<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended: JUNE 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission file number: 0-9628
ANCHOR PACIFIC UNDERWRITERS, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-1687187
(State or other jurisdiction (I.R.S. Employer Identification
incorporation or organization) No.)
1800 Sutter Street, Suite 400,
Concord, California, 94520 510/682-7707
(Address of principal executive offices (Registrant's telephone number
and Zip Code) including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding as of June 30, 1996
Common Stock, par value $.02 per share 3,685,612 shares
This document is comprised of 63 pages.
<PAGE>
ANCHOR PACIFIC UNDERWRITERS, INC.
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Consolidated Balance Sheets, June 30, 1996
(unaudited) and December 31, 1995................ 1
Consolidated Statements of Operations for
the six months and quarters ended June 30, 1996
and 1995 (unaudited)............................. 3
Consolidated Statements of Shareholders' Equity
for the six months ended June 30, 1996
(unaudited) and year ended December 31, 1995..... 4
Consolidated Statements of Cash Flows for
the six months ended June 30, 1996 and 1995
(unaudited)...................................... 5
Notes to Consolidated Financial Statements........ 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.... 10
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings ................................ 17
ITEM 2. Changes in Securities ............................ 17
ITEM 3. Defaults Upon Senior Securities .................. 17
ITEM 4. Submission of Matters to a Vote of Security
Holders .......................................... 17
ITEM 5. Other Information ................................. 17
ITEM 6. Exhibits and Reports on Form 8-K .................. 17
<PAGE>
PART I - FINANCIAL INFORMATION
ANCHOR PACIFIC UNDERWRITERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
June 30, December 31,
1996 1995
----------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents - corporate
funds $ 472,863 $ 904,781
Cash and cash equivalents - brokerage
fiduciary funds 1,186,103 1,529,524
Cash and cash equivalents - third-party
administration fiduciary funds 3,554,954 4,010,606
Accounts receivable (less allowance for
doubtful accounts of $32,885 in 1996 and
$49,560 in 1995) 1,758,946 1,255,335
Prepaid expenses and other current assets 328,183 295,537
----------- -----------
Total current assets 7,301,049 7,995,783
Property and equipment 2,953,812 2,892,462
Less accumulated depreciation and amortization (1,977,427) (1,835,530)
----------- -----------
976,385 1,056,932
Other assets:
Goodwill, net 2,111,567 2,128,452
Intangible assets, net 1,218,722 1,128,740
Deferred compensation 257,784 361,344
Other 62,855 61,182
----------- -----------
3,650,928 3,679,718
----------- -----------
Total assets $11,928,362 $12,732,433
----------- -----------
----------- -----------
</TABLE>
1
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ANCHOR PACIFIC UNDERWRITERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
June 30, December 31,
1996 1995
----------- ------------
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Cash and cash equivalents -
third-party administration
fiduciary funds $ 3,554,954 $ 4,010,606
Net premiums payable - insurance
companies 2,633,270 2,510,983
Accounts payable and accrued
expenses 437,335 404,801
Short-term debt 1,320,000 1,175,000
Current portion of long-term debt 97,885 156,622
Current portion of long-term liabilities 701,674 498,537
----------- -----------
Total current liabilities 8,745,118 8,756,549
Long-term liabilities 893,751 1,034,895
Long-term debt, including $790,000 in
1996 and 1995, owed to related parties 1,180,972 1,266,635
Deferred tax liability 111,322 111,322
Shareholders' equity:
Common stock - $.02 par value;
8,000,000 shares authorized;
3,685,612 and 3,674,501 shares
issued as of 6/30/96 and 12/31/95
respectively 73,712 73,490
Additional paid-in capital 3,004,053 2,989,275
Retained earnings (deficit) (2,080,566) (1,499,733)
----------- -----------
Total shareholders' equity 997,199 1,563,032
----------- -----------
Total liabilities and shareholders'
equity $11,928,362 $12,732,433
----------- -----------
----------- -----------
SEE ACCOMPANYING NOTES.
2
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ANCHOR PACIFIC UNDERWRITERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
Six Months Quarters
Ended June 30, Ended June 30,
---------------------------- ---------------------------
1996 1995 1996 1995
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues:
Commissions, fees & other
income $ 4,086,411 $ 4,438,332 $ 2,019,900 $ 2,196,401
Interest income 59,379 61,737 31,537 38,265
----------- ----------- ----------- ------------
Total revenue 4,145,790 4,500,069 2,051,437 2,234,666
Operating expenses:
Salaries, commissions &
employee benefits 2,763,056 3,013,603 1,387,103 1,470,902
Selling, general &
administrative expenses 1,607,116 1,522,164 809,088 773,943
----------- ----------- ----------- ------------
Total operating expenses 4,370,172 4,535,767 2,196,191 2,244,845
----------- ----------- ----------- ------------
(224,382) (35,698) (144,754) (10,179)
Other income (expense):
Amortization of goodwill &
intangible assets (186,902) (203,379) (95,162) (98,880)
Interest (202,193) (73,801) (72,786) (45,687)
Other 37,444 158,545 15,997 119,383
Nonrecurring merger expenses - (204,209) - -
----------- ----------- ----------- ------------
Total other income (expense) (351,651) (322,844) (151,951) (25,184)
----------- ----------- ----------- ------------
Loss before income taxes (576,033) (358,542) (296,705) (35,363)
Income tax expense 4,800 4,800 - -
----------- ----------- ----------- ------------
Net loss $ (580,833) $ (363,342) $ (296,705) $ (35,363)
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
Net loss per common & common
equivalent share $ (0.16) $ (0.09) $ (0.08) $ (0.01)
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
Weighted average number of
common & common equivalent
shares outstanding 3,683,760 3,923,263 3,685,612 3,923,263
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
</TABLE>
SEE ACCOMPANYING NOTES
3
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ANCHOR PACIFIC UNDERWRITERS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
Additional Retained
Common Stock Paid-In Earnings
Shares Amount Capital (Deficit) Total
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1994 (Restated) 3,923,258 $ 78,465 $ 3,294,702 $ (632,704) $ 2,740,463
Stock issued for
warrants exercised 163 3 486 - 489
Canceled stock:
Acquisition related
adjustment (248,710) (4,974) (305,917) - (310,891)
Fractional shares (210) (4) 4 - -
Net Loss - - - (867,029) (867,029)
-----------------------------------------------------------------
Balance at December 31, 1995 3,674,501 $ 73,490 $ 2,989,275 $(1,499,733) $ 1,563,032
Convertible debentures 11,111 222 14,778 - 15,000
Net loss - - - (580,833) (580,833)
-----------------------------------------------------------------
Balance at June 30, 1996
(Unaudited) 3,685,612 $ 73,712 $ 3,004,053 $(2,080,566) $ 997,199
-----------------------------------------------------------------
-----------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
4
<PAGE>
ANCHOR PACIFIC UNDERWRITERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months
Ended June 30,
--------------------------------
1996 1995
(unaudited) (unaudited)
OPERATING ACTIVITIES
Net loss $ (580,833) $ (363,342)
Adjustments to reconcile net
loss to cash provided by
(used in) operating activities:
Depreciation and amortization 141,897 105,506
Amortization of goodwill, and
other intangibles 186,902 203,379
Deferred tax liability - 5,135
Changes in operating assets and
liabilities, net of effect of
purchases of subsidiaries:
Cash and cash equivalents -
brokerage fiduciary funds 343,421 (81,950)
Accounts receivable (503,611) 45,518
Prepaid expenses and other
current assets (36,940) (11,119)
Other assets (1,673) 2,578
Deferred compensation 103,560 103,560
Net premiums payable - insurance
companies 122,287 170,251
Accounts payable and accrued expenses 32,534 59,321
Other liabilities (28,562) (10,072)
---------- ---------
Net cash (used in) provided by operating
activities (221,018) 228,765
INVESTING ACTIVITIES
Notes receivable, net (3,151) (147,143)
Purchases of property and equipment (61,350) (98,872)
Purchases of customer list (260,000) (203,763)
---------- ---------
Net cash used in investing activities (324,501) (449,778)
5
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ANCHOR PACIFIC UNDERWRITERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Six Months
Ended June 30,
--------------------------------
1996 1995
(unaudited) (unaudited)
FINANCING ACTIVITIES
Common stock - warrants exercised - 15
Debt:
Borrowings 145,000 657,697
Repayment (187,421) (412,057)
Capital lease payments - (46,610)
Net payments on amounts due on
acquisitions 156,022 62,976
---------- ----------
Net cash provided by financing
activities 113,601 262,021
---------- ----------
Net (decrease) increase in cash (431,918) 41,008
Cash and cash equivalents - corporate
funds at beginning of period 904,781 384,102
---------- ----------
Cash and cash equivalents - corporate
funds at end of period $ 472,863 $ 425,110
---------- ----------
SUPPLEMENTAL CASH FLOW
INFORMATION
Cash paid during the period for:
Interest $ 202,193 $ 73,801
---------- ----------
Income taxes $ - $ 5,600
---------- ----------
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING & FINANCING ACTIVITIES
Increase in goodwill, related to
adjustment of sublease liability $ - $ 104,542
---------- ----------
Common stock - convertible
debentures exercised $ 15,000 $ -
---------- ----------
SEE ACCOMPANYING NOTES
6
<PAGE>
ANCHOR PACIFIC UNDERWRITERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1996
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Anchor
Pacific Underwriters, Inc. and its subsidiaries ("Anchor") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments, consisting of normal recurring
accruals, considered necessary for a fair presentation have been included.
Operating results for the six month period ended June 30, 1996 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996. For further information, refer to the consolidated financial
statements and footnotes thereto included in Anchor's Form 10-K for the year
ended December 31, 1995.
The financial statements have been prepared on the going concern
basis. Anchor has reported net losses during the past three years. The
increase in net loss in 1995 and 1994 relates to expenses incurred in connection
with acquisitions and a merger. These events are further discussed in the
footnotes of the audited financials included in the 1995 Form 10-K. Anchor's
business is not capital intensive and Anchor historically has had sufficient
capital to meet its operating needs. However, Anchor is seeking to raise at
least $500,000 from members of the Board of Directors of Anchor and other
qualified investors through a subordinated bridge note to supplement working
capital. Anchor plans to continue making acquisitions and, in order to fund
these acquisitions, is presently seeking short-term financing to accommodate one
significant transaction; and, has contracted with an investment banking firm to
raise up to $10 million from institutional investors.
Management's plan to achieve profitability includes a strategy to
strengthen its core health insurance and property and casualty insurance
businesses by: (a) continuing to develop specialized affiliated business units
that target selected insurance market segments defined by industry type,
geographic location and consumer demographics; (b) establishing new products and
services; (c) strengthening sales and marketing staff; and (d) seeking to
acquire and integrate compatible insurance brokerage and administration
businesses in the Western United States. In conjunction with such acquisition
strategies, management intends to realize efficiencies and reduce expenses
through the integration and centralization of certain services with its existing
infrastructure.
RECLASSIFICATION
Certain prior year balances have been reclassified to conform with the
current year presentation.
NOTE 2 - ACQUISITIONS
On January 6, 1995, Anchor merged with System Industries, Inc.
("System"). For accounting purposes, the merger has been treated as a
recapitalization of Anchor with Anchor as the acquirer (reverse acquisition).
The historical financial statements prior to January 6, 1995 are those of
Anchor. These historical financial statements have been restated to give effect
to this recapitalization. Upon consummation of this merger, shareholders of
System received one share of Anchor Common stock and one Warrant to purchase one
share of Anchor Common Stock for every 42.3291 shares of issued and outstanding
System Common Stock. As a result of the merger, Anchor became a public company.
In February 1995, Anchor acquired certain third-party administration accounts
from a company located in Stockton, California at a purchase price of
approximately $204,000 (which reflects a $50,000 cash payment and a discounted
future income stream) with an additional $55,000 of stock consideration issued
at an agreed per share value of Anchor's Common Stock to be $1.75 per
7
<PAGE>
share. On March 1, 1996, Anchor purchased the R.L. Ferguson Insurance Agency
("RLF"), at a purchase price of approximately $260,000 (which reflects a
$95,000 cash payment and a discounted future income stream) with an
additional $25,000 of stock consideration to be issued at an agreed per-share
value of Anchor's Common Stock to be $2.00 per share. On April 1, 1996,
Anchor acquired certain property and casualty accounts from Norman I. Robins
("Robins") at a purchase price equal to 30% of the net commission revenues to
be paid over a period of 60 consecutive months. On May 1, 1996, Anchor and
PKW acquired certain property and casualty accounts from John R. McPherson
("McPherson") at a purchase price equal to 20% of the net commission revenues
to be paid over a period of 48 consecutive months.
The results of operations from these acquisitions are included in
Anchor's consolidated financial statements from the date of purchase.
Although Anchor is engaged in discussions with third parties regarding
potential acquisitions, as of August 7, 1996, it did not have any binding
agreements with respect to acquisitions. No assurances can be given with
respect to the likelihood, or financial or business effect, of any possible
future acquisition.
NOTE 3 - CONTINGENCIES
Anchor is subject to certain legal proceedings and claims arising in
connection with its business. It is management's opinion that the resolution of
these claims will not have a material effect on Anchor's consolidated financial
position.
NOTE 4 - CONVERTIBLE PREFERRED STOCK
Anchor has engaged an investment banking firm for the development of a
private placement to seek up to $10 million in long-term financing through the
proposed issuance of Series A Convertible Preferred Stock. The proceeds of
this offering will be used for debt consolidation, working capital and to
fund future acquisitions. Although the terms of the Series A Convertible
Preferred Stock have not been finalized, certain preferences will be given in
regards to liquidation, voting, board representation, conversion, dilution
and registration rights. There can be no assurances as to when or whether
Anchor will raise additional capital or what the final terms and conditions
would be for such capital.
NOTE 5 - ADJUSTABLE BRIDGE NOTES AND WARRANT
Anchor is also seeking to raise up to $3 million in short-term
financing through the proposed issuance of Adjustable Bridge Notes and Warrant
to Purchase Shares of Anchor Common Stock ("Adjustable Notes"). Anchor intends
to utilize a substantial portion of the proceeds to acquire all of the issued
and outstanding shares in a potential acquisition of an insurance specialty
managing general agency located in Scottsdale, Arizona. The proposed terms of
the Adjustable Notes are prime plus 5%, payable quarterly in arrears and
adjustable quarterly with a one year maturity from date of issuance. For every
million dollar principal amount invested the purchaser would receive a warrant
to acquire 60,000 shares of Anchor Common Stock. The purchase price for the
warrant would be at $1.75 per share and the warrant would provide antidilution
protection from stock splits, stock dividends, recapitalizations and
reorganizations. The Adjustable Notes would be treated as senior to all
indebtedness and obligations of Anchor, except for any obligation of Anchor
under existing bank lines of credit. All other indebtedness of Anchor would be
subordinated to the Adjustable Notes. There can be no assurances as to when or
whether Anchor will raise this additional capital or what the final terms and
conditions would be for such capital.
NOTE 6 - 10% SUBORDINATED BRIDGE NOTES AND WARRANT
During the second half of fiscal 1996, Anchor expects to raise
additional funds from members of the Board of Directors of Anchor and other
qualified investors through an issuance of 10% Subordinated Bridge Notes and
Warrant to Purchase Shares of Anchor Common Stock ("Subordinated Notes"). As of
August 7, 1996 Anchor had received initial commitments to purchase approximately
$500,000 of the Subordinated Notes. Anchor intends to utilize a substantial
portion of the proceeds from the Subordinated Notes to support current and
future working capital needs of Anchor. The proposed terms of the Subordinated
Notes are 10% interest paid annually in arrears with a one year maturity from
date of issuance. For every $10,000 of principal invested the purchaser would
8
<PAGE>
receive a five year warrant to acquire 1,000 shares of Anchor Common Stock. The
purchase price for the warrant would be at $1.75 per share and the warrant would
provide antidilution protection for stock splits, stock dividends,
recapitalizations and reorganizations. The Subordinated Notes would be treated
as junior to all indebtedness and obligations of Anchor, except that the
Subordinated Notes would be equal in status to indebtedness outstanding related
to the Subordinated Convertible Debentures issued during 1995 which become due
in 1997. There can be no assurances as to when or whether Anchor will raise
this additional capital or what the final terms and conditions will be for such
capital.
NOTE 7 - COMMITMENTS
On June 27, 1996, Anchor entered into an Engagement Letter with
Gerbsman Partners ("Gerbsman"), a business and investment banking firm, to
assist Anchor in developing a strategy to access short-term debt financing
sources for future acquisitions.
The Engagement Letter provides for a $25,000 retainer fee due and
payable on January 4, 1997, plus reasonable business expenses through July 31,
1996. If, however, Gerbsman earns a finder's fee of 3.5% of the gross proceeds
raised, then Anchor will not be required to pay the retainer fee. In addition,
Gerbsman will earn options/warrants of 30,000 shares of Anchor Common Stock upon
successful completion of said financing at an exercise price per share of $1.75
with a four year option period.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BACKGROUND
Anchor was organized in 1986 as a California general partnership for
the specific purpose of acquiring Harden & Company ("Harden"), a third-party
employee benefits administrator. Anchor was reorganized as a private California
corporation in March 1987 and became a public reporting Delaware corporation on
January 6, 1995 when it merged with System.
Since its inception, Anchor has expanded its insurance and financial
service capabilities through internal growth and a series of acquisitions. In
August 1994, Harden acquired BRI, a third-party employee benefits administrator
located in Scottsdale, Arizona; in October 1994, Anchor acquired Putnam, Knudsen
& Wieking, Inc. ("PKW"), a property and casualty insurance brokerage company
located in Oakland, California; in March 1996, Anchor acquired RLF, a property
and casualty insurance brokerage company located in Walnut Creek, California; in
April 1996, Anchor acquired certain property and casualty accounts from Robins;
and in May 1996, Anchor and PKW acquired certain property and casualty accounts
from McPherson. The RLF, Robins and McPherson acquisitions are not significant
to Anchor. These acquisitions were accounted for using the purchase method of
accounting. Anchor expects to continue to expand its insurance brokerage and
administration businesses and to explore other complementary expansion
opportunities.
Historically, Anchor derived a majority of its revenues from third-party
administration services. In light of its acquisition of PKW in October 1994;
the March 1, 1996 acquisition of RLF; the April 1, 1996 acquisition of
accounts from Robins; and, the May 1, 1996 acquisition of accounts from
McPherson, Anchor expects to significantly increase the percentage of its
revenues that are derived from property and casualty insurance brokerage
activities.
RESULTS OF OPERATIONS -- SIX MONTHS ENDED JUNE 30, 1996 AND 1995
GENERAL
Anchor derives a substantial portion of its revenues from commissions,
which generally are based on a percentage of premiums produced by Anchor,
contingent commissions, which generally are based on underwriting profits
derived over a given period of time by the insurance carrier, and fees received
for claims administration (including underwriting and risk analysis) services,
which generally are based on a percentage of premiums collected, or on a per
capita basis. Anchor does not assume any underwriting risk in connection with
its business.
Fluctuations in premiums charged by insurance companies may materially
affect commission revenues. During the last eight years, the property and
casualty insurance industry has experienced a "soft market" where the
underwriting capacity of insurance companies expanded, stimulating an increase
in competition and a decrease in premium rates, thereby reducing related
commissions and fees. In addition to the soft market for property and casualty
insurance, workers' compensation reform in California has had the effect of
reducing workers' compensation insurance premiums and, consequently, reducing
commissions generated by the sale of related insurance products. Although some
sources in the insurance industry have predicted future premium increases, the
likelihood of rate increases in 1996 remains uncertain. Anchor believes that
revenues generated from anticipated future growth and continued diversification
of its business will offset weaknesses in the property and casualty market and
any loss of revenues that may result from workers' compensation reform.
Inflation may also impact commission revenues by, among other things,
increasing property replacement costs and workers' compensation and liability
claims, thereby causing some clients to seek higher levels of insurance coverage
and pay higher premiums. During the past several years, the United States has
experienced very low rates of inflation along with business downsizing, reduced
sales and lower payrolls; these events have resulted in lower levels of exposure
to insure. Because the United States has recently experienced limited
inflationary pressures, inflation has had minimal impact on insurance prices.
10
<PAGE>
Other factors, such as client uncertainty about the effect of health
care reform, could also affect Anchor's business. Anchor believes, however,
that its expertise in two major areas that are the targets of health care reform
proposals (managed care and managed competition), combined with its strategy of
serving middle market clients, makes it well positioned to operate effectively
in a managed care and managed competition environment. Anchor also believes
that in light of the political changes in the United States Congress, the United
States will experience incremental, rather than comprehensive, changes in health
care regulations. It is not possible at this time to predict the effect that
any health care legislation will have on Anchor's business condition or
operations.
Anchor is unaware of any current regulatory proposals that could have
a material effect on its liquidity, capital resources or operations.
Anchor has taken steps to strengthen the sales management at both PKW
and BRI by hiring seasoned sales and marketing executives to take over marketing
responsibilities. Product development and new product sales continue to be a
top priority as does geographical diversification into other states. Marketing
for new business on the release of a new product by Harden and BRI's new carrier
began on April 1, 1996. Market reaction to these changes is encouraging and the
increase in new revenue is beginning to match prior periods of production.
REVENUES
TOTAL REVENUES. Total revenues for the six months ended June 30, 1996
were $4,145,790, a decrease of $354,279 or 7.9% compared to $4,500,069 of
revenues for the six months ended June 30, 1995. The decrease in revenues in
the most recent six month period resulted from net lost business due primarily
to a change in the underwriting carrier for Harden as discussed below. Anchor's
revenues vary from quarter to quarter as a result of the timing of policy
renewals and net new/lost business production, whereas expenses are fairly
uniform throughout the year.
Commissions and fees make up substantially all of Anchor's revenues.
The following table sets forth the percentages of Anchor's revenues attributable
to insurance brokerage services (for which commissions are generated), and
third-party administration and underwriting and risk analysis services (for
which fees are generated), for the six months ended June 30, 1996, 1995 and
1994. Also included is the percentage of revenues generated from premium
finance activities.
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1996 1995 1994
- ----------------------------------------------------------------------------
Insurance Brokerage 43% 41% 22%
- ----------------------------------------------------------------------------
Third-Party Administration 57% 59% 77%
- ----------------------------------------------------------------------------
Premium Financing - - 1%
- ----------------------------------------------------------------------------
Total 100% 100% 100%
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Historically, Anchor derived a majority of its revenues from third-party
administration services. In light of its acquisitions of PKW in October
1994; RLF in March 1996; and the account acquisitions of Robins in April 1996
and McPherson in May 1996, Anchor expects to continue to experience an
increase in the percentage of its revenues that are derived from insurance
brokerage activities.
COMMISSIONS. Commissions from insurance brokerage services are reported
net of sub-broker commissions and generally are recognized as of the
effective date of the insurance policy except for commissions on installment
premiums which are recognized periodically as billed. Commissions for the
first six months of 1996 were $1,750,869 a decrease of $46,483 or 2.6%
compared to $1,797,352 of commissions for the first six months of 1995. The
decrease resulted from net lost business for the six month period ended June
30, 1996.
11
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Anchor expects that commission revenues generated from sales of
workers' compensation insurance, which accounted for approximately 14.4% of
commission revenues (or 7% of Anchor's total revenues) for the first six months
of 1996, might continue to decrease as a result of workers' compensation reform
in California. Anchor believes, however, that revenues generated from
anticipated growth and continued diversification of its business will
substantially offset any loss of revenues that result from workers' compensation
reform.
FEES. Fees from Anchor's third-party administration (including
underwriting and risk analysis) services for the six months ended June 30, 1996
were $2,334,959 a decrease of $298,870 or 11.3% compared to $2,633,829 in fees
for the same period in 1995. This loss of fees income is the direct result of
changes in the underwriting carriers for Harden and BRI and is discussed below.
Revenues generated from fees by Anchor in the first six months of 1996
from third-party administration services consist of revenues generated by both
Harden and BRI. A significant portion of the Harden and BRI new fee revenues
relate to an insurance product underwritten by one insurance carrier, which
currently is an A+ (Superior) rated insurance carrier.
Harden's third-party administration revenues are substantially derived
from: (a) an insurance product currently underwritten by two insurance carriers,
which are rated A (Excellent) and A+ (Superior); and (b) the administration of
insurance programs underwritten by various insurance carriers for a number of
self-insured employers. The insurance product referred to in (a) above,
accounted for approximately 60.6% of Harden's revenues (or approximately 25.1%
of Anchor's total revenues) in 1995, and revenues related to the administration
of self-insured benefit plans described in (b) above, accounted for 38.0% of
Harden's revenues in such period. Self-insurance is a benefit plan in which a
client assumes a manageable portion of its insurance risks, usually placing the
less predictable and larger loss exposure with an excess insurance carrier.
The insurance company which offered the product that accounted for 65%
of Harden's 1994 third-party administration revenues informed Harden in the
first quarter of 1995 that as a result of changes in its business strategy, it
would discontinue offering such an insurance product by the end of 1995. On
July 20, 1995, Harden obtained a binding commitment from an A+ (Superior) rated
insurance carrier to underwrite the risk and provide a replacement product as of
October 1, 1995. The transition to the new carrier has caused several clients
to reevaluate their insurance needs. In conjunction with this transition
process, existing clients are required to satisfy the new carrier's underwriting
standards. During the first quarter in 1996, one client who represented
approximately 9% of Harden's 1995 revenues, (or 3.7% of Anchor's consolidated
revenues) was advised by the new carrier that it would not be accepted as a
client because it did not meet its underwriting standards. As a result of the
transition to the new carrier, Harden has experienced a near term loss of
business accounts and revenues. Management expects an improvement as new
clients are added over the next six to twelve month period.
Harden and BRI continue to seek alternative carrier sources to
strengthen and broaden their product offering in their small group product; as
well as facilitate geographical diversification. Negotiations are currently
underway with several intermediaries which management expects will result in new
small group carrier relationships prior to year-end.
INTEREST INCOME. Interest income consists of interest earned on
insurance premiums and other funds held in fiduciary accounts and interest
earned on investments. Interest income was $59,379 and $61,737 for the six
months ended June 30, 1996 and 1995, respectively. The decrease in interest
income in 1996, as compared to 1995, resulted primarily from a smaller amount
of insurance premiums and other funds being held in fiduciary accounts which
is directly related to business lost due to the change of primary insurance
carriers referred to above.
EXPENSES
TOTAL EXPENSES. Total operating expenses for the six months ended
June 30, 1996 were $4,370,172 a decrease of $165,595 or 3.7% as compared to the
operating expenses of $4,535,767 for the same period in 1995. As discussed
below, the decrease in total expenses resulted from a decrease in employee
compensation and benefits offset, in part, by an increase in selling, general
and administrative expenses.
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Anchor continues to monitor expenses closely as Harden and BRI
transition from one carrier to another for their major indemnity product.
Anchor is monitoring staffing as well as outside professional services. Recent
termination for contracted systems support has resulted in significant cost
savings.
EMPLOYEE COMPENSATION AND BENEFITS. Employee compensation and
benefits for the six months ended June 30, 1996 were $2,763,056 a decrease of
$250,547 or 8.3% as compared to $3,013,603 for the same period in 1995.
Starting in 1996, PKW went to a compensation system for all sales personnel
based upon commission only versus the prior practice of paying commission plus
salary. The change in 1996 was made in order to record commissions to properly
match with earned revenues. In addition, this overall decrease was also
attributed to normal attrition and selective downsizing at Harden, PKW and BRI.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $1,607,116 and $1,522,164 for the six months ended
June 30, 1996 and 1995, respectively. The $84,952, or 5.6% increase in 1996, as
compared to 1995, resulted primarily from reclassification of certain items
previously classified as employee compensation and benefits. General and
administrative expenses include rent, travel, insurance, postage, telephone,
supplies and other miscellaneous expenses.
Further, as to operating expenses, management has taken aggressive
steps to monitor and control costs associated with outside professional
services.
INTEREST EXPENSE. Interest expense totaled $202,193 and $73,801 for
the six months ended June 30, 1996 and 1995, respectively. The increase in
interest expense of $128,392 in the first six months of 1996, as compared to the
same period in 1995, resulted primarily from an increase in outstanding
borrowings on Anchor's existing lines of credit, and $75,000 of expense related
to the Convertible Preferred Stock Offering. Anchor expects that interest
expense will increase in 1996, as compared to 1995, due to larger outstanding
borrowings. The successful completion of the Convertible Preferred Stock
Offering and subsequent debt consolidation could materially lower interest
expense. There can be no assurances as to when or whether Anchor will raise
this additional capital or what the final terms and conditions will be for such
capital.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Goodwill represents
the excess of the cost of acquisitions over the fair value of net assets
acquired. Other intangibles include covenants not to compete, customer lists
and other contractual rights. Amortization of goodwill and other intangibles
was $186,902 and $203,379 for the six months ended June 30, 1996 and 1995,
respectively. The decrease in amortization of goodwill and other intangibles is
a result of an adjustment to goodwill in the fourth quarter of 1995 due to the
subsequent adjustment of the PKW purchase price. For further information, refer
to Adjustment to PKW Purchase Price, page 15, in Anchor's Annual Report on Form
10-K for the year ended December 31, 1995.
INCOME TAXES
Anchor's expense for income taxes was $4,800 for both six month
periods ended June 30, 1996 and 1995. This $4,800 expense represents the
minimum annual required tax payment due.
RESULTS OF OPERATIONS - QUARTERS ENDED JUNE 30, 1996 AND 1995
REVENUES
TOTAL REVENUES. Total revenues for the three months ended June 30,
1996 were $2,051,437, a decrease of $183,229, or 8.2%, as compared to 1995
second quarter revenues. The decrease resulted primarily from the carrier
change at Harden and BRI and lower premium and commission revenue at PKW.
COMMISSIONS. Commissions for the second quarter of 1996 were
$876,571, a decrease of $2,814, or .3%, as compared to $879,385 of commissions
for the second quarter of 1995. The net loss of business at PKW accounted for
substantially all of the decrease.
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<PAGE>
FEES. Fees from Anchor's third-party administration (including
underwriting and analysis) services for the three months ended June 30, 1996
were $1,142,773, a decrease of $171,419, or 13% as compared to $1,314,192 in
fees for the same period in 1995. The carrier change at Harden and BRI
accounted for substantially all of the decrease.
INTEREST INCOME. Interest income was $31,537 and $38,265 for the
three months ended June 30, 1996 and 1995 respectively. The decrease in
interest income in the second quarter of 1996, as compared to 1995, resulted
primarily from a smaller amount of insurance premiums and other funds held in
fiduciary accounts.
EXPENSES
TOTAL EXPENSES. Total operating expenses for the three months ended
June 30, 1996 were $2,196,191, a decrease of $48,654, or 2.2%, as compared to
the operating expenses for the same period in 1995. The decrease resulted
primarily from a decrease in employee compensation and benefits offset, in part,
by the increase in selling, general and administrative expenses.
EMPLOYEE COMPENSATION AND BENEFITS. Employee compensation and
benefits for the three months ended June 30, 1996 were $1,387,103, a decrease of
$83,799, or 5.7%, over the same period in 1995. The decrease related primarily
to normal attrition and selective downsizing at Harden, PKW and BRI.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $809,088 and $773,943 for the three months ended
June 30, 1996 and 1995, respectively. The $35,145, or 4.5%, increase in the
second quarter of 1996, as compared to the same period in 1995 resulted
primarily from reclassification of certain items previously classified as
employee compensation and benefits. General and administrative expenses include
rent, travel, insurance, postage, telephone, supplies and other miscellaneous
expenses.
Further, as to operating expenses, management has taken aggressive
steps to monitor and control costs associated with outside professional
services.
INTEREST EXPENSE. Interest expense was $72,786 and $45,687 for the
three months ended June 30, 1996 and 1995 respectively. The increase in
interest expense in 1996, as compared to 1995, resulted primarily from an
increase in outstanding borrowings on Anchor's existing lines of credit, and
expenses related to the Convertible Preferred Stock Offering. Anchor expects
that interest expense will increase in 1996, as compared to 1995, due to larger
outstanding borrowings. The successful completion of the Convertible Preferred
Stock Offering and subsequent debt consolidation could materially lower interest
expense. There can be no assurances as to when or whether Anchor will raise
this additional capital or what the final terms and conditions will be for such
capital.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Goodwill represents
the excess of the cost of acquisitions over the fair value of net assets
acquired. Other intangibles include covenants not to compete, customer lists
and other contractual rights. Amortization of goodwill and other intangibles
was $95,162 and $98,880 for the three months ended June 30, 1996 and 1995,
respectively.
INCOME TAXES
Anchor's minimum annual required tax payment due was reported during
the first quarter of 1996 and 1995. Therefore, there was no income tax expense
reported for the three month periods ended June 30, 1996 and 1995.
LIQUIDITY AND CAPITAL RESOURCES
Anchor's business is not capital intensive and Anchor historically has
had sufficient capital to meet its operating needs. Anchor reported net cash
flows (used in) operations of $(221,018) for the six months ended June 30, 1996,
compared to net cash flows provided by operations of $228,765 for the six months
ended June 30, 1995. During 1996, Anchor expects to meet its operating and
capital needs from cash flow derived from operations and borrowing under its
existing credit agreements. As of June 30, 1996, Anchor had approximately
$180,000 available on its existing lines of credit. Liquidity would be impaired
if cash flow from operations were
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reduced or if existing credit lines were insufficient. However, Anchor is
seeking to raise at least $500,000 from the members of the Board of Directors
of Anchor and other qualified investors through a subordinated bridge note
to supplement working capital. To further supplement current funding
sources, Anchor is presently seeking alternative bank lines and, as described
below, is seeking to raise up to $10 million from institutional investors and
$3 million from private sources.
During late 1995, Anchor engaged the services of an investment banker
to assist in raising approximately $10 million from institutional investors
through the proposed issuance of Series A Convertible Preferred Stock.
Marketing of this private placement to institutional investors began in June
1996. The proceeds of this offering would be used for debt consolidation,
working capital and to fund future acquisitions. At the present time, Anchor
expects to offer investors preferred stock that will be convertible into shares
of common stock. Anchor has had preliminary discussions with various potential
investors, but has not yet obtained any commitments with respect to such
financing. Consequently, there can be no assurance as to when or whether Anchor
will raise additional capital or what the terms and conditions would be for such
capital.
In June 1996, Anchor engaged the services of a business
consultant and investment banker to assist in raising approximately $3 million
from private investors through the proposed issuance of Adjustable Bridge Notes
and Warrant to Purchase Anchor Shares of Common Stock ("Adjustable Notes").
Marketing of these Adjustable Notes began in July 1996. The proceeds would be
used to acquire all of the issued and outstanding shares of an insurance
specialty managing general agency located in Scottsdale, Arizona. Anchor has
had preliminary discussions with various potential investors, but has not yet
obtained any commitments with respect to such financing. Consequently, there
can be no assurances as to when or whether Anchor will raise additional capital
or what the terms and conditions would be for such capital.
During the second half of fiscal 1996, Anchor expects to raise
additional funds from members of the Board of Directors of Anchor and other
qualified investors through an issuance of 10% Subordinated Bridge Notes and
Warrant to Purchase Shares of Anchor Common Stock ("Subordinated Notes"). As of
August 7, 1996, Anchor had received initial commitments to purchase
approximately $500,000 of Subordinated Notes. The proceeds would be used to
support current and future working capital needs. There can, however, be no
assurance as to when or whether Anchor will raise additional working capital or
what the terms and conditions would be for such capital.
Capital and certain acquisition related expenditures were $321,350 and
$302,635 for the six months ended June 30, 1996 and 1995, respectively.
During the first quarter of 1996, RLF, an insurance agency located in Walnut
Creek, California was acquired and merged into Anchor's insurance brokerage
subsidiary, PKW, located in Concord, California. In addition, during the
second quarter of 1996, certain property and casualty accounts of Robins and
McPherson were acquired and merged into PKW. During the first quarter of
1995 certain third-party administration accounts from a company located in
Stockton, California were acquired and merged in Anchor's third-party
administration subsidiary, Harden, located in Concord, California.
Short-term debt, current portion of long-term debt and current portion
of long-term liabilities at June 30, 1996, totaling in the aggregate $2,119,559
(as compared to $1,830,159 at December 31, 1995) consisted of: (a) $975,000
outstanding under a $1,000,000 revolving line of credit maintained by Anchor
with a regional San Francisco Bay Area bank; (b) $345,000 outstanding under a
$500,000 unsecured line of credit maintained by Anchor with another regional San
Francisco Bay Area bank; (c) approximately $228,750 of future fixed payments
under a consulting agreement entered into with a company affiliated with the
former shareholders of BRI; (d) $150,000 representing the current portion of
obligations with regard to certain real property leased by PKW prior to its
acquisition by Anchor and relocation to Anchor's executive offices; and (e)
$420,809 for certain other current liabilities.
On October 25, 1995 the $1,000,000 line of credit expired. The bank
has extended the line of credit to September 8, 1996. The line of credit
requires Anchor to maintain shareholders' equity of at least $800,000. Anchor's
shareholders' equity at June 30, 1996 was $997,199. The $500,000 unsecured line
of credit, expired on July 30, 1996. The line has been extended for sixty (60)
days while Anchor negotiates the renewal of the line. The interest rate on the
$1,000,000 line of credit is at the lending bank's prime rate. The $500,000
line of credit has an interest rate equal to the lending bank's prime rate plus
1 1/4%.
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In 1995, the bank that provided Anchor with the $1,000,000 line of
credit also provided Anchor with equipment financing loans of $125,000 and
$62,000 for equipment purchased with operating capital. The proceeds from the
$125,000 equipment financing loan were then used to reduce the outstanding
balance on said $1,000,000 line of credit.
At June 30, 1996, long-term liabilities, less the current portion
discussed above, totaled $2,186,045 (as compared to $2,412,852 at December 31,
1995), and primarily consisted of: (a) convertible debentures of $955,000; (b)
approximately $333,000 of future fixed payments under the consulting agreement
mentioned above with a company affiliated with the former shareholders of BRI;
(c) approximately $285,000 representing the long-term portion of obligations
with regard to certain real property leased by PKW prior to its acquisition by
Anchor and relocation to Anchor's executive offices; (d) approximately $275,600
represents deferred rent with regard to certain real property currently leased
by Anchor; and (e) approximately $337,445 for certain other long-term
liabilities. In May 1995, PKW entered into a sublease with respect to 82% of
PKW's prior office space. The sublease expires on September 30, 1997 (unless
extended by the subtenant through November 30, 1999, the date on which the term
of the master lease expires) and requires PKW to provide a multi-year rent
subsidy. In December 1995, PKW entered into a sublease with respect to an
additional 10% of PKW's prior office space. The sublease expires on November
30, 1999 and requires PKW to provide a multi-year rent subsidy. The amounts
classified as short and long-term liability with respect to the PKW leases
reflect such subsidy and are based upon the assumptions that: (a) the subtenant
of the May 1995, sublease will exercise its option to extend the lease through
1999; and (b) the remaining 8% of such office space will be subleased in 1997.
Anchor has not paid cash dividends in the past and does not expect to
pay cash dividends in the foreseeable future.
STRATEGY
Anchor's strategy is to strengthen its core health insurance and
property and casualty (including workers' compensation) insurance businesses by:
(a) continuing to develop specialized affiliated business units that target
selected insurance industry market segments defined by industry type, geographic
location and consumer demographics; (b) establishing new products and services;
(c) strengthening sales and marketing staff; and (d) seeking to acquire and
integrate compatible insurance brokerage and administration businesses in the
Western United States. In connection with this strategy, Anchor regularly
considers acquisition opportunities. To date, acquisitions by Anchor have
involved both relatively small acquisitions of insurance brokerage and
administration accounts as well as larger acquisitions of insurance brokerage
companies, such as PKW, and third-party administrators, such as BRI. Anchor
expects to continue to pursue appropriate acquisition opportunities, and
believes that its status as a public company enhances its ability to make
acquisitions and continue its expansion strategy. Although Anchor is engaged in
discussions with third parties regarding potential acquisitions, as of August 7,
1996, it did not have any binding agreements with respect to acquisitions. No
assurances can be given with respect to the likelihood, or financial or business
effect, of any possible future acquisition.
As part of Anchor's strategy to create the premier publicly traded
insurance brokerage/administrator in the Western United States, it expects to
obtain additional momentum by using its larger operating base to attract public
and private financing. Such funding would be available to Anchor for future
acquisition, expansion, and consolidation of its insurance operations.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Anchor and its subsidiaries are parties from time to time to various
lawsuits that have arisen in the normal course of business. Management is not
aware of any lawsuits to which Anchor or its subsidiaries is currently a party
or to which any property of Anchor or any of its subsidiaries is subject, which
might materially adversely affect the financial condition or results of
operations of Anchor.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
10.15a Amendment to Agreement for Purchase and Sale of Assets dated June
10, 1996, between Harden and Dutcher.
10.19 Purchase and Sale Agreement dated as of April 1, 1996, between
Anchor and Norman I. Robins.
10.20 Purchase and Sale Agreement dated as of May 1, 1996, between
Anchor and PKW and John R. McPherson.
10.21 Engagement Letter dated June 27, 1996, between Anchor and
Gerbsman Partners.
27.0 Financial Data Schedule
B. Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Anchor has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ANCHOR PACIFIC UNDERWRITERS, INC.
Date: August 7, 1996 /s/ James R. Dunathan
--------------------- -------------------------------------
James R. Dunathan
President and Chief Executive Officer
Date: August 7, 1996 /s/ Earl Wiklund
--------------------- -------------------------------------
Earl Wiklund
Senior Vice President and Chief
Financial Officer
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EXHIBIT 10.15a
<PAGE>
[LETTERHEAD]
June 10, 1996
Mr. Robert B. Dutcher, President
Dutcher Insurance Agency, Inc.
Post Office Box 4127
Stockton, California 95204
RE: AGREEMENT FOR PURCHASE AND SALE OF ASSETS ("AGREEMENT")
AND AMENDMENT DATED FEBRUARY 1, 1995
Dear Bob:
Section 8 of the Agreement, as Amended February 1, 1995, provides that Harden &
Company Insurance Services, Inc. ("Buyer"), will deliver to Dutcher Insurance
Agency, Inc. ("Seller") at the Closing, shares of common stock of Anchor Pacific
Underwriters, Inc. ("APU") worth $55,000. Section 3(a)(ii) of the Agreement, as
Amended February 1, 1995 provides the number of APU shares to be issued to
Seller shall be determined by dividing the average of the per share closing bid
price of APU common stock as reported by Nasdaq during the 30 days immediately
after such APU common stock begins trading on the Nasdaq system by $55,000 ("New
APU Stock Pricing Formula"). The same Section provides that the buyer shall
deliver to Seller a share certificate within 15 business days after the New APU
Stock Pricing Formula is calculated.
As discussed on June 3, 1996, the APU common stock has not begun trading on
Nasdaq. APU expects that ultimately its common stock will begin to trade on
Nasdaq; however, in consideration of the length of time that has elapsed since
entering into the Agreement, the Buyer and Seller have agreed to modify the APU
common stock Pricing Formula described in Section 3(a)(ii) of the Agreement, as
Amended on February 1, 1995 in the following manner:
Buyer and Seller have determined that the fair market value per
share of common stock as of June 3, 1996 to be $1.75. The number
of APU shares to be issued to Seller in satisfaction of Buyers
obligation under the Agreement, as Amended on February 1, 1995
shall be determined by dividing $55,000 by $1.75. Any fractional
shares will be paid by check to Seller in lieu of stock.
<PAGE>
Mr. Robert B. Dutcher, President
June 10, 1996
Page 2.
Buyer shall request its transfer agent, U.S. Stock Transfer,
to issue said certificate(s) for 31,428 shares of APU common
stock in the name of Robert B. Dutcher per Sellers instructions.
Very truly yours,
/s/ James R. Dunathan
- ------------------------------
James R. Dunathan
President and CEO
Anchor Pacific Underwriters, Inc.
The above modification to Section 3(a)(ii) of the Agreement and Amendment dated
February 1, 1995 is agreed to and accepted by:
Dutcher Insurance Agency, Inc.
By: /s/ Robert B. Dutcher
--------------------------
Robert B. Dutcher
President
<PAGE>
<PAGE>
Exhibit 10.19
<PAGE>
PURCHASE AND SALE AGREEMENT
This Agreement is made as of April 1, 1996, at Concord, California, by and
between Norman I. Robins ("Seller") and Anchor Pacific Underwriters, Inc., a
Delaware corporation ("Buyer").
RECITALS
A. Seller represents and warrants that he is the owner of a general
property, casualty, and Workers' Compensation insurance book of business at 2700
Ygnacio Valley Blvd., Walnut Creek, California.
B. Buyer desires to purchase from Seller and Seller desires to sell to
Buyer, on the terms and conditions of this Agreement, such book of business.
TERMS AND CONDITIONS
1. TRANSFER ASSETS. Subject to the terms and conditions set forth in this
Agreement, Seller agrees to sell, convey, transfer, assign, and deliver to
Buyer, and Buyer agrees to purchase from Seller the following described assets
(the "Assets"):
(a) Seller's customer lists, expiration files, customer account
records, including current copies of client policies, prior copies of client
policies, applications, quotations and claim/loss data that is currently
contained in the client's file, which assets are in accordance with the Schedule
of Clients shown in Exhibit "A" prepared by Seller and dated March, 1996.
(b) The goodwill of Seller relative to said assets.
(c) The historic or dead client files and records, including, but not
limited to, customer accounting records, and accounting records regarding
insurance companies; or copies thereof, if required.
(d) All trade secrets and confidential information of Seller.
2. CONSIDERATION FOR TRANSFER. The consideration for the transfer of the
Assets shall be payable as follows:
(a) Buyer shall pay to Seller within fifteen (15) days after the end
of each month for a period of 60 consecutive months, commencing with the first
full calendar month ending after the Closing Date (as hereinafter defined), a
sum equal to thirty
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<PAGE>
percent (30%) of the net commission revenue from the Schedule of Clients paid to
Buyer (the "Contingent Payments"). For purposes of this Paragraph 2, the term
"net commission revenue" is defined as gross commissions, including
endorsements, stipulated billings, monthly payments, and installments less
return commission from endorsements, stipulated billings, monthly payments,
installments, cancellation transactions and commission returns due to rebates or
premium rollbacks related in any manner to Proposition 103. "Net commission
revenues" do not include contingency commissions, service fees charged due to
late payment of premium and interest earned by Buyer on commission.
In the event all or any part of Anchor Pacific Underwriters, Inc. or
any of its subsidiaries should be sold, merged or reorganized, Buyer shall have
the right to pre-pay the Contingent Payments without penalty, based upon the
mutual agreement of the parties.
3. SELLER'S LIABILITY. It is expressly understood and agreed that Buyer
shall not be liable for any of the obligations or liabilities of Seller of any
kind and nature, and Seller hereby indemnifies Buyer and shall hold Buyer
harmless against any loss, cost, liability, claim or expense suffered or
incurred, directly or indirectly, as a result of the assertion against Buyer of
any obligation or liability of Seller.
4. ALLOCATION OF PURCHASE PRICE. The consideration for the transfer of the
Assets shall be allocated entirely to Seller's covenant not to compete. Both
parties agree to report this transaction for state and federal tax purposes in
accordance with this allocation of the purchase price.
5. EXCISE TAXES. Seller shall pay all sales and use taxes arising out of
the transfer of the Assets. Buyer shall not be responsible for any business,
occupation, withholding or similar tax, or any taxes of any kind related to any
period before the Closing Date.
6. REPRESENTATION AND WARRANTIES OF SELLER. In addition to the
representation and warranties contained in other paragraphs of this Agreement,
Seller hereby makes the following representations and warranties (which
representations and warranties shall survive the Closing regardless of what
investigations Buyer shall have made with respect thereto prior to the Closing),
each of which individual representation and warranty (i) is material and being
relied upon by Buyer, and (ii) is true in all respects as of the date hereof and
shall be true in all respects on the Closing Date:
6.1 Seller is the sole owner of (and Buyer will acquire hereunder) the
entire right, title and interest in and to the Assets.
6.2 The Assets are free and clear of all liens, encumbrances, claims,
rights, demands and restrictions of any kind or character.
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<PAGE>
6.3 Seller is not involved or aware of any pending or threatened
litigation which does or will affect the Assets.
6.4 There are no actions or proceedings pending or threatened against
Seller before any court or administrative agency in any way connected with the
Assets.
6.5 All laws, ordinances, rules and regulations of any government or
any agency, body or subdivision thereof bearing on the Assets have been complied
with by Seller.
6.6 Seller has received no notice or knowledge that any governmental
authority or any employee or agent thereof considers the operation, use or
ownership of Seller's insurance business to have violated any ordinance, rule,
law, regulation or order of any government or any agency, body or subdivision
thereof or that any investigation has been commenced or is contemplated
respecting such possible violation.
6.7 Neither this Agreement, nor anything provided to be done
hereunder, including but not limited to the transfer, assignment and sale of the
Assets violates or shall violate any contract, agreement or instrument to which
Seller is a party.
7. CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE. The obligations of Buyer
to purchase the Assets under this Agreement are subject to the satisfaction, at
or before the Closing of all the conditions set out below in this Paragraph 7.
Buyer may waive any or all of these conditions in whole or in part without prior
notice; provided, however, that no such waiver of a condition shall constitute a
waiver by Buyer of any of its other rights or remedies, at law or in equity, if
Seller shall be in default of any of its representation, warranties, or
covenants under this Agreement.
7.1 The due performance of Seller of each and every undertaking and
agreement to be performed by it hereunder, and the truth of each representation
and warranty made in this Agreement by Seller at the time as of which the same
is made and as of the Closing Date.
7.2 No action, suit, or proceeding before any court or any
governmental body or authority, pertaining to the transaction contemplated by
this Agreement or to its consummation, shall have been instituted or threatened
on or before the Closing Date.
7.3 R.C. Fischer Insurance shall have given its approval to the
transfer of the book of business from Seller to Buyer.
3
<PAGE>
8. PAYABLES AND RECEIVABLES.
8.1 Seller shall own and be responsible for all insurance carrier and
client payables and receivables on policy and binder transactions that occur
prior to the Closing Date on policies and binders with an effective date prior
to the Closing Date and shall save, defend and hold Buyer harmless with respect
thereto. Buyer shall be responsible for and own all insurance carrier and
client payables and receivables on policy and binder transactions that occur on
and after the Closing Date on policies and binders with an effective date prior
to the Closing Date and on all policy and binder transactions on policies with
an effective date as of the Closing Date and thereafter and shall save, defend
and hold Seller harmless with respect thereto. All moneys received by or
credited to Seller prior to and after the Closing Date that is the property of
Buyer shall be paid to Buyer at the earlier of the Closing or the tenth (10th)
of the month following that month that it is received by Seller.
8.2 Money paid to Buyer or Seller shall be accompanied by adequate
documentation to permit the parties to identify specific receivables and
payments by client policy.
8.3 Annual anniversaries on policies written for a period in excess of
one (1) year shall be deemed to have been annually renewed and treated as such.
8.4 All endorsement transactions, stipulated billings, monthly
payments, carrier installments, policy cancellations and interim and final
audits that occur or are effective on and after the Closing Date on policies
with an effective date prior to the Closing Date are the property and the
responsibility of Buyer.
9. SELLER'S OBLIGATIONS BEFORE CLOSING.
9.1 Seller will carry on its business and activities diligently and in
substantially the same manner as they previously have been carried out and shall
not make or institute any unusual or novel methods of purchase, sale, lease,
management, accounting or operation that vary materially from those methods used
by Seller as of the date of this Agreement.
10. CLOSING. The transfer of the Assets by Seller to Buyer (the "Closing")
shall take place at Buyer's office located at Concord, California on April 1,
1996 (the "Closing Date").
11. SELLER'S OBLIGATIONS AT CLOSING. At the Closing, Seller shall deliver
or cause to be delivered to Buyer a bill of sale of the Assets.
Simultaneously with the consummation of the transfer, Seller will put
4
<PAGE>
Buyer into full possession and enjoyment of the Assets to be conveyed and
transferred by this Agreement.
Seller, at any time before or after the Closing Date, will execute,
acknowledge, and deliver any further assignments, conveyances, and other
assurances, documents, and instruments of transfer, reasonably requested by
Buyer and will take any other action consistent with the terms of this Agreement
that may reasonably be requested by the Buyer for the purpose of assigning,
transferring, granting, conveying, and confirming to Buyer, or reducing to
possession, any or all property and assets to be conveyed and transferred by
this Agreement. If requested by Buyer, Seller further agrees to prosecute or
otherwise enforce in its own name for the benefit of Buyer any claims, rights,
or benefits that are transferred to Buyer by this Agreement and that require
prosecution or enforcement in Seller's name. Any prosecution or enforcement of
claims, rights, or benefits under this paragraph shall be solely at Buyer's
expense, unless the prosecution or enforcement is made necessary by a breach of
this Agreement by Seller.
12. BUYER'S OBLIGATIONS AFTER CLOSING.
12.1 Seller may transfer his property and casualty insurance license
to Buyer's agency. Buyer shall pay the costs related to such transfer.
12.2 Buyer shall at Buyer's cost provide Seller with Errors &
Omissions insurance protection under Buyer's policy.
13. SELLER'S OBLIGATIONS AFTER CLOSING.
13.1 Seller shall be available to work with Buyer in the servicing of
the book of business transferred under this Agreement on an "as needed" basis,
provided that such activity is held to a minimum amount of time and does not
interfere with Seller's other professional or career commitments.
13.2 Seller shall remain responsible for the collection of all
outstanding account receivables as of the Closing Date for all amounts due on
policies with transaction dates as of the Closing Date, or earlier.
13.3 Seller's Competition. Seller agrees that he will not at any time
within the five-year period, immediately following the Closing Date, directly or
indirectly engage in, or have any interest in any person, firm, corporation, or
business (whether as an employee, officer, director, agent, security holder,
creditor, consultant, or otherwise) that engages in any activity in any of the
counties of Alameda, Contra Costa, or San Francisco, California, which activity
is the same as, similar to, or competitive with any property and casualty
business now engaged in by Seller in any of these counties so
5
<PAGE>
long as Buyer (or any successor) shall engage in this activity in such county.
The parties intend that the covenant contained in the preceding
portion of this paragraph shall be construed as a series of separate covenants,
one for each county specified. Except for geographic coverage, each such
separate covenant shall be deemed identical in terms to the covenant contained
in the preceding paragraph. If, in any judicial proceeding, a court shall
refuse to enforce any of the separate covenants deemed included in this
paragraph, then this unenforceable covenant shall be deemed eliminated from
these provisions for the purpose of those proceedings to the extent necessary to
permit the remaining separate covenants to be enforced.
Seller further agrees not to divulge, communicate, use to the
detriment of Buyer or for the benefit of any other person or persons, or misuse
in any way any confidential information or trade secrets of Seller, including
personnel information, customer lists, or other technical data. Seller
acknowledges and agrees that any information or data she has acquired on any of
these matters or items was received in confidence.
13.4 Should Seller, following expiration of Seller's covenant not to
compete contained in paragraph 13.3 above, desire to directly re-enter the
property and casualty insurance business, Seller shall give Buyer the first
opportunity to negotiate an employment agreement with Seller.
14. INDEMNIFICATION BY SELLER. Seller agrees to indemnify and hold Buyer
harmless from and against any claim, loss, damage or expense, including any
reasonable attorneys' fees (including attorneys' fees on appeal), asserted
against or suffered by Buyer resulting from:
(a) Any breach by Seller of this Agreement;
(b) Any liability or obligation of Seller which Buyer is not required
to assume hereunder;
(c) The inaccuracy or breach of any of the
representations, warranties, or covenants made by Seller herein;
(d) Any other act or omission to act of Seller, its agents, employees
or contractors, the consequences of which Buyer has not expressly assumed
hereunder.
15. COST.
15.1 FINDER'S OR BROKER'S FEES. Each party represents that it has
dealt with no broker or finder in connection with any transaction contemplated
by this agreement,
6
<PAGE>
except Buyer's dealings with Jack T. Hunn, Insurance Marketing Associates; and,
as far as it knows, no broker or other person is entitled to any commission or
finder's fee in connection with any of these transctions, except the fee to be
paid to Jack T. Hunn, Insurance Marketing Associates by Buyer. Seller and Buyer
each agree to indemnify and hold harmless one another against any loss,
liability, damage, cost, claim, or expense incurred by reason of any brokerage,
commission, or finder's fee alleged to be payable because of any act, omission,
or statement of the indemnifying party.
15.2 EXPENSES. Each of the parties shall pay all costs and expenses
incurred or to be incurred by it in negotiating and preparing this Agreement and
in closing and carrying out the transactions contemplated by this Agreement.
16. MISCELLANEOUS PROVISIONS
16.1 The subject headings of the paragraphs and subparagraphs of this
Agreement are included for purposes of convenience only, and shall not affect
the construction or interpretation of any of its provisions.
16.2 This Agreement constitutes the entire agreement between the
parties pertaining to the subject matter contained in it and supersedes all
prior and contemporaneous agreements, representations, and understandings of the
parties. No supplement, modification, or amendment of this Agreement shall be
binding unless executed in writing by all the parties. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by the
party making the waiver.
16.3 This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16.4 This Agreement shall be binding on and shall inure to the benefit
of the parties to it and their respective heirs, legal representatives,
successors, and assigns. Buyer shall have the right to assign this Agreement
and all of Buyer's rights under it to a corporation or partnership in which
Buyer has an interest.
16.5 If any legal action or any arbitration or other proceeding is
brought for the enforcement of this Agreement or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions of
this Agreement, the successful or prevailing party or parties shall be entitled
to recover reasonable attorneys' fees and other cost incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.
7
<PAGE>
16.6 All representations, warranties, covenants, and agreements of the
parties contained in this Agreement, or in any instrument, certificate, or other
writing provided for in it, shall survive the Closing.
16.7 All notices, requests, demands, and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
on the date of service if served personally on the party to whom notice is to be
given, or on the third day after mailing if mailed to the party to whom notice
is to be given, by first class mail, registered or certified, postage prepaid,
and properly addressed as follows:
To Seller at: Norman I. Robins
2700 Ygnacio Valley Blvd.
Walnut Creek, CA 94589-3462
To Buyer at: J. R. Dunathan
Anchor Pacific Underwriters, Inc.
1800 Sutter Street, Suite 400
Concord, California 94520
Any party may change its address for purposes of this paragraph by giving the
other party written notice of the new address in the manner set forth above.
16.8 This Agreement shall be construed in accordance with, and
governed by, the laws of the State of California.
Executed the day and year first above written:
SELLER:
/s/ Norman I. Robins
-------------------------------
Norman I. Robins
BUYER:
Anchor Pacific Underwriters, Inc.,
By: /s/ James R. Dunathan
---------------------------
James R. Dunathan
President
8
<PAGE>
Exhibit A
B 0 0 K - 0 F - B U S I N E S S R E P 0 R T PAGE 1
<TABLE>
<CAPTION>
Eff. Exp. --------ANNUALIZED-------
Cust # Customer Type Date Date Status P/C Prl Pr2 Pr3 BCo ICo Premium Premium Com-% Agency Comm
- ------ -------------------------------- ---- ------- --------- ------ --- --- --- --- --- --- ------- ------- ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
* AADAC-1 A-Ada Construction & Window Co
AADAC-l A-Ada Construction & W CA-S 08/22/95 08/22/96 REN C NIR CNA CNA 1207.00 1207.00 15.00% 181.05
AADAC-l A-Ada Construction & W PCKG 08/22/95 08/22/96 REN C NIR CNA CNA 6099.00 6099.00 15.00% 914.85
Total AADAC-l (2) 7306.00 7306.00 1095.90
Average 3653.00 3653.00 15.00 547.95
* ADVAN-1 Advanced Materials Engineering
ADVAN-1 Advanced Materials Eng GL-S 09/25/95 09/25/96 REW C NIR AES AEQ 8649.00 8649.00 15.00% 1297.35
ADVAN-1 Advanced Materials Eng PROP 09/25/95 09/25/96 REN C NIR ASI ASI 3651.00 3651.00 20.00% 730.20
ADVAN-1 Advanced Materials Eng WC-S 02/22/96 02/22/97 REW C NIR REP REP 7985.00 7985.00 10.00% 798.50
Total ADVAN-1 (3) 20285.00 20285.00 2826.05
Average 6761.67 6761.67 13.93 942.02
* ADVAN-2 Advanced Radiologic Imaging
ADVAN-2 Advanced Radiologic Im PROP 12/24/95 12/24/96 REN C NIR DHI GIC 1629.00 1629.00 24.00% 390.96
Total ADVAN-2 (1) 1629.00 1629.00 390.96
* ALEXS-1 Alex's Automotive Repair Ctr.
ALEXS-1 Alex's Automotive Repa FS-N 10/02/95 10/02/98 REN C NIR AMW AMW 108.00 36.00 20.OO% 7.20
Total ALEXS-1 (1) 108.00 36.00 7.20
* ARCHS-1 Arch Street Studio
ARCHS-1 Arch Street Studio PCKG 11/04/95 11/04/96 REN C NIR ASI ASI 1373.00 1373.00 20.00% 274.60
Total ARCHS-1 (1) 1373.00 1373.00 274.60
* BANGK-1 Bang-Knudsen California, Inc.
BANGK-l Bang-Knudsen Californi SCAP 04/01/96 04/01/97 NEW C NIR HAR HAR 500.00 500.00 15.00% 75.00
Total BANGK-1 (1) 500.00 500.00 75.00
* BAYAR-3 Bay Area Records & Tapes
BAYAR-3 Bay Area Records & Tap WC-S O5/30/95 O5/30/96 REN C NIR REP REP 2695.00 2695.00 10.00% 269.50
Total BAYAR-3 (1) 2695.00 2695.00 269.50
* BERKE-1 Berkeley Blue Print Co.
BERKE-1 Berkeley Blue Print Co FS-N 07/01/93 07/01/96 REN C NIR AMW AMW 138.00 46.00 20.00% 9.20
BERKE-1 Berkeley Blue Print Co PCKG 08/01/95 08/01/96 REN C NIR ATL ATL12307.00 12307.00 17.50% 2153.73
Total BERKE-1 (2) 12445.00 12353.00 2162.93
Average 6222.50 6176.50 17.51 1081.47
* BERKE-2 Berkeley Design Shop
BERKE-2 Berkeley Design Shop PCKG 04/01/96 04/01/97 REW C NIR ASI ASI 9045.00 9045.00 15.00% 1356.75
BERKE-2 Berkeley Design Shop WC-S 10/01/95 10/01/96 REN C NIR SUP SUP 4655.00 4655.00 10.00% 465.50
Total BERKE-2 (2) 13700.00 13700.00 1822.25
Average 6850.00 6850.00 13.30 911.13
</TABLE>
<PAGE>
B 0 0 K - 0 F - B U S I N E S S R E P 0 R T PAGE 2
- ------------------------------- -----------
<TABLE>
<CAPTION>
Eff. Exp. -------ANNUALIZED-------
Cust # Customer Type Date Date Status P/C Prl Pr2 Pr3 BCo ICo Premium Premium Com-% Agency Comm
- ------- ------------------------------- ---- ------- ---------- ------ --- --- --- --- --- --- ------- ------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
* BODYT-1 Body Time
BODYT-1 Body Time FS-N 08/09/94 08/09/97 REN C NIR AMW AMW 169.00 56.33 25.00% 14.08
Total BODYT-1 (1) 169.00 56.33 14.08
* BREWE-1 Brewer Landscaping
BREWE-1 Brewer Landscaping GL-S 10/26/95 10/26/96 REN C NIR ASI ASI 933.00 933.00 20.00% 186.60
BREWE-1 Brewer Landscaping BOND 11/16/94 11/16/97 NEW C NIR OLD OLD 176.00 58.67 25.00% 14.67
Total BREWE-1 (2) 1109.00 991.67 201.27
Average 554.50 495.83 20.30 100.64
* CAGAR-1 California Gardens
CAGAR-1 California Gardens GL-S 05/26/95 05/26/96 REN C NIR ASI ASI 1458.00 1458.00 20.00% 291.60
CAGAR-1 California Gardens CA-S 01/17/96 01/17/97 REN C NIR NBK NBK 1493.00 1493.00 12.5O% 186.63
Total CAGAR-1 (2) 2951.00 2951.00 478.23
Average 1475.50 1475.50 16.21 239.12
* COITF-1 Coit Financial Group Et Al
COITF-l Coit Financial Group E SCAP 07/11/95 07/11/96 REN C NIR CNA CNA 853.00 853.00 20.00% 170.60
Total COITF-1 (1) 853.00 853.00 170.60
* CONTE-1 Contemporary Pensions, Inc.
CONTE-1 Contemporary Pensions, BOND 12/11/95 12/11/98 REN C NIR AMW AMW 93.00 31.00 20.00% 6.20
Total CONTE-1 (1) 93.00 31.00 6.20
* CONWA-1 Conway Engineering, Inc.
CONWA-1 Conway Engineering, In PCKG 01/08/96 01/08/97 REN C NIR ATL ATL 3037.00 3037.00 17.50% 531.48
CONWA-1 Conway Engineering, In WC-S 05/16/95 05/16/96 REN C NIR REP REP 1790.00 1790.00 1O.00% 179.00
Total CONWA-1 (2) 4827.00 4827.00 710.48
Average 2413.50 2413.50 14.72 355.24
* DOSSTE1 Terry Doss
DOSSTE1 Terry Doss PPKG 01/26/96 01/26/97 REN P NIR CNA CNA 3945.00 3945.00 12.00% 473.40
Total DOSSTE1 (1) 3945.00 3945.00 473.40
* EBTEL-1 Ebtel Federal Credit Union
EBTEL-1 Ebtel Federal Credit U GHEL 03/28/95 03/28/96 REN C NIR HAR HAR 350.00 350.00 15.00% 52.5O
Total EBTEL-1 (1) 350.00 350.00 52.50
* FAHLR01 Robert Fahle
FAHLR01 Robert Fahle PUMB 09/16/9S 09/16/96 REN P NIR MGI GSN 328.00 328.00 12.50% 41.00
FAHLR01 Robert Fahle HOME 09/20/95 09/20/96 REN P NIR CIG CIG 1041.00 1041.00 20.00% 208.20
Total FAHLROI (2) 1369.00 1369.00 249.20
Average 684.50 684.50 18.20 124.60
* FAMOU-1 Famous Foam, Inc.
FAMOU-1 Famous Foam, Inc. PCKG 09/15/95 09/15/96 REN C NIR ASI ASI 1670.00 1670.00 15.00% 250.50
</TABLE>
<PAGE>
B 0 0 K - 0 F - B U S I N E S S R E P 0 R T PAGE 3
............................... ...........
<TABLE>
<CAPTION>
Eff. Exp. -------ANNUALIZED--------
Cust # Customer Type Date Date Status P/C Prl Pr2 Pr3 Bco ICo Premium Premium Com-% Agency Comm
- ------ -------------------------------- ---- ------- ---------- ------ --- --- --- --- --- --- ------- ------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total FAMOU-1 (1) 1670.00 1670.00 250.50
* GEMME-1 Gemmer Asset Management
GEMME-1 Gemmer Asset Managemen SCAP 02/07/96 02/07/97 REN C NIR CNA CNA 500.00 500.00 20.00% 100.00
Total GEMME-1 (1) 500.00 500.00 100.00
* HARRI-3 Larry L. Harrison
HARRI-3 Larry L. Harrison SCAP 06/29/95 06/29/96 NEW C NIR CNA CNA 500.00 500.00 20.00% 100.00
Total HARRI-3 (1) 500.00 500.00 100.00
* KAHNR01 Roy M. Kahn
KAHNR01 Roy M. Kahn HOME 06/04/95 06/04/96 REN P NIR FIR FIR 3212.00 3212.00 20.00% 642.40
Total KAHNR01 (1) 3212.00 32l2.00 642.40
* MARIN-1 Marin Urgent Care
MARIN-1 Marin Urgent Care WC-S 07/01/95 07/01/96 REN C NIR CCI CCI 1470.00 1470.00 10.00% 147.00
Total MARIN-1 (1) 1470.00 1470.00 147.00
* MATSO-2 David F. Matson
MATSO-2 David F. Matson SCAP 08/11/95 08/11/96 REN C NIR HAR HAR 500.00 500.00 15.00% 75.00
Total MATSO-2 (1) 500.00 500.00 75.00
* MERGE-1 Merge Technologies Group, Inc.
MERGE-1 Merge Technologies Gro WC-S ll/2l/95 ll/2l/96 REN C NIR REP REP 1790.00 1790.00 10.00% 179.00
MERGE-1 Merge Technologies Gro PCKG 04/15/95 04/15/96 NEW C NIR HAR HAR 4411.00 4411.00 18.00 793.98
Total MERGE-1 (2) 6201.00 6201.00 972.98
Average 3100.50 3100.50 15.69 486.49
* MESOHE1 Hernan Mesones
MESOHEl Hernan Mesones AUTO 01/31/96 01/31/97 REN P NIR CNA CNA 1189.00 1189.00 13.00% 154.57
MESOHEl Hernan Mesones CFPP 01/31/96 01/31/97 RRW P NIR CFP CFP 1528.00 1528.00 10.00% 152.80
MESOHE1_Hernan Mesones HOME 01/31/96 01/31/97 RRW P NIR DHI FDC 813.00 813.00 15.00% 121.95
Total MESOHEl (3) 3530.00 3530.00 429.32
Average 1176.67 1176.67 12.16 143.11
* MWMAS-1 MWM Associates
MWMAS-l MWM Associates PCKG 03/05/96 03/05/97 REN C NIR DHI GEN 1840.00 1840.00 24.00% 441.60
Total MWMAS-1 (1) 1840.00 1840.00 441.60
* PROFE-1 Professional Forms & Systems
PROFE-1 Professional Forms & S PCKG 06/01/95 06/01/96 REN C NIR ASI ASI 810.00 810.00 20.00% 162.00
Total PROFE-1 (1) 810.00 810.00 162.00
*SHORLE1 Lenci H. Short
SHORLE1 Lenci H. Short FIRE 08/30/95 08/30/96 REN P NIR MCI SUT 1065.00 1065.00 10.00% 106.5O
</TABLE>
<PAGE>
B 0 0 K - 0 F - B U S I N E S S R E P 0 R T PAGE 4
............................... ...........
<TABLE>
<CAPTION>
Eff. Exp. ------ANNUALIZED--------
Cust # Customer Type Date Date Status P/C Prl Pr2 Pr3 BCo ICo Premium Premium Com-% Agency Comm
- ------- -------------------------------- ---- -------- --------- ------ --- --- --- --- --- --- ------- ------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHORLE1 Lenci H. Short HOME 06/13/95 06/13/96 REW P NIR DHI FDC 365.00 365.00 20.00% 73.00
SHORLE1 Lenci H. Short CFPP 06/13/95 06/13/96 REW P NIR CFP CFP 356.00 356.00 15.00% 53.40
Total SHORLE1 (3) 1786.00 1786.00 232.90
Average 595.33 595.33 13.04 77.63
* SH0RMAl Madge Short
SHORMAl Madge Short HOME 04/25/95 04/25/96 REN P NIR ATL ATL 1372.00 1372.00 20.00% 274.40
Total SHORMA1 (1) 1372.00 1372.00 274.40
* SIMPS-1 Simpson Manufacturing Co. Inc.
SIMPS-1 Simpson Manufacturing GHEL 11/04/95 11/04/96 REN C NIR HAR HAR 3645.50 3645.50 15.00% 546.83
Total SIMPS-1 (1) 3645.50 3645.50 546.83
* TAYLO-1 Patrick E. Taylor, MD
TAYLO-1 Patrick E. Taylor, MD WC-S 10/01/95 10/01/96 REN C NIR FIR FIR 1519.00 1519.00 10.00% 151.90
Total TAYLO-1 (1) 1519.00 1519.00 151.90
* THINF-1 Thin Film Analysis, Inc.
THINF-1 Thin Film Analysis, In PROP 05/24/95 05/24/96 NEW C NIR ASI ASI 562.00 562.00 20.00% 112.40
Total THINF-1 (1) 562.00 562.00 112.40
* WARNE-1 Warner Mortgage, Inc.
WARNE-1 Warner Mortgage, Inc. WC-S 08/15/95 08/15/96 NEW C NIR HAR HAR 1000.00 1000.00 13.00% 130.00
WARNE-1 Warner Mortgage, Inc. PCKG 08/15/95 08/15/96 NEW C NIR HAR HAR 847.00 847.00 18.00% 152.46
Total WARNE-1 (2) 1847.00 1847.00 282.46
Average 923.50 923.50 15.29 141.23
* WEINST1 Stuart Weinstein
WEINST1 Stuart Weinstein HOME 11/09/95 11/09/96 NEW P NIR JEN CGN 1050.00 1050.00 10.00% 105.00
Total WEINST1 (1) lO50.00 1050.00 105.00
* WILKRO1 Robert D. Wilkinson II
WILKROl Robert D. Wilkinson II AUTO 12/12/95 06/12/96 REN P NIR FIR FIR 597.00 1194.00 15.00% 179.10
Total WILKRO1 (1) 597.00 1194.00 179.10
* WRIGH-1 Norman Wright Co of N. CA
WRIGH-1 Norman Wright Co of N. PCKG 03/13/96 03/13/97 REN C NIR ASI ASI 4028.00 4028.00 15.00% 604.20
WRIGH-1 Norman Wright Co of N. WC-S 01/01/96 01/01/97 REN C NIR REP REP 1805.00 1805.00 10.00% 180.50
Total WRIGH-1 (2) 5833.00 5833.00 784.70
Average 2916.50 2916.50 13.45 392.35
Total business 114151.50114292.50 17270.84
Average 2153.80 2156.46 15.11 325.86
Total risks 53 Total policies 53
Total customers 37
Average policies per customer 1.43
</TABLE>
<PAGE>
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS.
NORMAN I. ROBINS, an individual ("Seller") for good and valuable
consideration, receipt of which is hereby acknowledged, and pursuant to a
certain Purchase and Sale Agreement dated April 1, 1996, hereby sells, assigns,
transfers, conveys, and delivers to ANCHOR PACIFIC UNDERWRITERS, INC.,
("Buyer"), and its successors and assigns, all right, title, and interest in and
to all of the following described assets:
a. Seller's customer lists, expiration files, customer account records,
including current copies of client policies, or copies of client policies,
applications, quotations and client files, which assets are in accordance with
the Schedule of Clients described in Exhibit A attached hereto and incorporated
herein by this reference.
b. The goodwill of Seller relative to said assets.
C. All trade secrets and confidential information of Seller.
TO HAVE AND TO HOLD the same unto the Buyer and its successors and assigns,
forever.
The Seller, for itself and its successors and assigns, hereby covenants
with the Buyer, its successors and assigns, that the Seller is the owner
absolutely of said property; that the same are free and clear of and from all
encumbrances; that it has good right to sell and to assign the same unto the
Buyer as aforesaid and will warrant and defend the same unto t e Buyer against
the lawful claims and demands of all persons.
The Seller hereby covenants and agrees to execute and deliver or cause to
be executed and delivered, and to do or to make, or to cause to be done or made,
upon receipt of the Buyer, any and all agreements, instruments, papers, acts, or
things, supplemental, confirmatory, or otherwise, as may reasonably be required
by the Buyer for the purpose of or in connection with perfecting and completing
the sale hereunder of the assets of the Seller which are hereby sold and
transferred.
IN WITNESS WHEREOF, the Seller has executed this Bill of Sale on 4/1/96,
1996.
/s/ Norman I. Robins
-----------------------------
NORMAN I. ROBINS
<PAGE>
Exhibit 10.20
<PAGE>
PURCHASE AND SALE AGREEMENT
This Agreement is made as of May 1, 1996, at Concord, California, by and
between John R. McPherson ("Seller") and Anchor Pacific Underwriters, Inc., a
Delaware corporation, and Putnam, Knudsen & Wieking, Inc., a California
corporation ("Buyer").
RECITALS
A. Seller represents and warrants that he is the owner of a general
property, casualty, and workers' compensation insurance book of business at
California Coastal Insurance, San Ramon, California.
B. Buyer desires to purchase from Seller and Seller desires to sell to
Buyer, on the terms and conditions of this Agreement, such book of business.
TERMS AND CONDITIONS
1. TRANSFER ASSETS. Subject to the terms and conditions set forth in this
Agreement, Seller agrees to sell, convey, transfer, assign, and deliver to
Buyer, and Buyer agrees to purchase from Seller the following described assets
(the "Assets"):
(a) Seller's customer lists, expiration files, customer account
records, including current copies of client policies, prior copies of client
policies, applications, quotations and claim/loss data that is currently
contained in the client's file, which assets are in accordance with the Schedule
of Clients shown in Exhibit "A" prepared by Seller and dated March, 1996.
(b) The goodwill of Seller relative to said assets.
(c) The historic or dead client files and records, including, but not
limited to customer accounting records, and accounting records regarding
insurance companies; or copies thereof, if required.
(d) All trade secrets and confidential information of Seller.
2. CONSIDERATION FOR TRANSFER. The consideration for the transfer of the
Assets shall be payable as follows:
(a) Buyer shall pay to Seller within fifteen (15) days after the end
of each month for a period of 48 consecutive months, commencing with the first
full calendar
1
<PAGE>
month ending after the Closing Date (as hereinafter defined), a sum equal to
twenty percent (20%) of the net commission revenue from the Schedule of Clients
paid to Buyer (the "Contingent Payments"). For purposes of this Paragraph 2,
the term "net commission revenue" is defined as gross commissions, including
endorsements, stipulated billings, monthly payments, and installments less
return commission from endorsements, stipulated billings, monthly payments,
installments, cancellation transactions and commission returns due to rebates or
premium rollbacks related in any manner to Proposition 103. "Net commission
revenues" do not include contingency commissions, service fees charged due to
late payment of premium and interest earned by Buyer on commission.
In the event all or any part of Anchor Pacific Underwriters, Inc. or
any of its subsidiaries should be sold, merged or reorganized, Buyer shall have
the right to pre-pay the Contingent Payments without penalty, based upon the
mutual agreement of the parties.
3. SELLER'S LIABILITY. It is expressly understood and agreed that Buyer
shall not be liable for any of the obligations or liabilities of Seller of any
kind and nature, and Seller hereby indemnifies Buyer and shall hold Buyer
harmless against any loss, cost, liability, claim or expense suffered or
incurred, directly or indirectly, as a result of the assertion against Buyer of
any obligation or liability of Seller.
4. ALLOCATION OF PURCHASE PRICE. The consideration for the transfer of the
Assets shall be allocated entirely to Seller's covenant not to compete. Both
parties agree to report this transaction for state and federal tax purposes in
accordance with this allocation of the purchase price.
5. EXCISE TAXES. Seller shall pay all sales and use taxes arising out of
the transfer of the Assets. Buyer shall not be responsible for any business,
occupation, withholding or similar tax, or any taxes of any kind related to any
period before the Closing Date.
6. REPRESENTATION AND WARRANTIES OF SELLER. In addition to the
representation and warranties contained in other paragraphs of this Agreement,
Seller hereby makes the following representations and warranties (which
representations and warranties shall survive the Closing regardless of what
investigations Buyer shall have made with respect thereto prior to the Closing),
each of which individual representation and warranty (i) is material and being
relied upon by Buyer, and (ii) is true in all respects as of the date hereof and
shall be true in all respects on the Closing Date:
6.1 Seller is the sole owner of (and Buyer will acquire hereunder) the
entire right, title and interest in and to the Assets.
6.2 The Assets are free and clear of all liens, encumbrances, claims,
rights,
2
<PAGE>
demands and restrictions of any kind or character.
6.3 Seller is not involved or aware of any pending or threatened
litigation which does or will affect the Assets.
6.4 There are no actions or proceedings pending or threatened against
Seller before any court or administrative agency in any way connected with the
Assets.
6.5 All laws, ordinances, rules and regulations of any government or
any agency, body or subdivision thereof bearing on the Assets have been complied
with by Seller.
6.6 Seller has received no notice or knowledge that any governmental
authority or any employee or agent thereof considers the operation, use or
ownership of Seller's insurance business to have violated any ordinance, rule,
law, regulation or order of any government or any agency, body or subdivision
thereof or that any investigation has been commenced or is contemplated
respecting such possible violation.
6.7 Neither this Agreement, nor anything provided to be done
hereunder, including but not limited to the transfer, assignment and sale of the
Assets violates or shall violate any contract, agreement or instrument to which
Seller is a party.
7. CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE. The obligations of Buyer
to purchase the Assets under this Agreement are subject to the satisfaction, at
or before the Closing of all the conditions set out below in this Paragraph 7.
Buyer may waive any or all of these conditions in whole or in part without prior
notice; provided, however, that no such waiver of a condition shall constitute a
waiver by Buyer of any of its other rights or remedies, at law or in equity, if
Seller shall be in default of any of its representation, warranties, or
covenants under this Agreement.
7.1 The due performance of Seller of each and every undertaking and
agreement to be performed by it hereunder, and the truth of each representation
and warranty made in this Agreement by Seller at the time as of which the same
is made and as of the Closing Date.
7.2 No action, suit, or proceeding before any court or any
governmental body or authority, pertaining to the transaction contemplated by
this Agreement or to its consummation, shall have been instituted or threatened
on or before the Closing Date.
7.3 California Coastal Insurance shall have given its approval to the
transfer of the book of business from Seller to Buyer.
3
<PAGE>
8. PAYABLES AND RECEIVABLES.
8.1 Seller or current servicing broker shall own and be responsible
for all insurance carrier and client payables and receivables on policy and
binder transactions that occur prior to the Closing Date on policies and binders
with an effective date prior to the Closing Date and shall save, defend and hold
Buyer harmless with respect thereto. Buyer shall be responsible for and own all
insurance carrier and client payables and receivables on policy and binder
transactions that occur on and after the Closing Date on policies and binders
with an effective date prior to the Closing Date and on all policy and binder
transactions on policies with an effective date as of the Closing Date and
thereafter and shall save, defend and hold Seller harmless with respect thereto.
All moneys received by or credited to Seller prior to and after the Closing Date
that is the property of Buyer shall be paid to Buyer at the earlier of the
Closing or the tenth (10th) of the month following that month that it is
received by Seller.
8.2 Money paid to Buyer or Seller shall be accompanied by adequate
documentation to permit the parties to identify specific receivables and
payments by client policy.
8.3 Annual anniversaries on policies written for a period in excess of
one (1) year shall be deemed to have been annually renewed and treated as such.
8.4 All endorsement transactions, stipulated billings, monthly
payments, carrier installments, policy cancellations and interim and final
audits that occur or are effective on and after the Closing Date on policies
with an effective date prior to the Closing Date are the property and the
responsibility of Buyer.
9. SELLER'S OBLIGATIONS BEFORE CLOSING.
9.1 Seller will carry on its business and activities diligently and in
substantially the same manner as they previously have been carried out and shall
not make or institute any unusual or novel methods of purchase, sale, lease,
management, accounting or operation that vary materially from those methods used
by Seller as of the date of this Agreement.
10. CLOSING. The transfer of the Assets by Seller to Buyer (the
"Closing") shall take place at Buyer's office located at Concord, California
on May 1, 1996 (the "Closing Date").
11. SELLER'S OBLIGATIONS AT CLOSING. At the Closing, Seller shall deliver
or cause to be delivered to Buyer a bill of sale of the Assets in the form
attached as Exhibit "B".
4
<PAGE>
Simultaneously with the consummation of the transfer, Seller will put
Buyer into full possession and enjoyment of the Assets to be conveyed and
transferred by this Agreement.
Seller or current servicing broker, at any time before or after the
Closing Date, will execute, acknowledge, and deliver any further assignments,
conveyances, and other assurances, documents, and instruments of transfer,
reasonably requested by Buyer and will take any other action consistent with the
terms of this Agreement that may reasonably be requested by the Buyer for the
purpose of assigning, transferring, granting, conveying, and confirming to
Buyer, or reducing to possession, any or all property and assets to be conveyed
and transferred by this Agreement. If requested by Buyer, Seller further agrees
to prosecute or otherwise enforce in its own name for the benefit of Buyer any
claims, rights, or benefits that are transferred to Buyer by this Agreement and
that require prosecution or enforcement in Seller's name. Any prosecution or
enforcement of claims, rights, or benefits under this paragraph shall be solely
at Buyer's expense, unless the prosecution or enforcement is made necessary by a
breach of this Agreement by Seller.
12. BUYER'S OBLIGATIONS AFTER CLOSING.
12.1 Seller may transfer his insurance licenses to Buyer's agency.
Buyer shall pay the costs related to such transfer.
13. SELLER'S OBLIGATIONS AFTER CLOSING.
13.1 Seller shall be available to work with Buyer in the servicing of
the book of business transferred under this Agreement on an "as needed" basis,
provided that such activity is held to a minimum amount of time and does not
interfere with Seller's other professional or career commitments.
13.2 Seller shall remain responsible for the collection of all
outstanding account receivables as of the Closing Date for all amounts due on
policies with transaction dates as of the Closing Date, or earlier.
13.3 SELLER'S COMPETITION. Seller agrees that he will not at any time
within the four-year period, immediately following the Closing Date, directly or
indirectly engage in, or have any interest in any person, firm, corporation, or
business (whether as an employee, officer, director, agent, security holder,
creditor, consultant, or otherwise) that engages in any activity in any of the
counties of Alameda or Contra Costa, which activity is the same as, similar to,
or competitive with any activity now engaged in by Seller in any of these
counties so long as Buyer (or any successor) shall engage in this activity in
such county.
5
<PAGE>
The parties intend that the covenant contained in the preceding
portion of this paragraph shall be construed as a series of separate covenants,
one for each county specified. Except for geographic coverage, each such
separate covenant shall be deemed identical in terms to the covenant contained
in the preceding paragraph. If, in any judicial proceeding, a court shall
refuse to enforce any of the separate covenants deemed included in this
paragraph, then this unenforceable covenant shall be deemed eliminated from
these provisions for the purpose of those proceedings to the extent necessary to
permit the remaining separate covenants to be enforced.
Seller further agrees not to divulge, communicate, use to the
detriment of Buyer or for the benefit of any other pers on or persons, or misuse
in any way any confidential information or trade secrets of Seller, including
personnel information, customer lists, or other technical data. Seller
acknowledges and agrees that any information or data she has acquired on any of
these matters or items was received in confidence.
13.4 Should Seller, following expiration of Seller's covenant not to
compete contained in paragraph 13.3 above, desire to re-enter the insurance
business, Seller shall give Buyer the first opportunity to negotiate an
employment agreement with Seller.
14. INDEMNIFICATION BY SELLER. Seller agrees to indemnify and hold Buyer
harmless from and against any claim, loss, damage or expense, including any
reasonable attorneys' fees (including attorneys' fees on appeal), asserted
against or suffered by Buyer resulting from:
(a) Any breach by Seller of this Agreement;
(b) Any liability or obligation of Seller which Buyer is not required
to assume hereunder;
(c) The inaccuracy or breach of any of the representations,
warranties, or covenants made by Seller herein;
(d) Any other act or omission to act of Seller, its agents, employees
or contractors, the consequences of which Buyer has not expressly assumed
hereunder.
15. COST.
15.1 FINDER'S OR BROKER'S FEES. Each of the parties represents and
warrants that it has dealt with no broker or finder in connection with any of
the transactions contemplated by this Agreement and, insofar as it knows, no
broker or other person is entitled to any commission or finder's fee in
connection with any of these transactions.
6
<PAGE>
15.2 EXPENSES. Each of the parties shall pay all costs and expenses
incurred or to be incurred by it in negotiating and preparing this Agreement and
in closing and carrying out the transactions contemplated by this Agreement.
16. MISCELLANEOUS PROVISIONS.
16.1 The subject headings of the paragraphs and subparagraphs of this
Agreement are included for purposes of convenience only, and shall not affect
the construction or interpretation of any of its provisions.
16.2 This Agreement constitutes the entire agreement between the
parties pertaining to the subject matter contained in it and supersedes all
prior and contemporaneous agreements, representations, and understandings of the
parties. No supplement, modification, or amendment of this Agreement shall be
binding unless executed in writing by all the parties. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by the
party making the waiver.
16.3 This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16.4 This Agreement shall be binding on and shall inure to the benefit
of the parties to it and their respective heirs, legal representatives,
successors, and assigns. Buyer shall have the right to assign this Agreement
and all of Buyer's rights under it to a corporation or partnership in which
Buyer has an interest.
16.5 If any legal action or any arbitration or other proceeding is
brought for the enforcement of this Agreement or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions of
this Agreement, the successful or prevailing party or parties shall be entitled
to recover reasonable attorneys' fees and other cost incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.
16.6 All representations, warranties, covenants, and agreements of the
parties contained in this Agreement, or in any instrument, certificate, or other
writing provided for in it, shall survive the Closing.
16.7 All notices, requests, demands, and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
on the date of service if served personally on the party to whom notice is to be
given, or on the third day after mailing if mailed to the party to whom notice
is to be given, by first
7
<PAGE>
class mail, registered or certified, postage prepaid, and properly addressed as
follows:
To Seller at: John R. McPherson
P.O. Box 207
Bethel Island, CA 94511
To Buyer at: J.R. Dunathan
Anchor Pacific Underwriters, Inc.
1800 Sutter Street, Suite 400
Concord, California 94520
And
James P. Wieking
Putnam, Knudsen & Wieking, Inc.
1800 Sutter Street, Suite 500
Concord, CA 94520
Any party may change its address for purposes of this paragraph by giving the
other party written notice of the new address in the manner set forth above.
16.8 This Agreement shall be construed in accordance with, and
governed by, the laws of the State of California.
Executed the day and year first above written:
SELLER: BUYER:
/s/John R. McPherson Anchor Pacific Underwriters, Inc.,
- -------------------------
John R. McPherson
By: /s/James R. Dunathan
---------------------------------
James R. Dunathan
President
Putnam, Knudsen & Wieking, Inc.
By: /s/James P. Wieking, Inc.
---------------------------------
James P. Wieking
Executive Vice President
8
<PAGE>
EXHIBIT A
---------
INSURED POLICY NUMBER
- ------- -------------
Donald Rogers and Stanley Pletz 1AGO820
GPP568229-03
Andrews E. Oyervides DBA: Ed's Custom Doors 01-CC-633580-6
Donald Rogers Trustee Estate of Paul Muller CCP-312915-00
Andrew Soe DBA: Rose & Grove Market 01-CC-199930-9
San Francisco Health Food Store 01-CD-452986-3
William Deming DBA: Pacific Woodworking ZHM 3781469-05
03518399
Home Connection, Inc. 02-BO-257664-5
Lawrence M. Hill & Jean Arentz Hill, Living Trust 01-CC-631854-6
Albino Antunes 01-AM-202830-2
Randall L. Zierau DBA: All American Electric 01-CC-138965-9
Raymond Aguiar GLI-1019335
2147307
Dr. Forrest Butler DBA: Butler Chiropractic Clinic 02-BO-098899-1
Symentrus Lyons DBA: Johnsons Hair Pieces 01-OL-275277-5
Donald Dare DBA: Dare Enterprises 01-CL-293215-4
Louis E. Weldon, ETAL DBA: Investors Affiliated 01-CD-686099-2
Northcal Properties Real Estate Agency 02-BOl92723-8
Westgate Electric Supply Inc. 01-CC-378999-7
CB1335
WN95-499830-06
Rod McPherson DBA: Speedee Oil Change GB Z041944501
02-CC-564471-4
Sabastino DeLuca & Rita DeLuca 02-BO-253853-6
Perry Baharian 01-CC-633572-6
1
<PAGE>
EXHIBIT A
---------
INSURED POLICY NUMBER
- ------- -------------
Jim & Barbara Curry DBA: C D S CIC-821294
Mark Fambrini DBA: Mark Fambrini Roofing 02-BA-082277-2
Scout Hall, Inc. CCP-261144-02
James Hemstalk & Western Financial Development 2063703
Speedee Ventures, Inc. 02-CC-562047-2
Irwin A. Suiter DBA: Suiter Installations 01-CC-065207-0
Mark Wheeler DBA: American Floors 01-CC-477133-7
Indolink Corporation 01-CC-136254-0
01-CD-690820-2
FO-44823
Harold Coursey DBA: Main Street Gallery 02-CC-570223-2
Alfred A. Mikalow CCP-315372-00
Singles Club Association of America GS 009851
Estate of Doris Soe CCP-327295-00
Raymond Aguiar HE-04-262319
Robert Armstrong HE-04-235857
HE-04-174192
02-04-521146
Valarie Austin 02-04-613309
Helen Babington 02-04-624846
Peter Banks 02-04-521442
Gerald Bearden 02-04-625671
Hester Blankenship HE-04-132349
Forrest Butler HE-04-261534
02-04-616161
Kim Carlsen 02-04-613567
2
<PAGE>
EXHIBIT A
---------
INSURED POLICY NUMBER
- ------- -------------
Karen Colby HE-04-175972
Lou Crossland HE-04-125515
02-04-519654
Robert Curtis HE-04-235406
02-04-531604
Steve Cvetich 01-EU-108555
HE-04-175361
02-04-624232
Marcia Dubow HE-04-175015
Gerald Duarte 02-04-624717
HE-04-236486
Devon Flynn HE-04-261522
Lennard Ghigliazza 02-04-616233
Marjorie Hall 02-04-620266
Paul Harbison HE-04-175685
02-04-666765
Arthur Hemstalk 02-04-625820
HE-04-251635
Evelyn Holland HE-04-236235
William Hull HE-04-175356
02-04-538111
Bobby Johnston HE-04-174980
02-04-517635
Therese Joyal HE-04-250519
Richard Kellner 02-04-613466
Roy Lawrence 02-04-669880
Stephan Lawrence HE-04-268434
02-04-616713
3
<PAGE>
EXHIBIT A
---------
INSURED POLICY NUMBER
- ------- -------------
Luther Lentz 02-04-613305
Joyce Lynch 02-04-126516
Johan Lindstrom 02-04-662682
Margaret McNew 02-04-680332
Don McPherson 02-04-669579
John McPherson HE-04-235392
Allen Mack HE-04-235387
Alfred Mikalow HE-04-242547
02-04-615521
Arthur Mirassou HE-04-235606
Phillip Mitchell HE-04-239168
Larry Moe 02-04-615316
Sanders Perkins 02-04-676627
HE-04-285690
Joyce Phillips HE-04-174620
02-04-668668
Kenneth Rissitto HE-04-115940
Ronald Selleneit HE-04-176246
William Sousa HE-04-236303
Robert Smith HE-04-235389
Dorian Splivalo HE-04-236243
Peggy Splivalo 02-04-667797
Joanne Splivalo 02-04-669971
Yasuyuki Toda HE-04-236384
4
<PAGE>
EXHIBIT A
---------
INSURED POLICY NUMBER
- ------- -------------
William Triantis 01-EU-145397
HE-04-236539
02-04-615872
Joan Vignone 02-04-669053
Eunice Vandepol HE-04-174834
02-04-669172
John Vargas 01-EU-199258
MF-04-040223
ME-04-122760
HE-04-242087
02-04-624890
Francora Wuesthoff 02-04-623660
Susan White 02-04-676231
Marianne Walton 01-EU-109481
HE-04-133975
02-04-615867
Richard Kellner PEL0064586
Alvin Jonas CPL0201436
Charles Morehouse PEL0068071
Bruce Anderson NZB3298724
Hezghia Bensadigh FZD6238578
NZD2769290
Charlie Boone NZF1150616
FZD6492645
Roger Campbell NZF1150605
Maurice Custodio NZA3650529
Eleanor Davidson NZD2615330
NZA3055125
Adrienne Demarest NZF1071976
5
<PAGE>
EXHIBIT A
---------
INSURED POLICY NUMBER
- ------- -------------
Randolf Douglas NZF1071975
Raymond Hall NZC3224336
David Hendrickson NZF1071991
Julie Lane NZF1150624
John McPherson NZA3766028
Anita Mason NZK8168208
Helen Maurer NZF1150604
Alfred Mikalow NZC2526664
William Monahan NZF1150601
Novel Perry NZE2071004
William Phillips FZD6238573
Norma Roper NZA4060429
Esther Smith NZF1150609
T. A. Toussoun NZD3395345
Roger White NZD3908344
Roy Ashworth CAH0625552
Valarie Austin CAH0609191
Benjamin Bradley CAA0771569
Marie Davies CAA0773589
Sebastiano DeLuca CAH0616552
CAH0615313
CAA0772229
CAU0122850
Robert Dulitz CAH0650788
David Fredrickson CAA0771855
6
<PAGE>
EXHIBIT A
---------
INSURED POLICY NUMBER
- ------- -------------
David Hendrickson CAA0768169
Joseph Kearney CAA0764405
Barbara Lindberg CAH0621100
John McPherson CAA0781974
Ann Mirassou CAH0648374
Oreallia Salonen CAA0773501
William Sousa CAH0631908
Dorian Splivalo CAB0125399
CAH0626529
Alice Summerhill CAH0641690
Maurice McDonald 298RK9778
Leonard Scott 298RQ8681
T. A. Toussoun 298RP4758
Duff Whipple 298RH6731
Lurlean Jackson MT75-70-305-7
Jerry Guss TT73-95681 -9
Hirstle Hammond NMC52-55-125-8
NMC52-55-126-8
Ruth McPherson MT55-68-744-2
Dorian Splivalo MT19-46-152-4
Bruce Anderson XA-48158406
David Barrett XA-13610945
Alice Surnmerhill XE-18546342
XA-16243207
7
<PAGE>
EXHIBIT A
---------
INSURED POLICY NUMBER
- ------- -------------
T. A. Toussoun XA-13874467
D. Paul Findlay 255-0017704542
James Chestney AVP5-25-08-76
Richard Kellner CAY-25190-5
Stephen Lawrence CAY-33996-5
Bill Clarkson IMY5100612
Joseph Brooks X067733-10
Sebastiano DeLuca PNM392937604
Kirk Hargreaves ANM4717222
Lurlean Jackson X067740
Donavon Wallace MFO4012114
HE04151886
Jack Friedland X069487-10
Rhoda Holthoff ANM3964293
Alfred Mikalow POY-049694
Karen Clare HVM3741562
Syd Hall X070195-10
John McPherson 050709875
Roger White ANM4179562
Arnold Holieb FNM4210608
Elizabeth Mitchell HVM3794494
Roger White PNM4816312
John McPherson 060501392596
Rhoda Holthoff HVM4064984
8
<PAGE>
EXHIBIT A
---------
INSURED POLICY NUMBER
- ------- -------------
Hezghia Bensidigh 0072986433
Francora Wuesthoff FVM3647977
D. Paul Findlay 0605000355896
9
<PAGE>
Exhibit "B"
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS:
JOHN R. McPHERSON, an individual ("Seller") for good and valuable consideration,
receipt of which is hereby acknowledged, and pursuant to a certain Purchase and
Sale -Agreement dated May 1, 1996, hereby sells, assigns, transfers, conveys,
and delivers to ANCHOR PACIFIC UNDERWRITERS, INC. and PUTNAM, KNUDSEN & WIEKING,
INC., ("Buyer"), and their successors and assigns, all right, title, and
interest in and to all of the following described assets:
a. Seller's customer lists, expiration files, customer account records,
including current copies of client policies, or copies of client policies,
applications, quotations and client files, which assets are substantially in
accordance with the Schedule of Clients described in Exhibit A attached hereto
and incorporated herein by this reference.
b. The goodwill of Seller relative to said assets.
C. All trade secrets and confidential information of Seller.
TO HAVE AND TO HOLD the same unto the Buyer and its successors and assigns,
forever.
The Seller, for itself and its successors and assigns, hereby covenants with the
Buyer, their successors and assigns, that the Seller is the owner absolutely of
said property; that the same are free and clear of and from all encumbrances;
that it has good right to sell and to assign the same unto the Buyer as
aforesaid and will warrant and defend the same unto the Buyer against the lawful
claims and demands of all persons.
The Seller hereby covenants and agrees to execute and deliver or cause to be
executed and delivered, and to do or to make, or to cause to be done or made,
upon receipt of the Buyer, any and all agreements, instruments, papers, acts, or
things, supplemental, confirmatory, or otherwise, as may reasonably be required
by the Buyer for the purpose of or in connection with perfecting and completing
the sale hereunder of the assets of the Seller which are hereby sold and
transferred.
IN WITNESS WHEREOF, the Seller has executed this Bill of Sale on ________,
1996.
/s/John R. McPherson
------------------------------
JOHN R. McPHERSON
<PAGE>
EXHIBIT 10.21
<PAGE>
[LETTERHEAD]
[LOGO]
June 22, 1996
Mr. James Dunathan
CEO
Anchor Pacific Underwriters, Inc.
1800 Sutter Street
Concord, California 94520
ENGAGEMENT LETTER
RE: Business Consulting &
Investment Banking
Dear Jim:
It was a pleasure meeting with you on Saturday and I would like to thank
you for your time, courtesy and confidence in Gerbsman Partners. As per our
discussion, I have outlined below an agreement from Gerbsman Partners to assist
Anchor Pacific Underwriters, Inc. ("Anchor") as a business consultant/investment
banker, in executing an agreed upon financing strategy for Insurance Service
Underwriters, Inc. and subsidiaries.
Set forth below are the services Gerbsman Partners would propose to perform
for Anchor, and the compensation Gerbsman Partners would expect to receive from
Anchor for those services.
SCOPE OF ENGAGEMENT
Gerbsman Partners understands that Anchor has a number of objectives for
its business consultant/investment banker. In order to meet the above
objectives, Gerbsman Partners, as your business consultant/investment banker,
will pursue the following work program on a best efforts basis:
1. Develop a selling strategy/plan to access short term
debt financing sources for the acquisition by Anchor of
Insurance Service Underwriters, Inc. and subsidiaries;
2. Assist Anchor, on a non-exclusive basis, to identify
and close short term debt financing sources for the
above.
GERBSMAN PARTNERS COMPENSATION
Gerbsman Partners proposes to be compensated in such a way as to:
1. Cover Gerbsman Partners costs for acting as a business
consultant/investment banker;
2. Provide finder's fees as a completion of successfully raising
capital;
3. Provide equity participation through the exercising of stock
purchase options or warrants.
<PAGE>
a. RETAINER AND FEES-
1. With the above concepts in mind, Gerbsman Partners would expect to
formalize its engagement by you a Business Consultant/Investment Banker at
Anchor with the understanding of a fixed fee retainer of $ 25,000 plus
reasonable business expenses through July 31, 1996; the $ 25,000 retainer will
be due and payable to Gerbsman Partners on January 4, 1997, regardless of
Gerbsman Partners finding capital for the acquisition. If Gerbsman Partners
earns a finder's fee, then Anchor would not owe Gerbsman Partners the above
retainer;
2. Gerbsman Partners will receive from Anchor a $ 5,000 dollar advance
for expenses upon the signing of this agreement. Gerbsman Partners will submit
to Anchor a detail expense account, with available receipts, for expenses
incurred on Anchor's behalf.
3. After July 31, 1996, Anchor may terminate this agreement or enter
into a modified agreement, to be mutually agreed upon, for Gerbsman Partners to
continue to perform business consulting - investment banking/capital formation
functions.
b. GERBSMAN PARTNERS DIRECT FINDER'S FEE -
1. Gerbsman Partners would expect to receive a finder's fee for any
monies raised for equity, sub-debt, debt and/or mezzanine financing as a result
of Gerbsman Partners direct efforts through its own sources. Gerbsman Partners
will document these sources in writing to Anchor. Gerbsman Partners will be
working on a non-exclusive basis;
2. Gerbsman Partners finder's fee is 3 1/2% of the gross proceeds of
the transaction for Insurance Service Underwriters, Inc. and subsidiaries.
c. GERBSMAN PARTNERS INDIRECT FINDER'S FEE- Gerbsman Partners, through its
efforts, may enlist other sources in the financing effort on behalf of the
company. In these instances, it will be Gerbsman Partners responsibility to
allocate a portion of Gerbsman Partners fees to these sources.
d. PAYABLE DATE(S) FOR FINDER'S FEE AND/OR OTHER COMMISSIONS-
Gerbsman Partners finder's fee will be due & payable to Gerbsman
Partners by the Escrow Agent/Bank/Company at the same time as the monies
Gerbsman Partners has assisted in raising for you are drawn down from the Escrow
Account/ Bank/Company.
e. RESIDUAL ENTITLEMENT-
Gerbsman Partners and/or its successor(s) or its designee will be
protected, for a period of 18 months from the date of any formal Engagement
Letter or 18 months from the date a reserved financing prospect is registered by
Gerbsman Partners, which ever is later, where Gerbsman Partners is retained to
identify and close equity, debt, sub-debt and/or mezzanine financing candidates
of Anchor and/or where funding of Anchor from funds received by Anchor are from
any sources directly identified and reserved by Gerbsman Partners. These
sources must and will be qualified as to their interest, be an identified
investor and/or financing source and must have met with Anchor in person and/or
qualified its interest by telephone, written follow up and/or electronic mail.
Gerbsman Partners will furnish you with a regularly updated list of such
contacts for your records.
<PAGE>
f. STOCK PURCHASE OPTIONS/WARRANTS-
1. Gerbsman Partners will earn options/warrants for 30,000
shares of Anchor per this agreement, upon completion of a
financing for the company;
2. The options/warrants will have an exercise price per share
of $ 1.75, be for a period of 4 years from the date of
earning the option/warrant and carry provisions for
piggyback rights registration rights;
3. The options/warrants will be delivered to Gerbsman Partners
by Anchor, no later than 30 days after the options/warrants
are earned by Gerbsman Partners;
4. Gerbsman Partners will earn the above warrants if any
transaction closes between Anchor and Insurance Service
Underwriters, Inc. and subsidiaries between the signing of
this agreement and April 15, 1997, regardless of whether
Gerbsman Partners has participated in the financing, finding
the sources for the financing and/or assisting Anchor to
close the financing.
NO GUARANTEE OF SUCCESS
Gerbsman Partners cannot guarantee the successful completion of any equity,
debt, sub-debt and/or mezzanine financing and makes no such guarantee herein, or
as the basis for any component of our compensation
INDEMNIFICATION
In consideration of Gerbsman Partners agreement to perform services under
the terms of this engagement, the Company shall:
a. indemnify and hold harmless Gerbsman Partners and any of its
directors, officers, employees, consultants or agents ( each, individually, an
"Indemnified Person") from any losses, claims, damages or liabilities to which
such Indemnified Person may become subject arising in any manner out of or in
connection with the rendering of services by Gerbsman Partners hereunder, except
to the extent that such losses, claims, damages or liabilities are determined in
judicial or administrative proceedings to have resulted primarily from the
negligence or willful misconduct of such Indemnified Person; and
b. reimburse such Indemnified Person for reasonable legal or other
expenses, as they are incurred, that arise in connection with investigating,
preparing to defend or defending any lawsuit, claim or proceeding and any
appeals therefrom arising in any manner out of or in connection with the
rendering of services by Gerbsman Partners hereunder; provided, however, that in
the event a determination is made to the effect specified in subparagraph (a)
above, such Indemnified Person promptly would remit to the Company any amounts
reimbursed under this subparagraph (b). The company also agrees to hold
harmless and indemnify Gerbsman Partners from any actions or statements, or any
failures to act or make statements, which commission or omission would cause us
to be in non-compliance with any and all Federal, State, Securities Exchange or
other regulatory authorities in the continuance or completion of the investment
banking transaction or funding for which Gerbsman Partners is rendering
assistance and/or financial consulting advice.
<PAGE>
The Company and Gerbsman Partners agree that (1) the above indemnification
and reimbursement commitments set forth above shall apply whether or not such
Indemnified Person is named party to any such lawsuit, claim or other proceeding
and (2) promptly after receipt by Gerbsman Partners of notice of its involvement
in any action, proceeding or investigation, it shall, if a claim in respect
thereof is to be made under the preceding paragraph, notify the Company in
writing of such involvement. To the extent it wishes, the Company shall be
entitled to assume the defense of any action which is the subject of the
preceding paragraph with counsel satisfactory to Gerbsman Partners.
TERM
This agreement will have a term for one year from the date of execution,
however it can be terminated unilaterally on July 31, 1996. In the event of any
such termination of this agreement, the Company shall continue to obligated to
pay to Gerbsman Partners (a) any compensation earned by Gerbsman Partners
through the date of such termination, (b) any such compensation due, as set
forth above, as a result of a transaction consummated through the efforts of
Gerbsman Partners within eighteen months of such termination, and (c) any out-
of-pocket expensed incurred by Gerbsman Partners through the date of
termination. The indemnity, contribution and expense reimbursement liability of
the Company shall remain operative and in full force and effect regardless of
any such termination. This agreement will be governed by the laws of the State
of California and may be amended only in writing signed by both parties.
SUMMATION
Jim, I would like to again thank you for your courtesy and confidence and I
look forward to establishing a mutually beneficial relationship with you and
anchor. If the foregoing correctly sets forth our understanding, please sign
the acknowledgment below and remit a check in the amount of $ 5,000 to Gerbsman
Partners.
Accepted: Sincerely yours,
June 27, 1996 /s/Steven R. Gerbsman
Gerbsman Partners
Steven R. Gerbsman
Principal
By:
/s/ James Dunathan
- ---------------------------------
Anchor Pacific Underwriters, Inc.
James Dunathan
CEO
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