PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into this 23rd day of May, 2002, by and
between ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, hereinafter collectively
referred to as "SELLER" and, Brooke Corporation hereinafter referred to as the
"BUYER":
WITNESSETH THAT:
WHEREAS, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ owns 51% of the ownership interest (hereinafter
referred to as "Membership Interest" or "Interest") of CJD and Associates,
L.L.C. hereinafter referred to as the Company;
WHEREAS, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ owns 49% of the ownership interest of the Company;
WHEREAS, the Membership Interest owned by Seller represents all of the
outstanding and issued Membership Interest of the Company;
WHEREAS, Buyer desires to purchase from Seller, on certain specified terms and
conditions, all of their Membership Interest in the Company;
WHEREAS, Buyer and Seller desire to enter into an agreement setting forth the
terms and conditions pursuant to which such purchase of the Interest shall be
consummated.
NOW THEREFORE, in consideration of the mutual promises and conditions herein set
forth, and in order to induce each other to enter into and perform the
undertakings herein set forth, Buyer and Seller, do, by these presents, hereby
agree as follows:
ARTICLE I
PURCHASE OF THE INTEREST
1. PURCHASE OF INTEREST. Buyer agrees to purchase 100% of Seller's Membership
Interest of the Company which represents 100% of the issued and outstanding
Membership Interest of the Company.
2. PURCHASE PRICE. The purchase price for the Interest of the Company being
acquired hereunder shall be the sum of (i) One Million Five Hundred Thousand and
No/100 Dollars ($1,500,000) and (ii) the net book value of the Company's assets
(exclusive of certain assets as set forth hereinafter) less its liabilities as
reflected on the Closing Balance Sheet (as hereinafter defined). All assets of
the Company shall be included in such computation except expiration rights and
organization costs (net of accumulated amortization with respect thereto). The
Company, Buyer and Seller shall be jointly responsible for compiling the Closing
Balance Sheet.
3. PAYMENT OF PURCHASE PRICE. Buyer will, upon execution of this agreement, pay
Seller Fifteen Thousand and no/100 Dollars ($15,000), which amount shall
constitute an ▇▇▇▇▇▇▇ money deposit. The Buyer shall pay to Seller an additional
cash payment of One Million Four Hundred Eighty Five Thousand and no/100 Dollars
($1,485,000) in good funds at the time of closing and another cash payment one
month after closing in the amount of the Company's net book value
which represents the remaining purchase price as calculated in accordance with
paragraph 2 of this Article.
4. CONTINGENCY PAYMENTS
In addition to the purchase price payable at closing (and the payment due one
month after closing) as set forth above, Seller shall be entitled to additional
payments contingent upon certain operational results of the Company after
closing. Specifically, it is agreed that for a period of 48 months beginning
with the fourteenth month after the month in which closing occurs, Buyer shall
pay to Seller contingency payments (the "Contingency Payments") equal to 30% of
(i) the gross income (as hereinafter defined) of the Company less (ii) brokerage
commissions (as hereinafter defined) paid by the Company. All Contingency
Payments shall be made on a monthly basis with each Contingency Payment due on
or before the twentieth day of the month following the month in which such
Contingency Payments have been earned in accordance with Generally Accepted
Accounting Practices and reconciled or verified against corresponding insurance
company statements. A summary of the basis upon which the amount of the
Contingency Payment was calculated shall accompany each payment. For purposes of
this provision, the gross income of the Company shall include all income earned,
as calculated in accordance with Generally Accepted Accounting Practices and
reconciled or verified against corresponding insurance company statements,
historically credited to the following accounts of the Company: 4000, 4010,
4030, 4100, 4110, 4120, 4200, 4300, 4500 and 4510. For the purposes of this
provision, the brokerage commissions shall include all amounts historically
reflected in the following accounts of the Company: 4020 and 5310.
In addition, notwithstanding anything herein contained to the contrary, Buyer
agrees to pay to Seller as additional Contingency Payments all profit sharing
commissions received by the Company between the date of closing and the end of
the thirteenth month following the month in which closing occurs. Such payments
shall be made by Buyer within ten days after the date of receipt of such profit
sharing commissions by the Company. For the purposes of this paragraph, profit
sharing commissions shall mean commissions historically credited to the
Company's account 4010.
5. TRANSFER RESTRICTIONS Buyer agrees that, during the five year period
following the closing of the agreement, the Company shall not sell or
otherwise transfer any services, policies, coverages, or products (or
commissions associated therewith) related to any insurance program or excess
and surplus lines insurance currently sold, renewed, serviced or delivered by
the Company or which may be sold, renewed, serviced or delivered in the
future by the Company (unless otherwise stated, for the purposes of this
Agreement, the "E & S Programs"). Furthermore, Buyer agrees that, during said
period, the Company's contracts that are currently in place with insurance
companies (or commissions associated therewith) will not be transferred to
any other person or entity. Commencing sixty (60) days after the closing date
and through a five year period following the closing of the agreement,
Company shall have the first right to quote any excess and surplus lines
risks which Buyer or a franchise agent of Buyer wishes to place. If excess
and surplus lines coverage for the risk cannot be written by Company or
coverage with another carrier is found to be better or can be obtained at a
better rate, then the Buyer and its franchise agents may quote and place the
risk with another excess and surplus lines agency. Nothing in this paragraph
shall be interpreted to guaranty the continued contractual relationship with
any company with which the Company is currently contracted. Furthermore,
nothing in this
agreement shall be interpreted to preclude Buyer from purchasing other excess
and surplus lines agencies or operations during the five-year period
following the closing date. In the event Buyer does acquire another excess
and surplus lines agency or operation, Buyer may, but shall not be required
to, consolidate the production of such agency or operation into the Company's
E&S Programs, and shall not be required to consider the income of any such
acquired agency or operation in the calculation of the Contingency Payments
described in paragraph 4 of this agreement.
Notwithstanding the foregoing, services, policies, coverages, products or
contracts shall not be considered related to the E & S Programs if they are part
of or associated with a limousine or car rental program.
6. CLOSING DATE. Closing of this sale shall occur on July 1, 2002 (the "closing
date"), unless (i) Buyer, upon 5 days written notice to Seller, exercises its
unilateral right to postpone the closing date up to 30 days, (ii) Buyer, upon 5
days written notice to Seller, exercises its unilateral right to accelerate the
closing date, or (iii) another date is agreed upon in writing by the parties. In
the event, Buyer exercises its unilateral right to accelerate the closing date,
the parties agree that, for the purposes of establishing the purchase price set
forth in paragraph 2 above, the Closing Balance Sheet shall be defined as the
balance sheet of the Company as of June 30, 2002, even if the accelerated
closing date is prior to June 30, 2002.
7. FINANCIAL STATEMENTS.
a) End of Fiscal Year Financial Statements. The financial statements of the
Company as of its most recent fiscal year end (Exhibit D) fairly present and
correctly state the financial condition of the Company as of that date according
to Generally Accepted Accounting Practices (except for the accounting treatment
of insurance expirations), and Seller has not learned of any facts indicating
that such financial statements are not substantially correct and accurate as of
that date. Seller shall provide to Buyer financial statements and/or accounting
reports, if any, regarding the financial condition of the Company as of the end
of the most recent fiscal year which have been prepared by Seller's or the
Company's accountants.
b) Closing Balance Sheet. A closing balance sheet shall be jointly compiled by
the Company, Buyer and Seller during the thirty days after closing and shall be
prepared in accordance with Generally Accepted Accounting Practices (except for
the accounting treatment of insurance expirations), showing the value of all
assets and liabilities as of the date of closing, including accrued liabilities
for expenses such as salaries and employee benefits.
c) A depreciation schedule that corresponds to the Company's net asset account
balances on the fiscal year end balance sheet will be provided by the Company to
the Buyer prior to closing.
d) In the event that Buyer discovers, within twelve (12) months of the closing
date, that the account balances of the Company's assets have been materially
overstated, or the account balances of the Company's liabilities materially
understated or undisclosed, on the closing balance sheet, then the Buyer may
reduce the amount of the contingency payments referenced in paragraph 4 of this
Article accordingly. If said contingency payments are insufficient to cover the
reduction, Seller shall pay Buyer any adjustment owed upon Buyer's request for
payment. In the event the Seller discovers, within twelve (12) months of the
closing date, that the account
balances of the Company's liabilities have been materially overstated on the
closing balance sheet, then the amount of such overstatement shall be paid to
the Seller upon Seller's request for payment. If Buyer and Seller dispute the
account balances of the Company's assets or liabilities, then an independent
accounting firm mutually agreed upon by the parties shall be retained to conduct
an audit of the closing balance sheet to resolve such dispute.
e) All material fixed liabilities and all material contingent liabilities that
are not incurred in the ordinary course of business shall be disclosed as
Exhibit H which Seller represents as accurate pursuant to Article II paragraph
11 of this agreement. In the event that any such liabilities are understated,
improperly disclosed or undisclosed, and results in direct obligation of the
Company, then the Buyer may reduce the amount of contingency payments referenced
in paragraph 4 of this Article accordingly. If said contingency payments are
insufficient to cover the reduction, Seller shall pay Buyer any adjustment owed
upon Buyer's request for payment.
f) Seller guarantees payment of insurance premium accounts receivables, premium
finance loan receivables and other receivables that are over ninety (90) days
delinquent at the time of closing. In the event Seller has to perform on any
such guarantee, then the Buyer may reduce the amount of contingency payments
referenced in paragraph 4 of this Article accordingly. If said contingency
payments are insufficient to cover the reduction, Seller shall pay Buyer any
adjustment owed upon Buyer's request for payment. To the extent Seller is
required to make any payment to Buyer (either through a reduction of a
Contingency Payment or direct payment by Seller to Buyer) under the terms of
this paragraph, and the receivable with respect to which such payment was made
by Seller is subsequently collect by Buyer, then the amount so collected by
Buyer shall be remitted by Buyer to Seller by the 20th day of the month
following the month of collection. If Seller so requests, Seller shall be
permitted to pursue collection of any such receivable for which Seller has made
payment to Buyer under the terms of this paragraph (whether by offset of
Contingency Payments or direct payment by Seller).
8. PLACE AND TIME OF CLOSING. Closing shall take place at the offices of the
Buyer at 11:00 a.m., Kansas City time on the Closing Date as provided herein.
9. PERFORMANCE PRIOR TO CLOSING. Buyer and Seller each will satisfy and
perform all obligations, requirements and undertakings to be satisfied or
performed by them, respectively, under this Agreement prior to the Closing
Date.
10. ADDITIONAL ACTIONS AT CLOSING. On the Closing Date, the following
transactions will take place and be accomplished:
a) Seller will deliver to Buyer certificates with assignment and transfer powers
evidencing Seller's ownership of 100% of the Membership Interests of the
Company, with full warranties of title, free and clear of all encumbrances.
b) The Seller will deliver to the Buyer all minute books, organizational
documents, Unit transfer books and other limited liability company records of
the Company brought current to the Closing Date.
c) During the five year period following the closing of this agreement, Seller
shall discontinue using the name Davidson ▇▇▇▇▇▇▇, CJD and Associates, L.L.C.
and/or any variation thereof except to the extent such use is pursuant to
Seller's employment with the Company.
d) Seller shall provide a detailed listing and aging of all the Company's
accounts or notes receivable outstanding as of the closing date.
e) Seller shall execute and deliver to Buyer the employment contract in
substantially the form and content attached hereto as Exhibit I.
f) The parties will cooperate to obtain at Closing a release of all personal
guarantees provided by Seller with respect to any Company obligations. To the
extent such releases cannot be obtained on the Closing Date, the parties agree
to exercise best efforts to obtain a release of such guarantees as soon as
reasonably possible thereafter. Until such guarantees have been released, Buyer
agrees to indemnify and hold Seller harmless from and against any loss, damage,
expense (including reasonable attorney's fees) or liability with respect to any
such guarantee. Specifically, the parties recognize that as soon as reasonably
possible after the Closing Date, they shall seek to replace the personal
guarantee of Seller with the corporate guarantee of Buyer with respect to all
contracts between the Company and insurance companies it represents.
11. CONTINGENCIES. a) The closing of this agreement is subject to Buyer's
satisfaction with the due diligence inspection conducted with respect to the
Company, the Company's assets and liabilities, and the valuation of same. The
inspection of the Company's assets shall include but is not limited to, an
inspection to determine that the current market value of tangible assets is
approximately the same as their book value.
b) In the event of unsatisfactory due diligence inspection then, this agreement
may, at the option of the Buyer, become null and void and Buyer shall be
entitled to the return of its ▇▇▇▇▇▇▇ money payments and all parties shall
thereupon be released from any further liability under this agreement. If Buyer
deems the due diligence to be unsatisfactory, it shall be obligated to give
notice of same to Seller on or before June 14, 2002, provided Seller has
provided Buyer with all information and documentation requested by Buyer to
conduct its due diligence inspection on or before June 5, 2002. If no such
notice is provided by such date, then the due diligence shall be deemed
satisfactory and Buyer shall be obligated to proceed to closing, subject to
satisfaction of all other conditions to closing as set forth herein.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby covenants, represents and warrants as follows:
1. SELLER. Seller has the power to execute, deliver and perform all
obligations hereunder, and has taken all actions required by law or otherwise
to authorize such execution, delivery and performance.
2. INTENTIONALLY LEFT BLANK.
3. THE COMPANY. CJD and Associates, L.L.C. is a Kansas limited liability company
which is duly organized, validly existing and in good standing under the laws of
the State of Kansas. Such limited liability company is licensed to sell excess
and surplus lines and property/casualty in the states in which it conducts
business where licensing of the Company is required. There is no proceeding
currently pending or any action threatened (including, without limitation,
action to revoke any licenses or authorities issued) by any entity regulating
the sale of insurance in any state in which the Company is licensed or
elsewhere. Furthermore, Seller is not aware of the existence of any facts that
may constitute the grounds for the suspension or revocation of any licenses or
authorities issued by any entity regulating the sale of insurance.
4. MINUTE BOOKS, RECORDS. Seller shall make available to Buyer or its
representatives the minute books and transfer books of the Company for
inspection. Such minute books are, with respect to all limited liability company
transactions and proceedings, accurate and complete in all respects and reflect
all resolutions adopted and all actions authorized or ratified by the members of
the Company, including those required to carry out the duties and obligations of
the Company hereunder. Copies of all minutes of meetings held or actions taken
by the Company will be made available to Buyer for inspection prior to the
Closing Date. The transfer books and Membership Unit certificate ledgers of the
Company are, with respect to all Membership Unit transfers and transactions, in
good order, complete, accurate and current and contain all necessary signatures
and set forth all Membership Interests issued, transferred and surrendered.
5. MEMBERSHIP INTEREST OF COMPANY. As of the Closing Date, Seller is the owner
and holder, beneficially and of record of 100% of the Membership Interest of the
Company. There are no liens, claims or encumbrances against such Interest and
that Seller has full and unlimited authority to dispose of such Interest.
6. FINANCIAL STATEMENTS. Seller represents that the end of fiscal year financial
statements and corresponding notes attached as Exhibit D accurately and fairly
represent the assets and liabilities of the Company as of the Company's most
recent fiscal year end in accordance with General Accepted Accounting Principals
(except for the accounting treatment of insurance expirations).
7. ASSETS. The Company has good and merchantable title to all assets shown on
its books, and such assets will be as of the Closing Date free and clear of all
liens, encumbrances and charges except for current personal property taxes and
assessments not delinquent and except as fully disclosed in writing to Buyer.
8. TAX RETURNS AND AUDITS. The company has duly filed on a timely basis with the
appropriate governmental agencies all tax returns and tax reports which are or
were due or are required to be filed by the Company with respect to all periods
of time, and all taxes, interest, penalties, and charges due or to become due
for all periods of time prior to closing have been paid in full. There are no
ongoing or pending examinations or investigations pertaining to taxes or
assessments asserted against the Company by any taxing authority, and no
agreement for the extensions of the time for the assessment of any amount of tax
has been or shall prior to the Closing Date be entered into or requested by or
on behalf of the Company. Seller acknowledges and agrees that income taxes for
profits of the Company up to the Closing Date shall be the sole responsibility
of Seller.
9. LITIGATION. Seller represents that there are no judgments, actions,
arbitration or decrees pending against the Company, nor is there any
litigation, action or proceeding threatening or pending against the Company
except as disclosed on Exhibit H.
10. NO DEFAULT OR VIOLATIONS. The execution and delivery of this Agreement and
compliance with and performance of the terms hereof by Seller will not conflict
with or result in a breach of the provisions of, or constitute a default under,
any indenture, agreement or other instrument to which the Seller is bound and
such execution, delivery, compliance and performance will not violate any law or
regulation of the United States, of the State of Kansas, or any regulatory or
administrative body or agency. Notwithstanding the foregoing, Seller and Buyer
acknowledge that the agreements by and between the Company and certain insurance
companies require the written consent of such insurance companies prior to a
change of control of the Company. A list of such insurance companies is attached
hereto as Exhibit E.
11. OTHER LIABILITIES AND CLAIMS. There are no material liabilities, debts,
leases, charges, claims, contracts or assessments against the Company, fixed or
contingent other than the liabilities and claims specifically disclosed on
Exhibit H and those fixed liabilities incurred in the ordinary course of
business. Accordingly, all material contingent liabilities have been disclosed
on Exhibit H and all material fixed liabilities that are not incurred in the
ordinary course of business have been disclosed in Exhibit H. Fixed liabilities
that are incurred in the ordinary course of business have not been disclosed on
Exhibit H but are included on the Seller's Financial Statements and Closing
Balance Sheet. The terms, conditions and/or circumstances of all liabilities
listed on Exhibit H shall be briefly summarized as part of said exhibit. For the
purposes of this paragraph, a liability, debt, lease, charge, claim, contract or
assessment shall be deemed material if it results in annual payments by the
Company of One Thousand Dollars ($1000) or more per year or could result in
liability to the Company of One Thousand Dollars ($1000) or more. For the
purposes of this paragraph, a liability shall be deemed incurred in the ordinary
course of business if such liability is incurred directly in relation to
insurance premium or net premium ▇▇▇▇▇▇▇▇.
12. PAYMENT OF CLAIMS. If prior to the Closing Date, any claim covered by any
provision, warranty, covenant, representation, obligation, statement, or
agreement of the Seller shall arise, the Buyer will give notice of such claim to
Seller and the Seller, at their own expense, shall employ counsel, accountants,
or other experts to handle the matter on behalf of the Company If such claim
results in a deficiency, judgment, payment, cost, claim or demand, including
penalty, interest, fees and all expenses, Seller will reimburse the company from
the proceeds of this transaction, net of recoverable insurance proceeds.
13. ADMINISTRATIVE ORDERS. There are no administrative orders or supervisory
actions by state or federal regulatory authorities now in force or pending as
of the date hereof which affect the Company.
14. INTENTIONALLY LEFT BLANK.
15. NAME. Buyer shall have the unrestricted use of the name Davidson ▇▇▇▇▇▇▇
and Seller has not authorized and will not authorize anyone else to use the
name or any variation thereof.
16. COMMISSIONS. The Seller warrants and represents that the Company has
received net sales commissions of at least Two million Four Hundred Thousand and
no/100 Dollars ($2,400,000), for the twelve (12) month period ending April 30,
2002. Net Commissions shall be defined as the total sales commissions income
received from insurance companies for such period less any sales commissions
expense paid for such period. It is agreed that total sales commissions income
shall include all income reflected in the following accounts of the Company:
4000, 4010, 4030, 4100, 4110, 4120, 4200, 4300, 4500 and 4510. Sales commissions
expense shall include all expenses reflected in the following accounts of the
Company: 4020 and 5310.
17. COMPETITION; NON SOLICITATION; COOPERATION. Seller shall not engage directly
or indirectly in the business of brokering excess surplus lines policies or
selling medically durable equipment policies for a period of five years from and
after the closing date except as an employee of the Buyer. Seller shall not for
a period of five years from and after the Closing Date directly or indirectly
solicit or write insurance policies or sell medically durable equipment policies
to or for any customers that are or were a part of the Company's insurance book
of business as of the Closing Date or at any time during the twelve month period
prior to the Closing Date; provided, however, that such restriction shall not
apply to Seller's service as an employee of Buyer after the Closing Date. Seller
shall not for a period of five years following the closing date directly or
indirectly attempt to divert any such customers from continuing to do business
with the Company or Buyer. Seller shall not for a period of five years following
the closing date, directly or indirectly, solicit any of the Company's
producers, employees or agents to work for or contract with Seller or any
competitor of Buyer, or make any disparaging statements about the Company or
Buyer. For a period of two years from and after the closing date, Seller shall
cooperate with the Buyer in all aspects of ownership transfer and shall assist
the Company in all aspects of management transition. The parties acknowledge
that the covenants set forth in this paragraph are material to this agreement
and that unless otherwise specifically stated herein, One Hundred Fifty Thousand
and No/100 Dollars ($150,000) shall be allocated to this covenant not to solicit
and not to compete. Seller agrees that the covenants contained in this paragraph
are reasonable and necessary and that Buyer has paid ample consideration for
same. Nothing set forth in this paragraph 17 shall preclude Seller from engaging
directly in the business of selling policies or soliciting or writing policies,
if and only to the extent such business, solicitation or writing is pursuant to
a written employment agreement with Buyer.
ARTICLE III
REPRESENTATION, WARRANTEES AND COVENANTS OF BUYER
Buyer hereby covenants, represents and warrants as follows:
1. STATUS. Buyer has the requisite power to execute, deliver and perform this
agreement and all transactions contemplated herein. Further, Buyer warrants that
it is a corporation in good standing under and by virtue of the laws of the
State of Kansas and that the actions contemplated herein have been approved by
the Executive Committee of the Board of Directors of Brooke Corporation.
2. NO DEFAULT OR VIOLATIONS. The execution and delivery of this Agreement and
compliance with and performance of the terms hereof by Buyer will not conflict
with or result in a breach of the provisions of, or constitute a default under
any indenture, agreement or other instrument to which Buyer is bound; such
execution, delivery, compliance and performance will not violate
any law or regulation of the United States or the State of Kansas or any
regulatory or administrative body or agency.
3. CONFIDENTIAL INFORMATION. Buyer and its agents, prospective agents,
employees, attorneys, accountants and representatives will hold in strict
confidence all data and information, classified or unclassified, obtained from
the Seller, pertaining to the financial condition, business or methods of
operation of the Company and any of Company's customers. If for any reason the
transaction contemplated by this agreement is not consummated, Buyer will return
to Seller all copies, compilations and abstracts of all data, information and
other written material regarding Company, or any of Company's customers,
obtained pursuant to or in connection with this Agreement, and will not attempt
to sell, transfer, use or profit from any such data, information or materials.
4. BALANCES DUE INSURANCE COMPANIES. Notwithstanding anything herein contained
to the contrary, Buyer agrees that for a period of 61 months following the
Closing Date, Buyer shall not remove or cause to be removed from the Company
accounts funds which represent balances due insurance companies for insurance
business written by the Company. Specifically, it is agreed that whenever the
Company writes insurance business and receives payment from the insured, a
portion of which is to be sent to the insurance company, the balance due the
insurance company shall remain with the Company until such amount is actually
remitted by the Company to the insurance company. The terms of this paragraph
shall be specifically enforceable by Seller and a similar provision shall be
included in the Security Agreement referenced in Article VII, paragraph 2.
ARTICLE IV
COVENANTS AND AGREEMENTS OF SELLER
1. CONDUCT OF BUSINESS IN REGULAR COURSE. From the date hereof and continuing
through the Closing Date, described as the "Interim Period", Seller shall not
permit the business and operations of the Company to be conducted in an unsafe
and unsound manner, nor permit any significant changes to be instituted in
policy or operations. During the Interim Period, Seller shall prevent the
Company from entering into any employment contract (other than those "at will");
making any substantial sales or changes in assets (subject to the right of
Seller to make distributions in cash or in kind as long as in kind distributions
do not result in removal of an asset that would materially impair the ability of
the Company to conduct its business after the Closing Date or would result in a
net book value of less than zero); engage in any extraordinary sales of assets;
paying any obligations or liabilities other than current liabilities incurred in
the ordinary and usual course of business; mortgaging, pledging or subjecting to
lien any of their respective property or assets, or entering into any
management, consulting or purchase agreements other than in the ordinary course
of business. If the Company enters into any "at will" Employment Contract with
any newly hired employee during the Interim Period, the Company shall give
notice of same to Seller. Seller shall also direct the Company, in accordance
with applicable laws and regulations. Seller shall also permit officers of Buyer
to be present at all formal meetings of the managers of the Company and shall
provide full access to all books and records of the Company. During the Interim
Period, Seller shall notify Buyer of any significant change in the operation and
management of the Company which might adversely affect the financial condition
or operations of the Company.
2. ACCESS TO COMPANY RECORDS, COOPERATION IN OBTAINING COMPANY CONTRACTS. Seller
will cause the Company to give Buyer full and free access at all reasonable time
to the financial statements, offices, properties, personnel (managers only),
auditors, books, records, Membership Unit books, minute books, company
statements, customer lists, expirations, renewals, files and correspondence of
the Company up until the Closing Date; provided however, that nothing herein
contained shall constitute an extension of the June 14, 2002 deadline for
completion of due diligence and delivery of the notice by Buyer that the due
diligence was unsatisfactory. Such access to the Company records shall be
conducted in such a manner that does not interfere with the normal operations of
the Company and does not alert employees of the pending transaction. Seller
shall cause the Company to provide Buyer and its agents all information and
documents reasonably requested by Buyer.
3. INDEMNIFICATION. (a) Seller agrees to indemnify Buyer for any damage (net of
any insurance proceeds, if applicable) resulting from any litigation or actions
against the Company from any claims that might arise due to events occurring
prior to Closing Date and of which Buyer or Seller receives notice within two
(2) years of the closing of this agreement. Claims shall include, but not be
limited to, claims of customers alleging failure to renew, issue or otherwise
service any policy prior to the date of closing, it being agreed that any
liability for such errors and omissions in the transaction of business shall
vest solely with Seller. However, notwithstanding anything herein contained to
the contrary, in no event shall Seller's obligation to indemnify Buyer hereunder
exceed in the aggregate the purchase price actually paid on the Closing Date.
Further, notwithstanding anything herein contained to the contrary, in no event
shall Seller have any indemnification obligation to Buyer hereunder until such
time as the claims for indemnification total in the aggregate of $25,000, and
then such indemnification obligation shall apply only to the amounts in excess
thereof, subject to the limitation set forth in the immediately preceding
sentence.
(b) The Seller warrants and represents that the Company currently has an errors
and omissions insurance policy in force.
4. LIMITED LIABILITY COMPANY ACTS. The Seller will cause the Company to perform,
with limited liability company proceedings and actions, all acts, deeds and
things to be done that are necessary to perform and to carry out the terms and
conditions of this Agreement, and, the Seller will execute all documents which
are necessary under this Agreement.
ARTICLE V
CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE
Buyer shall be obligated to pay the corresponding portion of the Purchase Price
to Seller on the Closing Date only after all of the following actions and
conditions have been taken or satisfied:
1. ORGANIZATIONAL ACTS. Seller shall cause a meeting of the members of the
Company to authorize execution of this Agreement, authorize the sale of the
Membership Interest of the Company to Buyer, and authorize adoption of any
necessary resolutions to comply, in accordance with applicable laws, with the
terms and conditions of this Agreement.
2. WARRANTIES AND REPRESENTATIONS. All provisions, warranties, covenants,
representations obligations, statements and agreements of the Seller set forth
in this Agreement shall be true in all respects as of the Closing Date, and
Seller have so certified in writing as of the Closing Date.
3. PERFORMANCE OF OBLIGATIONS. Seller have performed and complied with all
provisions, warranties, covenants, representations, obligations, statements and
agreements which are to be performed or complied with by them under this
Agreement prior to or on the Closing Date, and all contingencies have been met.
4. NO MATERIAL ADVERSE CHANGES IN FINANCIAL CONDITION. Between the date hereof
and the Closing Date there will not be:
a) Any materially adverse change in the financial condition, articles of
organization, operating agreement, assets, liabilities, or personnel of the
Company other than changes occurring in the ordinary course of business;
b) Any disposition, giving or encumbrance by the Seller of any Membership
Interest, or of any option or right to acquire any of the Membership Interest
of the Company or any acquisition, distribution or retirement of any
interest, except as provided herein;
c) Any materially adverse sale, encumbrance or other disposition of any asset
owned by the Company, other than transaction in the ordinary course of
business;
d) Any expenditures or commitment by the Company for the lease or purchase of
assets or services of any kind, other than supplies in small quantities or
other assets acquired in the ordinary course of business, unless Buyer
provides prior written consent;
e) Any damage, destruction or loss, whether or not insured which materially
affects the property, assets, business or prospects of the Company; or
f) Any increase in compensation, fees or benefits payable by the Company to
managers, members, employees or both.
5. CONSENT OF INSURANCE COMPANIES. Seller shall have obtained consent of all
those insurance companies identified on Exhibit E attached hereto and
incorporated herein by reference with assurance that the consummation of the
transactions described herein will not result in the termination of the
Agreement between the Company and each such insurance carrier.
ARTICLE VI
CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE
The Closing shall take place only after all of the following actions and
conditions have been taken or satisfied:
1. PAYMENT OF PURCHASE PRICE. Buyer shall have tendered to Seller the
Purchase Price in the manner provided for in this Agreement.
2. PERFORMANCE OF OBLIGATIONS. Buyer shall have performed and complied with
all obligations which are to be performed or complied with it under this
Agreement prior to or on the Closing Date.
3. CONSENT OF INSURANCE COMPANIES. Seller shall have obtained consent of those
insurance companies identified on Exhibit E attached hereto and incorporated
herein by reference with assurance that the consummation of the transactions
described herein will not result in the
termination of the Agreement between the Company and each such insurance
carrier. Seller shall exercise its best efforts to obtain such consents as soon
as reasonably possible and shall submit a written request to such insurance
companies for approval of the acquisition contemplated in this Agreement no
later than May 24, 2002.
ARTICLE VII
TERMINATION & DEFAULT
1. TERMINATION RIGHTS. This Agreement may be terminated, whereupon it shall be
null and void, at any time prior to the Closing Date by:
a) The Buyer or Seller upon written mutual consent;
b) Buyer, if assets of the Company are damaged or destroyed during the Interim
Period;
c) Seller, if Buyer has materially breached its obligations hereunder;
d) Buyer, if it is determined that Seller is in material violation of any
condition precedent to closing, provision, warranty, covenant, obligation,
representation, agreement or statement hereunder or that it will not be in full
force and effect or true on the Closing Date.
2. DEFAULT. If Buyer shall fail to pay any amount due at closing, this agreement
may be declared in default by Seller and Seller shall be entitled to retain the
▇▇▇▇▇▇▇ money heretofore paid in full satisfaction and liquidation of all
damages sustained by Seller. To secure the payment of the contingency payments
described in paragraph 4 hereof, as well as the additional payment due one month
after closing as provided in Section 3 of Article I hereinabove, and any and all
other amounts due from Buyer hereunder, Buyer hereby grants to Seller a first
lien security interest in and to the Company's assets. The parties agree to
execute a Security Agreement in a form mutually agreeable to Buyer and Seller,
and Buyer agrees that Seller may perfect its security interest by recording
Forms UCC-1 with the Secretary of State and Register of Deeds. In the event
Buyer fails to make contingency payments pursuant to paragraph 4 hereof within
fifteen (15) days of the payment due date, then the Seller shall give written
notice of such default to the Buyer at the address shown hereinafter. In the
event Buyer fails to cure its default within 30 days, Seller shall be entitled
to exercise the rights and remedies available to Seller allowed by applicable
law including without limitation foreclosure rights.
ARTICLE VIII
MISCELLANEOUS
1. ENTIRE AGREEMENT; LAW GOVERNING. This Agreement embodies the entire agreement
between the parties. There have been no agreements, representations or
warranties between the parties hereto other than those set forth and provided
for herein. This Agreement may be modified and amended only upon written
agreement of the parties. This Agreement was entered into, and shall be
construed and interpreted according to the laws of the State of Kansas. In the
event that this or any other provision may be declared invalid, it shall not
nullify the remaining terms of this agreement.
2. BINDING ON SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, and
be enforceable by, the parties hereto and their respective successors and
assigns.
3. NOTICES. All notices and other communications hereunder shall be deemed to
have been given when delivered by hand or when deposited in the mail, by
certified or registered mail, postage prepaid, as follows:
If to Buyer: ▇▇▇▇ ▇▇▇▇, President
Brooke Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Seller: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
4. COUNTERPARTS. This Agreement may be execute simultaneously in two or more
counterparts, each of which shall be deemed an original, and all of which when
taken together shall constitute one and the same agreement.
5. WAIVERS AND AMENDMENTS. No failure or delay by any party hereto to exercise
any right, power or privilege hereunder (and no course of dealing between any of
the parties or failure to insist upon strict compliance with each obligation,
covenant agreement or condition hereof) shall operate as a waiver or estopped
with respect to, any right, power or privilege. No waiver of any default on any
one occasion shall constitute a waiver of a subsequent or other default. No
single or partial exercise of any right, power or privilege shall preclude the
further or complete exercise thereof at any time thereafter.
6. BROKERS. Seller and Buyer covenant and agree that neither has used the
services of a Broker in negotiating this agreement and, in the event that any
claim or demand is made by a Broker, claiming by or through an Agreement with
either party hereto, said party shall hold the other party harmless against such
claim or demand and all expenses related thereto. Nothing in this paragraph
shall preclude any party to this Agreement from seeking, at their own expense,
competent professional counsel (attorney, accountant, business advisor, etc.) to
review this Agreement, assist with regulatory filing, or other actions necessary
for each party to perform this Agreement.
7. HEADINGS. The headings contained in the articles and paragraphs hereof are
inserted for convenience only and shall not constitute part of the agreement of
the parties or affect in any way the meaning or interpretation of this
Agreement.
8. EXHIBITS. The parties agree that the following listed exhibits are an
integral part of this agreement.
Exhibit A - (Reserved)
Exhibit B - (Reserved)
Exhibit C - (Reserved)
Exhibit D - End of Fiscal Year Financial Statements (and corresponding notes)
Exhibit E - List of Insurance Companies with Consent Requirements
Exhibit F - (Reserved)
Exhibit G - (Reserved)
Exhibit H - Disclosure of Liabilities, Debts, Charges, Claims, Contracts and
Assessments
Exhibit I - Employment Agreement
9. MEDIATION. Any issue, claim, dispute or controversy that may arise out of, in
connection with or relating to this Agreement (including any exhibits, addenda
or other document executed in connection herewith) or its breach, and which
Buyer and Seller are not able to resolve themselves by negotiation, shall be
submitted to mediation in a manner agreed to by Buyer and Seller. Seller and
Buyer agree to use mediation to attempt to resolve such issue, claim or dispute
prior to filing any arbitration action, complaints, charges, claims or other
proceeding. Buyer and Seller will select an independent mediator agreeable to
both parties. The mediator will communicate with the parties to arrange and
convene the mediation process that will be most efficient, convenient and
effective for both parties. The costs of the mediation and fees of the mediator
will be borne equally by Buyer and Seller; however, each party will be
responsible for the payment of the fees of his or its own counsel. The parties
will cooperate with the mediator in coming to a reasonable agreement on the
mediation arrangements which will include the time and place for conducting the
mediation, who will attend or participate in the mediation and what information
and written material will be exchanged before the mediation. The mediation will
be conducted at a place agreeable to both Buyer and Seller.
10. ARBITRATION. Any issue, claim, dispute or controversy that may arise out of,
in connection with or relating to this Agreement (including any exhibits,
addenda or other document executed in connection herewith) or its breach, and
which Buyer and Seller are not able to resolve through mediation, shall be
settled by arbitration administered by the American Arbitration Association
under its Commercial Arbitration Rules. The award of the arbitrator shall be
final as long as the award is rendered in conformity with statutory and
decisional law, and may be entered in any court having jurisdiction. The parties
authorize the arbitrator to order discovery proceedings, in the arbitrator's
discretion, and on terms and conditions the arbitrator may consider appropriate,
including depositions, interrogatories, requests for admission, and orders for
the examination of documents, person and things. Such orders shall be binding on
the parties. If any party fails to comply with a discovery order authorized by
this clause, the arbitrator may assume that the evidence that would have been
produced by complying with the order would have been unfavorable to the party
that failed to comply with the order.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
Seller: Buyer: Brooke Corporation
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
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/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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