EXHIBIT 10l
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT, dated as of May 1, 2001 (this
"Agreement"), is made and entered into by and among BROWN & BROWN OF MISSOURI,
INC., a corporation incorporated under the laws of the State of Missouri
("Buyer"), PARCEL INSURANCE PLAN, INC., a corporation incorporated under the
laws of the State of Delaware ("Seller"), OVERSEAS PARTNERS CAPITAL CORP., a
corporation organized under the laws of the State of Delaware ("Parent") and
OVERSEAS PARTNERS LTD., a corporation organized under the laws of the Islands of
Bermuda ("OPL").
BACKGROUND
Seller has its principal executive offices in St. Louis, Missouri and
is engaged in the small package insurance (i.e., insurance of individual
packages under US$25,000.00 in value) agency business throughout the United
States (as more fully described in SECTION 1.2, the "Business"), and wishes to
sell substantially all of its assets relating to the Business to Buyer. Buyer
desires to acquire such assets upon the terms and conditions expressed in this
Agreement. OPL owns all of the outstanding capital stock of Parent, which in
turn owns all of the outstanding capital stock of Seller. OPL and Parent are
entering into this Agreement to provide certain non-competition, indemnification
and other assurances to Buyer as a material inducement for Buyer to enter into
this transaction.
THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein, the parties agree as
follows:
ARTICLE 1.
THE ACQUISITION
Section 1.1 COVENANTS OF SALE AND PURCHASE. As of the Effective
Date (as defined in SECTION 2.6), at the Closing (as defined in SECTION 2.1) and
upon and subject to the terms and conditions of this Agreement, the parties
mutually covenant and agree as follows:
(a) Seller shall sell, convey and assign to Buyer all of
its right, title and interest of Seller in and to the Acquired Assets (as
defined in SECTION 1.2), free and clear of all liens, pledges, security
interests, charges, restrictions or encumbrances of any nature whatsoever;
(b) OPL shall agree to the non-competition covenants in
SECTION 5.2;
(c) Buyer shall purchase the Acquired Assets from Seller
and assume the Assigned Contracts (as defined in SECTION 1.2(C)) in exchange for
the consideration described in SECTION 1.4(A)(I), SECTION 1.4(A)(II) and SECTION
1.4(A)(IV); and
(d) Buyer shall receive the benefit of such covenants by
OPL in exchange for the consideration described in SECTION 1.4(A)(III).
Section 1.2 THE ACQUIRED ASSETS. In this Agreement, the phrase
"Acquired Assets" means all of the assets of Seller described below:
(a) Purchased Book of Business. All of the Business,
including but not limited to the small package insurance agency business and
renewals and expirations thereof, together with all written or otherwise
recorded documentation, data or information relating to the Business, whether
compiled by Seller or by other agents or employees of Seller, including but not
limited to: (i) lists of insurance companies and records pertaining thereto; and
(ii) customer lists, prospect lists, policy forms, and/or rating information,
expiration dates, information on risk characteristics, information concerning
insurance markets for large or unusual risks, and all other types of written or
otherwise recorded information customarily used by Seller or available to
Seller, including all other records of and pertaining to the accounts and
customers of Seller, past and present, including, but not limited to, the active
insurance customers of Seller, all of whom are listed on Schedule 1.2(a) hereto
(collectively, the "Purchased Book of Business").
(b) Intangibles. All intangible personal property
currently used by Seller in connection with the Business or pertaining to the
Acquired Assets, including without limitation the following:
(i) all of Seller's Business records necessary
to enable Buyer to renew the Purchased Book of Business;
(ii) the goodwill of the Business, including the
corporate name "Parcel Insurance Plan, Inc.", and any other trade names that are
currently used by Seller, and all telephone listings, post office boxes, mailing
addresses (to the extent transferable), and advertising signs and materials that
are currently used by Seller; and
(iii) all Intellectual Property (as defined below)
related to the Business and currently used by Seller.
As used in this Agreement, the term "Intellectual Property"
means (A) all patents, patent applications, and patent disclosures, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof, (B) all trademarks and service marks,
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (C) all copyrightable
works, all copyrights, and all copyright applications, registrations, and
renewals in connection therewith, (D) all trade secrets and confidential
business information (including research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information, and business and marketing plans and proposals), (E) all
computer software (including data and related documentation), but excluding
computer software commercially available to the general public and readily
replaceable, (F) all other proprietary rights, and (G) all copies and tangible
embodiments thereof (in whatever form or medium).
(c) Assigned Contracts. All of Seller's (i)
non-solicitation and non-disclosure agreements and covenants not to compete
listed on Schedule 1.2(c)(i) and contracts and agreements described in SECTIONS
3.9(C)(I), (II), (IV) (but only with respect to capitalized lease obligations),
(V) (but only with respect to agreements that are in favor of Buyer) and (XII)
and listed on Schedule 3.9(c), and (ii) contracts and agreements that would be
required to be listed on Schedule 3.9(c) pursuant to SECTIONS 3.9(C)(I), (II),
(IV) (but only with respect to capitalized lease
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obligations) and (XII) but for the amount of annual payments provided
thereunder, which are not listed on Schedule 3.9(c), which contracts and
agreements Seller has attempted in good faith to list on Schedule 1.2(c)(ii)
hereto (all of the contracts, agreements and instruments referenced in (i) and
(ii) of this SECTION 1.2(C) are collectively referred to herein as the "Assigned
Contracts").
(d) Miscellaneous Items. All other assets of Seller
relating or pertaining to the Purchased Book of Business, which may include (i)
computer disks, servers, software, databases (whether in the form of computer
tapes or otherwise), related object and source codes, and associated manuals,
and any other records or media of storage or programs for retrieval of
information pertaining to the Purchased Book of Business, (ii) all supplies and
materials, including promotional and advertising materials, brochures, plans,
supplier lists, manuals and handbooks, and related written data and information,
(iii) all Internet web site content, related object and source codes, domain
names and addresses, (iv) claims, customer and other deposits (subject to the
assumption of the liabilities related thereto pursuant to SECTION 1.4(D)(I)),
prepayments, refunds, causes of action, choses in action, rights of recovery,
rights of set off, and rights or recoupment, (v) copies of personnel, benefit,
compensation and other records and documents relating to the employees of
Seller, and (vi) any transferable franchises, approvals, permits, licenses,
orders, registrations, certificates, variances and similar rights obtained from
Governmental Authorities (as defined in Section 3.5), in all cases excluding all
property and casualty agent licenses or broker licenses held by Seller or its
employees.
(e) Tangible Property. All items of furniture, fixtures,
computers, office equipment and other tangible property used in the Business,
including but not limited to the property listed in Schedule 1.2(e). To the
extent that any of such items are subject to a lease identified in Schedule
3.9(c), Buyer shall assume such lease and acquire all of Seller's right, if any,
to acquire such property upon termination of such lease.
Section 1.3 EXCLUSIONS AND EXCEPTIONS. Seller does not agree to
sell or assign, and Buyer does not agree to purchase or assume, any assets,
liabilities and obligations not described in SECTION 1.2 and SECTION 1.4(D)(I)
of this Agreement. Without limiting the foregoing and notwithstanding anything
to the contrary set forth in, Buyer shall not purchase or assume any of the
following:
(a) Seller's cash in hand or in banks and other readily
liquid working capital as of the close of business on the Effective Date or the
Closing Date, whichever amount is greater, including Seller's accounts and other
receivables, money market certificates, stocks and bonds;
(b) (i) any contract, lease or other obligation that
relates to the Acquired Assets or the Purchased Book of Business and is not
otherwise specifically assigned to Buyer under this Agreement (including,
without limitation, any agreement (except capitalized lease obligations)
described in SECTION 3.9(C)(IV) of this Agreement), or (ii) any contract, lease
or other obligation whatsoever not relating to the Acquired Assets or the
Purchased Book of Business;
(c) (i) Seller's corporate charter and by-laws,
qualifications to conduct business as a foreign corporation, arrangements with
registered agents relating to foreign qualifications, taxpayer and other
identification numbers, seals, minute books, stock transfer books, blank stock
certificates, and other documents relating to the organization, maintenance, and
existence of Seller
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as a corporation or (ii) any of the rights of Seller under this Agreement (or
under any other agreement between Seller on the one hand and Buyer on the other
hand entered into on or after the date of this Agreement);
(d) except as set forth in SECTION 5.11(D), any duty or
liability of any type whatsoever with respect to any employee or to any pension
or profit sharing plan or other employee benefit including, without limitation,
those described in SECTION 3.19 hereof;
(e) any liability of Seller, Parent, or any of their
respective directors, officers, employees, agents, affiliates or
representatives, with respect to any litigation, proceedings, or other actions
or disputes directly or indirectly involving such parties including, but not
limited to, any such actions or disputes set forth in Schedule 3.10 hereto;
(f) (i) any liability of Seller for Taxes (as defined in
SECTION 6.6 hereof) arising in connection with the consummation of the
transactions contemplated hereby (including any income Taxes arising because
Seller is transferring the Acquired Assets), (ii) any obligation of Seller to
indemnify any person or entity (including Parent) by reason of the fact that
such person or entity was a director, officer, employee, or agent of Seller or
was serving at the request of any such entity as a partner, trustee, director,
officer, employee, or agent of another entity (whether such indemnification is
for judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such indemnification is pursuant to
any statute, charter document, bylaw, agreement, or otherwise) (iii) any
liability of Seller for costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby, or (iv) any liability or
obligation of Seller under this Agreement (or under any related agreement
between Seller on the one hand and Buyer on the other hand entered into on or
after the date of this Agreement); or
(g) any documents, books, records, agreements,
correspondence and financial data, whether in paper, electronic, digital or
other format, which do not relate or pertain to the Business.
Section 1.4 CONSIDERATION; ASSUMPTION OF LIABILITIES.
(a) Buyer shall on the Closing Date: (i) assume the
Assumed Liabilities as provided in SECTION 1.4(D); (ii) deliver to Seller at the
Closing US$18,256,711.18 which equals (A) Twenty Million Seven Hundred Thousand
United States Dollars (US$20,700,000), plus (B) the amount by which the "Credit
Due Seller" as set forth in Schedule 1.4(a) exceeds the amount of the "Credit
Due Buyer" as set forth in Schedule 1.4(a) but not less than zero, minus (C)
US$168,264.17, the amount by which the "Credit Due Buyer" as set forth in
Schedule 1.4(a) exceeds the amount of the "Credit Due Seller" as set forth in
Schedule 1.4(a) but not less than zero, plus (D)US$24,975.35 the "Total Assumed
Liabilities" amount set forth on Schedule 1.4(d)(i), minus (E) US$2,300,000 (the
"Holdback Amount"); (iii) deliver to OPL at the Closing Two Million Three
Hundred Thousand United States Dollars (US$2,300,000.00); and (iv) deliver to
LeBoeuf, Lamb, Greene & MacRae, L.L.P. ("LeBoeuf") at the Closing the Holdback
Amount.
(b) Subject to SECTION 1.4(C), all amounts payable by
Buyer pursuant to SECTION 1.4(A) shall be paid to Seller, OPL and LeBoeuf in
cash by wire transfer or delivery of other
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immediately available funds in United States currency to one or more accounts
designated in writing by LeBoeuf, Seller and/or OPL no later than two (2)
business days prior to the date each such payment is to be made.
(c) The Holdback Amount described in SECTION
1.4(A)(II)(E) shall be subject to reduction pursuant to SECTION 1.5 hereof to
offset any obligations of Seller or OPL under the indemnification provisions
contained in ARTICLE 6 hereof. Satisfaction of any indemnity obligations from
the Holdback Amount shall not operate to waive the indemnification obligations
of Seller or OPL contained in ARTICLE 6 for damages incurred by Buyer in excess
of such amounts. The Holdback Amount plus interest as provided in SECTION 1.5
hereof as may be reduced pursuant to SECTION 1.5 hereof, shall be paid to Seller
on April 30, 2002 (or the next business day if April 30, 2002 is not a business
day).
(d) As of the Effective Date, at the Closing and as
additional consideration for the purchase of the Acquired Assets, Buyer shall
execute and deliver to Seller:
(i) an assumption agreement, in substantially
the form attached hereto as Exhibit A (the "Assumption Agreement"), pursuant to
which Buyer shall assume from Seller and agree, subject to SECTION 1.3, to pay,
perform and discharge when due, to the extent the same are unpaid, unperformed
or undischarged on the Effective Date, all of the liabilities and obligations of
Seller (A) which arise under the terms of any Assigned Contract, or (B) which
are set forth on Schedule 1.4(d)(i) (collectively, the "Assumed Liabilities");
and
(ii) a bill of sale and assignment, in
substantially the form attached hereto as Exhibit B (the "Bill of Sale and
Assignment").
(e) For federal and state income tax purposes, the
parties agree to allocate the aggregate consideration set forth in SECTION
1.4(A) as follows: (i) $546,649 shall be allocated to the tangible property
listed on Schedule 1.2(e); (ii) $2,300,000 shall be allocated to the covenants
of OPL set forth in SECTION 5.2 hereof; and (iii) the remainder shall be
allocated to the Purchased Book of Business (the "Allocation"). Each of Buyer
and Seller shall file, in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"), an Asset Acquisition Statement on Form 8594 with its
federal income tax return for the tax year in which the Closing Date occurs, and
shall contemporaneously provide the other party with a copy of the Form 8594
being filed. The Form 8594 shall be consistent with the Allocation. Each of
Buyer and Seller also shall prepare any additional Forms 8594 from time to time
as are required to reflect any adjustments to the consideration set forth in
SECTION 1.4(A), and shall provide the other party with a copy of the additional
Form 8594 within 60 days after the calendar year in which the adjustment occurs.
The final version of each additional Form 8594 as agreed to by Buyer and Seller
shall be timely filed by each of Buyer and Seller.
Section 1.5 ESCROW OF HOLDBACK AMOUNT.
(a) At the Closing, Buyer, Seller and LeBoeuf shall enter
into the Escrow Agreement in the form attached hereto as Exhibit C. Subject to
SECTION 1.5(c), the Escrow Fund thereunder shall be subject to withdrawal by
Buyer in whole or in part to satisfy Seller's and OPL's indemnification
obligations hereunder, with the balance of the Holdback Amount, if any,
remaining
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after such withdrawals and payments, plus all accumulated interest
thereon, liquidated promptly after April 30, 2002 and, no later than three (3)
business days after such liquidation, delivered to Seller.
(b) Promptly after the Closing, Buyer and Seller shall
direct LeBoeuf to transfer the Holdback Amount plus any interest thereon to a
financial institution within or without the United States (the "Bank") as
selected by Seller (subject to the reasonable approval of Buyer), which shall
hold such amount in a money market deposit account, in Buyer's name and
designated as the "Parcel Insurance Plan Escrow Account", which shall bear
interest at the prevailing rate offered by such financial institution for such
accounts. Such account, subject to SECTION 1.5(C), shall be subject to
withdrawal by Buyer in whole or in part to satisfy Seller's or OPL's
indemnification obligations hereunder, with the balance of the Holdback Amount,
if any, remaining after any such withdrawals and payments, plus all accumulated
interest thereon, liquidated promptly after April 30, 2002 and, no later than
three (3) business days after such liquidation, delivered to Seller.
(c) Upon the occurrence of an indemnifiable event under
ARTICLE 6 hereof, Buyer shall first make a claim for the indemnifiable amount
resulting from such indemnifiable event from the Holdback Amount and shall
provide written notice of intention to make a withdrawal from the Escrow Fund
under the Escrow Agreement referenced in SECTION 1.5(A) or the money market
deposit account referenced in SECTION 1.5(B), as the case may be, to Seller or
OPL. Such notice shall summarize the reason for such withdrawal and the amount
of the Holdback Amount to be applied in satisfaction of OPL's indemnification
obligation. If Seller agrees with the purpose of such withdrawal, then Seller
and Buyer shall submit a written notice signed by Seller and Buyer to LeBoeuf or
the Bank, as the case may be, directing LeBoeuf or the Bank, as the case may be,
to release the indemnifiable amount to Buyer. If Seller disputes in good faith
the purpose of such withdrawal, Seller and Buyer shall resolve any dispute
before submitting any written notice to LeBoeuf or the Bank, as the case may be.
Section 1.6 COMMISSIONS COLLECTED. Notwithstanding anything to
the contrary in SECTION 1.3, all commissions on installments of agency bill
policies actually received by Seller prior to the Effective Date (as defined in
SECTION 2.6) shall be the property of Seller and those actually received by
Seller or Buyer on or after the Effective Date shall be the property of Buyer.
All contingent commissions and/or override commissions received on or after the
Effective Date, regardless of when earned, shall be the property of Buyer. All
additional or return commissions as a result of audits conducted prior to the
Effective Date and actually received from or repaid to insurance carriers before
the Effective Date shall be the property or the responsibility of Seller,
regardless of the effective date of the underlying policy, and those actually
received from or repaid to insurance carriers on or after the Effective Date
shall be the property or responsibility of Buyer, regardless of the effective
date of the underlying policy. Notwithstanding the provisions of SECTION 3.12
and SECTION 6.6 of this Agreement, (a) Seller shall be responsible for and shall
indemnify Buyer for Taxes in respect of commissions that are the property of
Seller in accordance with this SECTION 1.6, and (b) Buyer shall be responsible
for and shall indemnify Seller for Taxes in respect of commissions that are the
property of Buyer in accordance with this SECTION 1.6.
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ARTICLE 2.
CLOSING, ITEMS TO BE DELIVERED, FURTHER ASSURANCES,
AND EFFECTIVE DATE
Section 2.1 CLOSING. The consummation of the purchase and sale
of the Acquired Assets and the assumption of the Assumed Liabilities under this
Agreement (the "Closing") shall take place at 10 a.m., local time, on May 11,
2001 or on such later date upon which the parties may mutually agree (the
"Closing Date") at the offices of LeBoeuf, Lamb, Greene & MacRae, L.L.P., 125
West 55th Street, New York City, New York 10019, unless another location is
agreed to by the parties hereto.
Section 2.2 CONVEYANCE AND DELIVERY BY SELLER. At the Closing:
(a) Seller shall surrender and deliver possession of the
Acquired Assets to Buyer and take such steps as may be required to put Buyer in
actual possession and operating control of the Acquired Assets, and in addition
shall deliver to Buyer such bills of sale and assignments and other good and
sufficient instruments and documents of conveyance, in form reasonably
satisfactory to Buyer, as shall be necessary and effective to consummate the
transactions specified or contemplated by this Agreement and to transfer and
assign to, and vest in, Buyer all of Seller's right, title, and interest in and
to the Acquired Assets free and clear of any lien, charge, pledge, security
interest, restriction or encumbrance of any kind except as otherwise indicated
in this Agreement; and
(b) Seller shall deliver to Buyer: (i) all keys to each
office site, facility, and equipment transferred to Buyer; (ii) all security and
access codes, if any, applicable to each site, facility, and equipment
transferred to Buyer; and (iii) the Bill of Sale and Assignment, executed by
Seller.
Section 2.3 ASSUMPTION AND DELIVERY BY BUYER. On the Closing
Date, Buyer shall (a) make the payments described in SECTION 1.4(A)(II), (III)
and (IV), by wire transfer of immediately available funds in United States
currency to the appropriate accounts, and (b) deliver to Seller the Assumption
Agreement, executed by Buyer.
Section 2.4 MUTUAL PERFORMANCE. At the Closing, the parties shall
also deliver to each other the agreements and other documents referred to in
ARTICLE 5 hereof.
Section 2.5 FURTHER ASSURANCES. From time to time after the
Closing, at Buyer's request, Seller shall execute, acknowledge and deliver to
Buyer such other instruments of conveyance and transfer and shall take such
other actions and execute and deliver such other documents, certifications and
further assurances as Buyer may reasonably request in order to vest more
effectively in Buyer, or to put Buyer more fully in possession of, any of the
Acquired Assets. Each of the parties hereto shall cooperate with the others and
execute and deliver to the other parties such other instruments and documents
and take such other actions as may be reasonably requested from time to time by
any other party hereto as necessary to consummate the transactions specified or
contemplated by this Agreement and to carry out, evidence and confirm the
intended purposes of this Agreement.
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Section 2.6 EFFECTIVE DATE. The effective date of all documents
and instruments executed at the Closing shall be May 1, 2001 at 12:01 am Central
Daylight Time (the "Effective Date") unless otherwise specified.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF SELLER, PARENT AND OPL
Seller, Parent and OPL represent and warrant, jointly and severally, to
Buyer as follows:
Section 3.1 ORGANIZATION OF SELLER. Seller is a corporation
organized and in good standing under the laws of the State of Delaware. Seller
has all requisite corporate power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as now being conducted. Seller is duly qualified or licensed to do business and
is in good standing in each jurisdiction in which the property owned, leased, or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary.
Section 3.2 ORGANIZATION OF PARENT AND OPL.
(a) Parent is a corporation organized and in good
standing under the laws of the State of Delaware. Parent has all requisite
corporate power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as now being
conducted.
(b) OPL is a corporation organized and in good standing
under the laws of the Islands of Bermuda. OPL has all requisite corporate power
and authority and all necessary governmental approvals to own, lease and operate
its properties and to carry on its business as now being conducted.
Section 3.3 CAPITALIZATION. Parent owns and holds all of the
outstanding shares of capital stock of Seller and there are no outstanding
options or rights to acquire additional shares of capital stock of Seller.
Section 3.4 AUTHORITY. Seller, Parent and OPL each have the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery
and performance of this Agreement, and the consummation of the Agreement and the
other transactions contemplated hereby, have been duly authorized by all
necessary corporate action on the part of Seller, Parent and OPL, including
without limitation the respective boards of directors of Seller, Parent and OPL.
This Agreement has been, and the other agreements, documents and instruments
required to be delivered by Seller, Parent and OPL in accordance with the
provisions hereof (collectively, the "Seller's Documents") shall be, duly
executed and delivered by duly authorized officers of Seller, Parent and OPL on
behalf of Seller, Parent and OPL, respectively, and assuming this Agreement
constitutes a valid and binding obligation of Buyer, this Agreement constitutes,
and the Seller's Documents when executed and delivered shall constitute, legal,
valid and binding obligations of Seller, Parent and OPL, enforceable against
Seller, Parent and OPL in accordance with their terms, subject to applicable
bankruptcy, insolvency, reorganization or similar laws from time to time in
effect which offset
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creditors' rights generally and general equitable principles (regardless of
whether the issue of enforceability is considered in a proceeding in equity or
in law).
Section 3.5 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set
forth in Schedule 3.5, neither the execution, delivery or performance of this
Agreement by Seller and Parent nor the consummation by them of the transactions
contemplated hereby nor compliance by it with any of the provisions hereof shall
(a) conflict with or result in any breach of, any provision of their respective
Certificates of Incorporation or Bylaws (or equivalent charters or
organizational documents), (b) require any filing with, or permit,
authorization, consent or approval of, any federal, state, local, or foreign
court, arbitral tribunal, administrative agency or commission, or other
governmental or other regulatory authority or agency (each a "Governmental
Authority"), or (c) result in a violation or breach of, or constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice or consent under
any of the terms, conditions or provisions of any agreement or other instrument
or obligation to which Seller or Parent is a party or by which Seller or any of
its properties or assets may be bound.
Section 3.6 NO THIRD PARTY OPTIONS. There are no existing
agreements, options, commitments, or rights with, of or to any person to acquire
any of Seller's assets, properties or rights included in the Acquired Assets or
any interest therein.
Section 3.7 FINANCIAL STATEMENTS AND OTHER FINANCIAL DATA. The
following financial statements of Seller (collectively, the "Financial
Statements") have been delivered or previously made available to Buyer: (i)
statements of assets, liabilities and equity-income tax basis and the related
statements of revenues, expenses and retained earnings-income tax basis, and the
respective accountants' compilation reports related thereto, as of and for the
fiscal years ended December 31, 2000, December 31, 1999, and December 31, 1998
(the "Most Recent Fiscal Year End") for Seller, and (ii) unaudited statements of
assets, liabilities and equity-income tax basis and the related statements of
revenues, expenses and retained earnings-income tax basis ("Most Recent
Financial Statements") as of and for the three (3) months ended March 31, 2001
(the "Most Recent Fiscal Month End"). The Financial Statements (including the
Notes thereto) have been prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis throughout the
periods covered thereby, present fairly the financial condition of Seller,
including assets and liabilities (whether accrued, absolute, contingent or
otherwise) as of such dates and the results of operations of Seller for such
periods, are correct and complete, and are consistent with the books and records
of Seller (which books and records are correct and complete); provided, however,
that the Most Recent Financial Statements lack footnotes and other presentation
items. Seller has not guaranteed any premium financing on behalf of its
customers.
Section 3.8 ORDINARY COURSE OF BUSINESS. Since the Most Recent
Fiscal Month End, Seller has carried on the Business in the usual, regular and
ordinary course in substantially the manner heretofore conducted and has taken
no unusual actions in contemplation of this transaction, except with the consent
of Buyer. Since the Most Recent Fiscal Month End, there have been no events or
changes having an adverse effect on Seller, the Business or the Acquired Assets.
Except as set forth in Schedule 3.8, all of Seller's accounts payable, including
accounts payable to insurance carriers, are current and reflected properly on
its books and records, and
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shall be paid in accordance with their terms at their recorded amounts. Other
than as described on Schedule 3.8, and without limiting the generality of the
foregoing, since the Most Recent Fiscal Month End:
(a) Seller has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair consideration
in the ordinary course of business;
(b) Seller has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) either involving more than US$5,000.00 or outside the ordinary course
of business;
(c) no party (including Seller) has accelerated,
terminated, modified, or canceled any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) involving more
than US$5,000.00 to which Seller is a party or by which it is bound;
(d) Seller has not imposed or granted any mortgage,
pledge, lien, encumbrance, charge or other security interest upon any of its
assets, tangible or intangible;
(e) Seller has not made any capital expenditure (or
series of related capital expenditures) either involving more than US$5,000.00,
or outside the ordinary course of business;
(f) Seller has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any other person or
entity (or series of related capital investments, loans, and acquisitions)
either involving more than US$5,000.00, or outside the ordinary course of
business;
(g) Seller has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
US$5,000.00 singly or US$10,000.00, in the aggregate;
(h) Seller has not delayed or postponed the payment of
accounts payable and other liabilities outside the ordinary course of business;
(i) Seller has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims) either
involving more than US$5,000.00, or outside the ordinary course of business;
(j) Seller has not granted any license or sublicense of
any rights under or with respect to any patent, trademark, servicemark, logo,
corporate name or computer software;
(k) there has been no change made or authorized in the
charter or bylaws of Seller;
(l) Seller has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any of its
capital stock;
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(m) Seller has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
(n) Seller has not experienced any damage, destruction,
or loss (whether or not covered by insurance) to its property;
(o) Seller has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees outside
the ordinary course of business;
(p) Seller has not entered into any employment contract
or collective bargaining agreement, written or oral, or modified the terms of
any existing such contract or agreement;
(q) Seller has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
ordinary course of business;
(r) Seller has not adopted, amended, modified or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees;
(s) Seller has not made any other change in employment
terms for any of its directors, officers, and employees outside the ordinary
course of business;
(t) Seller has not made or pledged to make any charitable
or other capital contribution outside the ordinary course of business; and
(u) Seller has not entered into any agreement to purchase
or acquire any insurance agency business.
Section 3.9 ASSETS.
(a) Seller owns and holds, free and clear of any lien,
charge, pledge, security interest, restriction, encumbrance or third-party
interest of any kind whatsoever (including insurance company payables), sole and
exclusive right, marketable title and interest in and to the Acquired Assets,
including but not limited to the customer expiration records for those customers
listed in Schedule 1.2(a), together with the exclusive right to use such records
and all customer accounts, copies of insurance policies and contracts in force
and all files, invoices and records pertaining to the customers, their contracts
and insurance policies, and all other information comprising the Purchased Book
of Business. Seller has not received notice that any of the accounts listed in
Schedule 1.2(a) has canceled or non-renewed or intends to cancel or non-renew.
Schedule 1.2(a) also shows the premiums paid to Seller by each customer during
the twelve-month period ended April 30, 2001. None of the accounts shown in
Schedule 1.2(a) represents business that has been brokered through a third
party.
(b) The service marks "Parcel Insurance Plan(R)" and
"PIP(R)" are the only service marks used by Seller within the past three years.
Seller has not received notice of any claims filed during the past three years
against Seller alleging that it has violated, infringed on or otherwise
improperly used the Intellectual Property rights of a third party, or, if so,
the claim has been settled,
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withdrawn or abandoned with no existing liability to Seller and, to the
Knowledge (as defined in SECTION 7.2 hereof) of Seller and Parent, Seller has
not violated or infringed any trademark, trade name, service mark, service name,
patent, copyright or trade secret held by others.
(c) Schedule 3.9(c) lists all material contracts,
agreements and other written or verbal arrangements to which Seller is a party,
including, but not limited to:
(i) any agreement (or group of related
agreements) for the lease of personal property to or from any person or entity
providing for lease payments in excess of US$10,000.00 per annum;
(ii) any agreement (or group of related
agreements) for the purchase or sale of raw materials, commodities, supplies,
products, or other personal property, or for the furnishing or receipt of
services, the performance of which shall extend over a period of more than one
(1) year, result in a loss to Seller, or involve consideration in excess of
US$10,000.00;
(iii) any agreement concerning a partnership or
joint venture;
(iv) any agreement (or group of related
agreements) under which it has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease obligation, in excess
of US$10,000.00 or under which it has imposed a security interest on any of its
assets, tangible or intangible;
(v) any employment, confidentiality,
nonsolicitation or noncompetition agreement;
(vi) any agreement involving Parent or any of
Parent's affiliates (other than Seller);
(vii) any collective bargaining agreement;
(viii) any agreement for the employment of any
individual on a full-time, part-time, consulting, or other basis providing
annual compensation in excess of US$50,000.00 or providing severance benefits in
excess of US$50,000.00;
(ix) any agreement under which Seller has
advanced or loaned any amount to any of its directors, officers, and employees
outside the ordinary course of business;
(x) any agreement under which the consequences
of a default or termination could have a adverse effect on the Business,
financial condition, operations, results of operations, or future prospects of
Seller; or
(xi) any other written arrangement (or group of
related arrangements) either involving more than US$10,000.00 or not entered
into in the ordinary course of business.
Seller has delivered or made available to Buyer true and complete copies of each
such agreement, and, in the case of unwritten agreements, a true and complete
summary of such arrangements. Seller is in compliance with the terms thereof.
With respect to each such
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agreement listed in Schedule 3.9(c), to the Knowledge of Seller: (A) the
agreement is legal, valid, binding, enforceable, and in full force and effect;
(B) the agreement shall continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following the consummation of the
transactions contemplated hereby, and no event has occurred that with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (C) no party has
repudiated any provision of the agreement.
(d) The computer software currently being used by Seller
in connection with the Business performs in accordance with the documentation,
and other written material used in connection therewith is substantially free of
defects in programming and operation as needed in the operation of the Business.
Seller has delivered or previously made available to Buyer complete and correct
copies of all user and technical documentation in their possession related to
such software.
(e) Seller owns or leases all buildings, equipment, and
other assets necessary for the conduct of the Business as presently conducted.
All such assets are included within the Acquired Assets. Each such asset is free
from defects (patent and latent), has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to normal
wear and tear), and is suitable for the purposes for which it presently is used
and presently is proposed to be used.
Section 3.10 LITIGATION AND CLAIMS; SOLVENCY. Except as disclosed
in Schedule 3.10, there is no suit, claim, action, proceeding or investigation
pending or, to the Knowledge of Seller, threatened against Seller before any
Governmental Authority that would have a material adverse effect on (i) the
ability of Seller to timely perform its obligations under this Agreement or any
Seller's Document or to consummate the transactions contemplated hereby or
thereby, or (ii) the Business or financial condition, results of operations or
assets of Seller (a "Material Adverse Effect") or that would prevent Seller from
consummating the transactions contemplated by this Agreement. Seller is not
subject to any outstanding order, writ, injunction or decree which, insofar as
can be reasonably foreseen, individually or in the aggregate, in the future
would have a Material Adverse Effect or would prevent Seller from consummating
the transactions contemplated hereby. No voluntary or involuntary petition in
bankruptcy, receivership, insolvency or reorganization with respect to Seller,
or petition to appoint a receiver or trustee of Seller's property, has been
filed by or against Seller, nor shall Seller file such a petition prior to the
Closing Date or for one hundred (100) days thereafter, and if such petition is
filed by others, the same shall be promptly discharged. Seller has not made any
assignment for the benefit of creditors or admitted in writing insolvency or
that its property at fair valuation shall not be sufficient to pay its debts,
nor shall Seller permit any judgment, execution, attachment or levy against it
or its properties to remain outstanding or unsatisfied for more than ten (10)
days. Seller shall not become insolvent as a result of consummating the
transactions contemplated by this Agreement.
Section 3.11 COMPLIANCE WITH APPLICABLE LAW. Except as set forth
in Schedule 3.11, Seller holds all permits, licenses, variances, exemptions,
orders and approvals of all Governmental Authorities necessary for the lawful
conduct of the Business (collectively, the "Permits"), and Seller is in
compliance with the terms of the Permits except where the failure to hold any
such Permit or where noncompliance with such Permits would not have a Material
13
Adverse Effect. Seller is not in violation of any law, ordinance or regulation
of any Governmental Authority including without limitation any law, ordinance or
regulation relating to any of Seller's employment practices. As of the date of
this Agreement, no investigation or review by any Governmental Authority with
respect to Seller is pending or, to the Knowledge of Seller and Parent,
threatened.
Section 3.12 TAX MATTERS. Seller has no liability or obligation
in respect of Taxes (as defined in SECTION 6.6) for which Buyer may become
liable or to which the Acquired Assets may become subject.
Section 3.13 NON-SOLICITATION COVENANTS. Neither Seller nor
Parent is a party to any agreement that restricts Seller's or Parent's ability
to compete in the insurance agency industry or solicit specific insurance
accounts.
Section 3.14 ERRORS AND OMISSIONS. Seller has not incurred any
liability or taken or failed to take any action that may reasonably be expected
to result in a liability for errors or omissions in the conduct of the Business,
except such liabilities as are fully covered by insurance (other than
deductibles). All errors and omissions (E&O) claims currently pending or
threatened against Seller are set forth in Schedule 3.10. Seller has E&O
insurance coverage in force, with minimum liability limits of $3 million per
claim and $3 million aggregate, and a deductible of $10,000 per claim, and shall
provide to Buyer evidence of such E&O coverage prior to or on the Closing Date.
Section 3.15 ENVIRONMENTAL AND PUBLIC SAFETY COMPLIANCE. Seller
and its predecessors entities and affiliates have complied with all laws
(including rules and regulations thereunder) of any Government Authority
concerning the environment, public health and safety, and employee health and
safety except where noncompliance would not have a Material Adverse Effect, and
no charge, complaint, action, suit, proceeding, hearing, investigation, claim,
demand or notice has been filed or commenced against Seller or its predecessor
entities or affiliates alleging any failure to comply with any such law, rule or
regulation. Neither Seller nor its predecessor entities or affiliates has
received any notification from any Governmental Authority that it allegedly was
a contributor to or a potentially responsible party in connection with, any
place a which Hazardous Material was stored, treated, released or disposed. The
term "Hazardous Materials" means any "toxic substance" as defined in 15 U.S.C.
ss.ss. 2601 et seq. on the date hereof, including materials designated on the
date hereof as "hazardous substances" under 42 U.S.C. ss.ss.9601 et seq. or
other applicable laws, and toxic, radioactive, caustic, or otherwise hazardous
substances, including petroleum and its derivatives, asbestos, PCBs,
formaldehyde, chlordane and heptachlor.
Section 3.16 POWERS OF ATTORNEY. There are no outstanding powers
of attorney executed on behalf of Seller.
Section 3.17 INSURANCE. Schedule 3.17 sets forth the following
information with respect to each insurance policy (including policies providing
property, casualty, liability, and workers' compensation coverage and bond and
surety arrangements, and that policy described in SECTION 3.14 hereof) to which
Seller has been a party, a named insured, or otherwise the beneficiary of
coverage at any time within the past three (3) years:
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(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount (including
a description of how deductibles and ceilings are calculated and operate) of
coverage; and
(e) a description of any retroactive premium adjustments
or other loss-sharing arrangements.
With respect to each such insurance policy, to the Knowledge of Seller: (i) the
policy is legal, valid, binding, enforceable, and in full force and effect; (ii)
the policy shall continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby (including the assignments and assumptions
referred to in ARTICLE 1 hereof); (iii) neither Seller nor any other party to
the policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (iv) no party
to the policy has repudiated any provision thereof.
Section 3.18 LABOR MATTERS. Seller is not a party to or bound by
any collective bargaining agreement, nor has it experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. To the Knowledge of Seller, Seller has not committed any unfair labor
practice. Neither Seller, Parent nor the directors and officers (and employees
with responsibility for employment matters) of Seller or Parent has any
Knowledge of any organizational effort presently being made or threatened by or
on behalf of any labor union with respect to employees of Seller.
Section 3.19 EMPLOYEE BENEFIT PLANS. Schedule 3.19 lists each
Employee Benefit Plan (as defined below) that Seller maintains or to which
Seller contributes.
(a) Seller's group health plan, which includes Seller's
flexible spending account plan (collectively, the "Group Health Plans"),
complies in form and in operation in all material respects with the applicable
requirements of ERISA (as defined below), the Code, and other applicable laws.
No such Employee Benefit Plan is under audit by the United States Internal
Revenue Service or the United States Department of Labor, or any foreign
governmental agencies performing similar functions.
(b) All required reports and descriptions (including Form
5500 Annual Reports and summary plan descriptions) have been filed or
distributed appropriately with respect to the Group Health Plans. The
requirements of Part 6 of Subtitle B of Title I of ERISA and of Code Section
4980B have been met with respect to the Group Health Plans.
15
(c) All premiums or other payments for all periods ending
on or before the Closing Date have been paid with respect to the Group Health
Plans.
(d) Seller has delivered (or no later than sixty (60)
days prior to the Closing Date shall deliver) to Buyer correct and complete
copies of the plan documents and summary plan descriptions, the most recent Form
5500 Annual Report, and all related trust agreements, insurance contracts, and
other funding agreements that implement the Group Health Plans.
(e) Seller does not contribute to, nor has ever been
required to contribute to, any Multiemployer Plan (as such term is defined in
ERISA Section 3(37)) or has any liability (including withdrawal liability) under
any Multiemployer Plan.
(f) Seller does not maintain or contribute, nor has ever
maintained or contributed, or has ever been required to contribute to any
Employee Welfare Benefit Plan (as such term is defined in ERISA Section 3(1)
providing medical, health, or life insurance or other welfare-type benefits for
current or future retired or terminated employees, their spouses, or their
dependents (other than in accordance with Code Section 4980B).
(g) Except as provided in SECTION 5.11(C) and (D), Buyer
shall have no obligations or liability with respect to any Employee Benefit Plan
after the Closing Date.
As used in this Agreement, the term "Employee Benefit Plan" means any (a)
Employee Pension Benefit Plan, as such term is defined in ERISA Section 3(2),
(b) Employee Welfare Benefit Plan, as such term is defined in ERISA Section
3(1), or (c) material fringe benefit plan or program, which covers or provides
benefits to any Seller employee.
As used in this Agreement, the term "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
Section 3.20 UNDISCLOSED LIABILITIES. Except where such liability
would not have a Material Adverse Effect, Seller has no liability (and there is
no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against it giving rise to any
liability), except for (a) liabilities set forth on the face of the balance
sheet (rather than in any notes thereto) included in the Most Recent Financial
Statements and (b) liabilities that have arisen after the Most Recent Fiscal
Month End in the ordinary course of business (none of which results from, arises
out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement, or violation of law).
Section 3.21 INTELLECTUAL PROPERTY.
(a) Seller owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
necessary for the operation of the Purchased Book of Business as presently
conducted, except where the failure to own, or have the right to use, such
Intellectual Property would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect. Each item of Listed Intellectual
Property owned or used by Seller immediately prior to the Closing hereunder
shall be owned or available for use by Buyer on terms and conditions
substantially similar to those applicable immediately subsequent to the Closing
hereunder. "Listed Intellectual Property" shall mean those items listed in
Schedule 3.21(c) and
16
3.21(d) (except for computer software that is commercially available to the
general public and readily replaceable).
(b) To Seller's Knowledge, Seller has not interfered
with, infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and neither Seller nor Parent has
received any written notice or complaint (other than notices or complaints that
have been resolved, withdrawn or abandoned) alleging any such interference,
infringement, misappropriation, or violation (including any claim that Seller
must license or refrain from using any Intellectual Property rights of any third
party). To the Knowledge of Seller, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of Seller.
(c) Seller has no patents issued in its name, or patent
applications filed or pending. Schedule 3.21(c) identifies each license or other
agreement to which Seller is a party and pursuant to which Seller has granted to
any third party the right to use any of its Intellectual Property. Seller has
delivered to Buyer correct and complete copies of all such licenses and other
agreements (as amended to date). Schedule 3.21(c) also identifies (1) each trade
name and registered or unregistered trademark and service mark currently used by
Seller in the Business and (2) each copyright registration owned by Seller. With
respect to each item of Intellectual Property required to be identified in
Schedule 3.21(c):
(i) Seller possesses all right, title, and
interest in and to the item, free and clear of any security interest, license,
or other restriction;
(ii) The item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(iii) No action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
Knowledge of Seller, threatened, that challenges the legality, validity,
enforceability, use, or ownership of the item; and
(iv) Seller has not granted any sublicense or
similar right with respect to the license, sublicense, agreement, or permission.
(d) Schedule 3.21(d) identifies each license, sublicense,
or other agreement to which Seller is a party and pursuant to which Seller is
authorized to use Intellectual Property that any third party owns. Seller has
delivered to Buyer correct and complete copies of all such licenses,
sublicenses, or other agreements, (as amended to date). With respect to each
license, sublicense or agreement identified in Schedule 3.21(d):
(i) the license, sublicense, agreement, or
permission covering the item is legal, valid, binding, enforceable, and in full
force and effect;
(ii) the license, sublicense, agreement, or
permission shall continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby (including the assignments and assumptions
referred to in ARTICLE 2 above);
17
(iii) to Seller's Knowledge, no party to the
license, sublicense, agreement, or permission is in breach or default, and no
event has occurred that with notice or default or permit termination,
modification, or acceleration thereunder;
(iv) no party to the license, sublicense,
agreement, or permission has provided notice of repudiation of any provision
thereof;
(v) to the Knowledge of Seller, the underlying
item of Intellectual Property is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(vi) no action, suit, proceeding, hearing,
investigation, or complaint is pending against Seller or, to the Knowledge of
Seller, is threatened, that challenges the legality, validity, or enforceability
of the underlying item of Intellectual Property; and
(vii) Seller is not a party to any sublicense
pursuant to which Seller has granted rights to the license, sublicense, or
agreement.
Section 3.22 SUBSIDIARIES. Seller does not have and has never had
any subsidiaries.
Section 3.23 NO MISREPRESENTATIONS. None of the representations
and warranties of Seller and Parent set forth in this Agreement, notwithstanding
any investigation thereof by Buyer, contains any untrue statement of a material
fact, or omits the statement of any material fact necessary to render the
statements made not materially misleading.
ARTICLE 4.
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller and Parent as follows:
Section 4.1 ORGANIZATION. Buyer is a corporation organized and
in good standing under the laws of Missouri, and its status is active. Buyer has
all requisite corporate power and authority and all necessary governmental
approvals to own, lease, and operate its properties and to carry on its business
as now being conducted and as proposed to be conducted.
Section 4.2 AUTHORITY. Buyer has the requisite corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery, and performance of
this Agreement, and the consummation of the Agreement and the other transactions
contemplated hereby, have been duly authorized by all necessary corporate action
on the part of Buyer, including without limitation the board of directors of
Buyer. This Agreement has been, and the other agreements, documents and
instruments required to be delivered by Buyer in accordance with the provisions
hereof (collectively, the "Buyer's Documents") shall be, duly executed and
delivered by duly authorized officers of Buyer, and, assuming this Agreement
constitutes a valid and binding obligation of Seller, constitutes, and the
Buyer's Documents when executed and delivered shall constitute, valid and
binding obligations of Buyer, enforceable against it in accordance with their
terms, subject to applicable bankruptcy, insolvency, reorganization or similar
laws from time to time in effect which offset creditors' rights generally and
general equitable principles (regardless of whether the issue of enforceability
is considered in a proceeding in equity or in law).
18
Section 4.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Neither the
execution, delivery, or performance of this Agreement by Buyer nor the
consummation by Buyer of the transactions contemplated hereby nor compliance by
Buyer with any of the provisions hereof shall (a) conflict with or result in any
breach of any provision of the Articles of Incorporation or the Bylaws of Buyer,
(b) require any filing with, or permit, authorization, consent, or approval of,
any Governmental Authority (except for necessary reports and other filings with
the Securities and Exchange Commission (the "SEC") and the New York Stock
Exchange), (c) result in a violation or breach of, or constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or, except in connection with (i) the
loan facilities of Buyer's parent company, Brown & Brown, Inc., with SunTrust
Bank and Continental Casualty Company, respectively, or (ii) the insurance
carriers for certain of Buyer's insurance policies, require any notice or
consent any of the terms, conditions, or provisions of any agreement or other
instrument or obligation to which Buyer is a party or by which Buyer or any of
its properties or assets may be bound.
Section 4.4 LITIGATION. There is no suit, claim, action,
proceeding, or investigation pending or, to the Knowledge of Buyer, threatened
against Buyer or its affiliates before any Governmental Authority that would
have a material adverse effect on Buyer or would prevent Buyer from consummating
the transactions contemplated by this Agreement. Buyer is not subject to any
outstanding order, writ, injunction or decree which, insofar as can be
reasonably foreseen, individually or in the aggregate, in the future would have
a material adverse effect on Buyer or would prevent Buyer from consummating the
transactions contemplated hereby. No voluntary or involuntary petition in
bankruptcy, receivership, insolvency or reorganization with respect to Buyer, or
petition to appoint a receiver or trustee of Buyer's property, has been filed by
or against Buyer, nor shall Buyer file such a petition prior to the Closing Date
or for one hundred (100) days thereafter, and if such petition is filed by
others, the same shall be promptly discharged. Buyer has not made any assignment
for the benefit of creditors or admitted in writing insolvency or that its
property at fair valuation shall not be sufficient to pay its debts, nor shall
Buyer permit any judgment, execution, attachment or levy against it or its
properties to remain outstanding or unsatisfied for more than ten (10) days.
Section 4.5 COMPLIANCE WITH APPLICABLE LAW. Buyer holds all
permits, licenses, variances, exemptions, orders, and approvals of all
Governmental Authorities necessary for the lawful conduct of its insurance
agency business and the Purchased Book of Business. Buyer is not in violation of
any law, ordinance or regulation of any Governmental Authority, including,
without limitation, any law, ordinance or regulation relating to any of Buyer's
employment practices except where a failure to comply would not have a material
adverse effect on Buyer. As of the date of this Agreement, no investigation or
review by any Governmental Authority with respect to Buyer is pending or, to the
Knowledge of Buyer, threatened.
Section 4.6 CONTRACTS WITH THIRD PARTIES. Buyer and its
affiliates have no contract, agreement or understanding with any third party
concerning a potential sale of the Acquired Assets or the Business, or any
portion of either, following the Closing.
Section 4.7 FINANCIAL ABILITY. Buyer has adequate financial
resources and capability to consummate the transactions contemplated by this
Agreement and to honor its obligations
19
hereunder. Buyer will not become insolvent as a result of consummating the
transactions contemplated by this Agreement.
Section 4.8 NO MISREPRESENTATIONS. None of the representations
and warranties of Buyer set forth in this Agreement, notwithstanding any
investigation thereof by Seller, contains any untrue statement of a material
fact, or omits the statement of any material fact necessary to render the
statements made not materially misleading.
ARTICLE 5.
ADDITIONAL AGREEMENTS
Section 5.1 BROKERS OR FINDERS. Each of the parties represents,
as to itself, its subsidiaries and its affiliates, that no agent, broker,
investment banker, financial advisor, or other firm or person is or shall be
entitled to any broker's or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement, and
each of the parties agrees to indemnify and hold the others harmless from and
against any and all claims, liabilities, or obligations with respect to any
fees, commissions, or expenses asserted by any person on the basis of any act or
statement alleged to have been made by such party or its affiliate.
Section 5.2 NON-COMPETITION COVENANTS. Given the national nature
of the Business, OPL agrees that, for a period of five (5) years beginning on
the Closing Date, OPL shall not directly or indirectly (including, without
limitation, through Seller and/or Parent or any successor entity thereof) engage
in, or be or become the owner of a direct or indirect equity interest in, or
otherwise consult with, be employed by, or participate in the business of, any
entity (other than Buyer) engaged as a managing general agency (MGA) in the
Small Package Insurance agency business with respect to customers whose
shipments originate from within the United States (including its territories,
commonwealths and dependencies). Without limiting the foregoing, OPL shall not,
during such five-year period, (a) solicit, divert, accept business from, nor
service, directly or indirectly, as insurance solicitor, insurance agent,
insurance broker or otherwise, for his account or the account of any other
agent, broker, or insurer, either as owner, shareholder, promoter, employee,
consultant, manager or otherwise, any account that is part of the Purchased Book
of Business or any insurance account then serviced by Buyer, or (b) directly or
indirectly hire or solicit any employees of Buyer or its affiliates (other than
Charles D. Smith) to work for OPL or any of its affiliates, or any company that
competes with Buyer or its affiliates.
Section 5.3 REMEDY FOR BREACH OF COVENANTS. In the event of a
breach of the provisions of SECTION 5.2, Buyer shall be entitled to injunctive
relief as well as any other applicable remedies at law or in equity. Should a
court of competent jurisdiction declare any of the covenants set forth in
SECTION 5.2 unenforceable due to a unreasonable restriction, duration,
geographical area or otherwise, the parties agree that such court shall be
empowered and shall grant Buyer or its affiliates injunctive relief to the
extent reasonably necessary to protect their respective interests. Seller,
Parent and OPL each acknowledge that the covenants set forth in SECTION 5.2
represent an important element of the value of the Acquired Assets and were a
material inducement for Buyer to enter into this Agreement.
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Section 5.4 SUCCESSOR RIGHTS. The covenants contained in SECTION
5.2 shall inure to the benefit of any successor in interest of Buyer by way of
merger, consolidation, sale or other succession.
Section 5.5 ERRORS AND OMISSIONS TAIL COVERAGE. Seller shall
purchase and pay in full for a tail coverage extension on its E&O insurance
policy. Such coverage shall extend for a period of at least three (3) years from
the Closing Date, shall have per claim and aggregate coverages and deductibles
consistent with the coverages and deductibles currently maintained by Seller,
and shall otherwise be in form and substance reasonably acceptable to Buyer.
Seller shall take all reasonable steps to secure such coverage and shall deliver
to Buyer evidence of such coverage as soon as practicable after the Closing
Date.
Section 5.6 EXPENSES. Each of Buyer, Seller, Parent and OPL
shall bear its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby. Seller, Parent and OPL each agree that Buyer shall not bear Seller's,
Parent's or OPL's costs or expenses (including any of their legal fees and
expenses) in connection with this Agreement or any of the transactions
contemplated hereby. Seller also agrees that it has not paid any amount to any
third party, and shall not pay any amount to any third party until after the
Closing, with respect to any of the costs and expenses of Seller, Parent and OPL
(including any of their legal fees and expenses) in connection with this
Agreement or any of the transactions contemplated hereby. Sales, transfer,
documentary and similar taxes, fees and assessments, if any, payable in
connection with the sale, conveyance, assignment, transfers and deliveries made
to Buyer in connection herewith shall be paid by Seller.
Section 5.7 CONFIDENTIALITY.
(a) Buyer, Seller, Parent and OPL shall consult
with each other before issuing, and provide each other the opportunity to review
and comment upon, any press release, filing with the SEC or other public
statements with respect to the transactions contemplated hereby and shall not
issue any such press release or make any such public statement prior to such
consultation and the receipt of the approval of the other party, except as may
be required by applicable law, by court process or by obligations pursuant to
any listing agreement with any national securities exchange.
(b) Seller, Parent and OPL shall each treat
confidential and hold as such all of the information concerning the Business and
affairs of the Seller prior to Closing or Buyer subsequent to the Closing that
is not already generally available to the public ("Confidential Information");
provided, however, that Seller, Parent and OPL shall be permitted to use the
Confidential Information in connection with the defense against any legal
proceeding, claim, complaint or investigation involving Seller, Parent or OPL;
provided, further, that Seller, Parent and OPL shall use reasonable best efforts
to retain the confidentiality of such information used in any such defense. If
Seller or Parent is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, Seller (on behalf of itself or Parent, as the case may be) shall
notify Buyer promptly of the request or requirement so that Buyer may seek an
appropriate protective order or waive compliance with the provisions of this
SECTION 5.7. If, in the absence of a protective order or the receipt of a waiver
hereunder, Seller, Parent or OPL is, on the advice of counsel, compelled to
disclose any Confidential Information to
21
any tribunal or else stand liable for contempt, Seller, Parent or OPL, as the
case may be, may disclose the Confidential Information to the tribunal solely in
connection with such matter; provided, however, that Seller, Parent or OPL, as
the case may be, shall use its best efforts to obtain, at the request of Buyer,
an order or other assurance that confidential treatment shall be accorded to
such portion of the Confidential Information required to be disclosed as Buyer
shall designate.
Section 5.8 ENFORCEMENT OF EMPLOYMENT AGREEMENTS. After the
Closing, and at Buyer's request, Seller shall (a) take all reasonable measures
to enforce the terms of those non-compete/non-solicitation agreements with its
existing employees that either have not been or cannot be assigned to Buyer,
including pursuing legal and injunctive proceedings, and (b) cooperate with
Buyer in enforcing the terms of those contracts assigned to Buyer and shall join
in any legal or injunctive proceedings instituted by Buyer for such purpose.
Buyer shall bear the costs and fees of any such proceedings.
Section 5.9 CORPORATE NAME; DISSOLUTION OF SELLER AND/OR PARENT.
(a) Promptly after the Closing, Seller agrees to cease
all use of the corporate name "Parcel Insurance Plan, Inc." or the service marks
"Parcel Insurance Plan(R)", "PIP(R)", or any derivative thereof and shall, no
later than five (5) business days after the Closing, file an amendment to its
Certificate of Incorporation with the Delaware Secretary of State, changing its
corporate name to a new corporate name that bears no resemblance to its current
corporate name.
(b) Buyer acknowledges and agrees that at any time after
the Closing Date, Seller and/or Parent may voluntarily dissolve pursuant to
Section 275 of the Delaware General Corporation Law. Within 15 business days
after the filing of a certificate of dissolution with the Secretary of State of
the State of Delaware, Buyer shall be provided with written notice of any such
dissolution. Upon any such dissolution, OPL shall succeed to the rights and
obligations hereunder of the dissolved party.
Section 5.10 TERMINATION OF EMPLOYEE BENEFIT PLANS. At the
Closing, Seller shall deliver to Buyer copies of duly adopted resolutions of
Seller's Board of Directors (a) terminating Seller's Employee Benefits Plans
(other than the Group Health Plans), with such termination effective prior to
the Closing Date, (b) providing that no contributions shall be made to Seller's
401(k) Plan after such date, and (c) directing Seller's or Parent's legal
counsel to apply for a determination letter from the Internal Revenue Service
with respect to the termination of the 401(k) Plan and to submit a notice of
intent to terminate to all interested parties under the 401(k) Plan.
Section 5.11 EMPLOYEES OF SELLER. (a) (a) Prior to the Closing
Date, Buyer shall make offers of employment to all Seller employees listed in
Schedule 5.11 (the "Transferred Employees"). Such offers of employment shall be
at compensation levels which are, in the aggregate, economically similar to the
compensation levels which Transferred Employees enjoyed as employees of Seller.
Additionally, such Transferred Employees shall be entitled to the same benefits
as conferred upon any other employees of comparable rank of Buyer. Buyer agrees
to provide to the Transferred Employees who become employees of Buyer credit for
service under the existing employee benefit plans in which employees of Buyer
are participants (the "Existing Plans"), to the extent permissible under the
Existing Plans and to the extent that such Transferred Employees are otherwise
eligible to
22
participate, as employees of Buyer, in the Existing Plans, for the purposes of
participation, vesting and accrual of benefits; provided, however, that no
credit for service for purposes of participation, vesting or accrual of benefits
under the Existing Plans will be awarded to any such Transferred Employees under
any Existing Plan with respect to any period that is prior to the earliest date
that any of Buyer's existing employees have received credit for purposes of
participation, vesting or accrual of benefits under such Existing Plan. Buyer
further agrees that, to the extent possible, it will waive any "pre-existing
condition" exclusion or waiting periods that may limit any such Transferred
Employee's qualification for coverage under Buyer's standard and customary
health benefits and will credit all co-payments and deductions paid by the
Transferred Employees under Seller's plan prior to the Closing toward any
applicable deductible out-of-pocket requirements. Buyer shall maintain such
compensation and benefit levels for a period of at least one (1) year after the
Closing Date for those Transferred Employees who remain employed with Buyer.
(b) On and after the Effective Date, Buyer agrees to
assume responsibility for any and all liabilities and obligations of Seller
which have arisen or may arise in connection with the employment of the
Transferred Employees. Without limiting the foregoing, Buyer agrees that such
liabilities shall include, but not be limited to: the timely payment of all
payroll expenses, the timely withholding, payment and/or deposit of any
applicable income or employment taxes, and the timely payment of any required
contributions to any Employee Benefit Plan of Seller. Each of the foregoing
liabilities are among the Assumed Liabilities as defined in SECTION 1.4(D)(I)
hereof.
(c) Buyer agrees to assume responsibility for providing
the appropriate COBRA notices and for providing COBRA continuation coverage to
all "M&A qualified beneficiaries" as such term is defined in Treas.
Reg. ss. 54.4980B-9. For purposes of this Agreement, COBRA means health
continuation obligations under ss. 4980B of the Code.
(d) Subject to SECTION 6.6 hereof, on and after the
Closing Date, Buyer agrees to assume responsibility for Seller's Group Health
Plans, until such time as those Transferred Employees who participate in such
Group Health Plans become enrolled to participate in Buyer's group health plan
(including Buyer's flexible spending account plan).
(e) Nothing contained in this Agreement, expressed or
implied, is intended to confer any rights, obligations, liabilities, or remedies
on behalf of any Transferred Employee or their respective beneficiaries,
dependents or successors.
Section 5.12 NOTICES AND CONSENTS. Seller shall give any notices
to third parties, and Seller shall use its reasonable best efforts to obtain any
third party consents, that Buyer may request in connection with the matters
referred to in Schedule 3.5. Seller and Buyer shall give any notices to, make
any filings with, and use their reasonable best efforts and cooperate with one
another to obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred to in SECTION 3.5
above.
Section 5.13 CONDITIONS TO EACH PARTY'S OBLIGATION. The respective
obligations of each party to effect the transactions contemplated by this
Agreement to take place on the Closing Date shall be subject to the satisfaction
prior to or on the Closing Date of the following conditions, any of which may be
waived by a party with respect to its own obligation to close:
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(a) Approvals. All authorizations, consents, orders, or
approvals of, or declarations or filings with, or expirations of waiting periods
imposed by, any Governmental Authority, the failure to obtain which would have a
Material Adverse Effect, shall have been filed, occurred, or been obtained.
(b) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction, or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
shall be in effect (i) preventing the consummation of the transaction, (ii)
causing any of the transactions contemplated by this Agreement to be rescinded
following consummation, (iii) affecting adversely the right of Buyer to own the
Acquired Assets or to operate the Business, or (iv) affecting adversely the
Business, assets, properties, operation (financial or otherwise), or prospects
of Buyer with respect to its ownership of the Acquired Assets or operation of
its business as a result of such acquisition; provided, however, that the party
invoking this provision shall use its best efforts to have any such restraint
removed.
(c) Third Party Consents. All required third-party
consents shall have been obtained, including without limitation the consents
listed in Schedule 3.5.
Section 5.14 CONDITIONS TO OBLIGATIONS OF BUYER. The obligation
of Buyer to effect the transactions contemplated by this Agreement to occur on
the Closing Date is subject to the satisfaction of the following conditions,
unless waived by Buyer:
(a) Representations and Warranties. The representations
and warranties of the Seller, Parent and OPL set forth in this Agreement shall
be true and correct in all material respects as of the Closing Date.
(b) Performance of Obligations by Seller, Parent, and
OPL. Seller, Parent and OPL shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or prior to
the Closing Date including, without limitation, the satisfaction and release of
any liens, judgments, or other encumbrances upon any of the Acquired Assets.
(c) Seller, Parent and OPL Certificates. An officer of
each of Seller, Parent and OPL shall have delivered to Buyer a certificate to
the effect that each of the conditions specified in SECTIONS 5.13(A), (B) and
(C), and SECTIONS 5.14(A) and (B) is satisfied in all respects.
(d) Evidence of E&O Coverage. Buyer shall have received
from Seller evidence of E&O coverage required in SECTION 5.5.
(e) Termination of Seller Employee Benefit Plans. Buyer
shall have received from Seller copies of duly adopted resolutions of Seller's
Board of Directors as described in SECTION 5.10.
(f) Charles Smith Non-Solicitation and Confidentiality
Agreement. Buyer and Charles D. Smith, a member of the Board of Directors of,
and President, Treasurer and Assistant Secretary of Seller, shall have executed
and delivered a mutually agreeable Non-Solicitation and Confidentiality
Agreement.
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(g) Non-Disclosure and Non-Piracy Agreement. Daniel K.
Daly shall have executed and delivered to Buyer a copy of Buyer's standard
employment agreement, which contains confidentiality and non-solicitation
provisions.
(h) Completion of All Actions to be Taken by Seller,
Parent and OPL. All actions to be taken by Seller, Parent and OPL in connection
with consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
Buyer.
(i) Adverse Changes. There shall have been no material
adverse change to the business or financial condition of the Seller since the
Most Recent Fiscal Month End.
Section 5.15 CONDITIONS TO OBLIGATION OF SELLER, PARENT AND OPL.
The obligations of Seller, Parent and OPL to effect the transactions
contemplated by this Agreement to occur on the Closing Date are subject to the
satisfaction of the following conditions, unless waived by Seller, Parent or
OPL:
(a) Representations and Warranties. The representations
and warranties of Buyer set forth in this Agreement shall be true and correct in
all material respects as of the Closing Date.
(b) Performance of Obligations by Buyer. Buyer shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date.
(c) Buyer's Closing Certificate. An officer of Buyer
shall have delivered to Seller a certificate to the effect that each of the
conditions specified in SECTIONS 5.13(A), (B) and (C) and SECTIONS 5.15(A) and
(B) are satisfied.
(d) Completion of All Actions Taken by Buyer. All actions
to be taken by Buyer in connection with consummation of the transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required to effect the transactions contemplated hereby shall be
reasonably satisfactory in form and substance to Seller.
Section 5.16 ADDITIONAL POST-CLOSING COVENANTS. The parties agree
as follows with respect to the period following the Closing:
(a) General. Seller acknowledges and agrees that from and
after the Closing, Buyer shall be entitled to possession of all documents,
books, records, agreements and financial data of any sort, whether in paper,
electronic, digital or other format, relating to the Acquired Assets; provided,
however, that for a period of 30 days following the Closing Date, Buyer shall
provide to Seller, Parent and OPL and cause its affiliates to provide to Seller,
Parent and OPL the reasonable opportunity to investigate, access, examine and
copy such documents, books, records, agreements and financial data, whether in
paper, electronic, digital or other format, including such documents, books,
records, agreements and financial data transferred to Buyer pursuant to the
Assumption Agreement. Any such investigation, access and examination shall be
conducted during the regular business hours upon reasonable prior notice (but in
any event, not less than two (2) business days
25
prior to such investigation, access or examination) and under other reasonable
circumstances, and Seller, Parent, OPL and Buyer and their respective employees,
agents and representatives, including their respective counsel and independent
public accountants, shall cooperate in a reasonable manner and as reasonably
requested with the employees and representatives of each party and its
affiliates in connection with such investigation, access and examination.
(b) Litigation Support. If and for so long as any party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Acquired Assets, the other party shall
cooperate with the contesting or defending party and its counsel in the contest
or defense, make available its personnel, preserve documents and provide such
testimony and access to its books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending party (unless the contesting or defending party is
entitled to indemnification therefor under ARTICLE 6 hereof).
(c) Transition. Seller shall not take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, insurance carrier, or other business associate of Seller
from maintaining the same business relationships with Buyer after the Closing as
it maintained with Seller prior to the Closing. Seller shall refer all customer
inquiries relating to the Business to Buyer from and after the Closing.
Section 5.17 CONSENTS TO ASSIGNMENT.
(a) Anything in this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign any
contract, lease, license or agreement of any claim or right or any benefit
arising thereunder or resulting therefrom if an attempted assignment thereof,
without the consent of a third party thereto, would constitute a breach thereof.
(b) If any such consent is not obtained prior to the
Closing, Seller, Parent, OPL and Buyer shall cooperate (at their own expense) in
any lawful and reasonable arrangement under which Buyer shall obtain the
economic claims, rights and benefits under the asset, claim or right with
respect to which the consent has not been obtained in accordance with this
Agreement, including subcontracting, sublicensing or subleasing to Buyer and
enforcement of any and all rights of Seller against the other party thereto
arising out of a breach or cancellation thereof by the other party.
ARTICLE 6.
INDEMNIFICATION
Section 6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, INDEMNITIES
AND COVENANTS. Subject to SECTION 6.6, the representations, warranties and
indemnities set forth in this Agreement shall survive for a period of two (2)
years from the Closing Date (the "Indemnification Period"). All post-closing
covenants shall survive the Closing for the period(s) specified in this
Agreement or, if not specified, for the Indemnification Period. If a party has
received notice of a potential breach of a representation, covenant or warranty,
or the occurrence
26
of an otherwise potentially-indemnifiable event under this Agreement within the
Indemnification Period, such party may preserve its right to assert a later
claim for damages arising from such breach or event by delivering notice of same
to the other party within the Indemnification Period.
Section 6.2 INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF BUYER.
(a) To the extent that any Diverting Employee (as defined
below) directly or indirectly diverts, on or before the one-year anniversary of
the Closing Date, any line of coverage which is part of any account comprising
the Purchased Book of Business, subject to SECTION 1.5(C), Buyer shall be paid
by Seller or Parent (which obligations shall be joint and several) an amount
equal to (i) 3.0 times (ii) the aggregate annualized policy commissions on such
diverted lines of coverage. For purposes of this Agreement, a "Diverting
Employee" means any person who is an employee of Seller during the sixty
(60)-day period prior to the Closing Date but does not become employed by Buyer
by virtue of refusing to sign Buyer's standard employment agreement; provided,
however, that any person that is employed by Buyer at any time during the one
year period following the Closing Date shall not be a Diverting Employee (unless
such person ceased to be employed by Buyer during such one year period because
of such person's refusal to sign Buyer's standard employment agreement).
(b) Subject to SECTION 1.5(C), Seller and OPL agree,
jointly and severally, to indemnify and hold Buyer and its officers, directors,
and affiliates harmless from and against any Adverse Consequences (as defined
below), net of any tax benefits or insurance actually received by Buyer, that
any of such parties may suffer or incur resulting from, arising out of, relating
to, or caused by (i) the breach of any of Seller's, Parent's or OPL's
representations, warranties, obligations or covenants contained herein, (ii) the
operation of the Business, the ownership of the Acquired Assets by Seller prior
to the Effective Date, including, without limitation, any claims or lawsuits
based on conduct of Seller, Parent or OPL occurring before the Effective Date,
or (iii) any liability of Seller that becomes a liability of Buyer under any
bulk transfer law of any jurisdiction, under any common law doctrine of de facto
merger or successor liability, or otherwise by operation of law). For purposes
of this ARTICLE 6, the phrase "Adverse Consequences" means all charges,
complaints, actions, suits, proceedings, hearings, investigations, claims,
demands, judgments, orders, decrees, stipulations, injunctions, damages, dues,
penalties, fines, costs, amounts paid in settlement, liabilities (whether known
or unknown, whether absolute or contingent, whether liquidated or unliquidated,
and whether due or to become due), obligations, taxes, liens, losses, expenses,
and fees, including all attorneys' fees and court costs. For purposes of this
SECTION 6.2, "Adverse Consequences" also specifically includes any Adverse
Consequences attributable to any deductible(s) due and payable under Seller's
E&O tail policy as described in SECTION 5.5 hereof; provided, however, that to
the extent Buyer incurs or suffers any Adverse Consequences for which equitable
relief may be sought, the parties agree that Buyer may seek equitable relief for
such Adverse Consequences from Seller, Parent, and/or OPL, as appropriate.
Section 6.3 INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF SELLER
AND PARENT. Buyer agrees to indemnify and hold Seller, Parent, OPL and their
respective officers, directors, shareholders and affiliates harmless from and
against any Adverse Consequences, net of any tax benefits or insurance actually
received by such party, any of such parties may suffer or incur resulting from,
arising out of, relating to, or caused by (a) the breach of any of Buyer's
representations, warranties, obligations or covenants contained herein, (b) the
operation of the
27
Business, ownership of the Acquired Assets or assumption of the Assumed
Liabilities by Buyer on or after the Effective Date, including, without
limitation, any claims or lawsuits based on conduct of Buyer occurring on or
after the Closing, or (c) the employment by Buyer on or after the Effective Date
of any of the Transferred Employees who become employees of Buyer.
Section 6.4 MATTERS INVOLVING THIRD PARTIES.
(a) If any third party shall notify any party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") that may
give rise to a claim for indemnification against the other party (the
"Indemnifying Party") under this ARTICLE 6, then the Indemnified Party shall
promptly notify the Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying the Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced.
(b) The Indemnifying Party shall have the right to defend
the Indemnified Party against the Third Party Claim with counsel of its choice
satisfactory to the Indemnified Party so long as (i) the Indemnifying Party
notifies the Indemnified Party in writing within fifteen (15) days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party shall indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (ii) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying
Party shall have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (iii) the Third Party
Claim involves only money damages and does not seek an injunction or other
equitable relief, (iv) settlement of, or an adverse judgment with respect to,
the Third Party Claim is not, in the good faith judgment of the Indemnified
Party, likely to establish a precedential custom or practice materially adverse
to the continuing business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently.
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with SECTION 6.4(B) above, (i)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (ii) the
Indemnified Party shall not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party, and (iii) the Indemnifying Party shall not
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim unless such settlement is on exclusively monetary terms
or the Indemnified Party shall have consented in writing to the terms of such
settlement.
(d) If any of the conditions in SECTION 6.4(B) above is
or becomes unsatisfied, however, (i) the Indemnified Party may defend against,
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it may deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, the
Indemnifying Party in connection therewith), (ii) the Indemnifying Party shall
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (iii) the Indemnifying Party shall
28
remain responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this ARTICLE 6.
Section 6.5 LIMITS ON INDEMNIFICATION.
(a) Deductible. (i) Seller, Parent and OPL shall not have
any obligation or liability to Buyer under SECTION 6.2 unless and until the
aggregate amount of Adverse Consequences suffered by Buyer arising out of
matters referred to in SECTION 6.2 shall have exceeded US$150,000.00, in which
case Seller, Parent and OPL shall be obligated and liable under SECTION 6.2 only
with respect to such excess; and (ii) Buyer shall not have any obligation or
liability to Seller, Parent or OPL under SECTION 6.3 unless and until the
aggregate amount of Adverse Consequences suffered by Seller, Parent and OPL
arising out of the matters referred to in SECTION 6.3 shall have exceeded
US$150,000.00, in which case Buyer shall be obligated and liable under SECTION
6.3 only with respect to such excess.
(b) Limit of Liability. The aggregate liability of
Seller, Parent and OPL, on the one hand, and Buyer, on the other hand, under
SECTION 6.2 or SECTION 6.3, respectively, shall not exceed US$23,000,000.
Section 6.6 PAYMENT OF AND INDEMNIFICATION FOR TAXES, LITIGATION
AND CERTAIN EMPLOYEE BENEFIT MATTERS. Notwithstanding anything in this ARTICLE 6
to the contrary:
(a) Seller shall be responsible for and shall indemnify
Buyer for all Taxes in respect of the Acquired Assets payable for any Tax period
or portion thereof ending on or prior to the Effective Date. Buyer shall be
responsible for and shall indemnify Seller for all Taxes in respect of the
Acquired Assets payable for any Tax period or portion thereof beginning on or
after the Effective Date. All representations, warranties, covenants and
indemnities in connection with any Tax liabilities (including, without
limitation, in connection with Buyer's payment of any portion of the
consideration pursuant to SECTION 1.4(A) hereof) shall survive until the
expiration of the applicable statute of limitations period, provided, however,
that there shall be no double recovery for any breach of representation under
SECTION 3.12 hereof for any indemnification obligation under SECTION 6.6(A)
hereof.
As used in this Agreement, the term "Tax" means any 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 tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
(b) Notwithstanding SECTION 6.1, all representations,
warranties, covenants and indemnities in connection with the operation of the
Business, any litigation or other proceeding of any nature whatsoever directly
or indirectly related to the Acquired Assets or the Assumed Liabilities arising
prior to the Effective Date (including, but not limited to, any class action,
litigation or proceeding involving Seller, Parent or OPL), shall survive until
such litigation or
29
proceeding has been finally decided, settled or adjudicated; provided, however,
that Buyer shall not be entitled to indemnification pursuant to SECTION 6.3
unless Buyer has delivered to OPL written notice of any such litigation or
proceeding within one (1) year of: (i) the commencement of such litigation or
proceeding that commences on or after the Effective Date, or (ii) the joinder of
Seller, Parent or OPL to any class action, litigation or proceeding which such
joinder occurs on or after the Effective Date.
(c) All representations, warranties, covenants and
indemnities in connection with Buyer's assumption of responsibility for Seller's
Group Health Plans as set forth in Section 5.11(d) hereof shall survive until
the expiration of the applicable statute of limitations period.
(d) No Adverse Consequences with respect to the
indemnifiable events set forth in this SECTION 6.6 shall be subject to the
deductible or liability limitation (including the calculation of such deductible
or liability limitation) set forth in SECTION 6.5 hereof.
Section 6.7 TAX EFFECTS OF INDEMNIFICATION PAYMENTS. The Parties
agree that any indemnification payments made pursuant to this Agreement, except
any indemnification payment with respect to any breach of any covenant in
SECTION 5.2 of this Agreement, shall be treated for tax purposes as an
adjustment to the payments made under SECTION 1.4(A)(II), (III) or (IV).
ARTICLE 7.
[INTENTIONALLY OMITTED]
ARTICLE 8.
MISCELLANEOUS
Section 8.1 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
by facsimile (if confirmed), or mailed by registered or certified mail (return
receipt requested), or overnight courier service to the parties at the following
addresses or at such other address for a party as shall be specified by like
notice:
(a) If to Buyer, to
Brown & Brown of Missouri, Inc.
c/o Brown & Brown, Inc.
401 E. Jackson St., Suite 1700
Tampa, Florida 33601
Fax No.: (813) 222-4464
Attn: Laurel Grammig
General Counsel
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(b) If to Seller, Parent or OPL, to
Parcel Insurance Plan, Inc.
c/o Overseas Partners Capital Corp.
115 Perimeter Center Place, Suite 940
Atlanta, Georgia 30346
Fax No.: (770) 913-6756
Attn: David Gorst
With a copy to:
Overseas Partners Ltd.
Mintflower Place
8 Par-la-ville Road
Hamilton HMO8 Bermuda
Fax No.: (441) 295-3078
Attn: Malcolm C. Furbert
and to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
Fax No.: (212) 424-8500
Attn: Michael Groll
Any party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other party
notice in the manner herein set forth.
Section 8.2 USE OF TERM "KNOWLEDGE". "Knowledge" means the actual
knowledge of any director or officer of Buyer, Seller, Parent or OPL, as the
case may be, as to any matter as to which such person has executive or
supervisory responsibilities, and as to which such person has exercised
reasonable diligence in the performance of such responsibilities.
Section 8.3 COUNTERPARTS. This Agreement may be executed in two
(2) or more counterparts, each of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
Section 8.4 ENTIRE AGREEMENT. This Agreement (including the
documents and instruments referred to herein) constitutes the entire agreement
and supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
Section 8.5 ASSIGNMENT. Except as contemplated in SECTION 5.4
hereof, neither this Agreement nor any of the rights, interests, or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the
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other parties. This Agreement shall be binding upon, inure to the benefit of,
and be enforceable by the parties and their respective successors and assigns.
Section 8.6 SEVERABILITY. If any provision or covenant, or any
part thereof, of this Agreement should be held by any court to be illegal,
invalid or unenforceable, either in whole or in part, such illegality,
invalidity or unenforceability shall not affect the legality, validity or
enforceability of the remaining provisions or covenants, or any part thereof,
all of which shall remain in full force and effect.
Section 8.7 ATTORNEYS' FEES AND COSTS. The prevailing party in
any proceeding brought to enforce the terms of this Agreement shall be entitled
to an award of reasonable attorneys' fees and costs incurred in investigating
and pursuing such action, both at the trial and appellate levels.
Section 8.8 GOVERNING LAW. This Agreement shall be governed by
and construed and enforced in accordance with internal Missouri law without
regard to any applicable conflicts of law.
Section 8.9 AMENDMENT; WAIVER. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the parties hereto. Each of Seller and Parent may consent to any such amendment
for itself at any time prior to the Closing without the prior authorization of
its Board of Directors. No waiver by any party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
Section 8.10 INCORPORATION OF EXHIBIT AND SCHEDULES. The Exhibit
and Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
Section 8.11 SPECIFIC PERFORMANCE. Each of the parties
acknowledges and agrees that the other party would be damaged irreparably if any
of the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the parties
agrees that the other party shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and provisions hereof in any action instituted in
any court of the United States or any state thereof having jurisdiction over the
parties and the matter in addition to any other remedy to which it may be
entitled, at law or in equity.
Section 8.12 BULK TRANSFER LAWS. Seller hereby indemnifies and
agrees to hold Buyer harmless from, against and in respect of, and shall on
demand reimburse Buyer for, any loss, liability, cost or expense suffered or
incurred by Buyer by reason of the failure of Seller to pay or discharge any
claims of creditors that could be asserted against Buyer by reason of
non-compliance with the provisions of any bulk transfer laws of any jurisdiction
in connection with the transactions contemplated by this Agreement.
* * * * * * * * * *
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IN WITNESS WHEREOF, the parties have signed or caused this Agreement to
be signed by their respective officers thereunto duly authorized as of the date
first written above.
BROWN & BROWN OF MISSOURI, INC.
By: /s/ Jim W. Henderson
------------------------------------------
Name: Jim W. Henderson
Title: President
PARCEL INSURANCE PLAN, INC.
By: /s/ Charles D. Smith
------------------------------------------
Name: Charles D. Smith
Title: President
OVERSEAS PARTNERS CAPITAL CORP.
By: /s/ Mary R. Hennessy
------------------------------------------
Name: Mary R. Hennessy
Title: President
OVERSEAS PARTNERS LTD.
By: /s/ Mark R. Bridges
------------------------------------------
Name: Mark R. Bridges
Title: Executive Vice President, Chief
Financial Officer
33
EXHIBIT AND SCHEDULES
Exhibit A: Form of Assumption Agreement
Exhibit B: Form of Bill of Sale and Assignment
Exhibit C: Form of Escrow Agreement
Schedule 1.2(a): Active Insurance Customers of Seller
Schedule 1.2(c)(i): Assigned Contracts - Non-Disclosure Agreements
Schedule 1.2(c)(ii): Assigned Contracts - Other
Schedule 1.2(e): Tangible Property
Schedule 1.4(a): Adjustments to Purchase Price
Schedule 1.4(d)(i): Assumed Liabilities
Schedule 3.5: Consents and Approvals
Schedule 3.8: Ordinary Course Transactions
Schedule 3.9(c): Material Contracts
Schedule 3.10: List of Claims and Litigation of Seller
Schedule 3.11: Compliance
Schedule 3.17: Insurance
Schedule 3.19: Employee Benefit Plans
Schedule 3.21(c): Owned Intellectual Property
Schedule 3.21(d): Licensed Intellectual Property
Schedule 5.11: Transferred Employees
34