AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, (this "Agreement") is made as of
August 1, 2001, among OAK HILL FINANCIAL, INC., an Ohio corporation ("OHF"),
with its principal place of business located at 14621 S. R. 93, Jackson, Ohio
45640, and its wholly owned subsidiary, NEWCO, an Ohio corporation ("Newco");
and INNOVATIVE FINANCIAL SERVICES AGENCY, INC. d.b.a. McNelly, Patrick &
Associates, an Ohio corporation ("MPA"), with its principal place of business
located at 78 Broadway Street, Jackson, Ohio 45640, and RICHARD K. PATRICK and
RICK A. McNELLY (herein individually called a "Stockholder" and collectively
called the "Stockholders"). (The Stockholders and MPA are sometimes collectively
referred to as "Sellers.")
W I T N E S S E T H
WHEREAS, Sellers are engaged in the business of selling life, health,
and accident insurance underwritten by several insurance companies and advising
clients with respect to such insurance (collectively referred to as the
"Business");
WHEREAS, OHF desires to acquire the Business of MPA and, except as
specifically otherwise provided herein, all tangible and intangible assets and
properties owned or used by Sellers in connection with the Business pursuant to
a merger of Newco with and into MPA; and
WHEREAS, the holders of common stock of MPA shall receive common stock
of OHF as consideration in the transaction.
WHEREAS, the parties hereto desire to effectuate this transaction so as
to qualify as a non-taxable reorganization under Section 368(a) of the Code.
NOW, THEREFORE, in consideration of the respective covenants,
representations and warranties herein contained, the parties hereby agree as
follows:
1. DEFINITIONS
(a) "Acquisition Proposal" shall mean an inquiry received from, or any
offer or proposal made by or on behalf of, any other corporation, firm,
association, person or other entity relating to any possible transaction
involving Sellers, any possible sale of any assets of MPA other than in the
ordinary course of business, any possible sale of an equity interest in MPA, or
any possible other business combination involving any of the Sellers or any of
the assets of MPA.
(b) "Book of Business" shall mean all business revenue generated by an
individual Stockholder on behalf of MPA, any subsidiary of MPA or any successor
to the Business of MPA by policy renewals on an annual basis.
(c) "Cause" shall mean fraud, embezzlement, willful misconduct, or
gross negligence in the performance of a party's duties as an employee or a
violation of the terms and conditions for employment contained from time to time
in OHF reference materials on employment, including but not limited to the Oak
Hill Financial, Inc., Employee Handbook.
(d) "Closing" shall mean the acts and events that occur on the Closing
Date for the purposes of consummating this Agreement.
(e) "Closing Date" shall mean 12 A.M. then local time in Jackson, Ohio,
on August 31, 2001, assuming all conditions precedent described in Sections 11
and 12 hereof have been fulfilled as of that date, but if all of such conditions
precedent have not been fulfilled as of August 31, 2001, then at such time on
another date one business day after the party fulfilling such condition shall
notify the other parties that the last of the conditions precedent has been
satisfied or waived, or such other date as the parties may agree, provided that
the Closing Date shall in no event be later than December 31, 2001.
(f) Code" shall mean the Internal Revenue Code of 1986, as amended.
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(g) "Company" shall mean the Surviving Corporation or any other entity
that shall serve as a successor to the Business of MPA or any permitted assignee
or successor thereof following the Closing.
(h) "Confidential Information" shall mean any information acquired by
Stockholder during or as a result of past, present, or future employment by the
Company (including information conceived, discovered or developed by such
Stockholder), which is not readily available to the general public, and which
relates to the business or contemplated business of the Company, including
"know-how", innovations, inventions, discoveries, research projects, methods,
processes, customer lists, customer and insurance company contacts, customer and
insurance and marketing representative requirements and preferences, the
Company's contracts with customers and insurance companies and marketing
representatives, costs or prices or other financial information, credit terms,
methods of conducting business, systems, computer software, personnel data,
marketing or other business plans, and improvements thereto.
(i) "Effective Date" shall mean the time specified in the certificate
of merger filed by MPA and Newco (the "Certificate of Merger"), provided such
other appropriate documents as may be required to be filed, executed in
accordance with the relevant provisions of the Ohio General Corporation Law (the
"OGCL"), as well as such other filings, recordings or publications required by
the OGCL to be filed in connection with the Merger, have been filed.
(j) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
(k) "Incentive Plans" shall have the definition ascribed thereto in
Section 5(c).
(l) "Insurance Contracts" shall mean the items listed in Section
6(b)(32) or on Schedule 6(b)(32) hereto and any and all other contracts,
agreements, licenses, commitments, understandings, appointments, designations,
and any and all other relationships between Sellers, or any of them, and any
insurance companies and or with general agents of insurance companies, which
relate in any way to the Business, except for governmental licenses that are
personal and non-assignable.
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(m) "Interim Statement" shall mean the unaudited balance sheet of MPA
as of August 31, 2001 and the related unaudited statement of operations and
stockholders equity of MPA for the month then ended, prepared by MPA in
accordance with accounting principles generally accepted in the United States
consistently applied, which balance sheet and statements are annexed hereto in
the Disclosure Schedule and made a part hereof.
(n) "Knowledge" shall mean those facts that are known by Stockholders,
or any one of them individually, or by OHF, as applicable, after a reasonable,
good faith investigation.
(o) "Liabilities" shall have the definition ascribed thereto in
Section 2(b)(1).
(p) "MPA Stock" shall mean the common stock of MPA, no par value.
(q) "MPA Plans" shall mean any employee benefit plan including but not
limited to retirement plans, including but not limited to other qualified or
non-qualified deferred compensation or other similar plans maintained by MPA for
its employees or shareholder.
(r) "OHF Statements" shall have the definition ascribed thereto in
Section 6(a)(3)(ii).
(s) "OHF Stock" shall mean unregistered common stock of OHF, $0.50
stated value.
(t) "Surviving Corporation" shall have the definition ascribed thereto
in Section 3(a).
(u) "Taxes" shall mean all federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar) unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other taxes of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
(v) "Tax Return" shall mean any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
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(w) "Year End Statements" shall mean the unaudited balance sheet of MPA
as of June 30, 2001 prepared in accordance with accounting principles in the
United States consistently applied, and the related unaudited statement of
operations and retained earnings of MPA for the fiscal year then ended prepared
by MPA, and prepared in accordance with accounting principles generally accepted
in the United States consistently applied, which balance sheet and statements
are annexed hereto in the Disclosure Schedule and made a part hereof.
2. CONTRIBUTED BUSINESS AND ASSUMPTION OF LIABILITIES
(a) Contributed Business. All of the Stockholders shall, as of the date
ninety (90) days after the Effective Date, assign and transfer all right, title
and interest in all contract rights, Insurance Contracts, income interests,
tangible and intangible assets of every nature and kind attributable to the
Business to MPA, including but not limited to contracts or other understandings
with Insurance Services Agency of Ohio, Inc.
(b) Ongoing Responsibility for Liabilities of Seller.
(1) Subject to the terms and conditions of this Agreement and upon
completion of the Merger, the parties intend that MPA as the Surviving
Corporation shall be responsible for only (i) those debts, obligations and
liabilities of Sellers which are included in the liabilities set forth in the
liabilities section of the Year End Statements and the Interim Statement
compiled by MPA's auditors and only in the amounts set forth in such liabilities
section, as they may be increased or diminished in the ordinary course of
business by the Closing Date; provided, however, that such liabilities have not
materially increased prior to the Closing Date, and (ii) the obligations and
liabilities of Seller under those leases and other contracts and agreements
listed and described in the Disclosure Schedule (all such debts, obligations and
liabilities referred to in the preceding clauses (i) and (ii) are hereinafter
referred to as the "Liabilities").
(2) Without in any manner affecting the limitations on the on-going
obligations of MPA contained in Subsection 1 above, it is agreed that the
parties intend that, as between the parties to this
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Agreement, the Stockholders expressly agree to be liable to OHF for, all other
liabilities, obligations, contracts and commitments of MPA related to business
conducted prior to the Closing other than those described in subsection (b)(1)
above.
3. THE MERGER
(a) The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the OGCL, Newco shall be merged with
and into MPA at the Effective Date (the "Merger"). Following the Merger, the
separate corporate existence of Newco shall cease and MPA shall continue as the
surviving corporation (the "Surviving Corporation") and as a wholly-owned
subsidiary of OHF, and shall succeed to and assume all the rights, properties,
liabilities and obligations of Newco in accordance with the OGCL.
(b) Closing of the Merger. The Closing of the Merger will take place on
the Closing Date at the offices of Oak Hill Financial, Inc., 14621 State Route
93, Jackson, Ohio 45640, or at such other time, date or place as agreed to in
writing by the parties hereto.
(c) Effects of the Merger. The Merger shall have the effects set forth
in the OGCL. Without limiting the generality of the foregoing, at the Effective
Date all the properties, rights, privileges, powers and franchises of MPA and of
Newco shall vest in the Surviving Corporation, and all debts, liabilities and
duties of MPA and of Newco shall continue as the debts, liabilities and duties
of the Surviving Corporation. As between the parties to this Agreement, however,
nothing in this subsection shall change the intention and understanding set
forth in Section 2 (b)(2) above.
(d) Articles of Incorporation and Code of Regulations. The articles of
incorporation and code of regulations of Newco in effect at the Effective Date
shall be the articles of incorporation and code of regulations of the Surviving
Corporation until amended in accordance with applicable law.
(e) Directors. The directors of Newco at the Effective Date shall be
the initial directors of the Surviving Corporation, to hold office in accordance
with the articles of incorporation and code of
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regulations of the Surviving Corporation until their successors are duly elected
or appointed and qualified in accordance with applicable law or until earlier
death, resignation or removal.
(f) Officers. The officers of MPA at the Effective Date shall be the
initial officers of the Surviving Corporation, to hold office in accordance with
the articles of incorporation and code of regulations of the Surviving
Corporation until their successors are duly elected or appointed and qualified
in accordance with applicable law or until their earlier death, resignation or
removal.
4. EXCHANGE OF STOCK
(a) Exchange. Subject to the terms and conditions set forth in this
Agreement, the Stockholders agree that they shall each, on the Closing Date,
surrender to OHF certificates evidencing One Hundred and Twenty Five (125)
shares of MPA Stock owned by such Stockholder, duly endorsed in blank or
accompanied by an appropriate instrument of transfer satisfactory in form and
substance to counsel for OHF, which shares, in the aggregate, shall constitute
all of the issued and outstanding shares of MPA Stock. In exchange for the
surrender of the MPA Stock, OHF shall issue to each of the Stockholders Eighty
Six Thousand Two Hundred and Seven (86,207) shares of OHF Stock.
(b) Restrictive Legend. The certificates evidencing the shares of OHF
Stock to be issued to Stockholders at Closing shall bear the following legend in
conspicuous type:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE
SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR QUALIFICATION WITHOUT AN OPINION OF
COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION
OR QUALIFICATION IS NOT REQUIRED.
(c) Capital Stock of Newco. Each issued and outstanding share of
common stock, no par value, of Newco shall, by virtue of the Merger and without
any action on the part of Newco or OHF, be
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converted into one fully paid and nonassessable share of common stock, no par
value, of the Surviving Corporation.
(d) Cancellation of Treasury Stock and Capital Stock. Each share of MPA
Stock issued and outstanding immediately prior to the Effective Date that is
owned by MPA shall automatically be canceled and retired and shall cease to
exist, and no shares of OHF Stock or other consideration shall be delivered in
exchange therefor.
5. CONTINUED EMPLOYMENT AND COMPENSATION
On and after the Closing, each of the Stockholders shall continue in
their employment with the MPA as the Successor Corporation with the following
understandings:
(a) Commissions. The only compensation of each Stockholder for his
efforts on behalf of MPA as the Surviving Corporation is as follows:
(i) Each Stockholder shall receive 40% of the commission split
to MPA for all new business originated by such Stockholder and 20% of the
commission split for all renewal business for MPA maintained by such
Stockholder. The definition of "new" business and such percentages shall be
subject to change on an annual basis by OHF; provided, each Stockholder will be
notified in writing of any such change to the definition of "new" business and
such percentage no later than the preceding December 1st. OHF will not alter the
definition of "new" business and such percentages for a period of two (2) years
following the Closing Date.
(ii) Annually, a bonus equal to 50% of the actual net earnings
of MPA, computed in accordance with accounting principles generally accepted in
the United States consistently applied, in excess of the yearly budget
established by OHF shall be divided among the employees of MPA by OHF. Such
percentage is subject to change by OHF on an annual basis; provided, each
Stockholder will be notified in writing of any such change to such percentage no
later than the preceding December 1st. OHF will not alter such percentage for a
period of two (2) years following the Closing Date.
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(b) Book of Business. As of the Closing, Rick A. McNelly's Book of
Business shall be set at $875,000 and Richard K. Patrick's Book of Business
shall be set at $550,000.
(c) Stock Options and Other Long-Term Incentives. Each Stockholder
shall be entitled to participate in such Stock Option Plans and other long-term
incentive compensation programs that include similarly situated executives of
OHF and its subsidiaries as may exist from time to time (the "Incentive Plans").
The Stockholder's participation in such Incentive Plans, practices and programs
shall be on the same general basis and terms as are applicable to similarly
situated executives of OHF and its subsidiaries, although bonuses, target levels
and criteria may differ among such executives as determined by the Board or
Compensation Committee of the Board, if any, of OHF.
(d) Employee Benefits. The Stockholders shall be entitled to
participate in tax-qualified and nonqualified deferred compensation and
retirement plans, group term life insurance plans, short-term and long-term
disability plans, employee benefit plans, practices, and programs maintained by
OHF and made available to similarly situated executives of OHF and its
subsidiaries generally, and as may be in effect from time to time.
(e) Automobile Allowance. Each of the Stockholders shall be entitled
to an automobile allowance from MPA of $450 dollars per month. Such allowance is
subject to reasonable change by OHF from time to time.
(f) Employment at Will. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby nor the
employment of any of MPA's employees following the Closing shall be deemed to
create any obligation or a contract of continuing employment. Stockholders
expressly acknowledge that the terms and conditions of their employment with MPA
or any successor Company following the Closing are subject to change at the will
of OHF, it being the intention of the parties that such employment shall be "at
will."
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(g) Non-Competition. If a Stockholder's employment with MPA terminates
for any reason, then for a period of two years after such termination each
Stockholder shall be prohibited from engaging, directly or indirectly, whether
alone or together with or on behalf of or through any other person, firm,
association, trust, venture or corporation, whether as partner, shareholder,
agent, officer, director, employee, technical adviser, lender, trustee, or
otherwise, that competes in any line of the Business of MPA or its affiliates;
except this prohibition shall not apply to any Stockholder's direct or indirect
passive investment of less than 5% in publicly traded entities engaged in any
line of Business similar to MPA or its affiliates.
(h) Non-Solicitation of Customers or Employees. If a Stockholder's
employment with MPA terminates for any reason, then for a period of two years
after such termination of employment with the Company each Stockholder shall be
prohibited from directly or indirectly, causing any person to call on or solicit
or divert or attempt to take away from MPA, OHF or any successor Company or any
of its affiliates (including without limitation by divulging information to any
competitor or potential competitor of the Business of MPA), any person, firm,
corporation or other entity which is then or which at the Effective Date of the
Merger was a customer of MPA or its affiliates or whose identity was known to
such Stockholder at the Effective Date as a potential customer whom MPA or any
of its affiliates intended to solicit. Additionally, each Stockholder shall be
prohibited for a period of two years after such Stockholder's termination of
employment with the Company from directly or indirectly, hiring or offering
employment to or seeking to hire or offering employment to any employee of MPA,
OHF or any successor Company or any of its affiliates, whose employment is
continued by MPA, OHF or any successor Company or any of its affiliates after
the Effective Date, unless MPA, OHF or any successor Company or any of its
affiliates first terminates the employment of such employee or gives its written
consent to such employment or offer of employment.
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(i) Non-Piracy. Upon termination of employment with MPA for any reason,
a Stockholder shall be prohibited at any time from disclosing any Confidential
Information to any third party, except in furtherance of MPA, OHF or any
successor Company, unless such information becomes public otherwise than through
any act or omission of such Stockholder and otherwise than through breach of an
obligation of confidentiality owed by the Stockholder or any other party to MPA,
OHF or any successor Company or any of its affiliates.
6. REPRESENTATIONS AND WARRANTIES OF MPA AND THE STOCKHOLDERS
(a) Except as is otherwise provided for in the Disclosure Schedule
attached hereto and made a part hereof, each Stockholder represents and warrants
as follows:
(1) Ownership of MPA Stock. That (i) such Stockholder owns,
free and clear of any lien, encumbrance, charge or claim whatsoever, 125 shares
of MPA Stock and that such Stockholder has the sole right to sell such shares;
and (ii) as of the Closing Date, such Stockholder will own, free and clear of
any lien, encumbrances, charge or claim whatsoever, the 125 shares of MPA Stock
and will have the sole right to sell such shares.
(2) Power and Authority. Each such Stockholder has the full
power and authority to enter into this Agreement and to carry out and consummate
the transactions contemplated hereby and this Agreement constitutes a valid and
binding obligation of such Stockholder. The execution of this Agreement and the
consummation of all transactions contemplated hereby will not result in a
violation of any of the terms or provisions of any agreement to which the
Stockholder may be a party or by which such Stockholder or such Stockholder's
property may otherwise be bound or of any law, rule, license, regulation,
judgment, order or decree governing or affecting the Stockholder or such
Stockholder's property.
(3) Investment Representations. It is understood that OHF
and Newco will rely upon the following representations and warranties in
accepting this Agreement and that such representations and
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warranties will survive delivery and acceptance of this Agreement and the
closing of the transactions contemplated hereunder.
(i) That such Stockholder is aware of the kind of information
regarding OHF that would be available in a registration statement filed
under the provisions of the Securities Act of 1933, as amended (the
"Act") and that such Stockholder has had access to the same kind of
information about OHF that would be available in such a registration
statement and such additional information necessary to verify the
accuracy of such information;
(ii) That such Stockholder has been furnished with copies of
OHF's Annual Report on Form 10-K for the year ended December 31, 2000,
Quarterly Reports on Form 10-Q for the quarter ended March 31, 2001,
Current Reports on Form 8-K, dated January 23, 2001 and April 20, 2001,
the Annual Report to Stockholders, and a Memorandum relating to Rule
144 promulgated by the Securities and Exchange Commission under the Act
(collectively the "OHF Statements");
(iii) That such Stockholder has been afforded the opportunity
to examine and copy all documents, books and records relating to OHF
that such Stockholder has requested to examine and that no requested
information, oral or written, has been withheld from such Stockholder;
(iv) That such Stockholder is aware that the shares of OHF
Stock to be issued hereunder have not been registered under either
federal or state securities laws in reliance on certain exemptions
contained therein and, accordingly, the shares may not be sold or
otherwise transferred in the absence of such registration or
qualification without an opinion of counsel satisfactory to OHF that
such registration or qualification is not required;
(v) That such Stockholder understands that (A) in reliance
upon the representations made herein, the OHF Stock has not been
registered under the Act or any
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state securities laws, (B) since the OHF Stock has not been registered,
each Stockholder must bear the economic risk of holding the OHF Stock
and may not be able to liquidate his investment in the OHF Stock, (C)
OHF will note the restrictions on resale set forth above on its
transfer records and on the stock certificates evidencing ownership of
the OHF Stock, (D) Rule 144 under the Act may or may not be available
for resales of the OHF Stock in the future, and (E) while there is
presently a trading market for the OHF Stock, there is no assurance
that such market will exist in the future;
(vi) That such Stockholder is aware that there are economic
variables and risks that could adversely affect an investment in OHF
Stock, and that such Stockholder has relied primarily on such
Stockholder's own independent analysis and that of such Stockholder's
personal advisers to make an investment decision with respect to the
OHF Stock;
(vii) That such Stockholder is acquiring the OHF Stock for
such Stockholder's own account, for investment only, and not with a
view to or for the sale, distribution or fractionalization thereof;
(viii) That such Stockholder has such knowledge and experience
in financial and business matters that such Stockholder is capable of
evaluating the merits and risks of this transaction and of an
investment in OHF Stock; and
(ix) That such Stockholder has adequate means of providing for
his current needs and personal contingencies, has no need for current
income or liquidity in his investment in OHF Stock, is able to bear the
economic risks of this investment in the OHF Stock and can afford a
complete loss of such investment.
(b) Except as is otherwise provided for in the Disclosure Schedule,
Sellers jointly and severally represent and warrant as follows:
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(1) Organization and Standing. MPA is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio and is entitled to own or lease its properties and to carry on its business
as and in the places where such properties are now owned, leased or operated or
such business is now conducted. MPA is duly qualified to do business, and is in
good standing, in each jurisdiction in which the conduct of MPA's business or
ownership or leasing of its properties requires it to be so qualified except
where the failure to be so qualified would not have a material adverse effect on
the Business. The copies of the articles of incorporation and code of
regulations of MPA previously delivered to OHF constitute true, correct and
complete copies of MPA's articles of incorporation and code of regulations and
reflect all amendments thereto through and including the date hereof.
(2) Capitalization. The authorized capital stock of MPA
consists of 500 shares of common stock, no par value, of which 250 shares are
outstanding on the date of this Agreement, of which 125 are owned by each of the
Stockholders. All of the outstanding shares have been validly issued and are
fully paid and non-assessable and none of the outstanding shares were issued in
violation of the preemptive rights of any present or past Stockholder of MPA.
(3) Subsidiaries; Other Affiliates. MPA does not own any
shares of, or control or participate as a partner or joint venturer in any
corporation, limited liability company, partnership, association or business
organization. The Stockholders do not, directly or indirectly, own, control or
actively participate as a partner or joint venturer in, any corporation, limited
liability company partnership, association or business organization related to
the business of MPA or in competition with the business of OHF and its
affiliates, except for ownership interests of less than five (5) percent in
publicly traded corporations.
(4) Corporate Authorization. The board of directors of MPA
has, by unanimous vote, duly approved the execution, delivery of this Agreement
and all corporate action necessary for the consummation of the transaction
described herein have been taken. The resolutions of the board of
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directors of MPA and the Stockholders, in each case to be certified by the
secretary of MPA and delivered to OHF at the Closing, are true and correct.
(5) Noncontravention. This Agreement and all transactions
contemplated hereby will not result in a violation of or be in conflict with any
of the terms or provisions of the articles of incorporation or regulations of
MPA, or of any other material agreement to which MPA may be a party or by which
MPA may otherwise be bound or of any law, rule, license, regulation, judgment,
order or decree governing or affecting the operation of the business of MPA, nor
will the same constitute an event permitting termination of any material
agreement or the acceleration of any indebtedness.
(6) Options or Warrants. There are no outstanding options or
warrants or other agreements or arrangements to acquire shares of the capital
stock of MPA, nor are there outstanding any rights or privileges, preemptive or
contractual, to acquire such shares, other than statutory preemptive rights
pursuant to Ohio law.
(7) Fiscal Year End Statements. The Year End Statements are
true and complete in all material respects, have been prepared in accordance
with accounting principles in the United States consistently applied with prior
years and fairly reflect the financial condition, and results of operations of
MPA as of the date thereof.
(8) Interim Statement. The Interim Statement is true and
complete in all material respects, has been prepared in accordance with
accounting principles generally accepted in the United States consistently
applied and with the statements of prior years, and fairly reflects the
financial condition, of MPA as of the date thereof and the results of operations
for the period then ended.
(9) Absence of Undisclosed Liabilities. Except to the extent
reflected or reserved against in the Year End Statements and the Interim
Statement, as of the dates of such statements, MPA had no liabilities or
obligations of any nature, whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due, asserted or
unasserted, matured or unmatured, including,
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without limitation, liabilities for unfunded pension liabilities, Taxes (with
interest and penalties thereon), lawsuits and claims which exceed the aggregate
amount of $5,000.
(10) Taxes.
(a) MPA has timely filed, or has caused to be timely
filed on its behalf (taking into account any extension of time within which to
file), all Tax Returns required to be filed by it, and all such filed Tax
Returns are true, complete and accurate in all material respects. All Taxes
shown to be due on such Tax Returns, or otherwise required to be paid by MPA,
have been timely paid.
(b) The Year-End Statements and the Interim Statements
reflect an adequate reserve for all Taxes payable and deferred by MPA for all
periods and portions thereof through the date of such financial statements. No
deficiency with respect to Taxes has been proposed asserted or assessed against
MPA.
(c) The federal income tax returns of MPA have been
examined by and settled with the United States Internal Revenue Service (or the
applicable statue of limitations has expired) for all years through 1997. All
assessments for Taxes due with respect to such completed and settled
examinations or any concluded litigation have been fully paid. MPA has requested
or been granted an extension of time for filing any Tax Return that has not yet
been filed.
(d) MPA is not a party to or bound by any tax sharing,
tax indemnity or similar agreement with respect to Taxes pursuant to which it
will have any obligation to make payment after the Closing Date. MPA has not
entered into a closing agreement pursuant to Section 7121 of the Code or any
predecessor provision or any similar provision of state, local or foreign Tax
law.
(e) MPA has not constituted either a "distributing
corporation" or a "controlled corporation" (within the meaning of Section
355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code (i) in the two years prior to the date
of this Agreement
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or (ii) in a distribution which could otherwise constitute part of a "plan" or
"series of related transactions" (within the meaning of Section 355(e) of the
Code) in conjunction with the Merger.
(f) MPA has not been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code, other than the
affiliated group of which MPA is the common parent.
(g) No audit or other administrative or court
proceedings with respect to Federal income or state income or franchise Taxes of
MPA are pending and no notice thereof has been received. MPA has no outstanding
agreements, waivers, or arrangements extending the statutory period of
limitations applicable to any claim for, or the period for the collection or
assessment of Taxes.
(h) No claim has been made by a taxing authority in a
jurisdiction where MPA does not file Tax Returns that MPA is or may be subject
to income or franchise taxation in that jurisdiction.
(i) MPA is not a party to any contract, agreement
or other arrangement that provides for the payment of any amount that would not
be deductible by reason of Section 162(m) or Section 280G of the Code.
(j) No Liens for Taxes exist with respect to any assets
or properties of MPA, except for statutory Liens for Taxes not yet due.
(k) MPA has withheld and paid all Taxes required to be
withheld in connection with any amounts paid or owing to any employee, creditor,
independent contractor or other third party.
(l) MPA has made available to OHF true and complete
copies of (i) all Federal income Tax Returns for the preceding three taxable
years and (ii) any audit report issued within the last three years (or otherwise
with respect to any audit or proceeding in progress) relating to Taxes of MPA.
(11) Compensation Due Employees. The Disclosure Schedule
annexed hereto and made a part hereof contains a true and complete list showing
the names of all persons employed by or providing
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significant services to MPA, together with a statement as to the full amount of
compensation paid or payable to, or on behalf of, each person for services
rendered during the fiscal year ended June 30, 2001, and the current aggregate
annual base salary or compensation rate for each such person. MPA has no
outstanding liability for payment of wages, vacation pay (whether accrued or
otherwise), salaries, bonuses, reimbursable employee business expenses,
pensions, contributions under any employee benefit plan or any other
compensation, current or deferred, under any labor or employment contracts,
whether oral or written, based upon or accruing with respect to those services
of the employees or other service providers performed prior to the Closing Date,
except for any payment due for the current payment or contribution period. No
employee or service provider of MPA will, on the Closing Date, be entitled to
compensation (i) for services performed as a broker or finder in connection with
the transactions contemplated by this Agreement or (ii) solely by virtue of the
change in ownership of MPA as a result of the consummation of the transactions
contemplated hereby (such as a "golden parachute" contract). MPA has not,
because of past practices or previous commitments with respect to its employees
or service providers, established any rights on the part of such employees or
service providers to receive additional compensation with respect to any period
after the Closing Date.
(12) Union Agreements and Employment Agreements. MPA is not
a party to any union agreement or has any employment agreement with any of its
employees, which is not terminable at will and without cost at the election of
MPA.
(13) Contracts and Agreements. Except as shown on the
Disclosure Schedule, MPA is not a party to any written or oral non-competition
covenant, agency contracts for sales representations, any contracts or
commitments for "give-a-ways" or sharing of commissions or co-brokerage or
sub-brokerage agreements or any contracts or commitments which commit or will
commit MPA to expend in excess of $25,000 in the aggregate in 2001 or any year
thereafter. MPA has not received a notice of default, nor is MPA in default, nor
to the Knowledge of the Stockholders does any condition exist which with notice
or
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lapse of time, or both, would render MPA in default, under any material
contract, license, lease or other material agreement. MPA has not received
notice, nor to the Knowledge of the Stockholders is there reason to believe,
that any party to any of such agreements intends to cancel or terminate any of
such agreements or to exercise or not to exercise any options under any of such
agreements. None of such material contracts, licenses, leases or other material
agreements has been renegotiated by the parties thereto in anticipation of the
acquisition of MPA. MPA is not a party to, nor is MPA or its property bound by,
any agreement that is materially adverse to the business, properties or
financial condition of MPA.
(14) Title to Real and Personal Property. MPA represents that
it does not own any real property. The Disclosure Schedule annexed hereto and
made a part hereof contains a complete and accurate description and the location
and lessor of all real property leased by MPA. MPA (i) is in peaceful and
undisturbed possession of the space and/or estate under each lease under which
it is the tenant, and there are no material defaults by it as tenant thereunder.
None of such leases has been renegotiated by the parties thereto in anticipation
of the acquisition of MPA. Stockholders make no representation or warranty
whatsoever (including warranties of merchantability or fitness for a particular
use) with respect to any of the assets of MPA except to represent they are "AS
IS, WHERE IS" and Stockholders shall have no obligation or liability to expend
funds or to take any actions to correct any physical condition existing with
respect to any of the assets, whether or not such condition existed before the
Effective Date.
(15) Banks. The Disclosure Schedule annexed hereto and made a
part hereof contains a true and complete list showing the name of each bank in
which MPA has a line of credit, account, savings account, certificate of deposit
or safe deposit box and the names of all persons authorized to draw thereon or
to have access thereto.
(16) Accounts Receivable and Advanced Commissions. The
accounts receivable of MPA reflected on the Year End Statements and those
acquired and accrued thereafter through the date of this Agreement, are valid
and bona fide accounts receivable created in the ordinary course of business and
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have been collected or are to the Knowledge of the Stockholders, fully
collectible. None of the accounts receivable reflected on the Year-End
Statements or acquired or accrued thereafter through the date of this Agreement
includes work in process for which no statement has been rendered. MPA has
previously provided to Buyer the name of each insurance company from whom, as of
the date of this Agreement, MPA has received advanced commissions together with
the current amount of such advanced commissions as of the date of this
Agreement, and the period of time during which the same have been advanced.
(17) Insurance. The Disclosure Schedule annexed hereto and
made a part hereof lists and describes all insurance policies now in force
pursuant to which MPA is the insured. All errors and omissions claims asserted
against MPA in the past three years are described in the Disclosure Schedule
(Exhibit 6(b)(17)) and, all such claims have been settled by payment thereof and
the receipt by MPA of releases with respect thereto or have been reported to the
errors and omissions carrier of MPA, and MPA has not been notified, nor does MPA
have reason to believe, that such carrier will deny coverage. MPA has not been
refused any insurance coverage by any insurance carrier to which it has applied
for insurance during the past three years.
(18) Licenses, Permits and Consents. The licenses and permits
listed in the Disclosure Schedule annexed hereto and made a part hereof are, to
the Knowledge of the Stockholders, the only licenses and permits currently
required by any Stockholder, MPA or any employee or producer of MPA for the
operation of MPA's business and all of such licenses and permits are in effect
as of the date hereof. MPA has not received notice, nor, to the Knowledge of
Stockholders, does any appropriate authority intend to cancel or terminate any
of such licenses or permits or that valid grounds for such cancellation or
termination currently exist. Neither MPA, nor any employee or producer of MPA
has been barred from or ordered to cease and desist from any activities of any
type whatsoever in connection with the Business now engaged in by MPA, nor had
its or his license or qualification to conduct, participate or be involved in
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any business of the type now engaged in by MPA in any jurisdiction denied,
revoked, restricted or suspended or been involved in any proceeding to deny,
revoke, restrict or suspend any such license or qualification or bar or cease
any activities connected with the business of the type now engaged in by MPA. To
the Knowledge of the Stockholders, no consent, approval, order, notice to or
other authorization of any federal, state, county or local governmental agency
or department is required to be obtained as a prerequisite for the acquisition
of MPA or the merger with the Company, other than any consent, approval, order,
notice or authorization that may be required by reason of the nature of the
business conducted by the Company or as a result of the combined operations of
MPA and the Company after any such merger provided, no representation is hereby
made with respect to any consent, approval, order, notice or authorization that
may be required in connection with the acquisition of MPA or the merger with the
Company or the business conducted by the Company or as a result of the combined
operations of MPA and the Company after any such merger as a result of OHF's
ownership of the same.
(19) Litigation. There are no actions, suits, proceedings or
investigations (whether or not purportedly on behalf of MPA or the MPA Plans)
pending or, to the Knowledge of the Stockholders, threatened against or
affecting MPA, the Stockholders or the MPA Plans, nor, to the Knowledge of the
Stockholders are there any disputes, loss contingencies (as determined by
accounting principles generally accepted in the United States consistently
applied), or set of facts related to the operation or conduct of the Business of
MPA which could reasonably be expected to result in a claim being asserted
against MPA, the Stockholders or the MPA Plans, at law or in equity or before or
by any federal, state, municipal or other governmental department, commission,
board, agency or instrumentality, domestic or foreign, nor has any such action,
suit, proceeding or investigation been pending during the 12-month period
preceding the date of this Agreement; and neither MPA, the MPA Plans, nor any
Stockholder is operating under or subject to, or in default with respect to, any
order, writ, injunction or decree of any court or federal, state, municipal or
governmental department, commission, board, agency or instrumentality, domestic
or foreign.
-21-
(20) Compliance with Laws. To the Knowledge of Stockholders,
MPA and the Stockholders have complied in all material respects with all laws,
regulations and orders applicable to the Business, including but not limited to
requirements and restrictions with respect to the use, investment, application
and allocation of funds, and proceeds from the investment of such funds, held in
trust by MPA from time to time, and, to the Knowledge of Stockholders, the
present uses by MPA of its properties do not violate any such laws, regulations
and orders. Except for such laws or regulations that may be applicable to OHF,
with respect to which Stockholders hereby make no representations, to the
Knowledge of the Stockholders, no provision of the law of any state in which MPA
operates or, to the Knowledge of the Stockholders, any published pending
legislation, or published proposed regulation, or published regulation under
consideration, including but not limited to laws or regulations relating to the
insurance agency and brokerage business, will be violated by the acquisition of
MPA or the execution or consummation of this Agreement by MPA or the
Stockholders or precludes or will preclude any merger of MPA with the Company or
the execution or consummation of this Agreement by MPA and the Stockholders.
(21) Copyrights, Trademarks, Trade Names, etc. Except for its
d.b.a. "McNelly, Patrick & Associates," MPA does not own any trademarks,
trademark applications and registrations, trade names, service marks or
copyrights. The Company and any affiliate thereof, from and after the Closing
Date may, to the Knowledge of the Stockholders, conduct the business formerly
conducted by MPA without infringing upon the trademarks, trade names, service
marks or copyrights of anyone. To the Knowledge of the Stockholders from and
after the Closing Date, the Company may continue to use the name "Innovative
Financial Services Agency, Inc. dba McNelly, Patrick & Associates" or any
derivatives thereof in states in which it operates in the insurance business
without the consent of any party except for certain governmental authorities
with jurisdiction over such matters.
-22-
(22) Conduct of Business. From June 30, 2001, MPA has not:
(i) issued or committed to issue any stock, bonds, notes,
options, warrants or other corporate securities;
(ii) amended its articles of incorporation or code of
regulations;
(iii) incurred any obligations or liabilities (absolute or
contingent), except for obligations herein and except current
liabilities incurred, and obligations under contracts entered into, in
the ordinary course of business, except for its obligation as a member
of Ohio Valley Employee Benefits Agencies, Ltd. relating to the
purchase of Broker Briefcase software in an initial upfront amount not
to exceed $5000, with continuing monthly obligations of approximately
$400;
(iv) made any capital expenditures;
(v) discharged or satisfied any lien or encumbrance except
when the underlying indebtedness was due and payable or prepaid any
obligation or liability (absolute or contingent) other than obligations
referred to in (iii) above;
(vi) declared or paid any dividend or other distribution with
respect to shares of the capital stock or made any other payment (other
than as compensation or reimbursement for expenses) or distribution to
Stockholders, or purchased or redeemed any shares of capital stock;
(vii) mortgaged, pledged or subjected to lien, charge or any
other encumbrance, any assets or properties, tangible or intangible;
(viii) sold or transferred any tangible assets or cancelled
any debts or claims, except in each case in the ordinary course of
business;
(ix) sold, assigned or transferred any trademarks, trade
names, service marks, copyrights or other intangible assets;
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(x) suffered any extraordinary loss or waived any rights of
substantial value;
(xi) changed any accounting methods or practices, except for
MPA's conversion to accounting methods and practices undertaken in
accordance with accounting principles generally accepted in the United
States consistently applied;
(xii) entered into any transaction other than in the ordinary
course of business;
(xiii) made any loan to any person or entity, including but
not limited to any Stockholder;
(xiv) increased the compensation payable, or to become
payable, to any of the Stockholders, or other employee or service
provider of MPA, including but not limited to, any bonus payment, stock
options or deferred compensation and has not paid or accrued for any
Stockholder or other employee or service provider of MPA any bonus or
incentive payment or deferred compensation;
(xv) increased any benefits to employees under pension,
insurance or other employee benefit programs;
(xvi) entered into any employment, change of control,
severance, or other agreement or understanding;
(xvii) hired or otherwise engaged any new employees or
revenue producers;
(xviii) received or contracted to receive any advanced
commissions or made any arrangements to receive, borrow or accelerate
any commissions;
(xix) failed to take steps to adhere to OHF's employment
policies, including OHF's policy on the employment of immediate family
members;
(xx) made any material Tax election or settle or compromise
any material Tax liability if such action could reasonably be expected
to have a material adverse effect on OHF or the Surviving Corporation;
or
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(xxi) entered into an agreement to do any of the things
described in clauses (i) through (xx) above.
(23) Material Change. From the date of this Agreement through
the Closing Date, there will be no change in the employment of personnel
described in the Disclosure Schedule or in the condition, financial or otherwise
(including earnings), of MPA as shown in the Year End Statements except changes
occurring in the ordinary course of business, which changes have not materially
adversely affected MPA's business, properties or financial condition.
(24) No Liabilities as Guarantor. Except as and to the extent
reflected or reserved against in the Year End Statements, or as otherwise
disclosed in the Disclosure Schedule hereto, MPA is not directly or indirectly
liable upon or with respect to or obligated in any other way to provide funds in
respect of or to guarantee or assume any debt, dividend or other obligation of
any person, corporation, limited liability company, association, partnership or
other entity, except endorsements made in the ordinary course of business in
connection with the deposit of items of collection.
(25) Interest in Clients, Suppliers and Competitors. Neither
the Stockholders, nor any members of their immediate families, has any direct or
indirect interest in (i) any present competitor of MPA, (ii) any present client
of MPA or any prospective client who is currently being specifically solicited
as such, (iii) any present supplier of MPA or any prospective supplier whose bid
is currently under consideration, (iv) any person from whom or to whom MPA
leases any real or personal property or (v) any person engaged in the insurance
agency and brokerage business, nor does any such person hold positions as an
officer or director of a person described in (i), (ii), (iii), (iv) or (v)
hereof; provided that no representation is made with respect to interests of any
Stockholder or any member of their immediate families in a person described in
(i), (ii), (iii), (iv) or (v) hereof if such interest shall not exceed
beneficial ownership of 5% of such person and a public trading market exists for
the equity securities of such person.
-25-
(26) ERISA. MPA has delivered to OHF, if any, true, correct
and complete copies of all MPA Plans. To the Knowledge of Stockholders, all MPA
Plans, if any, are, in all material respects, in compliance with the applicable
terms of ERISA, the Code and any other applicable laws. To the Knowledge of
Stockholders, each MPA Plan which is intended to be qualified under Section
401(a) and 501(a) of the Code (an "Employee Pension Benefit Plan") has received
a favorable determination letter which takes into account the Tax Reform Act of
1986 related legislation or could so qualify for such a favorable determination
letter. To the Knowledge of Stockholders, each Employee Pension Benefit Plan has
been administered in a manner which will permit each plan to obtain a "GUST"
determination letter from the IRS within this applicable remedial amendment
period. To the Knowledge of Stockholders, there exist no circumstances that are
likely to result in revocation of any such favorable determination letter, if so
received or sought. To the Knowledge of Stockholders, the MPA Plans have not
engaged in or been a party to any prohibited transaction, as such term is
defined in Section 4975 of the Code or Section 406 of ERISA.
MPA has no liability for retiree health and life benefits under any MPA
benefit plan and there are no restrictions on the rights of MPA to amend or
terminate any employee benefit plan without incurring any liability thereunder.
To the Knowledge of the Stockholders, persons classified as employees
and independent contractors, if any, have been properly classified by MPA.
(27) Termination by Employees, Insurance Brokers or Clients.
From the date of this Agreement through the Closing Date, (i) none of the
insurance brokers or other employees of MPA has terminated, threatened to
terminate, or indicated a desire to terminate his or her relationship with MPA
or to work other than on a full time basis, either as a result of the
transactions contemplated by this Agreement or otherwise, except with respect to
steps taken to comply with OHF's policy on the employment of immediate family
members and (ii) from the date of this Agreement through the Closing
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Date, no client or group of clients which, singly or in the aggregate, accounted
for 10% or more of MPA's consolidated gross revenue for the fiscal year ended
June 30, 2001, has terminated or to the Knowledge of the Stockholders threatened
to terminate in whole or in part its relationship with MPA, either as a result
of the transactions contemplated by this Agreement or otherwise.
(28) Disclosure. To the Knowledge of Stockholders, no
representation or warranty by MPA or the Stockholders contained in this
Agreement, and no statement contained in any certificate furnished or to be
furnished to OHF by Stockholders pursuant hereto, or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact or omits to state all material facts which are necessary in
order to make the statements contained therein not misleading, in the light of
the circumstances under which such statements were made.
(29) Liabilities. The total liabilities of MPA as of the
Closing Date, as determined in accordance with accounting principles generally
accepted in the United States applied on a basis consistent with that of the
Year End Statements and the Interim Statement, will not exceed total assets,
provided that expenses attributable to this transaction will not be considered
in such determination.
(30) Customer List. The Disclosure Schedule annexed hereto and
made a part hereof contains a true and complete list of all accounts of MPA
which produced net commission income in excess of $20,000 during the fiscal year
ended June 30, 2001, or during the period from July 1, 2001, through the date of
this Agreement. MPA is the sole and exclusive owner of, and has the unrestricted
right to use, said list. MPA has not, within the three years prior to the
Closing, paid or promised to pay or to refund to any client, customer or account
of MPA any money or other valuable consideration as an inducement for the
purchase or renewal of a policy of insurance. Information as to customers,
expirations, renewals, group insurance, policy anniversaries and other similar
items indicating the source of income of MPA has not been divulged on a
non-confidential basis during the two-year period preceding the date of this
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Agreement, except in the ordinary course of business to former or present
employees, or otherwise been made available, to any person or firm other than
the parties to this Agreement.
(31) Certain Agreements with Clients. Neither MPA nor any
Stockholder is a party to any agreement under which any portion of any fees,
commissions or other payments earned by or payable to a Stockholder or MPA is to
be split with or otherwise paid to any other person except for sub-brokerage or
co-brokerage contracts or arrangements entered into in the ordinary course of
business and except for set-offs of brokerage commissions against fees for
services to the extent permitted by law and reflected in a written agreement
signed by the client a copy of which has been provided to OHF prior to the date
hereof.
(32) Insurance Contracts. All Insurance Contracts, together
with all rights, interests and claims of the Stockholders and MPA thereunder of
every nature and description, including, but not limited to the right to receive
accrued but unpaid commission thereunder and all commissions that may become due
and payable to any of the Stockholders or MPA thereunder at any time on or after
the Closing are owned exclusively by MPA. MPA maintains a contract with the
following carriers: Anthem BC/BS, Anthem Life Insurance, United HealthCare
Insurance Company of Ohio, Inc and United HealthCare of Ohio Inc., Medical
Mutual of Ohio, Nationwide, Aetna US Healthcare, BAC, Guardian Life Insurance
Company of America, VSP, Cincinnati Insurance Companies, Fortis, and American
Family Life Assurance Company of Columbus; a true and complete list of all of
the Insurance Contracts is available for review by Buyer at MPA's office. All of
the Insurance Contracts are valid and in full force and effect and constitute
the legal, valid and binding obligations of the Stockholders and MPA and, to the
Knowledge of the Stockholders, constitute the legal, valid and binding
obligations of the other parties thereto, and there are no existing defaults by
Stockholders or MPA or to the Knowledge of the Stockholders by any other party
thereunder and, to the Knowledge of the Stockholders, no event, act, or omission
has occurred which (with or without notice, lapse of time, or other happening or
occurrence of any other event) would
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result in a default thereunder. No other party to any of the Insurance Contracts
has asserted the right, and no basis exists for the assertion of any right, to
renegotiate the terms and conditions of any such contracts. The Stockholders are
unaware of any loss or threatened loss of any relationship with any policyholder
or insurance companies.
(33) Commissions. The aggregate revenues earned by Sellers
attributable to the Business during the fiscal years ended June 30, 1997 through
2001 are listed in the Disclosure Schedule. Except as disclosed in the
Disclosure Schedule, since the end of Seller's 2000 fiscal year, Seller has not
lost any insurance brokerage or agency customer or broker or production source
producing average annualized commissions, fees or other revenues of Twenty
Thousand Dollars ($20,000) or more over the immediately preceding three years
or, if less than three years ago, since the customer was first acquired. Except
as described in the Disclosure Schedule, all insurance brokerage or agency
business placed by all employees of MPA has been placed by them through and in
the name of MPA and all commissions on such business have been paid to and are
the property of MPA (including commissions on life insurance policies).
(34) Tax Treatment. MPA has not taken or agreed to take (or
failed to so take or agree to take) any action or is aware of any fact or
circumstance that would prevent the Merger from qualifying as a reorganization
under Section 368(a) of the Code.
(35) Accounting Treatment. MPA has not taken or agreed to take
(or failed to so take or agree to take) any action or is aware of any fact or
circumstance that would prevent the Merger from qualifying as a pooling under
accounting principles generally accepted in the United States.
7. REPRESENTATIONS AND WARRANTIES OF OHF
OHF hereby represents and warrants as follows:
(a) Organization and Standing. OHF is an Ohio corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio and qualified to do business in Ohio.
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(b) Corporate Authority of OHF. The board of directors of OHF has duly
approved the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein and the issuance of the
shares of OHF Stock to be issued pursuant to Section 4 hereof. This Agreement
and all transactions contemplated hereby will not result in a violation of the
articles of incorporation or code of regulations of OHF or any material
agreement to which OHF is a party or by which it is bound, or any law, rule,
license, regulation, judgment, order or decree governing or affecting the
operation of business of OHF in any material respect.
(c) Capitalization of OHF. The authorized capital stock of OHF on the
date hereof consists of 15,000,000 shares of voting common stock, without par
value, of which 5,337,101 were validly issued as of December 31, 2001, and
3,000,000 shares of preferred stock without par value, none of which shares are
presently issued and outstanding.
(d) OHF Stock. The OHF Stock to be delivered upon the consummation of
the transactions contemplated by this Agreement will, when so delivered, be
unregistered, validly issued and outstanding, fully paid and non-assessable.
(e) Tax Treatment. OHF has not taken or agreed to take (or failed to so
take or agree to take) any action or is aware of any fact or circumstance that
would prevent the Merger from qualifying as a reorganization under Section
368(a) of the Code.
(f) Accounting Treatment. OHF has not taken or agreed to take (or
failed to so take or agree to take) any action or is aware of any fact or
circumstance that would prevent the Merger from qualifying as a pooling under
accounting principles generally accepted in the United States.
8. REPRESENTATIONS AND WARRANTIES OF NEWCO
(a) Organization and Standing. Newco is an Ohio corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio and qualified to do business in Ohio. From the
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date of incorporation until the Effective Date, Newco will engage in no business
and will have no liabilities other than by reason of this Agreement.
(b) Corporate Authority of Newco. The board of directors of Newco has
duly approved the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein. This Agreement and all
transactions contemplated hereby will not result in a violation of the articles
of incorporation or code of regulations of Newco or any material agreement to
which Newco is a party or by which it is bound, or any law, rule, license,
regulation, judgment, order or decree governing or affecting the operation of
business of Newco in any material respect.
(c) Capitalization of Newco. The authorized capital stock of Newco on
the date hereof consists of 100 shares of voting common stock, without par
value, all of which are validly issued and held by OHF.
9. COVENANTS
(a) Conduct of Business. From the date of this Agreement until the
earlier of the Closing Date or the termination of this Agreement, unless the
prior written consent of OHF shall have been obtained, MPA shall operate the
Business only in the usual, regular and ordinary course, and use its best
reasonable efforts to preserve intact the Business. Without limiting the
generality of the foregoing, during such period, MPA and the Stockholders will
not (i) enter into any agreement of a character referred to Section 6(b)(22)
hereof, or (ii) take or permit to be taken any action of a character which is
listed in Section 6(b)(22) without the consent of OHF, which consent will not be
unreasonably withheld.
(b) Access to Information. From and after the date hereof, the
Stockholders will cause MPA to afford to the officers, employees and accredited
representatives of OHF free and reasonable access during normal business hours
to the properties and records of MPA in order that OHF may have full opportunity
to make such investigation as they shall desire of the affairs of MPA.
(c) Actions of Stockholders. Between the date of this Agreement and
the Closing Date, neither the Stockholders nor MPA will take or knowingly permit
to be taken any action or do or knowingly permit
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to be done anything in the conduct of the business of MPA, or otherwise, which
would be contrary to or in breach of any of the terms, conditions or provisions
of this Agreement, or which would cause any of the representations herein to be
untrue except as otherwise permitted in writing by OHF. MPA and the Stockholders
will use their best efforts to keep the services of its present service
providers and employees available and to preserve the goodwill of the clients
and others having business relations with MPA.
(d) Consents to Assignments. Between the date of this Agreement and the
Closing Date, the Stockholders and MPA will use their best efforts to obtain all
necessary consents from all appropriate insurance companies and general agents
to the assignment to the Company of Insurance Contracts.
(e) Maintenance of Insurance. MPA will continue to carry its existing
property and casualty and liability insurance through the Closing Date or
through the normal expiration date of such policies, whichever occurs later,
subject to variations in amounts required by the ordinary operation of its
business. Following the Closing Date, the insured party, under any key man or
split dollar insurance policy owned by MPA, may purchase such policy for its
cash surrender value. Any key man or split dollar insurance policies not
purchased by the insured party may be terminated or terminated by OHF at its
sole discretion.
(f) Regulatory Filings. Each of the parties hereto shall promptly take
all actions necessary to make each filing it is required to make with any
governmental agency or authority as a condition to the consummation of the
transactions contemplated hereby.
(g) Compliance with Conditions Precedent. Each of the parties hereto
shall use its best efforts to cause the conditions precedent for which such
party is responsible (whether under Section 11 or 12 hereof) to be fulfilled.
(h) Further Action. Each of the parties hereto agrees that it will, at
any time, and from time to time, after the Closing Date, upon the request of the
appropriate party, do, execute, acknowledge and deliver, or will cause to be
done, executed, acknowledged and delivered, all such further acts, deeds,
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assignments, transfers, conveyances, powers of attorney and assurances as may be
required to complete the transactions as contemplated by this Agreement.
(i) Additional Information. Between the date of this Agreement and the
Closing Date, the parties will promptly notify each other in writing of any
changes which will have to be made to any of the representations and warranties
made by the Stockholders, MPA or OHF in this Agreement (including, but not
limited to, the Exhibits or Schedule annexed hereto) so that the certificates
called for by Sections 11(d) and 12(c) of this Agreement may be delivered.
(j) Satisfaction of Conditions. Each of the parties hereto agrees to
notify the other parties hereto upon the satisfaction of the conditions
precedent to be performed by it pursuant to Sections 11 or 12 hereof.
(k) Acquisition Proposals. Unless and until this Agreement shall have
been terminated by either party pursuant to the provisions of Section 14 hereof,
Sellers shall not (i) directly or indirectly, solicit, encourage, initiate,
entertain, consider, or participate in any negotiations or discussion with
respect to any Acquisition Proposal, or (ii) disclose any information not
customarily disclosed to any person or entity or provide access to its
properties, books, or records or otherwise assist or encourage any person or
entity in connection with any Acquisition Proposal. Sellers will promptly
communicate to OHF the occurrence, nature, and terms of any Acquisition Proposal
that they may receive.
(l) Employment Policies and Employee Benefits. OHF covenants that
following the Closing, all persons who were employed by MPA as of the Closing
Date and who are employed by MPA as the Successor Corporation or by any other
affiliate of OHF following the Closing, shall be subject to all OHF Employment
Policies and shall be entitled as of the Effective Date to participate in all
group insurance and other benefit plans and programs made available by OHF to
its employees and to employees of its affiliates generally, to the extent
commensurate with his or her position with MPA as the Successor Corporation or
such other OHF affiliate. Each such employee will receive full credit for prior
service with
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MPA for purposes of determining his or her participation and vesting with
respect to all such benefit plans, but not for purposes of benefit accruals;
provided, however, that such employees will receive full credit for prior
service with MPA for purposes of determining their benefits under OHF's
vacation, personal, and sick day policies, and provided, further, that in no
event will prior service be recognized unless such recognition is permitted by
the Code and ERISA and does not place the qualified status of any MPA or OHF
Plan at risk.
(m) Procedure on Transfers. If any Stockholder desires to sell or
otherwise transfer any of the shares of OHF Stock received by such Stockholder
pursuant to Section 4 of this Agreement in reliance on Rule 144 at any time
during the applicable periods set forth in Rule 144, such Stockholder will
provide to the transfer agent for OHF Stock (the "Transfer Agent") a
representation letter in such form as the Transfer Agent may reasonably request,
together with such additional information as the Transfer Agent may reasonably
request. If OHF's counsel concludes that such proposed sale or transfer complies
with the requirements of Rule 144, OHF will cause such counsel to provide such
opinions as may be required by the Transfer Agent so that such Stockholder may
complete the proposed sale or transfer.
(n) Employee Benefit Plans. Prior to the Closing Date, MPA will take
appropriate steps to terminate its plans or otherwise transition its employees
to coverage by OHF employee benefit plans.
(o) Right to Piggyback Registration. (i) If, at any time or from time
to time, OHF shall determine to register any of its securities, either for its
own account or for the account of a security holder or holders exercising their
respective demand registration rights, other than a registration relating solely
to employee benefit plans, OHF will:
(A) promptly give to each Stockholder written notice thereof; and
(B) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the OHF Stock held by such Stockholder as specified in a written
request or requests, made within 30 days after receipt of such written notice
from
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OHF by any Stockholder, but only to the extent that such inclusion will not
diminish the number of securities included by OHF or by holders of OHF Stock who
have demanded such registration.
(ii) If the registration of which OHF gives notice is for a registered
public offering involving an underwriting, OHF will so advise the Stockholders
as a part of the written notice given pursuant to subsection (i) above. In such
event the right of any Stockholder to registration pursuant to subsection (i)
above shall be conditioned upon such Stockholder's participation in such
underwriting and the inclusion of such Stockholder's OHF Stock in the
underwriting to the extent provided herein. The Stockholders proposing to
distribute their OHF Stock through such underwriting shall (together with OHF
and the other holders distributing their securities through such underwriting)
enter into an underwriting agreement in customary form with the managing
underwriter selected for such underwriting by OHF (or by the holders who have
demanded such registration). Notwithstanding any other provision of this Section
9(o), if the managing underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the managing underwriter
may limit the number of shares of OHF Stock to be included in such registration.
OHF will so advise the Stockholders and any other holders of securities
distributing their OHF Stock through such underwriting pursuant to piggyback
registration rights similar to this Section 9(o), and the number of shares of
OHF Stock to be registered and other securities that may be included in the
registration and underwriting shall be allocated among all stockholders in
proportion, as nearly as practicable, to the respective amounts of registrable
securities held by such stockholders and other securities held by other holders
at the time of filing the registration statement; provided that the aggregate
amount of registrable securities held by selling Stockholders included in the
offering shall not be reduced below 25% of the total amount of securities
included in that offering. If any Stockholder disapproves of the terms of any
such underwriting, he may elect to withdraw therefrom by written notice to OHF
and the managing underwriter. Any securities excluded or withdrawn from such
underwriting
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shall be withdrawn from registration, and shall not be transferred in a public
distribution prior to 90 days after the effective date of the registration
statement relating thereto.
(iii) OHF shall have the right to terminate or withdraw any
registration initiated by it under this Section 9(o) prior to the effectiveness
of such registration whether or not any Stockholder has elected to include his
OHF Stock in such registration.
10. BROKERAGE
Except for broker's fees to be paid to Marsh Berry, in connection with
this Agreement and the transactions contemplated thereby, OHF, the Stockholders
and MPA represent and warrant to each other that all negotiations relative to
this Agreement and the transactions contemplated hereby have been carried on by
the Stockholders and MPA directly with OHF and that no person is entitled to any
broker's, finder's or financial advisor's fee in connection with or on account
of this Agreement or any transaction herein contemplated. OHF is liable for any
broker's fee payable to Marsh Berry under this Agreement and shall indemnify
Stockholders and MPA for any claim by Marsh Berry for such fees.
11. CONDITIONS PRECEDENT OF OHF AND NEWCO
All the obligations of OHF and Newco under this Agreement are subject
to the conditions that, on or before the Closing Date:
(a) Representations and Warranties True at Closing. The representations
and warranties of MPA and Stockholders, contained in this Agreement or in any
certificate or document delivered pursuant to the provisions hereof in
connection with the transactions contemplated hereby shall be true on and as of
the Closing Date as though such representations and warranties were made at and
as of such date.
(b) Compliance with Agreement. MPA and the Stockholders shall have
performed and complied with all agreements or covenants and conditions required
by this Agreement to be performed or complied with prior to or at the Closing.
-36-
(c) Board Approval. The board of directors of OHF and Newco shall have
duly approved the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein and the board of directors
of OHF shall have additionally approved the issuance of the shares of OHF Stock
to be issued pursuant to Section 4 hereof.
(d) Resolutions and Stockholders' Certificate. MPA and the Stockholders
shall have delivered to OHF a certificate of the Secretary of MPA, dated the
Closing Date, certifying that the respective resolutions of the board of
directors of MPA and the Stockholders previously delivered to OHF authorizing
the transactions contemplated herein have not been revoked, superseded or
amended, and MPA and the Stockholders shall have delivered to OHF certificates
of the Stockholders and of the chairman of the board or the president and the
secretary of MPA, in such detail as OHF may request, certifying as to the
fulfillment of the conditions specified in subsections (a) and (b) of this
Section 11.
(e) Approval of Proceedings. All actions, proceedings, instruments and
documents required to carry out this Agreement or incidental thereto, and all
other related legal matters shall have been approved by the legal counsel for
OHF.
(f) Opinion of Counsel. OHF shall have received an opinion of MPA's
counsel, dated the Closing Date, to the effect and in the form set forth in
Exhibit 11(f) annexed hereto and made a part hereof.
(g) Tax Opinion. OHF shall have received, subject to reasonable
qualifications and assumptions and based on the representations contained in the
Tax Matters Certificate, as described below, an opinion of its counsel to
provide in part that for Federal income tax purposes, this transaction shall
qualify as a non-taxable reorganization under Section 368(a) of the Code.
(h) Completion of Due Diligence. OHF shall have completed its due
diligence review of MPA and the Business and shall be satisfied with the results
of such due diligence review, such determination to be in its sole discretion.
-37-
(i) Injunction. On the Closing Date, there shall be no effective
injunction, writ or preliminary restraining order or any order of any nature
issued by a court or governmental agency of competent jurisdiction directing
that the transactions provided for herein or any of them not be consummated as
herein provided.
(j) Adverse Development. There shall have been no developments in the
Business since June 1, 2001, which would have a material adverse effect on the
value of such Business or on the assets, properties or goodwill of MPA except
for such developments in the insurance business generally, and all of the
Stockholders shall be employed by and active in the Business at such time.
(k) Consents. OHF and Newco shall have obtained all necessary consents
and approvals of other persons or governmental authorities, including but not
limited to, all necessary consents and approvals from federal banking agencies
and all applicable waiting periods shall have expired for the issuance of shares
of OHF Stock pursuant to this Agreement, to the performance by OHF and Newco of
the transactions contemplated by this Agreement and the operation of the
Business by the Company and no such approval or consent shall contain any
provision or condition which would be materially adverse to the operation of the
Business by the Company.
(l) Consents and Licenses. The Stockholders and the Company shall have
received all consents to the transfer of such Insurance Contracts, contracts,
licenses, leases, commitments and orders of MPA and the Stockholders as are
required to consummate the transactions contemplated hereby and all necessary
licenses and permits required to enable it or an affiliate thereof to carry on
the Business of MPA from and after the Closing Date; provided however, so long
as MPA and the Stockholders are not otherwise in breach of this Agreement or of
the Insurance Contracts, the failure to obtain any consent to an Insurance
Contracts transfer contemplated in connection with the consummation of the
transactions contemplated by this Agreement shall not be deemed a breach of this
Agreement or give rise to a claim for indemnification by OHF hereunder.
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(m) Repayment by Stockholders. The Stockholders shall have (i) paid to
MPA or otherwise discharged any personal indebtedness of the Stockholders and
their families to MPA, if any; and (ii) assumed or terminated leases on
automobiles leased by MPA.
(n) Acquisition of Renewals. MPA shall have acquired, upon terms
acceptable to OHF, the rights to renewal commissions pertaining to the placement
of insurance by each of the Stockholders and MPA.
(o) Tail Coverage. Sellers shall have purchased liability insurance
coverage against errors and omissions arising from the operation of the Business
prior to the Closing Date in limits reasonably acceptable to OHF, such coverage
to continue in full force and effect for a period of no less than three (3)
years following the Closing Date. The specific terms of the coverage are
summarized in the Disclosure Schedule.
(p) Treatment of Benefit Plans. If MPA sponsors a 401(K) Plan, other
qualified employee benefit plan or non-qualified severance or deferral plan,
such plan or plans shall be terminated prior to Closing or adequate steps, in
the reasonable opinion of OHF, have been made to transition MPA's employee
coverage by OHF employee benefit plans.
(q) Tax Matters Certificate. Sellers shall have delivered at Closing a
Certificate of Representations, (the "Tax Matters Certificate"), satisfactory to
OHF, with respect to the qualifications of the Merger as "reorganization" within
the meaning of Section 368(a) of the Code.
(r) Liabilities. The total liabilities of MPA as of the Closing Date,
as determined in accordance with accounting principles generally accepted in the
United States applied on a basis consistent with that of the Year End Statements
and the Interim Statement, will not exceed total assets, provided that expenses
attributable to this transaction will not be considered in such determination.
-39-
12. CONDITIONS PRECEDENT OF MPA AND THE STOCKHOLDERS
The obligations of MPA and the Stockholders hereunder are subject to
the conditions that, on or before the Closing Date:
(a) Representations and Warranties True at Closing. The representations
and warranties of OHF and Newco contained in this Agreement or in any
certificate or document delivered pursuant to the provisions hereof or in
connection with the transactions contemplated hereby shall be true on and as of
the Closing Date as though such representations and warranties were made at and
as of such date, except as otherwise contemplated herein.
(b) OHF's and Newco's Compliance with Agreement. OHF and Newco shall
have performed and complied with all agreements and conditions required by this
Agreement to be performed and complied with by it prior to or at the Closing.
(c) Resolutions and Officers' Certificate. OHF shall have delivered to
the Stockholders and MPA a certificate of the Secretary or an Assistant
Secretary of OHF and Newco, dated the Closing Date, certifying that the
resolutions of the Boards of Directors of OHF and Newco authorizing the
transactions contemplated herein have not been revoked, superseded or amended.
(d) Approval of Proceedings. All actions, proceedings, instruments and
documents required to carry out this Agreement or incidental thereto, and all
other related legal matters shall have been approved by counsel for MPA and the
Stockholders.
(e) Opinion of Counsel for OHF. MPA and the Stockholders shall have
received an opinion from counsel for OHF, dated the Closing Date, to the effect
and in the form set forth in Exhibit 12(e) annexed hereto and made a part
hereof.
(f) Tax Opinion. MPA shall have received, subject to reasonable
qualifications and assumptions and based on the representations contained in the
Tax Matters Certificate, an opinion
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from counsel for OHF to provide in part that for Federal income tax purposes,
this transaction shall qualify as a non-taxable reorganization under Section
368(a) of the Code.
(g) Injunction. On the Closing Date, there shall be no effective
injunction, writ or preliminary restraining order or any order of any nature
issued by a court or governmental agency of competent jurisdiction directing
that the transactions provided for herein or any of them not be consummated as
herein provided.
(h) Consents. MPA and the Stockholders shall have obtained all
necessary consents and approvals of governmental authorities to the performance
by MPA and the Stockholders of the transactions contemplated by this Agreement.
(i) Office Lease. OHF shall have entered into a lease with MPA for
office space currently leased by MPA from Rick A. McNelly and/or Rick A. McNelly
Insurance Agency, on mutually agreeable terms, including but not limited to a
monthly rent of $1500 plus utilities.
13. INDEMNITY BY THE STOCKHOLDERS
(a) For a period of twenty four (24) months after the date of Closing,
except for any representations and warranties with respect to Taxes which shall
survive the date of Closing for a period of seventy two (72) months, the
Stockholders shall severally indemnify and hold OHF and MPA as the Successor
Corporation and its affiliates harmless from and against the following:
(i) any and all liabilities, losses, damages, claims, costs and
expenses of Sellers of any nature, whether absolute, contingent or otherwise,
existing at the Closing Date to the extent (A) not reflected or reserved against
in full in the Year End Statements, the Interim Statement or the other
Disclosure Schedule hereto, or (B) incurred in the ordinary course of business
which is required to be disclosed in the Disclosure Schedule or Exhibits hereto
but is not so disclosed or (C) incurred
-41-
other than in the ordinary course of Business of MPA between July 1, 2001 and
the Closing Date and not otherwise authorized herein;
(ii) any and all damages or deficiencies resulting from any
misrepresentation, breach of any warranty or non-fulfillment of any agreement or
covenant on the part of the Stockholders or MPA, contained in this Agreement or
any certificate furnished or to be furnished to OHF pursuant hereto or in
connection with the transactions contemplated hereby; and
(iii) any and all actions, suits, proceedings, demands, assessments,
judgments, costs and expenses incident to any of the foregoing, including but
not limited to reasonable attorneys' fees.
(b) If any claim for which OHF or MPA is entitled to indemnity is
asserted against OHF or MPA by a third party or is determined by OHF, OHF shall
notify Stockholders promptly and give Stockholders (i) a written summary in
reasonable detail of the claim upon receipt of the same by OHF or MPA or a
determination by OHF and (ii) an opportunity to defend the same with counsel of
Stockholders' choice (subject to the approval of OHF, not to be unreasonably
withheld or delayed) at Stockholders' expense. OHF, at Stockholders' expense,
shall provide reasonable cooperation in connection with such defense. In the
event that Stockholders desire to compromise or settle any such claim and such
compromise will adversely affect OHF or MPA, OHF shall have the right to consent
to such settlement or compromise; provided, however, that if such compromise or
settlement is for money damages only and will include a full release and
discharge of OHF or MPA, and OHF withholds its consent to such compromise or
settlement, Stockholders' liability shall be limited to the amount of the
proposed settlement and upon payment of such sum to OHF or MPA, Stockholders
shall thereupon be relieved of any further liability with respect to such claim,
and from and after such date, OHF will undertake all legal costs and expenses in
connection with any such claims.
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(c) Stockholders shall not be obligated to indemnify OHF or MPA
pursuant to Section 13(a) unless the aggregate amount owed to OHF and MPA
pursuant to subsection (a) exceeds $25,000, in which event Stockholders will be
required to indemnify OHF or MPA for the entire amount of liability arising out
of a breach of subsection (a).
(d) This indemnity shall survive termination of this Agreement.
14. TERMINATION
Notwithstanding any other provision of this Agreement, this Agreement
may be terminated at any time prior to the Closing Date:
(a) By mutual consent of OHF, MPA and the Stockholders;
(b) By any party (provided that the terminating party is not then in
material breach of any representation, warranty, covenant, or other agreement
contained in this Agreement) in the event of an inaccuracy of any representation
or warranty contained in this Agreement of the other party which cannot be or
has not been cured within 30 days after the giving of written notice to such
party of such inaccuracy and which inaccuracy would provide the other party the
ability to refuse to consummate this Agreement under the applicable provisions
set forth in Section 11 of this Agreement in the case of any termination by OHF
and Section 12 of this Agreement in the case of any termination by MPA and the
Stockholders;
(c) By any party (provided that the terminating party is not then in
material breach of any representation, warranty, covenant, or other agreement
contained in this Agreement) in the event of a material breach by the other
party of any covenant or agreement contained in this Agreement which cannot be
or has not been cured within 30 days after the giving of written notice to the
breaching party of such breach;
-43-
(d) By any party (provided that the terminating party is not then in
material breach of any representation, warranty, covenant, or other agreement
contained in this Agreement) in the event (i) any consent of any regulatory
authority required for consummation of the transactions contemplated hereby
shall have been denied by final nonappealable action of such authority or (ii)
if any action taken by such authority is not appealed within the time limit for
appeal; or
(e) By any party in the event that the transaction shall not have been
consummated by December 31, 2001, if the failure to consummate the transactions
contemplated hereby on or before such date is not caused by any breach of this
Agreement by the party electing to terminate pursuant to this Section 14(e).
15. SURVIVAL OF REPRESENTATIONS, ETC.
Except as otherwise stated herein, all representations and warranties
and indemnities and other agreements made by the parties hereto in this
Agreement or pursuant hereto shall survive the Closing or the termination of
this Agreement pursuant to the provisions of Section 14(b), (c) or (d)
hereunder.
16. NOTICES
All notices, consents, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given or
delivered if delivered personally or mailed by registered or certified mail,
return receipt requested, with first class postage prepaid or sent by facsimile:
(a) To MPA or the Stockholders:
Mr. Rick A. McNelly
Mr. Richard K. Patrick
78 Broadway Street
Jackson, OH 45640
Phone Number: 800 782 4278
Facsimile Number: 740 286 3168
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(b) To OHF:
Oak Hill Financial, Inc.
14621 State Route 93
Jackson, Ohio 45640
Attn.: John D. Kidd
Phone Number 740 286 3283
Facsimile Number: 740 288 2035
or to such other addresses as such parties shall have last designated by notice
to the other parties. Any item so mailed shall be deemed to have been delivered
on the third day following the date on which it is so mailed.
17. MODIFICATION
This Agreement contains the entire agreement between the parties hereto
with respect to the transactions contemplated herein and shall not be modified
or amended except by an instrument in writing signed by or on behalf of the
parties hereto.
18. LAW TO GOVERN
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Ohio.
19. ASSIGNMENT
This Agreement shall not be assignable by any party hereto, except by
the laws of descent and inheritance, in the event of the death of a Stockholder,
to the executors, administrators, heirs-at-law and distributee thereof and by
the laws governing incapacity in the event of incapacity of a Stockholder, to
such Stockholder's personal representative, or by OHF to any affiliate of OHF
with the reasonable consent of the Stockholders. Nothing in this Agreement is
intended to confer upon any person, other than the parties hereto and their
assignees or successors, any rights or remedies under or by reason of this
Agreement.
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20. EXPENSES
OHF shall bear all customary legal and accounting expenses reasonably
incurred by Stockholders and MPA in connection with the preparation of this
agreement and all other ancillary agreements and in connection with the
consummation of the transactions herein contemplated.
21. WAIVER
No waiver by any party hereto, whether express or implied, of its
rights under any provision of this Agreement shall constitute a waiver of such
party's rights under such provision at any other time or a waiver of such
party's rights under any other provision of this Agreement. No failure by any
party hereto to take any action with respect to any breach of this Agreement or
default by another party hereto shall constitute a waiver of the former party's
right to enforce any provision of this Agreement or to take action with respect
to such breach or default or any subsequent breach or default by such other
party.
22. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
23. 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 thereof.
References to numbered "Sections," "subsections" and "Exhibits" refer to
Sections and subsections of this Agreement and the Schedule and Exhibits annexed
hereto. References to this Agreement herein shall, unless the context otherwise
requires, include the Schedules and Exhibits annexed hereto.
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24. PUBLICITY
Prior to the Closing Date, the parties hereto shall not make any public
release of any information regarding matters contemplated hereby and except (i)
that joint press releases, as agreed upon by the parties, may be released after
the execution of this Agreement, (ii) the parties hereto may each continue such
communications with employees, customers, suppliers, franchisees, lenders,
lessors, stockholders, and other particular groups as may be legally required or
necessary or appropriate and not inconsistent with the best interest of the
other parties hereto or the prompt consummation of the transaction contemplated
by this Agreement, and (iii) as required by law.
(Remainder of page left intentionally blank.)
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first hereinabove written.
Oak Hill Financial, Inc.
By:
-----------------------------------
Title:
Innovative Financial Services Agency, Inc.
dba McNelly, Patrick & Associates
By:
----------------------------------
Title:
STOCKHOLDERS:
-------------------------------------
Richard K. Patrick
-------------------------------------
Rick A. McNelly
-48-
EXHIBITS
Item Exhibit
---- -------
Consent and Representation Agreement 9(o)
Opinion of Seller's Counsel 11(f)
Opinion of Porter, Wright, Morris & Arthur LLP 12(e)
(as buyer's counsel)
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DISCLOSURE SCHEDULE
Introduction
The attached constitute the Disclosure Schedule to the Agreement and Plan of
Merger dated as of August 1, 2001 (the "Agreement") by and among OAK HILL
FINANCIAL, INC., an Ohio corporation, INNOVATIVE FINANCIAL SERVICES AGENCY, INC.
d.b.a. McNelly, Patrick & Associates, an Ohio corporation ("Seller"), and
RICHARD K. PATRICK and RICK A. McNELLY ("Stockholders").
1. Capitalized terms used herein and not otherwise defined herein
shall have the meanings given to such terms in the Agreement.
2. The following Schedules are qualified in their entirety by reference
to the specific provisions of the Agreement, are not intended to constitute and
shall not be construed as constituting representations or warranties of the
Seller, except to the extent provided in the Agreement.
3. Matters reflected in the following Schedules are not necessarily
limited to matters required by the Agreement to be reflected in the Schedules.
Such additional matters are set forth for informational purposes only and the
Schedules do not necessarily include other matters of similar nature.
4. Headings have been inserted on the Schedules for convenience of
reference only and shall not have the effect of amending or changing the express
description of the Schedules as set forth in the Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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Item Schedule
- --------------------------- --------
Interim Statement 1(m)
To be attached.
Year End Statements 1(w)
To be attached. The Year End Statements are on a cash basis of accounting and
are being restated to be presented in conformity with generally accepted
accounting principles.
Power and Authority 6(a)(2) Certain of MPA's Insurance Contracts contain "change
in control" or other notice provisions that may be triggered by an announcement
or the consummation of the transactions contemplated by this Agreement.
Good Standing and Foreign Qualification 6(b)(1)
No exception
Capitalization 6(b)(2)
No exception
Subsidiaries; Other Affiliates 6(b)(3)
Insurance Services Agency of Ohio, Inc.
Owned in equal parts by Patrick, McNelly and
Wells
Ohio Valley Employee Benefit Agency, Ltd.
Owned in equal parts by MPA, Snider & Fuller,
Herron and Schwendeman
Corporate Authorization 6(b)(4)
No exception
Noncontravention 6(b)(5)
Certain of MPA's Insurance Contracts contain "change in control" or other notice
provisions that may be triggered by an announcement or the consummation of the
transactions contemplated by this Agreement.
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Options or Warrants 6(b)(6)
No exception
Fiscal Year End Statements 6(b)(7)
The financial statements for the last five years are on a cash basis of
accounting and are being restated to be presented in conformity with generally
accepted accounting principles.
Interim Statement 6(b)(8)
The Interim Statement is on a cash basis of accounting and is being restated to
conform to GAAP.
Absence of Undisclosed Liabilities 6(b)(9)
MPA has contracts for services with the following:
The James Elliot Group entitled Service Agreement for the provision of various
computer services for a retainer of $4,800, for the year April 1, 2001 through
April 1, 2002; and Zywave for a software program entitled Broker Briefcase for
rate that vary by volume.
Taxes 6(b)(10)
No exception
Compensation Due Employees 6(b)(11)
Name of Employee Compensation Paid/Payable during Current Aggregate Annual Base Salary
Current Fiscal Year through June 30, or Compensation Rate
2001
Rick A. McNelly 619,573.75 298,000.00
Richard F. Patrick 324,457.26 156,000.00
Curtis Wiggins 5,821.20 43,245.00
Renna Geitz 37,765.82 29,744.00
Sharon Gahm 68,908.25 29,993.60
Sherry Barr 32,493.27 23,400.00
Angela Sprouse 5,638.50 16,640.00
Connie Crabtree 20,727.12 19,760.00
Kelley Lewis 18,985.31 18,720.00
Kathy Argabright 18,037.25 17,680.00
Jennifer McLaughlin 603.75 9,100.00
David McNelly 1,839.16 1,690.00
Deb Patrick 43,644.55 21,840.00
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Service Provider
The James Elliott Group, pursuant to a Service Agreement dated as of
April 4, 2001; payment of $4800 for services to be rendered from 4/01/01 to
4/01/02.
Union Agreements and Employment Agreements 6(b)(12)
No exception
Insurance Sales Contracts 6(b)(13)
MPA has certain sub-brokerage agreements that represent in the aggregate
approximately $571,331 paid from July 1, 2000 through June 30, 2001; and Sellers
expect such amount paid to increase on an annual basis.
Title to Real and Personal Property 6(b)(14)
The company leases its current office space at 78 Broadway, Jackson, Ohio from
Rick A. McNelly.
Banks 6(b)(15)
Name of Bank Type of Account Authorized/Access Persons
Oak Hill Bank Premium Investment Account Richard F. Patrick
2820116 Rick A. McNelly
Curtis Wiggins
Sherry Barr
Oak Hill Bank Corporate Checking Account Richard F. Patrick
143187 Rick A. McNelly
Curtis Wiggins
Sherry Barr
Oak Hill Bank Payroll Account Richard F. Patrick
2253359 Rick A. McNelly
Curtis Wiggins
Sherry Barr
Ohio Valley Bank Money Market Account Richard F. Patrick
2026317 Rick A. McNelly
Curtis Wiggins
Sherry Barr
Edward Jones Money Market & Stocks Richard K. Patrick
166-07563-1-1 Rick A. McNelly
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Accounts Receivable and Advanced Commissions 6(b)(16)
Accounts receivable have been approximately 80% collectable on a historical
monthly basis by MPA.
Firm Insurance Policies 6(b)(17)
The agency maintains the following insurance policies, excluding those provided
as an employee benefit, along with policy number and expiration date:
Package Safeco Insurance Company 01-CE-631874-3 7/20/02
Errors & Omissions Utica National Insurance 3285988 EO 5/01/02
Workers Compensation Ohio Bureau of W.C. 838209-0 6/30/02
Group Medical Insurance United Health Care #41283 7/1/02
Group Life Insurance United Health Care #41283 No exp.
Group STD & LTD UNUM #0103226 No exp.
Section 125 with FSA AFLAC ____ ____
Vision VSP #12700361 No exp.
Business Overhead-McNelly MONY 90X0-05-51 No exp.
Business Overhead-Patrick MONY 90X0-27-69 No exp.
Licenses, Permits and Consents 6(b)(18)
The agency maintains the following insurance license:
Ohio Department of Insurance - Accident and Health, including HMO
Innovative Financial Services Agency, Inc. #ACH311012234
The agency employs the following individuals with the licenses shown adjacent to
their name:
West Virginia - Non-resident Life & A&S
Richard K. Patrick #50621
Rick A. McNelly #74145
Ohio Department of Insurance - Life, Accident and Health, Variable Life
Sharon L. Gahm #LAV285403217
Rick A. McNelly #LAV290580903
Debra L. Patrick #LAV281549457
Richard K. Patrick #LAV294521958
Curtis W. Wiggins, Jr. #580453
Robert S. Holsinger #LAV293665528
Taylor Hoskins #LAV277580916
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Ohio Department of Insurance - Accident and Health
Rick A. McNelly #AC290580903
Ohio Department of Insurance - Pre-paid Dental
Rick A. McNelly #ACH290580903
Ohio Department of Insurance - Health Maintenance Organization
Richard K. Patrick #HMO294521958
Litigation 6(b)(19)
No exception
Compliance with Laws 6(b)(20)
No exception
Copyrights, Trademarks, Trade Names, etc. 6(b)(21)
Pursuant to a Purchase Agreement dated 7/28/98 by and between Rick A. McNelly,
as seller, and Marguerite Howard, as buyer, Marguerite Howard bought the right
to use the name "Rick McNelly Insurance" or a variation thereof.
Conduct of Business 6(b)(22)
No exception
Material Change 6(b)(23)
No exception
No Liabilities as Guarantor 6(b)(24)
No exception
Interest in Clients, Suppliers and Competitors 6(b)(25)
See disclosure set forth in Item 6(b)(3)
ERISA 6(b)(26)
No exception
Termination by Employees or Clients 6(b)(27)
No exception
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Disclosure 6(b)(28)
No exception
Liabilities 6(b)(29)
No exception
Customer List 6(b)(30)
Oak Hill Banks
Oak Hill Schools
Pike Co. Community Action
Sands Hill Coal
University of Rio Grande
Vinton Co. Employees
Vinton Co. Schools
Washington C.H. Schools
Waverly City Schools
Wellston City Schools
Western Local Pike Co.
Seoems District
McGinnis, Inc.
Area Agency on Aging
Lawrence Co. Employees
Jackson Co. Employees
Jackson City Schools
Holzer Clinic
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Greenfield Village Schools
Gallipolis City Schools
Gallia Co. Employees
Fairland Schools
Certain Agreements with Clients 6(b)(31)
No exception
Insurance Contracts 6(b)(32)
Certain of MPA's Insurance Contracts contain "change in control" or other notice
provisions that may be triggered by an announcement or the consummation of the
transactions contemplated by this Agreement.
Commissions 6(b)(33)
Commission schedule to be attached.
No exception
Tax Treatment 6(b)(34)
No exception
Accounting Treatment 6(b)(35)
No exception
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