ASSET PURCHASE AGREEMENT
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THIS
AGREEMENT made this 30th day of September, 2004, by and between
Armor Insurance Group, Inc., 3203 Corporate Court, Ellicott City, MD 21042, a
wholly owned subsidiary of BUCS Financial Corp, a corporation organized and
existing under the laws of the State of
Maryland, whose official address is
10455 Mill Run Circle, Owings Mills, MD 21117 (hereinafter individually or
collectively referred to as "Seller") and Russell Insurance Group, Inc., a
corporation organized and existing under the laws of the State of
Maryland,
whose official address is 2526 West Liberty Road, Westminster, MD 21157
(hereinafter referred to as
"Purchaser").
W I T N E S S E T H:
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WHEREAS, Seller is and/or operates an enterprise that is engaged in
the
business of selling insurance (the "Business") and
that has its principal place
of business at 3203 Corporate Court,
Ellicott City, MD
21042 (the
"Premises");
and
WHEREAS, Seller is
willing to sell the Acquired Assets of the Business
and Purchaser is ready, willing, and able to buy the same on the
terms and
subject to the obligations herein
stated;
NOW, THEREFORE,
in consideration of the premises and of the mutual
covenants herein contained, the parties
hereto agree as follows:
1. ASSETS TO BE TRANSFERRED: Seller agrees to convey, sell,
assign and
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transfer the following assets (collectively
"Acquired Assets of the Business"):
1.1 Property.
Goodwill, stock in trade, right to use the trade name
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(Armor Insurance Group, Inc.), all licenses pertaining to the
business
(to the extent such licenses are transferable), all expiration lists,
all customer lists and
all files used or useful in the Business. All
such lists and files
shall be set forth on
Exhibit "A" hereto
(the
"List") and hereby incorporated by reference.
1.2 Telephone Number.
The telephone number
or numbers utilized in the
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operations of the Business (i.e. 410-461-4434).
1.3 Computer Server.
The Computer Server (Server) currently utilized
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by the Seller in connection with storing all information related to
the business
operations
of the Seller and any
software that might
be
required in order for the Purchaser to retrieve and/or transfer all
pertinent
client/customer
information contained
in the Server and
required for Purchaser to continue to service such
customer/client.
Other than
the Acquired Assets specifically set forth in this
Agreement, the Purchaser has purchased no other assets and assumes no
liabilities that are not specifically
assumed or transferred under the terms and
conditions of this Asset Purchase
Agreement.
2. TERMINATION OF LEASE AND TRANSFER OF LICENSE: Seller understands
and
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acknowledges that Purchaser shall not
continue to rent any space under the Lease
between the Seller and the Seller's Landlord and that Seller shall assume
any
and all responsibility with respect to said
Lease; however, Purchaser shall have
the right to full use of the
Premises for sixty (60) days after the date of
Closing. Seller further agrees to indemnify and hold
harmless Purchaser
with
respect to any costs, expenses or fees incurred by
Purchaser as a result of the
Lease. Seller further agrees to use its
best efforts to assist Purchaser in its
efforts to secure the transfer of Seller's Maryland state insurance license
"license")to Purchaser, to the extent required
by Purchaser to utilize the List
in connection with Purchaser's business. In the event that the Purchaser
shall
need to operate under Seller's current license to obtain payments of any
kind,
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Purchaser shall have the right, to the
extent allowable by law, to operate under
Seller's current license until Purchaser may either transfer the
insurance to
another insurance carrier or obtain authorization to "write" insurance
for the
underwriter or underwriters utilized by Seller. Seller's commitment shall
include the signing of any documents required to permit the transfer of any
license. Purchaser should use its best efforts to effectuate the transfers
provided above.
3. PURCHASE
PRICE: Purchaser agrees to pay Seller certain sums as
---------------
follows:
3.1 Purchaser
agrees to pay Seller
the sum of Fourteen
Thousand Five
Hundred Dollars in currency of the United
States of America
(U.S.$14,500) for
the commissions earned by Purchaser from the BUCS
Financial Corp
account(s).
Payment shall be made at the Final
Closing expected to occur on or about
April
30, 2005. As set forth in Section 5.5, the
Seller commits to continue its use of
the Purchaser to service such accounts and, if Seller fails to satisfy the
requirements set forth in Section 5.5 shall,
in addition to the requirements
stipulated in Section 5.5, reimburse the Purchaser the full
balance of Fourteen
Thousand Five Hundred Dollars in currency of the United States of America
(U.S.$14,500) plus any prepaid commissions charged back to the
Purchaser by the
carrier of such policies.
3.2. Purchaser
shall also pay to
Seller an amount equal
to two times
the annual commission income of the retained Business acquired from Armor
Insurance Group, Inc., less any amount related to BUCS Financial Corp per
Section 3.1 above (the "Purchase Price"),
measured as of
December 31, 2004. The
amount paid to Seller shall be based upon information contained in insurance
company reports, including year-end written premium reports and other such
reports as available to the parties in order
to determine
the active
account
list as of December 31, 2004. Copies of such year-end reports
shall be provided
to the Seller or its agent
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<PAGE>
as they are received by Purchaser.
3.3. Payment of the
Purchase Price shall
be made to the Seller in two
installments. The first installment (the
"Initial Payment") will be made to the
Seller at Closing, via cashiers or certified
check, and shall be based upon a
mutually agreed upon estimate of the
Purchase Price (the
"Estimated
Purchase
Price"). The Estimated Purchase Price shall equal NINE HUNDRED FORTY-SIX
THOUSAND FIVE HUNDRED NINETY-TWO DOLLARS in currency of the United
States of
America (U.S.$946,592). The Initial Payment, to be paid to the Seller at
Closing, will be seventy-five percent (75%)
of the Estimated Purchase Price. The
second installment (the "Final Payment")
shall be determined by calculating the
Purchase Price, in accordance with Section 3.2 above,
and subtracting the
Initial Payment. The difference will be paid to the
Seller; however,
under no
circumstances shall the Seller receive less
than the Initial Payment. (By way of
example, the Seller and Purchaser have mutually agreed that the retained
business less the BUCS Financial Corp account at December 31, 2004
should be
approximately $473,296. This retained business was multiplied by two and the
result, $946,592, is the amount of the Estimated
Purchase Price. Thus, the
Initial Payment equals seventy-five percent (75%) of the Estimated
Purchase
Price or $709,944, which amount shall be paid to the
Seller at Closing. If upon
receipt of the 2004 year-end reports from insurance carriers (approximately
April 1, 2005), the retained Business is determined to be only
$450,000, the
Purchase Price shall equal two times the
$450,000 or $900,000. The Final Payment
is $190,056, which is calculated by subtracting
the Initial Payment of $709,944
from the Purchase Price of $900,000.) The parties agree that the year-end
reports from the insurance companies should be obtained and the
Purchase Price
calculated no later than April 1, 2005 and
that the Final Payment shall be paid
to
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<PAGE>
the Seller on or before April 30, 2005. Purchaser shall obtain the reports,
calculate the Final Payment in accordance
with the terms and
conditions of this
paragraph and provide both the reports and
the calculation
to the Seller.
The
parties further agree that in the event of
a delay in the
Purchaser
receiving
the reports from the insurance carriers, or in the event of disagreement
with
the amount of the retained Business or Final Payment, the deadlines for the
Final Payment due to Seller shall be
extended for a period of ninety (90) days.
The amount paid under this Paragraph 3 shall be allocated in the manner set
forth in Section 4 of this Agreement.
The parties also agree
that any and all
Commissions paid or
received
after September 30, 2004 shall remain the sole and exclusive property of
Purchaser. Any commissions paid to or received by Seller or any principal,
officer or director of Seller shall
immediately be turned over to Purchaser.
The Purchase Price, as
determined under this
Section 3, shall be paid
via cashiers or certified check on the day
of closing.
4. PURCHASE PRICE ALLOCATION: The Purchase Price shall be
allocated as
-------------------------
follows:
(a) Goodwill
$ 473,046
(b) Customer Lists,
Expiration Lists, etc. $ 473,046
(c) Equipment
$ 500
The parties further
provide that they
shall jointly agree and file an
IRS form 8594 as required by Section 1060
of the Internal
Revenue Code of 1986,
as amended.
5. CONTINGENCIES. This
Agreement and Purchaser's obligation to perform
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hereunder is expressly contingent upon the
following events:
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5.1 The transfer by
the Seller to the
Purchaser of all
licenses and
permits and approvals of the facility by
all regulatory authorities.
5.2 The transfer of the Business and the List be specifically
approved
by the carriers utilized by the Seller in
connection with the same.
5.3 Seller shall comply with the other terms and conditions imposed
by
this Agreement.
5.4. All employees or agents of Seller currently employed or
working as
of the date of this Agreement, in any capacity, with, for or on behalf of the
Seller relating to the Business, shall have executed a non-solicitation and
confidentiality agreement with Seller,
in a form and with
terms and conditions
satisfactory to Purchaser as contained in
Exhibit C as set forth in Section 7 of
this Agreement.
5.5 That BUCS
Financial Corp shall enter into an agreement with
Purchaser to continue to utilize the
services of Purchaser
for its corporate
bonding, liability and employee medical
benefit insurance
coverage through the
dates referenced below:
Corporate
bonding and liability
February 28, 2007
Employee medical benefit coverage
September 30, 2007
This Agreement shall provide that BUCS Financial Corp shall not compete or
solicit former clients of Seller.
Said Agreement is
attached hereto as
Exhibit
B, made a part hereof and hereby
incorporated by reference.
If any contingency is not satisfied, Purchaser shall, in its sole and
absolute discretion, have the option to: (a) extend the
closing date for ninety
(90) days, (b) waive the contingency
and
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<PAGE>
close with a reduced Purchase Price or (c) terminate the Agreement.
Nothwithstanding the foregoing, if the transaction does not close by November
30, 2004, due to the failure of the
Purchaser to meet its obligations under this
Agreement, Seller may terminate the Agreement
upon providing Purchaser five (5)
business days written notice.
6. CLOSING.
Purchaser and Seller agree to make full closing on or
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before the 1st day of October, 2004 at the
offices of Richard G. Solomon, 15245
Shady Grove Road, Suite 355, Rockville,
Maryland 20850 or at such other place as
the parties may mutually agree. Seller agrees to give possession at time of
Closing.
On the day of and
prior to Closing,
representatives
of Seller and
Purchaser shall inspect the Business and
all items listed on the List.
All notices of violations of orders or requirements noted or issued by
any governmental authority, or actions in any Court on account
thereof against
or affecting the Business or the Seller or its
owners or operators at or before
the date of Closing, shall be complied with at Seller's expense, and a
reasonable sum may be escrowed from
Seller's proceeds by Purchaser to accomplish
such compliance.
Risk of loss or damage to the Business or its assets, including but
not
limited to the assets on the List, by fire,
theft, or other casualty, is assumed
by Seller until Closing.
All expenses of the Business shall be adjusted as of date of
Closing.
7. NON-SOLICITATION
AND COVENANT NOT TO COMPETE. All employees or
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agents of Seller currently employed or
working as of the date of this Agreement,
in any capacity, with, for or on behalf of the
Seller relating to the Business,
shall execute a non-solicitation and
confidentiality
agreement with Seller upon
terms and conditions satisfactory to
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Purchaser in the form attached as Exhibit C of this
Agreement or other
form as
deemed satisfactory to Purchaser.
In addition,
Seller and Seller's
affiliates
shall execute a non-competition,
non-solicitation and
confidentiality agreement
for a period of five (5) years following the Closing upon terms
and conditions
satisfactory to the Purchaser in the form
attached as Exhibit B and provided for
in Section 5.5 of this Agreement.
8. WARRANTIES
OF SELLER.
Seller makes the
following warranties
and
---------------------
representations to Purchaser, and acknowledges that Purchaser
has entered into
this Agreement in reliance upon these
representations and warranties:
8.1. Organization and
Qualification of Seller. Seller is a corporation
duly organized, validly existing and in
good standing under the laws of Maryland
and (i) has all requisite corporate power and authority to own, operate and
lease its properties and to carry on its business as it is currently being
conducted; (ii) is in good standing and is
duly qualified to do business in each
jurisdiction where the character of its
properties owned or held under lease or
the nature of its business is such that a
failure to be so qualified would have
a material adverse effect on Seller; and
(iii) has in effect all federal, state,
local and foreign governmental authorizations, permits and licenses necessary
for it to own or lease its properties and
assets and to carry on its business as
it is currently being conducted.
8.2
Authorization, Execution and Delivery; Agreement Not in Breach.
(a) The undersigned, as officers of Seller, have all requisite
corporate power and authority to execute and deliver
this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery
of
this Agreement and the consummation of the
proposed transactions
have been duly
authorized by the entire Board of
Directors of Seller
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<PAGE>
and no other corporate proceedings on the part of Seller are necessary to
authorize the execution and delivery of
this Agreement and the
consummation of
the transactions contemplated hereby and thereby.
This Agreement and all
other
agreements and instrume
