purposes by the Company. (c) The Amended Purchase Agreement is incorporated into this supplement as Exhibit 2.29. Pro Forma Financial Information See attached - Schedule A Material Contracts with Seller. There have been no material contracts between the Company and LLC prior to the proposed effective date of the Amended Purchase Agreement. Information with Respect to Bartlett, Bozeman & Levin, LLC LLC is located in Chicago, Illinois. LLC was organized in 1995 and operates as a limited liability company under Illinois law. LLC provides insurance brokerage services for personal and small-to-medium size commercial and industrial accounts. Services provided include personal and commercial property and casualty insurance and group and individual life and health insurance products. The shares to be issued represent less than .1% of outstanding shares of the Company at the time of acquisition and the assets of LLC as of December 31, 1995 and pre-tax earnings for the year then ended represent approximately .47% and .44%, respectively, of the consolidated amounts of the Company. Furthermore, the Company's investment in LLC will represent approximately .5% of consolidated assets of the Company. Accordingly, due to the small size, and closely held nature of the insurance agency, it is not practical or cost effective to provide audited financial statements. Accordingly, the shares will be restricted as to resale until such time as the Company files audited financial statements which include the proforma results of operations of the Company including the operations of LLC. The restriction should end no later than March 31, 1997 when the Company files its Form 10-K for 1996. Common Stock and Dividend Data There is no established public trading market for the owners' interests of LLC. There are three owners of LLC. See Shareholder Information below for information regarding ownership. There have been no distributions to owners since the formation of LLC. Shareholder Information (a) (1) WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE RE QUESTED NOT TO SEND US A PROXY. (2) & (3) LLC has agreed to submit the Amended Purchase Agreement to its owners for adoption by unanimous written consent after receipt and review of the Prospectus. Since the acquisition can be completed only with the unanimous consent of the owners of the company being acquired (LLC), notice requirements shall have been met and there shall be no dissenters. (4) & (5) There are no material interests, direct or indirect, of affiliates, officers or directors of the registrant or of the companies being acquired (LLC) in the proposed transac tion. (6) LLC is a limited liability company. The ownership interest of LLC is as follows: OWNERSHIP NAME INTEREST Bartlett Agency, Inc. 33 1/3% David Bozeman 33 1/3 Stewart Levin 33 1/3 ------- 100% ======= (7) Upon completion of the proposed acquisition, no owner of LLC will serve as a director or executive officer of the registrant. Hilb, Rogal and Hamilton Company Date of this Supplement: October 8, 1996 SCHEDULE A - PRO FORMA CONDENSED FINANCIAL STATEMENTS (UNAUDITED) The following pro forma condensed consolidated balance sheet as of June 30, 1996 and the pro forma consolidated income state ments for the six months ended June 30, 1996 and the year ended December 31, 1995 give effect to the proposed acquisition of Bartlett, Bozeman & Levin, LLC ("LLC," expected to be effective on October 1, 1996); and the acquisition of certain assets and liabilities of ten insurance agencies purchased in 1996 and 13 insurance agencies purchased in 1995. The pro forma information is based on the historical financial statements of Hilb, Rogal and Hamilton Company and the acquired agencies, giving effect to the transactions under the purchase method of accounting and the assumptions and adjustments in the accompanying notes to the pro forma financial statements. The pro forma consolidated income statements give effect to the purchase method acquisitions and proposed purchase method acquisitions as if they had occurred on January 1, 1995. The pro forma condensed consolidated balance sheet gives effect to the business combinations which occurred or are probable of occurring subsequent to June 30, 1996, as if they had occurred before June 30, 1996. The pro forma statements have been prepared by management based upon the historical financial statements of Hilb, Rogal and Hamilton Company, LLC and other acquired agencies. These pro forma statements may not be indicative of the results that actually would have occurred if the combination had been in effect on the dates indicated or which may be obtained in the future. The pro forma financial statements should be read in conjunction with the audited financial statements and notes of the Company included in the Company's 1995 Annual Report to Shareholders which is incorporated by reference in the Company's Annual Report on Form 10-K, which is incorporated herein by reference. HILB, ROGAL & HAMILTON COMPANY PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) JUNE 30, 1996
HILB, ROGAL ACQUISITIONS PRO FORMA ADJUSTMENTS PRO FORMA AND HAMILTON (PURCHASES) FOR PURCHASE ACQUISITIONS CONSOLIDATED COMPANY ASSETS CASH AND CASH EQUIVALENTS $21,482,227 $1,956,659 (3,289,000) (2) $20,149,886 INVESTMENTS 5,352,730 124,425 5,477,155 RECEIVABLES & OTHER 45,846,017 2,569,204 (306,051) (1) 48,109,170 --------------------------------------------------------------------------- TOTAL CURRENT ASSETS 72,680,974 4,650,288 N/A (3,595,051) 73,736,211 INVESTMENTS 5,770,000 5,770,000 PROPERTY & EQUIPMENT 14,969,938 406,565 (406,565) (1) 515,000 (3) 15,484,938 INTANGIBLE ASSETS 64,391,946 333,356 (333,356) (1) 12,488,108 (3) 76,880,054 OTHER ASSETS 4,469,728 304,604 (1)(217,070) (1) 4,557,262 --------------------------------------------------------------------------- TOTAL ASSETS $162,282,586 $5,694,813 N/A $8,451,066 $176,428,465 =========================================================================== LIABILITIES & EQUITY: PREMIUMS PAYABLE-INS CO $67,191,549 $3,541,010 $70,732,559 OTHER ACCRUED LIABILITIES 15,124,267 457,735 15,582,002 ---------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 82,315,816 3,998,745 N/A 0 86,314,561 LONG-TERM DEBT 15,801,391 531,408 (271,226)(1) 2,325,600 18,387,181 OTHER LONG-TERM LIAB. 8,289,192 172,844 3,260,000 (3) 11,722,036 SHAREHOLDERS' EQUITY COMMON STOCK 25,350,220 1,133,233 (1,133,233) (4) 4,128,500 (2) 29,478,720 RETAINED EARNINGS 30,525,967 (141,417) 141,417 (4) 30,525,967 ---------------------------------------------------------------------------- 55,876,187 991,816 N/A 3,136,684 60,004,687 ---------------------------------------------------------------------------- $162,282,586 $5,694,813 N/A $8,451,066 $176,428,465 =============================================================================
(1) TO ADJUST FOR ASSETS AND LIABILITIES NOT ACQUIRED. (2) TO REFLECT PURCHASE PRICE OF ASSETS AND LIABILITIES ACQUIRED SUBSEQUENT TO JUNE 30, 1996 IN PURCHASE TRANSACTIONS. (3) TO ADJUST FOR ASSET VALUATIONS UNDER PURCHASE ACCOUNTING. (4) TO ELIMINATE SHAREHOLDERS' EQUITY OF ACQUIRED ENTITIES. HILB, ROGAL & HAMILTON COMPANY CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1996 HILB,ROGAL ACQUISITIONS PRO FORMA ADJUST- PRO FORMA & HAMILTON CO. (PURCHASES) MENTS FOR PURCHASE CONSOLIDATED ACQUISITONS REVENUES: COMMISSIONS & FEES $78,768,286 $6,444,435 $85,212,721 INTEREST AND OTHER INCOME 2,243,540 59,430 ($135,85O) (1) 2,167,120 ----------------------------------------------------------- TOTAL REVENUES 81,011,826 6,503,865 (135,850) 87,379,841 OPERATING EXPENSES: COMPENSATION AND BENEFITS 44,115,134 3,949,409 48,064,543 OTHER OPERATING EXPENSES 19,603,610 1,681,422 (136,050) (2) 21,148,982 AMORTIZATION OF INTANGIBLES 3,666,605 67,267 358,730 (3) 4,092,602 INTEREST EXPENSE 461,460 46,843 33,939 (4) 542,242 ----------------------------------------------------------- TOTAL OPERATING EXPENSE 67,846,809 5,744,941 256,619 73,848,369 ----------------------------------------------------------- INCOME BEFORE INCOME TAXES 13,165,017 758,924 (392,469) 13,531,472 INCOME TAXES 5,328,496 146,582 (5) 5,475,078 ----------------------------------------------------------- NET INCOME $7,836,521 $758,924 ($539,051) $8,056,394 =========================================================== NET INCOME PER COMMON SHARE $0.58 $0.58 =========================================================== SHARES ISSUED AND OUTSTANDING 13,368,868 334,538 13,703,406 =========================================================== WEIGHTED AVERAGE SHARES OUTSTANDING 13,626,914 381,487 14,008,401 ===========================================================
(1) TO ADJUST HISTORICAL INTEREST AND TO ADJUST FOR LOST INTEREST EARNED FROM CASH PAID FOR ACQUIRED AGENCIES. (2) TO REFLECT ADJUSTMENTS TO COMPENSATION AND OTHER OPERATING EXPENSES TO REFLECT ADJUSTED COMPENSATION, DEPRECIATION EXPENSE, RENT EXPENSE, ETC. (3) TO REFLECT ADJUSTMENTS TO AMORTIZATION OF INTANGIBLES DUE TO VALUATION OF AGENCY ASSETS ON THE PURCHASE BASIS OF ACCOUNTING. INTANGIBLE ASSETS REPRESENT EXPIRATION RIGHTS, THE EXCESS OF COSTS OVER THE FAIR VALUE OF NET ASSETS ACQUIRED AND NONCOMPETITION AGREEMENTS. (4) TO ADJUST HISTORICAL INTEREST AND REFLECT INTEREST ON ACQUISITION DEBT. (5) TO REFLECT ESTIMATED TAXES AND THE TAX EFFECT OF PROFORMA ADJUSTMENTS ON NET INCOME. HILB, ROGAL & HAMILTON COMPANY CONDENSED STATEMENT OF INCOME (UNAUDITED)
YEAR ENDED DECEMBER 31, 1995 HILB, ROGAL ACQUISITIONS PRO FORMA ADJUST- PRO FORMA & HAMILTON CO. (PURCHASES) MENTS FOR CONSOLIDATED ACQUISITIONS REVENUES: COMMISSIONS & FEES $141,555,188 $23,793,697 $165,348,885 INTEREST AND OTHER INCOME 6,591,850 424,653 ($676,548) (1) 6,339,955 ------------------------------------------------------------- TOTAL REVENUES 148,147,038 24,218,350 (676,548) 171,688,840 OPERATING EXPENSES: COMPENSATION AND BENEFITS 82,760,664 14,821,313 (442,931) (2) 97,139,046 OTHER OPERATING EXPENSES 38,264,085 8,224,127 (411,581) (2) 46,076,631 AMORTIZATION OF INTANGIBLES 6,965,947 375,297 1,139,066 (3) 8,480,310 INTEREST EXPENSE 559,654 264,555 (11,567) (4) 812,642 ------------------------------------------------------------- TOTAL OPERATING EXPENSES 128,550,350 23,685,292 272,987 152,508,629 ------------------------------------------------------------- INCOME BEFORE INCOME TAXES 19,596,688 533,058 (949,535) 19,180,211 INCOME TAXES 7,767,778 (166,591) (5) 7,601,187 ------------------------------------------------------------- NET INCOME $11,828,910 $533,058 ($782,944) $11,579,024 ============================================================= NET INCOME PER COMMON SHARE $0.82 $0.77 ============================================================= SHARES ISSUED AND OUTSTANDING 13,706,764 479,386 14,186,150 ============================================================= WEIGHTED AVERAGE SHARES OUTSTANDING 14,470,407 577,832 15,048,239 =============================================================
(1) TO ADJUST HISTORICAL INTEREST AND TO ADJUST FOR LOSTINTEREST EARNED FROM CASH PAID FOR ACQUIRED AGENCIES. (2) TO REFLECT ADJUSTMENTS TO COMPENSATION AND OTHER OPERATING EXPENSES TO REFLECT ADJUSTED COMPENSATION, DEPRECIATION EXPENSE, RENT EXPENSE, ETC. (3) TO REFLECT ADJUSTMENTS TO AMORTIZATION OF INTANGIBLES DUE TO VALUATION OF AGENCY ASSETS ON THE PURCHASE BASIS OF ACCOUNTING. INTANGIBLE ASSETS REPRESENT EXPIRATION RIGHTS, THE EXCESS OF COSTS OVER THE FAIR VALUE OF NET ASSETS ACQUIRED AND NONCOMPETITION AGREEMENTS. (4) TO ADJUST HISTORICAL INTEREST AND REFLECT INTEREST ON ACQUISITION DEBT. (5) TO REFLECT ESTIMATED TAXES AND THE TAX EFFECT OF PROFORMA ADJUSTMENTS ON NET INCOME. EX-2 2 PURCHASE AGREEMENT FOR BARTLETT, BOZEMAN & LEVIN, LLC AND BARTLETT AGENCY, INC. BY HILB, ROGAL AND HAMILTON COMPANY OF THE QUAD CITIES 1. On September 30, 1996, Hilb, Rogal and Hamilton Company of the Quad Cities, an Illinois corporation ("Buyer") and a wholly-owned subsidiary of Hilb, Rogal and Hamilton Company ("HRH"), acquired substantially all of the operating assets of Bartlett Agency, Inc., an Illinois corporation ("Bartlett"). 2. Bartlett, along with David Bozeman and Stewart Levin, owns all of Bartlett, Bozeman & Levin, LLC, which operates an insurance agency in the Chicago area ("LLC"). The members of LLC and the Shareholders of Bartlett now collectively wish to have substantially all of the operating assets of LLC conveyed to Buyer on substantially the same terms as Bartlett sold its assets to Buyer. Accordingly, the numbers in the Management Incentive Agreement and the terms of the Purchase Agreement are modified as shown on Exhibits 1 and 2 attached hereto. All references in such agreement to Seller and to Shareholders, respectively, shall be deemed to include LLC and the members of LLC, respectively. 3. LLC has attached hereto as Exhibit 3 all those disclosures it would have been required to make had it originally been a party to the Purchase Agreement set forth in Exhibit 2. 4. LLC and Bartlett have reached agreement among themselves as to allocation of proceeds pursuant to this Purchase Agreement, as set forth in Exhibit 4. 5. The obligation of Buyer to conclude this Purchase Agreement is conditioned upon: a. LLC executing the bill of sale set forth as Exhibit 5; b. Messrs. Bozeman and Levin executing the employment agreements set forth as Exhibits 6 and 7; c. LLC purchasing adequate tail insurance; d. LLC making proper arrangements to assign its lease to Buyer; and e. LLC clearing title to the assets conveyed, including the deposit of adequate funds into an escrow account to pay LLC's insurance company payables. 6. HRH's signature hereto acts as the same guaranty as given to Bartlett in the original purchase agreement. 7. HRH will not deliver its common stock for LLC until it has filed the S-4 registering 7,797 shares of HRH stock and the members of LLC have signed an acknowledgment thereafter requesting delivery of such shares. WITNESS the signature of all parties hereto this 7th day of October, 1996. HILB, ROGAL AND HAMILTON COMPANY By:_____________________________________ Its:_____________________________________ BARTLETT AGENCY, INC. By:_____________________________________ Its:_____________________________________ BARTLETT, BOZEMAN & LEVIN, LLC By:_____________________________________ Its:_____________________________________ _________________________________ ________________________________ Richard J. Miles David Bozeman _________________________________ _________________________________ Thomas K. Bracke Stewart Levin _________________________________ John J. Barrett _________________________________ Bradley T. Boyle EXHIBIT 2 AGREEMENT OF PURCHASE AND SALE BY AND BETWEEN HILB, ROGAL AND HAMILTON COMPANY OF THE QUAD CITIES AND BARTLETT AGENCY, INC. AND BARTLETT, BOZEMAN & LEVIN, LLC THIS AGREEMENT, effective as of 12:01 a.m. on October 1, 1996 ("Effective Date"), is made and entered into this 30th day of September, 1996, by and between HILB, ROGAL AND HAMILTON COMPANY OF THE QUAD CITIES, an Illinois corporation ("Buyer"), HILB, ROGAL AND HAMILTON COMPANY, a Virginia corporation ("HRH"), BARTLETT AGENCY, INC., an Illinois corporation ("Bartlett"), and BARTLETT, BOZEMAN & LEVIN, LLC, an Illinois limited liability company ("LLC") (Bartlett and LLC, collectively, "Seller"), RICHARD J. MILES ("Mr. Miles"), THOMAS K. BRACKE ("Mr. Bracke"), JOHN J. BARRETT ("Mr. Barrett"), DAVID BOZEMAN ("Mr. Bozeman"), STEWART LEVIN ("Mr. Levin") and BRADLEY T. BOYLE ("Mr. Boyle"), with Messrs. Miles, Bracke, Barrett and Boyle and the members of LLC collectively being referred to herein as "Shareholders". W I T N E S S E T H: WHEREAS, HRH is engaged in the business of owning insurance agencies; WHEREAS, Seller currently conducts an insurance agency business in and around the quad cities area of Illinois and Iowa (Moline, Rock Island, Davenport and Bettendorf) and greater Chicago; WHEREAS, Shareholders own Seller; PORTIONS OF THIS AGREEMENT ARE SUBJECT TO ARBITRATION. WHEREAS, Shareholders desire that Seller sell certain of its assets utilized in that business under the terms hereinafter provided; WHEREAS, HRH desires that Buyer purchase certain of Seller's assets utilized in such business. NOW THEREFORE, in consideration of the premises and of the mutual promises and covenants hereinafter set forth, and intending to be legally bound, the parties hereto agree as follows: 1. Sale and Assignment of Assets. Subject to the terms and conditions contained in this Agreement, Seller hereby agrees to sell convey, transfer, assign and deliver to Buyer, free and clear of any judgment, mortgage, pledge, lien, conditional sale agreement, security interest, option, or other encumbrance or claim of any nature whatsoever, all of Seller's right, title and interest in and to the following assets ("Assets"): (i) its insurance customer lists, expiration lists and records, book of business, business records, files and daily reports; (ii) all furniture, fixtures and equipment identified on Schedule 1 attached hereto, all of which are used in, or form a part of, Seller's insurance agency business; (iii) all of its rights and interest in and to its agency agreements with those insurance companies for which it acts as agent, including all contingency and profit sharing agreements with such companies; (iv) certain maintenance agreements related to the assets listed on Schedule 1; (v) all restrictive covenants or other agreements protecting or prohibiting any of the accounts transferred in (i) above from being solicited by others; and (vi) the goodwill of Seller, including, but not limited to, the corporate name of "Bartlett Agency, Inc.," the name "Bartlett, Bozeman and Levin" and any trade names related thereto. Seller shall sign such Bills of Sale in form and substance as set forth in Schedule 1.1, or other documents of assignment or transfer as Buyer shall request. Buyer is not acquiring, and is hereby expressly excluded from acquiring from Seller, the following assets of the Seller which the Seller retains: (i) cash or other readily liquid working capital on hand as of the close of business of Seller on the day prior to the Effective Date ("Pre-Effective Moment"); (ii) accounts and other receivables as of the Pre-Effective Moment, including commissions earned but not paid on business billed by Seller which was written and having an effective date prior to the Pre-Effective Moment, but excluding direct bill commissions which shall be treated as earned when received; and (iii) prepaid insurance, finance charges, taxes and licenses. Except for Seller=s lease and the obligations listed in Schedule 6.K, Buyer is not assuming any liabilities of Seller of any kind and shall be fully indemnified therefor. 2. Purchase Price. In consideration for the transfer and assignment of the above-described Assets, the Buyer shall pay to the Seller at the times specified herein the potential maximum value of EIGHT MILLION TWO HUNDRED EIGHTY- FIVE THOUSAND DOLLARS ($8,285,000) payable as follows (with the payments referenced below in A, B and C being hereafter collectively referred to as APurchase Price@): A. On the later of the Closing Date or the Effective Date ("Transfer Date"), Buyer shall deliver to Seller the sum of TWO MILLION TWO HUNDRED NINETY-NINE THOUSAND DOLLARS ($2,299,000) ($1,995,000 on September 30, 1996, and $304,000 on October 7, 1996); B. On the Transfer Date, Buyer shall deliver to Seller a certificate equaling, or certificates totalling, the value of SEVEN HUNDRED FIFTY-THREE THOUSAND FIVE HUNDRED and 00/100 DOLLARS ($753,500) in shares of the common stock of HRH ("HRH Stock") ($650,000 on September 30, 1996 and $103,500 on October 7, 1996) where the HRH Stock is valued at its average closing price on the New York Stock Exchange over a period of five (5) consecutive trading days, with the fifth and final trading day being the last trading day which is more than ten (10) days prior to the earlier of the Effective Date or the Closing Date, which amount is $13.275. To the extent the total number of shares of HRH Stock so calculated is not in a whole number of shares, Buyer shall round up any fraction of 0.5 or greater and shall round down any fraction less than 0.5. C. Buyer shall deliver the balance of the Purchase Price to the Seller in the form of three variable payments which will be payable, respectively, fourteen, twenty-six and thirty-eight months after the Effective Date (or as soon thereafter as the Year 1, Year 2 and Year 3 Agency Profits, as hereinafter defined, are finally determined) in the potential maximum amounts of $1,744,167, $1,744,167 and $1,744,167, respectively ("Buyer's Deferred Obligations"). Buyer's Deferred Obligations shall have interest imputed at the lowest applicable federal rate allowed Buyer pursuant to Section 1274 of the Internal Revenue Code of 1986 ("Code") with monthly compounding and any such imputed interest shall not be charged against Year 1, Year 2 or Year 3 Agency Profits. Buyer's Deferred Obligations shall contain a right of offset as specified in Sections 3 and 13 hereof. D. On the Transfer Date (and on October 7, 1996), Buyer shall pay to each of the Shareholders (other than Bartlett), not as a part of the Purchase Price (as herein defined) but as an integral part of the transactions contemplated herein, that sum called for in the Employment Agreement and Covenant Not to Compete for such Shareholder to receive for covenanting not to compete with Buyer or HRH. These payments have been separately bargained for by the parties and represent full and fair value to each of the Shareholders for his individual covenant not to compete. For purposes of satisfying certain terms and conditions contained in Sections 8.1.J and 12 of this Agreement, a pro rata portion of these payments to the Shareholders for covenanting not to compete may be drawn from to satisfy the amount of cash required to be withheld to satisfy the terms and conditions contained therein. E. In exchange for the promise to deliver the Purchase Price to Seller, Buyer shall receive the Assets from Seller free and clear of any lien or encumbrance of any kind whatsoever. 3. Abatement of the Purchase Price. A. Abatement of Purchase Price Based on Year 1 Agency Profit. (1) As used herein, the term "Year 1 Agency Profit" shall mean the net profit of Buyer earned from the Assets for the twelve month period beginning October 1, 1996, and ending September 30, 1997 ("Year 1"), determined in accordance with generally accepted accounting principles applied on a consistent basis, but subject to certain accounting policies (which shall satisfy generally accepted accounting principles) adopted from time to time by HRH and applied uniformly in determining the net profit of each subsidiary of HRH, before any provision for federal or state income taxes and before any provision for amortization of any portion of the Assets which are intangible and before any provision for any overhead charge by HRH, as the parent of the Buyer, to the Buyer. Additionally, the parties have reached special agreement with regard to the calculation of Year 1 Agency Profit as it relates to interest income and expense, profit sharing expense, bad debt expense, depreciation, professional fees, business insurance and other direct corporate costs, and a new producer's salary as set forth in this subsection. Specifically, interest income and expense shall be calculated in a manner consistent with the pro forma such that interest income and expense shall reflect the true operating results and shall not be unnecessarily credited or charged with excessive interest income or expense; profit sharing expense shall be set at 7% of eligible compensation, regardless of the actual number (higher or lower) actually determined to be contributed to HRH's Pension and Profit Sharing Plan; bad debt expense charged against earnings from the use of the Assets shall be $45,000 or the actual bad debt expense booked against the use of the Assets according to HRH accounting policy, whichever is greater; depreciation charges shall be set at $45,000 for the purpose of establishing a proper charge to fund replacements; the charges against the earnings from the use of the Assets for professional fees, business insurance and other direct corporate costs shall be $150,000, regardless of the actual costs incurred therefor by Buyer; and Year 1 Agency Profit shall not be charged with up to $30,000 of a new producer's salary provided that such new producer produces commission income from new accounts, which accounts were not acquired as part of the Assets or from existing customers of Seller or Buyer, equal to at least 50% of such salary. The Buyer shall cause the Year 1 Agency Profit to be determined, and the amount thereof communicated to the Shareholders, as soon as is reasonably practicable after Year 1, and, in all events, no later than sixty-two (62) days after Year 1. In the event of a disagreement by the Shareholders, collectively, as to the computation of the Year 1 Agency Profit, such disagreement shall be resolved in the manner described in subparagraph D., below. (2) To the extent the Year 1 Agency Profit shall be less than $1,380,000 (with such deficiency being the "Year 1 Deficiency"), then for each $1 of Year 1 Deficiency, Buyer shall be entitled to reduce the portion of the Purchase Price payable in fourteen months by aggregate amounts of $2.1667 down to a minimum aggregate amount payable, before applicable offset or indemnity, of $747,500 for $920,000 or less of Year 1 Agency Profit. For example, if the Year 1 Deficiency equals $50,000, the fourteen month payment to be received by Seller would be reduced by $108,335 to the aggregate amount payable, before applicable offset or indemnity, of $1,635,832. If the Year 1 Deficiency equals or exceeds $460,000, the fourteen month payment to be received by Seller would be reduced by the maximum amount of $996,667 to the minimum aggregate amount payable, before applicable offset or indemnity, of $747,500. B. Abatement of Purchase Price Based on Year 2 Agency Profit. (1) As used herein, the term "Year 2 Agency Profit" shall mean the net profit of the Buyer earned from the Assets for the twelve month period beginning October 1, 1997, and ending September 30, 1998 ("Year 2"), determined in accordance with generally accepted accounting principles applied on a consistent basis, but subject to certain accounting policies (which shall satisfy generally accepted accounting principles) adopted from time to time by HRH and applied uniformly in determining the net profit of each subsidiary of HRH, before any provision for federal or state income taxes, before any provision for amortization of any portion of the Assets which are intangible and before any provision for any overhead charge by HRH, as the parent of the Buyer, to the Buyer. Additionally, the parties have reached special agreement with regard to the calculation of Year 2 Agency Profit as it relates to interest income and expense, profit sharing expense, bad debt expense, depreciation, professional fees, business insurance and other direct corporate costs, and a new producer's salary as set forth in this subsection. Specifically, interest income and expense shall be calculated in a manner consistent with the pro forma such that interest income and expense shall reflect the true operating results and shall not be unnecessarily credited or charged with excessive interest income or expense; profit sharing expense shall be set at 7% of eligible compensation, regardless of the actual number (higher or lower) actually determined to be contributed to HRH's Pension and Profit Sharing Plan; bad debt expense charged against earnings from the use of the Assets shall be $45,000 or the actual bad debt expense booked against the use of the Assets according to HRH accounting policy, whichever is greater; depreciation charges shall be set at $45,000 for the purpose of establishing a proper charge to fund replacements; the charges against the earnings from the use of the Assets for professional fees, business insurance and other direct corporate costs shall be $150,000, regardless of the actual costs incurred therefor by Buyer; and Year 2 Agency Profit shall not be charged with up to $30,000 of a new producer's salary provided that such new producer produces commission income from new accounts, which accounts were not acquired as part of the Assets or from existing customers of Seller or Buyer, equal to at least 50% of such salary. The Buyer shall cause the Year 2 Agency Profit to be determined, and the amount thereof communicated to the Shareholders, as soon as is reasonably practicable after Year 2, and, in all events, no later than sixty-two (62) days after Year 2. In the event of any disagreement by the Shareholders, collectively, as to the computation of the Year 2 Agency Profit, such disagreement shall be resolved in the manner described in subparagraph D., below. (2) To the extent the Year 2 Agency Profit shall be less than $1,380,000 (with such deficiency being the "Year 2 Deficiency"), then for each $1 of Year 2 Deficiency, Buyer shall be entitled to reduce the portion of the Purchase Price payable in twenty-six months by aggregate amounts of $2.1667, down to a minimum aggregate amount payable, before applicable offset or indemnity, of $747,500 for $920,000 or less of Year 2 Agency Profit. For example, if the Year 2 Deficiency equals $50,000, the twenty-six month payment to be received by Seller would be reduced by $108,335 to the aggregate amount payable, before applicable offset or indemnity, of $1,635,832. If the Year 2 Deficiency equals or exceeds $460,000, the twenty-six month payment to be received by Seller would be reduced by the maximum amount of $996,667 to the minimum aggregate amount payable, before applicable offset or indemnity, of $747,500. C. Abatement of Purchase Price Based on Year 3 Agency Profit. (1) As used herein, the term "Year 3 Agency Profit" shall mean the net profit of the Buyer earned from the Assets for the twelve month period beginning October 1, 1998, and ending September 30, 1999 ("Year 3"), determined in accordance with generally accepted accounting principles applied on a consistent basis, but subject to certain accounting policies (which shall satisfy generally accepted accounting principles) adopted from time to time by HRH and applied uniformly in determining the net profit of each subsidiary of HRH, before any provision for federal or state income taxes, before any provision for amortization of any portion of the Assets which are intangible and before any provision for any overhead charge by HRH, as the parent of the Buyer, to the Buyer. Additionally, the parties have reached special agreement with regard to the calculation of Year 3 Agency Profit as it relates to interest income and expense, profit sharing expense, bad debt expense, depreciation, professional fees, business insurance and other direct corporate costs, and a new producer's salary as set forth in this subsection. Specifically, interest income and expense shall be calculated in a manner consistent with the pro forma such that interest income and expense shall reflect the true operating results and shall not be unnecessarily credited or charged with excessive interest income or expense; profit sharing expense shall be set at 7% of eligible compensation, regardless of the actual number (higher or lower) actually determined to be contributed to HRH's Pension and Profit Sharing Plan; bad debt expense charged against earnings from the use of the Assets shall be $45,000 or the actual bad debt expense booked against the use of the Assets according to HRH accounting policy, whichever is greater; depreciation charges shall be set at $45,000 for the purpose of establishing a proper charge to fund replacements; the charges against the earnings from the use of the Assets for professional fees, business insurance and other direct corporate costs shall be $150,000, regardless of the actual costs incurred therefor by Buyer; and Year 3 Agency Profit shall not be charged with up to $30,000 of a new producer's salary provided that such new producer produces commission income from new accounts, which accounts were not acquired as part of the Assets or from existing customers of Seller or Buyer, equal to at least 50% of such salary. The Buyer shall cause the Year 3 Agency Profit to be determined, and the amount thereof communicated to the Shareholders, as soon as is reasonably practicable after Year 3, and, in all events, no later than sixty-two (62) days after Year 3. In the event of any disagreement by the Shareholders, collectively, as to the computation of the Year 3 Agency Profit, such disagreement shall be resolved in the manner described in subparagraph D., below. (2) To the extent the Year 3 Agency Profit shall be less than $1,380,000 (with such deficiency being the "Year 3 Deficiency"), then for each $1 of Year 3 Deficiency, Buyer shall be entitled to reduce the portion of the Purchase Price payable in thirty-eight months by aggregate amounts of $2.1667, down to a minimum aggregate amount payable, before applicable offset or indemnity, of $747,500 for $920,000 or less of Year 3 Agency Profit. For example, if the Year 3 Deficiency equals $50,000, the thirty- eighth month payment to be received by Seller would be reduced by $108,335 to the aggregate amount payable, before applicable offset or indemnity, of $1,635,832. If the Year 3 Deficiency equals or exceeds $460,000, the thirty-eight month payment to be received by Seller would be reduced by the maximum amount of $996,667 to the minimum aggregate amount payable, before applicable offset or indemnity, of $747,500. D. Determination of Agency Profit. (1) As soon as practicable after Year 1, Year 2 and Year 3, and in all events, no later than sixty-two (62) days after each of Year 1, Year 2 and Year 3, respectively, Buyer or HRH shall deliver to the Shareholders the determination of the Year 1 Agency Profit , the Year 2 Agency Profit and the Year 3 Agency Profit ("Profit Statements"). In addition, the Shareholders or any firm or certified public accountants designated by the Shareholders (referred to below as the "Seller's Reviewer") shall be permitted reasonable access to the work papers, schedules, memoranda and other documents used in preparing the Profit Statements. (2) As soon as is reasonably practicable after delivery to the Shareholders of the Profit Statements, and, in all events, within thirty (30) days after such delivery, the Shareholders shall give written notice to the Buyer either to the effect that the Profit Statement is acceptable as prepared or specifying any disagreement with respect to any item in such document. In the event of any disagreement, the Shareholders, on the one hand, and the Buyer, on the other hand, shall each make a reasonable attempt to reconcile the difference; however, if they are unable to reconcile all differences within a period of fourteen (14) days after notification to the Buyer of such disagreement, then the Shareholders, on the one hand, and the Buyer, on the other hand, shall submit all questions in dispute to one of the "Big Six" firms of certified public accountants (other than Seller's Reviewer or the accounting firm normally employed by Seller, HRH or Buyer, if applicable, and from a neutral location) as may be agreed upon by the Shareholders, on the one hand, and the Buyer, on the other hand, or, in default of such agreement, as may be determined by the President at such time of the American Institute of Certified Public Accountants, which chosen accounting firm ("Umpire") shall, within a period of thirty (30) days after submission, determine and report to the Shareholders, on the one hand, and the Buyer, on the other hand, upon all questions in dispute, and the report of the Umpire shall be final, conclusive and binding on the Seller, Shareholders and the Buyer. The fees charged by the Umpire shall be equally divided between the Seller and the Buyer. The Profit Statements, as prepared by the Buyer or HRH, or, if varied by agreement between the Shareholders, on the one hand, and the Buyer, on the other hand, or by the report of the Umpire, then as so varied, shall be final, conclusive and binding on the Seller, Shareholders and the Buyer. E. No Commissions Counted Twice. Notwithstanding anything in the foregoing to the contrary, the accounting for any account for purposes of determining Year 1 Agency Profit, Year 2 Agency Profit and Year 3 Agency Profit shall be done in such a manner as to prevent any commissions which are earned in one year from being counted in two years and in such a manner as to prevent two years of commissions from any such account as being earned in any one year. 4. Allocation of Purchase Price. The Purchase Price shall be allocated at Closing in the manner prescribed under Section 1060 of the Code and the regulations promulgated thereunder. Buyer and Seller intend to allocate the Purchase Price, after imputation of interest, among the Assets as follows: Expiration Lists $5,605,385 Furniture, Fixtures and Equipment $160,000 Goodwill Balance of Purchase Price To the extent any payment based on Year 1 Agency Profit or Year 2 Agency Profit is less than the maximum payment called for herein, Buyer and Seller shall first apply such reduction to goodwill. If such reductions eliminate goodwill, then such reduction shall next be applied to the value of the expiration lists. If any payment is made pursuant to the Agreement in excess of the Purchase Price, such excess shall be allocable to goodwill. All adjustments shall be discounted to their present value at the time of such adjustment by using the imputed interest percentage which shall adjust the amount of imputed interest accordingly. Buyer and Seller mutually covenant and agree that for tax purposes each of them will report the purchase and sale consummated hereunder on the basis of the foregoing allocation. 5. Closing. The closing ("Closing") shall be held at the offices of Seller on September 30, 1996, at 1:00 p.m. ("Closing Date") and at the offices of LLC on October 7, 1996, for the purchase of that portion of Assets from LLC. 6. Representations and Warranties of Seller and Shareholders. Seller and Shareholders, jointly and severally, hereby represent and warrant to the Buyer and HRH as follows: A. Seller has good and marketable title to, and owns, the Assets to be sold, assigned and transferred hereunder, and the Assets are free and clear from any and all judgments, mortgages, pledges, liens, conditional sales agreements, security interest, options or other encumbrances or claims of every nature and kind whatsoever. B. Bartlett is a corporation and LLC is a limited liability company duly organized, validly existing and in good standing as a domestic corporation or limited liability company under the laws of the State of Illinois; Seller possesses all necessary power to enter into this Agreement and to consummate the transactions contemplated hereby; the Shareholders and Board of Directors or members of Seller have taken, or will have taken by the Closing Date, all necessary actions to authorize the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby; and neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will breach or violate any provision of Seller's articles of incorporation or organization or bylaws or of any statute, ordinance, contract, agreement or other such instrument to which Seller is a party or by which it is bound. C. No notice, report or other filing is required to be submitted to, and no consent, approval or authorization is required to be received from, any governmental authority or other person or entity in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereunder. D. Seller is not in default under any agreement which is being assigned to Buyer hereunder. E. There are no judgments, actions, suits, levies, attachments or governmental or administrative agency proceedings pending or threatened against or affecting the Assets or the transactions contemplated by this Agreement, nor are there any such actions pending or threatened between Seller and any of its clients or insurance companies for which it acts as agent. F. Seller is, and has been, in full compliance with all licensing and other regulatory laws for the conduct of its present operations (including, without limitation, its property and casualty, personal lines and life businesses) and all of Seller's employees or agents who write any type of insurance for Seller (including the Shareholders) are and have been, in full compliance with all licensing and other regulatory laws such that Seller and Shareholders have no liabilities of any nature related to any failure, whether intentional or inadvertent, to comply with any such laws and which may attach to, or affect the use of, the Assets by the Buyer or HRH. Attached hereto as Schedule 6.F is a complete list of all insurance licenses held by Seller and all states in which it is qualified to transact business. G. Seller maintains errors and omissions coverage for all of its operations in amounts which it deems to provide adequate coverage; all such policies are described on Schedule 6.G (carrier, retrodate, claims made or occurrence policy, deductible and limits); and there are no claims against Seller, its agents, employees or directors or any of the Shareholders. H. Except as disclosed on Schedule 6.H, Seller has no employment agreement with any employee which is not terminable at will and no employee pension, profit-sharing, or other retirement plan. I. The list of Seller's liabilities as of the Pre-Effective Moment, including liabilities for credit receivables and liabilities to insurance companies for all lines of insurance business outstanding as of the Pre-Effective Moment (which liabilities shall be separately stated and referred to as "Credit Receivables" and as "Insurance Company Payables"), to be attached hereto at Closing (or as soon thereafter as is practicable) as Schedule 6.I, will be complete and correct; and Seller and the Shareholders are and will be responsible for all liabilities of Seller of any type whatsoever accrued as of the Effective Date and agree to indemnify Buyer and HRH to the extent either pays any such liabilities, including without limitation any costs incurred in paying such liabilities. J. Seller and Shareholders understand and acknowledge that the HRH Stock to be received pursuant to this Agreement is registered and is subject to Rule 145 of the Securities Exchange Commission; the HRH Stock is being acquired for investment purposes only and not with a view to distribution or resale; any sale or other disposition of the HRH Stock shall be made pursuant to the regulations promulgated under Rule 145 or other applicable federal or state securities laws and in compliance with such laws and regulations. K. Except as disclosed on Schedule 6.K, there are no maintenance or other continuing agreements affecting or concerning the use of the Assets. L. Seller has timely filed all tax returns required of it and timely paid all tax liabilities owed by it, such that no tax liabilities to Buyer or HRH of any kind whatsoever could be attached to or associated with the Assets. M. Seller and Shareholders have caused (or will cause) to be delivered to Buyer true and complete copies of Seller's federal and state income tax returns and financial statements for the most recent three years (compiled or audited, as the case may be). Seller and Shareholders shall cause any newly-prepared financial information (including interim management reports) to be delivered promptly to the Buyer. Each of the foregoing financial statements is or will be true and correct, is or will be in accordance with the books and records of Seller, presents fairly, or will present fairly, the financial condition and results of operations of Seller as of and for the periods indicated, and has been prepared, or will be prepared, in accordance with generally accepted accounting principles consistently applied throughout the periods covered by such statements. All such financial statements did not contain and will not contain any untrue statement of any material fact nor omitted to state, or will omit to state, any material fact required to be stated to make such financial statements not misleading. N. Except as disclosed on Schedule 6.N, there are no financing statements or other security interests of any kind filed or required to be filed against the Assets or affecting the use of, or title to, the Assets ("Financing Statements"). Except as further disclosed on Schedule 6.N, there are no deferred money purchase notes related to the Seller's acquisition of any portion of the Assets ("Notes"). Any such liabilities related to the Financing Statements or Notes can and will be paid off at or prior to Closing, except as further detailed on Schedule 6.N. O. Except as disclosed on Schedule 6.0, Seller and Shareholders have not employed any broker or finder for the purposes of completing the transactions contemplated herein or for any transaction similar to the transactions contemplated herein such that no commission, finder's fee, brokerage fee or similar charge will be incurred for the consummation of the transactions contemplated herein. P. Except for the transactions contemplated herein, neither Seller nor Shareholders have entered into any agreement for the sale of the Assets (or any portion thereof) or for the direct or indirect sale or exchange of Seller. Q. Seller and Shareholders have received a copy of HRH=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. R. Shareholders and Seller understand and acknowledge that errors and omissions prior to the Effective Date remain their risk exclusively and are not insured under Buyer's or HRH's insurance program, and have been advised to, and will, take out insurance, effective as of the Effective Date to insure each Shareholder and the Seller for claims arising under errors and omissions occurring prior to the Effective Date; and when such insurance is purchased, Shareholders and Seller will furnish all such certificates of insurance to Buyer and HRH as soon as is practicable. S. Except as identified in Schedule 6.S, all relations between Seller and the present customers of Seller are good, and Shareholders have no knowledge of any proposed termination of any insurance account presently written or serviced by Seller. Also, except as otherwise set forth in Schedule 6.S, all customer accounts, including, without limitation, those accounts with respect to which Seller financed any premiums are current. For purposes of this Section, the terms "insurance account" and "customer account" shall be limited to accounts which generate aggregate annual income (commissions and fees) of $25,000 or more. T. The census data for all of Seller's employees as of the date hereof, in the form provided in Schedule 6.T, is true and complete in all material respects. U. The foregoing representations and warranties shall survive the Closing. 7. Representations and Warranties of Buyer and HRH. Buyer and HRH hereby represent and warrant to the Seller and the Shareholders as follows: A. Buyer is duly organized, validly existing and in good standing as a domestic corporation under the laws of the State of Illinois; HRH is duly organized, validly existing and in good standing as a domestic corporation under the laws of the Commonwealth of Virginia; each has the corporate power to enter into the transactions hereby contemplated. B. This Agreement and the transactions contemplated hereby will not breach or violate any provision of Buyer's or HRH's articles of incorporation or bylaws. C. Neither Buyer nor HRH has employed a broker or finder for the purposes of completing the transactions contemplated hereby. D. The shares of HRH common stock to be issued pursuant to this Agreement will, when so issued, be (i) duly and validly authorized and issued, fully paid and nonassessable, (ii) duly registered under the Securities Act of 1933, as amended, and (iii) listed on the New York Stock Exchange, subject only to the restrictions described in the Prospectus. E. The foregoing representations and warranties shall survive the Closing. 8. Conditions Precedent. 8.1 Conditions Precedent to Performance by Buyer and HRH. The obligation of Buyer and HRH to perform under this Agreement is contingent upon the following conditions being fulfilled at or prior to Closing (or the Effective Date, where stated to be applicable): A. At or prior to the Closing, each of the Shareholders (other than Bartlett) shall have entered into an Employment Agreement and Covenant Not to Compete with Buyer, in form and substance as set forth in Schedule 8.1.A attached hereto. B. At or prior to the Closing, Robert Avon, James Reier, Jon Pohlmann, Chris Slattery and Brent McCormick shall have entered into an Employment Agreement with Buyer, in form and substance as set forth in Schedule 8.1.B attached hereto. C. At or prior to the Closing, Buyer and HRH shall have received Boseman, Neighbour, Patton & Noe, counsel to Seller, an opinion, in form and substance as set forth in Schedule 8.1.C attached hereto, dated as of the Closing Date, that the representations and warranties contained in Sections 6.A, 6.B, 6.C, 6.D, 6.E, and 6.F made by Seller and Shareholders to Buyer and HRH are true, correct and complete and that the transfer of the Assets has been completed without any liability to Buyer or HRH for sales or use taxes or for failure to comply with the Bulk Sales Act. This opinion will not be required for the portion of the Assets purchased from LLC on October 7, 1996. D. The Shareholders and Seller shall have complied in all material respects with all representations, warranties, conditions, covenants and agreements required under this Agreement to be performed or complied with by Seller or the Shareholders on or before the Closing Date. E. No suit, action or proceeding, or governmental investigation, against or concerning, directly or indirectly, Seller, or any of Seller's assets and properties, shall have been instituted or reinstituted, nor shall any basis therefor have arisen, that might result in any order or judgment of any court or of any administrative agency which, in the opinion of the counsel for the Buyer, renders it impossible or inadvisable for the Buyer to consummate or cause to be consummated the transactions contemplated by this Agreement. F. All transactions contemplated hereby, and the form and substance of all legal proceedings and of all instruments used or delivered hereunder, shall be reasonably satisfactory to counsel for the Buyer. G. To the extent desired by the Buyer, the Buyer shall have obtained a statement in writing from each of the insurance companies identified (or to be identified) in Schedule 6.I of this Agreement, in form satisfactory to the Buyer and Buyer'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 recognize Buyer, its successors and assigns, as its agent under the existing agency contract between such company and Seller or that it will enter into a substantially similar agency contract with Buyer, its successors and assigns. H. There shall have been no material adverse change in Seller's business, business prospects, assets and properties, or goodwill between the date of the execution of this Agreement and the Closing Date. For purposes hereof, "material adverse change" means, without limitation, the loss of any one account generating an aggregate annual commission income of $25,000 or more. I. The Buyer shall receive certified copies of resolutions of the Board of Directors and Shareholders of Bartlett, to the extent deemed necessary by, and in form satisfactory to, counsel for the Buyer, authorizing the execution and delivery of this Agreement by Bartlett and the consummation of the transactions contemplated hereby. J. At or prior to the Closing, unless waived in writing by HRH, all of the liabilities listed or required to be listed in Schedule 6.I as Insurance Company Payables and all of the liabilities listed or required to be listed in Schedule 6.N shall have been satisfied in the manner prescribed in Section 12, infra. K. At or prior to the Closing, each of the Shareholders (other than Bartlett), and, if applicable, all those persons designated in Section 8.1.B, above, shall have obtained all licenses and other regulatory approvals necessary to operate lawfully the property and casualty, personal lines and life insurance businesses (in a manner similar to the present conduct of such businesses by Seller) to be conducted by Buyer and each of its agents, solicitors and employees. L. At or prior to the Closing, the parties shall have reached an acceptable understanding with respect to Bartlett's and LLC's existing leases of their office premises and Buyer's extent of assumption thereof. M. Subject to fulfillment of certain conditions precedent by HRH and Buyer, the board of directors of Seller will recommend to the Shareholders that Shareholders adopt this Agreement. Seller agrees to submit this Agreement to the Shareholders for adoption by unanimous written consent with written waiver of notice of the terms of this Agreement prior to the Effective Date, but only after delivery by HRH to the Shareholders and the Seller of an amended or supplemented S-4 registration statement for HRH's common stock to be issued pursuant to this Agreement and after the Shareholders have had an effective opportunity to review such prospectus. N. The Management Incentive Agreement attached hereto as Schedule 8.1.N shall have been executed by all applicable parties. [Exhibit 1 to the modified Purchase Agreement] 8.2 Conditions Precedent to Performance by Seller and Shareholders. The obligation of the Shareholders and the Seller 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 the Shareholders and the Seller: The registration statement on Form S-4 under the Securities Act of 1933 referred to in Section 8.1.M 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 the Shareholders and the Seller for their review and subsequent approval of this Agreement and the transactions contemplated thereby. 9. Covenants of Seller and Shareholders. Seller and Shareholders covenant and agree that, except as otherwise consented to in writing by Buyer and HRH: A. Regular Course of Business. Prior to the Transfer Date, Seller will carry on its business diligently and in the ordinary course consistent with past management practices, except as otherwise contemplated by this Agreement. B. Restricted Activities and Transactions of Seller. Prior to the Transfer Date, except as contemplated by this Agreement, Seller will not engage in any one or more of the following activities or transactions: (1) except for indebtedness in the ordinary course of business, issue, sell, deliver or agree to issue, sell or deliver any stock, bonds or other corporate securities of which Seller is the issuer (whether authorized and unissued or held in treasury), or grant or issue or agree to grant or issue any options, warrants or other rights calling for the issue thereof; (2) borrow or agree to borrow any funds or voluntarily incur, or assume or become subject to, whether directly or by way of guarantee or otherwise, any obligation or liability (absolute or contingent) except obligations and liabilities incurred in the ordinary course of business; (3) except in the ordinary course of business, mortgage, pledge or encumber any part of its assets, tangible or intangible; (4) sell or transfer, or agree to sell or transfer, any substantial part of its assets, property or rights; or cancel, or agree to cancel, any substantial debts or claims; (5) except in the ordinary course of business, enter, or agree to enter, into any agreement or arrangement granting any preferential rights to purchase any of the assets, property, or rights of Seller or requiring the consent of any party to the transfer and assignment of any such assets, property or rights; (6) except in the ordinary course of business, make or permit any amendment or termination of any material contract, agreement or license to which it is a party; (7) make any material change in any profit-sharing, bonus, deferred compensation, insurance, pension, retirement or other employee benefit plan, payment or arrangement, except as required by law; (8) except for minor acquisitions or dispositions effected in the ordinary course of business, merge or consolidate with any other corporation, acquire control of any other corporation or business entity, or take any steps incident to or in furtherance of any of such actions whether by entering into an agreement providing therefor or otherwise; (9) make any material alteration in the manner of keeping its books, accounts or records or in the accounting practices therein reflected; or (10) except for transactions not referred in clauses (1) - (9), above, and except in the ordinary course of business, enter into any other material contract, agreement, course of action or transaction. C. Confidentiality. Seller will, and will use its reasonable efforts to cause its authorized representatives (including, without limitation, the Shareholders) to, hold in strict confidence and not disclose to any other party without the prior written consent of Buyer and HRH, all information received by them from Buyer or HRH in connection with the transactions contemplated hereby, and the terms of this Agreement, except such information may be disclosed (i) where necessary to any regulatory authorities or governmental agencies, (ii) if required by court order or decree or applicable law, (iii) if it is publicly available or (iv) if it is otherwise contemplated herein. D. Consents. Seller will use its best efforts to obtain or take at the earliest practicable date and in any event before Closing, all consents, estoppel certificates and filings necessary to the consummation of the transactions contemplated hereby which are necessary to be obtained by Seller or which are reasonably requested by Buyer or HRH. E. No Change in Ownership. Between the date hereof and the Transfer Date, Seller and Shareholders shall use their best efforts to ensure that there shall be no change in ownership of Seller and no change in the interests of Seller held by each Shareholder. F. Reasonable Efforts. Between the date hereof and the Transfer Date, Seller and Shareholders shall use their reasonable efforts (i) to fulfill the conditions set forth in Section 8.1 hereof and (ii) to cause the representations and warranties under Section 6 hereof to be and to remain true and correct. G. Winding Up. Seller's conduct of business shall be wound up and concluded as soon as practicable with the result being that all such business shall have been transferred to Buyer. All costs of winding down, including, without limitation, the termination or freezing of Seller=s benefit plans (which shall be handled as set forth in Schedule 9.G.), shall be borne by Seller; however, to the extent HRH aids Seller in any such benefit plan work, no costs shall be imposed on Seller by HRH for its work. H. Nonsolicitation Covenant. Each of the Shareholders, by signature hereto, covenants that he shall not for a period of five (5) years after the Effective Date, directly or indirectly, except on behalf of Buyer, its successors or assigns, solicit or accept risk management, insurance or bond business from any of the customers of Seller as of the moment immediately preceding the Effective Date. Each of the Shareholders, by signature hereto, acknowledges: (i) that this covenant is ancillary to this Agreement, is integral hereto and is independent of any other provision herein, (ii) that this covenant is reasonably necessary for the protection of Buyer's legitimate business interests; (iii) that this covenant poses no undue hardship on the Shareholders and is reasonably limited as to duration and scope; and (iv) that this covenant is in addition to any covenants which Shareholders may make in any employment or other agreements executed or to be executed with Buyer. Further, if any part of this covenant is deemed overbroad or void as against public policy, each of the Shareholders, by signature hereto, acknowledges that such invalid portions shall be severable from this covenant and specifically requests that, upon such event, this covenant be reformed ("blue- pencilled") to permit Buyer to obtain the maximum permissible benefit from this covenant. 10. Covenants of Buyer and HRH. Buyer and HRH covenant and agree that, except as otherwise consented to in writing by Seller and Shareholders: A. Confidentiality. Buyer and HRH each will, and each will use its reasonable efforts to cause its authorized representatives to, hold in strict confidence and not disclose to any other party without the prior written consent of Seller and Shareholders, all information received by them from Seller and Shareholders in connection with the transactions contemplated hereby, and the terms of this Agreement, except such information may be disclosed (i) where necessary to any regulatory authorities or governmental agencies, (ii) if required by court order or decree or applicable law, (iii) if it is publicly available or (iv) if it is otherwise contemplated herein. B. Reasonable Efforts. Between the date hereof and the Transfer Date, Buyer and HRH shall use their reasonable efforts (i) to fulfill the conditions set forth in Section 8.2 hereof and (ii) to cause the representations and warranties under Section 7 hereof to remain true and correct. 11. Accounts and Other Receivables. Seller and Buyer agree that all accounts receivable of Seller as of the Pre-Effective Moment (including commissions earned but not paid on business billed by Seller which was written and having an effective date prior to the Effective Date, but excluding direct bill commissions not received by Seller prior to the Effective Date) to be attached hereto at Closing (or as soon thereafter as is practicable) as Schedule 11 belong to Seller and shall be paid to Seller in the manner described below. Buyer shall collect for a period of six months after the Effective Date all receivables paid to it which belong to Seller as determined by specific invoice. If there is no invoice enclosed or to which such payment is attributable and neither Seller nor Buyer is aware of a dispute as to the oldest balance of such account, then each payment shall be applied to the oldest balance of that account first. Not later than twenty (20) days after the end of any month, Buyer shall remit to Seller all receivables so collected for the Seller, or if the escrow account to be established pursuant to Section 12 is underfunded, then, and to such extent to such escrow account. This arrangement shall continue until (i) all such existing receivables as of the Pre-Effective Moment have either been paid to Seller or been determined by Seller to be bad debts or (ii) six months after the Effective Date, whichever occurs first. If all such receivables of Seller's have not been collected or determined by Seller to be bad debts by April 1, 1997, any remaining accounts shall be the sole responsibility of Seller to collect. Seller agrees that it will not litigate any accounts receivable claim without the prior written consent of Buyer and HRH. 12. Accounts Payable and Other Liabilities of Seller. Seller and Buyer mutually acknowledge and agree that Buyer is not assuming any of Seller's accounts payable or other liabilities of any kind whatsoever, whether arising prior to, on or after the Effective Date. A list with Seller's Insurance Company Payables is to be attached hereto as Schedule 6.I. Seller and Shareholders covenant and agree to pay all liabilities and payables owed by Seller which are related to its insurance business as they become due, other than any such liabilities or payables with respect to which there exists a reasonable basis to dispute the legal obligation to pay such liability or account payable. To ensure full payment of Seller's liabilities, Buyer and Seller agree that an amount equal to the sum of 120% of the amount listed or required to be listed on Schedule 6.I as Insurance Company Payables, plus 100% of the amount listed or required to be listed on Schedule 6.I as Credit Receivables plus 100% of the amount listed or required to be listed on Schedule 6.N as Notes or Financing Statements shall be drawn from the cash at Closing (including cash to be paid to each of the Shareholders for his covenant not to compete, if necessary) or shall be collected from the receivables of Seller in due course after Closing and held in co-escrow in an interest-bearing account in favor of Seller at a financial institution of Seller's choosing (which institution shall be reasonably available to HRH and Buyer, and, for the choice of which, neither HRH nor Buyer shall be liable in any way to Seller or Shareholders) and drawn upon by an officer of Buyer and the President of Seller ("Escrow Agents") to extinguish Seller's Insurance Company Payables, Credit Receivables and any other liabilities, whether listed or not and to pay off the Notes and the Financing Statements. Receivables of Seller collected by Buyer after the Effective Date may be deposited into the Escrow Account to the extent the Escrow Account is underfunded for as long as is necessary to extinguish the debts of Seller contemplated herein. When all such liabilities required to be listed as Insurance Company Payables, Credit Receivables, Notes or Financing Statements, or at Buyer's discretion, when all such liabilities listed as Insurance Company Payables, Credit Receivables, Notes or Financing Statements other than those for which there is a reasonable basis to dispute Seller's legal obligation to pay, have been paid or been adjusted and satisfied, the Escrow Agents shall release the balance of the cash (including interest accrued) to Seller (and Shareholders, if applicable). Evidence of such payment shall be in the form of a cancelled check or written receipt from the creditor or a statement that all amounts owed or accrued up to the Effective Date have been paid. The release of the balance of the cash to Seller (and Shareholders, if applicable) shall not relieve Seller of its obligation to pay any of its liabilities, including any contested liabilities should Seller be found liable. 13. Indemnification Provisions. A. Indemnification of Buyer and HRH. Seller and Shareholders covenant and agree that each shall jointly and severally indemnify and hold Buyer and HRH harmless from any and all damages or expenses (including legal costs and attorneys' fees) which Buyer or HRH may suffer due to any breach by Seller or Shareholders of any representations, warranties, conditions or covenants hereunder. In addition, Seller and Shareholders shall indemnify and hold Buyer and HRH harmless from any damages or expenses (including legal costs and attorneys' fees) which either may suffer or incur as a result of any claim which relates back on or prior to the Effective Date and which may be asserted against Buyer or HRH or any legal proceeding in which either may be made a party as a result of the purchase of the Assets, as a result of the conduct or operation of its business using the Seller's Assets prior to the Closing or as a result of Closing prior to the Effective Date of the transfer of the Assets. The foregoing indemnities shall be joint and several as to Seller and Messrs. Miles and Bracke and shall be pro rata as to Messrs. Barrett and Boyle. Buyer's Deferred Obligations contain a right of offset to secure this indemnity provided herein. B. Collection of Indemnity. In seeking to collect this indemnity, Buyer and HRH shall first make written demand on Seller (or shall offset from sums due to Seller) and if such demand shall not be satisfied within thirty (30) days of receipt, Buyer and HRH may then make such demand on Shareholders. Nothing herein shall be deemed to require Buyer and HRH to exhaust all potential collection remedies against Seller before making demand of any Shareholder. C. Limitations on Indemnity. The time period for assertion of this indemnity shall expire with the payment to Seller based on Year 3 Agency Profit (approximately thirty-eight (38) months after the Effective Date). Any claim for indemnification shall not survive such payment unless made in writing at or prior to the time of such Year 3 payment of the Purchase Price. The aggregate amount of potential liability for this indemnity is limited to the Purchase Price. 14. Miscellaneous. A. Binding Nature, Assignments. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, guardians, personal representatives, successors and assigns. No amendment, modification, termination or waiver of any provision of this Agreement shall be effective unless the same shall be in writing and signed by all parties hereto. B. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. C. Headings and Exhibits. The headings of the various Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. All Schedules and other documents referred to in this Agreement are an integral part of this Agreement. D. Notices. Any notices or other communications required or permitted hereunder shall be in writing and delivered at the addressesdesignated below, or mailed by overnight mail, registered or certified mail, return receipt requested, postage prepaid, addressed as follows, or to such other address or addresses as may hereafter be furnished by one party to the other in compliance with the terms hereof: If to Buyer or HRH, to: Mr. Robert H. Hilb, President Hilb, Rogal and Hamilton Company 4235 Innslake Drive P.O. Box 1220 Glen Allen, Virginia 23060-1220 With a copy to: Walter L. Smith, Esquire Hilb, Rogal and Hamilton Company 4235 Innslake Drive P.O. Box 1220 Glen Allen, Virginia 23060-1220 If to Seller or Shareholders, to: Mr. Richard J. Miles, President Bartlett Agency, Inc. P. O. Box 970 Moline, Illinois 61266-0970 With a copies to: Mr. Douglas A. Yoh Marsh, Berry and Company, Inc. 7466 Auburn Road Concord, Ohio 44077 Gary L. Sissel, Esquire Boseman, Neighbour, Patton & Noe Fifth Avenue Building 1630 Fifth Avenue P. O. Box 659 Moline, Illinois 61266-0659 All such notices and other communications shall be effective when delivered at the designated addresses or deposited in the mails in conformity with the provisions hereof. E. Public Releases. Buyer and Seller agree that HRH may publicly release the announcement attached as Schedule 14.E concerning the purchase of the Assets. F. Casualty Loss. The Seller shall bear the risk of loss, destruction, or damage to the Assets caused by fire or other casualty through Closing Date. Thereafter such risk shall shift to the Buyer. G. Payment of Fees. Buyer, Seller, HRH and Shareholders shall each pay their own attorneys' fees and other expenses relating to this transaction. H. Further Instruments and Actions. The parties shall execute and deliver such other documents and instruments as may be reasonably necessary (including, without limitation, obtaining the signatures of spouses) and shall take such further action as may be necessary or appropriate, to carry out the terms and purposes of this Agreement. I. Right to Modify or Amend. The parties may at any time by mutual agreement modify or amend this Agreement in any manner as agreed upon by them in writing. J. Termination. At any time prior to the Closing, the parties may by mutual written agreement terminate this Agreement. In the event this Agreement is so terminated, the parties shall have no liability to each other hereunder. K. Complete Agreement. This Agreement and the Schedules hereto constitute the entire Agreement between the parties hereto with respect to the transactions contemplated herein. No representation, promise or inducement not included or required to be included herein shall be binding upon any party hereto. L. Execution and Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall represent one agreement. M. Severability. Any provision of this Agreement which is invalid, illegal or unenforceable shall be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions hereof. N. Understanding of Agreement. Seller, Shareholders, HRH and Buyer acknowledge that each has read and understood the provisions of this Agreement, and that this Agreement entered into voluntarily and after having had all opportunities to seek such advice as each may have wished to receive. O. Later Acquisitions. Seller and Shareholders acknowledge that a later acquisition by Buyer of another insurance agency could affect the determination of Year 1, Year 2 and Year 3 Agency Profit and agree to cooperate with Buyer and HRH in making any adjustments as necessary to this Agreement to carry out its intent. Prior to October 1, 1999, HRH may not cause Buyer to make any acquisitions affecting Year 1, Year 2 or Year 3 Agency Profits unless either Mr. Miles or Mr. Bracke has consented thereto. P. Case and Gender. Wherever required by the context of this Agreement, the singular and plural cases and the masculine, feminine and neuter genders shall be interchangeable. Q. HRH Policy on Post-Acquisition Cash Held by Buyer. Seller and Shareholders acknowledge that they have been informed of the policy of HRH not to allow cash and cash equivalents in excess of what HRH believes to be the appropriate amount of working capital for any of its operating offices to remain in an interest-earning account for the benefit of that office. As such, Seller and Shareholders acknowledge that HRH, subject to any applicable state law restrictions, will cause any such excessive amounts of cash and equivalents to be dividended to HRH, that such dividends would reduce interest earnings attributable to Buyer after the Effective Date, and that HRH has the right to declare such dividends. R. Nonwaiver. The waiver by HRH or Buyer of any provision of this Agreement shall not operate or be construed as a waiver of any other provisions of this Agreement. WITNESS the following signatures and seals: BUYER: HILB, ROGAL AND HAMILTON COMPANY OF THE QUAD CITIES By ______________________________________ Its ______________________________________ SELLER: BARTLETT AGENCY, INC. By ______________________________________ Its ______________________________________ HRH: HILB, ROGAL AND HAMILTON COMPANY By ______________________________________ Its ______________________________________ SHAREHOLDERS: _________________________________________ Richard J. Miles _________________________________________ Thomas K. Bracke _________________________________________ John J. Barrett _________________________________________ Bradley T. Boyle Guaranty: The obligation of Buyer to make any payments to Seller is hereby guaranteed by HRH to the same extent as the Buyer is obligated to make any such payments. In seeking to enforce any such guaranty, Seller need not exhaust all collection efforts or remedies against Buyer first. HILB, ROGAL AND HAMILTON COMPANY By ______________________________________ Its ______________________________________ -----END PRIVACY-ENHANCED MESSAGE-----