As filed with the Securities and Exchange Commission on December 14, 2001
Registration No. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
BROWN & BROWN, INC.
(Exact name of Registrant as specified in its charter)
FLORIDA 59-0864469
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
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220 SOUTH RIDGEWOOD AVENUE
DAYTONA BEACH, FLORIDA 32114
(386) 252-9601
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
LAUREL L. GRAMMIG, ESQ.
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
BROWN & BROWN, INC.
401 EAST JACKSON STREET, SUITE 1700
TAMPA, FLORIDA 33602
(813) 222-4100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copy to:
Chester E. Bacheller, Esq.
Holland & Knight LLP
400 North Ashley Drive
Suite 2300
Tampa, Florida 33602
Phone: (813) 227-6431
Fax: (813) 229-0134
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
CALCULATION OF REGISTRATION FEE
===============================================================================================================================
Proposed
Maximum Amount of
Title of Each Class of Securities Amount to be Aggregate Registration
to be Registered Registered(1) Offering Price(1) Fee(2)
-------------------------------------------------------------------------------------------------------------------------------
Debt Securities
Common Stock, par value $0.10 per share
Warrants
Common Stock, par value $.10 per share, as may
be issued from time to time upon conversion or
exchange of the debt securities and warrants being
registered
Units consisting of two or more of the above
Total.......................................... $250,000,000 $250,000,000 $59,750
===============================================================================================================================
(1) There are being registered under this registration statement such
indeterminate number of shares of common stock of the registrant, such
indeterminate principal amount of debt securities of the registrant and
such indeterminate number of warrants of the registrant as shall have
an aggregate initial offering price not to exceed $250,000,000. If any
debt securities are issued at an original issue discount, then the
securities registered shall include such additional debt securities as
may be necessary such that the aggregate initial public offering price
of all securities issued pursuant to this registration statement will
equal $250,000,000. In addition, pursuant to Rule 416 under the
Securities Act of 1933, this registration statement will cover such
indeterminate number of shares of common stock of the registrant that
may be issued in respect of stock splits, stock dividends and similar
transactions. Any securities registered under this registration
statement may be sold separately or as units with other securities
registered under this registration statement. The proposed maximum
initial offering price per security will be determined from time to
time by the registrant in connection with the sale of the securities
registered under this registration statement.
(2) The estimated registration fee for the common shares, debt securities
and warrants has been computed pursuant to Rule 457(o).
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
SUBJECT TO COMPLETION, DATED DECEMBER 14, 2001
PROSPECTUS
$250,000,000
BROWN & BROWN, INC.
DEBT SECURITIES, COMMON STOCK
AND
WARRANTS
-------------------
When we offer securities, we will provide you with a prospectus supplement
describing the terms of the specific issue of securities, including the offering
price of the securities. The prospectus supplements may also add, update or
change information contained in this prospectus. You should read this prospectus
and any supplements carefully before you invest.
-------------------
Our common stock is traded on The New York Stock Exchange under the symbol
"BRO."
-------------------
INVESTING IN THESE SECURITIES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 5 OF THIS PROSPECTUS.
The securities may be offered in amounts, at prices and on terms determined at
the time of offering. The securities may be sold directly to you through agents
which we may select, or through underwriters and dealers which we may select. If
we use agents, underwriters or dealers to sell the securities, we will name them
and describe their compensation in a prospectus supplement.
-------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is ______________, ________.
TABLE OF CONTENTS
PAGE
----
About This Prospectus.............................................3
Brown & Brown, Inc................................................3
Disclosure Regarding Forward-Looking Statements...................4
Risk Factors......................................................5
Use of Proceeds..................................................10
Ratio of Earnings to Fixed Charges...............................10
The Securities...................................................11
Description of Debt Securities...................................11
Description of Capital Stock.....................................21
Description of Warrants..........................................24
Plan of Distribution.............................................25
Legal Matters....................................................27
Experts..........................................................27
Where You Can Find More Information..............................27
Incorporation by Reference.......................................27
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You should rely only on the information contained in this prospectus or
any supplement. We have not authorized any other person to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely on it. We are not making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted. You
should not assume that the information in this prospectus or any supplement is
accurate as of any date other than the date on the front of those documents. Our
business, financial condition, results of operations and prospects may have
changed since that date.
The information in this prospectus or any supplement may not contain
all of the information that may be important to you. You should read the entire
prospectus or any supplement, as well as the documents incorporated by reference
in the prospectus or any supplement, before making an investment decision.
2
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form S-3 that we
filed with the Securities and Exchange Commission utilizing a "shelf"
registration process. Under this shelf process, we may, from time to time, sell
any combination of securities described in this prospectus in one or more
offerings. This prospectus provides you with a general description of the
securities we may offer. Each time we sell securities, we will provide a
prospectus supplement that will contain specific information about the terms of
that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this prospectus
and any applicable prospectus supplement together with additional information
described below under the heading "Where You Can Find More Information."
When used in this prospectus and any prospectus supplement, the terms
"Brown & Brown," "we," "our," "us" and the "Company" refer to Brown & Brown,
Inc. and it subsidiaries. The following summary contains basic information about
us. It likely does not contain all the information that is important to you. We
encourage you to read this entire prospectus and the documents we have referred
you to.
BROWN & BROWN, INC.
OUR BUSINESS
We are a diversified insurance brokerage and agency that markets and
sells primarily property and casualty insurance products and services to its
clients. Because we do not engage in underwriting activities, we do not assume
underwriting risks. Instead, we act in an agency capacity to provide our clients
with targeted, customized risk management products. As of December 1, 2001, our
activities were conducted in 131 locations in 28 states. Of the 131 locations,
35 are in Florida; 18 in New York; ten in Virginia; eight in Louisiana; six in
Minnesota; five in each of Colorado and South Carolina; four in each of Georgia,
North Dakota, Texas and Washington; three in each of Arizona, California and New
Mexico; two in each of Connecticut, Michigan, Nevada, New Jersey and
Pennsylvania; and one in each of Indiana, Iowa, Missouri, Ohio, Oklahoma,
Tennessee, West Virginia, Wisconsin and Wyoming.
Our business is divided into four divisions: (1) the Retail Division;
(2) the National Programs Division; (3) the Service Division; and (4) the
Brokerage Division. The Retail Division is composed of Brown & Brown employees
who market and sell a broad range of insurance products to insureds. The
National Programs Division works with underwriters to develop proprietary
insurance programs for specific niche markets. These programs are marketed and
sold primarily through independent agencies and agents across the United States.
We receive 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. For the fiscal year ended December 31, 2000 and the
nine months ended September 30, 2001, we achieved commission and fee revenues of
approximately $258.3 million and $264.3 million, respectively.
RECENT DEVELOPMENTS
From January 1, 2001 through December 1, 2001, we acquired insurance
agencies based in Tampa, Florida; Rochester, New York; Lafayette, Louisiana;
Phoenix, Arizona (two); Thousand Oaks, California; Rome, New York; Titusville,
Florida; Manassas, Virginia; Tallahassee, Florida; Syracuse, New York; St.
Louis, Missouri; Roswell, New Mexico; Deerfield Beach, Florida; Las Vegas,
Nevada; Newington, Connecticut; Pryor, Oklahoma; Orlando, Florida; Clearwater,
Florida; St. Petersburg, Florida; Wheat Ridge, Colorado; Salem, Virginia; El
Paso, Texas; Bethlehem, Pennsylvania; Baton Rouge, Louisiana; Charleston, South
Carolina; Grand Forks, North Dakota; Flint, Michigan; Tacoma, Washington;
Novato, California; and Seattle, Washington.
You should read this information in conjunction with our consolidated
financial statements and the notes thereto that are incorporated by reference
into this prospectus. For other recent developments, we refer you to our most
recent and future filings under the Securities Exchange Act of 1934.
3
Our principal executive offices are located at 220 South Ridgewood
Avenue, Daytona Beach, Florida 32114, and 401 East Jackson Street, Suite 1700,
Tampa, Florida 33602, and our telephone numbers at those addresses are (386)
252-9601 and (813) 222-4100, respectively. Our website is located at
http://www.bbinsurance.com. Information contained in our website is not a part
of this document.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
We make "forward-looking statements" within the "safe harbor" provision
of the Private Securities Litigation Reform Act of 1995 throughout this
prospectus, supplements to this prospectus and in the documents we incorporate
by reference into this prospectus. You can identify these statements by
forward-looking words such as "may," "will," "expect," "anticipate," "believe,"
"estimate," "plan" and "continue" or similar words. We have based these
statements on our current expectations about future events. Although we believe
that our expectations reflected in or suggested by our forward-looking
statements are reasonable, our actual results may differ materially from what we
currently expect. Important factors which could cause our actual results to
differ materially from the forward-looking statements in this prospectus or in
the documents that we incorporate by reference into this prospectus include
those described under "Risk Factors" and:
- material adverse changes in economic conditions in the markets
we serve;
- future regulatory actions and conditions in the states in
which we conduct our business;
- competition from others in the insurance brokerage and agency
business;
- the integration of our operations with those of businesses or
assets we have acquired or may acquire in the future and the
failure to realize the expected benefits of such integration;
and
- other risks and uncertainties as may be detailed from time to
time in our public announcements and Securities and Exchange
Commission filings.
You should carefully read this prospectus, supplements to this
prospectus and the documents that we incorporate by reference into this
prospectus completely and with the understanding that our actual future results
may be materially different from what we expect. All forward-looking statements
attributable to us are expressly qualified by these cautionary statements.
4
RISK FACTORS
Before you invest in our securities, you should be aware that the
occurrence of any of the events described in this Risk Factors section and
elsewhere in this prospectus or in a supplement to this prospectus could have a
material adverse effect on our business, financial condition and results of
operations. You should carefully consider these risk factors and the specific
risks set forth under the caption "Risk Factors" in any supplement to this
prospectus, together with all of the other information included in this
prospectus or in a supplement to this prospectus and in documents we incorporate
by reference before you decide to purchase our securities. This prospectus
contains forward-looking statements that involve risks and uncertainties.
WE CANNOT ACCURATELY FORECAST OUR COMMISSION REVENUES BECAUSE OUR COMMISSIONS
DEPEND ON PREMIUM RATES CHARGED BY INSURANCE COMPANIES, WHICH HISTORICALLY HAVE
VARIED AND, AS A RESULT, HAVE BEEN DIFFICULT TO PREDICT.
We are primarily engaged in insurance brokerage and agency activities,
and derive revenues from commissions paid by insurance companies and fees for
administration and benefit consulting services. We do not determine insurance
premiums. Premium rates are determined by insurers based on a fluctuating
market. Historically, property and casualty premiums have been cyclical in
nature and have varied widely based on market conditions. From the mid-1980s
through 1999, general premium levels were depressed as a result of the expanded
underwriting capacity of insurance companies and increased competition. In many
cases, insurance companies lowered commission rates and increased volume
requirements. Significant reductions in premium rates occurred during the years
1986 through 1998 and continued, although to a lesser degree, through 1999. As a
result of increasing "loss ratios" (the comparison of incurred losses plus loss
adjustment expense against earned premiums) of insurance carriers through 1999,
there was a general increase in premium rates beginning in the first quarter of
2000 and continuing into the fourth quarter of 2001. Although the premium
increases varied by line of business, geographical region, insurance carrier and
specific underwriting factors, it was the first time since 1986 that we operated
in an environment of increased premiums for four consecutive quarters. The
terrorist attacks of September 11, 2001 caused the property and casualty
industry to experience significant losses. As a result, industry participants
expect that the rate increases and improving terms occurring before September 11
will continue through the remainder of 2001 and possibly into 2003. However, as
traditional risk-bearing insurance carriers continue to outsource the production
of premium revenue to non-affiliated brokers or agents such as ourselves, those
insurance carriers may seek to reduce further their expenses by reducing the
commission rates payable to those insurance brokers or agents. The reduction of
these commission rates, along with general volatility and/or declines in
premiums, may significantly undermine our profitability. Because we do not
determine the timing and extent of premium pricing changes, we cannot accurately
forecast our commission revenues, including whether they will significantly
decline. As a result, our budgets for future acquisitions, capital expenditures,
dividend payments, loan repayments and other expenditures may have to be
adjusted to account for unexpected changes in revenues.
WE DERIVE A SUBSTANTIAL PORTION OF OUR COMMISSION REVENUES FROM ONE
INSURANCE COMPANY, THE LOSS OF WHICH COULD RESULT IN ADDITIONAL EXPENSE AND LOSS
OF MARKET SHARE.
The programs offered by our National Programs Division are primarily
underwritten by the CNA Insurance Companies (CNA). For the year ended December
31, 2000 and the nine months ended September 30, 2001, approximately $7.5
million, or 37.3%, and $4.0 million, or 32.6%, respectively, of our National
Programs Division's commissions and fees were generated from policies
underwritten by CNA. During the same periods, our National Programs Division
represented 7.8% and 4.7% of our total commission and fee revenues,
respectively. In addition, for the same periods, approximately $9.7 million, or
4.9%, and $9.4 million, or 4.4%, respectively, of our Retail Division's total
commissions and fees were generated from policies underwritten by CNA.
Accordingly, revenues attributable to CNA represent approximately 5.1% of our
total commissions and fees. These figures represent a decline of revenues
generated by policies underwritten by CNA in recent years. This decline results
from certain of our programs and program accounts moving from CNA to other
carriers such as, for example, our Lawyer's Protector Plan(R) moving from CNA to
Clarendon National Insurance Company in November of 1999.
We have an agreement with CNA relating to each program underwritten by
it and each such agreement provides for either six months' or one year's advance
notice of termination. In addition, we have an existing credit agreement with
CNA under which $2 million was outstanding as of December 1, 2001. Upon the
occurrence of an
5
event of default by us under this credit agreement, including our termination of
any insurance program agreement with CNA, CNA may, at its option, declare any
unpaid balance due and payable on demand. If our relationship with CNA were
terminated, we believe that other insurance companies would be available to
underwrite the business, although some additional expense and loss of market
share would result.
BECAUSE OUR BUSINESS IS HIGHLY CONCENTRATED IN ARIZONA, FLORIDA AND NEW
YORK, ADVERSE ECONOMIC CONDITIONS OR REGULATORY CHANGES IN THESE STATES COULD
ADVERSELY AFFECT OUR FINANCIAL CONDITION.
For the year ended December 31, 2000, our Retail Division derived $14.9
million, or 7.4%, and $92.7 million, or 47.7%, of its commissions and fees from
its Arizona and Florida operations, respectively, constituting 5.8% and 35.9%,
respectively, of our total commissions and fees. For the nine months ended
September 30, 2001, our Retail Division derived $13.1 million, or 6.0%, and
$89.0 million, or 41.8%, of its commissions and fees from its Arizona and
Florida operations, respectively, constituting 4.9% and 33.7%, respectively, of
our total commissions and fees. We believe that these revenues are attributable
predominately to clients in Arizona and Florida. Additionally, as a result of
the Riedman Insurance acquisition in January 2001, we now have four additional
Florida offices and have folded other Riedman insurance business into our
existing Florida offices. For the year ended December 31, 2000, Riedman derived
$9.9 million, or 18.2% of its commissions and fees, from its Florida operations
and $15.1 million, or 27.8%, of its commission and fees from its New York
operations. Additionally, as a result of this acquisition (as well as subsequent
acquisitions and office consolidations), we now have 18 offices in New York,
where $20.9 million, or 7.9%, of our insurance business was concentrated for the
nine-month period ended September 30, 2001. We believe the regulatory
environment for insurance agencies in Arizona, Florida and New York currently is
no more restrictive than in other states. The insurance business is a
state-regulated industry, and therefore, state legislatures may enact laws that
adversely affect the insurance industry. Because our business is concentrated in
a few states, we face greater exposure to unfavorable changes in regulatory
conditions in those states than insurance agencies whose operations are more
diversified through a greater number of states. In addition, the occurrence of
adverse economic conditions, natural or other disasters, or other circumstances
specific to or otherwise significantly impacting Arizona, Florida and/or New
York could adversely affect our financial condition and results of operations.
THE DEBT SECURITIES WILL BE EFFECTIVELY JUNIOR TO ALL OF OUR SECURED
OBLIGATIONS.
The debt securities will be unsecured obligations of Brown & Brown. The
debt securities will be effectively junior in right of payment to all secured
indebtedness of Brown & Brown. Upon any distribution of assets pursuant to any
liquidation, insolvency, dissolution, reorganization or similar proceeding, the
holders of secured indebtedness will be entitled to receive payment in full from
the process of the collateral securing such secured indebtedness before the
holders of the debt securities will be entitled to receive any payment with
respect thereto. As a result, the holders of the debt securities may recover
proportionally less than holders of secured indebtedness of Brown & Brown. As of
September 30, 2001, Brown & Brown had approximately $97.2 million of unsecured
indebtedness outstanding, no secured indebtedness (except secured indebtedness
assumed pursuant to the Riedman and certain other acquisitions), and the
capacity to borrow approximately an additional $50 million of secured
indebtedness under our credit facility.
LOSS OF THE SERVICES OF J. HYATT BROWN, OUR CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER, COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND
FUTURE OPERATING RESULTS.
Although we operate with a decentralized management system, the loss of
the services of J. Hyatt Brown, our Chairman, President and Chief Executive
Officer, who beneficially owned approximately 17.2% of our outstanding common
stock as of December 1, 2001 and is key to the development and implementation of
our business strategy, could adversely affect our financial condition and future
operating results. We maintain a $5 million "key man" life insurance policy with
respect to Mr. Brown. We also maintain a $20 million insurance policy on the
lives of Mr. Brown and his wife. Under the terms of an agreement with Mr. and
Mrs. Brown, at the option of the Brown estate, we will purchase, upon the death
of the later to die of Mr. Brown or his wife, shares of our common stock owned
by Mr. and Mrs. Brown up to the maximum number that would exhaust the proceeds
of the policy.
6
OUR GROWTH STRATEGY DEPENDS IN PART ON THE ACQUISITION OF INSURANCE
AGENCIES, WHICH MAY NOT BE AVAILABLE ON ACCEPTABLE TERMS IN THE FUTURE AND
WHICH, IF CONSUMMATED, MAY NOT BE ADVANTAGEOUS TO US.
Our growth strategy includes the acquisition of insurance agencies. Our
ability to successfully identify suitable acquisition candidates, complete
acquisitions, integrate acquired businesses into our operations, and expand into
new markets, will require us to continue to implement and improve our
operations, financial, and management information systems. For example, most of
our offices manage their clients' information using The Application Manager For
Windows (WinTAM) computer program by Applied Systems. Part of the added time and
expense related to newly acquired agencies includes the integration of an
acquired agency's existing computer system into ours. Further, integrated,
acquired entities may not achieve levels of revenue, profitability, or
productivity comparable to our existing locations, or otherwise perform as
expected. In addition, we compete for acquisition and expansion opportunities
with entities that have substantially greater resources. Acquisitions also
involve a number of special risks, such as: diversion of management's attention;
difficulties in the integration of acquired operations and retention of
personnel; entry into unfamiliar markets; unanticipated problems or legal
liabilities; and tax and accounting issues, some or all of which could have a
material adverse effect on the results of our operations and our financial
condition.
OUR CURRENT MARKET SHARE MAY DECREASE AS A RESULT OF INCREASED
COMPETITION FROM INSURANCE COMPANIES AND THE FINANCIAL SERVICES INDUSTRY.
The insurance agency business is highly competitive and we actively
compete with numerous firms for clients and insurance carriers, many of which
have relationships with insurance companies or have a significant presence in
niche insurance markets, that may give them an advantage over us. Because
relationships between insurance agencies and insurance carriers or clients are
often local or regional in nature, this potential competitive disadvantage is
particularly pronounced outside of Florida.
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. However, to date, such direct writing has had relatively little effect
on our operations, primarily because our Retail Division is commercially
oriented.
In addition, to the extent that the Gramm-Leach-Bliley Financial
Services Modernization Act of 1999 and regulations recently enacted thereunder
permit banks, securities firms and insurance companies to affiliate, the
financial services industry may experience further consolidation, and we
therefore may experience increased competition from insurance companies and the
financial services industry, as a growing number of larger financial
institutions increasingly, and aggressively, offer a wider variety of financial
services, including insurance, than we currently offer.
PROPOSED TORT REFORM LEGISLATION, IF ENACTED, COULD DECREASE DEMAND FOR
LIABILITY INSURANCE, THEREBY REDUCING OUR COMMISSION REVENUES.
Legislation concerning tort reform has been considered, from time to
time, in the United States Congress and in several states. Among the provisions
considered for inclusion in such legislation have been limitations on damage
awards, including punitive damages, and various restrictions applicable to class
action lawsuits, including lawsuits asserting professional liability of the kind
for which insurance is offered under policies sold by our National Programs
Division, particularly our Physicians' Protector Plan(R) and Professional
Protector Plan(R) for Dentists. Enactment of these or similar provisions by
Congress, or by states in which we sell insurance, could result in a reduction
in the demand for liability insurance policies or a decrease in policy limits of
such policies sold, thereby reducing our commission revenues.
WE COMPETE IN A HIGHLY REGULATED INDUSTRY, WHICH MAY RESULT IN
INCREASED EXPENSES OR RESTRICTIONS ON OUR OPERATIONS.
We conduct business in a number of states and are subject to
comprehensive regulation and supervision by government agencies in many of the
states in which we do business. The primary purpose of such regulation and
supervision is to provide safeguards for policyholders rather than to protect
the interests of stockholders. The laws of the various state jurisdictions
establish supervisory agencies with broad administrative powers with respect to,
7
among other things, licensing to transact business, licensing of agents,
admittance of assets, regulating premium rates, approving policy forms,
regulating unfair trade and claims practices, establishing reserve requirements
and solvency standards, requiring participation in guarantee funds and shared
market mechanisms, and restricting payment of dividends.
Also, in response to perceived excessive cost or inadequacy of
available insurance, states have from time to time created state insurance funds
and assigned risk pools, which compete directly, on a subsidized basis, with
private insurance providers. We act as agents and brokers for state insurance
funds such as these in California, Nevada, and certain other states. These state
funds could choose to reduce the sales or brokerage commissions we receive. Any
such event, in a state in which we have substantial operations, such as Florida,
Arizona or New York, could substantially affect the profitability of our
operations in such state, or cause us to change our marketing focus.
State insurance regulators and the National Association of Insurance
Commissioners continually re-examine existing laws and regulations, and such
re-examination may result in the enactment of insurance-related laws and
regulations, or the issuance of interpretations thereof, that adversely affect
our business. Although we believe that we are in compliance in all material
respects with applicable local, state and federal laws, rules and regulations,
there can be no assurance that more restrictive laws, rules or regulations will
not be adopted in the future that could make compliance more difficult or
expensive. Specifically, recently adopted federal financial services
modernization legislation is expected to lead to additional federal regulation
of the insurance industry in the coming years, which could result in increased
expenses or restrictions on our operations.
CARRIER OVERRIDE AND CONTINGENT COMMISSIONS ARE LESS PREDICTABLE THAN
USUAL, WHICH IMPAIRS OUR ABILITY TO FORECAST THE AMOUNT OF SUCH COMMISSIONS THAT
WE WILL RECEIVE.
We derive a portion of our revenues from carrier override and
contingent commissions. The aggregate of these commissions generally accounts
for 3.1% to 5.2% of our total annual revenues. Contingent commissions are paid
by insurance companies and are based on the profit that the underwriter makes on
the overall volume of business that we place with that insurance company. We
generally receive these commissions in the first and second quarters of each
year. Override commissions are paid by insurance companies based on the volume
of business that we place with them and are generally paid over the course of
the year. Due to recent changes in our industry, including changes in
underwriting criteria due in part to the high loss ratios experienced by
insurance companies, we cannot predict the payment of these commissions as well
as we have been able to in the past. Further, we have no control over the
ability of insurance companies to estimate loss reserves, which affects our
ability to make profit-sharing calculations. Because these commissions affect
our revenues, any decrease in their payment to us could adversely effect the
results of our operations and our financial condition.
WE HAVE NOT DETERMINED THE AMOUNT OF RESOURCES AND THE TIME THAT WILL
BE NECESSARY TO ADEQUATELY RESPOND TO RAPID TECHNOLOGICAL CHANGE IN OUR
INDUSTRY, WHICH MAY ADVERSELY AFFECT OUR BUSINESS AND OPERATING RESULTS.
Frequent technological changes, new products and services and evolving
industry standards are all influencing the insurance business. The Internet, for
example, is increasingly used to transmit benefits and related information to
clients and to facilitate business-to-business information exchange and
transactions. We believe that the development and implementation of new
technologies will require additional investment of our capital resources in the
future. We have not determined, however, the amount of resources and the time
that this development and implementation may require, which may result in
short-term, unexpected interruptions to our business, or may result in a
competitive disadvantage in price and/or efficiency, as we endeavor to develop
or implement new technologies.
QUARTERLY AND ANNUAL VARIATIONS IN OUR COMMISSIONS THAT RESULT FROM THE
TIMING OF POLICY RENEWALS AND THE NET EFFECT OF NEW AND LOST BUSINESS PRODUCTION
MAY HAVE UNEXPECTED EFFECTS ON OUR RESULTS OF OPERATIONS.
Our commission income (including contingent commissions but excluding
fees), which typically accounts for approximately 87% to 90% of our total annual
revenues, can vary quarterly or annually due to the timing of policy renewals
and the net effect of new and lost business production. The factors that cause
these variations are not within our control. Specifically, consumer demand for
insurance products can influence the timing of renewals,
8
new business and lost business, which includes generally policies that are not
renewed, and cancellations. In addition, as discussed, we rely on insurance
companies for the payment of certain commissions. Because these payments are
processed internally by these insurance companies, we may not receive a payment
that is otherwise expected from a particular insurance company in one of our
quarters or years until after the end of that period, which can adversely affect
our ability to budget for significant future expenditures.
Quarterly and annual fluctuations in revenues based on increases and
decreases associated with the timing of policy renewals have had an adverse
effect on our financial condition in the past, and we may experience such
effects in the future.
WE MAY EXPERIENCE VOLATILITY IN OUR STOCK PRICE THAT COULD AFFECT YOUR
INVESTMENT.
The market price of our common stock may be subject to significant
fluctuations in response to various factors, including:
- quarterly fluctuations in our operating results;
- changes in securities analysts' estimates of our future
earnings; and
- our loss of significant customers or significant business
developments relating to us or our competitors.
Our common stock's market price also may be affected by our ability to
meet analysts' expectations and any failure to meet such expectations, even if
minor, could cause the market price of our common stock to decline. In addition,
stock markets have generally experienced a high level of price and volume
volatility, and the market prices of equity securities of many companies have
experienced wide price fluctuations not necessarily related to the operating
performance of such companies. These broad market fluctuations may adversely
affect our common stock's market price. In the past, securities class action
lawsuits frequently have been instituted against companies following periods of
volatility in the market price of such companies' securities. If any such
litigation is instigated against us, it could result in substantial costs and a
diversion of management's attention and resources, which could have a material
adverse effect on our business, results of operations and financial condition.
WE CANNOT ASSURE YOU THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE
SECURITIES OFFERED OTHER THAN OUR COMMON STOCK OR THAT SUCH A MARKET WILL NOT BE
VOLATILE.
There is no established trading market for the securities offered other
than our common stock, and we do not intend to apply for listing of the
securities (other than our common stock) offered on any national securities
exchange or for quotation of the securities offered on any automated dealer
quotation system. We expect that any underwriters we select will make a
market in the securities offered after the consummation of an offering of
securities issued in connection with this prospectus, although they would be
under no obligation to do so and may discontinue any market-making activities at
any time without any notice. Accordingly, no assurance can be given as to the
price of the securities offered, the liquidity of the trading market for the
securities offered or that an active public trading market for the securities
offered will develop. If an active public trading market for the securities
offered does not develop, the market price and liquidity of the securities
offered may be adversely affected. If the securities offered are traded, they
may trade at a discount from their offering price, depending upon prevailing
interest rates, the market for similar securities, our performance and certain
other factors. The liquidity of, and trading markets for, any debt securities
offered may also be adversely affected by general declines in the market for
non-investment grade debt. Such declines may adversely affect the liquidity of,
and trading markets for, the securities offered, independent of our financial
performance or prospects. Historically, the markets for non-investment grade
debt securities have been subject to disruptions that have caused substantial
price volatility. There can be no assurance that the market for any debt
securities offered will not be subject to similar disruptions. Any such
disruptions may have a material adverse effect on the value of such securities
offered.
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USE OF PROCEEDS
Unless otherwise indicated in the prospectus supplement, the net proceeds
from the sale of securities offered by this prospectus will be used to fund
acquisitions and for general corporate purposes, including capital expenditures,
and to meet working capital needs. Pending such uses, we anticipate that we will
invest the net proceeds in interest-bearing securities.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges
for the nine months ended September 30, 2001 and 2000 and the five years ended
December 31, 2000.
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
----------------------- ------------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
----------- ----------- ---------- ---------- ---------- ---------- ---------
Ratio of Earnings to Fixed Charges..... 14.0 46.6 42.3 34.9 34.1 20.4 19.5
=========== ========== ========== ========== ========== ========== =========
For purposes of computing the ratio of earnings to fixed charges,
earnings consist of the sum of pretax income from continuing operations,
interest amortized to cost of sales, interest expense (exclusive of capitalized
interest) and the portion of rent expense deemed to represent interest. Fixed
charges consist of the sum of interest expense, including capitalized interest
and amortization of debt issuance costs, if applicable, and the portion of rent
expense deemed to represent interest.
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THE SECURITIES
From time to time, we may offer under this prospectus, separately or
together:
- unsecured senior or subordinated debt securities;
- shares of common stock;
- warrants to purchase shares of common stock; and
- warrants to purchase debt securities.
The aggregate initial offering price of the offered securities will not
exceed $250,000,000.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth general terms and provisions of
the debt securities to which any prospectus supplement may relate. We will
describe the particular terms and provisions of the series of debt securities
offered by a prospectus supplement, and the extent to which such general terms
and provisions described below may apply thereto, in the prospectus supplement
relating to such series of debt securities.
The senior debt securities are to be issued in one or more series under
an indenture, as supplemented or amended from time to time between us and an
institution that we will name in the related prospectus supplement, as trustee.
For ease of reference, we will refer to the indenture relating to senior debt
securities as the senior indenture and we will refer to the trustee under that
indenture as the senior trustee. The subordinated debt securities are to be
issued in one or more series under an indenture, as supplemented or amended from
time to time, between us and an institution that we will name in the related
prospectus supplement, as trustee. For ease of reference, we will refer to the
indenture relating to subordinate debt securities as the subordinate indenture
and we will refer to the trustee under that indenture as the subordinate
trustee. This summary of certain terms and provisions of the debt securities and
the indentures is not necessarily complete, and we refer you to the copy of the
form of the indentures which are or will be filed as an exhibit to the
registration statement of which this prospectus forms a part, and to the Trust
Indenture Act of 1939, as amended. Whenever we refer to particular defined terms
of the indentures in this section or in a prospectus supplement, we are
incorporating these definitions into this prospectus or the prospectus
supplement.
GENERAL
The debt securities will be issuable in one or more series pursuant to
the applicable indenture, a supplemental indenture relating to such series of
debt securities, or a resolution of our board of directors or a committee of the
board. Unless otherwise specified in a prospectus supplement, each series of
senior debt securities will rank equally in right of payment with all of our
other senior obligations. Each series of subordinated debt securities will be
subordinated and junior in right of payment to the extent and in the manner set
forth in the subordinated indenture and any supplemental indenture relating to
that debt. In addition, such subordinated debt securities may rank equal or
senior in right of payment to other subordinated indebtedness which may have
been issued or will be issued in the future. Except as otherwise provided in a
prospectus supplement, the indentures will not limit our incurrence or issuance
of other secured or unsecured debt, whether under the indentures, any other
indenture that we may enter into in the future or otherwise. For more
information, you should read the prospectus supplement relating to a particular
offering of securities.
The applicable prospectus supplement or prospectus supplements will
describe the following terms of each series of debt securities:
- the title of the debt securities and whether such series
constitutes senior debt securities or subordinated debt
securities;
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- any limit upon the aggregate principal amount of the debt
securities;
- the percentage of principal amount at which the debt
securities will be issued;
- the date or dates on which the principal of the debt
securities is payable or the method of that determination or
the right, if any, of Brown & Brown to defer payment of
principal;
- the rate or rates, if any, at which the debt securities will
bear interest (including reset rates, if any, and the method
by which any such rate will be determined), the interest
payment dates on which interest will be payable and the right,
if any, of Brown & Brown to defer any interest payment;
- the place or places where, subject to the terms of the
indenture as described below under the caption "-Payment and
Paying Agents," the principal of and premium, if any, and
interest, if any, on the debt securities will be payable and
where, subject to the terms of the indenture as described
below under the caption "-Denominations, Registration and
Transfer," we will maintain an office or agency where debt
securities may be presented for registration of transfer or
exchange and the place or places where notices and demands to
or upon us in respect of the debt securities and the indenture
may be made;
- any period or periods within, or date or dates on which, the
price or prices at which and the terms and conditions upon
which debt securities may be redeemed, in whole or in part, at
our option pursuant to any sinking fund or otherwise;
- the obligation, if any, of Brown & Brown to redeem or purchase
the debt securities pursuant to any sinking fund or analogous
provisions or at the option of a holder and the period or
periods within which, the price or prices at which, the
currency or currencies including currency unit or units, in
which and the other terms and conditions upon which the debt
securities will be redeemed or purchased, in whole or in part,
pursuant to such obligation;
- the denominations in which any debt securities will be
issuable if other than denominations of $1,000 and any
integral multiple thereof;
- if other than in U.S. dollars, the currency or currencies,
including currency unit or units, in which the principal of,
and premium, if any, and interest, if any, on the debt
securities will be payable, or in which the debt securities
shall be denominated;
- any additions, modifications or deletions in the events of
default or covenants of Brown & Brown specified in the
indenture with respect to the debt securities;
- if other than the principal amount, the portion of the
principal amount of debt securities that will be payable upon
declaration of acceleration of the maturity thereof;
- any additions or changes to the indenture with respect to a
series of debt securities that will be necessary to permit or
facilitate the issuance of the series in bearer form,
registrable or not registrable as to principal, and with or
without interest coupons;
- any index or indices used to determine the amount of payments
of principal of and premium, if any, on the debt securities
and the manner in which such amounts will be determined;
- subject to the terms of the indenture as described below under
the caption "-Global Debt Securities," whether the debt
securities of the series will be issued in whole or in part in
the form of one or more global securities and, in such case,
the depositary for the global securities;
- the appointment of any trustee, registrar, paying agent or
agents;
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- the terms and conditions of any obligation or right of Brown &
Brown or a holder to convert or exchange debt securities into
preferred securities or other securities;
- whether the defeasance and covenant defeasance provisions
described under the caption "-Satisfaction and Discharge;
Defeasance" will be inapplicable or modified;
- any applicable subordination provisions in addition to those
set forth herein with respect to subordinated debt securities;
and
- any other terms of the debt securities not inconsistent with
the provisions of the applicable indenture.
We may sell debt securities at a substantial discount below their
stated principal amount, bearing no interest or interest at a rate which at the
time of issuance is below market rates. We will describe material U.S. federal
income tax consequences and special considerations applicable to those debt
securities in the applicable prospectus supplement.
If the purchase price of any of the debt securities is payable in one
or more foreign currencies or currency units or if any debt securities are
denominated in one or more foreign currencies or currency units or if the
principal of, premium, if any, or interest, if any, on any debt securities is
payable in one or more foreign currencies or currency units, we will set forth
the restrictions, elections, material U.S. federal income tax considerations,
specific terms and other information with respect to such issue of debt
securities and such foreign currency or currency units in the applicable
prospectus supplement.
If any index is used to determine the amount of payments of principal,
premium, if any, or interest on any series of debt securities, we will describe
the material U.S. federal income tax, accounting and other considerations
applicable thereto in the applicable prospectus supplement.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable prospectus supplement, the
debt securities will be issuable only in registered form, without coupons, in
denominations of $1,000 and any integral multiple thereof. Debt securities of
any series will be exchangeable for other debt securities of the same issue and
series, of any authorized denominations of a like aggregate principal amount,
the same original issue date, stated maturity and bearing the same interest
rate.
Holders may present each series of debt securities for exchange as
provided above, and for registration of transfer, with the form of transfer
endorsed thereon, or with a satisfactory written instrument of transfer, duly
executed, at the office of the appropriate securities registrar or at the office
of any transfer agent designated by us for such purpose and referred to in the
applicable prospectus supplement, without service charge and upon payment of any
taxes and other governmental charges as described in the indenture. We will
appoint the trustee of each series of debt securities as securities registrar
for such series under the indenture. If the applicable prospectus supplement
refers to any transfer agents, in addition to the securities registrar initially
designated by us with respect to any series, we may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, provided that we maintain a transfer
agent in each place of payment for the series. We may at any time designate
additional transfer agents with respect to any series of debt securities.
In the event of any redemption, neither we nor the trustee will be
required to:
- issue, register the transfer of or exchange debt securities of
any series during a period beginning at the opening of
business 15 days before the day of mailing of a notice for
redemption of debt securities of that series, and ending at
the close of business on the day of mailing of the relevant
notice of redemption; or
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- transfer or exchange any debt securities so selected for
redemption, except, in the case of any debt securities being
redeemed in part, any portion not being redeemed.
GLOBAL DEBT SECURITIES
Unless otherwise specified in the applicable prospectus supplement, the
debt securities of a series may be issued in whole or in part in the form of one
or more global securities that we will deposit with, or on behalf of, a
depositary identified in the prospectus supplement relating to such series.
Global debt securities may be issued only in fully registered form and in either
temporary or permanent form. Unless and until it is exchanged in whole or in
part for the individual debt securities represented by it, a global debt
security may not be transferred except as a whole by the depositary for the
global debt security to a nominee of the depositary, or by a nominee of the
depositary to the depositary or another nominee of the depositary, or by the
depositary or any nominee to a successor depositary or any nominee of the
successor.
The specific terms of the depositary arrangement with respect to a
series of debt securities will be described in the prospectus supplement
relating to the series. We anticipate that the following provisions will
generally apply to depositary arrangements.
Upon the issuance of a global debt security and the deposit of the
global debt security with or on behalf of the applicable depositary, the
depositary for the global debt security, or its nominee, will credit on its
book-entry registration and transfer system the respective principal amounts of
the individual debt securities represented by the global debt security to the
accounts of persons, more commonly known as participants, that have accounts
with the depositary. These accounts will be designated by the dealers,
underwriters or agents with respect to the debt securities or by us if the debt
securities are offered and sold directly by us. Ownership of beneficial
interests in a global debt security will be limited to participants or persons
that may hold interests through participants. Ownership of beneficial interests
in the global debt security will be shown on, and the transfer of that ownership
will be effected only through, records maintained by the applicable depositary
or its nominee with respect to interests of participants and the records of
participants with respect to interests of persons who hold through participants.
The laws of some states require that certain purchasers of securities take
physical delivery of the securities in definitive form. These limits and laws
may impair the ability to transfer beneficial interests in a global debt
security.
So long as the depositary for a global debt security, or its nominee,
is the registered owner of the global debt security, the depositary or its
nominee, as the case may be, will be considered the sole owner or holder of the
debt securities represented by the global debt security for all purposes under
the indenture. Except as provided below, owners of beneficial interests in a
global debt security will not be entitled to have any of the individual debt
securities of the series represented by the global debt security registered in
their names, will not receive or be entitled to receive physical delivery of any
debt securities of the series in definitive form, and will not be considered the
owners or holders of them under the indenture.
Payments of principal of, and premium, if any, and interest on
individual debt securities represented by a global debt security registered in
the name of a depositary or its nominee will be made to the depositary or its
nominee, as the case may be, as the registered owner of the global debt security
representing the debt securities. None of Brown & Brown, the trustee, any paying
agent, or the securities registrar for the debt securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interest of the global debt
security for the debt securities or for maintaining, supervising or reviewing
any records relating to those beneficial ownership interests.
We expect that the depositary for a series of debt securities or its
nominee, upon receipt of any payment of principal, premium or interest in
respect of a permanent global debt security representing any of the debt
securities, immediately will credit participants' accounts with payments in
amounts proportionate to their respective beneficial interest in the principal
amount of the global debt security for the debt securities as shown on the
records of the depositary or its nominee. We also expect that payments by
participants to owners of beneficial interests in the global debt security held
through the participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of customers
in bearer form or registered in "street name." These payments will be the
responsibility of these participants.
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Unless otherwise specified in the applicable prospectus supplement, if
the depositary for a series of debt securities is at any time unwilling, unable
or ineligible to continue as depositary and a successor depositary is not
appointed by us within 90 days, we will issue individual debt securities of the
series in exchange for the global debt security representing the series of debt
securities. In addition, unless otherwise specified in the applicable prospectus
supplement, we may at any time and in its sole discretion, subject to any
limitations described in the prospectus supplement relating to the debt
securities, determine not to have any debt securities of the series represented
by one or more global debt securities and, in such event, will issue individual
debt securities of the series in exchange for such global debt securities.
Further, if we so specify with respect to the debt securities of a series, an
owner of a beneficial interest in a global debt security representing debt
securities of the series may, on terms acceptable to us, the trustee and the
depositary for the global debt security, receive individual debt securities of
the series in exchange for such beneficial interests, subject to any limitations
described in the prospectus supplement relating to the debt securities. In any
such instance, an owner of a beneficial interest in a global debt security will
be entitled to physical delivery of individual debt securities of the series
represented by the global debt security equal in principal amount to its
beneficial interest and to have the debt securities registered in its name.
Individual debt securities of the series so issued will be issued in
denominations, unless otherwise specified by us, of $1,000 and integral
multiples thereof. The applicable prospectus supplement may specify other
circumstances under which individual debt securities may be issued in exchange
for the global debt security representing any debt securities.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable prospectus supplement,
payment of principal of, and premium, if any, and any interest on debt
securities will be made at the office of the trustee in New York or at the
office of such paying agent or paying agents as we may designate from time to
time in the applicable prospectus supplement, except that at our option, payment
of any interest may be made:
- except in the case of global debt securities, by check mailed
to the address of the person or entity entitled thereto as
such address shall appear in the securities register; or
- by transfer to an account maintained by the person or entity
entitled thereto as specified in the securities register,
provided that proper transfer instructions have been received
by the regular record date.
Unless otherwise indicated in the applicable prospectus supplement, we
will make payment of any interest on debt securities to the person or entity in
whose name the debt security is registered at the close of business on the
regular record date for the interest payment, except in the case of defaulted
interest. We may at any time designate additional paying agents or rescind the
designation of any paying agent; however, we will at all times be required to
maintain a paying agent in each place of payment for each series of debt
securities.
Any moneys deposited with the trustee or any paying agent, or held by
us in trust, for the payment of the principal of, and premium, if any, or
interest on any debt security and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable will, at
our request, be repaid to us or released from such trust, as applicable, and the
holder of the debt security will thereafter look, as a general unsecured
creditor, only to us for payment.
15
OPTION TO DEFER INTEREST PAYMENTS OR TO PAY-IN-KIND
If provided in the applicable prospectus supplement, we will have the
right, at any time and from time to time during the term of any series of debt
securities, to defer the payment of interest for such number of consecutive
interest payment periods as may be specified in the applicable prospectus
supplement, subject to the terms, conditions and covenants, if any, specified in
such prospectus supplement, provided that an extension period may not extend
beyond the stated maturity of the final installment of principal of the series
of debt securities. If provided in the applicable prospectus supplement, we will
have the right, at any time and from time to time during the term of any series
of debt securities, to make payments of interest by delivering additional debt
securities of the same series. Certain material U.S. federal income tax
consequences and special considerations applicable to the debt securities will
be described in the applicable prospectus supplement.
SUBORDINATION
Except as set forth in the applicable prospectus supplement, the
subordinated indenture will provide that the subordinated debt securities will
be subordinated and junior in right of payment to all senior indebtedness of
Brown & Brown. The term "senior indebtedness" will be defined in the applicable
prospectus supplement. If:
- We default in the payment of any principal, or premium, if
any, or interest on any senior indebtedness when the same
becomes due and payable, whether at maturity or at a date
fixed for prepayment or declaration or otherwise; or
- an event of default occurs with respect to any senior
indebtedness permitting the holders thereof to accelerate the
maturity thereof and written notice of such event of default,
requesting that payments on subordinated debt securities
cease, is given to us by the holders of senior indebtedness,
then unless and until the default in payment or event of default shall have been
cured or waived or shall have ceased to exist, no direct or indirect payment, in
cash, property or securities, by set-off or otherwise, will be made or agreed to
be made on account of the subordinated debt securities or interest thereon or in
respect of any repayment, redemption, retirement, purchase or other acquisition
of subordinated debt securities.
Except as set forth in the applicable prospectus supplement, the
subordinated indenture will provide that in the event of:
- any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar
proceeding relating to us, our creditors or our property;
- any proceeding for the liquidation, dissolution or other
winding-up of Brown & Brown, voluntary or involuntary, whether
or not involving insolvency or bankruptcy proceedings;
- any assignment by us for the benefit of creditors; or
- any other marshaling of the assets of us;
all present and future senior indebtedness, including, without limitation,
interest accruing after the commencement of the proceeding, assignment or
marshaling of assets, will first be paid in full before any payment or
distribution, whether in cash, securities or other property, will be made by us
on account of subordinated debt securities. In that event, any payment or
distribution, whether in cash, securities or other property, other than
securities of Brown & Brown or any other corporation provided for by a plan of
reorganization or a readjustment, the payment of which is subordinate, at least
to the extent provided in the subordination provisions of the indenture, to the
payment of all senior indebtedness at the time outstanding and to any securities
issued in respect thereof under any such plan of reorganization or readjustments
and other than payments made from any trust described below under the caption
"Satisfaction and Discharge; Defeasance," which would otherwise, but for the
subordination provisions, be payable or deliverable in respect of subordinated
debt securities, including any such payment or distribution which may be payable
or deliverable by reason of the payment of any other indebtedness of Brown &
Brown being subordinated to
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the payment of subordinated debt securities, will be paid or delivered directly
to the holders of senior indebtedness or to their representative or trustee, in
accordance with the priorities then existing among such holders, until all
senior indebtedness shall have been paid in full. No present or future holder of
any senior indebtedness will be prejudiced in the right to enforce subordination
of the indebtedness evidenced by subordinated debt securities by any act or
failure to act on our part.
MODIFICATION OF INDENTURES
From time to time, we and the trustees may modify the indentures
without the consent of any holders of any series of debt securities with respect
to some matters, including:
- to cure any ambiguity, defect or inconsistency or to correct
or supplement any provision which may be inconsistent with any
other provision of the indenture;
- to qualify, or maintain the qualification of, the indentures
under the Trust Indenture Act of 1939, as amended; and/or
- to make any change that does not materially adversely affect
the interests of any holder of such series of debt securities.
In addition, under the indentures, we and the trustees may modify some
of our rights, covenants and obligations and the rights of holders of any series
of debt securities with the written consent of the holders of at least a
majority in aggregate principal amount of the series of outstanding debt
securities; but no extension of the maturity of any series of debt securities,
reduction in the interest rate or extension of the time for payment of interest,
change in the optional redemption or repurchase provisions in a manner adverse
to any holder of the series of debt securities, other modification in the terms
of payment of the principal of, or interest on, the series of debt securities,
or reduction of the percentage required for modification, will be effective
against any holder of the series of outstanding debt securities without the
holder's consent.
In addition, we and the trustees may execute, without the consent of
any holder of the debt securities, any supplemental indenture for the purpose of
creating any new series of debt securities.
EVENTS OF DEFAULT
The indentures will provide that any one or more of the following
described events with respect to a series of debt securities that has occurred
and is continuing constitutes an "event of default" with respect to that series
of debt securities:
- failure for 60 days to pay any interest or any sinking fund
payment on the series of debt securities when due (subject to
the deferral of any due date in the case of an extension
period);
- failure to pay any principal or premium, if any, on the series
of the debt securities when due, whether at maturity, upon
redemption, by declaration or otherwise;
- failure to observe or perform in any material respect certain
other covenants contained in the indenture for 90 days after
written notice has been given to us from the trustee or the
holders of at least 25% in principal amount of the series of
outstanding debt securities;
- default resulting in acceleration of other indebtedness of
Brown & Brown for borrowed money, where the aggregate
principal amount so accelerated exceeds $50 million and the
acceleration is not rescinded or annulled within 60 days after
the written notice thereof to us by the trustee or to us and
the trustee by the holders of 25% in aggregate principal
amount of the debt securities of the series then outstanding,
provided that the event of default will be remedied, cured or
waived if the default that resulted in the acceleration of
such other indebtedness is remedied, cured or waived; or
- certain events in bankruptcy, insolvency or reorganization of
Brown & Brown.
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The holders of not less than a majority in outstanding principal amount
of the series of debt securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the trustee of
the series. The trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the series may declare the principal due and
payable immediately upon an event of default. The holders of a majority in
aggregate outstanding principal amount of the series may annul the declaration
and waive the default if the default (other than the non-payment of the
principal of the series which has become due solely by the acceleration) has
been cured and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited with the trustee
of the series.
The holders of a majority in outstanding principal amount of a series
of debt securities affected thereby may, on behalf of all the holders of the
series of debt securities, waive any past default, except a default in the
payment of principal or interest, unless the default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the trustee of the
series, or a default in respect of a covenant or provision which under the
related indenture cannot be modified or amended without the consent of the
holder of each outstanding debt security of the series. We are required to file
annually with the trustees a certificate as to whether or not we are in
compliance with all the conditions and covenants applicable to it under the
indentures.
In case an event of default shall occur and be continuing as to a
series of debt securities, the trustee of the series will have the right to
declare the principal of and the interest on the debt securities, and any other
amounts payable under the indenture, to be forthwith due and payable and to
enforce its other rights as a creditor with respect to the debt securities.
No holder of any debt securities will have any right to institute any
proceeding with respect to the indenture or for any remedy thereunder, unless
the holder shall have previously given to the trustee written notice of a
continuing event of default, the holders of at least 25% in aggregate principal
amount of the outstanding debt securities of the series shall have made written
request and offered reasonable indemnity to the trustee of the series to
institute the proceeding as a trustee, and the trustee shall not have received
from the holders of a majority in aggregate principal amount of the outstanding
debt securities of the class a direction inconsistent with the request and shall
have failed to institute the proceeding within 60 days. However, these
limitations do not apply to a suit instituted by a holder of a debt security for
enforcement of payment of the principal or interest on the debt security on or
after the respective due dates expressed in the debt security.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
Unless otherwise indicated in the applicable prospectus supplement, the
indentures will provide that we will not consolidate with or merge into any
other person or entity or sell, assign, convey, transfer or lease its properties
and assets substantially as an entirety to any person or entity unless:
- either we are the continuing corporation, or any successor or
purchaser is a corporation, partnership, or trust or other
entity organized under the laws of the United States of
America, any State thereof or the District of Columbia, and
the successor or purchaser expressly assumes our obligations
on the debt securities under a supplemental indenture; and
- immediately before and after giving effect thereto, no event
of default, and no event which, after notice or lapse of time
or both, would become an event of default, shall have happened
and be continuing.
Unless otherwise indicated in the applicable prospectus supplement, the
general provisions of the indentures do not afford holders of the debt
securities protection in the event of a highly leveraged or other transaction
involving us that may adversely affect holders of the debt securities.
18
SATISFACTION AND DISCHARGE; DEFEASANCE
The indentures will provide that when, among other things, all debt
securities not previously delivered to the trustee for cancellation:
- have become due and payable; or
- will become due and payable at their stated maturity within
one year, and we deposit or cause to be deposited with the
trustee, as trust funds in trust for the purpose, an amount in
the currency or currencies in which the debt securities are
payable sufficient to pay and discharge the entire
indebtedness on the debt securities not previously delivered
to the trustee for cancellation, for the principal, and
premium, if any, and interest to the date of the deposit or to
the stated maturity, as the case may be;
then the indenture will cease to be of further effect (except as to our
obligations to pay all other sums due pursuant to the indenture and to provide
the officers' certificates and opinions of counsel described therein), and we
will be deemed to have satisfied and discharged the indenture.
The indentures will provide that we may elect either:
- to terminate, and be deemed to have satisfied, all its
obligations with respect to any series of debt securities,
except for the obligations to register the transfer or
exchange of such debt securities, to replace mutilated,
destroyed, lost or stolen debt securities, to maintain an
office or agency in respect of the debt securities, and to
compensate and indemnify the trustee ("defeasance"); or
- to be released from its obligations with respect to certain
covenants ("covenant defeasance") upon the deposit with the
trustee, in trust for such purpose, of money and/or U.S.
Government Obligations, as defined in the indenture, which
through the payment of principal and interest in accordance
with the term used will provide money, in an amount sufficient
(in the opinion of a nationally recognized firm of independent
public accountants) to pay the principal of, interest on, and
any other amounts payable in respect of the outstanding debt
securities of the series.
Such a trust may be established only if, among other things, we have
delivered to the trustee an opinion of counsel (as specified in the indenture)
with regard to certain matters, including an opinion to the effect that the
holders of the debt securities will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of the deposit and discharge, and will
be subject to U.S. federal income tax on the same amounts, in the same manner,
and at the same times as would have been the case if the deposit and defeasance
or covenant defeasance, as the case may be, had not occurred.
REDEMPTION
Unless otherwise indicated in the applicable prospectus supplement,
debt securities will not be subject to any sinking fund requirements.
Unless otherwise indicated in the applicable prospectus supplement, we
may, at our option, redeem the debt securities of any series in whole at any
time or in part from time to time, at the redemption price set forth in the
applicable prospectus supplement plus accrued and unpaid interest to the date
fixed for redemption, and debt securities in denominations larger than $1,000
may be redeemed in part but only in integral multiples of $1,000. If the debt
securities of any series are so redeemable only on or after a specified date or
upon the satisfaction of additional conditions, the applicable prospectus
supplement will specify the date or describe the conditions.
We will mail notice of any redemption at least 30 days but not more
than 60 days before the redemption date to each holder of debt securities to be
redeemed at the holder's registered address. Unless we default in the payment of
the redemption price on and after the redemption date, interest shall cease to
accrue on the debt securities or portions thereof called for redemption.
19
CONVERSION OR EXCHANGE
If and to the extent indicated in the applicable prospectus supplement,
the debt securities of any series may be convertible or exchangeable into other
securities. The specific terms on which debt securities of any series may be so
converted or exchanged will be set forth in the applicable prospectus
supplement. These terms may include provisions for conversion or exchange,
either mandatory, at the option of the holder, or at our option, in which case
the number of shares of other securities to be received by the holders of debt
securities would be calculated as of a time and in the manner stated in the
applicable prospectus supplement.
CERTAIN COVENANTS
The indentures will contain certain covenants regarding, among other
matters, corporate existence, payment of taxes and reports to holders of debt
securities. If and to the extent indicated in the applicable prospectus
supplement, these covenants may be removed or additional covenants added with
respect to any series of debt securities.
GOVERNING LAW
The indentures and the debt securities will be governed by and
construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE TRUSTEES
Each trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act of 1939, as amended. Subject to these provisions, each trustee is
under no obligation to exercise any of the powers vested in it by the indenture
at the request of any holder of the debt securities, unless offered reasonable
indemnity by the holder against the costs, expenses and liabilities which might
be incurred thereby. Each trustee is not required to expend or risk its own
funds or otherwise incur personal financial liability in the performance of its
duties if the trustee reasonably believes that repayment or adequate indemnity
is not reasonably assured to it.
20
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
We are authorized to issue 140,000,000 shares of common stock, $0.10
par value per share. Each holder of our common stock is entitled to one vote for
each share held. Shareholders do not have the right to cumulate their votes in
elections of directors. Accordingly, directors are elected by a plurality of the
votes cast by the shares entitled to vote.
Our common stock is listed on The New York Stock Exchange. Holders of
our common stock will be entitled to dividends on a pro rata basis upon
declaration of dividends by our board of directors. Dividends will be payable
only out of unreserved and unrestricted surplus that is legally available for
the payment of dividends. Dividends that may be declared on our common stock
will be paid in an equal amount to the holder of each share. No pre-emptive
rights are conferred upon the holders of such stock and there are no liquidation
or conversion rights. There are no redemption or sinking fund provisions and
there is no liability to further calls or to assessments by us. Any
determination to declare or pay dividends in the future will be at the
discretion of our board of directors and will depend on our results of
operations, financial condition, contractual or legal restrictions and other
factors deemed relevant by our board of directors. Upon our liquidation, holders
of our common stock will be entitled to a pro rata distribution of our assets,
after payment of all amounts owed to our creditors.
RIGHTS PLAN
Effective July 29, 1999, our board of directors adopted a shareholder
rights plan. To implement the rights plan, our board of directors declared a
dividend distribution of one right for each outstanding share of common stock,
to shareholders of record at the close of business on August 11, 1999, and for
each share of common stock issued between August 11, 1999 and the distribution
date. When exercisable, each right will entitle the registered holder to
purchase from us one share of common stock at a purchase price of $100.00,
subject to adjustment. The description and terms of the rights are set forth in
a rights agreement between us and First Union National Bank, a national banking
institution, as rights agent, dated as of July 30, 1999, a copy of which is
attached as Exhibit 4.1 to our Current Report on Form 8-K filed with the
Securities and Exchange Commission on August 2, 1999. This summary description
does not purport to be complete and is qualified in its entirety by reference to
the rights agreement.
COMMON STOCK CERTIFICATES REPRESENTING RIGHT. Initially, the rights
will be evidenced by Brown & Brown common stock certificates representing shares
then outstanding, and no separate certificates for the rights will be
distributed. The rights will be exercisable and transferable apart from our
common stock and a distribution date will occur upon the earliest of (1) 10 days
following the stock acquisition date, which is a public announcement that a
person or group of affiliated or associated persons (an acquiring person) has
acquired, or obtained the right to acquire, beneficial ownership of 20% or more
of our outstanding common stock, (2) 10 business days following the commencement
of a tender offer or exchange offer that would result in the beneficial
ownership by a person or group of 20% or more of our outstanding common stock,
or (3) immediately after our board of directors declares any individual or
entity, owning at least 10% of our outstanding common stock, an adverse person
(as defined in the rights agreement) (the earlier of such dates is called the
distribution date).
Until the distribution date, (1) the rights will be evidenced by Brown
& Brown common stock certificates and will be transferred with and only with
such common stock certificates, (2) new common stock certificates issued after
August 11, 1999 will contain a notation incorporating the rights agreement by
reference, and (3) the surrender for transfer of any certificates for common
stock outstanding will also constitute the transfer of the rights associated
with the common stock represented by such certificate.
ISSUANCE OF RIGHTS CERTIFICATES. As soon as practicable following the
distribution date, separate certificates representing only rights shall be
mailed to the holders of record of our common stock as of the close of business
on the distribution date, and such separate rights certificates alone shall
represent such rights from and after the distribution date. Except as otherwise
determined by our board of directors, only shares of our common stock issued
before the distribution date will be issued with rights.
21
EXPIRATION OF RIGHTS. The rights are not exercisable until the
distribution date and will expire at the close of business on July 30, 2009,
unless earlier redeemed or exchanged by us as described below.
EXERCISE OF RIGHTS. If any person (other than an exempt person, as
defined in the rights agreement) becomes the beneficial owner of 20% or more of
the then-outstanding shares of our common stock (except pursuant to an offer for
all outstanding shares of our common stock determined by our board of directors
to be fair to and otherwise in the best interests of us and our shareholders),
or our board of directors declares any individual or entity (alone or together
with its affiliates and associates as defined in Rule 12b-2 of the Securities
and Exchange Act of 1934, as amended) owning at least 10% of the
then-outstanding shares of our common stock to be an adverse person (as defined
in the rights agreement), each holder of a right will thereafter have the right
to receive, upon exercise thereof, the number of shares of our common stock (or,
in certain circumstances, cash, property, or other securities of Brown & Brown
or a reduction in the purchase price) having a value equal to two times the
exercise price of the right. Notwithstanding any of the foregoing, following the
occurrence of either event described above, all rights that are, or (under
certain circumstances specified in the rights agreement) were, beneficially
owned by any acquiring person will be void. The rights are not, however,
exercisable following the occurrence of the event set forth above until such
time as the rights are no longer redeemable by us, as described below. Further,
rights generally are exercisable only after the effectiveness of a registration
statement covering the underlying shares of our common stock under the
Securities Act of 1933, as amended. J. Hyatt Brown, Chairman of the Board,
President, and Chief Executive Officer of Brown & Brown, is classified as an
exempt person in the rights agreement.
For example, at an exercise price of $100.00, each right not owned by
an acquiring person or an adverse person (or by certain related parties)
following an event set forth in the preceding paragraph would entitle its holder
to purchase $200.00 worth of common stock (or other consideration, as noted
above) for $100.00. Assuming that the common stock had a per-share market value
of $50.00 at such time, the holder of each valid right would be entitled to
purchase four shares of our common stock at $100.00.
If at any time following the stock acquisition date or the date on
which an individual or entity is declared an adverse person pursuant to the
rights agreement, (1) we are acquired in a merger or other business combination
transaction in which we are not the surviving corporation (other than pursuant
to a tender offer or exchange offer for all outstanding shares of common stock
determined by our board of directors to be fair to and otherwise in the best
interests of us and our shareholders), or (2) more than 50% of our assets or
earning power is sold or transferred (each of such events is referred to as a
"Section 13 Event"), then each holder of a right (except rights that have been
previously voided, as set forth above) shall thereafter have the right to
receive, upon exercise, common stock of the acquiring company having a value
equal to two times the exercise price of the right. If the rights cannot be
exercised for common stock of the acquiring company as set forth above, rights
holders will be entitled to put the rights to the acquiring company for cash
equal to the exercise price of the rights (i.e., at a 50% discount). The events
described in this paragraph and in the second preceding paragraph are referred
to as the triggering events.
ADJUSTMENTS TO PREVENT DILUTION. The purchase price payable, and the
number of shares of common stock or other securities or property issuable, upon
exercise of the rights are subject to adjustment from time to time to prevent
dilution (1) in the event of a stock dividend on, or a subdivision, combination,
or reclassification of, the common stock, (2) if holders of the common stock are
granted certain rights or warrants to subscribe for common stock or convertible
securities at less than the current market price of the common stock, or (3)
upon the distribution to holders of the common stock of evidences of
indebtedness or assets (excluding regular quarterly cash dividends) or of
subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the purchase price will be
required until cumulative adjustments amount to at least 1% of the purchase
price. No fractional share of common stock will be issued and, in lieu thereof,
an adjustment in cash will be made based on the market price of the common stock
on the last trading date before the date of exercise.
REDEMPTION OF RIGHTS. At any time until 10 days following the stock
acquisition date (or such later date as our board of directors may determine),
we may redeem the rights in whole, but not in part, at a price of $.01 per
right, payable in cash, or shares of common stock or other consideration deemed
appropriate by our board of directors. Thereafter, our right of redemption may
be reinstated if the period has expired during which holders of such rights may
exercise their rights for common stock following the stock acquisition date, no
triggering event has
22
occurred, and an acquiring person reduces his beneficial ownership to 5% or less
of the outstanding shares of our common stock in a transaction or series of
transactions not involving us and there are no other acquiring persons.
Immediately upon the action of our board of directors ordering redemption of the
rights, the rights will terminate and the only right of the holders of rights
will be to receive the $.01 redemption price.
EXCHANGE. At any time after any person becomes an acquiring person and
before the acquisition by such person of 50% or more of the outstanding shares
of our common stock, our board of directors may exchange the rights (other than
rights owned by such person or group that will have become void), in whole or in
part, at an exchange ratio of one share of our common stock per right (subject
to adjustment).
THREE-YEAR INDEPENDENT DIRECTOR EVALUATION PROVISION. The rights
agreement includes a three-year Independent Director Evaluation provision. Under
this provision, our board of directors shareholder rights plan committee,
composed of independent directors, will review the rights plan periodically (at
least every three years). This committee will communicate its conclusions to the
full board of directors after each review, including any recommendation of
whether the rights agreement should be modified or the rights should be
redeemed.
NO SHAREHOLDER RIGHTS BEFORE EXERCISE. Until a right is exercised, the
holder thereof, as such, will have no rights as a shareholder of Brown & Brown,
including the right to vote or to receive dividends. While the distribution of
the rights will not be taxable to shareholders or to us, shareholders may,
depending upon the circumstances, recognize taxable income if the rights become
exercisable for common stock (or other consideration) or for common stock of an
acquiring company as set forth above.
AMENDMENT OF RIGHTS AGREEMENT. Any of the provisions of the rights
agreement may be amended by our board of directors before the distribution date.
After the distribution date, the provisions of the rights agreement may be
amended by our board of directors to cure any ambiguity, to correct inaccuracies
and inconsistencies, to make changes that do not adversely affect the interests
of holders of rights (excluding the interests of any acquiring person), or to
shorten or lengthen any time period under the rights agreement; however, no
amendment to adjust the time period governing redemption shall be made at such
time as the rights are not redeemable.
23
DESCRIPTION OF WARRANTS
We may issue warrants for the purchase of debt securities or common
stock. Warrants may be issued independently or together with any other
securities offered by any prospectus supplement and may be attached to or
separate from such securities. Each series of warrants will be issued under a
separate warrant agreement to be entered into between Brown & Brown and a
warrant agent specified in the applicable prospectus supplement. The warrant
agent will act solely as an agent of Brown & Brown in connection with the
warrants of such series and will not assume any obligation or relationship of
agency or trust for or with any holders of the warrants. Further terms of the
warrants and the applicable warrant agreements will be set forth in the
applicable prospectus supplement. Copies of the form of warrant agreement and
warrant will be filed as exhibits to or incorporated by reference in the
registration statement of which this prospectus forms a part, and the following
summary is qualified in its entirety by reference to such exhibits.
The applicable prospectus supplement will describe the terms of the
warrants, including, where applicable, the following:
- the title of the warrants;
- the aggregate number of warrants;
- the price or prices at which warrants will be issued;
- the designation, terms and number of securities purchasable
upon exercise of warrants;
- the designation and terms of the securities, if any, with
which warrants are issued and the number of warrants issued
with each security;
- the date, if any, on and after which warrants and the related
securities will be separately transferable;
- the price at which each security purchasable upon exercise of
warrants may be purchased;
- the date on which the right to exercise the warrants shall
commence and the date on which that right shall expire;
- the minimum or maximum amount of warrants which may be
exercised at any one time;
- information with respect to book-entry procedures, if any; and
- any other terms of the warrants, including terms, procedures
and limitations relating to the exchange and exercise of the
warrants.
24
PLAN OF DISTRIBUTION
We may offer and sell the securities to or through underwriting
syndicates represented by managing underwriters, to or through underwriters
without a syndicate or through dealers or agents. The underwriters, dealers or
agents may include J.P. Morgan Securities Inc. and SunTrust Capital Markets,
Inc. The prospectus supplement with respect to the offered securities will set
forth the terms of the offering, including the following:
- the name or names of any underwriters, dealers or agents;
- the purchase price and the proceeds we will receive from the
sale;
- any underwriting discounts, agency fees and other items
constituting underwriters' or agents' compensation; and
- the initial public offering price and any discounts or
concessions allowed, re-allowed or paid to dealers.
If any underwriters are involved in the offer and sale, the securities
will be acquired by the underwriters and may be resold by them, either at a
fixed public offering price established at the time of offering or from time to
time in one or more negotiated transactions or otherwise, at prices related to
prevailing market prices determined at the time of sale. Unless otherwise set
forth in the applicable prospectus supplement, the obligations of the
underwriters to purchase the securities will be subject to certain conditions
precedent and the underwriters will be obligated to purchase all the securities
described in the prospectus supplement if any are purchased. Any initial public
offering price and any discounts or concessions allowed or re-allowed or paid to
dealers may be changed from time to time.
We may offer and sell the securities directly or through an agent or
agents designated by us from time to time. An agent may sell securities it has
purchased from us as principal to other dealers for resale to investors and
other purchasers, and may reallow all or any portion of the discount received in
connection with the purchase from us to the dealers. After the initial offering
of the securities, the offering price (in the case of securities to be resold at
a fixed offering price), the concession and the discount may be changed. Any
agent participating in the distribution of the securities may be deemed to be an
"underwriter," as that term is defined in the Securities Act of 1933, as
amended, of the securities so offered and sold.
If any underwriters are involved in the offer and sale, they will be
permitted to engage in transactions that maintain or otherwise affect the price
of the securities. These transactions may include over-allotment transactions,
purchases to cover "short" positions created by the underwriter in connection
with the offering, and the imposition of penalty bids. If an underwriter creates
a short position in the securities in connection with the offering, i.e., if it
sells more securities than set forth on the cover page of the applicable
prospectus supplement, the underwriter may reduce that short position by
purchasing the securities in the open market. In general, purchases of a
security to reduce a short position could cause the price of the security to be
higher than it might be in the absence of such purchases. As noted above,
underwriters may also choose to impose penalty bids on other underwriters and/or
selling group members. This means that if underwriters purchase securities on
the open market to reduce their short position or to stabilize the price of the
securities, they may reclaim the amount of the selling concession from those
underwriters and/or selling group members who sold such securities as part of
the offering.
Neither we nor any underwriter make any representation or prediction as
to the direction or magnitude of any effect that the transactions described
above may have on the price of the securities. In addition, neither we nor any
underwriter make any representation that such underwriter will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.
Underwriters, dealers and agents may be entitled, under agreements
entered into with us, to indemnification by us against some liabilities,
including liabilities under the Securities Act of 1933, as amended.
25
The place and time of delivery for the securities in respect of which
this prospectus is delivered will be set forth in the applicable prospectus
supplement if appropriate.
Unless otherwise indicated in the prospectus supplement, each series of
offered securities will be a new issue of securities for which there currently
is no market, other than the common stock, which is listed on The New York Stock
Exchange. Any underwriters to whom securities are sold for public offering and
sale may make a market in such series of securities as permitted by applicable
laws and regulations, but such underwriters will not be obligated to do so, and
any such market making may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the securities
Underwriters, agents and dealers may engage in transactions with or
perform services, including various investment banking and other services, for
us and/or any of our affiliates in the ordinary course of business.
26
LEGAL MATTERS
Certain legal matters with respect to the validity of the securities
offered hereby will be passed upon for Brown & Brown by Holland & Knight LLP,
Tampa, Florida, and for any underwriters, dealers or agents by counsel named in
the applicable prospectus supplement.
EXPERTS
The financial statements and schedule of Brown & Brown incorporated by
reference in this prospectus and elsewhere in the registration statement have
been audited by Arthur Andersen LLP, independent certified public accountants,
as indicated in their reports with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
The financial statements of Riedman Insurance (a division of Riedman
Corporation) incorporated by reference in this prospectus and elsewhere in the
registration statement have been audited by KPMG LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements, and
other information with the Commission. You may read and copy any materials we
file with the Commission at the Commission's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the Commission at
1-800-SEC-0330 for more information on its public reference rooms. The
Commission also maintains an Internet Website at http://www.sec.gov that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the Commission.
We have filed a registration statement on Form S-3 to register with the
Commission the securities described herein. This prospectus is a part of that
registration statement and constitutes a prospectus of Brown & Brown. As allowed
by Commission rules, this prospectus does not contain all the information that
can be found in the registration statement or the exhibits to the registration
statement.
INCORPORATION BY REFERENCE
The Commission allows us to "incorporate by reference" the information
we file with them, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference
is considered to be a part of this prospectus, and later information that we
file with the Commission will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings we make with the Commission under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, until we sell all of
the securities, or after the date of this initial registration statement and
before the effectiveness of this registration statement. The documents
incorporated by reference are:
The Commission allows us to "incorporate by reference" the information
we file with the Commission, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is an important part of this prospectus, and
information that we file later with the Commission will automatically update and
supersede this information. We incorporate by reference the following documents
(except to the extent superseded by information in this registration statement
or any documents subsequently filed with the Commission):
- Annual Report on Form 10-K for the year ended December 31,
2000 (including information specifically incorporated by
reference into our Form 10-K from our definitive Proxy
Statement) filed with the Commission on March 14, 2001.
27
- Amendment to Annual Report on Form 10-K/A, filed with the
Commission on March 27, 2001.
- Current Report on Form 8-K, filed with the Commission on
January 18, 2001.
- Amendment to Current Report on Form 8-K/A, filed with the
Commission on March 20, 2001.
- Amendment No. 2 to Current Report on Form 8-K/A, filed with
the Commission on March 23, 2001.
- Current Report on Form 8-K, filed with the Commission on
October 12, 2001.
- Current Report on Form 8-K, filed with the Commission on
October 24, 2001.
- Current Report on Form 8-K, filed with the Commission on
November 6, 2001.
- Current Report on Form 8-K, filed with the Commission on
December 12, 2001.
- Quarterly Report on Form 10-Q for the three-month period ended
March 31, 2001, filed with the Commission on May 15, 2001.
- Quarterly Report on Form 10-Q for the six-month period ended
June 30, 2001, filed with the Commission on August 8, 2001.
- Quarterly Report on Form 10-Q for the nine-month period ended
September 30, 2001, filed with the Commission on November 14,
2001.
- Registration Statement on Form 8-A12B, filed with the
Commission on November 17, 1997.
- All documents subsequently filed by Brown & Brown pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange
Act of 1934, as amended, shall be deemed to be incorporated by
reference in this prospectus and to be part hereof from the
date of filing of such documents.
- All documents filed by Brown & Brown after the date of filing
the initial registration statement on Form S-3, of which this
prospectus is a part, and prior to the effectiveness of such
registration statement pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Securities Exchange Act of 1934, as amended,
shall be deemed to be incorporated by reference into this
prospectus and to be part hereof from the date of filing of
such documents.
On request we will provide at no cost to each person, including any
beneficial owner who receives a copy of this prospectus, a copy of any or all of
the documents incorporated in this prospectus by reference. We will not provide
exhibits to any such documents, however, unless such exhibits are specifically
incorporated by reference into those documents. Written or telephone requests
for such copies should be addressed to Brown & Brown's executive offices located
at 401 East Jackson Street, Suite 1700, Tampa, Florida 33602, Attention:
Corporate Secretary, telephone number (813) 222-4100.
28
================================================================================
$250,000,000
BROWN & BROWN, INC.
DEBT SECURITIES, COMMON STOCK
AND WARRANTS
----------------------------
PROSPECTUS
----------------------------
------------------, ------
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees and expenses in connection with
the issuance and distribution of the securities being registered hereunder. All
such fees and expenses shall be borne by the undersigned company (the
"Company").
Commission Registration Fee................................ $ 59,750
Trustee's Fees and Expenses ............................... *
Transfer Agent and Registrar Fees and Expenses............. *
Legal Fees and Expenses.................................... *
Accounting Fees and Expenses............................... *
Printing, Engraving and Mailing Expenses................... *
Miscellaneous.............................................. *
Total...................................................... $ *
============
* To be filed with a current Report on Form 8-K or an amendment to the
registration statement.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a Florida corporation. Reference is made to Section
607.0850 of the Florida Business Corporation Act, which permits, and in some
cases requires, indemnification of directors, officers, employees, and agents of
the Company, under certain circumstances and subject to certain limitations.
Under Article VII of the Company's Bylaws, the Company is required to
indemnify its officers and directors, and officers and directors of certain
other corporations serving as such at the request of the Company, against all
costs and liabilities incurred by such persons by reason of their having been an
officer or director of the Company or such other corporation, provided that such
indemnification shall not apply with respect to any matter as to which such
officer or director shall be finally adjudged to have been individually guilty
of gross negligence or willful malfeasance in the performance of his or her
duties as a director or officer, and provided further that the indemnification
shall, with respect to any settlement of any suit, proceeding, or claim, include
reimbursement of any amounts paid and expenses reasonably incurred in settling
any such suit, proceeding, or claim when, in the judgment of the Board of
Directors, such settlement and reimbursement appeared to be in the best
interests of the Company.
The Company has purchased insurance with respect to, among other
things, liabilities that may arise under the statutory provisions referred to
above.
The general effect of the foregoing provisions may be to reduce the
circumstances in which an officer or director may be required to bear the
economic burden of the foregoing liabilities and expense.
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ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
Exhibit
Number Description
------- -----------------------------------------------------------------------
1.1 Form of Underwriting Agreement*.
4.1 Amended and Restated Articles of Incorporation (incorporated by
reference to Exhibit 3a to Form 10-Q for the quarter ended
September 30, 1998).
4.2 Form of Senior Indenture.*
4.3 Form of Subordinated Indenture.*
4.4 Form of Senior Debt Security.*
4.5 Form of Subordinated Debt Security.*
4.6 Form of Convertible Debt Security.*
4.7 Form of Warrant.*
4.8 Form of Warrant Agreement.*
5.1 Opinion of Holland & Knight LLP.*
12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Arthur Andersen LLP, independent certified public
accountants.
23.2 Consent of KPMG LLP, independent public accountants.
23.3 Consent of Holland & Knight LLP (included in Exhibit 5.1).
24.1 Power of Attorney of certain directors and officers of Brown & Brown.
25.1 Form T-1 Statement of Eligibility of Trustee for Senior Indenture under
the Trust Indenture Act of 1939*.
25.2 Form T-1 Statement of Eligibility of Trustee for Subordinated Indenture
under the Trust Indenture Act of 1939*.
* To be filed with a Current Report on Form 8-K or a
Pre-Effective or Post-Effective Amendment to registration
statement.
ITEM 17. UNDERTAKINGS
(a) The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered)
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and any deviation from the low or high end of the
estimated maximum offering range may be reflected in
the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a
20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
this registration statement or any material change to
such information in this registration statement;
provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the information required
to be included in a post-effective amendment by such
clauses is contained in periodic reports filed with
or furnished to the Commission by the Company
pursuant to Section 13 or Section 15(d) of the
Exchange Act of 1934 that are incorporated by
reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Company's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act of 1934 that is
incorporated by reference in this registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Company pursuant to its Certificate of Incorporation,
Bylaws, by agreement or otherwise, the Company has been advised that in
the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection
with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
(d) The Company hereby undertakes:
(1) To file an application for the purpose of determining the
eligibility of the trustee to act under subsection (a) of
Section 310 of the Trust Indenture Act of 1939, as amended
in accordance with the rules and regulations prescribed by
the Commission under Section 305(b)(2) of the Act.
(2) That for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form
of prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the Company pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be
part of this registration statement as of the time it was
effective.
(3) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at the time shall
be deemed to be initial bona fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Daytona Beach, State of Florida, on December 14,
2001.
BROWN & BROWN, INC.
By: *
------------------------------------
J. Hyatt Brown
Chief Executive Officer
--------------------
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on December 14, 2001.
Signature Title
--------- -----
* Chairman of the Board, President and
--------------------------------- Chief Executive Officer
J. Hyatt Brown (Principal Executive Officer)
* Vice President, Treasurer and
--------------------------------- Chief Financial Officer (Principal
Cory T. Walker Financial and Accounting Officer)
* Executive Vice President,
--------------------------------- Assistant Treasurer and Director
Jim W. Henderson
* Director
---------------------------------
Samuel P. Bell, III
* Director
---------------------------------
Bradley Currey, Jr.
* Director
---------------------------------
David H. Hughes
* Director
---------------------------------
Theodore J. Hoepner
* Director
---------------------------------
Toni Jennings
* Director
---------------------------------
John R. Riedman
* Director
---------------------------------
Jan E. Smith
*By: /S/ LAUREL L. GRAMMIG
-------------------------
Laurel L. Grammig
Attorney-In-Fact
II-4
EXHIBIT INDEX
Exhibit
Number Description
------- ----------------------------------------------------------------------
1.1 Form of Underwriting Agreement*.
4.1 Amended and Restated Articles of Incorporation (incorporated by
reference to Exhibit 3a to Form 10-Q for the quarter ended September
30, 1998).
4.2 Form of Senior Indenture.*
4.3 Form of Subordinated Indenture.*
4.4 Form of Senior Debt Security.*
4.5 Form of Subordinated Debt Security.*
4.6 Form of Convertible Debt Security.*
4.8 Form of Warrant.*
4.9 Form of Warrant Agreement.*
5.1 Opinion of Holland & Knight LLP.*
12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Arthur Andersen, independent certified public accountants.
23.2 Consent of KPMG LLP, independent public accountants.
23.3 Consent of Holland & Knight LLP (included in Exhibit 5.1).
24.1 Power of Attorney of certain directors and officers of Brown & Brown.
25.1 Form T-1 Statement of Eligibility of Trustee for Senior Indenture under
the Trust Indenture Act of 1939*.
25.2 Form T-1 Statement of Eligibility of Trustee for Subordinated Indenture
under the Trust Indenture Act of 1939*.
* To be filed with a Current Report on Form 8-K or a
Pre-Effective or Post-Effective Amendment to registration
statement.
II-5