EXHIBIT 10.34
PURCHASE AGREEMENT
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THIS AGREEMENT is executed this 15th day of January, 1999, to be
effective as of December 31, 1998, at 12:01 a.m. (the "Effective Date"), by and
between TALBOT AGENCY OF CALIFORNIA, INC., a California corporation ("Talbot"),
as purchaser, and XXXXXX, XXXXXXX & XXXXXXX, INC., a California corporation
("PKW"), as seller, and ANCHOR PACIFIC UNDERWRITERS, INC., a Delaware
corporation ("APU"), as sole shareholder of PKW and guarantor of PKW's
obligations under this Agreement.
RECITALS
A. PKW operates as an independent insurance agency, under the name Xxxxxx,
Xxxxxxx & Xxxxxxx in Concord, California ("Business").
B. PKW wishes to sell and Talbot desires to acquire certain of PKW's assets
described below upon the terms and subject to the conditions set forth
below.
THE PARTIES THEREFORE agree as follows:
AGREEMENTS
1. PURCHASE AND SALE.
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1.1 Purchase and Sale. On the terms and subject to the conditions of this
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Agreement, at the Closing (as defined in Section 3), PKW will sell, transfer and
deliver to Talbot all right, title and interest in and to the Assets (as defined
below), free and clear of all liens, security interests, claims, charges and
encumbrances of any nature whatsoever, other than those described in subsection
1.3 below. In reliance on the representations and warranties of PKW and APU
contained in this Agreement, and for the consideration expressed in this
Agreement, Talbot will buy the Assets from PKW at the Closing.
1.2 Assets. All of the following shall be referred to collectively in
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this Agreement as the "Assets":
(a) All of PKW's rights, title and interest, including the right to
solicit renewals, with respect to the insurance accounts listed on the attached
EXHIBIT 1.2(A) (collectively, the "Insurance Accounts"), and all original
records and files relating to the Insurance Accounts, including but not limited
to all customer lists and all records of expiration data which are or have been
maintained by PKW relating to the Insurance Accounts. The parties expressly
agree that Talbot shall be entitled to all commissions, contingent commissions,
profit-sharing participations and bonuses with respect to the Insurance Accounts
received from carriers on or after the Effective Date, excluding Direct Xxxx
Receivables as of December 31, 1998, notwithstanding that any insurance business
to which the same relate may have been written prior to the Effective Date.
Effective from and after the Closing, PKW assigns and transfers to Talbot any
and all rights, claims and causes of action that it now has or may have in the
future against any insurance company, agent or broker, or any other party
concerning the ownership of the Insurance Accounts.
(b) All of PKW's rights, title and interest in and to the office
equipment and other personal property assets listed on the attached EXHIBIT
1.2(B), and all office supplies used in the conduct of PKW's agency business
(collectively, the "Tangible Personal Property").
(c) All of PKW's payments from insureds held in trust, including all
premium trust bank accounts, a listing of which is attached as EXHIBIT 1.2(C),
plus cash and the appropriate bank account(s), in an amount sufficient to cause
the current assets included in the Assets to exceed the current liabilities in
the Liabilities by $1.00.
(d) All of PKW's rights under and leasehold interest in that certain
sub-lease arrangement (the "Sub-Lease") between PKW and APU for 10,692 square
feet of office space located at 0000 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxxxxx. Subsequent to the Closing, the parties will negotiate in good faith,
a new sublease between APU and Talbot with terms and conditions substantially
similar to the present Sub-Lease, subject to the right of Talbot to terminate
such new Sub-Lease on six months prior written notice.
(e) PKW's name as well as the goodwill value, if any ("Goodwill"), of
PKW's name and address and existing telephone numbers and telephone listings, as
well as all trade names and the goodwill value, if any, of the trade names
"Xxxxxx, Xxxxxxx & Xxxxxxx," "Xxxxxx, Xxxxxxx & Xxxxxxx Insurance," and all
other names used by PKW.
(f) All of PKW's rights under the asset purchase agreements,
employment agreements and non-competition agreements referenced in paragraph 1.4
below.
(g) All of PKW's accounts receivable ("Receivables") existing at the
Effective Date, excluding any amounts owed to PKW by insurance carriers as of
December 31, 1998 ("Direct Xxxx Receivables").
1.3 Liabilities. As of the Effective Date, in connection with the purchase
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of the Assets and in reliance on the representations and warranties of PKW and
APU, Talbot will assume the following liabilities of PKW (the "Liabilities"):
(a) The liabilities of PKW set forth on the attached EXHIBIT 1.3(A).
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(b) All of PKW's accounts payable ("Payables") existing at the
Effective Date. A complete listing of PKW's Payables and Receivables on the
Effective Date is attached as EXHIBIT 1.3(B) ("AP/AR Schedule").
NO OTHER LIABILITIES OF PKW EXCEPT THOSE SPECIFICALLY REFERENCED IN THIS
SUBSECTION 1.3 SHALL BE ACQUIRED OR ASSUMED BY TALBOT PURSUANT TO THIS
AGREEMENT.
1.4 Assignment and Assumption. As of the Effective Date, PKW and APU
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assign certain rights and Talbot assumes certain obligations, as described
below:
(a) PKW and APU assign all of their rights to Talbot, and Talbot
assumes all of their payment obligations, under a Contract for the Sale and
Purchase of Assets made as of March 1, 1996 with Xxxxxx Xxxxxxxx ("Xxxxxxxx"),
an individual, and the related Non-Competition Agreement and Employment
Agreement with Xxxxxxxx of even date therewith.
(b) PKW and APU assign all of their rights to Talbot, and Talbot
assumes all of their payment obligations, under a Contract for the Sale and
Purchase of Assets made as of April 1, 1996 with Xxxxxx Xxxxxx ("Xxxxxx"), an
individual, and the related Non-Competition Agreement with Robins of even date
therewith.
(c) PKW and APU assign all of their rights to Talbot, and Talbot
assumes all of their obligations, under a Contract for the Purchase and the Sale
of Assets dated May 1, 1996 by and between PKW and APU and Xxxx XxXxxxxxx
("XxXxxxxxx"), an individual, and the related Non-Competition Agreement by and
between PKW and XxXxxxxxx of even date therewith.
(d) PKW and APU assign all of their rights to Talbot, and Talbot
assumes all of their obligations under that Purchase Agreement dated May 31,
1997, between Dealey, Renton & Associates, as buyers, and PKW, as seller.
(e) PKW and APU assign all of their rights to Talbot, and Talbot
assumes all of their obligations under those Producer Agreements between PKW and
the producers listed in EXHIBIT 1.4(E) (the "Producer Agreements").
1.5 Definitions.
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"Net-Working Capital" means the difference between the current assets,
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included in the Assets, and the current liabilities, included in the
Liabilities, as of Closing. In calculating Net Working Capital such current
assets and current liabilities will be determined in a manner consistent with
generally accepted accounting principles.
"Purchase Price" means the purchase price to be paid for the Assets
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as described in subsection 1.6 below.
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"Contingent Commissions" means all commissions on renewal of Insurance
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Accounts (including any additions to Insurance Accounts existing at Closing).
"Pro Forma Pretax Profits" means earnings before interest, taxes,
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amortization, and management fees. For purposes of calculating Pro Forma Pretax
Profits, the amount of Contingent Commissions used in the calculation will be
determined by negotiation of the parties in good faith and only those staffing
or employee changes effectuated prior to the Closing Date will be considered in
determining Pro Forma Pretax Profits. The parties agree that the Pro Forma
Pretax Profits as of the close of business on December 31, 1998 are $513,092.00
as reflected on the Pro Forma Financial Statements a copy of which are attached
as EXHIBIT 1.5.
1.6 Purchase Price. The Purchase Price for the Assets and the Covenants
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shall be the lesser of (i) $2,250,000 or (ii) an amount equal to the sum of 4.5
times Pro Forma Pretax Profits plus one dollar of Net Working Capital; provided,
however, in no event shall the Purchase Price be less than $2,000,000.
1.7 Allocation of Purchase Price. The Purchase Price shall be allocated as
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follows:
(a) The Tangible Personal Property will be assigned a value equal to
its book value, and
(b) the balance of the Purchase Price will be assigned to the
Insurance Accounts and Goodwill. The amounts allocated to the Insurance Accounts
and Goodwill will be divided between the two items as follows: 80% to the
Insurance Accounts and 20% to Goodwill. The parties further acknowledge the
fairness and reasonableness of such allocations and agree that for federal and
state income tax purposes they will each report the sale and purchase of the
Assets in accordance with such allocations.
1.8 Payments. Subject to the provisions of Section 3.2(j), the Purchase
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Price shall be paid by Talbot to PKW in cash at Closing by wire transfer to such
account or accounts as designated by PKW.
1.9 Adjustment for Payables and Receivables. During the month of January
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2000, a reconciliation of the AP/AR Schedule to actual receipts and payments
will be performed by Talbot. In the event the amount of Receivables collected by
Talbot at December 31, 1999 is less than the amount of Receivables shown on the
AP/AR Schedule and/or the amount of Payables paid by Talbot at December 31, 1999
is more than the amount shown on the AP/AR Schedule, APU shall make a payment to
Talbot in the amount of such uncollected Receivables and/or excess Payables (the
"AP/AR Adjustment") by January 31, 2000. If the amount of Receivables so
collected is greater than the amount on the AP/AR Schedule and/or the amount of
Payables so paid is less
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than the amount on the AP/AR Schedule, Talbot shall make a payment to APU in the
amount of such excess Receivables or unpaid Payables by January 31, 2000. if any
payment required by this Section 1.9 is not made by January 31, 2000 or is
extended pursuant to the written consent of the parties owed such payment, the
unpaid amount shall bear interest at a rate of nine percent (9%) per year from
January 31, 2000 to the date actually paid. In the event that APU makes a
payment to Talbot pursuant to this section, Talbot will provide APU with access
to all related documents and will cooperate with any reasonable efforts by APU
to negotiate or collect on such Payables or Receivables (including, if
necessary, assigning receivables to APU).
2. EMPLOYMENT AGREEMENTS AND COVENANTS.
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2.1 Producer Agreements. PKW has Producer Agreements with each of the
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producers listed on EXHIBIT 1.4(E). The Effective Date of each of the Producer
Agreements is January 1, 1997. At the Closing, PKW will assign to Talbot the
Producer Agreements.
(a) Material Inducement. PKW and APU acknowledge that Talbot would
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not consummate the transactions contemplated by this Agreement but for the
agreement of each of the Producers listed on EXHIBIT 1.4(E) to execute and
perform their respective obligations under the Producer Agreements, including
without limitation the non-competition, non-solicitation and confidentiality
restrictions contained in the Producer Agreements.
2.2 Restrictive Covenants. PKW and APU acknowledge and recognize that to
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protect Talbot's legitimate business interests arising out of Talbot's
acquisition of the assets of PKW, Talbot is entitled to restrict PKW's and APU's
activities in the manner described in this Agreement. PKW and APU acknowledge
that Talbot would not consummate the transactions contemplated by this Agreement
but for the agreement of each of PKW and APU to the limitations of the following
non-solicitation and non-compete restrictions.
(a) No Solicitation. PKW and APU agree that they shall not, for the
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24 months following the Effective Date ("the Covenant Period"), engage in any of
the following activities or conduct:
(1) Solicit or attempt to solicit business from any person or
entity which made any purchase of goods or services from Talbot during the
Covenant Period or from PKW prior to the Closing (a "Customer"), including any
identified prospective customer (a "Prospective Customer").
(2) Request or advise any Customer, Prospective Customer, or
other person or entity having any business dealing with Talbot or PKW to
withdraw, curtail, change or cancel its business dealing with Talbot or
otherwise interfere with Talbot's actual Or prospective relationship with a
Customer or Prospective Customer.
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(3) Directly or indirectly solicit the employment of or employ
any person who is now or after the Closing is employed by Talbot.
For the purposes of this Agreement, the term "goods or services" shall mean
insurance policies and insurance-related goods and services, including, without
limitation, workers' compensation, commercial property, casualty, personal lines
and life, health, annuities or similar benefits policies or contracts provided,
administered or sold by any business within a 100 mile radius of the city of
Concord, in the State of California, which is similar to or competes with any
business carried on by Talbot or PKW, but excluding group life and health
policies or contracts, including Internal Revenue Service Section 125 Plans,
claims adjudication and administration of group health plans on behalf of
clients.
(b) Covenant Not to Compete. APU and PKW agree that during the
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Covenant Period, they will not directly or indirectly own, manage, operate,
join, control or participate in, or be connected as a shareholder, officer,
employee, partner, creditor, guarantor, adviser or otherwise with any business
within a 100 mile radius of the city of Concord, in the State of California,
which is similar to or competes with any business carried on by Talbot or PKW,
other than in group life and health policies or contracts, including Internal
Revenue Service Section 125 Plans, claims adjudication and administration of
group health plans on behalf of clients, except that APU or PKW may own
securities in any publicly held corporation which competes with Talbot, in which
none of APU or PKW owns of record or beneficially in the aggregate more than one
percent (1%) of the outstanding shares of the corporation.
(c) APU Employees. Talbot will not directly or indirectly solicit the
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employment of or employ any person who is now or after the Closing is employed
by APU.
(d) Remedies.
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(1) APU and PKW acknowledge that violation of the foregoing non-
solicitation and non-competition restrictions would cause irreparable injury to
Talbot. They also understand that Talbot's remedy at law for any breach of any
of their obligations under such restrictions would be inadequate, and agree that
temporary and permanent injunctive relief may be granted in any proceedings
which may be brought to enforce the non-solicitation and non-competition
restrictions, without the necessity of proof of actual damage in order to obtain
such injunctive relief.
(2) If either (or both) of PKW or APU violate the provisions of
this subsection 2.2, then, in addition to any other remedy provided in this
Agreement, Talbot shall be entitled to collect from any (or all) of the
breaching parties an amount equal to one times (1x) all gross revenues received
by any (or all) of them from or
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arising out of the prohibited activities, for twelve months commencing on the
date any business is transacted in violation of the terms of this Agreement.
(3) The parties acknowledge that the remedies provided herein are
reasonable in that they have purposely been (i) restricted in operation in
respect to both time and place, (ii) are supported by good consideration,
including without limitation, the purchase of Goodwill and (iii) afford
reasonable protections for and do not impose an unreasonable burden upon Talbot,
PKW, APU or the public.
(4) If a court of competent jurisdiction finds that the scope of any
non-competition or non-solicitation restriction contained in this Agreement is
too broad to permit enforcement of the restriction to its full extent, then the
parties agree that the restriction will be enforced to the maximum extent
permitted by law, and the scope of any restriction may be judicially modified
accordingly, in any proceeding brought to enforce the restriction.
3. CLOSING.
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3.1 Location and Date. The closing of the sale and purchase of the Assets
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(the "Closing") shall take place at the offices of PKW in Concord, California at
10:00 a.m. (Pacific Time) on January 15, 1999, or such other time and place as
the parties mutually may agree, but shall be effective for all purposes as of
the Effective Date.
3.2 Deliveries by PKW. At the Closing, PKW shall deliver the following
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to Talbot:
(a) The records relating to the Insurance Accounts, as described in
paragraph 1.2(a) above, and any assignments or other documents which reasonably
may be required in order to effectuate the transfer of the Insurance Accounts to
Talbot.
(b) A xxxx of sale with respect to the Personal Property assets, in
such form and content as Talbot reasonably may request.
(c) Such documents as may be necessary to transfer PKW's trust and
operating bank accounts, identified on EXHIBIT 1.2(C), and any other Assets, in
such form and content as Talbot reasonably may request.
(d) Assignments of the Producer Agreement(s), executed on behalf of
the Producers, and agreeing to the assignment to Talbot.
(e) Certificate of good standing for PKW issued by the Secretary of
State of California and dated within five days of the Closing date.
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(f) Certified resolution of the board of directors of PKW authorizing
PKW's entry into this Agreement and related transaction documents and the
amendment of its articles to change the corporate name.
(g) Certified resolution of the shareholder of PKW approving the sale
of substantially all of the corporation's assets and the amendment of its
articles to change the corporate name.
(h) Articles of Amendment to PKW's Articles of Incorporation to
change the corporate name, duly executed on behalf of PKW and in form and
substance suitable for filing with the Secretary of State of California.
(i) Proof of errors and omissions tail coverage in the amounts set
forth in Section 11 below.
(j) A letter from Imperial Bank committing to (i) release PKW from
its Continuing Guarantee dated on or about June 2, 1998 of that certain Line of
Credit to APU, and (ii) release its security interest on the assets of PKW,
including, but not limited to, 35,677 shares of PKW stock, and Imperial Bank's
UCC financing statement filed in the Office of the Secretary of State of the
State of California on October 27, 1997 as Document Number 9730360743. PKW shall
also deliver, within twenty days of the Closing, conclusive proof of the
releases set forth above, evidencing clear title to the Assets. Should PKW be
unable to provide a letter of commitment from Imperial Bank for delivery at
Closing, Talbot shall pay the Purchase Price to an Escrow Agent upon whom the
parties have mutually agreed. Once such letter is received by Talbot from
Imperial Bank, Talbot shall instruct the Escrow Agent to wire transfer the
Purchase Price to whichever account or accounts PKW and APU shall designate.
(k) Releases from employment contracts of all employees and producers
who have those signed agreements as of the Closing Date. Such release shall be
in language that is satisfactory to Talbot.
(l) Such other documents and instruments as may be reasonably
necessary to be delivered by PKW at Closing to carry out the intent of this
Agreement, and any other documents or records relating to PKW's business as
Talbot reasonably may request.
3.3 Deliveries by Talbot. At the Closing, Talbot shall deliver the
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following to PKW:
(a) Subject to the provisions of section 3.2(j), the Purchase Price
by wire transfer to an account or accounts designated by PKW.
(b) Certified resolution of the board of directors of Talbot
authorizing its entry into this Agreement and the related transaction documents.
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(c) Such other documents and instruments as may be reasonably
required to be delivered by Talbot at Closing in order to carry out the intent
of this Agreement, and any other documents as PKW reasonably may request.
4. REPRESENTATIONS AND WARRANTIES OF PKW AND APU. PKW and APU represent and
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warrant to Talbot that the following statements are true and correct on the date
hereof and were true and correct on the Effective Date as though made on such
date, except where another date is specified:
4.1 Organization; Standing. PKW is a corporation duly organized, validly
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existing and in good standing under the laws of the State of California, and has
all requisite corporate power and corporate authority and the right to own or to
hold under lease its properties and conduct its business as now conducted.
4.2 PKW's Authority. PKW has all requisite corporate power and authority
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to execute and deliver this Agreement and to perform its obligations hereunder,
and to sell and transfer to Talbot good and marketable title to the Assets free
and clear of all claims, liabilities, liens, pledges, charges, encumbrances and
equities of any kind, other than the Liabilities and Payables to be assumed by
Talbot as set forth in subsection 1.3 above.
4.3 Valid and Binding Obligations. The execution, delivery and
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performance of this Agreement have been duly authorized by all necessary
corporate action of PKW. This Agreement and all other instruments or agreements
executed in connection herewith by PKW or APU or both constitute, or will
constitute when delivered, the valid and binding obligations of PKW or APU,
respectively, enforceable in accordance with their respective terms, except to
the extent enforceability may be limited by bankruptcy, insolvency, moratorium
or other similar laws affecting the enforcement of creditors' rights generally,
and by equitable principles of general application.
4.4 No Violation. The execution and delivery by PKW of this Agreement
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and the implementation by it of all transactions contemplated by this Agreement
will not violate or constitute a default under any provision of PKW's articles
of incorporation or bylaws; any contract, instrument or other commitment to
which PKW is a party or otherwise bound or affected; any order, writ, judgment,
injunction, decree, law, rule, or regulation having applicability to PKW; or any
governmental license, permit or other authorization applicable to the business
transacted by PKW.
4.5 License. PKW is duly licensed and authorized to transact business as
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presently conducted in the State of California.
4.6 Financial Statements. The financial statements of PKW delivered or
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made available to Talbot are correct in all material respects and fairly present
the financial condition of PKW, as of their dates.
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4.7 Title; Absence of Liens. EXHIBITS 1.2(A) AND 1.2(B) to this
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Agreement contain a full and complete listing of the Insurance Accounts and the
Personal Property assets, respectively. PKW has good and marketable title to the
Assets, free and clear of all liens and encumbrances, other than the Liabilities
and Payables expressly to be assumed by Talbot pursuant to subsection 1.3 above.
Except as provided in the preceding sentence, there are no liabilities,
obligations, liens or encumbrances, whether accrued, absolute, contingent or
otherwise, arising out of any transactions entered into or any state of facts
existing prior to Closing and affecting the Assets or any portion thereof, or
which could give rise after Closing to a claim by a creditor of PKW against the
Assets or against Talbot or any of its affiliated companies.
4.8 Receivables and Payables. The AP/AR Schedule set forth in EXHIBIT
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1.3(B) is true and complete.
4.9 No Finder. Neither PKW or APU has taken any action which would give
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to any firm, corporation, agency or other person a right to a consultant's or
finder's fee or any type of brokerage commission in relation to or in connection
with the sale of the Assets to Talbot, except for any obligations to Xxxxxxx
Xxxxxx as broker to PKW and APU in this transaction, for which PKW and APU have
sole liability and will indemnify Talbot for all amounts related thereto.
4.10 Commitments to Transfer or Pledge the Assets. There are no
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outstanding commitments, options or other agreements under which PKW or APU has
agreed to transfer or pledge any interest in the Assets, or any portion thereof,
except as otherwise stated in this Agreement or the exhibits hereto.
4.11 Claims; Litigation. There are no legal, administrative, or other
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proceedings pending against or on behalf of PKW, including any claim, action,
suit, investigation or inquiry before any court or governmental body or agency
affecting or threatening the Assets. PKW has not been permanently or temporarily
enjoined or barred by order, judgment or decree of any court or other tribunal
or any governmental or self-regulatory body or agency from engaging in or
continuing any conduct or practice in connection with the business engaged in by
PKW.
4.12 Insurance Accounts. All insurance business written through and owned
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by PKW at the Effective Date is identified on EXHIBIT 1.2(A) to this Agreement.
The insureds' names, policy expiration dates and other data shown on EXHIBIT
1.2(A) or otherwise delivered to Talbot at Closing are accurate as of the date
of Closing. Except as set forth on EXHIBIT 1.2(A), all of such business is a
direct account of PKW and none has been brokered to PKW by any other party. PKW
represents that all commissions and fees which become due with respect to an
insurance policy, endorsement or any other transaction of insurance business for
any Insurance Account are on direct xxxx.
4.13 Compliance with Bulk Transfer Laws. The transactions contemplated by
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this Agreement do not constitute the sale of merchandise as the term
"merchandise" is
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defined or construed under the Bulk Transfer Laws of the State of California,
and may be consummated without liability to Talbot without any filing or
publication of notice under the Bulk Transfer Laws or other statutes of the
State of California. PKW hereby indemnifies and holds harmless Talbot from and
against, and agrees to defend Talbot from, any liability or claimed liability to
any creditor of PKW arising out of the failure of the parties to comply with any
of the provisions of the Bulk Transfer Laws of the State of California in
connection with the transactions contemplated by this Agreement.
4.14 Leaseholds. PKW is not in default of any obligation under the
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Sub-Lease (described in paragraph 1.2(d) above). The premises leased under the
Sub-Lease are in good and satisfactory condition and working order. No
condemnation proceeding is pending or threatened which would preclude or impair
the use of any of the real property which is used by PKW in the conduct of its
operations for the purposes for which it is currently used. There are no
restrictions on the rights of PKW to assign the Sub-Lease to Talbot other than
any restrictions which have been waived or otherwise removed.
4.15 Conduct of Business Prior to Closing. Except as otherwise
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disclosed to Talbot in writing, since November 30, 1998, and at all times until
the Closing date, PKW has:
(a) Operated its agency business in the usual, regular and
ordinary manner and refrained from making any material change in the nature or
management of such business.
(b) Used its best efforts, without making any commitment on
Talbot's behalf, to preserve PKW's business organization intact and to preserve
the good will of PKW's customers and others having business relationships with
PKW.
(c) Maintained all properties necessary for the conduct of the
agency business, whether owned or leased, in substantially the same condition as
they were on November 30, 1998 (reasonable wear and tear which are not such as
to adversely affect the operation of such business and damage due to unavoidable
casualty excepted); and has given notice to Talbot of any material damage to
such properties by fire or other casualty.
4.16 No Defaults. PKW has in all material respects performed all
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obligations required to be performed by it under all leases, contracts,
agreements, and other commitments to which it is a party which affect its
insurance business and is not in material default under any of them, and no
event has occurred which, with notice or lapse of time, would cause or
constitute a material default under any of them or the creation of a lien or
encumbrance upon any of the Assets.
4.17 Access to Records. Other than APU and the employees of PKW and
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APU, no other agent or broker, potential buyer, or its representatives (other
than
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Talbot) has had access to PKW's office books and records, including but not
limited to expirations, customer lists, and customer account records within the
last 36 months, excluding, however, financial statements of PKW.
4.18 No Undisclosed Commitments. There are no other agreements,
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leases, contracts, or other commitments to which PKW is a party and which relate
in any way whatsoever to the operation of PKW's insurance business which have
not been disclosed to Talbot prior to Closing.
4.19 Disclosure. Neither this Agreement nor any other document,
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certificate or statement furnished by or on behalf of PKW or APU in connection
with the transactions contemplated by this Agreement contains any untrue
statement of a material fact or fails to include all material facts necessary to
make this Agreement or such document, certificate or statement not misleading.
4.20 Licenses and Taxes. PKW has all licenses and permits, federal,
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state and local, necessary to conduct its business, and such licenses and
permits are in effect. PKW is in compliance with the insurance premium trust
laws of the State of California and is not "out-of-trust" with respect to any
account. PKW has paid or made adequate provision for the payment of all federal,
state or local taxes payable by PKW, and has filed all federal, state or local
tax returns required to be filed by PKW. The federal, state and local tax
returns of PKW are correct as filed. PKW has not elected Subchapter S status
under the Internal Revenue Code. PKW has complied in all material respects with
all applicable laws, regulations and requirements relating to the business of
PKW. Any employee benefit plans of PKW are adequately funded and are in
compliance with all applicable law and regulations.
4.21 Employees. The names, positions, and salaries of all the
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employees of PKW are identified on EXHIBIT 4.21 to this Agreement ("Employees").
The names and other information shown on EXHIBIT 4.21 are accurate as of the
date of Closing.
(a) Termination. On or before Closing, PKW will terminate the
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employment of all its Employees and producer contracts, other than the Producers
listed on EXHIBIT 4.21, relating to the Assets.
(b) Employment by Talbot. Talbot will offer employment to all
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of the Employees listed on EXHIBIT 4.21. Talbot will provide PKW with a list of
any Employees who were offered employment with Talbot and actually become
employed by Talbot. It is Talbot's desire that the Employees who accept Talbot's
offer of employment continue in the same roles and positions and continue to
have the same responsibilities as they did with PKW. In addition, it is the
intent of Talbot that no change in the role, position or responsibility of any
of the Employees who accept employment with Talbot be made without a discussion
of the issue with the members of PKW's prior management who have also accepted
Talbot's offer of employment.
12
Notwithstanding the foregoing, except for hiring those employees set forth on
EXHIBIT 4.21, Talbot will have absolute discretion in making all personnel
decisions, including but not limited to hiring, firing and defining of job
duties. Nothing in this Agreement will obligate Talbot to employ any of the
Employees for any period of time.
(c) Benefits. All Employees who accept Talbot's offer of
--------
employment, and who are eligible to participate, will be entitled to Talbot's
full benefit package, including 401(k), once all applicable waiting periods have
been satisfied.
5. REPRESENTATIONS AND WARRANTIES OF TALBOT. Talbot represents and
----------------------------------------
warrants to PKW that the following statements are true and correct on the date
hereof and will be true and correct on the Effective Date as though made on such
date, except where another date is specified:
5.1 Talbot's Corporate Existence: Good Standing. Talbot is a
-------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of California.
5.2 Talbot's Authority. Talbot has all requisite corporate power and
------------------
authority to execute and deliver this Agreement and to perform its obligations
hereunder.
5.3 Valid and Binding Obligations. The execution, delivery and
-----------------------------
performance of this Agreement have been duly authorized by all necessary
corporate action of Talbot. This Agreement and all other instruments or
agreements executed in connection herewith by Talbot constitute or will
constitute when delivered, the valid and binding obligations of Talbot
enforceable in accordance with their respective terms, except to the extent
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting the enforcement of creditors' rights generally, and by
equitable principles of general application.
5.4 No Violation. Talbot is not a party to or obligated or
------------
restricted by any contract, provision or other commitment which will be violated
by the entry into and performance by it of any of the terms and conditions
hereto.
5.5 No Finder. Talbot has not taken any action which would give to
---------
any firm, corporation, agency or other person a right to a consultant's or
finder's fee or any type of brokerage commission in relation to or in connection
with the sale of the Assets to Talbot.
6. CONDITIONS TO TALBOT'S OBLIGATIONS. Talbot's obligations hereunder
----------------------------------
are subject to the fulfillment, at or prior to the Closing or such other date as
may be specified, of each of the following conditions, any or all of which may
be waived, or extended, in writing by Talbot, in its sole discretion:
13
6.1 Accuracy of Representations and Warranties. Each of the
------------------------------------------
representations and warranties of PKW and APU contained in this Agreement shall
be true on and as of the Closing with the same force and effect as though made
on and as of the date of the Closing, except as affected by transactions
contemplated hereby.
6.2 Performance of Covenants. PKW and APU shall have performed and
------------------------
complied with all covenants, obligations and agreements to be performed or
complied with by it on or before the Closing pursuant to this Agreement.
6.3 Producer Agreements. The Producer Agreements with the Producers
-------------------
shall have been assigned to Talbot.
6.4 Material Adverse Change. No damage, destruction or loss (whether
-----------------------
or not covered by insurance) or other event materially and adversely affecting
the Assets shall have occurred.
6.5 Due Diligence. Talbot shall have completed all aspects of its
-------------
due diligence investigation, and shall not have discovered any information that
causes it reasonably to conclude that it does not wish to complete the
transaction.
6.6 Delivery of Schedules and Exhibits. PKW shall have delivered to
----------------------------------
Talbot all schedules, exhibits and records required under this Agreement, and
all of the same shall have been approved by Talbot after Talbot has completed
its examination of the same.
6.7 Satisfaction of all Debts and Liens Affecting Assets. PKW shall
----------------------------------------------------
have satisfied and removed any and all debts, liens and encumbrances affecting
the Assets, other than the Liabilities and Payables to be assumed by Talbot
pursuant to subsection 1.3 above.
6.8 Governmental and Other Consents. PKW shall have obtained all
-------------------------------
necessary consents and other authorizations necessary for Talbot to purchase and
take title to the Assets, including without limitation all government or other
regulatory agencies have jurisdiction and the approval of the board of directors
of PKW and APU.
7. TERMINATION. This Agreement may be terminated by either party at any
-----------
time prior to the Closing, by written notice of termination to the other, if any
of the conditions to Closing have not been satisfied or waived by the party to
which they are due.
8. INDEMNIFICATION AND REIMBURSEMENT.
---------------------------------
8.1 Indemnification by PKW and APU. PKW and APU indemnify and hold
------------------------------
harmless, and shall defend Talbot against:
14
(a) All liabilities of PKW of any kind, whether accrued, absolute,
contingent, or otherwise, as of the Effective Date (except to the extent
disclosed to Talbot prior to Closing and expressly assumed by Talbot pursuant to
this Agreement and identified on attached EXHIBIT 8.1(A)) and arising out of any
action, error or omission of PKW or APU or their officers, directors, employees
or agents, or any occurrence, prior to the Effective Date.
(b) All liabilities of any kind or nature, whether accrued, absolute,
contingent, or otherwise, and whether arising prior to or after the Closing,
which relate to or arise out of the acquisition, formation, ownership or
operation of PKW prior to the Effective Date, except to the extent disclosed to
Talbot prior to Closing and expressly assumed by Talbot pursuant to this
Agreement or other writing.
(c) Any and all claims of any of PKW's employees or former employees
related in any way to any services provided by any of them prior to the
Effective Date or related in any way to the termination of their employment by
PKW. This shall include, by way of example and not limitation, any claims for
wrongful discharge, discrimination or harassment; claims for vacation earned or
accrued prior to the Effective Date; claims related to termination of employment
agreements; and claims related to failure to pay minimum wages, failure to pay
other employee benefits, salaries, wages, commissions, or any employment taxes
related to wages, salaries and/or commissions earned (or alleged to be earned)
or payable prior to the Effective Date.
(d) Any damage or deficiency resulting from any misrepresentation,
omission, breach of warranty, nonfulfillment of any agreement, or guarantee on
the part of PKW under this Agreement, or from any misrepresentation in or
omission from any other instrument furnished or to be furnished to Talbot under
this Agreement.
8.2 Reimbursement by PKW. PKW and APU will reimburse Talbot for the
--------------------
amount of any loss, liability or damage suffered by Talbot in respect of any
liability, obligation, or claim to which the foregoing indemnity by PKW and APU
relates, upon demand made by Talbot. The aggregate amount of damages which are
demanded in a claim by Talbot under this Section 8, and thereafter suffered by
Talbot must exceed $10,000 before PKW and APU will be obligated to Talbot under
this Agreement. Any adjustment required by the AP/AR Adjustment shall not be
subject to this $10,000 cap. If such claim(s) exceeds this sum, then the entire
amount of such claim(s) shall be recoverable, it being the intention of the
parties that the $10,000 referred to in the preceding sentence be simply a
threshold for the making of claims and not a deductible. Notwithstanding the
foregoing, the total aggregate liability of PKW and APU under this Section 8
shall not exceed the following amounts for the following periods: (i) $5,000,000
during the twelve months immediately following the Closing Date, (ii) $3,500,000
during the period beginning thirteen months after the Closing Date and ending
twenty-four months after the Closing Date (less the aggregate amount, if any,
paid hereunder during the preceding 12 months), and (iii) $2,000,000 during the
15
period beginning twenty-five months after Closing Date and ending thirty-six
months after the Closing Date (less the aggregate amount, if any, paid hereunder
during the preceding 24 months). PKW and APU will have no liability under this
Section 8 for claims made by Talbot after the third anniversary of the Closing
Date, except for claims relating to Section 4.20, which shall survive for the
applicable statute of limitations if longer than three years from the date of
Closing and from criminal matters which shall continue indefinitely. The
obligations of PKW and APU hereunder shall be joint and several. Talbot agrees
that, to the extent reasonably possible, it shall not require any such payments
without providing ten (10) days' prior written notice to PKW and APU and
permitting PKW and APU an additional twenty (20) days thereafter to cure or to
contest such liability, obligation or claim.
8.3 Offset. As security for PKW and APU's' liability under the
------
foregoing indemnity, Talbot may, to the extent not reimbursed by PKW and APU,
reduce the balance of any obligation of Talbot to PKW and APU, by the amount of
any payments Talbot is required to make with regard to any item to which such
indemnity relates. Talbot's right to such offset will be subject to the PKW and
APU right to not less than ten days' prior written notice of Talbot's intention
to make such offset. The PKW and APU will have such ten-day period in which to
cure any claimed default giving rise to the offset. Talbot agrees that in the
event a court of competent jurisdiction determines, or the parties otherwise
agree, that any such offset was made improperly or in bad faith by Talbot, that
portion of such offset which has become due and payable to PKW and APU under the
terms of this Agreement or otherwise shall bear interest at a default rate of
nine percent (9%) per year from the date of the offset (or such date thereafter
as the payment became due and payable to PKW and APU, if later) to the date
paid.
8.4 Indemnification by Talbot. Talbot indemnifies and holds
-------------------------
harmless, and shall defend PKW and APU against:
(a) All liabilities of Talbot of any kind arising out of any action,
error or omission of Talbot, or any occurrence, on or after the Effective Date.
(b) Any claim, loss, damage or deficiency resulting from any
misrepresentation, omission or breach of warranty on the part of Talbot under
this Agreement.
(c) All liabilities assumed by Talbot pursuant to subsection 1.3.
8.5 Reimbursement by Talbot. Talbot will reimburse PKW and APU for
-----------------------
the amount of any loss, liability or damage suffered by PKW or APU in respect of
any liability, obligation, or claim to which the foregoing indemnity by Talbot
relates, upon demand made by PKW or APU. The aggregate amount of damages which
are demanded in a claim by PKW or APU under this Section 8, and thereafter
suffered by PKW or APU must exceed $10,000 before Talbot will be obligated to
PKW or APU under this Agreement. Any adjustment required by the AP/AR Adjustment
shall not be
16
subject to this $10,000 cap. If such claim(s) exceeds this sum, then the entire
amount of such claim(s) shall be recoverable, it being the intention of the
parties that the $10,000 referred to in the preceding sentence be simply a
threshold for the making of claims and not a deductible. Notwithstanding the
foregoing, the total aggregate liability of Talbot under this Section 8 shall
not exceed the following amounts for the following periods' (i) $5,000,000
during the twelve months immediately following the Closing Date, (ii) $3,500,000
during the period beginning thirteen months after the Closing Date and ending
twenty-four months after the Closing Date (less the aggregate amount, if any,
paid hereunder during the preceding 12 months), and (iii) $2,000,000 during the
period beginning twenty-five months after Closing Date and ending thirty-six
months after the Closing Date (less the aggregate amount, if any, paid hereunder
during the preceding 24 months). Talbot will have no liability under this
Section 8 for claims made by Talbot after the third anniversary of the Closing
Date. PKW and APU agree that, to the extent reasonably possible, they shall not
require any such payments without providing ten (10) days' prior written notice
to Talbot and permitting Talbot an additional twenty (20) days thereafter to
cure or to contest such liability, obligation or claim.
9. EMPLOYEES AND BENEFITS: PKW and APU understand and acknowledge
----------------------
that subsequent to the Effective Date, Talbot may, in its sole and absolute
discretion, hire certain employees previously employed by PKW. PKW and APU
represent, warrant and agree that they shall indemnify and hold Talbot harmless
from any and all claims of any of PKW's employees or former employees related in
any way to any services provided by any of them prior to the Effective Date or
related in any way to the termination of their employment by PKW. The foregoing
indemnity shall include, by way of example and not limitation, any claims for
wrongful discharge, discrimination or harassment; claims for vacation earned or
accrued prior to the Effective Date; claims related to termination of employment
agreements; and claims related to failure to pay minimum wages, failure to pay
other employee benefits, salaries, wages, commissions, or any employment taxes
related to wages, salaries and/or commissions earned (or alleged to be earned)
or payable prior to the Effective Date. PKW agrees that it will give full and
adequate notices with respect to the termination of employment to all employees,
effective the Effective Date. All accrued but unpaid compensation and benefits
with respect to the PKW employees (for example, holiday and vacation pay,
retirement benefits and appropriate government withholding for taxes, and
unemployment and workers' compensation premiums, and FICA payments) will be paid
by PKW for the period through the Effective Date. Talbot will be responsible for
employee wages and benefits after the Effective Date.
10. USE OF PKW NAME. As of the Effective Date, PKW assigns to Talbot
---------------
and shall thereafter permit Talbot to use the name "Xxxxxx, Xxxxxxx & Xxxxxxx,
Inc." and "Xxxxxx, Xxxxxxx & Xxxxxxx Insurance" and all other names used by PKW
(the "Trade Names"). PKW agrees to cause its articles of incorporation to be
amended to change its corporate name and will cooperate with Talbot in making
filings with the Secretary of State of California, the Department of Insurance
for the State of
17
California, the Clerks of the counties in which PKW does business, and any other
governmental agency necessary to permit Talbot to use the Trade Names.
11. TAIL COVERAGE. PKW agrees that prior to Closing it will obtain
-------------
errors and omissions "tail" coverage in an amount not less than $1,000,000 per
occurrence, $3,000,000 aggregate, which shall cover claims filed during an
extended reporting period of three years following the Effective Date.
12. SURVIVAL OF WARRANTIES AND REPRESENTATIONS. All statements in
------------------------------------------
this Agreement and its exhibits, and in any document delivered by a party in
connection with the transactions contemplated by this Agreement, will be deemed
representations and warranties hereunder by such party. All such representations
and warranties will survive the Closing.
13. NOTICES. All notices, consents, assignments and other
-------
communications under the provisions of this Agreement shall be deemed to have
been duly given when (a) delivered by hand, (b) sent by facsimile or telecopier
(with receipt confirmed), or (c) three days after delivery to the U.S. Postal
Service or other delivery service (receipt requested), postage prepaid; in each
case to the address of the parties set forth below, or to such other address as
a party may designate as to itself by giving notice of such change of address in
accordance with the provisions of this paragraph:
If to Talbot: Talbot Agency of California, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxx
Facsimile: (000) 000-0000
with a copies to: Talbot Agency, Inc.
0000 Xxxxxxxxx XX, Xxx. 000
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx Xxxxxx
Facsimile: (000)000-0000
and
Sutin, Thayer & Xxxxxx
Two Park Square, Suite 1000
0000 Xxxxxxxx Xxxxxxx X.X.
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Facsimile:(000)000-0000
18
If to PKW: Xxxxxx, Xxxxxxx & Xxxxxxx, Inc.
c/o Anchor Pacific Underwriters, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Facsimile: (000)000-0000
with copy to: A. Xxxx Xxxxxx
Sheppard, Mullen, Xxxxxxx & Xxxxxxx
Four Embarcadero Center, Suite 1700
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
If to APU: Xxxxx X. Xxxxxxxx
Anchor Pacific Underwriters, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
with copy to: A. Xxxx Xxxxxx
Sheppard, Mullen, Xxxxxxx & Xxxxxxx
Xxxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
14. MISCELLANEOUS.
-------------
14.1 Expenses. Except as otherwise provided in this Agreement, whether
--------
or not the transactions contemplated by this Agreement are consummated, each
party shall pay its own expenses and the fees and expenses of its counsel and
accountants and other experts, and APU personally guarantees payment of all such
fees and expenses incurred on behalf of PKW.
14.2 No Waiver. The waiver of any breach of any provision of this
---------
Agreement, or failure to enforce any provision hereof shall not operate or be
construed as a waiver of any subsequent breach by any party. Any waiver must be
in writing and signed by the parties.
14.3 Interpretation. Words used herein, regardless of the number and
--------------
gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender as the context requires.
19
14.4 Governing Law. This Agreement shall be interpreted and governed in
-------------
accordance with the internal laws of the State of California, without regard to
the conflicts of law principles thereof.
14.5 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be considered an original but all of which
together shall constitute one and the same instrument.
14.6 Entire Agreement. This Agreement sets forth the entire agreement
----------------
among the parties on the matters set forth herein and supersedes all prior
agreements, whether written or oral, among any of the parties hereto relating to
the Assets.
14.7 Severability. If any portion of this Agreement shall be invalid,
------------
void, voidable or unenforceable, such invalidity or unenforceability shall in no
way affect the validity or enforceability of any other portion hereof.
14.8 Binding Agreement. This Agreement shall extend to and be binding
-----------------
upon the parties hereto, their heirs, legal representatives, executors,
successors and assigns. The parties agree for themselves and their heirs,
representatives, executors, successors and assigns, to execute any instruments
and to perform any acts which may be necessary or desirable to carry out the
purposes of this Agreement.
14.9 Attorneys' Fees. In any suit, proceeding or action to enforce any
---------------
term, condition or covenant of this Agreement or to procure an adjudication or
determination of the rights of any party hereto, the most prevailing party shall
be entitled to recover from the other party to the proceeding reasonable sums as
attorneys' fees and costs and expenses in connection with such suit, proceeding
or action, including appeal, which sums may be included in any judgment or
decree entered therein.
14.10 Headings. The Section and other headings in this Agreement are
--------
included solely as a matter of convenience for reference and are not intended to
be a part of this Agreement.
14.11 Further Assurances. PKW, APU and Talbot shall cooperate with one
------------------
another to facilitate the orderly transfer of the Assets to Talbot. If any sum
of money due to either party under the terms of this Agreement is paid to the
other party, the party receiving such payment shall promptly account for and
endorse and transfer such payment to the party entitled thereto. At any time,
either before or after the Closing, Talbot, PKW and APU will execute such
additional instruments and take such actions as may be reasonably requested by
the other in order to confirm, perfect or otherwise carry out the intent and
purposes of this Agreement.
14.12 Negotiated Agreement. The parties hereto have been represented by
--------------------
counsel of their own choosing throughout this transaction who have carefully
negotiated the provisions of this Agreement. Accordingly, the Parties do not
believe
20
that any presumptions relating to the interpretation of contracts against the
drafter should be applied in this case and therefore waive its effects.
15. ARBITRATION. The parties agree to give written notice of any breach or
-----------
default in the terms of this Agreement, and the breaching party will have twenty
days after delivery of such notice within which to cure the breach or default.
If the party fails to cure any such breach or default within such period, the
non-breaching party may pursue its remedies pursuant to this Agreement. Any
controversy arising out of this Agreement or the breach thereof will be settled
by arbitration in San Francisco, California, or such other location as the
parties may mutually agree, in accordance with the then effective contract
arbitration rules of the American Arbitration Association, except that Talbot
may apply to a court of competent jurisdiction for any temporary or permanent
injunctive relief necessary to halt any breach or threatened breach by either of
APU, Xxxxxx or Xxxxxxx of the restrictive covenants contained in either of the
Employment Agreements. Judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
above stated.
PKW: XXXXXX, XXXXXXX & XXXXXXX, INC., a California
corporation
By /s/ J.R. Dunathan
------------------------------------------
Its President /C.E.O.
---------------------------------------
APU: ANCHOR PACIFIC UNDERWRITERS, INC., a Delaware
corporation
By /s/ J.R. Dunathan
------------------------------------------
Its President /C.E.O.
---------------------------------------
21
TALBOT: TALBOT AGENCY OF CALIFORNIA, INC., a California
Corporation
By /s/ Xxxx Xxxxxx
--------------------------------------------
Xxxx Xxxxxx
President
22
