EXHIBIT 10m
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of October
3, 2001, is made and entered into by and among BROWN & BROWN OF LEHIGH VALLEY,
INC., a Pennsylvania corporation ("Buyer"); HENRY S. LEHR, INC., a Pennsylvania
corporation ("Seller"); and WILLIAM H. LEHR, a resident of the Commonwealth of
Pennsylvania, and PATSY A. LEHR, a resident of the Commonwealth of Pennsylvania
(each a "Shareholder" and collectively, the "Shareholders").
BACKGROUND
Seller is engaged in the insurance agency business in Bethlehem,
Pennsylvania (the "Business"), and wishes to sell certain of its assets relating
to such Business to Buyer. Buyer desires to acquire such assets upon the terms
and conditions expressed in this Agreement. The Shareholders own all of the
outstanding capital stock of Seller and is 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 sufficiency of which
is hereby acknowledged, the parties agree as follow:
ARTICLE 1
THE ACQUISITION
Section 1.1 COVENANTS OF SALE AND PURCHASE. 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 will sell, convey and assign to Buyer all
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 except as set forth in
Schedule 1.1(a); and
(b) Buyer will purchase the Acquired Assets from Seller
in exchange for the consideration described in SECTION 1.4.
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 Seller's insurance
agency business, including but not limited to the life, health, bond, and
property and casualty insurance business (both personal and commercial lines)
and renewals and expirations thereof, together with all written or otherwise
recorded documentation, data or information relating to Seller's insurance
agency 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)
(collectively, the "Purchased Book of Business").
(b) General Intangibles. All of the following intangible
personal property used in connection with Seller's insurance agency business or
pertaining to the Acquired Assets:
(i) all of Seller's business records necessary
to enable Buyer to renew the Purchased Book of Business;
(ii) the goodwill of Seller's insurance agency
business, including the name "Henry S. Lehr, Inc." and all derivatives thereof
(but not including the names "Lehr Management Corporation" or "The Lehr
Institute"), and any other fictitious names and trade names that are currently
in use by Seller, and all telephone listings, post office boxes, mailing
addresses, and advertising signs and materials; and
(iii) any assignable non-solicitation agreements
and covenants not to compete made by employees of Seller and all other
assignable covenants not to compete in favor of Seller; provided, however, that
Buyer and Seller agree that due to Shareholders' continuing involvement and
interest in the business after the Closing Date, Seller shall retain such
continuing interest in the enforcement of the assigned non-solicitation
agreements and covenants not to compete as shall be necessary to the joint
enforcement of such provisions referenced in SECTION 4.9.
(c) Miscellaneous Items. All other assets of Seller
relating or pertaining to the Purchased Book of Business, including computer
disks, server, 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, and all supplies and materials,
including promotional and advertising materials, brochures, plans, supplier
lists, manuals, handbooks, and related written data and information, including
any customer deposits held for future due dates.
(d) Tangible Property. All items of furniture, fixtures,
computers, office equipment and other tangible property used in Seller's
business. To the extent that any of such items are subject to a lease as set
forth in Schedule 1.2(d), Buyer will assume the lease and acquire all of
Seller's right to acquire such property upon termination of the lease.
(e) Assigned Agreements. All of Seller's rights under the
leases and agreements identified in Schedule 1.2(e) hereof (the "Assigned
Agreements").
2
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 not
described in SECTION 1.2 hereof. Without limiting the foregoing, Buyer shall not
purchase or assume any of the following:
(a) cash in hand or in banks, certificates of deposits or
any interest accrued thereon, accounts receivable, life insurance policies
relating to Shareholders or proceeds thereof, money market certificates, stocks,
bonds, real estate and automobiles;
(b) any contract, lease or other obligation not
specifically assigned to Buyer under this Agreement;
(c) as set forth in more detail in SECTION 4.9, 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;
(d) corporate minutes books and stock books;
(e) all non-transferable permits;
(f) claims for refunds of taxes and other governmental
charges to the extent such refunds relate to periods ending prior to the
Effective Date; or
(g) any bonus, incentive, or advance payments received by
Seller in connection with the Assigned Agreements (except with respect to any
contingent commissions as set forth in SECTION 1.5).
Section 1.4 PURCHASE PRICE. (a) The purchase price for the
Acquired Assets (the "Purchase Price") shall be Eleven Million Six Hundred
Thousand and No/100 Dollars ($11,600,000.00).
(b) Subject to SECTION 1.4(C), the Purchase Price will be
paid to Seller as follows: (i) $10,440,000.00, which equals ninety percent (90%)
of the Purchase Price, shall be paid to Seller on the Closing Date; and (ii)
1,160,000.00, which represents the remaining portion of the Purchase Price (the
"Holdback Amount"), will be paid to Seller on or before October 31, 2002.
(c) In accordance with ARTICLE 7 hereof, the Holdback
Amount shall be delivered by Buyer at Closing to Fitzpatrick Lentz & Bubba,
P.C., which, along with Buyer's Assistant General Counsel, shall act as joint
escrow agents, and subject to reduction by Buyer to offset any obligations of
Seller and the Shareholders under the indemnification provisions contained in
ARTICLE 6 hereof. Satisfaction of any indemnity obligations from the deferred
portion of the Purchase Price shall not operate to waive the indemnification
obligations of Seller and the Shareholders contained in ARTICLE 6 for damages
incurred by Buyer in excess of such amounts; provided, however, that the
Holdback Amount shall be credited against the total aggregate liability of
Seller and the Shareholders referred to in SECTION 6.6 hereof.
3
(d) For federal and state income tax purposes, the
parties agree to allocate the Purchase Price as follows: (i) $500,000.00 of the
Purchase Price shall be allocated to the tangible property described in SECTION
1.2(D); (ii) $100,000.00 shall be allocated to the covenants of Seller,
$300,000.00 shall be allocated to the covenants of Shareholder William H. Lehr,
and $100,000.00 shall be allocated to the covenants of Shareholder Patsy A.
Lehr, contained in SECTION 4.2 hereof, and (iii) the remainder of the Purchase
Price shall be allocated to the Purchased Book of Business and related goodwill.
The parties shall execute corresponding IRS Form 8594s at Closing to confirm the
allocation of the Purchase Price.
Section 1.5 COMMISSIONS COLLECTED. All commissions on
installments of agency bill policies with an effective date prior to October 1,
2001 (the "Effective Date") and actually billed prior to such date shall be the
property of Seller and those billed or effective on or after the Effective Date
shall be the property of Buyer, regardless of when actually received. All
commissions on direct bill policies actually received by Seller from insurance
carriers before the Effective Date shall be the property of Seller and those
actually received from insurance carriers on or after the Effective Date shall
be the property of Buyer, regardless of when billed by the insurance carrier.
Buyer shall be entitled to all contingent commissions and/or override
commissions received on or after the Effective Date, regardless of when earned.
All additional or return commissions as a result of audits actually received
before the Closing shall be the property or the responsibility of Seller,
whether credit or debit, and regardless of effective date, and those actually
received on or after the Closing shall be the property or responsibility of
Buyer, whether credit or debit, and regardless of effective date.
Section 1.6 NO ASSUMED LIABILITIES. Except for the ongoing
obligation to service the Purchased Book of Business or any obligation otherwise
expressly assumed hereunder, Buyer shall not assume or be deemed to have assumed
any liability or obligation of Seller whatsoever.
ARTICLE 2
CLOSING, ITEMS TO BE DELIVERED,
FURTHER ASSURANCES, AND EFFECTIVE DATE
Section 2.1 CLOSING. The consummation of the purchase and sale of
assets under this Agreement (the "Closing") will take place at 9 a.m., local
time, on October 3, 2001 (the "Closing Date"), at the offices of Fitzpatrick
Lentz & Bubba, P.C., located at 4001 Schoolhouse Lane, Center Valley,
Pennsylvania, unless another date or place is agreed to in writing by the
parties hereto.
Section 2.2 CONVEYANCE AND DELIVERY BY SELLER. On the Closing
Date, Seller will 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 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 set forth in Schedule 1.1(a).
Without limiting the generality of the foregoing, at the Closing, Seller shall
deliver to Buyer:
4
(a) a Bill of Sale and Assignment, substantially in the
form of Exhibit 2.2(a), executed by Seller (the "Bill of Sale");
(b) an employment agreement, substantially in the form of
Exhibit 2.2(b), executed by the Shareholders (the "Shareholder Employment
Agreements");
(c) an Assignment and Assumption Agreement, substantially
in the form of Exhibit 2.2(d), with respect to the Assigned Agreements, executed
by Seller (the "Assignment and Assumption Agreement");
(d) duly adopted resolutions of Seller's Board of
Directors satisfactory to Buyer in its reasonable discretion: (i) approving a
plan of asset transfer (the "Plan of Asset Transfer") and proposing same to the
Shareholders for their consideration and adoption, in accordance with Section
1932(b) of the Pennsylvania Business Corporation Law (the "PBCL"); (ii)
terminating Seller's Employee Benefit Plans; and (iii) directing the Seller's
401(k) Plan's Trustee 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 participants and beneficiaries under
401(k) Plan (the "Seller's Board Resolutions"); and
(e) duly adopted resolutions of the Shareholders,
adopting the Plan of Asset Transfer in accordance with Section 1932(b) of the
PBCL (the "Shareholder Resolutions").
Section 2.3 DELIVERY BY BUYER. On the Closing Date, Buyer will
deliver to Seller:
(a) a wire transfer of immediately available funds to one
or more accounts designated in writing by Seller for the amount required to be
delivered at Closing pursuant to SECTION 1.4(B) hereof;
(b) the Shareholder Employment Agreements, executed by
Buyer;
(c) the Assignment and Assumption Agreement, executed by
Buyer;
(d) a Promissory Note, substantially in the form of
Exhibit 2.3(d), with respect to the Holdback Amount, executed by Buyer (the
"Promissory Note"); and
(e) duly adopted resolutions of Buyer's Board of
Directors, satisfactory to Seller in its reasonable discretion, approving the
transactions contemplated herein and Buyer's obligations under this Agreement.
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 4 hereof.
Section 2.5 FURTHER ASSURANCES. From time to time after the
Closing, at Buyer's request, Seller will execute, acknowledge and deliver to
Buyer such other instruments of conveyance and transfer and will take such other
actions and execute and deliver such other
5
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 will
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 carry out,
evidence and confirm the intended purposes of this Agreement.
Section 2.6 EFFECTIVE DATE. The Effective Date of this Agreement
and all related instruments executed at the Closing shall be October 1, 2001
unless otherwise specified. Notwithstanding the foregoing, Seller shall retain
the risk of loss for errors and omissions committed up until the Closing Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
I. Seller and the Shareholders, jointly and severally when and where
applicable, represent and warrant to Buyer as follows:
Section 3.1 ORGANIZATION. Seller is a corporation organized and
in good standing under the laws of the Commonwealth of Pennsylvania and its
status is active. 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 to do
business and is in good standing as a foreign corporation in each jurisdiction
where the conduct of its insurance agency business requires it to be so
qualified.
Section 3.2 CAPITALIZATION. The Shareholders own and hold 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 3.3 AUTHORITY. Seller 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 have been duly authorized by all necessary corporate action on
the part of Seller. This Agreement has been, and the other agreements, documents
and instruments required to be delivered by Seller in accordance with the
provisions hereof (collectively, the "Seller's Documents") will be, duly
executed and delivered by duly authorized officers of Seller on behalf of
Seller, and this Agreement constitutes, and the Seller's Documents when executed
and delivered will constitute, the legal, valid and binding obligations of
Seller, enforceable against Seller in accordance with their terms, subject to
applicable bankruptcy, insolvency, reorganization or similar laws from time to
time in effect relating to or affecting the enforcement of creditors' rights
generally and general equitable principles.
Section 3.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Neither the
execution, delivery or performance of this Agreement by Seller nor the
consummation by it of the transactions contemplated hereby nor compliance by it
with any of the provisions hereof will (a) conflict with or result in any breach
of any provision of its Articles of Incorporation or Bylaws, (b) require any
filing with, or permit, authorization, consent or approval of, any court,
arbitral tribunal,
6
administrative agency or commission, or other governmental or other regulatory
authority or agency (each a "Governmental Entity"), or (c) except with respect
to any consents which may be required pursuant to the Assigned Agreements (other
than the current lease for Seller's offices located at 3893 Adler Place,
Bethlehem, Pennsylvania, for which such consent has been obtained prior to
Closing) result in a violation or breach of, or constitute a default under, any
of the terms, conditions or provisions of any agreement or other instrument or
obligation to which Seller is a party or by which Seller or any of its
properties or assets may be bound.
Section 3.5 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 securities, assets, properties or rights included in the
Acquired Assets or any interest therein.
Section 3.6 FINANCIAL STATEMENTS. Seller has delivered to Buyer
true and complete copies of (a) its balance sheet at September 30, 2000 and the
related statement of income for the fiscal year then ended (the "2000 Financial
Statements"), and (b) its balance sheet at August 31, 2001 (the "Balance Sheet
Date") and the related statement of income for the eleven (11) months then ended
(the "Interim Financial Statements"). The 2000 Financial Statements were
prepared in accordance with generally accepted accounting principles and the
Interim Financial Statements were prepared in accordance with Seller's standard
internal accounting methodology, in each case consistently applied throughout
the periods involved (subject, in the case of the Interim Financial Statements,
to normal recurring audit adjustments). Such balance sheets fairly present the
consolidated financial position, assets, and liabilities (whether accrued,
absolute, contingent or otherwise) of Seller at the dates indicated and such
statements of income fairly present the results of operations for the periods
then ended. Seller's financial books and records are accurate and complete in
all material respects. Except as set forth in Schedule 3.6, Seller has not
guaranteed any premium financing on behalf of its customers.
Section 3.7 ORDINARY COURSE OF BUSINESS. Since the Balance Sheet
Date, Seller has carried on 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 Balance Sheet Date, there have been no events or changes having an
adverse effect on Seller or the Acquired Assets. All of Seller's accounts
payable, including accounts payable to insurance carriers, are current and
reflected properly on its books and records, and will be paid in accordance with
their terms at their recorded amounts.
Section 3.8 ASSETS. (a) Except as set forth in Schedule 1.1(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,
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
revenue received by Seller from each of its appointed
7
carriers in the twelve-month period ended September 30, 2001. None of the
accounts shown in Schedule 1.2(a) represents business that has been brokered
through a third party.
(b) The names "Henry S. Lehr, Inc.", "HSL, Inc.", "The
Lehr Companies", "Lehr Management", and "The Lehr Institute" are the only trade
names used by Seller or Shareholders within the past three (3) years. No party
has filed a claim during the past three (3) years against Seller alleging that
it has violated, infringed on or otherwise improperly used the intellectual
property rights of such party, or, if so, the claim has been settled with no
existing liability to Seller and, to the Knowledge of Seller and the
Shareholders (as defined in SECTION 7.2 hereof), Seller has not violated or
infringed any trademark, trade name, service mark, service name, patent,
copyright or trade secret held by others.
(c) Schedule 3.8 lists all material contracts, agreements
and other written or verbal arrangements to which Seller is a party, including,
but not limited to, (i) any employment, non-compete, confidentiality or
non-solicitation agreement to which Seller or either of the Shareholders is a
party, (ii) any agreement relating to the purchase or sale of assets by Seller
within the past five (5) years, (iii) any agreement between Seller and either of
the Shareholders or between Seller and any officer, director or affiliate of
Seller, and (iv) any other contract or agreement not entered into in the
ordinary course of business. Seller has delivered true and complete copies of
each such agreement to Buyer and, in the case of unwritten agreements, a true
and complete summary of such arrangements. The parties to all such agreements
are in compliance with the terms thereof.
(d) To the Knowledge of Seller and the Shareholders,
Seller's computer software included in the Acquired Assets performs in
accordance with the documentation and other written material used in connection
therewith, and is free of defects in programming and operation. Seller has
delivered to Buyer copies of all user and technical documentation related to
such software available to Seller.
Section 3.9 LITIGATION AND CLAIMS. Except as disclosed in
Schedule 3.9, there is no suit, claim, action, proceeding or investigation
pending or, to the Knowledge of Seller and the Shareholders, threatened against
Seller and, to the Knowledge of Seller and the Shareholders, no circumstances
exist that could reasonably form a basis for such a suit, claim, action,
proceeding or investigation to be initiated or threatened. 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
an adverse effect on Seller or the Acquired Assets 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 will 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 will 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 will not be sufficient to pay
its debts, nor will 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.
8
Section 3.10 COMPLIANCE WITH APPLICABLE LAW. To the Knowledge of
Seller and the Shareholders, Seller holds all permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities necessary for the
lawful conduct of the insurance agency business (collectively, the "Permits"),
and Seller is in compliance with the terms of the Permits. To the Knowledge of
Seller and the Shareholders, the business of Seller is not being conducted in
violation of any law, ordinance or regulation of any Governmental Entity
(including, without limitation, the Gramm-Leach-Bliley Financial Services
Modernization Act of 1999 and any applicable federal or state regulations
promulgated pursuant thereto), except for possible violations that individually
or in the aggregate do not, and, insofar as reasonably can be foreseen, in the
future will not, have an adverse effect on its business. As of the date of this
Agreement, no investigation or review by any Governmental Entity with respect to
Seller is pending or, to the Knowledge of Seller and the Shareholders,
threatened.
Section 3.11 TAX RETURNS AND AUDITS. Seller has timely filed all
federal, state, local and foreign tax returns, including all amended returns, in
each jurisdiction where Seller is required to do so or has paid or made
provision for the payment of any penalty or interests arising from the late
filing of any such return, has correctly reflected all taxes required to be
shown thereon, and has fully paid or made adequate provision for the payment of
all taxes that have been incurred or are due and payable pursuant to such
returns or pursuant to any assessment with respect to taxes in such
jurisdictions, whether or not in connection with such returns. Seller has not
received any notice that it is or may become subject to any audits with respect
to any federal, state, local or foreign tax returns required to be filed, and
there are no unresolved audit issues with respect to prior years' tax returns.
To the Knowledge of Seller and the Shareholders, there are no circumstances or
pending questions relating to potential tax liabilities nor claims asserted for
taxes or assessments of Seller that, if adversely determined, could result in a
tax liability that would have a material adverse effect on Seller or the
Acquired Assets for any period. Seller has not executed an extension or waiver
of any statute of limitations on the assessment or collection of any tax due
that is currently in effect. Seller is not holding any unclaimed property that
it is required to surrender to any state taxing authority including, without
limitation, any uncashed checks or unclaimed wages, and Seller has timely filed
all unclaimed property reports required to be filed with such state taxing
authorities. Seller does not purge its records of uncashed checks periodically.
Section 3.12 NON-SOLICITATION COVENANTS. Except as set forth in
Schedule 3.12, Neither Seller nor either of the Shareholders is a party to any
agreement that restricts Seller's or the Shareholder's ability to compete in the
insurance agency industry or solicit specific insurance accounts.
Section 3.13 ERRORS AND OMISSIONS; EMPLOYMENT PRACTICES LIABILITY.
Except as set forth in Schedule 3.13, Seller has not incurred any liability or
taken or failed to take any action that may reasonably be expected to result in
(a) a liability for errors or omissions in the conduct of its insurance business
or (b) employment practices liability (EPL), except such liabilities as are
fully covered by insurance. All errors and omissions (E&O) and EPL lawsuits and
claims currently pending or threatened against Seller are set forth in Schedule
3.13. Seller has E&O insurance coverage in force, with minimum liability limits
of $5 million per claim and $6 million aggregate, with a deductible of
$10,000.00 per claim and $30,000.00 aggregate, and the Shareholders will provide
to Buyer a certificate of insurance evidencing such coverage prior to or on the
Closing Date.
9
Seller has EPL insurance coverage in force, with minimum liability limits of $1
million per claim and $1 million aggregate, with a deductible of $2,500.00 per
claim, and the Shareholders will provide to Buyer a certificate of insurance
evidencing such coverage prior to or on the Closing Date. Seller has had the
same or higher levels of E&O and EPL coverage continuously in effect for at
least the past five (5) years.
Section 3.14 EMPLOYEE DISHONESTY COVERAGE. Schedule 3.14 sets
forth a complete and correct list of all employee dishonesty bonds or policies,
including the respective limits thereof, held by Seller in the three (3) year
period prior to the Closing Date, and true and complete copies of such bonds or
policies have been delivered to Buyer. Seller has complied with all the
provisions of such bonds or policies and Seller has an employee dishonesty bond
or policy in full force and effect as of the Closing Date.
Section 3.15 NO MISREPRESENTATIONS. None of the representations
and warranties of Seller and the Shareholders set forth in this Agreement or in
the attached Schedules, 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 misleading.
II. Buyer represents and warrants to Seller and the Shareholders as
follows:
Section 3.16 ORGANIZATION. Buyer is a corporation organized and in
good standing under the laws of the Commonwealth of Pennsylvania 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. Buyer is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
where the conduct of its insurance agency business requires it to be so
qualified.
Section 3.17 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 have been duly authorized by all necessary corporate action on
the part 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") will be, duly executed
and delivered by duly authorized officers of Buyer on behalf of Buyer, and this
Agreement constitutes, and the Buyer's Documents when executed and delivered
will constitute, the legal, valid and binding obligations of Buyer, enforceable
against Buyer in accordance with their terms, subject to applicable bankruptcy,
insolvency, reorganization or similar laws from time to time in effect relating
to or affecting the enforcement of creditors' rights generally and general
equitable principles.
Section 3.18 CONSENTS AND APPROVALS; NO VIOLATIONS. Neither the
execution, delivery or performance of this Agreement by Buyer nor the
consummation by it of the transactions contemplated hereby nor compliance by it
with any of the provisions hereof will (a) conflict with or result in any breach
of any provision of its Articles of Incorporation or Bylaws, (b) require any
filing with, or permit, authorization, consent or approval of, any court,
arbitral tribunal, administrative agency or commission, or other governmental or
other regulatory authority or agency
10
(each a "Governmental Entity"), or (c) result in a violation or breach of, or
constitute a default under, 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 3.19 NO MISREPRESENTATIONS. None of the representations
and warranties of Buyer set forth in this Agreement, notwithstanding any
investigation thereof by Seller or the Shareholders, contains any untrue
statement of a material fact, or omits the statement of any material fact
necessary to render the statements made not misleading.
ARTICLE 4
ADDITIONAL AGREEMENTS
Section 4.1 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 will 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 except
Berwind Financial, L.P. (any commissions or fees payable to which shall be the
sole responsibility of Seller), 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 4.2 NON-COMPETITION COVENANTS. (a) Subject to SECTION
5.1(C), Seller and the Shareholders each agree that it, he or she, as the case
may be shall not, for a period of five (5) years beginning on the Closing Date,
engage in, or be or become the owner of an equity interest in, or otherwise
consult with, be employed by, or participate in the business of, any entity
(other than Buyer) engaged in the insurance agency business within a fifty
(50)-mile radius of Bethlehem, Pennsylvania. Without limiting the foregoing,
Seller and the Shareholders shall not, during such five-year period, (i)
solicit, divert, accept business from, nor service, directly or indirectly, as
insurance solicitor, insurance agent, insurance broker or otherwise, for his or
her 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 (ii) hire or directly or indirectly solicit any
employees of Buyer or its affiliates to work for Seller, the Shareholders or any
of their affiliates, or any company that competes with Buyer or its affiliates.
The Shareholders acknowledge that the non-solicitation covenants contained in
any employment agreement he or she may enter into with Buyer will be in addition
to, and will not supersede or be subordinate to, the non-competition and
non-solicitation covenants contained in this SECTION 4.2.
(b) Notwithstanding anything in this Agreement to the
contrary, the covenants set forth in this SECTION 4.2 shall not be held invalid
or unenforceable because of the scope of the territory or actions subject hereto
or restricted hereby, or the period of time within which such covenants are
imperative; but the maximum territory, the actions subject to such covenants,
and the period of time in which such covenants are enforceable, respectively,
are subject to
11
determination by a final judgment of any court which had jurisdiction over the
parties and subject matter.
Section 4.3 REMEDY FOR BREACH OF COVENANTS. In the event of a
breach of the provisions of SECTION 4.2, 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 4.2 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 and
the Shareholders acknowledge that the covenants set forth in SECTION 4.2
represent an important element of the value of the Acquired Assets and were a
material inducement for Buyer to enter into this Agreement.
Section 4.4 SUCCESSOR RIGHTS. The covenants contained in SECTION
4.2 shall inure to the benefit of any successor in interest of Buyer by way of
merger, consolidation, sale or other succession.
Section 4.5 ERRORS AND OMISSIONS, EMPLOYMENT PRACTICES LIABILITY,
AND EMPLOYEE DISHONESTY EXTENDING REPORTING ("TAIL") COVERAGE. On or prior to
the Closing Date, the Shareholders shall cause Seller to purchase, at Seller's
expense, a tail coverage extension on each of Seller's errors and omissions
(E&O), employment practices liability (EPL), and employee dishonesty insurance
policy (or employee dishonesty bond, as the case may be). Such coverages shall
extend for a period of at least five (5) years from the Closing Date, shall have
the same coverages and deductibles currently in effect, and shall otherwise be
in form reasonably acceptable to Buyer. A certificate of insurance evidencing
each such coverage shall be delivered to Buyer at or prior to Closing.
Section 4.6 EXPENSES. Whether or not the transaction contemplated
by this Agreement is consummated, all costs and expenses incurred in connection
with this Agreement and the transaction contemplated hereby shall be paid by the
party incurring such expenses.
Section 4.7 CONFIDENTIALITY. The parties each agree to maintain
the terms of this Agreement, including the consideration payable by Buyer, in
strict confidence and shall not disclose such terms to any third party without
the prior written consent of Buyer, unless required to do so by law (including,
without limitation, applicable securities laws). Notwithstanding the foregoing,
Seller and the Shareholders acknowledge and agree that promptly after the
Closing, Buyer shall issue a press release, a copy of which shall have been
provided by Buyer to Seller and the Shareholders within a reasonable amount of
time in advance for their review and reasonable comment, which press release
shall, among other things, set forth Seller's estimated commission revenue for
the twelve-month period prior to Closing.
Section 4.8 TERMINATION OF EMPLOYEES; REIMBURSEMENT OF BUSINESS
EXPENSES AND SEGREGATION OF REVENUES AFTER EFFECTIVE DATE. (a) Except as
otherwise provided in SECTION 4.8(B) below, Seller shall terminate the
employment of all of Seller's employees, effective as of the Effective Date.
Seller shall be responsible for all payments, unless such payments are the
responsibility of a third party (i.e., insurer), to all of Seller's employees
(whether or not
12
terminated as of the Effective Date) for, and liabilities associated with, all
employee benefits and Employee Benefit Plans including, but not limited to,
vacation, bonuses, and sick leave benefits, accruing prior to the Effective
Date.
(b) With respect to those employees who are employed by
Seller pursuant to a written employment agreement ("Contract Employees"), all of
which agreements are attached hereto collectively as Schedule 4.8(b), Seller
shall not terminate their employment as of the Effective Date. With respect to
such Contract Employees:
(i) Seller and Buyer shall, at least two (2)
days prior to the scheduled Closing Date, jointly meet with each of the Contract
Employees and shall advise him/her that the employment agreements between Seller
and its Contract Employees will be assigned to Buyer as of the Closing Date. The
Notice attached hereto as Schedule 4.8(b)(i) shall be presented to the Contract
Employees by Buyer and Seller at such meetings, and the Contract Employees shall
be requested to sign the standard Brown & Brown employment agreement which shall
be attached to the Notice and is attached hereto as Schedule 4.8(b)(i). The
standard Brown & Brown employment agreement shall replace and supersede the
Contract Employees' current employment agreement with Seller but will provide
that the Contract Employees' commission schedule in effect as of the Closing
Date shall remain in effect through December 31, 2001.
(ii) In the event any of the Contract Employees
refuses to enter into the standard Brown & Brown employment agreement on or
before the close of business on October 19, 2001, such employees shall be
considered to have immediately voluntarily resigned from their employment with
Seller without cause ("Resigning Employees"). Seller shall indemnify and hold
Buyer harmless from and against any Adverse Consequences, as defined in SECTION
6.2(B), that Buyer may suffer or incur arising out of or relating to claims by
the Resigning Employees, or any of them, for severance payments and/or payments
in lieu of notice under their respective employment agreements with Seller.
(c) Buyer shall reimburse Seller for all wage and
employee benefit payments and other normal and customary business expenses made
or incurred by Seller after the Effective Date; provided, however, that on and
after the Closing Date, Seller shall segregate, hold in trust in a separate
account, and promptly pay over to Buyer all commissions and fees that are the
property of Buyer pursuant to SECTION 1.5 hereof. Buyer shall be responsible, as
of the Effective Date, for any wages and employee benefits under Buyer's
existing plans and policies for any employee of Seller, whether or not a
Contract Employee, who accepts an offer of employment with Buyer by entering
into Buyer's standard employment agreement.
Section 4.9 ENFORCEMENT OF ASSIGNED EMPLOYMENT AGREEMENTS. In the
event that a Resigning Employee whose employment agreement with Seller was
assigned to Buyer under SECTION 1.2 hereof, (i) materially breaches any of the
post-termination covenants under his or her employment agreement with Seller,
Seller and the Shareholders shall cooperate with Buyer in enforcing the terms of
such agreement assigned to Buyer and shall join in any legal or equitable
proceedings (to the extent permitted under applicable law) instituted by Buyer
for such purpose, the legal fees and costs of any such proceedings to be borne
by Seller.
13
Section 4.10 CORPORATE NAME. Promptly after the Closing,
Seller agrees to cease all use of the name "Henry S. Lehr, Inc." or any
derivative thereof and will, no later than five (5) business days after the
Closing Date, file an amendment to its Articles of Incorporation, changing its
corporate name to a new name that bear no resemblance to its current name.
ARTICLE 5
CONDITIONS
Section 5.1 CONDITIONS TO EACH PARTY'S OBLIGATION. The respective
obligations of each party to effect the transactions contemplated by this
Agreement shall be subject to the satisfaction prior to or on the Closing Date
of the following conditions:
(a) All authorizations, consents, orders, or approvals
of, or declarations or filings with, or expirations of waiting periods imposed
by, any Governmental Entity, the failure to obtain which would have a material
adverse effect on the Business or the Acquired Assets after the Closing, shall
have been filed, occurred, or been obtained;
(b) No temporary restraining order, preliminary or
permanent injunction, or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the transaction shall be in effect; and
(c) The obligations of the parties to effect the
transactions contemplated by this Agreement are subject to the simultaneous sale
of the assets of Apollo Financial Corporation to Buyer or its affiliates.
Section 5.2 CONDITIONS TO OBLIGATIONS OF BUYER. The obligation of
Buyer to effect the transactions contemplated by this Agreement is subject to
the satisfaction of the following conditions, unless waived by Buyer:
(a) The representations and warranties of Seller and the
Shareholders set forth in this Agreement shall be true and correct in all
material respects as of the Closing Date;
(b) Seller and the Shareholders 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;
(c) Buyer shall be satisfied, in its sole discretion,
with the results of its due diligence investigation of Seller's business and
records;
(d) Seller shall have delivered the Bill of Sale to
Buyer;
(e) Seller shall have delivered the Assignment and
Assumption Agreement to Buyer;
(f) Seller shall have delivered the Shareholder
Employment Agreement to Buyer;
14
(g) Subject to SECTION 4.9, Seller shall have delivered
the Staff Employment Agreements to Buyer;
(h) Seller shall have delivered to Buyer a copy of
Seller's Board Resolutions;
(i) Seller shall have delivered to Buyer a copy of the
Shareholder Resolutions, along with a copy of the Plan of Asset Transfer adopted
by the Shareholders;
(j) Seller shall have delivered evidence to Buyer,
satisfactory to Buyer in its sole discretion, of a Certificate of Insurance
regarding the errors and omissions tail coverage required under SECTION 4.5
hereof;
(k) Except as set forth in Schedule 1.1(a), all liens,
judgments, and other encumbrances on the Acquired Assets shall have been
satisfied and released prior to Closing;
(l) The Acquisition Committee and the Board of Directors
of Buyer's parent company, Brown & Brown, Inc., shall have approved this
Agreement and the transactions contemplated herein; and
(m) There shall have been no material adverse change to
the Business, Acquired Assets, or financial condition of Seller since the
Balance Sheet Date.
Section 5.3 CONDITIONS TO OBLIGATION OF SELLER AND THE
SHAREHOLDERS. The obligation of Seller and the Shareholders to effect the
transactions contemplated by this Agreement are subject to the satisfaction of
the following conditions, unless waived by Seller and the Shareholders:
(a) 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) 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 shall have executed and delivered the
Shareholder Employment Agreements to the Shareholders;
(d) Buyer shall have executed and delivered the
Assignment and Assumption Agreement to Seller;
(e) Buyer shall have executed and delivered the
Promissory Note to Seller; and
(f) Buyer shall have delivered to Seller and the
Shareholders certified Resolutions of Buyer's Board of Directors.
15
ARTICLE 6
INDEMNIFICATION
Section 6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, INDEMNITIES
AND COVENANTS. (a) Subject to SECTION 6.1(B) and unless otherwise set forth in
this Agreement, the representations, warranties and indemnities set forth in
this Agreement shall survive for a period of two (2) years from the Closing
Date. All post-closing covenants shall survive the Closing for the period(s)
specified in this Agreement or, if not specified, for a period of two (2) years
following the Closing Date. If a party has received notice of a potential breach
of a representation, covenant or warranty, or the occurrence of an otherwise
potentially-indemnifiable event under this Agreement within such two-year
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 two-year period.
(b) Notwithstanding anything set forth in SECTION 6.1(A),
all representations, warranties, covenants and indemnities in connection with
SECTION 4.7 or any tax liabilities shall survive in perpetuity, subject to
applicable statutes of limitations.
Section 6.2 INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF BUYER.
Subject to SECTION 6.4:
(a) To the extent that any Resigning Employee (as defined
in SECTION 4.8(B)(I)) diverts in direct contravention of such Resigning
Employee's employment agreement with Seller being assigned to Buyer hereunder,
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, Buyer
shall be paid by Seller and the Shareholders (which obligations shall be joint
and several) an amount equal to (i) 1.5 times (ii) the aggregate annualized
policy commissions on such diverted lines of coverage.
(b) Seller and the Shareholders 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)
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 or the Shareholders'
representations, warranties, obligations or covenants contained herein, or (ii)
the operation of the Business or ownership of the Acquired Assets by Seller on
or prior to the Closing, including, without limitation, any claims or lawsuits
based on conduct of Seller or the Shareholders occurring before the Closing. 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.
(c) In addition to and without limiting SECTION 6.2(A) or
(B), Seller and the Shareholders agree, from and after the Closing, to jointly
and severally indemnify Buyer from and against the entirety of any Adverse
Consequences Buyer may suffer resulting from, arising out of, relating to, in
the nature of, or caused by:
16
(i) any liability or obligation of Seller that
is not assumed hereunder (including 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); or
(ii) any liability of Seller for the unpaid taxes
of any person or entity (including Seller) under United States Treasury
Regulation ss. 1.1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise.
Section 6.3 INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF SELLER
AND THE SHAREHOLDERS. Subject to SECTION 6.4, Buyer agrees to indemnify and hold
Seller, the Shareholders and their respective officers, directors, shareholders
and affiliates harmless from and against any Adverse Consequences that 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, or (b) the operation of the Business
or ownership of the Acquired Assets by Buyer after the Closing, including,
without limitation, any claims or lawsuits based on conduct of Buyer occurring
after the Closing.
Section 6.4 LIMITATION OF LIABILITY. (a) No indemnification by
either party under SECTION 6.2 or 6.3 shall be required to be made:
(i) with respect to any claim for
indemnification by a party ("Indemnitee") as to which the party from whom
indemnification is sought ("Indemnitor") has not received written notice from
Indemnitee in accordance with SECTION 6.1(A);
(ii) with respect to any claim for
indemnification for breaches of representations or warranties under SECTION
6.2(B)(I) or SECTION 6.3(A) if and to the extent the facts underlying such claim
were known to the actual knowledge of Indemnitee prior to the Closing; or
(iii) with respect to (A) any claims under SECTION
6.2(A), the first Seventy-Five Thousand Dollars ($75,000.00) of aggregate
Adverse Consequences incurred by Buyer, and (B) with respect to any
indemnification claims pursuant to a provision other than under SECTION 6.2(A),
the first Twenty-Five Thousand Dollars ($25,000.00) (the "Basket Amount") of
aggregate Adverse Consequences incurred by a party (Seller and the Shareholders
being treated as one party for purposes of this SECTION 6.4), it being the
intent of the parties that each party shall have a "basket" in such amount with
respect to aggregate claims for indemnification.
(b) All amounts payable by Indemnitor shall be computed
net of any recovery actually paid to Indemnitee (less any deductible incurred by
Indemnitee) under any third-party insurance coverage with respect thereto which
offsets the Adverse Consequences that would otherwise be sustained by
Indemnitee.
(c) The total aggregate liability of any party with
respect to its indemnification obligations under this Agreement shall not exceed
Five Million Dollars ($5,000,000.00) (the "Maximum Liability Amount"); provided,
however, that the Holdback Amount shall be credited against the total aggregate
liability of Seller and the Shareholders set forth in this SECTION 6.4(B).
17
(d) Notwithstanding any of the foregoing provisions, any
Adverse Consequences for which Buyer is entitled to indemnification as a result
of the breach by Seller or the Shareholders of their covenants set forth in
SECTION 4.2 shall not be subject to the Basket Amount or the Maximum Liability
Amount.
ARTICLE 7
ESCROW
Section 7.1 ESCROW AGREEMENT. Pursuant to SECTION 1.4(C) hereof,
at Closing Purchaser shall by wire transfer deliver to Fitzpatrick Lentz &
Bubba, P.C. (the "Escrow Agent") the Holdback Amount (for purposes of this
ARTICLE 7, the "Escrowed Funds"), to be held and ultimately disbursed by the
Escrow Agent in accordance with this ARTICLE 7.
Section 7.2 INTEREST. The Escrowed Funds shall be deposited in a
high performance money fund with a current yield of approximately three (3%)
percent per annum. Subject to the remaining terms of this Article, all interest
earned on the Escrowed Funds shall accrue to the benefit of Seller and
Shareholders.
Section 7.3 INDEMNIFICATION CLAIMS.
(a) If Buyer shall make a claim for indemnification
hereunder. Buyer shall promptly give written notice of such claim to (i) the
Escrow Agent, (ii) Seller, and (iii) Shareholders. Such notice shall describe
the nature of the claim, the amount thereof, the provisions in this Agreement
and related documents on which the claim is based and shall include a brief
summary of the factual basis on which the claim is based. The thirty (30) day
period immediately following the date which Buyer gives notice to the Escrow
Agent, Seller and Shareholders is referred to herein as the "Response Period."
(b) If the Escrow Agent has not received a written
objection to a claim delivered pursuant to SECTION 7.3(A) from the Seller and/or
Shareholders during the Response Period, the claim shall be conclusively
presumed to have been approved by the Seller and/or Shareholders, and the Escrow
Agent shall promptly thereafter make a cash payment to Buyer equal to the amount
of the claim out of the Escrowed Funds
(c) If during the Response Period the Escrow Agent shall
have received from the Seller and/or Shareholders a written objection to the
claim made by Buyer pursuant to SECTION 7.3(A) above, then for a period of
thirty (30 ) days after receipt by the Escrow Agent of such objection, Buyer and
the Seller and/or Shareholders shall endeavor to resolve the difference and to
issue a joint written direction to the Escrow Agent in respect to the claim in
issue (a "Written Direction"). The Escrow Agent shall act in accordance with the
Written Direction, if an when issued. If a Written Direction is not issued prior
to the end of such thirty (30) day period, Buyer or the Seller or Shareholders
may institute litigation in any court of competent jurisdiction to adjudicate
its rights under this Agreement. The Escrow Agent shall transfer to Buyer funds
from the Escrowed Funds in an amount equal to the full amount of any final and
18
nonappealable order entered in connection with such litigation or the balance of
the applicable Escrowed Funds, whichever is less, not later than five (5) days
after receipt of such order.
(d) The obligations of Escrow Agent shall be limited to
receiving and holding the Escrowed Funds, and to disburse the same in accordance
with this ARTICLE 7. Should there arise any factual question or dispute
concerning the Escrowed Funds and whether the Escrow Agent turn over the same,
or to whom the same shall be paid or disbursed, or in any event, if the Escrow
Agent so decides, the Escrow Agent may, at its discretion, pay over and deliver
the same to the Court of Common Pleas of Northampton County to be held by said
court pending a resolution of the matter. Following such payment and delivery to
the court, the Escrow Agent shall there upon be discharged from all
responsibility and liability involving the said escrow paid to the court and may
represent Seller, Shareholders or Buyer hereunder in any such dispute. The
parties acknowledge that Escrow Agent is attorney for Seller and Shareholders
and that nothing herein shall preclude Escrow Agent from continuing to represent
Seller and the Shareholders in any adversary proceeding upon the payment of the
Escrowed Funds into court.
Section 7.4 DISTRIBUTIONS AND TERMINATION OF ESCROW. On or before
October, 31, 2002 (the "Release Date"), Escrow Agent shall wire transfer the
balance of the Escrowed Funds plus all interest earned thereon to Seller and/or
Shareholders as directed in writing by the Seller and Shareholders. On the
Release Date, the applicable amount shall be promptly distributed to the Seller
and/or Shareholders, assuming the remaining amount in the Escrow Account is in
excess of the maximum amount which would be payable to Buyer if all then pending
claims applicable to the Escrowed Funds were determined in favor of Buyer (the
"Maximum Claim Amount"). A claim shall be deemed to be "pending" for purposes of
this Section if written notice of a claim for indemnification has been given in
good faith by Buyer and received by the Escrow Agent pursuant to SECTION 7.3(A)
hereof prior to the Release Date. If the remaining amount of the Escrowed Funds
would not be in excess of the Maximum Claim Amount, then Escrow Agent shall only
distribute to Seller and/or Shareholders the Release Date the amount of the
Escrowed Funds in excess of the Maximum Claim Amount. Any monies scheduled to be
released, but instead retained by the Escrow Agent due to pending claims, shall
be promptly distributed either to Buyer or to the Seller and/or Shareholders by
the Escrow Agent upon, and in accordance with, either a Written Direction or
court order as described in SECTION 7.3(C) hereof. Following the Release Date,
as pending claims are satisfied or otherwise disposed of, any part of the
Escrowed Funds held by the Escrow Agent which is in excess of the Maximum Claim
Amount shall be promptly distributed to the Seller and/or Shareholders.
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,
telecopied (if confirmed), or mailed by registered or certified mail (return
receipt requested) 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
19
Brown & Brown of Lehigh Valley, Inc.
90 South Commerce Way, Suite 100
Bethlehem, Pennsylvania 18017-2267
Telecopy No.: (610) 867-1162
Attn: Robert Iocco
with a copy to
Brown & Brown, Inc.
401 E. Jackson St., Suite 1700
Tampa, Florida 33601
Telecopy No.: (813) 222-4464
Attn: Laurel Grammig
(b) if to Seller or to the Shareholders, to
William H. Lehr
Patsy A. Lehr
734 Paxinosa Avenue
Easton, PA 18042
with a copy to
Joseph A. Bubba, Esquire
Fitzpatrick Lentz & Bubba, P.C.
4001 Schoolhouse Lane
P.O. Box 219
Center Valley, Pennsylvania 18034-0219
Telecopy No.: (610) 797-6663
Section 8.2 USE OF TERM "KNOWLEDGE". With respect to the term
"Knowledge" as used herein: (a) an individual will be deemed to have "Knowledge"
of a particular fact or other matter if (i) such individual is actually aware of
such fact or other matter, or (ii) a prudent individual could be expected to
discover or otherwise become of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or matter; and (b) a corporation or other business entity will be
deemed to have "Knowledge" of a particular fact or other matter if any
individual who is serving, who has at any time in the twelve (12) months prior
to the Closing Date served, as a director, officer, executor, or trustee (or in
any similar capacity) of such corporation or business entity has, or at any time
had, Knowledge of such fact or other matter.
Section 8.3 COUNTERPARTS. This Agreement may be executed in two
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.
20
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 4.4
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 other parties.
This Agreement will 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 Pennsylvania law without
regard to any applicable conflicts of law.
Section 8.9 WAIVER OF JURY TRIAL. The parties hereby knowingly,
voluntarily and intentionally waive any right either may have to a trial by jury
with respect to any litigation related to or arising out of, under or in
conjunction with this Agreement.
Section 8.10 AMENDMENT; WAIVER. This Agreement may not be
amended, or any provision waived, except by an instrument in writing signed on
behalf of each of the parties.
* * * * * * * * * *
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK - SIGNATURE PAGE FOLLOWS]
21
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.
BUYER:
BROWN & BROWN OF LEHIGH VALLEY,
INC.
By: /s/ Thomas E. Riley
---------------------------------------
Name: Thomas E. Riley
Title: President
SELLER:
HENRY S. LEHR, INC.
By: /s/ William H. Lehr
---------------------------------------
Name: William H. Lehr
Title: President
SHAREHOLDERS:
/s/ William H. Lehr
-------------------------------------------
William H. Lehr, individually
/s/ Patsy A. Lehr
-------------------------------------------
Patsy A. Lehr, individually
ESCROW AGENT:
FITZPATRICK LENTZ & BUBBA, P.C.
By: /s/ Joseph A. Bubba
---------------------------------------
Joseph A. Bubba, Esquire, A Director
22
SCHEDULES AND EXHIBITS
Schedule 1.1(a): Permitted Liens and Encumbrances
Schedule 1.2(a): Purchased Book of Business
Schedule 1.2(d): Tangible Property
Schedule 1.2(e): Assigned Agreements
Schedule 3.6: Guaranteed Premium Financing
Schedule 3.8: Material Contracts
Schedule 3.9: List of Claims and Litigation
Schedule 3.12: Non-Solicitation Covenants
Schedule 3.13: E&O and EPL Claims and Litigation
Schedule 3.14: Employee Dishonesty Coverage
Schedule 4.8(b): Contract Employees
Schedule 4.8(b)(i): Notice
Exhibit 2.2(a): Bill of Sale
Exhibit 2.2(b): Shareholder Employment Agreement
Exhibit 2.2(d): Assignment and Assumption Agreement
Exhibit 2.3(d): Promissory Note
23