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EXHIBIT 10.24
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of July 5,
2001, is made and entered into by and among XXXXX & XXXXX, INC., a Florida
corporation ("Buyer"), MEADOWBROOK OF FLORIDA, INC., a Florida corporation d/b/a
Meadowbrook Xxxxxxx Agency ("Seller"), and MEADOWBROOK, INC., a Michigan
corporation ("Parent").
BACKGROUND
Seller is engaged in the insurance agency business in the State of
Florida (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. Parent owns all of the outstanding
capital stock of Seller and is entering into this Agreement to provide certain
non-solicitation, 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 ("Liens") other than (i)
those listed on Schedule 1.1(a) hereto and (ii) liens of mechanics, materialmen,
laborers, warehousemen, carriers and other similar common law or statutory liens
arising in the ordinary course of business which are not yet due and payable or,
if due and payable, have been adequately bonded or are being contested in good
faith by appropriate proceedings (collectively, "Permitted Liens"); 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 exclusively related to the
Business described below:
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(a) Purchased Book of Business. All of Seller's 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 of Seller used exclusively in connection with Seller's
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 Business in the State
of Florida, including the right to use the name "Xxxxxxx" and all derivatives
thereof within the State of Florida, and, subject to SECTION 5.8 hereof, 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 Parent in favor of Seller in
connection with the Business and all other assignable covenants not to compete
in favor of Seller in connection with the Business (including, without
limitation, any such agreements with or covenants by Xxxxx X. Xxxxxxx).
(c) Miscellaneous Items. All other assets of Seller relating
or pertaining exclusively to the 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 of Seller used
exclusively in connection with Seller's Business. To the extent that any of such
items are subject to a lease, Buyer will assume the lease and acquire all of
Seller's right to acquire such property upon termination of the lease.
Section 1.3 EXCLUSIONS AND EXCEPTIONS. Seller does not agree to sell or
assign, and Buyer does not agree to purchase or assume, any assets not described
in SECTION 1.2 hereof. Without limiting the foregoing, Buyer shall not purchase
or assume any of the following:
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(a) cash in hand or in banks, accounts receivable, money
market certificates, stocks, bonds, real estate and automobiles;
(b) any contract, lease or other obligation not specifically
assigned to Buyer under this Agreement; or
(c) 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 of Seller or Parent.
Section 1.4 PURCHASE PRICE. (a) The purchase price for the Acquired
Assets (the "Purchase Price") shall be equal to the sum of:
(i) Four Million Three Hundred Ten Thousand Five
Hundred Five and No/100 Dollars ($4,310,505.00) (the "Initial Purchase Price"),
which the parties agree is equal to 1.50 times the sum of (A) Core Revenue (as
defined herein) (other than from the First Service Corp. account (the "First
Service Account") and any override commissions received from Mutual Insurance
Corporation of America (collectively, the "MICOA Overrides")) in the
twelve-month period ended May 31, 2001, plus (B) one percent (1%) of such Core
Revenue, added as investment income, plus (C) the mutually agreed upon-
four-year average of contingent commissions received by Seller from the
Purchased Book of Business during calendar years 1999 through 2001, inclusive,
and the $200,000 in contingent commissions expected to be received by Buyer in
calendar year 2002 from Westport Insurance Corporation ("Westport"); plus
(ii) 0.5 times the actual Core Revenue for the
First Service Account for the twelve-month period ending May 31, 2002 (the
"2001 First Service Amount"), plus
(iii) 0.5 times the actual annual MICOA Overrides for
the twelve-month period ending May 31, 2002 (the "2001 MICOA Amount"); plus
(iv) 0.5 times the annual Core Revenue for the First
Service Account, as such account renews, for each of the two (2) twelve-month
periods ending May 31, 2003 and 2004, respectively (each a "First Service
Payment" and collectively, the "First Service Payments"); plus
(v) 0.5 times the annual MICOA Overrides for each of
the two (2) twelve-month periods ending May 31, 2003 and 2004, respectively
(each a "MICOA Payment" and collectively, the "MICOA Payments").
(b) As used herein, the term "Core Revenue" means commission
revenue net of any commissions paid to any third party producing agent or
agency, or to any third party broker, but shall not include contingent
commissions, first year life insurance commissions or any income item (such as
interest and countersignature fees) other than earned commissions and fees
earned in lieu of commissions. Revenues generated from any one account shall not
be included more than once in any twelve-month period in determining Core
Revenue for such period. Core Revenue will be determined in accordance with
generally accepted accounting principles. Specifically, direct xxxx revenue is
recognized when received (cash basis) and agency
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xxxx revenue is recognized on the later of the effective date of the policy
installment or the date the installment is billed to the customer.
(c) Subject to SECTION 1.4(D), the Purchase Price shall be
paid to Seller as follows:
(i) Four Million Forty-Three Thousand One Hundred
Seventy-Three and No/100 Dollars ($4,043,173.00), which is equal to the sum of
(A) Three Million Eight Hundred Seventy-Nine Thousand Four Hundred Fifty-Five
and No/100 Dollars ($3,879,455.00), which represents ninety percent (90%) of the
Initial Purchase Price, plus (B) One Hundred Twelve Thousand and No/100 Dollars
($112,000.00), which is the estimated 2001 First Service Amount, plus (C)
Fifty-One Thousand Seven Hundred Eighteen and No/100 Dollars ($51,718.00), which
is the estimated 2001 MICOA Amount, will be paid to Seller on the Closing Date
(as defined in SECTION 2.1);
(ii) the remaining portion of the Initial Purchase
Price in the amount of Four Hundred Thirty-One Thousand Fifty and 50/100 Dollars
($431,050.50) (the "Holdback Amount") shall be paid to Seller on or before July
31, 2002; provided, however, unless Buyer has received a written guarantee from
Westport within thirty (30) days following the Closing Date that contingent
commissions payable on those accounts underwritten by Westport for the twelve
month period ended December 31, 2001 shall be at least $200,000, the Holdback
Amount shall be reduced by the amount, if any, by which the contingent
commissions actually received or to be received by Buyer from Westport during
calendar year 2002 is less than $200,000. The Holdback Amount shall bear
interest from the Closing Date through the date of payment at the annual rate of
four percent (4%);
(iii) the First Service Payments and the MICOA
Payments shall each be paid to Seller on or before July 31, 2003, and 2004,
respectively, without interest; and
(iv) the actual 2001 First Service Amount and 2001
MICOA Amount shall be determined on or before July 31, 2002, and immediately
upon such determination, (i) any aggregate net increase of the actual 2001 First
Service Amount and 2001 MICOA Amount over the aggregate estimated 2001 First
Service Amount and 2001 MICOA Amount paid to Seller under Section 1.4(c)(i),
shall be paid by Buyer to Seller, and (ii) any aggregate net decrease of the
actual 2001 First Service Amount and 2001 MICOA Amount below the aggregate
estimated 2001 First Service Amount and 2001 MICOA Amount paid to Seller under
Section 1.4(c)(i), shall be paid by Seller to Buyer by withdrawal of the amount
of such aggregate net decrease from the Holdback Amount.
(d) The deferred portions of the Purchase Price described in
SECTIONS 1.4(C)(II) and (III) shall be subject to reduction by Buyer to offset
any actual mutually agreed or finally adjudicated obligations of Seller and
Parent under the indemnification provisions contained in ARTICLE 6 hereof
existing at the time of payment of such deferred portions of the Purchase Price
hereunder. Satisfaction of any indemnity obligations from the deferred portion
of the Purchase Price shall not operate to waive the indemnification obligations
of Seller and Parent contained in ARTICLE 6 for damages incurred by Buyer in
excess of such amounts.
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(e) For federal and state income tax purposes, the parties
agree to allocate the Purchase Price as follows: (i) the portion of the Purchase
Price equal to the book value of tangible property described in SECTION 1.2(D)
shall be allocated to the tangible property described in SECTION 1.2(D), (ii)
$10,000 shall be allocated to the covenants of Seller contained in SECTION 5.2
hereof; (iii) $10,000 shall be allocated to the covenants of Parent contained in
SECTION 5.2 hereof; and (iv) the remainder of the Purchase Price shall be
allocated to the Purchased Book of Business and related goodwill.
Section 1.5 COMMISSIONS COLLECTED. All commissions on installments of
agency xxxx policies with an effective date prior to July 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 xxxx 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 ASSUMED LIABILITIES. Except for the ongoing obligation to
service the Purchased Book of Business and to pay, perform and discharge the
obligations of Seller arising from and after the Effective Date under those
agreements of Seller assigned to Buyer pursuant to SECTION 1.1 hereof
(collectively, the "Assumed Liabilities"), Buyer shall not assume or be deemed
to have assumed any liability or obligation of Seller whatsoever. All
liabilities and obligations of Seller not expressly assumed by Buyer under this
SECTION 1.6 are referred to herein collectively as the "Excluded Liabilities".
Section 1.7 EFFECTUATION. To the extent that any of the contracts for
which assignment to Buyer is provided herein are not assignable or may not be
transferred without the consent of the other party, this Agreement shall not
constitute an assignment or an attempted assignment if such assignment or
attempted assignment would constitute a breach thereof. Seller will, both before
and after the Closing Date, use commercially reasonable efforts to obtain the
consent of the other party to the assignment to Buyer of any contracts in cases
in which such consent is required. If a consent is not obtained prior to the
Closing Date, Seller will cooperate with Buyer in any reasonable arrangements
designed to provide for Buyer the benefits under any such contract including
enforcement for the account of Buyer of any and all rights of Seller against the
other party or otherwise. If and to the extent that such consent is required but
is not obtained, the parties agree that, as between Seller, on the one hand, and
Buyer, on the other hand, Buyer shall nevertheless assume all of Seller's
responsibilities and be entitled to all of Seller's benefits arising from and
after the Effective Date under any such contracts as if such contracts had in
fact been assigned to Buyer. The parties hereby agree to cooperate in any
reasonable arrangements to effectuate the foregoing provision.
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Section 1.8 REIMBURSEMENT. From and after the Closing Date, Buyer
agrees to use its best efforts to collect any and all payments due to the
Business. In the event that on or after the Effective Date, Buyer receives any
payments with respect to accounts receivable of the Business or otherwise
belonging to Seller, Buyer shall reimburse the amount of such payment to Seller
by wire transfer of immediately available funds within ten (10) business days
after the end of the month in which such payment was received by Buyer. In the
event that on or after the Effective Date, Seller receives any payments with
respect to the Business belonging to Buyer, Seller shall reimburse the amount of
such payment to Buyer by wire transfer of immediately available funds within ten
(10) business days after the end of the month in which such payment was received
by Seller.
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, no later than July 6, 2001 (the date on which the Closing actually occurs
is referred to as the "Closing Date"), at Buyer's office located at 0000 Xxxxx
Xxxxxxx Xxxxxx, Xxxxx 000, Xx. Xxxxxxxxxx, Xxxxxxx 00000, 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 shall surrender and deliver possession of the Acquired Assets to Buyer
and take such steps as may be required to put Buyer in actual possession and
operating control of the Acquired Assets, and in addition shall deliver to Buyer
such bills of sale and assignments and other good and sufficient instruments and
documents of conveyance, in form reasonably satisfactory to Buyer, as shall be
necessary and effective to 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 Liens other than Permitted Liens.
Section 2.3 DELIVERY BY BUYER. On the Closing Date, Buyer shall wire
transfer to Seller immediately available funds in the amount required to be
delivered by Buyer at Closing pursuant to SECTION 1.4(C)(I) hereof.
Section 2.4 MUTUAL PERFORMANCE. At the Closing, the parties shall also
deliver to each other the agreements and other documents referred to in ARTICLE
5 hereof.
Section 2.5 FURTHER ASSURANCES. From time to time after the Closing,
at Buyer's request, Seller 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 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.
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Section 2.6 EFFECTIVE DATE. The effective date of this Agreement and
all related instruments executed at the Closing shall be July 1, 2001 (the
"Effective Date") unless otherwise specified. Notwithstanding the foregoing,
Seller shall retain the risk of loss for errors and omissions committed up until
the Closing Date and Buyer shall assume the risk of loss for errors and
omissions committed from and after the Closing Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT
Seller and Parent, jointly and severally, 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 State of Florida. Parent is a corporation
organized and in good standing under the laws of the State of Michigan Each of
Seller and Parent has all requisite corporate power and authority and all
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as now being conducted. Each of Seller and Parent 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. Parent owns and holds all of the
outstanding shares of capital stock of Seller and there are no outstanding
options or rights to acquire additional shares of capital stock of Seller.
Section 3.3 AUTHORITY. Each of Seller and Parent 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 and Parent. This Agreement has been, and
the other agreements, documents and instruments required to be delivered by
Seller and Parent in accordance with the provisions hereof (collectively, the
"Seller's Documents") will be, duly executed and delivered by duly authorized
officers of Seller and Parent on behalf of Seller and Parent, respectively, and
this Agreement constitutes, and the Seller's Documents when executed and
delivered will constitute, the legal, valid and binding obligations of Seller
and Parent, enforceable against Seller and/or Parent, as the case may be, 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 or Parent, nor
the consummation by either of them of the transactions contemplated hereby nor
compliance by either of them with any of the provisions hereof, will (a)
conflict with or result in any breach of any provision of their respective
Articles of Incorporation or Bylaws, (b) require any filing by Seller or Parent
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 (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
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of any agreement or other instrument or obligation to which Seller or Parent is
a party or by which Seller, Parent or any of their respective 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 or Parent's 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 December 31, 2000 and the
related statement of income for the fiscal year then ended, and (b) its balance
sheet at May 31, 2001 (the "Balance Sheet Date") and the related statement of
income for the five (5) months then ended. All of such financial statements were
prepared in accordance with generally accepted accounting principles,
consistently applied throughout the periods involved (subject, in the case of
interim period 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. 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 a material
adverse effect on the Acquired Assets or the business, operations, assets,
properties, results of operations or financial condition of Seller ("Material
Adverse Effect"). 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) Seller owns and holds, free and clear of any
Liens (including insurance company payables) other than Permitted Liens, 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. Neither Seller nor Parent has received written 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 carriers in the twelve-month period ended May 31,
2001. Except as set forth on Schedule 3.8(a), none of the accounts shown in
Schedule 1.2(a) represents business that has been brokered through Seller to an
insurance carrier.
(b) The names "Meadowbrook" and "Meadowbrook Xxxxxxx Agency"
are the only trades name used by Seller in the State of Florida 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
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been settled with no existing liability to Seller and, to the Knowledge of
Seller and Parent, Seller has not violated or infringed any trademark, trade
name, service xxxx, service name, patent, copyright or trade secret held by
others.
(c) Schedule 3.8 lists the following contracts, agreements and
arrangements exclusively related to the Business: (i) all agency agreements,
equipment leases, and maintenance or service agreements to which Seller is a
party; (ii) any employment, non-compete, confidentiality or non-solicitation
agreement to which Seller or Parent is a party; (iii) any agreement between
Seller and Parent 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 substantial compliance with the terms thereof.
(d) 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 substantially free of defects in programming and
operation. Seller has delivered to Buyer complete and correct copies of all user
and technical documentation related to such software.
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 or Parent, threatened against Seller, and, to the Knowledge
of Seller or Parent, no circumstances have occurred or arisen that could
reasonably be expected to form a basis for such a suit, claim, action,
proceeding or investigation. 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 Material 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 prior to the Closing Date. As of the Closing
Date, 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.
Section 3.10 COMPLIANCE WITH APPLICABLE LAW. Seller holds all permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary for the lawful conduct of the Business (collectively, the
"Permits"), except where the failure to hold such Permits would not,
individually or in the aggregate, have a Material Adverse Effect. Seller is in
substantial compliance with the terms of the Permits. The Business of Seller is
not being conducted in substantial violation of any law, ordinance or regulation
of any Governmental Entity. 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 Parent, threatened.
Section 3.11 TAX RETURNS AND AUDITS. Each of Seller and Parent (with
respect to the Business) has timely filed all federal, state, local and foreign
tax returns, including all amended returns, in each jurisdiction where Seller or
Parent 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,
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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. Neither Seller nor Parent (with respect to the
Business) is currently 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. There are no claims
asserted in writing for taxes or assessments of Seller or Parent (with respect
to the Business) that, if adversely determined, could result in a tax liability
that would have a Material Adverse Effect for any period. Neither Seller nor
Parent (with respect to the Business) has executed an extension or waiver of any
statute of limitations on the assessment or collection of any tax due that is
currently in effect. Neither Seller nor Parent (with respect to the Business) is
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 each of Seller and Parent (with respect to the Business) has timely
filed all unclaimed property reports required to be filed with such state taxing
authorities.
Section 3.12 NON-SOLICITATION COVENANTS. Neither Seller nor Parent is a
party to any agreement with respect to the Business that restricts Seller's or
Parent's ability to compete in the insurance agency industry comprising the
Business or solicit specific insurance accounts of the Business.
Section 3.13 ERRORS AND OMISSIONS; EMPLOYMENT PRACTICES LIABILITY.
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, to the
Knowledge of Seller and Parent, threatened against Seller are set forth in
Schedule 3.9. Seller has E&O insurance coverage in force, with minimum liability
limits of $15 million per occurrence and $15 million aggregate, with a
deductible of $250,000, and Parent will provide to Buyer a certificate of
insurance evidencing such coverage prior to or on the Closing Date. Seller has
EPL insurance coverage in force, with minimum liability limits of $5 million per
occurrence and $5 million aggregate, with a deductible of $75,000, and Seller
will provide to Buyer a certificate of insurance evidencing such coverage prior
to or on the Closing Date. Seller has been continuously insured with respect to
E&O and EPL coverage for the past three (3) 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 OTHER REPRESENTATIONS.
(a) After the Closing, neither Seller nor Parent shall retain
possession or control of any of the Acquired Assets.
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(b) As of the Closing Date, neither Seller nor Parent is
Insolvent (as defined hereinafter), and neither Seller nor Parent will be
rendered Insolvent as a result of the sale of the Acquired Assets to Buyer
pursuant to this Agreement. The term "Insolvent" means that either (i) the sum
of Seller's or Parent's respective debts is greater than all of Seller's or
Parent's respective assets at a fair valuation, or (ii) the Company or
Shareholder is failing to pay its or his respective debts as they become due;
provided, however, that, notwithstanding the foregoing definition, such term
shall be interpreted in accordance with applicable federal and state law.
Section 3.16 SCHEDULES AND EXHIBITS. Disclosure of any fact or item in
any Schedule or Exhibit hereto referenced by a particular Section in this
Agreement shall, should the existence of the fact or item or its contents be
relevant to any other Section, be deemed to be disclosed with respect to that
other Section whether or not an explicit cross-reference appears.
ARTICLE 4
REPRESENTATIONS OF BUYER
Buyer represents and warrants to Seller and Parent as follows:
Section 4.1 ORGANIZATION. Buyer is a corporation organized and in good
standing under the laws of the State of Florida. 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 4.2 AUTHORITY. Buyer has the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement 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 4.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Neither the
execution, delivery or performance of this Agreement by Buyer, nor the
consummation by Buyer of the transactions contemplated hereby nor compliance by
Buyer with any of the provisions hereof, will (a) conflict with or result in any
breach of any provision of the Articles of Incorporation or Bylaws of Buyer, (b)
require any filing by Buyer with, or permit, authorization, consent or approval
of Governmental Entity, or (c) result in a violation or breach of, or constitute
a default under, any of
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the terms, conditions or provisions of any agreement or other instrument or
obligation to which Buyer is a party or by which Buyer or any of its properties
or assets may be bound.
Section 4.4 LITIGATION. Buyer is not subject to any outstanding order,
writ, injunction or decree which would prevent Buyer from consummating the
transactions contemplated hereby.
ARTICLE 5
ADDITIONAL AGREEMENTS
Section 5.1 BROKERS OR FINDERS. Seller and Parent have retained
Lefenfeld Consulting, Inc. as agent and broker for the transactions contemplated
by this Agreement, whose fees, commissions and expenses will be paid solely by
Seller and/or Parent. Each of the parties represents, as to itself, its
subsidiaries and its affiliates, that no other 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, and each of the
parties agrees to indemnify and hold the others harmless from and against any
and all claims, liabilities, or obligations with respect to any fees,
commissions, or expenses asserted by any person on the basis of any act or
statement alleged to have been made by such party or its affiliate.
Section 5.2 NON-COMPETITION COVENANTS. (a) Buyer acknowledges the
national scope of the insurance business engaged in by Parent and its affiliates
and the fact that Parent and its affiliates currently operate and will continue
after the Closing to operate their respective insurance businesses in the State
of Florida. Notwithstanding the foregoing, Seller and Parent each agree that
neither shall, for a period of five (5) years beginning on the Closing Date, (i)
solicit, divert, accept business from, nor service, directly or indirectly, as
insurance solicitor, insurance agent, insurance broker or otherwise, for its
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, Parent or any of their
affiliates.
(b) Notwithstanding anything in this Agreement to the
contrary, the covenants set forth in this SECTION 5.2 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 determination by a final judgment of any court which had
jurisdiction over the parties and subject matter.
Section 5.3 REMEDY FOR BREACH OF COVENANTS. In the event of a breach of
the provisions of SECTION 5.2, Buyer shall be entitled to injunctive relief as
well as any other applicable remedies at law or in equity. Should a court of
competent jurisdiction declare any of the covenants set forth in SECTION 5.2
unenforceable due to a unreasonable restriction, duration, geographical area or
otherwise, the parties agree that such court shall be empowered and shall grant
Buyer or its affiliates injunctive relief to the extent reasonably necessary to
protect their
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respective interests. Seller and Parent each acknowledge that the covenants set
forth in SECTION 5.2 represent an important element of the value of the Acquired
Assets and were a material inducement for Buyer to enter into this Agreement.
Section 5.4 SUCCESSOR RIGHTS. The covenants contained in SECTION 5.2
shall inure to the benefit of any successor in interest of Buyer by way of
merger, consolidation, sale or other succession.
Section 5.5 ERRORS AND OMISSIONS, EMPLOYMENT PRACTICES LIABILITY, AND
EMPLOYEE DISHONESTY COVERAGE. After the Closing, Seller and Parent agree to
maintain, for a period of at least three (3) years, 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) in connection
with the Business, at coverages of at least those levels set forth in SECTION
3.13 and Schedule 3.14, provided that upon the expiration or other termination
of any such policy during such three year period, Seller and Parent agree to
obtain replacement policies at commercially available levels. A Certificate of
Insurance evidencing each such coverage shall be delivered at Buyer's request
during this three-year period.
Section 5.6 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 5.7 CONFIDENTIALITY. Each of the parties agrees 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.
Section 5.8 ENFORCEMENT OF EMPLOYMENT AGREEMENTS. After the Closing,
and at Buyer's reasonable request, Seller and Parent shall cooperate with Buyer
in enforcing the terms of any non-compete/non-solicitation agreements with
respect to the Business entered into prior to the Closing and shall join in any
legal or injunctive proceedings instituted by Buyer for such purpose. Buyer
shall bear 100% of the costs and fees of any such proceedings.
Section 5.9 CORPORATE AND TRADE NAMES. Promptly after the Closing,
Seller and Parent each agree to cease all use of the name "Xxxxxxx" within the
State of Florida. Seller and Parent hereby grant to Buyer and its affiliates an
exclusive, royalty-free license to utilize the trade name, phrase or logo
incorporating "Meadowbrook Xxxxxxx Agency" in combination with any other name,
or any such corporate logo in or on any of its literature, sales materials or
products or otherwise in connection with the Business acquired hereunder, for a
period of one (1) year after the Effective Date. Upon the expiration of such
one-year period, Buyer agrees that it will not, nor will it permit any of its
affiliates to, use any name, phrase or logo incorporating "Meadowbrook" or any
derivative thereof, by itself or in combination with any other name, or any such
corporate logo in or on any of its literature, sales materials or products or
otherwise in connection with the sale of any products or services.
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Section 5.10 RENEWALS. Buyer agrees to use commercially reasonable
efforts from and after the Closing Date to ensure the renewal of the First
Service Account and the MICOA Accounts.
Section 5.11 TERMINATION OF SELLER EMPLOYEES. Each of the parties
acknowledges and agrees that any employees of Seller that Buyer does not wish to
hire shall remain employees of Seller and, in the event that Seller elects to
terminate any such employees in connection with or as a result of the
transactions contemplated by this Agreement, Seller shall be responsibility for
any post-termination obligations owed to such terminated employees pursuant to
the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) or any other
applicable law.
Section 5.12 LEASE. Seller agrees to lease the premises on which the
Business is currently conducted to Buyer for a period of sixty (60) days
following the Closing Date. In consideration therefore, Buyer agrees to
reimburse Seller the full amount of the monthly lease amount (including all
insurance, utilities and taxes) payable by Seller to its landlord for the
premises under Seller's current lease agreement.
Section 5.13 SALE OF STOCK OF NATIONAL REALTY LIABILITY ALLIANCE, INC.
("NRLA") AND PHYSICIANS ONE STOP NATIONAL PURCHASING GROUP, INC. ("POS"). Buyer
and Parent each agree after the Closing to negotiate toward a mutually agreeable
arrangement for the purchase from Parent by Buyer of the outstanding capital
stock of NRLA and POS, such stock purchase to be consummated no later than
thirty (30) days after the Closing Date, provided a mutually agreeable purchase
arrangement can be reached by that time.
Section 5.14 CONDITIONS TO PARTIES' OBLIGATION. Each party's obligation
to complete the transactions contemplated by this Agreement shall be subject to
the following conditions, unless waived by such party: (a) each employee of
Seller that Buyer wishes to hire including, without limitation, Xxxxx X.
Xxxxxxx, having signed and delivered to Buyer a mutually employment agreement
which contains confidentiality, non-solicitation and, with respect to Xxxxx X.
Xxxxxxx, non-competition provisions; (b) Buyer shall have received copies of
duly adopted resolutions of Seller's Board of Directors and of Parent
authorizing the transactions set forth in this Agreement in accordance with
Sections 607.1202, 607.0821 and 607.0704 Florida Statutes; (c) evidence that all
Liens on any of the Acquired Assets (other than Permitted Liens) have been fully
satisfied and released; (d) Buyer being satisfied in its sole discretion of the
willingness of Seller's insurance carriers including, without limitation,
Westport, to appoint Buyer, and Seller's delivery to Buyer of Westport's consent
to Seller's assignment of its Program Administrator Agreement with Westport to
Buyer; and (e) approval by each party's Acquisition Committee.
ARTICLE 6
INDEMNIFICATION
Section 6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, INDEMNITIES AND
COVENANTS. (a) Subject to SECTION 6.1(B), 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,
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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
written notice of same to the other party within the two-year period, which
written notice shall identify the breach or other indemnifiable event with
reasonable specificity including the amount or estimated amount thereof.
(b) Notwithstanding anything set forth in SECTION 6.1(A), all
representations, warranties, covenants and indemnities in connection with (i)
any tax liabilities of Seller or Parent or (ii) any of the representations and
warranties set forth in SECTION 3.15 shall survive until the expiration of the
applicable statute of limitations.
Section 6.2 INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF BUYER. Seller
and Parent 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 (a) the breach of any
of Seller's or Parent's representations, warranties, obligations or covenants
contained herein, (b) the operation of Seller's Business or ownership of the
Acquired Assets by Seller on or prior to the Closing Date, including, without
limitation, any claims or lawsuits based on conduct of Seller or Parent
occurring before the Closing, or (c) the Excluded Liabilities; provided,
however, that Seller and Parent shall have no obligation to indemnify under
SECTION 6.2(A) AND (B) hereof until the aggregate total of such Adverse
Consequences incurred or suffered by all such indemnified parties, to the extent
such Adverse Consequences are not covered by insurance proceeds actually paid by
such indemnified party's insurance carrier on account of such Adverse
Consequences, exceeds $40,000 (the "Materiality Threshold Amount") at which xxxx
Xxxxxx and Parent shall be obligated to indemnify such indemnified parties for
any Adverse Consequences in excess of the Material Threshold Amount; further
provided, however, that Seller and Parent, collectively, shall not be obligated
to indemnify such indemnified parties for any Adverse Consequences in excess of
the amount of the Purchase Price in the aggregate. 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.
Section 6.3 INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF SELLER AND
PARENT. Buyer agrees to indemnify and hold Seller, Parent 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, (b) the
operation Seller's Business or ownership of the Acquired Assets by Buyer after
the Closing Date, including, without limitation, any claims or lawsuits based on
conduct of Buyer occurring after the Closing, or (c) the Assumed Liabilities;
provided, however, that Buyer shall have no obligation to indemnify under
SECTION 6.3 (A) AND (B) hereof until the aggregate total of such Adverse
Consequences incurred or
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suffered by all such indemnified parties, to the extent such Adverse
Consequences are not covered by insurance proceeds actually paid by such
indemnified party's insurance carrier on account of such Adverse Consequences,
exceeds the Materiality Threshold Amount, at which time Buyer shall be obligated
to indemnify such indemnified parties for any Adverse Consequences in excess of
the Material Threshold Amount; further provided, however, that Buyer shall not
be obligated to indemnify such indemnified parties for any Adverse Consequences
in excess of the amount of the Purchase Price in the aggregate.
Section 6.4 EXCLUSIVE REMEDY. Except in the case of fraud by any party
or as otherwise set forth in this Agreement (including, without limitation,
SECTION 5.3 hereof), Buyer, Seller and Parent agree that the indemnification
provisions of this ARTICLE 6 shall be their sole and exclusive remedy for any
claims or causes of action for money damages arising out of, based upon or
resulting from the provisions of this Agreement and the transactions
contemplated hereby and waive to the fullest extent permitted by applicable law
any and all such other claims or causes of action for money damages, whether
sounding in contract, tort or otherwise, and whether asserted at law or in
equity.
ARTICLE 7
MISCELLANEOUS
Section 7.1 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
Xxxxx & Xxxxx, Inc.
000 X. Xxxxxxx Xx., Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Telecopy No.: (000) 000-0000
Attn: Xxxxxx Xxxxxxx
(b) if to Seller or to Parent, to
Meadowbrook, Inc.
00000 Xxxxxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attn: General Counsel
Section 7.2 USE OF TERM "KNOWLEDGE". With respect to the term
"Knowledge" as used herein: Seller and Parent will be deemed to have "Knowledge"
of a particular fact or other matter if (i) any individual who is serving, or
who has at any time in the twelve (12) months prior to the Closing Date served,
as a director or officer of Seller or Parent is actually aware of such fact or
other matter or (ii) if Xxxxx X. Xxxxxxx or Xxxxxxx Xxxxx (a) is actually aware
of such fact or other matter or (b) should reasonably be expected to be aware of
such fact or other matter after
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having conducted a reasonably comprehensive investigation concerning the
existence of such fact or other matter.
Section 7.3 COUNTERPARTS; FACSIMILE. 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. This Agreement
may be executed and delivered by facsimile transmission with the same effect as
if a manually signed original were personally delivered.
Section 7.4 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 7.5 ASSIGNMENT. Except as contemplated in SECTION 5.4 hereof,
neither this Agreement nor any of the rights, interests, or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties,
which consent shall not unreasonably be withheld or delayed. This Agreement will
be binding upon, inure to the benefit of, and be enforceable by the parties and
their respective successors and permitted assigns.
Section 7.6 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 7.7 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 7.8 GOVERNING LAW. This Agreement has been made in the State of
Florida and shall be governed by and construed and enforced in accordance with
internal Florida law without regard to any applicable conflicts of law.
Section 7.9 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.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have signed or caused this Agreement to
be signed by their respective officers thereunto duly authorized as of the date
first written above.
BUYER:
XXXXX & XXXXX, INC.
By: ___________________________________________
Name: _________________________________________
Title: _______________________________________
SELLER:
MEADOWBROOK OF FLORIDA, INC.
By: __________________________________________
Name: ________________________________________
Title: _______________________________________
PARENT:
MEADOWBROOK, INC.
By: ___________________________________________
Name: ________________________________________
Title: _______________________________________
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SCHEDULES
Schedule 1.1(a): Permitted Liens
Schedule 1.2(a): Purchased Book of Business
Schedule 3.8(a): Brokered Business
Schedule 3.8: Material Contracts
Schedule 3.9: List of Claims and Litigation
Schedule 3.14: Employee Dishonesty Coverage
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