1
<PAGE 1>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996).
For the fiscal year ended December 31, 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 0-7201.
POE & BROWN, INC.
(Exact name of Registrant as specified in its charter)
Florida 59-0864469
_______________________________ __________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
220 South Ridgewood Avenue, Daytona Beach, FL 32114
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (904) 252-9601
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value
(Title of class)
________________________________
Indicate by check mark whether the Registrant (1) has filed all reports re
quired to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past ninety (90) days. Yes X No ___
____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ].
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, computed by reference to the last reported price at which
the stock was sold on March 7, 1997, was $176,787,330.
The number of shares of the Registrant's common stock, $.10 par value, out
standing as of March 7, 1997, was 8,699,489.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1996 Annual Report to Shareholders are
incorporated by reference into Parts I and II of this Report. With the
exception of those portions which are incorporated by reference, the
Registrant's Annual Report to Shareholders is not deemed filed as part of
this Report.
Portions of the Registrant's Proxy Statement for the 1997 Annual Meeting of
Shareholders are incorporated by reference into Part III of this Report.
<PAGE 2>
POE & BROWN, INC.
FORM 10-K ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 1996
PART I
ITEM 1. BUSINESS
GENERAL
Poe & Brown, Inc. (the "Company") is a general insurance
agency headquartered in Daytona Beach and Tampa, Florida that
resulted from an April 28, 1993 business combination involving
Poe & Associates, Inc. ("Poe") and Brown & Brown, Inc. ("Brown").
Poe was incorporated in 1958 and Brown commenced business in
1939. Industry segment information is not presented because the
Company realizes substantially all of its revenues from the
general insurance agency business.
The Company is a diversified insurance brokerage and agency
that markets and sells primarily property and casualty insurance
products and services to its clients. Because the Company does
not engage in underwriting activities, it does not assume
underwriting risks. Instead, it acts in an agency capacity to
provide its customers with targeted, customized risk management
products.
The Company is compensated for its services by commissions
paid by insurance companies and fees for administration and
benefit consulting services. The commission is usually a
percentage of the premium paid by an insured. Commission rates
generally depend upon the type of insurance, the particular
insurance company, and the nature of the services provided by the
Company. In some cases, a commission is shared with other agents
or brokers who have acted jointly with the Company in a
transaction. The Company may also receive from an insurance
company a contingent commission that is generally based on the
profitability and volume of business placed with it by the
Company over a given period of time. Fees are principally
generated by the Company's Service Division, which offers
administration and benefit consulting services primarily in the
workers' compensation and employee benefit markets. The amount
of the Company's income from commissions and fees is a function
of, among other factors, continued new business production,
retention of existing customers, acquisitions, and fluctuations
in insurance premium rates and insurable exposure units.
Premium pricing within the property and casualty insurance
underwriting industry has been cyclical and has displayed a high
degree of volatility based on prevailing economic and competitive
conditions. Since the mid-1980s, the property and casualty
insurance industry has been in a "soft market" during which the
underwriting capacity of insurance companies expanded,
stimulating an increase in competition and a decrease in premium
rates and related commissions and fees. Significant reductions
in premium rates occurred during the years 1987 through 1989 and
continue, although to a lesser degree, through the present. The
effect of this softness in rates on the Company's revenues has
been somewhat offset by the Company's acquisitions and new
business production. The Company cannot predict the timing or
extent of premium pricing changes as a result of market
fluctuations or their effect on the Company's operations in the
future.
<PAGE 3>
The Company's activities are conducted in 19 locations
throughout Florida, and in eight additional locations in Arizona,
California, Connecticut, Georgia, New Jersey, North Carolina,
Pennsylvania, and Texas. Because the Company's business is
concentrated in Florida, the occurrence of adverse economic
conditions or an adverse regulatory climate in Florida could have
a materially adverse effect on its business, although the Company
has not encountered such conditions in the past.
The Company's business is divided into five divisions: (i)
the Retail Division; (ii) the Professional Programs Division;
(iii) the Commercial Programs Division; (iv) the Service
Division; and (v) the Brokerage Division. The Retail Division is
composed of Company employees in 23 offices who market and sell a
broad range of insurance products to insureds. The two Program
Divisions work with underwriters to develop proprietary insurance
programs for specific niche markets. These programs are marketed
and sold primarily through approximately 350 independent agencies
and more than 2,000 independent agents across the United States.
The Company receives an override on the commissions generated by
these independent agencies. The Service Division provides
insurance-related services such as third-party administration and
consultation for workers' compensation and employee benefit
markets. The Brokerage Division markets and sells excess and
surplus commercial insurance, as well as certain niche programs,
primarily through independent agents.
The following table sets forth a summary of (i) the
commission and fee revenues realized from each of the Company's
operating divisions for each of the three years in the period
ended December 31, 1996 (in thousands of dollars), and (ii) the
percentage of the Company's total commission and fee revenues
represented by each division for each of such periods:
<TABLE>
<CAPTION>
1994 % 1995 % 1996 %
____ ____ ____ ____ _____ ___
<S> <C> <C> <C> <C> <C> <C>
Retail Division $56,018 58.4% $ 59,552 58.4% $ 66,798 58.4%
Professional Programs Division 20,907 21.8% 21,463 21.0% 20,377 17.8%
Commercial Programs Division 5,612 5.9% 6,079 6.0% 5,355 4.7%
Service Division 10,643 11.1% 10,751 10.5% 11,887 10.4%
Brokerage Division 2,672 2.8% 4,153 4.1% 9,961 8.7%
_______ _____ ________ _____ ________ _____
Total $95,852 100 % $101,998 100 % $114,378 100%
======= ===== ======== ===== ======== =====
</TABLE>
RETAIL DIVISION
The Company's Retail Division operates through 23 locations
in eight states. These locations employ approximately 591
persons. The Company's retail insurance agency business consists
primarily of selling and marketing property and casualty
insurance coverages to commercial, professional and, to a limited
extent, individual customers. The categories of insurance
principally sold by the Company are: Casualty - insurance
relating to legal liabilities, workers' compensation, commercial
and private passenger automobile coverages, and fidelity and
surety insurance; and Property - insurance against physical
damage to property and resultant interruption of business or
extra expense caused by fire, windstorm or other perils. The
Company also sells and services all forms of group and individual
life, accident, health, hospitalization, medical and dental
insurance programs. Each category of insurance is serviced by
insurance specialists employed by the Company.
<PAGE 4>
No material part of the Company's retail business depends
upon a single customer or a few customers. During 1996, the
Company's Retail Division received approximately $440,000 of fees
and commissions from Rock-Tenn Company, the Company's largest
single Retail Division customer. Such amount represented
approximately 1% of the Retail Division's total commission and
fee revenues for 1996.
In connection with the selling and marketing of insurance
coverages, the Company provides a broad range of related services
to its customers, such as risk management surveys and analysis,
consultation in connection with placing insurance coverages, and
claims processing. The Company believes these services are
important factors in securing and retaining customers.
PROFESSIONAL AND COMMERCIAL PROGRAMS DIVISIONS
In 1996, the Company's National Programs Division was
divided into two distinct market-responsive groups as a result of
changes in market conditions. The two divisions created as a
result of this separation are the Professional Programs Division
and the Commercial Programs Division. These divisions tailor
insurance products to the needs of a particular professional or
trade group, negotiate policy forms, coverages and commission
rates with an insurance company and, in certain cases, secure the
formal or informal endorsement of the product by a professional
association or trade group. Programs are marketed and sold
primarily through a national network of approximately 350
independent agencies and more than 2,000 independent agents, who
solicit customers though advertisements in association
publications, direct mailings and personal contact. The Company
also markets a variety of these products through certain of its
retail offices. Under agency agreements with the insurance
companies that underwrite these programs, the Company usually has
authority to bind coverages, subject to established guidelines,
to bill and collect premiums and, in some cases, to process
claims.
The Company is committed to ongoing market research and
development of new proprietary programs. The Company employs a
variety of methods, including interviews with members of various
professional and trade groups to which the Company does not
presently offer insurance products, to assess the coverage needs
of such professional associations and trade groups. If the
initial market research is positive, the Company studies the
existing and potential competition and locates potential carriers
for the program. A proposal is then submitted to and negotiated
with a selected carrier and, in most instances, a professional or
trade association from which endorsement of the program is
sought. New programs are introduced through written
communications, personal visits with agents, placements of
advertising in trade publications and, where appropriate,
participation in trade shows and conventions. Several new
programs are currently being reviewed or implemented by the
Company. There can be no assurance, however, as to whether the
Company will be successful in developing or implementing any such
new programs, or what the market reception will be.
Professional Programs. The professional groups serviced by
the Professional Programs Division include dentists, lawyers,
physicians, chiropractors, and optometrists and opticians. Set
forth below is a brief description of the programs offered to
these major professional groups.
- Dentists: The largest program marketed by the
Professional Programs Division is a package insurance policy
known as the Professional Protector PlanR, which provides
comprehensive coverage for dentists, including practice
protection and professional liability. This program, initiated
in 1969, is endorsed by 31 state or local dental societies, and
is offered in 49 states, the District of Columbia, the Virgin
Islands and Puerto Rico. This program presently insures
approximately 36,300 dentists, which the Company
<PAGE 5>
believes represents approximately 28% of the eligible practicing dentists
within the Company's marketing territories.
- Lawyers: The Company began marketing lawyers'
professional liability insurance in 1973, and the national
Lawyer's Protector PlanR was introduced in 1983. The program
presently insures approximately 36,000 attorneys and is offered
in 45 states, the District of Columbia and the Virgin Islands.
- Physicians: The Company markets professional liability
insurance for physicians, surgeons, and other health care
providers through a program known as the Physicians Protector
PlanR. The program, initiated in 1980, is currently offered in
thirteen states and insures approximately 3,000 physicians.
- Optometrists and Opticians: The Optometric Protector
PlanR was created in 1973 to provide optometrists and opticians
with a package of practice and professional liability coverage.
This program insures approximately 7,100 optometrists and
opticians in all 50 states and Puerto Rico.
- Chiropractors: The Chiropractic Protector PlanSM (the
"CPP") was introduced in 1996 to provide professional liability
and comprehensive general liability coverage for chiropractors.
This program is currently being offered in Florida and Illinois
with the expectation that it will soon be offered in other
states.
The professional programs described above are underwritten
predominantly through CNA Insurance Companies ("CNA"). The
Company and CNA are parties to Program Agency Agreements with
respect to each of the programs described above except for the
CPP, with respect to which an agreement is currently being
finalized. Among other things, these agreements grant the
Company the exclusive right to solicit and receive applications
for program policies directly and from other licensed agents and
to bind and issue such policies and endorsements thereto. In
fulfilling its obligations under the agreements, the Company must
comply with the administrative and underwriting guidelines
established by CNA. The Company must use its best efforts to
promote the programs and solicit and sell program policies. The
Company is compensated through commissions on premiums, which
vary according to insurance product (e.g., workers' compensation,
commercial umbrella, package coverage, monoline professional and
general liability) and the Company's role in the transaction. The
commission to which the Company is entitled may change upon 90
days written notice from CNA. The Program Agency Agreements are
generally cancellable by either party for any reason on advance
written notice of six months or one year. An agreement may also
be terminated upon breach, by the non-breaching party, subject to
certain opportunities to cure the breach.
Commercial Programs. The Commercial Programs Division's
Towing Operators Protector PlanR was introduced in 1993 and
currently provides specialized insurance products to tow-truck
operators in 42 states. The Automobile Dealers Protector PlanR
insures non-franchised automobile dealers whose primary business
is the sale of used cars and trucks. In Florida, the program is
endorsed by the Florida Independent Auto Dealers Association.
Since 1994, this program has been expanded into all 50 states and
currently insures approximately 3,600 dealers. The Automobile
Transporters Protector PlanSM , introduced in 1996 and offered in
all 50 states, encompasses risks engaged in the transportation of
automobiles and trucks on vehicles designed for multiple
automobile transportation. The Automotive Aftermarket Protector
PlanSM , introduced in 1996 and currently offered in 47 states,
is a property and casualty program for manufacturers of
automotive parts, manufacturers of machinery and equipment that
make or alter parts, and companies in
<PAGE 6>
the business of vehicle conversion. The Company also plans to
introduce its Manufacturers Protector PlanSM and Railroad Protector
PlanSM in 1997.
The Insurance Administration Center ("IAC") became a wholly-
owned subsidiary of the Company in 1989. IAC was founded in 1962
to serve as insurance consultant to the National Association of
Wholesaler-Distributors ("NAW"), including NAW's Industry
Associations, which have a total of approximately 40,000 member
companies. IAC currently serves NAW members as a third-party
administration facility for life and health coverages, and
markets and sells various employee benefit and property and
casualty insurance products to NAW members.
IAC's third-party administration services include billing,
premium accounting, eligibility, enrollment, claims payments and
financial reporting, and IAC currently processes claims for
approximately 265 employers associated with NAW in a program for
which John Hancock Life Insurance Company is the lead
underwriter. Since April 1995, IAC's property and casualty
offerings have been principally underwritten by General Accident
Insurance Company. Premiums written in 1996 totalled $37.8
million.
In April 1996, the Company sold substantially all the assets
of Health Care Insurers, Inc. ("HCI"), a wholly-owned subsidiary
located in Colorado Springs, Colorado. HCI marketed and sold
professional health care liability insurance and property
coverages through independent agents to hospitals, laboratories,
nursing homes, medical groups and clinics.
SERVICE DIVISION
The Service Division consists of two separate components:
(i) insurance and related services as a third-party administrator
("TPA") and consultant for employee health and welfare benefit
plans, and (ii) insurance and related services providing
comprehensive risk management and third-party administration to
self-funded workers' compensation plans.
In connection with its employee benefit plan administrative
services, the Service Division provides TPA services and
consulting related to benefit plan design and costing,
arrangement for the placement of stop-loss insurance and other
employee benefit coverages, and settlement of claims. The
Service Division provides utilization management services such as
pre-admission review, concurrent/retrospective review, pre-
treatment review of certain non-hospital treatment plans, and
medical and psychiatric case management. In addition to the
administration of self-funded health care plans, the Service
Division offers administration of flexible benefit plans,
including plan design, employee communication, enrollment and
reporting. The Service Division's workers' compensation TPA
services include risk management services such as loss control,
claim administration, access to major reinsurance markets, cost
containment consulting, and services for secondary disability and
subrogation recoveries.
The Service Division provides workers' compensation TPA
services for approximately 2,500 employers representing more than
$3 billion of employee payroll. The Company's largest workers'
compensation contract represents approximately 69% of the
Company's workers' compensation TPA revenues, or 4% of the
Company's total commission and fee revenues.
<PAGE 7>
BROKERAGE DIVISION
The Brokerage Division markets excess and surplus lines and
specialty niche insurance products to the Company's Retail
Division, as well as to other retail agencies throughout Florida
and the southeastern United States. The Brokerage Division
represents various U.S. and U.K. surplus lines companies and is
also a Lloyd's of London correspondent. In addition to surplus
lines carriers, the Brokerage Division represents admitted
carriers for smaller agencies that do not have access to large
insurance carrier representation. Excess and surplus products
include commercial automobile, garage, restaurant, builder's risk
and inland marine lines. Difficult-to-insure general liability
and products liability coverages are a specialty, as is excess
workers' compensation. Retail agency business is solicited
through mailings and direct contact with retail agency
representatives. In 1996, the Company acquired a 75% ownership
interest in Florida Intracoastal Underwriters, Limited Company
("FIU") of Miami Lakes, Florida. FIU is a managing general
agency that specializes in providing insurance coverages for
coastal and inland high-value condominiums and apartments. FIU
has developed a unique reinsurance facility to support the
underwriting activities associated with these risks.
EMPLOYEES
At December 31, 1996, the Company had 1,075 full-time
equivalent employees. The Company has contracts with its sales
employees that include provisions restricting their right to
solicit the Company's customers after termination of employment
with the Company. The enforceability of such contracts varies
from state to state depending upon state statutes, judicial
decisions and factual circumstances. The majority of these
contracts are terminable by either party; however, the agreements
not to solicit the Company's customers generally continue for a
period of three years after employment termination.
None of the Company's employees is represented by a labor
union, and the Company considers its relations with its employees
to be satisfactory.
COMPETITION
The insurance agency business is highly competitive, and
numerous firms actively compete with the Company for customers
and insurance carriers. Although the Company is the largest
insurance agency headquartered in Florida, a number of firms with
substantially greater resources and market presence compete with
the Company in Florida and elsewhere. This situation is
particularly pronounced outside Florida. Competition in the
insurance business is largely based on innovation, quality of
service and price.
A number of insurance companies are engaged in the direct
sale of insurance, primarily to individuals, and do not pay
commissions to agents and brokers. To date, such direct writing
has had relatively little effect on the Company's operations,
primarily because the Company's Retail Division is commercially
oriented.
REGULATION, LICENSING AND AGENCY CONTRACTS
The Company or its designated employees must be licensed to
act as agents by state regulatory authorities in the states in
which the Company conducts business. Regulations and licensing
laws vary in individual states and are often complex.
<PAGE 8>
The applicable licensing laws and regulations in all states
are subject to amendment or reinterpretation by state regulatory
authorities, and such authorities are vested in most cases with
relatively broad discretion as to the granting, revocation,
suspension and renewal of licenses. The possibility exists that
the Company could be excluded or temporarily suspended from
carrying on some or all of its activities in, or otherwise
subjected to penalties by, a particular state.
ITEM 2. PROPERTIES
The Company's executive offices are located at 220 South
Ridgewood Avenue, Daytona Beach, Florida 32114 and 401 East
Jackson Street, Suite 1700, Tampa, Florida 33602. The Company
also maintains offices in the following cities: Phoenix, Arizona;
San Francisco, California; Glastonbury, Connecticut; Aventura,
Florida; Brooksville, Florida; Ft. Lauderdale, Florida; Ft.
Myers, Florida; Jacksonville, Florida; Kissimmee, Florida;
Leesburg, Florida; Maitland, Florida; Melbourne, Florida; Miami
Lakes, Florida; Naples, Florida; Orlando, Florida; St.
Petersburg, Florida; Sarasota, Florida; West Palm Beach, Florida;
Winter Haven, Florida; Atlanta, Georgia; Clark, New Jersey;
Charlotte, North Carolina; Philadelphia, Pennsylvania; and
Houston, Texas.
The Company occupies office premises under noncancellable
operating leases expiring at various dates. These leases
generally contain renewal options and escalation clauses based on
increases in the lessors' operating expenses and other charges.
The Company expects that most leases will be renewed or replaced
upon expiration. See Note 8 of the "Notes to Consolidated
Financial Statements" in the Company's 1996 Annual Report to
Shareholders for additional information on the Company's lease
commitments.
In 1996, the Company sold a building located in downtown
Daytona Beach, Florida, having an aggregate book value of
approximately $128,000, for a nominal gain. The Company also owns
an office condominium in Venice, Florida which has a net book
value of $188,000, with no outstanding mortgage.
ITEM 3. LEGAL PROCEEDINGS
On February 21, 1995, an Amended Complaint was filed in an
action pending in the Superior Court of Puerto Rico, Bayamon
division, and captioned Cadillac Uniform & Linen Supply Company,
et al. v. General Accident Insurance Company, Puerto Rico,
Limited, et al. The case was originally filed on November 23,
1994, and named General Accident Insurance Company, Puerto Rico
Limited, and Benj. Acosta, Inc. as defendants. The Amended
Complaint added several defendants, including the Company and Poe
& Brown of California, Inc. ("P&B/Cal."), a subsidiary of the
Company, as parties to the case. The Plaintiffs allege that
P&B/Cal. failed to procure sufficient coverage for a commercial
laundry facility that was rendered inoperable for a period of
time as the result of a fire, and further allege that the Company
is vicariously liable for the actions of P&B/Cal. The Amended
Complaint seeks damages of $11.2 million against P&B/Cal., the
Company, the P&B/Cal. employee who handled the account and LBI
Corp., a/k/a Levinson Bros., Inc. The Company and P&B/Cal.
believe that P&B/Cal. has meritorious defenses to each of the
claims asserted against it, and that the Company likewise has
meritorious defenses to allegations premised upon theories of
vicarious liability. Both the Company and P&B/Cal. are
contesting this action vigorously, and trial is currently
scheduled for December 1997. In the event that damages are
awarded against P&B/Cal. or the Company, P&B/Cal. and the Company
believe that insurance would be available to cover such loss.
<PAGE 9>
The Company is involved in various other pending or
threatened proceedings by or against the Company or one or more
of its subsidiaries that involve routine litigation relating to
insurance risks placed by the Company and other contractual
matters. Management of the Company does not believe that any of
such pending or threatened proceedings (including the proceeding
described above) will have a materially adverse effect on the
consolidated financial position or future operations of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders
during the Company's fourth quarter ended December 31, 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded on the National Market
System of The Nasdaq Stock Market under the symbol "POBR." The
number of shareholders of record as of March 7, 1997 was 799, and
the closing price per share on that date was $26.50.
The table below sets forth information for each quarter in
the last two fiscal years concerning (i) the high and low sales
prices for the Company's common stock, and (ii) cash dividends
declared per share.
<TABLE>
<CAPTION>
Stock Price Range Cash
Dividends
High - Low Per Share
<S> <C> <C> <C>
1996
First quarter $25.50 $24.00 $0.12
Second quarter 24.75 22.75 0.12
Third quarter 25.38 23.50 0.12
Fourth quarter 27.50 24.00 0.13
1995
First quarter $22.50 $20.25 $0.12
Second quarter 24.25 22.00 0.12
Third quarter 25.25 23.25 0.12
Fourth quarter 25.25 24.25 0.12
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
Information under the caption "Financial Highlights" on page
6 of the Company's 1996 Annual Report to Shareholders is
incorporated herein by reference.
<PAGE 10>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Information under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on
pages 20-24 of the Company's 1996 Annual Report to Shareholders
is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of Poe & Brown, Inc.
and its subsidiaries, together with the reports thereon of Arthur
Andersen LLP and Ernst & Young LLP, appearing on pages 25-41 of
the Company's 1996 Annual Report to Shareholders, are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information contained under the captions "Management" and
"Section 16(a) Beneficial Ownership Reporting Compliance" on
pages 4-6 of the Company's Proxy Statement for its 1997 Annual
Meeting of Shareholders is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information contained under the caption "Executive
Compensation" on pages 7-10 of the Company's Proxy Statement for
its 1997 Annual Meeting of Shareholders is incorporated herein by
reference; provided, however, that the report of the Compensation
Committee on executive compensation, which begins on page 9
thereof, and the stock performance graph on page 11 thereof shall
not be deemed to be incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information contained under the caption "Security Ownership
of Management and Certain Beneficial Owners" on pages 2-3 of the
Company's Proxy Statement for its 1997 Annual Meeting of
Shareholders is incorporated herein by reference.
<PAGE 11>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information contained under the caption "Executive
Compensation -- Compensation Committee Interlocks and Insider
Participation" on page 9 of the Company's Proxy Statement for its
1997 Annual Meeting of Shareholders is incorporated herein by
reference.
<PAGE 12>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) The following documents are filed as part of this
report:
1. Consolidated Financial Statements of Poe & Brown,
Inc. (incorporated herein by reference from pages 25-
41 of the Company's 1996 Annual Report to
Shareholders) consisting of:
(a) Consolidated Statements of Income for each
of the three years in the period ended December
31, 1996.
(b) Consolidated Balance Sheets as of December
31, 1996 and 1995.
(c) Consolidated Statements of Shareholders'
Equity for each of the three years in the period
ended December 31, 1996.
(d) Consolidated Statements of Cash Flows for
each of the three years in the period ended
December 31, 1996.
(e) Notes to Consolidated Financial Statements.
(f) Reports of Independent Certified Public
Accountants.
2. Consolidated Financial Statement Schedule included
on page 11 of this report, consisting of:
(a) Schedule II - Valuation and Qualifying
Accounts.
All other schedules are omitted because they are not applicable
or not required, or because the required information is included
in the Consolidated Financial Statements or the Notes thereto.
The independent auditors' report with respect to the above-
referenced financial statement schedule appears on page 12 of
this report on Form 10-K.
3. EXHIBITS
3a Articles of Incorporation of the
Registrant, as last amended on April 28, 1993
(incorporated by reference to Exhibit 3a to Form
10-K for the year ended December 31, 1994).
3b Amended and Restated Bylaws of the
Registrant effective July 30, 1996 (filed
herewith).
4 Revolving Loan Agreement dated November 9, 1994, by and
among the Registrant and SunTrust Bank, Central Florida,
N.A., f/k/a SunBank, National Association
<PAGE 13>
(incorporated by reference to Exhibit 4 to Form 10-K for
the year ended December 31, 1994).
10a(1) Lease of the Registrant for office
space at 220 South Ridgewood Avenue, Daytona
Beach, Florida dated August 15, 1987
(incorporated by reference to Exhibit 10a(3) to
Form 10-K for the year ended December 31, 1993).
10a(2) Lease Agreement for office space at
SunTrust Financial Centre, Tampa, Florida, dated
February 1995, between Southeast Financial Center
Associates, as landlord, and the Registrant, as
tenant (incorporated by reference to Exhibit
10a(4) to Form 10-K for the year ended
December 31, 1994).
10b Registrant's 1985 Stock Option Plan
(incorporated by reference to Exhibit 10b(1) to
Form 10-K for the year ended December 31, 1984).
10c Registrant's 1989 Stock Option Plan
(incorporated by reference to Exhibit 10f to Form
10-K for the year ended December 31, 1989).
10d Loan Agreement between Continental
Casualty Company and the Registrant dated August
23, 1991 (incorporated by reference to Exhibit
10d to Form 10-K for the year ended December 31,
1991).
10e Indemnity Agreement dated January 1, 1979,
among the Registrant, Whiting National
Management, Inc., and Pennsylvania Manufacturers'
Association Insurance Company (incorporated by
reference to Exhibit 10g to Registration
Statement No. 33-58090 on Form S-4).
10f Agency Agreement dated January 1, 1979
among the Registrant, Whiting National
Management, Inc., and Pennsylvania Manufacturers'
Association Insurance Company (incorporated by
reference to Exhibit 10h to Registration
Statement No. 33-58090 on Form S-4).
10g Indemnification Agreement, dated February
22, 1993, between the Registrant and William F.
Poe, Sr. (incorporated by reference to Exhibit
10k to Registration Statement No. 33-58090 on
Form S-4).*
10h Deferred Compensation Agreement, dated May
1, 1983, as amended April 27, 1993, between Brown
& Brown, Inc. and Kenneth E. Hill (incorporated
by reference to Exhibit 10i to Form 10-K for the
year ended December 31, 1993).
10i Employment Agreement, dated April 28,
1993, between the Registrant and William F. Poe,
Sr. (incorporated by reference to Exhibit 10j to
Form 10-K for the year ended December 31, 1993).
10j Employment Agreement, dated April 28, 1993
between the Registrant and J. Hyatt Brown
(incorporated by reference to Exhibit 10k to Form
10-K for the year ended December 31, 1993).
<PAGE 14>
10k Portions of Employment Agreement, dated
April 28, 1993 between the Registrant and Kenneth
E. Hill (incorporated by reference to Exhibit 10l
to Form 10-K for the year ended December 31,
1993).
10l Portions of Employment Agreement, dated
April 28, 1993 between the Registrant and Jim W.
Henderson (incorporated by reference to Exhibit
10m to Form 10-K for the year ended December 31,
1993).
10m Registrant's Stock Performance Plan
(incorporated by reference to Exhibit 4 to
Registration Statement No. 333-14925 on Form S-8).
10n Asset Purchase Agreement, dated as of April
1, 1996, among the Registrant, Health Care
Insurers, Inc., Richard J. Greenwood, Bruce G.
Geer, and Richard J. Greenwood & Bruce G. Geer,
Inc. (filed herewith).
11 Statement Re: Computation of Per Share
Earnings.
13 Portions of Registrant's 1996 Annual Report
to Shareholders (not deemed "filed" under the
Securities Exchange Act of 1934, except for those
portions specifically incorporated by reference
herein).
22 Subsidiaries of the Registrant.
23a Consent of Ernst & Young LLP.
23b Consent of Arthur Andersen LLP.
24a Powers of Attorney pursuant to which this
Form 10-K has been signed on behalf of certain
directors and officers of the Registrant.
24b Resolutions of the Registrant's Board of
Directors, certified by the Secretary.
27 Financial Data Schedule.
______________________
* The registrant has Indemnification Agreements with certain of
its other directors and former directors (Joseph E. Brown,
Bruce G. Geer, V.C. Jordan, Jr., Byrne Litschgi, Charles W.
Poe, William F. Poe, Jr., and Bernard H. Mizel) that are
identical in all material respects to Exhibit 10g except for
the parties involved and the dates executed.
(b) REPORTS ON FORM 8-K
None.
<PAGE 15>
SCHEDULE II
POE & BROWN, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Additions
___________________________
(1) (2)
__________ ____________
Balance at Charged to Charged to Balance at
beginning cost and other accounts- Deductions- end of
Description of period expenses expenses describe period
___________ _________ __________ _______________ ___________ ___________
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996
Deducted from asset account:
Allowance for doubtful
accounts $100,000 $259,000 $ ------ $359,000(A) $ -----
________ ________ _________ ___________ _________
Year ended December 31, 1995
Deducted from asset account:
Allowance for doubtful
accounts $ 69,000 $ 72,000 $ ------- $ 41,000(A) $100,000
________ ________ __________ ___________ _________
Year ended December 31, 1994
Deducted from asset account:
Allowance for doubtful
accounts $435,000 $ 19,000 $ ------ $385,000(A) $ 69,000
________ ________ __________ ___________ _________
</TABLE>
________________________
(A) Uncollectible accounts written off, net of recoveries.
<PAGE 16>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
of Poe & Brown, Inc.:
We have audited in accordance with generally accepted auditing
standards, the 1996 and 1995 consolidated financial statements
included in Poe & Brown, Inc.'s Annual Report to Shareholders
incorporated by reference in this Form 10-K, and have issued our
report thereon dated January 24, 1997. Our audit was made for
the purpose of forming an opinion on those statements taken as a
whole. The schedule listed in Item 14(a)2(a) Schedule II -
Valuation and Qualifying Accounts is the responsibility of the
Company's management and is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not
part of the basic consolidated financial statements. The 1996
and 1995 amounts in this schedule have been subjected to the
auditing procedures applied in the audit of the 1996 and 1995
basic consolidated financial statements and, in our opinion,
fairly state in all material respects the financial data required
to be set forth therein in relation to the 1996 and 1995 basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Orlando, Florida
January 24, 1997
<PAGE 17>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
POE & BROWN, INC.
Registrant
By: *
___________________________________
J. Hyatt Brown
Chief Executive Officer
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed by the following persons on
behalf of the Registrant and in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
Signature Title Date
___________ ______ ____
<S> <C> <C>
* Chairman of the Board, President March 21, 1997
_______________________ and Chief Executive Officer
J. Hyatt Brown (Principal Executive Officer)
*
_______________________ Director March 21, 1997
Samuel P. Bell, III
*
_______________________ Director March 21, 1997
Bradley Currey, Jr.
*
_______________________ Director March 21, 1997
Bruce G. Geer
*
______________________ Director March 21, 1997
Jim W. Henderson
*
_______________________ Director March 21, 1997
Kenneth E. Hill
*
______________________ Director March 21, 1997
Theodore J. Hoepner
*
______________________ Vice President, Treasurer and March 21, 1997
James A. Orchard Chief Financial Officer
(Principal Financial and Accounting Officer)
</TABLE>
*By: /s/ LAUREL L. GRAMMIG
_______________________________
Laurel L. Grammig
Attorney-in-Fact
<PAGE 1>
EXHIBIT 3b
AS AMENDED EFFECTIVE AS
OF JULY 30, 1996
BY-LAWS
POE & BROWN, INC.
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meetings of Shareholders
The annual meeting of the Shareholders for the election of
the Board of Directors and the transaction of such further
business as may come before the meeting shall be held at the
Company's offices on the fourth Thursday of April each year (or
in the event such day is a legal holiday, on the day next
following which is not a legal holiday), unless by resolution of
the Board of Directors in any year a different time is
designated. Meetings of the shareholders may be held either
within or without the State of Florida.
Section 2. Special Meetings of Shareholders
Special meetings of the shareholders may be called by the
President or the Board of Directors whenever he or they deem it
proper and shall be called by the President or by the Board of
Directors upon the written request of shareholders holding a
majority of common stock outstanding. Such meetings may be held
either within or without the State.
Section 3. Notice of Meetings of Shareholders
A notice of each meeting of shareholders, signed by the
Secretary, shall be mailed to each shareholder having the right
and entitled to vote at such meeting, at his address as it
appears on the records of the Corporation, not less than 10 nor
more than 60 days before the date set for the meeting. If any
such shareholder's address is unknown, notice shall be given by
advertising once, in some newspaper published in Tampa, Florida
within the time above specified for served or mailed notice. If
any shareholder shall transfer any of his stock after notice, it
shall not be necessary to notify the transferee. Any
shareholder, however, may waive notice of any meeting, either
before, at or after such meeting.
Section 4. Qualification of Voters
The directors may fix a date not more than 70 days prior to
the date set for such meeting as the record date of which the
shareholders of record who have the right to and are entitled to
notice of and to vote at such meeting and any adjournment thereof
shall be determined.
<PAGE 2>
Section 5. Proxy and Voting
Shareholders who are qualified to vote may vote at any
meeting, either in person or, if absent, by proxy in writings
which shall be filed with the Secretary of the meeting before
being voted. Each common shareholder shall be entitled to as
many votes as he holds shares of stock.
Section 6. Quorum
At any meeting of the shareholders a majority in interest of
all the common stock issued and outstanding represented by
shareholders of record in person or by proxy shall constitute a
quorum for the transaction of business. A less interest may
adjourn any meeting and the meeting may be held as adjourned
without further notice, provided however, that directors shall
not be elected at meetings so adjourned. Any question may be
considered and acted upon at an annual meeting of the
shareholders, but no question not stated in the call for a
special meeting shall be acted upon thereat except by the written
consent to the holders of a majority of the outstanding common
stock, said consent to be filed with the records of the
Corporation.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Number and Qualifications of Directors
The Board of Directors shall consist of nine (9) in number
to be elected annually at the meeting of the shareholders by a
majority of the shares voted. The number may be increased or
diminished from time to time, by resolution of the Board of
Directors, but shall never be less than three (3). It shall not
be necessary for directors to be shareholders, but all directors
shall be of full age and at least one shall be a citizen of the
United States. A director shall hold office until his successor
is elected and has qualified.
Section 2. Meetings of Directors
The Board of Directors shall hold its regular and its
special meetings at such times and places, within or without the
state, as they deem to be to the best interest of the
Corporation. The Board of Directors shall fix the time and place
of its regular meetings. The President or any two directors may
call special meetings of the Board of Directors but the President
shall call a special meeting or meetings whenever requested in
writing so to do by the holders of a majority of the stock then
outstanding. The Board of Directors may conduct meetings by
means of a conference telephone hookup.
Section 2A. Action by Written Consent
Any action required or permitted to be taken at a meeting of
the Board of Directors or of a Committee may be taken by written
consent, without a meeting, if the action is taken by all of the
members of the Board or the Committee. The action shall be
evidenced by one or more written consents describing the action
taken and shall be signed by each director or Committee member.
<PAGE 3>
Section 3. Notice of Meetings of Board of Directors
After the Board of Directors has determined the time and
place for regular meetings no notice thereof need be given.
Notice of special meetings, stating the time and place thereof,
shall be given to each director by mailing the same special
delivery and, if it will expedite the notice, airmail, at his
residence or business address at least two (2) days before the
meeting, or by delivering the same to him personally or
telegraphing or telecopying the same to him at his residence or
business address not later than the day before the day on which
the meeting is to be held, unless in case of emergency the
President shall prescribe a shorter notice to be given
personally, by telephone, telegram or by telecopy. The meeting
of the Board of Directors for the election of officers may be
held without notice immediately after the annual meeting of the
shareholders and at the same place. Any director may waive
notice of any meeting of the Board of Directors either before, at
or after such meeting.
Section 4. Powers of Directors
The Board of Directors shall have the entire management of
the business of the Corporation. In the management and control
of the property, business and affairs of the Corporation, the
Board of Directors is hereby vested with all the powers possessed
by the Corporation itself, so far as this delegation of authority
is not inconsistent with the laws of the State of Florida, with
the Certificate of Incorporation or with these By-Laws. The
Board of Directors shall have the power to determine what
constitutes net earnings, profits, and surplus, respectively,
what amount shall be reserved for working capital and for any
other purposes and what amount shall be declared as dividends,
and such determination by the Board of Directors shall be final
and conclusive. The Board of Directors shall also have power to
determine what amounts, if any, shall be borrowed by the
Corporation and upon what terms, conditions or security and shall
be authorized to incur such indebtedness as they may deem
necessary and to authorize the execution thereof by the officers
of the Corporation. The Board of Directors may, by resolution,
designate two or more of their number to constitute an executive
committee, who, to the extent provided in such resolution, shall
have and may exercise the powers of the Board of Directors.
Section 5. Vacancies
When for any reason the office of a director shall become
vacant, the remaining directors shall by a majority vote elect a
successor who shall hold office until his successor is elected
and has qualified. Vacancies resulting from an increase in the
number of directors may be filled in the same manner.
Section 6. Quorum of Directors
A majority of the members of the Board of Directors is
required to constitute a quorum for the transaction of business,
but a lesser number (not less than two) may adjourn any meeting
and the meeting may be held as adjourned without further notice.
When a quorum is present at any meeting, the act of the majority
of the directors present shall be the act of f the Board of
Directors and this shall be true even if no notice of such
meeting shall have been given, provided a majority of the Board
shall waive, as hereinabove provided, the giving of such notice.
<PAGE 4>
Section 7. Resignation or Removal
Any director may resign at any time by giving written notice
to the Board of Directors, the President or the Secretary. Any
such resignation shall take effect at the time specified therein,
or if the time not be specified therein, upon its acceptance by
the Board of Directors. The shareholders at any meeting called
for the purpose by vote of a majority of the common stock issued
and outstanding may remove from office any director elected by
the shareholders or Board of Directors and elect his successor.
ARTICLE III
OFFICERS
Section 1. Election and Qualification
The Officers of this Corporation shall consist of a Chairman
of the Board, a President, a Vice President, a Secretary and a
Treasurer and one of more additional Vice Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers or such
other officers as the Board of Directors may provide. All of
such officers shall be elected by the Board of Directors
immediately after the annual meeting of the shareholders. None
of the officers need be directors. The same person may hold more
than one office, except those of President and Secretary or
Assistant Secretary. The Board of Directors shall have the
authority to fill any vacancy in any office.
The Board of Directors shall have full authority to fix the
compensation of all officers. All officers shall hold office
until their successors are elected and have qualified.
Section 2. Chairman of the Board
The Chairman of the Board shall preside at all meetings of
the shareholders and shall preside at meetings of the Board of
Directors, and in the absence, sickness or other disability of
the President, shall serve as the chief executive officer of the
Corporation. The Chairman of the Board, President or Vice
President, unless some other person is specifically authorized by
vote of the Board of Directors, shall sign all Certificates of
stocks, bonds, deeds, mortgages, leases, or any other written
instruments of the Corporation. He shall perform all the duties
commonly incident to his office and shall perform such other
duties as the Board of Directors shall designate.
Section 2A. President
The President shall be the chief executive officer of the
Corporation and shall preside at meetings of the shareholders
and/or directors in the absence, sickness or other disability of
the Chairman of the Board. The President shall perform all the
duties commonly incident to his office and shall perform such
other duties as the Board of Directors shall designate.
Section 3. Vice President
The Vice President shall perform the duties and have the
powers of the President (other than those as specified as duties
of the Chairman of the Board) during the absence, sickness, or other
<PAGE 5>
disability of the President. In addition, he shall perform
such other duties and have such other powers as the Board of
Directors shall designate.
Section 4. Secretary
The Secretary shall keep accurate minutes of all meetings of
the shareholders and the Board of Directors and shall perform all
the duties commonly incident to his office and shall perform such
other duties and have such other powers as the Board of Directors
shall designate. The Secretary shall have charge of the
Corporate Seal and shall, if requested to do so, attest written
instruments of the Corporation executed by the President or the
Chairman the Board and affix the Corporate Seal thereto. In the
absence of the Secretary, the Assistant Secretary shall perform
the aforesaid duties.
Section 5. Treasurer
The Treasurer, subject to the order of the Board of
Directors, shall have the care and custody of the money, funds,
valuable papers and documents of the Corporation and shall have
and exercise under the supervision of the Board of Directors all
the powers and duties commonly incident to his office. He shall
keep accurate accounts of the Corporation's transactions which
shall be the property of the Corporation.
Section 6. Resignation and Removal
Any officer of the Corporation may resign at any time by
giving written notice to the Board of Directors, the President or
the Secretary of the Corporation. Any such resignation shall
take effect at the time specified therein or if the time be not
specified therein upon its acceptance by the Board of Directors.
The shareholders at any meeting called for the purpose by vote of
a majority of the stock issued and outstanding may remove from
office any officer elected or appointed by the Board of Directors
and elect or appoint his successor. The Board of Directors by
vote of not less than a majority of the entire Board may remove
from office any officer or agent elected or appointed by it.
ARTICLE IV
STOCK
Section 1. Certificate of Stock
Certificates shall be signed by the Chairman of the Board or
the President and the Secretary or an Assistant Secretary and
sealed with the seal of the Corporation. The seal may be
facsimile, engraved or printed. When such Certificate is signed
by a transfer agent or by a registrar, the signature of any of
those officers named herein may be facsimile. Shares of stock
may be transferable only by the registered holder thereof in
person or by his attorney duly authorized in writing at the
office of an authorized transfer agent of the Corporation upon
the surrender of the certificate or certificates for such shares.
Section 2. Stock Register
A stock book, stock records or register shall be kept at the
office of the Corporation in Florida, or in the office of one or more
of its transfer agents or registrars, containing the names, alphabetically
<PAGE 6>
arranged, with the address, of every shareholder,
showing the number of shares of stock held of record by him. If
the stock records are kept in the office of a transfer agent or
registrar, the Corporation shall keep at its office in Florida
copies of the stock list prepared from the stock records and sent
to it from time to time by said transfer agent or registrar.
Section 3. Defaced or Mutilated Stock Certificates
A new certificate may be issued in lieu of any certificate
previously issued that may be defaced or mutilated, upon
surrender for cancellation of the part of the old certificate
sufficient, in the opinion of the Secretary, to protect the
Corporation against loss or liability.
Section 4. Loss of Stock Certificates
In case of loss of any certificate of stock, the owner,
before obtaining a duplicate thereof, shall be required to make
affidavit that the stock has been lost, stolen or destroyed,
describing the same accurately, which affidavit shall be filed
with the Treasurer and shall be further required to give to the
Corporation a bond or indemnity agreement satisfactory to the
Board of Directors.
ARTICLE V
SEAL
Section 1. Description of Seal
The corporate seal of the Corporation shall bear the words
POE & BROWN, INC., and the word "FLORIDA", which shall be between
two concentric circles, and on the inside the inner circle shall
be the words "CORPORATE SEAL" and figures "1959", an impression
of the said seal appearing on the margin hereof.
ARTICLE VI
AMENDMENTS
Section 1. Method of Amendment or Change
These By-Laws may be amended or repealed and additional By-
Laws added or adopted by a majority vote of the entire Board of
Directors so long as the proposed action is not inconsistent with
any By-Laws which may have been adopted by any shareholders
meeting by a vote of the majority of the issued and outstanding
common stock of the Corporation. These By-Laws may be amended or
repealed at any shareholders meeting by a vote of the majority of
the issued and outstanding common stock of the Corporation.
<PAGE 7>
ARTICLE VII
MISCELLANEOUS
Section 1. Indemnification of Directors and Officers
Every person who now is or hereafter may be a director or
officer of this Corporation, or a director or officer of any
other corporation serving as such at the request of this
Corporation because of this Corporation's interest as a
shareholder or creditor of such other corporation, shall be
indemnified by this Corporation against all costs and amounts of
liability therefor and expenses, including counsel fees,
reasonably incurred by or imposed upon him in connection with or
resulting from any action, suit, proceeding or claim of whatever
nature to which he is or shall be made a party by reason of his
being or having been a director or officer of this Corporation or
for such other corporation (whether or not he is such director or
such officer at the time he is made a party to such action, suit,
proceeding or claim or at the time such costs, expenses, amounts
or liability therefor are incurred by or imposed upon him),
provide that such indemnification shall not apply with respect to
any matter as to which such director or officer shall be finally
adjudged in such action, suit, proceeding or claim to have been
individually guilty of gross negligence or wilful malfeasance in
the performance of his duty as such director or officer and
provided further that the indemnification herein provided shall,
with respect to any settlement of any such suit, action,
proceeding or claim, include reimbursement of any amounts paid
and expenses reasonably incurred in settling any such suit,
action, proceeding or claim when, in the judgment of the Board of
Directors of this Corporation, such settlement and reimbursement
appeared to be for the best interests of this Corporation. The
foregoing right of indemnification shall be in addition to and
not exclusive of any and all other rights as to which any such
director or officer may be entitled under any agreement, vote of
shareholders or others.
Section 2. Validity of Certain Contracts
No contract other transaction between this Corporation and
any other association, firm corporation (whether or not a
majority of the ownership or capital stock of such other
association, firm or corporation shall be owned by this
Corporation), shall in any way be affected or invalidated by the
fact that any of the directors or officers this Corporation are
pecuniarily or otherwise interest in, or are directors or officer
such other association, firm or corporation; any director of
officer of this Corporation, individually, may be a party to or
may be pecuniarily or otherwise interested in any contract or
transaction of this Corporation; and any director of this
Corporation who is also a director of officer of such other
corporation, or who is so interested, may be counted in
determinate into existence of a quorum at the meeting of the
Board Directors of this Corporation which shall authorize or
confirm any such contract or transaction and may vote thereat to
authorize or confirm any such contract or transaction with like
force and effect as if he were not such director officer of such
other corporation or not so interested; and each and every person
who may become a director or officer of this Corporation is
hereby relieve from any liability that might otherwise exist from
thus contracting with this Corporation of the benefit of himself
or any person, firm, association or corporation in which he may
be in any way - interested; provided, however, in any said
contract or transaction there shall be an absence of actual fraud
- - - END -
<PAGE 1>
EXHIBIT 10n
ASSET PURCHASE AGREEMENT
This is an ASSET PURCHASE AGREEMENT, dated as of April 1,
1996 (the "Agreement"), among RICHARD J. GREENWOOD & BRUCE G.
GEER, INC., a Colorado corporation ("Buyer"), HEALTH CARE
INSURERS, INC., a Colorado corporation ("Seller"), POE & BROWN,
INC., a Florida corporation ("Parent"), BRUCE G. GEER ("Geer")
and RICHARD GREENWOOD ("Greenwood").
BACKGROUND
Seller is engaged primarily in the insurance agency business
and wishes to sell substantially all of its assets relating to
its insurance agency business to Buyer. Buyer desires to acquire
such assets upon the terms and conditions expressed in this
Agreement. Parent owns all of the capital stock of Seller and is
entering into this Agreement to provide to, and receive from,
Buyer, certain assurances regarding the conduct of their
respective businesses following the closing. Geer and Greenwood
(collectively, the "Shareholders") own all of the outstanding
capital stock of Buyer and are entering into this Agreement to
provide certain assurances to Seller and Parent as an inducement
for Seller and Parent to enter into this Agreement.
THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth herein, the parties agree as follows:
ARTICLE 1
The Acquisition
Section 1.1 Covenants of Sale and Purchase. At the Closing
(as defined in Section 2.1), and upon and subject to the terms
and conditions of this Agreement, Seller will sell, convey, and
assign to Buyer all right, title, and interest in and to the
Acquired Assets (as defined in Section 1.2) free and clear of all
liens, claims, pledges, security interests, charges,
restrictions, or encumbrances of any nature whatsoever, and Buyer
will purchase the Acquired Assets from Seller in exchange for the
Purchase Price (as defined in Section 1.4).
Section 1.2 The Acquired Assets. In this Agreement, except
as set forth in Section 1.3 below, the phrase "Acquired Assets"
means and shall include all goodwill, properties, and rights of
Seller used directly or indirectly in the conduct of, or
constituting the insurance agency business of, Seller, and
includes, without limitation, the following:
(a) Purchased Book of Business. All of the insurance
agency business of Seller, including but not limited to the
professional health care liability and property insurance
business and renewals and expirations thereof, together with all
written or otherwise recorded documentation, data or information
relating to Seller's insurance agency business, including but not
limited to: (i) lists of insurance companies and records
pertaining thereto; (ii) customer lists, prospect lists, policy
forms, and/or rating information, expiration dates, information
on risk characteristics, information concerning insurance markets for
large or unusual risks, and all other types of written or otherwise recorded
<PAGE 2>
information customarily used by Seller or
available to Seller, including all other records of and
pertaining to the accounts and customers of Seller, past and
present, including, but not limited to, the active insurance
customers of Seller, all of whom are listed on Schedule 1.2(a)
(the "Purchased Book of Business"). Schedule 1.2(a) lists only
those accounts from which Seller derived revenues from insurance
carriers from the placement of business with such carriers in
1995 or 1996.
(b) General Intangibles. All of the following
intangible personal property used in connection with Seller's
insurance agency business or pertaining to the Acquired Assets:
(i) all of those licenses, permits, and
authorizations granted by any governmental authority in
connection with the operation of Seller's insurance agency
business that are transferable;
(ii) all right, title, and interest in and under
the contracts, leases and agreements listed in Schedule
1.2(b)(ii);
(iii) all of Seller's business records
necessary to enable Buyer to operate the Purchased Book of
Business;
(iv) the goodwill of Seller's insurance agency
business, including the right to use the name "Health Care
Insurers, Inc." and any other fictitious names and trade names
which are currently in use by Seller, telephone listings, post
office box, mailing address, and advertising signs and materials;
and
(v) any assignable covenants not to compete made
by employees of Seller and all other assignable covenants not to
compete in favor of Seller.
(c) Tangible Personal Property. All tangible personal
property now located at the business premises of Seller and used
in the operation of Seller's insurance agency business, including
office supplies, software, manuals, furniture, fixtures and
equipment, the principal items of which are set forth on Schedule
1.2(c).
(d) Miscellaneous Items. All other assets of Seller
relating or pertaining to the Purchased Book of Business,
including proprietary rights and information, trade secrets,
computer disks, software, data bases whether in the form of
computer tapes or otherwise, related object and source codes, and
associated manuals, and any other records or media of storage or
programs for retrieval of information pertaining to the Purchased
Book of Business, and all supplies and materials, including
promotional and advertising materials, brochures, plans, supplier
lists, manuals, handbooks, and related written data and
information.
Section 1.3 Exclusions and Exceptions. Notwithstanding the
foregoing, Seller does not agree to sell or assign, and Buyer
does not agree to purchase or assume, the following:
(a) any prepaid expenses, cash in hand or in banks,
notes receivable, money market certificates, stocks, or bonds; or
<PAGE 3>
(b) any trade accounts receivable or other receivables
described in Sections 1.5(a), (c) and (f).
Section 1.4 The Purchase Price.
(a) As consideration for the Acquired Assets and the
other covenants of Seller herein, Buyer shall pay to Seller the
following (collectively, the "Purchase Price"):
(i) On the Closing Date (as defined in Section
2.1), Buyer shall pay $1,020,000 to Seller by wire transfer of
immediately available funds.
(ii) On or before May 1, 1997 (the "Second Payment
Date"), Buyer shall pay to Seller, in cash or immediately
available funds, a sum equal to 15% of the amount, if any, by
which Buyer's total revenues from the operation of Seller's
former insurance agency business during the twelve-month period
beginning on April 1, 1996 and ending on March 31, 1997 (the
"Earn Out Period"), exceeds $900,000 (15% of such excess is
herein referred to as the "Earn Out Amount"). For purposes of
this Section 1.4(a)(ii), the term "revenues" shall mean all
commissions, contingent commissions, interest income, and all
other revenues related to Buyer's insurance agency business after
the Closing, less brokerage fees payable on commissions. Buyer
agrees to operate the business in the ordinary course during the
Earn Out Period, substantially in accordance with the policies
and practices followed by Seller on a consistent basis prior to
the Closing Date.
(b) Buyer shall prepare its financial statements in
accordance with generally accepted accounting principles applied
on a consistent basis, and such financial statements shall be the
basis for determining the Earn Out Amount. Copies of Buyer's
financial statements for the Earn Out Period shall be promptly
furnished by Buyer to Seller or Parent. Seller and Parent shall
have the right, within 30 days of receipt of such financial
statements, to question and receive answers from Buyer's
executive officers and audit the financial books and records of
Buyer for the purpose of determining the accuracy of Buyer's
calculation of the Earn Out Amount and Buyer's compliance with
the terms of this Section 1.4.
(c) The parties will attempt in good faith to
resolve any disputes regarding the determination of the Earn Out
Amount by negotiations between executives of Buyer and Parent.
In the event the parties are unable to resolve any such dispute,
the dispute shall be resolved by informal arbitration before a
single arbitrator, who shall be an independent certified public
accountant chosen by mutual agreement of the parties. The
arbitrator shall determine the items in dispute in accordance
with this Agreement, and his or her determination shall be
conclusive, final, and binding for all purposes under this
Agreement. The fees of the arbitrator and the expenses of the
arbitration shall be borne by the non-prevailing party in the
arbitration proceeding.
(d) For federal income tax and other purposes, the
Purchase Price shall be allocated among the Acquired Assets by
each of the parties as follows:
(i) Fixed assets and other tangible property:
$35,000;
(ii) Purchased Book of Business: $900,000; and
(iii) Goodwill: $85,000 plus the Earn Out
Amount.
<PAGE 4>
Section 1.5 Commissions Collected. It is understood and
agreed as follows:
(a) All commissions on agency billed policies or
endorsements effective (whether new business or renewal business)
prior to the Effective Date, excluding any installments due on or
after the Effective Date, shall be the property of Seller
regardless of whether commissions for such polices are collected
before or after the Effective Date, and Seller (with Buyer's
assistance, as described in Section 1.5(g)) shall be responsible
for paying all premiums due the respective insurance companies
relative to such policies or endorsements. Buyer shall use its
best efforts to assist Seller in the collection and delivery to
Seller of all receivables due to Seller after the Effective Date.
(b) All commissions on agency billed policies or
endorsements effective (whether new business or renewal business)
on or after the Effective Date, including any installments due on
or after the Effective Date related to policies effective prior
to the Effective Date, shall be the property of Buyer, regardless
of whether commissions for such policies are collected before or
after the Effective Date, and Buyer shall be responsible for
paying all premiums due the respective insurance companies
relative to such policies or endorsements.
(c) Commission income related to any and all direct
bill policies, endorsements, cancellations, and audits receivable
before the Effective Date, but entered and received on or after
the Effective Date, shall be the property of Seller, whether
credit or debit, and regardless of effective date.
(d) Commission income related to all direct bill
policies, endorsements, cancellations, and audits receivable on
or after the Effective Date shall be the property of Buyer,
whether credit or debit, and regardless of effective date.
(e) Each of the parties will be responsible for
brokerage fees due on the respective commissions to which they
are entitled.
(f) Any and all contingent commissions related to
business placed in 1995 received prior to, on or after the
Effective Date shall be the property of Seller.
(g) Buyer shall assume responsibility for continuing
the business of Seller after the Closing, and shall take all
actions necessary or appropriate to assist Seller in fulfilling
its responsibilities with respect to currently unissued
policies, such as remitting premiums received that are payable to
insurance companies, paying any refunds due to insureds from cash
received from such insureds, and similar tasks with respect to
insurance accounts acquired from Seller.
Section 1.6 Expenses.
(a) All taxes, utilities, and expenses related to
Seller's insurance agency business shall be prorated as of the
Effective Date, with Seller responsible for the portions of such
items accruing before the Effective Date and Buyer responsible
for the portions of such items accruing on and after the
Effective Date.
(b) In connection with Buyer's assumption of the lease
for Seller's business premises, Buyer shall promptly refund to
Seller, upon Buyer's receipt thereof, the rent deposit made by Seller with
<PAGE 5>
respect to such lease, and Buyer shall also promptly
refund to Seller the amount of any prepaid utilities and other
prepaid items made by Seller prior to the Closing Date.
Section 1.7 Sales Taxes. To the extent they relate to the
Acquired Assets, all sales taxes due as a result of the transfer
of the Acquired Assets shall be paid by Buyer.
Section 1.8 Assumed Liabilities. On the Closing Date,
Seller shall deliver the Acquired Assets to Buyer, free and clear
of any and all liens and encumbrances, and Buyer shall assume all
obligations of Seller under the contracts and agreements assumed
by Buyer pursuant to Section 1.2(b)(ii); provided, however, that
except as contemplated by Section 6.7, Buyer shall not assume or
be deemed to have assumed (i) any obligations incurred by Seller
under the assumed contracts and agreements prior to the Effective
Date, (ii) any obligations of Seller under the provisions of
Sections 1.5 or 1.6, or (iii) any other liability or obligation
of Seller whatsoever.
ARTICLE 2
Closing, Items To Be Delivered,
Further Assurances, And Effective Date
Section 2.1 Closing. The consummation of the purchase and
sale of assets under this Agreement (the "Closing") will take
place at 10:30 a.m. on April 10, 1996 (the "Closing Date"), at
the offices of Poe & Brown, Inc., 401 East Jackson Street, Suite
1700, Tampa Florida 33602, unless another date or place is
agreed to in writing by the parties hereto.
Section 2.2 Conveyance and Delivery by Seller. On the
Closing Date, Seller will surrender and deliver possession of the
Acquired Assets to Buyer and take such steps as may be required
to put Buyer in actual possession and operating control of the
Acquired Assets, and in addition shall deliver to Buyer such bill
of sale and assignments and other good and sufficient instruments
and documents of conveyance, in form reasonably satisfactory to
Buyer and its counsel, as shall be necessary and effective to
transfer and assign to, and vest in, Buyer all right, title, and
interest in and to the Acquired Assets free and clear of any
lien, charge, pledge, security interest, restriction or
encumbrance of any kind.
Section 2.3 Wire Transfer by Buyer. On the Closing Date,
Buyer will wire transfer to Seller $1,020,000 in immediately
available funds, representing the portion of the Purchase Price
to be paid at Closing.
Section 2.4 Prepaid Expenses. Within three days after the
Closing Date, Buyer shall deliver a check to Seller representing
payment of all prepaid expenses of Seller. To the extent that
certain prepaid expenses are unknown at such time, Buyer will pay
Seller the amount of such additional expenses promptly upon their
determination.
Section 2.5 Mutual Performance. At or prior to the
Closing, the parties hereto shall also deliver to each other the
agreements, opinions, certificates, and other documents and
instruments referred to in Article 8 of this Agreement.
Section 2.6 Third Party Consents. To the extent that
Seller's rights under any agreement or other Acquired Asset to be
assigned to Buyer hereunder may not be assigned without the consent of
<PAGE 6>
another person which has not been obtained, Buyer will
use its best efforts to obtain such consents, and Seller shall
cooperate with Buyer to obtain any such required consents as
promptly as possible.
Section 2.7 Change in Name. Immediately after the Closing
Date, Seller shall execute and file all documents required to
change Seller's name to another name bearing no similarity to
Health Care Insurers, Inc. Neither Seller, Parent nor any of
their respective subsidiaries or affiliates shall use the name
"Health Care Insurers, Inc." (or any derivative name) after the
Closing Date.
Section 2.8 Further Assurances. From time to time after
the Closing, Seller, at Buyer's request, will execute,
acknowledge and deliver to Buyer such other instruments of
conveyance and transfer and will take such other actions and
execute and deliver such other documents, certificates and
further assurances as Buyer may reasonably require in order to
vest more effectively in Buyer, or to put Buyer more fully in
possession of, any of the Acquired Assets. Each of the parties
will cooperate with the other and execute and deliver to the
other party such other instruments and documents and take such
other actions as may be reasonably requested from time to time as
necessary to carry out, evidence and confirm the intended
purposes of this Agreement.
Section 2.9 Effective Date. The Effective Date of the
Agreement and all related instruments executed at the Closing
shall be April 1, 1996 unless otherwise specified.
ARTICLE 3
Representations And Warranties Of Seller And Parent
Seller and Parent represent and warrant to Buyer as follows:
Section 3.1 Organization. Each of Seller and Parent is a
corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation
and has all requisite corporate power and authority and all
necessary governmental approvals to own, lease, and operate its
properties and to carry on its business as now being conducted
except where failure to be so organized, valid, or active would
not, in the aggregate, have a material adverse effect on Seller.
Seller is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the property owned,
leased, or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except
where the failure to be so duly qualified or licensed and be in
good standing would not in the aggregate have a material adverse
effect on Seller.
Section 3.2 Authority. Each of Seller and Parent has the
requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery, and performance of this
Agreement has been duly authorized by all necessary corporate
action and no other corporate proceedings on the part of Seller
or Parent are necessary to authorize this Agreement. This
Agreement has been duly executed and delivered by Seller and
Parent and, assuming this Agreement constitutes a valid and
binding obligation of Buyer, constitutes the legal, valid, and
binding obligation of Seller and Parent, enforceable against them
in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, or similar laws from time to time in
effect which offset creditors' rights generally and general
equitable principles (regardless of whether the issue of
enforceability is considered in a proceeding in equity or in
law).
<PAGE 7>
Section 3.3 Consents and Approvals; No Violations. Except
as set forth in Schedule 3.3, neither the execution, delivery, or
performance of this Agreement by Seller or Parent nor the
consummation by them of the transactions contemplated hereby nor
compliance by them with any of the provisions hereof will (i)
conflict with or result in any breach of any provision of their
Articles of Incorporation or Bylaws, (ii) require any filing
with, or authorization, consent, or approval of, any court,
arbitral tribunal, administrative agency or commission, or other
governmental or other regulatory authority or agency (a
"Governmental Entity"), (iii) result in a violation or breach of,
or constitute a default under, any of the terms, conditions, or
provisions of any agreement or other instrument or obligation to
which Seller or Parent is a party or by which Seller or Parent or
any of their respective properties or assets are bound, or
(iv) violate any order, writ, injunction, decree, statute, rule,
or regulation applicable to Seller or Parent or any of their
respective properties or assets, except in the case of (iii) or
(iv) for violations, breaches, or defaults that would not,
individually or in the aggregate, have a material adverse effect
on Seller or Parent.
Section 3.4 Financial Statements. Seller has delivered to
Buyer true and complete copies of (i) the unaudited balance sheet
of Seller at December 31, 1995 and the related statement of
income for the fiscal year then ended, and (ii) the unaudited
balance sheet of Seller at February 29, 1996 and the related
statement of income for the two months then ended, each of which
has been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
involved. Such balance sheets fairly present the financial
position, assets, and liabilities of Seller at the dates
indicated and such statements of income fairly present the
results of operations for the periods then ended.
Section 3.5 Absence of Certain Changes. Except as
disclosed in Schedule 3.5 and in the unaudited balance sheet and
statement of income for the period ended February 29, 1996, to
the knowledge of Seller and Parent, since December 31, 1995,
there have been no events or changes having a material adverse
effect on Seller or the Acquired Assets.
Section 3.6 Acquired Assets. Seller owns and holds, free
and clear of any lien, charge, pledge, security interest,
restriction or encumbrance, sole and exclusive right, title, and
interest in and to the Acquired Assets, including but not limited
to the customer expiration records therefor, together with the
exclusive right to use such records and all customer accounts,
dailies, copies of insurance policies and contracts in force and
all files, invoices and records pertaining to the customers,
their contracts and insurance policies, and all other information
comprising the Purchased Book of Business.
Section 3.7 Litigation. Except as disclosed in Schedule
3.7, there is no suit, claim, action, proceeding, or
investigation pending or, to the best knowledge of Seller and
Parent, threatened, against Seller. Except as disclosed in
Schedule 3.7, to the knowledge of Seller and Parent, Seller is
not subject to any outstanding order, writ, injunction, or decree
which, insofar as can be reasonably foreseen, individually or in
the aggregate, in the future would have a material adverse effect
on Seller or the Acquired Assets or would prevent Seller from
consummating the transactions contemplated hereby.
Section 3.8 Compliance with Applicable Law. Seller holds
all permits, licenses, variances, exemptions, orders, and
approvals of all Governmental Entities necessary for the lawful
conduct of the insurance agency business (the "Permits"), except
for failures to hold such permits, licenses, variances,
exemptions, orders, and approvals that would not, individually or
in the aggregate, have an adverse effect on Seller. Seller is in
compliance with the terms of the Permits, except where the
failure so to comply would not have an adverse effect on Seller.
As of the date of this Agreement, no investigation or review
<PAGE 8>
by any Governmental Entity with respect to Seller is pending or
threatened, nor has any Governmental Entity indicated an
intention to conduct the same, other than, in each case, those
the outcome of which, as far as reasonably can be foreseen, in
the future will not have a material adverse effect on Seller or
the Acquired Assets.
Section 3.9 Tax Returns and Audits. Seller has timely
filed all federal, state, local, and foreign tax returns required
to be filed by it or has paid or made provision for the payment
of any penalty or interest arising from the late filing of any
such return, has correctly reflected all taxes required to be
shown thereon, and has fully paid or made adequate provision for
the payment of all taxes that have been incurred or are due and
payable pursuant to such returns or pursuant to any assessment
with respect to taxes in such jurisdictions, whether or not in
connection with such returns.
Section 3.10 Errors and Omissions. To the knowledge of
Seller and Parent, except as disclosed on Schedule 3.10, Seller
has not incurred any liability or taken or failed to take any
action that will result in a liability for errors or omissions in
the conduct of its insurance agency business, except such
liabilities as are covered by insurance. To the knowledge of
Seller and Parent, Seller now has adequate errors and omission (E
& O) insurance coverage in force under policies covering Parent
and its subsidiaries.
Section 3.11 Defaults Under Contracts. To the knowledge of
Seller and Parent, no party is in default under any of the
contracts and agreements listed in Schedule 1.2(b)(ii).
Section 3.12 No Misrepresentations. None of the
representations and warranties set forth in this Article 3
contains any untrue statement of a material fact or omits the
statement of any material fact necessary to render the statements
made not misleading.
ARTICLE 4
Representations And Warranties Of Buyer
Buyer represents and warrants to Seller as follows:
Section 4.1 Organization. Buyer is a corporation
organized, validly existing, and in active status under the laws
of Colorado and has all requisite corporate power and authority
and all necessary governmental approvals to own, lease, and
operate its properties and to carry on its business as now being
conducted and as proposed to be conducted, except where failure
to be so organized, valid, or active would not, in the aggregate,
have a material adverse effect on Buyer. Buyer is duly qualified
or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased, or operated by
it or the nature of the business conducted by it or as proposed
to be conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or
licensed and be in good standing would not in the aggregate have
a material adverse effect on Buyer.
Section 4.2 Authority. Buyer has the requisite corporate
power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution,
delivery, and performance of this Agreement, and the consummation
of the Agreement and the other transactions contemplated hereby,
have been duly authorized by all necessary corporate action on
the part of Buyer and no other corporate proceeding on the part
of Buyer is necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has
been duly executed and delivered by Buyer, and, assuming this
Agreement constitutes a valid and binding obligation of
<PAGE 9>
Seller, constitutes a valid and binding obligation of Buyer, enforceable
against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization or similar laws from time
to time in effect which offset creditors' rights generally and
general equitable principles (regardless of whether the issue of
enforceability is considered in a proceeding in equity or in
law).
Section 4.3 Consents and Approvals; No Violations. Neither
the execution, delivery, or performance of this Agreement by
Buyer nor the consummation by Buyer of the transactions
contemplated hereby nor compliance by Buyer with any of the
provisions hereof will (i) conflict with or result in any breach
of any provision of the Articles of Incorporation or the Bylaws
of Buyer, (ii) require any filing with, or authorization,
consent, or approval of, any Governmental Entity, (iii) result in
a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation, or acceleration)
under, any of the terms, conditions, or provisions of any
agreement or other instrument or obligation to which Buyer is a
party or by which Buyer or its properties or assets may be bound,
or (iv) violate any order, writ, injunction, decree, statute,
rule, or regulation applicable to Buyer or any of its properties
or assets, except in the case of (iii) or (iv) for violations,
breaches, or defaults that would not, individually or in the
aggregate, have a material adverse effect on Buyer.
Section 4.4 Litigation. There is no suit, claim, action,
proceeding, or investigation pending or, to the best knowledge of
Buyer, threatened against Buyer or its affiliates before any
Governmental Entity that is reasonably likely to have a material
adverse effect on Buyer or would prevent Buyer from consummating
the transactions contemplated by this Agreement.
Section 4.5 Compliance with Applicable Law. Buyer holds
all permits, licenses, variances, exemptions, orders, and
approvals of all Governmental Entities necessary for the lawful
conduct of the insurance agency business of Seller being acquired
by Buyer, except for failures to hold such permits, licenses,
variances, exemptions, orders, and approvals that would not have
a material adverse effect on Buyer.
Section 4.6 Contracts with Third Parties. Buyer and its
affiliates have no contract, agreement or understanding with any
third party concerning a potential sale of Seller's insurance
agency business following the Closing.
Section 4.7 No Misrepresentations. None of the
representations and warranties set forth in this Article 4
contains any untrue statement of a material fact, or omits the
statement of any material fact necessary to render the statements
made not misleading.
ARTICLE 5
Covenants Of Seller And Parent
Section 5.1 Operation of Business. During the period
through the Closing Date, Seller agrees that (except as expressly
contemplated or permitted by this Agreement or to the extent that
Buyer otherwise consents in writing):
(a) Ordinary Course. Seller shall carry on its
business in the usual, regular, and ordinary course in
substantially the same manner as heretofore conducted and shall
use all reasonable efforts to preserve intact its present
business, keep available the services of its present employees, and
<PAGE 10>
preserve its relationships with customers, suppliers, vendors
and others having business dealings with it to the end that the
goodwill, the ongoing business, and the Acquired Assets shall not
be impaired in any material respect at the Closing Date.
(b) No Dispositions. Other than (i) as may be
required by law to consummate the transactions contemplated
hereby, or (ii) sales or licenses of products or technology in
the ordinary course of business consistent with prior practice,
Seller shall not sell, lease, license, encumber, or otherwise
dispose of, or agree to sell, lease, license, encumber, or
otherwise dispose of, any of its assets that are material,
individually or in the aggregate.
(c) No Acquisitions. Seller shall not acquire or
agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial
portion of the assets of, or by any manner, any business or any
corporation, partnership, or other business organization or
division thereof, or otherwise acquire or agree to acquire any
property or assets not in the ordinary course of business.
(d) Indebtedness and Leases. Seller shall not incur
any indebtedness for borrowed money, guarantee any such
indebtedness, issue or sell any debt securities, warrants, or
rights to acquire any of its debt securities, or guarantee any
debt securities of others or enter into any material contracts,
leases, agreements or transactions other than, in each case, in
the ordinary course of business consistent with prior practice.
Seller shall not enter into any material leases.
(e) Employee Benefits. Seller will not, except as
expressly agreed by Buyer, (i) enter into, adopt, amend (except
as may be required by law), or terminate any employee benefit
plan, or any agreement, arrangement, plan, or policy between it
and one or more of its employees except in the ordinary course of
business consistent with past practice that, in the aggregate, do
not result in a material increase in benefits or compensation
expense, increase the compensation or fringe benefits of any
director, officer, or employee, (iii) pay any benefit not
required by any plan or arrangement as in effect as of the date
hereof, or (iv) enter into any contract, agreement, commitment,
or arrangement to do any of the foregoing.
Section 5.2 Access to Information. Upon reasonable notice,
Seller shall afford to the officers, employees, accountants,
counsel, and other authorized representatives of Buyer access
during normal business hours in the period prior to the Closing
Date, to its properties, books, contracts, commitments, records,
and senior management. Unless otherwise required by law, Buyer
will hold any such information which is nonpublic in confidence,
will not use such information in its business if the transaction
does not close and will return such information if the
transaction does not close.
Section 5.3 Covenant Against Solicitation. For a period of
three years following the Closing Date, each of Seller and Parent
agrees not to (and Parent shall cause each of its affiliates not
to) solicit, divert, accept business from, nor service, directly
or indirectly, as insurance solicitor, insurance agent, insurance
broker, or otherwise, for its account or the account of any other
agent, broker, or insurer, either as owner, shareholder,
promoter, consultant, manager, or otherwise, in any area of the
United States, any insurance account that is part of the
Purchased Book of Business identified in Schedule 1.2(a). This
Section 5.3 shall not prohibit Seller or Parent or their
respective subsidiaries and affiliates from (i) maintaining
business relationships with, or placing business through or for
insurance agents utilized by Buyer, so long as such business does
not relate to the insurance accounts identified in Schedule
1.2(a), or (ii) marketing the accounts listed in Schedule 5.3
that Parent or any of its affiliates has placed with Seller
<PAGE 11>
(and which will be acquired by Buyer hereunder) through agents or
brokers other than Buyer and/or to different insurance carriers
upon any renewal of such accounts, provided that any movement of
such accounts will be as a result of the availability of more
favorable policy terms and conditions.
Section 5.4 Covenant Not to Interfere. For a period of
three years following the Closing Date, each of Seller and Parent
agrees not to (and Parent shall cause each of its subsidiaries
and affiliates not to) hire or directly or indirectly solicit any
of Buyer's employees to work for Seller, Parent or any of their
respective subsidiaries or affiliates.
Section 5.5 Confidentiality. Each of Seller and Parent,
for a period of three years following the Closing Date, agrees
that it will not (and Parent shall cause each of its subsidiaries
and affiliates not to) disclose confidential information
concerning the Acquired Assets to any person, firm, corporation,
or entity for any reason without the prior written approval of
Buyer, which shall not be unreasonably withheld. The term
"confidential information" shall mean written documentation
related to the Acquired Assets known by Seller or Parent as of
the Closing Date, including (i) lists of Seller's customers and
companies and records pertaining thereto, (ii) customer lists,
prospect lists, policy forms, rating information, expiration
dates, information on risk characteristics, and other types of
written information customarily used by Seller. This Section 5.5
shall not apply to any confidential information that is or
becomes generally available to the public other than as a result
of a disclosure by Seller, Parent, or their respective
affiliates. This Section 5.5 shall also be inoperable to the
extent that Seller, Parent, or their respective affiliates
reasonably deems it necessary to disclose such information to
legal counsel, in connection with obtaining reasonably necessary
legal advice, or to the extent that Seller, Parent or their
respective affiliates become legally compelled to disclose such
information.
Section 5.6 Remedy for Breach of Covenants. In the event
of a breach of the provisions of Sections 5.3, 5.4 or 5.5, Buyer
shall be entitled to injunctive relief as well as any other
applicable remedies at law or in equity. Should a court of
competent jurisdiction declare any of the covenants set forth in
Sections 5.3, 5.4 or 5.5 unenforceable due to an unreasonable
restriction, duration, geographical area or otherwise, each of
the parties agrees that such court shall be empowered and shall
grant each injured party injunctive relief to the extent
reasonably necessary to protect its interests.
Section 5.7 Successor Rights. The covenants contained in
Sections 5.3, 5.4 and 5.5 shall inure to the benefit of any
successor in interest of Buyer by way of merger, consolidation,
sale or other succession.
ARTICLE 6
Covenants of Buyer And Shareholders
Section 6.1 Covenant Against Solicitation. For a period of
three years following the Closing Date, Buyer agrees, and, for
the period (not to exceed three years following the Closing Date)
that such Shareholder remains a shareholder of Buyer, each of the
Shareholders agrees, not to solicit, divert, accept business
from, nor service, directly or indirectly, as insurance
solicitor, insurance agent, insurance broker, or otherwise, for
its or his account or the account of any other agent, broker, or
insurer, either as owner, shareholder, promoter, consultant,
employee, manager, or otherwise, any insurance account serviced
by Parent or any of its subsidiaries or affiliates in any area of
the United States or Puerto Rico as of the Closing Date (other
than those accounts constituting the Purchased Book of Business
identified in Schedule 1.2(a)). This Section 6.1 shall not
prohibit Buyer or the Shareholders from maintaining business
relationships with, or placing business through or for insurance
agents utilized by Parent or its
<PAGE 12>
affiliates, so long as such business does not relate to any insurance
account serviced by Parent or any of its subsidiaries or affiliates as
of the Closing Date.
Section 6.2 Covenant Not to Interfere. For a period of
three years following the Closing Date, Buyer agrees not to hire
or directly or indirectly solicit any employees of Seller,
Parent, or their respective affiliates, to work for Buyer, any of
its affiliates, or any company that competes with Parent or its
affiliates.
Section 6.3 Remedy for Breach of Covenants. In the event
of a breach of the provisions of Sections 6.1 or 6.2, Seller
and/or Parent shall be entitled to injunctive relief as well as
any other applicable remedies at law or in equity. Should a
court of competent jurisdiction declare any of the covenants set
forth in Sections 6.1 or 6.2 unenforceable due to an unreasonable
restriction, duration, geographical area or otherwise, each of
the parties agrees that such court shall be empowered and shall
grant each injured party injunctive relief to the extent
reasonably necessary to protect its interests.
Section 6.4 Successor Rights. The covenants contained in
Sections 6.1 and 6.2 shall inure to the benefit of any successor
in interest of either Seller or Parent by way of merger,
consolidation, sale or other succession.
Section 6.5 Offers of Employment. All employees of Seller
who are actively employed on the business day immediately
preceding the Effective Date shall be offered employment with the
Buyer as of the Effective Date. Buyer shall also offer
employment to each employee that is temporarily absent on the
business day immediately preceding the Effective Date from active
employment, and who has rights of re-employment, upon termination
of such employee's temporary absence. Each offer of employment
shall be at the same position, location and rate of salary as of
the last day of his or her active employment immediately
preceding the Effective Date, except in the case of any such
employee who upon returning after a period of sickness or other
disability is not fully capable of performing all the essential
functions of his or her former position. Subject to applicable
laws, Buyer shall have the right to dismiss any or all of such
employees at any time, and to change the terms and conditions of
employment for such employees. To the extent permitted by
applicable law and the terms and conditions of Buyer's plans,
from and after the Effective Date, Buyer shall credit to such
employees, for eligibility and vesting purposes under all benefit
plans, benefit arrangements and compensation policies and
practices of Buyer, all previous service recognized for such
purposes by Seller under similar plans, arrangements, policies
and practices on the business day immediately preceding the
Effective Date. Buyer shall make available to all employees
comprehensive health and medical insurance coverage within 30
days after the Closing Date.
Section 6.6 Advise of Changes. From the Closing Date
through the Second Payment Date, Buyer shall confer on a regular
and frequent basis with Parent, report on operational matters,
and promptly advise Parent of any change or event having or
which, insofar as can reasonably be foreseen, could have, a
material adverse effect on Buyer's financial condition or results
of operations.
Section 6.7 Payment of Remaining Obligations. Following
the Closing, Buyer shall promptly pay, when due, the stipulated
percentage of commissions received by Buyer that is payable to
Insurance Marketing Enterprises, Inc. ("IME") under the terms of
the IME contract described in Schedule 1.2(b)(ii).
Section 6.8 Covenants of Shareholders. Each of the
Shareholders hereby agrees that, if he terminates his status as a
shareholder of Buyer within three years after the Closing Date,
he will not, during a three-year period commencing on the date
such Shareholder liquidates his equity interest in
<PAGE 13>
Buyer, solicit, divert, accept business from, nor service, directly or
indirectly, as insurance solicitor, insurance agent, insurance
broker, or otherwise, for his account or the account of any other
agent, broker, or insurer, either as owner, shareholder,
promoter, employee, consultant, manager or otherwise, any
insurance account placed by Parent or any of its subsidiaries
with Seller (before the Closing) or Buyer (after the Closing)
that is serviced by Buyer on the date such Shareholder liquidates
his equity interest in Buyer.
ARTICLE 7
Mutual Covenants
Section 7.1 Expenses. Whether or not the transaction is
consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses.
Section 7.2 Brokers or Finders. Each of Seller, Buyer and
Parent represents, as to itself and its affiliates, that no
agent, broker, investment banker, financial advisor, or other
firm or person is or will be entitled to any broker's or finder's
fee or any other commission or similar fee in connection with the
transactions contemplated by this Agreement, and each of Buyer,
Seller and Parent agrees to indemnify and hold the other parties
harmless from and against any and all claims, liabilities, or
obligations with respect to any other fees, commissions, or
expenses asserted by any person on the basis of any act or
statement alleged to have been made by such party or its
affiliate
Section 7.3 Preferred Agent Status. The parties agree that
Parent will continue to represent Buyer in a "Preferred Agent"
capacity following the Closing for a minimum of two years on
terms and conditions no less favorable than the most favorable
terms and conditions afforded to other agents. Buyer further
agrees to assist in any other placement needs reasonably
requested by Parent.
ARTICLE 8
Conditions
Section 8.1 Conditions to Each Party's Obligation To Effect
the Asset Purchase. The respective obligations of each party to
effect the transaction shall be subject to the satisfaction prior
to the Closing Date of the following conditions:
(a) Approvals. All authorizations, consents, orders, or
approvals of, or declarations or filings with, or expirations of
waiting periods imposed by, any Governmental Entity, the failure
to obtain which would have a material adverse effect on Seller or
Buyer, shall have been filed, occurred, or been obtained.
(b) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction, or other
order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the
transaction shall be in effect, and no action, suit, or
proceeding shall be pending before any court or judicial or
administrative agency wherein an unfavorable judgment, order,
decree, stipulation or charge would prevent consummation of the
transactions contemplated by this Agreement or cause such
transactions to be rescinded following consummation.
<PAGE 14>
(c) Opinion of Buyer's Counsel. Collins & McConnell,
as counsel to Buyer, shall have delivered to Buyer and Seller a
written opinion dated as of the Closing Date in the form attached
hereto as Exhibit 8.1(c) with only such changes as shall be in
form and substance reasonably satisfactory both to Seller and
Buyer.
Section 8.2 Conditions to Obligations of Buyer. The
obligation of Buyer to effect this acquisition are subject to the
satisfaction of the following conditions, unless waived by Buyer:
(a) Representations and Warranties. The
representations and warranties of Seller set forth in this
Agreement shall be true and correct as of the Effective Date and
(except to the extent such representations and warranties speak
as of an earlier date) as of the Closing Date as though made on
and as of the Closing Date, and Buyer shall have received a
certificate signed on behalf of Seller to such effect.
(b) Performance of Obligations by Seller. Seller
shall have performed all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and
Buyer shall have received a certificate signed on behalf of
Seller to such effect.
(c) Opinion of Seller's Counsel. Parent's general
counsel, as counsel to Seller, shall have delivered to Buyer a
written opinion dated as of the Closing Date in the form attached
hereto as Exhibit 8.2(c) with only such changes as shall be in
form and substance reasonably satisfactory to Buyer and its
counsel.
Section 8.3 Conditions to Obligations of Seller. The
obligation of Seller to effect this transaction is subject to the
satisfaction of the following conditions, unless waived by
Sellers:
(a) Representations and Warranties. The
representations and warranties of Buyer set forth in this
Agreement shall be true and correct in all material respects as
of the date of this Agreement and (except to the extent such
representations speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, and Seller
shall have received a certificate signed on behalf of Buyer by an
executive officer of Buyer to such effect.
(b) Performance of Obligations by Buyer. Buyer shall
have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the
Closing Date, and Seller shall have received a certificate signed
on behalf of Buyer by an executive officer of Buyer to such
effect.
(c) Third Party Consents and Amendments. Seller and
its affiliates shall have received any required consents and
approvals under their respective agreements governing outstanding
indebtedness.
ARTICLE 9
Termination and Amendment
Section 9.1 Termination. This Agreement may be terminated
at any time prior to the Closing Date:
(a) by mutual consent of Buyer, Seller and Parent;
<PAGE 15>
(b) by Buyer, Seller or Parent if there shall have
been a material breach of any representation, warranty, covenant,
or agreement on the part of the other party set forth in this
Agreement which breach shall not have been cured, in the case of
a representation or warranty, prior to the Closing or, in the
case of a covenant or agreement, within two business days
following receipt by the breaching party of notice of such
breach; or
(c) by either Buyer, Seller or Parent if any permanent
injunction or other order of a court or other competent authority
preventing the consummation of the acquisition shall have become
final and nonappealable.
Section 9.2 Effects of Termination. In the event of a
termination of this Agreement by either party as provided in
Section 9.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of any party, or
any of their respective officers or directors, except to the
extent that such termination results from the willful breach by a
party hereto of any of its representations, warranties,
covenants, or agreements set forth in this Agreement.
Section 9.3 Amendment. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of
the parties hereto.
Section 9.4 Extension; Waiver. At any time prior to the
Closing Date, the parties may, to the extent legally allowed, (i)
extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, and (iii)
waive compliance with any of the agreements or conditions
contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in
a written instrument signed on behalf of such party.
ARTICLE 10
Indemnification
Section 10.1 Indemnification Provisions for Benefit of
Buyer. Seller and Parent, jointly and severally, agree to
indemnify and hold Buyer harmless from and against any Adverse
Consequences (as defined below) Buyer may suffer or incur
resulting from or arising out of the breach of any of the
representations, warranties or covenants of Seller and Parent
contained herein. The phrase "Adverse Consequences" means
damages, fines, costs, amounts paid in settlement, liabilities,
obligations, taxes, losses, and fees, including all attorneys'
fees and court costs, both at the trial and the appellate level.
Section 10.2 Indemnification Provisions for the Benefit of
Seller and Parent. Buyer agrees to indemnify and hold Seller,
Parent, and their respective subsidiaries and affiliates harmless
from and against any Adverse Consequences any of such parties may
suffer or incur resulting from or arising out of the breach of
any of Buyer's representations, warranties, or covenants
contained herein.
Section 10.3 Matters Involving Third Parties. If any third
party shall notify any party hereto (the "Indemnified Party")
with respect to any matter that may give rise to a claim for
indemnification against another party (the "Indemnifying Party")
under this Article 10, then the Indemnified Party shall notify
the Indemnifying Party promptly; provided, however, that no delay
on the part of the Indemnified Party in notifying the
Indemnifying Party shall relieve the Indemnifying Party from any
liability or obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is damaged. The
<PAGE 16>
Indemnifying Party shall have the right, within fifteen days
after the Indemnified Party has given notice of the matter, to
assume the defense of any such claim, provided that the
Indemnifying Party admits in writing its indemnification
obligations hereunder. If the Indemnifying Party does not assume
the defense of any such claim, the Indemnified Party may defend
against or enter into any settlement with respect to, the matter
in any manner it may reasonably deem appropriate.
Section 10.4 Limitation. No party shall have the right to
make a claim for indemnification under this Article 10 unless and
until the aggregate amount of Adverse Consequences incurred by
such party exceeds $5,000, at which point the Indemnifying Party
shall be responsible for the entire amount of any such Adverse
Consequences, including the initial $5,000 thereof.
ARTICLE 11
Miscellaneous
Section 11.1 Survival of Representations, Covenants,
Warranties, and Agreements. Unless a specific term is set forth
elsewhere in this Agreement, all representations, warranties,
covenants, and indemnities made by the parties in this Agreement
shall be deemed made for the purpose of inducing the others to
enter into this Agreement, and shall survive the Closing and
remain operative and in full force and effect for a period of one
year following the Closing Date.
Section 11.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if
delivered personally, telecopied (if confirmed), or mailed by
registered or certified mail (return receipt requested) to the
parties at the following addresses or at such other address for a
party as shall be specified by like notice):
If to Seller or Parent, to
Poe & Brown, Inc.
401 East Jackson Street
Suite 1700
Tampa, Florida 33602
Attention: Thomas G. Cole
Telecopy No.: (813) 222-4166
(b) if to Buyer, to
Health Care Insurers, Inc.
5353 North Union, Suite 201
Colorado Springs, Colorado 80918
Attention: Richard Greenwood
Telecopy No.: (719) 528-8323
Section 11.3 Counterparts. This Agreement may be executed
in two or more counterparts, all of which shall be considered one
and the same agreement, and shall become effective when one or more
<PAGE 17>
counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 11.4 Entire Agreement; No Third Party
Beneficiaries; Rights of Ownership. This Agreement (including
the documents and instruments referred to herein) constitutes the
entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with
respect to the subject matter hereof.
Section 11.5 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Florida without regard to any applicable conflicts of
law.
Section 11.6 Publicity. Except as otherwise required by
law or the rules of The Nasdaq Stock Market, neither Seller,
Parent nor Buyer shall issue or cause the publication of any
press release or other public announcement with respect to the
transactions contemplated by this Agreement prior to the Closing
without the consent of the other parties, which consent shall not
be unreasonably withheld. Notwithstanding the foregoing, Parent
and its affiliates may respond to routine inquiries from
securities analysts in connection with the transactions
contemplated hereby.
Section 11.7 Assignment. Neither this Agreement nor any of
the rights, interests, or obligations hereunder shall be assigned
by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of, and be enforceable by
the parties and their respective successors and assigns.
Section 11.8 Arbitration. Any dispute arising under this
Agreement that is not resolved by discussions among the parties
hereto shall be submitted to arbitration proceedings in Tampa,
Florida, to be conducted in accordance with the rules and
procedures of the American Arbitration Association (the "AAA").
The parties shall select an arbitrator that is a member of the
AAA to arbitrate the dispute. If the parties are unable to agree
upon such an arbitrator, each party shall select an arbitrator
that is a member of the AAA, and those arbitrators shall select a
third arbitrator, who is a member of the AAA, who shall serve as
the sole arbitrator in the proceeding.
IN WITNESS WHEREOF, the parties have signed or caused this
Agreement to be signed by their respective officers thereunto
duly authorized as of the date first written above.
HEALTH CARE INSURERS, INC.,
a Colorado corporation
By: /s/ THOMAS G. COLE
_______________________________
Thomas G. Cole, Vice President
<PAGE 18>
POE & BROWN, INC.,
a Florida corporation
By: /s/ LAUREL J. LENFESTEY
_______________________________
Title: Vice President
RICHARD J. GREENWOOD &
BRUCE G. GEER, INC.
a Colorado corporation
By: /s/ RICHARD GREENWOOD
________________________________
Title: President
/s/ BRUCE G. GEER
___________________________________
Bruce G. Geer
/s/ RICHARD GREENWOOD
___________________________________
Richard Greenwood
<PAGE 19>
LIST OF EXHIBITS AND SCHEDULES
SCHEDULE 1.2(a): Purchased Book of Business
SCHEDULE 1.2(b)(ii): List of Material Contracts
SCHEDULE 1.2(c): List of Tangible Personal Property
SCHEDULE 3.3: Exceptions to Section 3.3 Representations
SCHEDULE 3.5: List of Material Changes
SCHEDULE 3.7: List of Lawsuits and Claims
SCHEDULE 3.10: List of E&O Claims
SCHEDULE 5.3: Accounts Placed by Parent with Seller
EXHIBIT 8.1(c): Opinion of Buyer's Counsel
EXHIBIT 8.2(c): Opinion of Seller's Counsel
<PAGE 1>
EXHIBIT 11
Statement Re: Computation Of Per Share Earnings
<TABLE>
<CAPTION>
Year Ended December 31,
_______________________________
1996 1995 1994
(in thousands, except per share data)
<S> <C> <C> <C>
Average shares outstanding 8,658 8,660 8,593
Net effect of dilutive stock options,
based on the treasury stock
method 25 39 77
_______ ______ _______
Total shares used in computation 8,683 8,699 8,670
======= ====== =======
Net income $16,498 $14,799 $13,519
======= ======= =======
Net income per share $ 1.90 $ 1.70 $ 1.56
======= ======= ========
</TABLE>
<PAGE 1>
EXHIBIT 13
PORTIONS OF 1996 ANNUAL REPORT TO SHAREHOLDERS
<TABLE>
<CAPTION>
Financial Highlights
Year ended December 31,
(in thousands, except per
share data) 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Commissions and fees(1) $114,378 $101,998 $ 95,852 $ 94,420 $ 88,276
Total revenues(2) $118,680 $106,365 $101,580 $ 97,821 $ 91,508
Total expenses $ 91,634 $ 83,036 $ 80,994 $ 84,774 $ 83,190
Net income before taxes and loss
from discontinued operations $ 27,046 $ 23,329 $ 20,586 $ 13,047 $ 8,318
Net income from
continuing operations $ 16,498 $ 14,799 $ 13,519 $ 8,118 $ 4,138
Net income(2, 3) $ 16,498 $ 14,799 $ 13,519 $ 8,118 $ 2,558
Net income per share
from continuing
operations(2, 3) $ 1.90 $ 1.70 $ 1.56 $ 0.95 $ 0.48
Net income per share $ 1.90 $ 1.70 $ 1.56 $ 0.95 $ 0.30
Weighted average number
of shares outstanding 8,683 8,699 8,670 8,571 8,569
Dividends declared per share $ 0.49 $ 0.48 $ 0.42 $ 0.40 $ 0.40
Total assets $179,743 $151,121 $140,980 $134,924 $129,143
Long-term debt $ 5,300 $ 7,023 $ 7,430 $17,637 $ 18,870
Shareholders' equity(4) $ 67,286 $ 54,412 $ 44,106 $27,246 $ 21,232
</TABLE>
(1) See Notes 2 and 3 to consolidated financial statements for
information regarding business purchase transactions which
impact the comparability of this information.
(2) During 1994, the Company sold 150,000 shares of its
investment in the common stock of Rock-Tenn Company for
$2,314,000, resulting in a net after-tax gain of $1,342,000,
or $.16 per share.
(3) During 1995 and 1994, the Company reduced its general tax
reserves by $451,000 and $700,000, or $0.05 and $0.08 per
share, respectively, as a result of reaching a settlement
with the Internal Revenue Service on certain examination
issues. See Note 9 to consolidated financial statements.
(4) Shareholders' equity as of December 31, 1996 and 1995
included net increases of $6,511,000 and $4,836,000,
respectively, as a result of the Company's application of
SFAS 115, "Accounting for Certain Investments in Debt and
Equity Securities."
<PAGE 2>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
General
In April of 1993, Poe & Associates, Inc., headquartered in Tampa,
Florida, merged with Brown & Brown, Inc., headquartered in
Daytona Beach, Florida, forming Poe & Brown, Inc. (the
"Company"). Since that merger, the Company's operating results
have steadily improved. The Company achieved pre-tax income from
operations of $27,046,000 in 1996 compared to $23,329,000 in 1995
and $20,586,000 in 1994. Pre-tax income as a percentage of total
revenues was 22.8% in 1996, 21.9% in 1995 and 20.3% in 1994. This
upward trend is primarily the result of the Company's achievement
of revenue growth and operating efficiency improvements.
The Company's revenues are comprised principally of
commissions paid by insurance companies, fees paid directly by
clients and investment income. Commission revenues generally
represent a percentage of the premium paid by the insured and are
materially affected by fluctuations in both premium rate levels
charged by insurance underwriters and the volume of premiums
written by such underwriters. These premium rates are established
by insurance companies based upon many factors, none of which is
controlled by the Company. Beginning in 1986 and continuing
through 1996, revenues have been adversely influenced by a
consistent decline in premium rates resulting from intense
competition among property and casualty insurers for expanding
market share. Among other factors, this condition of prevailing
decline in premium rates, commonly referred to as a "soft
market," has generally resulted in flat to reduced commissions on
renewal business. The possibility of rate increases in 1997 is
unpredictable.
Revenues are further impacted by the development of new and
existing proprietary programs, fluctuations in insurable exposure
units and the volume of business from new and existing clients
and changes in general economic and competitive conditions. For
example, stagnant rates of inflation in recent years have
generally limited the increases in insurable exposure units such
as property values, sales and payroll levels. Conversely, the
increasing trend in litigation settlements and awards has caused
some clients to seek higher levels of insurance coverage. Still,
the Company's revenues continue to grow through quality
acquisitions, intense initiatives for new business and
development of new products, markets and services. Effective
March 1, 1995, the Company acquired Insurance West by merger.
This merger was accounted for as a pooling-of-interests and,
accordingly, the Company's consolidated financial statements have
been restated for all prior periods. Also during 1995, the
Company acquired four general insurance agencies, an insurance
brokerage firm and several books of business (customer accounts)
which were accounted for as purchases. During 1996, the Company
acquired three general insurance agencies, an insurance brokerage
firm and several books of business (customer accounts) which were
accounted for as purchases.
Contingent commissions may be paid to the Company by
insurance carriers based upon the volume and profitability of the
business placed with such carriers by the Company and are
generally received in the first quarter of each year. In each of
the last three years, contingent commissions have represented
less than 3.5% of total revenues.
Fee revenues are substantially generated by the Service
Division of the Company, which offers administration and benefit
consulting services primarily in the workers' compensation and employee
<PAGE 3>
benefit self-insurance markets. Florida's legislative
reform of workers' compensation insurance, as well as certain
market factors, have resulted in increased competition in this
service sector. In response to the increased competition, the
Company has offered value-added services that enabled it to
increase 1996 fee revenues over that recognized in 1995. For the
past three years, service fee revenues have ranged from 9.1% to
11.1% of total commissions and fees.
Investment income consists primarily of interest earnings on
premiums and advance premiums collected and not immediately
remitted to insurance carriers, with such funds being held in a
fiduciary capacity. Investment income also includes gains and
losses realized from the sale of investments, although in 1996
and 1995, such sales were minimal and realized gains and losses
were immaterial. In 1994, investment income included a $2,185,000
realized gain from the sale of a portion of the Company's
investment in Rock-Tenn Company ("Rock-Tenn"). The Company's
policy is to invest its available funds in high-quality, short-
term fixed income investment securities.
The Company anticipates that results of operations for 1997
will continue to be influenced by these competitive and economic
conditions.
The following discussion and analysis regarding results of
operations and liquidity and capital resources should be
considered in conjunction with the accompanying consolidated
financial statements and related notes.
Results of operations for the years ended December 31, 1996, 1995
and 1994
Commissions and Fees
Commissions and fees increased 12% in 1996, 6% in 1995 and
2% in 1994. Excluding the effects of acquisitions, commissions
and fees increased 4% in 1996 and 3% in 1995. Acquisition
activity in 1994 did not have a material impact on commissions
and fees. The 1996 results reflect an increase in commissions for
all but one of the Company's operating divisions, mainly through
new business growth. In general, property and casualty insurance
premium prices remained flat in 1996; however, there were some
increases in premium rates for coastal properties as a result of
recent hurricanes in Florida. In addition, certain segments and
industries had some increases in insurable exposure units during
1996.
Investment Income
Investment income decreased to $3,230,000 in 1996 compared
to $3,733,000 in 1995 and $5,126,000 in 1994. This decrease is
primarily due to lower levels of invested cash and reductions in
interest rate returns. The 1994 results included a $2,185,000
gain from the sale of approximately 23% of the Company's
investment in the common stock of Rock-Tenn. This sale was in
conjunction with an initial public offering by Rock-Tenn of its
common stock. The Company continues to own 559,970 shares of
common stock of Rock-Tenn and has no current plans to sell these
shares. Excluding this gain, investment income in 1995 increased
by $792,000, or 27%. The increase in investment income after
excluding the Rock-Tenn gain is due to increased available funds
and the implementation of a consolidated cash management program
which resulted in improved earnings on cash and cash equivalents.
<PAGE 4>
Other Income
Other income consists primarily of gains and losses from the
sale and disposition of assets. During 1996, gains on the sale of
customer accounts were $997,000 compared to $590,000 in 1995 and
$411,000 in 1994.
Employee Compensation & Benefits
Employee compensation and benefits increased approximately
10% in 1996, 5% in 1995 and remained constant in 1994. Without
acquisitions, employee compensation and benefits increased 5% in
1996, 1% in 1995 and remained constant in 1994. Employee
compensation and benefits as a percentage of total revenue was
51% in 1996 down from 52% in 1995 and 1994. As of December 31,
1996, the Company had 1,075 full-time equivalent employees
compared to 1,035 at the beginning of the year. The increase in
personnel in 1996 is primarily related to acquisitions. The 1996
increase in compensation and employee benefits of $5,324,000 is
primarily attributable to the addition of personnel through
acquisitions and additional commission expense as a result of the
increased commission revenue.
Other Operating Expenses
Other operating expenses increased 11% in 1996, remained
constant in 1995 and decreased 12% in 1994. Without acquisitions,
operating expenses increased 6% in 1996 and decreased 3% in 1995.
Other operating expenses as a percentage of total revenues
remained constant in 1996 and 1995 at 22%, down from 23% in 1994.
Interest and Amortization
Interest and amortization increased $703,000, or 14%, in
1996 and decreased $580,000, or 10%, in 1995 and $553,000, or 9%,
in 1994. The increase in 1996 is due primarily to increased
amortization of purchased intangible assets as a result of
acquisition activity.
Income Taxes
The effective tax rate on income from operations was 39.0%
in 1996, 36.6% in 1995, and 34.3% in 1994. The lower effective
tax rate in 1995 and 1994 is primarily due to the effect of
recording a $451,000 and a $700,000 reduction, respectively, to
the general tax reserves as a result of reaching a settlement
with the Internal Revenue Service ("Service") on the Service's
outstanding examination issues (see below for detailed discussion
of this adjustment).
In 1992, the Service completed examinations of the Company's
federal income tax returns for tax years 1988, 1989 and 1990. As
a result of these examinations, the Service issued Reports of
Proposed Adjustments asserting income tax deficiencies which, by
including interest and state income taxes for the periods
examined and the Company's estimates of similar adjustments for
subsequent periods through December 31, 1993, would total
$6,100,000. The disputed items related primarily to the
deductibility of amortization of purchased customer accounts of
approximately $5,107,000 and non-compete agreements of
approximately $993,000. In addition, the Service's report
included a dispute regarding the time at which the Company's
payments made pursuant to certain indemnity agreements would be
deductible for tax reporting purposes.
<PAGE 5>
During 1994 and 1995, the Company reached settlement
agreements with the Service with respect to all of the disputed
items. In 1994, a partial settlement was reached. Payments made
under this partial settlement resulted in a $400,000 reduction to
the previously established tax reserves. During 1994, after
considering this reduction, the Company reduced the remaining
general tax reserves by $700,000. This decrease was recorded as a
reduction to the 1994 income tax provision.
In March of 1995, the Company reached an agreement with the
Service on all remaining items. This agreement resulted in
payments that reduced the reserve by approximately $349,000.
After considering these reductions, the Company recorded a
$451,000 reduction in the general tax reserve which was recorded
as a reduction to the 1995 income tax provision.
Liquidity and Capital Resources
The Company's cash and cash equivalents of $31,786,000 at
December 31, 1996 increased $3,436,000 from the December 31, 1995
balance of $28,350,000. During 1996, cash of $28,621,000 was
provided from operating activities, proceeds of $984,000 from
sales of fixed assets and customer accounts and proceeds of
$1,118,000 from the sale of investments. Cash was used during
1996 primarily for payments on long-term debt and notes payable
of $4,222,000, additions to fixed assets of $4,630,000, purchases
of investments of $881,000, acquisitions of business of
$12,254,000, repurchase of common stock of $1,055,000 and
dividend payments of $4,245,000.
The Company's cash and cash equivalents of $28,350,000 at
December 31, 1995 increased $5,165,000 from the December 31, 1994
balance of $23,185,000. During 1995, primary sources of cash were
$21,208,000 from operating activities, $1,469,000 from sales of
fixed assets and customer accounts and $106,000 from the exercise
of stock options and issuances of common stock. Cash was used
during 1995 primarily for payments on long-term debt of
$2,132,000, additions to fixed assets of $5,321,000, purchases of
investments of $1,208,000, acquisitions of businesses of
$6,005,000 and dividend payments of $4,149,000.
The Company's cash and cash equivalents of $23,185,000 at
December 31, 1994 decreased $3,947,000 from the December 31, 1993
balance of $27,132,000. During 1994, primary sources of cash were
$10,396,000 from operating activities, $2,346,000 from sales of
investments and $1,687,000 from the exercise of stock options and
issuances of common stock. Cash was used during 1994 primarily
for payments on long-term debt of $12,004,000 and dividend
payments of $3,542,000.
The Company's current ratio was 1.06 to 1.0, 1.13 to 1.0 and
1.10 to 1.0 as of December 31, 1996, 1995 and 1994, respectively.
The decrease in the ratio at December 31, 1996 was primarily the
result of increased current long-term debt due to acquisitions.
In November 1994, the Company entered into a revolving
credit facility with a national banking association that provides
for borrowings of up to $10,000,000. On borrowings under this
facility of less than $1,000,000, the interest rate is the higher
of the prime rate or the federal funds rate plus .50%. On
borrowings under this facility equal to or in excess of
$1,000,000, the interest rate is LIBOR plus .50% to 1.25%,
depending on certain financial ratios. A commitment fee is
assessed in the amount of .25% per annum on the unused balance.
The facility expires in November 1998. No borrowings were outstanding
<PAGE 6>
against this line of credit as of December 31, 1996.
Borrowings would be secured by substantially all of the assets of
the Company, subject to existing or permitted liens.
The Company has a credit agreement with a major insurance
company under which $5,000,000 (the maximum amount available for
borrowings) was borrowed at December 31, 1996 at an interest rate
equal to the prime rate plus 1%. The amount available under this
facility decreases by $1,000,000 each August through the year
2001, when it will expire.
The Company believes that its existing cash, cash
equivalents, short-term investment portfolio, funds generated
from operations and the availability of the bank line of credit
will be sufficient to satisfy its normal financial needs through
at least the end of 1997. Additionally, the Company believes that
funds generated from future operations will be sufficient to
satisfy its normal financial needs, including the required annual
principal payments of its long-term debt and any potential future
tax liability.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year ended December 31,
1996 1995 1994
<S> <C> <C> <C>
REVENUES
Commissions and fees $114,378 $101,998 $ 95,852
Investment income 3,230 3,733 5,126
Other income 1,072 634 602
Total revenues 118,680 106,365 101,580
EXPENSES
Employee compensation
and benefits 60,397 55,073 52,554
Other operating expenses 25,522 22,951 22,848
Interest and amortization 5,715 5,012 5,592
Total expenses 91,634 83,036 80,994
Income before income taxes 27,046 23,329 20,586
Income taxes 10,548 8,530 7,067
Net income $ 16,498 $ 14,799 $ 13,519
Net income per share $ 1.90 $ 1.70 $ 1.56
Weighted average number
of shares outstanding 8,683 8,699 8,670
</TABLE>
See notes to consolidated financial statements.
<PAGE 7>
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 31,786 $ 28,350
Short-term investments 1,087 1,308
Premiums, commissions and fees
receivable, less allowance for doubtful
accounts of $100 at 1995 62,940 56,553
Other current assets 7,307 6,336
Total current assets 103,120 92,547
Fixed assets, net 12,085 10,412
Intangibles, net 50,167 36,613
Investments 11,288 8,473
Other assets 3,083 3,076
Total assets $179,743 $151,121
LIABILITIES
Premiums payable to insurance companies $ 73,570 $ 64,588
Premium deposits and credits due customers 7,329 6,070
Accounts payable and accrued expenses 11,130 9,417
Current portion of long-term debt 5,365 1,768
Total current liabilities 97,394 81,843
Long-term debt 5,300 7,023
Deferred income taxes 3,603 1,502
Other liabilities 6,160 6,341
Total liabilities 112,457 96,709
SHAREHOLDERS' EQUITY
Common stock, par value $.10 per share;
authorized 18,000 shares; issued 8,656 shares
at 1996 and 8,682 shares at 1995
866 868
Additional paid-in capital 1,671 2,614
Retained earnings 58,238 46,094
Net unrealized appreciation of
available-for-sale securities,
net of tax effect of $4,163 at 1996
and $3,027 at 1995 6,511 4,836
Total shareholders' equity 67,286 54,412
Total liabilities and shareholders' equity $179,743 $151,121
</TABLE>
See notes to consolidated financial statements.
<PAGE 8>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands, except per share data)
<TABLE>
<CAPTION>
Common Stock Additional Net Unrealized Treasury Stock
Paid-in Retained Appreciation
Shares Amount Capital Earnings (Depreciation) Shares Amount Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 8,550 $ 855 $1,314 $ 25,883 __ 45 ($806) $27,246
Net income 13,519 13,519
Issued for stock option plans
and employee stock purchase
plans 85 9 872 (45) 806 1,687
Tax benefit from sale of option
shares by employees 55 55
Cumulative effect of change
in accounting principle
(see Note 1) 23 23
Net increase in unrealized
appreciation of available-
for-sale securities 5,318 5,318
Partnership distributions
for Insurance West (200) (200)
Cash dividends paid
($.42 per share) (3,542) (3,542)
Balance, December 31, 1994 8,635 864 2,241 35,660 5,341 -- -- 44,106
Net income 14,799 14,799
Acquired and issued for
stock option plans and
employee stock purchase
plans 47 4 318 (216) 106
Tax benefit from the sale
of option shares by employees 55 55
Net decrease in unrealized
appreciation of available-
for-sale securities (505) (505)
Cash dividends paid
($.48 per share) (4,149) (4,149)
Balance, December 31, 1995 8,682 868 2,614 46,094 4,836 -- -- 54,412
Net income 16,498 16,498
Acquired and issued for stock
option plans and employee
stock purchase plans (26) (2) (943) (109) (1,054)
<PAGE 9>
Net increase in unrealized
appreciation of available-
for-sale securities 1,675 1,675
Cash dividends paid
($.49 per share) (4,245) (4,245)
Balance, December 31, 1996 8,656 $866 $ 1,671 $58,238 $6,511 -- $-- 67,286
</TABLE>
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(in thousands) Year ended December 31,
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 16,498 $ 14,799 $ 13,519
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 7,471 6,487 6,398
Provision for doubtful accounts (100) 31 19
Deferred income taxes 966 (2,191) (1,173)
Net gains on sales of investments,
fixed assets and customer accounts (1,001) (537) (2,231)
Premiums, commissions and fees
receivable (increase) decrease (6,287) 200 (2,374)
Other assets (increase) decrease (699) 235 (2,439)
Premiums payable to insurance
companies increase (decrease) 8,982 1,393 (3,951)
Premium deposits and credits due
customers increase (decrease) 1,259 (900) 1,919
Accounts payable and accrued
expenses increase (decrease) 1,713 1,115 (683)
Other liabilities (decrease) increase (181) 576 1,392
Net cash provided by operating activities 28,621 21,208 10,396
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to fixed assets (4,630) (5,321) (2,400)
Payments for businesses acquired,
net of cash acquired (12,254) (6,005) (1,382)
Proceeds from sales of fixed
assets and customer accounts 984 1,469 1,337
Purchases of investments (881) (1,208) (187)
Proceeds from sales of investments 1,118 642 2,346
Other investing activities, net - - (53)
Net cash used in investing activities (15,663) (10,423) (339)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt (4,223) (2,132) (12,004)
<PAGE 10>
Proceeds from long-term debt - 500 -
Exercise of stock options,
issuances of stock and
treasury stock sales (1,054) 106 1,687
Tax benefit from sale of
option shares by employees - 55 55
Partnership distributions - - (200)
Cash dividends paid (4,245) (4,149) (3,542)
Net cash used in financing activities (9,522) (5,620) (14,004)
Net increase (decrease) in cash
and cash equivalents 3,436 5,165 (3,947)
Cash and cash equivalents
at beginning of year 28,350 23,185 27,132
Cash and cash equivalents at
end of year $31,786 $28,350 $23,185
</TABLE>
See notes to consolidated financial statements.
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
Nature of Operations
Poe & Brown, Inc. (the "Company") is a diversified insurance
brokerage and agency that markets and sells primarily property
and casualty insurance products and services to its clients. The
Company's business is divided into five divisions: the Retail
Division, which markets and sells a broad range of insurance
products to commercial, professional and individual clients; the
Professional Programs Division, which develops and administers
property and casualty insurance solutions for professionals
nationwide; the Commercial Programs Division, which serves
individual large accounts of commercial groups and trade
associations, providing primarily property and casualty and
employee benefits coverages; the Service Division, which provides
insurance-related services such as third-party administration and
consultation for workers' compensation and employee benefit self-
insurance markets; and the Brokerage Division, which markets and
sells excess and surplus commercial insurance primarily through
non-affiliated independent agents and brokers.
Principles of Consolidation
The accompanying consolidated financial statements include
the accounts of Poe & Brown, Inc. and its subsidiaries. All
significant intercompany account balances and transactions have
been eliminated in consolidation.
Revenue Recognition
Commissions relating to the brokerage and agency activity
whereby the Company has primary responsibility for the collection
of premiums from insureds are generally recognized as of the
latter of the effective date of the insurance policy or the date
billed to the customer. Commissions to be received directly from
insurance companies are generally recognized when determined.
Subsequent commission adjustments, such as policy endorsements,
are recognized upon notification from the insurance companies. Commission
revenues are reported net of sub-broker commissions. Contingent commissions
<PAGE 11>
from insurance companies are recognized when received. Fee income
is recognized as services are rendered.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents principally consist of demand
deposits with financial institutions and highly liquid
investments having maturities of three months or less when
purchased. Premiums received from insureds but not yet remitted
to insurance carriers are held in cash and cash equivalents in a
fiduciary capacity.
Premiums, Commissions and Fees Receivable
In its capacity as an insurance broker or agent, the Company
typically collects premiums from insureds and, after deducting
its authorized commission, remits the premiums to the appropriate
insurance companies. In other circumstances, the insurance
companies collect the premiums directly from the insureds and
remit the applicable commissions to the Company. Accordingly, as
reported in the Consolidated Balance Sheets, "premiums" are
receivable from insureds and "commissions" are receivable from
insurance companies. "Fees" are receivable from customers
pertaining to the Company's Service Division.
Investments
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." Under these
rules, the Company's marketable equity securities have been
classified as "available-for-sale" and are reported at estimated
fair value, with the unrealized gains and losses, net of tax,
reported as a separate component of shareholders' equity.
Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are
included in investment income. The cost of securities sold is
based on the specific identification method. Interest and
dividends on securities classified as available-for-sale are
included in investment income.
Nonmarketable equity securities and certificates of deposit
having maturities of more than three months when purchased are
reported at cost, adjusted for other-than-temporary market value
declines.
Application of SFAS No. 115 resulted in net unrealized gains
reported in shareholders' equity of $6,511,000 at December 31,
1996, $4,836,000 at December 31, 1995 and $5,341,000 at December
31, 1994, net of deferred income taxes of $4,163,000, $3,027,000
and $3,344,000, respectively. The adoption of this Statement
resulted in an increase of $23,000 to shareholders' equity as of
January 1, 1994, net of $15,000 in deferred taxes.
<PAGE 12>
As of January 1, 1994, the Company owned 659,064 shares of
common stock of Rock-Tenn Company ("Rock-Tenn") with an aggregate
cost of $565,000. As of that date, the common stock of Rock-Tenn
was not publicly traded and, therefore, had no readily
determinable market value. However, on March 3, 1994, the common
stock of Rock-Tenn was registered with the Securities and
Exchange Commission and began trading on the NASDAQ over-the-
counter securities market at the initial public offering price of
$16.50 per share. As part of the initial public offering of Rock-
Tenn's common stock, the Company sold 150,000 shares of its
investment in this stock and reported a net after-tax gain of
$1,342,000 in the first quarter of 1994. During 1996, the Company
received a Rock-Tenn stock dividend of 50,906 shares. The 559,970
and 509,064 shares of Rock-Tenn common stock held by the Company
as of December 31, 1996 and 1995, respectively, have been
classified as non-current, available-for-sale securities. The
Company has no current plans to sell these shares.
Fixed Assets
Fixed assets are stated at cost. Expenditures for
improvements are capitalized and expenditures for maintenance and
repairs are charged to operations as incurred. Upon sale or
retirement, the cost and related accumulated depreciation and
amortization are removed from the accounts and the resulting gain
or loss, if any, is reflected in income. Depreciation has been
provided using principally the straight-line method over the
estimated useful lives of the related assets, which range from
three to ten years. Leasehold improvements are amortized on the
straight-line method over the term of the related leases.
Intangibles
Intangible assets are stated at cost less accumulated
amortization and principally represent purchased customer
accounts, non-compete agreements, purchased contract agreements
and the excess of costs over the fair value of identifiable net
assets acquired (goodwill). Purchased customer accounts, non-
compete agreements and purchased contract agreements are being
amortized on a straight-line basis over the related estimated
lives and contract periods, which range from three to 15 years.
The excess of costs over the fair value of identifiable net
assets acquired is being amortized on a straight-line basis over
15 to 40 years. Purchased customer accounts are records and files
obtained from acquired businesses that contain information on
insurance policies and the related insured parties that is
essential to policy renewals.
The carrying value of intangibles, corresponding with each
agency division comprising the Company, is periodically reviewed
by management to determine if the facts and circumstances suggest
that they may be impaired. In the insurance brokerage and agency
industry, it is common for agencies or customer accounts to be
acquired at a price determined as a multiple of the corresponding
revenues. Accordingly, the Company assesses the carrying value of
its intangibles by comparison to a reasonable multiple applied to
corresponding revenues, as well as considering the operating cash
flow generated by the corresponding agency division. Any
impairment identified through this assessment may require that
the carrying value of related intangibles be adjusted.
Income Taxes
The Company files a consolidated federal income tax return.
Deferred income taxes are provided for in the consolidated financial
statements and relate principally to expenses charged to income for
<PAGE 13>
financial reporting purposes in one period and
deducted for income tax purposes in other periods, unrealized
appreciation of available-for-sale securities and basis
differences of intangible assets.
Net Income Per Share
Net income per share is based on the weighted average number
of shares outstanding, adjusted for the dilutive effect of stock
options, which is the same on both a primary and fully-diluted
basis.
Note 2 - Mergers
Effective March 1, 1995, the Company issued 146,300 shares
of its common stock in exchange for all of the partnership
interest in Insurance West, a Phoenix, Arizona general insurance
agency. The merger has been accounted for as a pooling-of-
interests and, accordingly, the Company's consolidated financial
statements have been restated for all periods prior to the merger
to include the results of operations, financial positions and
cash flows of Insurance West. The individual company operating
results of Insurance West prior to the date of the merger are not
material to the Company's consolidated operating results.
Note 3 - Acquisitions
During 1996, the Company acquired three general insurance
agencies, one insurance brokerage firm and several books of
business (customer accounts), which were all accounted for as
purchases. The total cost of these acquisitions was $18,328,000,
including $12,254,000 of cash payments and notes payable of
$6,074,000. The total purchase price was assigned to purchased
customer accounts, goodwill and other intangible assets.
During 1995, the Company acquired four general insurance
agencies, an insurance brokerage firm and several books of
business (customer accounts), which were all accounted for as
purchases. The total cost of these acquisitions was $7,250,000,
including $5,715,000 of cash payments and notes payable of
$1,535,000. The excess of the total purchase price over the fair
value of net tangible assets acquired of approximately $7,225,000
was assigned to purchased customer accounts, goodwill and other
intangible assets.
During 1994, the Company acquired the assets of three
insurance agencies for an aggregate cost of $656,000.
Substantially all of this cost was assigned to purchased customer
accounts, non-compete agreements and goodwill.
Additional or return consideration resulting from
acquisition contingency provisions is recorded as an adjustment
to intangibles when the contingency occurs. There were no
contingency payments made during 1996 or 1995. As of December
31,1996, the maximum future contingency payments related to the
1996 and 1995 acquisitions totaled $2,150,000. The results of
operations of the acquired companies have been included in the
consolidated financial statements from their respective
acquisition dates. Pro forma results of operations of the Company
for the years ended December 31, 1996, 1995 and 1994, including
1996, 1995 and 1994 acquisitions as though they occurred on
January 1, 1996, 1995 and 1994, respectively, were not materially
different from the results of operations as reported.
<PAGE 14>
Note 4 - Investments
<TABLE>
<CAPTION>
Investments at December 31 consisted of the following:
1996
(in thousands) Carrying value
Current Non-current
<S> <C> <C>
Available-for-sale marketable
equity securities $ 78 $11,059
Nonmarketable equity securities
and certificates of deposit 1,009 229
Total investments $1,087 $11,288
</TABLE>
<TABLE>
<CAPTION>
1995
(in thousands) Carrying value
Current Non-current
<S> <C> <C>
Available-for-sale marketable
equity securities $ 287 $8,272
Nonmarketable equity securities
and certificates of deposit 1,021 201
Total investments $1,308 $8,473
</TABLE>
The following summarizes available-for-sale securities at
December 31:
<TABLE>
<CAPTION>
Gross Gross
(in thousands) Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
Marketable Equity Securities:
1996 $516 $10,637 $16 $11,137
1995 $732 $ 7,855 $28 $ 8,559
</TABLE>
In 1996, proceeds from sales of available-for-sale
securities totaled $1,118,000, resulting in gross realized gains
and losses of $91,300 and $71,700, respectively. Proceeds from
sales of available-for-sale securities totaled $329,000 in 1995,
resulting in gross realized gains and losses of $42,000 and
$41,000, respectively. In 1994, proceeds from sales of available-
for-sale securities totaled $2,314,000, from which $2,185,000 of
gross gains were realized.
Cash, cash equivalents, investments, premiums and
commissions receivable, premiums payable to insurance companies,
premium deposits and credits due customers, accounts payable and
accrued expenses, and current and long-term debt are considered
financial instruments. The carrying amount for each of these
items at December 31, 1996 approximates its fair value.
Note 5 - Fixed Assets
Fixed assets at December 31 consisted of the following:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
<S> <C> <C>
Furniture, fixtures and equipment $23,766 $20,153
Land, buildings and improvements 262 672
<PAGE 15>
Leasehold improvements 926 644
$24,954 $21,469
Less accumulated depreciation
and amortization 12,869 11,057
$12,085 $10,412
</TABLE>
Depreciation and amortization expense amounted to $2,697,000
in 1996, $2,352,000 in 1995 and $2,132,000 in 1994.
Note 6 - Intangibles
Intangibles at December 31 consisted of the following:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
<S> <C> <C>
Purchased customer accounts $ 49,985 $ 32,244
Non-compete agreements 11,722 10,996
Goodwill 20,189 20,358
Purchased contract agreements 1,102 1,102
82,998 64,700
Less accumulated amortization 32,831 28,087
$ 50,167 $ 36,613
</TABLE>
Amortization expense amounted to $4,774,000 in 1996,
$4,135,000 in 1995 and $4,266,000 in 1994.
Note 7 - Long-Term Debt
Long-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
<S> <C> <C>
Long-term credit agreement $ 5,000 $ 6,000
Notes payable from treasury stock purchases 1,162 1,422
Acquisition notes payable 4,351 1,350
Other notes payable 152 19
10,665 8,791
Less current portion 5,365 1,768
Long-term debt $ 5,300 $7,023
</TABLE>
In 1991, the Company entered into a long-term credit
agreement with a major insurance company that provided
$10,000,000 at an interest rate equal to the prime rate plus 1%
(9.25% at December 31, 1996). The amount of available credit
decreases by $1,000,000 each August through the year 2001, when
it will expire. This credit agreement requires the Company to
maintain certain financial ratios and comply with certain other
covenants.
<PAGE 16>
In November 1994, the Company entered into a revolving
credit facility with a national banking association that provides
for borrowings of up to $10,000,000. On borrowings under this
facility of less than $1,000,000, the interest rate is the higher
of the prime rate or the federal funds rate plus .50%. On
borrowings under this facility equal to or in excess of
$1,000,000, the interest rate is LIBOR plus .50% to 1.25%,
depending on certain financial ratios. A commitment fee is
assessed in the amount of .25% per annum on the unused balance.
The facility expires in November 1998. No borrowings were
outstanding against this line of credit as of December 31, 1996
and 1995. Borrowings would be secured by substantially all of the
assets of the Company, subject to existing or permitted liens.
Treasury stock notes payable are due to various individuals
for the redemption of Brown & Brown, Inc. stock. These notes bear
no interest and have maturities ranging from calendar years
ending 1997 to 2001. These notes have been discounted at
effective yields ranging from 8.5% to 9.2% for presentation in
the consolidated financial statements.
Acquisition notes payable represents debt incurred to former
owners of certain agencies acquired in 1996 and 1995. These
notes, including future contingent payments, are payable in
monthly and annual installments through 1998, including interest
ranging from 4% to 6%.
Maturities of long-term debt for succeeding years are
$5,365,000 in 1997, $1,598,000 in 1998, $1,307,000 in 1999,
$1,256,000 in 2000 and $1,139,000 in 2001.
Interest expense included in the consolidated statements of
income was $941,000 in 1996, $877,000 in 1995 and $1,326,000 in
1994.
Note 8 - Commitments and Contingencies
The Company leases facilities and certain items of office
equipment under noncancelable operating lease arrangements
expiring on various dates through 2005. The facility leases
generally contain renewal options and escalation clauses based on
increases in the lessorsO operating expenses and other charges.
The Company anticipates that most of these leases will be renewed
or replaced upon expiration. At December 31, 1996, the aggregate
future minimum lease payments under all noncancelable lease
agreements are as follows:
<TABLE>
<CAPTION>
<S> <C>
Year Ending December 31, (in thousands)
1997 $ 4,164
1998 $ 3,905
1999 $ 3,515
2000 $ 3,120
2001 $ 2,566
Thereafter $ 6,313
Total minimum future lease payments $ 23,583
</TABLE>
Rental expense in 1996, 1995 and 1994 for operating leases
totaled $5,108,000, $4,785,000 and $4,269,000, respectively.
The Company is not a party to any legal proceedings other
than various claims and lawsuits arising in the normal course of
business. Management of the Company does not believe that any such
<PAGE 17>
claims or lawsuits will have a material effect on the
Company's financial condition or results of operations.
Note 9 - Income Taxes
At December 31, 1996, the Company had net operating loss
carryforwards of $669,000 for income tax reporting purposes that
expire in the years 1997 through 2002. These carryforwards were
derived from agency acquisitions by the Company beginning in
1985. For financial reporting purposes, a valuation allowance of
$38,000 has been recognized to offset the deferred tax assets
related to these carryforwards.
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the
corresponding amounts used for income tax reporting purposes.
Significant components of the CompanyOs deferred tax liabilities
and assets as of December 31, are as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
<S> <C> <C>
Deferred tax liabilities:
Fixed assets $ 975 $ 577
Net unrealized appreciation of
available-for-sale securities 4,163 3,027
Installment sales 108 204
Prepaid insurance and pension 833 769
Intangible assets 368 32
Total deferred tax liabilities 6,447 4,609
Deferred tax assets:
Deferred compensation 1,386 1,269
Accruals and reserves 965 1,376
Net operating loss carryforwards 261 327
Other 270 173
Valuation allowance for deferred tax assets (38) (38)
Total deferred tax assets 2,844 3,107
Net Deferred Tax Liabilities $ 3,603 $ 1,502
</TABLE>
Significant components of the provision (benefit) for income
taxes are as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
<S> <C> <C> <C>
Current:
Federal $ 8,281 $ 9,374 $ 7,237
State 1,301 1,347 1,003
Total current provision 9,582 10,721 8,240
Deferred:
Federal 809 (2,037) (1,076)
State 157 (154) (97)
Total deferred (benefit) provision 966 (2,191) (1,173)
Total tax provision $10,548 $ 8,530 $7,067
</TABLE>
<PAGE 18>
A reconciliation of the differences between the effective
tax rate and the federal statutory tax rate is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Federal statutory tax rate 35.0 % 35.0% 35.0%
State income taxes, net of federal
income tax benefit 3.3 3.5 2.8
Interest exempt from taxation
and dividend exclusion (0.5) (0.4) (0.3)
Non-deductible goodwill amortization 0.6 0.7 0.7
Internal Revenue Service examination - (1.9) (3.4)
Other, net 0.6 (0.3) (0.5)
Effective tax rate 39.0% 36.6% 34.3%
</TABLE>
Income taxes receivable were $645,000 at December 31, 1996
and income taxes payable were $425,000 at December 31, 1995 and
are reported as a component of accounts receivable and accounts
payable and accrued expenses, respectively.
In 1992, the Internal Revenue Service ("Service") completed
examinations of the Company's federal income tax returns for tax
years 1988, 1989 and 1990. As a result of its examination, the
Service issued Reports of Proposed Adjustments asserting income
tax deficiencies which, by including interest and state income
taxes for the periods examined and the Company's estimates of
similar tax adjustments for subsequent periods through December
31, 1993, would total $6,100,000. The disputed issues related
primarily to the deductibility of amortization of purchased
customer accounts of approximately $5,107,000 and non-compete
agreements of approximately $993,000. In addition, the Service's
report included a dispute regarding the timing at which the
Company's payments made pursuant to certain indemnity agreements
would be deductible for tax reporting purposes.
During 1994, the Company reached a settlement with the
Service with respect to certain of the disputed amortization
items and the indemnity agreement payment issue. This settlement
reduced the total remaining asserted income tax deficiencies to
approximately $2,800,000. Based on this settlement and review of
the remaining unsettled items, the Company reduced its general
income tax reserves to $800,000, which was sufficient to cover
its ultimate liability resulting from the settlement of the
remaining items. Accordingly, after taking into consideration a
$400,000 reduction of the reserve resulting from payments under
the partial settlement agreement, during 1994 the Company
recorded a $700,000 adjustment to decrease the originally
established reserves of $1,900,000. This decrease has been
recorded as a reduction to the 1994 current income tax provision.
In March of 1995, the Company reached a settlement with the
Service on all remaining items. The settlement resulted in the
payment of approximately $349,000, which reduced the recorded
reserve. As such, with all disputed items settled, the Company
recorded a $451,000 reduction in the general tax reserve which is
recorded as a reduction to the 1995 current income tax provision.
<PAGE 19>
Note 10 - Employee Benefit Plans
The Company maintains a defined benefit pension plan
covering substantially all previous Poe & Associates, Inc.
employees with one or more years of service. The benefits are
based on years of service and compensation during the period of
employment. Annual contributions are made in conformance with
minimum funding requirements and maximum deductible limitations.
During 1994, the defined benefit pension plan was converted to a
cash balance plan. The impact of this change on the plan costs
and plan liabilities was not material. On April 1, 1995, the
defined benefit pension plan was amended to freeze the accrual of
further benefits. The impact of this amendment on the defined
benefit pension planOs liabilities was not material.
The plan's funded status and amounts recognized in the
Company's consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
(in thousands) December 31,
1996 1995
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations,
including vested benefits of $2,524 in
1996 and $2,322 in 1995 $(2,524) $ (2,326)
Projected benefit obligations for
service rendered to date $(2,524) $ (2,326)
Plan assets at fair value, principally
consisting of a group annuity contract 2,667 2,237
Excess (deficit) of plan assets over
(under) projected benefit obligations 143 (89)
Unrecognized net excess of plan assets
under previously accrued but unfunded
pension costs, to be amortized 572 255
Net prepaid pension costs $ 715 $ 166
</TABLE>
The following assumptions were used in determining the
actuarial present value of the benefit obligations and pension
costs for the years ended December 31, 1996, 1995 and 1994:
discount rate of 7.5%; long-term rate for compensation increase
of 3.5%; and long-term rate of return on plan assets of 8.0%.
Pension costs included in the Company's consolidated
statements of income are comprised of the following:
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Service cost $ 36 $ 63 $ 91
Interest cost 177 215 304
Actual return on assets (83) (318) 113
Net amortization and deferral (97) 166 (407)
Net pension cost $ 33 $ 126 $ 101
</TABLE>
The Company has an Employee Savings Plan (401(k)) under
which substantially all employees with more than 30 days of
service are eligible to participate. Under this plan, the Company
makes matching contributions, subject to a maximum of 2.5% of
each participantOs salary. Further, the Company provides for a
discretionary profit sharing contribution for all eligible
employees. The Company's contributions to the plan totaled
$1,510,000 in 1996, $1,334,000 in 1995 and $1,208,000 in 1994.
<PAGE 20>
Note 11 - Stock-Based Compensation and Incentive Plans
Stock Option Plans
The Company has adopted stock option plans which provide for
the granting of options to purchase shares of the Company's stock
to key employees who contribute materially to the success and
profitability of the Company. The Company accounts for these
plans under Accounting Principles Board Opinion No. 25 ("APB
25"), under which no compensation expense has been recognized. In
October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123"), which is effective
for fiscal years beginning after December 15, 1995. SFAS 123
allows companies to continue following the accounting guidance of
APB 25, but requires pro-forma disclosure of net income and
earnings per share for the effects on compensation expense had
the accounting guidance of SFAS 123 been adopted. The pro-forma
disclosures are required only for options granted subsequent to
December 31, 1994. The Company granted no options in 1995 or
1996.
Under its stock option plans, the Company may grant future
options for up to 285,745 shares of the Company's stock to
employees and directors. Options previously granted under the
plans equaled the market price of the stock at the date of grant
and vest over a 5-year period. The following schedule summarizes
the stock option transactions from 1994 through 1996 pertaining
to these plans:
<TABLE>
<CAPTION>
Number of Option Shares Per Share Option Price Range
<S> <C> <C>
Outstanding, January 1, 1994 160,242 $ 6.00 -14.75
Exercised (65,173) 6.00 -14.75
Canceled (8,689) 7.60 - 14.75
Outstanding, December 31, 1994 86,380 7.60
Exercised (60,399) 7.60
Canceled (10,601) 7.60
Outstanding, December 31, 1995 15,380 7.60
Exercised (9,323) 7.60
Outstanding, December 31, 1996 6,057 7.60
</TABLE>
All of the 6,057 options outstanding at December 31, 1996
have a remaining contractual life of 2 years and are fully-vested
and exercisable.
Employee Stock Purchase Plan
The Company has adopted an employee stock purchase plan
("the Stock Purchase Plan"), which allows for substantially all
employees to subscribe to purchase shares of the Company's stock
at 85% of the lesser of the market value of such shares at the
beginning or end of each annual subscription period. During 1995,
the shareholders approved the authorization of 150,000 additional
shares of stock for Company employees under the Stock Purchase
Plan, bringing the total number of shares available for
<PAGE 21>
issuance to 250,000. As of December 31, 1996, 82,585 shares remained
authorized and reserved for future issuance under this plan.
The Company accounts for the Stock Purchase Plan under APB
25, under which no compensation expense has been recognized. Had
compensation expense for the Stock Purchase Plan been determined
consistent with SFAS 123, it would have had an immaterial effect
on the Company's net income and earnings per share for the years
ended December 31, 1996 and 1995.
Stock Performance Plan
Effective January 1, 1996, the Company adopted a stock
performance plan, under which up to 400,000 shares of the
Company's stock ("Performance Stock") may be awarded to key
employees contingent on the employees' years of service with the
Company and other criteria established by the Company's
Compensation Committee. Shares must be granted, awarded and
vested before participants take full title to Performance Stock.
Of the grants currently outstanding, specified portions will be
awarded based on increases in the market value of the Company's
common stock from the initial price specified by the Company.
Awards vest on the earlier of: (i) 15 years of continuous
employment with the Company from the date shares are granted to
the participant; (ii) attainment of age 64; or (iii) death or
disability of the participant. Dividends are paid on awarded and
unvested Performance Stock and participants may exercise voting
privileges on such shares. At December 31, 1996, 238,300 shares
have been granted under the plan at initial stock prices ranging
from $22.75 to $24.875. As of December 31, 1996, no stock
performance criteria have been met, and accordingly, no shares
have been awarded. The compensation element for Performance Stock
is equal to the fair market value of the shares at the date of
award and is expensed over the vesting period.
Note 12 - Supplemental Disclosures of Cash Flow Information
The Company's significant non-cash investing and financing
activities and cash payments for interest and income taxes are as
follows:
<TABLE>
<CAPTION>
(in thousands) Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Unrealized appreciation (depreciation)
of available-for-sale securities net
of tax effect of $1,136 for 1996,
($317) for 1995 and $3,344 for 1994 $1,675 $ (505) $5,341
Notes payable issued for purchased
customer accounts 6,074 1,535 -
Notes received on the sale of fixed
assets and customer accounts 280 - 266
Cash paid during the year for:
Interest 891 896 1,462
Income taxes 10,609 9,107 9,597
</TABLE>
Note 13 - Business Concentrations
Substantially all of the CompanyOs premiums receivable from
customers and premiums payable to insurance companies arise from
policies sold on behalf of insurance companies. The Company, as
broker and agent, typically collects premiums, retains its
commission, and remits the balance to the insurance companies.
<PAGE 22>
A significant portion of business written by the Company is for
customers located in Florida. Accordingly, the occurrence of
adverse economic conditions or an adverse regulatory climate in
Florida could have a material adverse effect on the Company's
business, although no such conditions have been encountered in
the past.
For the years ended December 31, 1996 and 1995,
approximately 22% and 24%, respectively, of the Company's
revenues were from insurance policies underwritten by one
insurance company. Should this carrier seek to terminate its
arrangement with the Company, the Company believes alternative
insurance companies are available to underwrite the business,
although some additional expense and loss of market share would
at least initially result. No other insurance company accounts
for as much as five percent of the Company's revenues.
Note 14 - Reinsurance Indemnity
Whiting National Insurance Company ("Whiting"), the Company's
risk-bearing subsidiary, ceased underwriting operations in early
1985, and in 1988 entered into liquidation under the supervision
of the New York State Insurance Department ("Department"). Since
then, the handling of Whiting's affairs has been the
responsibility of the Department.
In 1979, the Company agreed to indemnify a ceding insurer
should Whiting fail to perform under a reinsurance contract. As a
result, the Company is directly responsible for the management
and adjudication of claims outstanding under that indemnification
contract. The Company has historically estimated that certain
recoveries related to the indemnity were available to it from the
Whiting liquidation. While none of the underlying facts or
applicable law as to the Company's rights or creditor priority
had changed, the liquidation activities proceeded more slowly
than anticipated, making realization of those recoveries
uncertain. As a result, in 1992, those estimated recoveries were
written off and reserves associated with the underlying indemnity
obligation were bolstered because of adverse loss developments.
Reserves are periodically revised based on developments to date,
the Company's estimates of the outcome of this matter, and the
Company's experience in contesting and settling this matter. As
the scope of the liability or recovery becomes better defined,
there will be changes in the estimates of future costs or
recoveries. Management of the Company does not believe that any
such changes will have a material effect on the Company's
financial condition or results of operations.
<PAGE 23>
REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Poe & Brown, Inc.
We have audited the accompanying consolidated balance sheets
of Poe & Brown, Inc. and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of income,
shareholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Poe & Brown, Inc. and subsidiaries as of December 31, 1996 and
1995, and the results of their operations and their cash flows
for the years then ended in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Orlando, Florida
January 24, 1997
<PAGE 24>
To the Board of Directors of Poe & Brown, Inc.
We have audited the accompanying consolidated statements of
income, shareholders' equity and cash flows of Poe & Brown, Inc.
and subsidiaries for the year ended December 31, 1994. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
results of operations and cash flows of Poe & Brown, Inc. and
subsidiaries for the year ended December 31, 1994, in conformity
with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial
statements, in 1994 the Company changed its method of accounting
for certain investments in debt and equity securities.
/s/ Ernst & Young LLP
Tampa, Florida
January 28, 1995, except for Note 2,
as to which the date is March 1, 1995
<PAGE 1>
EXHIBIT 22
POE & BROWN, INC.
SUBSIDIARIES
Florida Corporations:
____________________
Arch-Holmes Insurance, Inc.
Brown & Brown, Inc. - d/b/a Poe & Brown Benefits, Poe & Brown
Financial Advisers,
United Self Insured Services, Poe & Brown Insurance
Madoline Corporation
Poe 1991, Inc.
Underwriters Services, Inc.
W.F. Poe Associates, Inc.
Foreign Corporations:
____________________
A.G. General Agency, Inc. (TX)
P & O of Texas, Inc. (TX)
P&B PHYSICIANplans, Inc. (CT)
Poe & Associates of Illinois, Inc. (IL) - d/b/a Insurance
Administration Center
Poe & Brown of Arizona, Inc. (AZ)
Poe & Brown of California, Inc. (CA)
Poe & Brown of Colorado, Inc. (CO)
Poe & Brown of Connecticut, Inc. (CT)
Poe & Brown of Georgia, Inc. (GA)
Poe & Brown Insurance Benefits, Inc. (TX)
Poe & Brown Metro, Inc. (NJ)
Poe & Brown of New Jersey, Inc. (NJ)
Poe & Brown of North Carolina, Inc. (NC)
Poe & Brown of Pennsylvania, Inc. (PA)
Poe & Brown of Texas, Inc. (TX)
Indirect Subsidiaries:
_____________________
American Underwriting Management, Inc. (FL)
DSD Insurance Agency, Inc. (AZ)
Ernest Smith Insurance Agency, Inc. (FL)
Farr Insurance, Inc. (FL)
Florida Intracoastal Underwriters, Limited Co. (FL) (limited
company)
Halcyon Underwriters, Inc. (FL)
The Homeowner Association Risk Purchasing Group, Inc. (AZ)
Hotel-Motel Insurance Group, Inc. (FL)
Jordan, Roberts & Company (FL)
MacDuff America, Inc. (FL)
MacDuff Pinellas Underwriters, Inc. (FL) - d/b/a Roehrig &
MacDuff
MacDuff Underwriters, Inc. (FL) - d/b/a Roehrig & MacDuff
Nevada Apartment Insurance (NV)
Poe & Brown of Nevada, Inc. (NV)
<PAGE 1>
EXHIBIT 23a
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Annual
Report (Form 10-K) of Poe & Brown, Inc. of our report dated
January 28, 1995, except for Note 2, as to which the date is
March 1, 1995, included in the 1996 Annual Report to Shareholders
of Poe & Brown, Inc.
Our audit also included the financial statement schedule of Poe &
Brown, Inc. listed in Item 14(a) for the year ended December 31,
1994. This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on
our audit. In our opinion, the financial statement schedule
referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
We also consent to the incorporation by reference in Post-
Effective Amendment Number 1 dated December 3, 1992 to
Registration Statement Number 33-1900 dated November 27, 1985 on
Form S-8, Registration Statement Number 33-76 dated September 3,
1985 on Form S-8, Post-Effective Amendment Number 2 to
Registration Statement Number 2-61019 dated May 27, 1980 on Form
S-8, Registration Statement Number 33-41204 dated June 12, 1991
on Form S-8, and Registration Statement Number 333-14925 dated
October 28, 1996 on Form S-8, and Registration Statement Number
33-41825 dated July 22, 1991 on Form S-8 of our report dated
January 28, 1995, except for Note 2, as to which the date is
March 1, 1995, with respect to the consolidated financial
statements for the year ended December 31, 1994 incorporated
herein by reference, and our report included in the preceding
paragraph with respect to the financial statement schedule
included in the Annual Report (Form 10-K) of Poe & Brown, Inc.
ERNST & YOUNG LLP
Tampa, Florida
March 21, 1997
<PAGE 1>
EXHIBIT 23b
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
of Poe & Brown, Inc.:
As independent certified public accountants, we hereby
consent to the incorporation of our report dated January 24,
1997, included or incorporated by reference in this Form 10-K,
into the Company's previously filed Registration Statements (File
No.'s. 33-1900, 33-76, 2-61019, 33-41204, 33-41825 and 333-
14925).
ARTHUR ANDERSEN LLP
Orlando, Florida
March 21, 1997
<PAGE 1>
EXHIBIT 24a
POWERS OF ATTORNEY
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel L. Grammig
and James A. Orchard, or either of them, as his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the 1996 Annual Report on Form 10-K
for Poe & Brown, Inc., and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises as fully to all intents and
purposes as he might or could in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their
substitutes, may lawfully do or cause to be done by virtue
hereof.
/s/ J. HYATT BROWN
_______________________________
J. Hyatt Brown
Dated: January 30, 1997
<PAGE 2>
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel L. Grammig
and James A. Orchard, or either of them, as his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the 1996 Annual Report on Form 10-K
for Poe & Brown, Inc., and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises as fully to all intents and
purposes as he might or could in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their
substitutes, may lawfully do or cause to be done by virtue
hereof.
/s/ BRADLEY CURREY, JR.
___________________________________
Bradley Currey, Jr.
Dated: January 30, 1997
<PAGE 3>
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel L. Grammig
and James A. Orchard, or either of them, as his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the 1996 Annual Report on Form 10-K
for Poe & Brown, Inc., and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises as fully to all intents and
purposes as he might or could in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their
substitutes, may lawfully do or cause to be done by virtue
hereof.
/s/ BRUCE G. GEER
_____________________________
Bruce G. Geer
Dated: January 30, 1997
<PAGE 4>
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel L. Grammig
and James A. Orchard, or either of them, as his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the 1996 Annual Report on Form 10-K
for Poe & Brown, Inc., and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises as fully to all intents and
purposes as he might or could in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their
substitutes, may lawfully do or cause to be done by virtue
hereof.
/s/ JIM W. HENDERSON
___________________________________
Jim W. Henderson
Dated: January 30, 1997
<PAGE 5>
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel L. Grammig
and James L. Olivier, or either of them, as his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the 1996 Annual Report on Form 10-K
for Poe & Brown, Inc., and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises as fully to all intents and
purposes as he might or could in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their
substitutes, may lawfully do or cause to be done by virtue
hereof.
/s/JAMES A. ORCHARD
_____________________________
James A. Orchard
Dated: January 30, 1997
<PAGE 6>
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel L. Grammig
and James A. Orchard, or either of them, as his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the 1996 Annual Report on Form 10-K
for Poe & Brown, Inc., and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises as fully to all intents and
purposes as he might or could in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their
substitutes, may lawfully do or cause to be done by virtue
hereof.
/s/ KENNETH E. HILL
__________________________________
Kenneth E. Hill
Dated: January 30, 1997
<PAGE 7>
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel L. Grammig
and James A. Orchard, or either of them, as his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the 1996 Annual Report on Form 10-K
for Poe & Brown, Inc., and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises as fully to all intents and
purposes as he might or could in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their
substitutes, may lawfully do or cause to be done by virtue
hereof.
/s/ SAMUEL P. BELL, III
________________________________
Samuel P. Bell, III
Dated: January 30, 1997
<PAGE 8>
POWER OF ATTORNEY
The undersigned constitutes and appoints Laurel L. Grammig
and James A. Orchard, or either of them, as his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the 1996 Annual Report on Form 10-K
for Poe & Brown, Inc., and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises as fully to all intents and
purposes as he might or could in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their
substitutes, may lawfully do or cause to be done by virtue
hereof.
/s/ THEODORE J. HOEPNER
___________________________________
Theodore J. Hoepner
Dated: January 30, 1997
<PAGE 1>
EXHIBIT 24b
CERTIFIED RESOLUTIONS OF THE BOARD OF DIRECTORS
The undersigned, Laurel L. Grammig, hereby certifies that
she is the duly elected, qualified and acting Secretary of Poe &
Brown, Inc., a Florida corporation (the "Company"), and that the
following resolutions were adopted by unanimous written consent
of the Board of Directors of the Company as of March 7, 1997:
RESOLVED, that the March 3, 1997 draft of the
Company's 1996 Annual Report on Form 10-K submitted to
the Directors is hereby approved in form and substance,
subject to any revisions, additions, deletions or
insertions deemed necessary or appropriate by Laurel L.
Grammig, the Company's Vice President, Secretary and
General Counsel, and that the Chief Executive Officer
and the Chief Financial Officer are hereby authorized
to sign the Form 10-K on behalf of the Company, either
personally or through a power of attorney, and to cause
the Form 10-K to be filed with the Securities and
Exchange Commission in accordance with the rules
promulgated by the Commission;
FURTHER RESOLVED, that the appropriate officers of
the Company are hereby authorized and directed to take
all actions they deem necessary or appropriate,
including the payment of any necessary filing fees, to
carry out the intent of the foregoing resolutions.
IN WITNESS WHEREOF, the undersigned Secretary of the Company
has executed this Certificate this 14th day of March, 1997.
/s/ LAUREL L. GRAMMIG
________________________________
Laurel L. Grammig
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
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